Arbitration – Arbitration Clause in Club Documents – Unconscionable and Unenforceable

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The circuit court was the proper adjudicator to determine whether a valid agreement to arbitrate existed and the arbitration clause contained in the Club Documents is unconscionable and unenforceable.

We affirmed the circuit court’s order denying the Defendants’ motion to compel arbitration and dismissed Plaintiffs’ cross-appeal.

In these cross-appeals, Appellants/Respondents Developers (Defendants) appealed the circuit court’s order refusing to compel arbitration in a dispute arising from several contracts underlying Defendants’ sale of real estate in the Palmetto Bluff Development to Respondents/Appellants Homeowners (Plaintiffs). Plaintiffs cross-appealed the circuit court’s order denying summary judgment for their declaratory judgment action.

Palmetto Bluff Development is a planned residential community located in Beaufort. Purchasers of real estate in Palmetto Bluff are required to join the Palmetto Bluff Club as a condition of purchasing property in the development; membership in the Club is purportedly automatic upon acceptance of a deed. Club membership is then further memorialized by the execution of a Club Membership Agreement, and the governing terms of the Club are set forth in the Club Membership Plan (collectively, the Club Documents). The Club is for-profit, is managed by Defendants, and retains the power, according to the parties, to unilaterally change its fees and policies with no input from the Club’s members.

In 2020, several of the Plaintiffs complained to Defendants about changes the Club was planning to make that Plaintiffs understood would, in some capacity, limit the ability of their short-term tenants to access and use the Club’s facilities. Later, in 2021, following failed mediation attempts, a larger group that included more of the Plaintiffs in the present action sent a letter disagreeing with Defendants’ assertion that Defendants possessed the ability to implement such restrictions. After further mediation attempts, the Plaintiffs commenced this suit, asserting 16 causes of action. Two days later, Plaintiffs sent a demand for arbitration to the AAA that included their complaint. Plaintiffs asked the circuit court to stay arbitration and sought summary judgment on the alleged invalidity of the arbitration clause. Defendants filed a counterdemand with the AAA. Defendants then asked the court to dismiss the action pursuant to Rule 12(b)(8), SCRCP, or, alternatively, to compel arbitration and stay the action. Following several hearings, the circuit court issued an order granting Plaintiffs’ motion to stay arbitration; denying Defendants’ motion to compel arbitration, in part because the arbitration agreement was unconscionable; and denying, without prejudice, Plaintiffs’ motion for partial summary judgment.

On appeal, Defendants sought answers on whether the circuit court erred in ruling on the arbitrability of the claims rather than reserving this determination for an arbitrator; in determining that an agreement to arbitrate does not exist between many of the parties; in finding that any agreements to arbitrate that do exist are invalid, unlawful, and unconscionable; and in determining that the South Carolina Uniform Arbitration Act applies. Plaintiffs questioned whether the circuit court erred in refusing to grant partial summary judgment to the Plaintiffs on their declaratory judgment claim.

Defendants appealed the circuit court’s refusal to compel arbitration and argued that the arbitration agreement contained in the Club Documents requires all claims in this case to be arbitrated. We held that the circuit court was the proper adjudicator to determine whether a valid agreement to arbitrate existed and the arbitration clause contained in the Club Documents is unconscionable and unenforceable.

We dismissed Plaintiffs’ appeal of the circuit court’s denial of its motion for summary judgment because, in South Carolina, “it is well-settled that an order denying summary judgment is never reviewable on appeal.” Bank of N.Y. v. Sumter County, 387 S.C. 147, 154, 691 S.E.2d 473, 477 (2010).

Affirmed.

315 Corley CW LLC v. Palmetto Bluff Development LLC (Lawyers’ Weekly No. 022-056-22, 12 pp.) (John D. Geathers, J.) Appealed from Beaufort County Circuit Court (R. Ferrell Cothran Jr., J.) Val S. Stieglitz, III, of Columbia, Robert Bruce Wallace, of Charleston, Kirsten Elena Small, of Greenville, and Alexandra Harrington Austin, of Charleston, all of Maynard Nexsen PC; and Donald Falk, admitted pro hac vice, of Schaerr Jaffe, LLP, of San Francisco, California, all for appellants/respondents. Ian S. Ford, Ainsley Fisher Tillman, and Hunter H. James, all of Ford Wallace Thomson LLC, of Charleston, for respondents/appellants. South Carolina Court of Appeals