Hensley v. Garrett ( 2010 )

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Billy Hensley, Respondent,

v.

Carolina First Investments, Inc. and James T. Garrett, Jr., President, Defendants,

Of whom James T. Garrett, Jr. is Appellant.

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Appeal From York County
S. Jackson Kimball, III, Circuit Court Judge

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Unpublished Opinion No. 2010-UP-345
Submitted March 1, 2010 – Filed June 30, 2010

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AFFIRMED

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Richard A. Harpootlian, of Columbia, for Appellant.

Daniel D. D'Agostino, of York, for Respondent.

PER CURIAM: James T. Garrett appeals the trial court's order denying his motion to compel arbitration.  We affirm.[1] 

FACTS/PROCEDURAL HISTORY

Billy Hensley brought this action against Garrett and Carolina First Investments, of which Garrett was the President, on June 21, 2005.  He asserted causes of action for negligence and violation of the South Carolina Unfair Trade Practices Act arising from Garrett's advice to invest his retirement funds with Thaxton Life Partners, Inc., which has since filed for bankruptcy.  Garrett filed a pro se answer on September 4, 2005, asserting several affirmative defenses and a counterclaim. 

On October 11, 2005, Garrett served a motion to dismiss/stay action and compel arbitration.  He asserted he was entitled to arbitration under the "Senior Subordinated Term Note Subscription Agreement" Hensley signed when purchasing the note of Thaxton Life Partners.  The trial court denied the motion, finding Garrett was not a party to the contract that provided for arbitration.  Garrett filed a timely motion to alter or amend. 

Prior to the hearing on the motion, the parties entered into an agreement in which Garrett withdrew his motion to alter or amend and agreed to not appeal the court's order denying his motion to compel arbitration.  The parties agreed neither party would take the deposition of the other prior to Garrett's trial date for charges of securities fraud and criminal conspiracy arising from his dealings with Thaxton Life Partners.  The trial court incorporated the parties' agreement into an order filed June 2, 2006. 

The parties proceeded with discovery, exchanging and responding to interrogatories and requests to produce.  In addition, the depositions of three witnesses were scheduled, but these depositions were cancelled when the witnesses asserted their rights against self-incrimination pursuant to the Fifth Amendment of the United States Constitution.  Hensley filed a motion for summary judgment on liability, which the court denied on March 4, 2008.  

Garrett then filed a motion to compel arbitration on March 12, 2008.  In the motion, Garrett asserted he had found two cases from the Fourth Circuit Court of Appeals in which the court held third parties to Thaxton Life Partners' "Senior Subordinated Term Note Subscription Agreement"[2] could enforce the agreement's arbitration provision.    

The trial court denied the motion.  It found Garrett had waived his right to compel arbitration in the order of June 2, 2006 in which he withdrew his motion to alter or amend and agreed to not appeal the court's decision denying arbitration.  In addition, the court found Garrett had waived arbitration due to his actions in the course of the litigation.  Garrett filed a motion to alter or amend, which the court denied.  This appeal followed. 

STANDARD OF REVIEW

The determination of whether a party waived its right to arbitrate is a legal conclusion subject to de novo review.  Rhodes v. Benson Chrysler-Plymouth, 374 S.C. 122, 125, 647 S.E.2d 249, 250 (Ct. App. 2007).  However, the trial court's factual findings underlying that conclusion will not be reversed if any evidence reasonably supporting them.  Id. at 125-26, 647 S.E.2d at 250-51.

LAW/ANALYSIS

Garrett argues the trial court erred in holding he had waived arbitration.  We disagree. 

The right to enforce an arbitration clause may be waived.  Liberty Builders, Inc. v. Horton, 336 S.C. 658, 665, 521 S.E.2d 749, 753 (Ct. App. 1999).  "There is no set rule as to what constitutes a waiver of the right to arbitrate; the question depends on the facts of each case."  Id.

Generally, the factors our courts consider to determine if a party waived its right to compel arbitration are:  (1) whether a substantial length of time transpired between the commencement of the action and the commencement of the motion to compel arbitration; (2) whether the party requesting arbitration engaged in extensive discovery before moving to compel arbitration; and (3) whether the non-moving party was prejudiced by the delay in seeking arbitration.  These factors, of course, are not mutually exclusive, as one factor may be inextricably connected to, and influenced by, the others.

Rhodes v. Benson Chrysler Plymouth, 374 S.C. 122, 126, 647 S.E.2d 249, 251 (Ct. App. 2007).

Garrett waived arbitration by withdrawing his motion to alter or amend the trial court's original order denying arbitration and agreeing to not appeal the order.  Garrett asserts he should not be deemed to have waived his right to arbitration because he did not possess knowledge of all of the material facts when he entered into the agreement as he was unaware the Fourth Circuit Court of Appeals would later find the arbitration agreement enforceable by third parties.  We find this contention is without merit.  See Janasik v. Fairway Oaks Villas Horizontal Prop. Regime, 307 S.C. 339, 344, 415 S.E.2d 384, 387-88 (1992) ("Generally, the party claiming waiver must show that the party against whom waiver is asserted possessed, at the time, actual or constructive knowledge of his rights or of all the material facts upon which they depended."). The Fourth Circuit's opinions did not alter the material facts of the case or the circumstances surrounding Garrett's waiver of arbitration.  They are merely judicial decisions contradicting the trial court's original order.  It was incumbent upon Garrett to timely appeal that order and prove to the appellate court the trial court's ruling was in error.  Instead, Garrett agreed to forgo his appeal and proceed with the litigation process. 

Over two and a half years passed between the commencement of this lawsuit and Garrett's current motion to compel arbitration.   During the course of the litigation, both parties submitted and responded to interrogatories and requests to produce.  In addition, Hensley filed two motions for summary judgment.  Thus, Hensley was prejudiced by Garrett's delay in seeking arbitration due to the time and expense incurred in engaging in discovery and preparing his motions for summary judgment. 

We conclude the trial court did not err in holding Garrett waived arbitration.  Accordingly, the trial court's order denying Garrett's motion to compel arbitration is

AFFIRMED.

HUFF, THOMAS and KONDUROS, JJ., concur. 

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[1] We decide this case without oral argument pursuant to Rule 215, SCACR.

[2] Am. Bankers Ins. Group v. Long, 453 F.3d 623 (4th Cir. 2006); Kirsh v. Finova Group, 2007 WL 4481158 (4th Cir. 2007).  Hensley was a party in the Kirsh case.