South Carolina Court of Appeals Diverges from Damico Opinion, Sending Recent Construction Defects Cases to Arbitration

September 2023

Could the latest opinion from the South Carolina Court of Appeals be the distant ringing of a death knell for runaway construction defects verdicts? On the heels of the Damico ruling earlier this year, the courts have issued several opinions distinguishing various arbitration agreements from the one analyzed in Damico and have sent subsequent cases to arbitration.

This summer, the Supreme Court and Court of Appeals compelled arbitration in Cleo Sanders v. Savannah Highway Automotive Company, et al. Appellate Case No. 2021-000137 / Opinion No. 28168 (petition for rehearing pending) and Joseph Abruzzo v. Bravo Media Productions, et al. Appellate Case No. 2020-001095 / Opinion 6004. Now, in the matter of Jonathan Mart, on behalf of himself and others similarly situated, Respondent, v. Great Southern Homes, Inc., Appellant, Appellate Case No. 2018-001598, the Court of Appeals reversed the circuit court's order denying a homebuilder’s motion to dismiss and compelled arbitration in this action, which was brought by the homeowner, individually and on behalf of other similarly situated homeowners. 

Looking solely at the sales contract between the buyer and homebuilder, the Court of Appeals distinguished Damico from the case at hand, finding that “the arbitration provision in the [sales contract]—standing alone—contains no such oppressive or unconscionable term.” The key issue is looking only at the arbitration provision, not the entire contract. Importantly, the court reiterated language from Damico noting, “…while the Sales Contract here is certainly an adhesion contract, a 'take-it-or-leave' it contract of adhesion is not necessarily unconscionable, even though it may indicate one party lacked a meaningful choice. Rather, to constitute unconscionability, the contract terms must be so oppressive that no reasonable person would make them and no fair and honest person would accept it.”

Questions as to 1) the validity of a provision requiring a home buyer to waive the implied warranty of habitability without separate consideration and 2) the validity of the homebuilder’s effort to transfer its warranty obligations to a third party upon the closing of the transaction have also been raised but not yet been discussed. Presumably, the answers to these questions will be determined by the arbiter. Could we see a difference between arbiters' willingness to award plaintiffs punitive damages versus the jury verdicts of the past? The outcome remains to be seen. We will continue to provide further updates as developments occur.

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