• office locations
    Bluffton, SC map
    Bluffton, SC Office
    The Plaza at Belfair
    4 Clarks Summit Drive
    Suite 200 | Bluffton, SC 29910-4993
    843.815.2171  Main | 843.815.5991  Fax
    Charleston, SC map
    Charleston, SC Office
    100 Calhoun Street
    Suite 400 | Charleston, SC 29401
    843.723.7831  Main | 843.722.3227  Fax
    Charlotte, NC map
    Charlotte, NC Office
    Bank of America Plaza
    101 South Tryon Street
    Suite 2610 | Charlotte, NC 28280
    704.347.1170  Main | 704.347.4467  Fax
    Columbia, SC map
    Columbia, SC Office
    1221 Main Street
    Suite 1800 | Columbia, SC 29201
    803.799.9800  Main | 803.753.3278  Fax
    Greenville, SC map
    Greenville, SC Office
    Poinsett Plaza
    104 South Main Street
    Suite 700 | Greenville, SC 29601
    864.271.4940  Main | 864.271.4015  Fax
    Hilton Head Is., SC map
    Hilton Head Island, SC Office
    Shelter Cove Executive Park
    23-B Shelter Cove Lane
    Suite 400 | Hilton Head Island, SC 29928
    843.785.2171  Main | 843.686.5991  Fax
    Myrtle Beach, SC map
    Myrtle Beach, SC Office
    Founders Centre
    2411 Oak Street
    Suite 206 | Myrtle Beach, SC 29577
    843.444.1107  Main | 843.444.4729  Fax
    Pawleys Island, SC map
    Pawleys Island, SC Office
    11019 Ocean Highway
    Pawleys Island, SC 29585
    843.235.4100  Main | 843.235.4101  Fax
  • contact us
      No   Yes  

News Room


Victory for Large Home Builders: South Carolina Federal Court Rejects Class ArbitrationFebruary 2, 2017

Related Information



On February 1, 2017, a federal district court in South Carolina ruled that a standard arbitration agreement between a national homebuilder and purchaser does not permit the purchaser to pursue class arbitration. This appears to be the first decision in South Carolina ruling that when an arbitration agreement does not address class arbitration, class arbitration is not available.

Whether a consumer can force class arbitration has been hotly contested for the past 15 years. In 2003, the Supreme Court of the United States took up the issue in Green Tree Financial Corp. v. Bazzle, but failed to reach a majority decision, instead issuing an opinion joined by only four of nine justices that an arbitrator, rather than a judge, should decide whether class arbitration is available. Since then, many businesses have been forced to defend class arbitration attempts, even though class arbitration was never intended or agreed to. Many of these cases had questionable underlying merits, but resulted in exorbitant settlements because of the inherent risks involved in class arbitration. More recently, the Supreme Court has released opinions recognizing some of the marked differences between ordinary two-party arbitration and class arbitration, casting doubt on the validity of the Bazzle plurality opinion.

Following these more recent cases, Del Webb and PulteGroup argued to the U.S. Court of Appeals for the Fourth Circuit, the regional court of appeals hearing cases from South Carolina, that because arbitration can only be required upon prior consent, a judge not an arbitrator should decide whether parties agreed to allow for class arbitration. The Fourth Circuit agreed. In an opinion last year, Del Webb Communities, Inc. v. Carlson, the Fourth Circuit held the Court, not an arbitrator, must decide whether class arbitration is permitted. Plaintiffs sought review by the Supreme Court of the United States, which declined to hear the case. The Fourth Circuit remanded the case to the district court with specific instructions to decide whether the underlying arbitration agreement allowed for class arbitration.

On remand, Del Webb and PulteGroup argued to the district court that the lack of any reference to class arbitration, together with the agreement’s otherwise bilateral language, signaled the parties did not agree to class arbitration. The Court agreed and held Del Webb could not be forced to submit to class arbitration. The Court, therefore, compelled the purchaser to arbitrate individually with Del Webb, not on a class action basis.

Vic Rawl, Jr., lead counsel for Del Webb and chair of McNair Law Firm’s Class Action Practice Group, stated “the Fourth Circuit’s opinion and the district court’s decision in Carlson are major victories for homebuilders and other businesses that regularly contract for arbitration with consumers because they decline to subject such businesses to class arbitration unless the businesses clearly agreed to it.” As the Supreme Court has noted, the primary benefits of arbitration-low-cost, speed, efficiency, and confidentiality-are lost if consumers are permitted to bring class actions in arbitration, as class actions are by necessity lengthy, expensive, and public. Moreover, because arbitrators’ decisions are generally insulated from appellate review, a class action arbitrator can order staggeringly large arbitration awards without any effective means of review. Indeed, in the Carlson case, the plaintiff sought to represent a class of thousands of homeowners purportedly claiming over five hundred million dollars in damages. 

The federal courts’ decisions in Carlson firmly reject the notion that class arbitration can be imposed on a defendant without their express consent. While these rulings are a victory for businesses that utilize consumer arbitration provisions, it remains best practice to update all arbitration clauses to expressly provide that arbitration may only proceed on a bilateral basis and that class arbitration is expressly not permitted.

Vic Rawl, Jr.Hal Frampton, and Robert Widener of McNair Law Firm, P.A. represented Del Webb Communities, Inc. and PulteGroup, Inc. in the Carlson cases. Mr. Rawl and Mr. Frampton regularly defend large builders and other businesses in class actions in South Carolina courts and in arbitration, and they consult regarding class action strategy nationally. Mr. Widener regularly consults on appellate matters in South Carolina.

For questions, please contact the author of this alert, A. Victor Rawl, Jr., a member of the firm's class action and litigation practice groups.