Justice KITTREDGE.
This case arises from a construction dispute. The contract between the general contractor and subcontractor provided for arbitration pursuant to the Federal Arbitration Act. When a complaint was filed, Appellant Sean Barnes, the general contractor, and Appellant Wando E., the property owner, sought to enforce the construction contract's arbitration clause. The trial court refused to compel arbitration on the basis that the contract did not sufficiently impact interstate commerce. We find the trial court erred in finding the parties' transaction had an insufficient nexus to interstate commerce and reverse.
Appellant Wando E., LLC, owns property along the Wando River in Berkeley County, South Carolina. Wando E. retained Appellant Sean Barnes to serve as the general contractor for the construction of a marina. Barnes, in turn, hired Respondent Cape Romain as a subcontractor for the project. Barnes and Cape Romain entered into a standard form contract
Section 5.1 of the Contract requires an affirmative election among various methods of dispute resolution. Parties must select arbitration, litigation in court, or "other." Barnes and Cape Romain checked the box beside arbitration, selecting it as the binding method of dispute resolution for any subsequent claim. Specifically, article 21 of the Contract provides that all "[c]laims, disputes and other matters in question arising out of or relating to this Contract" shall be subject to arbitration. Further, section 19.2 of the Contract expressly provides that if arbitration is selected as the method of dispute resolution, the Federal Arbitration Act
Several months into construction, the project engineer refused to certify further payments, raising concerns about certain angled pilings and misaligned dock sections.
Appellants moved to dismiss and compel arbitration, arguing that because all of the claims relate to Cape Romain's performance under the Contract, the claims should be arbitrated. Cape Romain opposed dismissal and arbitration, arguing Wando E. was not a party to the Contract and, thus, may not compel arbitration and that the arbitration clause is not enforceable under the FAA because the transaction did not impact interstate commerce.
Appellants argue the trial court erred in finding the arbitration provisions of the Contract cannot be enforced because the parties' transaction did not involve interstate commerce. We agree.
We find arbitration pursuant to the FAA is proper because the underlying marina construction transaction falls within the purview of Congress's commerce power. "Generally, any arbitration agreement affecting interstate commerce... is subject to the FAA." Landers v. Federal Deposit Ins. Co., 402 S.C. 100, 108, 739 S.E.2d 209, 213 (2013) (citing
Under the reach of the Commerce Clause, "Congress has authority to regulate (1) `the use of the channels of interstate commerce,' (2) `the instrumentalities of interstate commerce, or persons or things in interstate commerce ...' and (3) `those activities having a substantial relation to interstate commerce.'" United States v. Gould, 568 F.3d 459, 470 (4th Cir.2009) (quoting United States v. Morrison, 529 U.S. 598, 609, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000)). "Channels of commerce are `the interstate transportation routes through which persons and goods move.'" United States v. Ballinger, 395 F.3d 1218, 1225 (11th Cir.2005) (quoting Morrison, 529 U.S. at 613 n. 5, 120 S.Ct. 1740) (noting channels of interstate commerce include highways, railroads, navigable waterways, airspace, telecommunications networks and even national securities markets). "Instrumentalities of interstate commerce, by contrast, are the people and things themselves moving in commerce...." Id. at 1226 (identifying automobiles, airplanes, boats, shipments of goods, pagers, telephones and mobile phones as instrumentalities of interstate commerce).
Here, despite noting the following facts, the trial court concluded the parties' transaction did not involve interstate commerce: (1) that certain raw materials used in constructing the marina originated in Ohio; (2) that Cape Romain transported the raw materials on its equipment and barges through the navigable waterways of the Charleston Harbor and up the Wando River to the project site; and (3) that the marina was constructed in navigable waterways under a permit issued by the Army Corps of Engineers. In analyzing the
We initially observe that the materials used in constructing the dock were instrumentalities of interstate commerce, as they were manufactured or fabricated in Ohio and transported to South Carolina to be used in constructing the marina. In addition, Cape Romain consulted with an out-of-state engineering and survey company in connection with the installation of the dock sections. This Court has previously held that incorporating out-of-state materials and consulting with out-of-state professionals in connection with a construction project
Regarding channels of interstate commerce, as noted, the construction site is located on the Wando River — i.e., within a channel of interstate commerce — as evidenced by the need for the Army Corps of Engineers to issue a federal permit before construction could begin.
Even if we were to view this case only through the third category of the federal commerce power — regulation of activities having a substantial relation to interstate commerce — the record demonstrates that the activities implicated in this marine construction project bear on interstate commerce in a
Because the transaction did involve interstate commerce, we turn to the question of whether arbitration should be compelled under the Contract.
"Arbitration is contractual by nature...." Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir.1995); see also Towles, 338 S.C. at 37, 524 S.E.2d at 843-44 ("Arbitration is available only when the parties involved contractually agree to arbitrate."). "`There is a strong presumption in favor of the validity of arbitration agreements because of the strong policy favoring arbitration.'" Bradley v. Brentwood Homes, Inc., 398 S.C. 447, 455, 730 S.E.2d 312, 316 (2012) (quoting Towles, 338 S.C. at 37, 524 S.E.2d at 844). "This policy [favoring arbitration], as contained within the Act, `requires courts to enforce the bargain of the parties to arbitrate.'" KPMG, LLP v. Cocchi, ___ U.S. ___, 132 S.Ct. 23, 25, 181 L.Ed.2d 323 (2011) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985)); see also Zabinski, 346 S.C. at 592, 553 S.E.2d at 116 ("`The FAA simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.'" (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989))). "[C]ourts must `rigorously enforce' arbitration agreements according to their terms, including terms that `specify with whom the parties choose to arbitrate their disputes,' and `the rules under which that arbitration will be conducted.'" Am. Exp. Co. v. Italian Colors
Section 19.2 of the Contract expressly invokes the FAA and such contractual provisions should be enforced in accordance with their unambiguous terms. See Dean Witter, 470 U.S. at 221, 105 S.Ct. 1238 (noting that the "preeminent concern" in construing arbitration agreements is to protect the contractual rights of the parties, which requires courts to enforce "rigorously" those terms upon which private parties have agreed); Muñoz, 343 S.C. at 538, 542 S.E.2d at 363-64 (holding an agreement that provides it shall be governed by the FAA is enforceable in accordance with its terms). We hold it was error to refuse to compel arbitration.
Initially, we note Cape Romain has never challenged the arbitrability of the mechanics' lien claim — only the applicability of the FAA. Moreover, the issues involved in Cape Romain's mechanics' lien claim against Wando E. are completely dependent on the breach of contract dispute between Cape Romain and Barnes. See Sea Pines Co. v. Kiawah Island Co., 268 S.C. 153, 159, 232 S.E.2d 501, 503 (1977) (observing that where no debt is owed under a construction contract, no mechanics' lien is proper); Glidden Coatings & Resins v. Suitt Const. Co., 290 S.C. 240, 244, 349 S.E.2d 89, 91 (Ct.App.1986) (finding the predicate for recovery under a mechanics' lien suit is the existence of an unpaid debt); Blackwell v. Blackwell, 289 S.C. 470, 472-73, 346 S.E.2d 731, 732-33 (Ct.App.1986) (noting that a lien is valid only to the extent the underlying obligation it secures is valid); Shelley Const. Co., Inc. v. Sea Garden Homes, Inc., 287 S.C. 24, 26, 336 S.E.2d 488, 489 (Ct.App.1985) (a mechanics' lien is given to secure payment of the debt due for labor performed or materials furnished during construction). Thus, we are able to determine "with positive assurance" that the mechanics' lien claim arises directly from the Contract and, therefore, is encompassed by the arbitration agreement. See Zabinski, 346 S.C. at 597, 553 S.E.2d at 118 ("[U]nless the court can say
As a final matter, the trial court found Wando E. could not compel arbitration because it was not a party or signatory to the Contract between Cape Romain and Barnes. While Wando E., as a non-contracting party, may lack standing to compel arbitration, Barnes certainly has standing to do so. Appellants are correct that, in any event, Wando E. could join arbitration, once compelled pursuant to Barnes' motion.
The Contract provides:
(emphasis added).
Applying state-law principles of contract interpretation, we find as a matter of law that Wando E. is an entity who is "substantially involved in a common question of law or fact whose presence is required if complete relief is to be accorded in arbitration." Therefore, under the unambiguous terms of the Contract between Barnes and Cape Romain, Wando E. may properly be joined as a party to the arbitration proceedings. See Auto-Owners Ins. Co. v. Carl Brazell Builders, Inc., 356 S.C. 156, 162, 588 S.E.2d 112, 115 (2003) ("When a contract is unambiguous, clear, and explicit, it must be construed according to the terms the parties have used."); B.L.G. Enters. v. First Fin. Ins. Co., 334 S.C. 529, 535, 514 S.E.2d 327, 330 (1999) (noting "[t]he court's duty is `limited to the interpretation of the contract made by the parties themselves'" (quoting C.A.N. Enters. v. S.C. Health & Human Servs. Fin. Comm'n, 296 S.C. 373, 378, 373 S.E.2d 584, 587 (1988))).
We therefore conclude the trial court erred in denying the motion to compel arbitration. Because arbitration will proceed, the trial court proceedings shall be stayed pending the outcome of arbitration. See Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir.2002) ("This stay-of-litigation provision is mandatory. A district court therefore has no choice but to grant a motion to compel arbitration where a valid arbitration agreement exists and the issues in a case fall within its purview.").
TOAL, C.J., BEATTY, HEARN, JJ., and Acting Justice JAMES E. MOORE, concur.