Justice BEATTY.
In a matter of first impression, the Court is asked to determine if an unsuccessful party in an arbitration proceeding may prevent the confirmation of an award by paying the award prior to the confirmation proceeding. The answer is no.
Diane Henderson ("Henderson") filed an action against Summerville Ford-Mercury, Inc. ("Dealer") alleging Dealer made misrepresentations to Henderson when she purchased a used vehicle. The circuit court granted Dealer's motion to compel arbitration, and an arbitrator found for Henderson on her claims for violation of the South Carolina Unfair Trade Practices Act ("UTPA") and the South Carolina Regulation of Manufacturers, Distributors, and Dealers Act ("Dealers Act").
Henderson visited Dealer and stated she was looking for a first vehicle for her daughter, and she stressed the importance of finding something safe and reliable. Henderson purchased a used 2003 Jeep Grand Cherokee from Dealer. The sales contract prepared by Dealer contained an arbitration provision that required any disputes to be submitted to binding arbitration that "shall be governed by the [FAA]."
After the purchase, Henderson experienced mechanical problems with the Jeep. She brought this action in the circuit court
The arbitrator issued an award of $18,875.71 to Henderson on her UTPA claim and $16,990.00 on her claim under the Dealers Act. In addition, the arbitrator awarded Henderson attorney's fees of $45,200.00 and costs of $3,076.39. The arbitrator denied Henderson's remaining claims and directed Henderson to elect one remedy from the two claims on which she had prevailed. Dealer did not move to vacate, modify, or correct the award.
Dealer refused to agree to a consent order to confirm the award. Henderson moved for confirmation of the award by the circuit court. In the interim, Dealer paid the award. At the confirmation hearing, Henderson noted the underlying action had been stayed pending arbitration and that it needed
Dealer maintained that it had paid the award "almost immediately, within weeks of the arbitrator's decision," so the matter was moot because the purpose of confirmation was to enter a judgment that could be enforced. Dealer asserted Henderson "recites the [UAA] which is irrelevant because we moved to compel arbitration under the [FAA], and that's the statute under which arbitration was ultimately granted."
The court inquired of Dealer, "[N]ow you just [] don't want the [judgment] reflected in the [judgment] rolls of the County?" Dealer responded that it did "agree that as a record keeping matter something has to happen with this case," but maintained that dismissal under Rule 41(a), SCRCP was appropriate. Dealer stated the only purpose for confirmation of the judgment would be to enforce collection and that putting the judgment on the record now would only serve to give it "a bad name in the public record[.]"
The circuit court confirmed the arbitration award based on Dealer's violation of UTPA. The court applied section 15-48-120 of the UAA, which provides:
S.C.Code Ann. § 15-48-120 (2005) (emphasis added). The circuit court found "[t]he use of the word `shall' shows that confirmation by the Court is mandatory, not discretionary." The court concluded the only time a court is not required to confirm the award is when a party establishes grounds to vacate, modify, or correct the award, and Dealer had made no such motion. The circuit court directed the clerk of court to register the award as a judgment and to mark it paid in full.
This Court may make its own ruling on a question of law without deferring to the circuit court. Crossmann Cmties. of N.C., Inc. v. Harleysville Mut. Ins. Co., 395 S.C. 40,
Dealer contends the circuit court erred (1) in applying the UAA confirmation procedure, and (2) in confirming the award where the matter was "not justiciable."
It is undisputed that the arbitration proceedings, which culminated in an award to Henderson, were conducted pursuant to the FAA. The parties disagree, however, over whether the circuit court erred by applying the court's confirmation procedure set forth in the UAA instead of the FAA. For reasons discussed below, we conclude that it does not matter which act is applied as the result would be the same. The circuit court referenced section 15-48-120 of the UAA, quoted in full above, in confirming the award. The corresponding provision in the FAA is found in section 9 of the act:
9 U.S.C.A. § 9 (2009) (emphasis added).
Initially, we note Dealer generally asserted at the hearing that the FAA applied rather than the UAA, but it did not
As to the merits, "[g]enerally, any arbitration agreement affecting interstate commerce ... is subject to the FAA." Landers v. Fed. Deposit Ins. Corp., 402 S.C. 100, 108, 739 S.E.2d 209, 213 (2013). "Unless the parties have contracted to the contrary, the FAA applies in federal or state court to any arbitration agreement regarding a transaction that in fact involves interstate commerce, regardless of whether or not the parties contemplated an interstate transaction." Munoz v. Green Tree Fin. Corp., 343 S.C. 531, 538-39, 542 S.E.2d 360, 363 (2001) (footnote omitted) (citing Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)).
The general rule is that the FAA does not preempt state
The one case cited by Dealer on this issue, Toler's Cove Homeowners Association v. Trident Construction Co., 355 S.C. 605, 586 S.E.2d 581 (2003), actually supports the application of the UAA here. In Toler's Cove, this Court observed, "There is no federal policy favoring arbitration under a certain set of procedural rules and the federal policy is simply to ensure the enforceability of private agreements to arbitrate." Id. at 611, 586 S.E.2d at 584 (emphasis added). The Court
In Morgan Keegan & Co. v. Smythe, No. W2010-01339-SC-R11-CV, 401 S.W.3d 595, 604-06 (Tenn.2013), the Supreme Court of Tennessee similarly concluded a provision in its state arbitration act, not the FAA, governed the appeal of orders confirming or vacating arbitration awards in state court. The court stated that, because this was a case involving interstate commerce heard in the Tennessee courts, both the FAA and the state UAA applied, which necessarily implicated the doctrine of preemption. Id. at 604-05. The court explained "[t]he [FAA] contains federal substantive law requiring the parties and the courts to honor arbitration agreements." Id. at 606. The court reasoned that the appeal provisions of the FAA were procedural, not substantive, and agreed with authority from other jurisdictions, including this state, which have held that state
In Swissmex-Rapid S.A. de C.V. v. SP Systems, L.L.C., 212 Cal.App.4th 539, 151 Cal.Rptr.3d 229, 233 (2013), the California appellate court considered the "threshold issue ... whether Section 9 of the FAA is procedural in nature, and therefore applicable only to federal court proceedings, or whether Section 9 is substantive, so as to be applicable in a state court proceeding to confirm an arbitration award." Citing the United States Supreme Court's decision in Volt, 489 U.S. at 477 n. 6, 109 S.Ct. 1248, the court stated, "While the substantive provisions of the FAA apply in state as well as federal court proceedings, the FAA's procedural provisions apply only in federal court." Id. The court also noted the FAA preempts
In the current appeal, although the arbitration agreement stated the FAA would apply to the arbitration, it did not expressly state the FAA would apply to the subsequent procedure for confirmation once a final award was made. However, this is not a concern because the outcome would be the same. A similar situation occurred in White v. Siemens, 369 S.W.3d 911 (Tex.App.2012). The Texas Court of Appeals considered an arbitration provision that stated the matter shall be governed by the FAA. Id. at 915. The court noted, "[h]owever, [that] the agreement did not expressly mention whether the FAA applied to confirmation of the award." Id. Siemens moved for confirmation of the arbitration award under the Texas General Arbitration Act (TAA), and the opposing parties asserted the FAA applied. Id. In resolving the dispute, the court "note[d] that the FAA and the TAA are not mutually exclusive" and observed the FAA preempts only contrary state law. Id. The court stated, "Even where the FAA applies to substantive issues, we apply Texas law to procedural issues in arbitration proceedings." Id. (emphasis added). The court ultimately found it need not determine whether the confirmation statute was procedural or substantive, however, because the result to confirm the award would be the same under either act since both mandated confirmation unless the statutory grounds were established for vacating, modifying, or correcting the award. Id. at 915-16.
Based on the foregoing, we hold section 9 of the FAA applies only in federal court and that the circuit court did not err in applying the UAA's confirmation provision in the matter before this Court because the confirmation statute is procedural, not substantive. The FAA's substantive provisions apply to arbitration in federal or state courts, but a state's procedural rules apply in state court unless they conflict with or undermine the purpose of the FAA. Moreover, we find the outcome would be the same under either the FAA or the UAA, as both mandate confirmation unless grounds were established for vacating, modifying, or correcting the award,
In Swissmex, the appellate court did note one difference in the FAA, which is that 9 U.S.C.A. § 9 requires the parties' arbitration agreement to specify that they consent to the entry of judgment for any award obtained. Swissmex, 151 Cal. Rptr.3d at 235. However, as noted in Swissmex, even if the FAA's confirmation procedure applied, the parties could be deemed to have consented to entry of a judgment based on their agreement to apply the rules of the American Arbitration Association ("AAA"), as those rules are deemed incorporated into the contract and specifically provide the parties agree to entry of a judgment. Id. at 235-36.
Having found the UAA applies, we consider Dealer's further contention that the circuit court erred in confirming the arbitration award because its payment mooted the request, leaving no "justiciable controversy." This is a novel question in this state.
We find Dealer's argument to be without merit. Dealer concedes Henderson's underlying case had to be concluded in some fashion, as it was stayed pending arbitration. At the hearing in this matter, Dealer asserted the case should be dismissed under Rule 41(a), SCRCP. Henderson correctly argued that Rule 41(a) applies to voluntary dismissals and was not applicable here.
Confirmation is not a separate judicial process; it is merely a continuation of the arbitration procedure. See generally 6 C.J.S. Arbitration § 181 (2004) (stating a proceeding for confirmation of an arbitration award is not a trial or a separate proceeding, and generally, the only courses of action open to the court are limited to the statutory grounds for review, such as to confirm the award, correct then confirm the award, vacate the award, or to dismiss the proceeding, and dismissal "may ... be granted only when the court determines that the petitioner or the respondent is not bound by the arbitration award and is not a party to the arbitration" (emphasis added)).
Dealer filed no motion to vacate, modify, or correct the award, which are the prescribed statutory exceptions for avoiding confirmation of an award. We reject Dealer's assertion that payment of the award has somehow made the matter "nonjusticiable." Confirmation of an award is a distinguishable issue from a defendant's payment or satisfaction of an award.
We find confirmation is required by the UAA's statutory procedure governing confirmation. Both the UAA and the FAA use the words "shall" or "must" in directing that an award be confirmed upon application in the absence of a motion to vacate, modify, or correct the award, and such language is mandatory. See, e.g., Wigfall v. Tideland Utils., Inc., 354 S.C. 100, 111, 580 S.E.2d 100, 105 (2003) ("The term `shall' in a statute means that the action is mandatory."); Collins v. Doe, 352 S.C. 462, 470, 574 S.E.2d 739, 743 (2002) ("Under the rules of statutory interpretation, use of words such as `shall' or `must' indicates the legislature's intent to enact a mandatory requirement.").
We conclude the recordation of an arbitration award is a ministerial act that is a basic part of the arbitration process, not a new judicial proceeding that would require a different justiciable issue. Confirmation is mandatory unless the opposing party has established statutory grounds to vacate, modify, or correct the award. The payment or satisfaction of an award is a distinguishable issue from its recordation, and payment does not moot a confirmation request. We further conclude the UAA's confirmation statute applies to this procedural matter in state court. Consequently, we affirm the circuit court's confirmation of the arbitration award.
TOAL, C.J., PLEICONES, KITTREDGE and HEARN, JJ., concur.