Tuesday, April 24, 2007

S.C. Supreme Court further restricts the right to arbitration

In Aiken v. World Finance Corporation, the Supreme Court again dealt with arbitration issues and continued its recent trend in restricting arbitration. At base, Aiken had contracted with World Finance for a loan. Under the contract, all disputes arising out of or related to Aiken's relationship with World Finance were subject to arbitration. After the loans were paid off, several World Finance employees conspired to use the personal information provided by Aiken and other clients to obtain sham loans and embezzle the proceeds for the employees’ personal benefit. Aiken sued World Finance and World Finance moved to compel arbitration.

The South Carolina Supreme Court held that arbitration was not the proper venue of the case and announced the following rule: "this Court will refuse to interpret any arbitration agreement as applying to outrageous torts that are unforeseeable to a reasonable consumer in the context of normal business dealings."

The Court reasoned as follows:

In this case, we find the theft of Aiken’s personal information by World Finance employees to be outrageous conduct that Aiken could not possibly have foreseen when he agreed to do business with World Finance. Consequently, in signing the agreement to arbitrate, Aiken could not possibly have been agreeing to provide an alternative forum for settling claims arising from this wholly unexpected tortious conduct. Accordingly, we hold that Aiken’s claims for unanticipated and unforeseeable tortious conduct by World Finance’s employees are not within the scope of the arbitration agreement with World Finance.

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