Petition for Writ of Certiorari — Lennar Carolinas, LLC, Petitioner v. Patricia Damico, et al.

No. ____

IN THE

Supreme Court of the United States

____________________

LENNAR CAROLINAS, LLC,

Petitioner,

v.

PATRICIA DAMICO, ET AL.,

Respondents.

____________________

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the South Carolina Supreme Court

____________________

PETITION FOR A WRIT OF CERTIORARI

____________________

David Marroso

Daniel Cooper

O’MELVENY & MYERS LLP

1999 Avenue of the Stars

Los Angeles, CA 90067

(310) 553-6700

Jonathan D. Hacker

Counsel of Record

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

jhacker@omm.com

Attorneys for Petitioner

i

QUESTION PRESENTED

Under the Federal Arbitration Act (“FAA”), an

agreement to arbitrate “shall be valid, irrevocable,

and enforceable, save upon such grounds as exist at

law or in equity for the revocation of any contract.” 9

U.S.C. § 2. This Court’s precedents have repeatedly

held that the FAA embodies an equal-treatment or

anti-discrimination rule that prohibits states from applying state law rules that accord “suspect status” to

arbitration agreements or otherwise treat them differently from other contractual agreements. In this

case, however, the Supreme Court of South Carolina

reviewed a contractual arbitration agreement under

an adverse presumption that requires courts to view

arbitration provisions in consumer homebuying contracts with “considerable doubt” and “considerable

skepticism.”

The question presented is:

Whether the Federal Arbitration Act prohibits

courts from applying a state-law presumption expressly disfavoring enforcement of arbitration provisions in consumer homebuying contracts, when applicable state law does not subject other contractual

agreements to the same adverse presumption.

ii

PARTIES TO THE PROCEEDING

Petitioner is Lennar Carolinas, LLC.

Respondents are Patricia Damico; Brettany Buetow; Joshua Buetow; Bryant Camara; Cynthia Camara; Matthew Collins; Jonathan Douglass; Theresa

Douglass; Chad England; Czara England; Lenna Lucas; Danny Morrow; Ellen Davis Morrow; A.C.& A.

Concrete, Inc.; Alpha Omega Construction Group,

Inc.; Builders Firstsource-Southeast Group, LLC;

Civil Site Environmental; Coastal Concrete Southeast II, LLC; Coastal Concrete Southeast, LLC; Construction Applicators Charleston, LLC; Decor Corporation; Edward Dengg; Sylvia Dengg; DVS, Inc.;

Guaranteed Framing, LLC; Knight’s Concrete Products, Inc.; LA New Enterprises, LLC; Land/Site Services, Inc.; Manale Landscaping, LLC; Ozzy Construction, LLC; Raul Martinez Masonry, LLC; Anthony

Ray; Stacey Ray; South Carolina Exteriors, LLC;

Southern Green, Inc.; Spring Grove Plantation Development, Inc.; Super Concrete of SC, Inc.; TJB Trucking/Leasing, LLC; Volkmar Consulting Services, LLC;

Knight’s Redi-Mix, Inc.; and Myers Landscaping, Inc.

RULE 29.6 DISCLOSURE

Lennar Carolinas, LLC, is not a publicly held company. Its sole member is Lennar Homes, LLC, which

is not publicly held. Lennar Homes, LLC’s sole member is U.S. Home, LLC, which is not publicly held.

U.S. Home, LLC’s sole member is Lennar Corporation. Lennar Corporation is a publicly owned corporation. No publicly-held company owns ten percent or

more of Lennar Corporation’s stock.

iii

RELATED PROCEEDINGS

Patricia Damico, et al., v Lennar Carolinas, LLC

et al., No. 2014CP0802424, Court of Common Pleas of

South Carolina, Ninth Judicial Circuit, Berkeley

County, Judgment entered September 21, 2016.

Patricia Damico, et al., v Lennar Carolinas, LLC

et al., Court of Appeals of South Carolina, Appellate

Case No. 2016-002339, Judgment entered June 10,

2020.

Patricia Damico, et al., v Lennar Carolinas, LLC

et al., Appellate Case No. 2020-001048, the Supreme

Court of South Carolina, Judgment entered September 14, 2022.

iv

TABLE OF CONTENTS

Page

QUESTION PRESENTED ....................................... i

PARTIES TO THE PROCEEDING ......................... ii

RULE 29.6 DISCLOSURE ...................................... ii

RELATED PROCEEDINGS ................................... iii

PETITION FOR A WRIT OF CERTIORARI .......... 1

OPINIONS BELOW ................................................. 1

JURISDICTION ....................................................... 1

STATUTORY PROVISIONS INVOLVED .............. 1

STATEMENT ........................................................... 2

A. Factual Background ...................................... 3

B. Procedural Background ................................. 4

REASONS FOR GRANTING CERTIORARI ........ 11

A. The South Carolina Supreme Court

Decision Expressly Relies On An AntiArbitration Presumption In Direct

Conflict With This Court’s FAA

Precedents ................................................... 12

B. The South Carolina Supreme Court’s

Decision Conflicts With Other State

Supreme Court And Federal Circuit

Decisions Properly Enforcing The FAA’s

Anti-Discrimination Rule ............................ 17

C. Enforcement Of The FAA’s Antidiscrimination Rule Is An Important

Issue Well Presented In This Case ............. 19

v

TABLE OF CONTENTS

(continued)

Page

CONCLUSION ....................................................... 21

APPENDIX A: Opinion of the South Carolina

Supreme Court (Sept. 14. 2022) ........................ la

APPENDIX B: Opinion of the Sout.11 Carolina Court of Appeals (June 10. 2020) ........... 37a

APPENDIX C: Order Denying Motion to Compel Arbitration from the County of Berkeley, Court of Common Pleas, Ninth Judicial Circuit (Sept,. 19, 2016) .......................... 50a

APPENDIX D: Order Denying Rehearing of

the South Carolina Supreme Court (Nov.

17, 2022) ......................................................... 79a

APPENDIX E : Relevant. Statutory Provision .. 82a

APPENDIX F: Excerpt. from Lennar Carolinas, LLC Purchase and Sale Agreement ....... 83a

vi

TABLE OF AUTHORITIES

Page(s)

CASES

Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265 (1995) ........................................... 20

AT&T Mobility LLC v. Concepcion,

563 U. S. 333 (2011) .................................... 13, 14

Cir. City Stores, Inc. v. Adams,

532 U.S. 105 (2001) ........................................... 12

Dean Witter Reynolds, Inc. v. Byrd,

470 U.S. 213 (1985) ............................................. 9

Dr.’s Assocs., Inc. v. Casarotto,

517 U.S. 681 (1996) ............................... 12, 13, 16

Fanning v. Fritz's Pontiac-Cadillac-Buick, Inc.,

472 S.E.2d 242 (S.C. 1996) ................................. 7

Jorja Trading, Inc. v. Willis,

598 S.W.3d 1 (Ark. 2020) .................................. 18

Kindred Nursing Ctrs. Ltd. P’ship v. Clark,

581 U.S. 246 (2017) ....................11, 12, 14, 15, 19

KPMG LLP v. Cocchi,

565 U.S. 18 (2011) ............................................. 19

Laster v. AT&T Mobility LLC,

584 F.3d 849 (9th Cir. 2009)............................. 13

Marmet Health Care Ctr., Inc. v. Brown,

565 U.S. 530 (2012 ...................................... 17, 19

Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights

Comm’n,

138 S. Ct. 1719 (2018)....................................... 16

vii

TABLE OF AUTHORITIES

(continued)

Page(s)

Mortensen v. Bresnan Commc’ns, LLC,

722 F.3d 1151 (9th Cir. 2013)..................... 17, 18

Nitro-Lift Techs., L.L.C. v. Howard,

568 U.S. 17 (2012) ............................................. 19

Perry v. Thomas,

482 U.S. 483 (1987) ............................... 12, 14, 17

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395 (1967) ............................................. 4

Scherk v. Alberto-Culver Co.,

417 U.S. 506 (1974) ........................................... 12

Simpson v. MSA of Myrtle Beach, Inc.,

644 S.E.2d 663 (S.C. 2007) ........................... 8, 15

THI of N.M. at Hobbs Ctr., LLC v. Patton,

741 F.3d 1162 (10th Cir. 2014)......................... 18

Viking River Cruises, Inc. v. Moriana,

142 S. Ct. 1906 (2022)................................... 9, 13

Virgil v. Sw. Miss. Elec. Power Ass'n,

296 So. 3d 53 (Miss. 2020) ................................ 18

STATUTES

28 U.S.C §1257(a)..................................................... 1

9 U.S.C. § 16(a)(1)(C) ............................................... 1

9 U.S.C. § 2 ................................................... 1, 11, 13

OTHER AUTHORITIES

17A Am. Jur. 2d Contracts § 272 (2016) ................. 7

PETITION FOR A WRIT OF CERTIORARI

Petitioner Lennar Carolinas, LLC., respectfully

petitions for a writ of certiorari to review the judgment of the Supreme Court of South Carolina in this

case.

OPINIONS BELOW

The opinion of the Court of Common Pleas of South

Carolina is unreported but available at 2016 WL

11549619 and reprinted at App. 50a. The opinion of

the Court of Appeals of South Carolina is reported at

844 S.E.2d 66 and reprinted at App. 37a. The opinion

of the Supreme Court of South Carolina is reported at

879 S.E.2d 746 and reprinted at App. 1a.

JURISDICTION

The Supreme Court of South Carolina filed its

opinion on September 14, 2022. The Supreme Court

of South Carolina denied petitioner’s timely motion

for rehearing on November 17, 2022. On February 2,

2023, the Chief Justice extended the deadline for filing this petition to February 22, 2023. This Court has

jurisdiction under 28 U.S.C §1257(a). See also 9

U.S.C. § 16(a)(1)(C) (authorizing immediate interlocutory review of order refusing to compel arbitration).

STATUTORY PROVISIONS INVOLVED

Section 2 of the Federal Arbitration Act (“FAA”), 9

U.S.C. § 2, provides in relevant part:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract

2

or transaction, or the refusal to perform the

whole or any part thereof, or an agreement in

writing to submit to arbitration an existing

controversy arising out of such a contract,

transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds

as exist at law or in equity for the revocation of

any contract[.]

STATEMENT

Every year, thousands of home buyers sign contracts agreeing to resolve disputes with builders

through arbitration. This case is about whether

states may apply rules disfavoring enforcement of arbitration provisions that appear in consumer homebuyer contracts. The answer is no, as this Court’s

precedents have made clear time and again. Lower

courts, however, continue to resist the message, as the

decision below illustrates in unusually explicit terms.

In determining whether the arbitration agreement at

issue here is “unconscionable,” the South Carolina Supreme Court expressly applied a strong anti-arbitration presumption that places a heavy fist on the scale

against enforcement of arbitration agreements in

homebuying contracts.

The decision directly contravenes the FAA’s foundational principle that courts cannot accord suspect

status to arbitration agreements or otherwise treat

them differently from other contractual agreements.

And it directly conflicts with myriad precedents of

this Court and others articulating and applying that

anti-discrimination rule. Certiorari is warranted to

reinforce the lower courts’ obligation to enforce the

FAA and faithfully apply the precedents of this Court.

3

A. Factual Background

Plaintiffs below and primary respondents in this

Court are several individuals (the “Owners”) who own

houses constructed and sold to them by petitioner

Lennar Carolinas, LLC (“Lennar”). The houses at issue are in a community known as The Abbey at

Spring Grove Plantation (“The Abbey”) in Berkeley

County, South Carolina. Lennar purchased several

homesites at The Abbey from their previous owner,

Spring Grove Development.

Between January 2011 and May 2013, each Owner

entered into an individual contract (the “Purchase

and Sale Agreement”) with Lennar for the purchase

of a lot and the construction of a home in The Abbey.

Each Purchase and Sale Agreement contains an arbitration provision requiring the Owner to arbitrate

any claims arising out of Lennar’s construction of a

home in The Abbey. This provision is separately numbered as § 16 and bears the heading “Mediation/Arbitration of Disputes.”

By purchasing homes in The Abbey, the Owners

also became party to three other agreements with

Lennar: (1) covenants filed by the previous owner of

the land (the “Covenants”), (2) the Lennar Warranty,

and (3) the individual deeds (the “Deeds”). Each of

these agreements also includes an arbitration provision, but they are not directly at issue here, for reasons explained in the next section.

4

B. Procedural Background

On December 12, 2014, the Owners filed a complaint in the South Carolina Court of Common Pleas

against Lennar, Spring Grove Development, and certain subcontractors (“respondents by rule” in this

Court), asserting various claims based on alleged construction defects in the homes. Lennar moved to compel arbitration under the FAA, arguing that the Owners’ claims were subject to the arbitration provisions

in their various contracts, including each Owner’s respective Purchase and Sale Agreement. The Court of

Common Pleas of South Carolina denied Lennar’s motion, holding that when all the arbitration provisions

in the Purchase and Sale Agreements, Covenants,

and Deeds, are read together along with the entire

Lennar Warranty, the overall contractual arrangement was unconscionable, precluding enforcement of

the specific arbitration provisions within the contracts. App. 53a-71a.

Lennar appealed, and the Court of Appeals of

South Carolina reversed, ordering the Owners’ claims

against Lennar to arbitration. The Court of Appeals

found that the operative arbitration agreement between the Owners and Lennar was limited to the arbitration provision in § 16 of the Purchase and Sale

Agreement, and that the FAA mandated enforcement

of the provision. App. 46a-49a. The Court of Appeals

held that the trial court had improperly invalidated

the arbitration provision based on defects in the rest

of the agreements, rather than severing the provision

and analyzing it separately as required by Prima

Paint Corp. v. Flood & Conklin Manufacturing Co.,

388 U.S. 395 (1967), and its progeny. App. 46a-48a.

5

The Owners appealed to the South Carolina Supreme Court. Their sole argument on appeal was that

the Prima Paint severability doctrine did not apply

and that the unconscionability of the overall contractual arrangement precluded enforcement of § 16 specifically. The Supreme Court disagreed, affirming the

Court of Appeals’ ruling that under Prima Paint, the

court was required to determine whether § 16 was unconscionable when viewed on its own terms, leaving

for the arbitrator to determine whether other provisions rendered the overall agreement unenforceable.

App. 6a-8a.

The court did not, however, affirm the Court of Appeals’ decision and compel arbitration on that basis.

The South Carolina Supreme Court instead reached

out to reverse and bar arbitration on a ground the

Owners had not raised. Having correctly held that

§ 16 must be examined on its own terms, the court

conducted that examination sua sponte and concluded that the provision by itself was unconscionable

and unenforceable. App. 16a-36a.

The court objected in particular to two subparts of

the provision, §§ 16.4 and 16.5. App. 23a-25a. Section

16.4 qualifies the basic arbitration agreement set

forth in § 16.1, and provides in full:

The waiver or invalidity of any portion of thisSection shall not affect the validity or enforceability of the remaining portions of this Section. Buyer and Seller further agree (1) that

any Dispute involving Seller’s affiliates, directors, officers, employees and agents shall also

be subject to mediation and arbitration as set

forth herein, and shall not be pursued in a

6

court of law or equity; (2) that Seller may, at its

sole election, include Seller’s contractors, subcontractors and suppliers, as well as any warranty company and insurer as parties in the

mediation and arbitration; and (3) that the mediation and arbitration will be limited to the

parties specified herein.

App. 86a. In addition to expressly providing that any

unlawful components of the arbitration provision may

be severed, the provision ensures that Lennar can join

in an arbitration with an Owner other parties potentially liable for the claims, to the extent such parties

have arbitration agreements with Lennar. Meanwhile, Owners retain all their usual civil claims and

remedies against any such parties.

Section 16.5 in turn reiterates that normal res judicata principles fully apply:

To the fullest extent permitted by applicable

law, Buyer and Seller agree that no finding or

stipulation of fact, no conclusion of law, and no

arbitration award in any other arbitration, judicial, or similar proceeding shall be given preclusive or collateral estoppel effect in any arbitration hereunder unless there is mutuality of

parties. In addition, Buyer and Seller further

agree that no finding or stipulation of fact, no

conclusion of law, and no arbitration award in

any arbitration hereunder shall be given preclusive or collateral estoppel effect in any other

arbitration, judicial, or similar proceeding unless there is mutuality of parties.

App. 86a.

7

The South Carolina Supreme Court held that the

foregoing two provisions were unconscionable, and it

refused to enforce the provision requiring them to be

severed from the remainder of the arbitration agreement.

As in most other jurisdictions, the unconscionability doctrine in South Carolina permits a court to invalidate a contract term only when it is both “procedurally” and “substantively” unconscionable. See

App. 17a (citing Fanning v. Fritz's Pontiac-CadillacBuick, Inc., 472 S.E.2d 242, 245 (S.C. 1996); 17A Am.

Jur. 2d Contracts § 272 (2016). The provision here is

procedurally unconscionable, the South Carolina Supreme Court determined, because like most consumer

contracts, it is a contract of adhesion where the key

terms are “non-negotiable.” App. 20a-22a. The court

further recognized, however, that “a take-it-or-leaveit contract of adhesion is not necessarily unconscionable, even though it may indicate one party lacked a

meaningful choice.” App. 18a. Rather, the “procedural” unconscionability of an adhesion contract must

be coupled with “substantive” unconscionability, i.e.,

“the contract terms must be so oppressive that no reasonable person would make them and no fair and honest person would accept them.” App. 19a.

The court then held that §§ 16.4 and 16.5 could not

survive that substantive unconscionability standard.

The court began its analysis by applying an explicitly

anti-arbitration presumption, explaining that under

South Carolina law, “courts tend to view adhesive arbitration agreements with ‘considerable skepticism,’”

deeming it “doubtful ‘any true agreement ever existed

to submit disputes to arbitration.’” App. 21a (quoting

8

Simpson v. MSA of Myrtle Beach, Inc., 644 S.E.2d 663,

669 (S.C. 2007) (citations omitted)).

Applying that openly hostile presumption to the

arbitration provisions in § 16, the court held that the

§ 16.4 joinder provision was impermissibly one-sided

because it supposedly contravenes the “fundamental

principle of law that the plaintiff is the master of his

own complaint and is the sole decider of whom to sue

for his injuries.” App. 23a. “Giving Lennar the ‘sole

election’ to include or exclude subcontractors in the

arbitration proceeding,” the court asserted, “strips

[Owners] of that right.” App. 23a-24a.

In fact, the joinder provision does not affect Owners’ right to sue in any way—they can still sue anyone

else in a civil proceeding. And absent the arbitration

provision, if the Owners had brought a civil action

against Lennar, Lennar would have the right to join

other parties potentially liable for the Owners’ injury

or parties that Lennar itself may have claims against

arising from the same conduct. Section 16.4 merely

ensures that Lennar can exercise the same thirdparty joinder rights in arbitration, as to parties with

whom Lennar has an arbitration agreement. But because the South Carolina Supreme Court read the

provision with open hostility, it leapt to the conclusion

that extending Lennar’s joinder rights to arbitration

created a profoundly unfair, one-sided litigation landscape.

The court took a similar approach to the res judicata language in § 16.5. That provision explicitly creates no rights not already available under “applicable

law,” and it reiterates the routine principle that preclusion cannot apply absent “mutuality of parties.”

9

Again viewing the provision with “considerable skepticism,” the South Carolina Supreme Court construed

the anodyne provision as creating a unique “procedural defense to liability for Lennar” that is “wholly

unreasonable and oppressive” to Owners. App. 25a.

The provision is unfair, the court asserted, because

under § 16.4, Lennar can decide for itself which third

parties with Lennar arbitration agreements are

joined in the Owner’s arbitration. The result could be

inconsistent verdicts with no recovery for the

Owner—for example, Lennar might persuade an arbitrator to blame absent third parties for the Owner’s

injury, while the third parties persuade a court to

blame Lennar.

As this Court has recognized, however, the FAA

authorizes private parties to contract for “individualized arbitration procedures of their own design,” even

if “bifurcated proceedings”—and hence potentially inconsistent verdicts—are an “inevitable result” of the

chosen procedures. Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906, 1923 (2022) (quotation omitted); see Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.

213, 217 (1985) (recognizing that enforcing individual

arbitration agreements in multi-party proceedings

may result in “possibly inefficient maintenance of separate proceedings in different forums”). Rather than

respect the contractual choices about arbitration reflected in §§ 16.4 and 16.5, the court—viewing them

in accordance with the hostile presumption mandated

by South Carolina law—found them potentially inefficient and therefore oppressive.

Finally, the South Carolina Supreme Court declined to apply the severability provision written into

10

§ 16.4 and simply enforce the basic arbitration agreement without the joinder and res judicata provisions.

The court’s ruling was “based primarily upon two factors.” App. 35a. First, the court again invoked the

explicit anti-arbitration presumption South Carolina

courts apply to adhesive consumer arbitration agreements. Because the arbitration agreement is a “contract of adhesion,” the court warned, it must be reviewed with “considerable doubt that any true agreement ever existed to submit disputes to arbitration.”

App. 31a (quotation omitted). “Similarly,” the court

continued, “we find it considerably doubtful any true

agreement ever existed to sever any oppressive provisions from the arbitration agreement,” App. 31a—despite the unambiguous first sentence of § 16.4 expressly mandating severability.

Second, and relatedly, the court invoked a public

policy concern about preventing “overreach” in homebuying arbitration agreements. App. 33a. Enforcing

the severability clause by its plain terms, the court

declared, would allow sellers to use such clauses to

impose oppressive arbitration clauses, knowing that

buyers would likely not challenge them, and if they

did, courts would simply enforce the permissible provisions. Saying the quiet part out loud, the court

sharply criticized the use of arbitration agreements in

homebuyer contracts: “[W]e do not doubt that for

every arbitration agreement that finds its way to

court, there are thousands that exercise an in terrorem effect on homebuyers who respect their contractual obligations.” App. 35a (quotation and alterations omitted). The court agreed that, to protect

homebuyers who “simply comply with their

11

arbitration agreements rather than challenging them

in court,” South Carolina law “should provide a strong

incentive for home builders not to overreach” by subjecting arbitration severability provisions to heightened scrutiny. App. 35a (quotation and alterations

omitted).

Lennar filed a timely petition for reconsideration,

arguing among other things that the court’s opinion

discriminated against arbitration in violation of the

FAA. The petition was denied.

REASONS FOR GRANTING CERTIORARI

This case is a compelling candidate for certiorari,

if not summary reversal. The FAA requires courts to

treat all arbitration agreements—in all contexts—as

“valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation

of any contract.” 9 U.S.C. § 2. In other words, courts

must “place arbitration agreements on equal footing

with all other contracts.” Kindred Nursing Ctrs. Ltd.

P’ship v. Clark, 581 U.S. 246, 248 (2017) (quotation

omitted).

In holding the arbitration provision in the Purchase and Sale Agreement to be unenforceable, the

South Carolina Supreme Court explicitly invoked a

state-law presumption strongly disfavoring the recognition and enforcement of arbitration agreements in

consumer homebuyer contracts. Its holding flatly violates the FAA’s anti-discrimination rule and directly

conflicts with multiple decisions of this Court, other

state supreme courts, and federal circuits enforcing

that important rule. As it stands, the South Carolina

Supreme Court’s ruling offers a roadmap for litigants

12

and other courts to circumvent the FAA and disregard

otherwise clear arbitration agreements.

The decision’s heavy reliance on an anti-arbitration rule embedded in South Carolina law is so directly and obviously contrary to this Court’s precedents that summary reversal may well be warranted.

At a minimum, the Court should grant certiorari and

set the case for plenary consideration.

A. The South Carolina Supreme Court Decision Expressly Relies On An Anti-Arbitration Presumption In Direct Conflict With

This Court’s FAA Precedents

Congress enacted the FAA in “response to hostility

of American courts to the enforcement of arbitration

agreements, a judicial disposition inherited from

then-longstanding English practice.” Cir. City Stores,

Inc. v. Adams, 532 U.S. 105, 111 (2001). To overcome

that hostility, the statute requires courts to “‘place arbitration agreements upon the same footing as other

contracts.’” Scherk v. Alberto-Culver Co., 417 U.S.

506, 511 (1974) (quoting H. R. Rep. No. 96, 68th

Cong., 1st Sess., 1, 2 (1924)); see Kindred Nursing

Ctrs., 581 U.S. at 248. That foundational anti-discrimination rule prohibits courts from “singling out

arbitration provisions for suspect status.” Dr.’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). In

other words, “a court may not . . . in assessing the

rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different

from that in which it otherwise construes nonarbitration agreements under state law.” Perry v. Thomas,

482 U.S. 483, 491 n.9 (1987).

13

That principle applies fully to courts applying otherwise generally-applicable contract principles and

defense to contract enforcement, such as the doctrine

of “unconscionability.” Under FAA § 2, written arbitration agreements “shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or

in equity for the revocation of any contract.” 9 U.S.C.

§ 2 (emphasis added). That provision allows enforcement of “generally applicable contract defenses, such

as fraud, duress, or unconscionability,” Dr.’s Assocs.,

517 U.S. at 686-87, but only so long as the defense applies to arbitration agreements the same way it would

to any other agreement, see, e.g., Kindred Nursing

Ctrs., 581 U.S. at 252; AT&T Mobility LLC v. Concepcion, 563 U. S. 333, 339 (2011). In other words, “even

rules that are generally applicable as a formal matter

are not immune to preemption by the FAA.” Viking

River, 142 S. Ct. at 1917-18.

In Concepcion, for instance, the Court held that a

court could not permissibly apply a facially neutral

state-law “unconscionability” doctrine in a way that

uniquely disfavored the enforcement of arbitration

agreements. In that case, the Ninth Circuit had rejected an arbitration agreement as unconscionable because it violated a state-law rule prohibiting parties

from contracting away the right to class-wide proceedings in consumer arbitration agreements. According

to the Ninth Circuit, the state-law rule did not contravene the FAA because it was simply “a refinement of

the unconscionability analysis applicable to contracts

generally in California.” Laster v. AT&T Mobility

LLC, 584 F.3d 849, 857 (9th Cir. 2009).

14

This Court reversed. The Court emphasized that,

contrary to the Ninth Circuit’s analysis, the FAA’s

anti-discrimination rule bars courts from applying “a

doctrine normally thought to be generally applicable,

such as . . .unconscionability . . . in a fashion that disfavors arbitration.” Concepcion, 563 U.S. at 341. Put

differently, “a court may not ‘rely on the uniqueness

of an agreement to arbitrate as a basis for a state-law

holding that enforcement would be unconscionable,

for this would enable the court to effect what . . . the

state legislature cannot.’” Id. (quoting Perry, 482 U.S.

at 493 n.9). In particular, the Court held, a court cannot rely on the adhesive nature of most consumer contracts as a basis for discriminating against consumer

arbitration agreements. Id. at 346-47. Observing

that “the times in which consumer contracts were anything other than adhesive are long past,” the Court

explained that while states may address “concerns

that attend contracts of adhesion” in general, they

cannot subject provisions within such contracts to

special adverse rules that “conflict with the FAA or

frustrate its purpose to ensure that private arbitration agreements are enforced according to their

terms.” Id. at 346-47 & n.6.

The Court in Kindred Nursing Centers similarly

rejected an effort to apply a generally-applicable rule

in a manner that would uniquely disfavor arbitration

agreements. In that case, the Kentucky Supreme

Court had denied enforcement of an arbitration

agreement pursuant to a court-made rule barring contractual waiver of the jury-trial right by an attorneyin-fact absent a “clear statement” of intent to waive

the right. 581 U.S. at 252. Although the rule was

15

facially neutral, the Court explained, in substance it

discriminated against arbitration because it was “too

tailor-made to arbitration agreements” and because

the court did not apply the same rule to other agreements waiving jury-trial rights. Id. at 252 & n.1.

The South Carolina Supreme Court’s decision here

cannot be reconciled with those precedents. Under

the guise of the “unconscionability” doctrine, the

South Carolina Supreme Court applied a longstanding state-law rule that expressly and strongly disfavors the enforcement of arbitration agreements in

consumer homebuyer contracts. In the court’s own

words, South Carolina courts “view adhesive arbitration agreements with ‘considerable skepticism,’ as it

remains doubtful ‘any true agreement ever existed to

submit disputes to arbitration.’” App. 21a (quoting

Simpson, 644 S.E.2d at 669. And again: “[W]hen a

contract of adhesion is at issue, ‘there arises considerable doubt that any true agreement ever existed to

submit disputes to arbitration.” App. 31a (quoting

Simpson, 644 S.E.2d at 669)). The court applied that

“considerable skepticism” of homebuying arbitration

agreements both in determining whether two provisions of the agreement rendered it substantively unconscionable and whether the agreement’s unambiguous severability provision could be enforced as to

those two provisions. See supra at 9-11.

The court was especially clear about the importance of the anti-arbitration presumption to its

severability analysis. According to the court, that

analysis was “based primarily upon two factors,” the

first being the presumption that a consumer would

not willingly agree to an arbitration provision. App.

16

35a. “Similarly,” the court emphasized, “we find it

considerably doubtful any true agreement ever existed to sever any oppressive provisions from the arbitration agreement.” App. 31a. The court then applied the same presumption to the other factor—a

public policy of protecting homebuyers. In addressing

that factor, the court proffered fierce (and notably unsupported) criticism of how arbitration agreements

are used in consumer homebuying contracts: “[W]e do

not doubt that for every arbitration agreement that

finds its way to court, there are thousands that exercise an in terrorem effect on homebuyers who respect

their contractual obligations.” App. 35a (quotation

and alterations omitted).

It is difficult to imagine a more blunt departure

from the court’s obligation under the FAA to construe

and enforce arbitration agreements neutrally. In

Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights

Commission, 138 S. Ct. 1719 (2018), this Court held

that a merchant’s religious objection to complying

with a state law “was not considered with the neutrality that the Free Exercise Clause requires,” based on

comments made by state agency officials during administrative hearings, id. at 1731. The FAA requires

similar neutrality as to arbitration agreements, and

the violation of that requirement here is much

starker—it is written expressly and repeated directly

into the South Carolina Supreme Court’s decision.

By pervasively emphasizing the considerable doubt

and skepticism it was applying to the arbitration provision, the court accorded it “suspect status,” Dr.’s Assocs., 517 U.S. at 687, and construed it “in a manner

different from that in which it otherwise construes

17

nonarbitration agreements under state law,” Perry,

482 U.S. at 491 n.9.

If the FAA’s anti-discrimination rule means anything, the South Carolina Supreme Court’s decision

cannot stand. See Marmet Health Care Ctr., Inc. v.

Brown, 565 U.S. 530, 532 (2012) (per curiam) (summarily reversing West Virginia Supreme Court decision adopting “interpretation of the FAA [that] was

both incorrect and inconsistent with clear instruction

in the precedents of this Court”).

B. The South Carolina Supreme Court’s Decision Conflicts With Other State Supreme Court And Federal Circuit Decisions Properly Enforcing The FAA’s AntiDiscrimination Rule

The decision also conflicts with decisions of other

state courts of last resort and federal circuits enforcing the FAA’s anti-discrimination rule. The decisions

are too many to catalogue exhaustively, but several

exemplary decisions are especially close in point—decisions holding that arbitration provisions in consumer contracts and other adhesive agreements cannot be subjected to special adverse rules, burdens, or

presumptions.

In Mortensen v. Bresnan Communications, LLC,

722 F.3d 1151 (9th Cir. 2013), Montana courts had

applied a common-law “reasonable expectations” doctrine generally governing adhesive contracts to invalidate consumer arbitration agreements unless they

were explicitly explained to and signed by the consumer.

The Ninth Circuit held that the FAA

preempted the courts’ construction of this generally-

18

applicable doctrine to impose a special adverse burden on consumer arbitration agreements. Id. at 1160.

Similarly, in THI of New Mexico at Hobbs Center,

LLC v. Patton, 741 F.3d 1162 (10th Cir. 2014), the

Tenth Circuit held that the unconscionability doctrine

could not be applied to invalidate an adhesive arbitration agreement between a nursing home and its resident “based on the notion that arbitration is inferior

to litigation in court.” Id. at 1165.

And in Virgil v. Southwest Mississippi Electric

Power Association, 296 So. 3d 53 (Miss. 2020), the

Mississippi Supreme Court rejected a unconscionability-based challenge to the arbitration provision in an

electric power cooperative’s bylaws. The consumer

plaintiffs asserted that the provision was unfairly

unilateral and adhesive, but the court held that because they did not assert the same objection to other

bylaw provisions, their challenge improperly “single[d] out the arbitration provision for disfavored

treatment.” Id. at 63; see also Jorja Trading, Inc. v.

Willis, 598 S.W.3d 1, 6 (Ark. 2020) (rejecting challenge to arbitration agreement for lack of bilateral

provisions: “This court has not required that every

provision within a contract be bilateral. We therefore

cannot require that every provision in an arbitration

agreement be bilateral without violating the FAA because doing so would hold arbitration agreements to

a more stringent analysis than other contracts.”).

The South Carolina Supreme Court’s decision

again cannot be reconciled with these decisions. They

correctly hold that the FAA—and this Court’s precedents construing the FAA—prohibit application of

any state-law rule uniquely hostile to arbitration

19

agreements, even if the rule derives from an otherwise generally applicable doctrine like “unconscionability.” The same principle necessarily applies to a

generally applicable “public policy” such as “protect

consumer homebuyers.” No matter what the statelaw rule’s foundation or objective, if the rule disfavors

arbitration, it is invalid under the FAA. Period.

This Court should grant review—or summarily reverse—to ensure that lower courts respect and enforce the FAA’s categorical anti-discrimination rule.

C. Enforcement Of The FAA’s Anti-discrimination Rule Is An Important Issue Well

Presented In This Case

Because “[s]tate courts rather than federal courts

are most frequently called upon to apply the [FAA],”

it is “a matter of great importance . . . that state supreme courts adhere to a correct interpretation of the

legislation.” Nitro-Lift Techs., L.L.C. v. Howard, 568

U.S. 17, 17-18 (2012) (per curiam). This Court thus

has repeatedly reviewed and reversed—even summarily reversed—state-court decisions that contravene the FAA. See, e.g., Kindred Nursing Ctrs., 581

U.S. at 255-56 (state court “flouted the FAA’s command to place [arbitration] agreements on an equal

footing with all other contracts”); Nitro-Lift

Techs., 568 U.S. at 20 (state court “disregard[ed] this

Court’s precedents on the FAA”); Marmet Health Care

Ctr., 565 U.S. at 531 (state court erred “by misreading

and disregarding the precedents of this Court interpreting the FAA”); KPMG LLP v. Cocchi, 565 U.S. 18,

22 (2011) (per curiam) (state court “fail[ed] to give effect to the plain meaning of the [FAA]”).

20

The decision below not only reinforces the suspect

status of all consumer arbitration agreements in

South Carolina, but if allowed to stand, it will provide

a roadmap to other state courts seeking to evade the

FAA’s anti-discrimination mandate. Courts may consider themselves free to review consumer arbitration

agreements with open hostility; to override such

agreements based on public policy concerns about protecting consumers; and to assume that routine severability provisions are deceitful and abusive instruments that exist mainly to trick consumers into abiding by arbitration agreements they would otherwise

challenge.

The decision also puts at risk the validity of thousands of active homebuyer contracts in South Carolina and throughout the county. This Court has long

recognized that “private parties have likely written

contracts relying upon [its FAA precedent] as authority.” Allied-Bruce Terminix Cos. v. Dobson, 513 U.S.

265, 272 (1995). So it is here. Many homebuyer contracts contain arbitration terms identical or similar to

those deemed unconscionable by the South Carolina

Supreme Court in this case. The decision below invites nationwide litigation over the validity of those

provisions. And if other courts follow the South Carolina Supreme Court’s lead, countless disputes previously subject to arbitration will be plunged into civil

litigation, clogging the courts and frustrating the objective of expeditious recovery.

Certiorari—and perhaps summary reversal—is

warranted to reinforce the integrity of this Court’s

precedents and to ensure that lower courts respect the

anti-discrimination rule foundational to the FAA.

21

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

David J. Marroso

Daniel Cooper

O’MELVENY & MYERS LLP

1999 Avenue of the Stars

Los Angeles, CA 90067

(310) 553-6700

Jonathan D. Hacker

Counsel of Record

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

jhacker@omm.com

Attorneys for Petitioner

February 22, 2023