Background
In March 2023, Michael Bolmer purchased a used vehicle from AutoNation USA Charleston and financed it through Westlake Financial Services. His retail purchase agreement contained a mandatory arbitration clause. When the car developed oil leaks and he returned it under AutoNation’s return policy, Westlake nonetheless continued demanding payment on the returned vehicle and then reported the debt to credit bureaus, damaging Bolmer’s credit.
Bolmer filed a demand for arbitration with the American Arbitration Association (AAA) in June 2023. Over the following weeks, the AAA sent multiple notices to AutoNation at 2250 Savannah Highway in Charleston — the same address listed as AutoNation’s business address in the very retail purchase agreement containing the arbitration clause — requesting payment of the mandatory consumer arbitration filing fees. AutoNation never paid. After two rounds of notices and missed deadlines over six weeks, the AAA administratively closed the case and notified the parties that either party could now submit the dispute to an appropriate court. Bolmer then filed suit in circuit court. AutoNation moved to compel arbitration and to stay the litigation. The circuit court denied the motion by Form 4 order, and AutoNation appealed.
The Court’s Holding
Reviewing the denial of the motion to compel arbitration de novo, a unanimous panel affirmed. The court held that AutoNation waived its contractual right to arbitrate by repeatedly failing to pay the AAA’s mandatory filing fees. South Carolina law permits waiver of the right to enforce an arbitration clause, and the question turns on the totality of the circumstances rather than any fixed rule. The court found it significant that the AAA sent its fee notices to AutoNation’s address as listed in the retail purchase agreement, undercutting AutoNation’s argument on appeal that the dealer location — rather than its legal department — had received the notices. The court also noted that AutoNation raised the address-routing argument for the first time on appeal, making it procedurally barred.
Drawing on persuasive federal authority from multiple circuits, the court found that a party that drafts a mandatory arbitration clause into a consumer contract, then declines to pay the fees required to initiate and maintain that arbitration, acts inconsistently with its right to arbitrate and therefore waives it. Once the AAA closed its file and informed the parties the dispute could be submitted to a court, Bolmer’s election to proceed in circuit court was proper.
Key Takeaways
- In South Carolina, the right to enforce a contractual arbitration clause may be waived by conduct inconsistent with that right; repeated failure to pay AAA filing fees—despite multiple notices—is an act inconsistent with the right to arbitrate and constitutes a waiver.
- An argument that AAA fee notices were sent to the wrong internal contact at a dealership is procedurally barred if not raised before the circuit court; the notices’ delivery to the address printed on the very contract containing the arbitration clause negates any good-faith confusion claim.
- When the AAA administratively closes a consumer arbitration case due to a party’s nonpayment of fees and notifies the parties that the dispute may be submitted to a court, the non-defaulting party is free to file suit without waiving any argument that the other party forfeited its right to arbitrate.
- This is an unpublished opinion under Rule 268(d)(2), SCACR, but the arbitration-waiver principles it applies are drawn from well-established South Carolina and federal precedent.
Why It Matters
For South Carolina commercial and consumer practitioners, Bolmer confirms that an arbitration clause is not a shield that can be invoked selectively: a party that chooses to include a mandatory arbitration provision in its consumer contracts must also honor the administrative obligations that accompany arbitration, including the timely payment of forum fees. Businesses that routinely use AAA consumer arbitration clauses should ensure that fee notices from the AAA are routed to their legal departments promptly, because the address listed in the contract is the address to which such notices will properly be sent.
The decision aligns South Carolina with a growing body of federal authority holding that fee nonpayment constitutes waiver and underscores the court’s willingness to look past procedural labels — such as a Form 4 order — to reach the substance of the waiver question. Plaintiff-side counsel in consumer cases involving auto dealers or finance companies should carefully evaluate whether the defendant has paid arbitration fees on prior filed demands; a pattern of nonpayment could support a waiver argument even where arbitration was eventually initiated.