THE STATE OF SOUTH CAROLINA 

In The Supreme Court 

Cleo Sanders, Respondent, 

v. 

Savannah Highway Automotive Company, a General 

Partnership d/b/a Rick Hendrick Dodge Chrysler Jeep 

Ram; Santander Consumer USA Holdings, Inc.; Isiah S. 

White; Danny Anderson; and Patrick Bachrodt Jr., 

Defendants, 

of which Savannah Highway Automotive Company, a 

General Partnership d/b/a Rick Hendrick Dodge Chrysler 

Jeep Ram, and Isiah S. White are the Petitioners. 

Appellate Case No. 2021-000137 

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS 

Appeal from Charleston County 

J.C. Nicholson Jr., Circuit Court Judge 

Opinion No. 28168 

Heard April 28, 2022 – Filed July 26, 2023 

REVERSED AND VACATED 

John Thomas Lay Jr. and Jessica Waller Laffitte, of 

Gallivan, White & Boyd, PA, of Columbia, for Petitioners. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C. Steven Moskos, of C. Steven Moskos, PA, of 

Charleston, and Brooks Robert Fudenberg, of Law Office 

of Brooks R. Fudenberg, LLC, of Charleston, for 

Respondent. 

James Y. Becker and Robert Lawrence Reibold, of 

Haynsworth Sinkler Boyd, P.A., of Columbia, for Amicus 

Curiae the South Carolina Automobile Dealers 

Association. 

JUSTICE JAMES: The Federal Arbitration Act1 (FAA) sometimes requires the 

arbitrator to decide not only the merits of a dispute but also the gateway question of 

whether the dispute is arbitrable in the first instance. Petitioners Rick Hendrick 

Dodge Chrysler Jeep Ram (Rick Hendrick Dodge) and Isiah White contend this is 

such a case. Specifically, Petitioners argue the arbitrator—not the circuit court— 

must decide whether they can enforce an arbitration provision in a contract even 

after that contract has been assigned to a third party. The court of appeals rejected 

this argument and affirmed the circuit court's determinations that (1) the circuit court 

was the proper forum for deciding the gateway question of whether the dispute is 

arbitrable and (2) Petitioners could not compel arbitration because Rick Hendrick 

Dodge assigned the contract to a third party. Sanders v. Savannah Highway Auto. 

Co., 432 S.C. 328, 332-34, 852 S.E.2d 744, 746-47 (Ct. App. 2020). 

We hold the Prima Paint2 doctrine requires the arbitrator to decide whether 

the assignment extinguished Petitioners' right to compel arbitration. Therefore, we 

reverse the court of appeals' decision and vacate the circuit court's discovery order. 

Background 

In August 2012, Cleo Sanders purchased a vehicle from Rick Hendrick 

Dodge. Sanders and Rick Hendrick Dodge closed the deal by executing a retail 

installment sales contract (RISC) containing an arbitration provision. A portion of 

the arbitration provision provides: 

Any claim or dispute, whether in contract, tort, statute or otherwise 

(including the interpretation and scope of this Arbitration Clause, and 

1 9 U.S.C. § 1 et seq. 

2 Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the arbitrability of the claim or dispute), between you and us or our 

employees, agents, successors or assigns, which arises out of or relates 

to your credit application, purchase or condition of this vehicle, this 

contract, or any resulting transaction or relationship (including any such 

relationship with third parties who do not sign this contract) shall, at 

your or our election, be resolved by neutral, binding arbitration and not 

by a court action. 

Sanders alleges Rick Hendrick Dodge contacted Santander Consumer USA 

Holdings, Inc. (Santander) in an effort to assign the RISC to Santander. Among 

other allegations of wrongdoing, Sanders alleges Rick Hendrick Dodge 

misrepresented his income to Santander, thus causing Santander to accept an 

assignment of the RISC. Sanders contends that as a result of Rick Hendrick Dodge's 

wrongful acts, he had a monthly payment that was thirty-seven percent of his true 

pretax monthly income. Sanders did not make timely payments under the RISC, so 

Santander repossessed the vehicle. Sanders commenced this action against Rick 

Hendrick Dodge, Santander, Isiah White, Danny Anderson, and Patrick Bachrodt.

3 

Petitioners answered and moved to stay or dismiss the case and compel 

arbitration.4 Sanders then moved to compel discovery. Sanders argued Petitioners 

could not compel arbitration because Rick Hendrick Dodge assigned in full its rights 

and interests under the RISC to Santander. Petitioners acknowledged Rick Hendrick 

Dodge "fully assigned" the RISC to Santander but claimed the arbitrator—not the 

circuit court—should decide the gateway question of whether the arbitration 

provision is enforceable. The circuit court determined it was the proper forum for 

deciding the gateway arbitrability question and ruled on the merits of Sanders' 

challenge to arbitration. On the gateway arbitrability question, the circuit court 

determined that although the FAA applied, South Carolina law governed "the 

enforceability of the arbitration clause." The circuit court ruled that because Rick 

Hendrick Dodge assigned "all of its interests in the [RISC] to Santander," Petitioners' 

right to compel arbitration was extinguished. The circuit court denied Petitioners' 

motion to compel arbitration, and Petitioners appealed. 

A few weeks after Petitioners appealed, the circuit court granted Sanders' 

motion to compel discovery. The circuit court ordered Rick Hendrick Dodge to 

respond to Sanders' discovery requests in thirty days and ruled Rick Hendrick Dodge 

3 White, Anderson, and Bachrodt were representatives of Rick Hendrick Dodge. 

4 The circuit court granted Sanders' motion to dismiss Santander from the case 

without prejudice. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

would waive its right to arbitration by responding to discovery. Petitioners appealed 

the discovery order. 

The court of appeals consolidated the appeals and affirmed the circuit court. 

Sanders, 432 S.C. at 331, 852 S.E.2d at 745. Like the circuit court, the court of 

appeals held Petitioners could not compel arbitration after the assignment: "Because 

Rick Hendrick Dodge assigned the RISC to Santander, we find all alleged rights 

arising from the contract, including the right to have an arbitrator determine the 

arbitrability of the action and the right to arbitrate, were extinguished as to 

[Petitioners]." Id. at 334, 852 S.E.2d at 746-47. Apart from the passing mention of 

Rick Hendrick Dodge's "right to have an arbitrator determine the arbitrability of the 

action[,]" the court of appeals did not discuss Petitioners' argument that the arbitrator 

should decide that gateway question. The court of appeals also held the circuit court 

had authority to issue the discovery order. 

The court of appeals denied Petitioners' petition for rehearing and suggestion 

for rehearing en banc. We granted Petitioners a writ of certiorari to review the court 

of appeals' decision. 

Discussion 

Petitioners contend the court of appeals erred in affirming the circuit court's 

arbitration ruling. We review this issue de novo. See Chassereau v. Global-Sun 

Pools, Inc., 363 S.C. 628, 631, 611 S.E.2d 305, 307 (Ct. App. 2005) ("Appeal from 

the denial of a motion to compel arbitration is subject to de novo review."). 

However, we must honor the factual findings of the circuit court pertinent to its 

arbitration ruling if those findings are reasonably supported by evidence in the 

record. Partain v. Upstate Auto. Grp., 386 S.C. 488, 491, 689 S.E.2d 602, 603 

(2010). 

Our holding in this case is not controlled by what Petitioners refer to in their 

brief as the "heavily-favored arena of arbitration." We recently addressed the notion 

that the law "favors" arbitration in Palmetto Construction Group, LLC v. Restoration 

Specialists, LLC, 432 S.C. 633, 856 S.E.2d 150 (2021). We noted: "[O]ur statements 

that the law 'favors' arbitration mean simply that courts must respect and enforce a 

contractual provision to arbitrate as [they] respect[] and enforce[] all contractual 

provisions. There is, however, no public policy—federal or state—'favoring' 

arbitration." Id. at 639, 856 S.E.2d at 153. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I. Arbitration Appeal 

Petitioners do not ask this Court to reverse the court of appeals' holding that 

the assignment extinguished their right to arbitration. While Petitioners assert—in 

their brief and during oral argument—their right to arbitration was not extinguished 

by the assignment,5 Petitioners ask this Court to hold only that the FAA requires the 

arbitrator to decide the gateway question of whether the assignment extinguished 

their right to arbitration. 

Petitioners raise two arguments in support of their position that the arbitrator 

must decide Sanders' challenge to arbitration. First, they claim that because Sanders 

did not specifically challenge the validity of the arbitration provision, the Prima 

Paint doctrine requires the arbitrator to resolve Sanders' challenge. Second, 

Petitioners contend the parties contracted for the arbitrator to resolve Sanders' 

challenge to arbitration by including a delegation clause in their agreement. We 

begin our analysis with a review of general FAA provisions concerning arbitrability. 

A. The FAA and Gateway Arbitration Issues 

The parties concede Sanders' transaction with Rick Hendrick Dodge involved 

interstate commerce and is, therefore, governed by the FAA. The FAA provides: 

A written provision in . . . a contract evidencing a transaction involving 

commerce to settle by arbitration a controversy thereafter arising out of 

such contract or transaction . . . 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. The FAA recognizes arbitration agreements "may be invalidated by 

'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" 

Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) (quoting Doctor's Assocs., 

Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). Here, Sanders' challenge—or 

defense—to arbitration is that Petitioners lost the right to arbitration after Rick 

Hendrick Dodge assigned the RISC to Santander. 

5 Petitioners claim the assignment of a contract containing an arbitration provision 

does not always extinguish the assignor's right to arbitration. Specifically, 

Petitioners contend they retained the right to arbitration after assignment because of 

a "survival clause" in the arbitration provision. These arguments are for the 

arbitrator to resolve. 
 

 

 

 

 

 

 

 

 

 

 

 

 

When one party challenges another party's right to invoke an arbitration 

provision, the gateway question sometimes becomes: Does the court or the arbitrator 

decide whether the dispute is arbitrable? See Peabody Holding Co. v. United Mine 

Workers of Am., Int'l Union, 665 F.3d 96, 101 (4th Cir. 2012) ("Arbitrability disputes 

often necessitate a two-step inquiry. First, we determine who decides whether a 

particular dispute is arbitrable: the court or the arbitrator. Second, if we conclude 

that the court is the proper forum in which to adjudicate arbitrability, we then decide 

whether the dispute is, in fact, arbitrable." (citation omitted)). Under the FAA, the 

presumptive answer is that the court—rather than the arbitrator—resolves gateway 

questions of arbitrability such as whether an arbitration provision is enforceable and 

whether the provision applies to a particular dispute. Doctor's Assocs., Inc. v. 

Alemayehu, 934 F.3d 245, 250-51 (2d Cir. 2019); see Zabinski v. Bright Acres 

Assocs., 346 S.C. 580, 596, 553 S.E.2d 110, 118 (2001) ("The question of the 

arbitrability of a claim is an issue for judicial determination, unless the parties 

provide otherwise."). 

This case represents one instance in which the Prima Paint doctrine renders 

muddy what should be clear. Petitioners cite two situations in which the arbitrator 

must decide certain gateway questions. First, in Prima Paint and subsequent 

decisions, the United States Supreme Court held challenges to the contract 

containing an arbitration provision (sometimes referred to as the "container 

contract") are for the arbitrator to decide, while challenges to the arbitration 

provision itself are for the court to decide. See Prima Paint, 388 U.S. at 406; 

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006). Second, the 

Supreme Court "has consistently held that parties may delegate threshold 

arbitrability questions to the arbitrator, so long as the parties' agreement does so by 

'clear and unmistakable' evidence." Henry Schein, Inc. v. Archer & White Sales, 

Inc., 139 S. Ct. 524, 530 (2019) (quoting First Options of Chi., Inc. v. Kaplan, 514 

U.S. 938, 944 (1995)). 

B. Prima Paint 

The Prima Paint doctrine has been roundly criticized, and some of the caselaw 

interpreting and applying the doctrine is unnecessarily muddled. See, e.g., Ingold v. 

AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d 116, 121 (Colo. 2007) ("The 

'separability doctrine' of Prima Paint has been criticized throughout its 40-year 

existence, beginning with Justice Black's heated dissent from the Court's opinion."); 

Zeb-Michael Curtin, Rethinking Prima Paint Separability in Today's Changed 

Arbitration Regime: The Case for Inseparability and Judicial Decisionmaking in the 

Context of Mental Incapacity Defenses, 90 Iowa L. Rev. 1905, 1917 (2005) (noting 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

legal scholars have "condemn[ed] the [separability] doctrine's consequences"). Even 

so, we must apply the Prima Paint doctrine in cases governed by the FAA. 

In Prima Paint, the petitioner alleged it was fraudulently induced by the 

respondent into entering a contract that contained an arbitration provision. 388 U.S. 

at 397-98. The petitioner did not challenge the arbitration provision directly but 

instead claimed that because the contract was void, so too was the arbitration 

provision. The respondent moved to compel arbitration. Applying the FAA, the 

United States Supreme Court held the arbitrator had to resolve the petitioner's claim. 

In reaching this decision, the Supreme Court adopted what has become known as the 

severability (or separability) doctrine: "[A]rbitration clauses as a matter of federal 

law are 'separable' from the contracts in which they are embedded[.]" Id. at 402; see 

also Sphere Drake Ins. Ltd. v. Clarendon Nat'l Ins. Co., 263 F.3d 26, 31 (2d Cir. 

2001). The Supreme Court explained the judiciary's role is constrained by the FAA, 

and a "court may consider only issues relating to the making and performance of the 

agreement to arbitrate." 388 U.S. at 404. The Supreme Court held that because the 

petitioner's claim of fraudulent inducement did not challenge the arbitration 

provision specifically, the claim was for the arbitrator to resolve: 

If the claim is fraud in the inducement of the arbitration clause itself— 

an issue which goes to the making of the agreement to arbitrate—the 

federal court may proceed to adjudicate it. But the statutory language 

does not permit the federal court to consider claims of fraud in the 

inducement of the contract generally. 

Id. at 403-04 (cleaned up). The takeaway from Prima Paint is that the scope of the 

challenge to a party's right to invoke arbitration is critical. 

Since Prima Paint, courts have generally recognized two types of challenges 

to arbitration: (1) challenges to the validity of the container contract as a whole and 

(2) challenges to the validity of the arbitration provision contained in the contract. 

See Rent-A-Ctr., 561 U.S. at 70; Buckeye, 546 U.S. at 444. Under the Prima Paint 

doctrine, the arbitrator decides the first type of challenge, and the court decides the 

second type. See Rent-A-Ctr., 561 U.S. at 70; Buckeye, 546 U.S. at 445-46. 

We have applied the Prima Paint doctrine on several occasions. We recently 

stated: 

Pursuant to the Prima Paint doctrine, the FAA requires courts to 

separate the validity of an arbitration clause from the validity of the 

contract in which it is embedded. Munoz v. Green Tree Fin. Corp., 343 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

S.C. 531, 540, 542 S.E.2d 360, 364 (2001) (citing Prima Paint, 388 

U.S. at 395). The validity of the arbitration clause is a matter for the 

courts, whereas the validity of the contract as a whole is a matter for the 

arbitrator. Buckeye, 546 U.S. at 445-46 ("Unless the challenge is to the 

arbitration clause itself, the issue of the contract's validity is considered 

by the arbitrator in the first instance."). 

Damico v. Lennar Carolinas, LLC, 437 S.C. 596, 608-09, 879 S.E.2d 746, 753 

(2022) (cleaned up). We have held the court may hear a claim that an arbitration 

provision is unconscionable, but the arbitrator must hear a claim that the contract as 

a whole is unconscionable. Compare Smith v. D.R. Horton, Inc., 417 S.C. 42, 48-

49, 790 S.E.2d 1, 4 (2016) (holding the question of whether an arbitration provision 

is unconscionable is for the court to decide), with Carolina Care Plan, Inc. v. United 

HealthCare Servs., Inc., 361 S.C. 544, 555, 606 S.E.2d 752, 758 (2004) (holding the 

arbitrator must hear an unconscionability challenge where the party seeking to avoid 

arbitration "failed to allege that it lacked a meaningful choice as to the arbitration 

clause specifically"). However, as is often the case, the application of Prima Paint 

to a given set of facts is not so simple. Here, the parties seeking to enforce arbitration 

had assigned the contract containing the arbitration provision. 

1. The Parties' Arguments 

Petitioners argue Sanders' challenge to arbitration was not directed to the 

arbitration provision specifically. Rather, Petitioners claim Sanders challenged only 

their ability to enforce the RISC as a whole, thus making Sanders' challenge one for 

the arbitrator to decide. We agree with Petitioners. 

Sanders acknowledges he has not challenged the validity of the arbitration 

provision specifically. Therefore, it would seem Sanders' challenge is to the contract 

as a whole and that the Prima Paint doctrine mandates this challenge be decided by 

the arbitrator. Not so fast, says Sanders. Sanders claims that after Rick Hendrick 

Dodge assigned the contract to Santander, the agreement between him and Rick 

Hendrick Dodge ceased to exist. Sanders claims the court must decide his 

challenge—even though it is directed to the contract as a whole. As we will now 

explain, Sanders' argument is without merit. 

2. Courts Resolve Issues of Contract Formation 

As we explained above, there are generally two types of challenges to 

arbitration—a challenge to the validity of the container contract as a whole (to be 

decided by the arbitrator) and a challenge to the validity of the arbitration provision 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

therein (to be decided by the court). See Rent-A-Ctr., 561 U.S. at 70; Buckeye, 546 

U.S. at 444-46. Some courts have recently held the court must decide a party's 

contention that the container contract was never formed in the first place. See, e.g., 

Berkeley Cnty. Sch. Dist. v. Hub Int'l Ltd., 944 F.3d 225, 234 (4th Cir. 2019); Granite 

Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 296 (2010); Spahr v. Secco, 330 

F.3d 1266, 1272-73 (10th Cir. 2003). 

The Supreme Court of Texas confronted a contract formation challenge in In 

re Morgan Stanley & Co., 293 S.W.3d 182 (Tex. 2009). There, a Morgan Stanley 

client sought to avoid arbitration by claiming she lacked mental capacity to sign 

Morgan Stanley contracts containing arbitration provisions. Morgan Stanley argued 

the arbitrator had to decide the client's challenge because "the defense of mental 

incapacity is an attack on the validity of the contract as a whole[.]" Id. at 185. The 

court rejected Morgan Stanley's argument, noting the important distinction between 

issues of contract validity and issues of contract formation. The court held that 

because issues of contract formation necessarily raise the question of whether an 

arbitration agreement was ever created, such issues are for the court to decide. The 

court stated challenges to contract formation "add a third discrete category to the 

Prima Paint analysis, which includes: (1) a challenge to the validity of the contract 

as a whole, (2) a challenge to the validity of the arbitration provision itself, and (3) 

a challenge to whether any agreement was ever concluded." Id. at 187. The court 

explained that while the first challenge is for the arbitrator, the second and third 

challenges are for the court. 

Other courts have also held the Prima Paint doctrine does not prevent a court 

from deciding various challenges contract formation. Melaas v. Diamond Resorts 

U.S. Collection Dev., LLC, 953 N.W.2d 623, 632-33 (N.D. 2021); see, e.g., Sandvik 

AB v. Advent Int'l Corp., 220 F.3d 99, 107 (3d Cir. 2000) (holding a court had to 

decide whether a representative possessed authority to bind his principal to a contract 

containing an arbitration provision); Sanford v. MemberWorks, Inc., 483 F.3d 956, 

962 (9th Cir. 2007) (stating courts are "required to rule upon . . . contract formation 

issue[s] before compelling arbitration"). The rationale of these decisions is 

obvious—arbitration is a matter of consent, and courts can only order arbitration 

when they are satisfied the parties agreed to arbitrate a dispute. Granite Rock, 561 

U.S. at 299. Accordingly, the court is always the proper body to determine whether 

the parties agreed to arbitrate in the first instance. Id. at 299-300; Melaas, 953 

N.W.2d at 633 ("If the contract containing the arbitration agreement was never 

formed and therefore does not exist, then the parties never agreed to arbitrate."); 

MZM Constr. Co. v. N.J. Bldg. Labs. Statewide Benefit Funds, 974 F.3d 386, 400 

(3d Cir. 2020) ("Lack of assent to the container contract necessarily implicates the 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

status of the arbitration agreement, when the container contract and the arbitration 

provision depend on the same act for their legal effect."). 

3. Sanders' "Continued Existence" Argument Is Misplaced 

It is clear courts must determine issues of contract formation. If Sanders 

challenged arbitration by claiming the contract was never formed (e.g., because he 

never signed it or because there was no meeting of the minds), the court would 

decide the gateway question of arbitrability. But Sanders does not challenge contract 

formation. Instead, Sanders claims the court must determine whether the contract 

continued to exist after a certain point in time—even when, as here, the parties 

concede a valid contract was originally formed. We disagree with Sanders. 

Some cases include language that, on the surface, appears helpful to Sanders' 

argument. For instance, courts often state that they—rather than arbitrators—must 

determine whether a contract exists. However, a closer review of these cases shows 

courts were addressing the question of whether a contract existed in the first place, 

not whether the contract continued to exist after a certain point. See, e.g., Will-Drill 

Res., Inc. v. Samson Res. Co., 352 F.3d 211, 219 (5th Cir. 2003) (stating the court 

must resolve an attack to "the very existence of an agreement" where a party claims 

that not all parties signed the agreement containing the arbitration provision); Sphere 

Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587, 591 (7th Cir. 2001) (stating the 

arbitrator cannot resolve an "argument that the contract does not exist" where a party 

challenges an agent's authority to bind him to a contract containing arbitration 

provision); Thompson v. Lithia Chrysler Jeep Dodge of Great Falls, Inc., 185 P.3d 

332, 400 (Mont. 2008) (stating "the court is the proper body to hear a challenge to 

the existence of a contract containing an arbitration provision" where a party 

challenges arbitration on the ground that a condition precedent to the creation of a 

container contract did not occur). 

One case speaks more directly to the issue before us. In Large v. Conseco 

Finance Servicing Corp., the United States Court of Appeals for the First Circuit 

rejected an argument similar to the one Sanders advances. 292 F.3d 49, 52 (1st Cir. 

2002). The Larges borrowed money from Conseco and signed a loan agreement 

containing an arbitration provision. A year later, the Larges told Conseco they were 

rescinding the loan agreement on the ground that Conseco failed to accurately 

disclose the applicable interest rate. When Conseco responded that it made adequate 

disclosures and rescission was not appropriate, the Larges filed suit in district court. 

Conseco moved to compel arbitration, and the Larges opposed on the ground that 

the arbitration provision had been automatically rescinded—along with the 

remainder of the loan agreement—when they gave Conseco notice of rescission. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The district court granted Conseco's motion to compel arbitration, ruling the matter 

was for the arbitrator "absent an attack on the specific arbitration clause included 

within a contract[.]" Id. 

On appeal, the Larges advanced much the same argument Sanders makes here. 

They claimed that because the "loan agreement ceased to exist . . . so did the 

arbitration clause embedded in it." Id. The Larges further claimed the district court 

"overlooked the recent clarifications by the majority of circuits, which found that the 

[Prima Paint severability] doctrine does not apply to allegations of nonexistent 

contracts." Id. at 53 (alteration in original). The First Circuit rejected this argument: 

[T]he Larges cite cases involving allegations that the contract with the 

arbitration clause never existed. The "clarification" of Prima Paint in 

these cases does not bear on a dispute over a purported rescission of a 

contract that is acknowledged to have once existed[] but is alleged to 

have been rescinded subsequently. 

Id. The First Circuit concluded the Larges' allegation of a non-existent contract was 

immaterial to the Prima Paint analysis. Because the challenge to arbitration was 

directed at the loan agreement as a whole, the First Circuit held the challenge was 

for the arbitrator to decide. 

We agree with the First Circuit and reject Sanders' "contract existence" 

argument for two reasons. First, Sanders' argument rests on a misreading of contract 

formation cases; there is no support for the conclusion that a challenge to the 

continued existence of a container contract is for the court to decide under the Prima 

Paint doctrine. Second, there is good reason to treat a challenge to the original 

formation of a container contract differently from a challenge to the continued 

existence of the contract. As stated above, a challenge to the original formation of 

the container contract necessarily raises the question of whether the parties ever 

agreed to arbitrate. See Granite Rock, 561 U.S. at 299-300. Because arbitration is 

strictly a matter of consent, it would be illogical for the arbitrator to resolve such a 

challenge. See id.; All Am. Ins., 256 F.3d at 591. On the other hand, continued 

contract existence cases—like the one before us—typically present no such risk of 

sending a party to arbitration when that party never agreed to arbitration. 

Here, Sanders does not challenge the validity of the arbitration provision 

itself—for example, he does not argue the provision is unconscionable or that it 

expires on some express condition. Sanders concedes the arbitration provision 

would ordinarily require arbitration of the claims he makes against Petitioners. 

However, Sanders argues Petitioners' assignment of the contract to Santander 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

divested Petitioners of all rights under the contract. This is a challenge to the 

continuing validity of the contract as a whole. Therefore, Prima Paint requires the 

arbitrator to decide whether Petitioners retained the right to compel arbitration after 

assignment. 

As did the court of appeals, the dissent relies upon In re Wholesale Grocery 

Products Antitrust Litigation, 97 F. Supp. 3d 1101, 1106 (D. Minn. 2015), aff'd, 850 

F.3d 344 (8th Cir. 2017), in support of the general conclusion that an assignment 

erases the assignor's right to compel arbitration. The Wholesale Grocery court noted 

that "where a party assigns agreements that include an arbitration clause, the 

assignor's 'right to compel arbitration under those agreements is extinguished.'" Id. 

(quoting HT of Highlands Ranch, Inc. v. Hollywood Tanning Sys., Inc., 590 F. Supp. 

2d 677, 684-85 (D.N.J. 2008)). However, the courts in Wholesale Grocery and HT 

of Highlands Ranch were not asked to address, nor did they address, the question of 

whether the arbitrator or the court decides the gateway question of arbitrability.6 

B. Delegation Clause 

In light of our holding, we need not consider Petitioners' delegation clause 

argument. See Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598, 613, 

518 S.E.2d 591, 598 (1999) (providing that an appellate court need not address 

remaining issues when the resolution of a prior issue is dispositive).7 

C. Discovery Appeal 

Because we reverse the court of appeals on the gateway issue of arbitrability, 

we vacate the circuit court's discovery order. 

6 The court of appeals cited Kennamer v. Ford Motor Credit Co., 153 So.3d 752, 

762-63 (Ala. 2014), for the basic proposition that assignment of a contract containing 

an arbitration provision bars the assignor from enforcing the provision. However, 

the Kennamer court was not asked to address, nor did it address, the gateway Prima 

Paint question of whether the court or the arbitrator decides whether a dispute is 

arbitrable. 

7 Petitioners argue the court of appeals improperly created a blanket rule that an 

assignment always extinguishes the assignor's right to compel arbitration. Because 

we have reversed the court of appeals, there is no reason to address this argument. 

The arbitrator will have to determine whether this particular assignment 

extinguished Petitioners' right to arbitration. 
Conclusion 

The Prima Paint doctrine is not the model of clarity; however, as applied to 

this case, the doctrine requires us to hold that the arbitrator must decide the gateway 

question of whether Petitioners retained the right to compel arbitration after 

assignment of the RISC. We reverse the court of appeals' decision and vacate the 

circuit court's discovery order. 

REVERSED AND VACATED. 

FEW, J., and Acting Justice Aphrodite K. Konduros, concur. Acting Justice 

Kaye G. Hearn, dissenting in a separate opinion in which Acting Justice James 

E. Lockemy, concurs. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acting Justice Kaye G. Hearn: I agree with the majority's discussion of the general 

principles governing arbitration, but I disagree that the answer to the threshold 

question of whether this dispute is subject to arbitration is for the arbitrator to decide. 

Because I believe well-established law establishes that the contractual assignment 

from Rick Hendrick Dodge to Santander Consumer USA Holdings, Inc. 

extinguished any enforceable rights by Rick Hendrick Dodge, there is nothing left 

to enforce, including the arbitration provision. I understand Prima Paint requires 

that the arbitration provision is severable, but once Rick Hendrick Dodge assigned 

its rights under the contract, I do not believe severability can save the day because 

Rick Hendrick Dodge is not the party that may enforce the contract. 

I disagree with the majority's characterization of the cases the court of appeals 

relied on in concluding that the gateway question of arbitrability in this case was for 

the circuit court. The court of appeals relied in part on In re Wholesale Grocery 

Product Antitrust Litigation, a case involving allegations of antitrust violations by 

some of the largest wholesale grocers in the country. 97 F. Supp. 3d 1101, 1106 (D. 

Minn. 2015). In that multi-district litigation, the federal district court noted, 

"[W]here a party assigns agreements that include an arbitration clause, the assignor's 

'right to compel arbitration under those agreements is extinguished.'" Id. (quoting HT 

of Highlands Ranch, Inc. v. Hollywood Tanning Sys., Inc., 590 F.Supp.2d 677, 684-

85 (D.N.J. 2008)). Pointedly, the court stated, "the issue is not whether the right to 

arbitrate survives, but rather who is entitled to assert that right." Id. The court 

concluded the defendants were no longer signatories of the arbitration agreement 

because "they voluntarily and unconditionally transferred" the rights under the 

arbitration agreement. Id. As a result, they were not entitled to enforce the arbitration 

agreement. 

On appeal to the Eighth Circuit, the court affirmed. 850 F.3d 344, 350-51 (8th 

Cir. 2017). The Eighth Circuit rejected the defendants' position that an assignment 

should be treated the same as when a contract is terminated, the latter being that a 

party generally retains the right to arbitrate claims that are based on conduct that 

occurred during the life of the contract. Id. at 349. Instead, the court stated, "We see 

no reason to extend a presumption about what rights and obligations the parties to a 

contract might have intended to keep after the contract expired to a situation where 

a party has affirmatively given up—indeed, sold—everything it had under the 

contract." Id. at 349-50 (cleaned up). The court also concluded, "[I]t is the assignors, 

not their assignees, claiming a right to compel arbitration. The clear consequence 

. . . is that the assignors—in this case, the nonsignatory wholesalers—should have 

nothing left to enforce, since 'all of [their] remaining rights' were 'assumed' by 
 

 

 

 

 

 

 

 

 

 

 

 

 

someone else." Id. at 350 (quoting Koch v. Compucredit Corp., 543 F.3d 460, 466 

(8th Cir. 2008)). 

Like the decision from the federal court in Minnesota, the court of appeals in 

this case also relied on HT of Highlands Ranch, Inc. v. Hollywood Tanning Systems, 

Inc., 590 F. Supp. 2d 677 (D.N.J. 2008). There, operators of four franchisees of a 

national tanning business entered into a contract with the franchisor, which 

subsequently assigned its rights to another entity. Id. at 679. After the operators filed 

a lawsuit against the franchisor and others raising numerous allegations, the 

defendants filed a motion to dismiss the claims and compel arbitration. Id. at 683. 

The court denied the motion to dismiss and refused to compel arbitration, noting, "In 

light of the fact that, prior to the commencement of this action, Defendant HTS 

assigned its rights and obligations under the franchising agreements to Defendant 

HT Franchising . . . the Court cannot, at this stage, conclude that 'a valid agreement 

to arbitrate [presently] exists' between HTS and Plaintiffs." Id. at 684 (internal 

citation omitted).8 The court concluded, "[I]f, as Plaintiffs appear to allege in the 

Amended Complaint, HTS assigned the entirety of its rights under the 

franchise agreements to HT Franchising, its right to compel arbitration under those 

agreements 'is extinguished.'" Id. at 684-85 (quoting Restatement (Second) of 

Contracts § 317(1)). The court acknowledged that the successor in interest would 

retain the right to compel arbitration, just as Santander could compel arbitration in 

this case over claims subject to the arbitration clause. 

I agree with the court of appeals that these cases are persuasive because they 

apply the same general principle of contract law—that an assignment extinguishes 

the rights and obligations under an agreement once transferred to a third party. 

Restatement (Second) of Contracts § 317 (1981) ("An assignment of a right is a 

manifestation of the assignor's intention to transfer it by virtue of which the 

8 I disagree that this case does not concern the question of "who decides." First, the 

circuit court denied the motion to compel arbitration, noting "As the following 

discussion makes clear, the Court denies the HTS Defendants' motion on the narrow 

grounds that the validity of an existing arbitration agreement between HTS and 

Plaintiffs is a live question in this case." Id. at 684 n.6. Second, the court stated many 

of the plaintiffs' remaining arguments against compelling arbitration concerned the 

contract as a whole, and thus would be for the arbitrator to resolve. Id. This 

demonstrates the court treated the issue of the assignment's effect as a threshold 

question for the court to resolve while the remaining arguments would be for an 

arbitrator to decide, and thus, I disagree that it is not relevant to the question before 

the Court. 
 

 

 

 

 

 

 

 

 

 

 

 

 

assignor's right to performance by the obligor is extinguished in whole or in part and 

the assignee acquires a right to such performance."). Accordingly, I believe the 

majority places too fine a point on the slight distinction between whether an 

agreement to arbitrate ever existed versus if one continues to exist. To be sure, there 

are instances when a nonsignatory may be compelled to arbitrate a dispute. See 

Wilson v. Willis, 426 S.C. 326, 338, 827 S.E.2d 167, 174 (2019) ("South Carolina 

has recognized several theories that could bind nonsignatories to arbitration 

agreements under general principles of contract and agency law, including (1) 

incorporation by reference, (2) assumption, (3) agency, (4) veil piercing/alter ego, 

and (5) estoppel."). However, I would follow the general rule that an assignment 

extinguishes the rights under a contract, and without an agreement to enforce, it 

follows that the circuit court must generally resolve this threshold question. Henry 

Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 530 (2019) ("To be sure, 

before referring a dispute to an arbitrator, the court determines whether a valid 

arbitration agreement exists.").9 Accordingly, I respectfully dissent. 

Acting Justice James E. Lockemy, concurs. 

9 I acknowledge parties may delegate gateway issues to an arbitrator that typically 

would be for a court to decide. Henry Schein, Inc., 139 S. Ct. at 530 ("[A] court may 

not decide an arbitrability question that the parties have delegated to an arbitrator."). 

While this particular contract contained a delegation clause, Rick Hendrick Dodge 

failed to preserve the significance of this clause for appeal. Although it raised the 

delegation clause to the circuit court, the court did not rule on it and there was no 

Rule 59(e) motion filed. I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 422, 

526 S.E.2d 716, 724 (2000) ("If the losing party has raised an issue in the lower 

court, but the court fails to rule upon it, the party must file a motion to alter or amend 

the judgment in order to preserve the issue for appellate review.").