Court Opinion

ID: 9685348
Source: CourtListenerOpinion
Date Created: 2023-08-24 14:33:10.77883+00
Date Added: 2024-06-11T18:18:05.038062
License: Public Domain

SABERS, Justice
(dissenting).
[¶ 16.] According to the majority, the trial court has jurisdiction to declare, as a matter of law, that the forum selection clause is unconscionable, but the South Dakota Supreme Court does not have jurisdiction to say whether it was correct. This anomaly is achieved by characterizing the appeal as one which questions only the correctness of the trial court’s order compelling arbitration. This is simply not the case. Obviously, HPG desires arbitration—that is precisely the grounds upon which it brought its motion to dismiss DWU’s breach of warranty cause of action, but not the grounds upon which it appeals. The trial court went beyond simply ordering arbitration; it held as a matter of law, that the forum selection clause was unconscionable. See Durham v. Ciba-Geigy Corp., 315 N.W.2d 696, 701 n. 1 (S.D.1982) (“Under SDCL 57A-2-302(l) the issue of unconscionability is a matter of law to be determined by the trial court.”). We review questions of law de novo. Specialty Mills, Inc. v. Citizens State Bank, 1997 SD 7, ¶ 12, 558 N.W.2d 617, 621 (citing In re Petrik, 1996 SD 24, ¶ 10, 544 N.W.2d 388, 390). The majority cites no cases which state that we ever let questions of law go unreviewed.
[¶ 17.] If DWU were appealing the order compelling arbitration, I would have no quarrel with the majority’s characterization of the action as an “embedded proceeding”; according to the majority, this refers to proceedings where a party is seeking relief other than an order compelling or prohibiting arbitration, “typically some relief concerning the merits of the allegedly arbitrable dispute.” See supra ¶ 10. DWU sought relief concerning the merits of the dispute, i.e., breach of warranty claim, and it would be foreclosed from appealing an order compelling arbitration. Id.
[¶ 18.] In this case, DWU is not even appealing. In fact, even HPG is not appealing the order compelling arbitration. On the contrary, HPG sought arbitration and is appealing the trial court’s finding the situs clause was unconscionable. This is not an “embedded” proceeding as that term is defined. Clearly, this is not a “classic embedded proceeding” as stated by the majority. If this were a “classic embedded proceeding,” DWU would be appealing the order compelling arbitration of its breach of warranty claim, and it is not.
[¶ 19.] Under 9 USC § 3, the trial court was only authorized to “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement [.] ” (Emphasis added). The terms of this arbitration clause called for arbitration in New York. Cf. Spring Hope Rockwool, Inc. v. Industrial Clean Air, Inc., 504 F.Supp. 1385, 1389 (E.D.N.C.1981) (finding no case which applies the forum non conveniens doctrine to arbitration agreements and stating that the agreement is to be respected and enforced in accordance with the Arbitration Act).
[¶ 20.] If the terms of the arbitration clause itself are alleged to have been induced by fraud or coercion, that contention “precludes arbitration on the matter until a judicial trial of the question of fraud.” New Process Steel Corp. v. Titan Indus. Corp., 555 F.Supp. 1018, 1021 (S.D.Tex.1983) (citing Wick v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5thCir.1979); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 410-11 (2ndCir.1959), cert. dismissed, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37 (1960) (“If this arbitration clause was induced by fraud, there can be no arbitration; and if the party charging this fraud shows there is substance to his charge, there must be a judicial trial of *925that question before a stay can issue[.]”)). The New Process court goes on to explain that when a party alleges fraud concerning the substance of the contract, it is an issue for the arbitrators; however, if the allegations center upon the arbitration provisions, it is for the courts to determine.* 555 FSupp at 1022. DWU does not assert that the entire warranty contract is unconscionable; on the contrary, it only claimed uncon-scionability in relation to the situs clause. Therefore, there is no reason not to treat its claim of unconscionability exactly as we would a claim of fraud, i.e., resolve it judicially before a stay on the merits is issued. See, e.g., Johnson v. John Deere Co., 306 N.W.2d 231, 236-37 (S.D.1981), where this court discussed “procedural unconscionability,” which deals with the process of making a contract, including whether there was a meaningful choice of terms, and noted that “White & Summers suggests that it proximates the common law of fraud and duress.”
[¶21.] I would reach the merits of the unconscionability claim, as it presents a question of law and an issue which will not affect the arbitrability of disputes that fit within the arbitration clause (i.e., the breach of warranty claim).
[¶ 22.] KONENKAMP, J., joins this dissent.

 Clearly, HPG should not be denied the benefit of appellate review of a disputed question of law, as is being done in this case at this time.