United States District Court, D. South Carolina, Columbia Division
Joe Edens, Jr. and Village at Battery Creek, LLC, Plaintiffs,
Synovus Financial Corporation and Synovus Bank, Defendants.
ORDER AND OPINION
MARGARET B. SEYMOUR SENIOR UNITED STATES DISTRICT JUDGE
matter involves disputes regarding certain investments and
loans between and among Plaintiffs Joe Edens, Jr.
(“Edens”) and Village at Battery Creek, LLC
(“Battery Creek”) (together
“Plaintiffs”) and Defendants Synovus Financial
Corporation and Synovus Bank (together
“Defendants”). Plaintiffs filed a complaint on
December 15, 2016, in the Court of Common Pleas for Richland
County, South Carolina, asserting claims against Defendants
for (1) fraud in the inducement (First Cause of Action), (2)
breach of contract (Second Cause of Action), (3) breach of
contract accompanied by a fraudulent act (Third Cause of
Action), (4) fraud (Fourth Cause of Action), (5) constructive
fraud (Fifth Cause of Action), (6) misrepresentation (Sixth
Cause of Action), (7) promissory estoppel (Seventh Cause of
Action), (8) violation of the South Carolina Unfair Trade
Practices Act (“SCUPTA”) (Eighth Cause of
Action), and (9) breach of fiduciary duty (Ninth Cause of
Action). Plaintiffs also seek injunctive relief (Tenth and
Eleventh Causes of Action). Defendants removed the action to
federal court on the basis of diversity jurisdiction on March
27, 2017. ECF No. 1; see 28 U.S.C § 1332.
March 31, 2017, Defendants filed a motion to dismiss or, in
the alternative, to compel arbitration and stay the federal
proceedings. ECF No. 6. Defendants argue that Plaintiffs
agreed to binding arbitration for disputes related to the
loan. ECF No. 6-1 at 3. Edens disputes the arbitration is
binding on him individually. ECF No. 9 at 6. Plaintiffs also
assert that the arbitration agreement is unconscionable, or,
alternatively, that Plaintiffs' claims are not subject to
arbitration. ECF No. 9 at 1. The court held a hearing on the
motion on August 28, 2017.
served on the National Bank of South Carolina
(“NBSC”) board of directors beginning in 1969.
ECF No. 1-1 at ¶ 6. Subsequent to a merger in 1995, NBSC
became a division of Synovus Bank, which is a wholly-owned
subsidiary of Synovus Financial Corporation. Id. at
¶ 4. After the merger, two of Defendants' executives
requested Edens participate in Defendants' Family Asset
Management (“FAM”) program. Id. Edens
eventually invested $7, 000, 000 to be managed through the
FAM program. Id. Edens alleges the value declined
over $1, 000, 000 within nine months due to “very
questionable and risky investments.” ECF No. 9 at 3.
point prior to September 10, 2009, Defendants'
representatives began discussing with Edens the purchase of
an uncompleted residential construction project in Port
Royal, South Carolina (the “Project”). ECF No.
1-1 at ¶ 9. Defendants had advanced over $12, 000, 000
to a developer who had started but not completed the Project.
Defendants were beginning foreclosure proceedings on the
Project and wished to sell it “as is” for $3,
000, 000. Defendants' representatives urged Edens to
consider buying the note and mortgage covering the Project.
Id. According to Edens, Defendants “strongly
solicited [him] to ‘help the bank out, '”
though he had never been involved in residential real estate
development. ECF No. 9 at 4. Defendants' representatives
allegedly promised Edens that after they obtained a
settlement with the developer, Edens would have no personal
liability on the potential loans or financing. Id.
at ¶ 10. Edens alleges that Defendants promised to loan
him $3, 000, 000 to purchase the note and mortgage as well as
advance a $1, 500, 000 line of credit and a $650, 000 loan to
finish eight units the developer had substantially completed.
agreed to take over the Project and thereafter formed Battery
Creek. On September 10, 2009, Edens, as manager of Battery
Creek, executed numerous agreements enabling Battery Creek to
purchase the note on the Project. ECF Nos. 6-1 at 2; 10 at 3.
Edens executed a personal guaranty on the loans. ECF No. 6-1
at 2. After Plaintiffs and Defendants executed the various
documents, Defendants requested Edens keep his involvement in
the Project a secret and refrain from visiting the Project
until Defendants reached an agreement with the developer.
Id. Edens states that negotiations between
Defendants and the developer lasted over nine months. During
this time the Project was not properly secured and was
vandalized. Id. at 5. When Plaintiffs finally
assumed control of the Project, they spent over $650, 000
from the line of credit just to replace stolen items and
repair damage done to the residential units. Plaintiffs and
Defendants were unable to agree on any further construction
loans. Edens contributed $1, 000, 000 out of pocket to
complete the Project.
allege that Defendants have since “undertaken a pattern
and course of retaliation against” Plaintiffs by
force placing insurance on the properties and charging
Plaintiffs for the premiums some or most of which is kicked
back to Defendants from the insurer, refusing to release
parcels or units which have been sold from the master
mortgage, despite repeated requests in writing, and charging
or assessing, as well as refusing to remove, unwarranted fees
or surcharges from the loan(s).
ECF No. 1-1 at ¶ 18.
hearing on August 28, 2017, Plaintiffs clarified that both
Plaintiffs are requesting relief stemming from the loan
documents and financing of the Project, as set forth in the
First through Eighth Causes of Action. Edens individually is
requesting relief stemming from his investment in the FAM
program, as set forth in the Ninth Cause of Action.
Federal Arbitration Act (“FAA”) provides that
“[a] written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract . . .
shall be valid, irrevocable, and enforceable, save upon such
grounds as exist in law or in equity for the revocation of
any contract.” 9 U.S.C. § 2. To compel
arbitration, a defendant must demonstrate (1) the existence
of a dispute between the parties; (2) a written agreement
that includes an arbitration provision that purports to cover
the dispute; (3) the relationship of the transaction, as
evidenced by the agreement, to interstate or foreign
commerce; and (4) the failure, neglect, or refusal of the
plaintiff to arbitrate the dispute. See Adkins v. Labor
Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002);
Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th
Cir. 1991). “To decide whether an arbitration agreement
encompasses a dispute[, ] a court must determine whether the
factual allegations underlying the claim are within the scope
of the arbitration clause, regardless of the legal label
assigned to the claim.” J.J. Ryan & Sons, Inc.
v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 319 (4th
interpreting arbitration agreements, the court must resolve
any doubts concerning the scope of arbitrable issues in favor
of arbitration. Moses H. Cone Mem'l Hosp. v. Mercury
Const. Corp., 460 U.S. 1, 24-25 (1983). Even though
courts view arbitration agreements favorably, an
“underlying agreement between the parties to
arbitrate” must exist. Arrants v. Buck, 130
F.3d 636, 640 (4th Cir. 1997). “[A]rbitration is a
matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed so to
submit.” Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002). Written arbitration agreements are