SC Supreme Court Ruling: Palmetto Bluff Arbitration Lessons

A recent South Carolina Supreme Court decision involving Palmetto Bluff is a useful reminder that business contract language is not just “legal boilerplate.” For business owners, entrepreneurs, online sellers, retailers, and brand owners, the case is a good example of how one contract clause can reshape an entire business dispute.

The case, Corley v. Palmetto Bluff Development, involved property owners in the Palmetto Bluff community, a luxury resort community in Bluffton, South Carolina. The owners had marketed their properties for short-term rentals on national online platforms. Their relationship with the Palmetto Bluff entities included membership agreements, and those agreements included an arbitration provision.

That may sound far removed from the day-to-day concerns of a Charleston retailer, startup founder, restaurant group, software company, Amazon seller, or trademark owner. But it is not. Many businesses use standard-form agreements with customers, vendors, affiliates, franchisees, distributors, influencers, licensees, and online marketplace partners. Those business contracts often contain arbitration clauses, deadlines for bringing claims, venue provisions, class-action waivers, limitation-of-liability language, and other dispute-resolution terms that people rarely read carefully until something goes wrong. The Palmetto Bluff decision is a warning against assuming those clauses will always work exactly as drafted.

Arbitration Clauses Are Useful, But Not Automatic

Arbitration provisions are common in business contracts. Many companies prefer arbitration because it can be private, more streamlined than court litigation, and sometimes faster. A business may use arbitration clauses in customer terms, vendor agreements, independent contractor agreements, online terms of service, membership agreements, or licensing contracts.

But arbitration is still a matter of contract. Courts look closely at whether the parties actually agreed to arbitrate, what claims are covered, who decides threshold questions, and whether the provision is enforceable under applicable law.

In Corley, one issue was whether the Federal Arbitration Act applied. The South Carolina Supreme Court agreed that the transactions involved interstate commerce, which brought the Federal Arbitration Act into play. That part of the decision is not surprising. When people market properties through national internet-based platforms, use out-of-state services, deal with travelers from different states, or transact through modern online systems, interstate commerce is often not hard to find.

For online sellers and Amazon Brand Registry participants, that point should feel familiar. Even a small South Carolina business can quickly find itself in interstate commerce. A Charleston apparel company selling through Amazon, Etsy, Shopify, Walmart Marketplace, or its own website is usually not operating in a purely local bubble. Payments, fulfillment, platform terms, advertising, shipping, customer locations, and vendor relationships may all cross state lines. That does not mean every arbitration clause is enforceable. It means the drafting matters.

Who Decides If the Arbitration Clause Applies?

A major issue in arbitration law is who decides gateway questions. In plain English: if there is a fight about whether a business dispute must be arbitrated, does a court decide that issue, or does the arbitrator decide it?

Contracts sometimes try to delegate those threshold questions to the arbitrator. Businesses may do this by incorporating arbitration rules, such as AAA rules, that give arbitrators authority to decide their own jurisdiction. But courts often require “clear and unmistakable” evidence that the parties agreed to send those gateway issues to the arbitrator.

In Corley, the Palmetto Bluff entities argued that incorporation of AAA rules showed the parties intended an arbitrator, not a court, to decide arbitrability issues. The South Carolina Supreme Court disagreed. The Court looked at the business contract as a whole and found other language indicating that South Carolina procedural rules applied, which pointed back to the court deciding those issues.

Viewed as a drafting lesson, the problem was not simply that Palmetto Bluff used arbitration. The problem was that the agreement appeared to pull in different directions: AAA rules suggested one procedure, South Carolina arbitration-law language suggested another, the claim deadline shortened the time to bring claims, and the remedy limitations narrowed statutory rights. For South Carolina businesses, the takeaway is not ‘avoid arbitration.’ The takeaway is ‘draft the arbitration clause like it will actually be read by a court..

For a startup, this can happen easily. A founder downloads a template, copies a dispute clause from another agreement, adds a South Carolina governing-law provision, and then later adds AAA language from a different source. Each piece may look fine standing alone. Together, though, the clauses may be inconsistent.

Drafting Error 1: The Clause Tries to Use Two Arbitration Systems at Once

The opening sentence says the agreement is subject to arbitration under South Carolina Code Section 15-48-10 et seq., which points to the South Carolina Uniform Arbitration Act. But the body of the provision also says arbitration will proceed under AAA Commercial Arbitration Rules. That tension mattered in the Palmetto Bluff decision. The Supreme Court acknowledged that incorporating AAA rules can be evidence that the parties intended the arbitrator to decide arbitrability. But the Court found other language in the agreement pointed the other way, including the first-page South Carolina arbitration-law language and the South Carolina governing-law clause.

Drafting lesson: If the business wants the FAA and AAA rules to control arbitration procedure, the contract should say so clearly. If South Carolina substantive law applies to the merits, say that separately. Do not accidentally import South Carolina arbitration procedure if the intent is to delegate gateway issues to the arbitrator.

Drafting Error 2: The Delegation Clause Is Not Clear Enough

The sample provision says the arbitrator decides “existence, scope, validity, enforceability, and arbitrability.” That language is stronger than merely referencing AAA rules, but it still becomes muddy when surrounded by conflicting South Carolina arbitration-law language. The South Carolina Supreme Court said the FAA presumes courts decide gateway issues unless there is “clear and unmistakable” evidence that the parties delegated those issues to an arbitrator. In Palmetto Bluff, the Court found no clear and unmistakable delegation because other provisions suggested South Carolina procedural law applied, and under those rules the court decides arbitrability.

Drafting lesson: If the intent is for the arbitrator to decide arbitrability, the agreement should say so directly and avoid conflicting procedural language elsewhere in the contract.

Drafting Error 3: The 60-Day Deadline Is Dangerous

The sample clause requires arbitration within 60 calendar days after mediation and says any claim not filed by then is “waived and forever barred.” That is very close to the issue that sank the arbitration provision in the Supreme Court’s decision. The Court held the 60-day window was not functionally different from the 90-day deadline struck down in Huskins v. Mungo Homes and found the term improperly shortened the applicable statute of limitations.

Drafting lesson: A contract can create reasonable notice or dispute-resolution steps, but a business should be very careful about using arbitration language to shorten statutory limitation periods. In South Carolina, that can make the arbitration provision vulnerable.

Drafting Error 4: The Damages Waiver Goes Too Far

The sample provision bars treble, enhanced, and punitive damages. That may look attractive to a business trying to limit exposure, but it can backfire. The Court of Appeals found the Palmetto Bluff arbitration agreement unconscionable in part because it barred treble damages, which can conflict with statutory remedies under South Carolina law, including South Carolina Unfair Trade Practices Act claims.

Drafting lesson: A damages limitation should not wipe out remedies that a statute makes available. For brand owners and retailers, this is especially important because disputes can involve unfair trade practices, deceptive conduct, counterfeit sales, unauthorized distribution, or other claims where statutory remedies may matter.

Drafting Error 5: One Party Can Modify the Rules

The sample clause lets the company modify the agreement and arbitration provision in its “sole and absolute discretion.” That is another red flag. The Court of Appeals treated unilateral modification rights as part of the one-sidedness problem, especially where the business could modify documents that included the arbitration agreement.

Drafting lesson: If a business reserves amendment rights, the clause should include limits. For example, changes should apply prospectively, require notice, and not alter dispute-resolution rules for disputes that already exist.

Drafting Error 6: No Severability Safety Net

The sample clause has no severability language. That matters because a court may be less willing to strike one bad sentence and save the rest. The Court of Appeals declined to analyze whether the problematic provisions could be severed because the arbitration agreement did not contain a severability clause.

Drafting lesson: A severability clause will not save every arbitration agreement, but without one, the business may make it easier for a court to reject the entire provision.

The Problem With Short Deadlines

The other important issue involved timing. The arbitration provision included a short period for initiating arbitration. The South Carolina Supreme Court found that the 60-day demand window was unconscionable because it improperly shortened the time to bring claims.

South Carolina has already shown concern with contract provisions that shorten statutory limitation periods. In Huskins v. Mungo Homes, the South Carolina Supreme Court addressed a similar problem in the homebuilding context. The lesson from these cases is fairly direct: a business cannot assume it can dramatically shorten the time for customers, members, or counterparties to bring claims simply by placing that deadline inside an arbitration clause.

That matters well beyond real estate. Imagine a South Carolina online retailer that sells branded products nationwide. Its customer terms say all disputes must be arbitrated and that any claim must be brought within 30 days of purchase. A counterfeit claim, warranty dispute, subscription billing issue, or unfair trade practices claim might not be discovered within that period. If the shortened deadline conflicts with South Carolina law or public policy, the business may find the clause challenged or even invalidated.

The same issue can arise in trademark and brand disputes. Suppose a Charleston food brand licenses its name to a distributor. The license agreement says any dispute must be arbitrated within 45 days of the first breach. The distributor quietly uses the brand name outside the permitted territory, sells through unauthorized channels, and creates marketplace confusion. The brand owner may not discover the problem until months later. A court may not look kindly on a contract term that makes meaningful enforcement unrealistic.

Why Trademark Owners Should Care

At first glance, Corley is not a trademark case. It does not involve a USPTO trademark refusal, a TTAB opposition, or an Amazon Brand Registry takedown. But trademark owners should still pay attention because brand protection often depends on contracts.

Trademark rights are not protected only through registration. They are also protected through license agreements, coexistence agreements, vendor terms, reseller agreements, settlement agreements, influencer agreements, manufacturing contracts, franchise documents, and marketplace policies. If those agreements contain weak or conflicting dispute-resolution provisions, the brand owner may face unnecessary friction when enforcement becomes necessary.

For example, a South Carolina company might register a federal trademark and then allow a third-party manufacturer to place that trademark on products. If the agreement is loose about quality control, territory, termination, dispute resolution, and remedies, the trademark registration alone will not solve the problem. A federal trademark can be powerful, but it does not magically fix a poorly drafted contract.

Amazon sellers face a similar issue. Brand Registry may help with certain marketplace enforcement tools, but it does not replace careful contracts with suppliers, agencies, designers, manufacturers, and distributors. A seller may have a registered trademark and still be stuck fighting over ownership of product photography, packaging files, private-label designs, ad account access, or unauthorized resale channels. The contract often determines how quickly and effectively the business can respond.

The Local Business Takeaway

The Palmetto Bluff decision is especially relevant for Lowcountry businesses because so many companies here operate in industries where contracts, branding, and customer relationships overlap: hospitality, real estate, retail, restaurants, professional services, tourism, technology, wellness, and consumer products.

A Charleston business may start with a simple set of terms and conditions. Then it grows. It adds online sales, a membership program, gift cards, affiliate partnerships, wholesale accounts, influencer campaigns, branded merchandise, or multi-state customers. The original contract language may no longer fit the business, which is why it is important to work with your business attorney to update client and customer business contracts on a periodic basis.

The practical point is not that arbitration clauses are bad. They can be useful. The point is that arbitration clauses should be drafted with care. They should match the rest of the agreement. They should not contain unrealistic deadlines. They should be clear about who decides arbitrability. They should be reviewed in light of South Carolina law and the actual way the business operates.

A Better Way to Think About Boilerplate

Business owners often focus on price, deliverables, payment terms, and deadlines. That makes sense. Those are the visible parts of the deal. But “boilerplate” provisions often decide what happens when the relationship breaks down.

An arbitration clause can affect whether the dispute is heard in court or privately. A governing-law clause can affect which state’s rules apply. A venue provision can determine where the fight happens. A limitations provision can affect whether claims survive at all. A poorly drafted contract may save a little money at the beginning and create a much larger problem later.

For entrepreneurs and brand owners, the Palmetto Bluff ruling is a timely reminder to read the back half of the contract. The less exciting provisions may be the ones that matter most when your brand, revenue, or customer relationships are on the line.

Final Thoughts

South Carolina businesses do not need to panic every time a court reviews an arbitration clause. But they should take the issue seriously. The Corley decision shows that courts will look at the full agreement, not just the heading labeled “Arbitration.” If the provision is inconsistent, unclear, or unfairly shortens the time to bring claims, it may not deliver the protection the business expected.

For Charleston-area entrepreneurs, Amazon sellers, retailers, and growing brands, the better approach is to treat contracts as part of brand protection. A registered trademark helps protect the name. Good contracts help protect the business relationships built around that name. Both matter.