A Review: Scotus Weighs Taking a South Carolina Supreme Court Decision on Severability & Arbitration

By Bryan Ward

The U.S. Supreme Court’s “long conference” set for next Monday will consider Mungo Homes LLC v. Huskins, No. 24-1092. If the Supreme Court grants review on Sept. 29, the case could affect how courts look at state laws that affect severability of provisions that run afoul of the law, and as a result can halt the use of arbitration. 

The issue in the case as presented by petitioner Mungo Homes—an Irmo, S.C., homebuilder owned by a Berkshire Hathaway company--is “[ w]hether the South Carolina Supreme Court erred in applying a severability rule that disfavors arbitration and by creating a state-specific public policy defense to arbitration that conflicts with the [Federal Arbitration Act], such that enforcement of arbitration agreements in the State now turns on whether enforcement is sought in state or federal court.”

According to court filings, Mungo Homes arises from an arbitration clause in a home-purchase agreement requiring that claims be filed within 90 days. South Carolina law--S.C. Code Ann. § 15-3140 (2005)--however, does not allow contract terms that shorten statutory limitation periods.  That led the South Carolina Supreme Court to declare the contract void.

But a state appellate court had severed the clause, potentially allowing arbitration. The state’s Supreme Court disagreed, holding that the shortened limitation period made the contract void, and arbitration agreement provisions and terms non-severable and wholly unenforceable. Factors leading to a finding of non-severability were the absence of a severability clause and a conclusion that the sales agreement was an adhesion contract. Huskins v. Mungo Homes LLC, Opinion No. 28245 (S.C. Dec. 11, 2024) (available at https://bit.ly/3Iz5qkL).

 The petitioner’s brief excoriates the South Carolina Supreme Court for leaving the FAA’s history out of its decision, and relying on public policy that defers to state laws rather than the U.S. Supreme Court and its jurisprudence on the federal statute. “Despite [the U.S. Supreme Court’s] long binding precedent, the South Carolina Supreme Court has continuously ignored the FAA and invalidated arbitration agreements under the guise of State ‘public policy[,]’” the cert petition brief notes, adding that it is an argument about “‘public policy that conflicts with Congress’ policy goals in enacting the FAA and which has been disproportionately applied to refuse enforcement of arbitration agreements.”

The brief kicks off with the seminal Supreme Court case of AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (available at https://bit.ly/3VzHL6O), which authorized mandatory arbitration with a class waiver in consumer matters. In the case, the nation’s top Court held that the FAA preempts state laws that attempt to prevent parties from agreeing to waive class-action arbitration. But the FAA’s applicability to state procedural laws--such as the prohibition of contract terms shortening statutory limitation periods--was not prohibited, at least insofar as arbitration is not treated inconsistently under the FAA nor discriminated against. 

“Because the South Carolina Supreme Court’s holding overtly disregards this Court’s jurisprudence regarding the FAA,” states the Mungo Homes cert petition brief, “thus creating a conflict between state and federal courts within the same state—a problem that can repeat throughout the Country—review by [the U.S. Supreme] Court is warranted and necessary.”

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The respondents, from Richland County, S.C., who had purchased a home from the petitioner, say that the South Carolina decision adheres to the FAA and the U.S. Supreme Court’s jurisprudence about the law. 

Citing a case that the Court turned down that covered a similar severability question--Lennar Carolinas LLC v. Damico, 143 S. Ct. 2581 (2023) (cert. denied)—the respondents wrote,

There is no reason for a different result here.  Indeed, the trial court held that the FAA does not even apply to the contract in this case under a choice-of-law provision petitioner included in the arbitration clause, a ruling petitioner never challenged below and does not ask this Court to review. 

The respondents' brief explains that the time limit contract provision was a part of the arbitration agreement and its illegality was at the heart of the previous court decisions.  The brief backed the South Carolina Supreme Court on declining severability, noting that it had “neutrally applied general contract law severance principles drawn from sources that are not specific to arbitration.”

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In a reply brief, Mungo Homes states that the South Carolina Supreme Court decision ignores that, “as a matter of substantive federal law, an arbitration provision is severable from the remainder of the contract.” Buckeye Check Cashing Inc. v. Cardegna, 546 U.S. 440, 445-46 (2010) (available at https://bit.ly/4nf6tp9).

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More information on Mungo Homes can be found on the Court’s docket page here.

The matter is one of three arbitration cases slated for the so-called Sept. 29 Supreme Court long conference that will assess certiorari requests for the new 2025-2026 Court term, which will begin a week later.  (For more, see Amy Howe, “What is the Supreme Court’s long conference?” Scotusblog (Aug. 11) (available at http://bit.ly/4nHjyYf).) 

First, CPR Speaks last week posted about a high-profile mass arbitration case seeking a Washington, D.C., hearing. Bryan Ward, “A Review: The Scotus Papers in Live Nation v. Heckman, CPR Speaks (Updated 9/19) (Sept. 17) (available here). On Monday, CPR Speaks highlighted Flowers Foods Inc. v. Brock, No. 24-935, a potential second Supreme Court arbitration case visit in two terms for the maker of Wonder Bread; details at “A Review: Supreme Court Considers Another FAA Sec. 1 Arbitration Exemption,” CPR Speaks (Sept. 22) (available at https://bit.ly/4gGvh7h).

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The author, a second-year student at Brooklyn Law School in New York, is a 2025 CPR Fall intern. Russ Bleemer, editor of CPR’s Alternatives to the High Cost of Litigation, contributed to the research and writing of this post.

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