The recent South Carolina Court of Appeals decision of Howell v. Covalent Chemical, LLC (#5869 November 3, 2021) was an action under the South Carolina Payment of Wages Act, S.C. Code Ann. §§41-10-10 et. seq. In 2015 defendant Matthew Rowe formed Covalent LLC. The company was incorporated in Texas but had its headquarters in Raleigh, North Carolina. Rowe recruited plaintiff Howell, a South Carolina resident, as a sales representative for Covalent. In September 2015 in Greenville Howell signed an employment contract with Covalent; the contract stated that it was “made . . . at Houston, Texas” and identified Covalent at a Texas company. The contract contained the following governing law clause:
THE INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LOCAL, INTERNAL LAWS OF THE STATE OF TEXAS, UNITED STATES OF AMERICA. THE PARTIES AGREE TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN HARRIS COUNTY, TEXAS, AND WAIVE ANY RIGHT AVAILABLE TO A TRIAL BY JURY.
Howell’s primary sales territory was South Carolina; his territory never included Texas, and he only traveled to Texas once as part of his training.
Howell filed suit in South Carolina against Covalent alleging that he was not paid for certain earned commissions and expenses and he did not receive certain promised benefits. However, the circuit court granted the defendants’ motion to dismiss for improper venue.
The case turned on the enforceability of the choice-of-law and choice-of-forum provisions in the employment contract. The court of appeals began its analysis with the principle that choice-of-law provisions in contracts are generally enforceable. This principle is subject to the “public policy exception,” which provides that a South Carolina court will not enforce foreign law if enforcement violates the public policy of South Carolina. The plaintiff argued that the choice-of-law provision was unenforceable because it violated South Carolina public policy as expressed in §41-10-100, which prohibits private contracts from attempting to set aside provisions of the Payment of Wages Act. The court of appeals rejected this argument because it concluded that the plain language of the clause was limited to interpretation of the contract and did not pre-empt the Payment of Wages Act.
On the issue of venue (choice of forum), the court of appeals applied Texas law to determine the meaning of the forum selection clause. The court found that under Texas law unless a forum selection expressly provides that the chosen forum is exclusive, the clause is interpreted as permissive. Therefore, the trial court erred in granting the defendant’s motion to dismiss for improper venue because venue in Texas was permissive but not exclusive. Implicit in the court’s decision is that on remand the trial court should apply the South Carolina Payment of Wages Act since it was not pre-empted by the choice of law/choice of forum clause.
For more information about forum selection clauses, see Nathan M. Crystal & Francesca Giannoni-Crystal,Enforceability of Forum Selection Clause: A “Gallant Knight” Still Seeking Eldorado, 8 S.C. J. Int’l. L. & Bus 203
