Validation of Exclusive Administrative Forum Clauses under Section 11-35-4230

Introduction

The consolidated appeals in Intellectual Capital, Inc. v. Chief Procurement Officer (Appellate Case No. 2023-000667) and JMI Sports and JMIS College, LLC v. Chief Procurement Officer (Appellate Case No. 2023-000668) presented to the Supreme Court of South Carolina the question whether parties to state procurement contracts can be compelled—by a choice-of-forum clause and statute—to resolve their disputes exclusively through the Chief Procurement Officer (CPO) and related administrative apparatus, rather than in the unified judicial system. Appellants (Intellectual Capital, Inc., Barry Newkirk, Neil Richards, JMI Sports, JMIS College, LLC) had contracted with the South Carolina Workers’ Compensation Commission and Clemson University, respectively. When significant contract controversies arose—ranging from alleged non-performance and fraud to revenue disputes—Respondents invoked Section 11-35-4230 of the South Carolina Code to obtain resolution before the CPO. Appellants then filed declaratory judgment actions in Richland County circuit court, challenged the constitutionality of Section 11-35-4230 under the Separation of Powers Clause and judicial‐power provisions of the South Carolina Constitution, and sought a stay of administrative proceedings. The circuit court dismissed their complaints for lack of subject-matter jurisdiction and failure to exhaust administrative remedies. On appeal, the Supreme Court affirmed (as modified), holding that the appellants had contractually waived their right to immediate judicial resolution and therefore presented no justiciable controversy.

Summary of the Judgment

On April 23, 2025, the Supreme Court of South Carolina issued Opinion No. 28275, affirming the circuit court’s dismissal of the declaratory judgment actions “as modified.” The Court held:

Section 11-35-4230 grants the CPO exclusive initial jurisdiction over state procurement-contract disputes when the contract contains a clear choice-of-forum clause vesting that authority.
The appellants’ contracts unambiguously required all controversies “relating to the Agreement” to be resolved exclusively by the CPO, thereby waiving any right to immediate recourse in the circuit courts.
Because appellants knowingly and voluntarily waived their right to a court forum, there was no live, justiciable controversy for the circuit court to decide—a challenge became academic and non-justiciable.
Pre-existing precedent (Unisys Corp. v. SC Budget & Control Board, 346 S.C. 158 (2001)) supports the constitutionality of Section 11-35-4230 and the legislature’s power to direct procurement dispute resolution by administrative tribunal.
The Supreme Court therefore affirmed the dismissals, confirming the validity of exclusive administrative forum clauses and emphasizing the necessity of administrative exhaustion and contract enforcement.

Analysis

Precedents Cited

Unisys Corp. v. SC Budget & Control Board (346 S.C. 158, 551 S.E.2d 263 (2001)): Firmly held that no constitutional provision limits the General Assembly’s authority to designate the CPO as the exclusive forum for procurement-contract controversies.
Tourism Expenditure Review Comm. v. City of Myrtle Beach (403 S.C. 76, 742 S.E.2d 371 (2013)): Clarified that the Uniform Declaratory Judgments Act does not permit advisory opinions or pre-emptive constitutional challenges absent a justiciable controversy.
City of Columbia v. Sanders (231 S.C. 61, 97 S.E.2d 210 (1957)) and Power v. McNair (255 S.C. 150, 177 S.E.2d 551 (1970)): Established that courts may refuse purely advisory or academic declaratory judgments.
Dantzler v. Callison (227 S.C. 317, 88 S.E.2d 64 (1955)): Emphasized that a declaratory judgment requires a concrete controversy affecting legal rights.
Lee v. University of South Carolina (407 S.C. 512, 757 S.E.2d 394 (2014)) and Simpson v. MSA of Myrtle Beach, Inc. (373 S.C. 14, 644 S.E.2d 663 (2007)): Confirmed that South Carolina contract law enforces unambiguous, lawful agreements—even if those agreements waive judicial rights.
North Charleston Joint Venture v. Kitchens of Island Fudge Shoppe, Inc. (307 S.C. 533, 416 S.E.2d 637 (1992)) and Munoz v. Green Tree Financial Corp. (343 S.C. 531, 542 S.E.2d 360 (2001)): Recognized the validity of forum-selection and arbitration clauses as consensual waivers of judicial forum.
Wilson v. Willis (426 S.C. 326, 827 S.E.2d 167 (2019)): A non-signatory can be bound by a contract’s arbitration (or forum-selection) clause under alter-ego or agency theories.
Seabrook v. Knox (369 S.C. 191, 631 S.E.2d 907 (2006)): Reiterated that courts will not adjudicate moot or academic questions in the absence of an actual controversy.
Seaboard Lumber Co. v. United States (903 F.2d 1560 (Fed. Cir. 1990)): Federal analog emphasizing that waivers of Article III forum in procurement-contract disputes can rest on contractual choice-of-forum clauses.

Legal Reasoning

The Supreme Court’s reasoning unfolded along two parallel tracks: contract enforcement and justiciability doctrine.

Contractual Waiver and Choice-of-Forum: Under settled South Carolina law, “if a contract is neither illegal nor ambiguous, courts must enforce it according to its terms .…” (Lee v. Univ. of S.C.). Each procurement contract contained a clear “Choice-of-Forum” clause stipulating that “all disputes, claims, or controversies relating to the Agreement shall be resolved exclusively by the appropriate Chief Procurement Officer ….” The Court held this language unambiguously required appellants to submit first to the administrative process, thereby waiving any right to present those disputes directly to circuit court.
Justiciable Controversy and Administrative Exhaustion: The Declaratory Judgment Act does not sanction advisory opinions. Here, because appellants had contractually ceded their right to judicial resolution until completion of the administrative process, they presented no live dispute to the circuit court; their claims were premature and academic. Respondents’ motions to dismiss were therefore proper for failure to state a justiciable controversy and failure to exhaust administrative remedies.
Constitutional Authority of Section 11-35-4230: The Court reaffirmed Unisys’s conclusion that the Separation of Powers Clause does not bar the legislature from assigning contract dispute resolution to an executive-branch officer, especially where parties consent via contract. Any challenge to the statute’s validity must await a concrete administrative decision and full appellate process, not pre-emptive declaratory relief.

Impact

This decision has significant implications for state procurement and contract practice in South Carolina:

Parties contracting with state agencies must carefully review and negotiate choice-of-forum clauses; clear language is enforceable even if it requires administrative adjudication rather than direct access to court.
Administrative tribunals, including the CPO and Procurement Review Panel, retain primary jurisdiction over procurement-contract disputes, subject to judicial review only after exhaustion of remedies.
Separation-of-powers challenges to statutory administrative schemes cannot be litigated prematurely; appellants must proceed through the administrative process before invoking declaratory relief in court.
Litigants and practitioners should anticipate that appellate courts will enforce contractual waivers of judicial forum as a matter of policy favoring finality and respect for legislative design of procurement-dispute resolution.

Complex Concepts Simplified

Justiciable Controversy: A real, tangible dispute affecting legal rights or duties that a court can resolve. Courts decline to issue advisory opinions on hypothetical or academic questions.
Exhaustion of Administrative Remedies: Before seeking judicial relief, litigants must fully pursue and complete the administrative procedures provided by statute or contract (here, before the CPO and Procurement Review Panel).
Choice-of-Forum Clause: A contractual provision specifying where and how disputes will be resolved (e.g., in an administrative tribunal rather than a court). When clear and lawful, such clauses are enforceable.
Separation of Powers: The constitutional principle dividing government authority among legislative, executive, and judicial branches. Assigning executive-branch officers to resolve certain disputes does not necessarily offend separation of powers if permitted by statute.
Alter Ego: A legal theory allowing one party to bind another (e.g., individuals behind a corporate entity) to contractual terms when they operate interchangeably.

Conclusion

The Supreme Court’s decision in Intellectual Capital, Inc. v. Chief Procurement Officer and JMI Sports v. Chief Procurement Officer reaffirms the enforceability of unambiguous forum-selection clauses in state procurement contracts and upholds the constitutionality of Section 11-35-4230. By affirming the dismissals for lack of a justiciable controversy and contractual waiver of judicial forum, the Court underscores the binding nature of administrative dispute-resolution schemes when parties knowingly consent. In the broader legal context, this precedent clarifies that: (1) administrative exhaustion is mandatory before invoking declaratory relief; (2) separation-of-powers challenges must await a concrete administrative decision; and (3) contracting parties can validly allocate dispute resolution to non-judicial forums. Practitioners and agencies alike must heed these principles in drafting and enforcing state procurement agreements.