ADR Case Updates
Federal Arbitration Act Pre-empts State Law in Construction Defect/Mold Case Allowing Developer Defendant to Compel Arbitration, 04/01/07
In case you have not seen them, attached are four recent Court of Appeal ADR cases. The most notable is Shepard v. Edward Mackay Enterprises, Inc. (Third District), 2007 DJDAR 3883. Plaintiff bought a home from Defendant, and then filed suit alleging personal injury from mold caused by water intrusion under the concrete foundation. Defendant sought to compel arbitration. Plaintiff opposed the motion under CCP § 1298.7 that nullifies an arbitration clause in a real estate purchase contract for claims based upon personal injury or wrongful death. Defendant responded by asserting the Federal Arbitration Act (FAA), which does not recognize an exception for personal injury, and makes valid and enforceable any contractual arbitration provision evidencing a transaction involving [interstate] commerce. Defendant argued that construction of the house involved building materials produced out of state. The trial court denied Defendants motion to compel arbitration.
Reversed. Defendant produced sufficient evidence that several materials used in construction were manufactured outside California. Thus, the underlying sales contract involved interstate commerce, and the FAA pre-empted any contrary state law permitting Plaintiff to avoid arbitration. Therefore, Defendant was entitled to compel arbitration.
Two other cases involve enforceability of arbitration in suits against nursing homes. Flores v. Evergreen at San Diego (Fourth District, Div. One), 2007 DJDAR 3443 (husband who signed admission papers for wife suffering from dementia lacked authority to bind her to nursing home arbitration agreement conduct by the principal creates agency, marital status alone does not ); and Hogan v. Country Villa Health Services (Fourth District, Div. Three), 2007 DJDAR 2948 (health care power of attorney compels daughter to arbitrate elder abuse claim against nursing facility pursuant to arbitration clause in admission contract and Probate Code §4701).
Finally, in Lee v. Southern California University for Professional Studies (Fourth District, Div. Three), 2007 DJDAR 3664, the trial court correctly held that Defendant, a law school, may not compel arbitration against Plaintiff, one of its students, who filed an action for violation of the Consumer Legal Remedies Act, where she never signed an arbitration agreement with the school.
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