ADR Case Updates
Arbitration Clause in CC&R's is Enforceable, 09/12/2012
Although a condominium homeowner's association did not exist independent of the developer when it drafted and recorded a "declaration of restrictions," the arbitration clause in the restrictions is enforceable against the association in subsequent construction defect litigation. Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, (2012) 55 Cal. 4th 223.
Pinnacle Market Development (Pinnacle) developed a mixed-use residential and commercial community in downtown San Diego known as the Pinnacle Museum Tower Condominium Project. The restrictions provided for the creation of the Pinnacle Museum Tower Association as the homeowner association responsible for managing the complex. In addition, the restrictions stated that by accepting a deed for any part of the property, the Association and individual owners agreed to resolve any construction defect disputes by arbitration.
After individual owners bought units in the project, the Association filed a construction defect action against Pinnacle, which moved to compel arbitration. The trial court denied the motion and invalidated the agreement. The court of appeal affirmed, holding that because there was no independent homeowner's association when Pinnacle recorded the declaration of restrictions, the Association could not have agreed to the arbitration provision.
Reversed and remanded. Under the Davis-Stirling Common Interest Development Act (California Civil Code Section 1350, et seq.), a condominium development may be created when a developer records a declaration and conveys one unit in the development. Each owner of a development expressly consents, or is deemed by law to have agreed, to the terms in the recorded declaration. Such a result is not unreasonable, and based upon statutory and decisional law pertaining to common interests developments.
Here, although the Association did not exist when the declaration was recorded, nor bargain with Pinnacle over the terms therein, those terms reflected written promises that ran with the land, which were subject to enforcement against the Association. Thus, the motion to compel arbitration should have been granted.
In Addition, the Following Recent Cases Regarding Arbitration Hold:
Truly Nolen of America v. Superior Court (Miranda)(2012) 208 Cal. App. 4th 487 (California Supreme Court decision in Gentry v. Superior Court, which permits invalidation of class action arbitration waivers, remains viable despite U. S. Supreme Court holding in AT&T Mobility LLC v. Concepcion);
Caron v. Mercedes-Benz Financial Services USA LLC (2012) 208 Cal. App. 4th 7 (Federal preemption - arbitration clause in contract is not invalidated by class action waiver clause because federal law favoring arbitration preempts Consumers Legal Remedies Act);
Sparks v. Vista del Mar Child and Family Services (2012) 207 Cal. App. 4th 1511 (Unconscionability - former employee is not bound by arbitration clause, which was included in lengthy handbook that employee did not specifically acknowledge);
Nelsen v. Legacy Partners Residential, Inc., (2012) 207 Cal. App. 4th 1115 (Procedurally unconscionable arbitration clause buried on the back of a preprinted form employment agreement is enforceable because plaintiff failed to establish substantive unconscionability as the language did not explicitly limit the rights of either party);
Reyes v. Liberman Broadcasting, Inc., (2012) 208 Cal. App. 4th 1537 (Waiver - employer that did not assert right to compel arbitration for months does not waive right where it acted consistently with its rights);
Ackerman v. Eber (In re Eber) 687 F. 3d 1123 (Ninth Cir., 2012) (Bankruptcy court has discretion to decline to enforce applicable arbitration provision where arbitration would conflict with underlying purposes of Bankruptcy Code);
Nemecek & Cole v. Horn (2012) 208 Cal. App. 4th 641 (Disclosure - arbitrator is not required to disclose participation in bar association committee even if attorney, who worked for defendant law firm, also participated);
Comerica Bank v. Howsam (2012) 208 Cal. App. 4th 790 (In international arbitration matter, domestic disclosure rules are inapplicable when arbitrator made disclosure after proceedings commenced); and
Worthington v. Davi (2012) 208 Cal. App. 4th 263 (In granting relief under Real Estate Recovery Fund, trial court may consider arbitrator's factual findings when determining if judgment was based on fraud).
The California opinions are posted at: http://www.courts.ca.gov/opinions.htm, and the Ninth Circuit case at: http://www.ca9.uscourts.gov/opinions/.
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