As you all should know, arbitration has become a favorite method of resolving disputes in construction cases. Mediation is another favored method of doing the same. The reason for this favoritism is that you are more likely to get an arbitrator or mediator with construction experience. This is not always true in court where you will have a judge who has no understanding of construction, nor the fact that construction is not a science. I once had a judge who asked me why I subpoenaed the plans since they are so big and dirty!

In this case, Mr. and Mrs. Bruni ("Bruni") purchased their single family home in a development from James Didion. The contract contained a limited warranty and arbitration provision. Bruni later discovered that their home was defective. Bruni and other homeowners filed suit against the developer alleging construction defects. The homeowners opposed the Motions of the developer stating that the arbitration provisions were unconscionable. The trial court denied the Motions to Compel Arbitration agreeing that the arbitration provisions were unconscionable. The developer appealed. Essentially, the developer was stating that unconscionability must be decided by an arbitrator not the trial court.

The Appellate Court sided with the trial court. The Appellate Court stated that if a party is claiming forgery or fraud, asserting that it never agreed to the arbitration clause, then the court must decide the claim. But if the party is not denying that it agreed to the arbitration clause and instead claims some other defense to the enforcement of the clause, then the court must enforce the arbitration clause and allow an arbitrator to decide the issues.

Here, the Plaintiffs were claiming unconscionability that they never "knowingly agreed" to the arbitration provisions.

Therefore, the trial court and not the arbitrator is required to resolve the unconscionability claim. The reason the court held that the provision was unconscionable was because the provisions were contained in a contract of adhesion (a "take it or leave it" contract), and violated the reasonable expectations of the Plaintiffs (homeowners).

We believe that this is a relatively bad decision. Not because it is unfair, but anyone can say that they did not know what they were signing and therefore the court must decide. Since arbitration is much less expensive than litigation and since many courts are not typically able to resolve complicated construction disputes, this makes it very easy for someone to get out of an arbitration agreement and go to court.

Attorney Sam Abdulaziz of Abdulaziz, Grossbart & Rudman has been practicing construction law for over 30 years. He has written a book called "California Construction Law" which is updated annually. He represents numerous construction trade associations and contractors. He appears at Contractors State License Board meetings and has argued a number of cases before the appellate courts, including the California Supreme Court dealing with the "Pay-If-Paid Clause."

Abdulaziz, Grossbart & Rudman provides this information as a service to its friends & clients. The documents are of a general nature and are intended to highlight areas of the subject matter and should not be used as a substitute for specific legal advice. This document does not create an attorney-client relationship, or protect any confidential information until a written agreement is signed. You should seek the aid and advice of a competent attorney, accountant and/or other professional instead of relying on the presentation and/or documents.

Sam Abdulaziz can be reached at:
Abdulaziz, Grossbart & Rudman
P.O. Box 15458
North Hollywood, CA 91615-5458
Phone - (818) 760-2000
Fax - (818) 760-3908
info@agrlaw.net 
http://www.agrlaw.net