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August 17th, 2012

By Backing Arbitration Clause, California High Court Strikes Blow for Common Sense

Striking a blow for common sense and contractual arbitration clauses, the California Supreme Court last week ruled that a homeowners association must take its allegations of contruction defects against the developer to an arbitrator.

As reported by The Recorder, California’s leading source for legal news, the court essentially reasoned in Pinnacle Museum Tower Association v. Pinnacle Market Development (12 C.D.O.S. 9387) that, “Even though the homeowners association did not yet exist when the developer filed its declaration of restrictions, and therefore could not have consented to arbitration in the traditional sense, the individual homeowners who make up the association waived the right to a jury trial by consenting to the restrictions when buying their homes.”

“Given these circumstances, an association should not be allowed to frustrate the expectations of the owners (and the developer) by shunning their choice of a speedy and relatively inexpensive means of dispute resolution,” wrote Justice Marvin Baxter for a five-justice majority.  “Likewise, condominium owners should not be permitted to thwart the expectations of a developer by using an owners association as a shell to avoid an arbitration covenant in a duly recorded declaration.”

A real estate litigator quoted by The Recorder said “the decision settles an issue that has vexed California trial courts for some 15 years” and “will have a major impact on multiparty construction defect cases, which can get bogged down for years in front of special masters before getting sent out to trial.”

This ruling shows an encouraging embrace of common sense by a majority of California’s high court, which seems wisely willing to continue its promotion of arbitration as sound public policy.  More broadly, discouraging petty and/or preposterous lawsuits should become the raison d’être of every judge in the once Golden State as it crumbles toward insolvency.  If judges want to worry less about court budget cutbacks, they’d best start showing some real hostility to their state’s inventive but ultimately parasitic and enervating plaintiffs’ bar.

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