Friday, September 12, 2008

Jury Trial Waivers

In Grafton Partners v. Su0perior Court, 35 Cal. 4th 944 (2005), the Court held that a predispute jury trial waiver violated Article I, Section 16 of the California Constitution. That constitutional provision provides, among other things, that the right to a jury trial may only be "waived by consent of the parties expressed as prescribed by statute." Because the Legislature has never authorized predispute jury trial waivers, they are unconstitutional and thus unenforceable. (Howard Rice represented the Petitioners in that case.)

The Court of Appeal, Fourth Appellate District. Division One, has now decided that a provision authorizing judicial reference in CC&Rs promulgated by a developer is also unconstitutional and unenforceable. Treo @ Kettner Homeowners Ass'n v. Superior Court, available here. The developer of a condominium project recorded CC&Rs for the project, which contained a provision mandating judicial reference for any disputes between the developer and the condo owners or their association. When a construction defects dispute arose, the developer moved for judicial reference, the trial court granted the order, and the plaintiff sought a writ of mandate from the Court of Appeal.

Section 638 provides the a referee may be appointed "upon the motion of a party to a written contract or lease that provides that any controversy arising therefore shall be heard by a referee if the court finds that a reference agreement exists between the parties." The court acknowledged that CC&Rs are enforceable under some circumstances, but held that they were not the sort of "contract" that the Legislature intended to authorize in Section 638.

CC&Rs are generally entered into between a developer and a homeowners' association that the developer forms. As a result, as the court stressed, the homeowners who ultimately buy into the development do not assent to the CC&Rs, but merely acquire property with legal notice thereof. The court therefore found that the CC&Rs were not the sort of "contract" that could waive a jury by authorizing judicial reference: "Treating CC&R's as a contract such that they are sufficient to waive the right to trial by jury does not comport with the importance of the right waived. CC&R's are notoriously lengthy, are adhesive in nature, are written by developers perhaps years before many owners buy, and often, as here with regard to the waiver of trial by jury, cannot be modified by the association. Further, the document is not signed by the parties."

Assuming that this decision survives the inevitable petition for review, the question this leaves open is whether judicial reference agreements are enforceable if they are contained in adhesion contracts that, in contrast to CC&Rs, are signed by the parties. That will be an interesting battle.

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