In the class action Donia Townsend, et al. v. The Quadrant Corp., et al., four married couples who bought homes from builder The Quadrant Corp. charged that after moving in to their respective homes, various construction defects had caused them to incur damages from mold, pests and toxic gases, and had violated Washington’s Consumer Protection Act.
Each purchase contract included a clause mandating that any disputes with the builder would be arbitrated, not litigated.
The homeowners asked the court to find the arbitration clause unenforceable, alleging that the builder had presented the purchase agreement containing the clause on a "take it or leave it" basis, had applied high-pressure sales tactics to get them to sign the purchase agreement, and had failed to allow the homeowners to review the purchase agreement before signing it digitally.
The builder moved to compel the homeowners to arbitrate their claims, under the arbitration clause of the purchase agreement.
The trial court denied the builder’s motion. The builder appealed, arguing that the arbitrator, not the court, had the sole authority to determine whether the arbitration clause was valid.
The appeals court overturned the trial court’s decision on the enforceability of the arbitration clause. The court interpreted the Uniform Arbitration Act, Revised Code of Washington 7.04.A, to provide that in cases where a party challenges the validity of only the arbitration clause, rather than disputing the enforceability of the entire contract, it is the province of the court to determine whether the clause is valid.
Here, the homeowners’ argument was that the arbitration clause itself was substantively unconscionable, i.e., "one-sided or overly harsh." Accordingly, the Court of Appeals held, the lower court had the authority to determine the validity of the clause.
The court found that the arbitration clause was not, as the homeowners had argued, substantively unconscionable, as it did not exclude class-action lawsuits or impose costs prohibiting homeowners from vindicating their claims. The issue of whether the clause was invalid because the entire contract was procedurally unconscionable, the court ruled, was an issue to be determined by the arbitrator.
However, the homeowners’ noncontract claims of property damage and injury were not covered by the arbitration clause. The trial court was ordered to comply with the Court of Appeal’s findings.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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