Real Estate and Construction Law Blog

Ovitz v. Shulman
California Court of Appeal, Fourth District. Decided October 26, 2005

By Robert T. Sturgeon

The California Court of Appeal has vacated an arbitration award of over $3 million in damages and attorney's fees on the grounds that the arbitrator failed to disclose that he would entertain offers to serve as an arbitrator in other cases involving the parties or their attorneys, and failed to timely disclose that he had been engaged to serve as an arbitrator in a separate arbitration involving the attorneys for one of the parties. While this case did not involve parties in the construction industry, given the prevalence of arbitration agreements in construction contracts, it is noteworthy for construction industry professionals because it illustrates some potential pitfalls of contractual arbitrations.

Rojas v. Superior Court
(Coffin) 33 Cal. 4th 407(Jul. 12, 2004)

Owner of an apartment complex mediated and settled a dispute with the general contractor who built the complex. Subsequently, tenants in the complex sued owner and contractor for damages caused by construction defects. The tenants moved to compel discovery of the mediation files from the underlying dispute while owner and contractor argued that California Evidence Code Section 1119 protected such files from discovery.

Azteca Construction, Inc. v. ADR Consulting, Inc.
121 Cal. App. 4th 1156 (3d Dist. Aug. 25, 2004)

A dispute arose out of a written contract pursuant to which ADR had agreed to provide consulting services to Azteca. The contract required the dispute to be resolved through the American Arbitration Association. In compliance with Code of Civil Procedure Section 1281.9, the proposed arbitrator submitted a disclosure statement which revealed the proposed arbitrator's possible non-neutrality.

Pursuant to Section 1281.91 of the Code of Civil Procedure, Azteca demanded disqualification of the proposed arbitrator. The AAA, pursuant to its internal construction industry rules, determined that there was no good cause for disqualification and the arbitration proceeded. After the arbitration concluded, Azteca petitioned to vacate the award under Code of Civil Procedure Section 1286.2(a)(6)(B).

The Court of Appeal reversed the trial court's finding that Azteca had waived the applicable statutory provisions by agreeing to AAA arbitration. The Court of Appeal explained that statutory provisions regarding arbitrator disqualification may not be waived or superseded by a private contract and found that the proposed arbitrator here should have been disqualified under Section 1282.91 before the arbitration began. The Court directed the trial court to grant Azteca's petition to vacate the award.

Greenbriar Homes Communities, Inc. v. Superior Court(Couris)
117 Cal. App. 4th 337 (3d Dist. Mar. 8, 2004)

Homeowners brought claims against petitioner to recover for damages allegedly caused by petitioner's defective construction. Homeowners included original purchasers (those who had bought their homes from petitioner) and non-original purchasers who were not in privity of contract with petitioner. The sale agreements between petitioner and the original purchasers required all disputes to be determined by a judicial referee.