Article Courtesy of Dinsmore
Publications
By Jason Lambert
Published June 12, 2022
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Arbitration provisions are becoming more common in construction contracts, but a
recent court decision reveals that enforcing these provisions requires more than
just placing them in a contract. Contractors, especially those seeking to
arbitrate claims involving multiple property owners or an entire homeowner or
condominium association, must sufficiently establish that enough of the property
owners agreed to arbitrate their claims.
Mattamy Florida LLC .v. Reserve at Loch Lack Homeowners Association, Inc. arose
out of the construction of a subdivision by a developer. After completion of the
development, the homeowners association sued the developer for failure to
adequately develop, design, or construct the community. In response, the
developer moved to compel arbitration, and attached a single purchase agreement
and a single copy of a warranty. The developer claimed in the motion that all of
the townhomes in the community were sold subject to those two documents. Notably
though, the developer did not attach any affidavits in support of its motion,
nor did it specify which homeowners had purchased units subject to the
agreements, which homeowners were original purchasers, or how non-signatories to
the agreements would be bound by them.
The association latched on to these shortcomings in its response to the motion,
and further provided an affidavit from the association president indicating that
the association did not know how many of the members of the association had
executed the purchase agreements or agreed to the warranties. The trial court
entered an order denying the contractor’s motion to compel arbitration without a
hearing. Following the denial, the contractor filed a motion for rehearing and
98 home purchase agreements. This did not change the trial court’s ruling, so
the contractor appealed.
On appeal, the contractor argued that the association was required to arbitrate
its claim against the association due the underlying purchase agreements and
limited warranties being binding on the homeowners that were members of the
association. The Fifth District Court of Appeal declined to address this
specific issue, and instead agreed with the trial court that the contractor
failed to carry its burden of establishing the existence of an enforceable
agreement to arbitrate. Specifically, the court said:
“Here, [the contractor] submitted its motion, unsupported by affidavits and with
only a single purchase agreement and accompanying warranties attached. This left
several factual questions unaddressed and [the contractor’s] position supported
only by argument of counsel as presented in its initial motion to dismiss. And
while it appears [the contractor] attempted to supply evidentiary support after
its motion was denied, the trial court was not required to consider the filing.”
Accordingly, the matter stayed in litigation.
The importance of this case rests on the assumption that arbitration is
generally faster and marginally cheaper than litigation. Further, arbitration
can also make it more difficult for a class of individuals to stay together. Put
another way, the individuals can be forced to arbitrate claims separately,
increasing their individual costs. By losing the ability to compel arbitration,
the contractor in this case lost a significant advantage.
Contractors who have arbitration provisions in their contracts should take care
to preserve those rights and to use them to their advantage in litigation.
Further, contractors who want to enforce arbitration provisions against
potential class representatives, like a homeowners association or condo
association, should take care to ensure that specific language regarding that is
included in the arbitration provision. Language like this could have possible
helped the contractor in this case.
MATTAMY FLORIDA LLC v.
RESERVE AT LOCH LAKE HOMEOWNERS ASSOCIATION, INC. |