HEARING ON MOTION TO/FOR STAY PROCEEDINGS UNTIL ARBITRATION IS
COMPLETED FILED BY CLYDE MILES DEVELOPMENT,LLC
* TENTATIVE RULING: *

The motion by defendant Clyde Miles Development, LLC (“CMD” or “defendant”) is denied; defendant’ motion in the alternative to compel the matter to arbitration is also denied.

As a preliminary matter, the court exercises its discretion to consider plaintiffs’ late-filed opposition papers.

This is a construction defects action regarding 19 homes in Discovery Bay. Defendant moves for the matter to be stayed pending plaintiffs’ completion of the prelitigation procedures required in certain actions pursuant to Civil Code Section 895 et seq., often referred to as “SB 800” or the “Right to Repair Act.” SB 800 requires that homeowners who seek to litigate certain types of construction defects claims first give the builder notice of their claims and the opportunity to make repairs. Civil Code §§910, 912. If the homeowners fail to comply with these requirements, the builder can move for a stay pending completion of the prelitgation procedures. Civil Code §930 (b). CMD argues that because the plaintiffs in this action have not gone through the required prelitigation procedures, the matter should be stayed.

In this case, however, plaintiffs are not alleging claims under the statutory standards set by SB 800. Plaintiffs argue that under Liberty Mutual v. Brookfield Crystal Cove (2013) 219 Cal. App. 4th 98, and Burch v. Superior Court (2014) 223 Cal. App. 4th 1411, it is now clear that SB 800 is not the exclusive remedy in cases involving construction defects. Plaintiffs argue that in this case, as they have not chosen to state a cause of action under SB 800, they are not subject to its required prelitigation procedures.

As defendant notes, neither Liberty Mutual nor Burch directly addressed the applicability of SB 800 prelitigation requirements in cases not brought under SB 800; those cases say only that a construction defects suit can be brought alleging tort and contract causes of action rather than violations of the SB 800 statute. Defendants argue that under KB Home Greater Los Angeles, Inc. v. Superior Court (2014) 2014 Cal.App. LEXIS 167, even in a case where common law tort claims are alleged, the SB 800 prelitigation procedures apply. In KB Home, however, the Court of Appeal addressed an appeal from the trial court’s ruling on summary judgment motions on the plaintiff-insurer’s SB 800 cause of action, the sole cause of action remaining. Id. at *6. It did not consider the question of whether those procedures apply in a case where there are no SB 800 claims.

As neither side points to case law directly addressing the issue of whether the SB 800 prelitigation procedures apply in a case that does not state a cause of action under SB 800, the court turns to the statute itself. Civil Code Section 910 is clear that the prelitigation procedures set forth in Sections 910 and 912 apply only in cases alleging violation of the statutory standards of SB 800: “Prior to filing an action against any party alleged to have contributed to a violation of the standards set forth in Chapter 2 (commencing with Section 896), the claimant shall initiate the following prelitigation procedures…” Thus the requirements for notice and an opportunity to repair do not apply in cases, such as this one, in which there are no allegations of violations of those statutory standards, and the defendant cannot have the action stayed under Section 930(b).

Defendant argues that in the alternative, if a stay is not granted, the case should be compelled to arbitration because the purchase agreements, and the “Fit and Finish Warranty” for the homes both state that any disputes must be arbitrated, and a similar provision was included in the CC&Rs.

As plaintiffs note in opposition, the question of whether plaintiffs’ claims should be compelled to arbitration must be analyzed differently for those homeowners who purchased their homes directly from CMD than for those who were subsequent purchasers. The subsequent purchasers are not party to the purchase agreements and fit and finish warranties requiring disputes to be arbitrated. CMD argues that they are subject to the requirement in the CC&Rs for the properties that disputes be arbitrated, as the CC&Rs were incorporated by reference into each grant deed for each home. Declaration of Clyde Miles in support of motion, Exhibits F and G. However, as plaintiffs note in their opposition, the alternative dispute resolution provisions of the CC&Rs (which include the provision requiring arbitration of disputes) expressly state that they “do not apply to disputes between the owners … and any merchant builder (other than Hoffmann Construction Co. ) relating to sale of the lots of residences” and refers owners to their sale documents as to any alternative dispute resolution requirement for such disputes. Miles Declaration, Exhibit F, p. 91. The incorporation of this at best ambiguous provision of the CC&Rs into the deeds of subsequent purchasers is not sufficient to bind them to arbitrate disputes against CMD. Thus as to the subsequent purchaser homeowners, who did not sign purchase agreements agreeing to arbitration of disputes, defendant has not shown that they are bound to arbitrate their disputes with CMD. As to the subsequent purchaser plaintiffs, the motion to compel arbitration is denied.

The original purchaser plaintiffs, however, did agree to arbitrate any disputes with CMD. Memorandum of points and authorities in support of motion to stay, pp. 4-7; Miles Declaration ¶¶ 3-5, and Exhibits B,C and D thereto. Plaintiffs argue that the court should exercise its discretion under Code of Civil Procedure Section 1281.2 (c) to refuse to enforce the agreements to arbitrate here. Under Section 1281.2 (c), a court may refuse to enforce an arbitration agreement if a “party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” Here, plaintiffs argue, they will soon name as defendants to this action various subcontractors who are not party to the arbitration agreements with plaintiffs, and in order to avoid the possibility of conflicting rulings contemplated in Section 1281.2, the court should deny the motion.

The court’s discretion to refuse to enforce an arbitration agreement under Section 1281.2 (c), however, applies only where the party to the arbitration agreement “is also a party to a pending court action …” involving related claims, not subject to arbitration. That is not the case here as to the claims against the subcontractors, which are not yet pending. It is the case, however, as to the claims of the subsequent purchaser homeowners against CMD, which, as discussed above, are not subject to arbitration. For precisely the reasons set forth in Section 1281.2 – the possibility of conflicting rulings on common issues of law or fact – it would make little sense for the court to order the claims of the original purchaser plaintiffs to arbitration while those of the subsequent purchaser plaintiffs remain in court. For this reason, the motion to compel arbitration is denied as to those homeowners who purchased their homes directly from CMD.

Evidentiary Rulings:

Defendant’s Request for Judicial Notice is granted. Evidence Code §452(c) and (d).

E-Filing

The court will order the case to e-filing on the LexisNexis e-filing service effective April 1st, 2014. If any party wishes to object, it must do so on or before March 25th, 2014.