Cobb v. Ironwood Country Club
233 Cal. App. 4th 960
| Cal. Ct. App. | 2015Background
- Plaintiffs (two current, two former Ironwood members) sued for declaratory relief, alleging the Club reneged on prior promises to repay members' $25,500 "Land Purchase Assessments" upon resale of memberships.
- Members had funded a land purchase via loans reported as liabilities payable on sale of a member’s certificate; plaintiffs allege Ironwood stopped collecting equivalent payments from new members and ceased repayments.
- Complaint filed August 2012; Ironwood’s bylaws then contained no arbitration clause.
- In December 2012 (four months after the complaint), Ironwood’s board adopted a bylaw requiring arbitration of claims "of or by a Member past or present" and waiving certain damages.
- Ironwood moved to compel arbitration in January 2013; the trial court denied the motion, finding the bylaw amendment could not retroactively bind plaintiffs and would render the contract illusory.
- Ironwood appealed; the Court of Appeal affirmed, holding unilateral retroactive imposition of arbitration on accrued claims violated the covenant of good faith and fair dealing and did not create an enforceable agreement to arbitrate the pending dispute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a unilaterally adopted bylaw amendment can compel arbitration of an already-filed lawsuit | Plaintiffs: amendment does not create their assent; applying it retroactively impairs accrued rights | Ironwood: members agreed to bylaws and future amendments when they joined, so amendment binds past and present members | Held: No — unilateral retroactive amendment cannot bind members as to accrued, pending claims; violates covenant of good faith and fair dealing |
| Whether the dispute is "ongoing" so the bylaw is not retroactive | Plaintiffs: lawsuit asserts accrued legal claims entitled to court forum; arbitration bylaw would retroactively affect those accrued rights | Ironwood: dispute is ongoing, not a discrete past event, so arbitration can apply | Held: All pending suits are "ongoing," but applying arbitration to already accrued causes of action is retroactive and impermissible absent consent |
| Whether public policy favoring arbitration requires sending the case to arbitration | Plaintiffs: arbitration is consensual; no agreement to arbitrate this dispute exists | Ironwood: doubts should be resolved in favor of arbitration | Held: Policy does not overcome lack of voluntary agreement; no doubt here — amendment does not create assent |
| Whether the arbitration bylaw is one-sided/unconscionable | Plaintiffs: bylaw favors Club, excludes Club’s claims, limits damages, may be unconscionable | Ironwood: (implicit) bylaw is valid club governance | Held: Court noted one-sided terms could be unconscionable and emphasized contractual voluntariness; did not enforce the bylaw here |
Key Cases Cited
- Asmus v. Pacific Bell, 23 Cal.4th 1 (reserve to modify contract may be unenforceable if unfettered)
- Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342 (implied covenant of good faith limits discretionary powers affecting another's rights)
- Avery v. Integrated Healthcare Holdings, Inc., 218 Cal.App.4th 50 (unilateral changes to arbitration agreements cannot retroactively apply to accrued or known claims)
- Peleg v. Neiman Marcus Group, Inc., 204 Cal.App.4th 1425 (modification provisions silent on retroactivity are limited by covenant so changes do not apply to accrued claims)
- Peng v. First Republic Bank, 219 Cal.App.4th 1462 (implied covenant prevents modifying arbitration agreement once claim accrued or is known)
- Buttram v. Owens-Corning Fiberglas Corp., 16 Cal.4th 520 (law recognizes retroactive application when it affects causes of action that accrued before effective date)
- Coon v. Nicola, 17 Cal.App.4th 1225 (retroactive arbitration enforceable only where party expressly consents to retroactivity)
- Victoria v. Superior Court, 40 Cal.3d 734 (arbitration depends on voluntary agreement)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (doctrine of unconscionability limits one-sided arbitration clauses)