McCaffrey Group, Inc. v. Superior Court
169 Cal. Rptr. 3d 766
Cal. Ct. App.2014Background
- McCaffrey built single-family homes in a Fresno development; real parties own 24 homes there.
- SB 800/Home Right to Repair Act governs nonadversarial prelitigation procedures for defects diagnosed after Jan 1, 2003, but builders may opt out with contractual procedures.
- McCaffrey elected to replace statutory procedures with contractual prelitigation provisions in 2001/2003 purchase agreements and warranties, requiring notice, inspection, repair, and mandatory nonbinding mediation before suit.
- Real parties sued for construction defects; McCaffrey moved to compel ADR and stay litigation, arguing contractual provisions should be enforced and Act procedures foregone.
- The trial court held the contractual provisions unconscionable and unenforceable, especially against original purchasers post-2003 and especially against subsequent purchasers; it declined to enforce the ADR clauses.
- This writ petition addresses whether the contractual ADR and judicial reference provisions are enforceable against all real parties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contractual ADR is enforceable where builder opted out of the Act | McCaffrey asserts contractual ADR is valid and may be enforced for all real parties. | Real parties contend the Act governs and contractual provisions are unenforceable as unconscionable and in conflict with §914. | Contractual ADR is enforceable; builder may opt out and requires compliance for original and subsequent purchasers. |
| Whether the contractual procedures are unconscionable | Procedures are not unconscionable; reasonable in timeframes and good-faith obligations apply. | Procedures are adhesive, lack Act timelines, and impose burdens on homeowners, making them unconscionable. | Contractual provisions are not unconscionable for original post-2003 purchasers; pre- and subsequent purchasers' enforceability follows listed rules. |
| Effect on subsequent purchasers bound by contractual terms | Subsequent purchasers are bound by the contractual procedures via covenants run with the land or through the agreement. | Subsequent purchasers should be bound only if they contractually agreed; otherwise Act provisions apply. | Subsequent purchasers are bound to the contractual procedures as enforced against them. |
| Relation between contract provisions and the judicial reference clause | Judicial reference clause is enforceable if ADR is enforced; severance not required. | Judicial reference could be unconscionable and should be reconsidered. | Court retains discretion on severance; ruling focuses on enforcing contractual ADR and mediation; reference clause not decided for all parties. |
Key Cases Cited
- Anders v. Superior Court, 192 Cal.App.4th 579 (Cal. Ct. App. 2011) (builder opts out of Chapter 4; prelitigation repairs may proceed if procedures are fair)
- Baeza v. Superior Court, 201 Cal.App.4th 1214 (Cal. Ct. App. 2011) (builder opts out of Chapter 4; 912 disclosure not applicable to contract buyers)
- Tarrant Bell Property, LLC v. Superior Court, 51 Cal.4th 538 (Cal. 2011) (discretionary use of judicial reference; considerations for severance)
- Trend Homes, Inc. v. Superior Court, 131 Cal.App.4th 950 (Cal. Ct. App. 2005) (unconscionability sliding scale; procedural vs. substantive balance)
- Greenbriar Homes Communities, Inc. v. Superior Court, 117 Cal.App.4th 337 (Cal. Ct. App. 2004) (prelitigation and costs in judicial reference context; cost considerations)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (Cal. 2012) (unconscionability; sliding scale and practical enforcement)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (contract formation; procedural unconscionability framework)
- Wagner Construction Co. v. Pacific Mechanical Corp., 41 Cal.4th 19 (Cal. 2007) (reasonable time for performance; implied timeframes in contracts)
- Standard Pacific Corp. v. Superior Court, 176 Cal.App.4th 828 (Cal. Ct. App. 2009) (burden to show release from Chapter 4 for prelitigation procedures)