156 F. Supp. 3d 176
D.D.C.2016Background
- Plaintiff Julio Lamboy Ruiz owns a condominium unit at Millennium Square and made architectural modifications he believes were approved under the condominium bylaws.
- Associations (Millennium Square Residential Association and Unit Owners Association) contend some modifications lacked approval and demand restoration; Ruiz sued for declaratory relief that his changes comply with the bylaws.
- The Associations moved to stay the suit and compel arbitration under the bylaws, pointing to Sections 11.6 (disputes to arbitration) and 19.2 (arbitration procedure).
- Section 19.2 prescribes arbitrator selection: a residential-owner-appointed arbitrator, a commercial-owner-appointed arbitrator, and a third chosen by those two; it also asks that arbitrators decide within 30 days and assigns costs to the losing party.
- Ruiz conceded the dispute is covered by the bylaws but argued the arbitration provision is unconscionable (procedural and substantive), citing lack of party participation in arbitrator selection, absence of written opinions, and no guaranteed discovery.
- The Court found the bylaws fall within the FAA, rejected most unconscionability arguments, held the arbitrator-selection clause unenforceable, severed that clause, and compelled arbitration (staying the case). Parties were directed to report any agreed selection mechanism within 30 days; the Court noted it could appoint arbitrators under 9 U.S.C. § 5 if necessary.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAA applies | Bylaws concern local real property and not interstate commerce, so FAA inapplicable | FAA covers commerce in D.C.; bylaws fall within FAA | FAA applies |
| Whether arbitration agreement is enforceable (general) | Arbitration clause unconscionable; therefore unenforceable | Bylaws form a valid contract to arbitrate covered disputes | Agreement to arbitrate valid (mostly enforceable) |
| Procedural unconscionability due to adhesion | Take-it-or-leave-it bylaws make contract of adhesion; plaintiff had no meaningful choice | Condo purchase does not render owner powerless; no extreme disparity in bargaining power shown | No procedural unconscionability established |
| Substantive unconscionability of arbitration procedures | Section 19.2 is unfair: no written reasons, no discovery, and plaintiff lacks role in selecting arbitrators | Section 11.6+19.2 together allow owner participation (Associations' main defense); otherwise arbitration should proceed | No requirement for written reasons or guaranteed discovery; only arbitrator-selection provision is unconscionable and severed; remainder enforced |
Key Cases Cited
- Aliron Int’l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863 (D.C. Cir. 2008) (summary-judgment standard applies to motions to compel arbitration)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) (arbitration agreements can be invalidated by ordinary contract defenses)
- Perry v. Thomas, 482 U.S. 483 (1987) (arbitration agreements subject to generally applicable contract defenses)
- Curtis v. Gordon, 980 A.2d 1238 (D.C. 2009) (unconscionability requires lack of meaningful choice plus unreasonably favorable terms)
- Schwartz v. Chow, 867 A.2d 230 (D.C. 2005) (arbitrators are not required to state grounds for awards)
- Booker v. Robert Half Int’l, Inc., 413 F.3d 77 (D.C. Cir. 2005) (unenforceable contract terms may be severed while enforcing the remainder)