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U.S. Home Corp. v. Michael Ballesteros Trust

Supreme Court of Nevada, En Banc

April 12, 2018

U.S. HOME CORPORATION, A DELAWARE CORPORATION, Appellant,
v.
THE MICHAEL BALLESTEROS TRUST; RODRIGO ASANION, INDIVIDUALLY; FEDERICO AGUAYO, INDIVIDUALLY; FELIPE ENRIQUEZ, INDIVIDUALLY; JIMMY FOSTER, JR., INDIVIDUALLY; THE GARCIA FAMILY TRUST; ARNULFO ORTEGO-GOMEZ, INDIVIDUALLY; ELVIRA GOMEZ-ORTEGA, INDIVIDUALLY; JOHN J. OLSON, INDIVIDUALLY; IRMAA. OLSON, INDIVIDUALLY; OMAR PONCE, INDIVIDUALLY; BRANDON WEAVER, INDIVIDUALLY; JON YATES, INDIVIDUALLY; AND MINTESNOT WOLDETSADIK, INDIVIDUALLY, Respondents.

          Appeal from a district court order denying a motion to compel arbitration. Eighth Judicial District Court, Clark County; Joanna Kishner, Judge.

          Payne & Fears LLP and Gregory H. King, Sarah J. Odia, and Chad D. Olsen, Las Vegas, for Appellant.

          Shinnick, Ryan & Ransavage P.C. and Duane E. Shinnick, Courtney K. Lee, Melissa Orr, and Bradley S. Rosenberg, Las Vegas, for Respondents.

          Canepa Riedy Abele and Scott K. Canepa, Las Vegas, for Amicus Curiae Nevada Justice Association.

          Wood, Smith, Henning & Berman, LLP, and Janice M. Michaels, T. Blake Gross, and Anthony S. Wong, Las Vegas, for Amicus Curiae Nevada Home Builders Association.

          OPINION

          PICKERING, J.

         This is an appeal from an order denying a motion to compel arbitration in a construction defect action. The Federal Arbitration Act (FAA) declares written arbitration agreements 'Valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. In this appeal, we must determine whether the FAA governs the arbitration agreement contained in the common-interest community's Covenants, Conditions, and Restrictions (CC&Rs). Because the underlying transaction involved interstate commerce, we hold that it does and that, to the extent Nevada case law concerning procedural unconscionability singles out and disfavors arbitration of disputes over transactions involving interstate commerce, that case law is preempted by the FAA. We therefore reverse and remand for entry of an order directing the parties to arbitration.

         I.

         This construction defect action concerns 12 single-family homes located in a southern Nevada common-interest community. Appellant U.S. Home Corporation is the developer. The community is subject to CC&Rs that define U.S. Home as a "declarant." The CC&Rs include a section entitled "Arbitration, " which states in relevant part:

Arbitration. Any dispute that may arise between: (a) the . . . Owner of a Unit, and (b) the relevant Declarant, or any person or entity who was involved in the construction of any. . . Unit, shall be resolved by submitting such dispute to arbitration before a mutually acceptable arbitrator who will render a decision binding on the parties which can be entered as a judgment in court pursuant to NRS 38.015, et seq.

         Three of the respondents are original purchasers who contracted directly with U.S. Home to build and sell them homes. These respondents each signed a Purchase and Sales Agreement (PSA). The PSAs include an arbitration clause, in addition to that contained in the CC&Rs, in which the parties "specifically agree that this transaction involves interstate commerce and that any dispute . . . shall first be submitted to mediation and, if not settled during mediation, shall thereafter be submitted to binding arbitration as provided by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) or, if inapplicable, by similar state statute, and not by or in a court of law." The remaining ten respondents are subsequent purchasers who took title subject to the CC&Rs but did not sign a PSA.

         Between August 2013 and February 2015, U.S. Home received construction defect pre-litigation notices on behalf of all respondents (the Homeowners). U.S. Home responded with letters demanding arbitration. The Homeowners then filed, in the district court, an NRS Chapter 40 construction defect complaint against U.S. Home seeking damages for breach of contract, breach of implied warranties, and negligence. U.S. Home filed a motion to compel arbitration based on the arbitration clauses in the CC&Rs and PSAs. The district court denied the motion. It held that the underlying transaction did not involve interstate commerce so the FAA did not apply. Applying state law, the district court invalidated the arbitration agreements as unconscionable. This appeal followed.

         II.

         Before considering whether the FAA controls, there is a threshold question we must resolve: Does the arbitration clause in the CC&Rs bind the Homeowners?[1] The Homeowners maintain that U.S. Home cannot compel arbitration based on the CC&Rs because "CC&Rs are not 'contracts, ' but covenants that run with the land." Citing Pinnacle Museum Tower Association v. Pinnacle Market Development, LLC,282 P.3d 1217 (Cal. 2012), where the California Supreme Court held that an arbitration provision contained in recorded CC&Rs was enforceable against a non-signatory homeowners' association, U.S. Home argues that, by purchasing homes in a common-interest community, the Homeowners assented to the obligations the CC&Rs impose, including, in this case, the obligation to arbitrate their ...


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