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One Bite At the Apple for Residential Contractors in Pre-Litigation ADR: If Builder's Arbitration Clause Fails, Homeowner Cannot Be Compelled to Utilize “Calderon” Process
In residential construction disputes, the legislature has mandated that the parties utilize an alternative dispute resolution (ADR) procedure that, hopefully, will cut down on litigation. The procedure is known as the “Calderon” process, a reference to the legislator who sponsored the statute in question (Cal. Civil Code, §§ 895-945.5).
The Calderon pre-litigation process requires the affected homeowner to notify the contractor of defects and allow the contractor an opportunity to make repairs.
But the statute also enables the builder to contract for an alternative ADR process at the time of the initial sale of the residence in question. In a case decided by the court of appeal, the builder did just that, but the court ruled that the arbitration procedures the contractor had imposed on the however were unfair – the court declared them unconscionable and, therefore, unenforceable.
A legal question arose as to what to do next. The builder, having lost his bid to required arbitration on his terms, sought to force the homeowner to utilize the Calderon procedure prior to proceeding to court. However, the court of appeal held that the contractor gets only one bite at the ADR apple, and if the homeowner wishes to proceed directly to court after the builder’s arbitration clause fell by the wayside, the homeowner could do so.
The case is Anders v. Superior Court, and a complete copy it attached for your convenience.
The lesson here for contractors is that if they want arbitration, they need to utilize fair procedures. One approach would be to adopt the rules of the American Arbitration Association or some other ADR provider, so the parties know they have a set of workable procedures that will stand up in court. Otherwise, the opportunity for ADR in these cases can be lost.
Our firm regularly advises parties in construction disputes. We handle cases affecting single family residences, planned unit developments (condos, TICs and cooperatives) as well as commercial properties and office buildings. Our clients include owners, as well as contractors and other professional involved in the construction process.
Feel free to give us a call if you have an issue in this area.