Plaintiffs, residential tenants, sued defendants, the landlord and its agents

Procedural Posture

Plaintiffs, residential tenants, sued defendants, the landlord and its agents, alleging that defendants negligently inspected, maintained, or repaired the premises and that water incursion and moisture resulted. Defendants moved to compel arbitration under an arbitration provision in the lease. The Monterey County Superior Court (California) denied the motion, and defendants appealed.

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Overview

The lease provided for binding arbitration of personal injury disputes arising from the condition of the leased premises. In affirming the denial of the motion to compel arbitration, the court interpreted Cal. Civ. Code § 1953(a)(4) and held that it established that a tenant could not validly agree, in a residential lease agreement, to binding arbitration to resolve disputes regarding his or her rights and obligations as a tenant. The court also held that the specific arbitration clause lacked the "modicum of bilaterality" required in an arbitration agreement and was, therefore, unconscionable. The court reasoned that the reality was that personal injury claims arising from the condition of the leased premises were largely, if not exclusively, tenant claims. Further, buried in the small print, the arbitration clause required that the demand for arbitration had to be made in writing within 180 days after the claim arose. In addition, all administrative fees and costs had to be advanced prior to the arbitration, and there was no opportunity in the printed form lease for the tenants to decline the provision, such as by not initialing it.

Outcome

The court affirmed the decision of the superior court, with defendants to bear costs on appeal.