AIA Arbitration Clause- Dick?????

[Bob Kovacs]

Dick-

I'm cutting and pasting this from a posting over on FHB. I don't know anything about it, but thought you may, since it involves your favorite "time-tested, court-proven" contract.

"My lawyer informed me that last week, the California Court of Appeals ruled that the standard AIA Contract, used by millions of contractors all over the country, has a non-enforceable arbitration provision used to compel homeowners to arbitrate.

Apparently, the AIA arbitration clause is not in a type style, nor in the proper color, as required by a statute.

We usually take the position that AIA Contracts are universally enforced and accepted throughout the country because of the Federal Arbitration Act, which trumps any state law, because the construction materials (studs, sinks, windows, tile) come from all over the country, and involve interstate commerce.

The decision which I read briefly states that the Court could not determine whether the construction project (a $100,00 home remodel) involved interestate commerce, which was ridiculous,and therefore the Federal law did not trump the California statute.

Bottom Line: If you are doing work in California for a homeowner, you need a separate signed arbitration clause, in addition to the AIA contract.

I hate lawyers. This particular case involved a trial lawyer as the homeowner, who signed the arbitration clause, agreed to arbitrate, particpated in 4 days of arbitration, and only when the award was against him, did he complain. I hate lawyers.

Regards,
Boris"

What's the story, Dick?

Bob

[Dick Seibert]

Re: AIA Arbitration Clause- Dick?????

Bob:

Send me a link to the case and I'll review it. Mandatory Arbitration has come under fire all over the nation for depriving a citizen of their constitutional rights to jury trials. HADD has been advocating the removal of arbitration clauses in several states, most notably Texas where most of the abuses have occurred. Mandatory Arbitration is a contract between the parties, in which each party contractually agrees to waive it's right to trial in consideration for (supposedly) faster, cheaper alternative dispute resolution. The constitutional issue of whether parties can legally waive their constitutional rights has always been a huge legal issue. In most arguments regarding the validity of mandatory arbitration clauses, the central issue is the adhesion contract issue, the home builder presenting it to the buyer on a "take it or leave it basis", without a bargained for meeting of the minds. The surprising issue here is that it's the AIA contract, so presumably both parties were signing a neutral third party agreement, and an industry standard contract that's withstood the test of time.

Courts favor arbitration to reduce court backlogs, it's very tough to get a mandatory arbitration agreement of any kind thrown out by the courts. Is this a lower court? If so it will probably be reversed on appeal, send me a link, of if you don't have a link, if you can get a case cite I can look it up if it's a published case, if it's not published it's not binding and is relative to the sole case it was rendered on.

[Bob Kovacs]

Re: AIA Arbitration Clause- Dick?????

I don't have a link to the case- all I've got is what I posted. If something comes up on the other forum, I'll send it to you.

[russell120]

Re: AIA Arbitration Clause- Dick?????

This URL (which I found by googling: California arbitration aia case):http://userwww.sfsu.edu/~gtarakji/en...bitration.html notes a case in California where an arbitration clause was thrown out (Player vs. George M. Brewster and Son, Inc. (Sweet p.;65-6, 18 Cal.Apo.2d 526 and 96 Cal.Rptr 149)). However, the author of the article notes that it was a New Jersey contractor doing business in California who stipulated that the arbitration was to occur in New Jersey where the subcontractor did no business.

It may not be the case you are referring to, but arbitration clauses can be used very abusively, so I would withhold judgment if all the facts are not known.

[Ode...]

Re: AIA Arbitration Clause- Dick?????

Evidently, some remotely similar situations are coming up here too. I shall enter this discussion with hands in the air. I am with you Bob. Lawyers are unfortunatiely a necessary evil to life in business today.
TN contractor with employees who files claim on WC months later in different state for accident in that happened on a jobsite in TN. The TN underwriter does not have appoval in the other state, nor do many other underwriters.
The insurer will not defend or enter on behalf of the insured to bring the claim back to where the accident occured because they cannot operate in the other state. So insurers not crossing state lines for details can cause problems.
It does show some persistence in this matter.

[Dick Seibert]

Re: AIA Arbitration Clause- Dick?????

Bob:

My cursory research shows no such case. There may have been some off-the-wall lower court decision, these things happen all the time, but are usually overturned on appeal, and are not binding decisions anyway. The scenario you cut and pasted doesn't make any sense at all, state courts don't rule on Federal matters, they don't have any jurisdiction in Interstate Commerce cases, if they did their decision would be immediately appealed. This conflict of laws issue is coming to a head here with the medical marijuana cases, the state law has legalized it, but it is illegal under Federal law. Contracts are constitutionally reserved for the states, the Federal law has no jurisdiction over contract matters, and Interstate Commerce challenges would have to be brought in Federal Court.

Russell's post certainly doesn't refer to the case you refer to, but there is one important point that they make:

Adhesion Contracts: Despite the fact that courts, today, tend to favor arbitration, contracts characterized (by the court) as adhesion contracts tend to be an exception. This is very well illustrated in Player vs. George M. Brewster and Son, Inc. (Sweet p.;65-6, 18 Cal.Apo.2d 526 and 96 Cal.Rptr 149) where the court held that the arbitration clause favored the party with the greater bargaining power (the New Jersey Prime Contractor) by specifying his home office's location as the place of arbitration while he does work in California (the location of the project) and the California subcontractor does not do business in the East. Because the contract was characterized as an adhesion contract, the court ruled out that the California subcontractor should have access to courts in his state and should not be forced to arbitrate in New Jersey.

All you guys that write adhesion contracts take note, but the AIA contract is not an adhesion contract. It is *the* industry standard contract written by a neutral party.

Let's put this matter aside until a published case can be cited. I think it's an "Urban Myth"! About the only way you can get an arbitration award thrown out is to prove fraud on the part of the arbitrator, an adhesion contract is suspect, but it's really tough to get an award thrown out based upon adhesion contracts (although arbitrators and courts throw out adhesion contracts all of the time). Judges love arbitration, they don't want to work, they are civil servants, they want to lessen their case load so they can go play golf, or whatever else they like to do.

If anybody can find anything out about this, I'd be glad to review it, but don't worry about lower court cases or Appellate Court cases that aren't certified for publication, the Appellate Courts won't certify their decisions if they don't want them to set precedents!

[Allan Edwards]

Re: AIA Arbitration Clause- Dick?????

Dick, I know you think the AIA contract is the “industry” standard, as you know I don’t agree with that, I know very few builders or remodelers who use it, but let me ask you (and others) this question. What percentage of all residential construction (new homes and remodeling) have an AIA architect involved? I would say less than 10%.

[Allan Edwards]

Re: AIA Arbitration Clause- Dick?????

I will say it is an “industry” standard contract on AIA Architect driven jobs.

[Bill Lacey]

Re: AIA Arbitration Clause- Dick?????

How many of you think being registered in the AIA actually makes a difference on the quality of the architect?

[Allan Edwards]

Re: AIA Arbitration Clause- Dick?????

I don't think it makes any difference. In fact, the best designer I know (and use) is not an architect at all, but a building designer. for spec houses with sex appeal he designs circles around any $100,000 fee/job architect I've seen.

[Allan Edwards]

Re: AIA Arbitration Clause- Dick?????

I will say the AIA architects do a better job on exterior design and exterior detail.

[Dick Seibert]

Re: AIA Arbitration Clause- Dick?????

What percentage of all residential construction (new homes and remodeling) have an AIA architect involved? I would say less than 10%.

Allan:

At this point I would say that most construction in our seismic zone is architect designed, since engineering is required and most engineers won't work on designs that aren't provided by architects for professional and liability reasons. There is also the status of buying an architect designed house, same as granite counters and copper gutters, people like to brag about their architect, especially if he's got a big name, but I think this has a lot to do with the relative sophistication and educational level of the market you are building in.

I realize that this forum is The Journal of "Light" Construction, but a lot of "light" construction is commercial as well, in fact over 50% of my work has been commercial and industrial. I would guess that about 50% of my work has had an AIA contract.

[Allan Edwards]

Re: AIA Arbitration Clause- Dick?????

Objection, non responsive!

What percentage of ALL residential construction (new homes and remodeling) have an AIA architect involved?

Residential only
Entire country-rural areas, medium size towns, every state
Remodeling & New Homes

I would still guess less than 10%

[Dick Seibert]

Re: AIA Arbitration Clause- Dick?????

I have no idea, I would guess that in the Bay Area it's approaching something like 80%. All professional contractors use professional architects, I know I do most of the time. I guess an architect doesn't have to belong to the AIA, they just have to belong to the State Board, I have never known an architect that didn't belong to the AIA, but I assume there are some.

One of our biggest problems in the new home business is the fact that appraisers don't take quality into consideration anymore (they used to), they base their appraisals on square footage and comparables. One of the few things we can do to overcome that stupidity, is to uses a famous architect. I've done a lot of work on Clarence Tantau's homes in Piedmont, Tantau's homes bring much more per square foot than others in the Bay Area. Today, architects are the ones that argue the designs in front of neighborhood groups, planning commissions, and obtain environmental Impact Reports (or get Negative Declarations) and make the PowerPoint Presentations, then you have to wade through all of the Design Staff requirements and engineering approvals. It would be impossible to get an approval for a new home without an architect in the immediate Bay Area, in San Francisco proper it's impossible without a
Permit Expeditor, and that's a minimum $10,000 (and a scandal).

[Allan Edwards]

Re: AIA Arbitration Clause- Dick?????

Dick, I think we just discovered the problem. You are like Jim Carrey in that movie “Truman” where he thought the whole world was his little neighborhood and was shocked to find out differently. There’s a whole world out there Dick beyond the Bay.

Maybe your first sentence answered my question correctly?

“I have no idea”