Must Reading For Home Sellers, Brokers And Service Providers Who Want To Understand Their Obligations To Arbitrate.
Home sellers sign Residential Listing Agreements (RLAs) with their brokers, and Residential Purchase Agreements (RPAs) with their buyers. Both RLAs and RPAs constantly undergo drafting revisions in California. And both types of standard agreements include arbitration agreements, leading to issues about the seller's obligations to arbitrate with the broker and with any service providers to the broker. Those issues were addressed in Laymon v. J. Rockliff and Hernandez v. Mason-McDuffie Real Estate, Inc., A147464 & A147469 (consolidated appeals) (1/1 6/9/17) (Margulies, Humes, Dondero). Originally unpublished, the case is now certified for publication -- thankfully, because it will be useful for home sellers, brokers, and service providers (e.g., providers of title insurance, escrow, natural hazard disclosure reports, and home-warranty contracts).
In this case, home sellers sued their brokers and their brokers' service providers, alleging that the brokers "violated their fiduciary duties by failing to disclose alleged kickbacks paid by the service providers to the brokers in connection with the sales." The home sellers signed an RLA, a 2007 RPA, a 2010 RPA, or some combination thereof. The Court of Appeal held that home sellers who signed any of those agreements were bound to arbitrate with their brokers, as well as with the service providers, who were non-signatories, but able to take advantage of the doctrine of equitable estoppel. This required a liberal reading of the arbitration provisions -- a reading that promotes "a strong public policy in favor of arbitration" such that "any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration . . . . " Rice v. Downs, 248 Cal.App.4th 175, 184-186 (2016). This is a good example of a case that plaintiffs want to try to a jury and defendants want to arbitrate!
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