Gonski v. Second Judicial District Court Ex Rel. County of Washoe

245 P.3d 1164, 126 Nev. 551, 126 Nev. Adv. Rep. 51, 2010 Nev. LEXIS 61
CourtNevada Supreme Court
DecidedDecember 30, 2010
Docket53414
StatusPublished
Cited by44 cases

This text of 245 P.3d 1164 (Gonski v. Second Judicial District Court Ex Rel. County of Washoe) is published on Counsel Stack Legal Research, covering Nevada Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gonski v. Second Judicial District Court Ex Rel. County of Washoe, 245 P.3d 1164, 126 Nev. 551, 126 Nev. Adv. Rep. 51, 2010 Nev. LEXIS 61 (Neb. 2010).

Opinions

OPINION

By the Court,

Douglas, J.:

This original writ proceeding involves real party in interest’s attempt to enforce two arbitration provisions that it drafted with respect to petitioners’ purchase of a residential home in Reno, Nevada. Petitioners argue that the two arbitration clauses at issue, one of which was in the purchase agreement and the other of which was contained in a limited warranty, are unconscionable, and thus unenforceable, for a variety of reasons. Most significantly, petitioners assert that the arbitration provisions waived statutory remedies and failed to fully and clearly inform petitioners of the significant rights being forfeited. The district court disagreed, however, and compelled arbitration, causing petitioners to seek this court’s review.

We conclude that the arbitration provisions at issue are unconscionable as to several aspects that, taken together, demonstrate that petitioners were not made fully aware, or given the opportunity to become aware, of the provisions’ terms. In particular, the circumstances under which the provisions were signed, combined with their nonhighlighted nature, failed to provide petitioners with a meaningful opportunity to agree to the arbitration terms. Also, the first provision misleadingly suggested that real party in interest would pay the arbitration costs, while the second document, purportedly incorporated into the first, required petitioners to pay the initial arbitration costs. And finally and most significantly, the provisions’ confusing language suggested that NRS Chapter 40 remedies would be fully available, even though the terms of the contract impermissibly- waived most Chapter 40 homeowner protections. The provisions’ confusing and misleading language created a situation in which petitioners could not reasonably be expected to understand the terms’ meanings, even if they were given adequate opportunity for review. Further, they impermissibly waived statutory rights designed to effect a public purpose, in favor of real party in interest. Accordingly, the arbitration provisions governing construction defects are unconscionable, and the district court manifestly abused its discretion in compelling arbitration, such that mandamus relief is warranted.

[554]*554 PROCEDURAL HISTORY AND FACTS

In April 2004, petitioners Donald and Linda Gonski signed a purchase agreement for a home located in an age-restricted subdivision developed by real party in interest PN II, Inc., d.b.a Pulte Homes of Nevada (Pulte Homes). Several months later, the Gonskis served Pulte Homes with an NRS Chapter 40 notice of construction defects, and the parties subsequently participated in mediation. When the mediation proved unsuccessful, the Gonskis filed a district court complaint against Pulte Homes, alleging various claims based on construction defects in their home.

In response to the Gonskis’ complaint, Pulte Homes moved to compel arbitration, pointing to the purchase agreement’s arbitration clause:

ARBITRATION: Any controversy, claim or dispute arising out of or relating to this Agreement or Your purchase of the Home (other than claims under the Limited Warranty) shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association (AAA) and the Federal Arbitration Act (Title 9 of the United States Code) and judgment rendered by the arbitrator(s) may be confirmed, entered and enforced
Purchaser’s Initials_Purchaser’s Initials_Seller’s Initials_
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in any court having jurisdiction. As a condition precedent to arbitration, the dispute shall first be mediated in accordance with the Construction Industry Mediation Rules of the AAA, or such other mediation service selected by Us. Claims under the Limited Warranty will be arbitrated in accordance with the arbitration provision set forth in the Limited Warranty.
In the event the claim relates to a construction defect, the construction dispute provisions (including good-faith mediation) of Chapter 40 of Nevada Revised Statutes shall also apply if and to the extent that the alleged defect is covered by the Limited Warranty.

The Gonskis opposed the motion to compel, pointing out that the purchase agreement purported to incorporate a second arbitration clause, applicable to construction defect claims, found on pages 9-10 of the home’s separate limited warranty. The limited warranty’s arbitration clause provides as follows:

Dispute Settlement
This Dispute Settlement provision sets forth the exclusive remedy of all disputes or controversies under this Limited Warranty.
[555]*555If the Plan Administrator is unable to successfully mediate the dispute, the Plan Administrator will inform The Homeowner and The Builder that the dispute is unresolved and that Binding Arbitration is provided as a remedy for resolving the dispute.
Any binding arbitration proceeding will be conducted pursuant to the United States Arbitration Act (9 U.S.C. § 1 et seq.) (“the Act”) by an independent, nationally recognized, arbitration organization designated by the Plan Administrator. The rules and procedures followed will be those under the Act, which may be supplemented by the arbitration organization’s rules. A copy of the applicable rules and procedures will be delivered to you upon your request to the Plan Administrator.
The • arbitration will determine The Homeowner’s, The Builder’s and (if applicable) the Insurer’s rights and obligations under this Limited Warranty. These rights and obligations include, but are not limited to, those provided to The Homeowner or The Builder by local, state or federal statutes in connection with this Limited Warranty. The award of the arbitrator(s) will be final, binding and enforceable as to The Homeowner, The Builder and (if applicable) the Insurer, except as modified or vacated in accordance with the Act or the arbitration organization’s rules. A judgment rendered by the arbitrator(s) may be confirmed, entered and enforced in any court having jurisdiction.

In their opposition,.the Gonskis argued that both the purchase agreement’s and the limited warranty’s arbitration provisions were unconscionable and, thus, unenforceable. In so arguing, they described the circumstances under which the purchase agreement was signed, noting that they had paid a $10,000 deposit to join a lottery system to purchase a home in the specialized subdivision. A few days later, they were notified of an available residence and instructed to come to the office in five days. According to the Gonskis, when they arrived at the office, several other people were waiting; they were handed a stack of 25 preprinted forms, totaling over 469 papers, and told that if the documents were not signed and executed at that time, “there were several other people waiting to step in and purchase the residence.” The Gonskis asserted that they were not given adequate time to review the documents provided to them or sufficient explanation of their contents, and they were directed to leave the documents in the office after [556]*556signing.

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Bluebook (online)
245 P.3d 1164, 126 Nev. 551, 126 Nev. Adv. Rep. 51, 2010 Nev. LEXIS 61, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gonski-v-second-judicial-district-court-ex-rel-county-of-washoe-nev-2010.