Arbitration Remains the Answer To Failure to Maintain
A Permanent Injunction Stopping Interference with Arbitration Clauses Took Effect Januar
y 1, 2024. 62 F.4th 473 (2023) Case No. 2:19-cv-02456-KJM-DB.
Executive Summary: Deciding legal disputes by arbitration (in the comfort and convenience of the offices and chambers of a retired judge) is an option that can be included in mobilehome park residency rental agreements. This convenient method for resolving legal disputes is faster and way more convenient for everyone than trials in filthy county courthouses (lined with homeless, pan-handlers and defecation, with unsafe parking and absence of security). Arbitration? It’s available pursuant to federal law that favors alternate dispute resolution. The MRL expressly allows arbitration. Statutes interfering with arbitration (including general landlord tenant statutes) are preempted by the “Supremacy Clause.” California’s last interference (see below: AB51) was enjoined January 1, 2024. Yes, a federal judge enjoined the entire California Legislature and State Court system.
This is great news for those who value freedom and liberty to make deals free of shackles of a smug nanny.
The problem for Parkowners is that arbitration remains unadapted for most communities. In the event of a Park-wide dispute, courts have declined to order arbitration, whether to avoid a multiplicity of differing outcomes, or unfair, overreaching terms. With this most recent decision, the prospects for widespread acceptance dramatically change.
AB 51: Fatuous Law Making in Need of a Stern Parent, Like Jerry Brown. AB51 prohibits employers from requiring waivers of arbitration before entering employment (as to certain claims under California laws for fair employment and housing). It states, for example, that an employee can’t be required to waive any right, forum (read, court and jury trial), or procedure for a violation of any discrimination claims contained in the Fair Employment and Housing Act, including pursuing a civil action. This prohibits arbitration.
The law also adds: “Any person violating this [law] is guilty of a misdemeanor.” So, AB51 weaponizes the arbitration clause, making it criminal. Folks, there is nothing criminal in a favored federal policy (this is the impudent child unable to cope with a plain legal reality).
The legislature said if the crime of arbitration were committed, the agreement would remain enforceable. Gov. Jerry Brown had previously vetoed several arbitration bills, describing them as preempted and unlawful. But he was out of office when AB 51 was passed. The Senate Judiciary Committee incredulously claimed (really, seriously) that AB 51 “successfully navigates around” Supreme Court precedent, thus avoiding preemption because AB51 only deals with formation of arbitration agreements, not enforceability. The Ninth Circuit Court of Appealls saw this as transparent tomfoolery, and annuled AB51 outright and in its entirety.
The Court seems to emphasize, if not chide, the legislature for being embarrassingly inept: the “legislature was persuaded by the legal theory that the FAA did not preempt a state rule that inhibits the formation of an arbitration agreement, but does not render such an agreement unenforceable once executed.” As if to say, “look at this, really? Could you really be that dumb?”
● What Can We Learn? The take-aways from the Ninth Circuit: The rental agreement in a mobilehome park, like an employment agreement, is portrayed as a dark bit of one-sided mischief that always benefits the employer, or park owner.
Not so. While always the object of criticism and scorn (for overreaching), totally ignored is the monopoly of tenant power in the beginning. When mobilehome parks were first available, the balance of power was completely with the buyer. Then, mobilehome tenants dominated all terms and conditions. Consumers exploited a starving industry of vacant lots and utiliity pedestals. Buyers only made offers that made sense to them. The alternative? buyers walked. No one would have invested tens of thousands to install a mobile home unless they were adequately protected and secured. They didn’t have to, why would they?
Despite the grossly disproportionate tenant bargaining power, the legislature misconstrues (ignores) the real history of mobilehome parks in California and claims that it is the tenants who deserve the provenance of a special relationship in the law. Civil Code §798.55.
In respect to California contract law, the Ninth Circuit court felt it necessary to address the most simple, plain and basic legal principles of contract law. The court said that the legislature misunderstands California contract law. Note this basic civics lesson.
1. A contract may be “consensual,” as that term is used in contract law, even if one party accepts unfavorable terms due to some degree of unequal bargaining power.
2. It is a basic principle of contract law that a contract is not enforceable unless there is mutual, voluntary consent. See, e.g., CAL. CIV. CODE §§ 1565, 1567.
3. It has long been established that parties to a contract are generally deemed to have consented to all the terms of a contract they sign, even if they have not read it.
4. This is true even if the contract at issue is an adhesion contract, defined by California courts as “a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.”
5. Despite unequal bargaining power, “a contract of adhesion is fully enforceable according to its terms unless certain other factors are present,” such as when a provision “does not fall within the reasonable expectations of the weaker or `adhering’ party” or when a provision “is unduly oppressive or unconscionable.”
6. Contrary to California’s arguments, a ruling that the FAA preempts AB 51 does not create a “new substantive right” for employers to mandate unconscionable or illegal arbitration requirements.
7. An employee can “consent” to an employment contract by entering into it, even if the contract was a product of unequal bargaining power and even if it contains terms (such as an arbitration provision) that the employee dislikes, so long as the terms are not invalid due to unconscionability or other generally applicable contract principles.
8. Because the parties to a contract are deemed to consent to its terms, the “basic precept that arbitration `is a matter of consent, not coercion,’” means only that courts must “ensure that `private agreements to arbitrate are enforced according to their terms’” even in the face of state laws imposing different requirements on the contracting parties.
9. If the parties agreed to resolve a matter by arbitration, “the FAA pre-empts state laws which `require a judicial forum for the resolution of [those] claims.”
Conclusion: Rental agreements can include arbitration clauses. All rental agreement should have them. The chances are very good that a mobilehome park may enforce arbitration in lieu of a jury trial, for a fair resolution of a dispute in a way which is less expensive, faster, safer and far more comfortable and convenient. In the view of this author, it is a best practice of mobilehome park operation. This may call for the review and amendment of an arbitration clause from time-to-time to stay abreast of developments. Your insurance company should like it, a lot. And attorneys representing Parkowners should always recommend arbitration. Owners should install mediation and arbitration as a way to resolve disputes and better safeguard rapport. Since the legislature has also eliminated state exemptions for long-term leases, many owners are forced to revert back to short-term (1-12) rental agreements. Contrary to the erroneous opinioon of some, long-term leases are also available as they have always been, but now without the restrictions prreviously imposed under Civil Code §798.17.
Arbitration should be included into all new rental agreements, and other residency documents where appropriate. Arbitration clauses can be adopted in a number of different scenarios which would markedly increase the rights of the management and residents to a mutually fair resolution of disputes.
-Terry R. Dowdall
