Hmmm. I don't know about this one. And it's an important holding. Not particularly for the doctrine that it espouses or the rules that it applies. But rather because of its practical consequences.
The basic scoop here is that Justice Bedsworth holds that the arbitration clause at issue in this contract doesn't really compel arbitration because the text of that clause doesn't actually say that the parties are required to arbitrate, and instead merely recites the disclosures (in all caps) that are required by CCP 1298 whenever the parties are agreeing to an arbitration clause. In other words, the parties only agreed to the disclosures required for arbitration, but never actually agreed to arbitration itself. At least according to Justice Bedsworth and the rest of the panel.
That may sound just like a hypertechnical dissertation on the particular contract here. But it's actually a really important holding. Because the form real estate contract at issue here is, from what I can tell, the exact same as the form contracts signed in a plethora of other residential real estate deals, and also contains a contractual clause that is identical to that in a number of other contracts as well. In other words, if this contract doesn't effectively compel arbitration, then tons of other contracts -- including contracts that pretty much everyone thinks contain ironclad arbitration provisions -- don't compel arbitration either. Lots. Lots. Lots. Indeed, I bet I could find a dozen arbitration cases in which arbitration was previously compelled based upon language identical to that here and in which the parties admitted that arbitration was required. (Sadly, however, I've got a brief in the Court of Appeal due on Friday that totally requires my current attention, so I'll not be able to take myself up on this bet. Damn work. Always getting in the way.)
So not only is the holding important, but I'm also not sure that it's right. Principally because I have no doubt -- no doubt whatsoever -- that the parties mutually intended this clause to compel arbitration. That when they initialed the provision, they thought that their initials required them to arbitrate. Which is a pretty telling (and important) point about the meaning of this provision. It takes a damn sophisticated lawyer to articulate -- as Justice Bedsworth does -- a reason why the textual provision doesn't actually appear to affirmatively compel arbitration. Indeed, Justice Bedsworth implicitly recognizes this fact -- alongside a backhanded (but fun) swipe at Clinton -- when he notes that the reason the clause doesn't itself facially compel arbitration is because the only operative ("affirmative") portion only says that "BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE NEUTRAL ARBITRATION OF ALL DISPUTES TO WHICH IT APPLIES AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTED LITIGATED IN A COURT OR IN A JURY TRIAL." Sounds like an arbitration provision, right? But Justice Bedsworth notes that the word "IT" isn't defined, so who knows what "it" means? And since this clause only requires the parties to arbitrate disputes "to which it applies", and since the term "it" isn't defined, there's no effective arbitration clause. See?
Okay, that's a pretty good legal argument. But I'm quite sure it wasn't the intent of the parties. So what do you do? Obviously, in the end, the result will be a fight between those who would stick (potentially woodenly) to the express text of a contract and those who would interpret this contract more flexibly to effectuate what I think was the clear intent of the parties. Justice Bedsworth doesn't get into this fight, but instead merely takes as a given that if the text doesn't expressly say X, then X isn't required. To me, at least as applied here, that's a result that's far from self-evident.
Even though this is a very narrow holding, I wouldn't be surprised to see it reviewed and/or depublished by the California Supreme Court. Admittedly, I also wouldn't be surprised if they left it alone, especially since it appears (at least at first glance) to be such a narrow and contract-specific holding. But I think that the import of this case is actually far more significant than might first appear.
