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The California Court of Appeal rejected an argument that a predispute agreement to submit all disputes to judicial reference violates California’s prohibition against non-statutory predispute jury trial waivers.
In Woodside Homes of California v. Wheeler, C052432, 2006 WL 2398672 (Cal. Ct. App. Aug. 21, 2006), Wheeler bought a new house from Woodside Homes. Her purchase agreement contained a clause providing for all disputes to be submitted to general judicial reference pursuant to the California Civil Code of Procedure. When Wheeler sued for construction defects, Woodside Homes filed a motion for appointment of a referee, which the trial court initially granted.
Meanwhile, the California Supreme Court decided Grafton Partners v. Superior Court, 36 Cal.4th 944 (Cal. 2005), holding that California law requires statutory grounds for predispute waiver of the right to a jury trial. Wheeler moved to vacate the reference order, arguing that the provision for judicial reference was a non-statutory predispute jury trial waiver impermissible under Grafton. The trial court granted her motion, and Woodside Homes appealed.
On appeal, the Court reversed the trial court, finding that judicial reference, like arbitration, is a predispute jury trial waiver “prescribed by statute” and thus permissible under Grafton. In fact, as the Court noted, Grafton cited California Civil Code of Procedure § 638, which authorizes judicial reference, as one example of a statutory predispute waiver.
Despite the “unmistakable statements” in Grafton indicating that predispute judicial reference agreements are permissible, Wheeler maintained that Section 638 does not unambiguously authorize predispute jury trial waivers because it does not use the words “jury” or “waiver.” The Court explained the flaw in her argument by noting that use of the words “jury trial” or “waiver” is unnecessary because a judicial reference agreement necessarily waives a jury trial.
This decision highlights the policy interest espoused in Grafton: “arbitration (like reference hearings) conserves judicial resources far more than the selection of a court trial over a jury trial. It is therefore rational for the Legislature to promote the use of arbitration and reference hearings by permitting predispute agreements, while not according the same advantage to jury trial waivers.”
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