Originally from Dispute Resolution Journal

RESIDENTIAL CONSTRUCTION

Narrow Arbitration Clause

The D.C. Court of Appeals held that condominium owners could not be forced to arbitrate with the builder over defective construction because the parties’ agreement only covered damages arising from the construction plans.

The condo owners filed a lawsuit after the building’s water and sewer systems broke. The lawsuit alleged that flooding caused toxic mold and water damage and asserted numerous common law, contract claims, strict liability, and statutory claims. The builder moved to compel arbitration. The condominium owners opposed the motion to compel, arguing that the dispute was outside the scope of the arbitration clause in the condo purchase agreement, which covered disputes “involving delivery of the Unit in accordance with the Plans.” The trial court denied the builder’s motion to compel arbitration.

The D.C. Court of Appeals affirmed, finding that the dispute over poor construction was not covered by the arbitration clause, which only covered disputes about construction plans. It found support for its decision in the fact that the arbitration clause was in the “plats and plans” section of the agreement. The court also reasoned that because the arbitration clause designated the project architect as the arbitrator, the parties intended to arbitrate disputes within the architect’s realm.