Court Opinion

ID: 3156077
Source: CourtListenerOpinion
Date Created: 2015-11-19 16:07:24.286593+00
Date Added: 2024-06-11T12:00:53.587663
License: Public Domain

INDIVIDUALLY,
                Petitioners,
                vs.
                THE SECOND JUDICIAL DISTRICT
                COURT OF THE STATE OF NEVADA,
                IN AND FOR THE COUNTY OF
                WASHOE; AND THE HONORABLE
                PATRICK FLANAGAN, DISTRICT
                JUDGE,
                Respondents,
                   and
                LENNAR RENO, LLC, A NEVADA
                LIMITED LIABILITY COMPANY,
                Real Party in Interest.

                  ORDER GRANTING IN PART AND DENYING IN PART PETITION
                                FOR WRIT OF MANDAMUS

                            This is an original petition for a writ of mandamus challenging
                a district court order granting a motion to compel arbitration in a
                construction defect action.
                            Petitioners purchased homes built by real party in interest
                Lennar Reno, LLC. Roughly half of the petitioners signed purchase
                agreements as original purchasers (though Lennar failed to produce
                purchase agreements for four of the original purchasers), while the
                remaining petitioners were subsequent purchasers who did not sign
                purchase agreements. Lennar presented four different form purchase
                agreements to petitioners depending on when each original purchaser
                executed the agreement. All four agreements contain an arbitration
                provision (or multiple arbitration provisions) and an independent
                severability clause. Following the purchases, petitioners served Lennar
                with NRS Chapter 40 notices. Petitioners then filed a complaint asserting
                breach of contract and construction defect causes of action against Lennar.

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                  Lennar moved to compel arbitration under the purchase agreements. The
                  district court granted Lennar's motion. This petition for writ of
                  mandamus followed.
                                 Except for the few for whom Lennar cannot produce purchase
                  agreements, the district court was correct to compel petitioners to
                  arbitrate. There is no immediate right of direct appeal from an order
                  compelling arbitration.    Clark Cnty. v. Empire Elec., Inc., 96 Nev. 18, 19-
                  20, 604 P.2d 352, 353 (1980) (noting that the law's policy favoring
                  arbitration would be defeated should the defaulting party be permitted to
                  appeal at the threshold of a proceeding and indefinitely delay the
                  arbitration matter). However, mandamus affords interlocutory appellate
                  review where the party seeking extraordinary writ relief demonstrates
                  that: (1) an eventual appeal does not afford "a plain, speedy and adequate
                  remedy in the ordinary course of law," and (2) mandamus is needed either
                  to compel the performance of an act that the law requires or to control the
                  district court's manifest abuse of discretion. NRS 34.160; NRS 34.170;
                  Tallman v. Eighth Judicial Dist. Court, 131 Nev., Adv. Op. 71, P.3d
                       (2015).
                                 Regarding the first requirement, petitioners contend that they
                  have no adequate remedy at law besides mandamus because waiting for
                  an eventual appeal would force them to arbitrate claims that they never
                  agreed to arbitrate and/or arbitrate provisions that are unenforceable due
                  to unconscionability. In response, Lennar contends that petitioners have
                  the ability to appeal from a future court order approving an arbitration
                  award with which they are dissatisfied, constituting an adequate remedy
                  at law. Both petitioners and Lennar fail to address the second
                  requirement for extraordinary writ relief. We nonetheless accept

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                mandamus review of this petition under a theory similar to that
                articulated in Tallman. Our case law prior to Tallman had not yet clearly
                delineated a party's burden when moving for extraordinary writ relief
                from an order compelling arbitration, and this court's prior decision in
                Kindred v. Second Judicial District Court              suggested that orders
                compelling arbitration automatically satisfy NRS 34.170's requirement
                that there not be a "plain, speedy and adequate remedy" at law.            See

                Kindred, 116 Nev. 405, 409, 996 P.2d 903, 906 (2000); see also Tallman,
                131 Nev., Adv. Op. 71,      P.3d at n.1. Tallman clarified petitioners'
                burden, stating that the unavailability of an immediate appeal from an
                order compelling arbitration may present a situation in which eventual
                appeal is not an adequate remedy at law, but the same does not hold true
                in all cases. 131 Nev., Adv. Op. 71, P.3d at n.1. While we conclude that
                the district court erred in part by granting Lennar's motion to compel
                arbitration with respect to four of the petitioners, it correctly granted the
                motion with respect to the majority of petitioners. See id. (explaining that
                when reviewing a district court's handling of an order to compel
                arbitration, this court reviews questions of law de novo, and questions of
                fact for clear error).
                             Contrary to petitioners' contentions with respect to the
                subsequent purchasers who did not sign purchase agreements, the district
                court did not err in compelling such petitioners to arbitrate. As explained
                in Truck Insurance Exchange    xi.   Palmer J. Swanson, Inc., "[u]nder a theory
                of estoppel, [a] nonsignatory is estopped from refusing to comply with an
                arbitration clause when it receives a direct benefit from a contract
                containing an arbitration clause." 124 Nev. 629, 636-37, 189 P.3d 656,
                661-62 (2008) (internal quotations omitted). Here, petitioners received a

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                direct benefit from the contracts containing arbitration clauses when they
                asserted breach of contract causes of action under said contracts. Thus,
                the original purchasers for whom Lennar produced signed purchase
                agreements and the nonsignatory subsequent purchasers are estopped
                from refusing to comply with the purchase agreements' arbitration
                clauses. However, the petitioners for whom Lennar failed to produce
                purchase agreements—Peter and Jacquelyn Andada and Robert and
                Cristina Schwitters—cannot be compelled to arbitrate.' The district court
                erred in granting Lennar's motion to compel arbitration pertaining to
                these petitioners.   See Tallman, 131 Nev., Adv. Op. 71,          P.3d.
                (internal citations omitted).
                            Further, any unconscionable clauses contained within the
                home purchase agreements can be severed according to each agreement's
                severability clause. While an agreement may contain substantively
                unconscionable clauses, a severability clause allows the offensive language
                to be severed without invalidating the remainder of the agreement,
                including an arbitration provision.   See Serpa v. Darling, 107 Nev. 299,
                303-04, 810 P.2d 778, 781-82 (1991). Not only does this contractual
                reading preserve the parties' intent, but it also furthers Nevada's general
                public policy favoring enforcement of arbitration agreements.      See D.R.
                Horton, Inc. v. Green, 120 Nev. 549, 553, 96 P.3d 1159, 1162 (2004).
                Because the district court failed to adequately address the
                unconscionability of each home purchase agreement, we decline to reach

                     'During oral argument, Lennar conceded that these petitioners
                cannot be bound to the arbitration clauses contained in the purchase
                agreements.

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                the issue. Instead, we instruct the district court to revisit each agreement
                and provide an in-depth analysis of any unconscionable language within
                each. The district court shall sever only the language in the agreements
                which constitutes an unconscionable abrogation of the homeowners' rights.
                             Accordingly, we
                             ORDER the petition GRANTED IN PART AND DENIED IN
                PART AND DIRECT THE CLERK OF THIS COURT TO ISSUE A WRIT
                OF MANDAMUS instructing the district court to vacate its order as to
                Peter and Jacquelyn Andada and Robert and Cristina Schwitters, and to
                reassess all the purchase agreements and sever only the unconscionable
                clauses. 2

                                                       rtiffer___
                                                   Saitta

                                                   Gibbons

                      2 We have considered the parties' remaining arguments and conclude
                that they are without merit.

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                cc:   Hon. Patrick Flanagan, District Judge
                      Shinnick, Ryan & Ransavage P.C.
                      Gordon & Rees, LLP
                      Washoe District Court Clerk

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