McCaffrey Group, Inc. v. Superior Court

California’s Right to Repair Act (the act) established statutory nonadversarial procedures in an attempt to reduce litigation in the residential-construction industry. The act required a homeowner to notify the builder of any claimed defects and to give the builder the opportunity to repair them. The act, however, also permitted builders to establish their own prelitigation procedures to replace the statutory procedures. Those procedures were required to be fair and enforceable. A contractor that adopted its own procedures could not then rely on the statutory procedures. The plaintiffs bought houses from the McCaffrey Group, Inc. (McCaffrey) (defendant). In its contracts, McCaffrey adopted its own prelitigation procedures to replace the act’s statutory procedures. McCaffrey’s procedures were largely similar to the statutory procedures, although unlike the statutory procedures, the contractual procedures did not contain exact procedural timelines. Under the contracts, if a dispute was not initially resolved, the parties were required to submit the dispute to nonbinding mediation. If the mediation did not work, the parties at that point could sue. The plaintiffs sued McCaffrey, claiming that their homes contained defects resulting from McCaffrey’s work. McCaffrey moved to compel the plaintiffs to participate in the dispute-resolution process prescribed under the contracts. The superior court denied the motion, finding that the contracts were substantively unconscionable. McCaffrey petitioned the court of appeal for a writ ordering the superior court to direct the plaintiffs to engage in the prelitigation procedures in the contracts.