In Satomi Owners Association v. Satomi, LLC (2009), the Washington Supreme Court was faced with an important constitutional issue as to whether the Federal Arbitration Act preempts the judicial enforcement provision of the Washington Condominium Act.
The case arose out of the allegedly defective construction of two condo projects in King County. The condominium owner's associations brought construction defect claims under the Washington Condominium Act against the condo developers and contractors.
The developers and contractors argued that such claims had to be arbitrated because of the arbitration clause in the parties' respective contracts and the strong federal policy favoring enforcement of arbitration provisions under the Federal Arbitration Act. The condominium owner's associations argued that construction defect claims were beyond the scope of the contractual arbitration clauses, relying on the express judicial enforcement provision in the Washington Condominium Act.
The Washington Supreme Court wrestled with the apparent conflict between the federal and state laws, and ultimately held that the judicial enforcement provision of the Washington Condominium Act was preempted by federal law. Thus, when there is an arbitration provision in the parties' contract, the proper forum for condo construction defect claims is arbitration, not state court.
However, Satomi Owners Association v. Satomi, LLC does not render the judicial enforcement provision of the Washington Condominium Act completely toothless. Where the parties contract does not contain an arbitration clause, the judicial enforcement provision still applies and condo construction defect claims may be brought in state court.
Satomi Owners Association v. Satomi, LLC ought to be considered in drafting and negotiating any condo construction contract. The decision provides an increased level of certainty in contracting for alternative dispute resolution and a strong signal as to how courts will likely construe the scope of an arbitration clause in the context of condo construction.