Some CC&Rs require all disputes be resolved by a general judicial reference. Because this waives a member's right to a trial by jury, the courts have invalidated such provisions.
Judicial Reference Defined. In a judicial reference, a pending court action is sent to a referee for hearing, determination and a report back to the court. A general reference directs the referee to try all issues in the action. The hearing is conducted under the rules of evidence applicable to judicial proceedings. In a general reference, the referee prepares a statement of decision that stands as the decision of the court and is reviewable as if the court had rendered it. The primary effect of such a reference is to require trial by a referee and not by a court or jury. (Trend Homes, Inc. v. Superior Court (2005) 131 Cal.App.4th 950, 955-956.)
CC&R Restriction Invalidated. In Treo @ Kettner Homeowners Assn. v. Superior Court (2008) 166 Cal.App.4th 1055, the Court of Appeals evaluated the impact of a CC&R restriction that required the use of a judicial reference for all disputes. The Court made the following determination:
[T]he right to trial by jury anchored in our Constitution and the policy that the right is a fundamental one and that, while it may be waived, the circumstances and manner of its waiver are serious matters requiring actual notice and meaningful reflection.
The problem, however, is that later purchasers and their successors, who will make up almost all association members, effectively have no choice but to accept the CC&R's prepared by the developer, including in this case the waiver of the right to trial by jury….
Treating CC&R's as a contract such that they are sufficient to waive the right to trial by jury does not comport with the importance of the right waived. CC&R's are notoriously lengthy, are adhesive in nature, are written by developers perhaps years before many owners buy, and often, as here with regard to the waiver of trial by jury, cannot be modified by the association. Further, the document is not signed by the parties….
We conclude that a developer-written requirement that all disputes between owners and the developer and disputes between the association and the developer is not a written contract as the Legislature contemplated the term in the context of section 638.” (Treo @ Kettner Homeowners Assn. v. Superior Court (2008) 166 Cal.App.4th 1055, 1067)
A subsequent court made a similar ruling based on the decision in the Treo @ Kettner case.
In Treo, the covenants, conditions, and restrictions (CC&R's) of a condominium development contained a requirement that all disputes between a developer and a homeowners association be decided by a general judicial reference. The question was whether that requirement was enforceable under Code of Civil Procedure [55 Cal.4th 245] section 638, which allows appointment of a referee (and hence waiver of a jury trial) if a reference agreement exists between the parties. Relying on Grafton Partners v. Superior Court (2005) 36 Cal.4th 944 (Grafton), Treo determined that a waiver of the constitutional right to trial by jury requires "actual notice and meaningful reflection." (Treo, supra, 166 Cal.App.4th at p. 1066.) Because the jury waiver in the subject CC&R's did not meet those requirements, Treo held it was "not a written contract as the Legislature contemplated the term in the context of [Code of Civil Procedure] section 638." (Treo, at p. 1067.) The Treo court was particularly troubled that the CC&R's were lengthy and adhesive in nature, and that the jury waiver was not signed by the parties and could not be modified by the association. ( Ibid.) Persuaded by Grafton's observation that any statutory ambiguity in permitting a jury waiver must be resolved in favor of affording a jury trial (Grafton, at p. 956), Treo concluded that, even though CC&R's "can reasonably be 'construed as a contract' . . . when the issue involved is the operation or governance of the association or the relationships between owners and between owners and the association," CC&R's do not "suffice as a contract when the issue is the waiver pursuant to [Code of Civil Procedure] section 638 of the constitutional right to trial by jury." (Treo, at p. 1066.) (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (2012) 55 Cal.4th 223, 245.)
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