Satomi Owners Ass'n v. Satomi, LLC, 80480-0.

Citation225 P.3d 213,167 Wash.2d 781
Decision Date24 December 2009
Docket NumberNo. 80480-0.,No. 81083-4.,No. 80584-9.,80480-0.,80584-9.,81083-4.
CourtUnited States State Supreme Court of Washington
PartiesSATOMI OWNERS ASSOCIATION, a Washington nonprofit corporation, Respondent, v. SATOMI, LLC, a Washington limited liability company, Petitioner. Blakeley Commons Condominium Association, a Washington corporation, Respondent, v. Blakeley Commons, LLC, a Washington corporation; Intracorp Real Estate, LLC, a Washington corporation; John and Jane Does 1 through 20, individuals; Contractor Does 21 through 35, entities conducting business in Washington, Appellant, and Blakeley Village, LLC, a Washington corporation, Appellant, and Intracorp Real Estate, LLC, a Washington corporation, Respondent, Accurate Siding, Inc., a Washington corporation; 2009 Custom Aluminum, Inc., a Washington corporation; Dan Brown Enterprises, Inc., a Washington corporation; Edmonds Roofing Co., Inc., a Washington corporation; My-Lan Co., Inc., a Washington corporation; Pacific Rim Framing Co., Inc., a Washington corporation; Peter Ross, Inc., a Delaware corporation; Professional Homebuilders, LLC, a Washington corporation; and Snyder Roofing of Washington, LLC, a Washington corporation, Respondents. The Pier at Leschi Condominium Owners Association, a Washington nonprofit corporation, Respondent, v. Leschi Corp., a Washington corporation, Appellant.

Betsy A. Gillaspy, Daniel Louis Dvorkin, Joel T. Salmi, Salmi & Gillaspy, PLLC, Kirkland, WA, Stellman Keehnel, DLA Piper LLP, Seattle, WA, Lori Kay O'Tool, David E. Chawes, Mark F. O'Donnell, Preg O'Donnell & Gillett, PLLC, Seattle, for Appellant(s).

Stellman Keehnel, DLA Piper LLP, Seattle, WA, Kit William Roth, Attorney at Law, Seattle, WA, for Petitioner(s).

Marlyn Kathryn Hawkins, Dean Eric Martin, Barker Martin PS, Seattle, WA, Gregory Paul Turner, Steven George Wraith, Lee Smart PS Inc., Seattle, WA, Walter John Sinsheimer, Attorney at Law, Seattle, WA, Patrick N. Rothwell, Davis Rothwell Earle & Xochihua PC, Seattle, WA, Rodd K. Skoglund, Adil A. Siddiki, Casey & Skoglund, PLLC, Seattle, WA, Joseph Andrew Grube, Ricci Grube Aita & Breneman, PLLC, Seattle, WA, William Scott Clement, Clement & Drotz, Seattle, WA, John Curtis Dippold, Carney Bradley Spellman, Seattle, WA, John Francis Kennedy, Law Offices of John Francis Kennedy, Gig Harbor, WA, William Scott Noel, Law Offices of Kelley Sweeney, Seattle, WA, for Respondent(s).

Thomas Fitzgerald Ahearne, Foster Pepper, PLLC, Seattle, WA, for amicus curiae on behalf of Master Builders Ass'n of King & Snohomish Counties.

Julie M. Nichols, Building Industry Ass'n of WA, Olympia, WA, for amicus curiae on behalf of Building Industry Ass'n of Washington.

Stellman Keehnel DLA Piper LLP, Seattle, WA, Kit William Roth, Attorney at Law, Seattle, WA, for amicus curiae on behalf of Blakeley Village, LLC.

Lori Kay O'Tool, David E. Chawes, Preg O'Donnell & Gillett, PLLC, Seattle, WA, for amicus curiae on behalf of Leschi Group.

John Kenneth Butler, Preg O'Donnell & Gillett, PLLC, Seattle, WA, Bruce M. Thornton, Los Angeles, CA, for amicus curiae on behalf of Professional Warranty Service Corp.

ALEXANDER, C.J.

¶ 1 Although these consolidated cases present several issues, the issue that is common to them all is whether the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, preempts the judicial enforcement provision of the Washington Condominium Act (WCA), RCW 64.34.100(2). We conclude that the WCA's judicial enforcement provision is preempted by the FAA and, accordingly, reverse in part the Court of Appeals' opinion in Satomi Owners Ass'n v. Satomi, LLC, 139 Wash.App. 175, 159 P.3d 460 (2007), review granted, 163 Wash.2d 1017, 180 P.3d 1292 (2008). We also reverse the portion of the trial court's order that is before us in Blakeley Commons Condominium Ass'n v. Blakeley Commons, LLC,1 as well as the trial court's order in The Pier at Leschi Condominium Owners Ass'n v. Leschi Corp. We remand Blakeley and Leschi to their respective trial courts for further proceedings consistent with this opinion.

I. FACTS
A. Satomi Owners Ass'n v. Satomi, LLC

¶ 2 Satomi, LLC developed the Satomi Condominiums, an 85-unit condominium complex located in Bellevue.2 Satomi Clerk's Papers (SCP) at 18. When the condominiums were sold by Satomi, LLC, the purchasers signed an addendum to the condominium purchase and sale agreements, entitled a "warranty addendum."3 It contained an arbitration clause.4

¶ 3 In February 2005, Satomi Owners Association (Satomi Association) filed suit in King County Superior Court against Satomi, LLC, alleging defects in construction and construction materials and resulting damages throughout the complex. Satomi Association claimed breach of implied and express warranties under the WCA, violation of duty to disclose documentation to Satomi Association, breach of implied warranty of habitability, and violations of Washington's Consumer Protection Act (CPA), chapter 19.86 RCW. Satomi, LLC denied the allegations and demanded arbitration based on the arbitration clause in the warranty addendum. Satomi Association filed a motion to quash the arbitration demand. Satomi, LLC opposed Satomi Association's motion and cross-moved to compel arbitration.

¶ 4 The trial court granted Satomi Association's motion to quash Satomi, LLC's arbitration demand based on three grounds: (1) the FAA does not apply and thus does not preempt the WCA's judicial enforcement provision, (2) Satomi, LLC did not prove that all of the individual owners agreed to arbitrate, and (3) even if the individual owners agreed to arbitrate, the arbitration clause is inapplicable to Satomi Association because it "is a legally separate corporate entity which is neither a `successor or transferee.'" SCP at 144.

¶ 5 Satomi, LLC appealed the trial court's decision to the Court of Appeals, Division One. Following oral argument but prior to the Court of Appeals' issuing its decision, the parties reached a settlement and Satomi Association moved to terminate appellate review. The Court of Appeals denied the motion and subsequently issued its opinion. Satomi Owners Ass'n, 139 Wash.App. at 190 n. 50, 159 P.3d 460.

¶ 6 The Court of Appeals, in a divided opinion, affirmed the portion of the trial court's order denying arbitration of Satomi Association's WCA statutory warranty claims, holding that the FAA did not preempt the WCA's judicial enforcement provision because the FAA does not apply "under the circumstances here." Id. at 178, 159 P.3d 460.5 It reversed the trial court's order with respect to the contractual and common law warranty claims, however, holding that all unit owners signed the warranty addenda and Satomi Association was bound by the arbitration clause in the warranty addendum.

¶ 7 Satomi, LLC petitioned this court to review the portion of the Court of Appeals' decision holding that the WCA's judicial enforcement provision was not preempted by the FAA. In opposing review, Satomi Association asserted that if review were granted, we should reverse the portions of the Court of Appeals' opinion holding that all unit owners signed the warranty addenda and Satomi Association was bound by the arbitration clause in the warranty addendum. Department Two of this court granted review and consolidated the matter with Blakeley and Leschi.

B. Blakeley Commons Condominium Ass'n v. Blakeley Commons, LLC

¶ 8 Blakeley Village developed a condominium project in Seattle consisting of 109 units—106 of the units were residential units. Twenty-nine residential units were sold to residents of other states, and one was sold to a Canadian citizen. Every purchaser of a residential unit executed a warranty addendum, which contained an arbitration clause.6

¶ 9 In January 2006, Blakeley Association filed a lawsuit in King County Superior Court against Blakeley Village and various subcontractors, based on alleged defects in workmanship and materials affecting the units, common elements, and limited common elements of Blakeley Commons. The Blakeley Association's claims against Blakeley Village were for breach of implied warranty under the WCA, breach of implied warranty of habitability, breach of fiduciary duty, violation of the CPA, and breach of contract. Its claims against subcontractors were for breach of express warranty and breach of contract. Blakeley Village moved to stay the proceedings and compel arbitration. The trial court ordered the case stayed pending resolution of the appeal in Satomi.

¶ 10 After the Court of Appeals issued its opinion in Satomi, Blakeley Association moved to lift the stay and deny mandatory arbitration. The trial court granted the motions and ordered the parties to agree on a new trial date, stating that "[t]he Satomi decision controls." Blakeley Clerk's Papers (BCP) at 740. In a subsequent order, however, the trial court clarified that its first order applied only to Blakeley Association's WCA claims. It ordered all non-WCA claims stayed pending arbitration of those claims based on "(1) the arbitration provisions in the Warranty Addendums to the Purchase and Sale Agreements entered into by the Blakeley Commons owners and (2) the holding in Satomi Owners Association v. Satomi, LLC." BCP at 752 (citation omitted).

¶ 11 Blakeley Village filed a notice of appeal and statement of grounds for direct review by this court of the portion of the trial court's revised order that denied arbitration of Blakeley Association's WCA claims and denied a stay of those claims pending arbitration. Blakeley Association filed an answer in opposition to the request for direct review. This court granted review and consolidated the case with Satomi and Leschi.7

C. The Pier at Leschi Condominium Owners Ass'n v. Leschi Corp.

¶ 12 The Pier at Leschi Condominium is a 28-unit conversion condominium complex located in Seattle. The building originally operated as an apartment complex until Leschi Corp. purchased it and converted the units to...

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