Cox, Castle & Nicholson LLP Represents National Homebuilder in Major Construction Defect Case Victory.

Business Editors & Legal Writers

LOS ANGELES--(BUSINESS WIRE)--June 10, 2002

Cox, Castle & Nicholson LLP and client U.S. Home Corp. scored a critical victory for homebuilders in the California Court of Appeal last week.

The decision, perhaps the first in California, upholds a builder's right to enforce arbitration agreements that include construction defect claims.

In Basura v. U.S. Home Corp., the Appellate Court held that homeowners who agree to arbitrate construction defect claims pursuant to an arbitration provision in a residential purchase and sale agreement must arbitrate those claims where the agreement involves interstate commerce; here, goods or services from outside California.

The Court held further that, to the extent a California statute relating to arbitration purports to limit the right to arbitrate, federal law can preempt it.

The Court addressed specifically the application of federal law to arbitration provisions contained in real estate purchase agreements. Almost 80 years ago, Congress enacted a federal law to preempt or protect against state laws that purport to defeat arbitration.

Federal law applies broadly to contracts that involve goods or services in interstate commerce. The California Court of Appeal held that this includes such things as the interstate movement of construction materials and equipment. The Court also found it important that interstate mail and telephone communications had occurred in connection with construction of the homes.

Leading the legal team for U.S. Home Corp. were litigation partners Sandra Stewart and Kenneth Bley and associate Joanna Huchting.

"The Court's decision in Basura will have widespread beneficial impact on the ability of homebuilders to enforce their arbitration agreements which, increasingly, have come under attack," said Stewart. "Arbitration provides a speedy and economical means of resolving construction defect disputes and benefits builders and homeowners alike."

"Basura takes a huge step in the right direction. Homebuilders now must take a fresh look at their arbitration provisions and redraft them, where necessary, to ensure that they conform to law and are fair and even-handed," Bley added.

"Builders also need to be aware that federal law preempts state arbitration laws that apply solely to defeat arbitration, but it does not operate to enforce arbitration agreements that are unfair."

With offices in Los Angeles, Orange County and San Francisco, Cox, Castle & Nicholson LLP has one of the nation's largest concentrations of attorneys serving the real estate and financial services industries. For more information about Cox, Castle & Nicholson LLP and its Development Risk Management Practice Group, contact Stewart or Jeff Masters at 310/277-4222 or visit www.coxcastle.com.

Note to Editors: Cox, Castle & Nicholson LLP is a registered trademark of the firm.