CLIENT ALERT
By John Perten
In an unpublished appeals court decision, Mamaril v. Keller, the Massachusetts appeals court ruled that a homeowner was not bound by an arbitration clause contained in a home improvement contract. The Home Improvement Contractor (“HIC”) law, M.G.L. c. 142A, gives a homeowner the choice of HIC arbitration or litigation in the event of a dispute even if the contract itself is silent on this issue. In contrast, a contractor can only utilize arbitration if there is an arbitration clause in the HIC contract that is set forth clearly and conspicuously, using statutorily approved language and specifically initialed by the homeowner.
Mamaril was a dispute between a homeowner and her contractor. In their contract, the contractor inserted an arbitration clause that provided that “any disputes shall be settled through arbitration in county where Keller Waterproofing & Foundation, LLC resides.” After the parties were unable to resolve their dispute, the contractor filed a declaratory judgment action in Worcester Superior Court seeking to affirm that because of the arbitration clause, the dispute should be resolved by arbitration in Worcester County. The homeowner then filed a lawsuit for breach of contract in Essex County. The Worcester County action was transferred and consolidated into the Essex County action. The Essex County judge ruled that the homeowner had the right to litigation notwithstanding the arbitration clause in the contract. The contractor appealed that decision.
The Court stated that the dispute resolution language of the HIC law trumped the general rules regarding enforceability of commercial arbitration clauses. According to the Court, to allow a contractor to undermine the homeowner’s statutory right to bring an action by inserting an arbitration clause, would be to undermine the whole dispute resolution procedure in the HIC law. Moreover, because the arbitration clause in the contract did not comply with the HIC law, i.e. it was not conspicuous or initialed by the homeowner and was not in the form prescribed by the regulations, it was unenforceable.
Had the contractor used the approved form of an arbitration clause and had the homeowner initialed it, the case might have been different, though it seems doubtful that the contractor could have specified other than HIC arbitration. Anecdotally, HIC arbitration is thought of as a pro-consumer forum. However, even if forced to use HIC arbitration, the statute provides for an appeal to court for a new trial if dissatisfied with the arbitration decision. So, while you still may be forced into HIC arbitration you can still get your day in court, although the adverse arbitration decision is a piece of evidence which the Court can consider at the trial.
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John H. Perten is a shareholder at Sheehan Phinney Bass + Green PA. He is a member of the Construction, Litigation and Business Groups. He may be reached at jperten@sheehan.com or 617.897.5641.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice.
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