Don’t Forget The Master Deed: The Enforceability of Jury Trial and Class Action Waivers

If you are involved in enough construction defect litigation, you will likely come across cases involving multi-family residential developments, including condominium units. Last week, the South Carolina Court of Appeals issued an opinion dealing with such a development and looking at the issue of whether the unit owners were bound by certain waivers in the master deed.

In The Gates at Williams-Brice v. DDC Construction, Op. No. 5438 (S.C. Ct. App. filed August 31, 2016), the issue on appeal was whether the owners were entitled to proceed as a class in a jury trial against certain defendants for alleged faulty workmanship that occurred during the construction of 158 condominium units. Shortly after filing an amended complaint asserting claims for construction deficiencies against various parties, the owners amended the master deed to remove certain provisions—originally included by the developer—that purported to limit the owner’s  rights. Those provisions removed by the master deed amendment included a jury trial waiver and a class action waiver.

After the amendment, certain defendants filed a motion for a nonjury trial and to strike the owners’ class action allegations and jury trial demand. After hearing arguments from both parties, the circuit court issued an order in which it denied the defendants’ motion. On appeal, the defendants contended the circuit court erred in failing to enforce the written jury trial and class action waivers in the master deed.

In its opinion, the South Carolina Court of Appeals held the circuit court erred in denying the defendants’ motion and addressed multiple issues related thereto. As to timeliness, the court found that the defendants raised the issues regarding mode of trial at the first opportunity when they timely appealed the circuit court’s order denying its request for a nonjury trial. As to the master deed amendment, the court found the owners could not retroactively amend the master deed once litigation commenced between the parties. As to the enforceability of the waivers, the court noted the terms of the master deed were expressly incorporated into each unit owner’s purchase contract and, by signing the purchase contract at closing, each homeowner was charged with having read the master deed’s contents. As a result, even if the owners were unaware of the inclusion of these waiver provisions, the court noted they cannot avoid the effects of the waivers merely by arguing they were unaware that such provisions were included in the deed. Further, the court found the waiver provisions were conspicuous, unambiguous, and not unconscionable. Finally, the court found that the defendants could pursue their right to a nonjury trial and to proceed without a class while declining to exercise its right to arbitrate.

This opinion serves as a good reminder that any defendant in multi-family construction defect litigation should check the original master deed to determine whether it contains any provisions that might prove helpful in defending against the owners’ claims.