Watson v. Professional Business Management Corporation
Facts: A homeowner in financial distress signs an agreement with a law clinic containing an arbitration clause. The law clinic refers the homeowner to a lender, which originates a loan secured by the homeowner’s residence. The homeowner defaults on the lender’s mortgage, and files a court action against the law clinic and the lender, accusing them of collaborating to fraudulently drive the homeowner to the lender.
Claim: The lender claims they can compel the homeowner into arbitration since the homeowner’s litigation considers the lender and the law clinic a joint enterprise and the law clinic signed the arbitration agreement.
Counterclaim: The homeowner claims they cannot be compelled to arbitrate their claim against the lender since the arbitration agreement was only signed by the law clinic, not the lender.
Holding: A California appeals court holds arbitration between the homeowner and the mortgage lender is not enforceable since the lender did not sign the arbitration agreement. [Watson v. Professional Business Management Corporation (2026) 345 CA3rd 2]
Watson v. Professional Business Management Corporation
Editor’s Note — firsttuesday has advocated against arbitration provisions, as any decision reached by an arbitrator is final and binding. The arbitrator can ignore legal precedent, making the outcome of any arbitration impossible to predict. As a matter of policy, firsttuesday does not include any arbitration provisions in our library of real estate forms. Realty Publication, Inc. forms encourage mediation as the preferred alternative dispute resolution.
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