In Thompson v. Toll Dublin, LLC, condominium purchasers sued the project developers for fraud based on concealment of wet, moldy and unhealthy conditions. Pursuant to their purchase agreement with defendants, plaintiffs signed documents, including a Title 7 Addendum and a Title 7 Master and Dispute Resolution Declaration. Plaintiffs also received a copy of Title 7, which addresses construction defect claims and contains a provision which expressly excludes fraud claims. The trial court ruled that the arbitration agreement did not apply to plaintiffs’ fraud-related claims, and the California Court of Appeals affirmed the trial court ruling.

Affirming the trial court, the Appeals Court found that the addendum and master Declaration applied only to Title 7 claims — not to plaintiffs’ fraud-based claims. The stated purpose of the addendum was to implement the requirements of Title 7. Although certain language in the addendum and master declaration could be interpreted to include non-Title 7 claims, such an interpretation in this instance would be unreasonable given the context of the entire arbitration agreement. The Appeals Court went further to rule that the arbitration agreement was unconscionable, finding that the arbitration provisions constituted a contract of adhesion and included both the procedural and substantive elements of unconscionability. Thompson v. Toll Dublin, LLC, 165 Cal. App. 4th 1360, 81 Cal Rptr. 3d 736 (2008).