News & Information: Orando REALTOR® magazine - Case Study

Rock, Paper, Scissors

Wednesday, July 9, 2014  
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Orlando REALTOR® | July/August 2014

Arbitration trumps litigation
when it comes to obligations
to the REALTOR® Code of Ethics

REALTOR® A and REALTOR® B had been engaged in a cooperative transaction that resulted in a dispute regarding entitlement to compensation. Rather than requesting arbitration before the board of REALTORS®, REALTOR® A filed suit against REALTOR® B for payment of the compensation he felt REALTOR® B owed him.

Upon receiving notification of the lawsuit, REALTOR® B filed a request for arbitration with his local REALTOR® association, which was reviewed by the grievance committee and found to be a mandatory arbitration situation. REALTOR® A was advised of the grievance committee’s decision, but refused to withdraw from the lawsuit. Thereupon, REALTOR® B filed a complaint with the association charging a violation of Article 17 as supported by Standard of Practice 17-1.

REALTOR® A was directed to be present at a hearing on the complaint before the board of directors. Evidence that REALTOR® B had sought REALTOR® A’s agreement to submit the dispute to arbitration was presented at the hearing. REALTOR® A defended his action in filing the suit and refusing to submit to arbitration by asserting that under laws of the state, the association of REALTORS® had no authority to bar his access to the courts or to require him to arbitrate his dispute with REALTOR® B.

The board of directors concluded that REALTOR® A was correct as to his legal right and as to the association’s lack of any right to prevent him from filing a suit. It was pointed out to REALTOR® A, however, that the association of REALTORS® is a voluntary organization whose members accept certain specified obligations with respect to their relations with other REALTORS®, and that if he wished to continue as a member of the association he would be obliged to adhere to the association’s requirements as to arbitration.

Because REALTOR® A would not withdraw the litigation, the board of directors concluded that REALTOR® A was in violation of Article 17 for refusing to arbitrate in a mandatory arbitration situation.

Reference: Article 17, Case 17-1
Source: NAR

Note: If REALTOR® A had filed litigation against REALTOR® B and had REALTOR® B then requested arbitration with the grievance committee determining that an arbitration issue of a mandatory nature existed, REALTOR® B might have successfully petitioned the court to remand the matter to the association for arbitration, and there would have been no finding of a violation of Article 17 since the arbitration process would have been ultimately complied with.

Source: NAR

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