Procuring Cause Guidelines and Considerations by an Arbitration Hearing Panel
The Minnesota Association of REALTORS® requires its members to arbitrate disputes that arise out of their relationship as REALTORS®. Article 17 of REALTORS® Code of Ethics supplies the basis for arbitration: "In the event of a controversial dispute between REALTORS® associated with different firms, arising out of their relationship as REALTORS®, the REALTOR® shall submit the dispute to arbitration in accordance with the regulations their association or associations rather than litigate the matter."
A number of cases brought to the committee include a claim or counterclaim where one or both of the parties stated that they though the case involved the "threshold law," "threshold policy," "threshold guideline," or some such language. The use of the term "threshold" goes back to the time when the Association had a guideline that, while not absolute, served as a guide in deciding claims involving who was entitled to the selling portion of the commission.
Several years ago, the Minnesota Association of REALTORS® adopted the recommendations of the National Association of REALTORS® that a number of factors need to be considered by an Arbitration Hearing Panel with each arbitration heard. As a result of these recommendations, the Hearing Panel, considers various factors including, but not limited to, the following:
No Predetermined Rules or Regulation:
The Hearing Panel will avoid any assumption or presumption of entitlement to any award on the basis of any predetermined rule or regulation of the Association of REALTORS®, and shall make its determination in each case on the merits of all ascertainable and relevant facts.
Arbitration Hearing and Award Separated from Ethics Hearing:
A Hearing in Arbitration as to entitlement to any award shall be held separately from any Ethics Hearing. Any award in arbitration shall be granted on the basis of judgment by the Hearing Panel as to authorized agency performed which was the actual "Procuring Cause" (or the "predominant efficient cause") An award in arbitration shall not be made on the basis of alleged or determined violation of the Code of Ethics as a basis for its finding. Any alleged or suspected violation of ethics shall be referred to the Professional Standards Committee.
Award to Conform With State Law:
An award in arbitration must not violate the state law of the state in which it is held.
Consideration of the Whole Course of Conduct:
In a dispute as to the entitlement to an award, the Hearing Panel must weigh the whole course of conduct of the parties, their relationship, and their understandings in order to determine the extent to which the acts of each of the parties produced or contributed to the transactions from which the dispute arises. In making its determination, the Hearing Panel shall be entitled to make reasonable inferences from the evidence and the evidence shall be sufficient to support such inferences. The issues to be arbitrated shall be those framed by the complaint, response and other pleadings of the parties. No other issue shall be considered by the Hearing Panel in making its determination.
The separation of arbitration proceedings under the Code of Ethics should not be construed as precluding consideration by the Hearing Panel of all factors, including the propriety of the conduct of the parties, relevant to the dispute which is the subject of the arbitration.
The Hearing Panel is to avoid any preconceived of predetermined notions as to the appropriate award in arbitration that is to be made. Members of the panel will disregard, as required by the Interpretation - 31, Official Interpretation of Article 1, Section 2, Bylaws of the NATIONAL ASSOCIATION OF REALTORS®. An association rule or a rule of a Multiple Listing Service owned by, operated by, or affiliated with an association which establishes, limits or restricts the REALTOR® in his/her relations with a potential purchaser, affecting recognition periods or purporting to predetermine entitlement to any award in arbitration, is an inequitable limitation on its membership.
Each member of such panel is conscious of the obligation to fairly and impartially seek to ascertain and understand all pertinent facts or factors which are relevant to the dispute before the Panel.
The members are also conscious that they are seeking to render a reasoned and reasonable peer judgment in a business dispute arising out of a real estate transaction, and that the purpose and function of the hearing in arbitration neither includes determination nor conclusion as to alleged or possible violation of the Code of Ethics.
Arbitration Hearing Panels are called on to resolve contractual questions, not to determine whether the law or the Code of Ethics has been violated. An otherwise substantiated award cannot be withheld solely on the basis that the Hearing Panel looks with disfavor on the potential recipient?s manner of doing business or even that the panel believes that unethical conduct may have occurred.
To prevent any appearance of bias, an Arbitration Hearing Panel shall make no referrals on ethical concerns to the Grievance Committee. This is based on the premise that the fundamental right and primary responsibility to bring potentially unethical conduct to the attention of the Grievance Committee rests with the parties and others with firsthand knowledge.
The following are guidelines for hearing panel members. Panel members can, if they choose, ask questions based on the guidelines, and use the guidelines as points of discussion in executive session. These guidelines are a methodology of analysis, and a process by which panel members and arbitration principals can examine relevant facts involved in the dispute. They are not rules, and they must not be looked at as predetermines of a hearing panel?s decision.
These guideline questions are not listed in order of importance. Depending upon the facts of a dispute, hearing panels may decide that one or more questions may be irrelevant to the issue at hand, or that one or more questions are key to their decision. All panel members are urged not to focus exclusively on any one aspect of the dispute, or on any single guideline questions. These guideline questions can help hearing panel members evaluate the dispute within the full context of the transaction. Hearing panel members are not required to ask, or limited to, these guideline questions.
- WHAT DID EACH PARTY DO TO EARN A BROKERAGE FEE?
This question is intended to convey to the panel members and to the parties to the dispute that each party has an EQUAL burden of proof when claiming a commission; and that it is the actions of each party, not the status of either party (i.e. Listing Agent; Open House Agent; Buyer's Agent, etc.) which are paramount. It is for the parties to cite what they did and why and it is for the hearing panel to decide the value and effect of those actions.
- WHO HAD EFFECTIVE CONTROL OF THE BUYER?
The selling of real estate is neither passive nor spontaneous. Rather, it requires the ability to bring together a number of elements to a point at which the buyer is willing to make an offer. The questions for panel members to ask themselves is which agent (if either) created the circumstances which managed the buyer to the point of making an offer; and why did the buyer respond to that agent? Was either agent so integral to the transaction that without him/her no sale would have occurred?
- WHO/WHAT CAUSED THE BUYER TO MAKE THE AFFIRMATIVE DECISION TO BUY THE PROPERTY?
At first glance it would appear that by asking this, the panel is begging the question. For if it can be answered, what else is there to decide? But this question suggests that the panel members evaluate the relative importance of varied facts, and determine whether any one factor, (or either agent) was of paramount significance. For example, was the property itself an over-riding factor, and the role of either agent secondary? Was there a unique or advantageous financing method involved, and if so, which agent discussed it with the buyer? Was there a substantial objective to purchasing perceived by the buyer, and if so, which agent overcame it?
- WHOSE/WHAT ACTIONS LED TO THE INITIAL INSPECTION OF THE PROPERTY BY THE BUYER?
While undue weight should not be given to the first inspection of a property by the buyer, and while the panel should specifically reject the supposition that all relevant events commence with the first inspection, still it is undeniable that the inducement of a buyer to see a property is often an intrinsic part of the buying process. Therefore, the hearing panel may wish to determine whether the initial viewing of the property was in response to the direct activity of either agent.
- BEFORE, DURING, AND AFTER THE INSPECTION(S) OF THE PROPERTY BY THE BUYER, WHOSE ACTIONS AND ACTIVITIES INITIATED A SERIES OF EVENTS WHICH LED TO AN ACCEPTABLE OFFER?
The transformation of a prospect into a buyer involves initiating and maintaining a relationship throughout the buying process. That relationship may begin at an open house; in response to a call generated by a sign or ad; at a qualifying interview; or under other innumerable circumstances. This relationship may include the buyer relying upon the agent as a source of information, counsel, and judgment. The hearing panel may endeavor to determine which agent (if either) had such a relationship with the buyer which was instrumental to the sale. The hearing panel may also determine which agent diligently and effectively pursued the sale of the property of the buyer.
- WAS THE ACTION OF ANY AGENT INVOLVED IN THE DISPUTE AN INAPPROPRIATE INTRUSION ON THE OTHER AGENTS PURSUIT OF A TRANSACTION?
In contemplating the actions of each agent, the hearing panel may wish to determine whether those actions were an unwarranted interference calculated to interrupt a usual and customary sales process, or whether the intrusion and the series of events initiated by it led to the sale.
Conclusion:
The preceding guidelines, questions or factors to be considered are typical of, but are not all inclusive of, the questions or factors considered by the panel concerning any case brought by members for a hearing. The overall objective of an Arbitration Hearing Panel is to weigh carefully and impartially the whole course of conduct of the parties, and to render a reasoned and reasonable peer judgment as to the proper award in the arbitration.
