RE54R06

RE54R06Alternative Dispute

Resolutionand Procuring Cause

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What Do YOU Think?❏ Your Buyer Went Direct… do you

still get paid?

❏ You sent your client to Open Houses and they were to report back to you for you to write an offer…. do you still get paid?

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What Do YOU Think?

❏ They have an agency disclosure but no Buyer Agreement… who gets paid?

❏ You had a buyer for a property,and the list agent never let you in...

You Are Fed Up and Not Going to Take it...

❏ How do you file a complaint?

❏ What are your rights?

❏ What is the Process?

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#helpless

What Happened?

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Evolution of ADR- WHY?

❏ Alternative Dispute Resolution has grown rapidly in the United States since the political and civil conflicts of the 1960's.

❏ Community Mediation Groups started appearing in the 1970's

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Evolution of ADR- WHY?

❏ A significant increase in the number of lawsuits being filed in U.S. courts.

❏ The judicial system became overloaded with cases resulting in long delays.

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Evolution of ADR- WHY?

❏ Processes like mediation and arbitration soon became popular ways to deal with a variety of conflicts.

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Alternative Dispute Resolution (ADR) and Procuring Cause

The objectives of this course provide a comprehensive overview of Alternative Dispute Resolution ("ADR") as well as the concept and legal basis for Procuring Cause.

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No Litigation if Possible

In the absence of a mutually agreed process for ADR, real estate licensees or their clients and customers involved in any dispute must, in most cases, litigate these matters.

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Why ADR?Massachusetts Licensing Laws do not mandate ADR of business disputes,❏ There is federal and state law

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Why ADR?

❏ There is federal and state law ❏ Uses in commercial

transactions, ❏ real estate transactions ❏ in many other states

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Why ADR?

❏ many multiple listing services❏ local real estate boards.

The Code of Ethics of the National Association of REALTORS® contain arbitration clauses.

Part of Contracts

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Real Life Examples

The course will integrate some case law regarding the "procuring cause" doctrine.

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ADR Definition

Alternative Dispute Resolution is an alternative method to resolving legal disputes as opposed to filing lawsuits and submitting to a court forum.

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ADR Advantages

❏ Savings of costs related to dispute resolution

❏ Speedier timeframe for resolution❏ Confidentiality

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ADR Advantages

❏ Opportunity for creative resolution❏ Option for mediation or arbitration

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ADR Advantages

❏ More direct participation by the disputants

❏ Tends to generate less escalation and ill-will between disputing parties

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ADR Disadvantages

❏ Critics question legitimacy - ❏ No judicial resolution❏ Critics feel outcomes are more

cooperative and less definitive

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ADR Disadvantages

❏ Critics believe ADR encourages compromise

❏ Proceedings and results are private

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History of ADR

❏ Mediation goes back hundreds of years

❏ 1922 - Arbitration Society of America founded

❏ (predecessor of American Arbitration Association ("AAA"))

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Timeline for ADR

❏ 1938 - NYU Law School offers first course ever in arbitration law

❏ 1944 - 75% of collective bargaining agreements provide for arbitration as final step in grievance process.

❏ 1947 - Federal Mediation and Conciliation Service (FMCS) created for labor disputes

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State and Federal Law

❏ New York State Arbitration Law - the first modern arbitration statute in the USA

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State and Federal Law❏ Federal Arbitration Act of

1925 and as amended in 1970, 1988 and 1990

❏ 1982 - President Reagan signs bill authorizing arbitration in patent disputes.

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State and Federal Law

❏ 1990 - Florida becomes the first state to require brokers to provide customers option of taking cases to AAA rather than industry sponsored forum.

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Laws Enacted

❏ Alternative Dispute Resolution Act of 1996

❏ Alternative Dispute Resolution Act of 1998 -

❏ Federal CourtsExecutive Order 12988 - 1996

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MGL c 251 § 12 (a)

❏ Provides for the basis that may allow a court to overturn an arbitration decision.

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MGL c 251 § 12 (a)❏ § The award was procured by

corruption, fraud or other undue means.

❏ § There was evident partiality by the arbitrators.

❏ § The arbitrators exceeded their powers.

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MGL c 251 § 12 (a)

❏ § The arbitrators refused to postpone a hearing or grant an extension when one was reasonable requested.§ There was no arbitration agreement and the party did not participate in the hearing.

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Uniform Arbitration Act❏ MGL c 251 § 1 through § 13❏ Uniform Arbitration Act, M.G.L. c.

251. provides for the legality of arbitration in commercial disputes in Massachusetts and the legal parameters related to the use of arbitration.

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National Business Practices

National business practices and trends❏ ADR trends in real estate transactions in

other state❏ ADR resources offered by NAR❏ ADR trends in all business❏ ADR in real estate in Massachusetts

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ADR is For...

❏ As a prelude to litigation❏ Purchase and Sale

Agreements❏ Level playing field for both

disputing parties

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ADR is For...

❏ Commission disputes❏ Use by MLS services❏ Use by local real estate boards

Association Dispute ResolutionOption #1 – Informal❏ Ombudsman❏ Mediation

Option #2 – Formal ❏ Ethics complaints❏ Arbitration requests

Informal Dispute ResolutionOmbudsman Program

❏ Only available if offered by local association.

❏ Voluntary process.

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Informal Dispute ResolutionOmbudsman Program❏ Ombudsmen may field and

respond to inquiries and complaints, solicit responses, and meet with disputing parties.

❏ Disputants reserve right to file a formal ethics complaint.

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❏ Primary role is communication and conciliation (not adjudication).

❏ Does not determine an ethics violation.

Ombudsman’s Functions

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❏ Anticipates, identifies, helps resolve misunderstandings or disagreements before disputes or unethical conduct charges arise.

Ombudsman’s Functions

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Ombudsmen can help repair breakdowns in communication and develop acceptable resolutions between disputing parties.

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Mediation Versus Arbitration

Mediation ArbitrationLow-cost Moderate costLittle delay Moderate delayMaximum range of solutions

Win/lose/split

Parties control outcome Arbitrators control outcome

Uncertain closure Definite closureMaintain/improve relationships

May harm relationships

Informal Dispute Resolution-Mediation❏ Voluntary process, unless the

Association (at its discretion) requires its REALTOR® members to mediate per Article 17.

Informal Dispute Resolution-Mediation

❏ Enabling bylaw provisions (found in Article VII of the NAR Model Bylaws for Local Member Boards) must be adopted to mandate mediation.

Mediation❏ Disputing parties meet with a

mediator appointed by the association.

❏ Parties create a mutually acceptable resolution of the dispute, rather than go before an arbitration hearing panel.

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❏ An alternative process of dispute resolution in which one or more impartial and independent third parties intervene in a conflict or dispute with the consent of the disputing parties to assist them in negotiating a consensual and informed agreement.

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Mediation

❏ In mediation, the decision-making authority remains with the participants themselves and the mediator does not have the authority to make a binding decision.

❏ Preferred dispute resolution tool by the REALTOR® organization.

❏ Must be available to all REALTORS®.

Mediation for REALTORS

❏ May offer before or after grievance committee’s review.

❏ If offered before, must offer again after grievance committee determines matter is arbitrable and forwards on to a hearing.

Mediation for REALTORS

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Mediation Advantages❏ Usually less costly❏ Speedier timeframe for

resolution❏ Confidentiality

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Mediation Advantages

❏ Usually results in compromise❏ Opportunity for creative

resolution❏ Opportunity for direct role of

principals in resolution

Keep Calm?

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Mediation Disadvantages

❏ Small claims court may be more practical

❏ Discovery may be limited❏ Usually results in compromise❏ No limits on evidentiary submissions❏ Possibility of no resolution

If a resolution is reached, parties sign an agreement containing the terms of the settlement, and no arbitration hearing is held.

Mediation

Quiz! Mediation is:a. a process that can be required at local discretion in

which a trained mediator assists the parties in coming to a mutually acceptable resolution of their dispute.

b. a voluntary process in which the parties agreement of settlement is non-binding.

c. a mandatory process where the parties must settle the dispute.

d. a mandatory process in which the parties must attend a settlement hearing before an arbitration hearing panel.

Mediation is:

The answer is A - a process that can be required at local discretion in which a trained mediator assists the parties in coming to a mutually acceptable resolution of their dispute.

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Arbitration❏ The non-judicial submission of a dispute to

one or more independent and impartial parties for a final and usually binding decision of the matter

❏ (may be non-binding by agreement of the parties).

Arbitration Guidelines

❏ Found in the Code of Ethics and Arbitration Manual.

❏ Guide hearing panels in resolving arbitrable issues.

❏ Focus primarily on procuring cause as the basis for resolving most commission disputes.

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Arbitration Advantages❏ Usually less costly❏ Speedier timeframe for resolution❏ Confidentiality❏ Opportunity for creative

resolution

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Arbitration Disadvantages❏ Small claims court may be

more practical❏ Discovery may be limited❏ Generally binding and

therefore lacking the right of appeal

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Arbitration Disadvantages

❏ No limits on evidentiary submissions

❏ May provide decision without explanation or rationale

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Arbitration Disadvantages❏ May result in compromise❏ Confidentiality❏ Fees may be far more

costly than court fees❏ Undermines constitutional

right to use legal system

Filing an Arbitration Request❏ Arbitration is conducted under

Article 17 of the Code of Ethics and under a state’s arbitration statute (if any).

❏ Article 17 provides that arbitration occurs under the following circumstances . . .

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NAR Code of Ethics

❏ Requirement of NAR Code of Ethics❏ Sources of Arbitrators and

Mediators❏ AAA❏ Other ADR resources❏ Local ADR options

The Code of Ethics: Our Promise of

Professionalism

Duties To REALTORSⓇ

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Article 17

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Article 15

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Official Case Interpretations❏ Fact situations for which each

Article and/or Standard of Practice of the Code are applied.

❏ May not be charged, but may be cited in support of an alleged violation.

Enforcement of the Code of Ethics❏ Every associations is responsible for enforcing

the Code.❏ This includes providing mediation and

conducting ethics and arbitration hearings.❏ Only REALTORS® and

REALTOR-ASSOCIATES® are subject to the Code.

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Case Study

❏ Licensee refers a prospective buyer to a property but does not accompany the prospect.

❏ Requirement of follow-through of Procuring Cause claimant or consequences of abandonment of prospective buyer.

Who can file an ethics complaint?

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Grievance Committee in Ethics

Is there a potential violation of the Code of Ethics?

The primary emphasis of discipline is educational, to create a heightened awareness of and appreciation for the Code of Ethics.

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Arbitration and Article 17

❏ Contractual or specific non-contractual disputes, as defined by Standard of Practice 17-4

❏ Between REALTORS® (principals)❏ Arising out of their relationship as

REALTORS®

NOTE: Clients also may arbitrate with their REALTOR® principals.

Grievance Committee in Arbitration❏ s there an arbitrable issue?

❏ (That is, a money dispute, typically concerning which REALTOR® is entitled to the cooperative commission in a transaction.)

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Arbitration Hearing Panel

❏ Conducts full “due process” hearing.❏ Comprised of members from an

association’s professional standards committee.

❏ After a hearing, panel decides which party is entitled to the award, based on a preponderance of the evidence.

Payment of an Arbitration Award

❏ An unpaid award typically may be judicially enforced.

❏ Some associations require that award monies be deposited with the association, pending review of the hearing process

Concepts of Procuring Cause in

Arbitration

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Procuring Cause

❏ What is a Procuring Cause?

❏ The effort that brings about the desired result or the licensee who clearly originated a chain of events that resulted in a sale or lease within a timely manner.

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Procuring Cause

The proximate cause; the cause originating a series of events, which, without break in their continuity, result in the accomplishment of the prime object. The inducing cause; the direct or proximate cause. Substantially synonymous with "efficient cause."

Procuring Cause Factors

❏ No pre-determiners.❏ Consider the entire course of events.❏ Writing an offer, making the first

showing, or an agency relationship, in and of themselves, do not necessarily determine procuring cause or entitlement.

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Procuring CauseThe proximate cause; the cause

originating a series of events which, without break in their continuity, result in the accomplishment of the prime object.

Procuring Cause

It is the squirrel that shakes the branch and not the squirrel that gathers the nut. – Arkansas Supreme Court

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Thresholds

❏ Mere introduction of buyer and seller by licensee.

❏ Circumstances requiring more than full commission.

❏ Parties to a Procuring Cause dispute.

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Challenge

Regardless of the efforts expended, only one of the brokers or salespersons whose efforts brought about the transaction may claim the commission.

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Mohamed v. RobbinsA broker will be regarded as the "procuring cause" of a sale, so as to be entitled to commission, if his or her efforts are the foundation on which the negotiations resulting from the sale are begun. A cause originating a series of events which without break in their continuity result in accomplishment of prime objective of the employment of the procure who is producing a purchaser ready, willing and able to buy real estate on the owner's terms. Mohamed v. Robbins. 23 Ariz.App. 195, 531 P.2d 928, 930"

- Black's Law Dictionary, Sixth Edition definition

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Case Study- Who Gets Paid… by Whom?

When more than one real estate broker or salesperson from different firms work with the same potential buyer, regarding the same property, the Seller, Landlord and Listing Broker expect to pay a single commission.

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Case Study❏ Licensee shows property to a prospective

buyer and seller concludes the transaction❏ Listing agent shows property to prospective

buyer then buyer engages a Buyer's Agent to conclude sale.

Enforcement of the Code of Ethics

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Enforcement of the Code of Ethics❑ An association where someone holds

membership or gains MLS access has jurisdiction to process ethics complaints and arbitration requests filed against that individual.

❑ Associations do not determine violations of law and regulation.

Ethics Hearing Panel❑ Following a hearing, panel decides

whether the Code of Ethics has been violation, proven through clear, strong, and convincing evidence.

❑ If a Code violation is found, then the panel also determines the discipline.

Authorized Discipline❑ Letter of warning❑ Letter of reprimand❑ Education❑ Fine, not to exceed $15,000

Authorized Discipline

❑ Probation of one year or less❑ Suspension of not less than 30 days, nor

more than one year❑ Expulsion from membership for one to three

years❑ Suspension or termination of MLS privileges

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Materials❏ Black's Law Dictionary (West Publishing)❏ National Association of REALTORS® Code of Ethics and

Arbitration Manual (Copyright National Association of REALTORS®, Chicago Ill)

❏ Code of Ethics of the National Association of REALTORS® (Copyright National Association of REALTORS®)

❏ The Real Estate Legal Desk Book, ❏ A Broker's Guide to Consumer Protection, Procuring

Cause and Commissions, (Copyright Greater Boston Real Estate Board)

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Resources

❏ M.G.L. c. 251, Uniform Arbitration Act ❏ § 1 through § 13❏ ADR Act of 1990❏ The Language of Real Estate

by John W. Reilly, published by Dearborn Real Estate EducationAmerican Arbitration association website: http://www.adr.org/❏ Actual case studies available from Department of

registration, Real Estate Brokers & Salespersons

Educator❏ Instructor Training Institute❏ Certified Distance Educator Institute❏ Certified Trainer, zipForms❏ Owner/Instructor- Agent Rising ❏ Presenter/Trainer - MAR, NEAR, SEMAR, RASEM❏ ePro, ABR, Notary, B.A.

2019 Volunteer❏ 2018 MA Realtor of the Year❏ Past President RASEM 2018❏ Dean- MAR Leadership Academy 2016

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