Part 2 — When the Agent Can be Compelled to Mediate/Arbitrate
Today, we conclude our look at when agents/brokers may be compelled to participate in mediation or arbitration. While generally, they must contractually agree to such, in some situations, the court has carved out exceptions to when a party may be required to participate in mediation/arbitration even though they contractually did not agree. It can happen!
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing Alex Munn at awmunn@bpelaw.com or managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to setup a date and time.
When the Agent an be Compelled to Mediate/Arbitrate — Part 2
By: D. Keith B. Dunnagan, Esq.
In Part 1 of this article regarding the agent/broker’s obligation to mediate/arbitrate, we examined the limitations of forcing agents and brokers to participate in mediation and arbitration. In the seminal case of Nguyen v. Tran, 157 Cal.App.4th 1032 (2007) the appellate court rejected the notion that one broker could force another broker to mediate a dispute. However, the question becomes can the agents/brokers be forced to participate in mediation/arbitration when disputes arise. In short, the answer is it depends.
By contract, the Buyer has the authority to compel their own agent/broker to participate in mediation/arbitration. Pursuant to the Buyer Representation Agreement, buyer and broker “agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction…”. Contractually speaking, if an agent receives a demand from their client to mediate they must do so because the penalty for not mediating is loss of the ability to recover attorneys’ fees upon successful defense of the action.
Similarly, the Listing Agreement contains a mediation/arbitration clause as well. However, that clause was previously modified to limit the mediation/arbitration requirement to disputes involving payment of commissions. Nothing in the listing agreement suggests or requires that the listing broker participates in mediation when some other dispute arises.
The premise to start with is that if there is a contractual agreement executed by the individual, be it a party to the transaction or an agent/broker then the individuals who agreed in writing can be compelled to participate in mediation/arbitration. However, nonsignatories may also be compelled in some situations to participate in mediation/arbitration as well.
Currently, the way the RPA is framed is that the buyer and seller are parties to the contract and the brokers are specifically excluded from the contracts as parties. Therefore, the mediation/arbitration provision of the RPA, generally cannot be enforced against the agents/brokers without their consent. Nonetheless, how do agents and brokers get brought into many of the mediations/arbitrations between the buyers and sellers. Many will often agree to participate for business reasons. But for those that are unwilling there is a general exception that stands for the proposition that when there is a confidential relationship amongst the parties (think the agency relationship between broker and client – which is a fiduciary relationship) or when the nonsignatory is a third party beneficiary of the contract who received a benefit (say possibly a commission) as a result of the contract. If one of these exceptions is met, then it turns on the factual analysis of each case.
While is certain though, is that one broker involved in a transaction, as a nonsignatory to the contract may not enforce the mediation/arbitration provision against another broker who is also a nonsignatory to the contract. California courts, nonetheless, regularly enforce mediation/arbitration provisions against nonsignatories when sought by a signatory. In doing so, the facts must warrant such a decision and it is limited to the situations where the party (agent/broker) had a relationship that predated the contract or was a beneficiary of the contract.
Determining when parties are obligated to mediate or arbitrate can be difficult, especially when it involves parties that did not sign the contract. Each situation should be examined and investigated on its own merits. Should you find yourself in a situation wondering if you are required to mediate/arbitrate or who may be compelled to do such, seek competent legal assistance to help determine the rights and obligations of the parties. The attorneys at BPE Law Group have significant experience when it comes to mediation and arbitration under the CAR Forms and can assist you on how these provisions are applied.
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The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
Today, we conclude our look at when agents/brokers may be compelled to participate in mediation or arbitration. While generally, they must contractually agree to such, in some situations, the court has carved out exceptions to when a party may be required to participate in mediation/arbitration even though they contractually did not agree. It can happen!
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing Alex Munn at awmunn@bpelaw.com or managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to setup a date and time.
When the Agent an be Compelled to Mediate/Arbitrate — Part 2
By: D. Keith B. Dunnagan, Esq.
In Part 1 of this article regarding the agent/broker’s obligation to mediate/arbitrate, we examined the limitations of forcing agents and brokers to participate in mediation and arbitration. In the seminal case of Nguyen v. Tran, 157 Cal.App.4th 1032 (2007) the appellate court rejected the notion that one broker could force another broker to mediate a dispute. However, the question becomes can the agents/brokers be forced to participate in mediation/arbitration when disputes arise. In short, the answer is it depends.
By contract, the Buyer has the authority to compel their own agent/broker to participate in mediation/arbitration. Pursuant to the Buyer Representation Agreement, buyer and broker “agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction…”. Contractually speaking, if an agent receives a demand from their client to mediate they must do so because the penalty for not mediating is loss of the ability to recover attorneys’ fees upon successful defense of the action.
Similarly, the Listing Agreement contains a mediation/arbitration clause as well. However, that clause was previously modified to limit the mediation/arbitration requirement to disputes involving payment of commissions. Nothing in the listing agreement suggests or requires that the listing broker participates in mediation when some other dispute arises.
The premise to start with is that if there is a contractual agreement executed by the individual, be it a party to the transaction or an agent/broker then the individuals who agreed in writing can be compelled to participate in mediation/arbitration. However, nonsignatories may also be compelled in some situations to participate in mediation/arbitration as well.
Currently, the way the RPA is framed is that the buyer and seller are parties to the contract and the brokers are specifically excluded from the contracts as parties. Therefore, the mediation/arbitration provision of the RPA, generally cannot be enforced against the agents/brokers without their consent. Nonetheless, how do agents and brokers get brought into many of the mediations/arbitrations between the buyers and sellers. Many will often agree to participate for business reasons. But for those that are unwilling there is a general exception that stands for the proposition that when there is a confidential relationship amongst the parties (think the agency relationship between broker and client – which is a fiduciary relationship) or when the nonsignatory is a third party beneficiary of the contract who received a benefit (say possibly a commission) as a result of the contract. If one of these exceptions is met, then it turns on the factual analysis of each case.
While is certain though, is that one broker involved in a transaction, as a nonsignatory to the contract may not enforce the mediation/arbitration provision against another broker who is also a nonsignatory to the contract. California courts, nonetheless, regularly enforce mediation/arbitration provisions against nonsignatories when sought by a signatory. In doing so, the facts must warrant such a decision and it is limited to the situations where the party (agent/broker) had a relationship that predated the contract or was a beneficiary of the contract.
Determining when parties are obligated to mediate or arbitrate can be difficult, especially when it involves parties that did not sign the contract. Each situation should be examined and investigated on its own merits. Should you find yourself in a situation wondering if you are required to mediate/arbitrate or who may be compelled to do such, seek competent legal assistance to help determine the rights and obligations of the parties. The attorneys at BPE Law Group have significant experience when it comes to mediation and arbitration under the CAR Forms and can assist you on how these provisions are applied.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.