How to succeed in making a “Due Process” procedural challenge to a real estate board arbitration or ethics hearing.
Due process rules for real estate disputes involving Realtors are confusing. I don’t even believe, respectfully, that the local board arbitration and ethics panels understand fully what “due process is.” In fact, I was not even aware of all of the different types of due process requirements that were out there before I began writing this blog. So this blog will help provide you some general ideas and legal concepts for you to review either (a) pre-arbitration (so you can identify key violations when they surface at the hearing, and (b) post-arbitration reviews to see if you have the types of DUE PROCESS VIOLATIONS which could warrant a new hearing or a vacation of the arbitrator’s award. So let’s get going.
Rule 71 (from the C.A.R. arbitration and ethics manual) states:
Request for Procedural Review by the Directors
(a) Any party may file a written request for procedural review (Form A-15) by the Directors within twenty (20) calendar days after the hearing Panel’s award has been sent to the parties. The Association Executive may require the party requesting the review to supply the necessary number of copies of the request for review.
(b) A request for review must be accompanied by a deposit with the Association in the amount provided in the Association’s current schedule of fees.
(c) The only basis for a review of an arbitration award is a lack of due process in the processing or hearing of the arbitration. The request for review must clearly indicate the alleged procedural deficiencies that occurred and contain in reasonable detail a summary of the facts and evidence supporting the challenge.
Attorney Steve Tip: What this means is you have to be able to draft a brief that discusses all of the PROCEDURAL DIE PROCESS deficiencies that existed at the hearing. If you kept good notes, or obtained a copy of the audio tape at the end of the case, you should have a good idea of which one of the following may apply. So this list is more of a running list of possible challenges that may or may not apply in seeking to get a new hearing after an adverse award or decision.
What is a kangaroo Court?
Sometimes you will find you run into a local Realtor association “kangaroo court.” To me, this is sad when it happens, but sometimes you run into a lot of professional “pro standards” people who think they know everything about real estate law, and when they select a panel of arbitrators sometimes they pick persons who have no training, skill, appearance, or even any interest in resolving a commission dispute (keep in mind there is no pay or compensation for sitting on a arbitration or ethics panel). If you add in some ego and bias and an intent to decide in favor of one party over the other (before the hearing even starts), you have a perfect storm for running into a kangaroo court! These are tough panels to work with, but in my opinion, I think you have to try to take control of this type of panel early on and insist that you receive EACH AND EVERY ELEMENT OF DUE PROCESS SET FORTH ABOVE. You do this for a couple of reasons:
1. To make sure you get your day in Court
2. To get everything down on the record (both arbitration and ethics hearings will be tape recorded). You also have a right to bring your own court reporter. This should be done when it is clear and obvious the panel has an axe to grind.
3. You are preserving the record for appeal in case you lose and need to make a “due process” procedural challenge. If it is not on the record, it will be your word against theirs.
So dealing with what you might perceive to be a kangaroo court is a very tricky situation. This makes it all the more important to retain real estate counsel to assist you so that you can seek to obtain as fair as hearing as possible.
Top 5 problems that might arise when you have a “kangaroo court” in a real estate arbitration
Some of the problems that arise with these types of panels that are assembled are the following:
1. Bias controls the day (i.e. the panel starts cutting you off, and talking over you, and questioning YOU but not asking any questions of your adversary). Sometimes a panel member won’t even ask a question, indicating they are not at all interested in the commission dispute.
2. Witnesses are not called if its getting late in the day. We have had occasion where witness are brought, for example, to testify to procuring cause factors, advertising practices, etc., and given that the hearings can go late into the day, the panel members (who aren’t being paid) want to go home, and have already made up their minds. We are people after all, and yes we get this way sometimes. However, if you brought witnesses who are often times sworn in at the beginning of the hearing, these people should be allowed to talk and testify as part of due process guarantees. After all, they are sitting out in the hallway the whole day, so they should be heard. Sometimes the presiding panel chairperson will pressure you not to call your witnesses (while you are “off the record”), but you need to make clear what is going on once you are “back on the record.” Failure to do this can result in no one believing your version of events and we actually had one case where I was able to get a panel chairman to testify that he believed my Client “chickened out.” This could not have been further from the trust and was a blatant and obvious lie. These are the types of things people will do to cover their tracks when you take these disputes up to an arbitration review panel. Expect the unexpected.
3. Hearsay evidence is considered even though Court of law would not deem it reliable. In Realtor local board association arbitrations, most any type of evidence is admitted. The panel has wide latitude on what to accept as evidence. This has to be expected. But when completely unreliable “hearsay evidence” is admitted, you might at least want to point that out for the record. Hearsay evidence, in a nutshell is where Broker Bob testifies that Salesperson Susie told him he was in the right and Salesperson Susie is not in court to testify. The statement is thus not reliable and could be totally made up. Another problem is introducing “last minute” (ambush evidence). Point out the unfairness of these things on the tape recording.
4. Documents are not authenticated. In Courts, documents have to be “authenticated” before they can be admitted into evidence. In Realtor ethics and arbitration commission disputes, this is not required. Just bear in mind that some documents may not be deemed reliable, and when you see something you might want to say “this document is not what it purports to be.” It’s not authenticated and should be given very little evidentiary value. Again, the panel may tell you that you have no right to “object” at a hearing, but if you don’t object its hard to object at a later date. Note your opposition “for the record.”
5. Deliberation on a commission or ethics dispute can last 5-10 minutes. This can be evidence that there was no real deliberation or reviewing of evidence following a hearing. While this does not always indicate bias, it might be, especially if you have a 1-2 day hearing and the multiple exhibits admitted into evidence and there was no real deliberation. In addition, you need to make sure the panel members each sign their OWN names on the final award. We have seen situations where one panel member appears to have signed the final arbitration award for other panel members. This indicates SHODDY work and raises fair due process concerns.
These are some of the problems that you might find at a board arbitration hearing. When these “kangaroo courts” bounce all over your legal rights, this is a good time to hire a California real estate arbitration and ethics lawyer to review your case for the potential of appealing the case and this is done by being able to allege and prove procedural due process violations and deficiencies that resulted in the broker or salesperson not being able to get a fair hearing. Please note that this real estate blog is not trying to make the point that all arbitration panel members are bad people, there are a lot of very good and dedicated professionals that I have a lot of respect for, its just that in these “cozy” environments “groupthink” tends to predominate and you just have to make sure you get a full and fair opportunity to have your case heard by fair and neutral decision makers.
Recognized Due Process Challenges (procedural deficiencies) to an Arbitration or From the C.A.R. Arbitration manual #6.
This section of the manual notes that a lack of due process may cause a decision to be invalidated. The section provides that “a party to a hearing has the right to”:
(1) adequate notice of a complaint and response; (2) time to prepare a defense; (3) representation by legal counsel; (4) challenge of potential Panel members; (5) necessary continuances for good cause; (6) testify on his own behalf, call and cross-examine witnesses; (7) notification of the decision rendered.
The practice manual goes on to note”
“Due process does not, however, include an automatic right to a transcript of the proceeding. If a party wishes a transcript, he may pay for a copy of the Association’s official record of the hearing or, at his own expense, have a court reporter present. In this event, the party shall pay the court reporter and provide a copy of the transcript, if made, to the Association. Due process does not require tape recording of a hearing; N.A.R. policy, however, requires tape recording of a hearing as a service to the parties, not for legal reasons.”
So stay with me here, given the above, it looks like you have 7 separate due process rights for a arbitration hearing. I will continue to number these as you will see there are more due process rights than that (at least in my humble opinion).
Due Process According to National Association of Realtors (NAR)
The National Association of Realtors has their FIVE E’S of due process. I would add these as additional elements that you must ensure is provided to you. Here they are, I will continue to count these down, starting with number 8. Let’s take a look what NAR says:
The Five Elements of “Due Process”
According to NAR (or which each local Realtor Association is a part of):
“In assessing whether this demonstration has been or can be made, the courts look to the five elements, which, over the centuries of judicial experience, have come to be recognized as the sine qua non of “due process.”
- (8) Equality. The system must not discriminate procedurally between parties. If one party is entitled to counsel, then all are entitled. If notice is provided one, it must be provided for all. The essential requirement for Equality is that the system provide a “level playing field” for the disputants. Discrimination in appearance or fact is an anathema to the Equality required to satisfy due process.
- (9) Economy. The cost of access to the system must not be a barrier to its use or operate to the disadvantage of one or the other parties. This means that grievance and arbitration proceedings should not be made a Board profit center and, in fact, may have to become subsidized to assure open access.
- (10) Expedition. As “justice delayed is frequently justice denied,” there is an affirmative obligation on the part of the system to expedite ethics and arbitration proceedings. This does not foreclose orderly procedure with adequate time to ensure notice, time to prepare, opportunity to identify and gather witnesses, and otherwise develop facts and arguments. It does, however, foreclose dilatory tactics, unreasonable extension of time, and protraction of hearings.
- (11) Evidence. The system must be designed and function to elicit evidence, not assumptions; proof, not presumptions. While strict rules of evidence in the judicial sense do not apply, there must be control of what is admitted as relevant and judgment as to what is mere speculation and hearsay designed to prejudice rather than inform.
- (12) Equity. The system must produce decisions that reflect a sense and substance of “rightness” and “reasonableness.” In matters involving unethical conduct, the punishment should fit the offense. The judgment should reflect consideration of extenuating circumstances and a balancing of competing values and objectives. Moreover, the predictability, consistency, and uniformity of the system’s performance is an important measure of Equity.
N.A.R. concludes with:
“Every Board may expect every decision it renders as a result of a grievance or arbitration proceeding to be evaluated by the Courts under the five E’s – Equality, Economy, Expedition, Evidence and Equity – to determine if it satisfies due process. The Board has no power or capacity to constitute itself a “court of last resort.” But, if a Board can satisfy a court that its decision has satisfied the five E’s, the court will let the decision on the merits stand.”
As you can see, these elements open up a wide latitude for a due process challenge. In fact, the last association I presented at, the panel members did not even seem to be aware of the C.A.R. 5 E’s. Once I made it clear (and read the elements to them) my challenges were much better received, as they should have been. As I informed the review panel members and their attorney “these are the NAR rules of which this panel must follow and I am entitled to make my arguments for procedural due process violations consistent with these guidelines.” As you can probably tell, often times you need to FIGHT for your right to speak and FIGHT for justice. At any rate, now we are up to 12 due process things that can be discussed and raised in an ethics disciplinary hearing or local board association commission dispute. Yes, you do have rights.
N.A.R. ethics and arbitration manual comments on “due process” required at a hearing
The CAR manual (which local realtor associations must follow) also outlines proper “due process procedure” for Ethics hearings and states that “the hearing will proceed as follows”:
(13) Chairperson cites authority to hear case and explains reason for hearing.
(14) The complaint will be read into the record.
(15) The testimony of all parties and witnesses will be sworn or affirmed. All witness will be excused from the hearing except when testifying.
(16) Both parties are to receive an UNINTERRUPTED OPENING STATEMENT
(17) The broker raising the ethics dispute must layout the ethical violations (Article by Article) and explain how the respondent violated each section, AND ALSO explain how he or she did NOT violate any sections.
(18) Complainant presents evidence
(19) Respondent is afforded opportunity to cross-examine each witness after they testify
(20) Respondent must be allowed to present their evidence (documents and witnesses) to refute the allegations
(21) Complainant must have a chance to cross-examine witness and challenge evidence provided by the Respondent; and gets a final chance to offer additional evidence to rebut the defenses raised by the Respondent.
(22) Respodent gets one final chance to submit their evidence
(23) The Board must check to make sure there is no further evidence
(24) Uninterrupted closing statements must then be provided to both parties
(25) Final written decision is made and notice provided to both parties
Attorney Steve Tip: The arbitration hearing (ex. a procuring cause commission dispute) will not result in “findings of fact” or a “reason for decisions.” In other words, you won’t know why a decision was for or against a salesperson or broker. In ethics hearing cases, you will be entitled to a formal reason for the decision and recommended disciplinary guidelines (ex. fines, fees, etc.). Make sure to read our blog about Real Estate Mugshots if you lose a hearing.
As you can see, at my count I see at least 25 different grounds where “procedural” due process challenges can be made to a Realtor Board Arbitration (ex. commission dispute) or board ethics hearing for violations of NAR code of ethics. It is important to know your legal rights GOING IN to a hearing, and also AFTER THE HEARING where you will be informed by a member of the professional standards committee that “you can only challenge on due process grounds.” With the reading of this blog, I think you know have a better appreciation and understanding of this important and complex legal term of art.
Our Real Estate Arbitration and Ethics Legal Services
1. Filing ethics complaints (for violations of NAR code of ethics articles)
2. Responding to ethics complaints
3. Representation at Realtor Board hearings (ex. broker commission disputes)
4. Serving as your Ethics Advocate
5. C.A.R. mediation with ombudsman
6. CAR interboard arbitrations
7. CalBRE real estate investigations
8. Appealing ethics hearings or arbitration hearings on due process grounds
9. Real estate audits
10. State and Federal Court litigation
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