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Island Realty v. Van Dyk Group, Inc.

A-1407-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

BROKERS; ARBITRATION — Arbitration between real estate brokers belonging to a broker’s trade association can consider the association’s code of ethics because it constitutes an agreement that governs the association’s member’s activities.

A buyer who sought to purchase a house contacted two different real estate brokers. The buyer viewed a house with an agent from the first broker’s office and made an offer. The buyer and seller couldn’t agree on a price. A week later, the buyer viewed the same house with an agent from the second broker’s office. This time, the buyer and the seller agreed on a purchase price. It was the same price that the buyer offered when it viewed the house the first time. The contract listed the second broker as the buyer’s agent and as entitled to the commission. Both brokers were members of the same state and county brokers’ associations and agreed to arbitrate in accordance with the rules of the association. The arbitrators found that the first broker was the procuring cause, or facilitator, of the sale of the home. The second broker did not accept the arbitrators’ decision and sued the first broker. The lower court denied the first broker’s motion to confirm the award and vacated the arbitrators’ decision.

On appeal, the Appellate Division pointed out that there were limited circumstances under which an arbitration award can be vacated, such as for fraud or corruption, but that courts are not to review the factual determinations of the arbitrators. It also pointed out that the only argument made by the second broker was that the arbitrators were incorrect to apply the association’s standard regarding procuring cause instead of applying state law. The Court found that the arbitrators rightly based their decision on the county real estate brokers board’s code of ethics, which constituted an agreement that governed the association’s member’s activities. The Court also found that the arbitrators had appropriately weighed the facts regarding the nature of the transaction and the relationship between the parties. As a result, the Court found that the lower court incorrectly vacated the arbitrators’ decision. It then reversed the lower court’s vacation of the award to the first broker.

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