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Island Realty v. Van Dyk Group


April 7, 2008


On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-3289-05.

Per curiam.


Argued December 19, 2007

Before Judges Lisa and Simonelli.

Defendants Van Dyk Group, Inc. and Jeff Gamble (collectively Van Dyk) appeal from the September 26, 2006 order vacating an arbitration award and denying their motion to confirm the award and for reasonable attorney's fees. We reverse and remand for entry of an order consistent with this opinion.


The facts are straightforward. Plaintiff Island Realty and Van Dyk are members of the Ocean County Board of REALTORS(r) (the Board) and the National Association of REALTORS(r) (NAR). Greg Gaske contacted Van Dyk and Island Realty about purchasing a home in the Long Beach Island area.*fn1 On March 5, 2005, Van Dyk's agent, Janet Frank, showed Gaske property located at 140 Catherine Lane, Manahawkin (the Property), which was listed through the sellers' realtor, G. Anderson Agency (Anderson), at a price of $629,999. Gaske instructed Frank to make an offer of $550,000. Frank presented a verbal offer in that amount to Anderson on March 7, 2005, and a written offer on March 8, 2005.

After further negotiations, the sellers reduced the price to $615,000. However, Gaske would not offer more than $585,000. As a result, negotiations ended on March 10, 2005, and Frank made an appointment with Gaske for March 12, 2005, to show Gaske other properties.

Gaske did not meet with Frank on March 12, 2005. Instead, he met with Island Realty's agent, John Hubert, who took Gaske to see the Property. Hubert admitted that before showing Gaske the Property, Gaske said he had already seen it. Hubert was "taken aback," "a little bit hurt," and it was "a little bit disappointing for [him] to hear" that Gaske had contacted another realtor. However, instead of referring Gaske back to the other realtor, Hubert showed Gaske the Property and told Gaske it was up to Gaske as to how he wanted to proceed. Gaske asked Hubert what he thought the Property was worth, and Hubert responded, "at least $600,000." Gaske then made a cash offer in that amount, which the sellers rejected. Gaske then offered $615,000, which the sellers accepted. This was the same price Frank had negotiated.

Gaske entered into a contract of sale, which provided for payment of a two-percent commission to Island Realty and two percent to Anderson. On or about March 21, 2005, Van Dyk discovered that Gaske had signed the contract for $615,000, and Island Realty, not Van Dyk, was listed as Gaske's agent, entitling Island Realty to the two-percent commission. Van Dyk filed a complaint with the Board asserting entitlement to Island Realty's commission.

As members of the Board and NAR, Island Realty and Van Dyk agreed to resolve real estate related disputes through binding arbitration, utilizing the Board's Bylaws and the NAR's Code of Ethics and Standards of Practice and Arbitration Manual of the NAR (Code of Ethics). On July 15, 2005, Van Dyk and Island Realty executed a Response and Agreement to Arbitrate, consenting to arbitration through the Board in accordance with the Code of Ethics. The parties also agreed to "abide by the arbitration award and to comply with it promptly." The parties further agreed as follows:

In the event I do not comply with the arbitration award and it is necessary for any party to this arbitration to obtain judicial confirmation and enforcement of the arbitration award against me, I agree to pay the party obtaining such confirmation the costs and reasonable attorney's fees incurred in obtaining such confirmation and enforcement.

The Board appointed three disinterested arbitrators to conduct the arbitration and determine which realtor was the "procuring cause" of the sale, utilizing the procedures and provisions set forth in the Bylaws and Code of Ethics.

According to the Code of Ethics, the arbitrators' decision "as to procuring cause shall be conclusive with respect to all current or subsequent claims of the parties for compensation arising out of the underlying cooperative transaction."

At the beginning of the arbitration, the arbitrators made clear they were acting in accordance with the Bylaws and Code of Ethics. After hearing all of the testimony, the arbitrators determined Van Dyk was the "procuring cause" of the sale, and issued a written award ordering Island Realty to pay Van Dyk the $12,300 commission.*fn2 Island Realty did not comply with the arbitration award. Instead, it filed a complaint in lieu of prerogative writs.

Van Dyk filed a motion to confirm the arbitration award and for attorney's fees and costs. Although Island Realty did not file a formal cross-motion to vacate the award, the motion judge treated its opposition as a cross-motion and granted it, denied Van Dyk's motion, and vacated the award. This appeal followed.


Van Dyk contends the judge exceeded his authority by weighing the facts and substituting his judgment for that of the arbitrators on the issue of "procuring cause." We agree.

The arbitration was governed by New Jersey's version of the Uniform Arbitration Act, N.J.S.A. 2A:23B-1 to -32. As such, the award could only be vacated for the following reasons:

(1) the award was procured by corruption, fraud, or other undue means;

(2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to section 15 of this act, so as to substantially prejudice the rights of a party to the arbitration proceeding;

(4) an arbitrator exceeded the arbitrator's powers;

(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection pursuant to subsection c. of section 15 of this act not later than the beginning of the arbitration hearing; or

(6) the arbitration was conducted without proper notice of the initiation of an arbitration as required in section 9 of this act so as to substantially prejudice the rights of a party to the arbitration proceeding. [N.J.S.A. 2A:23B-23a(1) to (6).]

Island Realty admitted that (1) the arbitration hearing was conducted on proper notice to the parties; (2) the award in favor of Van Dyk was not procured by corruption, fraud or other undue means; (3) no arbitrator exceeded his powers during the hearing or in entering the award; and (4) the award was not procured by corruption, fraud, or similar wrongdoings. Island Realty's sole argument was that the arbitrators' decision was contrary to New Jersey law on the issue of "procuring cause."

Despite Island Realty's admissions, the judge determined that the award was procured by "undue means," N.J.S.A. 2A:23B-23a(1), and the arbitrators exceeded their powers, N.J.S.A. 2A:23B-23a(4). The judge reasoned that the Code of Ethics contained a provision that New Jersey law would apply, that where there was a conflict between the two, New Jersey law must apply, and that the arbitrators made a mistake of New Jersey law in determining "procuring cause." This was error.

Arbitration is a favored remedy, the essential purpose of which is "to offer a swift and efficient alternative to traditional litigation[.]" Kimm v. Blisset, LLC, 388 N.J. Super. 14, 30 (App. Div. 2006), certif. denied, 189 N.J. 428 (2007). "[A]rbitration . . . is, at its heart, a creature of contract." Id. at 25 (citations omitted). "[O]n private agreements to arbitrate, 'state contract-law-principles generally govern a determination whether a valid agreement to arbitrate exists.'" Ibid. (citing Hojnowski v. Vans Skate Park, 187 N.J. 323, 342 (2006)). However, "'the duty to arbitrate, and the scope of the arbitration, are dependent solely upon the parties' agreement.'" Ibid. (quoting Singer v. Commodities Corp. (U.S.A.), 292 N.J. Super. 391, 402 (App. Div. 1996)), (emphasis added).

Here, the Code of Ethics is the parties' "agreement." It required the arbitrators to strictly follow New Jersey law only as to the "procedures by which arbitration requests are received, hearings are conducted, and awards are made[,]" which the arbitrators followed. However, in determining "procuring cause," the Code of Ethics distinguishes between a dispute between a seller and listing broker and a dispute between listing and cooperating brokers. The former is "often decided in court[,]" and "[t]he reasoning relied on by the courts in resolving such claims is articulated in Black's Law Dictionary, Fifth Ed., definition of procuring cause." The latter is governed by the Code of Ethics, not the courts. Thus, the dispute here is governed by a provision in the Code of Ethics entitled, "Procuring Cause." This provision acknowledges that the arbitrators may be "guided" by the court's definition of "procuring cause," but it does not require strict compliance with New Jersey law. Rather, the provision specifically provides as follows:

While guidance can be taken from judicial determinations of disputes between sellers and listing brokers, procuring cause disputes between listing and cooperating brokers, or between two cooperating brokers, can be resolved based on similar though not identical principles. While a number of definitions of procuring cause exist, and a myriad of factors may ultimately enter into any determination of procuring cause, for purposes of arbitration conducted by Boards and Association of REALTORS(r), procuring cause in broker to broker disputes can be readily understood as the uninterrupted series of causal events which results in the successful transaction. Or, in other words, what "caused" the successful transaction to come about. "Successful transaction," as used in these Arbitration Guidelines, is defined as "a sale that closes or a lease that is executed." Many REALTORS(r), Executive Officers, lawyers, and others have tried, albeit unsuccessfully, to develop a single, comprehensive template that could be used in all procuring cause disputes to determine entitlement to the sought-after award without need for a comprehensive analysis of all relevant details of the underlying transaction. Such efforts, while well-intentioned, were doomed to failure in view of the fact that there is no "typical" real estate transaction any more than there is "typical" real estate or a "typical" REALTOR(r).

In determining "what caused the successful transaction to come about," the Code of Ethics lists numerous factors the arbitrators may consider, the purpose of which "is to guide [them] as to facts, issues, and relevant questions that may aid them in reaching fair, equitable, and reasoned decisions." Among the factors are the nature and status of the transaction, the roles and relationships of the parties, the initial contact with the buyer (i.e., who first introduced the property to the buyer), the conduct of the broker and buyer, and the continuity and breaks in continuity of the broker-buyer relationship. Based upon these factors, the arbitrators determined that Van Dyk "caused the successful transaction to come about."

"'Arbitrators decide both the facts and the law,' . . . and the determinations of arbitrators are given collateral estoppel effect by reviewing courts." Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179, 187 (1981) (citing Ukrainian Nat'l Urban Renewal Corp. v. Joseph L. Muscarelle, Inc., 151 N.J. Super. 386, 398 (App. Div.), certif. denied, 75 N.J. 529 (1977)). "An arbitrator's factual determinations concerning the merits of [a] dispute submitted to him are not reviewable by the court. . . ." Ukrainian, supra, 151 N.J. Super. at 396. Thus, the scope of judicial review of an arbitration award is a limited one. Barcon, supra, 86 N.J. at 187; Block v. Plosia, 390 N.J. Super. 543, 552 (App. Div. 2007). Arbitration awards are final and not subject to judicial review absent fraud, corruption or similar wrongdoing, and a private sector arbitration award may not be vacated to correct errors of law or fact made by the arbitrators. Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 357 (1994) (quoting Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 519 (1992), rev'd o.g., 158 N.J. 392 (1999)); Selective Ins. Co. v. Nat'l Cont'l Ins. Co., 385 N.J. Super. 62, 67 (App. Div.) (quoting Tretina, supra, 135 N.J. at 357-58), certif. denied, 188 N.J. 218 (2006); David v. Gov't Employees Ins. Co., 360 N.J. Super. 127, 147 (App. Div.) (citing Allstate Ins. Co. v. Universal Underwriters Ins. Co., 330 N.J. Super. 628, 633 (App. Div. 2000)), certif. denied, 178 N.J. 251 (2003); Empire Fire and Marine Ins. Co. v. GSA Ins. Co., 354 N.J. Super. 415, 421 (App. Div. 2002) (citing Tretina, supra, 135 N.J. at 357-58).

Applying these principles, and the mandate in the Code of Ethics that the arbitrator's decision as to "procuring cause" shall be "conclusive," we conclude the trial judge erred in vacating the arbitration award based upon a mistake of law. Thus we reverse and remand for confirmation of the award, and for a determination of an award of costs and reasonable attorney's fees to Van Dyk.

Reversed and remanded.

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