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A California court has considered when the 180-day filing deadline for an arbitration begins tolling.
On May 11, 2005, real estate licensees Brook and Mark Luter (collectively, “Salespeople”) terminated their relationship with their broker, L. Stroope, Inc. (“Brokerage”) when the Brokerage left the Bakersfield Association of REALTORS® (“Association”) Multiple Listing Service in order to join a short-lived entity named the Bakersfield Listing Service (“BLS”). When the Salespeople left, they had approximately 20 transactions proceeding to closing.
The Salespeople informed the Brokerage that they expected to receive their full commission for all of the pending transactions. The Brokerage sent the Salespeople a letter on June 9, 2005 (“Letter”), informing them that they would only receive a 50 percent commission, pursuant to a clause in the agreement between the Brokerage and the Salespeople addressing commissions on departure from the firm.
In late December 2005, the Salespeople filed an arbitration request with the Association. The Association had difficulty convening a panel of Association members to hear the arbitration, as the Brokerage was involved in litigation with the Association over the formation of the BLS and so the Brokerage believed that it could not get a fair hearing at the Association. Eventually, the Association transferred the arbitration to another REALTOR® association.
Following the transfer of the arbitration, the Brokerage filed a lawsuit against the Salespeople, seeking damages in both contract and tort. The Brokerage claimed that the Salespeople had breached their fiduciary duty, misrepresented themselves, and unfairly competed with the Brokerage while associated with the Brokerage. The Salespeople filed a motion to compel arbitration. The trial court ruled that the Salespeople had failed to file their request for arbitration within the 180-day period required by NAR’s Code of Ethics and Arbitration Manual (“Manual”). The Salespeople appealed.
The California Court of Appeal, Fifth District, reversed the trial court and sent the matter to the REALTOR® arbitration process. The Broker claimed that the Letter put the Salespeople on notice that they an arbitrable claim, and the Salespeople waived their right to arbitration by failing to file a request for arbitration within 180-days after receiving the letter. The Salespeople argued that the 180-day trigger didn’t start until the transactions at issue had closed, meaning that most of the approximately 20 transactions would be subject to arbitration.
The court looked at the Manual (note: while the Association used a manual prepared by the California Association of REALTORS®, the language at issue here mirrors the language used in the NAR manual). The Manual states that “[r]equests for arbitration must be filed within one hundred eighty (180) days after the closing of the transaction, if any, or within one hundred eighty (180) days after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence, whichever is later.”
Looking at the Manual’s language, the court found that it was the later of the two possible events which would trigger the arbitration filing period requirements. Therefore, even if the Letter did put the Salespeople on notice that they might have an arbitrable dispute with the Brokerage, the Salespeople did not have to file the arbitration request until 180-days after each transaction’s closing because that was also an arbitration trigger and was the later of the two triggers. The court sent the case back to the trial court so that the court could send to arbitration all transactions which closed within the 180-day period prior to the Salespeople’s arbitration filing.
L. Stroope, Inc. v. Luter, No. F051088, 2007 WL 3015456 (Cal. Ct. App. Oct. 17, 2007). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].