Yalnezian v. Glendale Ass’n of REALTORS®: Association’s Disciplinary Sanctions Upheld

A California appellate court has considered a member’s challenge to discipline imposed upon him by a REALTOR® association.

The Glendale Association of REALTORS® (“Association”) operated a multiple listing service (“MLS”). The MLS committee filed a complaint against one of its member firms, Right Home (“Brokerage”), alleging violations of the Code of Ethics, the MLS rules and regulations, and the Association’s bylaws for failing to specify in the MLS that one of the Brokerage’s listings was subject to a variable rate commission. The MLS committee had forwarded its complaint to the Association’s grievance committee after a member of that committee saw an advertisement for a property offered by the Brokerage which stated “”Buy Direct Price Discount” available if no other agent is involved”. The Brokerage had not indicated in its MLS data sheet that the listing was subject to a variable commission.

The Association conducted a hearing, after which the hearing panel (“Panel”) determined that the Brokerage had committed violations of the Code of Ethics and the MLS rules. The Panel recommended that a letter of reprimand should be placed in the Brokerage’s file for a year and a $500 fine imposed. The Brokerage filed an appeal of the Panel’s decision, but the findings of the Panel were upheld. The Brokerage then filed a lawsuit, seeking an administrative mandate to overturn the Association’s sanctions. The trial court ruled in favor of the Association, and the Brokerage appealed.

The Court of Appeal of the State of California, Second Appellate District, affirmed the ruling of the trial court. The court first looked at the standard of review used by courts to evaluate disciplinary proceedings conducted by a private association. The relevant law stated that judicial review of these proceedings is limited, and a court will only intervene in cases when the association’s decision is contrary to the rules of the association or the association’s bylaws. The association’s members are also entitled to a fair hearing.

The Brokerage’s first argument was that it did not receive adequate notice of the charges against it because the complaint did not contain specific factual allegations but instead only cited the rules the Brokerage had allegedly violated and attached a copy of the advertisment. The court looked at the complaint, and found that the complaint clearly set forth the various rules and regulations the Brokerage was accused of violating. In addition, the Brokerage received a hearing before the Panel and was allowed to develop its arguments in response to the allegations. The court also found that the Panel could have recommended much stronger discipline against the Brokerage for its conduct, and instead the panel had recommended a relatively mild sanction. Taken together, the court found that the Brokerage had adequate notice of the allegations made against it.

Next, the Brokerage argued that the Panel had been biased against it. One challenge was made to a member of the Panel who had asked that the Brokerage remove a testimonial she authored found on the Brokerage’s website. The Panel member testified that she had written the recommendation in 1992 when Brokerage had only been involved in mortgage financing, but she had requested removal of the recommendation when the Brokerage became a direct competitor of hers in the real estate brokerage market. The court found that the Panel member’s testimony was reasonable and not contradicted by any evidence. The Brokerage also argued that all members of the Panel were biased because they were direct competitors of the Brokerage. The court rejected this argument, stating it would be impossible for any private organization to discipline its members, since all members were likely competitors. Thus, the court rejected the bias claims.

Finally, the court considered the Brokerage’s argument that the penalty imposed upon it was excessive. In California, courts generally decline to substitute the judgment of the court for that of a private organization in an intra-organizational dispute and will only intercede when the interpretation of the rules by the private organization is unreasonable. The court reviewed the relevant rules and possible disciplinary sanctions contained within NAR’s Code of Ethics and Arbitration Manual. Since the Brokerage admitted it had not stated in the MLS listing that the property was subject to a variable commission and the Brokerage was responsible for the accuracy of the information it submitted to the MLS, the court found there was a sufficient basis for the Panel to find violations of the Code and MLS rules. The court also found that the limited discipline recommended by the Panel was not unreasonable. Therefore, the court rejected the Brokerage’s challenge to the Association’s discipline.

Yalnezian v. Glendale Ass’n of REALTORS®, NO. B172632, 2005 WL 2519330 (Cal. Ct. App. Oct 12, 2005) [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].

Editor’s Note: NAR Legal Affairs would like to thank Larry Lackman of The Law Offices of Lawrence H. Lackman for alerting us to this decision.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement