Part 4, Appendix IV — Rationale of Declaratory Relief Procedure
Central to the enforcement of the Code of Ethics is Part Four, Section 25, Preliminary Judicial Determination Prior to Imposition of Discipline, which provides:
If the Board of Directors has reason to believe that the imposition of a proposed sanction will become the basis of litigation and a claim for damages, it may specify that the discipline shall become effective upon entry of the final judgment of a court of competent jurisdiction in a suit by the Board for declaratory relief declaring that the discipline proposed violates no rights of the member.
The purpose of the declaratory relief procedure is to avoid, or at least minimize to the maximum extent possible, the risk that the Board or its members may be legally liable in damages as a result of their enforcement of the Code of Ethics.
Boards of REALTORS® are not courts of law, and REALTORS® are not members of the judiciary. However well-advised they may be by Board counsel, the requirements of substantive law or of procedural due process are often complex and difficult to perceive fully and to apply correctly. Moreover, in many states, Boards are without many of the powers and mechanisms which are available to courts of law, i.e., subpoena and other powers of discovery, etc., to aid in the identification and protection of legal rights.
The great value of seeking confirmation of decisions involving enforcement of the Code of Ethics, where the disciplined member does not appear to accept the decision, is that such confirmation permits the correction of any violations of law or procedure before such violations can cause injury and hence liability. This means, in turn, that the controversy will have little interest to the “contingent fee” attorney. It further means that the Board is on record with the court as having “clean hands;” that is, as seeking to do justice and construe its policies and rules in accordance with the law.
There is one principle all Boards must respect: the Code of Ethics must be construed and enforced, at all times, in a manner consistent with the requirements of law and due process. While the Code exacts a standard of performance from REALTORS® which goes beyond the law, the Code does not place the REALTOR® or the Board above the law.
Needless to say, in any instance in which a declaratory judgment is sought, the implementation of discipline should be stayed until final judgment is rendered confirming its propriety.
Procedures for securing declaratory judgments of the type contemplated by Part Four, Section 25 will vary from state to state. For this reason, each State Association, working with its counsel, will want to develop, to the extent possible, detailed information as to how such proceedings may be instituted by Board counsel. These procedures should be periodically reviewed at meetings of Board attorneys and standard forms of pleadings developed wherever possible. Although no petition for declaratory relief should be prepared except by the Board's legal counsel, a sample outline of content for a petition for declaratory relief may be found in Form #E-18.
Moreover, whenever a declaratory judgment proceeding is contemplated by a Board, it is recommended that a copy of the complaint be submitted to the State Association prior to filing. The purpose of such submission is threefold: first, to permit the State Association to acquaint the Board with any other relevant precedents; second, to advise the Board of any problems perceived in the complaint or issues presented; and third, to acquaint the State Association, and through it the NATIONAL ASSOCIATION OF REALTORS®, with controversies involving issues having state or national implications and requiring state or national involvement.
While not without cost, the declaratory judgment procedure is nevertheless an economical form of litigation. By its very nature, it should avoid the usual heavy litigation costs of defending the issues of “damages”. By concerning itself with issues of law, it avoids the significant legal costs normally involved in arguing factual issues. Moreover, the procedure tends to avoid the polarization of the parties and the antagonism which attends litigation when a sanction has been imposed.
It has been said that the declaratory judgment proceeding is unsatisfactory because it delays the imposition of discipline, frustrates the consensus of the Board, and involves the Board in unnecessary litigation and costs.
There is a single answer to this complaint, and it is a complete one.
Any action taken by the Board which cannot survive a declaratory judgment proceeding would certainly subject the Board and its members to legal liability. Avoiding this liability is well worth the minimal delays and costs represented by the declaratory judgment proceeding. To the extent it frustrates the consensus of the Board, such consensus must be, and should be, frustrated, since it necessarily violates the law.
In a time of shifting social, economic, and political values, of uncertain legal precedents, and of arbitrarily escalated legal liability, the declaratory judgment procedure represents nothing more nor less than the legal implementation of the worthy maxim “Better safe than sorry.”