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Jorgensen Realty v. Box: Court Upholds Board's Award in Arbitration of Inter-Member Dispute

In Jorgensen Realty, Inc. v. Box, Jorgensen Realty appealed an order confirming a Board arbitration award. The Colorado Court of Appeals affirmed that the Board had legally arbitrated an inter-member dispute.

Jorgensen, Box, McClintock, and The Frederick R. Ross Investment Co. (FRIC) were members of the Colorado Association of REALTORS® (CAR). A commission dispute arose between Jorgensen and the other parties, and Jorgensen filed a Request for Arbitration with CAR. Shortly thereafter, the chairman of CAR's Professional Standards Committee informed Jorgensen that the dispute was not accepted for arbitration and that he was free to pursue other remedies. Jorgensen subsequently sued to recover the commission. Nearly three weeks later, CAR notified Jorgensen and the others of their right to appeal the refusal to arbitrate. Box, McClintock, and FRIC pursued the CAR appeals process, and CAR concluded that the matter was now subject to arbitration.

Jorgensen requested an evidentiary hearing in the trial court, claiming that CAR's decision to arbitrate was unwise and uncertain. The court denied that request. Instead, ordered the parties to submit to arbitration, and stayed further court proceedings pending arbitration. The arbitration panel decided in favor of Box, McClintock, and FRIC. These parties sought a court order to confirm the award. The trial court confirmed the award, denied Jorgensen's request to vacate, and dismissed Jorgensen's lawsuit. Jorgensen appealed, arguing that by initially deciding not to arbitrate, CAR waived its jurisdiction over the matter and, in turn, released it from any obligation to submit the dispute to arbitration. Jorgensen also contended that the trial court erred in failing to conduct an evidentiary hearing regarding the circumstances surrounding CAR's declaration and application of its appeals rules.

With respect to Jorgensen's first contention, the Colorado Court of Appeals cited case law and reasoned that the relationship between a voluntary association and its members was a contractual one and that, by joining such an organization, members agreed to abide by the rules and regulations, and assumed the obligations incident to membership. (See Savoca Masonry Co. v. Homes & Son Construction Co., 112 Ariz. 392, 542 P.2d 817 (1975); California Dental Assoc. v. American Dental Assoc., 23 Cal. 3d 346, 590 P.2d 401, 152 Cal. Rptr. 546 (1979); Appeal of Two Crow Ranch, 159 Mont. 16, 494 P.2d 915 (1972)).

The Colorado Court of Appeals stated that by becoming a member of CAR, Jorgensen agreed to be bound by its rules and regulations, specifically those set forth in the Code of Ethics and Arbitration Manual. The manual gave CAR authority to determine whether it would accept a dispute for arbitration and also provided that such determination was subject to approval by the Board of Directors, which may delegate such authority to an appeals panel. The court held that CAR's actions did not constitute a waiver or release from the obligation to arbitrate the dispute.

With respect to Jorgensen's second argument, the Colorado Court of Appeals cited case law and held that in the absence of some clearly irrational and unreasonable invasion of a member's rights, courts will not review the internal operation and affairs of voluntary organizations. (See Board of Regents v. Nat'l Collegiate Athletics Assoc., 561 P.2d 499 (Okla. 1977); Bonneville Properties, Inc. v. Simons, 677 P.2d 1111 (Utah 1984)). Jorgensen did not allege or demonstrate any harm or invasion of its rights resulting from the establishment of an appellate procedure within CAR, or by the arbitration proceeding which Jorgensen itself had requested. In light of that, the court of appeals held that the trial court did not err in denying Jorgensen's request for an evidentiary hearing. For all of these reasons, the court of appeals affirmed the decision.

Jorgensen Realty, Inc. v. Box, 701 P.2d 1256 (Colo. Ct. App. 1985).