The Five E's of Due Process
By William D. North, Past Senior Vice President and General Counsel, NATIONAL ASSOCIATION OF REALTORS®
This article appeared in The Executive Officer, Vol. 21/5, October 1984, pp. 15–19.
The Code of Ethics, which every Board of REALTORS® is bound to enforce and every REALTOR® is bound to observe, requires the creation and enforcement of what amounts to a private judicial system. This system is not intended or designed to replace the federal and state judiciary. Nor could it do so, lacking as it does the imprimatur and coercive power of government.
Rather, the judicial system contemplated by the Code of Ethics is intended to complement and supplement the judicial resources of the state and provide an alternative means of dispute resolution that is cheaper, swifter, and as fair, or, perhaps, even fairer. It is also intended to provide a means of applying the standards of professional performance that REALTORS® have imposed on themselves through the Code.
The Private Forum Concept
The concept of a private forum for dispute resolution is by no means alien to or inconsistent with sound principles of jurisprudence. On the contrary, much of modern commercial law has evolved from the rules, customs, and usages developed and applied by business and professional associations through the “law merchant” as far back as the medieval guilds.
Since the earliest days, the special needs of commerce for efficient, inexpensive, equitable ways to decide controversies arising out of the course of business or professional transactions have been recognized. The very nature of commerce, involving as it does complex undertakings and understandings, dealings with multiple parties often at a distance, and promises of future or contingent performance, must inevitably generate controversy in proportion to the level of business activity. Likewise, the widespread reliance on professional and business customs, usage, and course of dealing to determine the terms and conditions of a transaction or relationship has encouraged reference of disputes to those familiar with such custom, usage, and dealing.
There are, of course, many trade and professional organizations that have established codes of ethics and professional standards to guide the conduct of their constituency and to assure its consistency with the public interest. Such organizations have uniformly created mechanisms for the administration and enforcement of these codes and standards in the form of grievance and peer review committees.
The Significance of Arbitration
The NATIONAL ASSOCIATION OF REALTORS®, however, has gone further than any other major business or professional association in its dispute resolution effort. It has incorporated into its Code of Ethics not only the obligation to abide by the highest and best standards of professional performance and responsibility, but also the obligation to arbitrate, as opposed to litigate disputes with fellow REALTORS® and with the public.
The significance of the REALTORS® obligation to arbitrate cannot be overestimated. It provides assurance that REALTORS® vis-à-vis each other and the public will have the capacity to assert or defend their rights. It forecloses the leverage of a deep-pocket approach to dispute resolution that forever subordinates justice to the economics of litigation. It prevents REALTORS® and their business claims from being held hostage to an overcrowded docket, and overworked judge, or a dilatory lawyer.
But the REALTOR®’s obligation to arbitrate also assures a decision reflecting an understanding and knowledge of the real estate marketplace. Too often the tactics of trial in a court of law involve an attempt to confuse the trier of fact, be it judge or jury. Established practice is misconstrued, known custom and expectation is obscured, and professional usage is obfuscated in an effort to induce error or bias. These tactics must fail, however, when the trier of fact, a panel of REALTORS®, is sophisticated in and sensitive to the realities and relationships of the real estate business.
It is the assurance that disputes will be arbitrated rather than litigated that is the foundation of the inter-REALTOR® cooperation. In turn, it is this cooperation that is the foundation of multiple listing, referral, and other agency and information exchange relationships. Arbitration is the REALTOR®'s guarantee against the exploitation of his or her commitment to cooperation by those who would use the law’s delays and costs to frustrate justice.
But, as important as arbitration is as a dispute resolution mechanism, the ethics proceeding is equally important in resolving dispute involving whether or not a REALTOR® has fulfilled his responsibilities to his profession.
The ethics proceeding may arise from the same facts that give rise to an arbitration but involve the vindication of an entirely different set of interests; in the case of arbitration, the interests of the parties to the transaction in dispute; in the case of ethics, the interests of the Association in the protection of the public trust, confidence, and reliance that it has placed in REALTORS®.
The Reciprocal Obligation
But, the obligation imposed upon REALTORS® to subject themselves to the jurisdiction of this private judicial system imposes a corresponding and reciprocal obligation on the system itself. That obligation is to function in a manner that assures “due process.”
The obligation to assure “due process” in the resolution of disputes is a strict one, allowing no deviation or departure. The right of a private judicial system to function is conditioned by the law on its unequivocal commitment to due process and its capacity to fulfill that commitment. Courts do not surrender their jurisdiction to resolve controversies, even by agreement of the parties, unless it can be demonstrated on an ongoing basis that the tribunals to function in their stead are capable of providing an equivalent or superior “fairness,” or, as it is more technically described in the law, “due process.”
The Five Elements of “Due Process”
In assessing whether this demonstration has been or can be made, the courts look to the five elements, which, over the centuries of judicial experience, have come to be recognized as the sine qua non of “due process.”
- Equality. The system must not discriminate procedurally between parties. If one party is entitled to counsel, then all are entitled. If notice is provided one, it must be provided for all. The essential requirement for Equality is that the system provide a “level playing field" for the disputants. Discrimination in appearance or fact is an anathema to the Equality required to satisfy due process.
- Economy. The cost of access to the system must not be a barrier to its use or operate to the disadvantage of one or the other parties. This means that grievance and arbitration proceedings should not be made a Board profit center and, in fact, may have to become subsidized to assure open access.
- Expedition. As “justice delayed is frequently justice denied,” there is an affirmative obligation on the part of the system to expedite ethics and arbitration proceedings. This does not foreclose orderly procedure with adequate time to ensure notice, time to prepare, opportunity to identify and gather witnesses, and otherwise develop facts and arguments. It does, however, foreclose dilatory tactics, unreasonable extension of time, and protraction of hearings.
- Evidence. The system must be designed and function to elicit evidence, not assumptions; proof, not presumptions. While strict rules of evidence in the judicial sense do not apply, there must be control of what is admitted as relevant and judgment as to what is mere speculation and hearsay designed to prejudice rather than inform.
- Equity. The system must produce decisions that reflect a sense and substance of “rightness” and “reasonableness.” In matters involving unethical conduct, the punishment should fit the offense. The judgment should reflect consideration of extenuating circumstances and a balancing of competing values and objectives. Moreover, the predictability, consistency, and uniformity of the system’s performance is an important measure of Equity.
Every Board may expect every decision it renders as a result of a grievance or arbitration proceeding to be evaluated by the Courts under the five E’s – Equality, Economy, Expedition, Evidence and Equity – to determine if it satisfies due process. The Board has no power or capacity to constitute itself a “court of last resort.” But, if a Board can satisfy a court that its decision has satisfied the five E’s, the court will let the decision on the merits stand.
It is this ultimate right which courts of law reserve to review the decisions of private judicial systems that foreclose Boards of REALTORS® from any form of interference with or any effort to inhibit the exercise of that right. Thus, a Board may not, even in an arbitration matter, foreclose a REALTOR® who believes he has been denied due process in the course of a hearing or arbitration from seeking judicial review. Notwithstanding the obligation to arbitration and to abide by the award in arbitration imposed by Article 14 of the Code, no REALTOR® should be held to have violated the Code by insisting on judicial review. Sanctioning a member for seeking judicial review of a Board decision would be perceived, beyond question, as an effort to oust the jurisdiction of the courts to deny the protection of the law, and as an irresponsible and unreasonable exercise of Association power.
An Awesome Responsibility
REALTORS® have elected to be their own judge. But, in making that election, they have committed their judgments to be judged. The enforcement of the Code of Ethics is an awesome responsibility.
To vindicate the Code of Ethics, it is first necessary to vindicate the integrity of the process that is the due of every REALTOR®.