Court Opinion

ID: 9797663
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:27:02.703858+00
Date Added: 2024-06-11T08:57:44.558112
License: Public Domain

Justice COATS,
dissenting.
In its search for a statutorily cognizable arbitration agreement, the majority conflates two distinct doctrines to impute a new term of contract from the parties' membership in a common voluntary association. Despite its characterization of this new doctrine of imputed promises as limited in seope, today's holding cannot help but further erode the independence of parties to fix the terms of their own contracts and the ability of voluntary associations to control their internal operations without undue interference by the courts. Because I consider this imposition of unintended terms to be both unwarranted and likely to work substantial mischief, I respectfully dissent.
In 1975, Colorado enacted a version of the Uniform Arbitration Act, attaching specific legal consequences to agreements between disputing parties to arbitrate their disputes. See "Uniform Arbitration Act of 1975," §§ 13-22-2011 to -228, C.R.S. (2008) (adopting Unif, Arbitration Act, 1956 Act §§ 125, 7 U.L.A. 95, 95-768 (2005). We have previously interpreted the arbitration act to limit enforceable arbitration agreements, from which these legal consequences flow, to agreements satisfying the elements of a contract between the disputing parties. Seq, eg., Hughley v. Rocky Mountain Health Maint. Org., Inc., 927 P.2d 1325, 1330 (Colo.1996). Although the majority refers to the language of the 2004 revision of the Act, see Uniform Arbitration Act §§ 18-22-2011 to 229, C.R.S. (2006) (adopting Unif. Arbitration Act (2000) §§ 18-3, T7ULA. 1, 10-94 (2005) ),1 it clearly limits "agreements to arbitrate," within the meaning of the statute, to contractual obligations. See, eg., maj. op. at 677-78, 679 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 128 S.Ct. 588, 154 L.Ed.2d 491 (2002)).2
Although it seems clear that the district court had no such intention when it ordered the parties to submit to arbitration pursuant to the rules of the Denver Metropolitan Commercial Association of REALTORS (DMCAR), the majority essentially frames the issue of this original proceeding as whether membership in the association necessarily implies a condition of all future referral contracts between members, amounting to an "agreement to arbitrate" within the meaning of the statute. In its quest for a rationale to elevate the association's arbitration requirement to the level of a contractual obligation of each member to the others, the majority intuitively merges two different contract theories, neither one of which is quite applicable or equal to the task. On the one hand, it treats the subsequent referral agreement of the parties as the contract at issue and looks to law governing implied conditions for support. And on the other, it looks for support in case law treating membership in a voluntary association as a contract between the association and its members and the *685rules and bylaws of the association as binding on the members.
With regard to the former, the agreement to arbitrate imputed by the majority to the referral contract can hardly be described as a condition of performance at all. It is clearly a separate promise or term in its own right. See 13 Richard A. Lord, Williston on Contracts § 88:5 (4th ed. 2000) ("A promise is a manifestation of an intention to act ... in a specified way ... while a condition is an event, not certain to occur, which must occur, unless its nonoceurrence is excused, before performance under a contract becomes due."). Furthermore, it is neither implied by the terms of the parties' referral agreement nor implied by extrinsic evidence of the actual intent of the parties.3 Instead, the majority imputes it, as a matter of law, from separate promises to the association to arbitrate disputes with fellow members.
While we have allowed that parties may be bound, under limited cireumstances, by custom or industry practice, at the same time we have held that the parties must not only have known of the custom but must have contracted with reference to it. See Garman v. Conoco, Inc., 886 P.2d 652, 660 (Colo.1994); cf. Fleming v. Gill, 60 Colo. 294, 297, 158 P. 88, 88-89 (1915) (refusing to alter specific commission agreement on basis of custom among Denver real estate brokers to divide commissions). In any event, these are matters of fact, ultimately subject to the intent of the parties to any particular contract. See Pittman v. Larson Distrib. Co., 724 P.2d 1379, 1884-85 (Colo.App.1986). The district court made no such factual determinations in this case, and for aught that appears in the allegations of the parties about their prior dealings or the terms of their cursory, e-mail referral agreement,4 there is little reason to believe such a promise was intended. Rather than look to the terms of the specific referral agreement and, if appropriate, the circumstances surrounding its formation, however, the majority creates a new rule of imputed promises, constructively finding a promise to arbitrate in subsequent contracts between members of a private association, the bylaws of which impose such a duty.
Sensing perhaps the novelty of this proposition, the majority offers, in reliance on our holding in BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 73 (Colo.2004), that "valid contractual duties can arise out of a network of agreements involving commercially sophisticated parties." Maj. op. at 681. In Dufficy we held only that the duty of care owed by the designing engineer for a Denver City construction project and its project inspector, to a sub-contractor contractually obliged to follow the engineer's plans and specifications, was defined by the interrelated project contracts, which therefore also limited the subcontractor's remedies for economic loss. The transformation of that proposition into a rule imputing to private contracts the bylaws of voluntary associations is not only unwarranted by anything in our opinion in Dufficy but dramatically alters settled law governing private associations. See Scott v. Lee, 208 Cal.App.2d 12, 24 Cal.Rptr. 824, 826 (1962) (finding that association rules failed to create a contract enforceable by one member against another); see also Savoca Masonry Co. v. Homes & Son Constr. Co., 112 Ariz. 892, 542 P.2d 817, 821 (1975) (relying on Scott); Coyle v. Morrisdale Coal Co., 284 F. 294, 295 (S.D.N.Y.1922) ("At common law it is the general rule that the members of an unineor-porated association may not sue at law one of their number on a contract between himself and them."); McMahon v. Rauhr, 47 N.Y. 67, 67 (1871) ("A member of a voluntary [association] ... cannot ... maintain an action at law, in behalf of the association, against another member upon any agreement made with the association.").
With regard to the majority's claim of support from settled law treating arbitration provisions of voluntary associations as bind*686ing on their members, I believe the majority similarly misperceives the import of those authorities. Ironically, the rule upon which the court of appeals relied in Jorgensen Realty, Inc. v. Box, 701 P.2d 1256 (Colo.App.1985)-that the relationship between a voluntary association and its members is a contractual one and, by joining such an organization, a member agrees to submit to its rules and regulations and assumes the obligations incident to membership-should have caused the district court to decline interference in association matters rather than finding a binding contractual agreement between association members. In Jorgensen, when faced with a member's challenge to a realtor asso-clation's resolution of an arbitration dispute according to its own Code of Ethics and Arbitration Manual, the court of appeals held that "[in the absence of clearly arbitrary and unreasonable invasion of a member's rights, courts will not review the internal operation and affairs of voluntary organizations." Id. at 1258.
While the contract model for explaining the relationship between voluntary associations and their members has not been without theoretical criticism, see, eg., Zechariah Chafee, The Internal Affairs of Associations Not for Profit, 48 Harv. L.Rev. 998, 1001-07 (1930); NAACP v. Golding, 342 Md. 663, 679 A.2d 554, 559-62 (1996), it has long been accepted by the courts, not as a basis for enforcing association rules against one member at the behest of another, but rather as a basis for deferring to the association's resolution of member-to-member disputes according to its own procedures. See Jorgensen Realty, Inc., 701 P.2d at 1258; see also Crane v. Ind. High Sch. Athletic Ass'n, 975 F.2d 1315, 1329 (7th Cir.1992) (Posner, J., dissenting) ("Hence [courts] will not enforce rights created by [an association's] rules, but only civil or political rights having their origin elsewhere."); Houston Oilers Inc. v. Harris County, Tex., 960 F.Supp. 1202, 1207 (S.D.Tex.1997) ("The principal reason courts ought not to intrude into internal operations of consensual associations is that participants have agreed to abide by their own informal mechanism for resolving disputes."); Lawson v. Hewel, 118 Cal. 618, 50 P. 7683, 764 (1897) (whether rules have been violated and appropriate penalty are "eminently fit for the association itself to determine"); Van Valkenburg v. Liberty Lodge No. 300 A.F. & A.M., 9 Neb.App. 782, 619 NW.2d 604, 607 (2000) ("Generally courts will not interfere with the internal affairs of an association to settle disputes between members or with regard to discipline or internal government, provided that the government of the association is administered fairly and in conformity with its laws and other applicable law and no property or civil rights have been violated.").
Of the six other jurisdictions noted by the majority as support for its rationale, three merely held, along with our court of appeals in Jorgensen, that the member-parties were bound to comply with their own association's bylaws. See Rogers Realty, Inc. v. Smith, 76 P.3d 71 (Okla.Civ.App.2008); King v. Larsen Realty, Inc., 121 Cal.App.3d 349, 175 Cal.Rptr. 226 (1981); Bastone v. Dial-A-House, Inc., 100 Misc.2d 1026, 420 N.Y.S.2d 467 (Sup.Ct.1979). Of the remaining three, one dealt with association bylaws that specifically incorporated state statutes, characterizing membership in the association as a statutory
agreement to arbitrate according to those statutes, see Van C. Argiris & Co. v. Pain/Wetzel & Assocs., Inc., 68 Ill.App.3d 993, 20 Ill.Dec 616, 380 N.E.2d 825 (1978), and the remaining two construed state statutes that significantly expanded the definition of an agreement to arbitrate beyond that included in the Uniform Arbitration Act. See Topolski v. Helena Ass'n of Realtors, Inc., 308 Mont. 224, 15 P.3d 414 (2000) (finding an agreement to arbitrate under Montana's statute, which had been modified from the uniform act to expressly include a written agreement between members of a professional organization to submit to arbitration controversies arising between members); Elbadramany v. Stanley, 490 So.2d 964 (Fla.Dist.App.1986) (finding an agreement to arbitrate under Florida's statute, which had been modified from the uniform act to include such things as inter-local agreements in which two or more parties agree to submit to arbitration controversies concerning water use permits applications). Whatever those courts might think about the issue pending before us today, their prior holdings concern*687ing their substantially different statutes hardly provide persuasive authority for us.
The difference between providing a statutory remedy for contractual agreements to arbitrate and deferring to resolution of member disputes by private associations is not without significance. While Lane might still be entitled to a remedy in the bylaws of the association, it is far from clear that such a remedy could include an order to submit to arbitration. See Denver Metro. Commercial Ass'n of REALTORS®, Bylaws, art. VI, § 2 (2004) ("Any REALTOR® Member ... may be reprimanded, fined, placed on probation, suspended, or expelled by the Board of Directors for a violation of these Bylaws. ..."); Nat'l Ass'n of REALTORS®, Code of Ethics and Arbitration Manual § 14 (2005) ("Disciplinary action may only consist of one or more of": written warning, written reprimand, requirement to re-take ethics class, fine not to exceed $5,000, probation, suspension, expulsion with possibility of reinstatement, or termination.). In any event, it appears from the record before us that Lane did not pursue any resolution by, or sanction from, the association, onee Urgitus and Calhoun refused to arbitrate and submitted their resignations. Neither did he seek court enforcement of any order of the association for violation of its own rules.5
In my view, the membership agreement and bylaws of the association amounted at most to a promise or agreement to enter into contractual agreements with other member-realtors to arbitrate disputes over their joint real estate contracts, which clearly did not occur in this case. By treating the membership application itself as a contractual obligation between members to comply with the constitution, bylaws, and rules of the association, affording contractual remedies to members for violations by other members, the majority stands the rule it seeks to follow on its head, endangering the deference traditionally shown to voluntary associations of all kinds.
For largely the same reasons, I can take little comfort in the third-party beneficiary theory of the special concurrence. A third-party beneficiary's right to enforce a contract cannot rise higher than the rights of the contracting party through whom he claims. See 13 Richard A. Lord, Williston on Contracts § 87:28 (4th ed.2000). If membership in a voluntary association merely constitutes an entitlement to, and agreement to be bound by, the association's resolution of internal matters and enforcement of its own rules, a fellow member can benefit from the membership contract of another no more than to have the association's rules enforced upon the offending member. If membership in the association does not constitute a statutory agreement to arbitrate at all, it cannot constitute an agreement to arbitrate benefiting a third party.
Admittedly, there is evidence in the comments added to the 2000 revision of the Uniform Arbitration Act that its drafters intended arbitration provisions contained in the bylaws of corporate or other associations to be enforceable arbitration agreements. See Unif. Arbitration Act (2000) § 6 emt. 1, 7 U.L.A. 28, 2824 (2005). Even if Colorado's later adoption of the 2000 revision applied to this case, however, the general assembly chose not to adopt those comments, in stark contrast to its choice in adopting other uniform acts. See, eg., Uniform Child-Custody Jurisdiction and Enforcement Act (UC-CJEA) §§ 14-18-101 to -4083, C.R.S. (2006). I have little doubt that the general assembly could create a statutory obligation to arbitrate flowing from membership in private associations if it chose to do so, but I do not consider such an obligation compatible with existing contract law.
Because I do not believe our current statute indicates such a legislative choice, and unlike the majority, I do not consider it the role of the courts to impute arbitration provisions of private associations to individual contracts between members, I respectfully dissent.

. Section 13-22-203, CRS. (2006), specifies that the new statute will apply only to agreements to arbitrate made on or after August 4, 2004, unless the parties otherwise agree, on the record. Since the parties do not agree that the arbitration statute applies at all, they clearly have not agreed to application of the 2004 Act.

. Even the revised version of the Act, to which the majority refers, continues to assign to the court the initial obligation of determining whether there is an "agreement to arbitrate" between the parties. See Unif, Arbitration Act (2000) § 6 cmt. 2, 7 U.L.A. 24 (2005) ("[Wlhether a dispute is encompassed by an agreement to arbitrate [is] for a court to decide and issues of procedural arbitrability, ie., whether prerequisites such as time limits, notices, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide."); cf. maj. op. at 674 n. 2.

. Such extrinsic evidence could certainly exist, but the district court issued its arbitration order without any findings of fact, conclusions of law, or for that matter, any explanation whatsoever.

. The only written evidence of any agreement between the parties, one that never mentions a REALTOR® association of any kind, consists of a two-line email from Urgitus to Lane stating, "Bob, Per our conversation CB Richard Ellis agrees to pay Lane Realty a referral fee of 20% on any deals going forward with John P. Weberg. Please call me with any questions. Thank you."

. Despite the resignations of Urgitus and Calhoun, the bylaws of the association purported to bind them to arbitrate disputes with other members arising while they were still members. See Bylaws art. VI § 5(a).