Court Opinion

ID: 9797662
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:27:02.701227+00
Date Added: 2024-06-11T08:57:44.556120
License: Public Domain

Justice EID,
specially concurring.
I agree with the majority that the trial court correctly ordered the parties to arbitrate their dispute, but I reach that result by taking a different route.
The majority finds the required "agreement to arbitrate," § 18-22-207(1), C.R.S. (2006), in the referral fee agreement between plaintiff Lane and defendants Urgitus and Calhoun. Maj. op. at 682. According to the majority, implied in that agreement is a term obligating the parties to arbitrate any dispute that might arise between them-a term that exists by virtue of their membership in a voluntary professional association that created a "duty to arbitrate" as a "condition of their membership agreements...." Id. at 680.
By contrast, in my view, the relevant "agreement[s] to arbitrate" are the express agreements between Urgitus and DMCAR and Calhoun and DMCAR (the "Membership Agreements"), which require Urgitus and Calhoun to submit any dispute over referral fees involving other DMCAR members to arbitration. As I explain below, Lane is a third-party beneficiary to the Membership Agreements, and as such he is entitled to enforce those agreements in order to compel Urgitus and Calhoun to arbitrate.
No one disputes the fact that both Urgitus and Calhoun entered into the Membership Agreements with DMCAR. In these agreements, Urgitus and Calhoun both committed to "arbitrate business disputes" with other DMCAR members "in accordance with the Code of Ethics and Arbitration Manual of the Board and the Constitutions, Bylaws, and Rules and Regulations" of DMCAR. Id. at 676. The Code of Ethics, in turn, makes clear that the duty to arbitrate extends to all *683disputes over "entitlement to commissions and compensation in cooperative transactions that arise out of the business relationships between REALTORS® . . . ." Id. at 676.
Lane's referral fee dispute with Urgitus and Calhoun is precisely the type of dispute among REALTORS® contemplated by the Membership Agreements. The only question is whether Lane can enforce Urgitus's and Calhoun's promises to DMCAR to arbitrate this dispute. In my view, he can.
A non-party can compel arbitration if it can show that it is a third-party beneficiary to an arbitration agreement. See Eagle Ridge Condominium Ass'n v. Metro. Builders, Inc., 98 P.3d 915, 917 (Colo.App.2004) ("A nonparty, such as a third-party beneficiary, may fall within the scope of an arbitration agreement and may bring an action on the contract if that is the intent of the parties."); Parker v. Ctr. for Creative Leadership, 15 P.3d 297, 298 (Colo.App.2000) (same); Eychner v. Van Vleet, 870 P.2d 486, 489 (Colo.App.1998) (same). This is an unremarkable application of the black-letter rule that a third-party beneficiary may enforce the terms of a contract. See, eg., Jefferson County Sch. Dist. No. R-1 v. Shorey, 826 P.2d 880, 848 (Colo.1992) (describing the third-party beneficiary doctrine as a "basic rule of contract law"); E.B. Roberts Constr. Co. v. Concrete Contractors, Inc., 704 P.2d 859, 865 (Colo.1985) (applying the third-party beneficiary doctrine). In order to enforce the terms of a contract as a third-party beneficiary, a plaintiff must show (1) that the contracting parties intended to benefit the third party, and (2) that the claimed benefit is a direct and not merely incidental benefit of the contract. See W.B. Roberts, 704 P.2d at 865 (citations omitted).
The language of the Membership Agreements clearly demonstrates that the contracting parties-here, Urgitus, Calhoun, and DMCAR-intended to benefit other REALTOR® members such as Lane. In the Agreements, Urgitus and Calhoun pledged to "arbitrate business disputes in accordance with the Code of Ethics," which in turn requires the arbitration of disputes over referral fees that arise between REALTORS®. The purpose of this provision has a single intended beneficiary: REALTOR® members, such as Lane, who may have disputes with the contracting parties. Indeed, the obligation to arbitrate benefited Urgitus and Calhoun as well, as they could seek to recover referral fees from other REALTOR® members through arbitration in the future.
It is true that Lane was not specifically named as a third-party beneficiary of the Membership Agreements. Yet "it is not nee-essary that the third party be specifically referred to in the agreement. It is sufficient if the claimant is a member of the limited class that was intended to benefit from the contract." Smith v. TCI Commc'ns, Inc., 981 P.2d 690, 698 (Colo.App.1999). Here, the "limited class" of beneficiaries was defined by the Membership Agreements and the Code of Ethics as other members of the REALTOR® organization with whom the member might have a business dispute. Seq, e.g., Bloom v. Nat'l Collegiate Athletic Ass'n, 93 P.3d 621, 623-24 (Colo.App.2004) (holding that a student-athlete at the University of Colorado could sue under the bylaws of the NCAA, which were binding on member schools like Colorado, because "the NCAA's constitution, bylaws, and regulations evidence a clear intent to benefit student-athletes").
Furthermore, Lane's benefit from the Membership Agreements was direct, not incidental. The Membership Agreements specifically contemplate that a benefit of DMCAR membership is the right to have disputes with other members arbitrated rather than litigated. Compare Shorey, 826 P.2d at 843 (finding that dispute resolution procedure in collective bargaining agreement was directly intended to benefit union members such as plaintiff), and Villa Sierra Condominium Ass'n v. Field Corp., 878 P.2d 161, 166 (Colo.App.1994) ("[An agreement between a local government and another party was designed to bestow a direct benefit upon private property, thereby making the owners of that property direct third-party beneficiaries of the agreement."), with Fourth & Main Co. v. Joslin Dry Goods Co., 648 P.2d 178, 181 (Colo.App.1982), disapproved of in part in E.B. Roberts, 704 P.2d at 865 n. 7 (noting that an incidental benefit usually is nothing *684more than a "fortuitous windfall" from an agreement, not an express term of the agreement designed to benefit a third party).
I share Justice Coats's belief that we should be hesitant to "erode the indepen-denee of parties to fix the terms of their own contracts...." Diss. Op. at 684. In this case, however, I believe that Urgitus and Calhoun did fix the terms of their own contracts with DMCAR with the intention of benefiting other REALTORS® as third parties. Because Lane is a third-party beneficiary to the Membership Agreements, he is entitled to enforce their arbitration provisions. I therefore agree with the majority that the trial court correctly compelled arbitration, and specially concur on that basis.