Opinion
No. CV 03-0825180
June 9, 2005
MEMORANDUM OF DECISION
The defendant corporation, a purchaser of real estate, moves to compel the plaintiff real estate broker to arbitrate a dispute according to the terms of the plaintiff's membership in the Greater Hartford Association of Realtors (GHAR). "We adhere to the established rule that arbitrability . . . is ordinarily a legal question for the courts . . . Arbitrability includes the issue of who is entitled to arbitrate a claim." (Citations omitted; internal quotation marks omitted.) Gaudet v. Safeco Ins. Co., 219 Conn. 391, 399, 593 A.2d 1362 (1991). "It is well established that [a]rbitration is a creature of contract . . . It is designed to avoid litigation and secure prompt settlement of disputes . . . [A] person can be compelled to arbitrate a dispute only if, to the extent that, and in the manner which, he has agreed so to do . . . No one can be forced to arbitrate a contract dispute who has not previously agreed to do so." (Internal quotation marks omitted.) Nussbaum v. Kimberly Timbers, Ltd., 271 Conn. 65, 72, 856 A.2d 364 (2004).
The contract in the present case is an agreement entered into by the plaintiff as part of its membership in the GHAR. This agreement, entitled the Code of Ethics and Standards of Practice of the National Association of Realtors, is incorporated into the GHAR bylaws, of which the plaintiff is a member. The defendant cites Article 17 of the code of ethics, which mandates that "[i]n the event clients of REALTORS wish to arbitrate contractual disputes arising out of real estate transactions, REALTORS shall arbitrate those disputes in accordance with the regulations of their Board, provided the clients agree to be bound by the decision."
Even though it is the policy of the law to favor settlement of disputes by arbitration . . . arbitration agreements are to be strictly construed and such agreements should not be extended by implication . . . Accordingly, the basis for arbitration in a particular case is to be found in the written agreement between parties . . . Persons thus cannot compel arbitration of a disagreement between or among parties who have not contracted to arbitrate that disagreement between or among themselves." (Citations omitted.) Wesleyan University v. Rissil Construction Associates, Inc., 1 Conn.App. 351, 354-55, 472 A.2d 23, cert. denied, 193 Conn. 802, 474 A.2d 1259 (1984).
The plaintiff argues that the defendant cannot compel arbitration, because it is not a party to the contract. General Statutes § 52-410(a) provides in relevant part that "[a] party to a written agreement for arbitration claiming the neglect or refusal of another to proceed with an arbitration thereunder may make application to the superior court . . . for an order directing the parties to proceed with the arbitration in compliance with their agreement." "[W]hile § 52-410 limits the availability of the remedy to parties . . . the word is not defined." (Internal quotation marks omitted.) Gaudet v. Safeco Ins. Co., supra, 219 Conn. 397. The Supreme Court has concluded that "[t]he term is used generically so that its meaning must therefore be derived from the agreement itself." (Internal quotation marks omitted.) Id. The Supreme Court has held that "[i]n the context of uninsured motorist coverage . . . § 52-410 does not exclude enforcement of its terms by third party beneficiaries. We construe the word party within § 52-410 to refer to anyone on whom the agreement confers enforcement rights." (Internal quotation marks omitted.) Id.
"The most recent scholarly commentary on Connecticut arbitration law agrees . . . that the issue of whether a third party beneficiary can enforce an arbitration clause in a contract against a reluctant signatory is unsettled. Hodgson and Parley, Alternative Dispute Resolution in Connecticut's Courts, § 2.8.4, p. 33 (1998). The trend seems to be to treat the application and enforcement of procedural rights under a contract, relating to remedies and to dispute resolution, in the same way as substantive rights are treated." Duchess of Dixwell Avenue, Inc. v. Neri Corp., Superior Court, judicial district of New Haven, Docket No. CV 98 0421694 (August 4, 1999, Pittman, J.) ( 25 Conn. L. Rptr. 220).
The defendant does not dispute that it is not a signatory to the contract, but instead argues that it is entitled to enforce the agreement as a third-party beneficiary. "[T]he ultimate test to be applied [in determining whether a person has a right of action as a third party beneficiary] is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making, including the motives and purposes of the parties . . . Although [the Supreme Court has] explained that it is not in all instances necessary that there be express language in the contract creating a direct obligation to the claimed third party beneficiary . . . [it has] emphasized that the only way a contract could create a direct obligation between a promisor and a third party beneficiary would have to be . . . because the parties to the contract so intended." (Citation omitted; emphasis in original; internal quotation marks omitted.) Grigerik v. Sharpe, 247 Conn. 293, 311-12, 721 A.2d 526 (1998).
"General Statutes § 52-410 was enacted in 1929 as a legislative response to judicial refusal to enforce arbitration clauses as violating public policy . . . Since 1929, the wheel has turned, and most courts favor arbitration as an expeditious method of settling certain types of disputes . . . There is accordingly little reason to distinguish between a third party beneficiary's right to enforce an arbitration clause of a contract and a third party beneficiary's right to enforce any other clause of a contract." (Citations omitted.) Gaudet v. Safeco Ins. Co., supra, 219 Conn. 397, n. 7.
The Supreme Court has held that, regardless of whether an employee is a third-party beneficiary of a collective bargaining agreement, the employee may not compel arbitration absent an express provision allowing such action. Arsenault v. General Electric Co., 147 Conn. 130, 133-34, 157 A.2d 918 (1960). The present case, however, is factually dissimilar. The contract here unequivocally provides that realtors that are members of GHAR shall arbitrate agreements with clients who agree to be bound by the result. The language of the agreement is drafted with the intent that the signatories assume this direct obligation to clients as third-party beneficiaries. The agreement, which is by its own terms a "Code of Ethics," is intended to provide limits and structure to the signatories' behavior, and the arbitration clause is intended to benefit clients while resolving disputes without the intervention of the court system. The obligation to arbitrate is clear and was, presumably, entered into voluntarily. Because the defendant is an intended third-party beneficiary to the agreement, the motion to stay pending arbitration is granted.
Booth, J.