Real estate companies that face allegations of price-fixing in a lawsuit are asking the court to reconsider an order allowing the case to proceed in light of an antitrust-related U.S. Supreme Court decision in May.
The lawsuit, which seeks class-action status, charges that real estate consumers in Kentucky have paid inflated real estate commissions because of illegal price fixing by brokers in the state, facilitated by real estate rebate restrictions set by the Kentucky Real Estate Commission, a state agency.
The lawsuit alleges that certain real estate companies named in the lawsuit “have charged a real estate broker commission of 6 percent, have described this 6 percent fee as the ‘standard’ or ‘typical’ fee, and have habitually refused to negotiate a lower fee. Certain (companies) have stated that they would not negotiate a lower fee unless another broker were willing to do so.” The real estate companies named in the suit have pledged to fight the charges.
Companies named in the lawsuit, filed in U.S. District Court for the Western District of Kentucky, include HomeServices of America Inc., HomeServices of Kentucky Inc., Semonin Realtors, Rector Hayden Realtors, RE/MAX International Inc., RE/MAX Connections, RE/MAX Properties East, Century 21 Real Estate LLC, Cendant Corp., Coldwell Banker Real Estate Corp., Coldwell Banker McMahan, and RE/MAX Alliance.
These companies, according to the complaint, allegedly “combined, conspired and agreed to fix, maintain, and inflate real estate broker commissions and associated fees and refuse to compete on the basis of price,” in real estate transactions within the state.”
Christopher Burnette, a Savannah, Ga., resident who paid a 6 percent broker commission in a real estate transaction to RE/MAX Alliance, is one of the parties named in the lawsuits, and two other individuals are not represented in the case but can appeal to seek inclusion in the case, according to the amended complaint.
Daniel R. Gravelyn, a lawyer who represents HomeServices in the lawsuit, said in a statement, “Our view is and has been that the claims in the lawsuit are meritless and we intend to vigorously defend against them.”
While U.S. District Court Judge Thomas B. Russell ordered in June that aspects of the complaint would be allowed to proceed in court, the real estate companies named in the lawsuit have asked the judge to reconsider whether the case should be dismissed, based on a 7-2 U.S. Supreme Court decision in the Bell Atlantic Corp. v. Twombly case.
That ruling, said Gravelyn, “changed the standards for pleading an antitrust claim.”
Specifically, the Supreme Court decision found that a complaint must state “enough facts to state a claim to relief that is plausible on its face” in order for the court to consider whether antitrust conspiracy occurred. In the Supreme Court case, the parties that filed the lawsuit “have not nudged their claims across the line from conceivable to plausible,” so it was appropriate for their complaint to be dismissed.
Likewise, the real estate companies in the Kentucky price-fixing lawsuit contend that the lawsuit lacks factual allegations to suggest a plausible antitrust conspiracy. A court filing by lawyers for Realogy-affiliated real estate brands including Coldwell Banker and Century 21 asks the court to dismiss all claims against its affiliated companies. The latest amended complaint in the case, filed in July, “fails to state any direct claims against Century 21 and Coldwell Banker Real Estate Corp.,” the court filing states.
A spokesperson for Realogy Corp. said Thursday, “We believe the case is wholly without merit and we’re going to aggressively defend against the claims.”
Stephen J. Squeri, a lawyer for RE/MAX, said that if the case is allowed to proceed, the real estate companies in the lawsuit will seek to oppose a class-action certification for the case. “We’re confident that we’ll prevail in (the lawsuit) ultimately, if not in the near future.”
In opposition to the motions by the real estate companies to reconsider dismissal of the complaint, lawyers representing real estate consumers charged in a court filing that the real estate companies are simply restating previous claims that the court already considered and “are improperly seeking a second bite of the apple,” and that the companies “have not shown that Twombly, or any actions taken by the court on their prior motions, warrant reconsideration.”
Also, the lawyers state in the court filing that they have alleged “an admission of price-fixing, frequent exchanges of price information, frequent opportunities to conspire, two enforcement actions brought by the Justice Department, a common motive to conspire, and … dramatic price increases,” among other allegations.
The state’s real estate commission, according to the lawsuit, had passed a ban on real estate rebates in 1991, and the U.S. Department of Justice in March 2005 filed a complaint against that policy, charging that it violated federal antitrust law by stifling compensation. In July, the commission settled that lawsuit and agreed to lift its restrictions.
Some of the companies named in the complaint “have enforced their price-fixing agreement by boycotting price-cutting rivals, such as Help-U-Sell,” the complaint alleges.
Gary S. Jacobson, a lawyer who is representing the proposed class of real estate consumers in the case, said the next step in the case is a conference with the judge, scheduled for Aug. 29. Jacobsen said if the judge allows the case to proceed as earlier ordered, the next step will be to attempt to certify the class-action status of the case.