Two multiple listing services in Michigan and Pennsylvania that federal regulators had accused of anti-competitive practices have also become entangled in civil lawsuits seeking millions of dollars in damages on behalf of consumers.
Pittsburgh-based West Penn Multi-List Inc. has agreed to pay $2.38 million to settle allegations that its member brokers conspired to pass rules aimed at restricting competition from nontraditional and discount brokerages.
The MLS’s actions allegedly resulted in consumers paying inflated commissions in its 15-county service area.
West Penn denied the allegations, made in a lawsuit filed last year — not long after the MLS had settled a similar complaint by the Federal Trade Commission.
In both instances, attorneys for West Penn and its member brokers denied discriminating against discount brokerages, but said settling the cases was preferable to the uncertainty, costs and delay of further litigation.
Under the terms of a settlement granted final approval on Nov. 1, lawyers who had sought to represent consumers in a class-action suit were awarded $1 million in fees and expenses, leaving $1.36 million to be divided among as many as 8,550 consumers who filed claims in the case — an average of $160 each.
Consumers who bought or sold homes in Allegheny, Crawford, Mercer, Venango, Clarion, Butler, Lawrence, Armstrong, Indiana, Beaver, Westmorland, Washington, Greene, Fayette, or Somerset counties between Feb. 13, 2005, and Feb. 13, 2009, were eligible to file claims.
In the meantime, Michigan’s largest MLS, Realcomp II Ltd., remains embroiled in a similar antitrust lawsuit filed last year by lawyers seeking class-action standing to represent tens of thousands of home sellers who allegedly paid inflated commissions to full-service brokerages during a four-year period ending April 27, 2007.
Realcomp was one of seven MLSs targeted by federal regulators in an October 2006 enforcement action. The FTC alleged that the MLSs — located in Colorado, New Hampshire, New Jersey, Michigan, Virginia and Wisconsin — had refused to transmit exclusive agency property listings to public-facing websites.
Brokers often use exclusive agency listing agreements when providing discounted and menu-based services to clients.
All but one of the seven MLSs targeted by the FTC eventually entered into consent agreements with the government. Realcomp chose to fight the allegations in court, winning an initial victory when the FTC’s chief administrative law judge dismissed the case against the MLS in 2007.
When a full panel of the FTC reversed that decision, Realcomp then took its case to the Sixth Circuit Court of Appeals. The MLS did not rescind its policy of withholding exclusive agency listings from Realtor.com, MoveInMichigan.com, and other public websites until February 2009, when the court of appeals denied Realcomp’s motion to stay an FTC order.
On March 31, 2011, the Sixth Circuit Court of Appeals denied Realcomp’s petition to overturn the FTC’s order, and last month the U.S. Supreme Court declined to review the case, bringing the five-year dispute to a close.
Realcomp civil suits
For much of the period Realcomp was taking on the FTC, it was also litigating two separate civil suits.
In 2007, Realcomp and MiRealSource — a neighboring MLS that had entered into a consent agreement with the FTC — were sued by Home Quarters Real Estate Group, a brokerage that offered cash rebates to buyers and commission discounts to sellers. Both MLSs reached separate, undisclosed settlement agreements with Home Quarters in October 2010.
The same month, Realcomp was hit with a suit, seeking class-action status, claiming the MLS had "restrained, suppressed and eliminated price competition for real estate brokerage services" in Southeastern Michigan.
In an Oct. 8, 2010, complaint, lawyers for three couples who sold homes in 2005 said they had paid more for brokerage services than they would have had Realcomp not restrained competition.
Lawyers for the couples are seeking to represent all similarly situated homeowners who purchased brokerage services in Realcomp’s four-county service area from May 1, 2004, through April 27, 2007.
Attorneys for Realcomp and the seven Realtor associations that own the MLS filed a motion to dismiss the claims against them on the grounds that the MLS and the associations were a "single entity," and therefore incapable of conspiring with one another — an argument also made by West Penn’s broker-owners.
In a June 28 order, U.S. District Judge Stephen Murphy declined to dismiss the case, noting that as shareholders, each Realtor association appoints two members to Realcomp’s board of directors.
"The complaint can be read reasonably to allege that the shareholders exist to serve their members, and that through their ability to influence Realcomp policy, the shareholders implemented the will of more established brokers using (exclusive right to sell listing agreements) so as to reduce competition from discount brokers," Murphy ruled.
"Accordingly, dismissal of the case against the shareholders at this stage would be inappropriate."
Realcomp is owned by the Detroit Association of Realtors, the Dearborn Board of Realtors, the Eastern Thumb Association of Realtors, the Livingston Association of Realtors, the Metropolitan Consolidated Association of Realtors, the North Oakland County Board of Realtors, and the Western Wayne Oakland County Association of Realtors.
In July, attorneys for Realcomp filed an answer to the complaint against the MLS, denying all of its allegations and arguing that the plaintiffs in the complaint did not suffer antitrust injury, lacked standing to sue, and that their claims were barred by the statute of limitations.
The case is currently scheduled to go to trial on Jan. 10, 2013.
West Penn settles
West Penn’s legal troubles began in January 2009, when the FTC filed a complaint against the MLS alleging that it had violated antitrust laws by refusing to list properties represented by brokers who entered into exclusive agency listing agreements with their clients.
West Penn said it had already changed some of its rules. Under the terms of a consent agreement approved the following month, West Penn agreed that, in the future, it would not prevent members from offering or accepting exclusive agency listings, or refuse to publish information about those properties on approved Websites.
But in April 2010, the MLS was named in an antitrust lawsuit that sought triple damages on behalf of all buyers and sellers who had used brokerage services to purchase homes listed in the West Penn MLS during a four-year period ending Feb. 13, 2009 — the date the FTC consent order went into effect.
During that period, the new lawsuit claimed, West Penn’s rules not only barred exclusive agency listings, but raised entry barriers for competitors by imposing burdensome prerequisites and subjective standards for MLS membership.
The rules, which were the result of "agreements and concerted action" to restrain competition, "provided a means of identifying potentially aggressive competitors" so that the defendants could "exclude them from West Penn MLS membership," lawyers who filed the antitrust suit alleged.
"If defendants hadn’t restricted these innovative brokerages from competing in the West Penn MLS service area, these brokerages would have provided West Penn MLS service area customers of real estate brokerage services with competitive options and, in the process, placed downward pressure on the prices charged by the brokerage defendants, who offer only traditional methods of providing real estate brokerage services," the lawsuit claimed.
Claims for violations of federal antitrust law generally must be filed within four years. But attorneys who filed the lawsuit sought an exemption from that rule. Until the FTC consent order was approved, they argued, consumers would have had no way of knowing that West Penn member brokers had allegedly engaged in a secret "conspiracy," holding meetings to discuss "fixing the prices of real estate services."
West Penn member brokers named in the case included Howard Hanna Co.; NRT Pittsburgh LLC (doing business Coldwell Banker Real Estate Services); Freeman Realty; Northwood Realty Services; and PPR Realty (doing business as Prudential Preferred Realty).
In seeking to have the case dismissed, attorneys for West Penn and its member brokers argued that the lawsuit did not identify any specific injury to consumers directly caused by an antitrust violation.
"In lieu of evidentiary facts, the complaint asks this court to engage in guesswork and speculation into the minds of unidentified ‘discount brokers’ and their theoretical business practices," laywers for West Penn said in support of their motion.
The named plaintiff in the case — Thomas Logue, who hired Howard Hanna to sell his Pittsburgh home in 2006 — had never attempted to purchase anything less than full services from the brokerage, lawyers for the MLS and its member brokers said.
Nor did Logue’s complaint assert that he had tried to hire a discount broker.
The antitrust suit relied on the FTC consent order "as though it were a fully litigated judicial or administrative finding," when there was no adjudication and West Penn "simply settled with the government" without any admission of guilt, attorneys for the MLS said.
As for allegations of a conspiracy, the lawsuit "does not identify when these clandestine meetings took place, who participated, and what was discussed," lawyers for West Penn said, describing "nothing more than an abundance of intricate conspiracy theories that are unsupported by factual allegations."
Like Realcomp, attorneys for West Penn argued that, "For purposes of the antitrust laws, a corporation and its officers and directors are considered a single entity, which are incapable of conspiring with one another."
In a July 8, 2010, ruling, U.S. District Court Judge Arthur J. Schwab declined to dismiss the case, saying attorneys for Logue should be permitted to offer further evidence in support of their antitrust allegations.
It would have been premature, Schwab said at the time, to decide on legal issues raised by attorneys for West Penn "without the benefit of additional facts developed through the discovery process that may bear on the legal questions."
According to court filings, a mediation session the following month failed to produce a settlement. On Oct. 5, 2010, Logue’s attorneys filed an amended complaint, adding six brokerage executives as defendants.
The case then entered an extensive discovery phase, which included the production and review of thousands of pages of documents and real estate transactions. In March 2011, Logue’s lawyers prepared a motion for class-action standing to represent other similarly affected consumers.
In May, with a scheduled hearing on the motion for class-action standing looming, an agreement in principle to settle the lawsuit was reached after two days of phone discussions.
After the settlement agreement was granted preliminary approval on June 21, the claims administrator in the case compiled a list of 66,490 buyers and sellers of properties listed by West Penn during the claims period.
The claims administrator used a skip-tracing service to obtain 46,398 confirmed or updated addresses.
Notices and claim forms were mailed in July to 47,309 individuals and businesses that purchased brokerage services during the four-year period. As of Oct. 11, 8,550 claim forms had been returned, the claims administrator said.