Hyland v. Homeservices of America, Inc.: Antitrust Lawsuit Proceeds

On June 28, 2007, Kentucky federal court issued a number of rulings in a class action lawsuit alleging that various real estate entities illegally conspired to fix commission rates. Below is a brief discussion of the lawsuit, and then a summary of the June 28, 2007 rulings.

Casey W. Hyland, Graham Pullen, and Christopher Burnette (collectively, “Plaintiffs”) filed a lawsuit against a number of large real estate entities seeking to recover damages from January 1, 1991 to present. The lawsuit alleged that the Plaintiffs directly or indirectly paid a fixed commission rate to their brokers, depending on whether they were buyers or sellers of real estate. The parties acknowledge that only the listing broker received a commission from the transaction and the listing broker then paid a portion of the commission to buyer’s representatives. The trial court had originally dismissed the case because buyers did not purchase the challenged services, but reinstated the case when the court learned that one of the Plaintiffs had also sold property during the period in question. The court considered various motions to dismiss filed by the defendents.

I. Motions to Dismiss filed by Cendant Corp., NRT Inc., Coldwell Banker Real Estate Corp. (“CBREC”), and Century 21 Real Estate LLC (“Century 21”)

After considering these four motions to dismiss, the court dismissed NRT from the lawsuit but allowed the litigation to proceed against the other defendants.

NRT argued that the court lacked personal jurisdiction over it, as the Plaintiffs had not alleged sufficient facts to support the court’s exercise of jurisdiction. The Plaintiffs argued that NRT was subject to jurisdiction in Kentucky because one of its subsidiaries conducted business in the state. Looking at other cases, the court found that a parent/subsidiary relationship was insufficient to confer jurisdiction over a parent. Instead, a party must allege that the parent is consistently engaging in business within the state. Since the Plaintiffs had failed to make these kinds of allegations against NRT, the court dismissed NRT from the lawsuit.

The remaining defendants all argued that they were not directly engaged in any of the transactions at issue and so should be dismissed from the lawsuit. Cendant is the parent company of NRT, Century 21, and CBREC, while Century 21 and CBREC are franchisors. Cendant argued that the Plaintiffs had failed to allege facts that could hold Cendant liable in this case, while the Century 21 and CBREC both argued that they did not control the day-to-day activities of their franchisees and the franchisees were not their agents.

The court looked at the standard for evaluating motions to dismiss in antitrust cases. In antitrust cases, the U.S. Supreme Court has stated that dismissals prior to allowing the parties discovery should be granted sparingly. Using that standard, the court ruled that the Plaintiffs had sufficiently alleged a conspiracy against all three defendants and so allowed the allegations to proceed to the discovery phase of litigation.

2. Joint Motion to Dismiss Based on Kentucky Rebate Ban and Statute of

Limitations

All of the defendants filed a motion to dismiss the lawsuit on the grounds that the Plaintiffs’ antitrust allegations relied upon a state rebate regulation. Because compliance with a state regulation cannot serve as the basis for an antitrust lawsuit, the defendants argued that the court must dismiss the entire lawsuit. The Plaintiffs countered by arguing that their central argument was that the defendants fixed commission rates and the references to the state’s rebate ban merely served to buffer their central argument.

The court found that the allegations contained in the lawsuit for the price fixing conspiracy were sufficient. While the court agreed that the Plaintiffs could not rely upon compliance with the rebate ban to show antitrust violations, the other allegations could support an antitrust claim. Thus, the court rejected the joint motion to dismiss.

The defendants also argued that the applicable 4-year statute of limitations barred all claims prior to October 11, 2001, or four years prior to the date that the Plaintiffs filed this lawsuit. The Plaintiffs argued that because the allegations concerned an ongoing conspiracy, their claims could date back to 1991. The court ruled that the statute of limitations applied to the Plaintiffs’ claims and limited the Plaintiffs’ lawsuit to only those claims occurring after October 11, 2001.

3. RE/MAX’s Motions to

Dismiss

There were two different RE/MAX dismissal motions considered by the court: first, RE/MAX International Inc.’s motion to dismiss for the Plaintiff’s failure to state a claim against it; and second, two Kentucky RE/MAX offices seeking dismissal for improper service by the Plaintiffs.

RE/MAX International argued that it was merely a franchisor and none of the facts alleged by the Plaintiffs in support of their claims involved RE/MAX International. In response, the Plaintiffs argued that they had alleged vicarious liability, apparent agency, and joint venture against RE/MAX International. The court ruled that the allegations against RE/MAX International were sufficient to survive a motion to dismiss, as the allegations stated that the RE/MAX International exercised certain levels of control over its franchisees. Thus, the court rejected RE/MAX International’s motion to dismiss.

Next, the court considered the two RE/MAX franchisees arguments for dismissal on the grounds that they were not properly served. While employees of both RE/MAX offices had received the summons in this matter, neither summons was delivered to the proper location and neither employee was the proper agent for service of summons. The Plaintiffs argued that they had properly alerted the two RE/MAX offices to the claims against them.

The court found that the Plaintiffs’ improper service and their failure to explain why this improper service was excusable required the court to dismiss the two RE/MAX offices from the lawsuit. The Plaintiffs had adequate time to correct the improper service, and they had failed to do so. Thus, the two RE/MAX franchisees were dismissed.

Hyland v. Homeservices of America, Inc., No. 3:05 CV 612 R, 2007 WL 1959149/1959150/1959157/1959159/1959160/1959161 (W.D. Ky. June 28, 2007). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].

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