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Legal Action Committee Funding May 2012

Below are summaries of the case funding recommendations made by NAR's Legal Action Committee, which were subsequently approved by the Board of Directors at the 2012 Midyear Legislative Meetings and Trade Expo, held in Washington, D.C., during May 2011.

NAR provide funding of $ 161,667 in seven of the nine cases for which assistance was requested, as follows:

1. Hyland and Pullen v. HomeServices of America, Coldwell Banker McMahan Company, Semonin, REALTORS®, Rector-Hayden REALTORS®; RE1MAX; et al. (KY).

This case was brought by four individuals who purchased or sold homes and paid real estate commissions to one or more of the defendant real estate brokerage firms. Plaintiffs bring the complaint on their own behalf and as a class action representing other consumers who purchased or sold real estate in Kentucky, alleging that the defendants formed an agreement to fix real estate commissions at an "industry-standard" 6%. Plaintiffs seek treble damages from all defendants, alleging an agreement among the defendants to fix real estate commissions, and also alleging that the ban on paying consumers commission rebates approved and implemented by the Kentucky Real Estate Commission enabled the conspiracy, facilitated price fixing, and inhibited price competition. Settlements have been reached (pending court approval) with all of the defendants except Coldwell Banker McMahan Company and one other defendant.

2. Raymond James Financial Services, Inc. v. Barbara J. Phillips, Etc., et.al. (FL).

Respondent Barbara J. Phillips filed an arbitration claim with the Securities Industry and Financial Markets Association alleging claims of negligence, misconduct including breach of fiduciary duty, and state and federal securities law violations against Petitioner Raymond James. Petitioner filed a motion to dismiss, asserting that the Respondents' claims were time barred by the statute of limitations under Florida law. The circuit court held that the Florida statutes of limitations did not apply to Respondent's arbitration claims, and on appeal the District Court of Appeal of Florida, Second District affirmed the circuit court's decision. The matter is now on further appeal to the Florida Supreme Court. Florida REALTORS® has filed an amicus brief arguing for reversal of the Court of Appeals ruling so that arbitration provisions included in real estate transaction agreements are subject to the statute of limitations provided by law, rather than the parties remaining indefinitely subject to arbitration of disputes.

3. Marin Association of REALTORS® v. California (CA).

The California Association of REALTORS® and the Marin Association of REALTORS® seek assistance with the legal costs associated with a request to, and negotiations with, the California Attorney General to set aside all or portions of the "Final Judgment Granting Permanent Injunction and Imposition of Civil Penalty" entered against the Marin Association in 1978. That judgment and injunction imposes requirements on the Association's operation of its MLS that are more restrictive than apply generally, including prohibiting charging MLS participants fees or payments for MLS services higher than pro-rated costs, requiring lockbox services to be provided on the same terms to all MLS participants and thereby prohibiting favorable terms being available to REALTOR® members of the association, enforcing rules other than those related to "solicitation, preparation, submission and publication of any listings placed on the multiple listing service," or imposing rules that are more rigorous than those "required by law."

4. Metropolitan Regional Information Services, Inc. v. American Home Realty Network, Inc. and Jonathan J. Cardella (MD).

MRIS filed this complaint against American Home Realty Network, Inc., d/b/a Neighborcity.com and Jonathan J. Cardella, alleging copyright infringement by the Defendants through the unauthorized reproduction, preparation of derivative works, distribution, and public display of MRIS's copyrighted MRIS Database and related informational content. MRIS also seeks a preliminary and permanent injunction to prevent further damage to MRIS as a result of the alleged unauthorized, infringing activities of Defendants. MRIS alleges Defendants are misappropriating the MRIS Database and informational content, along with other MLS databases, and providing Defendant's customers with unauthorized access to and use of the copyrighted MRIS Database and informational content in support of Defendant's referral business. Plaintiffs allege that Defendants have not acquired a license or any form of permission from MRIS to allow them to access, reproduce, modify, publically display or otherwise use the MRIS Database or any portion thereof. Defendants have admitted that they have not sought or received permission from MRIS or the listing agents/brokers on Defendant's website, but deny their use of the data is infringing.

5. Waterkeeper Alliance, Inc. (Assateague Coastkeeper) v. Hudson Farm and Perdue (MD).

Plaintiff, an environmental advocacy organization, brought this case alleging that the defendants, Alan and Kristin Hudson Farm and Perdue Farms, Inc., violated the Clean Water Act by permitting pollutants from their poultry farm to be released into drainage ditches adjoining their farm, which pollutants allegedly reach the Pocomoke River and ultimately the Chesapeake Bay. Alan and Kristin Hudson own and operate the farm and have a "Poultry Producer Agreement" with Perdue whereby Perdue provides various supplies related to raising chickens in exchange for access to the chickens produced. The court denied the parties cross motions for summary judgment because the parties presented conflicting factual evidence regarding whether certain pollutants found in drainage ditches near the farm originate with poultry farming operations, and whether that pollution, if any, reaches navigable waters, including the Pocomoke River via its tributaries. Trial is scheduled to begin on October 9.

6. The Land Man Realty, Inc. v. Weichert, Inc., Weichert REALTORS® Northeast Group, and Lorraine Conoby (NY).

Plaintiff commenced this litigation against Weichert seeking a share of the commission paid to Weichert as listing broker on the sale, alleging breach of contract and a theory of "unjust enrichment." Since both plaintiff and defendant are Realtor® firms, Defendant responded that the breach of contract action was barred by the plaintiff's duty to arbitrate the claim pursuant to Article 17 of the Code of Ethics. The court concluded that "there was no contract between plaintiff and defendants in this case," and therefore the duty under Article 17 of the Code of Ethics to arbitrate "contractual or specific non-contractual disputes described in section 17-4" (of the Standards of Practice) did not apply to bar plaintiff's claim. But the court also denied Weichert's motion for summary judgment as to the breach of contract claim brought by the plaintiff, concluding that whether "plaintiff's ...actions were a procuring cause of the property sale, making it a cooperating agent authorized under the law to receive a commission was an issue of fact for the jury."

Weichert appealed the Supreme Court's decision to the New York State Appellate Division, Third Department, asserting that Plaintiff was obligated to arbitrate the claim. The Appellate Division affirmed the lower court's ruling, finding that "in the absence of an express and unequivocal agreement between the parties, it is not necessary for this dispute to be submitted to arbitration." The court did not address the duty imposed on REALTORS under Article 17 of the Code of Ethics to arbitrate "contractual" disputes. NYSAR is assisting defendant Weichert to seek rehearing by the Appellate Court or appeal to the New York State Court of Appeals, and intends to file an amicus brief if the matter is considered by the Court of Appeals.

7. National Wildlife Federation v. Federal Emergency Management Agency (WA).

The National Wildlife Federation (NWF) brought this case against the Federal Emergency Management Agency (FEMA) asserting that FEMA had implemented the National Flood Insurance Program (NFIP) in a manner that permitted or insufficiently limited development in floodplains in the Puget Sound area, and that such permitted development may threaten the habitat of various listed endangered species in violation of the Endangered Species Act. In particular, NWF challenges FEMA's implementation of the "Reasonable and Prudent Alternatives" set forth in the National Marine Fisheries Service Biological Opinion that described threats to salmon and killer whale habitat resulting from FEMA's NFIP program. POSFR, a group of Puget Sound area property owners and industry groups representing them, requested and was granted the right to intervene as a defendant in the case. They assert that property owners will be subject to more stringent regulation and adversely affected by limiting or making unavailable flood insurance for property in the area if NWF succeeds in the case, and that FEMA does not adequately represent their interests.

The court denied NWF's motion for a preliminary injunction to prevent FEMA from issuing flood insurance in certain communities until it sufficiently implemented the Reasonable and Prudent Alternatives set forth in the Biological Opinion, holding that NWF had failed to offer evidence that the way in which FEMA was applying the Reason and Prudent Alternatives was likely to produce irreparable harm to the endangered species.