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Bolinger v. First Multiple Listing Service, Inc.

United States District Court, N.D. Georgia, Gainesville Division

September 26, 2014

HEATHER Q. BOLINGER, et al., Plaintiffs,


RICHARD W. STORY, District Judge.

This case comes before the Court on Defendants' Motion to Strike Plaintiffs' Sur-Rebuttal Expert Reports [257], Plaintiffs' Motion for Leave to File a Second Amended Complaint [266], Defendants' Motion for Summary Judgment [272], Plaintiffs' Motion to Strike the Testimony of Plaintiffs' Withdrawn Expert, Grant Mitchell [289], Plaintiffs' Motion to Strike Paragraphs Eleven (11) through Thirteen (13) of the Affidavit of Frederick G. Boynton [290], Plaintiffs' Motion for Oral Argument [303], and Defendants' Motion for Order or for Leave to File a Reply to Plaintiffs' Response to Statement of Undisputed Material Facts in Support of Defendants' Joint Motion for Summary Judgment [323]. After reviewing the record, the Court enters the following Order.


Plaintiffs Heather Q. Bolinger, Paul A. Terry, and Anne M. Terry assert claims under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., and under state law in regard to Defendants' alleged unlawful kickback and fee-splitting scheme. Plaintiffs bought and sold homes through Defendant Brokers and Agents, who used a listing service provided by Defendant First Multiple Listing Service, Inc. ("FMLS"). Plaintiffs allege that Defendants engaged in a quid pro quo arrangement whereby the Brokers and Agents referred business to FMLS in exchange for kickbacks in the form of Patronage Dividends. Notwithstanding the voluminous record, the Court finds only the following facts essential to resolving Plaintiffs' claims.

I. FMLS's Business Model

First Multiple Listing Service maintains an electronic database on which its members-licensed real estate brokers representing both buyers and sellers-may list and find properties. (Defs.' Statement of Material Facts ("SMF"), Dkt. [272-1] ¶ 2.) FMLS does not market its services to individual buyers and sellers. ( Id. ¶ 31.) Real estate brokers who pay to join FMLS are known as Principal Members, and licensed real estate sales agents working with Principal Members must also join FMLS as Associate Members. ( Id. ¶¶ 4-5.) Defendant Brokers and Agents were all Principal and Associate Members at the time of Plaintiffs' transactions in October and November 2009. ( Id. ¶¶ 6-7.)

Generally, Principal Members like Defendant Brokers are required by FMLS to list all real estate for sale in a particular geographic area on the FMLS Database. ( Id. ¶¶ 37-38.) When a property listed on FMLS is bought or sold, each Principal Member involved in the transaction must pay FMLS a Sold Fee equal to.12% of the sales price. ( Id. ¶¶ 44, 47.) Thus, if one Principal Member represents the buyer in a transaction and another Principal Member represents the seller, both Principal Members pay FMLS a Sold Fee. These Sold Fees form the basis of Plaintiffs' fee-split claim.

Each month, FMLS pays its Principal Members Patronage Dividends based on the amount of available cash from Sold Fees and other revenues relative to its anticipated short-term expenses. ( Id. ¶ 69.) The Patronage Dividends are divided among Principal Members on a pro rata basis according to each Principal Member's pro rata contribution to the total amount of Sold Fees FMLS collected in the preceding twelve-month period. ( Id. ¶ 70.) Defendants assert that Patronage Dividends are a return of excess cash on hand, but Plaintiffs characterize them as kickbacks. The Court next explains how the FMLS model worked in connection to Plaintiffs' real estate transactions. All Brokers mentioned below are Defendants in this action and are Principal Members of FMLS.

II. Plaintiffs' Transactions

A. Heather Bolinger

In August 2009, Bolinger engaged Peggy Slappey Properties, Inc. ("PSP") to help her locate property to purchase, although they did not enter into a written agreement. ( Id. ¶ 82.) Bolinger later purchased a piece of property that PSP located using FMLS. ( Id. ¶¶ 83-84.) The sellers of that property had agreed to pay their broker, Atlanta Partners, 6% of the sale price, and Atlanta Partners in turn agreed to share 3% of the sale price with any cooperating broker (here PSP). ( Id. ¶ 87.) During negotiations, Atlanta Partners agreed to reduce its share of the commission to 2% and thus charged the sellers a 5% commission. ( Id. ¶ 88.) Atlanta Partners shared an amount equal to 3% of the sale price with PSP. (Id.) Bolinger paid no commission to either PSP or Atlanta Partners, and Plaintiffs do not dispute that Bolinger did not directly pay anything to FMLS. ( Id. ¶¶ 89-90.) Bolinger's broker, PSP, received its share of the commission from Atlanta Partners and deposited the commission in its operating account. ( Id. ¶ 97.) PSP then issued a check from its operating account to FMLS for the Sold Fee. ( Id. ¶ 98.)

B. Paul and Anne Terry

The Terrys entered into two written agreements to buy and sell property through Heritage Real Estate, Inc. ("Heritage"). ( Id. ¶¶ 99, 126.) The listing agreement for the sale of their house provided for a commission of $195 plus 6% of the gross sale price. ( Id. ¶ 106.) Heritage also agreed to share 3% of the sale price with a cooperating broker. (Id.) Under the agreement, Heritage further agreed to list the Terrys' home with FMLS and Georgia Multiple Listing Service. (Exclusive Seller Listing Agreement, Dkt. [273-48] at 3.)

The ultimate buyers of the home later found the Terrys' listing through the FMLS Database. (Defs.'SMF, Dkt. [272-1] ¶¶ 102, 104.) The Terrys sold their house, and Heritage ended up taking a lower commission of 6% of the net sale price instead of 6% of the gross sale price. ( Id. ¶ 107.) Heritage split half that commission with Bueno and Finnick, Inc. ("B&F"), the buyers' broker, while the Terrys' sales agent covered the $195 fee. (Id.) Heritage deposited the commission funds into its operating account. ( Id. ¶ 113.) Heritage then paid a Sold Fee to FMLS out of its operating account. ( Id. ¶ 114.)

The same day the Terrys closed the sale of their home, they also finalized the purchase of a new piece of property that Heritage had located through FMLS. ( Id. ¶¶ 123-28.) In their buyer brokerage agreement, the Terrys agreed to pay Heritage a $195 commission if Heritage earned a cooperating-broker commission of less than 3.5% of the sale price of the property. ( Id. ¶ 127.) At closing, the sellers paid a commission to their broker, Lanier Partners, and Lanier Partners shared 3% of the sale price with Heritage. ( Id. ¶ 131.) Because that commission was less than 3.5%, the Terrys paid Heritage a flat commission of $195 pursuant to the buyer brokerage agreement. ( Id. ¶ 133.) Heritage then paid FMLS a Sold Fee out of its operating account. ( Id. ¶ 142.)

III. Plaintiffs' Allegations

Plaintiffs allege that FMLS's payment of Patronage Dividends to its members constitutes a kickback in exchange for referrals. Under Plaintiffs' theory, Brokers referred Plaintiffs' business by placing listings on the FMLS Database and by paying Sold Fees after each sale. Plaintiffs argue, moreover, that Defendants split unearned commissions in violation of RESPA. First, Plaintiffs contend that because the Sold Fees FMLS collects exceed FMLS's operating costs by between 74% to 83%, that excess portion is unearned (a "front-end" split). (See Pls.' Resp., Dkt. [295] at 65-66.) Second, Plaintiffs state that because that excess portion of the Sold Fees is unearned, the use of those funds to pay Patronage Dividends is a second split of unearned commissions (a "back-end" split). Further, FMLS's members perform no service in return. (See id. at 71.)

Plaintiffs also assert that the Brokers and FMLS function together as affiliated business arrangements ("ABA") that Defendants failed to disclose in violation of RESPA. (See id. at 72.) Finally, Plaintiffs bring state-law claims of unjust enrichment, violation of Georgia's Uniform and Deceptive Trade Practices Act, O.C.G.A. § 10-1-370 et seq., and negligent misrepresentation. Defendants move for summary judgment on all claims.


I. Summary Judgment Legal Standard

Federal Rule of Civil Procedure 56 requires that summary judgment be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). "The moving party bears the initial responsibility of informing the... court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.'" Hickson Corp. v. N. Crossarm Co. , 357 F.3d 1256, 1259 (11th Cir. 2004) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986) (internal quotations omitted)). Where the moving party makes such a showing, the burden shifts to the non-movant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 257 (1986).

The applicable substantive law identifies which facts are material. Id. at 248. A fact is not material if a dispute over that fact will not affect the outcome of the suit under the governing law. Id . An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 249-50.

Finally, in resolving a motion for summary judgment, the court must view all evidence and draw all reasonable inferences in the light most favorable to the non-moving party. Patton v. Triad Guar. Ins. Corp. , 277 F.3d 1294, 1296 (11th Cir. 2002). But, the court is bound only to draw those inferences which are reasonable. "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Allen v. Tyson Foods, Inc. , 121 F.3d 642, 646 (11th Cir. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587 (1986)). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson , 477 U.S. at 249-50 (internal citations omitted); see ...

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