A lawsuit, Bolinger, et al., vs. First Multiple Listing Service, Inc., Defendant Class of Real Estate Brokers, et al., was filed on October 14, 2010 in federal court in Gainesville, Georgia, on behalf of buyers and sellers of residential real estate in metro Atlanta and North Georgia against First Multiple Listing Service, Inc. (“FMLS”), its member real estate brokers, the agents who handled the transactions of the named plaintiffs, and three boards of REALTORS®. FMLS is a multiple listing service (“MLS”) that provides an electronic database for listing residential real estate for sale.  It is the largest MLS in metro Atlanta and North Georgia.  The suit alleges a longstanding practice of FMLS and its members paying themselves, and consequently charging buyers and sellers, unearned hidden transaction fees and kickbacks in connection with residential real estate closings in violation of federal and state law.

Since 1974, the federal Real Estate Settlement Practices Act (“RESPA”) has required full disclosure of all fees and charges in real estate closings involving a federal mortgage loan.  It therefore applies in the vast majority of residential real estate sales.  RESPA also prohibits unearned fees or kickbacks designed to encourage the referral of business by settlement service providers, such as FMLS and its members.  One of the principal purposes of these RESPA provisions is to lower the cost of real estate closings by eliminating secret and inflated charges.

The lawsuit alleges that members of FMLS, which include virtually every residential real estate broker and agent in North Georgia, are required to list with FMLS all properties for sale that are located in a “compulsory area” that includes  17 Georgia counties and to pay undisclosed, unearned transaction fees to FMLS after closing and all services are rendered.  The lawsuit also alleges that the brokers later receive a kickback of all or substantially all of those fees from FMLS, and share in transaction fees paid on other closings.  The suit further contends that these unearned transaction fees and kickbacks are funded by real estate commissions paid by consumers.  The alleged undisclosed, post-closing transaction fee is $1.20 per thousand dollars of the selling price (i.e., .0012% of the sales price), and is doubled if the listing and selling agents work for different brokers.  For example, the sale of a house for $200,000 with different listing and selling agents would result in an undisclosed, post-closing transaction fee of $240.  According to the lawsuit, neither the transaction fee nor the kickback is ever disclosed to the buyer or seller, either in the voluminous documents executed at closing or otherwise.

The lawsuit also challenges these practices under the Sherman Act, which is the core federal antitrust law.  Notably, the “MLS Antitrust Compliance Policy” of the National Association of REALTORS® expressly prohibits basing MLS fees on a percentage of the sales price rather than the value of the services rendered.  Yet investigation for the lawsuit found not only that, as alleged, FMLS charges a per-transaction fee based on the sales price, and pays a kickback to brokers for utilizing its services, but that FMLS may be the only MLS in the country to do so. Further, the fees associated with FMLS are alleged to be higher than those charged by MLS’s elsewhere in Georgia and around the country.

The lawsuit asserts numerous claims under RESPA, the Sherman Act, the Georgia Uniform Deceptive Trade Practices Act, and other state law.  In the last year alone, the alleged unearned transaction fees and kickbacks are estimated to be in the tens of millions of dollars.  The commissions associated with these fees are many times greater.  The lawsuit seeks to recover for plaintiffs and other similarly situated buyers and sellers these commissions, undisclosed transaction fees, kickbacks, and other damages for at least the last four years, plus their costs and attorney’s fees for bringing this case, and to enjoin defendants from continuing these allegedly unlawful practices.

Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C. is a regional and nationwide civil trial law firm committed to excellent representation and legal counsel. We specialize in and handle consumer litigation, including deceptive trade practices; business fraud and commercial tort cases; contract disputes; business to business litigation; and cases of catastrophic injury and wrongful death involving issues related to automotive and general products liability; car, truck, and construction accidents; insurance coverage litigation and premises liability cases. Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C., is known for its effective, aggressive, expedient and novel methods to resolve complex litigation matters.

We have joined forces with the firm of Taylor English Duma, a full service firm with a broad litigation practice, including class actions, and the Sterbcow Law Group, LLC, a New Orleans based firm with extensive experience with RESPA and related legal issues arising in the real estate industry.

Call Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C. at 404-523-7706 today for a confidential, no-charge consultation regarding your potential claims.