– Copycat commission lawsuits are spreading across the country following the Sitzer/Burnett jury verdict.
– “Ambulance chasers” (personal injury lawyers) are now getting involved in these lawsuits.
– The real estate industry may be at risk of facing multiple lawsuits, potentially leading to consolidation into a multi-jurisdiction litigation suit.
– The first lawsuit filed has a higher chance of survival, while later lawsuits may be dismissed, transferred, or consolidated with the initial lawsuit.
– Personal injury lawyers are targeting smaller targets in the industry for an easier payday.
– The Burton suit in South Carolina and the QJ Team lawsuit in Texas are examples of lawsuits that aim to localize the claims and prevent consolidation.
– Brokers are increasingly concerned that their firms may be the next target of these copycat lawsuits.
– Settlements are becoming more likely as the number of lawsuits increases.
– Class-action real estate commercials may start appearing on television and radio, encouraging consumers to join lawsuits or be part of a class to claim damages.
As copycat commission lawsuits spread across the country in the wake of the Sitzer/Burnett jury verdict, a new demographic of plaintiffs’ attorneys are getting in on the action: so-called “ambulance chasers.”
While the plaintiffs in the Moehrl, Sitzer/Burnett and Nosalek lawsuits are all represented by large law firms with class-action experience, the plaintiff in the relatively small Burton suit in South Carolina is represented by attorneys at Knie & Shealy Law Offices in Spartanburg. The firm’s website advertises that it specializes in personal injury lawsuits.
“It’s not good,” Mike Ruggio, a partner at Taylor English Duma LLP and an antitrust law professor at Pittsburgh Law School, said.
“Whenever you see personal injury lawyers coming, it’s not a good sign. I hate to say it, but they can be kind of mercenary in how they go about things, and they look for the best percentages they can.”
Due to this, Marx Sterbcow, the managing partner at Sterbcow Law Group, fears the real estate industry may be in for a “death by a thousand cuts.”
“I could see this being brought out among states and having attorneys trying to basically create their own territory within one state to try and avoid multi-jurisdiction litigation or class actions,” Sterbcow said.
Although the number of copycat commission lawsuits has proliferated in the two weeks since the jury verdict in the Sitzer/Burnett suit was announced, these lawsuits potentially run the risk of being consolidated into a multi-jurisdiction litigation suit, as there are federal rules in place to prevent the wildfire-like spread of copycat lawsuits.
According to these rules, the first lawsuit filed will most likely survive while everything filed after may be dismissed, transferred or consolidated in with the initial lawsuit. However, if the issues raised, plaintiffs or defendants differ enough in these later lawsuits, they have a higher chance of survival.
This explains why Michael Ketchmark, the lead attorney for the plaintiffs in the Sitzer/Burnett suit, chose to sue a whole different group of corporate brokerages in the Gibson lawsuit he filed just hours after the Sitzer/Burnett verdict was announced. This also provides a window of opportunity for personal injury lawyers.
“Those guys aren’t going after big dogs with big war chests and defense firms on retainer. They want smaller targets who are far easier to greenmail,” industry analyst Rob Hahn wrote in the Nov. 12 edition of his NotoriousROB email newsletter in reference to personal injury lawyers.
“Once the local personal injury guys really get involved, we’ll see hundreds, maybe thousands of cases filed across the entirety of the industry. Not because any of those lawyers give a goddamn about the consumer, but because they want an easy payday. Ten thousand fists in the air indeed.”
The industry has already had a preview of this with the Burton suit in South Carolina, which only names the National Association of Realtors and Keller Williams as defendants, unlike some of the other copycat lawsuits, such as the Batton 2 suit, which names seven defendants, or the March lawsuit and its 27 Manhattan brokerage defendants.
The recently filed QJ Team lawsuit in Texas also seems to be adopting a similar strategy despite the plaintiffs employing two major class-action law firms, Lynn Pinker Hurst & Schwegmann and Kaplan Fox & Kilscheimer.
Although the suit names major corporate brokerages like Keller Williams and HomeServices of America, it also names real estate teams, such as The Loken Group and Hexagon Group, as well as an individual broker, Mark Anthony Dimas, suggesting that the plaintiffs’ attorneys are looking to localize the lawsuit in order to prevent consolidation with other suits with the same claims. Several local Realtor Associations were also named, which is different than the earlier suits.
As more and more copycat lawsuits pop up, brokers are increasingly concerned their firm may be next.
“I think it is just a matter of time until the copycat lawsuits are in every state going after every brokerage,” Lisa Chinatti, the broker-owner of Chinatti Realty, said. “I think the question mark is whether it retains itself to just the brokerage level or whether it trickles down to the team or even agent level.”
In addition, as the lawsuits continue to pile up, the likelihood that brokerage firms decide to settle also increases.
“Getting enough lawyers to defend this, it is just cost-prohibitive to go at this alone,” Sterbcow said. “This is a big boy’s game and everybody else is caught up with the tsunami of water coming in on the shore.”
Despite an increased likelihood of settlements, Sterbcow believes it’s just a matter of time before class-action real estate commercials start popping up on television and radio.
“You’re going to start seeing a lot more advertising for consumers across the country to either join a lawsuit or to be part of a class, and it will almost become like a BP oil spill-type arrangement, to some degree, given the large dollar amounts that are involved,” Sterbcow said.
“It will be: ‘Have you or a loved one closed on a house in the last five years and used a real estate agent? If so, please give us a call as you may be entitled to damages.’”
Property Chomp’s Take:
In recent times,
While the initial commission lawsuits were filed by large law firms with class-action experience, the recent Burton suit in South Carolina is being represented by personal injury attorneys from Knie & Shealy Law Offices. This shift in representation has raised concerns within the industry. Antitrust law professor Mike Ruggio warns that personal injury lawyers can be opportunistic and may prioritize their own financial gain over the interests of their clients.
The involvement of personal injury lawyers has led to fears that the real estate industry may face a barrage of lawsuits, creating a “death by a thousand cuts” scenario. These lawyers may seek to establish their own territories within a state to avoid multi-jurisdiction litigation or class actions. This fragmentation of lawsuits could make it more challenging for defendants to defend themselves effectively.
However, federal rules exist to prevent the proliferation of copycat lawsuits. According to these rules, the first lawsuit filed is likely to survive, while subsequent lawsuits may be dismissed, transferred, or consolidated with the initial case. The survival of later lawsuits depends on the differences in issues raised, plaintiffs, or defendants.
To exploit potential loopholes, lead attorney Michael Ketchmark filed the Gibson lawsuit shortly after the Sitzer/Burnett verdict, targeting a different group of corporate brokerages. This strategy opens up opportunities for personal injury lawyers to find smaller targets and easier financial settlements.
The Burton suit in South Carolina and the recently filed QJ Team lawsuit in Texas also demonstrate a localization strategy. These lawsuits name specific brokerages, real estate teams, and individuals, aiming to prevent consolidation with other similar cases. This approach complicates the legal landscape and adds to the uncertainty for brokers, who fear they may become the next target.
As the number of copycat lawsuits continues to rise, brokerage firms face increasing pressure to settle. The costs of defending these lawsuits are often prohibitive, leading many to consider settlement as a more viable option. This trend towards settlements may pave the way for class-action real estate commercials to appear on television and radio, encouraging consumers to join lawsuits or become part of a class seeking damages.