Hyland et al v. Homeservices of America, Inc. et al
MEMORANDUM AND OPINION by Senior Judge Thomas B. Russell on 1/17/2012; re 531 MOTION for Settlement Motion for an Order Directing that Class Members be Notified of the Pendency of this Class Action, and Preliminarily Approving the Proposed Settl ement with Defendant RE/MAX International, Inc. filed by Christopher R. Burnette, Mystic Burnette, 542 MOTION to Strike 529 MOTION for Settlement Most Favored Nation Provision filed by Homeservices of Kentucky, Inc., 550 MOTION for S ettlement Motion for an Order Preliminarily Approving the Proposed Settlement with Defendant ReMax of Kentucky-Tennessee, Inc. filed by Christopher R. Burnette, Mystic Burnette, 529 MOTION for Settlement filed by Christopher R. Burnette, Mystic Burnette ; an appropriate order(s) shall issuecc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
CASE NO. 3:05-CV-612-R
CASEY WILLIAM HYLAND, et al.
HOMESERVICES OF AMERICA, INC., et al.
This matter is before the Court upon Plaintiffs’ motions for preliminary approval of three
separate proposed settlements, with the following defendants: (1) the Realogy Defendants
(Realogy Corporation, Century 21 Real Estate LLC, and Coldwell Banker Real Estate
Corporation) (DN 529); (2) Re/Max International (DN 531); and (3) Re/Max of KentuckyTennessee (Suzy Watkins; Realtors 2000, Inc. d/b/a Re/Max Alliance; David Bischof Realty,
LLC d/b/a Re/Max Connections; Properties East, Inc. d/b/a Re/Max Properties East; and
Alliance Real Estate Services, LLC d/b/a Re/Max Alliance) (DN 550). Also before the Court is
the HomeServices Defendants’ motion to strike the most favored nation clause of the Plaintiffs’
proposed settlement with the Realogy Defendants (DN 542). Regarding the motion to strike,
Plaintiffs have filed a response (DN 546), the Reaology Defendants have filed a response (DN
547), and the HomeServices Defendants have filed a reply (DN 559). These matters are now
ripe for adjudication.
In this class action suit, filed on October 11, 2005, Plaintiffs allege that Defendants
engaged in a price-fixing conspiracy to inflate the price of commissions charged by real estate
brokers for the purchase of real estate in Kentucky. The remaining defendants can be
subdivided into five groups: (1) the HomeServices Defendants (HomeServices of America, Inc.
and HomeServices of Kentucky, Inc. d/b/a Semonin Realtors and Rector-Hayden Realtors); (2)
McMahan Company, Inc. d/b/a Coldwell Banker McMahan Company; (3) Re/Max International,
Inc.; (4) Re/Max of Kentucky-Tennessee (Suzy Watkins; Realtors 2000, Inc. d/b/a Re/Max
Alliance; David Bischof Realty, LLC d/b/a Re/Max Connections; Properties East, Inc. d/b/a
Re/Max Properties East; and Alliance Real Estate Services, LLC d/b/a Re/Max Alliance); and (4)
the Realogy Defendants (Realogy Corporation, Century 21 Real Estate LLC, and Coldwell
Banker Real Estate Corporation).
On November 17, 2007, this Court certified a Rule 23(b)(3) class consisting of “All
persons who paid a commission to Defendants and/or their affiliates . . . in connection with the
sale of residential real estate (excluding initial sales of newly constructed homes) located in the
Commonwealth of Kentucky during the period from October 11, 2001 to October 11, 2005 . . . .”
DN 322. Defendants sought to appeal the Court’s certification order; however, on March 13,
2009, the defendants’ petition for leave to appeal the Court’s order was denied by the Sixth
Circuit. DN 325.
On August 17, 2009, this Court denied Plaintiffs’ motion for a preliminary approval of a
proposed settlement with Re/Max International. DN 331. Pursuant to that proposed settlement,
Re/Max International would pay $46,250 in cash and provide cooperation to Plaintiffs in the
prosecution of this action against the remaining defendants. This cooperation would have
included Re/Max International making employees available for interviews and depositions, and
for declarations and affidavits. Re/Max International would further provide relevant documents
to Plaintiffs upon request and make its employees available to testify at the trial of this action.
This Court declined to preliminarily approve of this settlement citing concerns over the low
monetary value of the settlement in light of the costs of providing notice of the proposed
settlement. Specifically, “if notice of the settlement were not combined with other required
notices, this settlement would actually be a monetary net loss to the class.” DN 331 at 4. The
Court then noted that “[i]f other settlements are granted preliminary approval, the class’s
resources would be conserved by combining . . . all the communications with the class into a
single notice.” Id. at 5. For these reasons, the Court deferred consideration of the request for
preliminary approval until it could be determined if all or a substantial number of settlements as
a whole merit preliminary approval. Id. at 6.
On November 23, 2011, Plaintiffs filed a motion for preliminary approval of a proposed
settlement with the Realogy Defendants (DN 529). Plaintiffs simultaneously filed a motion
renewing its previously denied motion for preliminary approval of the Re/Max International
settlement (DN 531). Then, on December 15, 2011, Plaintiffs filed a motion for preliminary
approval of a proposed settlement with the Re/Max of Kentucky-Tennessee group of defendants
STANDARD FOR PRELIMINARY APPROVAL
Class actions may be settled or compromised only with the approval of the court and after
giving notice of the proposed settlement to the class. Fed.R.Civ.P. 23(e). There is a three-step
process that district courts follow when approving a class action settlement:
(1) the court must preliminarily approve the proposed settlement, i.e., the court
should determine whether the compromise embodied in the decree is illegal or
tainted with collusion; (2) members of the class must be given notice of the
proposed settlement; and (3) a hearing must be held to determine whether the
decree is fair to those affected, adequate and reasonable.
Tennessee Assoc. of Health Maintenance Orgs., Inc. v. Grier, 262 F.3d 559, 565-66 (6th
Cir.2001). In determining whether preliminary approval is appropriate, the Court should
evaluate whether the proposed settlement “appears to be the product of serious, informed, non-
collusive negotiation, has no obvious deficiencies, does not improperly grant preferential
treatment to class representatives or segments of the class, and falls within the range of possible
approval.” In re Nasdaq Market-Makers Antitrust Litigation, 176 F.R.D. 99, 102
As the Court previously stated in its Order denying Plaintiffs’ previous motion for
preliminary approval of the proposed settlement with Re/Max International, it would be helpful
for the Court to consider the terms of all the proposed settlements as a whole when deciding if
preliminary approval is appropriate.2 Accordingly, the Court will separately examine the terms
and conditions of each of the proposed settlements and then determine the adequacy of the
settlements as a whole.
Proposed Settlement with Realogy Defendants
a. The Terms of the Proposed Settlement
Plaintiffs and the Realogy Defendants reached this settlement with the mediation
assistance of the Honorable Richard B. Solum, now retired. In consideration for a release by the
As the Court must determine whether the proposed settlement falls within the range of possible
approval, it is worth noting the factors the Court will consider when ultimately determining whether the
settlement is fair, reasonable and adequate. These include:
(1) the risk of fraud or collusion; (2) the complexity, expense and likely duration of the
litigation; (3) the amount of discovery engaged in by the parties; (4) the likelihood of
success on the merits; (5) the opinions of class counsel and class representatives; (6) the
reaction of absent class members; and (7) the public interest.
Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers of America v.
General Motors Corp., 479 F.3d, 615, 631 (6th Cir.2007).
“If several such settlements are being negotiated, it is ordinarily wise to defer consideration until all are
submitted, thereby saving the time and expense of successive notices and hearing and allowing the judge
and class members to assess the adequacy of the settlements as a whole.” Manual for Complex Litigation
Class Members, the Realogy Defendants have agreed to pay an amount up to $7,500,000 directly
to class members, and up to $1,100,000 for the cost of notice, settlement administration, Class
Counsel’s costs, and attorneys’ fees.
With respect to the amount to be paid directly to class members, upon the timely
submission of a claim establishing that the dismissing plaintiff is a member of the class, the
Realogy Defendants will pay the following amounts:
(1) $125 per claim for each dismissing plaintiff who is a member of the class by
reason of having sold certain Kentucky residential real property during the class
period through HomeServices of America or its affiliates;
(2) $75 per claim per claim for each dismissing plaintiff who is a member of the
class by reason of having sold certain Kentucky residential real property during
the class period through Realogy or its affiliates; and
(3) $30 per claim for each dismissing plaintiff who is a member of the class by
reason of having sold certain Kentucky residential real property during the class
period through the Re/Max or its affiliates or franchisees.3
According to the affidavit of Gary Jacobson, counsel for Plaintiffs, the amount to be paid directly
to class members could total $7,536,965. The Reaology Defendants would make a payment of
attorneys’ fees and costs, in an amount to be approved by the Court, not to exceed $1,000,000.
Additionally, the Realogy Defendants would make a payment of costs of direct mail notice and
one-half of the costs of claims administration up to $100,000.
Plaintiffs contend that preliminary approval of their proposed settlement with the
Realogy Defendants is proper based on “their experience, their knowledge of the strengths and
weaknesses of the case, their analyses of the likely recovery at trial and after appeals, the risks of
litigation, and of the [ ] factors [set forth in Int'l Union, United Automobile, Aerospace & Agricultural
Implement Workers of America v. General Motors Corp].” DN 529-1 at p. 10.
A dismissing plaintiff who submits the approved claims forms and who sold more than one property
through these defendants will receive from the Realogy Defendants, the appropriate sum in respect to
each such sale.
b. The HomeServices’ Defendants’ Motion to Strike
With respect to the Plaintiffs’ proposed settlement with the Realogy Defendants, the
HomeServices Defendants have filed a motion to strike paragraph 11, the Most Favored Nation
(MFN) Clause. This MFN Clause provides as follows:
11. Most Favored Nation. The most favored nation clause shall apply to and only
to settlements with the HomeServices Defendants. Effective upon the date
hereof, [unless there is a material change from present circumstances such that
the prospect or amount of ultimate recovery from the HomeServices Defendants is
substantially lessened or reduced,] in the event that Dismissing Plaintiffs’
settlement in this Action with any of the HomeServices Defendants provides a
more favorable term or terms than the term or terms set forth herein, then the
Realogy Defendants shall be entitled to the more favorable term or terms and this
Settlement Agreement shall be amended to incorporate the more favorable term or
terms. In the event that the more favorable term relates to the Settlement
Consideration set forth in paragraph 5 hereof, the amount paid by the Realogy
Defendants shall be equitably reduced to be the same as in the more favorable
subsequent settlement. In that event, the Realogy Defendants shall be entitled to
receive a payment, out of the funds to be paid by the HomeServices Defendant
that would otherwise be paid to the benefit of the Class, to reduce the amount paid
or to be paid by the Realogy Defendants per Class Member to the same level per
Class Member as the amount paid or to be paid by the settling HomeServices
Defendant; and such payment to the Realogy Defendants shall be made prior to
any payment to the Class pursuant to the settlement with the HomeServices
Defendant. Notwithstanding the foregoing, this provision does not apply to any
term or terms that are contained in a settlement agreement for which plaintiffs
and/or the HomeServices Defendants have moved for preliminary approval or
entered into a Memorandum of Understanding prior to the date this Settlement
Agreement is entered into. Example No.1: If Plaintiffs settled with the
HomeServices Defendants for an aggregate consideration equal to $125 per claim
for members of the Class who sold property through the HomeServices
Defendants, $75 per claim for members of the Class who sold property through
franchises of the Realogy Defendants or their affiliates, and $30 per claim for
members of the Class who sold property through defendant RE/MAX or its
affiliates or franchisees, then there shall be no credit or payment due under this
most favored nations clause. Example No. 2: If Plaintiffs settle with the
HomeServices Defendants for an aggregate consideration in which the payment is
a specified sum (e.g., $3,000,000), then the aggregate consideration paid by the
Realogy Defendants under this Settlement Agreement shall be compared against
the aggregate sum paid by the HomeServices Defendants under the HomeServices
settlement agreement for purposes of this most favored nations clause.
After the HomeServices Defendants filed a motion to strike the MFN Clause, the parties
held a “meet and confer” on December 5, 2011. As a result of this meeting, Plaintiffs and the
Realogy Defendants negotiated an amended MFN clause which contains a “material change”
amendment. This material change clause is demarcated in brackets above. The amended MFN
clause defines “material change” as “an important change in circumstances, such as (i) a grant of
summary judgment or partial summary judgment for the HomeServices Defendants, (ii) a decertification of the Class that has been certified in this action, (iii) an adjudication in favor of the
HomeServices Defendants, or (iv) any other change in circumstances that is of substantially
similar material significance as the previous examples.” The amended MFN Clause also
provides that “this provision shall terminate one year from the date hereof.”
Despite the amendment to add the material change amendment, the HomeServices
Defendants contend that this clause should be stricken from the proposed settlement with the
Realogy Defendants because it is predatory, violative of public policy, and because the changes
to the MFN clause are illusory. Plaintiffs responded that Class Counsel made a valid judgment
in agreeing to the challenged MFN Clause, and that the HomeServices Defendants’ motion is
procedurally improper and otherwise unsupported in law. Additionally, the Realogy Defendants
contend that the HomeServices Defendants lack legal standing to challenge the MFN Clause.
As an initial matter, the Court will address Plaintiffs’ position that the HomeServices
Defendants’ motion to strike is procedurally improper. Federal Rules of Civil Procedure 12(f)
provides that “the court may order stricken from any pleading any insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.” The Court agrees with Plaintiffs that
this Rule in unavailing to the HomeServices Defendants because the Plaintiffs’ proposed
settlement agreement is not a pleading. Further, “nonsettling defendants in a multiple defendant
litigation context have no standing to object to the fairness or adequacy of the settlement by other
defendants, but they may object to any terms that preclude them from seeking indemnification
from the settling defendants. Nonsettling defendants also have standing to object if they can
show some formal legal prejudice to them, apart from loss of contribution or indemnity rights.” 4
Newberg on Class Actions § 11:55.
The HomeServices Defendants contend that they have standing to object because the
MFN Clause is an absolute economic and legal barrier to any settlement. However, “[m]ere
allegations of injury in fact or tactical disadvantage as a result of a settlement simply do not rise
to the level of plain legal prejudice.” Agretti v. ANR Freight Sys., Inc., 982 F.2d 242, 247 (7th
Cir. 1992) (citation omitted). Although the inclusion of the MFN Clause may put the
HomeServices Defendants at a tactical disadvantage, it does not amount to a formal legal
prejudice required to bestow standing to challenge the proposed settlement. Nevertheless,
regardless of whether the HomeServices Defendants can show formal legal prejudice, it remains
the Court’s duty to determine whether the proposed settlement is “at least sufficiently fair,
reasonable and adequate to justify notice to those affected and an opportunity to be heard.” In re
Baldwin-United Corp., 105 F.R.D. 475, 482 (S.D.N.Y.1984). Therefore, as part of this duty, the
Court will consider whether the inclusion of the amended MFN Clause in the proposed
settlement constitutes an obvious deficiency or militates against finding that the proposed
settlement falls within the range of possible approval.
II. Proposed Settlement with Re/Max International
The terms of the Plaintiffs’ proposed settlement with Re/Max International are the same
as the proposed settlement that this Court declined to preliminarily approve in its August 17,
2009 Order (DN 331). Plaintiffs contend that this Court should now preliminarily approve this
settlement because it has alleviated two of the concerns previously expressed by the Court: (1) it
combines notice of the Re/Max International settlement with notice of additional settlements
with other Defendants so as to conserve resources, and (2) it combines notice of the pendency of
this certified class action to the Class so as to conserve resources. Plaintiffs maintain that
Re/Max International’s cooperation constitutes valuable consideration in this settlement.
Additionally, counsel for Plaintiffs have determined that the risks of holding Re/Max
International liable are substantially greater than those same risks with respect to the other
Defendants in this action.
III. Proposed Settlement with Re/Max of Kentucky-Tennessee
The terms of the Plaintiffs’ proposed settlement with Re/Max of Kentucky-Tennessee are
substantially similar to the terms of the proposed settlement with Re/Max International. After
the Court’s entry of a final approval of the proposed settlement, Re/Max of Kentucky-Tennessee
will make a payment of $42,500 as well as provide cooperation in the continued prosecution of
this action against the non-settling Defendants in the form of interviews with officers and
employees, provision of affidavits, deposition and trial testimony, and the provision and
authentication of non-privileged documents. In exchange, Re/Max of Kentucky-Tennessee will
receive a release of the claims from Plaintiffs and class members.
Plaintiffs state that continued litigation against Re/Max of Kentucky-Tennessee poses
unique risks due to its unique defenses such as the presence of arbitration clauses in its
Franchisees’ agreements, the enforcement of which posed a risk that a class would not have been
certified and treble damages may not have been available. Re/Max of Kentucky-Tennessee was
the sub-franchisor of various Re/Max entities in Kentucky, but does not own these entities and
they are not subsidiaries of Re/Max of Kentucky-Tennessee.
IV. The Adequacy of the Proposed Settlement Agreements as a Whole
There is no evidence that the proposed settlements with the Realogy Defendants, Re/Max
International, and Re/Max of Kentucky-Tennessee are anything other than the product of noncollusive negotiations, as this action has been vigorously litigated by all the parties.
Additionally, the proposed settlements are the product of lengthy negotiation between the parties
involved and, at least with respect to the Realogy settlement, were negotiated with the assistance
of a neutral mediator.
The proposed settlements also do not improperly benefit any segment of the class. With
respect to the Realogy settlement, the differing amounts to be paid depending upon the broker
represents a judgment regarding proof of the price-fixing allegations and the relative risks
concerning the defendants’ capability to respond to any substantial judgment against them and
whether the corporate parent (which may have a greater capacity to respond) would ultimately be
made liable for the acts of its subsidiaries. DN 529-2, Solum Declaration at ¶ 6. Therefore, the
remaining issue before the Court is whether the proposed settlements have any obvious
deficiencies, and whether the settlement falls within the range of possible approval. The
proposed settlements should be “at least sufficiently fair, reasonable and adequate to justify
notice to those affected and an opportunity to be heard.” In re Baldwin-United Corp., 105
F.R.D. 475, 482 (S.D.N.Y.1984).
With respect to the Re/Max International and now the Re/Max of Kentucky-Tennessee
settlements, the issue remains that these settlements provide negligible monetary value to the
class members. However, the ability to combine notice of these proposed settlements with notice
of the proposed Realogy settlement and notice of the pendency of this action does alleviate some
of the concerns expressed by this Court in its August 17, 2009 Order. Additionally, due to the
extensive discovery that has already taken place, the opinions of Plaintiffs’ counsel regarding the
relative risks of proceeding with litigation against these defendants is entitled to some weight.
See Meijer, Inc. v. Warner Chilcott Holdings Co. III, Ltd., 565 F.Supp. 2d 49, 57 (Dist. D.C.
2008). The Court is cognizant that complex antitrust litigation is rife with uncertainties, risks,
and delays and that there is at least some value to the “cooperation agreement” which may
improve the chance of recovery against the remaining defendants. Accordingly, the Court finds
that the proposed settlements between the Plaintiffs and Re/Max International and Re/Max of
Kentucky-Tennessee are sufficiently fair, adequate, and reasonable to justify notice to the
settlement class for an opportunity to be heard.
With respect to the proposed settlement with the Realogy Defendants, the Court has
certain reservations regarding the inclusion of the MFN Clause at this late stage of the litigation.
The Court’s principal concern is that the MFN Clause will significantly lessen the likelihood of
any settlement between the HomeServices Defendants and Plaintiffs. If after completion of
discovery it appears that Plaintiffs’ case against the HomeServices Defendants is not as strong as
once thought, Plaintiffs would be “straight-jacketed” from settling for an amount less than the
settlement with the Realogy Defendants. However, the material change amendment does
provide for some flexibility in this regard. For this reason, the Court does not find the inclusion
of this MFN Clause to be a barrier to preliminary approval at this time.
For the foregoing reasons, the Court finds that the proposed settlements are sufficiently
fair, adequate, and reasonable to justify notice to the settlement class for an opportunity to be
heard. Defendants’ motion to strike (DN 542) is DENIED and Plaintiffs’ motions for
preliminary approval of the proposed settlements (DN 529, DN 531, and DN 550) are
With respect to the proposed Notice of Pendency of Class Action, Proposed Partial Class
Settlements and Hearing IT IS FURTHER ORDERED that, in each of the sections giving notice
of the respective proposed settlements, Plaintiffs shall revise the “Object to Settlement” Option4
to make clear that class members must send their objections, bearing the caption Hyland v.
HomeServices of America, Civil Action No. 3:05-cv-612, to the Clerk of Court at the following
Office of the Clerk
Gene Snyder United States Courthouse
601 W. Broadway, Room 106
Louisville, Kentucky 40202
The appropriate orders shall issue.
January 17, 2012
Located on pages 10, 17-18, and 23-24 of the Notice of Pendency of Class Action, Proposed Partial
Class Settlements and Hearing. DN 550-5.
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