Hyland et al v. Homeservices of America, Inc. et al
MEMORANDUM AND OPINION by Senior Judge Thomas B. Russell on 5/3/2012; re 601 MOTION to Notice Motion for Final Approval of the Settlement of the Claims Against Defendants Realogy Corporation, Century 21 Real Estate LLC, Coldwell Banker Real Estate Corporation, Avis Budget Group, Inc., fka Cendant Corporation, REMAX Internat filed by Christopher R. Burnette, Mystic Burnette; appropriate orders shall enter cc: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 Plaintiff’s motion for final approval of the
settlement of claims against Defendants Realogy Corporation, Century 21 Real Estate LLC,
Coldwell Banker Real Estate Corporation, Avis Budget Group, Inc., f/k/a Cendant Corporation,
REMAX International, Inc., REMAX Kentucky-Tennessee, Inc. Suzy Watkins, Realtors 2000,
Inc. d/b/a REMAX Alliance, David Bischof Realty, LLC, d/b/a RE/MAX Connections,
Properties East, Inc. d/b/a REMAX Properties East, and Alliance Real Estate Services, LLC,
d/b/a REMAX Alliance (DN 601). Also before the Court is Plaintiff’s motion for reimbursement
of costs and/or interim award of attorneys’ fees (DN 608). The Court held a final fairness
hearing in this matter on April 17, 2012. This matter is now ripe for adjudication. For the
following reasons, Plaintiffs’ motions are GRANTED.
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 defendants can be subdivided into the
following 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
Group (Re/Max International, Inc.; Properties East, Inc. d/b/a Re/Max Properties East; Alliance
Real Estate Services, LLC d/b/a Re/Max Alliance; Realtors 2000, Inc. d/b/a Re/Max Alliance);
(4) Re/Max of Kentucky/Tennessee, Inc.; and (5) 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, citing concerns over the low monetary value of
the proposed settlement in light of the costs of providing notice of the proposed settlement. DN
331. 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 Re/Max of Kentucky-Tennessee. DN 550. The Court
preliminarily approved all three proposed settlements on January 17, 2012 and ordered that
Plaintiffs provide notice of the class action and of the proposed settlements to class members.
Plaintiffs have now filed a motion for final approval of the three class action settlements
and a motion for reimbursement of costs and/or an interim award of attorneys’ fees. The Court
held a final fairness hearing on April 17, 2012. No objections were filed with the Court, and no
objectors appeared at the fairness hearing to comment or object on the proposed settlements.
The Court is now prepared to issue its final decision on the class action settlements in this case.
1. The Proposed Settlements
a. The Re/Max International and Re/Max of Kentucky-Tennessee Settlements
The terms of Plaintiffs’ proposed settlement with Re/Max of Kentucky-Tennessee and
the terms of the proposed settlement with Re/Max International are substantially similar. 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 and Re/Max International will make a payment of $46,250.
Additionally, Re/Max of Kentucky-Tennessee and Re/Max International will 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 and Re/Max International will receive a release of the claims
from Plaintiffs and class members.
b. The Realogy 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
Class Members, the Realogy Defendants have agreed to pay an amount up to $5,096,6401
According to the affidavit of Gary Jacobson, counsel for Plaintiffs, the amount to be paid
directly to class members could total $5,096,640. At the time the Court preliminarily approved
the Realogy Settlement, Plaintiffs estimated this amount to be $7,536,965. However, Counsel
for Plaintiffs recently filed a supplemental declaration with a more conservative estimate of the
directly to class members, up to $1,000,000 for Class Counsel’s costs and attorneys’ fees, and up
to $100,000 for the costs of direct mail notice and settlement administration. 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 have agreed to 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.2
The proposed Realogy Settlement also has a Most Favored Nation (“MFN”) Clause, to
which the HomeServices Defendants object. The Clause provides:
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. For purposes of this Agreement, a “material change”
shall mean an important change in circumstances, such as (i) a grant of
summary judgment or partial summary judgment for the HomeServices
Defendants, (ii) a de-certification of the Class that has been certified in this
number of class members who sold residential real estate through each of the respective
defendants. DN 619.
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.
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. 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. This provision shall terminate one year from the
The HomeServices Defendant objected to the inclusion of the MFN provision in the
Realogy Settlement Agreement as predatory and violative of public policy. After they filed a
motion to strike to MFN provision, Plaintiffs and counsel for the Realogy Defendants amended
the clause, adding the sentences that appear in bold above. After the amendment, the
HomeServices Defendants continued to object to the inclusion of the amended MFN provision,
noting that the changes were merely illusory. In the Court’s order preliminarily approving the
Realogy Settlement, the Court found that the HomeServices Defendants did not have standing to
object to the MFN provision because they had not shown that its inclusion would result in formal
legal prejudice. Reviewing the settlement agreement for fairness, the Court noted its
reservations regarding the MFN provision. Specifically, the Court noted that its inclusion would
significantly lessen the likelihood of any settlement between the HomeServices Defendants and
Plaintiffs. However, because the material change amendment provided some flexibility, the
Court did not find its inclusion to be a barrier to preliminary approval.
2. Plaintiff Provided Proper Notice
The Court finds that the notice process was adequate and consistent with Federal Rule of
Civil Procedure 23 and the standards of due process. Rust Consulting, Inc. (“Rust”), the
settlement administrator, was responsible for disseminating notice to the class members. From
January 27, 2012 to February 28, 2012, Rust mailed a total of 122,490 notice packets to the list
of class members provided to it by Plaintiffs’ counsel. DN 601-5 at ¶ 12. In response to
inquiries from potential class members, Rust mailed an additional 27 notice packets. Id. at ¶ 14.
As of March 22, 2012, the United States Postal Service had returned 22,608 notice packets as
undeliverable without forwarding addresses; 9,066 of these notice packets were re-mailed to the
class members after new addresses were located. Id. at ¶ 15. On February 3, 2012 and February
8, 2012, publication notice was published in 13 newspapers. Id. at ¶ 17. Although pursuant to
this Court’s order banner advertisements were to appear on Zillow.com and Homes.com,
Zillow.com refused to allow the banner advertisement. In lieu of banner advertisement on
Zillow.com, Rust caused the banner advertisement to appear on Realtor.com. As of March 3,
2012, the online banner advertisements had delivered 1,028,974 impressions. Id. at ¶ 18.
Additionally, a website dedicated to the settlement was established.3
3. Final Approval of the Settlement
The Court may approve a settlement that would bind class members only after a hearing
and a determination that the settlement is fair, reasonable, and adequate. Fed.R.Civ.P. 23(e)(2).
The United States Court of Appeals for the Sixth Circuit has held the following seven factors
should “guide the inquiry”:
(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 Auto., Aerospace, and Agric. Implement Workers of America v. Gen. Motors
Corp., 497 F.3d 615, 631 (6th Cir.2007) (internal citations omitted). No one of these factors is
dispositive. Rather, all are to be weighed and considered in light of the particular demands of the
case. See, e.g., Grenada Investments, Inc. v. DWG Corp., 962 F.2d 1203, 1205-06 (6th
Cir.1992). Federal policy favors class action settlement. Int'l Union, 497 F.3d at 632. In fact,
“[o]nce preliminary approval has been granted, a class action settlement is presumptively
reasonable, and an objecting class member must overcome a heavy burden to prove that the
settlement is unreasonable.” Levell v. Monsanto Research Corp., 191 F.R.D. 543, 550 (S.D.Ohio
2000) (citing Williams v. Vukovich, 720 F.2d 909, 921 (6th Cir.1983); Bronson v. Bd. of Educ. of
City School Dist. of Cincinnati, 604 F.Supp. 68, 71 (S.D.Ohio 1984)).
a. The Risk of Fraud or Collusion
“‘Courts presume the absence of fraud or collusion in class action settlements unless
there is evidence to the contrary.’” Thacke v. Chesapeake Appalachia, L.L.C., 695 F.Supp.2d
521, 531 (E.D. Ky. 2010) (quoting Leonhardt v. ArvinMeritor, Inc., 581 F.Supp.2d 818, 838
(E.D.Mich.2008)). This Court discussed the risk of fraud or collusion briefly in its preliminary
approval of the settlements, finding:
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 non-collusive 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 pricefixing 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.
DN 568 at p. 9.
Since that time, the Court has not been presented with any additional information which
may evidence fraud or collusion with respect to the settlements. However, the HomeServices
Defendants continue to object to the inclusion of the MFN Clause in the Realogy Settlement.
After hearing from the parties at the fairness hearing, the Court finds that the inclusion of the
MFN Clause is not reason to deny approval of the proposed settlements. The inclusion of the
MFN clause was suggested by the Hon. Richard Solum, an impartial mediator. Further, the
inclusion of the MFN clause helped induce the Realogy Defendants to enter the settlement,
thereby conferring a benefit to the class. Although its inclusion may lessen the likelihood of any
settlement with the HomeServices Defendants, the MFN clause does not preclude settlement
with the non-settling defendants and the material change amendment does provide some
flexibility in this regard. Accordingly, the Court finds no evidence of collusion or fraud, and this
factor weighs in favor of finding the settlement agreements to be fair, reasonable, and adequate.
b. The Complexity, Expense, and Likely Duration of the Litigation
“In evaluating a proposed class settlement, the Court must also weigh the risks, expense
and delay the plaintiffs would face if they continued to prosecute the litigation through trial and
appeal.” Thacker, 695 F.Supp.2d at 531 (citations omitted). The Court weighs these factors
against the recovery provided by the settlement. In re Cardizem CD Antitrust Litig., 218 F.R.D.
508, 523 (E.D.Mich.2003).
Several factors weigh in favor of settlements: the complexities of anti-trust litigation, the
continued costs associated with the ongoing litigation, the likelihood of appeals, the large class
size, and the lengthy duration of this litigation, as evidenced by the extensive motion practice
engaged in by the parties up to this point. This litigation was filed in 2005. Since that time,
counsel for Plaintiffs state that they have spent a collective 16,606.07 hours pursuing this action.
Although Plaintiffs are continuing with litigation against the non-settling defendants and will
therefore continue to incur expenses, the length and complexity of the continuing litigation will
likely lessen by an appreciable amount if the proposed settlements were approved. For these
reasons, the Court finds that this factor weighs slightly in favor of settlement.
c. The Amount of Discovery Engaged in by the Parties
Discovery in this action ended on April 6, 2012. The parties have completed more than
forty depositions, have exchanged four expert reports and four supplemental expert reports, and
have reviewed more than one million pages of documents. Declaration of Fred T. Isquith, DN
601-7 at ¶ 4-5. Thus, there are substantial factual bases on which to premise settlement. See
Newby v. Enron Corp., 394 F.3d 296, 306 (5th Cir. 2004). Because the parties have completed a
lengthy and extensive discovery process, the Court finds that this factor weighs in favor of
d. The Likelihood of Success on the Merits
The Court must also weigh the likelihood of success on the merits in considering the
whether the settlement is fair, reasonable, and adequate. As the Sixth Circuit noted, “The
fairness of each settlement turns in large part on the bona fides of the parties' legal dispute.
Although this inquiry understandably does not require us to ‘decide the merits of the case or
resolve unsettled legal questions,’ we cannot ‘judge the fairness of a proposed compromise’
without ‘weighing the plaintiff's likelihood of success on the merits against the amount and form
of the relief offered in the settlement.’” Int'l Union, 497 F.3d at 631 (quoting Carson v. Am.
Brands, Inc., 450 U.S. 79, 88 n. 14 (1981)).
Although Class counsel contend that they are constrained from fully disclosing all of the
risks they considered in determining that the settlements are in the best interest of the class,
Plaintiffs acknowledge that two of the settling defendants made no real estate sales in Kentucky
and that the remaining settling defendants had business practices calling for sales associates to
make a case-by-case determination of the level of brokerage commissions. In light of this
revelation, the likelihood of success on the merits against these settling defendants is low.
Additionally, class action litigation in particular is unpredictable. See, e.g., New England Health
Care Employees Pension Fund v. Fruit of the Loom, Inc., 234 F.R.D. 627, 631 (W.D. Ky. 2006).
In contrast, the settlements offer a reasonable resolution that provides Plaintiffs with the
cooperation of the Re/Max International and the Re/Max of Kentucky-Tennessee Defendants and
with a significant monetary amount from the Realogy Defendants. Accordingly, the Court finds
that this factor weighs in favor of final approval of the settlements.
e. The Opinions of Class Counsel and Class Representatives
“In deciding whether a proposed settlement warrants approval, the informed and
reasoned judgment of plaintiffs' counsel and their weighing of the relative risks and benefits of
protracted litigation are entitled to great deference.” Thacker, 695 F.Supp.2d at 532. Class
counsel in this case are experienced in the areas of class actions and antitrust cases. These
attorneys have conducted arm’s-length negotiations and have completed extensive discovery in
order to assess the merits of the settlements. It is the opinion of class counsel that, “[i]n light of
the inherent risks of class litigation and the complexity of the issues and proof herein, and of the
benefits offered by the proposed Settlements, Class Counsel recommend that these proposed
Settlements be finally approved as fair, reasonable, and in the best interests of the Class.” DN
601-1 at p. 5-6. Accordingly, the Court finds that this factor weighs in favor of settlement.
f. The Reaction of Absent Class Members
In analyzing a proposed settlement, it is appropriate to consider the reaction of the
Settlement Class. Brotherton v. Cleveland, 141 F.Supp.2d 894, 906 (S.D.Ohio 2001). “A certain
number of . . . objections are to be expected in a class action . . . If only a small number are
received, the fact can be viewed as indicative of the adequacy of the settlement.” In re Cardizem
CD Antitrust Litigation, 218 F.R.D. 508, 527 (E.D.Mich.2003). Here, there have been no
objectors to the proposed settlements. Accordingly, the Court finds that this factor weighs in
favor of settlement.
g. The Public Interest
The Court finds that the settlement serves the public interest. “[T]here is a strong public
interest in encouraging settlement of complex litigation and class action suits because they are
‘notoriously difficult and unpredictable’ and settlement conserves judicial resources.” In re
Cardizem, 218 F.R.D. at 530 (quoting Granada Inv., Inc. v. DWG Corp., 962 F.2d 1203, 1205
(6th Cir.1992)); accord Ehrheart v. Verizon Wireless, No. 08-4323, 2010 WL 2365867, at *3 (3d
Cir. June 15, 2010) (“Settlement agreements are to be encouraged because they promote the
amicable resolution of disputes and lighten the increasing load of litigation faced by the federal
courts.”). Further, the public has a great interest in enforcing federal antitrust laws, which are
our “Magna Carta of free enterprise.” United States v. Topco Associates, Inc., 405 U.S. 596, 610
In conclusion, the Court’s analysis of these seven factors demonstrates that the
settlements should be approved as fair, reasonable, and adequate.
4. Attorneys’ Expenses
“As with attorneys’ fees, an award of costs and expenses, is also a matter left to the
discretion of the trial court.” In re Rio Hair Naturalizer Prods. Liab. Litig., No. MDL 1055,
1996 WL 780512 at * 19 (E.D. Mich. Dec. 20, 1996). “[C]lass counsel is entitled to
reimbursement of all reasonable out-of-pocket litigation expenses and costs in the prosecution of
claims and in obtaining settlement, including expenses incurred in connection with document
productions, consulting with experts and consultants, travel and other litigation-related
expenses.” In re Cardizem, 218 F.R.D. at 535.
In accordance with the terms of the Realogy Settlement, class counsel requests
$1,000,000 in costs and expenses. The Court has reviewed the reports of costs and expenses
submitted by class counsel. These reports include claims, totaling $1,083,383.82, for experts and
consultant fees, legal research, travel, document vendors, filing fees, services fees, court reporter
fees, photocopies, postage and delivery, computer and office supplies, and telephone and fax
costs. In light of the length of this litigation and the voluminous document discovery, the Court
finds that the requested $1,000,000 figure is a reasonable recovery of costs as documented. In as
much as the actual costs exceed the amount awarded as costs in this action, the Court makes no
ruling on the reasonableness of the hourly rates requested by counsel.
For the foregoing reasons, and pursuant to Federal Rule of Civil Procedure 23, the Court
finds that the settlement agreements entered into by the parties are fair, reasonable, and adequate.
The Court will GRANT Plaintiffs’ motion of final approval of the class action settlements (DN
601) and will GRANT Plaintiffs’ motion for reimbursements of costs in the amount of
$1,000,000 (DN 608). A separate order consistent with this Memorandum Opinion will be
May 3, 2012
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