Houlihan Lawrence fails to get dual agency lawsuit dismissed

Consent requires more than a signature on a disclosure form, the judge said
May 01, 2019 01:30PM

The lawsuit claims that the 1,300-agent-strong residential brokerage makes dual agency part of its fundamental business plan (Credit: iStock)

The lawsuit claims that the 1,300-agent-strong residential brokerage makes dual agency part of its fundamental business plan (Credit: iStock)

UPDATED, May 1, 4:28 p.m.: The highest court in New York is allowing a dual-agency lawsuit against Houlihan Lawrence to move forward.

In a ruling earlier this month, the Supreme Court of the State of New York said it would let the claims about breach of fiduciary duty and deceptive or unfair sales practices to proceed. The court noted that establishing consent for dual agency requires more than a client’s signature on a disclosure form, Inman reported.

The ruling didn’t comment on the alleged agent bonuses or forged documents.

Last year, a class-action lawsuit accused Houlihan Lawrence of “predatory behavior” over its dual agency practices. The lawsuit claims that the 1,300-agent-strong residential brokerage makes dual agency part of its fundamental business plan and obscures its agents’ roles. Houlihan Lawrence also provides less disclosure than other brokerages about its agents’ dual roles, according to the lawsuit, which says the brokerage represented both sides of the deal in nine out of 10 of Houlihan Lawrence’s biggest Westchester sales.

A motion to dismiss the suit was filed in October, with the brokerage’s attorneys arguing that since the buyer and seller plaintiffs each signed statutory disclosure forms consenting to dual agency, their breach of fiduciary duty claims should be tossed.

In response, Judge Linda Jamieson referred to state law, which states, “An agent acting as a dual agent must explain carefully to both the buyer and seller that the agent is acting for the other party as well. The agent should also explain the possible effects of dual representation, including that by consenting to the dual agency relationship the buyer and seller are giving up their right to undivided loyalty.”

“By these very words … it appears that the mere signing of the [statutory disclosure] form is insufficient, and the legislature required more,” Jamieson wrote.

The ruling also noted that the lawsuit argues commonality but that the facts of every transaction are different. In a statement to Inman, Houlihan Lawrence said, ““We are pleased that the Supreme Court of the State of New York (Westchester County) has dismissed a proposed class action claim filed by a former client alleging a failure to comply with New York law on dual agency. No class has been established.”

The brokerage added that the ruling “confirms that the plaintiffs had no right of action under New York law governing dual agency relationships.”

The court dismissed claims alleging failure to provide statutory disclosure forms in a timely manner and unjust enrichment. Claims from seller plaintiffs Ellyn and Tony Berk were dismissed on a technicality, the report said. [Inman] — Meenal Vamburkar