Preview
FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
PAMELA GOLDSTEIN, )
ELLYN & TONY BERK as Administrators of )
the Estate of Winifred Berk, and PAUL )
BENJAMIN, on behalf of themselves and all ) MEMORANDUM OF LAW
others similarly situated, )
) Index No. 60767/2018
Plaintiffs, ) Hon. Linda S. Jamieson
)
vs. )
)
HOULIHAN LAWRENCE INC., )
)
Defendant. )
)
HOULIHAN LAWRENCE’S
MOTION FOR SUMMARY JUDGMENT
March 11, 2024
Robert D. MacGill (pro hac vice) Alfred E. Donnellan
Scott E. Murray (pro hac vice) Nelida Lara
Matthew T. Ciulla (pro hac vice) DELBELLO DONNELLAN WEINGARTEN
MACGILL PC WISE & WIEDERKEHR LLP
156 E. Market St., Suite 1200 One North Lexington Ave, 11th Floor
Indianapolis, IN 46204 White Plains, NY 10601
(317) 721-1253 (914) 681-0200
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TABLE OF CONTENTS
TABLE OF AUTHORITIES……………………………………………………………………...ii
FACTS…………………………………………………………………………………….………2
LEGAL ARGUMENT……………………………………………………………………….……3
Plaintiffs’ claims fail because—even assuming their theory of
the case—there is no class-wide evidence showing that Houlihan
Lawrence agents uniformly failed to obtain informed consent to
dual agency………………………………………………………………………..………3
Houlihan Lawrence did not provide to its agents a uniform script
or training to misrepresent the impact of dual agency…………………………….………4
There is no evidence that Houlihan Lawrence monitored or
policed the content of dual agency disclosure conversations to
ensure their alleged inadequacy.………………………………………………….……… 6
Any purported “risks” of dual agency transactions are necessarily
individualized and thus cannot form the basis of class-wide relief.………………………9
Plaintiffs cannot rely on Houlihan Lawrence’s in-house bonus
program to avoid entry of summary judgment.…………………………………….……10
Even if Plaintiffs had received uniformly inadequate disclosures,
their claims would fail because they cannot show class-wide harm.……………….……13
Under New York law, Plaintiffs must prove impact and damages
to prevail on their fiduciary duty and deceptive sales practices claims.…………………13
The undisputed evidence shows that Plaintiffs were not harmed
by any alleged nondisclosure.……………………………………………………………16
The Statute of Limitations bars all claims for transactions prior
to July 14, 2015.………………………………………………………………….………18
Houlihan Lawrence is entitled to judgment on claims asserted
by buyers who were unrepresented and the corresponding
claims asserted by sellers in those same transactions.………………………...…………20
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Although Houlihan Lawrence believes that summary judgment
is appropriate, in the alternative, it asks the Court to decertify the class…………...……22
CONCLUSION…………………………………………………………………………..………24
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TABLE OF AUTHORITIES
Case(s): Page(s):
Access Point Med., LLC v. Mandell,
106 A.D.3d 40, 44 (1st Dept. 2013)……………………………………...………………19
Berkovits v. Berkovits,
190 A.D.3d 911, 915 (2d Dept. 2021)……………………………………………………14
Carr v. Nat’l Bank & Loan Co.,
167 N.Y. 375, 379 (1902)…………………………………………………...……………15
City of New York v. Maul,
14 N.Y.3d 499 (2010).…………………………………………………………..……22, 23
Corsello v Verizon N.Y., Inc.,
18 N.Y.3d 777 (2012)……………………………………………………….……………23
DeFilippo v. Mut. Life Ins. Co. of N.Y.,
13 A.D.3d 178 (1st Dept. 2004).…………………………………..…………………22, 23
Gaidon v. Guardian Life Ins. Co. of Am.,
96 N.Y.2d 201, 210 (2001)……………………………………………………….………19
John J. Reynolds, Inc. v. Snow,
11 A.D.2d 653, 654 (1st Dept. 1960)………………………………………….…………15
People v. Wells Fargo Ins. Servs., Inc.,
16 N.Y.3d 166 (2011)………………………………………………………...………11, 13
Ramirez v. Donado Law Firm, P.C.,
169 A.D.3d 940, 942 (2d Dept. 2019)………………………………………..………14, 16
Sotheby’s Int’l Realty, Inc. v. Black,
2007 U.S. Dist. LEXIS 92168, *1 (S.D.N.Y. Dec. 13, 2007)……………..……………..15
Super Glue Corp. v. Avis Rent A Car Sys., Inc.,
132 A.D.2d 604, 608 (2d Dept. 1987)……………………………………………………22
TPL Associates v. Helmsley-Spear, Inc.,
146 A.D.2d 468, 470 (1st Dept. 1989)………………………………………..…………15
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Weiss v. TD Waterhouse,
45 A.D.3d 763, 764 (2d Dept. 2007)………………………………………..……………19
Wendt v. Fischer,
243 N.Y. 439, 443 (1926)…………………………………………………...……14, 15, 16
Yatter v. William Morris Agency,
256 A.D.2d 260, 261 (1st Dept. 1998)……………………………………………..……19
Statutes:
22 NYCRR 202.8-g………………………………………………………………………….……2
CPLR 214(2)………………………………………………………………………………..……19
New York General Business Law § 349…………………………………………….………passim
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Plaintiffs have vigorously litigated this case for almost five years. The Court has
generally accepted Plaintiffs’ allegations as true in adjudicating previous motion practice. The
circumstances have now changed. Plaintiffs must now come forward with admissible evidence to
support each element of their claims to avoid summary judgment. They cannot do so.
The undisputed facts and established New York law show that Plaintiffs built this case on
two false premises. First, Plaintiffs convinced this Court to certify a class action based on their
representation that every single one of the 1,300-plus Houlihan Lawrence real estate agents at
issue gave the same, corporate-mandated, “scripted” disclosures to their clients when obtaining
consent to dual agency transactions and that these “scripted” disclosures were legally deficient.
Five years of discovery have proven this representation to be false. There is not now and never
has been a “uniform script” followed by all Houlihan Lawrence agents. Similarly, there is no
evidence that every agent gave the same oral disclosure, let alone that every such disclosure was
deficient.
To the contrary, none of the agents deposed by Plaintiffs testified that there is any such
“script.” Instead, they testified that dual agency disclosure conversations are unique to each
agent and each transaction. Further reiterating this record testimony, Houlihan Lawrence has
submitted with this motion affidavits from its current and former chief operating officers, its
former regional manager, a former senior vice president, and multiple office managers who have
collectively overseen hundreds of agents over the class period and who confirm that Houlihan
Lawrence does not provide—and has never provided—any “script” to be used by agents during
the agency disclosure conversation. All these witnesses also confirm that the individual agents
are responsible for determining the content of the agency disclosure conversations they have
with their clients based on the unique circumstances of each situation and using their individual
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experience and the State-mandated training provided by independent, New York-licensed real
estate agent instructors. Because no reasonable jury could find that any uniform “script” existed
or that all members of the class received identical disclosures, Plaintiffs’ claims fail on a class-
wide basis, and judgment should be entered against them and in favor of Houlihan Lawrence.
Second, Plaintiffs told this Court that they could prevail on a class-wide basis without
establishing any individualized injury, causation or damages as a result of the allegedly deficient
disclosures. Again, Plaintiffs are wrong. As a matter of New York law, Plaintiffs must establish
that Houlihan Lawrence’s alleged failure to obtain informed consent to dual agency actually
caused each class member harm, which would necessarily require individualized evidence
regarding impact and damages. Plaintiffs’ decision to forgo any such individualized evidence in
favor of prosecuting this case as a class action dooms their claims and, again, requires judgment
to be entered against them. (And, in any event, economic analysis of the class transactions shows
no statistically significant difference between dual agent transactions and non-dual agent
transactions. Thus, it is undisputed—and indisputable—that the class was not injured.)
Based on the undisputed and overwhelming evidence, it is clear that Plaintiffs cannot
prove on a class-wide basis—or even individually—the essential elements of their claims. It is
time for this case to end.
FACTS
Pursuant to Page 3 of this Court’s Rules, 22 NYCRR 202.8-g, and Commercial Division
Rule 19-a, HL attaches a Statement of Facts.
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LEGAL ARGUMENT
Plaintiffs’ claims fail because—even assuming their theory of the case—there
is no class-wide evidence showing that Houlihan Lawrence agents
uniformly failed to obtain informed consent to dual agency.
Plaintiffs assumed a high burden by choosing to pursue this case as a class action. To
establish liability on either of their claims—for breach of fiduciary duty or violation of the
deceptive sales practices act (New York General Business Law § 349)—Plaintiffs must first
prove that all class members received materially identical dual agency disclosures that were
insufficient under New York law. It is not enough to show that the named Plaintiffs received
inadequate disclosures or even that some undefined large number of consumers received
inadequate disclosures—such anecdotal evidence would be insufficient to show class-wide
liability. Plaintiffs voluntarily assumed this high burden, and they have come woefully short.
Plaintiffs’ liability theory rests on the following logic chain. First, Plaintiffs say, Houlihan
Lawrence “standardized” and “systematized” its agency disclosure by giving its agents “uniform
training on ‘how to have the conversation’ about dual agency and otherwise scripting the
disclosure it required them to make as part of HL’s standardized sales presentations.” NYSCEF
688 at 1. Second, according to Plaintiffs, the jury can infer that agents followed this alleged
uniform training and scripting, arguing that “it would be unreasonable to surmise that there are
agents who nevertheless made proper disclosure on their own” because it would require the
agents to “ignore their duty to follow HL’s direction” and to “overcome the inability of most
agents to understand” the problems with dual agency. NYSCEF 688 at 23.
The undisputed evidence proves that both links in this logic chain are false.
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Houlihan Lawrence did not provide to its agents a uniform script or
training to misrepresent the impact of dual agency.
Houlihan Lawrence is entitled to summary judgment on Plaintiffs’ claims because the
undisputed evidence refutes their allegation that Houlihan Lawrence provided a uniform script
and training to its agents to misrepresent the impact of dual agency. As set forth in the numerous
affidavits submitted with this motion, Houlihan Lawrence has never imposed any type of “script”
on its agents for how to handle agency disclosure or dual agency. SUF-¶¶42-43. Instead, the
conversation between an agent and a client with respect to dual agency varies from transaction to
transaction—it is not uniform. SUF-¶41.
At the class certification stage, Plaintiffs focused on the Prompt Sheet, presumably
because it does not mention the risk articulated in the 443 Disclosure Form that a designated
agent may be unable to give undivided loyalty to her client. NYSCEF 688 at 8-9. But in
subsequent discovery, Plaintiffs have not developed any evidence that this Prompt Sheet was
actually used by any agent in any class transaction when obtaining consent to dual agency, let
alone that it was used by every agent in every class transaction, which is the burden they have
assumed. To the contrary, Houlihan Lawrence has submitted sworn declarations with this motion
from multiple office managers who collectively oversaw hundreds of agents during the class
period, and every one of these managers has testified as follows:
they do not recall having ever seen the Prompt Sheet before;
they have never used the Prompt Sheet for any purpose; and
they have never instructed or otherwise asked the agents in their offices to use the Prompt
Sheet for any purpose. SUF-¶¶80-81. 1
1
“SUF” refers to the Statement of Undisputed Facts, which is attached hereto.
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Similarly, Plaintiff’s expert, Mr. Cusack, admitted at deposition that he does not know how many
of Houlihan Lawrence’s agents received the Prompt Sheet, read the Prompt Sheet or used the
Prompt Sheet – if any. 2 SUF-¶82. Thus, even if some agents may have used the Prompt Sheet for
some purpose during the class period, there is no class-wide evidence that every agent in every
class transaction did. And, again, that is the burden Plaintiffs assumed by prosecuting this case as
a class action.
Moreover, the Prompt Sheet is only one of the many documents made available by
Houlihan Lawrence to its agents regarding dual agency disclosures. In addition to the Prompt
Sheet, Houlihan Lawrence made available at least the following documents, all of which
expressly reminded agents of the impact of dual agency (including designated agency) on their
fiduciary obligations:
The 443 Disclosure Form itself, which expressly states that neither dual agents nor
designated agents can provide undivided loyalty to their clients;
The HL Best Practices document, which similarly states that neither dual agents nor
designated agents can provide undivided loyalty to their clients;
The HL Exclusive Right to Sell listing agreement, which similarly states that neither dual
agents nor designated agents can provide undivided loyalty;
Training materials from outside resources, including the Director of Legal Affairs and
Professional Standards at Hudson Gateway Association of REALTORS® (“HGAR”),
who reminded Houlihan Lawrence that designated agents have split loyalty;
Forms from the New York State Association of REALTORS® (“NYSAR”), which
Plaintiffs themselves say “fill[s] the [alleged] gap left by the [Section 443] Form and
industry-standard listing agreement when seeking consent to dual agency”; and
HL’s Policy Regarding Buyer Clients, which expressly states that agents cannot provide
undivided loyalty in a dual agency transaction.
2
Houlihan Lawrence has filed a motion to exclude Mr. Cusack’s testimony. But even if the Court
were to allow Mr. Cusack to testify, summary judgment would be required for the reasons set
forth herein.
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SUF-¶79.
The existence of these documents disproves the fundamental premise of Plaintiffs’
claims—that Houlihan Lawrence uniformly trained all of its agents during the class period to
misrepresent the risks associated with dual agency. Therefore, even if Plaintiffs respond to this
motion by providing anecdotal evidence of some documents or some training materials that do
not fully describe the risks of dual agency, any such documents or training materials could not
establish the uniformity required for Plaintiffs to establish the first element of their liability
claims on a class-wide basis. Indeed, as hard as he tried not to, even Plaintiffs’ expert (Mr.
Cusack) conceded at deposition that “it’s possible” that some Houlihan Lawrence agent provided
a disclosure on dual and designated agency that even he would find sufficient. SUF-¶63.
For this reason alone, Plaintiffs’ claims fail, and the Court should enter summary
judgment in favor of Houlihan Lawrence.
There is no evidence that Houlihan Lawrence monitored or policed
the content of dual agency disclosure conversations to ensure
their alleged inadequacy.
Even if there were evidence that Houlihan Lawrence provided some uniformly deficient
training or script to its agents (which there is not), that would not be sufficient to satisfy the first
element of liability on a class-wide basis. Instead, Plaintiffs would also need to prove that every
agent in every class transaction followed the deficient training by failing to provide adequate
disclosures. But there is no such evidence. Indeed, the evidence is to the contrary.
As a preliminary matter, Houlihan Lawrence did not monitor or police the content of its
agents’ dual agency disclosure conversations. SUF-¶44. These disclosure conversations occur
between individual agents and individual clients. SUF-¶¶41,43. No other person generally
participates in or listens to these conversations. SUF-¶¶43-44. Thus, as Plaintiffs’ expert
admitted, nobody associated with Houlihan Lawrence—whether an office manager, an executive,
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or anyone else—was aware of what any particular agent told any particular client in any
particular transaction. 3 SUF-¶45. Thus, there was no way for Houlihan Lawrence to monitor or
police the content of these conversations, and no way for Houlihan Lawrence to know whether
its agents were following the hypothesized “uniform script” or “uniform training” alleged by
Plaintiffs. Without any such monitoring and policing, there is no reasonable basis from which to
infer that every agent in every class transaction would have followed any such script or direction.
This is particularly true given that Houlihan Lawrence agents received additional
information regarding dual agency disclosures from multiple sources—including New York
state-mandated training to obtain and maintain their licenses—which expressly explained and
reminded them of their obligation to inform clients of the impact of dual agency on their ability
to provide undivided loyalty. For example, New York requires real estate agents to complete at
least 77 hours of training to become licensed salespersons—and 152 hours to become licensed
brokers—including 11 hours of training on agency law and the required disclosures relating to
dual agency. SUF-¶¶25, 28. Licensees must complete 22.5 hours of “continuing education” every
two years to maintain their licenses, including at least 2 hours that must be “agency related”
instruction. SUF-¶30. Houlihan Lawrence never directed its agents to ignore this training when
providing dual-agency-related disclosures. SUF-¶40.
3
As set forth in the accompanying affidavits, managers “do not generally participate in the
disclosure conversations between Houlihan Lawrence agents and their clients” and therefore
“generally do not know what any particular agent said to any particular client when obtaining
their consent to dual and/or designated agency.” SUF-¶44. Instead, these managers “generally
trust the agents who work in [their] office[s] to comply with their obligations to obtain informed,
written consent to dual and designated agency, and [they] do not have any reason to think that the
agents . . . fail to do so.” Id.; SUF-¶45 (Cusack also testified to the same: he had not seen any
evidence in his work in this case that Houlihan Lawrence management monitored the disclosure
conversations that its agents had with their clients).
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Similarly, Houlihan Lawrence brought in independent, outside resources to provide
optional training to its agents regarding dual agency disclosures. SUF-¶33. Don Cummins—
Director of Legal Affairs for HGAR —presented on the 443 Disclosure Form and discussed the
“risks representing both sides [of a transaction] and [how to] disclos[e] it properly to your
client(s).” SUF-¶35. There is no evidence that Houlihan Lawrence agents uniformly ignored this
training or neglected to incorporate it into their disclosure conversations. SUF-¶40. Nor did
Houlihan Lawrence instruct them to do so. Id. The same is true with respect to training provided
by HGAR’s Leon Cameron, which similarly emphasized that the “[a]gent must explain to the
client that the agent cannot provided undivided loyalty” when obtaining consent to dual agency
with designated sales agents. SUF-¶¶36-37.
At least one Houlihan Lawrence manager directed his agents to use the dual agency form
disseminated by NYSAR when explaining the risks of dual agency to their clients. SUF-¶38.
Plaintiffs’ own expert—Thomas Cusack—points to this NYSAR form as an example of a
disclosure that he thinks “fills in” the alleged gaps left by the 443 Disclosure Form. SUF-¶38.
The fact that at least one Houlihan Lawrence manager referred his agents to the exemplar
disclosure highlighted by Plaintiffs’ own expert proves conclusively that there is no class-wide
evidence that Houlihan Lawrence directed its agents to give uniformly inadequate disclosures.
Finally, many Houlihan Lawrence agents worked at other brokerage companies before
joining Houlihan Lawrence and received training on dual agency disclosures from those
companies. SUF-¶62. Houlihan Lawrence’s former General Sales Manager—Jim Gricar—
testified that he did not see any evidence that Houlihan Lawrence treated dual agency disclosures
any differently than these other companies. SUF-¶83. This fact further disproves Plaintiffs’
theory that Houlihan Lawrence directed its agents to give substandard dual agency disclosures.
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Any purported “risks” of dual agency transactions are necessarily
individualized and thus cannot form the basis of class-wide
relief.
Plaintiffs’ attempt to obtain class-wide relief based on alleged inadequate disclosures fails
for another reason—even under Plaintiffs’ theory, the purported “risks” associated with such
transactions are inherently individualized and there is no “uniform” disclosure that had to be
provided in every case, beyond the 443 Disclosure Form itself. Indeed, if there were uniform
risks that were present in every transaction that had to be disclosed, the New York Legislature
presumably would have included them in the 443 Disclosure Form. The fact that the Legislature
chose not to do so is telling.
For example, when Plaintiffs’ expert, Thomas Cusack, was asked “[w]hat is it specifically
that you think an agent has to say to their client to comply with their obligations as you
understand them . . . when they’re covering the disclosure form and obtaining consent with
respect to a dual agency or a designated agency transaction[,]” Mr. Cusack testified that it would
depend on the client:
These licensees that you’re asking me are the agent of this client. Understood.
They are the agent of this client. They must say whatever is sufficient to warn
their client of the risks, conflicts, and consequences. That’s their duty.
So if – if one of them makes them aware, if two of them makes them aware, if
three of them – but they are licensed to be the client of that particular – or the
agent of that particular client, which means that – let’s not go through the
fiduciary duties – but the big one is loyalty and disclosure. I’m putting your
interest first. And whoever you are, I’m going to tell you exactly what it means
so that you can look me in the eye and say I understand the consequences, but
I’m okay with you because I trust you. . . .
SUF-¶64, emphasis added.
When asked a follow-up question, Mr. Cusack repeated the same answer – the disclosure
necessary for a particular transaction would depend on the client:
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Q: Okay. So the disclosure – some clients may need you to disclose one of the
items you covered; some clients might require two. It’s going to be – it’s going to
depend on the client as to what they need in order for that client to understand and
give their informed consent; is that right?
***
A: Okay. It’s – it’s whatever is necessary for the client to understand what the
risks are, the consequences, and the conflicts. The inherent conflicts. And there’s
a – there’s a whole series of things before that that establish what you’re
expecting from me as your agent.
Id.
Through this testimony, Plaintiffs’ own expert has admitted that he cannot provide a
single disclosure that, in his opinion, would be either required or sufficient in every single class
transaction to inform the client of the so-called “risks” of dual or designated agency transactions.
Id. Even under his mistaken view of the law, any supposed “risks” of dual agency transactions
that are not otherwise disclosed on the 443 Disclosure Form would be individualized and
subjective. Id. Thus, there is no uniform, standard disclosure that must be provided in every
transaction that could form the basis for Plaintiffs’ request for class-wide relief.
Plaintiffs cannot rely on Houlihan Lawrence’s in-house bonus
program to avoid entry of summary judgment.
Plaintiffs will likely argue that, even if they cannot prove that Houlihan Lawrence agents
uniformly gave inadequate disclosures regarding dual agency generally, their claims should
proceed because—they say—Houlihan Lawrence agents uniformly failed to disclose the in-
house bonus. This backup argument fails for multiple reasons.
First, the only way to determine whether any agent disclosed the in-house bonus program
to her clients would be to ask her. While it is Houlihan Lawrence’s position that no such
disclosure is necessary, neither Plaintiffs nor Houlihan Lawrence can know whether any
particular agent disclosed the program anyway. Determining the answer to this question would
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require individualized testimony from every agent involved in a dual agency transaction, which
would overwhelm any common issues and destroy any efficiencies that a class action otherwise
provides.
Second, only some Houlihan Lawrence agents participated in the in-house bonus
program. For example, of the nine agents involved in the named Plaintiff transactions, only two
were eligible for and received an in-house bonus. SUF-¶97. The other seven (7) agents did not.
Id. Because these seven (7) agents did not participate in the program, the program could not have
had any impact on their fiduciary duties to their clients, and there was nothing for them to
disclose. Thus, the current class definition would be overly broad and would include many class
members who could not claim to be entitled to any disclosure regarding the in-house bonus
program.
Third, as a matter of New York law, an agent’s individual compensation arrangement with
her affiliated broker is not required to be disclosed. On this point, People v. Wells Fargo Ins.
Servs., Inc., 16 N.Y.3d 166 (2011), is instructive. There, the Attorney General sued Wells Fargo
Insurance Services for breach of fiduciary duty. Id. at 169. Wells Fargo was an insurance broker.
Id. Unbeknownst to Wells Fargo’s clients, in addition to any commission that it would earn on
selling an insurance policy, Wells Fargo was also paid certain cash “incentives” by insurance
companies based on the number of clients who purchased that company’s policies. Id. The
Attorney General alleged that, as a result of these undisclosed incentives, Wells Fargo “steered”
its customers to those insurers who offered the incentives and away from those who did not. Id.
at 169-70.
The Court of Appeals rejected the Attorney General’s claim, holding that Wells Fargo was
not under a duty to disclose these incentive arrangements. Id. at 170. In reaching this result, the
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Court of Appeals specifically noted that Wells Fargo did not do anything that “was contrary to
industry custom; indeed, the parties seem to agree that arrangements like those the Attorney
General complains of have been commonplace, and have not generally been disclosed.” Id. at
171. The court went on to observe that such “nondisclosure may be a bad practice”, but that “[a]
regulation, prospective in effect, is a much better way of ending a questionable but common
practice than what the Attorney General asks us to do here: in substance to outlaw the practice
retroactively by creating a new common-law rule.” Id. at 172.
The same principles apply here. First, it is undisputed that in-house bonus programs are
common within the real estate industry and that such programs are not generally disclosed to
clients. SUF-¶¶101-102. Houlihan Lawrence’s own program dates back to at least the 1990s.
SUF-¶92. And similar programs have been offered over the years by companies such as Rand
Realty, Julia B. Fee, and Sotheby’s. SUF-¶¶99, 101.
Moreover, in-house bonuses are just one way in which an individual agent’s
compensation may vary from one transaction to another, and none of these are disclosed to the
client. SUF-¶¶103-105. For example, it is very common for an agent to be eligible for a
performance bonus where her commission split will increase if she meets certain volume goals.
SUF-¶104. To illustrate, an agent may be on a 50/50 plan at the beginning of the year and then, if
she sells $1 million worth of real estate, her plan may shift to a 60/40 arrangement, where she
would retain 60% of any commissions for the rest of the year rather than 50%. As the agent nears
the $1 million mark, she has an obvious incentive to close the next transaction to increase her
commission split, which theoretically could cause her to “pressure” the next client to close a
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transaction in order to increase her split. 4 But Houlihan Lawrence is not aware of any company
or agent who discloses such arrangements to their clients. SUF-¶102.
Just as in Wells Fargo, the Plaintiffs here cannot rest their fiduciary duty claims on an
alleged obligation to disclose long-standing industry-standard compensation arrangements that,
as a matter of industry practice, have never been disclosed to clients. If the State of New York
wants to mandate disclosure of in-house bonuses or any other agent-specific compensation
practice, the State is free to do so through regulation. But this Court should not permit Plaintiffs
to retroactively punish an industry-standard practice through maintenance of a common-law
fiduciary duty claim.
Finally, even if Plaintiffs could overcome the above fatal defects in this theory, their
attempt to base their claims on the in-house bonus would fail because they cannot prove
causation or damages on a class-wide basis. This particular defect is discussed below.
Even if Plaintiffs had received uniformly inadequate disclosures, their claims
would fail because they did not suffer class-wide harm.
Not only have Plaintiffs failed to adduce class-wide evidence showing that every class
member received an inadequate dual agency disclosure, but they have also failed to prove that
every such class member suffered harm. For this additional, independent reason, Houlihan
Lawrence is entitled to summary judgment.
Under New York law, Plaintiffs must prove impact and damages to
prevail on their fiduciary duty and deceptive sales practices
claims.
It is black letter law that a plaintiff asserting a claim for either breach of fiduciary duty or
violation of GBL § 349 must prove that the alleged breach actually caused her to suffer harm.
4
This risk is purely theoretical. Houlihan Lawrence is confident that its agents always act in their
clients’ best interest, regardless of any such incentives.
13
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See, e.g., Berkovits v. Berkovits, 190 A.D.3d 911, 915 (2d Dept. 2021) (“The elements of a cause
of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary
relationship, (2) misconduct by the defendant, and (3) damages directly caused by the
defendant’s misconduct”); Ramirez v. Donado Law Firm, P.C., 169 A.D.3d 940, 942 (2d Dept.
2019) (A cause of action to recover damages for a violation of General Business Law § 349 must
“identify consumer-oriented misconduct which is deceptive and materially misleading to a
reasonable consumer, and which causes actual damages.”).
Plaintiffs attempt to avoid this black letter law by relying on Wendt v. Fischer, a 100-year-
old case that is easily distinguishable. 243 N.Y. 439, 443 (1926). In that case, the broker was
conflicted because it had an ownership interest in the buyer. Id. The broker did not disclose the
fact of this adverse ownership interest to the broker’s seller-client. Id. at 442. A few weeks after
purchasing the property, the broker re-sold the property at a profit. Id. The seller/client sued for
an accounting, and the court appropriately held that the seller could void the transaction, which
then required the broker to disgorge its compensation and profits. Id. at 444.
Plaintiffs rely heavily on the language in Wendt that, “[i]f dual interests are to be served,
the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its
stark significance.” NYSCEF 688 at 18. But this language must be read in context. In Wendt, the
broker argued that its statement to the seller that the buyer was a “client” of the broker was
sufficient to disclose the conflict of interest. 243 N.Y. at 443. But the Court rejected this assertion
because a situation where the broker represents both the seller and the buyer is very different
than a situation where the broker is the buyer. Id. In rejecting this false equivalency, the Court
observed: “Disclosure so indefinite and equivocal does not set the agent free to bargain for his
own account or for the account of a corporation which acts through him alone.” Id.
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The situation here is easily distinguishable from Wendt. In this case, Houlihan Lawrence
did not have any ownership interest in the any of the clients at issue; and Houlihan Lawrence
clearly and unambiguously disclosed the fact that it was representing both the buyer and the
seller in each class transaction. The only dispute is over whether Houlihan Lawrence’s agents
disclosed certain additional so-called “risks” to the client of consenting to a dual agency
transaction. Even if the Court were to accept Plaintiffs’ theory that such “risks” must be
disclosed, any such technical deficiency in any particular disclosure conversation does not justify
departing from black letter law requiring a plaintiff to prove injury, causation, and damages in a
breach of fiduciary case.
Plaintiffs’ reliance on Sotheby’s Int’l Realty, Inc. v. Black, 2007 U.S. Dist. LEXIS 92168,
*1 (S.D.N.Y. Dec. 13, 2007), is similarly misplaced. In that case—just as in Wendt—the fact of
the dual agency was not disclosed to the broker’s client. Id. at *4 (emphasis added). The Black
court described the applicable standard as follows: “In the context of a real estate transaction, a
broker may not ‘act as agent for both seller and purchaser of property’ unless the broker first
obtains the consent of both principals ‘given after full knowledge of the facts.’” Id. at *5-6
(emphasis added). The other cases cited in Black were similar—in those cases, the fact of the
dual agency was not disclosed. Id. at *12, see, e.g., Carr v. Nat’l Bank & Loan Co., 167 N.Y.
375, 379 (1902) (fact of dual agency was not disclosed to client); TPL Associates v. Helmsley-
Spear, Inc., 146 A.D.2d 468, 470 (1st Dept. 1989) (framing question as “whether appellant was
‘fully informed of every fact material to [its] interests.’”); John J. Reynolds, Inc. v. Snow, 11
A.D.2d 653, 654 (1st Dept. 1960) (fact of broker’s conflict of interest was not disclosed).
15
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Here—unlike in Wendt or Black—Plaintiffs do not claim that the fact of the dual agency
relationship was hidden from them. To the contrary, Houlihan Lawrence agents go out of their
way to advertise the fact that they are affiliated with the Houlihan Lawrence brand. SUF-¶3.
Thus, every class member was aware of the fact that the agents working with the seller
and the buyer on their transaction were both affiliated with Houlihan Lawrence. Plaintiffs’ claim
here is fundamentally different than the claims in Wendt or Black. Thus, to the extent either of
those cases suggests that a fiduciary duty claim can proceed without proof of causation and
damages, such cases do not apply here. Plaintiffs must prove that the alleged breach of fiduciary
duty—the alleged failure to disclose certain unidentified “risks” of dual agency—actually caused
harm and damages on a classwide basis.
Moreover, neither Wendt nor Black applies to Plaintiffs’ claim for violation of GBL 349.
Under New York law, a plaintiff must prove that the consumer-oriented misconduct “cause[d]
actual damages.” Ramirez, 169 A.D.3d at 942.
The undisputed evidence shows that Plaintiffs were not harmed by
any alleged nondisclosure.
Plaintiffs’ decision to structure this lawsuit as a class action and to avoid any
individualized issues relating to impact means that they are not even attempting to establish
damages. This strategic decision do
Preview
FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF WESTCHESTER PAMELA GOLDSTEIN, ) ELLYN & TONY BERK as Administrators of ) the Estate of Winifred Berk, and PAUL ) BENJAMIN, on behalf of themselves and all ) MEMORANDUM OF LAW others similarly situated, ) ) Index No. 60767/2018 Plaintiffs, ) Hon. Linda S. Jamieson ) vs. ) ) HOULIHAN LAWRENCE INC., ) ) Defendant. ) ) HOULIHAN LAWRENCE’S MOTION FOR SUMMARY JUDGMENT March 11, 2024 Robert D. MacGill (pro hac vice) Alfred E. Donnellan Scott E. Murray (pro hac vice) Nelida Lara Matthew T. Ciulla (pro hac vice) DELBELLO DONNELLAN WEINGARTEN MACGILL PC WISE & WIEDERKEHR LLP 156 E. Market St., Suite 1200 One North Lexington Ave, 11th Floor Indianapolis, IN 46204 White Plains, NY 10601 (317) 721-1253 (914) 681-0200 1 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 TABLE OF CONTENTS TABLE OF AUTHORITIES……………………………………………………………………...ii FACTS…………………………………………………………………………………….………2 LEGAL ARGUMENT……………………………………………………………………….……3 Plaintiffs’ claims fail because—even assuming their theory of the case—there is no class-wide evidence showing that Houlihan Lawrence agents uniformly failed to obtain informed consent to dual agency………………………………………………………………………..………3 Houlihan Lawrence did not provide to its agents a uniform script or training to misrepresent the impact of dual agency…………………………….………4 There is no evidence that Houlihan Lawrence monitored or policed the content of dual agency disclosure conversations to ensure their alleged inadequacy.………………………………………………….……… 6 Any purported “risks” of dual agency transactions are necessarily individualized and thus cannot form the basis of class-wide relief.………………………9 Plaintiffs cannot rely on Houlihan Lawrence’s in-house bonus program to avoid entry of summary judgment.…………………………………….……10 Even if Plaintiffs had received uniformly inadequate disclosures, their claims would fail because they cannot show class-wide harm.……………….……13 Under New York law, Plaintiffs must prove impact and damages to prevail on their fiduciary duty and deceptive sales practices claims.…………………13 The undisputed evidence shows that Plaintiffs were not harmed by any alleged nondisclosure.……………………………………………………………16 The Statute of Limitations bars all claims for transactions prior to July 14, 2015.………………………………………………………………….………18 Houlihan Lawrence is entitled to judgment on claims asserted by buyers who were unrepresented and the corresponding claims asserted by sellers in those same transactions.………………………...…………20 i 2 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Although Houlihan Lawrence believes that summary judgment is appropriate, in the alternative, it asks the Court to decertify the class…………...……22 CONCLUSION…………………………………………………………………………..………24 ii 3 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 TABLE OF AUTHORITIES Case(s): Page(s): Access Point Med., LLC v. Mandell, 106 A.D.3d 40, 44 (1st Dept. 2013)……………………………………...………………19 Berkovits v. Berkovits, 190 A.D.3d 911, 915 (2d Dept. 2021)……………………………………………………14 Carr v. Nat’l Bank & Loan Co., 167 N.Y. 375, 379 (1902)…………………………………………………...……………15 City of New York v. Maul, 14 N.Y.3d 499 (2010).…………………………………………………………..……22, 23 Corsello v Verizon N.Y., Inc., 18 N.Y.3d 777 (2012)……………………………………………………….……………23 DeFilippo v. Mut. Life Ins. Co. of N.Y., 13 A.D.3d 178 (1st Dept. 2004).…………………………………..…………………22, 23 Gaidon v. Guardian Life Ins. Co. of Am., 96 N.Y.2d 201, 210 (2001)……………………………………………………….………19 John J. Reynolds, Inc. v. Snow, 11 A.D.2d 653, 654 (1st Dept. 1960)………………………………………….…………15 People v. Wells Fargo Ins. Servs., Inc., 16 N.Y.3d 166 (2011)………………………………………………………...………11, 13 Ramirez v. Donado Law Firm, P.C., 169 A.D.3d 940, 942 (2d Dept. 2019)………………………………………..………14, 16 Sotheby’s Int’l Realty, Inc. v. Black, 2007 U.S. Dist. LEXIS 92168, *1 (S.D.N.Y. Dec. 13, 2007)……………..……………..15 Super Glue Corp. v. Avis Rent A Car Sys., Inc., 132 A.D.2d 604, 608 (2d Dept. 1987)……………………………………………………22 TPL Associates v. Helmsley-Spear, Inc., 146 A.D.2d 468, 470 (1st Dept. 1989)………………………………………..…………15 iii 4 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Weiss v. TD Waterhouse, 45 A.D.3d 763, 764 (2d Dept. 2007)………………………………………..……………19 Wendt v. Fischer, 243 N.Y. 439, 443 (1926)…………………………………………………...……14, 15, 16 Yatter v. William Morris Agency, 256 A.D.2d 260, 261 (1st Dept. 1998)……………………………………………..……19 Statutes: 22 NYCRR 202.8-g………………………………………………………………………….……2 CPLR 214(2)………………………………………………………………………………..……19 New York General Business Law § 349…………………………………………….………passim iv 5 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Plaintiffs have vigorously litigated this case for almost five years. The Court has generally accepted Plaintiffs’ allegations as true in adjudicating previous motion practice. The circumstances have now changed. Plaintiffs must now come forward with admissible evidence to support each element of their claims to avoid summary judgment. They cannot do so. The undisputed facts and established New York law show that Plaintiffs built this case on two false premises. First, Plaintiffs convinced this Court to certify a class action based on their representation that every single one of the 1,300-plus Houlihan Lawrence real estate agents at issue gave the same, corporate-mandated, “scripted” disclosures to their clients when obtaining consent to dual agency transactions and that these “scripted” disclosures were legally deficient. Five years of discovery have proven this representation to be false. There is not now and never has been a “uniform script” followed by all Houlihan Lawrence agents. Similarly, there is no evidence that every agent gave the same oral disclosure, let alone that every such disclosure was deficient. To the contrary, none of the agents deposed by Plaintiffs testified that there is any such “script.” Instead, they testified that dual agency disclosure conversations are unique to each agent and each transaction. Further reiterating this record testimony, Houlihan Lawrence has submitted with this motion affidavits from its current and former chief operating officers, its former regional manager, a former senior vice president, and multiple office managers who have collectively overseen hundreds of agents over the class period and who confirm that Houlihan Lawrence does not provide—and has never provided—any “script” to be used by agents during the agency disclosure conversation. All these witnesses also confirm that the individual agents are responsible for determining the content of the agency disclosure conversations they have with their clients based on the unique circumstances of each situation and using their individual 1 6 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 experience and the State-mandated training provided by independent, New York-licensed real estate agent instructors. Because no reasonable jury could find that any uniform “script” existed or that all members of the class received identical disclosures, Plaintiffs’ claims fail on a class- wide basis, and judgment should be entered against them and in favor of Houlihan Lawrence. Second, Plaintiffs told this Court that they could prevail on a class-wide basis without establishing any individualized injury, causation or damages as a result of the allegedly deficient disclosures. Again, Plaintiffs are wrong. As a matter of New York law, Plaintiffs must establish that Houlihan Lawrence’s alleged failure to obtain informed consent to dual agency actually caused each class member harm, which would necessarily require individualized evidence regarding impact and damages. Plaintiffs’ decision to forgo any such individualized evidence in favor of prosecuting this case as a class action dooms their claims and, again, requires judgment to be entered against them. (And, in any event, economic analysis of the class transactions shows no statistically significant difference between dual agent transactions and non-dual agent transactions. Thus, it is undisputed—and indisputable—that the class was not injured.) Based on the undisputed and overwhelming evidence, it is clear that Plaintiffs cannot prove on a class-wide basis—or even individually—the essential elements of their claims. It is time for this case to end. FACTS Pursuant to Page 3 of this Court’s Rules, 22 NYCRR 202.8-g, and Commercial Division Rule 19-a, HL attaches a Statement of Facts. 2 7 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 LEGAL ARGUMENT Plaintiffs’ claims fail because—even assuming their theory of the case—there is no class-wide evidence showing that Houlihan Lawrence agents uniformly failed to obtain informed consent to dual agency. Plaintiffs assumed a high burden by choosing to pursue this case as a class action. To establish liability on either of their claims—for breach of fiduciary duty or violation of the deceptive sales practices act (New York General Business Law § 349)—Plaintiffs must first prove that all class members received materially identical dual agency disclosures that were insufficient under New York law. It is not enough to show that the named Plaintiffs received inadequate disclosures or even that some undefined large number of consumers received inadequate disclosures—such anecdotal evidence would be insufficient to show class-wide liability. Plaintiffs voluntarily assumed this high burden, and they have come woefully short. Plaintiffs’ liability theory rests on the following logic chain. First, Plaintiffs say, Houlihan Lawrence “standardized” and “systematized” its agency disclosure by giving its agents “uniform training on ‘how to have the conversation’ about dual agency and otherwise scripting the disclosure it required them to make as part of HL’s standardized sales presentations.” NYSCEF 688 at 1. Second, according to Plaintiffs, the jury can infer that agents followed this alleged uniform training and scripting, arguing that “it would be unreasonable to surmise that there are agents who nevertheless made proper disclosure on their own” because it would require the agents to “ignore their duty to follow HL’s direction” and to “overcome the inability of most agents to understand” the problems with dual agency. NYSCEF 688 at 23. The undisputed evidence proves that both links in this logic chain are false. 3 8 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Houlihan Lawrence did not provide to its agents a uniform script or training to misrepresent the impact of dual agency. Houlihan Lawrence is entitled to summary judgment on Plaintiffs’ claims because the undisputed evidence refutes their allegation that Houlihan Lawrence provided a uniform script and training to its agents to misrepresent the impact of dual agency. As set forth in the numerous affidavits submitted with this motion, Houlihan Lawrence has never imposed any type of “script” on its agents for how to handle agency disclosure or dual agency. SUF-¶¶42-43. Instead, the conversation between an agent and a client with respect to dual agency varies from transaction to transaction—it is not uniform. SUF-¶41. At the class certification stage, Plaintiffs focused on the Prompt Sheet, presumably because it does not mention the risk articulated in the 443 Disclosure Form that a designated agent may be unable to give undivided loyalty to her client. NYSCEF 688 at 8-9. But in subsequent discovery, Plaintiffs have not developed any evidence that this Prompt Sheet was actually used by any agent in any class transaction when obtaining consent to dual agency, let alone that it was used by every agent in every class transaction, which is the burden they have assumed. To the contrary, Houlihan Lawrence has submitted sworn declarations with this motion from multiple office managers who collectively oversaw hundreds of agents during the class period, and every one of these managers has testified as follows: they do not recall having ever seen the Prompt Sheet before; they have never used the Prompt Sheet for any purpose; and they have never instructed or otherwise asked the agents in their offices to use the Prompt Sheet for any purpose. SUF-¶¶80-81. 1 1 “SUF” refers to the Statement of Undisputed Facts, which is attached hereto. 4 9 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Similarly, Plaintiff’s expert, Mr. Cusack, admitted at deposition that he does not know how many of Houlihan Lawrence’s agents received the Prompt Sheet, read the Prompt Sheet or used the Prompt Sheet – if any. 2 SUF-¶82. Thus, even if some agents may have used the Prompt Sheet for some purpose during the class period, there is no class-wide evidence that every agent in every class transaction did. And, again, that is the burden Plaintiffs assumed by prosecuting this case as a class action. Moreover, the Prompt Sheet is only one of the many documents made available by Houlihan Lawrence to its agents regarding dual agency disclosures. In addition to the Prompt Sheet, Houlihan Lawrence made available at least the following documents, all of which expressly reminded agents of the impact of dual agency (including designated agency) on their fiduciary obligations: The 443 Disclosure Form itself, which expressly states that neither dual agents nor designated agents can provide undivided loyalty to their clients; The HL Best Practices document, which similarly states that neither dual agents nor designated agents can provide undivided loyalty to their clients; The HL Exclusive Right to Sell listing agreement, which similarly states that neither dual agents nor designated agents can provide undivided loyalty; Training materials from outside resources, including the Director of Legal Affairs and Professional Standards at Hudson Gateway Association of REALTORS® (“HGAR”), who reminded Houlihan Lawrence that designated agents have split loyalty; Forms from the New York State Association of REALTORS® (“NYSAR”), which Plaintiffs themselves say “fill[s] the [alleged] gap left by the [Section 443] Form and industry-standard listing agreement when seeking consent to dual agency”; and HL’s Policy Regarding Buyer Clients, which expressly states that agents cannot provide undivided loyalty in a dual agency transaction. 2 Houlihan Lawrence has filed a motion to exclude Mr. Cusack’s testimony. But even if the Court were to allow Mr. Cusack to testify, summary judgment would be required for the reasons set forth herein. 5 10 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 SUF-¶79. The existence of these documents disproves the fundamental premise of Plaintiffs’ claims—that Houlihan Lawrence uniformly trained all of its agents during the class period to misrepresent the risks associated with dual agency. Therefore, even if Plaintiffs respond to this motion by providing anecdotal evidence of some documents or some training materials that do not fully describe the risks of dual agency, any such documents or training materials could not establish the uniformity required for Plaintiffs to establish the first element of their liability claims on a class-wide basis. Indeed, as hard as he tried not to, even Plaintiffs’ expert (Mr. Cusack) conceded at deposition that “it’s possible” that some Houlihan Lawrence agent provided a disclosure on dual and designated agency that even he would find sufficient. SUF-¶63. For this reason alone, Plaintiffs’ claims fail, and the Court should enter summary judgment in favor of Houlihan Lawrence. There is no evidence that Houlihan Lawrence monitored or policed the content of dual agency disclosure conversations to ensure their alleged inadequacy. Even if there were evidence that Houlihan Lawrence provided some uniformly deficient training or script to its agents (which there is not), that would not be sufficient to satisfy the first element of liability on a class-wide basis. Instead, Plaintiffs would also need to prove that every agent in every class transaction followed the deficient training by failing to provide adequate disclosures. But there is no such evidence. Indeed, the evidence is to the contrary. As a preliminary matter, Houlihan Lawrence did not monitor or police the content of its agents’ dual agency disclosure conversations. SUF-¶44. These disclosure conversations occur between individual agents and individual clients. SUF-¶¶41,43. No other person generally participates in or listens to these conversations. SUF-¶¶43-44. Thus, as Plaintiffs’ expert admitted, nobody associated with Houlihan Lawrence—whether an office manager, an executive, 6 11 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 or anyone else—was aware of what any particular agent told any particular client in any particular transaction. 3 SUF-¶45. Thus, there was no way for Houlihan Lawrence to monitor or police the content of these conversations, and no way for Houlihan Lawrence to know whether its agents were following the hypothesized “uniform script” or “uniform training” alleged by Plaintiffs. Without any such monitoring and policing, there is no reasonable basis from which to infer that every agent in every class transaction would have followed any such script or direction. This is particularly true given that Houlihan Lawrence agents received additional information regarding dual agency disclosures from multiple sources—including New York state-mandated training to obtain and maintain their licenses—which expressly explained and reminded them of their obligation to inform clients of the impact of dual agency on their ability to provide undivided loyalty. For example, New York requires real estate agents to complete at least 77 hours of training to become licensed salespersons—and 152 hours to become licensed brokers—including 11 hours of training on agency law and the required disclosures relating to dual agency. SUF-¶¶25, 28. Licensees must complete 22.5 hours of “continuing education” every two years to maintain their licenses, including at least 2 hours that must be “agency related” instruction. SUF-¶30. Houlihan Lawrence never directed its agents to ignore this training when providing dual-agency-related disclosures. SUF-¶40. 3 As set forth in the accompanying affidavits, managers “do not generally participate in the disclosure conversations between Houlihan Lawrence agents and their clients” and therefore “generally do not know what any particular agent said to any particular client when obtaining their consent to dual and/or designated agency.” SUF-¶44. Instead, these managers “generally trust the agents who work in [their] office[s] to comply with their obligations to obtain informed, written consent to dual and designated agency, and [they] do not have any reason to think that the agents . . . fail to do so.” Id.; SUF-¶45 (Cusack also testified to the same: he had not seen any evidence in his work in this case that Houlihan Lawrence management monitored the disclosure conversations that its agents had with their clients). 7 12 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Similarly, Houlihan Lawrence brought in independent, outside resources to provide optional training to its agents regarding dual agency disclosures. SUF-¶33. Don Cummins— Director of Legal Affairs for HGAR —presented on the 443 Disclosure Form and discussed the “risks representing both sides [of a transaction] and [how to] disclos[e] it properly to your client(s).” SUF-¶35. There is no evidence that Houlihan Lawrence agents uniformly ignored this training or neglected to incorporate it into their disclosure conversations. SUF-¶40. Nor did Houlihan Lawrence instruct them to do so. Id. The same is true with respect to training provided by HGAR’s Leon Cameron, which similarly emphasized that the “[a]gent must explain to the client that the agent cannot provided undivided loyalty” when obtaining consent to dual agency with designated sales agents. SUF-¶¶36-37. At least one Houlihan Lawrence manager directed his agents to use the dual agency form disseminated by NYSAR when explaining the risks of dual agency to their clients. SUF-¶38. Plaintiffs’ own expert—Thomas Cusack—points to this NYSAR form as an example of a disclosure that he thinks “fills in” the alleged gaps left by the 443 Disclosure Form. SUF-¶38. The fact that at least one Houlihan Lawrence manager referred his agents to the exemplar disclosure highlighted by Plaintiffs’ own expert proves conclusively that there is no class-wide evidence that Houlihan Lawrence directed its agents to give uniformly inadequate disclosures. Finally, many Houlihan Lawrence agents worked at other brokerage companies before joining Houlihan Lawrence and received training on dual agency disclosures from those companies. SUF-¶62. Houlihan Lawrence’s former General Sales Manager—Jim Gricar— testified that he did not see any evidence that Houlihan Lawrence treated dual agency disclosures any differently than these other companies. SUF-¶83. This fact further disproves Plaintiffs’ theory that Houlihan Lawrence directed its agents to give substandard dual agency disclosures. 8 13 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Any purported “risks” of dual agency transactions are necessarily individualized and thus cannot form the basis of class-wide relief. Plaintiffs’ attempt to obtain class-wide relief based on alleged inadequate disclosures fails for another reason—even under Plaintiffs’ theory, the purported “risks” associated with such transactions are inherently individualized and there is no “uniform” disclosure that had to be provided in every case, beyond the 443 Disclosure Form itself. Indeed, if there were uniform risks that were present in every transaction that had to be disclosed, the New York Legislature presumably would have included them in the 443 Disclosure Form. The fact that the Legislature chose not to do so is telling. For example, when Plaintiffs’ expert, Thomas Cusack, was asked “[w]hat is it specifically that you think an agent has to say to their client to comply with their obligations as you understand them . . . when they’re covering the disclosure form and obtaining consent with respect to a dual agency or a designated agency transaction[,]” Mr. Cusack testified that it would depend on the client: These licensees that you’re asking me are the agent of this client. Understood. They are the agent of this client. They must say whatever is sufficient to warn their client of the risks, conflicts, and consequences. That’s their duty. So if – if one of them makes them aware, if two of them makes them aware, if three of them – but they are licensed to be the client of that particular – or the agent of that particular client, which means that – let’s not go through the fiduciary duties – but the big one is loyalty and disclosure. I’m putting your interest first. And whoever you are, I’m going to tell you exactly what it means so that you can look me in the eye and say I understand the consequences, but I’m okay with you because I trust you. . . . SUF-¶64, emphasis added. When asked a follow-up question, Mr. Cusack repeated the same answer – the disclosure necessary for a particular transaction would depend on the client: 9 14 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Q: Okay. So the disclosure – some clients may need you to disclose one of the items you covered; some clients might require two. It’s going to be – it’s going to depend on the client as to what they need in order for that client to understand and give their informed consent; is that right? *** A: Okay. It’s – it’s whatever is necessary for the client to understand what the risks are, the consequences, and the conflicts. The inherent conflicts. And there’s a – there’s a whole series of things before that that establish what you’re expecting from me as your agent. Id. Through this testimony, Plaintiffs’ own expert has admitted that he cannot provide a single disclosure that, in his opinion, would be either required or sufficient in every single class transaction to inform the client of the so-called “risks” of dual or designated agency transactions. Id. Even under his mistaken view of the law, any supposed “risks” of dual agency transactions that are not otherwise disclosed on the 443 Disclosure Form would be individualized and subjective. Id. Thus, there is no uniform, standard disclosure that must be provided in every transaction that could form the basis for Plaintiffs’ request for class-wide relief. Plaintiffs cannot rely on Houlihan Lawrence’s in-house bonus program to avoid entry of summary judgment. Plaintiffs will likely argue that, even if they cannot prove that Houlihan Lawrence agents uniformly gave inadequate disclosures regarding dual agency generally, their claims should proceed because—they say—Houlihan Lawrence agents uniformly failed to disclose the in- house bonus. This backup argument fails for multiple reasons. First, the only way to determine whether any agent disclosed the in-house bonus program to her clients would be to ask her. While it is Houlihan Lawrence’s position that no such disclosure is necessary, neither Plaintiffs nor Houlihan Lawrence can know whether any particular agent disclosed the program anyway. Determining the answer to this question would 10 15 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 require individualized testimony from every agent involved in a dual agency transaction, which would overwhelm any common issues and destroy any efficiencies that a class action otherwise provides. Second, only some Houlihan Lawrence agents participated in the in-house bonus program. For example, of the nine agents involved in the named Plaintiff transactions, only two were eligible for and received an in-house bonus. SUF-¶97. The other seven (7) agents did not. Id. Because these seven (7) agents did not participate in the program, the program could not have had any impact on their fiduciary duties to their clients, and there was nothing for them to disclose. Thus, the current class definition would be overly broad and would include many class members who could not claim to be entitled to any disclosure regarding the in-house bonus program. Third, as a matter of New York law, an agent’s individual compensation arrangement with her affiliated broker is not required to be disclosed. On this point, People v. Wells Fargo Ins. Servs., Inc., 16 N.Y.3d 166 (2011), is instructive. There, the Attorney General sued Wells Fargo Insurance Services for breach of fiduciary duty. Id. at 169. Wells Fargo was an insurance broker. Id. Unbeknownst to Wells Fargo’s clients, in addition to any commission that it would earn on selling an insurance policy, Wells Fargo was also paid certain cash “incentives” by insurance companies based on the number of clients who purchased that company’s policies. Id. The Attorney General alleged that, as a result of these undisclosed incentives, Wells Fargo “steered” its customers to those insurers who offered the incentives and away from those who did not. Id. at 169-70. The Court of Appeals rejected the Attorney General’s claim, holding that Wells Fargo was not under a duty to disclose these incentive arrangements. Id. at 170. In reaching this result, the 11 16 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Court of Appeals specifically noted that Wells Fargo did not do anything that “was contrary to industry custom; indeed, the parties seem to agree that arrangements like those the Attorney General complains of have been commonplace, and have not generally been disclosed.” Id. at 171. The court went on to observe that such “nondisclosure may be a bad practice”, but that “[a] regulation, prospective in effect, is a much better way of ending a questionable but common practice than what the Attorney General asks us to do here: in substance to outlaw the practice retroactively by creating a new common-law rule.” Id. at 172. The same principles apply here. First, it is undisputed that in-house bonus programs are common within the real estate industry and that such programs are not generally disclosed to clients. SUF-¶¶101-102. Houlihan Lawrence’s own program dates back to at least the 1990s. SUF-¶92. And similar programs have been offered over the years by companies such as Rand Realty, Julia B. Fee, and Sotheby’s. SUF-¶¶99, 101. Moreover, in-house bonuses are just one way in which an individual agent’s compensation may vary from one transaction to another, and none of these are disclosed to the client. SUF-¶¶103-105. For example, it is very common for an agent to be eligible for a performance bonus where her commission split will increase if she meets certain volume goals. SUF-¶104. To illustrate, an agent may be on a 50/50 plan at the beginning of the year and then, if she sells $1 million worth of real estate, her plan may shift to a 60/40 arrangement, where she would retain 60% of any commissions for the rest of the year rather than 50%. As the agent nears the $1 million mark, she has an obvious incentive to close the next transaction to increase her commission split, which theoretically could cause her to “pressure” the next client to close a 12 17 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 transaction in order to increase her split. 4 But Houlihan Lawrence is not aware of any company or agent who discloses such arrangements to their clients. SUF-¶102. Just as in Wells Fargo, the Plaintiffs here cannot rest their fiduciary duty claims on an alleged obligation to disclose long-standing industry-standard compensation arrangements that, as a matter of industry practice, have never been disclosed to clients. If the State of New York wants to mandate disclosure of in-house bonuses or any other agent-specific compensation practice, the State is free to do so through regulation. But this Court should not permit Plaintiffs to retroactively punish an industry-standard practice through maintenance of a common-law fiduciary duty claim. Finally, even if Plaintiffs could overcome the above fatal defects in this theory, their attempt to base their claims on the in-house bonus would fail because they cannot prove causation or damages on a class-wide basis. This particular defect is discussed below. Even if Plaintiffs had received uniformly inadequate disclosures, their claims would fail because they did not suffer class-wide harm. Not only have Plaintiffs failed to adduce class-wide evidence showing that every class member received an inadequate dual agency disclosure, but they have also failed to prove that every such class member suffered harm. For this additional, independent reason, Houlihan Lawrence is entitled to summary judgment. Under New York law, Plaintiffs must prove impact and damages to prevail on their fiduciary duty and deceptive sales practices claims. It is black letter law that a plaintiff asserting a claim for either breach of fiduciary duty or violation of GBL § 349 must prove that the alleged breach actually caused her to suffer harm. 4 This risk is purely theoretical. Houlihan Lawrence is confident that its agents always act in their clients’ best interest, regardless of any such incentives. 13 18 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 See, e.g., Berkovits v. Berkovits, 190 A.D.3d 911, 915 (2d Dept. 2021) (“The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct”); Ramirez v. Donado Law Firm, P.C., 169 A.D.3d 940, 942 (2d Dept. 2019) (A cause of action to recover damages for a violation of General Business Law § 349 must “identify consumer-oriented misconduct which is deceptive and materially misleading to a reasonable consumer, and which causes actual damages.”). Plaintiffs attempt to avoid this black letter law by relying on Wendt v. Fischer, a 100-year- old case that is easily distinguishable. 243 N.Y. 439, 443 (1926). In that case, the broker was conflicted because it had an ownership interest in the buyer. Id. The broker did not disclose the fact of this adverse ownership interest to the broker’s seller-client. Id. at 442. A few weeks after purchasing the property, the broker re-sold the property at a profit. Id. The seller/client sued for an accounting, and the court appropriately held that the seller could void the transaction, which then required the broker to disgorge its compensation and profits. Id. at 444. Plaintiffs rely heavily on the language in Wendt that, “[i]f dual interests are to be served, the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its stark significance.” NYSCEF 688 at 18. But this language must be read in context. In Wendt, the broker argued that its statement to the seller that the buyer was a “client” of the broker was sufficient to disclose the conflict of interest. 243 N.Y. at 443. But the Court rejected this assertion because a situation where the broker represents both the seller and the buyer is very different than a situation where the broker is the buyer. Id. In rejecting this false equivalency, the Court observed: “Disclosure so indefinite and equivocal does not set the agent free to bargain for his own account or for the account of a corporation which acts through him alone.” Id. 14 19 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 The situation here is easily distinguishable from Wendt. In this case, Houlihan Lawrence did not have any ownership interest in the any of the clients at issue; and Houlihan Lawrence clearly and unambiguously disclosed the fact that it was representing both the buyer and the seller in each class transaction. The only dispute is over whether Houlihan Lawrence’s agents disclosed certain additional so-called “risks” to the client of consenting to a dual agency transaction. Even if the Court were to accept Plaintiffs’ theory that such “risks” must be disclosed, any such technical deficiency in any particular disclosure conversation does not justify departing from black letter law requiring a plaintiff to prove injury, causation, and damages in a breach of fiduciary case. Plaintiffs’ reliance on Sotheby’s Int’l Realty, Inc. v. Black, 2007 U.S. Dist. LEXIS 92168, *1 (S.D.N.Y. Dec. 13, 2007), is similarly misplaced. In that case—just as in Wendt—the fact of the dual agency was not disclosed to the broker’s client. Id. at *4 (emphasis added). The Black court described the applicable standard as follows: “In the context of a real estate transaction, a broker may not ‘act as agent for both seller and purchaser of property’ unless the broker first obtains the consent of both principals ‘given after full knowledge of the facts.’” Id. at *5-6 (emphasis added). The other cases cited in Black were similar—in those cases, the fact of the dual agency was not disclosed. Id. at *12, see, e.g., Carr v. Nat’l Bank & Loan Co., 167 N.Y. 375, 379 (1902) (fact of dual agency was not disclosed to client); TPL Associates v. Helmsley- Spear, Inc., 146 A.D.2d 468, 470 (1st Dept. 1989) (framing question as “whether appellant was ‘fully informed of every fact material to [its] interests.’”); John J. Reynolds, Inc. v. Snow, 11 A.D.2d 653, 654 (1st Dept. 1960) (fact of broker’s conflict of interest was not disclosed). 15 20 of 31 FILED: WESTCHESTER COUNTY CLERK 03/11/2024 10:30 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1753 RECEIVED NYSCEF: 03/11/2024 Here—unlike in Wendt or Black—Plaintiffs do not claim that the fact of the dual agency relationship was hidden from them. To the contrary, Houlihan Lawrence agents go out of their way to advertise the fact that they are affiliated with the Houlihan Lawrence brand. SUF-¶3. Thus, every class member was aware of the fact that the agents working with the seller and the buyer on their transaction were both affiliated with Houlihan Lawrence. Plaintiffs’ claim here is fundamentally different than the claims in Wendt or Black. Thus, to the extent either of those cases suggests that a fiduciary duty claim can proceed without proof of causation and damages, such cases do not apply here. Plaintiffs must prove that the alleged breach of fiduciary duty—the alleged failure to disclose certain unidentified “risks” of dual agency—actually caused harm and damages on a classwide basis. Moreover, neither Wendt nor Black applies to Plaintiffs’ claim for violation of GBL 349. Under New York law, a plaintiff must prove that the consumer-oriented misconduct “cause[d] actual damages.” Ramirez, 169 A.D.3d at 942. The undisputed evidence shows that Plaintiffs were not harmed by any alleged nondisclosure. Plaintiffs’ decision to structure this lawsuit as a class action and to avoid any individualized issues relating to impact means that they are not even attempting to establish damages. This strategic decision do