Realty Times June 12, 2000

First Decision Handed Down In Cleveland Adverse Commissioning Lawsuit
by Realty Times Staff

A federal jury in Akron, Ohio, hearing an anti-trust dispute between Re/Max International and two huge Cleveland independents, Realty One and Smythe, Cramer, ruled last week that the two independents engaged in a conspiracy against Re/Max.

With that decision, the jury now returns to the courtroom this week to hear additional evidence concerning liability.

The decision was the first in the federal court trial that began in late April. That lawsuit was filed in 1995.

Re/Max claims that Realty One and Smythe, Cramer - the dominant listing companies in the region - engaged in restraint of trade by offering Re/Max agents commission splits of 25 and 35 percent, substantially lower than the typical 50-50 splits offered to other real estate companies.

Executives from Realty One and Smythe, Cramer have indicated they did not act in concert to lower commissions to Re/Max, even though their actions were taken within weeks of each other in 1995.

In its ruling, the jury indicated it did not believe that assertion.

The executives have contended they were justified in lowering the commission split to Re/Max offices to thwart Re/Max raids to recruit top producing agents. With the lower splits, top producers would make little more working for Re/Max than they would if they stayed with the independents.

The jury decision today was in response to a question posed by Judge David Dowd after the first several weeks of testimony.

The question was: Did the defendants (Smythe, Cramer and Realty One) engage in a conspiracy? The jury answer today was, "Yes."

Because of that answer, the jury now will hear evidence concerning three more questions:

"Did the conspiracy result in unreasonable restraint of trade?"

"Did the conspiracy affect interstate commerce?"

And, "Did the conspiracy result in injury to the plaintiff's (Re/Max's) business?"

Joseph Aveni, CEO of Realty One, said he was disappointed with the decision.

"The decision that the jury made was a disappointment, but involves only one issue in a complex and continuing trial. Realty One remains resolute in again stating that it did not engage in any conspiracy and has conducted its business in an ethical manner. However, because the trial is still in process it would be inappropriate for us to comment further at this time."

Cynthia Lambert, general counsel for Symthe, Cramer, said her company was disappointed in the decision and "strongly denies" there was any conspiracy between the two companies.

It is not certain when the trial will end.

There are at least two lawsuits going on elsewhere - in Iowa and Georgia - that stem from Re/Max recruiting policies. It did not appear the Ohio decision would have any immediate impact on those lawsuits.



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