Lenn Harley regards herself as an Internet pioneer. An early adopter of buyer's agency, she found the Internet to be the perfect vehicle to bring her relocation business as well as local buyers. But Harley learned the hard way that some brokers consider the Internet to be their domain, too. When she obtained the rights to an lucrative and possibly resalable domain name, her broker sued her to prevent her from taking the domain name with her.

The story began in Maryland, a dual agency state, where Harley felt that she couldn't properly serve her buyers to the degree she wanted. Agents in the Maryland, Virginia, and Washington D.C. area often are licensed to work in all three jurisdictions, so it was a natural lateral move when Harley joined a Virginia firm called Ken Murphy and Associates.

Murphy advertised for buyers regularly, and Harley found her business growing exponentially. But things suddenly changed in 1995 when Murphy retired and sold the business to his managers Dick Bryan and Jeff Ocean. Murphy's core business had been working with small builders and providing agency services for them, a business plan the two brokers planned to stick with, according to Harley. The new owners had little interest in buyer's agency or the Internet, said Harley, and they discontinued advertising for buyers. Harley felt her business was drying up. She turned to the Internet to get more business and registered her first domain name, http://www.homefinders.com.

According to Harley, she paid for the domain name, paid a Webmaster to create the site, and paid to keep up the site. She is the sole registrant for the domain name. "I quickly became an Internet junkie," says Harley.

Harley's efforts on the Internet paid off, and her business was soon back on track, but she missed having the wind at her back from a supportive broker. She decided to pull up stakes and go with an exclusive buyer's agency firm. When she left in 1998, brokers Bryan and Ocean responded with a lawsuit against her.

Bryan and Ocean, who have since renamed their brokerage Bryan and Ocean, L.L.C. declined to comment, and referred their attorney, Patrick Norman, who said, "We are prohibited by law from commenting."

Both parties are restricted from commenting on the arbitration, according to Harley and her attorney, but the pleadings and the award are a matter of public record.

While many brokers would have been content to collect the residues of business initiated while an agent is associated with the company, Bryan and Ocean wanted to get the rights to her first domain name. The brokers may have believed that she would hand over the domain name rather than defend herself in litigation. In mandatory arbitration, attorneys' fees and court costs aren't included in any award. Even if Harley prevailed, the suit would be financially punishing to her, a Pyrrhic victory at best. Despite the advice of her attorneys who pleaded with her to settle, Harley refused to be intimidated. She decided to stand her ground.

"The first year I was gone, I paid them (the brokers) over $50,000 just in referral fees," says Harley. After investing $10,000 in attorneys who failed to move the case forward, Harley decided to find an attorney with "more fire in the belly."

Harley's new attorney Paul Thaler with Thaler Liebeler Machado and Rasmussen, LLP, a Washington DC firm, is a specialty litigator with experience in employment disputes and other corporate matters. He believes that the brokers reasons for litigation were to take the domain name to resell for a profit. "The plaintiffs (Bryan and Ocean) believed it was desirable, and it has a perceived value," speculates Thaler. "Who is to say what the value is? A lot of the case stemmed from a perceived value to just that particular domain name. If the broker believes that the domain name was worth one million dollars, that would give him reason to pursue it."

Continues Thaler, "But Ms. Harley was able to show that she has been a pioneer in using the Internet for real estate. When she first started, very few Realtors used the Internet and she was able to get names like Homefinders.com. She had a desirable site. From our perspective, it was not just the site that was valuable, but the person who was working the site that made it more valuable."

The case was heard by an arbitrator, Judge Ronald P. Wertheim of the Superior Court of Washington D.C., whose decision is binding. Not only did Judge Wertheim find against the broker plaintiffs, he stated, "The documentary record fails to support Claimant's allegations in significant material respects as to whether the compensation arrangement between the parties provided consideration for Respondent's Web-site expenses, while it is undisputed that Respondent as an independent contractor invested substantial sums in designing, establishing and maintaining the Web-site in question. Respondent's testimony is not substantially undermined by the apparent inconsistencies adduced, in view of the uncertainties concerning many of the legal concepts that necessarily underlie those apparent inconsistencies. This Arbitrator concludes that Claimant has not carried its burden of proof by a preponderance of the evidence."

The Arbitrator found Harley to be the legal owner of the URL address and domain name "Homefinders.com" and awarded her $16, 535.81 in unpaid commissions withheld by the brokers. However, Harley spent $65,000 in legal fees fighting the suit. Still, she is elated. "Agents for years have been at the mercy of brokers," says Harley. "Of course agents need supervision, but it is the agents who spend the money to generate business. Brokers have a lot of authority over what agents do even though we are independent contractors. If you invest your money and you work hard, you own the product of your creativity."

"I think it was ill-advised for the broker to pursue it, given the merits of the case," says Thaler. "There was never a doubt that she was the proper owner of that domain name."

"We aren't talking about an employee of Microsoft creating software applications in their basement on the weekends. Real estate agents work by themselves and work through a broker to sell a home. They are sole proprietors of their business. That is a important distinction in the ownership of intellectual property," says Thaler. "I just hope other agents aren't forced to endure this kind of litigation when they decide to leave a broker."

For Lenn Harley, the lawsuit had a lasting effect on how she perceives brokerage. She decided she was "sick of working for brokers," and says that the case inspired her to pursue her broker's license. Now she is the principal of her own buyer's brokerage, The Homes Place.

Editor's note: The award for Case Number: 166299 (Chancery) will be filed in Circuit Court for Fairfax County Virginia and will be a matter of public record as early as next week.

Published: September 20, 2000

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