Do you know exactly when you should disclose agency to your buyer, and if so, do you?

That's the question facing some Alaskan brokers who are being sued by buyers claiming that they weren't informed early enough in the transaction of their agents' dual agency status.

The same attorney Robert Wagstaff, Esq., who represented Joe Columbus, Jr. and his agent Robert Holbrook and McAlpine Investments, Inc., in their successful ($200,000 settlement before punitive damages could be awarded) lawsuit against agent Bonnie Mehner and her brokerage Prudential Jack White, has filed a new lawsuit on behalf of buyer clients.

This time the plaintiffs are Eldon and Elizabeth Tanner, who claim that it was not disclosed to them until well into their purchase of a $46,900 Mat-Su property that the same brokerage firm, Prudential Vista, was acting as dual agent to both sides of the transaction.

Uh, oh - shades of Debs VS Coldwell Banker.

In 2000, a California buyer named Jerome Debs claimed that he overpaid for a property because his brokerage firm was also representing a competing buyer whose agent caused Debs' accepted contract to be set aside by the seller in a competing bid. Since Coldwell Banker was representing both buyers, Debs felt that Coldwell Banker didn't do enough to protect his interests as a client, particularly since his offer had already been accepted by the seller. Because he could prove how he was damaged materially, the case went to court.

Explains attorney Robert Wagstaff, "There are different degrees of dual agency, when an agent represents both sides and when two agents from the same brokerage represent both sides of the transaction. It's worse when one agent does it, but if the same brokerage is collecting commissions, it's still dual agency."

Debs VS Coldwell Banker was settled out of court, for an undisclosed sum. Even though the brokerage had to pay, the case represented a skirmish won for the real estate industry. Without a verdict, the case did nothing to abrogate the law of agency. That means it didn't set any new precedent and agents could resume doing business as usual.

However, with the Colombus case in Alaska, there was a verdict and the case was settled for a large amount before punitive damages were awarded.

And Wagstaff is planning to hit the same defendants again, as well as others who practice undisclosed dual agency.

"They (Prudential Jack White) do a high volume residential business," says Wagstaff. "For Alaska, they are the biggest player up there and now they are on court record saying they ignored the statute because it was too difficult to follow, that everybody does it, and this is how we do business."

Like the Debs case, the Tanner case has the vast potential to impact designated and dual agency laws across the nation. And a lot depends on the intentions of these attorneys and their clients. Will Wagstaff go the distance or will he settle?

"We are asking for disgorgement of commissions," says Wagstaff, "and punitive damages."

For years, the National Association of Realtors and their state associations have lobbied to enact new representation statutes that allow the continuing practice of dual agency. But dual agency is problematic. When disclosure is offered it reveals an inherent conflict of interest that typical agency law simply doesn't properly address.

Wagstaff says he is aware the problem is nationwide, and fully realizes the potential his lawsuit has to impact the practices of dual agents everywhere. He says he knows first-hand how consumers can get "sucked in" to dual agency arrangements.

While listing a property he owns in Colorado, he says he was disclosed by the listing agent that if the brokerage or the agent found a buyer that their fiduciary relationship would change to a facilitator relationship for both parties, with his permission.

"He said that to the wrong person," says Wagstaff. "I said that wasn't going to happen."

The agent didn't really mention that one of Wagstaff's options would be to continue a fiduciary relationship - until he insisted on it.

"I'm sophisticated," says Wagstaff, "but the average buyer out there might not be, especially first-time buyers. How can a dual agent, who is representing the seller to get the highest price for the home be working in the buyer's interest?"

That's why, this time, proponents of dual agency might not be so lucky as to get by with red faces and writing big checks.

Wagstaff has asked the Superior Court judge to assign class action status to the lawsuit. Class action would invite others who have purchased property with Prudential Vista or Prudential Jack White to contact the attorneys.

The court has not yet responded on the request for class action status, and possibly will not for about six months.

Published: October 4, 2002

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