A lawsuit filed by Next Generation Realty against Iowa Realty (and it's sister company First Realty) MidAmerican Energy Holdings Company (parent company of Home Services of America, Inc which owns Iowa Realty) and the Des Moines Area Association of Realtors (DMAAR) has been dismissed by District Court.

Judge Glenn E. Pille, Fifth Judicial District of Iowa, ruled in a Summary Judgment read by the court on February 18, 2003, that the plaintiff, Next Generation Realty and its homebuyer's subsidiary Homebuyer's Consultants had no case against Iowa Realty and the Board of Realtors in violating Iowa Code 553.5, a code regarding monopoly. The DMAAR was added as a defendant when the plaintiffs alleged that the DMAAR had conspired with Iowa Realty, et al, to exclude them from membership in the MLS for nonpayment of "exclusive right to sell" listing fees in the MLS.

To read the complete Judgment, Click Here. (requires Adobe Acrobat Reader to open)

In short, Next Generation Realty claimed that Iowa Realty, et al, was a monopoly that refused to coop fees and used its influence to get Next Generation Realty kicked out of the MLS, owned by DMAAR. Iowa Realty and DMAAR contended that the MLS is for cooperation and that it was Next Generation who refused to cooperate by taking only "exclusive right to sell" listings and refusing cooperation to other brokers, and that it was justified in withholding cooperative fees from Next Generation Realty agents on its listings.

But, in filing, Next Generation had to explain its business practices, including its preference for "exclusive right to sell" listings, of which the company admitted to the court that it takes almost 98 percent of the time. The way the company used exclusive right to sell listings, according to sources, was that it refused to disclose such listings to the MLS, thereby avoiding fees to educate other brokers about their existance. The company also refused cooperation on those listings, yet expected other brokers to pay the company on their listings. The company advertised to the public that consumers could save money by not using the MLS. According to local custom and unlike MLS listings which must be posted to the MLS within two days of the seller's signature, "exclusive right to sell" listings must be disclosed to the MLS, but with no time limit, nor do they need to be entered into the MLS database until they are about to close. In addition, they are handled separately as information on listings that are not available to other agents to show their buyers. The information that the homes are for sale is made either by word or mouth or made available in a nonpublic section of the MLS software. Next Generation refused cooperation on its "exclusive right to sell" listings. When Iowa Realty wrote the company a letter outlining that it was going to offer it zero compensation, Next Generation cried monopoly.

The MLS, according to spokespersons, was tired of getting complaints from members that there was no information on the listings to give to buyers, who could not understand why such homes were unavailable for viewing through their own agents. The MLS imposed a processing fee of $35 for all "exclusive right to sell" listings, which Next Generation Realty felt unfairly impacted the company. When Next Generation racked up over $36,120.00 in unpaid fees, the MLS committee asked the Board of Realtors to kick Next Generation out, hence the Board's addition to the lawsuit.

The case was filed September 28, 1999 as an antitrust action. The defendants had put a motion before the court for Summary Judgment, which is a request to look at the law and make a ruling before the onset of trial. In this case, Judge Pille found judgment for the defendants.

As it turned out, the judge zeroed in on the commission issue, not conspiracy or the size of the Iowa Realty brokerage, as being key to the case.

When Iowa Realty attempted to work an arrangement where their agents were paid something by Next Generation and Next Generation would be offered the equal amount by Iowa Realty, Next Generation refused, according to Mike Knapp, president of Iowa Realty. Instead, Next Generation filed suit. According to spokespersons for the MLS, "exclusive right to sell" listings are less than five percent of all MLS listings, which meant that Next Generation Realty was taking advantage of a loophole in the MLS rules to use the MLS while refusing cooperation.

"Monopoly has nothing to do with it," said Knapp. "They do not offer our agents opportunity to earn a commission and we don't have to offer them one. I have a daughter who is five years old, and she understands the concept of sharing. You share with me, and I'll share with you. If you don't want to share, don't expect us to let you use our information. It is a basic tenet of cooperation.

Said Knapp, "All of us have been to neighborhoods where they have pot luck suppers, and there is always someone who shows up with nothing but a fork."

Tom Franklin, co-owner of Next Generation Realty refused comment for Realty Times. "You were biased, and your article was slanted," he said. "Don't ever call me again."

What persuaded the judge? Knapp explained, "Our defense is that we view the brokerage and MLS as a forum for mutual opportunity for agents and brokers, and there was not an opportunity with Next Generation. They refused to put listings on the MLS, so our agents didn't have the opportunity to make commissions from their listings, and we didn't feel we should share our commissions with them if they weren't going to reciprocate."

Would it have made a difference if Next Generation had offered $1 compensation in the MLS? "Yes, and we would have offered them $1," said Knapp. "We made that specific offer to them, 'If you come up with a dollar amount, we will offer you that same dollar amount, and they refused to do that. They wanted the commission."

Despite huge legal fees, Iowa Realty says it is not going to countersue Next Generation Realty. "I don't know if we have a basis," says Knapp, "we have a great legal system, but one of its downsides is that anyone can sue you anytime. We are going to go about our business and not look back. For us it was important lawsuit, not from the damages claimed, but that we stood up to these falsehoods.

"The real estate business is not sustainable, and an MLS is not sustainable, if the broker is required to do business with others who do not offer a reciprocal opportunity," says Knapp. "If Iowa Realty put their listings into the MLS and other brokers refused to, then you have a situation where the parasites kill the host, the host being the MLS."

Continues Knapp, "The business practice of Realtors is so different from other businesses. Can you imagine going to a Dodge dealership in Des Moines and asking for something they don't have and they take you over to the Chevy dealership and sell you something? That will never happen. The brokerage business has elevated itself above others to service the entire marketplace. There are no examples of that kind of cooperation anywhere else."

Iowa Association of Realtors CEO Martin Lee, isn't so forgiving.

"I am going to try to convince the Des Moines leadership to file for a judgment to collect those fees," he says of the $36,120 owed the DMAAR's MLS by Next Generation Realty. "Those fees have been upheld by the court in this judgment. We had legal costs to defend this suit, so the Board should go back and get those fees."

The moral of the story? "If you are going to participate in the MLS, follow the rules," says Lee, "and if you don't want to follow the rules, don't join."

Published: February 20, 2003

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