The federal court has given the green light for a proposed class-action lawsuit alleging price-fixing in the GTA’s real estate industry to move forward in the legal process.
Chief Justice Paul Crampton’s recent decision, though significant, represents a preliminary step, according to David Dunbar, an expert in regulatory compliance and competition law.
The outcome remains uncertain, but if certified and tried, it could potentially reshape commission structures and negotiation practices in the industry.
The federal court recently allowed for a proposed class-action lawsuit that alleges price-fixing within the Greater Toronto Area’s real estate industry to move forward in the legal process.
In a recent interview, David Dunbar, former senior general counsel at Canada’s Competition Bureau, and a lawyer specializing in regulatory compliance and competition who practices in association with Caravel Law, shared his insights on the recent developments in the Sunderland lawsuit.
The original lawsuit alleges that some of Canada’s biggest real estate brokerages and associations/boards were involved in price-fixing and anti-competitive practices. The recent ruling saw the removal of the franchisors as defendants, and what’s left, according to Dunbar, is the allegation that the brokers and the associations attempted to control the price for buyer brokerage services.
If Sunderland is successful, how realtors are compensated — and brokerages’ financial viability — will be completely upended. Here are the key takeaways from the conversation.
The recent decision
Natalka Falcomer (NK): A recent decision was made by Chief Justice Crampton regarding the Sunderland case. What was the decision about?
David Dunbar (DD): It’s important to clarify that the class action has not been approved yet; the approval is a significant hurdle that will be dealt with in the months to come, and it remains to be seen if such approval will be granted. The recent decision pertains to a preliminary step that can occur before certifying the class or hearing a case if a defendant moves to dismiss a claim.
Essentially, the defendants brought a motion arguing that the claim should be dismissed at this early stage because even if you take all of the allegations at face value, they fail to disclose a reasonable cause of action. Put more simply, this motion — which creates a mini trial-within-a-trial – asked the court to strike out the claim. This was carefully considered by the court, and in a 70-page set of written reasons, Chief Justice Paul Crampton partially agreed with the defendants.
The result of the Chief Justice’s decision is a pared-down claim and the removal of the franchisors as defendants. The decision also eliminated the allegations against the remaining defendants with respect to fixing, maintaining, or increasing the supply for buyer brokerage services. What this means for the plaintiffs is that those claims cannot now be brought against the remaining defendants. So, what’s left is the allegation that the brokers and the associations attempted to control the price for buyer brokerage services. You can think of it this way: the statement of claim was given a thorough pruning by the judge. The plaintiff’s core argument still remains but in a reduced form.
NK: Why should the real estate industry, particularly realtors, care about this proposed class-action lawsuit?
DD: At this stage, there isn’t a conclusive judgment or indication that the lawsuit will or won’t be successful. It’s crucial to emphasize that the class action has not been approved yet, and the recent developments are part of the early stages of litigation.
Realtors and the real estate industry, in general, should be aware of the lawsuit because it could have significant implications if it progresses further. However, it’s premature to conclude that this lawsuit represents a clear threat to the industry. The Justice’s decision underscores that the remaining claim — that the defendants exercised control — has yet to be proved at trial. Personally, I still think Sunderland has an uphill battle to win this case.
Class action approval? Not quite
NK: Does the approval of the class action suggest that the case has merit? Does it signal a particular perspective from the judiciary?
DD: I think there has been some confusion in the reporting on this story. This decision didn’t approve the creation of a class action. It merely allows part of the statement of claim to go forward for future consideration as a possible class action. What’s more, the recent developments in the lawsuit don’t necessarily indicate that the case is a strong one. The court’s decision to permit certain aspects of the claim to proceed is a preliminary step. It’s not a final judgment on the merits of the case. In his decision, the Chief Justice expressed a “generous approach” to the surviving claims, acknowledging their novelty. This suggests that he is open to considering the arguments presented by the plaintiffs, but it does not necessarily indicate a final perspective on the case.
Justice Crampton also noted that it’s not plain and obvious at this stage that the claims are entirely inaccurate, which means there is room for further exploration in the legal process. Ultimately, it’s essential to remember that the court’s decision at this early stage does not make a final determination on the case’s merits. It merely allows certain aspects of the lawsuit to proceed to the next phase of litigation.
Potential industry impact
NK: How might this case impact the real estate industry?
DD: The potential impact of this case on the real estate industry hinges on the outcome of the legal proceedings. If the class action is ultimately certified and proceeds to trial, it could lead to significant changes in how real estate transactions are conducted and how commissions are structured.
The central allegation in the lawsuit is that brokerages conspired to artificially increase buyer brokerage commissions, which were shouldered by home sellers. If successful, this lawsuit could potentially result in changes to commission structures and practices within the industry. It could also impact the ability of real estate professionals to negotiate commissions and prices. However, it’s important to reiterate that the case is still in its early stages, and its ultimate outcome remains uncertain. Realtors and industry stakeholders should continue to monitor the proceedings and seek legal counsel as necessary to address any potential implications.
Next steps in the legal process
NK: What’s next in the legal process for this proposed class action lawsuit?
DD: The next steps in the legal process for this class action lawsuit will involve further proceedings to determine whether the class should be certified and whether the remaining claims have merit. The court will continue to evaluate the evidence and arguments presented by both parties.
It’s possible that additional motions and hearings will take place, and there may be opportunities for the parties involved to amend their claims or defences. The case will proceed through the legal system, and the ultimate outcome will be determined based on the evidence and legal arguments presented. As with any legal matter, it’s crucial for all parties involved to engage in a fair and transparent legal process to ensure that justice is served.
This interview with David Dunbar provides valuable insights into the recent developments in the class action lawsuit against the Toronto real estate industry. While the preliminary approval of certain claims is a significant step, the ultimate outcome of the case remains uncertain.
Realtors, industry professionals, and the public should continue to follow the legal proceedings closely to understand the potential implications for the real estate industry.