A class-action lawsuit filed against a leading Westchester brokerage accuses the firm of using “bait-and-switch” tactics to lure clients into forfeiting their right to dedicated representation.
The suit alleges that Houlihan Lawrence, a Berkshire Hathaway affiliate that is active in Westchester, Fairfield, Dutchess and Putnam counties, failed to fully disclose the details of its dual-agency policy and other conflicts of interest. Accusations that the agency categorically denies.
“A former client has filed a lawsuit against our company and we deny allegations in the complaint,” a company statement reads. “Houlihan Lawrence has been dutifully serving our clients for 130 years and is confident in our business practices. We will continue to represent our buyer and seller clients with integrity.”
In a dual-agent transaction, one agent or agency represents both the buyer and seller. Because these arrangements can negate an agent’s negotiating incentives, brokers are required by law to disclose the risks and downsides involved.
The complaint filed in Westchester County Supreme Court on July 14 quotes a former New York State Department attorney as saying: “if dual agency is disclosed properly, there isn’t anyone in their right mind who would agree to it.”
Filed by the law firm Boies Schiller Flexner LLP, Pamela Goldstein v. Houlihan/Lawrence Inc. claims the brokerage failed to educate thousands of clients on the specifics of its dual agency arrangements since at least 2011. It seeks restitution for commission payments and legal fees for all impacted parties.
“Dual agency was never intended to be a routine business practice. In fact, the law makes it extraordinarily difficult for real estate brokers like Houlihan Lawrence to lawfully act as a dual agent,” Jeremy Vest, a partner at Boies Schiller Flexner, said. “But Houlihan Lawrence has aggressively used dual agency and has taken over the Westchester County real estate market in the process.”
Last year, Pamela Goldstein, a Westchester-based lawyer, purchased a home in White Plains using Houlihan Lawrence as its buyer’s agent.
Unaware that her buyer’s agent both worked for and was related to the seller’s agent on the other end of the transaction, Goldstein said she feels she was unfairly pressured into a bidding war for the property, which she ultimately purchased for $40,000 more than the asking price.
“My agent didn’t even tell me that the listing agent he was supposed to be negotiating against on my behalf was not only his boss but also his brother-in-law,” Goldstein said. “I was shocked to realize Houlihan Lawrence couldn’t be trusted to disclose such an egregious conflict of interest.”
Although Goldstein is the only plaintiff named in the complaint, a spokesman said Boies Schiller Flexner has reached out to other former Houlihan Lawrence clients and been contacted by others in the days since the filing was announced.
The suit alleges that the agency breached its fiduciary duties to its clients and used ill-gotten gains to fuel its ascendance to the top of New York’s northern suburban real estate market.
William Ohlemeyer, another partner at Boies Schiller Flexner, said he hopes the class-action suit will discourage other agencies from resorting to similar measures in the future.
“This suit seeks to ensure that, going forward, no homebuyer or seller in the tri-county area enters into a dual-agent transaction without fully understanding that they are giving up their right to be represented by an agent who is loyal to them—and only to them—throughout the entire transaction,” Ohlemeyer said.