SAN FRANCISCO (Legal Newsline) – On June 9, the California's First Appellate District of the Court of Appeal released its decision on the cases of homeowners who sued their brokers for receiving allegedly undisclosed kickbacks from third party services through the real estate software TransactionPoint.

The court dismissed the plaintiffs' cross appeal, stating an order to arbitration is not appealable under California law, and reversed the trial court’s decision for the other plaintiffs, and remanded for entry of an order compelling arbitration by all plaintiffs.

In 2015, the plaintiffs, two sets of homeowners, filed nearly identical lawsuits alleging that their brokers received undisclosed payments from the real estate settlement services ordered through TransactionPoint. 

The plaintiffs alleged the brokers were not entitled to retain that compensation under the residential listing agreement (RLA) and that because they are not disputing their obligation to pay the brokers their commission, but rather disputing the broker’s right to keep the received compensation, the RLA arbitration clause doesn’t apply to them.

The plaintiffs alleged that payments under the sublicense agreements operated as kickbacks. When the broker allegedly ordered settlement services from a service provider through TransactionPoint, the service provider paid the broker a sublicense fee, purportedly for the service provider’s use of the software.

Real estate companies J. Rockcliff Inc. and Mason-McDuffie Real Estate Inc. filed motions to compel arbitration of plaintiffs’ claims based on arbitration clauses in the contracts. In their motion, the defendants contended that all three arbitration clauses require arbitration of the claims in plaintiffs’ complaints.

The trial court ruled that these claims do not concern plaintiffs’ obligation to pay compensation because the plaintiffs did not dispute this obligation.

Judge Sandra Marguiles vacated the trial court’s order denying arbitration pursuant to the RLA and the 2007 residential purchase agreement (RPA) and reversed the rulings. 

Marguiles remanded the matter to the trial court to enter an order compelling all plaintiffs to arbitrate their claims with the broker defendants. The cross-appeal of the trial court’s order for one set of homeowners to arbitrate their claims against the broker defendants and the service provider defendants under the 2010 RPA is dismissed. 

Marguiles and the justices concluded that the plaintiffs who executed the RLA are required to settle their claims.

The court of appeals held that home sellers who signed any of the residential listing and residential purchase agreements were bound to settle with their brokers, as well as with the service providers, who were non-signatories, and that the defendants could recover their costs on appeal.

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