Dual Agency: A Hazardous Real Estate Practice

Douglas Whipple

Douglas Whipple

“Dual Agency” is a practice used
routinely in many residential real estate
transactions, and the liability risks often are
not recognized by the parties or the real estate
licensees (both agents and brokers). Many
licensees are ill-equipped to know how to
identify a conflict between the interests of the
buyer and the seller after the Dual Agency
Agreement has been signed and, when such a
conflict happens, how to proceed.

The potential hazard of dual agency
relationships has been recognized in the
industry for years but those warnings have
not necessarily been heeded. According to a
survey of legal issues conducted by the National
Association of Realtors® (NAR) in 2011, 57% of
respondents stated that the issue of dual agency
is the basis for a “moderate” or “high” number
of disputes, and more than 83% placed the issue
among their top three current legal issues. The
survey disclosed a belief that agents and brokers
do not understand dual agency. When the NAR
survey was conducted again in 2013, breach of
fiduciary duty lawsuits accounted for the largest
single number of residential real estate-related
court cases, including conflicts over the duties
owed in a dual agency relationship.

An excellent example of this legal minefield
is the recent case of Martha v. Black v. Stouffer
Realty, Inc. & Relic, Summit Cty. Common Pleas
Case 2010-11-7671. Conflicts arose between the
interests of the seller of a home in Richfield and
the buyer after they had signed a Dual Agency
Agreement. These conflicts served to posture the
Agent on the side of Seller and adverse to Buyer.
Eventually the transaction fell through. Seller,
disgruntled, sued Buyer for breach of contract.
Buyer in turn sued Agent and Broker for fraud,
breach of fiduciary duty and breach of the Dual
Agency Agreement. The jury returned verdicts
against Agent and Broker on all three counts
and the court entered judgment on the three
verdicts. This judgment was affirmed on appeal.
Black v. Stouffer Realty, Inc. & Relic, 9th Dist. C.A.
26550 (Dec. 26, 2013).

The Ohio Department of Commerce Division
of Real Estate publishes a standardized form
that defines “dual agency” and provides a list of
actions that the licensee shall and shall not take,
outlined by R.C. 4735.57(B). A dual agent may
not, among other things, advocate or negotiate
on behalf of either party or engage in conduct
that is biased on behalf of either party.

By signing the Real Estate Purchase
Agreement, Seller and Buyer had expressed their
common objective to conclude the transaction.
Agent thus perceived her fiduciary duty to
the parties as doing whatever was necessary
to consummate the transaction. But a dual
agent’s obligation is more complex than this.
Agent’s misperception resulted in considerable
conflict, trouble and expense for all concerned
— particularly for Agent and her Broker.

The transaction was peppered with mistakes
by Agent from the beginning. Buyer testified
that only after she had submitted her initial offer
on the Purchase Agreement form did Agent
present Buyer with the Dual Agency Agreement
form, stating authoritatively “Oh, I have this
form you have to sign. This is so I represent both
the buyer and seller fairly.” Buyer was under the
impression that signing the document was a
requirement — not a choice.

By this point in time Agent should have
presented Buyer with the “Consumer Guide to
Agency Relationships.” OAC 1301:5-6-05; R.C.
4735.56(D). At trial Agent admitted that failing
to give the Consumer Guide to Buyer until
weeks later was wrongful.

Buyer’s initial offer was $500,000, with the
deal being contingent on her ability to sell her
present home in Green. Seller formulated a
written counteroffer of $515,000, and delivered
this counteroffer to Agent. However, Agent
never presented the $515,000 counteroffer to
Buyer. Agent instead presented a different
counteroffer to Buyer four days later, after
Agent and Seller secretly conferred with each
other. The revised counteroffer provided
for a purchase price of $510,000, with Agent
waiving $5,000 of her commission. It also
provided that the contingency clause would
be removed. When Buyer accepted the
revised counteroffer she did not know that the
original counteroffer had ever existed. Agent
concealed the initial counteroffer from Buyer
and suggested the revised counteroffer so as to
accommodate Seller’s afterthoughts about the
contingency clause.

An agent in a dual agency relationship
may not engage in any act of advising on or
advocating the price of the property — no
matter how well intentioned. Here, Agent
appreciated how important it was to Seller to
remove the contingency clause but ignored
how important the clause was to Buyer. Agent
was duty-bound to convey to Buyer, as Buyer’s
agent, Seller’s original counteroffer. Had
Agent done so, Buyer could have accepted the
purchase price of $515,000 and retained the
ability to terminate the transaction if she was
unable — in a soft housing market — to sell her
present home. Agent presumably understood
that the contingency clause was desirable to
Buyer and undesirable to Seller. Agent believed
that her willingness to waive some of her
commission to facilitate the transaction was
commendable; when in fact any effort by a dual
agent to influence an agreement on the price
terms is prohibited.

Another problem was the physical appearance
of the Purchase Agreement. Agents often
direct the parties to hand-write their offers
and counteroffers in the margins and spaces
of the original purchase agreement form. The
final version of the Purchase Agreement in this
case was virtually indecipherable due to the
numerous revisions that had been scribbled
throughout the document. The quagmire of
notations created ambiguity as to whether Buyer
was to make a down payment of $148,000 or
only $103,000.

Once the parties agreed to the terms of the
deal in principle Agent could have prepared
and had the parties sign a clean, readable
copy of the Purchase Agreement. This is what
most lawyers would do if finalizing a contract
containing countless revisions. Had Agent
done so the ambiguity would have come to light
and the parties could have resolved it early on.

The ambiguity as to the down payment, which
Agent could have prevented, was a major reason
why Seller sued Buyer for breach of contract.

Agent also crossed the line by trying to
facilitate financing. Because the purchase
of the property was no longer contingent on
the sale of Buyer’s home, Buyer sought to
obtain a mortgage loan. The bank’s appraisal
of the property came back at $25,000 less
than the $510,000 price in the Purchase
Agreement. Agent informed the loan officer
that she disputed the initial appraisal. Agent
requested that the initial appraisal be appealed
and supplied the loan officer with several
additional comps for consideration. But Agent
failed to obtain Buyer’s permission to pursue
this appeal.

As a result of Agent’s appeal, a revised
appraisal established a value of the property
that was even lower than the first appraisal —
$58,000 less than the purchase price. The loan
officer informed Agent that the revised appraisal
was controlling. Agent protested and suggested
that yet a third appraisal be obtained — again
without Buyer’s authorization.

At this point it was in Buyer’s best interest
to abandon the anticipated deal. Buyer had no
motivation to pay $510,000 for property that
appraised for $58,000 less. A loyal advocate
would have helped Buyer find a permissible way
to terminate the contract rather than continue
to pursue the transaction aggressively. The
positions of the parties were irreconcilable;
Seller wanted to keep the deal and Buyer wanted
to kill the deal. Agent could no longer serve the
interests of both sides.

The bank eventually denied Buyer’s loan
application based on the low appraisals. Agent,
still oblivious to the concept of neutrality,
promptly put Seller’s property back on the
market and served as dual agent for Seller and
the eventual purchaser of the property. When
all was said and done, Seller ended up with the
Agent and Buyer ending up with a Summons.
There were many times that Agent should have
informed Seller and Buyer of a conflict and
that she was unable to proceed in a manner
that was unbiased as to both parties. This
case is an important teaching tool for brokers
and agents as to their obligations to both sides
after the Dual Agency Agreement has been
signed. It demonstrates the sobering fact that
the principles of dual agency sometimes require
the licensees to notify the seller and buyer of
their right to terminate or revoke the agency
relationship. See, e.g., R.C. 4735.57(B)(7),
R.C. 4735.71(A) and R.C. 4735.72(E)(1).

Dual agency is not an effortless maneuver to
score a double commission; it fundamentally
changes the agent’s relationship with both
seller and buyer. For prospective sellers
and buyers, this case illustrates why they
should not casually consent to a Dual Agency
Agreement that an agent has asked them to
sign. The case demonstrates that brokers have
a responsibility to ensure that their agents
understand the Dual Agency Agreement well
enough to explain it to sellers and buyers and
to implement it conscientiously.

Lawyers ordinarily refuse to enter into dual
representation relationships with potentially
adverse parties; and once in such a relationship
they proceed with considerable caution. In
matters involving dual agency, the real estate
sales industry would do well to emulate the
laudable principle of restraint that is exercised
by the legal community. Real estate licensees, for
the benefit of their clients as well as themselves,
should not view the Dual Agency Agreement
as a routine practice but, rather, a contract
laden with serious risks that may outweigh its
potential value.

Douglas Whipple has been a civil
trial lawyer for 33 years, providing
legal services to businesses, families
and individuals. He represented the
Buyer in this litigation. Mr. Whipple
is a Life Member of the 8th District Judicial
Conference, and has been a CMBA member since
1982. He can be reached at Whipple Law LLC,
whipple-law.com, (216) 912-8479.

What Interns Do May Determine What They Are Due

By Monica Levine Lacks

What Interns Do May Determine What They Are Due

What are interns doing in your business?

For college students, summer often means the temporary retirement of books and backpacks, and the chance to “play grown-up” with a resume-building internship. And for the businesses and institutions who retain and train these future “grown-ups,” summer may bring an opportunity to utilize low-cost or no-cost labor to accomplish outstanding tasks, while grooming potential members of their future workforce. Or maybe not. Lawsuits challenging the legality of unpaid and “underpaid” internships under the Fair Labor Standards Act, and a six-factor test issued by the U.S. Department of Labor, raise questions as to whether interns must be paid in accordance with U.S. wage and hour laws, and their state equivalents (in Ohio, R.C. 4111.01 et seq). Among the factors that may present the greatest hurdle for employers are that the internship – which must be “similar to training which would be given in an educational environment” – also be “for the benefit of the intern” and that that the employer derive “no immediate advantage” from the intern’s activities.

These and other factors have formed the basis for a number of class actions against employers utilizing summer and longer-term interns. In April 2010, the U.S. Wage and Hour Division published Fact Sheet No. 71, articulating six factors to help “for-profit” sector employers determine whether interns must be paid under the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA). The criteria include:

  1. That the internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship;
  6. The employer and the intern understand that the intern is not entitled to wages for time spent in the internship

To show that an employment relationship does not exist (and that the FLSA’s minimum wage and overtime requirements do not apply to the intern), all six of the factors must be met. Notably, the Wage and Hour Division has pointed out that the requirements do not apply to internships in the public sector and for non-profit charitable organizations.
Granting in part the plaintiff’s motion for summary judgment, and conditionally certifying a class of plaintiffs under the FLSA, the United States District Court in Glatt v. Fox Searchlight Pictures, Inc., S.D.N.Y. No. 11-06784, 6/11/13, rejected the employer’s position that its unpaid interns met the six-factor test. As a result, the court found that two interns working on the set of the movie “Black Swan” were misclassified as unpaid interns and were entitled to damages under the FLSA and its New York state equivalent. As to the first factor, the court emphasized that, while classroom training is not a prerequisite, “internships must provide something beyond on-the-job training that employees receive.” In Glatt, the subject interns “did not acquire any new skills aside from those specific to the [the employer’s] back office, such as how it watermarked scripts or how the photocopier or coffee maker operated.” Addressing the second factor, the “benefit of the intern,” the court pointed out that while the plaintiffs received some benefits from their internships, such as resume listings, job references, and an understanding of how a production office works, those benefits were “incidental” to working in the office like any other employee. Because the employer received the benefits of their unpaid work, which would otherwise have required paid employees, the employer, not he plaintiffs, primarily benefited from the relationship.

The court found that the third factor – regarding the displacement of regular employees – was not met because the interns performed administrative tasks that might otherwise have been done by paid employees, such as reconciling invoices, drafting cover letters, organizing file cabinets, making photocopies, and running errands. For these reasons, the employer obtained an immediate advantage from the interns’ work (the fourth factor). The fifth factor – that the interns knew they were not entitled to a job at the end of the internship – was satisfied by the employer.

The undisputed fact that the interns knew they would not be paid (the sixth factor) may be of particular interest to employers. The court observed that this fact added little, “because the FLSA does not allow employees to waive their entitlement to wages.” In short, an understanding between the employer and the intern that the internship is unpaid will afford an employer little if any protection.

The Glatt court distinguished the facts before it from the “trainee” exception established in Walling v. Portland Terminal Co., 330 U.S. 148 (1947). In Walling, the United States Supreme Court held that “trainees” attending a week-long course for prospective railroad breakmen were not employees covered by the FLSA. The program in that case was used purely as a training device for the trainees’ benefit; did not expedite company business; and occasionally impeded it. Accepting the “unchallenged findings” that the railroads obtained no “immediate advantage” from the trainees’ work, the Supreme Court concluded that they were not employees under the FLSA. Walling, 330 U.S. at 153.

In November 2013, the Glatt defendants’ interlocutory appeal of the trial court’s summary judgment order was certified by the United States Court of Appeals for the Second Circuit. Significantly, in February 2014, the court of Appeals denied appellants’ motion to stay pending appeal the district court’s ordering permitting issuance of notice to putative class members, creating further challenges and costs for the appellants. While the district court’s conclusions remain subject to change, its findings suggest that employers will be closely scrutinized under the six factor test regardless.

Such was the case in the Northern District of New York, where another putative class of interns sought damages under the FLSA and its New York equivalent. The plaintiff in Kozik v. Hamilton College, C.A. No. 6:12-cv-1870 (LEK/TWD), brought an FLSA action alleging that interns in Hamilton College’s athletic department were working long hours – sometimes 80 or more hours per week – with the college’s varsity sports programs, performing the same jobs as fully paid assistant coaches. The interns, who were not students at the college, alleged that they received flat pay at monthly or other intervals at a rate well below minimum wage and overtime provisions. During their “in season” varsity sports, interns allegedly were required to travel with their assigned teams, often working ten hours or longer at a time. During the off-season, they were required to perform “game management duties” (arguably enabling the college to avoid hiring workers for games), as well as participating in recruiting activities and showcases and camps. The lead plaintiff maintained that the interns’ salaries of $1100 per month or $275 per week resulted in an effective hourly wage of as little as $2.60 in some weeks, and that they never received overtime pay. Kozik settled in January 2014, while the plaintiff’s motion for conditional collective action certification was pending, and four months before trial.

A number of other lawsuits have been brought by putative classes of interns – all alleging that they were unpaid or underpaid in violation of the FLSA. While the litigation stems primarily from the state of New York, the federal coverage of the FLSA potentially exposes employers nationwide to litigation and potential damages resulting from alleged misclassification of interns. Employers – many of whom seek to create relationships of mutual benefit by hiring student interns for the summer or longer terms – are well advised to scrutinize those arrangements to determine their wage and hour obligations, if any, under the FLSA and their analogous state laws.

Monica Levine Lacks is a Cleveland attorney. She has an extensive background in labor and employment law, as well as ERISA denial of benefits litigation. She annually participates in the CMBA Bench-Bar Run for Justice. She has been a member of the Cleveland Metropolitan Bar Association since 2006. Monica can be contacted at monica.lacks@gmail.com

**Printed by permission of the Cleveland Metropolitan Bar Association**

Paperless Documents – Why?

Paperless Documents Why?

Paper can present a daunting obstacle for workers.

by Michelle Cady-Cook, Director of Marketing, Cady Reporting Services

Imagine: A paperless office…While there are very few offices in the world that are truly paperless, there are steps that law firms and you personally can take towards having a paperless (or maybe a less-paper) office. In the words of Lao Tzu, “The journey of a thousand miles begins with one step.”

What do paperless office procedures do for you?

  • Increase your efficiency.

How much time have you spent searching for that paper that you “know is here somewhere”? It is much easier to organize your files electronically. You can cross-index individual files so they can be a part of multiple cases. You can also organize and reorganize files whenever and however you would like.

  • Save money on your storage costs.

As we accumulate more and more paper we also increase storage costs. If we have our documents stored electronically, not only will we reduce storage needs and costs, but it will be easier and cheaper to transmit our files to anyone else who may need them. Not only is it cheaper to store files electronically, but you can sleep better at night knowing that your documents are protected against fires, flood and other types of loss by having your files safely backed up in several locations.

  • Scanned files are portable.

One of the challenges that busy paralegals, secretaries and attorneys face is the fact that there are only so many hours in a day. One benefit of going paperless is the ability to work no matter where you are. If there is a large case with many documents, it can be very cumbersome to deal with. If your files were stored on a DepoLaunch* CD, it would be easy whenever you had a few minutes, to just pop it in and work no matter where you were. (And with DepoLaunch you can even have the video file with you as well.)

  • Easier collaboration

Whether you work in a small or large firm, electronic files can make it easier to collaborate. Sending files back and forth via email or posting shared files on a local server negates the need for sharing paper copies and all of the hassle of keeping track of files and making sure all copies are complete and updated.


  • Utilize search capabilities.

When you have all your files stored electronically, you can utilize the
impressive power of desktop search software. Using this software (which will index all your files), you can locate relevant information. Desktop search software will search the text of your files so you can find arguments made by your attorney in earlier briefs and motions, and you can go right to the relevant spot in a long file. Just imagine if you have 500 pages of medical records in a case and you are looking for a specific entry. I’m sure you would agree that searching a file is much easier than searching through 500 pieces of paper.

  • Save the planet.

By going the paperless route, you can reduce paper consumption, thereby saving trees and reducing pollutants to our environment. As an additional benefit, you also reduce your costs by ordering less paper.

  • Scanned documents can make your clients happier.

When the client calls and needs information from a specific document, you can find it right away instead of hanging up and getting back to them within the next week. If you have a searchable document, you will be less likely to miss key points. Your greater efficiency and accuracy will make clients happy, which makes the boss happy, which make you an indispensable assistant.

It is 2014. What a great time to allow technology to make your life easier.

*Depolaunch is a self-running CD/DVD which stores your deposition transcript, exhibits and video. It is a proprietary product of the NNRC. Cady Reporting is the Cleveland affiliate of the NNRC.

Cleveland Court Reporting Services

Cleveland Court Reporting Services

Cleveland court reporters can be a powerful asset.

For attorneys working in Cleveland, there are fewer assets more critical than the work of Cleveland court reporting companies. They can provide the experience and technological savvy to help attorneys accomplish their goals and better serve their clients with greater speed, economy, and efficiency.

One of the ways that Cleveland court reporters are accomplishing this is by staying ahead of new technologies that can enhance the work of the law firm. Over the last several years, several new tools have become available that allows law firms to take advantage of broadcast quality video that almost gives them the power to be in two places at once.

Using video conferencing coupled with video depositions and high quality video and audio, an attorney can work on a deposition in Cleveland from anywhere via an electronic, live hookup. When attorneys feel the need to work in person here, support personnel can view a live deposition via the hookup and even communicate with counsel over a secure chat hookup.

Cleveland attorneys who can accomplish their depositions in person also have several reasons to choose experienced court reporters. Trial presentations have become more sophisticated, and for better or worse more trials on television means more exposure to the courtroom for potential jurors who have grown to have an expectation of new technology and multimedia presentations.

Choosing the right court reporting firm can be a crucial detail that makes a difference in how cases are approached during pretrial and how they are presented to juries. Choosing a firm that can craft innovative solutions for each challenge can be a key to success.

Tips to Improve Your Online Marketing

TIps to Improve YourOnline Marketing

Cleveland court reporters should be mindful of their online presence.

From Michelle Cady-Cook, Cady Reporting Services, Cleveland, OH

The old saying goes, “you are either growing for you’re dying.”  One of the only ways to grow your Cleveland court reporter business is to focus on your marketing strategy.  In this economy, it’s imperative that your business gets noticed.

There is no one way to do things when it comes to marketing, and the only wrong way is to do nothing at all.  Some have large budgets and others work on a shoestring.  Regardless of what type of business you have, you can tap into and apply some very practical strategies that will work for your business.  Here are three areas that can make a big difference:

  •            Ÿ Increased visibility in your community
  •            Ÿ Online presence
  •            Ÿ Great customer service and contact to build deep customer relationships

When you are looking to grow your business, make friends!  Connecting with people in a positive way shows them “you” and from there they are able to understand what your business is driven by.  So join local organizations where you can network with people and build relationships.  From here, you can tap valuable resources and become a resource yourself.  Interview others when you find that they have information helpful to you.  People are honored when you ask about their opinions and experiences.  Tape the interview, give them a copy and post it on your various sites.  When you in turn become a resource to others, it lets people know that you’re an expert in your field.  This makes you a trusted and valuable resource.  Your network will increase in quality and quantity.

Analyze your internet presence.  The internet is the place most people look for information about businesses.  How is your website placed on sites like Google and Bing?  Are you actively using social media sites? Being active on social media sites like Facebook, Twitter, LinkedIn and Google+ is important, and will only get more so as time goes on.

Many people do not see the immediate benefits or ROI of social media and then choose not to participate.  However, there are many reasons to do so.  Social media makes it more possible to connect with customers. Logging onto these sites has become daily routine for most people.  Be visible where the people are.  You can be in front of your existing and potential customers every day for free!

When you post interesting, informative and helpful content you grow respect and form better connections with customers.  You may not always be able to see the exact like-to-loyal-customer trail on sites like Facebook, but not having a social media presence may cause customers (and especially potential customers) to question why you don’t have one.  Lack of presence may cause people to ask questions or have thoughts such as, “are they trying to hide something?” or “they must not be very cutting edge.”

Social media sites help your company to be transparent, and therefore likeable.  Not only can you market your company, but you can also see what makes your competition tick.  What are they posting? What is getting them likes?  Keeping track of competitors, and also your clients’ activities is very valuable.  Of course, as with everything, as an owner you must establish common-sense rules for yourself and employees using social networking and discussion sites, and always be positive and helpful on them.


Once you follow your plan and achieve your goals of more customers, keeping them is important.  Building deep relationships with customers will keep them coming back.  They should be made to feel important and appreciated.  Always treat customers as individuals by using their name and sincerely caring about their needs because people value that in a company.  Ask yourself, “How can I make my customers feel good about doing business here?”  Thank your customers every chance you get.  Hand-written notes tell people that you took time to sit down and think about them for a few minutes out of your day.  If one of your customers has a need that your company does not normally fulfill, remember the power of the word, “yes”.  When you can go a little bit out of your way to help them, doing business with you becomes easy, and people always want to return to people who are easy to work with.


One of the most important points is to not let yourself be your own obstacle to great marketing.  The future of the company lies in your hands.  There is never a good reason to not do at least some of these things.  It is like brushing your teeth, or exercising.  We make time for these things because they are essential for the health of our bodies.  Marketing activities are essential for the health of our companies.  Keep focused on your marketing strategies and work toward your goals a little bit at a time, and you will watch your business grow.

Litigation Support from Cleveland Court Reporting Companies


Litigation Support from Cleveland Court Reporting Companies

Cleveland court reporting companies provide a variety of services.

Cleveland court reporting companies are well known around Ohio for providing litigation support and other services to local attorneys. For years they have provided transcripts, video services, and other important tools for lawyers, and those services extend far beyond Ohio’s borders.

In today’s legal world, lawyers need to be able to connect with their cases remotely. Time spent traveling to depositions is time spent away from clients. Cleveland court reporters can use technology to connect lawyers via the internet, giving them a real-time window into depositions and other legal proceedings.

Choosing a team with these professional services gives lawyers a way to better serve their clients. The technology of live legal video, synchronized transcripts, off-site storage of transcripts and live chat capability for attorneys during proceedings has given these firms a reputation that is unmatched in the Cleveland area.

These firms can also provide conference rooms that are internet- and video-ready, meaning the logistical work of setting up remote meetings is simplified.

When lawyers around the country need to accomplish their work in the Cleveland area, technology is a powerful asset. Reporting firms can bring that technology to attorneys’ cases and provide a number of services that allow lawyers to connect with other attorneys and witnesses while staying connected with clients in their own practices around the country.