East End real estate industry accused of monopoly practices

The owners of Hampton Bays-based Suffolk Research Service, George and Jean Simpson, have struck another blow in a David-and-Goliath battle against 26 heavyweights of Hamptons real estate.

Representing themselves as litigants, earlier this month Mr. and Ms. Simpson each filed a $9 million minimum complaint against several local real estate heavy-hitters and officers, including the big five firms—The Corcoran Group, Prudential Douglas Elliman, Sotheby’s, Brown Harris Stevens, and Town and Country Real Estate—as well as the company that owns and operates RealNet Solutions and Hamptons Real Estate Online (HREO). The lawsuit alleges anti-competitive practices, collusion, price-fixing, and breaking real estate law via restraint of trade by operating and participating in the Open RealNet Exchange (OREX) system, which the Simpsons describe as an illegal and cost-prohibitive multiple listing service, or MLS.

In the complaint, the Simpsons allege that of the approximate 1,500 to 2,000 agents on the South Fork, between 1,000 and 1,200 of them work for the defendants. By virtue of the use of OREX, which the Simpsons allege costs $40,000 a year, the defendants are using unfair practices to control the East End real estate market, the lawsuit charges.

The remaining defendants listed in the suit are a who’s who of the East End real estate industry. They include the firms Agawam Realty, Coldwell Banker, Devlin McNiff Real Estate, Mrs. Condie Lamb Agency, Engel & Volker Real Estate, Hampton Homes, Keeshan Inc., Saunders & Associates, Norma Reynolds Sotheby’s Real Estate, The Marketplace Realty, Atlantic Beach Realty, 91 Jobs Lane Realty, The Morley Agency, First Hampton Realty, Strough Real Estate, and Simon Harrison Real Estate. Individually cited are Gary DePersia, Tim Davis, and Susan Breitenbach of The Corcoran Group, and Paul Brennan of Prudential Douglas Elliman.

When called in search of a response to the complaint on Friday afternoon, a “no comment” response was given by a Corcoran Group representative as well as by Mr. Brennan, Mr. DePersia and Agawam Albertson Principal Broker Jack Hangen. Calls to several other defendants on Friday afternoon were not returned.

According to information gathered by the Simpsons—their business, Suffolk Research Service is a supplier of real estate deed transfer data, and Ms. Simpson is a licensed real estate agent—the cost to join OREX is 40 to 80 times more expensive than the state-approved multiple listing services operated by the Long Island Board of Realtors and the Hamptons and North Fork Realtors Association.

A longtime opponent of OREX, Mr. Simpson said that the “illegal MLS” is a tool that is used to price the smaller real estate agencies out of business.

“They are basically putting me and everybody else out of business by not playing fair,” he said during a telephone interview on Friday. “The purpose of joining [OREX] is to exclude ... They want to keep the business all to themselves.”

In response to the lawsuit, which was filed on Friday, March 6, in United States Eastern District Court of New York, OREX Managing Partner Nick Khuri defended the service that his business provides, while also shooting down the Simpsons’ claims as “false” and “exaggerated.”

“We have no pretense to be MLS or anything—we just supply the technology,” he said on Friday. “Our product is a database system ... We took real estate out of the Stone Age and into the e-Age, and no one is excluded.”

Though Mr. Khuri was reluctant to quote concrete prices for the use of his company’s technology, he did say that OREX is free for companies that use both RealNet and HREO. He added that there is an annual fee for RealNet and HREO that is based on the package, users, officers, and whether or not the company is a charter member. “The costs vary and are complex and detailed. There are many factors to take into account,” he said.

Mr. Khuri said that he and Mr. Simpson have a history of legal battles, and that Mr. Simpson has brought lawsuits against his company in the past but has so far never gained any legal traction.

“George has brought lawsuits against us and others in the past, but the judge threw it out ... He has a rep for trying to compete and go into the market using lawsuits, character assassination and going to the press,” Mr. Khuri said, dismissing the lawsuit as frivolous.

Mr. Simpson maintained that he has a responsibility to enforce the principle of the law and the integrity of the real estate industry on the East End. He says the use of OREX—which he estimated lists between 80 to 90 percent of the “exclusive” listings being sold on the South Fork, and which he alleges are not listed on other multiple listing services—goes against what is right and fair to excluded agents and their clients.

“They know they’re breaking the law—they just don’t give a damn because they’re making money and taking a bigger piece of the pie for themselves,” he said. “This is one of the reasons the real estate industry has the reputation it has, and it’s very well deserved. The most important thing here is that people are being damaged. This is the biggest industry in the Hamptons, and if you collude, you are hurting the buyers and sellers here ... You are hurting the consumer by playing these silly little protectionist games.”

Mr. Simpson went on to say that he has legal precedence to stand on with his suit. In page five of the complaint, the 1982 lawsuit United States v. Realty Multilist Inc. is referenced. The decision in that case states: “When a broker is excluded from an MLS without reasonable justification, the broker and the public are harmed.”

During a telephone interview on Friday, Southampton-based Hamptons Fine Homes Principal Broker Dana Berger agreed that the OREX system is exclusionary and cost-prohibitive for smaller agencies and is “not in line with what our real estate licenses say.”

Ms. Berger said that she believes that Mr. Khuri is overcharging for the OREX system, which goes against the agent’s code of fiduciary responsibility to a client by limiting the visibility of certain listings. That creates an unfair advantage for the larger agencies and the buyers and sellers they represent, she said.

“They’ve gotten so large they can make their own system ... But my client’s money is just as green as Corcoran’s buyer’s money,” she said. “Where does an elephant sleep? Anywhere he wants to.”

As for the lawsuit, Ms. Berger resisted jumping into the fray, but she said she believes that Mr. Simpson and his wife are trying to bring to light a practice that, though going strong, is neither legal nor ethical.

“This is according to what’s right in terms of the law, not about the personalities,” she said. “Because of George, this will no longer be shoved under the corner of the rug ... Because there is so much money and this market is so valuable, they [the defendants] feel they are above the law—and it’s wrong. This should be according to Hoyle, according to the rules, according to the law. Just do the right thing.”