Trade group objected to data share and potential merger with California Regional MLS
Key Takeaways
- The Greater San Diego Association of Realtors filed a federal lawsuit Thursday against its own MLS, Sandicor.
- GSDAR alleges that Sandicor has withheld access to data and that other shareholders have used Sandicor unfairly to compete with GSDAR.
- The complaint demands, among other items, a jury trial, a minimum of $1.5 million in damages, restitution and more.The Greater San Diego Association of Realtors filed a federal lawsuit Thursday against its own MLS, Sandicor Inc., and its fellow Sandicor shareholders.
GSDAR owns Sandicor, which has 19,500 members, along with the North San Diego County Association of Realtors and the Pacific Southwest Association of Realtors.
The allegations
GSDAR, which has more than 12,000 members, makes the following allegations:
- Sandicor and the other shareholders have denied GSDAR access to its own MLS data
- The other shareholders have used Sandicor to compete unfairly with GSDAR for members
- The other shareholders have used Sandicor funds to “push” a potential merger with California Regional MLS — the nation’s largest MLS at nearly 80,000 members
“Although Plaintiff owns a supermajority of Sandicor’s outstanding shares and contributes most of Sandicor’s funding, Sandicor’s board is controlled by PSAR and NSDCAR,” attorneys for GSDAR wrote in the complaint.
“They have used this position of power to wield Sandicor as an anticompetitive weapon, milked its resources for their own enrichment, and frustrated its purpose, all while actively preventing Plaintiff from participating in corporate decisions.”
The complaint’s claims against Sandicor, the North San Diego County association and the Pacific Southwest association include breach of fiduciary duty, waste of corporate assets, “unfair, illegal, and/or fraudulent business practices,” and breach of written contract, among other claims.
NSDCAR and PSAR are also accused of violating state and federal antitrust laws, breach of fiduciary duty by controlling shareholders and intentional interference with contractual relations.
Board voting skewed
Sandicor CEO Ray Ewing declined to comment for this story, noting that he and Sandicor’s legal counsel had not seen a copy of the complaint until Inman’s inquiry. GSDAR, PSAR, and NSDCAR did not respond to requests for comment by publication time.
According to the complaint, although each of the three associations have two members on the Sandicor board and GSDAR is the majority shareholder in Sandicor, the board’s voting formula only gives GSDAR four-elevenths of the voting power.
This means, GSDAR’s attorneys allege, that PSAR and NSDAR have been able to “dominate and control” Sandicor’s board and proceed with certain projects over GSDAR’s objections, including:
- “exploring, approving, and creating a task force to investigate a merger with CRMLS, which, if the merger went through, will diminish the value of Sandicor’s database;
- “authorizing Sandicor to develop a Web portal that competes with one its shareholders (Plaintiff) at great expense and without the necessary shareholder approval; and,
- “preventing Plaintiff from obtaining a data feed to use in conjunction with its Web portal while allowing other consumer facing websites to have feeds from Sandicor.”
Data-share agreement could ‘destroy and devalue’ MLS database
GSDAR also objected to a data-share agreement between Sandicor and CRMLS, also announced Thursday. In the complaint, GSDAR’s attorneys claimed agreement “threatens to destroy and devalue Sandicor’s most valuable asset: its database.”
CRMLS CEO Art Carter told Inman that was not a fair statement.
“The value of the database in CRMLS’s opinion is derived by how many eyeballs can be placed upon that data and from our standpoint a datashare increases the value of the database, not decreases,” he said.
He confirmed that CRMLS and Sandicor have been in merger talks since November 2012, with the most recent meeting taking place this week.
“From CRMLS’s standpoint the enthusiasm in the room seemed to indicate to us that there was a lot of support from their brokerage community in having a merger occur,” Carter said.
CRMLS was not aware of GSDAR’s displeasure at the idea of a merger until about six to eight months ago, he said. “Whether or not they voiced it internally is unknown to us,” he added.
According to the Greater San Diego association, if the merger were to go through, “it would destroy the value of Sandicor and value proposition offered by the Associations. The merger would also dramatically impact each Association’s operational revenue.”
In response to the allegation that a merger would destroy Sandicor’s value, Carter said, “It’s CRMLS’s position that our database is made up by information that is directly attributable and owned by the brokerage community and as such the brokerage community should have a say in the dissolution or use of that database.
“We were a little bit surprised that Greater San Diego has taken the position in the lawsuit that the business purposes of the association might be of a higher concern than the brokers’ needs, wants and desires.
“We’re also a little bit surprised by the statements in the lawsuit that signify San Diego is a unique and isolated marketplace. The 2,300 shared members between Sandicor and CRMLS probably would differ with that statement.”
CRMLS is not a party to this lawsuit.
Complaint demands
The complaint demands, among other items, a jury trial, a minimum of $1.5 million in damages, restitution, a “judicial determination” of disputes between Sandicor shareholders in regards to its corporate structure, and an order compelling Sandicor to produce for inspection its books, records and documents regarding its finances and operations, the datashare agreement and the potential merger.