Has our CEO informed the Board of Directors about a potential HSV lawsuit? Hot Springs Village People received a communication today, May 7, 2019, with this document enclosed. The communication stated the Board of Directors has not been notified of this potential HSV lawsuit. This document was sent to the Hot Springs Village Board of Directors, attention Lesley Nalley on April 30, 2019.
Letter from Legacy Law Firm to HSV POA Board of Directors, Attention Lesley Nalley
Via Federal Express and Electronic Mail
April 30, 2019
Hot Springs Village Property Owners’ Association, Board of Directors
Attn: Leslie Nalley, Chief Executive Officer
895 DeSoto, Blvd Hot Springs Village, AR 71909 Inalley@hsvpoa.org
Re: Hot Springs Village Builders Guild
Sherman Anti-Trust and Clayton Anti-Trust Acts
Ms. Nailey:
I have been contacted by individuals regarding your efforts to promote individual builders, and other professions, above all others to stifle competition and increase revenue for the Property Owners’ Association. Based on the facts, I have been asked to investigate whether your actions in this regard are violations of the Federal Sherman Anti-Trust and Clayton Anti-Trust Acts. Violations of those acts carry severe penalties, including, but not limited to, triple damages and costs (including a reasonable attorney’s fee) to a private claimant, injunctive relief, as well as the potential for fines if prosecuted by the government.
In particular, the clients informed me that you have engaged in a scheme in which you recruit builders to be a member of your guild by promising free advertising on your website and through the newspaper, The Village Voice, and other mediums. We also have reason to believe the builders also receive preferential treatment in the form of relaxed restrictions by the Architectural Control Committee and reduced costs to purchase lots on which to build. In exchange for these benefits, we have been informed that you require these builders to construct on POA lots and list the properties with the realty company owned by the Property Owner’s Association, thus reaping the benefits of a commission from the sale of the lots.
If true, these actions are certainly anti-competitive as you are attempting to freeze out non-guild members as well as other realtors and private property owners. By providing benefits unique to guild members and requiring them to build only on lots you own, you are harming the owners of the village as well as the businesses that do not receive the advantage of free advertising and reduced regulations.
Of course, if you believe your actions do not violate federal and state anti-trust laws, then you would have no issues providing us with documentation regarding these guilds. In particular, we demand you provide us with all communications, documents and agreements related to the builders’ guild. We are also asking you to provide copies of any and all agreements between you and guild members, advertising and promotional material related to the guild, copies of any and all documents related to the guilds as well as any communications between you and members of the Architectural Control Committee related to membership in the guild as well as the application process. Please provide all guidelines established for membership in the Guild as well as any agreements between your realty company and guild members related to the purchase of Village owned lots and the construction of homes on such lots.
This matter is of great importance to my clients and should litigation be deemed necessary; we would be able to obtain all these documents through discovery. Thus, there is no reason for you to delay in complying with our requests. Please provide the requested documents within 15 days from the date of this letter.
Sincerely,
PBM/kk
Letter-to-Ms.-Nalley-4-30-19
Andy Kramek
05/07/2019 — 3:41 pm
Oh dear. It seems that our CEO may have overstepped a line somewhere and, while that is not in itself necessarily surprising, this could have serious repercussions. Does the fact that they got her name wrong impact anything?
Andy Kramek
05/07/2019 — 3:43 pm
Oh, hang on it’s correct in the original letter, but just misspelled in the re-typed extract.
HSVP C
05/07/2019 — 3:47 pm
Andy, that was not retyped. It was copied and pasted. It is the same in both, but that should have no bearing on the legitimacy of the case. I have noticed a lot of the court pleadings, etc. have misspellings. But this is not a pleading and Lesley is our only CEO here, so it is obvious who the person in the Attention line is.
Andy Kramek
05/07/2019 — 4:48 pm
Good. I am glad that it won’t matter a jot. Now all we need is some answers from the CEO.
Anonymous
05/07/2019 — 4:43 pm
Not another law suit with triple payout?!!!!!!!!!!!!!!!!!!!!!!!!!!!
Anonymous
05/07/2019 — 7:00 pm
How many lawsuits and other legal actions caused by one person before that person can be fired (or contract terminated) for cause. When it appears that one person singularly costs the POA and homeowners so much in legal fees wouldn’t this be considered not working in the best interest of the POA which is also for cause to terminate contract. Maybe we need more than just a Finance Control committee reporting to the BOD.
Too many secrets are starting to leak out, what more is there to come out?
I now have a better understanding of why the “Protective Covenants” have been added for the rest of us.
Looks like we the homeowners property values would have been impacted by a secret guild. Already has been impacted by these excessive permits required for unreasonable restrictions and fees – sorry the double speak name is “Proactive Covenants” or is that “Protective Covenants” I get confused with the unclear “answers”.
Kirk Denger
05/07/2019 — 9:42 pm
All building permit fees including $8,000, utilities, sewer, and hook-up are deferred until closing. ACC and inspectors look the other way on substandard POA sponsored housing, all the while encumbering and fining non-guild builders and Realtors. Nailey wasted $800,000 which does not include the annual million $ malpractice insurance dividends, of our hard earned assessments on legal fees last year alone. Her reaction: “They will have to prove it,” with a virtually unlimited legal defense funding of other people’s money, the CEO knows she is above the law. Thank you, Philip, for taking your time to help remove this toxic CEO from our community. The Nailey protective covenants come straight from the Congress of New Urbanism playbook and have been strangling HSV for 12 months too long now.
Tom Blakeman
05/08/2019 — 7:23 am
Regardless of whether Ms Nalley immediately notified board members or not they obviously now know of this demand letter by the “grapevine” if nothing else. Frankly, it is surprising that this complaint has taken so long in coming.
The test here now is what kind of response, explanation and action we will see forthcoming from our Board. For sure the three newest members ran on a ticket that included disbanding of Land and Homes due to its extravagant cost and minuscule results. Now they have been notified in clear terms that there is likely a blatant violation of Federal law as well.
Board members please know that the traditional party line commentary of “not an appropriate topic to comment on” or “our policy is not to discuss legal actions” and similar will not be acceptable to your constituency.
Andy Kramek
05/08/2019 — 7:43 am
Quite apart from any other consideration, I would assume that if the allegations contained in the letter are correct, it would seriously jeopardize the non-profit status of the Village. The legal position, with respect to tying in trade organizations (the practice of requiring that a person purchase membership of an organization in order to retain a qualification) has generally been considered allowable by courts. However, the allegations in this letter go far beyond those considered ‘normal’. Consequently I felt that I should ask Cindi Erickson, as the new Chairperson of the Board about this one, so I sent the following e-mail at 7:24 last night….
——————————————————————
Post about Potential Lawsuit against the POA on hotspringsvillagepeople
Dear Mrs Erickson,
I saw in a post on hotspringsvillagepeople.com that a law firm has asked the POA (and, if I am reading it correctly, also the Village Voice) about the membership and operations of the Builder’s Guild featured on the HSV Website under the “Our Builders” heading in the “Real Estate” drop down.
The only information I have seen is contained in this link and I have no idea what it really means.
https://hotspringsvillagepeople.com/potential-hsv-lawsuit/
Is this real, or is it some sort of frivolous harassment?
If real, is it something we, as property owners, should be concerned about?
Regards
Andy Kramek
——————————————————————
Andy Kramek
05/08/2019 — 7:55 am
And I received the following reply this morning:
Good morning Mr. Kramek,,
I’m sorry but board members are not to publicly discuss current or potential matters of litigation.
Cindi
So, apparently we ARE going to get the usual line on this one too!
anonymous
05/08/2019 — 8:41 am
Here’s an interesting treatise on the subject of anti-trust by a company that trains real estate agents. Note they quote one of the potential violation penalties as prison time:
The Sherman Anti-Trust Act of 1890
The foundation for federal Anti-Trust laws is the Sherman Act of 1890.
The Sherman Anti-Trust Act of 1890
Section 1. Trusts, etc., in restraint of trade illegal; penalty
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.
NOTE: the emphasis of this act is to prohibit the restraint of trade to allow for greater competition.
The Clayton Antitrust Act was enacted in 1914 by the US to add further substance to the antitrust law by seeking to prevent anticompetitive practices in their incipiency. The Clayton act specified particular prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures. It supplemented the Sherman Act.
The Three Types of Anti-Trust violations which are Most Important in the Real Estate Industry
Conspiracy to Fix Prices
Imbalanced Commission Splits
Conspiracy to Boycott
Conspiracy to Fix Prices – It is a violation of both State and Federal Anti-Trust Laws for there to be ANY agreement between competing real estate brokers to fix the prices that each will charge to a third party.
Let’s look at some examples regarding Conspiracy to Fix Pricing which are prohibited:
Brokerage A and Brokerage B agreed to charge all their clients x % commission on all listings.
Brokerage A , brokerage B and Brokerage C agreed to pay a set amount to outside brokers fee for any referral.
A broker tells her clients that her brokerage charges 6% commission on all their listings and that all other brokers charge the same amount as it is a “standard” in the industry.
Imbalanced Commission Splits – brokers need to be especially careful of imbalanced exploitative splits when cooperating with others brokers on listings. As exploitative split is one that:
(a) Minimizes the broker’s costs of cooperation with other agents
(b) Maximizes the broker’s commission because they sell their own listings
(c) Maximizes the broker’s commission when they sell other agent’s listings
Here’s an example of an imbalanced commission split:
A listing broker offers 1% to buyer’s brokers who sell his or her listings. Yet the broker seeks 3% of the commission when he or she sells the listing of other brokers who have 6% total commission.
This splitting structure discourages cooperation from other broker and increases the likelihood that the broker can sell his or her own listing.
Conspiracy to Boycott – The conspiracy to boycott happens when a group of competitors agree not to deal with another firm or when brokers collectively decide not to deal with a third party to eliminate competition. Here’s an important distinction:
Individuals each have a right to choose who they will and will not do business with. It is the collective action of a group which is prohibited by Anti-Trust Laws.
Let’s look at an example:
Over a lunch meeting, broker A from XYZ Realty and broker B from ABC Realty agree not to show the listings of Matt Realty. They further state that if no other brokers will show the Matt Realty listings then Matt should be out of business in no time. This is a conspiracy to boycott to eliminate competition.
Jim Rosenow
05/08/2019 — 9:09 pm
Just a FYI — federal antitrust laws like the ones referenced in the letter only apply to interstate commerce and likely would have no bearing on local POA affairs, which are normally of an intrastate (i.e., within Arkansas) nature. From what I could see, this law firm has no obvious experience in prosecuting federal antitrust matters and may be just shaking the tree to see if anything falls.
Kirk Denger
05/10/2019 — 12:48 am
95% of property owners and potential property owners are interstate, but the fruit has already fallen.
Anonymous
05/09/2019 — 7:29 am
Conspiracy to boycott, collusion to limit competition, sounds familiar….oh the tangled web we weave….
Scott McCord
05/08/2019 — 2:43 pm
Anonymous comments, “Guess what I heard” comments, “look what someone forwarded to me” comments carry little if any value or importance. Why did the originator not have the gumption to publish themselves. They would rather let someone else “stir the pot”.
Since so many are calling for transparency, can the authors of the comments both here on next door and on hotspringsvillagepeople.com share with everyone specifically who forwarded this attorney’s letter to them and which Board members they spoke with to come to the conclusion that the Board had not been informed?
My guess is no one will come forward to reveal where this information originated.
“Transparency”… I doubt it.
HSVP C
05/08/2019 — 2:51 pm
Mr. McCord, I have not spoken to any Board Members on this subject, so please don’t incorrectly suggest I have. There is one thing in your comment that was stated correctly, “My guess is no one will come forward to reveal where this information originated.” Your guess is correct.
Kirk Denger
05/08/2019 — 9:46 pm
McNailey, information comes forward and is revealed by we the people of HSV people and independents all around you everyday and night. When you realize and admit that you are the originator, you will begin to show out of the depths of your denial some measure of the value of importance. Let’s talk, let’s listen, let’s move forward together and be friends. Comply with Philip’s demands and show that you have nothing to hide.
Gene Garner
05/08/2019 — 5:33 pm
This information originated at Legacy Law LLC, authored by attorney Phillip Montgomery. It was sent to the registered agent (Lesley Nalley) of Hot Springs Village Property Owners Association.
If the question is “who revealed the existence of this demand letter?” why is that important? The fact that it exists and we Property Owners were not notified is another example of the veil of secrecy that surrounds the CEO & BOD. We are the last to know and the first to pay for the missteps and incompetence of our “leaders”.
There is only one reason to know the identity of the person(s) that forwarded this letter and that is to punish them for daring to shine a light on potentially illegal actions by the leadership. I’d like to know their identity myself, to thank them and offer my assistance.—Gene
Andy Kramek
05/08/2019 — 5:44 pm
Totally agree, Gene. I am not normally in favor of leaking information anonymously. However, when the it reveals criminal actions (as this apparently does) it is, I think, justified.
Minn daly
05/15/2019 — 9:12 am
Gene, another CEO huge mistake on builders guild. It seems that Cindi is protecting her from POA members on this issue. When will we get answers on all of the law suits? Coopers has been scheduled for June what about the others? So sad that Lorrie was not elected, we really need a lightening rod within this board to get the CEO under control or dismissed. Minn
Tom Blakeman
05/09/2019 — 7:52 am
The idea promoted above that Federal anti-trust laws apply only to interstate commerce is sadly way off base. Anyone who has ever gotten a real estate license will tell you that about half of their training is on legal issues and half of that again is about anti-trust. And, as any real estate agent will tell you: “all real estate is local”.
Another thing to consider is that if this issue does become a lawsuit it will be in Federal court and not in a local state court where shenanigans like improper venue delays won’t hold any sway.
Bottom Line: This needs to be taken very seriously.
Jim Rosenow
05/09/2019 — 10:37 pm
Mr. Blakeman — My earlier comment related only to the two federal acts that were noted. I am a retired corporate attorney with considerable past experience in federal antitrust matters. Those federal acts typically require violations involving interstate commerce to be applicable. It is possible that Arkansas also has state antitrust statutes that may apply only to intrastate (i.e., in state) matters and possibly the POA, but there was no specific statutory reference to any such state laws in the letter sent to the POA.
I am sure there are many legal issues discussed when securing a local real estate license, including some antitrust laws. I am also sure that there are real estate professions who participate in multi-state transactions that could possibly be affected by those federal statutes. However, without knowing more, I just don’t think the federal statutes are applicable here. I guess we’ll just have to let the paid lawyers who actually know sift through this one.
Tom Blakeman
05/10/2019 — 8:34 am
Mr Rosenow: you might be interested in the link below.
https://www.nar.realtor/antitrust#section-171122
Jim Rosenow
05/10/2019 — 6:33 pm
Thank you. The linked article is a general overview of both federal and state antitrust laws and may be useful for some purposes. However, it fails to show the distinctions between the two, which is very important when trying to apply a particular law to a particular situation.
While I’m not inclined to conduct a further seminar on antitrust laws, here’s one link for your edification from a legal site. You will note that it clearly states that “the Sherman Act can only be used when the conduct in question restrains or substantially affects interstate commerce or trade.” That was the only the point that I was trying to make in my earlier comments.
https://www.law.cornell.edu/wex/antitrust
As an aside, I’ve already found it preferable to seek legal advice from knowledgeable lawyers and not professionals in other fields.
Tom Blakeman
05/11/2019 — 8:45 am
You might want to research specific cases regarding this subject and the real estate industry. Below is a link to a DOJ case wherein a Columbia SC MLS was tried under the Sherman Act and found guilty. The jurisdiction and applicability of the law was due to the fact that consumers buying homes in Columbia were from out of state, loans were used from out of state lenders and consumers accessed the MLS from out of state. This is just an example of many.
https://www.justice.gov/atr/case-document/final-judgment-59
In our situation there is an MLS involved, buyers come from other states, the builders guild is advertised via the POA website to be accessed anywhere. No doubt the buyers use loans in some cases to buy and almost any mortgage loan today is backed by one Federal agency or another. Furthermore, the parties behind the demand letter are most likely franchisees of one of the major national real estate brokerages. Just a guess.
As another reference you might want to consider is that there is currently a major lawsuit in progress which covers multiple states, multiple major brokerage franchises, multiple mls entities, and the NAR over price fixing so this type issue is currently paramount on the national stage. Just filed in March I think.
You are correct that I’m not a lawyer but I do know a bit about the real estate industry. I also know that just like every profession law is very compartmented. Most likely a corporate lawyer who did not deal in real estate is unaware of the many facets of that very complex industry.
I guess we’ll just have to wait and see what shakes out.
Gene Garner
05/20/2019 — 1:44 pm
First of all I am not an attorney and don’t pretend to be an expert when it comes to legal matters– but the following statute explains Arkansas’ position on anti-trust practices
A.C.A. § 4-75-310
Chapter 75 Unfair Practices Subchapter 3– Monopolies Generally
4-75-310. Driving out or financially injuring competition.
If any person, company, partnership, association, corporation, or agent engaged in the manufacture or sale of any article of commerce or consumption produced, manufactured, or mined in this state or elsewhere shall, with the intent and purpose of driving out competition or for the purpose of financially injuring competitors, sell within this state at less than cost of manufacture or production or sell in such a way, or give away, in this state their productions for the purpose of driving out competition or financially injuring competitors engaged in similar business, then the person, or persons, company, partnership, association, corporation, or agent resorting to this method of securing a monopoly within this state in such business shall be deemed guilty of a conspiracy to form or secure a trust or monopoly in restraint of trade and on conviction shall be subjected to the penalties of this subchapter.
It sounds to me that the”Guild’s” purpose is to drive out competition and financially injure other builders. But then again I’m not a lawyer.—Gene