Campaign Finance Reform Has Modest Impact on RPAC
Below are summaries of recent court cases affecting the real estate industry.
February 1, 2004
The U.S. Supreme Court has affirmed the constitutionality of most of the provisions of the Bipartisan Campaign Reform Act of 2002. The ruling is expected to have only a modest impact on the fundraising and advocacy activities of the REALTORS® Political Action Committee (RPAC).
The Act, which became effective in November 2002, bars national political parties from raising millions of dollars in unregulated “soft money” contributions to finance get-out-the-vote campaigns and television ads. The law also sets strict limits on the “issue ads” that independent groups can air in a campaign’s final weeks. A number of groups, including U.S. Sen. Mitch McConnell (R-Ky.) and the National Rifle Association, challenged the Act based on its alleged infringement of free speech, in violation of the First Amendment of the U.S. Constitution.
An appellate court upheld most of the Act’s provisions, and the ruling was appealed to the Supreme Court.
The Supreme Court also upheld most of the Act’s provisions, including Title I, which regulates the use of “soft money” in campaigns. However, the Court struck down the Act’s prohibition on political contributions by minors.
Since the Act was largely intended to limit the influx and effect of “soft money” on federal election campaigns, the NAR Legal Department believes the Supreme Court’s ruling will only have a very limited impact on fund-raising and operations of RPAC in part because RPAC relies less on soft-money contributions than many other PACs.
The provisions that will have some impact on RPAC include:
- Soft money restrictions. RPAC receives soft money from state PACs, local boards and MLSs, affiliate chapters, and some real estate and real estate-related companies. RPAC previously used such soft money to make contributions to the state election accounts of national party committees. Soft money was also used to fund the “Opportunity Race” program, which encourages members at the state and local levels to advocate the election of specific candidates for federal office. The Campaign Reform Act prohibits direct contributions to non-federal accounts of national party committees. However, since the Act does not restrict a corporation’s ability to communicate with its members about federal candidates at corporate expense, NAR can continue to operate the Opportunity Race program and can continue to receive and use soft money contributions from state PACs.
- Electioneering communications. The Supreme Court upheld the prohibition of using broadcast media ads referring to a federal candidate at corporate expense where the communication is made 1) within 60 days of a general election or 30 days of a primary election; 2) using broadcast, cable, or satellite transmission; and 3) is done in a manner that is targeted to the “relevant electorate” in a federal election. As a result, any communications made by RPAC/NAR’s “Political Advocacy” program within the designated time frames must now be made using direct mail, phone banks, e-mail, or unrestricted media.
- Contribution limitations. The Supreme Court upheld the Act’s provisions that let individuals increase their hard-hard money contributions to federal candidates. However, the Act dos not change the $5,000-per-year limit on contributions by an individual to federal PACs, such as RPAC, and the $5,000-per-election limit on contributions by federal PACs to candidates.
Protection Clause Entitles Broker to Commission
The Colorado Court of Appeals, Division II, has affirmed the ruling of a trial court that a protection clause in a listing agreement entitled a brokerage to a commission, even though the broker did not conduct negotiations with the entity that purchased the property after the listing agreement expired.
Wm. R. Winton Ltd. entered into a listing agreement with David Shands, a licensed real estate broker, to sell a property the company owned. Although the listing agreement expired in 1999, the seller allowed the broker to continue to market the property. For two months starting in May 2000, Fred Ziegler made a number of offers to purchase the property through his buyer’s representative.
In August 2000, the seller executed an exclusive right-to-sell, designated-party listing agreement with the broker in which the “designated party” was Ziegler and a corporation controlled by Ziegler. This second listing agreement, which was set to expire in December 2000, also contained a protection clause that entitled the broker to a commission if any party with whom the broker conducted negotiations purchased the property within a year following the expiration of the listing agreement, so long as the broker provided the eventual purchaser’s name in writing to the seller at the expiration of the listing agreement. The seller and the corporation entered into a purchase agreement in August 2000, but the sale did not close before the end of 2000. The broker’s attorney sent a letter to the seller stating that the broker expected to receive a commission if the property sold during the protection clause period to Ziegler or his corporation.
In March 2001, after Ziegler rescinded the purchase agreement because he was unable to secure financing, he formed a new corporation with an investor. The investor purchased the seller’s property in May 2001, and then immediately transferred the property to the new corporation. No commission was paid to the broker at closing, and the broker sued, seeking payment. The trial court awarded the broker a commission, and the seller appealed.
Colorado law states that a broker’s right to a commission is dependent on the terms of the listing agreement. The court stated that the purpose of the listing agreement is to compensate a broker who was the procuring cause of the sale, and Colorado law has consistently rejected attempts by sellers to circumvent the terms of the listing agreement by using a strawman as a conduit for a sale of real estate. The court found that while the broker never conducted negotiations with the investor, the property was ultimately transferred to an entity in which Ziegler had an interest. Since the broker had conducted negotiations with Ziegler and also submitted Ziegler’s name in writing to the seller upon expiration of the listing agreement, the court ruled that the broker was entitled to the commission. The court rejected the seller’s argument that it did not have knowledge of the actions taken by Ziegler, stating that the fact that the seller was not involved in the actions taken by Ziegler did not relieve the seller from paying a commission.
Court Rejects Title VII Claims against Brokerage
A federal court has ruled that a real estate broker could not bring a lawsuit for sexual discrimination against a brokerage company because she was not an employee of the brokerage.
Broker Alexandra Kakides, who has worked at the King Davis Agency Inc. since 1960, became a vice president of the brokerage in 1976 and entered into a written employment agreement. When Kakides realized in 1995 that other brokers in the company who were independent contractors received higher compensation, Kakides asked to be compensated as an independent contractor. The company’s owner, Kingsbury Davis, granted her request, but also provided additional “management income” for her role as a company vice president.
In 1999, when the brokerage merged with another company, Kakides entered into an independent contractor agreement with the merged company. Under the new agreement, she no longer received additional income for management activities. Kakides also was responsible for paying for all of her expenses, such as insurance, advertising, and licensing fees.
Over the course of the years, Kakides alleged that Davis made a number of inappropriate comments containing sexual innuendos to her. Kakides also alleged that the Davis had struck on the buttocks on at least two occasions. When Kakides complained to Davis in November 2000 about the alleged sexual harassment, Kakides claimed that Davis and others at the merged firm snubbed her and caused her to resign. In December 2000, Kakides filed a complaint with the Massachusetts Commission Against Discrimination. In December 2001, she also filed a lawsuit naming Davis, the brokerage, the merged brokerage, and other individuals affiliated with the brokerages. The lawsuit alleged violations of Title VII, a federal statute that bars discrimination in the workplace based on race, color, religion, sex, or national origin. The defendants filed a motion for judgment in their favor.
The U.S. District Court, District of Massachusetts, ruled in favor of the defendants, agreeing with the defendants’ argument that all allegations made by Kakides after Dec. 1, 1999, were not covered by Title VII because Title VII only covers claimed made by employees and not those of independent contractors. The broker argued that she was an employee and thus covered by the Act. She based her argument on two points—that she was hired as an employee by the brokerage and that she remained an employee after signing the independent contractor agreement with the merged brokerage because the merged company had exercised control over her consistent with that of an employer, including requiring her to work specific hours of floor time and providing her with an office and office support.
The court rejected Kakides’ argument, finding that prior case law and an overwhelming number of factors supported the finding of independent contractor status. Since the court ruled that Kakides was not an “employee” under Title VII, it dismissed all of her post-1999 claims. The defendants argued that Kakides’ remaining claims were barred by the statute of limitations. Title VII states that a discrimination charge has to be filed within 300 days after the alleged unlawful employment practice occurred when a filing is made to a state agency like the Commission. Since all of the remaining allegations were from 1999 and earlier, the court entered judgment in favor of the defendants.
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