BOTrnN! & Borrmr, mc. Francis A. Bottini, Jr. (SBN 175783) Albert Y. Chang (SBN 296065) . Yury A. Kolesnikov (SBN 271173) 5 ‘7817 Ivanhoe Avenue, Suite 102 7 La Jolla, California 92037 : (858) 914-2001 (858) 914-2002 fbottini@bottinilaw.com achang@bottinilaw.com ykolesnikov@bottinilaw.com | Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA V2752%6 BRADLEY T. JUEN, on behalf of ) Case No. 115CVe himself and all others similarly situated, ) : ) Class Action Plaintiff, ) By vs. ) Compiamr For: SY F. Ax ) ALAIN PINEL REALTORS, INC., a ) @_ Breacuss or Frouciary Duries; California corporation, RHESUS, INC, ) a California corporation, ROBERTG. ) (2) AIDING. AND ABETTING BREACHES PROFETA, PAUL L. HULME, ROBERT ) or Frnuciary Duries; RANDOLPH GERLACH, ) DON FAUGHT, KEVIN A. COLE, ) (3) VioLarion or Carrrornia Civ. |ALBERT L. KNAPP, JR, RONALDM. ) Cove § 1710(3); GABLE, and DOES 1-100, ) ) @) VioxaTion oF Canirornta Bus. & Defendants. ) Pror. CovE § 17200; 2 ) () Consrructive Fraup; ) ) © Unsusr Enricumenr; ann ) ) @) AccountiIne ) ) ) Demanp ror Jury TRIAL COMPLAINT FOR BREACH OF FIDUCIARY DUTYPlaintiff, by his undersigned attorneys, as and for his class action complaint, alleges upon personal knowledge with respect to himself, and upon information and [belief as to all other allegations based upon, inter alia, the investigation of counsel, as follows: NATURE OF THE ACTION 1. This is a class action brought by Plaintiff on behalf of all persons and entities residing in California who, between August 23, 2004 and July 11, 2011 (the “Class Period”), employed the services of Alain Pinel Realtors, Inc. or Rhesus, Inc. (Alain Pinel”) to buy or sell a residential home in California in a transaction in which escrow closed and Alain Pinel received a commission as part of that closing, and where Alain Pinel or any of its agents or owners received any payments from any person or company related to the TransactionPoint software (the “Class”). 2. Plaintiff brings this action against Alain Pinel, a California corporation providing real estate services, and some of its managing owners and brokers during the Class Period - Paul L. Hulme, William Don Faught, Robert G, Profeta, Kevin A. Cole, Albert L. Knapp, Jr., Robert Randolph Gerlach, and Ronald M. Gable (collectively, “the Individual Defendants”). Plaintiff seeks to recover for Defendants’ breaches of fiduciary duties in accepting undisclosed payments or commissions while acting as real estate agents for Plaintiff and other members of the Class. Plaintiff also brings claims against Defendants for aiding and abetting each other's breaches of fiduciary duties, fraudulent concealment, violation of California's unfair competition law, constructive fraud, unjust enrichment, and for an accounting arising out of the above-mentioned conduct. 3. California law prohibits any real estate agent or broker from accepting any undisclosed form of payment while acting as a real estate agent for a client. Acceptance by a real estate agent or broker of any undisclosed payment while acting as areal estate agent for a client amounts to a breach of fiduciary duty and, if liability is established, subjects the real estate agent or broker to disgorgement of the full amount 1 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTYof commission paid by the client in the subject real estate transaction. 4. During the Class Period, Alain Pinel utilized the “TransactionPoint” real estate software system developed by Fidelity National Financial, Ine. (“FN”) to prepare transaction documents and order related real estate settlement services (such as title insurance, escrow, natural hazard disclosure reports, and home-warranty contracts) for Plaintiff and other members of the Class. In doing so, Alain Pinel entered into sublicensing agreements with providers of real estate settlement services, including but not limited to subsidiaries of FNF, to enable those providers to be listed in TransactionPoint as providers of settlement services. Pursuant to these agreements, Defendants received undisclosed payments from the service providers for the real estate settlement services ordered through TransactionPoint. 5. On July 11, 2011, FNF agreed to settle charges brought against it by the U.S. Department of Housing and Urban Development (“HUD”) stemming from the use of the TransactionPoint software. HUD alleged that FNF paid unnamed real estate brokers improper kickbacks or referral fees in violation of the Real Estate Settlement Procedures Act (“RESPA”). As part of the settlement, FNF agreed to cease this practice and pay HUD $4.5 million to resolve the complaint. At no point has HUD or FNF disclosed the names of the real estate brokers who received the improper payments. 6. Subsequently, on January 8, 2013, FNF entered into a settlement with several California district attorneys to resolve an unfair competition lawsuit also ‘stemming from the use of the TransactionPoint software. The district attorneys alleged that the use of TransactionPoint facilitated unlawful secret payments to brokers for the referral of business to title insurers and other service providers. As part of the settlement, FNF agreed to cease this practice and pay a total of $873,588. 7 Plaintiff brings this action to recover for Defendants’ breaches of fiduciary duties in receiving undisclosed payments while acting as real estate agents for Plaintiff and other Class members. Plaintiff also brings this action to recover for Defendants’ aiding and abetting the breach of fiduciary duties and other wrongful 2 COMPLAINT FOR BREACH OF FIDUCIARY DUTYSoeur an eun u 12 3 4 15 16 7 18 19 20 21 2 2B 4 25 26 7 conduct, which constituted unfair, fraudulent, and unlawful business practices in violation of California’s unfair competition law. JURISDICTION AND VENUE 8. The Court has jurisdiction over this action under California Constitution, Article VI, § 10, because this case is a cause not given by statute to other trial courts. This action is not removable to federal court. The amount in controversy as to the named Plaintiff does not exceed $75,000, exclusive of interest and costs and all parties are California citizens. 9. This Court has jurisdiction over Defendants because Defendant Alain Pinel is headquartered in Santa Clara, California, and because Defendants conduct business in and maintain operations in this County. Moreover, Defendants maintain sufficient minimum contacts with California to render jurisdiction by this Court permissible under traditional notions of fair play and substantial justice. 10. _ Venue is proper in this Court because the events and conduct at issue took place in substantial part and have effect in this County, and because Alain Pinel’s headquarters are located at 12772 Saratoga-Sunnyvale Road, Suite 1000, Saratoga, California 95070. PARTIES A. Plaintiff 11. Plaintiff Bradley T. Juen is a California resident. In 2008, Plaintiff employed the services of Alain Pinel to sell a residential home located at 7108 Pelican Street, Danville, California 94506. Plaintiff paid Defendant Alain Pinel a substantial commission for acting as Plaintiff's real estate agent and broker in the transaction. Defendants recommended that Plaintiff utilize real estate settlement services from Fidelity companies as part of the real estate transaction. Relying on Defendants’ advice and recommendation, Plaintiff consented to the use of real estate settlement services from Fidelity companies, including Chicago Title and Fidelity National Home Warranty Company. Upon information and belief, Alain Pinel and/or its owners 3 COMPLAINT FOR BREACH OF FIDUCIARY DUTYreceived profits and payments from third parties as part of such transactions, which Defendants never disclosed to Plaintiff. B. Defendants 12. Defendant Alain Pinel is a California corporation doing business as a real estate broker licensed with the California Bureau of Real Estate. Its principal place of business is located at 12772 Saratoga-Sunnyvale Road, Suite 1000, Saratoga, California 95070. During the Class Period, Alain Pinel acted as a real estate broker for Plaintiff and the Class members. Upon information and belief, and unbeknownst to Plaintiff and the Class members, Alain Pinel and/or its owners received undisclosed commissions or kickbacks from real estate settlement service providers and/or third parties while acting as a real estate agent for Plaintiff and the Class members. Alain Pinel is a citizen of California. 13. Defendant Rhesus, Inc., is a California corporation doing business as a real estate broker and licensed by the California Bureau of Real Estate. Its principal place of business is located at P.O. Box 7249, Carmel, California 93921. During the Class Period and currently, Rhesus conducted and conducts business under the name of Alain Pinel Realtors. It is owned by Defendant Robert G. Profeta and his wife, Judith Profeta. Defendant Profeta signed an agreement with FNF relating to TransactionPoint on behalf of Rhesus on August 23, 2004. Rhesus is a California citizen. 14. Defendant Robert G. Profeta is a licensed California real estate broker. He is a California citizen and lists his address with the California Bureau of Real Estate as P.O. Box 7249, Carmel, California 93921. During the Class Period, Profeta did ‘business under the name of Alain Pinel Realtors. 15. Defendant Paul L. Hulme is an individual and is a seasoned real estate investor; he is listed as the President, Founder, and CEO (as well as owner) of Alain Pinel Realtors Inc. on the company’s website. During the Class Period, Hulme acted as an owner, manager, and control person at Alain Pinel. Upon information and belief, 4 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTYAwa wn and unbeknownst to Plaintiff and the Class members, Hulme and/or Alain Pinel received undisclosed commissions, payments or kickbacks from real estate settlement service providers and/or other third parties, including but not limited to FNF and/or its subsidiaries, while Alain Pinel acted as a real estate agent for Plaintiff and the Class members. Hulme is a citizen of California. 16. Defendant Robert Randolph Gerlach is a licensed California real estate broker; Gerlach was and is a managing broker at Alain Pinel for its Palo Alto, California branch. During the Class Period, Gerlach acted as a managing broker and real estate agent at Alain Pinel. On December 21, 2006, Gerlach signed a broker agreement with FNF regarding the TransactionPoint software on behalf of Alain Pinel. Upon information and belief, and unbeknownst to Plaintiff and the Class members, Gerlach and/or Alain Pinel received undisclosed commissions, payments, or kickbacks from real estate settlement service providers and/or other third parties, including but not limited to FNF and/or its subsidiaries, while Alain Pinel acted as a real estate broker for Plaintiff and the Class members. Gerlach is a citizen of California, and his mailing address listed with the California Bureau of Real Estate is 504 Rochampton Road, Hillsborough, CA 94010. 17. Defendant William Don Faught is a licensed California real estate broker; Faught was and is a managing broker at Alain Pinel for its Pleasanton, California branch. During the Class Period, Faught acted as a managing broker and real estate agent at Alain Pinel. On January 12, 2007, Faught signed a broker agreement with ENF regarding the TransactionPoint software on behalf of Alain Pinel. Upon information and belief, and unbeknownst to Plaintiff and the Class members, Faught and/or Alain Pinel received undisclosed commissions, payments, or kickbacks from real estate settlement service providers, including FNF and/or its subsidiaries, while Alain Pinel acted as a real estate broker for Plaintiff and the Class members. Faught is a citizen of California, and his mailing address listed with the California Bureau of Real Estate is 2306 Pendolino Lane, Livermore, CA 94550. 5 ‘COMPLAINT FOR BREACH OF Fipuciary Dury18. Defendant Kevin A. Cole is a licensed California real estate broker; Cole ‘was and is a managing broker at Alain Pinel and is an officer of Alain Pinel. Duringa portion of the Class Period, Cole acted as a managing broker and real estate agent at Alain Pinel. Upon information and belief, and unbeknownst to Plaintiff and the Class members, Cole and/or Alain Pinel received undisclosed commissions, payments or kickbacks from real estate settlement service providers, including FNF. and/or its subsidiaries, while Alain Pinel acted as a real estate broker for Plaintiff and the Class members. Cole is a citizen of California, and his mailing address listed with the California Bureau of Real Estate is 19284 Harleigh Dr., Saratoga, CA 95070. 19. Defendant Albert L. Knapp, Jr. is a licensed California real estate broker; Knapp was a managing broker and officer and a real estate agent at Alain Pinel during portion of the Class Period. From July 2003 to December 2009, Knapp served as President and Chief Operating Officer at Alain Pinel. During that time, Knapp acted as a managing broker and officer at Alain Pinel. Knapp left Alain Pinel in December 2009, at which time Defendant Hulme took over Knapp’s responsibilities as President of Alain Pinel. Upon information and belief, and unbeknownst to Plaintiff and the Class members, Knapp and/or Alain Pinel received undisclosed commissions, payments or kickbacks from real estate settlement service providers, including FNF and/or its subsidiaries, while Alain Pinel acted as a real estate broker for Plaintiff and the Class members. Knapp is a citizen of California, and his mailing address listed with the California Bureau of Real Estate is 2171 Monroe St., Yountville, CA 94599. 20. Defendant Ronald M. Gable is a licensed California real estate broker; Gable was and is a managing broker at Alain Pinel for its San Mateo and Half Moon Bay, California branches. During the Class Period, Gable acted as a managing broker and real estate agent at Alain Pinel. On February 1, 2007, Gable signed a broker agreement with FNF regarding the TransactionPoint software on behalf of Alain Pinel. Upon information and belief, and unbeknownst to Plaintiff and the Class members, Gable and/or Alain Pinel received undisclosed commissions, payments, or kickbacks 6 ‘(COMPLAINT FOR BREACH OF FIDUCIARY DUTYfrom real estate settlement service providers, including FNF and/or its subsidiaries, while Alain Pinel acted as a real estate broker for Plaintiff and the Class members. Gable is a citizen of California, and his mailing address listed with the California Bureau of Real Estate is 287 Hubbard Ave., Redwood City, CA 94062. 21. Defendants Paul L. Hulme, William Don Faught, Robert G. Profeta, Kevin A. Cole, Albert L. Knapp, Jr., Robert Randolph Gerlach and Ronald M. Gable are sometimes referred to herein as the Individual Defendants. C. Doe Defendants 22. Various other individuals, partnerships, corporations, and other business entities, unknown to Plaintiff, have participated in the violations alleged herein and have performed acts and made statements in furtherance thereof, Because the true names and capacities of these defendants are unknown to Plaintiff, Plaintiff sues these defendants as Doe Defendants 1-100. Plaintiff will amend the complaint to show the true names and capacities of these defendants when they have been ascertained. 23. Plaintiff is informed and believes, and on that basis alleges, that each of ‘the fictitiously-named defendants is responsible in some manner for the occurrences herein alleged, and that Plaintiff's injuries as here alleged were proximately caused by the conduct of these fictitiously-named defendants. DEFENDANTS’ FIDUCIARY DUTIES 24, Areal estate broker and agent is a fiduciary that has an obligation to disclose all material information about a real estate transaction to his or her clients, including any compensation the agent is receiving. In any transaction on behalf of his principal, the agent is bound to exercise utmost good faith and honesty. 25. — The law, thus, imposes on real estate agents and brokers an obligation of undivided service and loyalty. This relationship not only imposes a duty of acting in the highest good faith toward the principal but precludes the agent or broker from obtaining any advantage over the principal in any transaction by virtue of the fiduciary relationship. The agent or broker is charged with the duty of fullest disclosure of all 7 COMPLAINT FOR BREACH OF FIDUCIARY DuvySee aaueun ul 12 13 14 15 16 17 18 19 20 21 2 23 24 25 26 27 28 material facts concerning the transaction that might affect the principal's decision. 26. Areal estate licensee who “claim[s] or takes] . . . any secret or undisclosed amount of compensation, commission, or profit or [fails] to reveal to the employer of [such] licensee the full amount of the licensee’s compensation, commission, or profit under any agreement authorizing or employing [such] licensee to do any acts for which a license is required” is subject to discipline by the Real Estate Commissioner. CaL. BUS. & PROF, CODE § 10176(g). Such a licensee also violates his or her fiduciary duties toward the employer and will not be allowed to retain the undisclosed profit: “[A] real estate licensee, while acting in his or her capacity as such, must not receive any benefit from the transaction of his or her agency other than that which is known and accepted by the principal. The agent will not be permitted to retain anything that might otherwise derive from participation in the transaction unless the agent fully discloses the nature and amount of the benefit and receives the approval of the principal. It is totally immaterial that the transaction is otherwise [fair to the principal, or that the principal receives exactly the price wanted for the property ....” See 2 Miller & Starr, CAL. REAL ESTATE §3:32 at p. 177 (gd ed. 2000) (emphases added). “[TJhe principal's right to recover does not depend on any deceit of the agent, but is based upon the duties incident to the agency relationship and upon the fact that all profits resulting from that relationship belong to the principal.” Crogan v. Metz, 47 Cal. 2d 398, 404-05 (1956). 27. Areal estate licensee is also subject to discipline by the Real Estate Commissioner for “[mJaking any substantial misrepresentation.” CAL. BUS. & PROF. Cope § 10176(a). Failure of a real estate licensee “who acts as an agent for either party ina transaction for the sale ... of real property... and who receives compensation, or who anticipates receiving compensation, from a lender in connection with the securing of financing for the transaction, ... to disclose to both parties, prior to the closing of the transaction, the form, amount and source of compensation received or expected” amounts to “misrepresentation” for purposes of California Business & Professions 8 COMPLAINT FOR BREACH OF FIDUCIARY DUTYCode § 10176(a). See 10 CAL. CODE REG. § 2904. 28. — By receiving and/or conspiring to receive undisclosed payments while acting as real estate agents for Plaintiff and other Class members, Defendants violated their fiduciary duties owed to Plaintiff and other Class members and committed constructive fraud. Control, Authority, and Conspiracy 29. Atall relevant times during the Class Period, Alain Pinel was the employer of the Individual Defendants. During the Class Period, Alain Pinel acted as a real estate broker for Plaintiff and the Class and, thus, breached its fiduciary duties when it failed to disclose the unlawful commissions or kickbacks received. by it and/or its owners from real estate settlement services providers. Alain Pinel is also liable to Plaintiff and the Class under the doctrine of respondeat superior because Alain Pinel either had knowledge of the Individual Defendants’ breaches of fiduciary duties and/or such knowledge can be imputed to Alain Pinel from its close relationship with the Individual Defendants. Moreover, Alain Pinel is liable even if the Individual Defendants were acting for their own purposes because Alain Pinel placed the Individual Defendants in the position to defraud Plaintiff and the other Class members, and Plaintiff and the other Class members relied upon the Individual Defendants’ apparent authority to make the representations. Alain Pinel either approved or ratified the Individual Defendants’ actions. 30. Atal relevant times, Alain Pinel and the Individual Defendants acted jointly in receiving the unlawful commissions or kickbacks and in concealing that practice from Plaintiff and the other Class members. Alain Pinel and the Individual Defendants agreed to the fraudulent, unfair, and unlawful scheme alleged herein and, at all relevant times, concurred in the tortious scheme with knowledge of its unlawful purpose. 31. Defendant Alain Pinel and the Individual Defendants, together with Doe Defendants 1 through 100, conspired to receive the undisclosed commissions or 9 (COMPLAINT FOR BREACH OF FIDUCIARY DUTYkickbacks and to conceal that material information from Plaintiff and the Class. Defendants are therefore jointly liable for each other's breaches of fiduciary duties. 32. The Individual Defendants, as the owners, managing agents and officers of Alain Pinel, directly ordered or authorized Alain Pinel to engage in the tortious conduct alleged herein. SUBSTANTIVE ALLEGATIONS |A. Background on the TransactionPoint Software 33. TransactionPoint was a proprietary, web-based software platform developed by FNF in 2002 and designed to automate online ordering and document retrieval in real estate transactions. TransactionPoint assisted brokers in preparing transaction documents and ordering related real estate settlement services, such as escrow, title insurance, home-warranty contracts, and natural-hazard disclosure services. At all relevant times, FNF was the owner and licensor, through various related entities and successors, of the TransactionPoint software. 34. During the Class Period, FNF marketed and licensed TransactionPoint to real estate brokers as a marketing tool and revenue stream. Among other things, TransactionPoint allowed real estate brokers to order real estate settlement services, including title insurance, escrow services, mortgages, home-inspection services, natural hazard disclosure reports, home-warranty contracts, and other real estate settlement services, from third-party vendors of such real estate settlement services. 35. FNF encouraged and facilitated real estate brokers to generate revenue by marketing so-called “sublicense agreements” related to TransactionPoint to third- party vendors for payment of a specified fee, termed a “sublicense fee,” per order received for title insurance, escrow services, mortgages, home-inspection services, natural hazard disclosure reports, home-warranty contracts and other real estate settlement services. Many of these third party vendors were affiliated or wholly-owned Fidelity companies, such as Chicago Title, Disclosure Source, Fidelity National Home ‘Warranty Company, etc. (“Fidelity Companies”), but FNF also allowed real estate 10 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTYSew uvaunun a SEARS HERS ERS Eero tephra th na reer rer Eee Hee teeter eee eee eEE eS eo SSEPESSECRBST FRESH agents to use TransactionPoint from third party vendors unaffiliated with FNF. 36. Real estate agents placed orders for real estate settlement services with preferred vendors who agreed to pay the sublicensing fee to the real estate agent’s broker. FNF's own subsidiaries, such as Chicago Title Insurance Company, Fidelity National Title Insurance Company, Ticor Title Insurance Company, Security Union Title Insurance Corporation, Lawyers Title Insurance Corporation, Fidelity National Title Company, Disclosure Source, and Fidelity National Home Warranty Company, entered into sublicensing agreements with real estate brokers throughout California and paid the aforementioned sublicensing fees to become preferred vendors. 37. _ Between approximately 2003 and 201, the Fidelity Companies and other third party vendors, as providers of real estate settlement services, entered into “Real Estate Service Provider Access Agreements” with real estate brokers whereby each such company agreed to pay a specified sublicense fee to the broker for the use of ‘TransactionPoint for each title order, escrow order, mortgage, home-inspection service, natural hazard disclosure report, home-warranty contract, and other real estate settlement service on a California property it received from brokers via the ‘TransactionPoint software. B. Governmental Actions Against FNF and the Fidelity Companies 38. On July 11, 2011, FNF agreed to settle the allegations brought against it by HUD relating to the TransactionPoint software, in which HUD alleged that the Fidelity Companies paid real estate brokers improper kickbacks or referral fees in violation of RESPA. HUD claimed FNF and the Fidelity Companies engaged in a widespread and years-long campaign to pay real estate brokers kickbacks for the referral of real estate settlement services. As part of the settlement, FNF agreed to cease this practice and pay HUD $4.5 million to resolve HUD’s allegations. 39. On January 8, 2013, FNF entered into a settlement with various California district attorneys to resolve an unfair competition lawsuit stemming from FNF's use of the TransactionPoint software. In the complaint, the district attorneys nu COMPLAINT FOR BREACH OF FIDUCIARY DUTY.alleged that FNF’s operation of TransactionPoint facilitated unlawful secret payments to the brokers for the referral of business to providers of real estate settlement. ‘Services. 40. — Atno point did HUD or the California district attorneys disclose the identity of Alain Pinel or any other real estate broker who had received kickbacks from ‘third parties such as the Fidelity Companies. Plaintiff only learned recently that Alain Pinel was one of the brokers who received such kickbacks by receiving documents obtained through a Freedom of Information Act Tequest. At all relevant times, Defendants Alain Pinel and the Individual Defendants actively and fraudulently concealed from Plaintiff and the public their receipt of secret payments from FNF, the Fidelity Companies, and/or other third parties. Further, Defendants have never admitted to receiving the secret payments and have never disclosed the secret payments to Plaintiff or any other Class member. C. Defendants’ Wrongful Conduct 41. Defendants Alain Pinel and Rhesus are real estate brokerage firms incorporated and operating in California under the name of Alain Pinel Realtors, Defendants were and/or are managing brokers and/or owners at Alain Pinel during ‘the Class Period. During the Class Period, Defendants acted as real estate agents and brokers for Plaintiff and other Class members during the purchase or sale of their residential homes in California. Unbeknownst to Plaintiff and the other Class members, Defendants received undisclosed payments or kickbacks from real estate settlement service providers, including but not limited to FNF and/or its subsidiaries, while acting as real estate agents for Plaintiff and the Class members. 42. During the Class Period, Olivia Sethney, FNF's Vice President of Transaction Management Services, made a presentation to Defendant Alain Pinel regarding FNF's proprietary, web-based TransactionPoint software. 43. During the Class Period, Defendant Alain Pinel entered into “Application ‘Service Provider Agreements” with FNF (“ASP Agreements”), which provided Defendants with access to the TransactionPoint software. Various individuals signed 12 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTYSe wmv anew nn RS EE THRO ha en ha hd teat ce ee erect eee cetera reece ree ex eR EB BSL SSCESRGETSES the ASP Agreements on behalf of Alain Pinel, including but not limited to Defendants Ronald M. Gable, Robert G. Profeta, Robert Gerlach, and William Don Faught. Ms. Sethney signed the ASP Agreements on behalf of FNF. 44. During the Class Period, FNF and Defendant Alain Pinel entered into a non-disclosure agreement with regard to the ASP Agreements. 45. Following the execution of the ASP Agreements, Defendant Alain Pinel entered into sublicensing agreements with providers of real estate settlement services, including but not limited to the Fidelity Companies, which allowed those providers to be listed in the TransactionPoint software as providers of settlement services. The providers of real estate settlement services (including the Fidelity Companies), or other third parties acting on their behalf, paid sublicensing fees to Defendant Alain Pinel and/or its owners for each real estate settlement service Defendants ordered from those providers through TransactionPoint. 46. Defendants never disclosed the payment of the sublicensing fees to their clients, including Plaintiff and the other Class members. Nor did Defendants ever request or receive the informed written consent of Plaintiff or any Class member to receive such payments. 47. Defendants breached their fiduciary duties to Plaintiff and the Class and committed constructive fraud because the information Defendants concealed from Plaintiff and the Class was material. Real estate settlement service providers are selected by parties prior to the time that they enter into a real estate purchase or sale contract. The selection of real estate service providers is material because real estate settlement services are important and material services associated with a real estate ‘transaction, and levels of competency and service vary widely among competing ‘companies. 48. _ Real estate agents representing the buyer and seller frequently suggest competing real estate settlement service providers in offers and counteroffers on behalf of their principals, prior to entering into and signing real estate contracts. Consumers 13 (COMPLAINT FOR BREACH OF FIDUCIARY DUTYScweruxwrany being represented by such real estate agents rely on their real estate agent's recommendation as to the best companies to provide the real estate settlement ‘services, since most consumers have limited information about the companies providing such services and real estate agents are intimately familiar with such ‘companies. 49. Consumers also rely on their real estate brokers to recommend real estate service providers based on quality, service, and professionalism. During the Class Period, Plaintiff and the Class relied on the recommendations of Defendants regarding the selection of real estate settlement service providers and assumed that Defendants were making objective recommendations based on the best interests of Plaintiff and the Class. 50. — During the Class Period, however, Defendants recommended real estate settlement service providers to Plaintiff and the Class based on the fact that Defendants were receiving secret and undisclosed kickbacks and payments from FNF and the Fidelity Companies, and not because the Fidelity Companies provided the best services or were the best fit for the real estate transactions entered into by Plaintiff and the Class. Defendants’ receipt of undisclosed and secret compensation from third parties such as FNF and the Fidelity Companies was a highly material fact that should have been disclosed to Plaintiff and the Class, since any reasonable consumer, had they been advised of such compensation, would have considered such information material in deciding whether to follow their broker's recommendation. Had consumers been properly advised about compensation their broker was receiving from a real estate settlement service provider, they would naturally question whether the broker was recommending the service provider due to the payments received by the broker instead of the merits and qualifications of the service provider. 51. Defendants’ receipt of undisclosed payments or kickbacks would have ‘been material to Plaintiff and other Class members’ decision to retain them. Defendants’ intentional conduct and their failure to disclose such conduct amounted to 4 COMPLAINT FOR BREACH OF FIDUCIARY DUTYoppression, fraud, or malice and were done with the intention of (a) benefitting themselves; and (b) depriving Plaintiff and members of the Class of legal rights or otherwise causing injury. Defendants intentionally failed to disclose the payments they received from third parties such as FNF and/or the Fidelity Companies in the HUD-1 statements provided to Plaintiff and other Class members at the close of escrow in order to conceal the payments, which Defendants knew were unlawful. Defendants’ ‘conduct was malicious so as to justify an award of exemplary and punitive damages. D. Equitable Tolling 52. During the relevant period, Plaintiff did not discover and could not have discovered, through the exercise of due diligence, Defendants’ breaches of their fiduciary duties or their violations of California law because Defendants did not disclose, and actively concealed, their receipt of undisclosed, unlawful profits and payments from third parties. 53. _ Plaintiff was unaware of and had no knowledge of Defendants’ business arrangements and agreements with FNF, including the ASP Agreements and the non-disclosure agreement. Similarly, Plaintiff was unaware of and had no knowledge of Defendants’ sublicensing agreements with preferred vendors, including with Fidelity ‘Companies. 54. Plaintiff could not have discovered Defendants’ breaches of fiduciary duties and violations of law prior to filing suit because Defendants made absolutely no disclosure of the kickbacks from preferred vendors in the escrow documents, HUD-1 statements, or any other real estate settlement documents. Thus, none of the documents provided to Plaintiff made any disclosure of any payment of kickbacks or other things of value to Defendants from FNF, Fidelity Companies, and/or other preferred vendors for the referral of real estate settlement services. 55. Moreover, Defendants not only failed to disclose any information whatsoever that would have allowed Plaintiff, exercising due diligence, to discover the unlawful commissions, but Defendants also intentionally concealed and attempted to 45 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTYdisguise the illegal kickbacks received to avoid detection by consumers. CLASS ACTION ALLEGATIONS 56. _ Plaintiff brings this action as a class action on behalf of himself and all other persons and entities residing in California who, between August 23, 2004 and July 11, 2011, employed the services of Alain Pinel to buy or sell a residential home in California in a transaction in which escrow closed and Alain Pinel received a commission as part of that closing, and where Alain Pinel or any of its agents or owners received any payments from any person or company related to the ‘TransactionPoint software. Excluded from the Class are Defendants, their co- conspirators, and any person, firm, trust, corporation, or other entity related to or affiliated with Defendants. 57. This action is properly maintainable as a class action. 58. The Class is so numerous that joinder of all members is impracticable. Based on a review of publicly-available documents, Plaintiff believes there are at least hundreds, if not thousands, of Class members. 59. Questions of law and fact predominate as to all members of the Class, including: (i) Whether Defendants acted as real estate agents and brokers for Class members; Gi) Whether Defendant Alain Pinel entered into agreements with FNF and/or other third parties relating to the TransactionPoint software; (iii) | Whether Defendants received payments from third parties such as FNF or any of the Fidelity Companies related to their use of the ‘TransactionPoint software; (iv) Whether Defendants breached their fiduciary duties owed to Plaintiff and the Class, aided and abetted such breaches, and committed constructive fraud; 16, ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTYCem wauneun (v) Whether Defendants’ conduct amounted to unfair, fraudulent, and unlawful conduct in violation of California's unfair competition law; (vi) Whether an accounting should be ordered; and (vii) the appropriate measures of damages and/or restitution, 60. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other Class members and Plaintiff has no interests antagonistic to the interests of other members of the Class. Plaintiff will fairly and adequately protect the interests of the Class. 61. _ The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications that would establish incompatible standards of conduct for Defendants, or adjudications that would, as a practical matter, be dispositive of the interests of individual members of the Class who are not parties to the adjudications or would substantially impair or impede those non-party Class members’ ability to protect their interests. ‘CAUSES OF ACTION COUNTI Breach of Fiduciary Duty (Against All Defendants Except Hulme) 62. Plaintiff incorporates by reference and re-alleges each and every preceding paragraph as if fully set forth herein. 63. Asreal estate brokers and agents, Defendants owed fiduciary duties of the utmost good faith, honesty, and loyalty to Plaintiff and the other Class members. Pursuant to those duties, Defendants had an obligation to disclose to Plaintiff and the other Class members all material information concerning the real estate transactions in which Defendants were acting as brokers and agents, including any compensation Defendants were receiving from any third parties. 64. By accepting undisclosed payments while serving as real estate brokers 7 (COMPLAINT FOR BREACH OF FIDUCIARY DUTYSew ya anueen BQH Conse tno ten tho Hs eet ee tee eee ee eS ao PBESORSUXESSCsea ee eEaoe Se and agents for Plaintiff and other Class members, Defendants breached their fiduciary duties of the utmost good faith, honesty, and loyalty owed to Plaintiff and other Class. members. Defendants violated their fiduciary duties by putting their personal interests ahead of the interests of their clients. 65. Defendants never disclosed the payment of the sublicensing fees to Plaintiff and the other Class members, and Plaintiff and the Class members were not aware that Defendants were paid undisclosed payments or kickbacks from third parties while acting as real estate brokers for Plaintiff and the Class members. 66. Plaintiff and the Class members have been damaged. COUNT 1 Aiding and Abetting Breaches of Fiduciary Duties (Against All Defendants) 67. _ Plaintiff incorporates and re-alleges each and every allegation set forth above as if fully set forth herein. 68. Defendants knowingly aided and abetted each other’s breaches of fiduciary duties in receiving the unlawful secret profits or kickbacks and not disclosing those payments to Plaintiff and the other Class members and, thus, are liable for aiding and abetting breaches of fiduciary duties. 69. All Defendants benefitted from their aiding and abetting. Specifically, Defendants benefitted by receiving part or whole of the commissions paid by Plaintiff and the other Class members, by receiving the undisclosed payments from third parties and/or by receiving increased compensation as a result of the wrongdoing, 70. Asarresult of Defendants’ wrongful conduct, Plaintiff and the Class members have been damaged. COUNT IIT Violation of California Civil Code § 1710(3) (Against All Defendants) 71. Plaintiff incorporates and re-alleges each and every allegation set forth above as if fully set forth herein. 18 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTY72. Defendants owed fiduciary duties to their clients, including Plaintiff and ‘the other Class members. As fiduciaries, Defendants were obligated to disclose to Plaintiff and the other Class members all information Defendants possessed that was material to Plaintiff's and the other Class members’ interests. 73. During the Class Period, the following material facts were within Defendants’ knowledge: @ ___ the existence of the ASP Agreements between Alain Pinel and ENF, which provided Defendants with access to TransactionPoint; (i) _ the existence of sublicensing agreements between Defendants and providers of real estate settlement services, including but not limited to the Fidelity Companies, which allowed those providers to be listed in the TransactionPoint software in exchange for sublicensing fees paid to. Defendants of real estate settlement services ordered through ‘TransactionPoint; and Gii) the payment of undisclosed sublicensing fees and/or other payments to Defendants from providers of real estate settlement services in transactions in which Defendants were acting as the broker for Plaintiff and other Class members. 74. During the Class Period, Defendants intentionally concealed such material facts from Plaintiff and the Class with the intent to defraud Plaintiff and the Class. 75. — Plaintiff and other members of the Class were unaware of these ‘concealed facts, and had no means of ascertaining such concealed facts. Moreover, these concealed facts were highly material to Plaintiff and other members of the Class because disclosure of the payments would have been material to the decisions made by Plaintiff and other Class members as to which real estate settlement service providers to utilize in their real estate transactions. 76. Asa result of Defendants’ concealment of these material facts, Plaintiff 19 ‘COMPLAINT FOR BREACH OF FIDUCIARY DUTY.and other members of the Class have been injured. COUNT IV Violation of California Bus. & Prof. Code § 17200 (Against All Defendants) 77. _ Plaintiff incorporates and re-alleges each and every allegation set forth above as if fully set forth herein. 78. The Unfair Trade Practices Act defines unfair competition to include any “unfair,” “unlawful,” or “fraudulent” business act or practice. CAL. BUS. & PROF. CODE § 17200. Unfair competition also includes “unfair, deceptive, untrue or misleading advertising.” Id. The Act provides for restitution for violations. Id. § 17203. 79. This cause of action is brought on behalf of Plaintiff, members of the Class, and members of the general public pursuant to Business & Professions Code § 17200 et seq. Under Business & Professions Code § 17200 et seq., Plaintiff and the Class are entitled to obtain restitution for the monies paid to Defendants by reason of Defendants’ unlawful, unfair, and/or deceptive acts and practices. 80. During the Class Period, Plaintiff and the Class employed Defendants to serve as their real estate brokers. During the Class Period, Plaintiff and other Class members paid Defendants substantial commissions for serving as their real estate brokers in residential real estate transactions. 81. Asa direct and proximate result of the acts and practices alleged above, members of the Class and the general public who employed Defendants’ services have been injured. This Court is empowered to, and should, order restitution to all persons from whom Defendants unfairly, deceptively, and/or unlawfully took money. 82. _Asalleged herein, Defendants’ conduct constituted an “unfair” business practice under § 17200 because it amounts to a conduct that is “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Real estate brokers and agents are fiduciaries and have an obligation to disclose all material information about a real estate transaction to their clients, including any and all compensation the agent is receiving. Consumers trust their real estate brokers because, as fiduciaries, 20 COMPLAINT FOR BREACH OF FIDUCIARY DUTYthe brokers are obligated by law to look out for their best interests. A practice whereby the real estate agent receives undisclosed commissions or kickbacks for referring a particular provider of real estate settlement services and then conceals such conduct from its clients is undoubtedly “immoral, unethical, oppressive, unscrupulous or substantially injurious” to those clients. 83. As alleged herein, Defendants’ conduct also constituted a “fraudulent” business practice under § 17200 because Defendants’ receipt of undisclosed payments was “likely to deceive” Plaintiff and the Class. Disclosure of the commissions paid to Defendants by providers of real estate settlement services would be highly material to Plaintiff and the other Class members because it would cause them to wonder whether Defendants were recommending the particular provider of real estate settlement services based on an objective evaluation by Defendants or merely because Defendants were being paid a kickback. The failure to disclose such payments was, therefore, “likely to mislead” Plaintiff and the Class. 84. As alleged herein, Defendants’ conduct also constituted an “unlawful” business practice under § 17200 for the following reasons: () _ Byreceiving undisclosed payments while acting as real estate brokers for Plaintiff and other Class members, Defendants breached the fiduciary duties of utmost good faith, honesty, and loyalty owed to Plaintiff and other Class members. Gi) Defendants also violated Cal. Bus. & Prof. Code § 10176(g), which prohibits real estate agents from: “[t]he claiming or taking by a licensee of any secret or undisclosed amount of compensation, commission, or profit or the failure of a licensee to reveal to the employer of the licensee the full amount of the licensee's compensation, commission, or profit under any agreement authorizing or employing the licensee to do any acts for which a license is required under this chapter for compensation or 24 COMPLAINT FOR BREACH OF FIDUCIARY DUTYSew vane n commission prior to or coincident with the signing of an agreement evidencing the meeting of the minds of the contracting parties, regardless of the form of the agreement, whether evidenced by documents in an escrow or by any other or different procedure.” Gi) Defendants also violated Cal. Bus. & Prof. Code § 10176(a), which prohibits the “[mlaking [of] any substantial misrepresentation.” “It shall constitute misrepresentation under Section 10176(a) ... for a real estate licensee who acts as an agent for either party ina transaction for the sale . .. of real property . .. and who receives ‘compensation, or who anticipates receiving compensation, from a lender in connection with the securing of financing for the transaction, to fail to disclose to both parties, prior to the closing of the transaction, the form, amount and source of compensation received or expected.” 10 CaL. CODE REG. § 2904. (iv) Defendants’ conduct was also unlawful because it violated Cal. Bus. & Prof. Code § 10176(i), which prohibits “[alny other conduct, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealing.” (¥) Defendants’ conduct was also unlawful because it violated California Civil Code § 1710(3), as set forth supra in Count III. 85. Plaintiff and the Class were injured and lost money or property as a result of Defendants’ violations of Business & Professions Code § 17200. COUNT V Constructive Fraud (Against All Defendants Except Hulme) 86. Plaintiff incorporates and re-alleges each and every allegation set forth above as if fully set forth herein. 87. Atall relevant times Defendants were fiduciaries of Plaintiff and the 22 (COMPLAINT FOR BREACH OF FIDUCIARY DUTYRow oR Cwm aan Class. 88. During the Class Period, in violation of their fiduciary duties, Defendants received unlawful and undisclosed payments or kickbacks from third parties. 89. _ In failing to disclose the unlawful payments or kickbacks received, Defendants acted with intent to deceive Plaintiff and the Class. Moreover, because Defendants’ failure to disclose the unlawful payments or kickbacks amounted to a failure to disclose a material fact and a breach of their fiduciary duties owed to Plaintiff and the Class, the fraud is presumed from the fiduciary relationship and Defendants’ failure to disclose. Thus, there is no need to plead or prove a representation or the falsity of representation, nor is there a need to plead or prove any intent to defraud or to conceal a material fact. 90. The fiduciary relationship between Defendants and Plaintiff and the Class gives rise to a rebuttable presumption of reliance by Plaintiff and the Class. Defendants have the duty to prove that Plaintiff and the Class did not rely on Defendants’ nondisclosure of their receipt of unlawful commissions or kickbacks. 91. Asa result of Defendants’ nondisclosure, Plaintiff and the Class have been injured. COUNT VI Unjust Enrichment (Against All Defendants) 92. Plaintiff incorporates and re-alleges each and every allegation set forth above as if fully set forth herein. 93. By their wrongfil acts and omissions, Defendants were unjustly enriched at the expense of, and to the detriment of, Plaintiff and the Class. 94. During the Relevant Period, Defendants received unlawful and undisclosed commissions or kickbacks from third party providers of real estate settlement services, and/or received increased compensation from serving as officers and managing brokers of Defendant Alain Pinel. Defendants’ fiduciary duties, however, precluded them from receiving any undisclosed compensation while acting as 23 COMPLAINT FOR BREACH OF FIDUCIARY DUTY.Sec mui auvaee nn B real estate agents for Plaintiff and the other Class members. 95. _ Plaintiff and the Class seek an order from this Court mandating disgorgement of the secret payments as well as the entire commissions received by Defendants from Plaintiff and each Class member for Defendants’ services in each respective real estate transaction. COUNT VII Accounting (Against All Defendants) 96. Plaintiff incorporates and re-alleges each and every allegation set forth above as if fully set forth herein. 97. Atall relevant times Defendants were fiduciaries to Plaintiff and the Class. 98. During the Class Period, Defendants obtained seeret profits while acting as fiduciaries to Plaintiff and the Class in real estate transactions. 99. At no time did Defendants disclose such secret profits to Plaintiff and the Class or obtain informal consent from Plaintiff or any other Class member authorizing Defendants to retain such secret profits. 100. Plaintiff and the Class seek accounting from Defendants to identify all ‘secret profits or payments received from third parties during the Class Period while acting as real estate agents for Plaintiff and the Class. 101. Plaintiff and the Class seek a constructive trust over all the secret profits and compensation received by Defendants during the Class Period while acting as real estate agents for Plaintiff and the Class. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: A. A declaration that this action is properly maintainable as a class action; B. A declaration that Defendants’ conduct alleged herein constitutes breaches of fiduciary duties and a violation of California Bus. & Prof. Code § 17200; 24 (COMPLAINT FOR BREACH OF FIDUCIARY DUTYee ee) Cc An award of damages for breaches of fiduciary duties and for aiding and abetting breaches of fiduciary duties; D. —_ Anaward of damages for violation of California Civil Code § 1710(3) and an award of restitution for violation of California Bus. & Prof. Code § 17200; E. _ Anaward of punitive damages; FB An accounting for all the compensation received by Defendants from Plaintiff and the Class or any third parties during the Class Period while providing real estate services to Plaintiff and other Class members, and a constructive trust to be imposed on all such compensation received during the Class Period; G. An award to Plaintiff of the costs and disbursements of this action, including reasonable attorneys’ and experts’ fees; and H. An award of such other and further relief as the nature of this case may require or as this Court deems just and proper. DEMAND FoR JURY TRIAL Plaintiff hereby demands a trial by jury of all triable issues. Dated: January 8, 2015 Respectfully submitted, Borrit & BOTTINI, INC. Francis A. Bottini, Jr. Albert Y. Chang Yury A, Kolesnikoy Francis A. Bottini, Jr. 7817 Ivanhoe Avenue, Suite 102 La Jolla, California 92037 Telephone: (858) 914-2001 Facsimile: (838) 914-2002 E-mail: fbottini@bottinilaw.com achang@hottinilaw.com ykolesnikov@bottinilaw.com Attorneys for Plaintiff 25 COMPLAINT FOR BREACH OF FIDUCIARY DUTY