Consolidation plans that would create one of the largest broker-owned multiple listing services in the country hit a snag this week when an opposing shareholder group filed a lawsuit challenging the merger.
Opposing shareholders are challenging a vote approving the consolidation of Multiple Listing Service of Northern Illinois with a competing broker-owned MAP MLS. The dissenting shareholders include five of the 10 Realtor associations that own Chicago-area MLSNI, one of the largest MLSs in the country. The lawsuit was filed in Cook County Circuit Court.
In addition to consolidating the MLSs, the disputed shareholder vote also approved a restructuring plan for the governance of the unified MLS. The combined MLS would be broker-owned and broker-controlled. In several other markets, too, brokers are pushing for greater broker control and for regionalization of MLSs or MLS data.
Jim Nelson Jr., a broker at RE/MAX Suburban and MLSNI president, said an informal meeting of all 10 shareholders had been planned today in an effort to resolve the dispute over the approved consolidation plan, though the lawsuit “kind of put a damper on the whole discussion.”
The dissident shareholders had earlier threatened litigation if MLSNI proceeded with the transaction — they have said that the transaction lacked substantial economic or other benefits for MLSNI, its owners and its members, as MLSNI already had substantial market share and the vast majority of MAP members are already members of MLSNI.
Proponents of the consolidation plan, meanwhile, have argued that a unified MLS would mean a single MLS membership for those real estate professionals in the Greater Chicago area who are now members of both MLSs. The consolidation plan, as approved, would reduce the representation of Realtor association shareholders on the restructured board of directors.
Herbert C. Steinmetz Jr., a lawyer who is representing the group of opposing shareholders, said that an agreement has been reached not to move forward on the transaction until Jan. 18.
In a statement, the Chicago Association of Realtors — one of the shareholder associations that supports the MLSNI-MAP transaction, stated, “The plaintiffs were seeking a temporary restraining order. Instead, attorneys for MLSNI, Chicago Association of Realtors, the Realtor Association of West/South Suburban Chicagoland, and the North Shore-Barrington Association of Realtors agreed on a date for the preliminary injunction hearing, and also that MLSNI would not close on a transfer of substantially all of its assets prior to that date.”
A preliminary injunction hearing will be held on Jan. 18 and Jan. 19, the Chicago association noted.
The group of shareholders behind the lawsuit includes the McHenry County Association of Realtors, Realtor Association of Fox Valley, the Aurora Tri-County Association of Realtors, the Oak Park Board of Realtors and the West Towns Board of Realtors.
“The case seeks a declaratory judgment stating that the quorum was not present at the shareholders meeting where the action was approved,” Steinmetz said. The shareholders have also hired another law firm, Shefsky & Froelich Ltd., to assist with the case.
Steinmetz said the action has been filed against MLSNI, five other shareholder associations, “and certain individuals.”
The Chicago Association of Realtors, North Shore-Barrington Association of Realtors and the Realtor Association of West-South Suburban Chicagoland voted to approve the MLSNI-MAP transaction.
Nelson said that a hearing will be held in mid-January. “We would love the chance to argue the merits (of this case) at that time. We’re considering all of our options as well,” he said.
“We were fairly frustrated that the five shareholders have declared for months and months now that (they were) going to boycott the meeting and weren’t going to show up for a vote,” Nelson said.
The five shareholders opposing the MLSNI-MAP merger did not show up to participate in a vote on the deal, and the remaining shareholders voted 3-1 to approve the transaction, with one shareholder abstaining.
The MLSNI board had voted 14-4 in October to approve the consolidation with MAP MLS. MLSNI has about 51,000 members and MAP MLS has about 14,000 members.
Under its current operating structure, MLSNI has 22 members on its board of directors including 10 shareholders from member associations and 12 broker members. The consolidation reportedly would establish a 15-member board with 13 broker members and two members representing MLSNI’s current 10 shareholders.
Brokerage companies that purchase stock in the new company would become shareholders and would elect members of the new board, MLSNI officials have said.
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