Welcome. Thank you so much for attending today's CLE regarding hot topics in real estate litigation. My name is Megan Stumph-Turner. I'm a member with Baker Sterchi Cowden and Rice LLC in our Kansas City office, we also have offices in Saint Louis, Missouri, two offices in Illinois, in and also in Springfield, Missouri, as well. I've noted here that I'm licensed to practice in Missouri, Kansas and Iowa, and I look forward to speaking with you guys today about several hot topics in real estate litigation. Just an overview of what I intend to cover with this presentation. First, there are, interestingly, some antitrust litigation issues that have come to a head in the real estate realm. Now, I will say I'm not an antitrust litigation expert, but I hope I know enough to be dangerous and give you some information about litigation that is ongoing and of interest. One set of litigation involves buyer broker commissions and kind of long standing practice where in a lot of transactions particular to MLS listings, the listing agent would offer to pay the buyer broker commissions and then pocket listing litigation, which we'll talk about what that is and what that means. Next, we move on to the continued sort of onslaught of litigation arising out of invocation of force majeure clauses in contracts in the post-pandemic era. Of course, you know, parties try to work things out before litigation often. And due to, you know, lengthier statutes of limitations for breaches and written agreements, oftentimes there is still an ongoing influx of litigation involving, you know, the sort of fallout of especially commercial real estate leases and the like with stay at home orders and so forth, impacting Place's ability to do business as usual. So we'll talk about that for quite a bit. Interestingly, there are some copyright issues that have come to play in a case that was petitioned for Supreme Court review, but that was denied and then subsequent relevant lawsuit that has come up. But essentially this deals with, you know, blueprints and floor plans that are used to market real estate in the residential realm for the most part. And then finally, just more state level claims or local level claims. Failure to disclose in selling real estate, particularly in the unique residential market that we've had over the past few years. And of course, litigation related to construction of real estate delays, supply chain issues and those sorts of unique market driving factors. At first. Let's talk about the antitrust litigation piece of things. As I mentioned, you know, the brokerage fees is a big one, hot topic that there's litigation kind of going on across the country. Class action lawsuits, the pocket listing litigation and specifically the Sherman Act are at play here. And again, it's not an area that I practice in regularly, but the Sherman Act just as an overview, it prohibits entities from conspiring to unreasonably restrain trade, so practices such as price fixing, bid rigging, allocating customers or workers or markets, those sorts of practices are prohibited under the Sherman Act. And so you'll see how that comes to play with these real estate issues. The first sort of set of cases. And again, there's there's numerous ones going on, but one that's kind of coming to a head right now because one of the cases is set for trial this fall is this sister sister case versus the National Association of Realtors and others. So this litigation and others of its ilk question the legality of a longstanding practice where real estate brokers are representing the home seller will often offer to pay or pay the commission of brokers representing home buyers. So we see suits popping up in Illinois and Missouri. Those are the ones coming to a head. But again, this is going over in several jurisdictions and probably going to continue for the foreseeable future. And the plaintiffs are, for the most part, sellers who allege that this practice where their brokerage agreed to pay the buyer commission, caused them damage in assuming that they would pay the fees and, you know, the potential for inflating the buyer's agent fees, thereby damaging these sellers. Now, interestingly, you know, the defendant's position and other defendants and advocacy groups related to this organization. They maintain that the practice is pro-consumer. You think about a first time home buyer or lower to middle income home buyers and that sort of practice of, you know, the seller covering closing costs and the commissions for both broker brokerage entities, you know, really is helpful arguably to those buyers. But you can see the arguments on both sides being made. Class action certification was granted in this litigation. And as I mentioned, the first case is set for trial in October. So certainly we'll continue to monitor that. All right. So as I mentioned, the sites are case is not the only set of cases that are currently in the antitrust realm with respect to buyer brokerage fees. There's also another set of cases under Merrill, which is also a class action that covers thousands of home sellers across the country. And, you know, I think one of the takeaways here is that there are a lot of folks monitoring the industry. And with the potential magnitude of these cases altogether being in the multiple billions of dollars range, you know, it's going to have a significant impact on the industry. You know, our buyer's agent commission is going to be reduced. It remains to be seen the the impact across the industry. But again, this Merrill case out of Chicago has also taken a huge step toward trial and grown massively in its potential impact over recent weeks. The court ruled that the lawsuit would be a class action would be certified. It would include thousands of home sellers who paid a commission to specified companies for a pretty lengthy period of time, 2015 to 2020. If you think about all of the real estate transactions in these areas, these markets that would have come to play during that time, as well as current and future sellers, engage with the entities, not just those who initially filed suit. I believe in 2019. So this is a pretty broad, sweeping potential plaintiff class here. And you know, the court in its reasoning, its rationale, kind of went through the process for buying and selling residential property in the United States and noted that most people use and rely upon agents. The vast majority of the homes are listed on the multiple listing service, and there are rules that require those listings to include a unilateral offer of compensation to the broker who finds a buyer for the home. Sometimes it's a fixed percentage of the home sale price or a definite dollar amount. And that is the basis for why the plaintiffs in Merrill and in Incisor are seeking, you know, in excess of multi-billion dollar damages. They say that the rules or guidelines, depending on on who you ask, forced them to pay buyers agent commissions that would have been paid by home buyers in a truly competitive market. You know, it remains to be seen how the courts are going to come down on these. The court, you know, seemed sympathetic to that perspective. You know, there's a lot of different interested university professors filing briefing in these cases. You know, experts, you know, note that buyers can find homes without the assistance of buyer brokers through websites such as Zillow. In more competitive markets, the increasing use of the Internet has reduced consumer costs. So but ultimately, who's going to decide these cases? If they don't settle, It's going to be the jurors. Interestingly, you know, several of the defendants, kind of different brokerages have entered into settlements in these cases. And, of course, you know, when you see one, you're going to see more. There's going to be a bit of a domino effect. But I do think that it seems there are some defendants who at least haven't shown a hand and are willing to try these cases. And so, you know, aside from the the vast economic impact of the settlements or potential awards in these cases, the future of the industry and how these transactions will come to play is particularly at stake here. I think the litigation has the potential to go on for quite some time. But again, we'll look back to sites or and other cases to see those trial results. Um, you know, there's as I mentioned, it's not just Missouri and Illinois have this going on. Um, I encourage you to monitor the litigation. There's a difference. Before we get into this next section, there's a different case, Merrill versus Na and others. That's also pending. It involves, you know, MLS agencies all across the country. So same issues, similar issues and arguments being made in that case. But it'll be interesting to see how these turn out. Next, moving on to pocket listing litigation. So first of all, for those who are newer to this type of practice or are not familiar with the industry terminology, it'd be helpful to just kind of define the pocket listing. That's where you have an exclusive real estate listing that is not advertised by the realtor to the general public. So it's a single real estate agent handling the listing. You don't collaborate as you often would with other brokers for this listing. And you might wonder, okay, why would somebody not want to take advantage of the MLS and the collaboration and just sort of public posting and oftentimes it's sellers who want to ensure some sort of privacy by not having that listing made public. So just a little background as to what that is and why it's an issue. So the litigation, the key case pending right now is this tan or top agent network versus Na. Um, it challenges the clear cooperation policy which required Na member real estate listing brokers to submit any listing that they have regardless of privacy concerns or, you know, what the customer might have wanted within one business day of marketing a property to the public. Um, Tan and other private listing services sued Na under the Sherman Act as well as some related state laws or or other laws, because the rule either forces agents to avoid private non MLS listing services or agree to unfavorable terms, leaving agents and or customers with fewer choices, higher prices and potentially lower quality projects or products. So those are the allegations being made. Interestingly, from a procedural standpoint, this lawsuit was originally dismissed, but a similar lawsuit had been dismissed, went up on appeal and was ultimately reinstated on appeal. That's the.com versus Na lawsuit that I've cited here. And therefore, based on that authority, the ninth Circuit Court of Appeals has also reinstated this case. And the court noted that real estate agents regard participation in their local MLS is crucial to their ability to compete as an important factor in making the determination that, you know, regardless of outcome, there's at least a proper claim stated here and dismissal was improper. Next. Moving on to the subject of force majeure. It is hard to believe that we're still seeing the pandemic fallout in a post-pandemic world, but we certainly are. So there's been quite a bit of litigation across the country from 2021 really kind of is when it started to hit the courts or the higher courts, at least to the present year. And you know why I'm focusing on the commercial real estate aspect of this is you can imagine that, well, these entities may have better access to funds to litigate these cases. But I think the issues are so interesting because they're contractually driven and obviously, as you'll see in these cases, the specific language cited in folks force majeure provisions is key here. So regardless of what industry you're serving, if you found yourself on this call, if you're in house counsel or if you're advising in house counsel, if they have not reworked their force majeure provisions in performance contracts, I would encourage, you know, counsel, to just take a look and make sure that the language is protective as possible for that client. So really we've seen, you know, hate to. So just run this Covid 19 concept into the ground. But again, we we saw kind of the perfect storm with supply chain issues with the pandemic and stay at home orders and and all that. The perfect storm for force majeure clauses to come to light that honestly I think a lot of us attorneys considered something that we would deal with in law school and maybe not see a ton of in our actual litigation practice. And looks like we were not correct if that was our prediction. So just kind of an overview. Force majeure meaning a superior force. It is a creature of contract. So the parties dictate, particularly in the commercial setting, what the terms of the force majeure are going to be and what will give rise and what the remedies are in the event of a force majeure event. So it's really just a way for the parties to a contract to agree, negotiate and allocate risk and loss in the event that their ability to perform the duties under the contract is hindered, delayed or altogether prevented because of an event that the parties simply could not have anticipated would happen or that was beyond their control. So I've cited some examples of force majeure clauses here in the materials. You'll see one here that specifically mentions epidemic. This entity clearly had some foresight in drafting this prior to Covid 19. You know, and then you see some catchall language here that I think is important and helpful, which is other clauses, not the fault of and beyond the control of the authority and contractor and so on and so forth. So first case example wanted to give you just from this last year is this Pru Center acquisition versus that. So as you can imagine, we're dealing with Saks Fifth Avenue retail store and that was impacted by or argued that they were impacted by the pandemic. So the parties least importantly contained the force majeure provision stating that neither party shall, in any event, be liable for failure to perform any obligation under the lease in the event such party is prevented from so performing. And we'll say that's pretty broad, sweeping language that was included in the contract. So as everybody knows, in certain areas, Covid related stay at home orders, orders required Saks to close their store or reduce in-person workforce by 100%. And so the dispute arose in this case as to whether Saks would be essentially required to make payments that would have come due during the stay at home order. There didn't appear to be any dispute that there was at least a forbearance, that Saks did not have to make the payments during the forbearance period or stay home period. But those rent rent payments that accumulated during the stay at home order. Saks argued they would never have to make those up. The obligation never came due. And of course, the landlord was taking a different position. So what did the courts decide? Well, of course, sought to collect unpaid rents and filed suit against the Massachusetts land court held that the obligation to pay rent during the stay home order period was excused entirely, not just delayed. So it was a positive outcome for the tenant here and had sought reconsideration of the land court or trial court's order. They cited to several other cases where various courts have held that force majeure clauses were not to excuse performance altogether, but simply act as sort of a forbearance of the obligation to make those payments. But the court noted that those cases had contracts that involved distinctly different language. And so the court ultimately held that the obligation to pay rent was excused, not delayed, and the motion to reconsider was denied. Moving on to the next similar issue case arising out of New York in late 2022. Is this experience New York Now, which evidently is a souvenir shop and a tenant of property owned by 126, the parties entered into a commercial lease that contained the following force majeure provision that says anything in this lease to the contrary notwithstanding, neither party should be or shall be in default in the performance of any provisions of the lease. To the extent that such performance shall be delayed or prevented by strike, war, act of God or other causes beyond the control of the party seeking performance. Now, as most folks know, and particularly those in New York, Governor Cuomo had issued an order for nonessential businesses to reduce their in-person workforce by 100%. So in other words, if you've got a retail shop that sells souvenirs, you're shut down during this period. So immediately after that stay home order was entered, the tenant really did try to be proactive here. They put the landlord on notice that they were intending to invoke the force majeure provision of the lease and they stopped making their monthly rent payments at that time. So as often is the case in correspondence back and forth until things go to a head. There wasn't a response, according to the record initially, but later, several months later, in August of 2020, the landlord sent a rent demand notice for the April to August, what they deem to be past due or missed payments. And the tenant responded that the demand was an error because the force majeure provision had properly been invoked pursuant to the terms of the contract. The tenant then vacated the premises shortly thereafter, they provided the landlord with notice of lease termination effective immediately. The tenant again trying to be proactive about the situation and at least get guidance when we or the other sought a declaratory judgment from the court filed suit to seek that seeking an order that the force majeure provision operated to excuse nonpayment of rent and rescission of the lease under theories of frustration, of purpose and possibility and failure of consideration. Of course, predictably, the landlord countersued for nonpayment of rent. When the court was analyzing this particular force majeure provision, the Supreme Court of New York applied the precedent that courts construing a force majeure provision must do so narrowly so that it only if the force majeure clause specifically includes the event that actually prevents the parties performance will that party be excused. But simply, words matter what the parties agree to in a contract matter. So the court found that COVID-19 thought this was an interesting discussion in the holding, if you're interested, could be an act of God. The pandemic could be an act of God. But either way it was contemplated and foreseen by the parties catchall provision beyond the parties control. So in, you know, construing this contract, they found essentially tenant Yes. You've met that first element that the force majeure provision may apply or does apply to this particular instance. However, to to to initiate or invoke I'm sorry, force majeure, the materials have a typo there. But to invoke force majeure tenant must show that the force majeure event is what delayed or prevented performance under the lease. You can't simply say this force majeure event happened. As with most litigation, you've got to tie it to causation. So the court found that the premises and goods themselves, the souvenirs and other, you know, trinkets or items were not destroyed. So even though the customers couldn't come into the store and buy things in person, certainly there were things that the business could have done to go ahead and sell goods, deliver them. Think it's safe to say that would have still had an impact on the business, but it didn't prevent them from doing business altogether. So The Court in light of those facts held that the tenant's rental obligation was not excused. Kind of looking back to earlier in in the pandemic period. Just some interesting holdings. There's this there's a slew of cases that kind of came out of fitness centers. As you can imagine, those were greatly impacted by the pandemic. I think everybody who wanted to get into a gym and couldn't was going crazy. But in this case, plaintiff landlord sought to recover for unpaid rent owed under the commercial lease from the fitness center. And then, of course, similar to the arguments made in New York, these California defendants argued that the stay at home orders, government mandated closure, excused them from paying rent under the force majeure provision. And again, just like that last New York holding, which is why I've cited this case again, is the court held held that the tenant failed to demonstrate that the government closures were the root cause of the ability to pay rent. Inability to pay rent. The next case I've cited here is this 853rd Avenue owner versus Discovery Communications out of New York in 2022. Again, we have a building owner landlord filed suit for claims of unpaid rent. They filed a motion for summary judgment against the tenant, arguing that the tenant violated the lease provision that required removal of their personal property from the subject premises within five days after the leases expiration. So a little different issues here. This is not involving the obligation to pay under the lease its obligation to get your stuff out. The tenants properly asserted defenses were that the Covid 19 pandemic inhibited the ability to timely vacate after the expiration of the lease. So the trial court denied the owner summary judgment motion and the appellate court affirmed that lower court's decision. They reasoned that the parties contract included a force majeure provision that excused the tenant's obligations under these particular circumstances. Assuming that lease, Section 25, which requires the defendant to remove property within five days of lease termination, applies. Defendant has a colorable defense to that section under the force majeure provision extending its time to remove property. And because that section includes other causes beyond the reasonable control of the performing party. So I hope you're starting to see a theme here that, yes, it's great to try to incorporate and anticipate every foreseeable instrument or instance where the parties may not be able to perform. But it's also great to include kind of that catchall language to protect the unforeseen risks of your client. I thought this was an interesting case as well. This table versus maps, hotels. This is this involves a very high dollar real estate transaction for the sale of several luxury hotels. And was the buyer entitled to walk away from this contemplated transaction where the seller, in light of the Covid 19 pandemic, made drastic changes to their business operations? Examples of those changes in business practices being hotel closures and significant downsizing of the employee base. And in light of the party's ordinary course covenant in this commercial contract, the Delaware Court of Chancery answered yes, and on appeal, the Delaware Supreme Court agreed. So here's just an overview of the relevant facts. First, maps is the buyer. They agreed to purchase 15 hotel properties for almost $6 billion. Covid 19 arrived just before closing, so closing was obviously delayed. The ordinary course covenant in this case provided in relevant part that between the date of the agreement and the closing date, unless the buyer shall otherwise provide its prior written consent, the business of the company and its subsidiary shall be conducted only in the ordinary course of business, consistent with past practice in all material respects. As you can imagine, in light of the Covid 19 orders and wanting to take precautions, it was not business as usual. So the buyer refused to close, in large part due to the buyer's alleged violation of the parties. Ordinary course covenant. The seller is the one who sued the buyer to compel specific performance of the sale transaction, and as stated, the court held in favor of the buyer and support of the Supreme Court's ruling. The court reasoned a couple of things. The sophisticated parties could have, but did not include qualifiers in the ordinary course covenant as they had in other covenants throughout the contract. I think that's important, you know, particularly where you have two sophisticated entities probably represented by counsel. And if you've made other carve outs in your commercial contract that are very specific with respect to other provisions, it seems that the courts are understandably going to have less sympathy when you fail to anticipate or make the carve out for this other section. And then as a matter of contract interpretation, the court interpreted the parties intent to not include any exception to the ordinary course covenant because of that. So a major result and a lot at stake in that case. But again, words and contracts do matter, especially in the commercial sense. And moving on to some cases involving the interplay of force majeure, the pandemic and the bankruptcy code, I'll go through these just kind of quickly to make sure we've got time to move on to other areas. But Pier one, they had filed for bankruptcy about a month before Covid was declared a national emergency. You know, after the stay at home orders and other effects of the Covid 19 pandemic affected the business. The debtors filed in the bankruptcy court, a motion seeking authority to delay rent payments up through May 31st of 2020. So about 104 days after the petition date, several of the landlords objected and sought to compel the timely payment of rent under the applicable leases. The court the bankruptcy court overruled the objections and granted the debtors motion. And, you know, the they know that although the court acknowledged the debtors requested relief would seem to be an express contradiction of Section 360 5D3, the bankruptcy code, the court noted that Section 360 5D3 does not provide a separate remedy to effect payment. So if a debtor tenant fails to pay rent or performance other lease obligations, all a lessor has is an administrative expense claim and not a claim entitled to super priority, meaning the payments would not be required to start until confirmation of the Chapter 11 plan. And then Chuck E Cheese. I hope others recognize this from their childhood. Maybe I'm dating myself here, but unfortunately, Chuck e Cheese fell on hard times as well and filed for bankruptcy a few months after the pandemic. You know, national emergency and stay at home orders. They subsequently filed a motion seeking to delay rent payments at numerous locations due to the obvious drastic reduction in business caused by the pandemic. While they were able to reach an agreement with many lessors. Some objected to their lease stock. Now, unlike in Pier One, this bankruptcy court granted the landlord's objection and denied the debtor's motion. They held that the extent and the intent of Section 360 5D3 of the bankruptcy Code are clear. Commercial real property lessees must continue to perform after filing for bankruptcy. So Chuck E Cheese also raised a frustration of purpose argument. Under Washington law, which the court also rejected because the language in the respective leases was held to have allocated the risk of government regulations impacting performance. Therefore, the doctrine of frustration of purpose could not apply. I think that's important because it notes that across the courts you'll see that where the parties did include force majeure or other specific contractual provisions, you know, equitable sort of principles like doctrine of frustration, of purpose or impossibility may not be applied because the parties clearly, you know, anticipated and tried to incorporate contractual language that would prevail. And again, thought it was interesting that the sort of force majeure world touched on the political convention or convention, the week of the Republican Party of Texas convention, Houston versus terminated the party's agreement to hold this political convention, citing the pandemic under direction of the mayor, the Republican Party filed suit claiming breach of contract. Where are we going to have our convention? The trial court granted summary judgment for Houston first, but summary judgment was reversed in a March 2022 opinion. Remanding the case, the Court of Appeals held that Houston for summary judgment motion filed or failed to establish a causal connection between pandemic related conditions and cancellation of the event. So again, beat us into the ground as much as I can. If there's a takeaway in this section, it's, you know, one of the major ones is it's not enough to just say and invoke force majeure and, you know, prove that there's an event that gives rise to that. You've got to establish that causal connection between the conditions, the force majeure event and the lack of performance or failure to perform. So conversely, if the parties do not anticipate and do not incorporate a force majeure provision in the contract, there are common law doctrines that can be applied to help the party who is unable to perform. We talked about those a bit the doctrine of impossibility impracticability and frustration of purpose. So counsel out there, if you're charged with representing a party who really ought to have had a force majeure provision in the contract, but unfortunately did not they didn't have your guidance when drafting the contract, have no fear or at least don't panic yet. Take a look at your state's provisions and case law on these doctrines to see if one might apply. And moving on to the next major subject here is construction, delay and cost disputes, giving rise to litigation with respect to real estate construction contracts. I'm sure all the practitioners and listeners have a story that they could tell about this or, you know, having trouble getting bids, having trouble getting a contract or agreement performed, having trouble getting a project completed. And if you are in the construction industry or know folks are highly sympathetic to those folks as well, just the significant cost and material rise and worker shortages and ongoing supply chain issues. So supply chain issues. So what does this mean for real estate litigation? We have seen and will continue to see, just with open statutes of limitations, still going. A significant rise in litigation for breach of construction contracts. You know, in construction defect cases that I defend. Oftentimes I feel like what gives rise to the issue isn't even the defect in and of itself that's claimed. It's because you can see in the communications between the contractor and the customer that maybe delays and deadlines aren't being met. And that's what makes the prospective homeowner or customer angry in the first place. So just a kind of personal note there about things I see in my practice. Okay. So just some background numbers that support this this issue in the industry related to construction, delayed cost disputes. What's the kind of unique driving factors here? According to US jobs report, you know, during the pandemic and afterwards, non-residential construction employment fell by 9000 workers in the heavy and civil engineering sectors. The construction unemployment rate rose to 7.1 from 4% across all industries, as reported by the Associated Builders and contractors. And supply chain issues have obviously made it harder over the years to count days to completion to try to anticipate profits and build in the appropriate price and construction contracts. So, you know, certainly this is cause for concern in this construction industry. And imagine, you know, folks are working with their council to kind of revamp their standard construction contracts, contracts to anticipate for these issues. So what are some of the potential claims that construction industry has to face based on these unique driving factors? And what are some strategies to deal with those? Obviously, there's going to be a rise in claims and has been a rise in claims arising out of construction based delays. Um, but there's ways to get around that. Um, you know, as we mentioned here, one of the defenses is if the owner is first to breach, you can argue that the owner is the one that caused the delay or otherwise failed to perform under the construction contract. Um, you know, there's similar doctrines to what we discussed earlier with, you know, not only force majeure, which of course is an important part of any construction contract, as we've seen in the commercial real estate realm, those principles apply in construction as well as sort of more common law or equitable doctrines such as impracticality, um, and something called mutual mistake. So again, similar to the commercial real estate realm, I'm not going to get through, you know, sites here, but we've seen cases where the construction company owners are able to claim, you know, frustration of purpose impracticability under certain circumstances. In addition to invoking actual express force majeure provisions to protect their interests with these claims. When it comes to the theory of mutual mistake, sometimes that's successfully argued in order to get relief under a contract to void or modify a contract where the parties were mistaken or misunderstood about some basic or material facts that caused one of them to get into the contract in the first place. So, you know, if the parties assumed one thing, but another thing happened, perhaps the contract can be reformed. There is one case I will cite to on this principle that's not in the materials. It's aluminum Company of America versus Essex Group. This case involves sort of long term construction contracts for Alcoa to supply Essex with aluminum and other materials to determine the price for the materials under the contracts. The contract included a provision that had this complex pricing formula the parties had based upon labor costs and material costs and other factors known at that time. This formula, however, failed to adequately adjust the price of the materials after supply chain shortages and other crises. And so, you know, Alcoa stood to lose multi-millions of dollars under this contract. So they implemented the or used the mutual mistake doctrine in order to reform the project. And so it's not always successful, but it's certainly worth a try in instances where counsel has not anticipated and advised to include different factors, which I've noted here, ways to kind of prevent these issues in the first place, which I'll get into on the next slide. Um. Moving on to kind of what companies were constructed. Construction contractors can do to protect themselves. I've noted a few things here. You know, with this concern and price variability, have an attorney help you negotiate economic price adjustment clauses in the contracts. You know, and I've noted here, particularly for a longer term project, a complex project, high priced construction contracts and the ability to build in the express right to adjust the price to meet rising fuel and material costs based on, you know, nationally recognized indexes. When these materials increase or decreases substantial, that's a great way to advise and assist your clients. Um, you know potential claims that and defenses that arise out of owner caused delay. Um you know certainly there's often cause for delay on both sides. There's unpredictability. You know, maybe you can make a record that the customer didn't make decisions as quickly as they would need to. You know, if there were someone that wanted to check over every color shade material used in the project, and you're not getting prompt responses on those, that may be a defense to a delay based claim. Um, you know, some courts will permit a contractor to recover the difference in price from the time the work should have been completed to when it was completed awarding damages to the contract for the contractor for the difference in material costs. Um, contractors can also claim an escalation. Materials and labor costs for owner caused delays or suspensions which result in the contractor performing the work after the price increase. Another category in the sort of rising out of this unique economy in real estate litigation is failure to disclose claims. These have been around. They're not new, but we anticipate and are seeing a rise due to this sort of unprecedented seller's market for home sales. Why is that? So it's been so competitive for buyers out there. Buyers want to get in their homes. Sometimes they need to get in a home right away, a new home for circumstances that could take all day to discuss. But buyers, you know, in their quest to find the next home, overlooked details in this market. We have seen, you know, from 2021 on a significant increase in buyers who are willing to waive their right to home inspections, maybe even purchase homes sight unseen when they're not sophisticated investors in the market to get the home that they at least think they want at the time. Now, for folks out there who are interested in or do litigation, I think one thing we can agree on is buyer's remorse is a key driving factor in litigation. One of the factors that has led to this sort of crazy market and buyer's remorse is, of course, as I mentioned, the buyers waiving their right to home inspections. So going on today, you know, why is this important? I'm sure there are some folks on on the call that haven't gone through the home buying process or just need a refresher, maybe don't remember what option you selected on your own real estate contract. So, of course, you know, common real estate wisdom says it's smart to get an inspection of the property before you buy it. In most instances, I think folks would advise that you should not waive a home inspection if you really want to make sure you're getting out any potential issues. However, there are some folks that have moved forward without an inspection because they don't have the luxury of waiting and they want to be the first to get that high offer in, to get the property when they need it. And this insane seller's market, um, more and more buyers have taken the risk and surveys show that in 2021, more than 21% of accepted bids removed the home inspection clause. And we're still trying to gather data for years following. I anticipate that 2022 is not going to be a ton different. But just by way of comparison, back in 2019, it was only 13%. So you see not quite double, but an 8% jump there in folks who were willing to go through the process without an inspection. This is because there's an overwhelming lack of supply in the home buying market, persistently high demand. And prices, of course, we've seen have been at record highs. Um, you know but real estate folks warn and of course council would warn you're asking to buy a house without knowing what you're buying and these instances. All right. And just some facts about, you know, just kind of the number of houses on the market. And I think, you know, in early 2021, again, the last guide available, there were about one 833,000 homes on the market in the US. And by way of comparison, again, two years ago, just before the pandemic started, that number was almost double that at 1.5 million. So just think about that. Certainly the number of people overall in the country has not had that reduction. So the demand and, you know, driving market forces that have led to the seller's market are very apparent when you look at those major numbers here. Um, you know, there's most of the major US metro areas where average home values have been surveyed have increased 40% or more to 2019 to 2021. Um, you know, the uptick in homebuyers during the pandemic. It kind of in that elder millennial range helped increase the price average of the average home 30% since January of 2020, according to Zillow's data. So again, those are just some of the factors that go into, you know, when we question why are there so many people jumping into homeownership without weighing the risks or having a professional come in to look at these issues? Those are some of the unique driving factors as to why. So a survey that I don't have here or a chart that I don't have up here from 2021, I thought it was a little stale. I haven't found anything more. Recent is one that shows the the data on how many folks were waiving their inspection. I think it was upwards of more than a 40% increase in 2021. Haven't seen new data yet, but so thought I'd move on to some more recent data that has been collected. And this is, you know, the aftermath of those 21, 20, 21 decisions. The July 2022 homebuyer survey taken from anytime estimate American Homebuyer Survey of July 2022. Um, the regrets you can see here, I spent too much. Okay. We've got people that came in in that crazy seller's market offering well over the listing price bought too quickly. You know, that suggests, hey, I rushed into this transaction without really evaluating the risks, without getting the inspections and things that I needed. You know, other things here, like too much maintenance, fixer up or along the same lines there of not getting an inspection. Um, of course, things that have nothing to do with this economy but thought were humorous don't like my neighbors and don't like my home. So I guess there's always cause for buyer remorse. But I think we can see from the highest percentage on this chart that a lot of it has to do with the sort of panic that buyers had in 2020, 2021, getting a home. So these are very these failure to disclose defects in real estate cases are very state specific. And so I encourage you to look at the state where the property is located to determine what the applicable laws and regulations are. So excited. A couple of Missouri statutes just by way of example here. Um, I, I hate the stigma that has been attached to Missouri at times. But there, as I'm sure across the country, are required disclosures regarding methamphetamine production. Um no duty to independently investigate though. And then another statute involving environmental concerns require to disclose solid waste disposal on property. Again, no duty to independently investigate. Um, please review your state's consumer protection laws. It's not just going to be a potential breach of contract or even sort of a common law, negligent misrepresentation type claim where attorney's fees aren't necessarily recoverable and there are some consumer protection acts that have teeth. They may give rise to punitive damages or recovery of attorney's fees. So by way of example here, the Missouri Merchandising Practices Act makes it unlawful to use deception, fraud, false pretense, false promise, misrepresentation. Et cetera. In connection with the sale or advertisement of merchandise, including sale of existing homes. So under that statute, if you meet the threshold, you can pursue punitive damages, you can pursue recovery of attorney's fees. So all of a sudden, even if you have, you know, a relatively low actual damage, claim, those cases and the costs associated with them go up because of that. Um, and then there are exceptions to real estate disclosure requirements. For instance, in Missouri, the stigma conditions, those are not required to be disclosed. Again, look at your state laws to determine an even though it is not required in the state of Missouri. It is common practice among a lot of the reputable and well known real estate firms here to include in the sales contract materials for residential sales a seller's disclosure. And it includes a very detailed checklist where the current owner who's selling the property marks down. You know, have you ever had an issue with flooding, with cracks in the foundation, with, you know, and it goes kind of line by line or a page or two through different elements of the home, and it gives the seller the opportunity to make sure that there's just no doubt whatsoever that they have disclosed everything that they ought to disclose. As you can imagine, that cuts both ways. Sometimes it is, you know, really a good faith effort to disclose everything. And other times, you know, something was left out, whether intentional or not. And that just gives the the plaintiff something to feed on, to file a suit or make a demand. So again, the takeaway here is that with experienced real estate counsel in your state or locality to make sure that you have best practices in place and can hopefully prevent litigation in this realm. And just back on that disclosure, I've also copied in here the Missouri applicable statute as far as real estate agent's role in making real estate disclosures in Missouri. The takeaway here is that sellers or listing agents are not required to conduct any sort of independent inspection of the property or attempt to discover information to disclose to the buyer. But if that listing agent is already aware or discovers in connection with the representation of their client that there is a material adverse defect in the property that is required to be disclosed to the buyer. I think probably a best practice there is to advise the client, hey, this needs to be disclosed. But ultimately, even if the seller refuses to do so, the seller's agent is required to make that disclosure independent of their respective of their duty to the seller. All right. Moving on to. A totally different topic here is copyright disputes regarding floor plans. So this case out of the eighth Circuit, again, I think I mentioned earlier, was brought up with a petition in hopes that the Supreme Court would review it. Unfortunately, they denied review as we see more cases come up in light of this decision, perhaps that will be re-evaluated by the US Supreme Court. So this case Designworks versus Columbia House of Brokers, Realtor or Realty out of the eighth Circuit Design Works, built the home for the customer, and two real estate companies, created the floor plans of the home in order to aid in selling the home. Design works brought suit for copyright infringement against them under at least as far as I'm see kind of a novel theory. And the defendants raised a statutory defense under 17 USC section 120 a claiming that that section protected them from liability for copyright infringement. The trial court held in favor of the real estate firm, finding that the statute protected the creation of floor plans by exempting pictures or other pictorial representations of architectural works. But the eighth Circuit Court of Appeals reversed, and in so doing, they found a distinction between artistic reproductions and functional reproductions. The court found the subject floor plans to be functional reproductions and held that they were not covered under the statutory defence. And as mentioned in June 2022, the US Supreme Court denied cert review. I think it's important to note what Section 128 provides for with respect to the copyright infringement code 17 USC, section 128 that provides that copyright and architectural work that has been constructed does not include the right to prevent the use of pictorial representations of visible from a public place. So if you're able to see it from a public place not intruding on private property and you know you're able to use the pictorial representation or make a pictorial representation if that is in plain view. So again, the eighth Circuit Court of Appeals found a distinction between artistic reproductions and functional reproductions and held that they were not covered under the statutory defense. Now moving on to a subsequent case that sort of clarified and I think disputed the eighth Circuit holding out of design works is this Flores Architects LLC versus Creekside Development Case. Um, and that decision was entered August 9th of 2022. So Kipp is an entity that creates architectural works and technical drawings that depict those works. And other related defendants are real estate development firms and related entities who ultimately managed and developed this subdivision called Creekside Ranch out of Texas. In 2016, the parties executed a license agreement for use of CFA's copyrighted materials and constructed houses, ultimately embodying those designs. Um, throughout the process, over the years, nearly identical renderings start to appear and alleged that and other employees had created copycat renderings and floor plans. Now file suit for various causes of action, including copyright infringement. One of the claims that they filed was under the Digital Millennium Copyright Act. The court did dismiss those claims upon a motion to dismiss. But the copyright infringement claims required further analysis. And so the court disagreed here with the Eighth Circuit's interpretation of the 120, a exception to copyright infringement and think their language is telling here for objects that the floor plans are not considered pictorial representations under Section 120. A relies on the eighth Circuit opinion of design work, stating that to consider floor plans as a pictorial representation would be to render the specific enumeration superfluous and design works. The eighth Circuit reasoned that Section 128 is specific enumerations of pictures, paintings and photographs reveals reveals a certain quality that 128 requires, which is a connotation of artistic expression. Thus, the eighth Circuit concluded that because floor plans serve the functional purpose of informing potential buyers of home layouts and interiors and helping to sell homes that they were not exempted under 128. But art and function are not mutually exclusive, and marketing materials may be and usually are both. Indeed, in enacting the Architectural Works Copyright Protection Act, Congress recognized that architecture itself is both artistic and functional. Architecture is a form of artistic expression that performs a significant societal purpose. Okay, so the big takeaway here is, you know, this District of Texas court disagreed with the eighth Circuit, sort of implied, you know, intent that these concepts are mutually exclusive, that something is either pictorial or artistic or it's functional. The court here says it can be both. So the apply the law to be applied that way. I think it's going to be interesting to see how these copyright cases pan out. I think we can anticipate seeing ultimately a split enough among the circuits that ultimately the court, the Supreme Court, will be kind of forced to take those issues up. But for now, we're left in sort of this limbo period. So key takeaways from everything we've talked about, just kind of backtracking for today, antitrust, if you're in the opportunity to advise real estate agents and brokerages, just say advise them to remind buyers and sellers in these transactions that they have options, that things are negotiable. I'm not good in light of these cases to suggest that there isn't a way to deviate from the standard practice of splitting commissions a certain way, so on and so forth. Force Majeure. I think, again, any opportunity that we as lawyers have to advise and assist clients with, including robust force majeure provisions and clear remedies for the same is ideal here. I think that it even would be great if you're representing a client and and will be for the foreseeable future. Help them out by putting a tickler on the calendar to just take a look at their in house contracts and see what might need to be up to date with, you know, growing case law and different outcomes, as I mentioned earlier and as we saw in the cases, sometimes that catchall language that seems vague and maybe doesn't seem helpful as you're reading or drafting a contract can be helpful for the unpredictable in force majeure context. And then also an event that could trigger a force majeure provision does not do so unless there is, say it with me, a causal connection between the force majeure event and non-performance. Secondly, when it comes to the topic of construction contracts and if you have the opportunity to assist clients with negotiating or drafting such contracts, ensure that your contractor clients consider including price variation clauses to protect themselves in uncertain economic times. I'm sure that there are a lot of folks who could have benefited from that just in hindsight with these issues we've seen over the past few years and also in defending a contractor against who a claim is made, consider whether there's other defenses like the owner also caused delay or was forced to breach. Moving on to failure to disclose if your client is selling the property or if you are involved with somebody selling property, the client should be advised to err on the side of disclosure to avoid disputes because it's not just about common law claims. Again, under different consumer protection acts that many states have enacted, you have potential punitive treble and attorney fee damage awards under those statutes that are available that turn what might be a claim worth a few thousand dollars into something much more substantial advise buyers not to waive the right to inspection if you're in a position to do so. And please also advise sellers that a waiver inspection under many states, certainly the ones that I practice in, does not negate the duty to disclose known defects under the statute governing what a realtor's duties are. Listing agents should look to state law, but oftentimes they usually are no under no duty to conduct independent investigation as to the condition of the property in an effort to discover potential defects as the fiduciary duty is to the seller and not the buyer. And finally, with the last issue, we discussed copyright issues and floor plans. I think it's probably a best practice in this time of uncertainty for real estate firms to engage council prior to creating and utilizing any floor plans to sell homes in light of the design works holding to monitor in other cases that will crop up along the coming months and years. With that. I appreciate everyone who attended. If you have questions or follow up or just want to discuss these issues and nerd out a little bit together on real estate litigation issues, you are more than welcome to contact me. I've got my email address here and my direct line here at the firm. I'd love to hear from you and I wish you the best of luck with your practice and wish you well. Thank you.