The Yacht Law Podcast
The Yacht Law Podcast
A Deep Dive Into the Yachting Industry's Class Action Controversy
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Navigate the seas of high-stakes litigation with us as maritime attorney Michael Moore and journalist Diane M. Byrne dissect a recently filed class action lawsuit that's a topic of conversation throughout the yachting industry. Discover the allegations of price-fixing among the elite brokerage firms and listing platforms. Michael's expertise illuminates the parallels with real estate commission controversies, offering a look at the legal strategies and implications for the yachting world's most prominent players.
The episode takes you through broker commissions and what the lawsuit describes as buyer-broker commissions. Uncover the misconceptions clouding yacht sales and the debate over the necessity of listing yachts on digital platforms like YATCO and Boats.com. This episode promises an in-depth analysis that challenges preconceived notions about the yacht brokerage industry and its practices, providing insight into the potential outcome of a case that could redefine the landscape of niche market litigation.
Have a yacht law question? Email it to info@megayachtnews.com or michael@moore-and-co.com for your chance to have it answered on our podcast. All requests for confidentiality and/or anonymity are respected.
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Welcome everyone. Michael, good to see you.
Michael Moore:Thank you, good to see you, Diane.
Diane M. Byrne:There has been a pretty big development in the yachting world. It's been getting a lot of publicity and a lot of questions actually being asked, so I think it's a really good opportunity for us to go over some of the particulars. I know you definitely have some really good insight on this situation and I think you can really help a lot of people better understand what's going on.
Diane M. Byrne:There's a class action lawsuit. For those of you listening who aren't familiar, there's a class action lawsuit against a number of major companies in yachting. A number of them are brokerage houses, but the lawsuit also names some of the platforms where yacht brokerage listings are given, which includes YATCO, Boats. com, the International Yacht Brokers Association actually is also named in it. There's a number of big companies named in it, suffice to say, and the allegations are that the various brokers are engaging in price fixing and that these companies, like YATCO, etc. Are supporting it, if I understand correctly. So, michael, please correct me if I'm wrong, but definitely give us what's the background on this. If I also understand correctly, it seems like this lawsuit might have some of its roots in something that just happened in the real estate world in terms of commissions.
Michael Moore:Yeah, absolutely lawsuit, a copycat lawsuit, and it comes out of a decision in the real estate world where the these mega groups, mainly the big multiple listing services, were accused of fixing the commissions due to the various agents who were also benefited from these multiple listing services. But I think, but frankly, that particular analogy is what created this lawsuit, according to a number of people who've looked at it and decided that that's what drove this lawsuit. And there have been two additional lawsuits filed in addition to the case that I think we call the Ya Mon lawsuit. The case comes out of a buyer of a yacht these are pretty much allegations in the complaint who basically was a plaintiff's lawyer, who was the buyer and after he bought the yacht he filed this lawsuit. Now I think that to understand the lawsuit, we're going to have a lot of lawyering going on to basically deal down in the lawsuit. But the way I see it kind of a cursory review is that they actually name a lot of entities that are quite different one from the other. Then to understand that you have groups of defendants, there must be 15 or 20 defendants, you have brand names in the yacht world, brokers like United Yacht Sales or Denison Yachts or Northrop and Johnson or Galati, HMY, MarineMax, Allied Marine. These are the kind of the standard industry stalwarts that have all been named. I have not yet seen copies of the two copycat suits, but I'm guessing those suits may add additional defendants in the same category or they may also add new plaintiffs. This particular lawsuit, the plaintiff, is styled as Ya Mon Expeditions LLC, which is a Wyoming LLC that is said to be owned by a lawyer who felt aggrieved when he bought a boat and discovered after the fact that the commissions were paid to a listing broker and then the listing broker in turn, I suppose, shared that with what's called a cooperating broker. And this lawsuit is basically trying to question, if you will, the legitimacy of the whole arrangements between so-called MLS systems in the guy brokerage world, analogizing to the MLS systems in the in the world, analogizing to the MLS systems in the real estate world, and so that's kind of where things kind of fall apart, it seems to me, for the plaintiffs. But the sad part is there's going to be a lot of money spent on lawyers in an area, an effort to kind of at least initially distinguish the different entities named before any resolution of the cases found.
Michael Moore:You mentioned the digital platform law which I think would basically apply to. These are my opinions. These are not to be. I don't represent anyone in the lawsuit. I've actually said no to several people who've asked me to represent them. The problem with these kind of cases is when you have 20, 30 litigants, you have 20 and 30 sets of lawyers, you have 20 and 30 filings and so on and so on and so forth, because they can be extremely burdensome in a very unproductive manner for a law firm that basically would like to continue dealing with, you know, sort of real problems and real industry questions and disputes, as opposed to cases like this, which are so-called class action lawsuits involving lots and lots and lots of people.
Michael Moore:But first of all, digital platform. Probably the closest defendant in this case that I see that to me is hand in glove with the digital platform law is YATCO. It is clearly, from what I can see, a digital platform. It does not get involved with commissions in any way, shape or form, as far as I can tell. I've gone to the website, checked it out, so they're going to raise, no doubt, the law that came out of the child porn controversies, of the early stage internets, going back to the law that was passed in 1996, the so-called Communications Decency Act, which the Department of Justice was behind passing a law 47 USC 2230, that was all about.
Michael Moore:The idea was all about nurturing innovation and fostering accountability. The whole of these noble objectives was to give these digital platforms immunity so they could do things like remove child porn from their digital platforms without being sued. So that's one category. The larger category and what looks like the gist of the lawsuit is the claims brought against the yacht brokerage associations like IYBA and Yaba, as well as with the actual brokerage houses, and they do this under federal antitrust laws and they basically allege that you know there's this is unreasonable price fixing, there's some kind of unreasonable price fixing in the yacht world. So that's, that's the gist of the lawsuit.
Diane M. Byrne:Right, OK, so to go into a little more detail about the allegation of price fixing with the real estate decision that recently came down, what I found quite interesting was the fact that, despite the contracts that people sign that spell out that there is an X percent commission paid to the broker and that commission is therefore split between the selling broker and the buying broker, the court found that it was not permissible for the sellers to have to pay that buyer's commission. Is that basically the same argument that this lawyer, the owner of the Ya Mon boat, is trying to make, that it's unreasonable for someone to have to pay both brokers?
Michael Moore:Yeah, it does sound like the argument they're trying to make and it does not square, at least in my experience, with anything that I've dealt with in the yacht world in my mere 50 years of working in the yacht world, if I start counting from the day I graduated law school. But basically the attitude of the yacht world as I understand it and this is my opinion at this point is that the buyer just needs to decide how much they want to pay for a yacht, what gross dollars they pay for the yacht, and it's up to the seller to decide how much the seller should receive that would be acceptable to sell the boat. In other words, it would be net of commissions and there's always a hugely negotiated situation where the seller basically says I can't accept that offer, it's just not enough money for me. I think the boat's worth more than that. And of course he looks at the situation, realizes what he's going to pay to the brokers and that's certainly a factor that he thinks about. In terms of timing is another factor, because you spend money with every day of ownership. But there's no condition.
Michael Moore:This class action alleges things that are just simply not correct. There's no condition to the sell of the yacht. Relative to the payment of those commissions, it's just simply the seller's decision as to what he wants to receive before agreeing to sell the boat at a given price. The commissions are not even known to the buyer. They're. In my experience in the industry.
Michael Moore:The concept of a buyer's broker, which is one of the first things they mentioned in their lawsuit, is not even a concept generally acknowledged in the certainly in the Florida market, which is where this lawsuit was filed. That's filed if you want to have a buyer's broker. A buyer can enter into a contract with a broker, but generally there's no contract between the buyer and a broker. The only relationship between the broker is the relationship with the listing broker and then the listing broker's relationship to the seller. So there's just a completely out of the box and misunderstanding of so-called non-negotiable offers regarding buyers and buyer broker compensations. It's almost never seen in the industry that buyers have anything to do with commissions or so-called buyers brokers or selling buyers have anything to do with commissions or so-called buyers brokers or selling brokers have anything to do with commissions vis-a-vis the buyer. All of the how they get paid is directly up a chain starting with the listing broker and then listing broker to the seller.
Diane M. Byrne:So this lawsuit was just recently filed, so it's still in what's called the discovery phase, is that correct?
Michael Moore:Correct. It was filed on February 29th of this year.
Diane M. Byrne:Okay, for those of the listeners who aren't up on all the legal terms, what exactly is the discovery phase? It's essentially a fact-gathering phase, wouldn't it be?
Michael Moore:Yeah, exactly, in other words, the the lawsuit is just a series of allegations that have been articulated by lawyers and yeah, I mean, it doesn't mean a thing. It's just a few hundred dollars and a complaint and you're into a lawsuit situation. But you enter immediately the so-called discovery phase. I mean, initially, every lawsuit you start with you have to have a basis for naming a particular defendant and then you have to have notice to that defendant. They've articulated the basis in the complaint and notice is underway. At this time they're having to serve all these defendants I don't know, there's 20 or so. You have to hire process servers to go out and find them and serve them and then, once you do that, the time starts ticking. The clock starts ticking on the time within which the complaint has to be answered, and that's usually 20 days. Under certain circumstances it can be extended to like 30 days the most time. It can be extended just at a professional courtesy. But they're not even into the stage of service. They're not through the service stage yet. I'd say that many of the entities on that page have not yet been served. Some have been. I've been advised and then you enter Once you have a service and you have the 20 days or 30 days passed, you have to file an answer to the complaint, or at least you have to respond to the complaint, but only after all of that.
Michael Moore:That's the motion stage, usually a fairly short stage relative to the entire thing, and then you're into discovery. In other words, it'll be every single organization on. There will be subpoenaed notice to answer questions, called interrogatories, or notice to sit for their depositions, which is just a question and answer, a session between the lawyer, the two they made the lawyer asking the questions and the witness answering the questions. And it can take forever. It'll take, it may take. I don't know how long the real estate case took, but I think it took years. In fact, there were multiple cases preceding the one that was successful, that were failures, and somehow that one stuck. And that one yeah, that one, you know it was a big ruling and instantly generated all these other cases.
Diane M. Byrne:Right right that the plaintiff's lawyers have not apparently brought up but that possibly could be used as an argument by some of the defendants, and that's the notion of the Section 230 part of the Communications Decency Act that you were talking about before. This I find really interesting because, most first of all, I don't think most people are familiar with this ruling, but those people who are familiar with it know it, mostly because of recent attempts to change it in terms of holding platforms like Facebook, Twitter, now known as X, Instagram, you name it down to forums, the forums that we see in yachting, forums that are all over the web and in all sorts of enthusiast universes, and, just in general, they're part of websites, news websites. This is a rule that holds them protected, essentially, against information that's posted by their users.
Diane M. Byrne:So it sounds to me that some of these plaintiffs might potentially and I say potentially because I'm not a lawyer, obviously, and I'm not arguing this case, but, considering Section 230 has successfully protected online platforms against user-generated content in the past could possibly YATCO and Boats. com and some of those other listing groups be protected against any allegations of price fixing, because they're not the ones engaged in this alleged behavior. They're providing a way for it to be publicized essentially. Is my understanding correct in that respect?
Michael Moore:Well, I think to some extent it is.
Michael Moore:I think that one of the primary targets, if you're sorting through these allegations, right at the beginning, there's this allegation that Boats Group LLC is a. They analogize to the MLS system in the real estate world and they talk about the fact that all realtors are required to go through these MLS systems in order to sell their products. Right, and it's that that. That thing, that MLS system, it's not and it's not. And I don't know, in the real estate context, if that became an issue as to whether it was a true digital platform and entitled to the protections of the laws that were passed back in 96 and in subsequent amendments, the so-called 46, usc 230. 30. But when you look at the primary target, Boats Group LLC, first of all, no one's required. Anybody, no one does, in terms of the yacht brokerage world, go to all these different platforms that are out there. I mean, they're like Boat Trader, Yacht World, Boats. com, Casas de Barcos, I think that means things of boats, Nautica, now Nances de Bateau, which is another way of saying boats Bateau. I don't know many of them in French, but Bote en Coupe. These are all platforms Okay, but you know, boats24.com, a UK company, a UK company.
Michael Moore:It's, frankly, just one example that the premise that applies in the real estate world doesn't apply in the yacht world. I mean, I know many yacht brokers who don't use any MLS system. They just simply do their own thing. They make their phone calls, they look for leads, they go to bars, they go to docks, they go to marinas and they sniff around. They do it the old-fashioned way, to the extent that they do go to digital platforms. My understanding, using Yachtco as an example, is they just simply post their vessels and the characteristics of their vessels online. No one's requiring them to do that. I think International Yacht Brokers Association, another defendant in Vlasic they're a trade association, a 501c6 trade association, as is IYBA, as is CABA, the American and California yacht brokerage associations respectively but no one's requiring anyone out there in the marketplace to go to an MLS system. Any buyer can do whatever it wants to do. It can walk down the docks, buy a boat that it sees it likes, make an offer on the spot, use a broker, not use a broker. In the old days of the idea, there was some kind of a standard in the industry regarding commission amounts. That's been ancient history. That is ancient history that's gone away forever. So I think that the premise of this lawsuit is faulty. No one requires anybody to list vessels on any MLS platform. That's not true.
Michael Moore:And one thing about the lawsuits is the allegations on information and belief are true, as asserted. But you know, these allegations are the allegations asserted in the lawsuit just simply are not correct in the yacht world. Now you know, you get into facts and proved facts and in a lawsuit the fact is something that a jury or a judge finds they're finders of fact. Fact is something that a jury or a judge finds they're finders of fact. But is it a fact that yacht sellers bear an inflated cost in the yacht world, the inflated cost of using brokers? In the yacht world, you don't have to use a broker at all. It's a negotiated price. So I don't have to use a broker at all, and it's a negotiated price. So I don't see it from my perspective.
Diane M. Byrne:I do not see that these are well-founded allegations. You know this is a suit definitely to keep eyes on. I'm sure we're not alone in watching the developments and wondering how it's all going to shake out. Certainly it's going to take a long time to. Like you said earlier, these are never quick processes. When there are multiple defendants listed it's going to take quite some time to work through each one of them and even see if they all remain part of the suit. There's always suits where multiple defendants are named initially but some of them are excused I guess is the term by the judge.
Michael Moore:Yeah, I think that the thing that on that comment, I mean, as with all lawsuits generally, when they come before a judge there it a judge it's like a new day. The judge most likely will have no real understanding of the outworld. They'll have no real understanding of how brokerage works in the outworld. The court will have to make some kind of determination as to whether this is a market, as to whether this is a market. I think it's one of the questions of class action lawsuits is sort of discrete members of a class. You know, is there such a thing in the world? I mean, I have to be honest with you, it's a pretty small world. First of all, these poor buyers, these poor billionaire buyers, need to be protected from these horrible yacht brokers. I just don't think that's ever been a problem. They're quite capable of protecting themselves. So you know, sort of the rules, the underpinnings of protecting the poor hapless consumer is kind of ridiculous in the context of the yacht world. I just don't think. I mean the whole emphasis on buyer and broker-buyer commission rule. There is no such thing in the yacht world that I've ever heard of. Again, I'm just one person. A judge is going to have to make a decision. But until I do some research into it, I've never heard of such a thing as a broker-buyer buyer-broker commission rule.
Michael Moore:That was a big part of the real estate thing because there were these fixed deals with these 100,000 person realtor systems, mls systems. That is not the way it works in the art world. I mean, they're going to get into how many boats are sold each year and where are they sold? Because it's not just Southern District of Florida, they're sold all over the world. There's just a subset of a global world. See, one thing about real estate is it sits in one place and it's always set in that same place since the beginning of time. But yachts move around. You know, one year they're here, the next year they're there and, by the way, a lot of times they're relocated for sales just because of you know. You can do that with yachts. You can move to tax-friendly jurisdictions and so forth. You can do that with yachts.
Diane M. Byrne:You can move to tax-friendly jurisdictions and so forth. Yeah, and they change brokers too. For the same reason, a boat might be overseas, represented by a European broker, moves to the US, represented by a US broker, vice versa. What about? I'm just? I'm wondering out loud here. There have been, in general, class-action lawsuits that courts have found not to be worthy of remaining as a class action lawsuit. There's no cause for it to remain that way. Could that even possibly be a development with this? Where it would, it would not be one large suit, it would have to be individual suits according to what that's a likely scenario.
Michael Moore:Wow, I, I really do see that I don't. I mean, obviously I'm in the in the industry to to some extent and I have my views, but I'm always going to basically try to call it the way I see it. So, but I think that when you're into the class action, you know you have to have these similarly situated personalities. You're talking about a boat group that's buying $100,000 boats and you got at the upper end. The people are buying these $100 million boats, crossing national borders, sailing the seven seas, changing brokers freely, always with new and different legal regimes. I don't know. There are many, many issues of basically, how do you file a class action and what is the nature of that beast. There's a lot of lawyers out there that just really love to either defend or prosecute class actions. To an extent it's like the mother load if you're succeeded. I mean, I knew a guy that litigated you know I was a fed ship, by the way but he litigated for like 20 years and virtually almost went bankrupt several times, literally lived out of his car and then one day things changed. He got lucky and got favorable rulings and he got a settlement of several hundred million dollars, in the case nearly a billion dollars. He made a couple hundred million dollars in fees, so he lived poor and stressed out for 20 years and now owns a billion dollars. He made a couple hundred million dollars in fees, so he lived poor and stressed out for 20 years and now owns a fed ship and is cruising the world's oceans because of his tenacity. But the court, you know, awarded him a wonderful fee because he said look, when this guy started this process no one thought he would win and he went from year to year to year and losing, losing, losing and ultimately, you know, succeeded Ron Motley who had the. I was talking with Phil Purcell, who's kind of an industry icon at this point, but back in the day when he was with he's now the head of Marine Industry Association of South Florida, of course, but back in the day when he was with Westport, we were involved. But back in the day when it was at Westport, we were involved. I mean, I represented Ron Motley, so I know how I was involved. I kind of forget how Phil was, except he was a go-to guy for information and Mr Motley hit the tobacco companies. It was the Rice Motley Law Firm. There's a movie about it. The firm it's called. That firm was the rice motley law firm. They hemorrhaged money for decades trying to tag the tobacco.
Michael Moore:You say that tobacco causes cancer because it has never been proven that a causal connection. It was only a risk factor, meaning that if you, if you, smoke cigarettes every day, there's a risk factor that you will most likely, or more than likely than not, get lung cancer. But never really were able to prove that it caused it and the tobacco companies denied it. And even to this day it's a risk factor that was articulated by the courts. It says look, we don't know a lot of things. Here's what we know If you breathe asbestos for 20 years, you're likely to get mesothelioma. You will get it. You most likely will. It's not like being shot in the head, that's pretty obvious. But it's a risk factor for mesothelioma. And there's a bunch of law lawyers out there, right, that's all they do. That's all they do, that's all they litigate.
Michael Moore:So back to the subject at hand and the wonderful world of yachting. You know, I don't know. I looked through that complaint and frankly, I just see a lot of paragraphs that I say I just don't think that's true. Maybe I'll learn something. I've been at it for a while. I learned something new every day.
Michael Moore:They talk about standard commissions. There is no standard commission in the industry, although I will admit, if you go to like the International Yacht Brokers Association, the trade association that has what 2,000 members, 2,000 members Is that a class? They usually have a form that does have a commission statement in their standard commission, standard central listing agency form. But in my experience that is negotiated on a routine basis, just routinely stricken through. It's more likely than not it'll be 10%, it's going to be less than 10%, and then you've got to split it with the cooperating broker and every broker is going to split this commission with his house and every split with the house differs but according to the houses. Some houses are 50-50, some are not.
Michael Moore:I don't know, I don't think that. I think a lot of judges looking at this lawsuit, looking at a bunch of yacht buyers, these poor, underrepresented people, and you know they're going to look at this thing and say, yeah, this is really a class of people that needs to be protected. I'm not so sure. You know, I have to tell you I can certainly relate. You know, when the champagne's flat and the caviar's run out. It's a bad time, you know. You got to kind of worry about that.
Diane M. Byrne:Well, there is. There's certainly a lot to unpack in these in the in the lawsuit, and certainly a lot that's going to continue to be uncovered and develop. It's not ending anytime soon, so we'll have to keep an eye on this and see what shakes out. Michael, as always, thank you for your insight and helping educate us about what is and isn't potentially applicable in the world of the law.
Michael Moore:Thank you very much, Diane. It's always a pleasure. I hope you enjoy the rest of your day.
Diane M. Byrne:Thank you everyone, as always, for listening. If you have a yacht law question that you would like us to address in an upcoming episode of the Yacht Law Podcast, even if they are follow-up questions to this particular podcast episode, please reach out to Michael Moore or me. Our contact information is in the show notes for this episode. Our goal is to help you make better educated decisions, whether you are a yacht owner, a crew member, a representative in the industry or someone seeking to learn more about the world of yachting, and we can keep you anonymous if you wish, until next time. Take care everybody.
