Facts

Paul M. Zagaris, Inc ("PMZ") was a broker company that provided real estate services to Californian residents. Disclosure Source and Valley NHD prepared and provided natural hazard disclosure ("NHD") reports that PMZ utilized in its real estate transactions. Valley NHD, however, shared the same physical address with PMZ and designated Jon Paul Zagaris, the broker of record for PMZ, as its agent for service of process. Plaintiffs and other Californian residents had employed the services of PMZ between July 1, 2008 and July 31, 2011.

PLAINTIFFS' CONTENTIONS: Plaintiffs alleged that defendants conspired and engaged in a fraudulent secret-profit scheme that allowed kickbacks from the NHD reports providers. Specifically, Valley NHD acquired NHD reports from Disclosure Source in unbranded form at discounted prices, provided them in the real estate transactions of PMZ's clients, and allowed said reports to be invoiced at a higher price without performing substantive work on the reports. Hence, plaintiffs brought a class action against defendants for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, constructive fraud, unjust enrichment, civil conspiracy, accounting, and violation of California Civil Code Section 1710(3) and California Business and Professions Code Section 17200. At time of settlement, Ms. Higashi was the only remaining plaintiff.

DEFENDANTS' CONTENTION: Defendants denied all allegations and claimed that the relationship between PMZ and Valley NHD was disclosed to all customers in writing and that the price markup over Valley NHD's costs was justified by the work performed and risk borne by Valley NHD. Plaintiffs claimed more than $10 million in damages but settled for less than a million. PMZ's carrier opted to settle this matter despite PMZ's strong defenses given the high cost of defending a class action and the relatively low settlement amount,

Settlement Discussions

Parties participated in a mediation before the retired judge Ronald M. Sabraw, a JAMS mediator, but no settlement was reached. Following the mediation, Judge Sabraw made a mediator's proposal to settle all claims between plaintiff and defendants, which was subsequently accepted by all parties and resulted in a global settlement.

Result

$950,000 non-reversionary settlement.