A proposed class action lawsuit alleges that The Estates LLC and several co-conspirators have engaged in a “bid-rigging” scheme to manipulate foreclosure sales in North Carolina.
Alleging violations of the Sherman Antitrust Act, the 27-page complaint claims defendants The Estates LLC; The Estates (UT), LLC; The Estates Real Estate Group, LLC; Timbra of North Carolina, LLC; Versa Properties, LLC; Red Tree Holdings, LLC; Maldives, LLC; and two individuals have agreed to take part in a “system” designed to coordinate bidding in foreclosure sales and thereby increase profit generated by such transactions.
The lawsuit explains that The Estates operates a database of properties that face foreclosure in North Carolina and allows only one member of its organization to bid on each property. Investors, the case continues, can become members of The Estates and thereby gain access to the database by paying a monthly fee, as well as agreeing to pay a “finders fee” and a share of the profits for each sale brokered by the organization.
When an investor is interested in a property, they indicate within the database a desire to bid, the lawsuit explains, and one of The Estates’ “acquisition assistants” then places the bid on the investor’s behalf. No other members are permitted to bid on that particular sale, which, according to the suit, allows members to keep their costs low and generate a greater profit from the investment. It’s this apparent bidding structure that the plaintiffs allege has caused proposed class members—persons and entities whose properties were sold through foreclosure proceedings in North Carolina at which an Estates member was the high bidder and for which the Estates placed the bid—substantial harm. From the complaint:
“The Plaintiffs, and other similarly situated homeowners and property owners, lost their homes and properties through the Estates’ illegal bidding practices or otherwise were deprived of proceeds in excess of the foreclosed debt because when properties are sold at foreclosure auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with any remaining proceeds paid to the homeowner.”
Further, the case alleges that in order to avoid revealing the apparent scheme, Estates members are required to establish a separate company in order to participate in each foreclosure sale, with some members forming one company just to place the bid and another to purchase the property. The case argues this set up is a blatant method with which to hide foreclosure transactions.
“Upon information and belief,” the complaint posits, “this fragmented structure is designed both to mask the involvement of the Estates in the transaction and to make it difficult to discovery [sic] the coordinated nature of the bidding at numerous foreclosures.”
According to the lawsuit, the defendants’ alleged scheme allows The Estates’ members to profit off the losses of property owners who often use the proceedings from foreclosures to pay off their mortgage and other debts associated with the property.
The case argues that each instance of bid-rigging constitutes a felony and a violation of the Sherman Antitrust Act.