Attorney Kathryn Holbert has been defending real estate professionals for more than 15 years. In this webinar, Kathryn provides insight into what you should do in Nevada if served with a subpoena.
Kathryn is joined by Dave Miller, Regional Vice President with Fidelity National Home Warranty in this informative webinar that covers:
- Exactly what a subpoena is
- Why they are requested
- Why they can’t be ignored
- How real estate professionals can avoid litigation
- Why appearing in court on your own is a bad idea
- How a qualified real estate attorney can help you
Always contact your E&O insurance company when you receive a subpoena. (CRES real estate E&O can include subpoena coverage.)
To find out more, watch the full webinar, view the podcast, or see the transcript below.
Thank you for joining us today. I’m Laura Prouse from CRES Insurance, a Gallagher Affinity Division. Today, we welcome attorney Kathryn Holbert. Kathryn has been defending real estate professionals for more than 15 years and is a very active member of the CRES Real Estate Defense Council Panel.
Along with Kathryn, we have Dave Miller, regional vice president with Fidelity National Home Warranty. Dave manages the CRES Advantage Home Warranty Plan. When CRES real estate E&O members purchase a Fidelity Home Warranty, they give their seller up to $25,000 in Seller’s E&O Protection, and reduce their own out-of-pocket claims cost up to $5,000.
Thank you, Laura. Let’s start from the basics. What exactly is a subpoena, and why would a real estate agent be served with one?
A subpoena is basically a court order, ordering somebody to do something, to either appear, to produce documents or do both together. A lot of times it will start with, “Just give us your documents.” Of course, for real estate agents, they’re usually seeking a transaction file or property management file or something like that.
And then they can also say, “We also want you to appear and talk about these documents.” That might come at the same time. They might review the documents, and then after looking at them say, “Hey, I want you to talk to me about this.” And then you’ll get a second subpoena.
If you get a subpoena, you have to take an action. You can’t just ignore it. And you’ve got to do it by a specific date, which is contained within the subpoena.
When it comes to the agent, they understand they have to do something, but they might not know exactly what they have to do. They might not know why they’re being requested. There’s a variety of reasons why … because these are third-party subpoenas.
If you’re being subpoenaed because you’re already involved in the lawsuit, that’s a different issue. The subpoena goes to your attorney.
But today we’re talking about a subpoena that you get served with for a lawsuit that is going on between other people that you are not involved with.
Your number one goal in that situation is to stay out of the litigation.
You definitely do not want to do anything or produce anything or say anything that is going to get you involved. And primarily, whatever attorney serves you with the subpoena, they are looking for information to support their client’s case.
However, that attorney and any other attorneys that are involved are also going to be looking for any possible way they can bring you into the lawsuit. From the plaintiff’s perspective, if they have one more party that they might be able to get money from, great. From the defendant’s perspective, if they have one more party that they might be able to spread the liability among, great.
So, even though you are not currently a party when you get a subpoena, that doesn’t mean you won’t later become a party. And in fact, that is definitely one of the goals of the subpoena — to find a way to bring you into the lawsuit.
Don’t think you’re going to handle it on your own. “This is no big deal. I’m just going to send the documents in. I’ll just appear at testimony. I’ll tell the truth.” It’s not that they don’t want the truth, but they want their version of the truth. And you don’t ever want to just show up to a deposition on your own.
So, the attorneys are thinking: “We’re not seeing anything yet, but there might be something there. We definitely want your transaction file, and if we see something in the transaction file, we’ll bring you in.”
They’ve already essentially made an analysis. They know who you are. They know you’re involved. And they have already made a preliminary analysis that they don’t want to name you as a party, but they still want your documents. Your documents are still involved for a reason, generally speaking.
I’ve also seen subpoenas, though, for something that truly doesn’t have anything to do with you or your transaction. One example that comes to mind is a property management company was served with a subpoena from the Nevada Division of Welfare. And they were concerned that maybe the tenant had committed welfare fraud, and so they wanted the documents that the property manager had on application and rent and whatnot. But there was never any possibility, really, that the licensee would become involved in the dispute between the tenant and the Welfare Division.
Another thing to note: a lot of times, the attorneys that draft these subpoenas are not real estate attorneys, so they don’t truly understand the documents that the licensees do and don’t have.
If I’m dealing with an attorney in a situation where the agent might possibly get involved in the lawsuit, I’m only giving him exactly what he’s asking for. If he doesn’t ask the right question or ask for the right document, we’re not volunteering anything. We’re not necessarily being uncooperative, but we’re not going out of our way to cooperate with somebody that could potentially sue us (and is actually seeking to sue us.)
That makes perfect sense. Only answer what you’re being asked because, the more you tell, it could open up other avenues for them to pick at.
And of course, the natural inclination, for real estate licensees is always, “Let’s be helpful. And if I just am honest and give them everything that I have, I’m not going to get sued.” Unfortunately, it’s exactly the opposite.
Appearing as a Result of a Subpoena
You say that subpoenas require you either appear and/or produce documents. Let’s talk about appearing. What are some things that agents and real estate professionals should know when they are appearing in person?
The appearance should never be on your own. When you appear, it can be for a trial testimony. It can be at an arbitration. It can be at a mediation. And somebody just getting served with a subpoena might not even know that, because it just says you have to show up at this time and this place and give testimony regarding something, your transaction file or the real property located at a specific address.
And you might not know, but that’s why you need to get an attorney involved that can figure out what is the purpose of this. What is the underlying litigation going on? What is the underlying dispute? How does my participation play in?
Because all of that matters for preparation, and preparation before deposition testimony or trial testimony is a fairly lengthy process between an attorney and their client. And it’s very important. You should never just walk in and sit down and say, “Hey, I’m just going to answer your questions and tell the truth.”
Not only is it not in your best interest, but frankly it doesn’t necessarily serve the other side, either, because then they have to do your deposition preparation for you, basically.
A lot of times, your real estate errors and omissions insurance policy has got subpoena coverage, because it is very much considered a part of risk management. Your insurance company knows that if they help you respond to the subpoenas correctly, that it reduces your chances of being involved in the litigation.
So, check your own policy to see if you have coverage for this. (CRES real estate E&O individual policies include subpoena coverage, and it’s available on firm policies.)
If you get a demand for money or services, you’re going to call the risk management hotline at CRES, or actually just file it to the claims department. It’s the same should you be served with a subpoena — the first call you make should be to the CRES ClaimPrevent® Risk Management Legal Services Hotline.
If for whatever reason you don’t have subpoena coverage, it’s still worth paying your own attorney to handle it, rather than trying to do it on your own. It could literally (and very frequently) make the difference between being a third-party witness versus a defendant.
Furnishing Documents as a Result of a Subpoena
Let’s talk about the documentation. Maybe some agents don’t record as much information and save it as they should. Where would those agents be in trouble, in a situation like this, where they would have to provide documents?
It depends on what exactly are they asking for, versus what you have. And another very interesting issue is what is a transaction file? Not everybody has the same definition of that.
Frequently, with the Nevada Division of Real Estate, if there’s a complaint, the subpoenas will come into the broker (because it’s actually the broker’s file, not the agent’s file. It belongs to the broker.)
NRED will send a letter to the broker and say, “Give me your transaction file.” And the broker sends what they think is their transaction file, and yet, oftentimes, it does not include correspondence. It does not include photographs. And the Nevada Division of Real Estate’s like, “I asked you for your entire transaction file.”
And I’ve tried to explain to the division, there’s no ill will there. They’re not trying to hide anything. It’s just that, literally, it’s a storage situation. They don’t store the photographs and the correspondence in exactly the same electronic form and place as they do the rest of the transaction file. So, oftentimes, if you don’t specifically ask for the correspondence and the photographs, they don’t get included in that transaction file.
Sometimes I might call and say, “Hey. You didn’t necessarily ask for documents, but I’ve got them, or photographs. Do you want the photographs?” And sometimes, I’ll say. “They didn’t ask for them. They’re not getting them.”
Not everybody even defines transaction file the same way, but usually that’s all that’s asked for on the subpoena, is, “Send us your transaction file.”
Is the Subpoena Improper?
You have seven valuable bullet points of things that are going to happen from there. And number one, the attorney reviews the subpoena, just to make sure that it was proper. What would make it improper?
If it’s served to the wrong corporate entity, perhaps. There’s a lot of big RE/MAX, eXp Realty, etc.
And maybe this was an eXp transaction, but not this particular broker. Or they named the right person, but they didn’t serve it properly. They didn’t give you enough time to respond. They didn’t give you the proper form for your rights and obligations.
So there are some procedural formatting issues that may or may not be correct.
But to have an enforceable subpoena, it needs to be correct.
If it’s not proper, you don’t want the real estate professional to give them this information.
Never Talk to the Other Party’s Attorney Without Your Own Counsel
Your attorney will speak to the other party’s attorney.
If you are my client, and I’m talking to the other attorney, you don’t talk to the other attorney.
You don’t speak the same language as the attorney does, and you can’t represent yourself. Really, nobody can effectively represent yourself.
Preparing for a Deposition
The attorney will prepare the real estate agent for the deposition. What are some things that the agent should know? What happens in a deposition, and how can an agent maybe answer too many questions that are inappropriate and get them in further trouble?
A deposition is completely different than a conversation, and it’s not necessarily a fact-finding mission.
The attorney that’s sent out notice of the deposition has got a very clear goal that he wants to accomplish, which of course is to benefit his client.
You are not his client, so he is not your friend. He is not helping you.
I’ve heard licensees say, “I’ll just sit down and tell my story.”
That’s not even possible at a deposition. It’s not like you sit down, and the attorney says, “Okay, tell me your story.” They ask very specific questions that you have to respond to. What you think is the most important thing you may never get the opportunity to say because you don’t just get to talk or say what you want to say or what you think is important. You have to respond to their questions.
They’re not just really looking for the truth. They’re looking for very specific facts and information, and they will want you to just say this one little thing and then nothing else. And you are not in control of it at all, and if you don’t understand the process and what is going on, you can very easily immediately become a party, versus a third-party witness.
And of course, in conversation, you can anticipate what somebody may be asking and answer more than they actually ask. I always say, “Never do that in a deposition.”
Whenever possible, answer their question with a yes or a no, and if there’s a follow-up question, make them ask that.
That way, you are not answering something that has not really been asked.
And the thing that you might think is the most important to say to them might be the thing that gets you in trouble and gets you involved in the lawsuit. So you don’t want to say that, if they’re not asking for it.
Once you involve the attorney with you, it’s good to keep them up to date on everything, because if this turns into you getting sued, instead of just being a third-party witness, the attorney will be with you for that trial and already have knowledge of everything.
The other thing I forgot to mention specifically relating to real estate transaction documents and real estate transaction files is there are very often documents in your files that are not yours (like a home inspection report.)
If you’re representing the seller, and there was a notice of request for repairs, and you ended up with a home inspection report in your file, you have that document, but it is not yours. It was purchased from the home inspector by the buyer, and you can’t necessarily just turn that over. But you also can’t just not turn it over.
That’s where we get into raising the objections that may be necessary to the subpoena and getting a protective order from the court. Sometimes, depending on what the issues are, if the home inspection report is going to be a huge red flag and a big part of the transaction and could potentially even bring in the home inspector, I want the home inspector to have a heads up on that.
I want to be able to tell whoever sent us the subpoena, “I’ve got a home inspection report. You’ve got to get it from the home inspector. And I’ll tell you who that home inspector was, but you’ve got to go directly to them and get it.
And sometimes, they’ll do that voluntarily. Sometimes, we would actually have to get a protective order from the court to say, “If they want this document that belongs to somebody else, they’ve got to get it from who it belongs to.”
Every subpoena is different, just like every real estate transaction is different. And that’s why you have to bring in the professional to do it because I might do something in one case and something totally different in another case, because the cases are different — and the subpoenas are different because the situation is different.
What you also mention is when you’re being served with a subpoena or ordered with a subpoena, it’s not always from a real estate attorney. Sometimes, it’s just from a regular attorney that’s not a real estate attorney.
Yes, there was a case from the Nevada Division of Welfare Services that wanted a property management file, but they didn’t ask for all of the documents they should have.
Sometimes, it’s a domestic dispute like a divorce, but they want your transaction file because maybe somebody did something before they got married or while they were split. Maybe one of the spouses was involved in a transaction, and the other spouse didn’t know about it. That is a frequent occurrence.
As the real estate agent, you’re never going to become involved in the divorce action, per se, but if you handled that transaction incorrectly, the other spouse could bring you in under a new lawsuit. And that’s even worse than becoming a party to the original thing, when you get involved in a whole new lawsuit because the one party decides you didn’t handle the transaction right.
I think there was one where the MLS subpoenaed information from a real estate agent because somebody had sued the MLS, and they wanted some information. So, it’s not necessarily a big deal. A subpoena is a tool that legal professionals use to obtain information, whether it’s testimony or documents or both. So, that’s all it is, is it’s a tool that’s being used by a professional to get something that you’ve got. But it’s not as easy to respond to it as just say, “Okay, I’ll give you what you ask for.” Because from the very beginning, you have to analyze, what is it they’re actually asking for and what is it that I’ve got?
Always Take Action on a Subpoena
Some people that think they do nothing wrong, as a real estate professional, could get a subpoena and just fly off the handle and be extremely negative and put a fence up and say, “You know what, I’m not giving them anything.”
You definitely don’t want to ignore a subpoena and say, “I’m not cooperating with that. I’m going to set it aside.” But really, all you should do is call an attorney and give it to them.
Even though you maybe could cooperate, and maybe you could handle it correctly and give them everything that they need, don’t even try to spend the time on this. If you get a subpoena, your normal, automatic, first reaction is call your insurance, get an attorney involved, and let them handle it from there.
Now, of course, your attorney’s going to be wanting your file. And I go through it, and I say, “Give me everything that you’ve got. I’ll decide what we’re going to produce and what we’re not going to produce.” You don’t want to spend the time and effort. Even if you think you know how to do that, why would you spend your time on that? It’s not a money-making process for you. Go do what your job is. Stay in your lane and do what you need to do.
You don’t want to ignore it or to say, “I’m not responding to this.” But don’t be afraid of it. It’s just a request for information. Don’t panic and say, “Hey, my file’s not complete,” and definitely don’t try to complete your file. Whatever it is, it is, and we deal with it. And you just call your insurance and call an attorney and let them handle it.
And you mention, it’s just a request for information. Should an agent then just think, I’m going to go ahead and just take care of this myself. I don’t want to involve my real estate broker, because maybe I had an issue last week that he or she was involved in. So, should I just do this by myself?
Absolutely not. Any request for the file should always be directed to the broker because the transaction file belongs to the broker. Whether they represent buyer or seller, it’s a broker file. However, it’s the agent, of course, that usually has the specific information.
It’s not at all uncommon for them to request the documents from the broker, but then send a different subpoena to the agent and say, “We want the agent to talk about these documents.”
But if you just get the subpoena for the testimony as an agent, you’ve got to involve your broker immediately. Your broker’s got to know that’s going on, and the broker should call the insurance and call the attorney. But never, as an agent, say, “I’m just going to handle this on my own.”
Anything you do, as an agent, involves the broker and the brokerage, and they have to know everything that you’re doing, including responding to subpoena.
How long should a real estate professional keep a file together? Even emails — how long should they save these?
You follow the Nevada law on that which is seven years. So, if it’s over that long, you say, “The Division’s Commission only says I have to keep it for this long. I kept it for that long, and it’s gone now.”
Thanks to both of you. Always very informative.