Attorney General Ellison reaches $3.5 million settlement with Edina Realty

Settlement resolves investigation into Edina’s alleged breaches of fiduciary duties firm owes its clients; Edina will provide refunds for consumers and reforms to its business practices going forward

November 19, 2024 (SAINT PAUL) — Attorney General Keith Ellison today announced his Office has reached a settlement with Edina Realty, Inc. that resolves the Attorney General’s investigation into the secret payments Edina received from Home Security of America, Inc. (HSA) in exchange for promoting HSA's home warranties to Edina’s unsuspecting clients.  Under the settlement, Edina will pay $3.5 million to the Attorney General’s Office to provide refunds to certain Edina clients who purchased an HSA home warranty.  The settlement also requires Edina to end contractual relationships with any third parties that pay Edina to promote their products to Edina’s clients, and not enter into any new such relationships.  Edina is also prohibited from licensing its name or trademark to any third parties that market their services to Edina’s clients.

Real estate brokers like Edina are fiduciaries under Minnesota law and owe their clients, among other things, the duties of utmost loyalty and disclosure.  After completing its investigation, with which Edina cooperated, the Attorney General alleged that, despite being a fiduciary, Edina did not disclose to its clients the payments it received from HSA, thereby depriving its clients of the opportunity to make an informed decision as to whether to purchase an HSA home warranty.  The investigation also found that HSA confused consumers into believing that the HSA home warranty was a valuable product and contained valuable benefits that the warranty did not have. The investigation also found that Edina lent its name and trademark to HSA in marketing home warranties to Edina’s clients, which may have led some consumers to believe that HSA’s home warranty service contracts were in fact Edina products.

The Attorney General’s investigation alleged that Edina’s conduct harmed Minnesota consumers by causing them to purchase HSA warranties that they otherwise would not have purchased and that Edina violated its fiduciary duties of loyalty and disclosure, as well as Minnesota’s Deceptive Trade Practices Act (Minn. Stat. § 325D.44) and Minnesota’s Consumer Fraud Act (Minn. Stat. § 325F.69).

“Buying a home is the most expensive and significant financial decision most Minnesotans will ever make,” Attorney General Ellison said. “Real estate brokers like Edina are legally required to act in the best interests of their clients. After a careful investigation, my Office is alleging that Edina Realty violated that duty by secretly accepting substantial payments from Home Security of America to push their home warranty contracts on unsuspecting clients. This settlement will put an end to these practices and recover all the secret payments Edina received from HSA. Most importantly, today’s settlement will put this money back in the pockets of Edina’s customers who were misled into purchasing HSA warranties without ever being told that Edina was being paid handsomely to promote these problematic home warranties.”

Details of the Settlement

Under the settlement, Edina customers who purchased an HSA home warranty on or after July 1, 2018 are eligible to fill out a claim to recover the first year premium they paid to HSA if:

The current first year premium for a basic HSA home warranty is $545 for Minnesotans, according to HSA’s website. The settlement applies to both Edina’s home buyer, and home seller clients who purchased an HSA home warranty. A claims administrator will contact eligible customers, which the Office believes to number in the thousands, in the future regarding compensation. Eligible customers do not need to take any action at this time to preserve their right to file a claim.

Minnesotans who believe they were the victims of a scam are encouraged to file a complaint with the Office of Minnesota Attorney General Keith Ellison using this online form. The Office can also be contacted by phone at (651) 296-3353 (Metro area) or (800) 657-3787 (Greater Minnesota).