demand for hearing, no. 21-0126 - mike kreidler

DEMAND FOR HEARING AND FOR STAY OF ACTION – 1

COM050.1

CARNEY BADLEY SPELLMAN, P.S. 701 Fifth Avenue, Suite 3600

Seattle, WA 98104-7010 (206) 622-8020

STATE OF WASHINGTON OFFICE OF THE INSURANCE COMMISSIONER

In the Matter of MODUS TITLE LLC, WAOIC 1028784

Respondent.

ORDER NO. 21-0126

DEMAND FOR HEARING AND FOR STAY OF ACTION

Pursuant to RCW 48.04.010(1)(b) and (5), Modus Title, LLC (“Modus Title”), a recently

acquired subsidiary of Compass, Inc. (“Compass”), through its undersigned counsel, requests a

hearing on the Order Revoking License, Order No. 21-0126 issued by the Office of Insurance

Commissioner (“OIC”) on March 17, 2021(the “Order), and requests an automatic stay of such

Order pending the requested hearing as provided under RCW 48.04.020.

Modus Title is aggrieved by the threatened actions set forth in the Order, in that a

revocation of its license is unwarranted and will cause unjustified business interruption and

potential damage to Modus Title’s and Compass’ reputations. Further, certain of the factual

allegations contained in the Order are incorrect or were fully remediated prior to the date of the

Order. The factual errors in the Order potentially increase Modus Title’s and Compass’

reputational harm, and are improperly relied upon by the OIC in the determination that its

revocation of Modus Title’s license under RCW 47.17.530(1)(6) is the appropriate remedy in this

matter. Modus Title relies on the definitions and limits on the OIC’s jurisdiction and authority

under Title 48 RCW, relevant provisions of the Washington Administrative Code and applicable

federal, state and agency case law.

DATED this 21st day of March, 2021.

Received electronically 03-22-21 RC

DEMAND FOR HEARING AND FOR STAY OF ACTION – 2 COM050.1


Seattle, WA 98104-7010 (206) 622-8020

CARNEY BADLEY SPELLMAN, P.S. By S/ Catherine A. Woods

Catherine A. Woods, WSBA #54437 Attorney for Compass, Inc.

DEMAND FOR HEARING AND FOR STAY OF ACTION – 3 COM050.1


Seattle, WA 98104-7010 (206) 622-8020

CERTIFICATE OF SERVICE

The undersigned certifies under penalty of perjury under the laws of the State of Washington that I am an employee at Carney Badley Spellman, P.S., over the age of 18 years, not a party to nor interested in the above-entitled action, and competent to be a witness herein. On the date stated below, I caused to be served a true and correct copy of the foregoing document on the below-listed attorney(s) of record by the method(s) noted: ☒ Email

Rebekah Carter Tim Ascher Office of the Insurance Commissioner MS 40255 P.O. Box 40255 Olympia, WA 98504 [email protected] [email protected]

DATED this 21st day of March, 2021.

S/ Catherine A. Woods Catherine A. Woods, WSBA #54437 Attorney for Compass, Inc.

mailto:[email protected]

mailto:[email protected]

DocuSign Envelope ID: 544C62C2-D3B4-4F1 E-8FF0-863C47ECC544

STATE OF WASHINGTON OFFICE OF THE INSURANCE COMMISSIONER

In The Matter of

MODUS TITLE LLC,

Licensee.

To: Gerry Guerin Modus Title LLC

Order No. 21-0126

WAOICNO. 1028784 NPN 19275505

ORDER REVOKING LICENSE

Dba Modus, Modus Closing, Modus Escrow, and Modus Title & Escrow 901 5th Avenue, Ste 3310 Seattle, WA 98164 [email protected] [email protected]

IT IS ORDERED AND YOU ARE HEREBY NOTIFIED that your Washington State

insurance producer license is REVOKED, effective APRIL 1, 2021 pursuant to RCW 48.17.530.

BASIS:

1. Modus Title LLC ("the Licensee" or "Modus Title") is a resident business entity

title insurance producer first licensed in Washington on August 30, 2019. The Licensee has the

following "doing business as" (dba) names registered with the Insurance Commissioner:

"Modus", "Modus Closing", "Modus Escrow", and "Modus Title & Escrow".

2. Modus Title has also registered the trade names "Modus" and "Modus Closing"

with the Washington State Department of Revenue.

3. Modus Technologies, Inc. is a foreign corporation and registered in Washington

State on February 1, 2018 as "an online real estate closing platform". Modus Technologies, Inc.

has registered "Modus Technologies" and "Modus" as trade names with the Washington State

Department of Revenue. The web address for Modus Technologies, Inc. is

www.modusclosing.com; however, "Modus Closing" is a registered trade name for Modus Title

LLC, the entity licensed by the Insurance Commissioner.

4. Both Modus Title and Modus Technologies share "Modus" as a common registered

trade name.

ORDER REVOKING LICENSE ORDER NO. 21-0126

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State of Washington Office of the Insurance Commissioner POBox40255 Olympia, WA 98504-0255


5. On February 8, 2021, the email address of "[email protected]" was

added at the Licensee's request to the licensing record for Modus Title as maintained by the

Insurance Commissioner. Again, www.modusclosing.com is the web address for Modus

Technologies, Inc.; however, an "@modusclosing.com" email address has been registered by

Modus Title as the current "mailing email address" for Modus Title.

6. The Insurance Commissioner opened an investigation upon receipt of complaints

from two (2) Washington title companies. Both companies allege that the Licensee is providing

rebate and inducements through a technology platform operating under the tradenames "Modus

Technologies" and "Modus." Modus Technologies, Inc. ("Modus") wholly owns Modus Title. As

Steve Theodore ("Theodore"), Modus' in-market representative, says in a YouTube video: "We

,are two companies in one." Registration information from the Washington Secretary of State show

that Modus Technologies and Modus Title share a common governor, Jai Sim.

7. Modus (www.modusclosing.com) is a proprietary software platform ("the

platform"). Modus does not require real estate agents to use Modus Title (www.modustitle.com).

Modus offers the following services to real estate agents via its platform:

• Staging Boost," a service to secure cleaning, landscaping, staging, and listing preparation renovation with payment deferred until closing of the home sale or for up to 365 days. "ZingFix" is the third-party vendor the realtor contracts with directly to provide for the services. Invoices are sent at a later date or fees are deducted from the net proceeds at closing.

• "List Assist," wherein Modus partners with Virtuance Photography to provide professional listing photos. Realtors contract directly with Virtuance.

• Earnest money deposits, document storage from real estate transactions, wire transfers, notary services, complimentary home books, farming reports, pre-listing materials to give a competitive edge on the next listing presentation, and 24/7 concierge service.

8. Modus receives no compensation from the realtor, or from Virtuance or ZingFix,

for using Modus to arrange for these services. Nor does Modus receive any compensation from

the realtor to use the platform for the other offered services.

9. In addition, the platform states that Modus is a distinct entity from Modus Title

LLC, and that use of the platfonn does not require the use of Modus Title LLC.


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2 State of Washington Office of the Insurance Commissioner POBox40255 Olympia, WA 98504-0255


Closings were moved from other title companies to Modus Title LLC

10. Fidelity National Title ("Fidelity"), one of the complainants, provided

documentation that four ( 4) closings were moved to Modus Title because of services provided

under the Staging Boost program offered on the platform or because of a home warranty issue. As

one broker, "S.C.D.", stated:

I wanted to write you to say that I'm going with Modus Title & Escrow with my upcoming listing because my clients need financial support to stage their home and I don't have the capability to help them at the moment. ... (Modus offers a partnership with ZingFix where the company will front the cost of staging, and then it's taken out of the sellers net proceeds.) I'm so bummed out, but I look forward to working with you hopefully in the near future!

11. In a February 1, 2020 email, realtor "D.B." notified Fidelity:

Unfortunately we are having to switch the escrow portion to Modus for the [L.S.] transaction because of the contractors doing repairs.

12. The Insurance Commissioner contacted D.B. who confirmed he used the services

of Modus Title one time because he had a client who required renovation work for the home sale,

and those services were not charged until the closing of escrow.

said:

13. In a text message provided by Fidelity on April 3, 2020, another realtor, "J.R.",

Sorry, this transaction is moving to Modus. Buyers negotiated this through inspection so they can get a free warranty from escrow.

14. The Insurance Commissioner contacted J.R. who confirmed he used the services of

Modus Title one time. He was selling a house using Ticor Title, but the buyer wanted a home

warranty. The buyer's agent, L.Y. of The Cascade Team (see below), identified that Modus

provided a free warranty. As a result, the buyer requested the switch to Modus Title. It was J.R.'s

understanding that the free warranty was only available to the buyer if escrow and title services

were switched to Modus.

15. Finally, in a March 29, 2020, Addendum to Purchase and Sale Agreement between

buyers, "M.B./A.B.", and seller, "A .C.", the closing agent was changed as follows:

Closing agent will change to Modus Escrow whom will provide a home warranty for the buyers.


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Modus' Statements

16. In a December 9, 2019, email from Steve Theodore ("Theodore"), a Modus in-

market Growth Executive, to Chicago Title Company, Theodore explained:

An interesting side benefit of partnering with us for escrow is that you can even leverage our amazing Staging Boost program to help you deal with post-inspection results when in contract, meaning your seller would be able to have needed repairs performed with no money down, and then the fees would be paid to contractors out of net proceeds when the home closes.

17. Further, at a January 29, 2020, presentation to a real estate agency found on

Y ouTube, Theodore said, "From the buy side, if you didn't have the ability to dictate who was

doing escrow on a deal, but it would be a creative way to write in Modus if you could kind of talk

about some of these things [Staging Boost] so effectively you are selling Modus from the buy side

whereas we are usually talking to a listing agent."

18. Modus is acting as an agent or other representative of Modus Title, and is directly

and indirectly offering a "thing of value" to influence the referral of title insurance business,

Modus' disclaimer notwithstanding.

Modus' offerings to and advertisements on behalfofrealtors are violations of 48.29.210 and WAC 284-29-215

19. Fidelity provided the following communications between Modus and various real

estate agents:

• A February 5, 2020, email written by Danny Taylor, Partner Success Executive for Modus/Modus Closing ([email protected]) to real estate agent, Erin Myers, identifying Modus as "a tech-powered Title and Escrow company .... Please see attached, our Staging Boost program. These are digital flyers, I can, of course, get you co-branded material if you wish." The email contains a disclaimer that any title or escrow company can be utilized.

Realtor Erin Myers ("Myers") signed a declaration attesting, in part, that she used Modus one time for the convenience of doing everything online in one place. Myers said that Modus' selling point was that everything could be done through their company, from the preparation of documents to closing.

• A February 10, 2020 (J [email protected])


LA- 1618059 - 1

email from Jessica Lane ("Lane") to [email protected], offering a

4 State of Washington Office of the Insurance Commissioner PO Box40255 Olympia, WA 98504-0255

DocuSign Envelope ID: 544C62C2-D384-4F1 E-8FF0-863C47ECC544

hyperlink for "List Assist", a photography service offered through a partnership with Virtuance photography.

The Insurance Commissioner contacted realtor Joe Bauman ("Bauman") who confirmed, by declaration, that he received the referenced email from Lane of Modus which offered List Assist, described as photography services for agents and clients with costs differed [sic] to commission. Bauman said he is also aware that Modus Closing offers to stage, clean, and remodel homes prior to listing and collecting payment at closing. Bauman believes that the products offered by Modus Closing were only offered if the Modus Title agency was utilized.

• A link to a real estate agency website, www.thecascadeteam.com/marketing.php, which offers their "Prime Marketing" full service marketing system to sellers that included Staging Boost through "Modus" and "The Cascade Team Real Estate" (cobranded);

• An April 17, 2020, email sent by Lane, Growth Executive for Modus ([email protected]), describing Modus as the fastest growing Title & Escrow Company in the nation. Included in the email is a description of Staging Boost, which allows clients to defer payments up to $55,000 to prepare their home for sale, and Modus coordinates the contractors. In addition, Modus provides "Transaction tracker," "100% Secure Digital Earnest Money Deposits" by phone, complimentary mobile notary service and courier options, 24/7 concierge services, and List Assist through Virtuance Photography. The emails contain a postscript: "PS - Ready to open title? Visit Modustitle.com anytime, anywhere to begin", as well as a hyperlink to Modus Title.

Lane also included a "Competitive Comparison" chart in the email, comparing the services offered by Modus to three other title companies: Old Republic Title Company, First American Title, and Fidelity National Title Agency.

• A June 4, 2020, email from Lane of Modus attaching the "Greater Seattle Housing Report", offering co-branding to the recipients, and providing a postscript hyperlink to www .Modustitle.com.

• A June, 2020, Instagram post showing the Greater Seattle Housing Report co-branded with both Modus' logo and real estate agent, D.H., of Compass Real Estate.

• In a social media post Modus representative, Theodore, promoted a brokers open representing a condo with real estate agent, "C.V.V."

Modus provides free materials to realtors

20. In a December 9, 2019, email to realtor, J.S., Modus Growth Executive, Nathan

Whalen, said Modus offers the following:


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5 State of Washington Office of the Insurance Commissioner PO Box40255 Olympia, WA 98504-0255


• Title and Escrow - "Team with over 50+ years of experience" • Staging Boost • Earnest Money Deposits • Complimentary HomeBooks, Farming Reports, and Pre-Listing Materials to give you

a competitive edges at your next listing presentation; and • 24/7 concierge - "Your very own dedicated home closing team."

21. The Insurance Commissioner documented that the HomeBooks offered by Modus

Title, doing business as Modus and Modus Closing, are valued at $6, but were offered as

"complimentary" through email solicitation to real estate agents promoting Modus. Modus

provided sample invoices for Home Books and Farming Listings identifying a billing of $6.61 per

book/listing charged by "The Modus Team" to the real estate agent.

22. Modus responded as follows:

• Modus Technologies and Modus Title are two separate entities, with separate offices, and operate independent websites that do not link to each other. Jai Sim is the cofounder and Executive Chairman of Modus Technologies, and since Modus Technologies owns Modus Title, Mr. Sim occupies the position of Managing Officer at Modus Title.

• Modus Title and Modus Escrow do not benefit from Modus Technologies' software platform. Brokers have made over 200 transactions through the platform without using Modus Title.

• Modus Technologies provides a proprietary software platform to real estate brokers supporting real estate transactions and workflow tracking including "List Assist" and "Staging Boost". Title insurance and escrow are deliberately not listed on their platform to avoid a referral to either Modus Title (or Modus Escrow).

• Staging Boost is a service available through Modus Technologies' platform for ZingFix. It allows the costs of the staging born by the seller to be deferred until closing. Staging Boost's marketing materials support that brokers are not required to use Modus Title. Modus plays no further part of those transactions, as both Virtuance and ZingFix directly communicate with the real estate brokers.

• "Elevate" was a program offered by Modus Technologies to educate brokers on how to use the software. Modus Technologies discontinued Elevate in January 2020. Brokers were instructed they were free to use any title insurance company.

• Modus Technology, a separate entity, makes home books and farm reports available for purchase ($6) by real estate brokers, who are invoiced quarterly.

23. Modus provided a spreadsheet to the Insurance Commissioner which documented:


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a) From 12/20/2019 to 3/31/2020, Modus Title sold 297 policies, collecting $583,468 in premium;

and b) From 7 /2/19 to 3/18/20, business performed via the Modus platform involved 348

transactions through 14 (including Modus Title) title companies.

24. RCW 48.29.210(1) prohibits a title insurer, title insurance agent, or _employee,

agent, or other representative of a title insurer or title insurance agent from, directly or indirectly,

giving any fee, kickback, or other thing of value to any person as an inducement, payment, or

reward for placing business, referring business, or causing title insurance business to be given to

either the title insurer, or title insurance agent, or both.

25. RCW 48.29.210(2) provides that a title insurer, title insurance agent, or employee,

agent, or other representative of a title insurer or title insurance agent shall not, directly or

indirectly, give anything of value to any person in a position to refer or influence the referral of

title insurance business to either the title insurance company or title insurance agent, or both,

except as permitted under rules adopted by the Insurance Commissioner.

26. WAC 284-29-200(2) provides that RCW 48.29.210 not only applies to title

insurance producers or associates of producers, but to every person in position, directly or

indirectly, to refer or influence the referral of title insurance business.

27. WAC 284-29-205(9) defines "representative of a title company" as any person

acting directly or indirectly on behalf of the title company.

28. WAC 284-29-205(13) defines "title company" as either a title insurance company

authorized to conduct title insurance business in this state under chapter 48.05 RCW or a title

insurance agent defined in RCW 48.17.010(15), or both. The term includes employees,

representatives, and agents of title insurance companies and title insurance agents.

29. WAC 284-29-205(5) defines 'give' as "to transfer to another person, or cause

another person to receive, retain, use or otherwise benefit from a thing of value whether or not the

title company receives compensation in return. It also means the transfer to a third person of

anything of value that in any manner benefits a person in a position to refer or influence the referral

of title insurance business."

30. WAC 284-29-205(12) defines "thing of value" as anything that has a monetary

value. It includes but is not limited to cash or its equivalent, tangible objects, services, use of

facilities, monetary advances, extensions of lines of credit, creation of compensating balances, title

company employee time, advertisements, discounts, salaries, commissions, services at special ORDER REVOKING LICENSE 7 State of Washington ORDER NO. 21-0126 Office of the Insurance Commissioner

POBox40255 LA - 1618059 - 1 Olympia, WA 98504-0255


prices or rates, sales or rentals at special prices or rates, and any other form of consideration, reward

or compensation.

31. WAC 284-29-215(2) states that except as provided in subsection (1) of this section,

a title company must not directly, indirectly, by payment to a third-party or otherwise, use any

means of communication or media to advertise on behalf of, for, or with a producer, including but

not limited to:

(a) Advertising real property for sale or lease unless the property is owned by the title company; (b) Advertising or promoting the listings of real property for sale by real estate licensees; ( c) Advertising in connection with the promotion, sale, or encumbrance of real property.

32. WAC 284-29-215(3) states that no advertisement may be placed in a publication

that is published or distributed by or on behalf of a producer of title business, including but not

limited to, websites, flyers, postcards, for sale signs, flyer boxes, or any other means of

communication or any other media.

33. WAC 284-29-260(6)(i) prohibits a title company from giving, paying or offering

to pay, either directly or indirectly, or make payment to a third party for the benefit of any producer

for any advertisement published in the name of, for, or on behalf of any producer.

34. WAC 284-29-255(1) provides that a title company must not give, offer to give,

provide, or offer to provide nontitle services (for example: Computerized bookkeeping, forms

management, computer programming, trust accounting for trust accounts not held in the name of

the title company, short sale consultants, or transaction coordination) or any similar benefit to a

producer, without charging and actually receiving a fee equal to the value of the services provided

and in an amount at not less than what the producer would pay if the services were purchased on

the open market or the title company's cost to provide the service, whichever is greater.

35. WAC 284-29-200(6) provides that title companies much not enter into any

agreement, arrangement, scheme or understanding, or in any other manner pursue any course of

conduct designed to avoid RCW 48.29.210 and WAC 284-29-200 through WAC 284-29-265.

36. RCW 48.17.530(1)(b) allows the Insurance Commissioner to place on probation,

suspend, revoke, or refuse to issue or renew a title insurance agent's license for violating any

insurance laws, or violating any rule, subpoena, or order of the Insurance Commissioner or of

another state's insurance commissioner.


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8 State of Washington Office of the Insurance Commissioner PO Box 40255 Olympia, WA 98504-0255


37. By offering, directly or indirectly, inducements via direct email solicitation and via

the Modus platform, the Licensee violated RCW 48.29.210(1) and RCW 48.29.210(2). By

advertising on behalf of, for, or with realtors, the Licensee violated WAC-284-29-215(2), WAC

284-29-215(3), and W AC-284-29-260(6)(i). By offering to give complimentary nontitle services

to realtors, the Licensee violated WAC 284-29-255(1 ). By entering into an arrangement designed

to avoid the Insurance Commissioner's regulations governing title insurance producers, the

Licensee violated WAC 284-29-200(6).

38. Specifically, the Licensee's violations are as follows:

A. The Licensee engaged in 4 real estate transactions moving from an unrelated title company to Modus Title due to "Staging Boost" or home warranty offer, violating 48.29.210.

B. The Licensee engaged in 2 instances of "co-branding", violating WAC 284-29-200(6).

C. The Licensee engaged in 1 social medial post, violating WAC 284-29-215(3).

D. The Licensee engaged in 6 instances of giving or offering to give or provide nontitle services without charging and actually receiving a fee equal to the value of the services provided and in an amount at not less than what the producer would pay if the services were purchased on the open market or the title company's cost to provide the service, whichever is greater, violating WAC 284-29-255(1 ).

E. The Licensees, in conjunction with Modus Technologies, Inc., have engaged in a scheme to avoid the Insurance Commissioner's regulations.

These violations justify the revocation of its license under RCW 48.17.530(1)(6).

ENTERED at Tumwater, Washington, this 17th day of March, 2021.

MIKE KREIDLER Insurance Commissioner

By and through his designee

TIM ASCHER Insurance Enforcement Specialist Legal Affairs Division


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NOTICE OF YOUR RIGHT TO A HEARING

If you are aggrieved by this Order Revoking License, you may demand a hearing in

accordance with RCW 48.04.010, WAC 284-02-070, and WAC 10-08-110. Generally a hearing

demand must be in writing and received within ninety (90) days after the date of this Order

Revoking License, which is the day it was mailed to you, or you will waive your right to a

hearing.

If the Insurance Commissioner receives your demand for a hearing before the effective

date listed on the order revoking your license, the revocation will be automatically stayed

(postponed) and your license will remain in effect pending the hearing.

You may fill out a demand for hearing form online at the following location: https://www.insurance.wa.gov/how-file-demand-hearing

Alternatively, if you choose to file by mail, your demand for hearing must briefly state

how you are harmed by this decision and why you disagree with , it, along with contact

information (phone number, mailing address, e-mail address, etc.) for yourself and any

representative that appears on your behalf. The demand may be sent to the following address:

Hearings Unit Office of the Insurance Commissioner PO Box 40255 Olympia, WA 98504-0255

You will be notified of the time and place of your hearing. If you have questions about

filing a demand for hearing or the hearing process, please telephone the Hearings Unit at (360)

725-7002, or send an email to [email protected].


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10 State of Washington Office of the Insurance Commissioner PO Box 40255 Olympia, WA 98504-0255


CERTIFICATE OF MAILING

The undersigned certifies under the penalty of perjury under the laws of the state of

Washington that I am now and at all times herein mentioned, a citizen of the United States, a

resident of the state of Washington, over the age of eighteen years, not a party to or interested in

the above-entitled action, and competent to be a witness herein.

On the date given below I caused to be served the foregoing Order Revoking License on

the following individual by email and by depositing in the U.S. mail via state Consolidated Mail

Service with proper postage affixed:

Gerry Guerin Modus Title LLC 901 5th Avenue, Suite 3310 Seattle, WA 98164 kelsie. eagon(iz{modusclosing. com [email protected]

CT Corporation System Registered Agent for Modus Title LLC 711 Capitol Way South, Ste 204 Olympia, WA 98501

Courtesy copy to: Hunter G. Jeffers Attorney at Law Stoel Rives, LLP 600 University Street, Ste 3600 Seattle, WA 98101 [email protected]

I /J.-t~ ,,./'\ f, Dated this __ T ___ day of LJ} °'-L (_,r--...,

Legal Assistant Legal Affairs Division


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11

, 2021, in Tumwater, Washington.

State of Washington Office of the Insurance Commissioner PO Box40255 Olympia, WA 98504-0255

demand for hearing, no. 21-0126 - mike kreidler

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