Attorneys Say Legal Battles Will Continue as Companies Face Tough Choices

“This is not the end. It is not even the beginning of the end—but it is, perhaps, the end of the beginning.”

Winston Churchill was referencing battles and war, not real estate, when he spoke those words. But in the lower-stakes context of the National Association of REALTORS® (NAR) settling seller lawsuits last week, the substance of these words—if not the drama—appears to be applicable. 

“The NAR settlement is not the end,” says Ben Diessel, a lawyer specializing in antitrust and technology litigation. “One of the ways that the industry is responding is by folks sort of just taking a hard look at what they’re doing and figuring out if there are changes that are appropriate to make. And as with everything else, it’s very fact-specific, and the circumstances matter.”

Diessel uses the Churchill quote both to emphasize the importance of the moment, as well as the fluidity. It would be easy to see this landmark moment—in which NAR agreed to pay $418 million and quickly change foundational compensation practices—as an exclamation mark at the end of the commission lawsuit saga. But of course, reality is much messier. 

Jessica Edgerton, chief legal officer for Leading Real Estate Companies of the World®, told RISMedia in the wake of the settlement that while “rule changes are what we’ve been anticipating and preparing for,” the settlement leaves a huge number of unanswered questions.

“There is a lot of work that will need to be actively done,” she says.

In the long term, the biggest threats still facing real estate are lawsuits filed by homebuyers, which are not covered by the settlement, and the Department of Justice (DOJ), which has the power to intervene in any class-action settlement—including NAR’s—and push for more changes or penalties.

These developments are still likely years away—an appeals court has yet to rule on the DOJ’s attempt to restart its investigation, and the buyer lawsuits are likely still two years from going to trial.

What is happening now, though, is a shift into a “brave new world.” Mike Ketchmark, lead attorney for the Burnett plaintiffs (and the public face of those seeking to change the current system) told RISMedia that he doesn’t believe the transition is something to worry about.

“I wouldn’t expect there to be any turmoil,” he says. “Agents are going to transition into the new world that’s going to exist, and the free market, and they’re going to do a great job at it.”

Echoing Edgerton, Ketchmark says he believes that most people working in real estate have been preparing practically for the changes agreed to in the NAR settlement—which include, among other things, mandatory buyer agency agreements and removal of compensation offers from the MLS. 

He adds that he doesn’t believe that real estate professionals are going to resist shifts in how compensation is offered, despite how hard NAR fought the lawsuits over the last five-plus years.

“I don’t expect that you’re going to have continued resistance to this. There’s going to be an acceptance of the fact that the way Americans buy and sell homes is going to change for the better, and I think the reset button has been hit on the housing market,” he says.

Choices matter

Diessel sees the path ahead as much less clear and linear. His firm, Wiggin and Dana, has represented smaller real estate entities that faced claims of commission-setting or price-fixing. Although the NAR settlement covers the vast majority of REALTORS® as individuals (those affiliated with HomeServices were specifically excluded), and most small- and mid-size brokerages, plenty of seller lawsuits are likely to continue. 

The choice of what to do if you aren’t covered by the NAR settlement is individualized and “fact intensive,” according to Diessel, and the agreement shouldn’t be seen as an albatross for anyone who still wants to fight. For many companies or MLSs not affiliated with NAR, there might not be a choice.

“What area are we talking about? What is the competitive landscape? What are the particular association rules? How are they being interpreted? How are they being applied?” he asks. Are they more permissive in some respect? And what, if any, is the competitive impact of those rules and the pro-competitive justification? So all of that is in the mix in these sorts of litigation,” he explains.

Only brokerages with REALTOR® principals or those participating on NAR-owned MLSs could theoretically be covered (others are excluded based on their size, as defined by total transaction volume, with companies above $2 billion needing to pay additional fees to join the settlement). 

HomeServices is also choosing to continue the legal fight on all fronts, having recently been dropped from the buyer suits on a technicality. Back in February, the company also made what Edgerton characterized as a compelling petition to the Supreme Court, which could potentially result in major new legal precedents and upend all or parts of the Burnett case.

Edgerton voiced support for HomeServices—now the last remaining defendant in the Burnett case. 

“No matter what they decide to do, I am standing on the sidelines along with the rest of the industry cheering them on. The appeal arguments are very real and viable,” she said.

Diessel emphasized the general uncertainty, and says he expects some companies to continue fighting—even those who have the option to opt-in to NAR’s agreement.

“You’re going to be paying the expenses associated with continuing to carry that litigation, but also, you’re going to get whatever the outcome of that litigation is, right? Your own separate settlement could be a better or worse deal than opting in,” he noted.

Legally, Diessel also said he doesn’t see any seller lawsuit filed or ongoing as a “slam dunk” despite the fact that so many big brokerages have chosen to settle (many other big national companies, including Compass, eXp, Douglas Elliman, Weichert and United Real Estate, are still fighting as well).

“I think these are serious antitrust questions,” he says. “I know there’s been a jury verdict already, but I wouldn’t discount the need to make a plaintiff meet the burden to actually demonstrate that there are anti-competitive effects.”

Many brokerages and MLSs have also proactively changed their policies in the last few years, which could change how courts view copycat suits, according to Diessel.

The risk is, of course, facing a huge judgment, as NAR and the other settling companies did. Losing a case, even as a small brokerage, could have direct and potentially catastrophic financial consequences, while opting in to the NAR settlement (for those who qualify) at least has a known cost.

For those who don’t have the option to opt-in or choose not to, for whatever reason, Diessel agrees with Edgerton that just like the current real estate environment, the law is far from settled on these issues.

“I don’t think the book is closed in terms of establishing (antitrust analyses),” he says. “All of that is very fact-specific…and so I think that’s definitely on the table for potential litigants, or folks who are already litigating this stuff.”

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