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In advance of this month’s final approval hearing for the National Association of Realtors’ proposed settlement of antitrust cases nationwide, the real estate industry awaits whether the U.S. Department of Justice will weigh in on the deal, but in the meantime, homesellers have filed a slew of objections attempting to derail it.
The bulk of the objections were filed Oct. 28. On Nov. 26, Judge Stephen R. Bough of the U.S. District Court for the Western District of Missouri will hold a fairness hearing for settlements reached with NAR and real estate franchisor HomeServices of America to resolve antitrust claims in cases known as Sitzer | Burnett and Moehrl as well as other, similar cases nationwide.
Collectively, the two have agreed to pay $668 million to a class of tens of millions of homesellers across the country and to implement business practice changes.
The objections primarily related to the scope of the settlements, protesting the alleged insufficiency of the amount of monetary damages to be awarded to individual homesellers and of the impact of the deals’ business practice changes.
Objectors also sought to have the court exclude claims brought by homebuyers and claims brought by sellers who sold through non-Realtor multiple listing services from being resolved by the deals.
Most of the objectors are named plaintiffs in other commission-related cases. For example, eight homesellers in a Pennsylvania case known as Moratis after its lead plaintiffs (formerly, Spring Way Center) submitted a filing asking the court to deny the deals’ final approval, noting that the Moehrl and Sitzer | Burnett classes were originally certified as class actions as that covered a total of 24 MLS markets.
“The proposed settlement, however, seeks to expand that class certification to more than 600 MLSs across the country,” the Moratis filing says.
“[E]ach MLS engaged in the price-fixing, participated in the illegal activity, and used rules adopted for its particular MLS, although they may have used similar mechanisms to accomplish it.
“Moreover, the NAR settlement allows non-NAR MLS organizations, such as West Penn MLS, to opt-in even though they did not operate under NAR’s rules during the class period and had their own, separate interactions with their co-conspirators not related to or mediated through NAR. Their actions, while similar, were separate and distinct, and require separate and distinct remedies.”
Similarly, objections from homesellers Monty March and Robert Friedman, homesellers who each have filed antitrust lawsuits against the Real Estate Board of New York (REBNY), protested that their claims should not be included in the NAR deal because they are unrelated to NAR.
“NAR is not a party in March, and REBNY is not a party in any real estate commission litigation outside New York City,” March’s filing states.
“This is because REBNY and NAR have absolutely nothing to do with each other. And they have had nothing to do with each other for three decades.”
Moreover, the $418 million that NAR has agreed to pay “is no way near sufficient to address both the nationwide harms of the nationwide NAR conspiracy and the discrete and separate harms stemming from the REBNY agreement/conspiracy,” the filing adds.
Friedman’s objection to the NAR settlement also called for brokerages who have no connection to NAR, such as those operating exclusively in New York City under REBNY’s rules, to not be covered under the deal.
“The most egregiously unfair, unreasonable, and inadequate provision of the NAR settlement is one that appears unprecedented in its reach: all real estate brokerages whose 2022 ‘Total Transaction Volume’ falls below an arbitrary threshold of $2 billion … will be gifted a proverbial ‘get out of jail free’ card, regardless of their participation in the NAR conspiracy, culpability, potential exposure, or ability to pay,” the Friedman filing states.
“Sub-$2B Brokerages—which may include as many as six defendants in Friedman that operate substantially or exclusively in New York City and exclusively under REBNY rules — will be automatically covered by the NAR settlement without making any monetary contribution. The settling parties have made no showing how this is fair, reasonable, or adequate to Friedman and the REBNY Brooklyn Class.”
Friedman also objected to the lack of a requirement that brokerages prove their sales volume was under the $2 billion threshold, particularly if those brokerages did not appear in the T360 Real Estate Almanac brokerage rankings for 2022. Brokerages’ place in those rankings is what determines who is covered and who is not under the proposed NAR settlement.
“[N]one of the six Friedman Defendants who might be Sub-$2B Brokerages are included in the publicly available version of the Almanac,” including prominent brokerage Serhant, Friedman’s filing says.
“Serhant may not meet the criteria based on the statements of its CEO and Founder, who posted to LinkedIn that ‘SERHANT. sold $2,200,000,000+ worth of real estate in 2022.’
“Once again, the Court should take the settling parties at their word. This assertion cannot be contradicted by reported transaction volume in the Almanac since Serhant doesn’t appear in it.”
Several objections pointed to the fact that HomeServices’ franchisees are paying nothing into the settlement fund and are getting a “free pass.”
“The proposed settlement fails to seek any consideration from HomeServices’ franchisees,” the Moratis filing states.
“This is true despite the Burnett complaint’s recitation of examples of franchisees actively participating in the price-fixing activities at issue.
“Moreover, the modest ‘practice changes’ in the proposed settlement contain no mandatory language applicable to franchisees. Nor does the proposed settlement contemplate an injunction forbidding sellers from making offers of compensation to buyer brokers as proposed [by the U.S. Department of Justice].
“Under the proposed settlement, even though they were active participants in the conspiracy, the franchisees will be permitted to retain their profits from the conspiracy they carried out against the plaintiffs.
“Moreover, they will not have to reform any of their conduct moving forward under the proposed settlement.”
Law firm Knie & Shealy, which represents South Carolina homesellers in a commission suit, filed an objection on behalf of homesellers Benny D. Cheatham, Robert Douglass, Douglas Fender and Dena Fender.
“[W]ith respect to the franchisees the settlement agreements contain language like ‘make clear and periodically remind’ and ‘advise and periodically remind,’” the Knie & Shealy filing states.
“In order to be effective, these settlement agreements should make mandatory adoption of these practice changes as a condition of owning a franchise and the failure to follow those provisions a condition exposing the franchisees to revocation of the franchise.”
“Further, the underlying purpose of antitrust law, that violators be punished, victims be amply compensated, and incentivize private actors to vindicate the public interest in having open, competitive markets, is undermined by the fact that these franchisees are able to escape any accountability.”
This is particularly galling to the objectors because of HomeServices’ publicly stated income.
“HomeServices had a sales volume of $136.1 billion in 2023 alone,” the Moratis filing adds.
“Assuming that HomeServices and its franchisees made 3% in commissions of this volume, they made $4.083 billion in 2023 alone. HomeServices $250,000,000 settlement payment is a mere 6% of HomeServices’ 2023 income — say nothing of its income in prior years during the statute of limitations period.”
The Knie & Shealy filing stresses that settlement class members will receive “$35 at most” for claims worth thousands of dollars.
The Moratis objectors cast doubt on the effectiveness of the business practice changes contained in the deals, calling them “illusory,” in part because they only prohibit commission sharing through the MLS.
“Using other means to continue the same conspiracy is not only likely under this structure, but nearly guaranteed: already real estate brokers groups are openly discussing hiding their price fixing in the ‘concessions’ field of a real estate contract,” the filing says.
“No doubt they will find many clever ways to funnel clients’ money to each other as long as this settlement only addresses the means of the conspiracy and not the meat of it.”
Homesellers who are also homebuyers and suing as homebuyers also filed objections. James Mullis, who is a plaintiff in the Batton 1 and Davis buyer commission suits, asked the court to clarify that the settlements did not cover claims brought by homebuyers against NAR and HomeServices, but only those brought by homesellers.
“The Court should approve the settlements only if the settling parties expressly carve out homebuyer claims from the definition of ‘Released Claims’ or otherwise clarify that the settlements do not release damages claims related to transactions in which class members purchased homes,” Mullis’s filing states.
“If not, the Court should reject the settlements as unfair, unreasonable, lacking intraclass equity, and failing to adequately represent class members who purchased homes.”
Similarly, Hao Zhe Wang, a homebuyer and homeseller who filed suit against NAR, REBNY and several brokerages, also said the settlements should not forestall homebuyer claims, in part because Wang alleges to do so would be discriminatory.
“Because racial minorities are less like to inherit homes and tend to pay more in buyer broker fees than in listing broker fees and because first-generation Americans have nothing to inherit and tend to pay more in buyer broker fees than in listing broker fees, the settlement that home-seller plaintiffs reached with NAR not only disfavors homebuyers but is racially discriminatory in impact and in effect,” Wang’s filing states.
“I object to NAR’s settlement for this unlawful discrimination.”
Email Andrea V. Brambila.
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