Before the final approval of the National Association of REALTORS® (NAR) (theoretically) comprehensive settlement, with a petition pending before the Supreme Court in a potentially further-reaching spat with the Department of Justice (DOJ), is there the potential for the other shoe to drop? Could this be the calm before yet another storm—direct federal intervention in real estate rules, massive buyer-side lawsuits or a total rug-pull of the NAR settlement deal?
As always, the answer is yes—all of those things are possible. But with significant misunderstandings about the legal system and the relative roles and positions of the parties involved, many in the industry have likely been fixating on the wrong scenarios.
One of the biggest unanswered questions is whether or not the NAR settlement deal will get a final stamp of approval in November, with the DOJ poised to file a “statement of interest” in the case, as it has in many others.
Brian Schneider, general counsel for Bright MLS who is representing industry defendants in four ongoing lawsuits, says the “odds-on betting” is that the DOJ does in fact, intervene in the NAR settlement, which many in the industry have worried could fully upend the tenuous truce created by the agreement.
But Schneider adds that a scenario where the NAR deal is thrown out is “extremely unlikely” for a multitude of reasons, even as copycat lawsuits and law enforcement action continue to progress.
“The Justice Department will file a paper likely of similar substance to what they filed in the federal court in Boston, arguing that any settlement that doesn’t prohibit offers of compensation entirely, or take steps in that direction at least, is not going far enough,” he says.
And it is not the DOJ, but the judge—Stephen R. Bough, who presided over the Burnett trial in the Western District of Missouri—who has the final say on whether the deal becomes finalized. Schneider says that real estate professionals should generally feel comfortable accepting that the current rules banning compensation from the MLS and requiring buyer agreements with every client are here to stay.
But there are many more uncertainties around the DOJ’s push against real estate policy and beyond, many of which could easily create more issues outside the current paradigm.
According to Schneider, the DOJ is currently issuing CIDs—essentially subpoenas but in a civil rather than criminal investigation—to various “industry stakeholders around the country,” despite having partially paused its investigation into NAR pending a Supreme Court petition.
“We don’t know exactly what they have gathered,” he says. “We have some suspicions that they’re gathering a broader set of MLS data around the country, a broader set of information about what the industry has done in response to the proposed settlement. We know that they have issued CIDs to a broad swath of different types of companies in the industry, whether it be associations or MLSs or brokerages.”
While that is a frightening prospect, and could be interpreted as the beginning of some larger pressure campaign against the industry, that is not necessarily the case. Schneider says that one purpose of these CIDs is simply to bolster the likely intervention in the settlement with data that could support an argument that more restrictions are needed.
Dave Gringer, an antitrust lawyer representing Howard Hanna who previously worked for the DOJ, cautions that the common perception that antitrust law enforcement can just “snap its fingers and affect major change” is not accurate.
“They are law enforcement, not lawmakers, and they don’t get to just pronounce what the law is or how industries must conduct their business,” Gringer says. “They can bring cases for violations of the law and if they win those cases, they can shape conduct under an order. Or NAR…could settle with the DOJ and agree to (the) terms (of an order). But a settlement with the DOJ or even a judgment that the DOJ were to obtain against NAR—that binds NAR. It doesn’t bind (businesses) who aren’t parties to the judgment.”
What are the possibilities heading into the fairness hearing, where by law, Bough will decide whether the NAR settlement is approved? Schneider says one of the most important things to keep in mind is what the judge is actually looking at—something that a layperson might not be aware of.
“When a judge has a final approval hearing on a class-action settlement, they aren’t looking behind the settlement to judge whether it’s a good deal. They’re looking at the settlement to judge whether it’s fair, and that’s just a different standard than whether it’s the best possible deal for all plaintiffs or defendants,” he explains. “They’re looking at it to say, does this accomplish the general goals of what a class-action settlement ought to accomplish? And that’s a relatively flexible standard…all signs indicate Judge Bough will find in favor of the parties and approve the settlement.”
Another lawyer who has worked on real estate antitrust cases, who spoke on background to discuss sensitive legal issues, says that another important distinction to make is between judges and courts. Bough’s courtroom turned out to be a favorable venue for plaintiffs, this lawyer said, but anyone seeking further changes or damages—including the DOJ—will face numerous “hurdles” that plaintiffs in Missouri had to overcome in order to prevail. Failing any of these tests could sink a case early on.
And although several parties are objecting to the NAR settlement—including plaintiffs in the buyer cases, real estate practitioners and putative class members—Schneider says he expects Bough to approve the settlement, even if the DOJ joins the objectors.
“Much of the arguments that the Justice Department made in Boston, if they make the same arguments in Missouri, (they) are unlikely to be persuasive to Judge Bough,” he says. “All signs indicate Judge Bough will find in favor of the parties and approve the settlement.”
Beyond Missouri
If the settlement is approved as expected, Schneider says the picture is still very murky. The DOJ could file their own specific lawsuit, or could seek another settlement with NAR to push for further changes.
But he notes that both of those scenarios require more pieces to fall into place. Either the DOJ needs a judge to rule in their favor in an entirely new lawsuit, or more likely, they would need NAR to agree to yet another settlement.
Fully banning offers of compensation is an example of something the DOJ has indicated that it wants that antitrust lawyers could bring as a separate case, according to Schneider.
The DOJ could also argue to Bough, Schneider says, that there is a “narrower” way to solve the antitrust violation alleged in the lawsuits, but approving the settlement would prevent that from being implemented.
“I think that’s probably their best argument to give Judge Bough some pause,” he says. “I think (the DOJ) is going to have to actually say what that alternative relief might look like, because if it’s just banishing offers of compensation, I think Judge Bough is going to see through that, (and) see that that can’t be accomplished.”
Gringer takes an even wider look, and notes that the DOJ’s investigation of NAR only affects NAR on a strictly legal basis, and that the settlement is still built on the foundation of a single lawsuit in a single state.
“That’s sort of a broader point here—I understand NAR is perceived as being very powerful, but NAR settled a case against NAR. They didn’t settle a case for Howard Hanna. They didn’t settle a case for anyone else,” he says. “They gave some terms that some people could opt into, but this is a local industry.”
The question of whether brokers and agents might flee NAR due to these legal woes, or seek out alternatives, is not a legal one. NAR has said repeatedly that real estate professionals are free to join or not join the organization, and the upstart American Real Estate Association (AREA) has claimed it can coexist with NAR—though it also threatened a lawsuit over the Clear Cooperation policy.
Jason Haber, co-founder of AREA, told RISMedia earlier this month via email that “no legal action is being taken at present,” but claimed that his organization has continued to hear from agents specifically about the controversial policy and issues it creates for both agents and consumers.
“I think homeowners are better served when their bespoke needs can be addressed by them and their agent and not by a trade group based in downtown Chicago,” Haber says.
While NAR reconsiders Clear Cooperation and the DOJ mulls its next move, almost two dozen copycat cases are still percolating around the country, many naming smaller companies or associations.
Gringer says that “some” of these cases will likely not proceed after the NAR settlement is approved, but adds that each case will “rise and fall on its own merits.”
“I’ve looked at a lot of them and I don’t see much merit to them,” he says.
Gringer also points out that a judge dismissed a Pennsylvania-based Burnett copycat case involving an independent MLS. That judge, William Stickman, found that plaintiffs had failed to provide sufficient facts to back up their claims and focused on the specific language of allegedly anti-competitive rules that were not identical to NAR’s.
“So we know that it is not going to be as simple as, ‘So goes Missouri, so goes the nation.’ That to me is interesting that everyone seems to think (otherwise),” he says.
Schneider goes further, saying that he expects a majority of copycats to be quickly dismissed, with plaintiff attorneys “very likely” making “side arrangements” with the lawyers behind the bigger cases for some compensation in exchange for letting their cases go.
Another important distinction—most, or at least many of the companies named in the copycat cases are smaller, family-owned and local. If those defendants go all the way to a jury trial, they are likely to garner more sympathy from a panel of average people than NAR, Keller Williams and HomeServices did in the Burnett trial.
The lawyer who requested anonymity highlighted this point, saying that these smaller companies have a much better shot at trial than the “faceless” national corporations.
Buyer aware
Last but not least of the pending legal threats are the buyer cases—class-action lawsuits going back to 2021 filed by homebuyers rather than sellers, which have so far been allowed to move forward as “indirect purchasers” in certain states.
The largest of these cases, two loosely consolidated lawsuits known as Batton, recently got a new judge after the previous judge recused herself due to a “family relationship” with one of the law firms involved.
Schneider says he doesn’t expect any huge changes due to that switch, with the new judge, Lashonda Hunt, saying she will adhere to precedent set by her predecessor and seek to keep Batton on its previous schedule, aiming for a trial as soon as 2026.
“It seems very unlikely that the new judge is going to fundamentally change the direction of the case,” he says.
Schneider notes that the Batton cases have already been “cut back” based on a ruling by Bough, who said that settlements in the seller cases also include any buyer who sold a house in the same six to eight year period that they bought
That ruling is being appealed, but regardless of whether or not it stands, there are a huge number of first-time buyers and other demographics who could still be part of the Batton classes, Schneider says, with the expectation that plaintiffs will continue to push forward with those claims.
Because those claims are being brought on a state-by-state basis in jurisdictions that allow those indirect purchaser claims, there is also some possibility of splintering or further copycats. While the Batton plaintiffs “appear to have identified all state laws that likely would bring them damages,” there is nothing stopping other lawyers from bringing individual state claims in certain markets.
Many states have modified their antitrust laws to allow these indirect purchaser lawsuits since a landmark 1977 Supreme Court ruling banned them at the federal level. If another state does so, that could open the gates for more lawsuits.
“It’s a possibility, but it would be very narrow what’s left,” Schneider says.
The big picture for the buyer cases is that they still pose a significant risk and are very much in the early stages, according to the lawyer who has worked on real estate antitrust cases. Those cases also seem likely to persist, after Howard Hanna and HomeServices successfully argued this past summer that the court did not have jurisdiction over the company in Batton, but plaintiffs refiled the claims in a new district shortly after that decision.
And even if Bough’s ruling is upheld, and a large number of buyers who also sold homes are excluded from the class, Schneider says there is still “money to be had” for the buyer plaintiffs.
“I would be very skeptical that they’re going to throw up their hands and walk away just because their damages have been limited a bit by the (seller) settlement,” he says.
Michael Catarevas contributed to this reporting.
