HomeServices of America, the last (and largest) of the original four brokerages targeted by class-action, commission-focused lawsuits, today announced it has settled claims that the company conspired on rules to inflate real estate compensation, joining more than a half-dozen other large brokerages—as well as the National Association of REALTORS® (NAR)—in choosing to pay and change practices rather than face another trial and a cascade of copycat cases.
Paying $250 million and agreeing to make changes to policies around commissions and disclosures, HomeServices, like the other brokerages and NAR, admitted no wrongdoing as part of the settlement, but will be indemnified from claims filed by recent homesellers pending final approval by a judge.
Speaking to RISMedia, HomeServices of America Executive Vice President Chris Kelly says that he hopes agents will “get comfortable with articulating their value,” moving forward, and that the settlement will help in promoting transparency among their brokerages’ intentions.
“We pursued multiple paths towards a resolution,” Kelly adds. “We believed in those paths, and ultimately we got to a point where the settlement path became the most logical and beneficial way forward.”
The amount is being paid solely by HomeServices of America, and there will be no required contributions from parent entities or franchisees, Kelly emphasized——meaning the deep-pocketed Warren Buffett empire.
Plaintiffs in at least one of the lawsuits had sought to add Berkshire Hathaway Energy, the holding company for the Berkshire Hathaway conglomerate, to at least one of the commission lawsuits, arguing that it contributed to and benefitted from alleged price-fixing.
HomeServices of America’s decision to cease fighting the seller suits marks a critical juncture in the saga of legal challenges facing real estate. The company was specifically and comprehensively excluded from a settlement agreed to by the National Association of REALTORS® (NAR) back in March, which otherwise covered most brokerages and MLSs (with a provision allowing others to pay an additional fee and opt in).
The company had until recently seemed dug in for a protracted courtroom battle, petitioning the Supreme Court just last month and wrangling over discovery requests in another lawsuit.
According to Kelly and Chris Dusseault, an attorney who has led much of the company’s legal work in the commission cases, the settlement came about independent from NAR’s agreement.
“It took us time to get to a point where we could negotiate with plaintiffs a deal that HomeServices itself could pay independently, and to convince them that that was something that they should agree to do,” Dusseault says. “I don’t think that the NAR timing, or if NAR hadn’t settled, would have changed (our strategy). I think we were looking for an opportunity if one presented itself that was reasonable and within our ability to pay.”
The settlement amount, while larger than what other brokerages have paid, still represents a tiny fraction of the Burnett judgment, as plaintiffs had sought to squeeze $4.7 billion from the company as it stood alone fighting the two legacy lawsuits (the other, known as Moehrl, was scheduled to go trial early next year).
Potential damages from Moehrl and the copycats lawsuits are reaching into the hundreds of billions—far less than the total amount paid to settle the cases, which now total around $940 million (with some brokerages not yet publicly disclosing how much they paid).
Looking Ahead
Now, with the seller lawsuits effectively—though not exhaustively—addressed by the industry, real estate practitioners will turn their attention to other threats—lawsuits filed by buyers, which are not covered by HomeServices of America’s settlement, and a 2-1 split decision made by a panel of judges for the D.C. Circuit Court of Appeals, which allowed the DOJ to reopen its investigation into NAR.
Several other large brokerages not covered by the NAR settlement seem likely to forge their own agreements with plaintiffs, despite the fact that they have the option to join the NAR agreement. Compass became the first brokerage named in a copycat suit to settle, paying only a fraction of what it would have if it had opted into NAR’s deal, with @properties Christie’s International Real Estate and Realty ONE Group following close behind.
In the short term, HomeServices of America’s settlement will hopefully allow the industry to take a breath before the next plunge. In the Moehrl case, the company was slated to face a jury alone sometime in early 2025. Assuming this settlement and the others receive final approval by a judge, that will not happen.
Dusseault says that for HomeServices of America, the settlement represents the removal of a tremendous distraction that allows franchises, affiliates and agents at the company to “get back to doing business.”
“We continue to think that the outcome of the (Burnett) trial was wrong. We continue to stand by the conduct that was at issue, but we had an opportunity to put it behind us with a broad release that a payment that we could afford to make as a company. And so we took that opportunity,” he says. “I think it’s great for the company and everyone who works within it.”
Kelly acknowledges that all the changes coming out of the lawsuits will result in a time period that “is a little bumpy” not just for HomeServices of America, but for the entire industry. The company has been proactively pushing out educational materials, he says, and will continue to do so through the coming months.
“We’ve told all our people, you’re going to have to be comfortable being uncomfortable for several months as some of these new policies go into effect, because we as an industry are just going to have to learn to adapt. And we’ll work through them,” he says.
Operating companies under HomeServices of America will be provided today with various pieces of collateral material that will be distributed to agents, according to Kelly, including a settlement guide, and a comprehensive set of FAQ’s explaining new rule changes.
RISMedia Founder & CEO John Featherston says that the settlement “allows brokers to get back to the business of growing their firms,” and believes that the crucial steps of educating agents on the upcoming new rule changes is a critical part of the process in moving past these industry-wide, commission-related legal battles.
In announcing its own settlement, NAR previously articulated a sentiment seemingly shared by HomeServices of America and other brokerages, as the industry at large appears ready to pursue the settlement path.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, Interim CEO of NAR in that announcement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry.”
But none of the settlement agreements—NAR’s, HomeServices of America’s and all of the others—are in any way final. Judges have not yet given their final approval, and federal law gives DOJ regulators the power to intervene in class-action settlements that are “inequitable.”
Kelly says that while the company understands that the DOJ could upend these lawsuit resolutions, the choice to settle still provides more certainty than the company would have if it was still actively litigating the cases.
“Settling was still the best course for us right now because it put us on the same kind of timeline, schedule and runway as the other defendants that have settled so far. We can only operate in the known environment right now,” he explains. “If the DOJ comes in and files a statement of interest and wants to do something different, we’ll just have to cross that bridge when it comes. We try not to allow ourselves to have a hypothetical—a maybe, maybe-not thing—influence what the right decision was for what we did know.”
A judge has already delayed her approval of a settlement in the MLS PIN case based on the DOJ’s objections, and with the recent appeal’s court decision, more action from the DOJ is possible, and would likely come before final settlement hearings for agreements struck by RE/MAX and Anywhere, which are scheduled to take place in late May.
This is a developing story. Stay turned to RISMedia for updates.
