With only days before a judge will issue his final decision and close a historic (and frustrating) chapter in the history of residential real estate, plaintiffs who led the charge on commission class-action lawsuits and the two largest defendants in that case—HomeServices of America and the National Association of REALTORS® (NAR)—have laid out their final, comprehensive arguments in favor of sweeping settlement agreements that will effectively end the lawsuits.
Against a handful of vehement objectors, both sides of the landmark Burnett case laid out their reasoning across 150-plus pages, broadly characterizing the agreements as the only way forward for the industry, with plaintiffs and defendants offering very different takes on practice changes and how they affect real estate practitioners, buyers and sellers.
“(The settlement) reflects years of hard-fought litigation, and the realities of what would happen if the parties continued to fight,” lawyers for NAR wrote. “NAR would have gambled its own existence, as well as that of its members and their small businesses, state, local and territorial REALTOR® associations, and multiple listing services—and even put buyers and sellers of real estate in the United States (including the Settlement Class) at high risk for irreparable harm.”
Adding together $250 million paid out by HomeServices, $418 million paid by NAR and an additional $30 million from companies and MLSs that opted into the NAR deal, just under $800 million is at stake in the upcoming hearing. Total settlements, including those in copycat cases, are well over $1 billion at this point, and NAR characterized its payment as over half its total assets.
And while Judge Stephen R. Bough is widely expected to sign off on the deals in Kansas City next Tuesday, both plaintiffs and defendants dedicated significant time pushing back against the handful of objectors who have urged Bough to vacate the deal.
“The Court has already overruled objections that are similar, and in many cases substantially identical, to each of the objections here,” plaintiffs wrote. “For a class of this size, or any size, the number of objections received is remarkably low. Indeed, there are only, at most, thirteen sets of objections before the Court. This is out of a class comprised of millions of home sellers.”
NAR in particular focused on objections coming from plaintiffs in other commission lawsuits—referring to these as “pile-on cases,” and noting they were all filed after the Burnett verdict with largely identical claims regarding commission-setting and conspiracy.
Some of those objectors have called the dollar amount inadequate to redress the alleged harm to homesellers, while others claim their markets are substantially different from the national cases.
“A handful of objectors have claimed that the NAR settlement should have allowed them to pursue their own claims, some based on geography (class definition), some based on how much they think their claims are worth (released claims), and some based on the released party,” NAR lawyers wrote. “Of course, NAR would not agree to a Swiss cheese release riddled with holes and exceptions that expose itself and its members (who, as discussed…funded NAR, simply followed NAR rules, and will follow the practice changes).”
It was that “pile-on” that forced NAR to come to the settlement, the filing says, with the REALTOR® advocacy organization continuing to defend the practice of mandatory buyer commission offers on the MLS.
“To this day, NAR is confident that it and its members had done nothing wrong, and that its rules at issue in Moehrl and Sitzer benefitted consumers,” the filing read. “But, in the wake of the jury’s verdict in this case, lawyers across the country immediately started filing dozens of pile-on lawsuits based on the NAR rules at issue in Moehrl and Sitzer, with no end in sight. Thus, NAR, its members and their businesses, and United States real estate in general were presented with a new and existential threat.”
That threat, long recognized by some in and outside of the industry, is finally ending now—though notably, cases filed by homebuyers continue to creep forward in federal courthouses around the country.
Those buyer plaintiffs are themselves objecting to the NAR settlement, based on the likelihood that Bough grants NAR and HomeServices some immunity from homebuyer claims, as he did in previous settlements.
Burnett plaintiffs, in their arguments to dismiss the buyer plaintiffs’ objections, acknowledge that people who bought a house but did not sell one over the last few years are still free to sue NAR and other defendants. They also argue that buyers will benefit indirectly from the settlement in the long term—something that is still disputed by experts both in and outside the industry,
“The practice changes achieved by the Settlements completely remake the residential housing market and will save all Class members many billions of dollars by lowering commissions on future home sales,” the plaintiffs wrote.
While there is early evidence that commissions fell in the time period after the settlement, it remains to be seen whether these trends continue, or how agents—particularly buyer agents—will see their compensation change, or whether that savings will actually be passed onto homebuyers.
NAR, for its part, was careful in its filing when characterizing the practice changes or assessing their effect on the industry, only claiming that its policy shifts “directly address” the fundamental claims of the class-action plaintiffs. NAR also points out it implemented the new policies months before the final approval of the deal “as an act of good faith.”
“While NAR maintains that the rules challenged in Moehrl and Sitzer benefit consumers, the class is receiving significant non-monetary concessions from NAR (which they would not receive if litigation pushed NAR and its members into bankruptcy)—in addition to $418 million,” NAR wrote.
