By Michele McCaskill
VP, Risk Management and Assistant General Counsel
Lawsuits, Lawsuits and More Lawsuits
As you may know, for the past few years, the real estate industry has been under increasing attack. Numerous lawsuits have been filed across the country naming multiple MLSs, brokerages and NAR as defendants. From the beginning, Canopy staff have been closely monitoring these lawsuits, many of which involve alleged antitrust claims.
Moehrl, Burnett (formerly Sitzer), Leeder, Nosalek (formerly Bauman), PLS, Top Agent Network (TAN), REX, NAR, Columbia House of Brokers, Designworks Homes, Conti, and Compass RE NY, are among some of the names referenced in a long list of pending lawsuits. The numerous legal issues underpinning these lawsuits currently under scrutiny by the court, is even longer. In addition to the many lawsuits alleging antitrust violations, other lawsuits target NAR’s Clear Cooperation Policy, IDX rules and other anti-competitive behaviors. The potential outcome of these lawsuits? Uncertain at best. What is certain is that these lawsuits call into question how the real estate industry operates today and if successful, could result in billions of dollars in damages.
A quick Internet search will lead you to an unending variety of sources, news articles, opinions and editorials addressing each of these lawsuits. Perhaps the most important thing you can do as a real estate professional is educate yourself and be prepared to answer consumer questions. To help, NAR has created two websites specifically designed to help you address consumer concerns. Www.realestatecommissionfacts.com provides basic information and facts about how real estate commission works and how commissions are paid. A second website, www.nar.realtor/competition-in-real-estate is an interactive website explaining, among other topics, the benefits of a competitive marketplace and of using a Realtor®.
The majority of the lawsuits we are watching are very slow-moving and because of this, there has not been much to report. The most movement we have seen of late, which is of great significance, is the class action certification granted on April 22, 2022 by the judge in the Burnett lawsuit . Burnett, which is among a handful of “copycat lawsuits”, was filed shortly after the filing of the first class action lawsuit, popularly known as, Moehrl v. NAR.
Moehrl was filed in March of 2019 in the Federal Court of Illinois against NAR, Realogy Holdings, HomeServices of America, HSF Affiliates, Long & Foster, BHH Affiliates, RE/MAX Holdings and Keller Williams Realty. Broad subpoenas were issued to many MLSs across the county, including Canopy MLS. Canopy MLS is not a named defendant to this lawsuit, and its attorneys responded to the subpoena early in 2021. Discovery in this case is still on-going.
At the heart of the Moehrl lawsuit is NAR’s mandatory broker compensation rule. Moehrl alleges that NAR, by implementing certain “NAR-Mandated” rules and policies, conspired with others to inflate commission rates paid by home sellers. The plaintiffs in this case are seeking class action certification, which has not yet been granted. The defendants have filed their opposition to the court granting class action status and the plaintiffs have filed their petitions in support of the status. With the certification of Burnett as a class action lawsuit, many are questioning whether that ruling will lead to the Federal Court of Illinois also granting class action status to the plaintiffs in Moehrl.
The Burnett lawsuit, originally Sitzer v. NAR, Realogy Holdings, HomeServices of America, Re/Max Holdings and Keller Williams Realty, was filed in April 2019 in the Federal Court of Missouri. This lawsuit involves allegations substantially similar to those alleged in the Moehrl case. Total damages alleged in this case alone, which may be significantly lower than in the Moehrl case, are upwards of billions of dollars. A jury trial date for this case has been set for February 2023.
NAR’s Clear Cooperation Policy (“CCP”) is at the center of the lawsuits filed by PLS.com and TAN. The allegations, which are the same for both lawsuits, allege that NAR’s CCP is anti-competitive because it obstructs the business model of private listing networks. In April of 2022, the Ninth Circuit Court of Appeals reversed the dismissal of the case by the US District Court of California’s Western Division in February of 2021. That case is starting back up at the trial level. A motion to dismiss in the TAN case was granted for a second time in August of 2021 but that dismissal may be appealed.
Despite REX Homes ceasing operations, the REX v. Zillow and NAR antitrust lawsuit, will continue. REX, which was filed in March of 2021 in the Federal Court of Washington State, alleges that NAR’s IDX rules are anti-competitive and that Zillow and NAR are co-conspirators in a “concerted action” to conceal non-MLS listings on Zillow’s website, which harm consumers. Broad subpoenas have been issued to many MLSs across the country. Discovery in this case is proceeding and additional attorneys have been hired by REX.
We, at Canopy, remain dedicated to continually monitoring the lawsuits affecting our industry and will share updated information as these cases move through the legal process.