‘Don’t wait for the plane to crash’: Lawyers offer grim antitrust update

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The Council of Multiple Listing Services offered its usual and highly anticipated legal update at its annual conference on Friday, and this one was a doozy.

According to panelist Chris Osborn, a partner at Seattle-based law firm Stoel Rives and attorney for Northwest MLS, things are not looking good for the real estate industry in several class action antitrust cases currently pending in federal courts.

Chris Osborn

“If you keep score, what you’ll find in the end is that it’s zero for the good guys,” Osborn told the nearly 1,000 attendees at the event.

“None of these cases – not one – have gone our way. Not one. On the contrary, things are moving quite quickly, with quite significant consequences.

“It will be a wild ride,” he added.

The lawsuits relate to controversial National Association of Realtors rules, including one that requires listing brokers to offer buying brokers a commission for submitting a listing to a realtor-affiliated MLS. The US Department of Justice (DOJ) is also currently investigating the rule, and the Consumer Federation of America has released numerous studies condemning the rule.

The largest of the lawsuits are Moehrl and Burnett (formerly Sitzer), named after their lead home seller plaintiffs, whose defendants are NAR and real estate franchisors Realogy, Keller Williams, RE/MAX and HomeServices of America. Sitzer/Burnett recently obtained class action status and Moehrl is currently seeking class certification.

Another lawsuit, Nosalek (formerly Bauman), also challenges the rule, but sued an MLS broker, MLS PIN, rather than NAR, as well as the franchisors. Another suit, Batton (formerly Leeder), is challenging the rule on behalf of buyers rather than sellers.

Discount brokerage REX Real Estate sued NAR and Zillow over a different rule, NAR’s No-Mixing Rule, which allows MLSs to prohibit MLS listings from displaying online with listings. not MLS.

And two private listing services, The PLS.com and Top Agent Network have filed antitrust lawsuits challenging NAR’s clear cooperation policy, which requires listing brokers to submit a listing to their MLS within one day. business after a property has been marketed to the public.

The Sitzer/Burnett case is scheduled to go to trial in February 2023 and there is no indication that it won’t, according to Osborn.

“This judge hearing the case is a ‘non-BS’ judge,” Osborn said, referring to Judge Stephen R. Bough of the U.S. District Court for Western Missouri.

” He does it. If someone files a request, they decide very quickly. The group certification process is complete there, which means that the applicants are no longer representatives of the group. It’s the whole class. There are thousands of plaintiffs in this case.

The damages claimed by the plaintiffs are “astronomical”, according to Osborn.

“We could call them an existential threat to the defendants, which include NAR and the nation’s largest brokerage franchisors. The claims could be mind-boggling.

The case is “unlikely” to be decided by summary judgment before trial, Osborn added.

“So that means that before we meet again, this matter will be decided,” he said.

Moehrl, who was filed in front of Sitzer and Osborn, called “the mother of them all,” is an even bigger case involving 20 MLS markets nationwide. Plaintiffs’ law firms are “straight out of the Who’s Who of plaintiffs’ law firms,” ​​Osborn said. “These are the guys who took on Big Tobacco. They are really big. They know what they are doing. »

But while law firms have “aggressively pursued litigation,” the judge in that case, Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois, took much longer to rule than Bough, Missouri, so it’s unclear when this case will go to trial, according to Osborn.

“They are still being discovered,” he said. “In fact, some of you unfortunately just received subpoenas just yesterday to testify in this case and that’s at least an inconvenience.”

Regarding the Bauman/Nosalek case, Osborn said it was “frightening” that the plaintiffs sued an independent MLS, rather than NAR, in this case, but the case was “moving at a snail’s pace.” .

“I think they’re waiting to see what happens [in Sitzer and Moehrl] and not spend more money on it,” Osborn said.

“They want to ride the coattails of the big boys.”

Yet in any case, the claims for damages run into the billions of dollars and Moehrl up to a trillion dollars, according to Osborn.

Regarding the Leeder/Batton case brought by homebuyers, Osborn said it could be “a very reasonable case, just as reasonable as the Bauman, Sitzer or Moehrl cases.”

“Buyers say ‘who cares who, it’s our money that pays the brokers’ commissions,'” Osborn said. “’We are told not to worry about our pretty little heads because the seller pays, not to be afraid.’

“The fact is that their brokers were paid the same in every transaction regardless of their skill and without the knowledge of the buyers, they could just go to another broker and hand another broker the same compensation which might be more capable than the broker they work with.

The case was dismissed but was amended and the defendants filed another motion to dismiss the case, he added.

Mitchell Skinner

Mitchell Skinner

Regarding the DOJ’s involvement in these antitrust cases and its investigation of NAR, panelist Mitch Skinner, attorney for CMLS, said the industry “should have understood what was going on” when the DOJ and FTC organized a joint workshop on competition in real estate brokerage in 2018. , shortly before a 10-year consent decree between NAR and DOJ have expired.

In 2019, the DOJ sent NAR a Civil Investigation Request (CID) into several of its rules. The parties reached a settlement, but the DOJ abruptly withdrew from that settlement agreement and a few days later, NAR dispatched another CID seeking new information on the rules regarding buyer broker commissions and pocket lists. NAR then filed a motion to try to reverse the DOJ’s request or at least modify it to make it less onerous.

In January, both sides said their part in the case and are just waiting for the judge to rule.

“I understand that this tribunal has been slow to rule because it is dealing with all of the criminal complaints from the January 6 insurrection,” Skinner said.

“So once the court is done with this case, which needs a speedy trial, maybe we will hear something about it. But in the meantime, we have this Justice Department overlay hanging over the prosecution: Moehrl, Sitzer, REX, PLS.com. So it’s all kind of related.

Osborn interrupted him. “It’s all very connected, not just somewhat connected. Absolutely.”

Still, panelists stressed that the current crisis represented “a huge opportunity” for the industry.

“If the industry doesn’t see this as an opportunity, we’ll lose a spectacular chance to do what needs to be done,” Osborn said.

“This is an urgent situation and the trick is to take advantage of it to accomplish change as industry leaders, to accomplish change that you otherwise couldn’t.”

Quoting a metaphor made by California Regional MLS CEO Art Carter on Thursday, Osborn said, “Rather than waiting for the plane to crash to unbuckle your seatbelt so you can get out of there, Art is ready to jump out of the plane now. Because he knows it’s going to crash, it’s better to make a change at this point. This is where we are.

Claude Szyfer

Now is the time to innovate, according to panelist Claude Szyfer, partner at Stroock & Stroock & Lavan LLP.

“It’s an opportunity to reflect on how we provide service and how we provide better service to consumers and brokers,” he said.

“People should be prepared to look critically at what they do. I would rather control my own destiny than have my destiny dictated to me either by a judge through a court order or by a regulator.

Osborn agreed that MLS should look in the mirror.

“I’m 100% confident that MLS as an industry is extremely pro-competitive, but that doesn’t mean there aren’t aspects of MLS that aren’t pro-competitive,” a- he declared.

There should be transparency about how consumers can affect their relationship with brokers, according to Osborn.

“One of the reasons I wonder about the Leeder case is that the buyers indeed seem to not have as much information about the transaction or as much control,” he said.

“It’s arguably – certainly the critics say – one of the shortcomings of the MLS system, in the brokerage industry. Now it doesn’t have to be. I’m here to say it’s easy to fix. Maybe it wasn’t a problem before, but that’s called change, and you have to react to that change.

Email Andrea V. Brambila.

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