If the antitrust lawsuit filed by the U.S. Justice Department against the National Association of Realtors proceeds to trial, the United States plans to call the Realtor association’s general counsel, ZipRealty’s CFO, the former president and CEO for eRealty, and the CEO for Home Buyers Marketing II among its witnesses, according to court documents.
The federal government has also identified 20 multiple listing service areas from which it has requested or obtained detailed data and 16 additional MLS areas from which it has collected evidence or will draw evidence.
Lawyers representing the government and Realtor group met last week with a court magistrate for a routine conference in the antitrust lawsuit, which was filed in September 2005. The lawsuit, filed in U.S. District Court in Chicago, charges that the Realtor group approved overly restrictive policies for the online display and sharing of property information among real estate professionals, while the Realtor group has maintained that its policies are not illegal.
Laurie Janik, general counsel for the National Association of Realtors, said lawyers for the association expressed a worry about the possible number of depositions that the government may take to assist in building a case against the Realtor association. Depositions, which are recorded statements given under oath for use in court, can be time-consuming and costly, said Janik, noting the government had announced plans for 10 depositions in one small market area. That number has since been trimmed to three for that market area, she said.
Janik suggested that there are numerous less costly methods for parties to gather information.
“They’re very expensive. We’ve got to send an attorney there (and there is) travel time and attorney time during the deposition. If they were to do 10 depositions I’d probably have an attorney out there for a week, which is unreasonable if we’re going to duplicate that in 36 market areas,” Janik said.
Prior to announcing the lawsuit, the government took about 10 depositions, Janik said, “including mine and several members of our work group.” Lawyers for the National Association of Realtors, meanwhile, took a deposition from a broker in Kansas prior to the government’s announced plan for more depositions in that state, Janik said. In a court filing, a U.S. Justice Department attorney stated that the government planned to call Janik as a witness if the case proceeds to trial.
Other witnesses that the government expects to call upon include: Gary Beasley, president and chief financial officer of ZipRealty Inc.; Russell Capper, former president and CEO of eRealty, a company that was acquired by Prudential Real Estate Services; and Steve Polston, CEO for Home Buyers Marketing II.
Janik said the magistrate did provide some assurance that there would not be hundreds of depositions allowed for the case, though no specific limit was set.
Michael Erdman, a Chicago lawyer who has been monitoring the lawsuit, said in a posting at his Web site that the government has said it expects to conduct 45-50 depositions, excluding experts. Also, Erdman stated that the government announced it “is aware of at least forty-eight brokers nationwide that have opted out” under a listings policy adopted by the Realtor group, and has plans to take depositions from a “significant number” of them.
According to the court documents filed by the Justice Department, Beasley of ZipRealty “is likely to testify about the services that ZipRealty offers, the market benefits that competition from ZipRealty offers, and the effects of NAR policies relating to VOWs.” It was the Realtor group’s approved Virtual Office Web site policy, or VOW policy, that triggered a two-year investigation preceding the lawsuit.
Association leaders reacted to the lawsuit with a public announcement that the group had adopted a new, modified policy to replace its approved VOW policy, though the association later urged Realtor-operated MLSs not to enact the modified policy and not to implement controversial aspects of the VOW policy. The modified policy, known as the Internet Listings Display or ILD policy, and VOW policy provided for the online sharing or withholding (known as “opt-out” provisions) of property information at brokers’ Web sites.
ZipRealty has provided “a substantial amount of documents” to the Justice Department, court documents state, and ZipRealty is now fighting in court to block an effort by the National Association of Realtors to obtain more documents that it seeks as evidence in defending against the Justice Department lawsuit. NAR had served ZipRealty with a subpoena “that essentially asks Zip to open its doors to NAR — one of Zip’s competitors — and allow NAR access not only to the details of Zip’s operations, but Zip’s unique business model, its ‘Coca-Cola formula,’ as well,” a ZipRealty lawyer stated in a court filing.
Capper, formerly with eRealty and currently with Prudential Real Estate Services, is likely to testify “about the services that eRealty offered prior to its acquisition … the VOW-related services that Prudential offers now, the market benefits that competition from eRealty offered and that Prudential offers, and the effects of NAR policies relating to VOWs,” according to court documents. Janik, meanwhile, “is likely to be asked to testify about the development of the VOW policies and the effects of NAR policies relating to VOWs.”
And Polston is expected to testify “about the services that (Home Buyers Marketing II) offers, the market benefits that competition from HBMII offers, and the effects of NAR policies relating to VOWs,” court documents state.
A July letter by a U.S. Department official noted, at that time, that the Justice Department was “currently aware of eleven MLS areas in which opt outs occurred,” and the department plans to include evidence about those opt outs, or specific situations in which an MLS member opted to withhold property listings from an online broker-exchange system. Those markets, according to the letter, include: Jackson, Wyo.; Marathon, Fla.; Des Moines, Iowa; Hays, Kan.; York, Pa.; Cleveland, Ohio; Hudson, N.Y.; Emporia, Kan.; Detroit, Mich.; and Portland, Ore.
And a Dec. 8 letter from the Justice Department includes a list of 20 MLS areas from which the government “has requested or obtained detailed data,” including: Atlanta, Ga.; Austin, Texas; Bakersfield, Calif.; Boston, Mass.; Chicago, Ill.; Dallas, Texas; Denver, Colo.; Detroit, Mich.; Emporia, Kan.; Fargo, N.D.; Hudson, N.Y.; Ithaca, N.Y.; Las Vegas, Nev.; Philadelphia, Pa.; Phoenix, Ariz.; Portland and statewide in Maine; San Diego, Calif.; Tampa and Orlando, Fla.; Washington, D.C., and Baltimore, Md.; and York, Pa.
Among the other MLS area from which the government has drawn evidence or plans to draw evidence: Cleveland, Ohio; Des Moines, Iowa; Hartford, Conn.; Hays, Kan.; Houston, Texas; Jackson, Wyo.; Los Angeles, Calif.; Marathon, Fla.; Miami, Fla.; Minneapolis, Minn.; Portland, Ore.; Sacramento, Calif.; Seattle, Wash.; St. Louis, Mo.; and Tulsa, Okla.
Justice Department officials said in court documents that they may draw upon evidence establishing that “a relatively small group of brokers controls a large share of the market” in some areas, and they may also use national surveys and other analyses of the brokerage industry in their lawsuit.
The next status conference for the lawsuit will be held Feb. 7.