The National Association of Realtors’ bid to transfer the smaller of two bombshell commission lawsuits to consolidate them has failed, likely making the 1.3 million-member trade group’s legal fight more costly.
Looks like it’ll be a two-front war.
The National Association of Realtors‘ bid to transfer the smaller of two bombshell commission lawsuits in order to consolidated them has failed, likely making the 1.3 million-member trade group’s legal fight costlier.
Two class-action lawsuits have been filed against the 1.3 million-member trade group and real estate giants Realogy, Keller Williams, RE/MAX and HomeServices of America that could upend the U.S. real estate industry by effectively forcing changes in how buyer’s agents are traditionally compensated.
The suits allege that the sharing of commissions between listing and buyer brokers violates the Sherman Antitrust Act by inflating seller costs. They seek to have homebuyers pay their broker directly, rather than having listing brokers pay buyer brokers from what the seller pays the listing broker.
The first suit, filed by nine law firms on behalf of homeseller Christopher Moehrl and other plaintiffs, is located in the Northern District of Illinois. The second suit, filed by two law firms on behalf of homeseller Joshua Sitzer and other plaintiffs, is located in the Western District of Missouri.
In May, NAR’s board of directors allocated an additional $1.7 million to its legal team’s 2019 budget to fight the suits.
In a July 10 motion to transfer the Sitzer case to the Northern District of Illinois, NAR, also represented by two law firms, argued that transferring the Sitzer case would “promote judicial economy and avoid inconsistent judgments” and that “[t]o permit a situation in which two cases involving precisely the same issues are simultaneously pending in different District Courts leads to the wastefulness of time, energy and money …”
Though similar, the Sitzer suit is not entirely identical to Moehrl in that it alleges violation of the Missouri Antitrust Law and the Missouri Merchandising Practices Act in addition to the Sherman Antitrust Act.
The Moehrl suit also purports to cover transactions made through 20 multiple listing services across the country, none of which are in Missouri, while the Sitzer complaint is on behalf of sellers who listed their homes in four MLSs in Missouri: MARIS, Heartland MLS, Southern Missouri MLS and the Columbia Board of Realtors MLS. These MLSs have some 30,000 subscribers combined.
NAR’s attorneys also argued that the Missouri district court lacked “personal jurisdiction over NAR” because it did not transact business in the state and its “contacts” with the state are “not substantial.”
But the court disagreed, noting that NAR’s alleged enforcement of a rule named in the Sitzer complaint occurred in the Missouri district. The rule, which applies in all Realtor-affiliated MLSs nationwide, requires listing brokers to make a “blanket unilateral offer of compensation” to buyer brokers when listing a property.
The court also noted that NAR received approximately $1.5 million in annual dues from its Realtor members in the Missouri district.
“We were disappointed in the ruling because NAR believes that our contacts with Missouri are not sufficient to subject us to the jurisdiction of a Missouri court. But we respect the decision of the Court,” NAR spokesperson Mantill Williams told Inman in an emailed statement.
“We remain steadfast in our position to stand by the pro-competitive and pro-consumer MLS system that courts in the past have repeatedly ruled serves the best interests of sellers and buyers alike.”
When asked whether consolidation would have potentially lessened the cost of the litigation, Williams said it’s likely.
Earlier this month, NAR filed motions to dismiss both the Sitzer and Moehrl suits. The motions are pending.