A U.S. District Court judge Friday denied motions by the National Association of Realtors (NAR) and some of the nation’s largest real estate companies to dismiss a lawsuit that takes aim at the practice of homesellers paying the buyer’s broker commission.
In denying the motion to dismiss, Judge Andrea Wood argued that the plaintiffs would have paid “substantially lower commissions,” if not for the buyer broker commission rules, and the rules have created an artificial inflation of commission rates.
“In sum, Plaintiffs’ allegations plausibly show that the buyer-broker commission rules prevent effective negotiation over commission rates and cause an artificial inflation of buyer broker commission rates in the markets served by the [multiple listing services] identified in the [lawsuit complaint],” Wood’s ruling reads. “Thus, Plaintiffs’ allegations are sufficient to survive dismissal under the rule of reason analysis.”
Discovery in the lawsuit is ongoing and the parties are set to meet again later this month to set a schedule for the end of discovery, as well as discuss the class-action status sought by the plaintiffs.
In a statement, a spokesperson for NAR said the association was disappointed in the ruling, but told Inman, that it was, “only the first round.”
“As the case moves forward, we intend to demonstrate how the MLS system creates competitive, efficient markets that benefit home buyers and sellers as well as small business brokerages,” the spokesperson told Inman. “The MLS fosters cooperation between brokers providing the best and greatest number of options for buyers and sellers.”
“The broker commission structure also ensures greater access for first-time, low-income and many other home buyers who otherwise couldn’t afford a home purchase,” the spokesperson continued. “We are confident that when the case is ultimately decided, we will prevail.”
The lawsuit, filed in 2019 on behalf of seller Christopher Moehrl, is one of two related lawsuits seeking class-action status that allege the sharing of commissions between the listing and buyer broker — referred to in the suit as the buyer broker commission rules — inflates seller costs and violates the Sherman Antitrust Act.
In a motion to dismiss filed in May 2019, NAR argued the lawsuit misrepresented the rules that govern multiple listing services, which, “have long been recognized by the courts across the country as protecting consumers and creating competitive, efficient markets.”
“Specifically, the NAR contends that Plaintiffs fail to allege sufficiently that the buyer broker commission rules constitute an unreasonable restraint of trade,” the ruling reads.
In seeking to dismiss the lawsuit, NAR also argues that the plaintiffs fail to show they have suffered an “antirust injury.” A plaintiff must show that claimed injuries are of the type that antitrust laws were intended to prevent, Wood’s ruling reads.
“The Court finds that plaintiffs have sufficiently pleaded that they suffered an antitrust injury from Defendants’ conspiracy,” Wood wrote. “Each Plaintiff was a home seller required to pay a commission to the buyer-broker for the person who purchased their home. But-for Defendants’ conspiracy, each plaintiff would have paid substantially lower commissions.”
The corporate defendants named in the suit, HomeServices of America, Keller Williams, RE/MAX, Realogy, Long & Foster Companies, HSF Affiliates, all backed NAR’s motion to dismiss, and separately filed their own motions to dismiss, all of which were denied in the same ruling.
“We are disappointed in the court’s decision and continue to believe this case is without merit,” a spokesperson for Realogy told Inman in a statement. “We are unable to provide further comment on this pending litigation.”
A spokesperson for RE/MAX said the international franchisor will, “continue to vigorously defend ourselves against a complaint that is baseless.”
Keller Williams declined to comment on the judge’s ruling. None of the other corporate defendants immediately responded to a request for comment, Monday morning. The story will be updated if any comment is received.
Read the entire decision below:
UPDATE: Story updated with comment from NAR and RE/MAX.