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In a serious blow to the National Association of Realtors and major real estate franchisors, potentially millions of homesellers can ask to be reimbursed for billions in commissions they paid to buyer agents between 2015 and 2020 as a result of a federal court ruling on Wednesday.
Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois has granted class certification in the larger of two federal commissions lawsuits that could rock the real estate industry and impact how agents are compensated nationwide. The suit is known as Moehrl after its lead plaintiff; the smaller of the two suits, known as Sitzer/Burnett, got class certification nearly a year ago.
In March 2019, homeseller Christopher Moehrl filed a federal antitrust suit against the National Association of Realtors and real estate franchisors Anywhere (formerly Realogy), HomeServices of America, RE/MAX and Keller Williams.
The suit, which has been a bombshell from Day 1, alleges that some NAR policies — including one requiring listing brokers to offer buyer brokers a commission in order to list a property in a Realtor-affiliated multiple listing service — violate the Sherman Antitrust Act by inflating seller costs. NAR has 1.5 million members nationwide; the vast majority are residential real estate agents and brokers.
The plaintiffs’ motion for class certification relies on the opinions of two experts, NYU economics professor Nicholas Economides and Harvard law professor Einer Elhauge. The defendants tried to exclude their testimony from the case but Wood denied that request as part of Wednesday’s ruling.
Economides has estimated that total class damages in the case come to $13.7 billion. If the court awards treble damages, that figure could go up to $41.1 billion.
“At issue in this case are the standardized rules promulgated by the NAR and then adopted by Corporate Defendants, which, in turn, enforce those rules against their affiliated brokers throughout the nation,” Wood wrote in her order.
“Plaintiffs’ evidence includes Defendants’ own policies and representations that reflect how the NAR and Corporate Defendants work together to implement and enforce the MLS Rules, Code of Ethics, and Case Interpretations. Plaintiffs also highlight evidence showing how various senior executives from each Corporate Defendant were extensively involved in the NAR’s governance.
“That evidence regarding Defendants’ conduct in joining and advancing a single agreement is undoubtedly common across the class, and the existence of the alleged conspiracy will be one of the predominate issues in the litigation.
“The Court concludes that Plaintiffs have shown the existence of common questions concerning antitrust impact that can be answered with common evidence such as Elhauge and Economides’s expert opinions.”
Wood’s ruling certifies two classes in 20 MLS markets nationwide, the first of which seeks monetary damages and the second of which does not seek such damages but asks for an injunction barring the defendants from continuing to violate antitrust laws by maintaining and enforcing the challenged NAR rules:
- “Home sellers who paid a commission between March 6, 2015, and December 31, 2020, to a brokerage affiliated with a Corporate Defendant in connection with the sale of residential real estate listed on a Covered MLS and in a covered jurisdiction. Excluded from the class are (i) sales of residential real estate for a price below $56,500, (ii) sales of residential real estate at auction, and (iii) employees, officers, and directors of defendants, the presiding Judge in this case, and the Judge’s staff.”
- “Current and future owners of residential real estate in the covered jurisdictions who are presently listing or will in the future list their home for sale on a Covered MLS. Excluded from the class are (i) sales of residential real estate for a price below $56,500, (ii) sales of residential real estate at auction, and (iii) employees, officers, and directors of defendants, the presiding Judge in this case, and the Judge’s staff.”
In her order, Wood left the door open for HomeServices to narrow one or both of the classes through a separate motion requesting that the class definitions exclude unnamed members whose listing agreements contained an arbitration provision.
Wood appointed plaintiffs Christopher Moehrl, Michael Cole, Steve Darnell, Jack Ramey, Daniel Umpa, and Jane Ruh as class representatives and law firms Cohen Milstein Sellers & Toll PLLC, Hagens Berman Sobol Shapiro LLP, and Susman Godfrey LLP as co−lead class counsel.
“We are disappointed in the decision,” NAR spokesperson Mantill Williams told Inman in an emailed statement.
“Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for homebuyers and sellers. The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and thus creates a larger pool of buyers for sellers.
“For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation and make homeownership possible for more people. In fact, the U.S. model of independent, local broker marketplaces is widely considered the best value and most efficient model in the world, with no hidden or extra costs and with more complete, verified information compared to other countries.”
In an emailed statement, Keller Williams spokesperson Darryl Frost told Inman, “The court did not decide the merits of the plaintiffs’ claims, which we categorically deny. The case is far from over, and we will continue to vigorously defend ourselves in court.”
RE/MAX declined to comment for this story. Inman has reached out to HomeServices and Anywhere for comment and will update this article if and when we hear back.
Editor’s note: This story has been updated with information from the judge’s order and with a comment from Keller Williams.