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The National Association of Realtors isn’t taking the U.S. Department of Justice’s efforts to resume an investigation into its commission and pocket listing policies without a fight.
In a brief filed in the U.S. Court of Appeals, the 1.5 million-member trade group said Friday the government’s arguments for resuming the probe were “alarming” and would “destabilize the law” if accepted. The Department of Justice previously appealed to overturn a lower court ruling that set aside the law enforcement agency’s request for information from NAR on its Clear Cooperation Policy around pocket listings and Participation Rule on commissions.
“The government settles vast numbers of enforcement actions against civil and criminal defendants,” NAR’s attorneys wrote in the brief. “Those defendants rely on the government to keep its word. A holding that an agency can escape its commitments as easily as DOJ claims it can here would call into question countless negotiated resolutions.”
The DOJ argued in an opening brief in June that it never agreed not to reopen a probe into the policies when it sent NAR a letter in November 2020 telling the trade group that it had closed its investigation into the rules. The antitrust enforcer reopened the investigation in July 2021, after withdrawing from a proposed settlement with NAR and a change in presidential administrations.
The DOJ reopened its probe with a new civil investigative demand (CID) — a type of administrative subpoena — seeking information on the trade group’s rules, including:
- The Participation Rule, which requires listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing into a Realtor-affiliated multiple listing service.
- The Clear Cooperation Policy, which requires listing brokers to submit a listing to their Realtor-affiliated MLS within one business day of marketing a property to the public.
NAR maintains that it only agreed to the proposed settlement with DOJ, which outlined changes to other NAR MLS-related policies, in return for the agency’s closure of its investigation of those two rules.
“DOJ’s sole contention is that closing the investigation required only telling NAR that it was closed, after which DOJ could resume the investigation and reissue the CIDs at any time and for any reason,” NAR’s attorneys wrote.
“That strained reading defies the ordinary understanding of a promise to close an investigation in return for consideration.”
In January, Judge Timothy J. Kelly of Washington, D.C.’s district court set aside the DOJ’s July 2021 request for information from NAR. The ruling drew a variety of reactions from agents, brokers and other industry players, demonstrating divisions within the real estate industry over the two controversial rules.
The rules at issue in this case are the subject of multiple antitrust lawsuits filed against NAR filed by private parties, some in which the DOJ has intervened. No matter what happens with the DOJ’s investigation, those lawsuits are ongoing.
In March, the DOJ formally appealed the ruling to the U.S. Court of Appeals for the District of Columbia Circuit and in June submitted its opening brief.
In its brief, the DOJ argued the lower court “made several serious errors of basic contract law,” including inferring that the DOJ had waived its sovereign right as part of the country’s Executive Branch to investigate and prosecute potentially unlawful conduct — without the DOJ explicitly saying it was waiving that right, which would be required by law.
NAR’s brief emphasized that the agency had not advanced that argument at the lower court level and therefore forfeits that argument, but even if it didn’t, that the requirement that the DOJ must explicitly say its waiving that right comes from cases in which the government breached a contract due to a legislative act.
“DOJ did not breach its agreement because of a subsequent legislative action or other similar development; it breached its agreement simply because it no longer wanted to be bound,” NAR’s brief said.
The DOJ’s brief also maintained that a decision to reopen an investigation that reached no conclusion due to changes in leadership or priorities was within the Executive Branch’s discretion — an argument NAR also found “alarming.”
“Although a new administration is free to change the government’s policies, it is not free to repudiate the government’s contracts,” NAR’s brief said.
“That is part of what it means to say that we have ‘a government of laws, and not of men.'”
Mantill Williams
In an emailed statement, NAR spokesperson Mantill Williams told Inman that the lower court’s “careful decision” that the government be held to the terms of its settlement agreements was “correct” and the appeals court should affirm it.
“As we say in our brief, after having signed an agreement previously, the Department of Justice’s (DOJ) argument that it can resume its investigation based solely on a change of leadership or change of heart lacks legal merit,” Williams said.
“NAR has upheld our end of the agreement, and we expect the DOJ to do the same. It is alarming that the DOJ would try to resume an investigation that the Department committed to closing more than two years ago.
“NAR guidance for local MLS broker marketplaces has long been recognized to ensure fair, transparent and competitive real estate markets for consumers and businesses.”
Inman reached out to the DOJ’s Antitrust Division for comment and will update this story if a response is received. The deadline for the DOJ to file a brief in reply to NAR’s filing is August 11. Oral arguments in the case have not yet been scheduled.
