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Jury awards $5B to homesellers in landmark Sitzer | Burnett verdict

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KANSAS CITY, Mo. — A federal jury has issued a verdict against the National Association of Realtors and major real estate franchisors in an antitrust case that alleged some of the nations largest real estate companies conspired to inflate real estate commissions.

The suit represents approximately 500,000 Missouri homesellers seeking reimbursements for $1.78 billion in commissions paid to buyer brokers. Ultimately, the jury awarded $1,785,310,872 in damages, which, under the law, will be automatically trebled to $5.356 billion.

The eight-person jury deliberated for about 2.5 hours Tuesday morning before issuing its unanimous verdict.

The jurors were asked to find whether homeseller plaintiffs in a class action lawsuit had proved “by a preponderance of the evidence that a conspiracy existed to follow and enforce” a NAR policy known as the cooperative compensation rule. The case specifically centered on whether there was a conspiracy in the suit’s four subject multiple listing services in Missouri between April 29, 2015 through June 30, 2022.

The jury said “yes” and also found that the conspiracy had “the purpose or effect of raising, inflating, or stabilizing broker commission rates paid by home sellers.”

The jury laid the conspiracy at the feet of every one of the defendants: NAR, Keller Williams, Anywhere (formerly, Realogy), RE/MAX, HomeServices of America and two of its subsidiaries HSF Affiliates and BHH Affiliates.

The jurors found that the conspiracy had caused the plaintiffs to pay more for real estate brokerage services when selling their homes than they would have without the conspiracy.

The cooperative compensation rule, also known as the Participation Rule, requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS. The suit, originally filed in April 2019, argued that the rule violated the Sherman Antitrust Act by inflating seller costs.

“It’s been a long four and a half year fight,” plaintiffs’ lead counsel Michael Ketchmark of Ketchmark and McCreight told Inman after the verdict. “But the truth has come out. The jury heard all the evidence and today’s the day of accountability. The message was sent out loud and clear from Missouri that what’s happening in the real estate market is wrong.

“The National Association of Realtors and the corporate real estate defendants have been found liable for a conspiracy to rip homeowners off when they sell their homes.”

In an emailed statement, NAR spokesperson Mantill Williams told Inman the trade group will appeal and ask for the damages award to be reduced, emphasizing that it may be years before the case is ultimately resolved.

“NAR rules prioritize consumers, support market-driven pricing and promote business competition,” Williams said.

“This matter is not close to being final as we will appeal the jury’s verdict. In the interim, we will ask the court to reduce the damages awarded by the jury.

“We stand by the fact that NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing.

“We will continue to focus on our mission to advocate for homeownership and always put consumer interests first. It will likely be several years before this case is finally resolved.”

NAR is not the only defendant who will seek a higher court’s opinion on the case. In an emailed statement, a HomeServices spokesperson told Inman, “We are disappointed with the court’s ruling and intend to appeal.”

The company also predicted the verdict would have a detrimental impact on homebuyers.

“Today’s decision means that buyers will face even more obstacles in an already challenging real estate market and sellers will have a harder time realizing the value of their homes,” the company said.

“It could also force homebuyers to forgo professional help during what is likely the most complex and consequential financial transaction they’ll make in their lifetime.

“HomeServices of America believes that home buyers and sellers deserve fairness and transparency. Buying or selling a home is a complicated process, and it’s essential to have a knowledgeable, experienced advocate to support buyers and sellers throughout their journey and protect their interests.”

HomeServices also doubled down on the practice of cooperative compensation.

“Cooperative compensation helps ensure millions of people realize the American dream of homeownership with the help of real estate professionals,” the spokesperson said.

In an emailed statement, Keller Williams spokesperson Darryl Frost told Inman, “We disagree with the verdict but respect the jurors who decided the case based on the issues in front of them.”

Frost said the franchisor was disappointed that the judge in case, Stephen R. Bough of the U.S. District Court in Western Missouri, had not allowed to the jury to hear “crucial evidence,” namely, that cooperative compensation is permitted under Missouri law.

“This is not the end,” Frost said. “Keller Williams followed the law regarding cooperative compensation and stands by the evidence presented on the 100-year-old practice of sellers’ agents offering commissions to other agents who help market and sell homes.

“Looking forward, we will consider all options as we assess the verdict and trial record, including avenues of appeal.”

In an emailed statement, a RE/MAX spokesperson told Inman, “RE/MAX, LLC entered into a settlement for the Burnett class action lawsuit last month and was not a participant in the trial. The settlement remains subject to court approval, which we expect to be forthcoming.”

Similarly, a spokesperson for Anywhere told Inman the company remained “pleased” to have entered into a nationwide settlement “with no admission of wrongdoing” earlier this month.

“The settlement releases our company, affiliated agents, and franchisees from liability related to these claims,” the company said.

“The jury verdict, while disappointing, does not alter our settlement, and we look forward to obtaining court approval and implementing our settlement agreement.”

The spokesperson added, “Anywhere strongly believes in the value of both buyer and seller agents to help consumers successfully navigate one of life’s most expensive and impactful transactions. We remain fully committed to supporting all agents as they expertly serve their clients.”

Immediately following the verdict, shares in multiple publicly traded real estate companies dipped. By mid afternoon, for example, both Anywhere and RE/MAX were down more than 4 percent, while Compass and Redfin — defendants in a similar and newly filed case — were down more than 6 percent and 5 percent, respectively.

Some of the real estate industry’s biggest names were called to the stand amid the two-week trial, with many assuring an eight-member jury that no conspiracy existed between the franchisors and the National Association of Realtors.

During 11 days of arguments and testimony, the defendants repeatedly said the plaintiffs didn’t provide evidence to prove the alleged conspiracy.

With NAR in particular, the trade organization’s lead counsel, Ethan Glass, told jurors on Monday that if the plaintiffs had their way, homebuyers wouldn’t have access to real estate agents at all, thus setting the industry back 30 years to the days of “subagency” when buyers didn’t have agents with fiduciary duties to protect their interests.

“The plaintiffs’ lawyer has utterly failed to prove that a conspiracy to follow and enforce the rule even exists,” Glass, an attorney with Cooley, told jurors during his closing arguments on Monday.

Keller Williams’ lead attorney, Timothy Ray, told jurors that testimony about the franchisor that was brought up during the trial was wrong. “None of what you’ve been told is true,” Ray said. “Not a single thing.”

Keller Williams co-founder Gary Keller took the stand in person last week to say that there was no “standard” commission, and that the 6 percent commission was a “myth.”

During a colorful rebuttal to closing arguments, Ketchmark told the jurors that the plaintiffs weren’t blaming real estate agents for the alleged conspiracy.

“Did I ever say at one time that 1.6 million Realtors are part of this conspiracy?” he added. “It’s a deliberate attempt to confuse you.”

Ketchmark said that every single one of the homeowners in the class had been forced to pay a buyer-broker commission in order to have their listing on the MLS.

“The law says they [the defendants] can’t do that,” Ketchmark said.

Editor’s note: This story has been updated with comments from NAR, HomeServices, Keller Williams, Anywhere, RE/MAX and plaintiffs’ attorney Michael Ketchmark. 

Email Andrea V. Brambila.

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