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Another giant real estate company has seen the writing on the wall.
Keller Williams is now the third real estate franchisor to reach a settlement with plaintiffs in two bombshell lawsuits that could upend how consumers pay agents nationwide, agreeing to hand over $70 million and change its business practices.
On Thursday, Feb. 1, plaintiffs for the suit known as Sitzer | Burnett filed a motion for preliminary approval of the deal in the U.S. District Court in Western Missouri alerting the court that Keller Williams, which has 180,000 agents under its umbrella, had agreed to settle all of the claims against the company as part of a proposed nationwide class settlement.
The deal was jointly negotiated with the plaintiffs in a larger bombshell suit known as Moehrl as well as another, similar suit filed in December known as Umpa, which was filed in the same court as Sitzer | Burnett.
The deal also aims to cover KW from any current or future suits nationwide from any homeseller that sold a home through any U.S. multiple listing service where a commission was paid to any brokerage in connection with the sale of the home, including a suit filed in Massachusetts known as Nosalek. It will be up to the court to decide whether to allow the deal this scope.
“Today, after months of protracted negotiations, including a post-trial mediation with a well-respected mediator and continued negotiations and sharing of financial information, Plaintiffs and Keller Williams reached a settlement,” the plaintiffs’ filing said.
Attorneys for the plaintiffs said the deal is “substantially similar to those reached with Anywhere and RE/MAX,” two real estate franchisors that reached settlements with the plaintiffs before Sitzer | Burnett went to trial in October, for $83.5 million and $55 million, respectively. Those settlements have already received preliminary approval from the court.
“[T]he non-monetary terms of the settlement are identical in all material respects to the terms of the Anywhere and RE/MAX agreements,” the filing said. “As with Anywhere and RE/MAX, the settlement was reached after a lengthy investigation and exchange of documentation relating to Keller Williams’s ability to pay.”
If approved by the court, the settlement means Keller Williams will pay substantially less than it could have to resolve Sitzer | Burnett. On Oct. 31, in a historic verdict, a jury found that Keller Williams, RE/MAX, Anywhere, the National Association of Realtors, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates paid by homesellers. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners. If that award stands, it would be trebled by law to more than $5.3 billion.
The deals leave NAR, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, as the remaining defendants in the case.
“I’m relieved to share that we have negotiated a nationwide settlement of the Sitzer | Burnett case – on terms that protect our agents, our franchisees, and our industry,” Gary Keller, executive chairman of Keller Williams, said in an email sent to all Keller Williams leaders, agents and associates Thursday morning.
“Crucially, the settlement releases individual agents and franchisees from copycat litigation filed in the wake of Sitzer/Burnett.”
Since the Sitzer | Burnett verdict, an ever-rising pile of similar lawsuits have been filed across the country.
The settlement is not just a resolution, but a “launchpad,” according to Keller.
“We had full confidence in the strength of our appeal,” Keller said. “But we also knew the appellate process could be long and unpredictable – and that our franchisees and agents would have no protection and complete uncertainty while that process played out over time. Our Keller Williams family needs and deserves protection now, not later.
“We came to the decision to settle with careful consideration for the immediate and long-term well-being of our agents, our franchisees, and the business models they depend on. It was a decision to bring stability, relief, and the freedom for us all to focus on our mission without distractions. It allows us all to turn our attention back to what we do best: delivering unparalleled value in an ever-evolving real estate market.”
In a phone interview, Michael Ketchmark, lead counsel for the plaintiffs in Sitzer | Burnett, praised Keller’s leadership in deciding to settle and called for NAR and HomeServices to do the same.
“I think this shows tremendous leadership on on his behalf and his willingness to respond to what the jury system is telling telling their company to do,” Ketchmark said.
“We’re calling now upon the National Association of Realtors and HomeServices to join with us in changing this. We want them to sit down at the table with the plaintiffs’ attorneys and the Department of Justice and others to get the National Association of Realtors out of the business of allowing the MLSs to be used to fix commissions.”
According to Ketchmark, the combined $208.5 million from Anywhere, Keller Williams and RE/MAX will be credited against the Sitzer | Burnett verdict amount, the rest of which NAR and HomeServices will be responsible for.
“HomeServices and the National Association of Realtors can easily cover this entire jury verdict and the entire judgment,” Ketchmark said.
“That will not have the same economic impact on them that it would have on Keller Williams. This would have bankrupted Keller Williams. The same isn’t true for the other defendants. We’ve never had a desire to bankrupt anyone.
“We want these companies to change their practices and so that’s why this settlement was reached. Every time there’s a settlement is a step. David’s getting stronger in his fight against Goliath and that’s what’s happening here today.”
KW spokesperson Darryl Frost told Inman the $70 million payment in the deal “will not impact our operations or our ability to support our franchisees and agents.”
The suits allege that some NAR rules violate the Sherman Antitrust Act by inflating seller costs. The suits primarily target NAR’s Participation Rule (also known as the cooperative compensation rule), which requires listing brokers to offer buyer brokers a commission in order to list a property in a Realtor-affiliated multiple listing service.
According to the plaintiffs’ filing, the settlement creates a $70 million common fund and includes “the same injunctive relief provided under the RE/MAX settlement.”
“We are excited that this is another step in the direction of changing the way that people buy and sell homes in our country,” Ketchmark said.
The settlement agreement lays out the business practice changes Keller Williams has agreed to, including no longer requiring franchisees and their affiliated agents to join or be members of NAR or follow the Realtor Code of Ethics or NAR’s MLS policy handbook.
Keller admitted on the stand during the Sitzer | Burnett that KW does require agents to join Realtor associations and multiple listing services, but allows them to obtain an exemption from their team leader. He said KW doesn’t track exemptions.
Per the proposed settlement, the other changes KW agreed to include:
- make clear and periodically remind franchisees and agents affiliated with those franchisees that it does not require them to make offers of compensation to or accept offers of compensation from cooperating brokers, or that, if made, does not require such offers to be blanket, unconditional, or unilateral
- make clear that (i) franchisees and affiliated agents must be transparent to prospective home sellers and buyers that broker commissions are not set by law and are negotiable and (ii) buyer side brokers and agents must be transparent regarding the cooperative compensation offered on any listings for which a client requests information
- make clear that franchisees and affiliated agents acting as buyer-side brokers or agents must be transparent with their clients in accurately disclosing their compensation structure in connection with each transaction and must refrain from advertising or otherwise representing that their services are free (unless they are, in fact, not receiving any compensation for those services from any party)
- display offers of compensation made by listing brokers or agents, where such data is available and/or provided to Keller Williams for all active listings shared on kw.com and recommend and encourage that franchisees and agents include cooperative compensation offers (if any) on any listings that they publicly display or share with prospective buyers through IDX or VOW displays, or through any other form or format
- not provide software that permits franchisees and affiliate agents to filter out or restrict MLS listings that are searchable by and displayed to consumers based on the level of compensation offered to any cooperating broker and recommend and encourage that any franchisees and their agents refrain from utilizing any technology or taking manual actions to filter out or restrict MLS listings that are searchable by or displayed to consumers based on the level of compensation offered to any cooperating broker unless directed to do so by the client
- expressly advise and periodically remind franchisees and affiliated agents of their obligation to show and market properties regardless of the existence or amount of cooperative compensation offered
- not express or imply a minimum commission requirement in franchise agreements, training materials or other policies
- develop educational materials that reflect and are consistent with each provision in this injunction, and eliminate educational materials, if any, that are contrary to it
According to Ketchmark, in addition to seeking court approval for the deal, the process of getting the settlement funds out to homesellers nationwide will begin. He said that as part of the process the defendants will turn over the names and identities of eligible homesellers.
“We’ll send out letters notifying them,” Ketchmark said. “We’ll send out postcards notifying them. We’ll set up a website. We’ve already started doing that with RE/MAX and Anywhere. It’s a very, very intensive process, but that’s what you do in a big class action case like this and so everyone will receive notice, and they’ll be told how to go about filling out the procedures and the materials to get their money returned to them.”
Asked how much money eligible sellers will receive, Ketchmark said it depends on the number of people who submit claims.
“It would be subject to the amount of commissions that they paid and look at how much buyers’ commission that they were forced to pay,” Ketchmark said.
“If the money’s available there to pay the full amount, it would. If it’s not, it would just be dependent upon the number of claims that are filed.
“The more settlements like this that we have … the more money that’s going to be returned to the consumers and homeowners.”
Keller’s full email is below:
Keller Williams Family,
I’m relieved to share that we have negotiated a nationwide settlement of the Sitzer/Burnett case – on terms that protect our agents, our franchisees, and our industry. Crucially, the settlement releases individual agents and franchisees from copycat litigation filed in the wake of Sitzer/Burnett.
This is a significant moment for our entire Keller Williams family. As you all know, we fought hard for our agents and franchisees and their ability to manage their own businesses according to accepted, ethical industry practices. However, over the past few months, the Sitzer/Burnett verdict drove speculation and uncertainty across the industry.
We had full confidence in the strength of our appeal. But we also knew the appellate process could be long and unpredictable – and that our franchisees and agents would have no protection and complete uncertainty while that process played out over time. Our Keller Williams family needs and deserves protection now, not later.
We came to the decision to settle with careful consideration for the immediate and long-term well-being of our agents, our franchisees, and the business models they depend on. It was a decision to bring stability, relief, and the freedom for us all to focus on our mission without distractions. It allows us all to turn our attention back to what we do best: delivering unparalleled value in an ever-evolving real estate market.
Evolution is certain. I hope and believe that all of us at Keller Williams will be leading that evolution for many years to come. We will continue to play by the rules, act ethically, advocate for the integrity of the industry, and – of course – deliver value.
Keller Williams was built for entrepreneurs. This ethos is at the core of our business, allowing agents the freedom to manage their businesses, set their service fees, and negotiate compensation with clients independently. That was true before these lawsuits, it was true at trial, and it remains true as we put this settlement behind us.
I want to thank you for your unwavering support during these challenging times. Your resilience, dedication, and trust in Keller Williams have been pivotal to our ability to navigate this period.
As we move forward, we will continue to pivot, adapt, and thrive – just as we always have. This settlement is not just a resolution; it’s a launchpad. We will remain focused on what we do best: building our businesses and transforming the real estate industry together.
Thank you for your continued commitment to excellence and for being an invaluable part of the KW family.
Thank you for all you do to help others live their best lives possible.
Onward with gratitude …
Read the settlement agreement:
Editor’s note: This story has been updated with comments from plaintiffs’ attorney Michael Ketchmark, more details about the settlement terms and an embed and link to the motion for preliminary approval and settlement agreement.