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A lawsuit filed in West Virginia challenging the constitutionality of a requirement that brokers have an in-state brick-and-mortar office to do business has been paused by a federal court.
On Monday, March 17, Judge Thomas E. Johnston of the U.S. District Court for the Southern District of West Virginia granted a motion to stay a case filed by online discount broker Derek Eisenberg against the West Virginia Real Estate Commission in December. West Virginia filed a motion to dismiss Eisenberg’s suit on March 3, and Eisenberg planned to respond to that motion on the 17th.
Instead, all parties in the case filed the motion to stay on March 14, noting that “legislation has been introduced in both the West Virginia House and Senate that, if enacted, may resolve the claims asserted in this case.”
Derek Eisenberg
According to an amended complaint filed by Eisenberg in January, the West Virginia Real Estate Licensing Act was amended in 2023 to require anyone with a West Virginia broker’s license to maintain a brick-and-mortar office in the state and to conduct their business there. Violations of the law can result in fines in the thousands of dollars and up to 90 days in jail.
But on March 12, Delegates Roger Hanshaw (Republican) and Sean Hornbuckle (Democrat) introduced West Virginia House Bill 2010, which would create “an exception to the requirement that a real estate broker maintain a definite place of business within the state for non-residents who maintain a definite place of business in their jurisdiction of residence.”
Therefore, the parties in the suit “jointly agreed that it would be an efficient and economical use of the parties’ and the Court’s resources to temporarily stay this litigation to allow the legislative process to proceed,” the March 14 motion to stay reads.
Both sides asked the court to pause all deadlines in the case “through the end of the current West Virginia state legislative session, giving the Governor time to sign any resulting legislation.” They agreed they would file a joint update on or before April 30 telling the court the legislation’s status and either propose resuming the case’s deadlines or notifying the court that the suit would be voluntarily dismissed.
In his order, Johnston agreed to the parties’ request and said that if the case was not dismissed, Eisenberg’s opposition to the defendants’ motion to dismiss and the parties’ joint discovery plan would be due May 15.
“I can only guess that the attorney general realized that the legislation was unfair to out-of-state licensees and would also be unfair to West Virginia residents that sought licenses in other states with similar rules,” Eisenberg told Inman.
Eisenberg is president of Continental Real Estate Group, which operates entirely online under a fee-for-services business model in 45 states and Washington, D.C. He himself holds a broker’s license in 26 states, including West Virginia.
His goal is to expand nationwide to all 50 states by the end of 2025, but he contends that paying thousands of dollars to comply with states’ brick-and-mortar requirements threatens those plans. He asserts he can do everything required of a broker without a physical office.
The complaint alleges the law as it currently stands is violating the Interstate Commerce Clause of the U.S. Constitution because it discriminates against out-of-state brokers wishing to do business in West Virginia who cannot use their home or first office as their in-state office as resident brokers can.
The complaint also alleges the law violates the U.S. Constitution’s Privileges and Immunities Clause because “states may not discriminate against citizens from another state in their ability to exercise their privileges or immunities, including their right to pursue a common calling within the state” as well as the Constitution’s Equal Protection Clause and Due Process Clause.
“The Fourteenth Amendment protects the right to pursue a lawful calling without arbitrary government interference,” the filing says.
The complaint asks the court for a permanent injunction prohibiting the defendants from enforcing the in-state office mandate and for an award reimbursing the costs of filing the suit.
The West Virginia Real Estate Commission filed a motion to dismiss the former suit, maintaining that the in-state office requirement is not discriminatory because it is applied “evenhandedly to residents and nonresidents alike.”
The commission emphasized that the mandate was enacted for a legitimate state interest: broker accountability. According to the filing, the law requires that licensed brokers’ “records shall be open to inspection … at all times during regular business hours at the broker’s place of business” and that the commission is authorized to examine a broker’s records when there is a complaint alleging violations of the law or the commission’s rules.
The filing asserts that it is unreasonable for nonresident brokers to be exempt from in-person inspections or for the commission to be expected to send investigators to other states for in-person inspections.
The commission also said the in-state office requirement served to ensure broker competence by contributing to “on-the-ground familiarity with West Virginia properties” and “local social pressure to conduct themselves professionally and competently.”
The commission downplayed Eisenberg’s contention that resident brokers can work from their homes to satisfy the requirement.
“[U]nless ‘more than a few’ brokers work ‘from their homes,’ ‘any [hypothetical] advantage [that] inures to resident [brokers] in this regard is minimal,’” the filing says.
Eisenberg filed a complaint against Nevada officials in December that is nearly identical to the West Virginia complaint. On March 5, Nevada officials filed a motion to dismiss that suit, making similar arguments regarding the law being applied equally to in-state and out-of-state brokers and ensuring broker competency. The suit is ongoing.
Read the court’s order granting the motion to stay (re-load page if document is not visible):
