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2022 promises to keep the lawyers busy.  Since the White House included the brokerage business model in its 2021 Executive Order on Promoting Competition both the Department of Justice (DOJ) and the Federal Trade Commission have started investigations into competition in the real estate industry.  If that isn’t enough, the industry faces numerous private litigations challenging the policies and rules of the National Association of REALTORS® (NAR) especially in the area of  MLS .  Antitrust Law will cast a long shadow across the industry for the foreseeable future.  With so much going on we thought a score card would be appropriate.

Private Lawsuits

Pocket Listing Service (PLS) v. NAR, California Regional MLS (CRMLS), Bright MLS and Midwest Real Estate Data (MRED) alleging violation of the Sherman Antitrust Act through adoption of the Clear Cooperation Policy. This particular lawsuit has seen a lot of activity since it was filed in May of 2020.  In February of 2021 US District Judge John W. Holcomb dismissed the case with prejudice meaning it could not be amended.  Later that month PLS filed a notice of appeal with the US Court of Appeals Ninth Circuit.  The Ninth Circuit agreed to hear the appeal.  The American Antitrust Institute filed an Amicus Brief with the Court asking that the Court overturn the dismissal in addition the DOJ Antitrust Division filed an amicus brief discussing errors of antitrust law committed by the District Court.  Oral arguments before Ninth Circuit took place in January 2022 (the DOJ participated in the arguments) a federal appellate ruling is expected later this year.

In addition, a similar lawsuit was brought by Top Agent Network (TAN) v. NAR challenging the Clear Cooperation Policy. In August of 2021 a federal court dismissed the lawsuit.  In September of 2021 TAN filed an appeal opening the window for another ruling affecting NAR’s listing rule.

REX v. NAR and Zillow alleging that Zillow’s agreement to adopt NAR’s rules for MLS listing data, including a Buyer Agent Commission Rule and NAR Segregation Rule violate Section 1 of the Sherman Act.  This section of the Sherman Act prohibits agreements between two or more individuals or independent entities that unreasonably restrain trade. In December 2021 the Court issued an order rejecting a motion to dismiss allowing the suit to move forward.  In the meantime NAR filed a counter claim of false advertising under the Lanham Act claiming that REX had falsely claimed that NAR’s rules have “artificially inflated commissions [and} hindered the development of technology for home listings.”  We should expect some action this year on this case.

There are four consumer class actions focused on NAR’s Broker Compensation Rules which are in the midst of discovery.   Sitzer v NAR, Berkshire Hathaway, Inc., Keller Williams Realty, Inc., RE/MAX LLC., Realogy, Realogy Holdings Corp., The Long & Foster Companies, Inc., Columbia Board of Realtors, Kansas City Regional Association of Realtors, MARIS MLS, Missouri Association of Realtors, Southern Missouri Regional MLS LLC. (Western District of Missouri) and Christopher MOEHRL v. NAR, HomeServices of America Inc., BHH Affiliates, LLC., Keller Williams Realty, Inc., Re/Max Holdings, Inc., Realogy Holdings Corp., Long & Foster Companies, Inc. (Northern District of Illinois) and  Leeder v NAR, HomeServices of America Inc., Keller Williams Realty, Inc., Re/Max LLC., Realogy Holdings Corp., Long & Foster Companies, Inc., BHH Affiliates LLC., HSF Affiliates, LLC (Northern District of Illinois) and finally Nosalek v. MLS Property Information Network, HomeServices of America Inc., BHH Affiliates, LLC., Keller Williams Realty, Inc., Re/Max Holdings, Inc., Realogy Holdings Corp., Realogy Services Group, LLC, Realogy Holdings Corp., Long & Foster Companies, Inc., Berkshire Hathaway, Inc., HSF Affiliates, LLC., NRT New England LLC, RMCO LLC. (District Court of Massachusetts).  Nosalek does not include NAR as a defendant.

 Status of the consumer actions:

Sitzer: DOJ Antitrust Division has filed a statement of interest, fact discovery will close in April 2022, expert discovery ends in July, oral arguments on class certification are set for April 2022, Daubert Hearing and dispositive motions are set for November 2022. Trial should begin in February of 2023.

Moehrl: DOJ Antitrust Division has filed a statement of interest, class certification expert briefings should be in September 2022, completion of fact discovery by October 2022.  At this time a trial date has not been set.

Leeder: Defendants filed for a dismissal in April 2021.  With briefing complete a ruling is expect this year.

Nosalek:  The Court denied a motion to dismiss and agreed with the plaintiff that the rule could plausibly steer clients away from properties with lower commission offers and toward higher-paying commissions, based upon information unavailable to the homebuyers.  After defendants file their answer the case will go to discovery.

Government Action

 NAR v Department of Justice (DOJ): NAR filed a lawsuit against the DOJ challenging DOJ’s withdrawal from a consent decree proposed in November 2020 the dispute was over DOJ’s ability to investigate and challenge NAR’s practice in the future. In July 2021 DOJ unilaterally withdrew from the settlement.  Several days later DOJ issued a new Civil Investigative Demand (CID) to investigate numerous rules and practices including NAR’s Participation Rule and Clear Cooperation Policy.  CID are powerful investigative tools that the DOJ use to gather evidence in support of civil charges CID detectives primarily investigate felony-level crime. NAR has filed a petition in federal court (Sept 2021) to quash or modify the new DOJ CID. Stay tuned.

President Biden in July 2021 issued a wide-ranging executive order to promote competition in 72 various sectors of the economy.  One of those initiatives states that in order to “address persistent and recurrent practices that inhibit competition,” the Chair of the Federal Trade Commission is “encouraged to exercise the FTC’s statutory rulemaking authority” in several areas, including “unfair tying practices or exclusionary practices in the brokerage or listing of real estate.” Currently the FTC is deadlocked with two commissioners opposed to any rulemaking and two in support of new rules.  President Biden has nominated a fifth commissioner to the US Senate in January 2022.  The fifth commissioner will be able to break the deadlock. 

2022 will likely be a roller coaster ride for the real estate industry with Court action expected on NAR v DOJ (maybe an appeal), movement of the seven lawsuits through the Court system, and with the deadlock broken the FTC will be issuing new rules consistent with the President’s Executive Order.  Long standing industry rules, practices, and regulations will be under the antitrust microscope by federal antitrust enforcers and the Courts.

You can find information on all these cases by googling the defendant and plaintiff names. Example Moehrl v NAR. Like to watch the lawyers and court in action? Watch the 1/14/2022 Ninth Circuit hearing (about 45 min) in PLS.com v NAR by clicking this link:  https://www.ca9.uscourts.gov/media/video/?20220114/21-55164/ 

Updates as available will be included in future newsletters.

 

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