Centralization, Litigation, and Risk: A Quiet Warning for New York Brokers and Agents

Centralization, litigation risk, and liability exposure are reshaping the modern real estate industry.

Recently, while reading a post by Notorious Rob (Rob Hahn) outlining several litigation-related predictions for the real estate industry, I found myself thinking less about whether any single prediction would come true and more about a deeper question:

Has the modern structure of the real estate industry made itself unusually attractive to large-scale litigation?

Not because of widespread misconduct. Not because of bad actors. But because of how the industry has organized itself.

What follows is a structural look at how we got here — and why brokers and agents, particularly in New York, may want to think carefully about risk, affiliation, and liability going forward.

1. Early Real Estate Was Intentionally Decentralized

• State regulation, not federal
• Local markets, not national ones
• Small brokerages, often owner-operated
• No national rule-making authority

This mattered legally.

Antitrust law punishes collective behavior. Litigation economics favor deep pockets. Jury narratives require simple villains.

A town full of independent brokers with different practices is hard to sue, expensive to coordinate litigation against, and difficult to frame as a conspiracy. The industry was structurally lawsuit-resistant — not because it was pure, but because it was fragmented.

2. Consolidation Changed the Litigation Math

Consolidation was not merely economic. It was jurisdictional and narrative. It created national brands, uniform rules, centralized governance, mandatory participation structures, shared forms, and publicly identifiable defendants.

Instead of thousands of local actors behaving independently, plaintiffs can now argue that an industry operates under national rules enforced by a central body backed by deep pockets.

That shift alone changed the feasibility of class actions, the size of settlements, and the willingness of plaintiff firms to invest enormous resources into litigation. This is why Sitzer happened when it did.

3. NAR Didn’t Just Centralize Power — It Centralized Liability

NAR’s success as a trade organization produced national MLS policies, uniform cooperation rules, standardized forms ecosystems, mandatory membership linkages, and enforcement mechanisms.

Those structures are operationally efficient and politically powerful — but legally radioactive. Antitrust law does not care about intent. It cares about structure.

And the structure now looks like competitors acting in concert, rules affecting pricing behavior, and market access tied to membership. That is litigation-attractive.

4. Deep Pockets Change Everything

Class-action firms do not hunt wrongdoing. They hunt recoverable damages.

Early local brokerages offered no aggregation of damages, no treasury worth attacking, and no uniform policy to challenge. Modern real estate offers billions in transaction volume, insured defendants, national settlements, and repeatable legal theories.

Once juries accepted the narrative and settlements were paid, the industry became marked — not morally, but economically.

5. Why This Is Not Just the Cost of Doing Business

Litigation used to be transactional, isolated, and insurable. Now it is structural, recursive, and governance-level.

Each settlement creates precedent, exposes new theories, and lowers the bar for the next case. That is why Zillow risk bleeds into broker risk, forms risk bleeds into association risk, and national policy bleeds into state liability.

This is systemic litigation.

6. Decentralization Isn’t Anti-Professional. It’s Defensive

The instinct toward local, local, local is not nostalgia. It is risk logic.

Decentralization diffuses liability, fractures class definitions, raises litigation costs, reduces settlement leverage, and forces plaintiffs to prove individualized harm.

It does not eliminate lawsuits — but it changes their economics.

The Irony

Professionalization was meant to protect consumers. Consolidation was meant to improve efficiency. Centralization was meant to provide clarity.

The industry did not become corrupt. It became a legal target bullseye.

A New York Lens: The Monestier Appeal

Professor Tanya Monestier of the University at Buffalo School of Law, a nationally recognized scholar in class-action and civil procedure law, objected to the Sitzer | Burnett v. NAR settlement as a member of the class herself.

After her objection was overruled, she filed an appeal with the U.S. Court of Appeals for the Eighth Circuit. Oral arguments are scheduled to be heard later this month, with a decision expected in 2026.

She argues the settlement provides negligible monetary relief (roughly $16 per class member compared to alleged average damages exceeding $11,000), relies on illusory injunctive relief, and raises serious Article III standing and Rule 23 deficiencies.

Plain-English Explainer: Article III and Rule 23

Federal courts may only decide real cases and controversies. Plaintiffs must show concrete personal injury and relief that benefits them directly.

When settlements primarily benefit future consumers rather than the class itself, courts may lack constitutional authority to approve them.

Rule 23 requires that class settlements be fair, reasonable, and adequate to the class — and courts must independently verify that standard.

Agents, Independent Contractors, and Risk

In New York, salespersons are independent contractors. They operate small businesses under broker supervision.

The growing willingness of plaintiffs’ attorneys to name individual brokerages as defendants underscores a tension that has long existed in the independent contractor model. While agents are treated as independent for compensation and tax purposes, brokerages retain regulatory and supervisory responsibility. Recent lawsuits suggest courts may be receptive to arguments that brokerages cannot fully outsource risk to platforms, vendors, or agents when those systems shape consumer interactions, disclosures, and financial incentives.

Errors & Omissions insurance is written to protect brokerages first. Coverage for agents is derivative and limited.

As litigation focuses increasingly on agent-level fiduciary conduct, agents should understand where broker protection ends and personal exposure begins.

These issues are especially relevant for licensees navigating New York real estate licensing requirements, where broker supervision and disclosure obligations are already tightly defined.

Some agents may wish to ask whether individual or supplemental E&O coverage is available. This is not advice — but awareness.

A Changing Landscape: Independent MLSs and AI Lower the Barriers

One additional development is quietly reshaping the affiliation calculus for agents and brokers.

For much of the past several decades, large REALTOR®-affiliated brokerages have held a decisive advantage in marketing reach, listing exposure, and technology.

That gap is narrowing.

Newer independent MLS platforms such as NY State MLS and Life & Homes MLS, combined with AI-driven tools, are lowering barriers that once made independence impractical.

If I can access comparable technology and exposure independently, what additional risk am I assuming by affiliating with highly centralized systems?

That question does not require a single answer. But it is increasingly reasonable to ask.

A Quiet Warning

This is not an argument against professionalism or cooperation.

It is an observation that consolidation attracts litigation, centralization concentrates liability, and independent contractors ultimately bear responsibility for their own businesses.

For agents choosing where to affiliate, and brokers deciding how to structure operations, risk allocation deserves careful thought.

Further Reading

Readers interested in thoughtful industry analysis may wish to follow Notorious Rob (Rob Hahn) .