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Plaintiffs in the bombshell Sitzer | Burnett and Moehrl antitrust commission cases asked a federal court Friday for initial approval of a proposed settlement with the National Association of Realtors, triggering a deadline for brokerages left out of the deal to take action to be covered.
Attorneys for the plaintiffs on Friday filed a motion for preliminary approval of the deal, which would require NAR to pay $418 million plus interest over the course of four years and to make several rule changes, including eliminating the rule at the center of multiple antitrust lawsuits filed against the 1.5-million-member trade group. Known as the cooperative compensation rule or the Participation Rule, it requires listing brokers to make blanket, unilateral offers of compensation to buyer brokers in order to submit a listing in a Realtor-affiliated multiple listing service.
NAR would also agree not to create rules that allow listing agents to set compensation for buyer brokers. Brokers would be required to work with buyers to enter into written buyer representation agreements before touring homes and could still negotiate pay via fixed-fee commissions paid directly by consumers, concessions from sellers or a portion of the listing broker’s compensation.
If the proposed settlement is preliminarily approved, NAR would implement the rule changes in July.
In their filing, plaintiffs’ attorneys said the proposed deal provides “an immediate, substantial, and fair recovery for the Settlement Class” and is “the product of a half-decade litigation and extensive negotiations” over nearly four years.
“The Settlement was informed by weighing the substantial monetary, practice change, and cooperation relief against the risks, cost, and delay of further litigation (including appeals), as well as limitations on NAR’s ability to pay the full amount of any trial judgment entered against it,” the motion reads.
“The Settlement Agreement, if approved, ends litigation with NAR, and to the extent that they comply with the relevant terms of the Settlement Agreement, state, local, and territorial Realtor associations, many of NAR’s members, Realtor MLSs, and small brokerages,” the motion adds.
“It also provides a framework for larger brokerages and non-Realtor MLSs to resolve potential liabilities. Importantly, any entity receiving a release must agree to practice changes described in the Settlement.”
Preliminary approval from the court, the U.S. District Court for the Western District of Missouri, allows members of the settlement class to be notified of the proposed deal and to be provided options for submitting claims, objecting to the deal or opting out of the deal, according to the filing.
The proposed settlement class, which the filing asks the court to certify, includes millions of homesellers nationwide and various time periods depending on where particular lawsuits have been filed and federal and state law limitations. Specifically, it “includes all persons who sold a home that was listed on a multiple listing service anywhere in the United States where a commission was paid to any brokerage in connection with the sale of the home in the following date ranges:
- Homes listed on Moehrl MLSs: March 6, 2015 to date of Class Notice;
- Homes listed on Burnett MLSs: April 29, 2014 to date of Class Notice;
- Homes listed on MLS PIN: December 17, 2016 to date of Class Notice;
- Homes in Arkansas, Kentucky, and Missouri, but not on the Moehrl MLSs, the Burnett MLSs, or MLS PIN MLS: October 31, 2018 to date of Class Notice;
- Homes in Alabama, Georgia, Indiana, Maine, Michigan, Minnesota, New Jersey, Pennsylvania, Tennessee, Vermont, Wisconsin, and Wyoming, but not on the Moehrl MLSs, the Burnett MLSs, or PIN MLS: October 31, 2017 to date of Class Notice;
- For all other homes: October 31, 2019 to date of Class Notice.”
The filing defends the nationwide scope of the proposed settlement which extends beyond the proposed classes in the lawsuits that have been filed so far. Sitzer | Burnett, for example, only covers four MLS markets while Moehrl covers 20 MLS markets across the country.
“[B]ecause any non-nationwide settlement would have left NAR exposed to litigation involving claims exceeding its ability to pay, the only feasible means for Plaintiffs to obtain any settlement at all was to settle on a nationwide basis on behalf of the entire Settlement Class,” the motion says.
“The Settlement is fair and reasonable in light of NAR’s financial condition and its inability to satisfy even the Burnett judgment. The Settlement obtains greater than 50% of NAR’s net assets.
“Thus, the Settlement captures an amount that represents a majority of NAR’s liquid assets, without completely depleting the working capital the organization requires to operate. This is especially so where NAR anticipates a decline in future membership revenues as a result of this Settlement and current market conditions.”
The case parties have agreed to not send out notice to the settlement class until at least August 17, 2024 — 120 days after Friday’s filing of the preliminary approval motion — in order to allow NAR enough time to implement its practice changes and to give brokerages and MLSs not automatically covered by the deal time to opt in.
Katie Johnson
On the morning of April 20, Katie Johnson, NAR’s chief legal officer, emailed the latter, letting them know that the motion had been filed and the clock for them was now ticking to indicate that they wanted to join in on the deal. Only brokerages with less than $2 billion in total residential sales volume in 2022 don’t have to take any action to be covered.
“As the brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion, I’m writing to let you know that we will be sending an email today to all NAR members to let them know that the Motion for Preliminary Approval was filed late last night,” Johnson wrote.
“The filing activates a number of deadlines, including the deadline for MLSs and brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion to opt-in to the release if they so choose. That deadline is now June 18, 2024.
“The settlement is subject to final Court approval, and plaintiffs have requested a hearing on final approval of the settlement to be held on November 22, 2024. We will let you know when that date is confirmed.”
Brokerages who opt in to the NAR deal must either deposit into an escrow account an amount equal to 0.0025 multiplied by the brokerage’s average annual total transaction volume over the most recent four calendar years — or, if they don’t have the ability to pay that amount, participate in non-binding mediation with the plaintiffs at their own cost. As an example of the first option, a brokerage with $2 billion average annual total transaction volume would be required to pay $5 million.
More than 90 brokerages would not be automatically covered, among them some of the biggest names in real estate including Compass, eXp Realty, Douglas Elliman, Redfin, Howard Hanna Real Estate, @properties, HomeSmart, Weichert Realtors, United Real Estate, William Raveis, Fathom Realty, The Real Brokerage, John. L. Scott Real Estate, Brown Harris Stevens, Realty One Group, The Agency, and Baird & Warner.
Some, like Compass, have already negotiated their own settlements separate from the NAR deal.
Many of the brokerages not automatically covered are current defendants in the commission lawsuits that proliferated after a landmark verdict in October in Sitzer | Burnett awarded $1.78 billion in damages to about 500,000 Missouri homesellers after a jury found that the NAR, Keller Williams, RE/MAX, Anywhere, HomeServices and two of its subsidiaries, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates.
Read NAR’s email to large brokerages:
From: Katie Johnson
Sent: Saturday, April 20, 2024 7:44 AM
Subject: Litigation Update: Motion Filed for Preliminary Approval of Settlement Agreement
Good morning, all.
As the brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion, I’m writing to let you know that we will be sending an email today to all NAR members to let them know that the Motion for Preliminary Approval was filed late last night. You can see a copy of that email below.
The filing activates a number of deadlines, including the deadline for MLSs and brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion to opt-in to the release if they so choose. That deadline is now June 18, 2024. As explained in the message below, those appendices and instructions are available on facts.realtor.
We have spoken with many of you or your legal counsel the past few weeks. Please continue to reach out if we can be of any assistance.
Respectfully,
Katie Johnson
+++++
Hello, all.
I’m writing to provide an update regarding the proposed settlement agreement we announced on March 15, 2024, to end litigation of claims brought on behalf of home sellers related to broker commissions.
Late last night, on April 19, 2024, Plaintiffs’ counsel filed a Motion for Preliminary Approval of this agreement with the federal court in the Western District of Missouri. Importantly, this filing initiates the 60-day time period during which all REALTOR® MLSs, brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion, and non-REALTOR® MLSs who want to be covered by the settlement must take action. The deadline for these actions is June 18, 2024.
REALTOR® MLSs: In order to be released under the settlement agreement, all MLSs wholly owned by REALTOR® associations must agree to and execute Appendix B – REALTOR® MLS “Opt In” Agreement and return it to the email addresses realtorsoptin@jndla.com, realtorsoptin@cohenmilstein.com, and nargovernance@nar.realtor within 60 days.
Brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion: In order to be released under the settlement, eligible brokerages must agree to and execute Appendix C – Brokerage “Opt In” Agreement and return it – along with the required documentation and indication noted in paragraph 20 of Appendix C – to the email addresses realtorsoptin@jndla.com, realtorsoptin@cohenmilstein.com, and nargovernance@nar.realtor within 60 days.
Non-REALTOR® MLSs: In order to be released under the settlement, MLSs not wholly owned by REALTOR® associations must agree to and execute Appendix D – Non-REALTOR® MLS “Opt In” Agreement and return it – along with the required indication noted in paragraph 20 of Appendix D – to the email addresses realtorsoptin@jndla.com, realtorsoptin@cohenmilstein.com, and nargovernance@nar.realtor within 60 days.
For questions about completing an opt-in agreement, please contact Mike Rohde at mrohde@nar.realtor.
Scrivener’s errors were corrected in the filed version of the settlement agreement, but no substantive changes were made. The corrected version is available on facts.realtor. Also available on facts.realtor, are fillable versions of the appendices with instructions for those entities that desire to opt-in.
We expect that the Court will rule on the motion for preliminary approval soon. The practice changes set forth in the settlement agreement are slated to take effect in late July of this year, and class notice will take place no earlier than August 17, 2024. The settlement is subject to final Court approval, and plaintiffs have requested a hearing on final approval of the settlement to be held on November 22, 2024. We will let you know when that date is confirmed. For a more comprehensive view of what’s ahead, please see an estimated timeline here. Below this email, I have also included a handful of FAQs specific to this filing.
We will continue to keep you informed as the settlement process progresses and the time for implementation of the practice changes approaches. As always, if you have any questions, please don’t hesitate to reach out to me or my team.
Thank you,
Katie
Read the motion for preliminary approval: