In less than a week, attorneys in the unprecedented Burnett-Sitzer class action commission lawsuit will make their opening arguments before a jury in Kansas City, Missouri, beginning what is likely to be a landmark historic trial that touches on the foundation of real estate.
Facing recent home sellers who are arguing that several National Association of REALTORS® (NAR) policies are anti-competitive and inflate commissions—specifically focused on buyer agent compensation—NAR and the other brokerages named in the suit will have their chance to prove that organized real estate is competitive and pro-consumer.
Two brokerages named in the suits (Anywhere and RE/MAX) already chose to settle with the plaintiffs, making what were superficially relatively minor changes to their practices while paying out a total of around $150 million.
But in the days leading up to the trial, the remaining defendants have suffered a series of defeats as they spar over jury instructions and depositions.
First, the judge allowed some of the plaintiffs to withdraw as class representatives, meaning they will not have to testify at trial, with lawyers for NAR claiming that this is an attempt to dodge cross-examination and calling the witnesses “critical” to their defense.
Then, just yesterday, the judge ruled that the jury can be made aware of the recent Anywhere and RE/MAX settlements (though not the amounts paid), something that NAR and the other brokerages have strenuously objected to, filing a last-minute appeal urging the judge to reconsider.
“(T)here is a substantial risk that informing the jury of the settlements creates the risk of ‘the jury mistakenly inferring that settlements are a concession of liability’ because the claims against the settling and remaining defendants ‘all revolve around the same general factual circumstances—’ NAR’s rules,” wrote NAR lawyers in a court filing.
While a jury will ultimately decide the case in what is expected to be a three week trial, after years of depositions and court maneuvers, the positions, evidence and arguments of both sides are now crystalizing, as plaintiffs and defendants have filed their trial briefs, offering a preview of how it will all play out in court.
According to its filing, NAR plans to focus on the allegedly pro-competitive effects of its rules in the market, while emphasizing that the kind of cooperation enforced between buyer and seller agents is flexible, and has precedent in other industries.
“Plaintiffs’ conspiracy allegations boil down to an argument that trade associations are walking conspiracies, which courts routinely have rejected,” NAR lawyers wrote.
They also claim that there is no “direct evidence” of conspiracy between NAR and the other defendant brokerages, characterizing brokerages’ use of NAR rules and policies as something that would have happened anyway.
“To sell a home, real estate agents must cooperate—and there is nothing negative or illegal about that cooperation,” they wrote. “Plaintiffs seek to make this normal and legal commerce grounds for liability.”
NAR lawyers also foreshadowed a potential fight over cross examination, saying they objected to plaintiffs playing videotaped depositions when some of the people deposed are later going to testify live.
For their part, lawyers for the plaintiffs characterized NAR’s mandatory offer of buyer agent compensation policy as “a market-shaping and distorting rule that has severe anticompetitive effects, stifling innovation and competition.”
“The (r)ule requires every home seller to offer payment to the broker representing their adversary, the buyer, even though the buyer’s broker is retained by and owes a fiduciary obligation to the buyer (who may be told, falsely, that the services of the buyer broker are ‘free’),” the plaintiffs’ lawyers wrote.
In 2021, NAR issued new guidance discouraging buyer agents from advertising their services as “free.”
Lawyers for the plaintiffs also emphasized how “entwined” NAR, the MLS industry and brokerages are, including through “parallel membership requirements” and the use of essentially copy-pasted rules applied to franchises and MLS members.
They also previewed the kind of damages they would be seeking, saying that the number would be “well more than $1.3 billion,” based on the premise that without NAR’s rules, no home seller would pay for buyer commission.
There also promises to be more jostling once the trial starts, with plaintiffs asserting that NAR is “resisting agreements” to authenticate documents produced by defendants.
While it was unclear exactly what sorts of documents this was referring to, recent settlement agreements entered into by RE/MAX and Anywhere require them to authenticate documents for the plaintiffs, even as they themselves are no longer defendants in the suit.
In a statement provided to RISMedia, NAR VP of Communications Mantill Williams said the goal was simply to make sure “documents introduced by plaintiffs at trial comply with the Court’s rules.”
“Plaintiffs continue to try to distract from what should be the main focus here. NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing,” Williams added.
The buyer agent affair
Also ahead of the trial, NAR held a webinar billed as an overview and Q&A session focused on the Burnett case. Speaking on the trial and the issues raised was NAR VP of Legal Affairs and Antitrust Compliance Lesley Muchow, who leaned heavily on the argument that NAR and the remaining defendant brokerages were fighting for consumers.
“NAR’s rules are very intentionally pro-consumer and pro-business competitive. And the realities are that the market sets a commission,” Muchow said. “Agent compensation is set between brokers and their clients and has always been negotiable at any point in the transaction.”
A win for the plaintiffs, Muchow claimed, would be “bad news for consumers,” and would force the industry “back into the 19th century,” decreasing transparency and creating more opportunities for fraud.
Notably, Muchow also pushed back against a proposal championed by some consumer advocates that buyers could finance their agent’s commission as part of their mortgage, rather than having the seller pay it. She described the process of making all the legal and practical changes for this to happen as complex and uncertain, arguing that it wouldn’t even necessarily lower costs for consumers.
But at the same time, Muchow said the NAR advocacy team “continue(s) to explore options in the event buyers would be forced to pay out of pocket for professional representation.”
Plaintiffs in both the Burnett and the upcoming Moehrl suit have also heavily leaned on the fact that in Europe, real estate commissions are much lower, and buyer agency is rare. Muchow responded by saying that for Europeans, home buying is “more time consuming, it’s impersonal, it’s costly, and ultimately less consumer friendly,” despite the lower fees.
“With volumes of property, neighborhoods, transaction, legal and regulatory detail to navigate, it’s really important and in the consumer’s best interest to have an expert, a local professional to manage the process,” she said.