Buyer-Side Commission Suit Expands; Potential Damages Pushing $1 Trillion

In the immediate aftermath of their victory in the Burnett trial, as recent homesellers won a $1.78 billion verdict against the National Association of REALTORS® (NAR) and two corporate brokerages, lawyers filed a nearly identical suit against more real estate companies, taking their class-action claims from Missouri across the entire country.

And it looks like the team behind another major commission-focused lawsuit were paying attention. Last week, the attorneys behind the Batton lawsuit—formerly known as Leeder—were also inspired to expand their case, according to court filings.

Both these cases are named after the same lead plaintiff, Mya Batton, a Tennessee resident. Both suits make similar claims to the Burnett case—that NAR and big brokerages conspired over rules that would inflate commissions—with one key difference.

Batton and the other plaintiffs are recent homebuyers, rather than homesellers like the plaintiffs in Burnett (and its nationwide carbon copy, known as Gibson). These cases allege that the same rules that Burnett plaintiffs successfully argued harmed sellers are also harming buyers.

Specifically, they claim buyers were disallowed or discouraged from negotiating commissions, were falsely told that buyer agent services are free and were steered to properties with higher commission rates, all of which contributed to higher commission costs (baked into the price of the home) and inferior services.

While the original Batton case named NAR and the same original four brokerage defendants as Burnett—Keller Williams, HomeServices of America, RE/MAX and Anywhere—the second Batton suit adds eight new big real estate companies, but removes NAR. 

Those eight companies are Compass, eXp World Holdings (the parent company of eXp), Redfin, Weichert, United Real Estate, Howard Hanna Real Estate Services and Douglas Elliman, the same companies named in the Gibson suit. Notably, RE/MAX and Anywhere’s settlements ahead of the Burnett trial do not absolve them in Batton.

The new Batton suit also expands its request for damages from 17 states and territories to 25 (including Washington, D.C.). 

That means that nearly all the largest corporate brokerages are facing the possibility of having to pay damages on both sides of millions of transactions. While the Gibson suit is not explicit in what time period it will cover, both Batton suits are seeking to include buyers who used MLS-affiliated MLSs from Dec. 1, 1996 through today.

This date coincides with the adoption of NAR’s “participation rule,” requiring blanket offers of compensation to buyer agents, which plaintiffs in the Burnett case successfully argued constitutes an unlawful anti-competitive restraint. 

There were slightly over 154 million home sales across the country in that time period, according to NAR and Federal Reserve data. If the Batton plaintiffs were able to expand their claims for damages across all 50 states, the suit would cover 138 million transactions (based on roughly 90% taking place on NAR-affiliated MLSs).

And assuming the plaintiffs were to triumph in Batton, and a jury were to award damages roughly in line with what was calculated in the Burnett case, the dollar amount would come to slightly under $1 trillion, at $970.5 billion.

If the Gibson case also certifies a nationwide class using a time period similar to the Burnett case—roughly the last seven years—damages would be about $262 billion, using the same data.

These numbers are obviously untenable for the industry, and it seems exceedingly unlikely that these cases will advance to the point that these kinds of damages are considered, as all the combined revenues of all the named defendants would only cover a tiny fraction of that amount.

In the leadup to the Burnett case, lawyers for HomeServices of America decried the plaintiffs’ damage calculations as an “all or nothing” strategy, and spoke disparagingly of the combined $138 million settlement that RE/MAX and Anywhere agreed to as “pennies on the dollar.”

But clearly, attorneys were emboldened by the Burnett verdict (which is still under appeal), and likely by how fast the jury returned it with full damages, deliberating for about two and half hours after two weeks of testimony.

Whether or not the Batton cases will go forward at all is still uncertain, with the judge in the original currently considering a motion to dismiss, and the second in its very early stages.

Notably, the Gibson case is currently assigned to Judge Stephen R. Bough, who also oversaw the Burnett case and took a relatively narrow view of the antitrust questions involved, disallowing NAR from arguing that its rules are pro-competitive. 

The second Batton case was recently assigned to Judge Edmond Chang, in the federal district court of Northern Illinois, on NAR’s home turf in Chicago. The first Batton case is being presided over by Judge Andrea Wood, in the same court.

Judge Wood is also overseeing the Moerhl case—another limited but larger lawsuit filed by sellers—which is scheduled to go to trial in the first half of next year.