Editor’s note: The COURT REPORT is RISMedia’s weekly look at current and upcoming lawsuits, investigations and other legal developments around real estate.
The last couple weeks were anything but quiet in the courtroom, with some major developments in several important cases. With 2024 fast approaching, we learned that another major commission case could be tried before 2025, and that an appeal of the Burnett verdict might be heard in the same time period.
Separately, one of the largest real estate companies in the world is being sued by a former CEO, who alleges the company and its co-founder—one of the most powerful real estate executives—committed fraud, retaliated against franchises and developed a paranoid obsession over a rival company.
While the justice system moves very slowly for the most part, the past few months have proven that big shifts can happen suddenly. Whatever happens next, it pays to be prepared.
‘You made the bet, and you lost the bet’
The biggest legal development last week was probably in what was once considered a dormant case, in the United States v. National Association of REALTORS® (NAR). Heard by U.S. Court of Appeals, D.C. Circuit, a panel of three judges heard oral arguments from the Department of Justice and NAR regarding the status of a DOJ investigation into alleged antitrust practices by the REALTOR® organization.
Focused on similar rules and practices as the ongoing class action suits, the DOJ agreed to close that investigation under the Trump administration, but is attempting to reopen it under Biden. This year, a federal judge ruled that the DOJ had to abide by the terms of the original agreement.
But the district appeals court appeared incredulous of NAR’s arguments, with one judge positing that NAR signed the agreement hoping that a second Trump term would mean the investigation stay closed.
“You made the bet, and you lost the bet,” he said.
If the appeals court rules that the DOJ can reopen its investigation—and if the Supreme Court does not intervene—that investigation could quickly ramp up, and seek much more expansive penalties or rule changes from NAR than it did three years ago.
Plenty of uncertainty remains, and a decision by the court could take months. But when and if the DOJ is allowed to pursue its inquiry, real estate practitioners would likely see a much swifter and more significant push for change around issues like buyer commission, “cooperative compensation” and MLS policy.
‘Aggressively defend against…baseless claims’
In the summer, former Keller Williams CEO John Davis sued the company and Co-Founder Gary Keller for what he claimed were unfair business practices and other misconduct. But last week, Davis expanded his claims, saying that Keller is pocketing increased tech fees the company has implemented, and continues to bully and threaten franchise owners over cap changes.
Davis also claims Keller owned or invested in certain companies that he pushed franchise owners to work with, and that Keller has held a grudge against rival brokerage eXp that borders on “paranoia.”
A Keller Williams spokesperson said Davis’ lawsuit amounted to an attempt to garner media attention, and that the company would “continue to follow the law and aggressively defend against his baseless claims.”
‘As soon as it’s reasonable’
The Moehrl class action case, which is similar to the Burnett suit won by plaintiffs, alleges that homesellers were forced to pay inflated commissions due to NAR rules and a conspiracy with big brokerages.
Last week, the judge in that case asked the parties—including NAR, Keller Williams and HomeServices—to be prepared for a trial date in Q4 2024, after initially targeting earlier next year.
Though NAR requested that the schedule be altered as they parse out an appeal and new legal issues arising from Burnett, the judge declined, saying she would set a specific date “as soon as it’s reasonable.”
In good news for the defendants, she also said she would not be depending too much on precedent set in the Burnett case, which NAR and the other defendants continue to claim was tried incorrectly.
Another copycat
Attorneys were extremely quick to begin filing new lawsuits in the wake of the Burnett verdict. Another suit, filed recently in Georgia federal court, makes many similar claims to Burnett, according to the Atlanta Journal Constitution.
Notably, RE/MAX is named in this suit, despite settling the other seller-side commission lawsuits. The size of the class in this suit would also likely be larger than Burnett, as plaintiffs seek to include all recent homesellers in Georgia.
Finalizing settlements
While Anywhere and RE/MAX have so far been unopposed in seeking settlements in the Moehrl and Burnett cases, there is still technically a chance that those deals could fall apart.
A final ruling on the settlements could come as soon as May, according to an attorney for RE/MAX, at which point the companies and all their agents and franchises would be absolved from claims in those cases. The two companies still face other commission-focused lawsuits.
Mortgage violations
Bank of America last week agreed to pay $12 million after being accused of violating federal law by failing to collect data on mortgage customer’s race, sex and other protected characteristics.
The Consumer Financial Protection Bureau (CFPB) said that from 2016 to 2020, loan officers at the 17th-largest mortgage lender falsely claimed that customers declined to provide the information, after the loan officers failed to ask them in violation of federal law.
Bank of America said it has taken “additional steps” since 2021 to ensure it collects the proper data.
