Facing a $1.8 billion judgment and a cavalcade of copycat lawsuits after the Burnett verdict, the vast majority of real estate brokerages made the business decision to quickly settle, rather than risk more court losses. Presumably, the same logic would apply to lawsuits filed by homebuyers, which are not fully covered by settlements in the seller cases (consisting of Burnett and most of the copycats).
Howard Hanna, which has long shown an independent streak, might be finding success in a different approach to the buyer cases. As other companies appear to be moving toward striking deals in those lawsuits, the Pennsylvania-based brokerage is pushing ahead with a new defense in a new venue, according to a court transcript obtained by RISMedia.
“Maybe there was a conspiracy that (the National Association of REALTORS®) facilitated. But there (are) no facts to suggest we participated in whatever conspiracy may have happened,” said Dave Gringer, a lawyer representing Howard Hanna at the hearing. “And, in fact, there’s good reason to believe we didn’t.”
The new venue appears to have opened possibilities in the buyer case (which makes largely the same accusations of price-fixing and conspiracy as the seller cases), as a new judge is considering other elements of the underlying legal theories, as well as Howard Hanna’s unique place in the alleged misconduct.
The recent debate took place at a federal courtroom in the Eastern District of Pennsylvania yesterday, where Howard Hanna previously petitioned to have the case moved, successfully arguing the original venue—Illinois—was not appropriate due to the company’s lack of any connection to that state.
Judge Wendy Beetlestone, now overseeing the Howard Hanna case, appears to be taking a different approach than judges in other buyer lawsuits, allowing both defendants and plaintiffs an in-person chance to lay out their arguments. She is also specifically considering whether to apply a different, less strict antitrust standard than what was used in the Burnett case, while also deciding whether or not to let the case move forward at all.
At the hearing, Howard Hanna’s lawyers were able to reference specific developments in the commission lawsuit landscape in order to support the position that there is not enough evidence to connect them to the NAR rules, and specifically sought to distance themselves from NAR—as they have also done outside the courtroom.
“Remember, Your Honor, there’s been a public trial about conspiracies in this industry. A public trial. And they have all the discovery they have from the other cases they’ve brought. And they can’t allege a single fact about my client,” Gringer added.
Specifically, Gringer and Seth Waxman, another lawyer representing Howard Hanna, pointed to MLSs that don’t follow NAR rules, including its “home base” of West Penn MLS, which “was formed at the instigation of the Hanna companies,” according to Waxman.
Those MLSs have successfully been dismissed from commission copycat suits, Waxman said.
Although Beetlestone gave little indication on where she was leaning, she did question plaintiffs on whether there was specific evidence showing that Howard Hanna had an active role at NAR promulgating policies like the (now repealed) Participation Rule, or whether they were alleging any coordination with other brokerages.
“Is that how you would respond to Mr. Waxman’s statements, that nothing—there’s no linkage between Hanna executives’ participation and the rule? I mean, are you saying—it was continuously done, so therefore it doesn’t matter when they were there, they were always engaged. Is that your point?” she asked.
Noelle Forde, a lawyer representing the plaintiffs, answered that this should still be taken as evidence of a “scheme.”
“I can’t say that we alleged that (Howard Hanna executives) were on the (NAR) board every single year. But they were members of NAR during the time period and they were required to comply with the rule and presumably they did,” she said. “That would be the reasonable inference. And the rules had the effect of increasing prices.”
As the industry seeks to put commission lawsuits in the rearview, the buyer cases represent an uncomfortable reminder that commission litigation is not over. Both Beetlestone and Judge Andrea Wood, who previously oversaw the larger Batton buyer case, ruled that the seller cases do not nullify buyer claims. Beetlestone also agreed with Wood that buyers are likely harmed by the rules, based on allegations and evidence at this early stage.
But Beetlestone appeared at least somewhat open to shifting tact in other areas, specifically regarding whether defendants can argue that NAR rules actually had a pro-competitive effect on the market. Notably, Judge Stephen Bough, who oversaw the Burnett case, applied a different standard that mostly disallowed defendants from making these arguments.
At the same time, Waxman said he wanted “to be very clear” that at this stage of the litigation, Howard Hanna is not arguing that the NAR rules were, in fact, pro-competitive, as NAR and other big brokerages have sought to do.
In the larger buyer case, Wood declined to make a determination on these standards, and the judge currently overseeing the case, LaShonda Hunt, has also not yet done so.
Getting in front of a new judge might be an end to itself. Defendants in other cases complained on several occasions that plaintiffs were “venue shopping” to bring their lawsuits to Missouri and Bough, claiming that Bough was much more friendly to their claims.
Last year, Gringer told RISMedia that he didn’t believe every case would follow Burnett, pointing out that real estate is not a monolithic business, despite what was represented in that case. Both judges and juries will eventually have to examine the factual basis underpinning claims against specific companies in specific regions.
Speaking to Beetlestone yesterday, he reaffirmed this point, specifically noting that companies like Howard Hanna that mostly operate at a regional level have essentially no connection to other entities that participated in the alleged conspiracy to fix prices.
“Many of the firms don’t compete in the same areas,” Gringer noted. “Our company is really focused on…rust belt-type areas. You know, (plaintiffs) didn’t mention Redfin as a co-conspirator. You’re not going to find any Redfin agents in some of the places we’re operating. We’re not conspiring with Redfin.”
