Following lengthy oral arguments earlier this month, Judge Wendy Beetlestone of the Eastern District of Pennsylvania today dismissed claims by buyer plaintiffs that Howard Hanna conspired with other brokerages to fix commissions, also affirming the company’s arguments regarding the appropriate antitrust analysis—at least for now.
The ruling represents another win for the independent brokerage, as it appears willing to fight the commission lawsuits after most of its peers have tapped out.
“We are pleased that the Court recognized that the complaint failed to plausibly allege that Howard Hanna entered into an unlawful agreement with its competitors,” a Howard Hanna spokesperson told RISMedia in a statement. “This is the second court to so hold, and we look forward to further victories. Howard Hanna has always focused on putting its customers first and it always will.”
Beetlestone also dismissed more than a dozen state-level claims based on consumer protection or unjust enrichment statutes, though some are likely to be refiled as the dismissals came on purely procedural grounds.
On June 12, Beetlestone listened to arguments around the complex legal underpinnings of the antitrust case, pressing lawyers both for Howard Hanna and the plaintiffs regarding how rules agreed to with NAR could be the basis of an antitrust conspiracy. She also asked both sides about the appropriate antitrust analysis—specifically, whether evidence that the rules offered pro-competitive benefits will be considered in the case, using the so-called “rule of reason.”
In the end, she decided the rule of reason is appropriate, allowing the court to consider aspects of the agreement or business that had pro-competive effects.
“But this decision is not trapped in amber; should subsequent factual development reveal that the underlying agreement has a different shape, a different mode of analysis may be proper at a later stage,” Beetlestone cautioned.
Notably, the Burnett case was decided under a “per se” analysis, which did not allow NAR or other defendants to introduce evidence or arguments that rules had a positive effect on competition. Industry luminaries subsequently decried this restriction and attributed the court loss at least in part to the per se limitations.
Regarding whether plaintiffs had made compelling arguments that Howard Hanna conspired with other brokerages to create rules like the Participation Rule (now repealed) to drive up commission rates, Beetlestone said “at best,” the allegations show Howard Hanna knew other brokerages were contemplating the same rules and were open to collaboration.
“(B)inding precedent holds that joining a trade organization, helping develop its rules, and enforcing those rules (even in collaboration with other members of the organization) do not plausibly establish the existence of a prior and separate horizontal agreement among competitors,” she wrote.
A lawyer for the plaintiffs told Beetlestone during oral arguments that even agreeing and enforcing the rules was a “conscious commitment to effectuate a scheme,” and described a so-called “hub-and-spoke” conspiracy, where all the big brokerages were conspiring with each other independently, but also through (and with) NAR as the “hub.”
Beetlestone disagreed, saying there was no “rim” of companies independently connecting and conspiring to create these rules.
Howard Hanna had argued that plaintiffs had only made the most superficial allegations regarding this conspiracy—essentially that its executives served on NAR boards during the times that the allegedly anticompetitive rules were created and affirmed.
That is enough at this early stage of the lawsuit, Beetlestone ruled.
“This evidence directly and circumstantially describes an agreement between Hanna and NAR—entities ‘at different levels’ of the real estate market—and thus plausibly suggests a vertical agreement,” she wrote.
Looking at the state law claims, Beetlestone dismissed allegations made under Rhode Island consumer protection laws based on a legal exemption in that state for claims involving real estate brokerage services. She also tossed claims in Colorado, Michigan, New York, Oregon, Pennsylvania, Virginia and Wisconsin due to a lack of evidence of “deceptive conduct” as required by those states.
In Arizona, Hawaii, Nevada, Utah and Massachusetts, plaintiffs failed to inform the attorneys general of those states before filing their lawsuit, as required by state statute, and so those claims were dismissed as well—although Beetlestone noted that plaintiffs belatedly filed notice, and no state has objected to the lawsuit.
