In a potentially precedent-setting move, a federal judge recently dismissed an MLS that is not affiliated with the National Association of REALTORS® (NAR) from a class-action commission lawsuit, finding that certain rules involving offers of compensation are not as “unilateral” as alleged by plaintiffs.
In one of the many Burnett copycat suits filed late last year, recent homesellers had targeted BAREIS, a California broker-owned listing service with accusations of conspiracy and price-fixing, largely built on the premise that “mandatory” offers of compensation inflated commission costs and harmed consumers.
But after several months of proceedings, Judge Haywood Gilliam Jr. wrote that the specific rules adopted by BAREIS left open the possibility of offering nothing to a buyer agent, with his decision hinging on two key words in the MLS’ policy.
“As written, these rules do not require what Plaintiff alleges they do,” Gilliam Jr. wrote. (The) reference to a ‘blanket, unilateral contractual offer of compensation’ is modified by ‘if any.’ The inclusion of ‘if any’ belies the allegation that ‘a blanket, unilateral contractual offer of compensation’ is mandated by the operation of the Rule itself. If it is possible to offer zero dollars, then such an offer is definitionally not required, regardless of whether it is actually made very often.”
With the deadline for opting in to the NAR settlement passing just yesterday, this ruling could provide an opening for those MLSs who choose to go their own way and confront current—or future—commission-based class-action lawsuits on their own terms. While NAR had long interpreted its “participation rule” as requiring some offer of compensation, BAREIS has argued that its largely similar rules are different enough to separate it from the national association’s alleged misconduct.
“The BAREIS MLS Rules illustrate that broker-NAR-BAREIS members did not slavishly adopt the allegedly anticompetitive NAR rules,” BAREIS lawyers wrote in a March filing. “Plaintiff’s conclusory theory that the NAR brokers (who sit on BAREIS boards and committees) agreed to follow the NAR rules as directors of BAREIS breaks down in the face of the actual facts.”
BAREIS also highlighted the “if any” qualifier as separating it from NAR’s rules, and undermining plaintiffs claims the commission offers were mandatory.
It is unknown how many NAR-unaffiliated MLSs are planning to continue on their own path, with at least one prominent listing service standing by its rules and publicly opting out of the NAR settlement.
In the BAREIS case, Gilliam Jr. is notably allowing plaintiffs to amend their accusations and attempt to “reframe” the lawsuit or “marshal new facts” to show BAREIS engaged in anticompetitive conduct, though at press time plaintiffs had not attempted to do so.
A lawyer representing the plaintiffs previously told RISMedia her firm does not comment on pending litigation. BAREIS did not immediately respond to a request for comment.
Other recent developments in this litigation could also have implications for the industry at large, with Gilliam Jr. handing down mixed rulings as far as how he will handle companies involved in settlement agreements.
While essentially every defendant had requested a pause in the case at least until the NAR settlement receives a final approval hearing in November, Gilliam Jr. only granted that request for companies who had already struck their own settlements, or were covered by NAR’s settlement.
Windermere and eXp were not granted the stay, with neither having their own agreement or having opted into the NAR settlement (at least at the time when Gilliam ruled earlier this month).
“The Court does not see a reason to grant a stay that would implicate these…Defendants, since the impact of the NAR settlement (or other nationwide settlements) on Plaintiff’s claims against them is uncertain,” he wrote.
That means these companies will face further deadlines, expenses and other potential pitfalls between now and November, even if they are eventually protected by the NAR settlement. This kind of pressure could certainly push entities outside of the NAR agreement to come up with their own deals separately, if other judges see the issue the same way Gilliam Jr. did.
Emailed inquiries to Windermere and eXp were not immediately returned.
Judges in New York, Massachusetts and Pennsylvania have ruled, or will soon rule on similar requests to stay proceedings or dismiss defendants in Burnett copycat suits, with a key hearing in the lawsuit targeting NAR-independent entities in Manhattan scheduled for next Wednesday, June 26.
