The COURT REPORT is RISMedia’s weekly look at current and upcoming lawsuits, investigations and other legal developments around real estate.
Four days of testimony set battle lines in Zillow-Compass showdown
With top executives, brokers and a mob of journalists packing a high-rise federal courtroom in Manhattan last week, the public got its first glimpse of how the fight between portal behemoth Zillow and mega-brokerage Compass is going to play out—both in their lawsuit and more broadly across the real estate world.
The evidentiary hearing was not to decide the merits of the case after Compass sued Zillow back in June over new listing restrictions. Rather, it was for Judge Jeannette Vargas to decide whether she will block Zillow’s rules from going into effect while the rest of the lawsuit plays out, with Compass claiming it (as well as agents and consumers) will be “irreparably harmed” if the rules are allowed to remain in place.
But over the course of about 30 hours of testimony, including from Compass CEO Robert Reffkin and Zillow CEO Jeremy Wacksman, most revealing to real estate professionals was how the two companies are approaching the issue of private listings, with Compass seeking to show that Zillow’s new rules serve only to consolidate its power, while Zillow arguing that Compass’s private listing campaign is reckless and at the expense of its own agents.
Among many other new revelations, Compass revealed documents that show Zillow at least contemplated “hardline” tactics against brokerages and MLSs as it worried a “contagion” of private listings could hurt its business, while Zillow showed misleading communications from Compass executives to agents regarding the impact of using a private listing.
Compass also presented communications between Zillow executives and Redfin CEO Glenn Kelman, alleging that the two portals conspired over the rules. Zillow has strongly denied this, noting that it talked extensively about its rules with numerous industry stakeholders.
Vargas is not expected to rule on the temporary injunction until sometime after Dec. 5, when both parties file post-trial supplements.
Michigan brokers suing NAR say policy tweaks support their case
After the National Association of Realtors® (NAR) made comprehensive updates to MLS policies—saying that most are meant to “modernize” and remove “outdated practices”—brokers who are currently suing NAR are citing the changes as evidence that these policies ran afoul of the law.
The broker lawsuit, known as Hardy v. NAR, was the first of a handful of post-settlement federal legal claims by brokers, who have challenged Realtor® membership requirements and fees, mostly focusing on MLS access.
“This admission is critical to the issues raised,” the Hardy plaintiffs wrote to the judge overseeing the case, “and rebut the Defendants’ arguments that the previous policy of the NAR requiring membership in its organization in order for brokers and agents to access the MLS did not violate Anti-trust law,” the filing reads.
The policy changes in question removed language that said “(t)o the extent permitted by law, the National Association remains firmly and unequivocally committed to the principle that association membership is a reasonable condition of participation in the association’s multiple listing service.”
In a statement provided to RISMedia, NAR said it “stands by…pro-competitive, pro-consumer local broker marketplaces,” adding that it would “respond directly in court.”
California agent becomes key witness in Pulte dust-up
A real estate agent, Christine Bish, has become a central figure in a Justice Department investigation examining the conduct of Trump administration officials during a mortgage fraud probe targeting Senator Adam Schiff.
Federal prosecutors are investigating whether two Trump allies—Justice Department official Ed Martin and FHFA Director Bill Pulte—improperly used unauthorized individuals, including Bish, to gather information and act as witnesses in their investigation.
Bish was questioned by prosecutors in Maryland about her communications with Martin and Pulte, with subpoenas seeking details about anyone “claiming to be acting at the direction” of these officials. Bish herself is currently running for Congress as a Republican in California’s 6th congressional district, covering parts of the Sacramento metro region.
She told the AP that Pulte called and left a voicemail after she submitted allegations against Schiff to the FHFA, but denied that she had a conversation with him.
Lawsuit targeting Zillow adds allegations from “confidential witness”
In a class-action lawsuit focused on Zillow’s mortgage referral and fee structures, plaintiffs last week added a bevy of new accusations through “confidential witnesses”—current and former loan officers and agents who worked with the company—who claim Zillow sought to hide the fact it was funneling customers to its mortgage business.
“According to (one of the confidential agents), although Zillow does not put it in writing, Zillow’s representatives tell agents in the Zillow Flex and Premier programs that they have to steer clients to Zillow Home Loans, and that the more clients agents steer to Zillow Home Loans, the better their leads will be,” the lawsuit claims. “Zillow also has certain minimum quotas that the agents must meet, or they are kicked out of the program.”
The plaintiffs—represented by one of the same law firms that led the initial commission lawsuits—claims that these practices violate the Racketeer Influenced and Corrupt Organizations (RICO) act, as well as the Real Estate Settlement Procedures Act (RESPA), and have “extract(ed) hundreds of millions if not billions of dollars from Plaintiffs and Class Members.”
According to the filing, Zillow also “cherry-picks” buyers who will easily qualify for loans and drops those that require more work, according to one agent cited in the lawsuit.
Zillow did not respond to a request for comment last week.
