The Eighth Circuit Court of Appeals in Kansas City, Missouri, heard oral arguments in the Sitzer-Burnett settlement appeal on Jan. 14, with attorneys representing objectors as well as defendants debating the validity of the settlement amount and its effectiveness in addressing homebuyer claims.
Nearly two years after the landmark March 2024 settlement—where the National Association of Realtors® (NAR) agreed to sweeping rule changes and $418 million in damages, and brokerage defendants reached collective settlements well into the hundreds of millions—the case continues to face legal scrutiny over whether the nationwide agreement adequately reflects the $1.78 billion jury verdict (with treble damages of more than $5 billion) reached in October 2023, when a Missouri court found NAR and major brokerages liable for conspiring to artificially inflate real estate commissions.
Settlement scope and amount in question
In October 2023, a Missouri jury awarded $1.78 billion in damages to home sellers harmed by the alleged NAR commission-fixing rules, an amount that was eligible to be increased to over $5 billion through the application of mandatory treble damages under the Sherman Antitrust Act. As part of the March 2024 settlement, defendants agreed to settle nationwide cases for $1.78 billion across all settlements—a figure that has drawn sharp criticism from appellants (those who apply to a higher court for a reversal of a lower court’s decision) and raised questions about defendants’ ability to pay.
Daniel McArdle Booker, one of the attorneys for the appellants, argued that the numbers don’t quite match up.
“The parties now are looking to settle with essentially every harmed home seller in every one of these conspiracies…all across the country for less than the bottom line, pretrebling, amount for just the Missouri home sellers,” Booker explained. “As I count it, it now stands at about $1.78 billion in proposed settlements…so $700 million less for everybody across the whole country than what the jury found was the damages…for Missouri homeowners.”
Patrick Knie, attorney for a group of four appellants referred to as the South Carolina objectors, argued that the court relied on counsel’s assessment that the settlement amount was fair, as opposed to a review of financial data. “Not only did the court not require it, but it denied objectors timely motion for discovery of financial records,” said Knie, who also objected to the lower court’s requirement that objectors’ attorneys and objectors themselves appear at every hearing.
Knie also argued against the enlargement of the class size, referring to “the theft of the $1.7 billion verdict from a class of 600,000 Missourians to be distributed instead to 35 million home sellers in the United States.”
“There is case law that says that a class can somewhat be enlarged from an original verdict, but this is not somewhat being enlarged. This is going from 600,000 to 35 million,” said Knie. “The Burnett verdict was for Missourians, not South Carolinians and not for class members and other states. We should be allowed to proceed in our own states with the lawsuits we have filed, which the lower court has stayed.”
Judge Lavenski Smith pointed out that the wide disbursement of settlement funds is typical in large class-action cases.
“To some degree, you’re going to always have this when there is a settlement,” said Smith. “That’s part of giving up the opportunity for a greater return—a potential return in order to achieve a resolution of the dispute on a large scale. That’s what class actions settlements typically involve.
“If the case resulted in the type of damages that the Missouri case portended across the country, the effect on the various defendants could be bankruptcies and destruction, economic destruction that would essentially hold the potential for reducing what anyone gets,” Smith added.
Scott McCreight, representing the original Burnett plaintiffs, Rhonda Burnett, Jerod Breit, Jeremy Keel, Frances Harvey and Hollee Ellis, disclosed the dire financial circumstances that drove the settlement.
“When we settled first with Anywhere and REMAX, we were just days away from trial in Burnett, and we were confident, but no one ever knows how a jury trial will turn out…And most disturbing of all, we had the fact that none of these defendants could afford to pay the Burnett verdict. Approximately $1.8 billion, trebled to $5.4 billion, and the day after the verdict came down, Keller Williams came to us and said, ‘We’ve engaged bankruptcy counsel; we’re actively considering it.’ And the other defendants were making similar overtures.”
According to McCreight, the financial burden of the settlement forced Keller Williams “to borrow money just to make the first payment.”
Matthew Rowen, an attorney present on behalf of Keller Williams, confirmed this assessment, stating that while “it was difficult for my client to actually make the payment, they had to obtain financing, which again underscores the real risks…real world risks that would have resulted but for a settlement.”
No justice for homebuyers?
James R. Layton, an attorney representing James Mullis—who both bought and sold a home during the settlement period and is suing NAR and big brokerages in an Illinois-based class action—focused on whether homebuyers’ claims should be released in a settlement originally framed as a seller case.
Although there is some overlap, Layton argued that buyer and seller claims are fundamentally distinct transactions.
“The nature of damages is different, yet the district court concluded that this particular settlement covers our claims; that is, buyers’ claims as well as the sellers’ claim, even though the settlement agreement itself says nothing expressly about that,” Layton explained.
“(Y)ou should send this back to the district court and say, ‘No, you’ve got to have somebody speaking to these buyer claims,'” said Layton. “This case was never tried as a case with buyer claims. It was always a purchase claim case. (W)e ask that you provide some protection for these folks like Mr. Mullis who have an additional claim.”
NAR pushes back
Christopher Michel, an attorney representing NAR, referred to the settlement as one of the largest in antitrust history. He explained that while NAR “strongly believes that plaintiffs’ claims are legally flawed,” the decision to settle was necessary in order to avoid “truly massive liability.”
“The global settlement that the parties negotiated reflects a comprehensive response to those competing considerations,” said Michel. “It demands more than half of NAR’s available assets, $418 million, in addition to another $30 million from NAR affiliated brokerages, and it requires the most dramatic practice changes in the real estate industry in decades. In return, it brings a decisive end to the nationwide litigation challenging NAR’s rules and practices as targeted by the class plaintiffs.”
Michel argued that the “scattered objections before this court do not come close to showing that the district court abused its discretion in approving this historic settlement.”
“Ultimately, an overwhelming majority of the class accepted this historic and highly favorable settlement, and this court should not allow the objector to prevent the class from receiving relief.”
In a statement to RISMedia, an NAR spokesperson said, “NAR will continue to advocate for the court-approved commission settlement at the upcoming oral arguments and throughout the appeals process. The practice changes enacted following the settlement have further empowered consumers to negotiate compensation and promoted transparency in the marketplace. Importantly, the appellate arguments, by themselves, do not alter the practice changes or any part of the court-approved settlement.”
According to the association, the appellate court’s decision will take time and may come in late summer or early fall this year.
