It has been three years since the filing of two major antitrust lawsuits against NAR and certain major brokerages that challenged the way real estate agents are compensated (the Sitzer/Burnett and the Moehrl cases). Defendants in Sitzer/Burnett then filed a Motion to Dismiss in the hope that the Court would dismiss the case and avoid the excessive costs of litigation. The Court did not dismiss. That was Strike One.
The cases moved forward into the discovery phase of the litigation. There were the usual depositions, motions, expert witnesses and subpoenas for documents. Then came the big procedure in the Sitzer case -- the Motion for Class Action Certification. That motion and related filings were placed under seal until the judge issued his ruling granting the Certification on April 22, 2022. Litigation expenses and damages will be high because the certified class is huge consisting of sellers who closed transactions during the past eight years. We are talking about more than 400,000 transactions. Throw in the fact that In federal antitrust cases, damages can be tripled. That was Strike Two.
The Defendants are filing appeals to the certification order. There was no reversal on appeal, so the case will proceed to trial where attorneys can still argue the merits of the case. The trial court is not bound to the findings of the motion judge, although the momentum definitely has moved toward the plaintiffs. We could be talking liability and awards of more than a Billion dollars. Will there be a Strike Three?
These cases do not outlaw the activity of buyer brokers, although the Court action will have an impact on MLS rules. As for the unilateral offer of compensation, note that, in contract terms, “an offer” can be rejected. Thus the buyer broker could reject that offer of compensation. The buyer could then structure the purchase offer with a provision that the seller agrees to instruct the escrow to distribute certain closing expenses including the negotiated buyer broker fee.
So, in light of the ongoing antitrust claims and Department of Justice concerns, what should buyer brokers do to protect their rights to compensation? Is it time to call it a day? No way. It is time to work with buyers using written representation agreements rather than relying on past practice. It is time for more transparency as to how real estate agents are compensated and how that can be communicated to buyers and sellers.