Inman Connect is LIVE Aug. 8-10! Join us for impactful interviews, cutting-edge conversations and networking with thousands of real estate pros. Get valuable takeaways to thrive in a rapidly shifting market. Can’t come to Vegas? Register now for a virtual ticket.
The judge in charge of an antitrust case between the largest multiple listing service in New England and homeseller plaintiffs pushed back against a proposed settlement between the two while at the same time praising changes to a commission rule included in the deal.
Judge Patti Saris, of the U.S. District Court in Massachusetts, presided over a hearing Wednesday to consider preliminary approval of a settlement agreement between the plaintiffs and broker-owned multiple listing service MLS PIN in which the latter agreed to overhaul its commission policies, pay $3 million and cooperate against the remaining defendants named in the suit: Real estate franchisors Anywhere, RE/MAX, Keller Williams and HomeServices of America.
Right off the bat, Saris expressed skepticism about the way the settlement agreement was structured.
“I’ve never seen a settlement agreement like this in my 30 years,” Saris said at the beginning of the hearing, which was held over Zoom.
According to legal filings, of the $3 million, up to $900,000 will go toward attorneys’ fees, up to $200,000 will go toward expenses, about $250,000 will go toward notifying settlement class members and each of the three named lead plaintiffs will get up to $2,500 for being class representatives. The plaintiffs will ask the court to use the remaining funds of at least $1,642,500 to pay for future expenses for the litigation against the remaining defendants “for the benefit of Settlement Class Members.”
Saris pointed out that the class members in the case won’t be getting any money from the settlement agreement, but “the plaintiffs’ class-action attorneys get fully funded for expenses to date, and they basically get a litigation fund open-ended for the future for as long as it takes, which may be another three to five years.”
“You’re getting all your money,” she told plaintiffs’ attorneys. “It basically eliminates all risk for you.”
The case, known as Nosalek after its lead homeseller plaintiff (previously Bauman), was filed in December 2020. Like federal commissions suits Moehrl and Sitzer/Burnett, it seeks class-action status and alleges that the sharing of commissions between listing and buyer brokers inflates seller costs and is a conspiracy in restraint of trade in violation of the Sherman Antitrust Act.
However, Nosalek differs in one important respect from the other suits: The National Association of Realtors is not named as a defendant but MLS PIN is. The MLS, which has a full-time staff of 60 employees, boasts approximately 46,000 subscribers in six New England states and New York. Many of the brokers who are subscribers of MLS PIN are likely to be franchisees of the remaining defendants.
At Wednesday’s hearing, Stacey Mahoney, who said she was representing Realogy Holdings Corp. (now known as Anywhere), said that when MLS PIN’s board voted to approve the settlement agreement, the brokers under Realogy brands on that board abstained from the vote.
During the hearing, Saris asked the plaintiffs’ attorney, Robert Izard, if there was a way to take some of the $3 million from MLS PIN and give it to class members.
“I’m just confused,” Saris said. “None of [the cases you cite] are ones in which the plaintiffs don’t get a penny. That’s the thing that I’m struggling with.”
Izard explained, given that there are “well over 300,000 class members,” if the court were to award plaintiffs’ attorneys their expenses to date plus a 30 percent fee that would come to between $1.5 million and $2 million and class members would get less than $5 each.
Saris said she found that argument “persuasive,” but questioned why the settlement would cover plaintiffs’ attorneys’ expenses for dealing with all the defendants, rather than just their costs in regards to MLS PIN.
Izard replied that he didn’t know if he would be able to fairly divvy up the time spent dealing with just MLS PIN.
Saris asked how he envisioned the litigation fund would work. Izard said the money would not be used on an ongoing basis but rather be held in an attorney trust account until his firm asked the court to approve the expenses at “an appropriate time.”
“I’ve never done that before,” Saris said. “It’s always at the end of the litigation, but based on whether you have success or not. This is just very creative, I’ll give you that, but it’s just so unusual.”
She admitted that she did “love” the proposed rule changes in the settlement, which would make the offering of compensation to buyer brokers optional, similar to changes broker-owned Northwest MLS has adopted. The changes are contingent on the settlement’s approval.
“I do love what you’ve accomplished,” Saris said. “I had problems with that [rule], so I denied the motion to dismiss and I think two other courts did as well.”
She said she “loves” the idea of stopping the practice of requiring listing brokers to offer compensation to buyer brokers “so that at least it stops the damages. The other defendants might like that, too. It sort of caps it, if you will.”
Saris said that was a reform that was “worthwhile.”
“I do think the rule change is important and congratulations,” she said. “I’m just worried here about the fairness … of how you’ve structured it, which is the individual plaintiffs get no dollars.”
Saris suggested that Izard’s firm get paid some portion of what they’ve put up to date and take the rest of the money and put it in a pot. If the plaintiffs won that pot would grow and then the whole pot would be divided among the plaintiffs, which would also have been invested and accumulated interest. If the plaintiffs lost, the pot from the MLS PIN settlement would be what the plaintiffs got, minus a “fair” attorney fee.
“That seems a little more fair to me,” Saris said.
Izard proposed a solution similar to what Saris suggested.
“The court can decide what, if any, the court thinks would be appropriate for the plaintiffs and their counsel to receive now either for reimbursement of expenses or fees,” Izard said.
“We hold the rest and it’s just treated as a fund that, at the end of the case, the court could decide to allocate however it wants for whatever purpose it thinks is most appropriate at the end of the case when the court has seen what’s happened and how everything’s worked its way out.”
Saris asked the plaintiffs’ attorneys to, by Sept. 5, either recraft the settlement agreement or brief her on cases with similar settlements, perhaps with an expert’s opinion on how to construct such agreements fairly.
“I do ideally want to do this as quickly as possible because I actually think that the rule change is a good thing,” Saris said.
“I don’t want to be the person who blows that up.”
