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On Nov. 20, 2023, Judge Stephen Bough found that the Anywhere and RE/MAX proposed settlements in the Sitzer | Burnett litigation “are fair and reasonable” and that “the class representatives have adequately represented the class.”
As a result, the entire playing field for 2024 has shifted. The question for every agent, brokerage, association and MLS is: How will you respond given that this settlement will begin impacting your transactions as early as mid-2024?
Make no mistake about it — we’re entering a time where there is going to be massive confusion among industry players at multiple levels, including agents, brokerages, multiple listing services (MLSs), as well as local and state associations.
Making matters even worse, brokerages, associations and MLSs not named in Sitzer or Moehrl are now being hit by copycat lawsuits that could have ramifications as serious as those now posed by Sitzer.
The big questions for 2024
The most critical issue for those not currently involved in this litigation is how to proceed in light of the preliminary approval of the Anywhere and RE/MAX settlement agreements.
Options include:
- Continue doing business as usual.
- Adopt a wait-and-see attitude because the final ruling in Sitzer | Burnett is still months away.
- Take steps to start implementing what Anywhere and RE/MAX agreed to in their settlement agreements.
- Hold off on taking any action to see if any of the defendants can post the required bond to proceed with their appeals.
- Take the lead in having the listing agents in your brokerage, association or MLS begin working with buyer-brokerage agreements and only negotiate the listing side of the commission and have the buyer’s agents negotiate their commission with the seller and/or buyer directly.
Arguments for continuing with business as usual
There are several strong arguments for deciding to take this course of action.
The final ruling in Sitzer is not due until mid-April 2024 at the earliest
One of the strongest arguments for continuing business as usual is that the post-trial motions in Sitzer will last at least through March 18, 2024. At that point: “Execution of any judgment shall be stayed until 30 days after resolution of all post-trial motions,” according to reporting by Inman’s Andrea Brambila.
In other words, the earliest we could see Judge Stephen Bough’s final ruling in the Sitzer Burnett case would most likely be mid-April 2024.
It is possible, however, that he may grant final approval to the Anywhere and RE/MAX settlement agreements at an earlier date before his final ruling in the case.
The remaining defendants are moving forward with an appeal
At this point, an appeal appears likely, especially since the defendants have lawyered up with some of the nation’s most prominent appellate attorneys.
Keller Williams made the most notable hire, Paul D. Clement. Clement served as U.S. Solicitor General from 2005-2008.
Clement’s firm’s track record is impressive; his website states: “Over the past three Terms alone, we have argued 14 [Supreme Court] cases and prevailed in 12.”
“The verdict here raises serious legal issues and poses a threat to a wide range of businesses by converting practices enshrined in state law into per se antitrust violations,” Clement said about the Sitzer Burnett verdict.
Nevertheless, the cost of mounting an appeal is substantial. In addition to incurring massive legal fees, the defendants will also be required to post a bond at the time they file the appeal that will cover the cost of the judgment should they lose the appeal.
The wild card here is how much Judge Bough will set as the amount of damages. That ruling will determine the amount of the bond the defendants must post to move forward.
If Bough’s final ruling includes treble damages, it seems highly unlikely that any of the remaining defendants have enough assets to cover a bond over $5 billion. Obviously, a lower amount would be easier for the defendants to meet.
Based on conversations with other experts in this matter, the fly in the ointment is that the jury found that the defendants engaged in price fixing. It will be fascinating to see the arguments that Clement and the big guns representing the other defendants make in the upcoming post-trial emotions as well as whether their appeals do indeed move forward.
If any of the parties are unable to meet the financial requirements for the bond, the appeal is no longer an option. At that point, the two most likely outcomes would be to settle or possibly face bankruptcy.
A common sense move
The settlement agreements reached by Anywhere and RE/MAX are pivotal due to their substantial market share. In 2022, Anywhere was involved in 1.2 million home sales, according to its website, while RE/MAX reports it participated in 2 million transaction sides.
Given that Statista reports a total of 5.03 million real estate transactions occurred in 2022, Anywhere and RE/MAX agents were involved in approximately one-third of all transactions in 2022. Consequently, any agent transacting with Anywhere or RE/MAX will soon be subject to the terms set forth in these settlement agreements.
If you are a broker, you operate an MLS or you run an association, implementing the practices below based on the settlement agreements seems like a common sense move to mitigate risks both now and in the future and allow your agents to operate under the same set of rules.
The key elements in the Anywhere settlement are:
- Agents may no longer claim that buyer agent services are free.
- Anywhere will require company-owned brokerages and their affiliated agents to include the listing broker’s offer of compensation for prospective buyers’ agents as soon as possible in each active listing, consistent with MLS rules and/or capabilities of third-party website operators.
- Anywhere affiliated brokers and agents are prohibited from using any technology (or manual methods) to sort listings by offers of compensation unless requested by the client.
- Agents must clearly disclose that offers of compensation to buyers’ agents are not set by law and are fully negotiable.
Since Bough has just granted preliminary approval for these aspects of the Anywhere and RE/MAX settlements, it’s just common sense that both brokerages and agents can and should implement these practices now.
Where the Anywhere and RE/MAX settlement may hit NAR exceptionally hard
An additional provision in the settlement agreements could be a real headache for NAR in terms of its membership count because both Anywhere and RE/MAX also agreed that they would no longer require their brokerages, franchisees or agents to belong to NAR, follow the code of ethics or follow the MLS handbook.
Redfin has already opted to exit NAR, and if the settlements are approved, Anywhere and RE/MAX agents and brokers will have the option of opting out of NAR membership as well. It seems likely that many may choose to do so.
This also means that all these agents will no longer have to follow the Clear Cooperation rule, which requires agents to share their listings with the MLS within one business day of marketing a property to the public, ostensibly to promote transparency and fair competition.
It is important to note, however, that many agents do not have the option of opting out of NAR membership if they want to continue using the MLS. That is likely to blunt the effect of this particular term in the settlements.
The real estate industry is facing a critical turning point
No one can really predict what is going to happen. However, it makes sense for brokers and agents to start integrating buyer-brokerage agreements in their businesses as soon as possible. It also makes sense that they begin implementing many of the commonsense steps in the Anywhere and RE/MAX settlement agreements as well.
What I would very much like to see happen is that brokers, MLSs, and state and local associations take the lead by changing their contracts so that their listing agreements only require the listing agent to negotiate their own part of the commission, leaving it up to the seller, the buyer’s agent, and the buyer to determine who pays the buyer agent commission. This is what the DOJ wants, and it would go a long way to stopping future lawsuits.
“If the settlement is granted final approval by the Missouri court, all U.S. RE/MAX affiliates, including franchisees and agents, will be protected from claims connected to the lawsuits and any similar claims,” RE/MAX’s statement noted about the most important benefit of reaching a settlement in these matters.
The bottom line
Given the current litigation and all the copycat lawsuits, there is an urgent need for clear guidelines from associations, brokers, and MLSs designed to help their agents and members navigate this rapidly approaching post-verdict landscape.
The time to take action is now — the question is what decision will you make for you, your agents, your business and your future?
Bernice Ross, president and CEO of BrokerageUP and RealEstateC
