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HomeServices will no longer have to fight an antitrust commission lawsuit lodged by homebuyers against the National Association of Realtors and major real estate franchisors.
Judge Andrea R. Wood
On Tues. Feb. 20, Judge Andrea Wood of the U.S. District Court for the Northern District of Illinois Eastern Division dismissed a claim made by the buyer plaintiffs’ under a federal antitrust law, but declined to toss nearly all of the plaintiffs’ claims under state antitrust laws.
The suit, which seeks class-action status and is known as Batton 1, was originally filed by New Jersey homebuyer Judah Leeder in January 2021 and alleged NAR rules have inflated agent commissions and resulted in higher home prices paid by the buyers. In May 2022, Wood dismissed the suit, agreeing with the defendants that homebuyers are indirect purchasers of their buyer broker’s services because those services are purchased for them by homesellers, making those buyers ineligible for recovering damages from antitrust violators.
Wood also noted at the time that homesellers, whom she said were the direct purchasers of buyer broker services, were pursuing a similar case in her jurisdiction, which worked against the homebuyer’s suit. That case is known as Moehrl and it alleges commission sharing inflates seller costs rather than buyer costs. Wood is the same judge overseeing the Moehrl case. Still, she gave the homebuyer plaintiff leave to amend his complaint.
In July 2022, eight homebuyers filed an amended complaint against NAR, Realogy, Keller Williams, RE/MAX, HomeServices of America and three of the latter’s subsidiaries: BHH Affiliates, HSF Affiliates and The Long & Foster Companies. The amended complaint terminated Leeder as its lead plaintiff and instead featured eight new plaintiffs, lead by Mya Batton, who purchased homes in Tennessee, Florida, Kansas, North Carolina, Nevada, Massachusetts, and New Mexico.
In addition to the Sherman antitrust claim and the unjust enrichment claim of the original suit, the amended suit accuses the defendants of violations of state antitrust statutes and consumer protection laws in 35 states as well, including Arizona, California, Connecticut, D.C., Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia, Vermont, West Virginia, and Wisconsin.
The defendants responded to the amended complaint with motions to dismiss. In Wood’s Feb. 20 order ruling on those motions, she said that the amended complaint’s allegations regarding the federal claim seeking “injunctive relief” — an order forcing the defendants to stop their alleged illegal behavior — still “essentially mirror the allegations” in the original complaint and she still believes homesellers rather than buyers are “better suited” to seek injunctive relief.
Wood pointed to the recent verdict in the case known as Sitzer/Burnett to bolster this viewpoint. In that case, a jury found that KW, RE/MAX, Anywhere, NAR, HomeServices, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates paid by homesellers. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners. If that award stands, it would be trebled by law to more than $5.3 billion.
“To the extent a putative class member faces a significant threat of injury from Defendants’ alleged antitrust violations in their capacity as a buyer, they would likely be simultaneously exposed to injury as a seller too — i.e., they would be threatened with the same injury as that suffered by the home seller class certified in Moehrl and Burnett,” Wood wrote.
“This circumstance further underscores that the home sellers are best situated to seek injunctive relief.”
She dismissed the federal claim “without prejudice,” meaning the plaintiffs can re-submit the claim with different arguments should they choose to.
At least for now, because the federal claim did not survive, Wood dismissed HomeServices and three of its subsidiaries — BHH Affiliates, HSF Affiliates and the Long & Foster Companies — as defendants from the case — also without prejudice.
“HomeServices Defendants argue that they are not subject to personal jurisdiction in Illinois because none of the constituent entities are Illinois-based companies and the [complaint] fails to include any allegations connecting them to Illinois,” Wood’s order reads.
Without a claim under which the court can assert nationwide authority, the court thus has no personal jurisdiction over the HomeServices defendants, according to Wood.
“We were pleased to see the dismissal, and given the fact it was based on jurisdictional grounds and without prejudice (to a potential refiling), we are going to refrain from formally commenting as we wait to see if the plaintiffs take any additional action,” Chris Kelly, executive vice president for HomeServices, told Inman in a statement.
Inman has asked an attorney for the plaintiffs for comment and will update this story if and when a response is received.
The Batton 1 case had sought class certification on behalf of two proposed classes: a nationwide injunctive relief class and a damages class. Because the federal claim was dismissed, only the latter proposed class remains. That class is made up “All persons who, since December 1, 1996 through the present, purchased in the Indirect Purchaser States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for damages under “antitrust, unfair competition, consumer protection, and unjust enrichment laws.”
Wood allowed nearly all of the claims under state laws to proceed, noting that the U.S. Supreme Court had ruled that states could allow indirect purchasers to recover damages under their own antitrust laws.
She only dismissed the amended complaint’s Tennessee antitrust and consumer protection law claims, which the plaintiffs had already voluntarily dismissed themselves, and a claim under the Kansas Consumer Protection Act (KCPA). Wood dismissed the latter because the plaintiffs claimed “it was deceptive for buyer-brokers to advertise their services as free when, in fact, their commissions are passed through to buyers because the commissions are incorporated into home prices,” but failed to assert that that misrepresentation was actually made to any plaintiff.
Still, Wood was receptive to the plaintiffs’ argument that commissions are baked into home prices and that was one reason she allowed the state-law claims to continue.
“[T]he Court finds Plaintiffs’ theory of injury relatively simple,” Wood wrote.
“A home seller pays a total commission meant to compensate both the buyer- and seller-brokers. Then, the MLS listing for the seller’s home informs potential buyer-brokers of the set rate at which they will be compensated if they find a buyer for the home. While a home seller may be content to bear the costs associated with the services provided to them by their own seller-broker, they will be less willing to pay for the buyer-broker’s services, which, of course, are rendered to the buyer rather than the seller.
“It would therefore be economically rational for a home seller to try and offset the costs they incur for services provided to the buyer by raising the price of the home they are selling by an amount commensurate with the portion of the total commission earmarked for the buyer-broker. Thus, as alleged, there is a single, straight-line path by which the commission is passed through to the homebuyer.
“For that reason, the Court cannot conclude that the [amended complaint] fails to plead proximate causation as to any state-law claim.”
Read the court’s order:
Editor’s note: This story has been updated with a comment from HomeServices.
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