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After a nearly two-hour hearing, a federal judge in New York granted requests from defendants to pause two commission lawsuits in the wake of a nationwide settlement reached by the National Association of Realtors, despite objections from plaintiffs who said the deal did not cover their claims.
At a case management conference on Wednesday morning with dozens in attendance both in person and on the phone, Magistrate Judge Robert W. Lehrburger heard from attorneys on both sides of commission suits known as March and Friedman. Both suits seek class-action status and allege the Real Estate Board of New York’s rules governing its Residential Listing Service (RLS) kept commissions high and violated state and federal antitrust laws.
Combined, the suits accuse REBNY and some three dozen other defendants, most of them real estate brokerages, including Douglas Elliman, Compass, Brown Harris Stevens, Serhant, The Agency and Nest Seekers.
Lehrburger’s decision contrasts with that of a federal judge in Pennsylvania, who last week rejected a stay request from West Penn MLS, another broker-owned MLS that opted into NAR’s deal. The plaintiffs in that case argued against the NAR deal’s scope, criticized its required practice changes as ineffective to stop the alleged conspiracy, and stressed the uncertainty of the deal ever going into effect.
On May 28, an attorney for defendant Engel & Volkers New York Real Estate, on behalf of itself and 16 other defendants, sent Lehrburger a letter asking for a stay of the March and Friedman cases in order to temporarily relieve defendants from having to respond to the suits.
The letter argued that a proposed NAR settlement contained mechanisms to resolve all commission-related antitrust claims against them and that the final approval hearing for that deal would not take place until Nov. 26.
“Without clarity about all the Defendants’ status in this case, it is impossible to agree on an efficient approach to briefing motions to dismiss,” the letter reads.
“For this reason, at least five other related cases nationwide have been stayed to allow defendants time to determine whether they will opt into the NAR Settlement framework as Released Parties and to allow Released Parties to receive a decision on final approval.
“A number of these stays have been entered with the consent of all parties because they recognize that the impact of the NAR Settlement is unknown and that attempting to proceed with briefing substantive motions will waste the parties’ and the court’s resources.”
In a subsequent June 24 letter, Engel & Volkers NYRE informed the court that it had reached a nationwide settlement of claims in another major commission case known as Gibson, but that the March and Friedman plaintiffs continued to oppose a stay.
On May 31, attorneys for Friedman replied to the initial letter, arguing that the NAR settlement does not release the claims asserted in that suit.
“Friedman alleges a wholly separate conspiracy perpetrated through The Real Estate Board of New York, Inc. (‘REBNY’) to inflate buyer-broker commissions in specific areas of Brooklyn for homes listed on REBNY’s Residential Listing Service (“RLS”) under the REBNY rules and code of ethics,” the letter reads.
“NAR is not a party in Friedman, and REBNY is not a party in the NAR cases. Indeed, REBNY and NAR have nothing [to] do with each other. Unlike the NAR conspiracy, the REBNY conspiracy involved each brokerage and principal broker agreeing in writing to abide by the REBNY rules and code of ethics as a precondition to transacting on the RLS.
“And buyer-broker commissions in New York City are far more inflated under the REBNY conspiracy than the distinct NAR conspiracy.”
Despite maintaining that its RLS is not a multiple listing service, REBNY opted into the NAR settlement last week as a non-Realtor MLS by a June 18 deadline.
On Wednesday, Lehrburger rejected the plaintiffs’ attorneys’ arguments. He declined to rule on the scope of the settlement and said that decision was not essential to the decision to grant a stay, especially since the criteria typically considered for a stay were met.
“I’ve considered the private interests of the plaintiffs and any prejudice to the plaintiffs [and] I don’t find there’s any prejudice from a stay,” Lehrburger said.
“I find that the private interests and burden on the defendants would be great if litigation conduct proceeded.”
“Certainly the interests of the court are served with respect to judicial economy and resources in staying things for the time being, and for the same reasons, it’s in the public interest to do so as well,” he added.
The stay will remain in place until the defendants formally request another stay following the Nov. 26 final approval hearing for the NAR settlement. That motion for a stay will be due two weeks after Nov. 26. Plaintiffs will have 45 days to respond and then defendants will have 21 days to reply. The case will be stayed until the court rules on that motion.
At Wednesday’s hearing, Lehrburger also hinted that he would consider consolidating the March and Friedman cases “for pretrial purposes,” but ultimately decided that that issue did not need to be addressed immediately.
“We can address that at a later time, if it remains relevant,” he said.
