Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
On Tuesday, a district court judge in Missouri gave final approval to the NAR settlement.
For anyone keeping tabs on the litigation, the approval will hardly come as a surprise. The writing was on the wall when Judge Stephen R. Bough ordered objectors to appear in person in his Missouri courtroom for the fairness hearing.
Objectors would have to spend thousands of dollars out of pocket for travel and accommodations and would have no more than three minutes to speak. The “fairness” hearing, to state the obvious, hardly seemed a beacon of fairness.
TAKE THE INMAN INTEL INDEX SURVEY FOR NOVEMBER
Not even a last-minute twist could stop this train. Two days before the fairness hearing, the Department of Justice filed a statement of interest in the case. The agency’s position was it doesn’t care about the civil settlement. The DOJ we’ll pursue an antitrust action if, and when, it feel like it. Oh, and by the way, the whole buyer agreement signed before touring thing? The DOJ thinks its an antitrust violation.
Despite the 11th-hour intervention, Bough approved the settlement.
So the settlement is final — sort of.
It will be appealed to the Eighth Circuit Court of Appeals. That court will review the judge’s determination approving the settlement as fair, reasonable and adequate. The scope of that review will depend on who appeals what — but it’s likely the Eighth Circuit will examine the definition of the class, scope of the release, dollar value of the settlement fund and the value of the injunctive relief. In short, it’s not over till it’s over.
In the meantime, plaintiffs finally went “on the record” to clarify the meaning of the settlement agreement. In a filing dated Nov. 20, they dropped a bombshell on the real estate industry. Buried in a 137-page submission was the plaintiffs’ statement on what is not permitted under the NAR Settlement:
- Realtors are not permitted to modify their buyer representation agreements upward to collect additional compensation.
- Realtors are not permitted to collect seller-paid bonuses after they have already entered into a representation agreement with a buyer.
- Realtors are not permitted to use minimum/maximum ranges (Georgia Association of Realtors, I’m looking at you!).
- Realtors are not permitted to craft property-specific agreements that are tailored to the rate of compensation offered by a seller.
- A so-called “touring agreement” must specify the amount of Realtor compensation in the touring agreement itself. It cannot be supplemented with a full-service brokerage agreement at a different compensation rate after the fact.
In short, all the workarounds I’ve been preaching about for six months are prohibited under the NAR Settlement. Why it took plaintiffs six months to say this, I don’t know. Actually, I have my suspicions. But I’ll keep them to myself for now.
Concretely, this means forms have to be changed. Training sessions need to be redone. Someone needs to let Zillow know. And a whole bunch of other stuff. Thanks, Mr. “We’ll-Be-Watching-You.” Maybe you could have said something sooner.
Plaintiffs specifically address in their filing what can happen if industry participants don’t follow these rules and engage in workarounds: “And finally, if agents or brokers violate the practice change requirements, then they are not released and Prof. Monestier (or any person) can sue those agents or brokers herself.” (I’ll ignore the not-so-subtle drip of sarcasm in the statement).
In short, engaging in these workarounds sets up Sitzer | Burnett 2.0. The most logical attorneys to prosecute violators are obviously class counsel themselves. Whether they’ll do so is another question entirely, but it seems like this is the case that keeps on giving.
Looming over all this, of course, is the threat of DOJ action. It’s probably safe to assume that defendants have some breathing room with the transition to a new administration. But this DOJ is playing the long game. If Republicans lose the next election, don’t be surprised if the DOJ picks up right where it left off.
Legally speaking, this is what we refer to as a complete cluster***k.
Tanya Monestier is a Professor of Law at the University at Buffalo School of Law in New York. Follow her on Twitter, or connect with her on LinkedIn.
