In PART 4 of the real estate commission lawsuit series we’ll take a look at the choices available to the defendants. Remember, new lawsuits could add thousands of more defendants, including your brokerage or even you personally (not likely).
1. There are three main choices – fight, settle or bankruptcy. It feels like a game of Marry, Date, Kill.
2. Fight – most defendants have elected to fight the lawsuits. Most lawsuits are still pre-trial and only the Burnett case has gone to trial and resulted in a judgment against the defendants. In the Burnett case, all but Home Services have offered to settle the lawsuit.
3. Fighting is Risky. This could be an existential fight. Lose and you could lose everything. Home Services is one big brokerage that is fighting tooth and nail. They always have the option to bail out and settle. The billion-dollar bill will wipe them out.
4. Remember the Per Se Rule – the biggest obstacle to fighting is that one court has already ruled that the clear cooperation rule is illegal and a contravention of the Sherman Act re the Per Se rule that excludes any consideration of the benefit of the co-op rule.
5. Agent Leakage – then there’s the problem of agent leakage. Brokerages that have settles will actively try to recruit agents from brokerages that haven’t settled. Come to us, it’s safe over here.
6. Settle – NAR has proposed a settlement. So too has Re/Max, Anywhere, Keller Williams, eXp Realty and Real Broker. Others too like MLSPin. The most important settlement is the NAR settlement as it offers the broadest blanket cover and immunity.
7. The interesting settlement is the proposed settlement by the Real Broker. They appear to have negotiated a better settlement with the Umpa plaintiffs than the terms offered under the proposed NAR settlement. We’ll cover the NAR settlement in detail in PART 7.
8 – Competition to Settle – the plaintiffs’ attorneys have competition to settle, and defendants can play them off against each other. Only the attorney that settles get paid. This is a huge off ramp for any of the current and future defendants.
9. A Future Roadmap. The biggest benefit of any settlement is that going forward it creates certainty and a roadmap for the new real estate industry. Were agents, we adapt to the market all the time. No biggie. We’ve got this.
10. Bankruptcy – there’s always the option to file for bankruptcy. In the absence of a settlement, this will be the only option as the joint and several billion-dollar judgments will wipe out any company. Each defendant is liable for the full settlement amount.
11. Bankruptcy is Brutal – but what will happen in a bankruptcy? How will creditors be ranked and preferred? Will agents become creditors of the brokerage for their 80% commission splits? Bankruptcy isn’t a practical option and will be a business death knell.
