You’re about to get your street law degree.
When someone in your office brings up the real estate commission lawsuits, you get to smile, nod knowingly and show off your legal smarts.
All you need is a few legal concepts.
1. Per Se Rule – this one is a whopper. In antitrust cases the court will only look to determine if the defendant’s actions fell into an illegal category of agreement, like price fixing. The court simply asks – was there price fixing? It disregards other positive defenses like if the conduct was for a beneficial business purpose or it provided competitive benefits.
2. Why it matters – NAR built a defense around how good the MLS and cooperative policy was for the public. It’s the “eat your vegetables, they’re good for you” defense. The court didn’t care. They just wanted to know if there was or wasn’t anticompetitive behavior and policies. Ouch.
3. Class Action – The Burnett case received class action certification. All the other suits are seeking class action status. This massively expands the plaintiff pool to millions of home sellers.
4. Why it matters – in addition to expanding the plaintiff pool, it allows for joint and several liability for any judgment against the defendants. It also incentivizes plaintiffs to go after more defendants (including you) and it has a profound impact on any settlement.
5. Several – several refers to any named defendant. There are over a dozen copycat lawsuits so there are dozens and potential thousands more defendants. All will be jointly liable for the total judgment. Even the smallest defendant.
6. Individual – technically you, as an individual, or brokerage owner, could be sued as a defendant in a commission lawsuit. Maybe you have a client that really hates you. You could be on the hook for billions of dollars under the joint and several rule. Not likely, but not much fun.
7. What to do – I grew up in Africa. When approached by a predator we were taught to look as big as possible. You need to do the opposite. Look small. Plaintiff attorneys are only looking for big prey.
8. Class Action Settlement – class action laws also allow for special settlement rules by a class. A defendant can settle current and future claims against the entire class, throughout the country, even if a person in the class is not a party to the lawsuit. Whoa.
9. Why it matters – if the settlement agreements are ratified by the court, the plaintiffs can pay to put the whole thing behind them. It’s back to business as usual, but with the rule changes agreed to in the settlement agreements. Pay your fine and get blanket indemnity.
10. Triple Damages – antitrust laws allow for triple damages, plus costs and reasonable legal fees. No punitive damages are allowed. It limits claims to the past four years. No liability for anything before 2019. Change your policies right now to avoid future liability.
11. Why it matters – the Burnett judgment was for $1.8 billion. Triple that and it’s $5.8 billion, plus interest, costs and legal fees. The Gibson case wants $200 billion. Triple that and it breaks my calculator. It’s monopoly money that will bankrupt any and every defendant.
12. Forces a Settlement – the judgment amounts are so high that they will force a settlement. That’s why everyone but Home Services has settled. The attorney’s know this and are grabbing as much cash as they can from each defendant. Attorney’s are competing to settle as only the settling attorney gets paid. Defendants can pitch attorneys against each other for a lower settlement claim.
13. The DOJ May Object – this is the big one. Under the Class Action Fairness Act the DOJ can object to a class action settlement if it is unfair to unnamed class members. The DOJ has already objected to the proposed Nosalek case settlement.
14. Why it matters – the proposed settlement by NAR could be thrown out or be amended to include much stricter rule changes. Right now, it offers a big chunk of money but largely business as usual. It has huge implications for buyer agents. NAR is offering to remove co-op commission from the MLS. That’s almost business as usual. There is still buyer co-op, just not on the MLS. The DOJ wants to eliminate any seller offer of buyer agent compensation. That could eliminate buyer agents.
15. Combine and Consolidate – there is a motion to combine and consolidate all the suits into one lawsuit. Lots of defendants are fighting it.
16. Why it matters – If successful, consolidation will streamline the legal process and help us get to clarity about what the future will look like. We want resolution so we can get back to business, with whatever changes are required by the new rules.
17. Injunctive Relief – one last one. The court can order injunctive relief to stop anticompetitive behavior or to eliminate its effects. This gives the court the power to prescribe rule changes that go beyond any proposed in a settlement.
18. There it is – your street law crash course. Have fun explaining to the top producer in your office that they may be the first one in their family to run up a billion-dollar bankruptcy.
