PART 5. Who is Liable? Are You Liable?
In PART 5 of the real estate commission lawsuit series, let’s look at who was sued and who is or could be sued and liable for billions in damages. Hint – it could be you!
1. NAR – let’s start with NAR. NAR is the big daddy and deep pockets defendant, sued in the Burnett suit and most of the copycat lawsuits. NAR represents some 1.6 million Realtors. NAR doesn’t represent non-Realtors. You’re on your own.
2. The Named Defendants – any company named as a defendant in any of the lawsuits is at risk of paying damages, including triple damages, costs and legal fees, and is subject to joint and several liability (the worst kind of liability) for the entire judgment amount.
3. The List of Defendants – it’s becoming a long list. It includes NAR, Realtor Associations, MLSs, the big national brokerages, larger local brokerages and even a few large teams. That’s the current list. The future list could theoretically include every agent in the country.
4. State and Local Associations, Local MLSs – Realtor Associations and MLSs are firmly in the litigation crosshairs. Although NAR is sued at the creator of the alleged conspiracy, so too are local associations and MLSs sued as co-conspirators.
5. Big Brokerages on the List – Anywhere, Berkshire Hathaway, Re/Max, Keller Williams, eXp Realty, Redfin, Real, Fathom, Long & Foster, Weichert, Howard Hanna, United, Elliman – plus many, many more. Interestingly, Side is also on the list.
6. Even Some Big Teams – a couple of big teams made the dreaded defendant’s list. The Hexagon Group, Loken Group and Michael Group in Texas. There’s some legal complexity here as teams sit within a brokerage and technically the brokerage owns the listing.
7. And one individual broker – stand up and take a bow Mark Anthony Dimas, you rockstar. Mark is a broker / owner and is a very successful agent. It’s interesting that he was sued individually as it makes the point that any agent may be sued individually.
8. Class Action Settlements – a class action settlement can provide blanket indemnity against all members of the plaintiff class, even class members who are not party to a lawsuit. Any settlement will be nationwide and should put an end to most current and future lawsuits.
9. The Settled Defendants – all the defendants who agree to settle, if the settlements are accepted by the court, will be required to pay the agreed settlement amount. NAR, Realtor Associations, MLSs, Anywhere, Remax, KW, Real, Compass. * Not a full list.
10 – Proposed Settlement Amounts (in millions) – NAR $418, Anywhere $83.5, KW, $70 Remax $55, Compass $57.5, Real $9.25 and MLS PIN $3 million. The list will grow. The settlement amounts are nowhere near the judgment award, but still a huge chunk of change.
11. The NAR Settlement Umbrella – NAR’s proposed settlement will cover member brokerages with under $2 billion in sales volume. It will also cover individual member agents even if the brokerage isn’t covered. Non-realtors aren’t covered.
12. $2 billion Brokerages – Brokerages with over $2 billion transaction volume are expressly excluded by the NAR settlement umbrella. There’s around 90 such brokerages. NAR did carve out a mediation process and a payment formula for these brokers.
13. What about Individual Realtor Members? – most individual Realtors will be covered by the settlement, even if their brokerage is not covered. Realtors must be “members of NAR at the date of Class Notice”. Q – What date is that? A – around Mid-July 2024. Bingo!
14. What about non-Realtors? – non-Realtors are not covered by NAR. Could this be a recruiting tool for NAR? Non-Realtors could become Realtors before the “date of Class Notice” (est. July 2024). That’s an $800 insurance policy in the form of membership fees.
15. Can Agents be Sued Individually? – Yes, but I doubt it will be common. A million agents will be covered by the NAR settlement, but certainly not all. There are additional legal defenses for agents (the broker owns the client). But who wants to be the guinea pig?
16. Will We All Pay Indirectly? – Probably Yes, it’s likely that we’ll all pay indirectly. NAR, State and local associations, your MLS, your franchisor, may raise dues. Like a one-off special HOA assessment. I can’t imagine a world where it doesn’t happen.
17. Commission Claw Backs – Can your broker recover commission that was paid to you over the past four years? Your broker may now be seriously out of pocket, having paid you full commission on deals for which there is a large damages penalty. Maybe, but not likely.
18. Revenue Share – the large revenue share brokerages, like KW, eXp and Real, may change their revenue share agreement. Their current rev share plans allow them to unilaterally make changes. Real has already done it once before. KW is being sued for doing it. Likely.
19. Wait and See – we’re back to be patient and wait and see if you’re covered by any settlements. Remember that no settlements have been approved. There will be objections, appeals and opt-outs from settlement. It’s still a mess.
20 – Stop the Bleeding – no matter the proposed settlements, you need to stop the bleeding today by eliminating any anti-competitive actions. Start by making full disclosure to your sellers about any intended offer of co-op commission to the buyer. Explain their choices.
21 – The Worst Case Scenario – it’s not improbable that national or local attorneys wait until the settlements are accepted by the court, and then sue everyone who is not indemnified. Ambulance chasers and vulture attorneys must be licking their lips. Watch for the first TV ad.
22 – “Are you feeling lucky, punk?” – Anyone can sue anyone. A disgruntled client could sue you. You brother-in-law who you represented in a deal could sue. Especially an ex-brother-in-law. It’s unlikely, but we’ve never seen anything like this.
23 – A Passing Thought – my gut reaction here is to a) get myself under the indemnity umbrella of a settlement class. Join NAR or even change brokerages to a settled brokerage, or b) if an independent and exposed as a non-Realtor, change my operating entity to a new LLC.
24 – An Interesting Thought – NAR’s settlement includes a waiver against suing NAR as a condition to fall under the settled class. Hello! Did NAR just let you know they’re worried about being sued by members? They got us into this trouble, right?
It’s CYA time.
Next, in part 6 of the real estate commission lawsuit series, we’ll cover the details of the proposed NAR settlement.
