The trial for one of two high-profile broker commission lawsuits kicks off in Kansas City on Monday, with opening arguments expected to start once the judge empanels the jury.
At the heart of the class-action case, known as Sitzer/Burnett, is a National Association of Realtors policy called the “participation rule,” which requires listing brokers to offer compensation to buyer’s agents.
The policy, which applies to agents listing properties on Realtor-affiliated MLSs, means home sellers are on the hook for covering the commissions of agents they didn’t hire.
The plaintiffs — including Missouri home sellers Rhonda Burnett, Jarod Breit and Jeremy Keel, among others — allege that NAR colluded with some of the nation’s largest brokerages to hike up agents’ pay, violating the Sherman Antitrust Act.
The lawsuit, filed in 2019, argues that the rule creates a conflict of interest for buyer’s agents, who may not negotiate lower prices for their clients because it would decrease their commission pool.
By requiring sellers to pay the commission, the rule also prevents buyers from determining a commission amount based on performance, which supporters say further incentivizes buyer’s agents to negotiate with their own best interest at heart.
On the other side, NAR — the largest trade group in the U.S. with 1.5 million members — argues that its decades-old policies are beneficial to consumers, in part, because they make buyer’s agents affordable for those who need help navigating the marketplace.
The association also claims its participation policy does not mandate listing brokers offer any meaningful compensation to buyer’s agents, just that they disclose what the offer of compensation will be.
Keller Williams and HomeServices of America, named as defendants along with NAR, claim that they did not participate in a conspiracy with NAR and that they had nothing to do with the creation and implementation of the group’s participation policy.
Anywhere Real Estate and RE/MAX were originally included as defendants, but the brokerages recently settled for $83.5 million and $55 million respectively and agreed to change some of their policies to enhance transparency around buyer’s agent commissions.
The brokerages are also no longer requiring their agents to be NAR members.
At stake for the remaining defendants is potentially $4 billion in damages, including the $1.3 billion in commissions that members of the class paid to buyer’s agents in over seven years.
Potential witnesses submitted by each side for the trial could include NAR’s CEO Bob Goldberg, HomeServices’ CEO Gino Blefari and Keller Williams co-founder Gary Keller.
The Missouri-based trial is expected to last three weeks and for the jury to reach a verdict by Nov. 10. Any appeals based on the outcome wouldn’t start until 2024.
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The federal judge presiding over the case is U.S. District Court Judge Stephen Bough.
Catch up with the key moments that came ahead of the trial:
- Bough allowed the Sitzer/Burnett to receive class-action status in April 2022, three years after the lawsuit was filed, and dismissed the defendants’ motions for summary judgment in December, ensuring the case would head to trial.
- The Department of Justice requested in June to reopen an investigation into NAR and its policies, including the participation rule.
- NAR and other defendants in the Sitzer/Burnett case filed in August to suppress evidence related to discrimination and the government’s investigation into the trade group.
- Anywhere and RE/MAX agreed to settle both cases last month, with proposed deals that include rule changes.
- Two weeks before the trial’s start date, Redfin announced it would require many of its agents to revoke their membership in NAR.
- Days before the trial, NAR departed from the original interpretation of its participation rule and claimed that the policy does allow for listing brokers to offer zero compensation for buyer’s agents.