Resi Brokerages Face Wave of Expensive Antitrust Cases

A guilty verdict in a landmark antitrust suit that landed late last month rocked the world of residential brokerage, but the industry-wide shocks are likely just getting started.

After the jury in the Sitzer/Burnett trial found NAR, Keller Williams and HomeServices of America colluded to inflate commissions for possible damages of more than $5 billion, residential players have scrambled to understand the potential consequences.

While it’s unclear what extent of change is coming for commission structures around the country, the wave of legal action is sure to land on brokerages’ bottom lines.

The guilty verdict has already been followed by a series of nearly identical lawsuits. And no residential players — not even brokerages that have already settled — are guaranteed safe.

“We’re going to see defendants writing checks and very likely changing their practices if the verdict survives,” said Daniel Francis, former deputy director of the FTC’s Bureau of Competition and a law professor at New York University.

A lawsuit filed last week in New York City against the Real Estate Board of New York and 25 other New York City residential firms alleges REBNY’s Universal Co-Brokerage Agreement inflated commissions in the same way that NAR’s Clear Cooperation Policy did.

The wave of legal actions are likely to crash on firms already contending with uncertain economic conditions and stubborn markets across the United States.

“Antitrust litigation is notorious in a way very few kinds are … for being extremely expensive because it often requires so much document production and such lengthy discovery to figure out whether or not the plaintiffs’ claims are founded,” Francis said.

Two former defendants in the Sitzer suit, Anywhere and Re/Max, agreed to eight-figure settlements ahead of the trial. At $84 million and $55 million, the proposed deals also apply to Moehrl, a lawsuit out of Illinois slated for trial in early 2024 that could fetch up to $40 billion in damages.

The verdict — and the settlements — are awaiting approval from a judge. Even so, the nature of antitrust lawsuits, and the resulting damages and litigation costs, pose a specific challenge for brokerages.

Copycat lawsuits can be filed anywhere there are plaintiffs who have standing to file a complaint.

A partner at a top law firm can charge $1,500 to $2,000 per hour, according to Francis, and antitrust lawsuits typically take several years to resolve.

Executives for Anywhere said in a recent town hall they expect six to nine months before a final approval hearing is scheduled for the settlement, putting the decision more than one year after the parent company of Corcoran, Coldwell Banker, Century 21 and Sotheby’s International Realty said its status as a defendant in the Sitzer case had “meaningfully impacted” its bottom line.

The company attempted to pre-empt future lawsuits by expanding the scope of the classes in its proposed settlement, which includes defendants in the three lawsuits and “all other MLSs.” Despite touting its “nationwide settlement” as precluding the company from further legal risk, but that may not be the case.

“Plaintiffs not in a certified class can’t have their rights extinguished — in most cases,” Francis said, speaking generally about antitrust litigation. “So settling defendants are still vulnerable to claims from plaintiffs outside the settling class, if any such plaintiffs exist.”

Anywhere also agreed to rule changes as a result of the lawsuit, which won’t necessarily prevent further litigation because it doesn’t excuse past illegal activity, according to Francis, but can mitigate the damages.

“If nothing else, at the bare minimum, the risk level of these practices and policies has skyrocketed in the wake of this verdict,” said Francis.

New York-based brokerage Compass, which was not a defendant in the Sitzer case, has been named in three copycat lawsuits filed after the verdict. The new slate of cases includes one in Missouri by the same attorney for the Sitzer plaintiffs and another that joined Moehrl in Illinois.

The lawsuits come as the residential giant has been under pressure to become profitable over the past year, reporting its second consecutive cash-flow positive quarter as now finds itself having to litigate or settle multiple costly lawsuits.

CEO Robert Reffkin declined to comment on the cases during his company’s third-quarter earnings call, and a company representative declined to comment on the firm’s legal strategy moving forward, citing the ongoing nature of the litigation.