The National Association of Realtors was adamant it would appeal a Kansas City jury’s verdict against it and two brokerages in a landmark antitrust lawsuit over broker commissions.
For months after the jury handed down the $1.8 billion judgment — and as dozens of copycat lawsuits were filed in its wake — the 1.5 million-member trade group held firm in its resolve.
“We’re not done,” NAR’s former president, Tracy Kasper, said at its annual conference in November. “We will be appealing this. It’s far from over.”
But the organization reversed course last week with a proposed settlement. Under the terms, which are pending court approval, NAR agreed to pay $418 million over four years and change the commission-sharing rule central to the litigation.
If confirmed by the judge, the agreement also releases NAR, its members, associated MLSs and brokerages with transaction volumes at $2 billion or below from similar lawsuits filed by homesellers, with provisions for larger firms to opt in to the settlement’s coverage.
A spokesperson for NAR said the organization settled to avoid the typically years-long appeals process and the cost of continuing in the court system — and the specifics of the trade group’s settlement deal show it’s getting out for a fraction of the cost of litigating the appeal.
Back-of-the-settlement math
To appeal the verdict, NAR would have to post a bond, which would have delayed the payment of the judgment while the case moved through the upper courts. The bond also ensures NAR has set aside the necessary funds should it lose the appeal.
Under the federal court system, the sum of a bond is determined by the judge. Typically, it’s the amount of the judgment plus interest.
That means NAR would have been on the hook for its portion of up to $5.4 billion in damages, depending on the judge’s review of the jury’s decision. Under antitrust law, judges can treble the damages to award plaintiffs up to three times the judgment amount.
“The bond, in this case, would have had to be negotiated, but given the size of the judgment could have been beyond NAR’s ability to pay,” the spokesperson wrote in the email.
The group’s settlement sum is a mere slice of what it would have had to pay, regardless of the judge upping the damages.
NAR could have secured the bond through a surety company, which would have allowed them to use assets as collateral — of which it had over $1 billion in 2022, according to its latest tax filing.
But a bond company isn’t a sure-fire solution.
In New York, a high-profile example is playing out in the case of former President Donald Trump, who has yet to secure a $464 million bond to appeal the ruling in his civil fraud claims. Thirty different companies denied his requests for such a large amount. If he can’t secure the bond, it’s possible the New York Attorney General will begin seizing his assets to pay the damages.
The group said in a fact sheet outlining the settlement terms it considered filing for bankruptcy, but ultimately decided to forego Chapter 11 because that approach would not have provided protections for its members named in other lawsuits.
“We believe that would have left members with continued uncertainty and potential liability risk,” the organization wrote.
The lone defendant
HomeServices of America is now the only defendant left holding the multi-billion dollar bag, but it could petition the court to offset the damages based on the other defendants’ settlement amounts, a combined total of more than $626 million.
Even if the judge doesn’t treble the damages, HomeServices could be liable for more than $1 billion in damages in the Sitzer/Burnett case alone if the company doesn’t settle.
The brokerage is controlled by Warren Buffet’s Berkshire Hathaway, which had more than $160 billion on hand at the end of 2023. The conglomerate acknowledged the guilty verdict in its most recent annual report, saying it could lose up to $5.4 billion as a result.
HomeServices also remains a defendant in the lawsuit out of Illinois known as Moehrl. Though the case, which is projected to go to trial in the fourth quarter of this year, could fetch up to $40 billion in damages.
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