‘No legitimate justification’: California broker sues NAR over ‘anticompetitive’ dues

In the charges, Diaz claims that the policy is “an illegal group boycott” that has “no legitimate justification.” He said the result of the policy is “reduced consumer choice, artificial inflation of business costs and market foreclosure for alternative business models in real estate brokerage.”

“We believe the claims in Mr. Diaz’s case against NAR raise important legal and public interest concerns that deserve serious scrutiny,” said Diaz’s representative Charles A. Hamm in an email to HousingWire. “We’re continuing to learn about professionals across the country who have experienced similar harm.”

The California Association of Realtors (CAR), the Lodi Association of Realtors and the Central Valley Association of Realtors are also named defendants in the suit, as are five unknown “Does” whom Diaz said he will name when their identities are uncovered.

“NAR is proud to provide unparalleled value for brokerage firms and individual members,” said a NAR spokesperson in an email to HousingWire. “The unified Code of Ethics enhances consumer trust, the best-in-class advocacy improves members’ ability to execute their next transaction, and our resources and professional development ensure members are always on the cutting edge of the industry. We will respond to the plaintiff’s claims in court.”

“CAR’s advocacy efforts have played a key role in protecting mortgage interest deductions, opposing point-of-sale mandates and other proposals that could impact property rights,” CAR said in a statement to HousingWire. “These efforts have helped reduce potential legal and regulatory costs for members, brokers and consumers. CAR will address the pending lawsuit through the appropriate legal channels.”

The other defendants could not be reached immediately.

The lawsuit states that many agents choose not to become Realtors in remote areas like Modesto, where the trade group doesn’t provide benefits. But not being a NAR member can prevent a brokerage from hiring them because of the financial barrier it poses.

The case is being brought “per se,” meaning that the plaintiff claims that the behavior is inherently illegal and anticompetitive, thus absolving them of proving any negative impact of the rule. 

The plaintiff charges the defendants with violations of the Sherman Act and the California Cartwright Act.

The VDF rule is written into NAR’s bylaws and requires brokers to pay additional dues for each non-Realtor agent working for the brokerage. Failure to do so can result in the broker’s own membership being suspended or revoked.

But Diaz said there are “legitimate and lawful business interests” in hiring licensed agents for tasks that don’t require NAR membership or services related to membership. 

Examples provided are “Agent Visual Inspection Disclosures” — which are required by California state law — commercial sales and leasing activity. Diaz believes the VDF rule punishes brokers for hiring personnel to perform these duties.

Diaz’s suit is the latest in a long line of attacks against NAR policies and rules, most notably the landmark Sitzer-Burnett case that NAR settled for $418 million. The plaintiffs in the case asserted that NAR’s requirement for listing agents to provide blanket offers of compensation to buyer agents on NAR-affiliated MLSs was anticompetitive.

The settlement roiled the industry and imposed new rules that ban offers of agent compensation on the local MLS, in addition to requirements related to the agreements that prospective homebuyers sign with their agents.

Sitzer-Burnett was also brought per se, and the Missouri judge in the case — Stephen Bough — allowed it to proceed as such. Industry observers believe that played a huge role in NAR losing the case.