KANSAS CITY, Missouri — After 11 days of testimony, the eight-person jury here took just a little over two hours to decide its verdict in the Sitzer/Burnett commission lawsuit trial. It found the National Association of Realtors, HomeServices of America and Keller Williams guilty of collusion to maintain high commission rates.
Despite the guilty verdict, other than having to pay nearly $1.8 billion in damages, many questions still remain about what this means for the real estate industry, as the defendants still await Judge Stephen Bough’s final judgment.
“It’s yet to be determined what this means for Realtors at this point,” Timothy Ray, the lead attorney for Keller Williams, told HousingWire in the Charles Evans Whittaker U.S. Courthouse in downtown Kansas City on Tuesday afternoon.
The president of RESPRO, Ken Trepeta, sees two potential outcomes in Bough’s final ruling.
One option is that NAR and the MLSs can no longer require cooperative compensation, but listing agents and their sellers can still offer the buyer broker compensation if they so choose. The second option, which Trepeta finds more alarming, is that Bough calls for a complete end to all cooperative compensation.
“It depends on how far they take it,” Trepeta said. “Will they go so far as to say that the idea of splitting commissions, even when it isn’t mandatory, is an antitrust violation? It is a situation where buyers need to pay their own agents and sellers have to pay their agent separately?”
One thing possibly preventing Bough from taking the second option is a specific Missouri state law, which allows for a seller or landlord to “agree that a designated broker may share with another designated broker the compensation paid by the seller or landlord.”
In addition, a state regulation states that a designated broker is authorized “to cooperate with and compensate other designated brokers acting pursuant to any other brokerage relationship including but not limited to buyer’s agents and/or transaction brokers.”
“It is implied in RESPA as well,” Trepeta said. “One of the exemptions in the law is cooperative agreements among brokers, which means splitting the commission. So it is allowed under federal law and it has been the practice forever, so that might prevent them from going that far with this.”
For Steve Murray, the co-founder of RealTrends Consulting, the verdict and the potential rulings from Bough mean it is highly likely the Department of Justice will get involved as it recently has in the much smaller Nosalek commission lawsuit.
“They didn’t do it directly, but this is a win for the DOJ,” Murray said. “I think the DOJ wants any co-broker commission paid by the seller outlawed. I think they are going to seek that — that would be their dream world.”
Due to this, Murray is uncertain if the RE/MAX and Anywhere settlement agreements, which still need final approval, will be okayed by Bough or the DOJ, if it gets involved. This is especially true if the terms of Bough’s injunction, which could come any day now, greatly differ from the contents of the two settlement agreements.
“I don’t think they can impose a different set of rules on these co-defendants,” Murray said.
Over the course of the trial, Murray said he was surprised at the direction the plaintiffs took with the case. He felt it was greatly different from their initial and amended complaints, which stated the plaintiffs took issue with the system of cooperative compensation itself, not the actual commission rates.
In the end, he said the industry was “found guilty of price fixing” because it did not defend or effectively explain the value of the cooperative compensation system to the jury.
“They didn’t really present an affirmative case that I could see,” Murray said. “When they let it become an argument just about commission rates, that was when they lost it. They got their butts kicked.”
While the Sitzer/Burnett trial may be done, the commission lawsuit war is far from over, as all three defendants have announced their intention to appeal the verdict.
“We’re going to continue to take this fight to the next level,” said Ray, the Keller Williams attorney. “We’re going to explore all of the appellate options and then consider what to do next — we’re keeping our appellate options open.
“It’s hard to imagine that in 2.5 hours all the evidence was properly considered.”
In addition, Michael Ketchmark, the lead attorney for the plaintiffs in the Sitzer/Burnett suit, has already filed another lawsuit against NAR, Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna and Douglas Elliman, on behalf of three new home sellers, who all claim to have suffered from a real estate industry conspiracy that inflated agent commissions.
ugh!