The National Association of Realtors building in Washington D.C. | TheAgency [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0/)]
The Chicago-based National Association of Realtors is asking a federal judge to toss a class action suit by a group of home sellers, which alleges real estate agents across the country breached antitrust law by scheming to lock in high commission rates, because brokers are free to negotiate compensation.
The suit was lodged March 6 in U.S. District Court for the Northern District of Illinois. Plaintiffs are property owners who sold their real estate from Colorado, Texas, Minnesota, California, West Virginia, Wisconsin and Maryland. Named plaintiffs include Christopher Moehrl, Michael Cole, Steve Darnell, Valerie Nager, Jack Ramey, Daniel Umpa, Jane Ruh and Sawbill Strategic Inc.
The National Association of Realtors (NAR) is a defendant. Also named as defendants are what the suit says are the four top real estate brokers in the nation: Realogy Holdings of Madison, N.J.; HomeServices of America of Minneapolis; RE/MAX of Denver; and Keller Williams Realty of Austin, Texas.
Jack Bierig | Schiff Hardin LLP
The action centers on the Multiple Listing Services (MLS), regional databases of properties on the market through which most houses are sold, according to the suit. The NAR controls a number of MLS and requires brokers who belong to the NAR to list properties on an MLS.
The NAR has set rules for use of an MLS that compel the seller’s broker to offer compensation to the buyer’s broker, even though the buyer’s broker is working on behalf of the buyer, not the seller, the lawsuit said. Further, compensation must be offered to every buyer’s broker, regardless of their experience, the services they furnished and their arrangements with the buyer, the lawsuit said.
“Home sellers have been forced to pay commissions to buyer brokers — their adversaries in negotiations to sell their homes — thereby substantially inflating the cost of selling their homes,” the plaintiffs said in the lawsuit.
Competition among brokers and buyers has been “restrained,” the plaintiffs said, adding the system may cost consumers $30 billion per year.
The plaintiffs want an injunction to bar the alleged Realtor practice and damages to be determined at trial.
The NAR called the suit a "complete mischaracterization" of its rules.
"They base their claim on the NAR requirement that a listing broker must make an offer of cooperation and compensation to any buyer's broker who produces a ready, willing, and able purchaser — a basic aspect of the MLS system that has existed for decades. This system, and the rules upon which it has been based, have repeatedly been upheld by the courts," the NAR said.
The U.S. Justice Department authorized, and a federal judge approved, a consent decree for the NAR to restrict MLS membership to brokers who offer cooperation and compensation to other MLS members, the NAR said.
The NAR said its rules do not dictate commission amounts but rather allow brokers to offer either a percentage of the sale price or a specific dollar figure.
The NAR said sellers set commission amounts to encourage buyer-broker cooperation, not to steer buyers to listings with higher commissions..
"This is simply a common-sense effort by sellers to attract buyers for their homes. Far from being anticompetitive, it is the free market at work," the NAR said.
The NAR claimed the plaintiffs failed to suggest how the rules caused harm to them, such as showing how the rules allegedly reduced their proceeds from their house sale.
U.S. District Judge Andrea Wood is presiding over the case.
Plaintiffs are represented by the following firms: Cohen, Milstein, Sellers & Toll, of Chicago; Handley, Farah & Anderson, of Washington, D.C.; Hagens Berman Sobol Shapiro, of Chicago; Teske, Katz, Kitzer & Rochel, of Minneapolis; Susman Godfrey LLP, of Houston; Wright, Marsh & Levy, of Las Vegas; Wexler Wallace LLP, of Chicago; Gustafson Gluek PLLC, of Minneapolis; and Justice Catalyst Law, of Brooklyn.
Defendants are represented by attorney Jack Bierig and others at the firms of Schiff Hardin LLP, of Chicago; Morgan, Lewis & Bockius, of Philadelphia; Barnes & Thornburg, of Indianapolis; Foley & Lardner, Milwaukee; Holland & Knight, of Tampa, Fla.; and Jones Day, of Chicago.