Appeals court hears arguments on reopening the DOJ’s probe into NAR

The National Association of Realtor’s ongoing battle with the Department of Justice is heating up again. On Friday, a three-judge appellate court panel in Washington, D.C. heard oral arguments from both NAR and the DOJ, over whether the federal agency will be able to reopen its probe into the trade group.

The DOJ’s Antitrust Division would like to investigate NAR’s Clear Cooperation Policy and Participation Rule, which are currently at the epicenter of the proliferating commission lawsuits. Based on reports from several news agencies, the panel of judges seemed inclined to allow the DOJ to reopen its probe.

In 2020, the DOJ’s antitrust division agreed to a settlement after investigating the trade groups listing and agent compensation policies. The settlement proposed at the time included requirements for NAR to boost transparency about broker commissions and to stop misrepresenting that buyer broker services are free.

However, the DOJ, under new leadership in the Biden administration, withdrew the settlement in July 2021, stating that the terms of the agreement prevent regulators from continuing to investigate certain association rules that they feel harm buyers and sellers.

NAR filed a petition in September 2021 to set aside or modify the DOJ’s probes into the trade group.

In late January 2023, Judge Timothy J. Kelly of the U.S. District Court for the District of Columbia, a Trump appointee, ruled in favor of NAR, stating that the earlier settlement terms were still valid, and that allowing the investigation to continue would take away the benefits NAR had negotiated in the original settlement.

The DOJ appealed the ruling in March and filed its first brief in early June. NAR filed a reply brief in late July. Things finally came to a head on Friday, when oral arguments were held.

“The question is whether in addition to agreeing to close its investigation, the [DOJ Antitrust] Division made a commitment not to reopen it,” Justice Department lawyer Fred Liu argued appeals hearing, according to a report from Politico. “The division repeatedly rejected such a commitment throughout negotiations.”

NAR attorney Christopher Michel argued that the “DOJ’s entire case depends on [Liu’s] contention that its binding promise to close the investigation left it with precisely the same unfettered discretion [to investigate the compensation system] after it made that promise as it had before it made that promise.”

According to Michel, under this interpretation the “DOJ’s promise would mean essentially nothing at all.”

In reference to a letter the DOJ sent NAR in Nov. 2020, in which the DOJ agreed to close its investigation into NAR, Judge Florence Y. Pan stated that she couldn’t “see how you can read it to make any commitments about the future. The plain and ordinary meaning of ‘closed’ does not imply ‘and will never reopen.”

“If I close the door, does that mean I’m never going to open it again?” she added.

Pan was appointed by President Joe Biden.

Judge Justin Walker, who was appointed by former President Donald Trump, added that the letter afforded NAR confidence that if the personnel and the antitrust division didn’t change after the election it would be in the clear.

“You made that bet and you lost,” Walker said, according to Bloomberg.

In an emailed statement, Mantill Williams, the vice president of communication at NAR, wrote that the DOJ’s attempt to reopen the investigation “boils down to an apparent institutional change of heart under new DOJ appointees.”

“The Justice Department is not free to ignore the principles of contract law and fair dealing that bind every other party before the courts,” he added. “The district court’s decision that the government must be held to the terms of its 2020 settlement agreement is correct and should be affirmed.”

The DOJ’s Antitrust Division did not wish to comment on the appeal hearing.

The appeal comes at a challenging time for the trade group, which is currently facing several commission lawsuits, which accuse NAR and many of the nation’s largest corporate brokerages of colluding to artificially inflate real estate agent commissions.