Copycat commission lawsuits hit the West Coast

The copycat commission lawsuits have made it to the West Coast. A home seller plaintiff in California filed an antitrust lawsuit on Friday in U.S. District Court for Northern California, accusing the real estate industry of colluding to artificially inflate real estate agent commissions.

The lawsuit was filed by Christina Grace, who sold a house listed on Bay Area Real Estate Information Services MLS (BAREIS MLS) in April 2020 and paid a commission to the buyer’s agent. Grace is seeking class action status for the suit, with the proposed class being any homeowner who listed and sold a home on BAREIS MLS between Dec. 8, 2019, and the present.

The defendants in the lawsuit including the usual players, National Association of Realtors, RE/MAX, Anywhere, Keller Williams, Compass, and eXp World Holdings, as well as BAREIS MLS and four local Realtor associations, Marin Association of Realtors, North Bay Association of Realtors, Northern Solano County Association of Realtors, and Solano Association of Realtors.

Both Anywhere and RE/MAX have entered into settlement agreements with the plaintiffs in the original three commission lawsuits, Sitzer/Burnett, Moehrl and Nosalek. The settlement agreement has recently received preliminary approval from the judge overseeing the Sitzer/Burnett suit.

Like the other commission lawsuits, the Grace suit takes aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to the buyer’s broker in order to list the property on the MLS. Although BAREIS MLS is partially broker-owned and not solely owned by Realtor associations, the complaint alleges that since “virtually all committee members” were NAR members during the proposed class period and NAR members are required to comply with the NAR Handbook and code of ethics, the Participation Rule was in play with properties listed on BAREIS MLS. In addition, BAREIS MLS has its own rule similar to NAR’s Participation Rule.

“In a competitive market, the seller would pay nothing to the buyer broker, who would instead be paid by the buyer (their client), and the total commission paid by the seller would be set at a level to compensate only the seller’s broker,” the complaint states. In a competitive market, the cost of buyer broker commissions would be paid by home buyers, and buyer brokers would compete with one another, including by potentially offering a lower commission rate. The anticompetitive rules adopted by BAREIS restrain price competition among buyer brokers because the home buyer that retains the buyer broker does not negotiate or pay any commission to his or her broker.”

In an emailed statement, NAR’s VP of communications Mantill Williams continued to defend NAR’s cooperative compensation practices.

“The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible,” Williams wrote. “Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of REALTORS will respond to this complaint in court.”

The Marin Association of Realtors shared a similar sentiment in its emailed statement, writing: “The Marin Association of REALTORS® stands by the value of the professional expertise that its members provide to their clients, and we strongly disagree with the allegations made in the complaint.”

Of the brokerage defendants, eXp and Keller Williams were the only firms to comment on the new suit.

In an email, an eXp spokesperson wrote: “While we have not yet received the formal complaint, we have been closely observing the ongoing antitrust litigation against our competitors in recent years. We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions. Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction.”

Darryl Frost, a spokesperson at Keller Williams shared similar thoughts: “We have followed the law regarding cooperative compensation and will vigorously defend ourselves against this lawsuit. Offers of cooperative compensation remain negotiable and at the discretion of the seller.”

Compass, RE/MAX and Anywhere all said they cannot comment on pending litigation and none of the other defendants returned a request for comment.

The plaintiff is demanding a jury trial, damages, a permanent injunction barring the defendants from requiring sellers pay the buyer broker, and “restitution and restitutionary disgorgement of all monies wrongfully obtained from Plaintiff and the Class by Defendants.”