Court Report: DOJ Presses on NAR, MLSs React as Rule Change Opt-in Deadline Passes

Editor’s note: The COURT REPORT is RISMedia’s weekly look at current and upcoming lawsuits, investigations and other legal developments around real estate.

While the National Association of REALTORS®’ (NAR) settlement in class-action lawsuits has yet to be officially approved, the consequences of that settlement are beginning as MLS rule changes go into effect. However, the Department of Justice (DOJ) appears unconvinced that matters of antitrust in the real estate sector have been totally resolved.

The Department of Justice continues push for real estate industry reform

Despite offering a cautiously positive assessment of the settlement struck by NAR late last month, DOJ antitrust regulators are signaling they will push for changes to more real estate rules outside the significant shifts already agreed to.

In three separate moves, lawyers for the DOJ targeted the so-called “commingling” MLS rule, which bans real estate platforms that use MLS data from presenting those listings alongside listings from other sources, and also directly intervened in a major real estate association’s plans to prepare for NAR’s settlement.

And in a status update in the Massachusetts-based commission case known as MLS PIN, last week, plaintiffs and defendants said they specifically asked DOJ lawyers to commit to taking a position on the NAR settlement before November 26, when a hearing is scheduled to potentially grant final approval to that agreement.

NAR has continued to defend MLS rules, as well as the settlement agreement struck back in March.

The DOJ squares off with NAR for investigation rehearing

The DOJ last week pushed back against NAR’s request for a rehearing before the three-judge panel or a full panel of circuit judges after the court recently allowed the DOJ to reopen its long-running investigation into the real estate industry.

NAR cites the letter saying the investigation has closed as evidence it should not be reopened, while the DOJ contests that “has closed” language does not restrict it from future actions.

The DOJ had previously closed an investigation into NAR in 2020, and the letter they sent is at the center of NAR’s appeal. The text of the letter is as follows:

“This letter is to inform you that the Antitrust Division has closed its investigation into Clear Cooperation Policy and Participation Rule. Accordingly, NAR will have no obligation to respond to (previously issued civil subpoenas). No inference should be drawn, however, from the Division’s decision to close its investigation into these rules, policies or practices not addressed by the consent decree.”

MLSs react as NAR settlement opt-in deadline passes

One of the centerpieces of NAR’s rule changes in its class-action settlement is that offers of compensation can no longer be advertised on Multiple Listing Services (MLSs). This rule change will take effect in August; the deadline for MLSs to opt in to the rule change was June 18, 2024.

SmartMLS, covering the Connecticut residential real estate market, has chosen to opt into the rule changes. SmartMLS President Michael Barbaro explained the decision:

“A robust, transparent and universally adopted MLS is critical to providing real time market insights to sellers and homebuyers alike. As Connecticut’s residential real estate industry navigates this period of change, SmartMLS is committed to preserving and protecting the open marketplace in the interest of the consumers it serves. While we were not a party to this litigation, opting in to the Burnett agreement is necessary to minimize disruption in the marketplace.” 

South Carolina-based MLS REsides, Inc. however has declined to opt in, following the path of Northwest MLS. REsides has said it will implement its own independent rule changes come August 2024.

Colette Stevenson, CEO of REsides, explained:

“Our state law allows for compensation to be offered. Agents need to be able to communicate options to buyers and sellers in a clear and concise manner. It’s understandable that change can be frustrating, but we are encouraging our subscribers to embrace forward-thinking strategies to improve conversations with their clients. The highest level of communication and transparency is essential for one of the most important financial transactions a consumer can make.”

Engel & Völkers is the latest brokerage to settle

On Thursday, June 20, 2024, German-based luxury brokerage Engel & Völkers was the latest brokerage to settle in the class-action commission lawsuits that the real estate industry has been facing. The terms of the settlement, which still faces final approval from a judge, have not been publicly disclosed.

The company is one of several brokerages named in Burnett copycat cases to settle seller-filed commission cases in the past few months, rather than continue litigating.

NAR faces new lawsuit from former employee

Roshani Sheth, a former NAR product manager, has filed a lawsuit against her former employer, claiming that NAR fired her for reporting incidents of sexual harassment and has since failed to abide by terms of a settlement. Sheth is seeking over $1 million in damages from the suit.

Sheth’s lawsuit claims that the association has “made several attempts to ruin (Sheth’s) career and cause her economical and reputational harm.” 

An NAR spokesperson responded that the organization “is committed to fostering a diverse, equitable and inclusive workplace. We don’t comment on matters of employment.”

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