The COURT REPORT is RISMedia’s weekly look at current and upcoming lawsuits, investigations and other legal developments around real estate.
Weichert denied dismissal from Gibson case
On Dec. 30, 2024, Weichert was denied a dismissal from the commission lawsuit Gibson v. NAR. A copycat case of Sitzer v. Burnett, Gibson is also filed in the Western District of Missouri and overseen by Judge Stephen R. Bough (who recently approved NAR’s settlement agreement in November 2024).
The petition for dismissal was first filed on July 15, 2024, with Weichert claiming the court lacked jurisdiction over it under both Missouri’s “long-arm statue” (where an individual or business who is not a Missouri resident can still “submit to the jurisdiction” of Missouri if they do business within the state) and federal antitrust law.
The dismissal reaffirms the court’s jurisdiction over Weichert, stating the case plaintiffs have shown sufficient evidence of jurisdiction under both “broad and narrow readings” of relevant law, according to the ruling Monday.
In November 2024, Weichert filed for a stay in Gibson after reaching a settlement in the similar (but smaller scale) lawsuit Hooper V. NAR. That stay was denied on Dec. 5, 2024, with Judge Bough writing that Weichert had potentially conducted a “reverse auction” by settling in Hooper. (This refers to when a defendant settles with one class of plaintiff to drive down the overall settlement cost). Weichert’s turn of events has drawn comparisons to eXp Realty, which also settled in another case before petitioning for an (ultimately denied) stay in Gibson.
Following amended complaint in Lutz case, defendants once more file for dismissal
On Dec. 12, 2024, an amended complaint was filed in Lutz v. HomeServices of America, which included 31 new plaintiffs. Filed in the Florida Southern District Court, Lutz is distinct from most ongoing commission-centered lawsuits in that the plaintiffs are homebuyers, not homesellers.
HomeServices of America and Douglas Elliman, both defendants in Lutz, previously filed for dismissal in August 2024, citing the words of Judge Andrea Wood when overseeing the case Batton v. National Association of REALTORS® that plaintiffs are not “efficient enforcers of antitrust laws.”
As a result of the new complaint, the defendants’ motion to dismiss was denied as “moot” on Dec. 13, 2024. On Dec. 23, 2024, defendants in Lutz v. HomeServices of America filed for a new dismissal, indicating their strategy has not changed.
Real Estate Board of New York sues to block broker fee reform bill
The Real Estate Board of New York (REBNY) is leading a lawsuit to block the newly passed FARE Act, which undoes a longstanding New York City practice where tenants are required to pay brokers’ fees. Under the FARE Act, the party that hires the broker is required to pay their fee, and such fees are mandated to be disclosed in listing and rental agreements.
The Act was passed by the New York City Council on Nov. 15, 2024 on a 42-8 vote margin. New York City Mayor Eric Adams did not sign the bill, but because it passed by a veto-proof majority, it automatically became law 30 days later on Dec. 14, 2024. It is currently set to take effect in June 2025.
REBNY has previously voiced strong opposition to the FARE Act, and argued the law will result only in landlords passing on the burden of brokers’ fees to tenants via higher rents. On Dec. 16, 2024, REBNY and other plaintiffs filed a lawsuit to block the law, in a brief calling it “constitutionally defective and preempted by New York state law.”
The suit elaborates with a statement that the FARE ACT “violates Plaintiffs’ right to free commercial speech under the First Amendment,” as it disincentivizes brokers and landlords from publishing open listings on apartments by making it illegal for brokers to publish a listing then seek compensation from the tenant. The suit adds that the FARE Act also makes existing listing agreements “which require the broker to negotiate and seek compensation from a tenant” unenforceable under law, a claimed violation of the Constitution’s Contracts Clause.
The suit finally states that “The New York State Legislature has enacted a comprehensive and detailed regulatory scheme to regulate licensed real estate brokers,” suggesting the FARE Act (which only applies to New York City) is preempted in its attempt to regulate brokers.
New York Councilmember Chi Ossé, the FARE Act’s primary sponsor, described the lawsuit as a “last desperate attempt by the real estate lobby to undermine the voices of city residents. New Yorkers deserve a rental system that works for them—not one that exploits them” (via The New York Times).
In an interview with Curbed (a real estate focused outlet of New York magazine), New York University law professor Roderick Hills said he found the plaintiffs’ First Amendment and Contract Clause arguments to be lacking, but that the argument that the FARE Act is preempted by New York state law is more substantive.
“I don’t think that the city could, for example, regulate the licensing of real-estate brokers. But saying that you can’t regulate what tenants are charged—I think it’s harder to say that there’s preemption there,” Hill explained. “It’s about what landlords are charging and what tenants are paying, which actually doesn’t regulate brokers at all, strictly speaking.”
This is not the first time in recent history that New York City’s broker fees practices have seen attempted reform. In 2020, regulators at the New York Department of State attempted to end the practice of renters being mandated to pay broker fees via an interpretation of the Housing Stability and Tenant Protection Act. This was also met with opposition from the real estate industry, REBNY included, and was ultimately struck down as an “abuse” of regulation in 2021. It remains to be seen whether the battle over the FARE Act will end differently.
Consumer Financial Protection Bureau launches suit against Rocket and Jason Mitchell Group
On Dec. 23, 2024, the Consumer Financial Protection Bureau (CFPB) announced it had filed a lawsuit against Rocket Homes as well as Jason Mitchell and his eponymous real estate brokerage, the Jason Mitchell Group.
The pertinent issue of the lawsuit is an alleged illegal referral, or “kickback” scheme, wherein Rocket Homes would supposedly provide brokerages with preferential treatment (such as referrals) in exchange for those brokerages directing their clients to Rocket Mortgage for home loans and to Amrock (another Rocket subsidiary) for title and insurance services.
The Jason Mitchell Group is named in the lawsuit because the CFPB states in its release that, during its investigation, it found the brokerage had “referred thousands of clients” to Rocket Mortgage and Amrock. The release goes further, alleging that Mitchell himself would incentivize agents to refer clients to Rocket and Amrock by offering $250 gift cards to the agents who produced the most referrals to Rocket.
Both Rocket and Jason Mitchell have denied the claims of the lawsuit. In a statement shared with RISMedia, Rocket Homes said:
“The CFPB’s allegations are false and a distortion of reality. The accusation that homebuyers paid more when working with Rocket Homes is a lie. Data shows one third of consumers with a loan application already in progress with Rocket Mortgage, before contacting Rocket Homes, chose to close with a different lender. This proves Rocket Homes is committed to empowering homebuyers to make the best decisions for their unique needs.”
In a post shared on LinkedIn, Mitchell claimed he refused a $200,000 settlement agreement from the CFPB.
“The ‘terms’ of the consent order would have (been) admitting things that simply are not true,” wrote Mitchell. “I choose to stand up and fight because JMG is being used as a pawn in this case.”
In its release, the CFPB cited this alleged scheme as a violation of the Real Estate Settlement Procedures Act, which prohibits kickbacks for referrals and the incentivized client steering. The release also included a statement from CFPB Director Rohit Chopra, who said:
“Rocket engaged in a kickback scheme that discouraged homebuyers from comparison shopping and getting the best deal. At a time when homeownership feels out of reach for so many, companies should not illegally block competition in ways that drive up the cost of housing.”
Any monetary civil penalty procured by the CFPB, the release states, will be deposited into the bureau’s victims relief fund.
NAR and Phoenix Association of REALTORS® in dispute over MLS Choice program
The holiday season saw the continuation of a conflict between the National Association of REALTORS® (NAR) and the Phoenix Association of REALTORS® (PAR), which ratcheted up at December’s end.
Earlier in December, NAR sent a cease and desist letter to PAR over the association’s new “MLS Choice” program. MLS Choice, which is set to take effect on Jan. 1, 2025, would allow brokers and agents to access multiple listing services (for a $249 annual fee) without NAR memberships. This would be contrary to NAR’s “Three-Way Agreement” structure, which incentivizes agents and brokers to join, and pay dues to, NAR alongside local and statewide associations. (“Traditional REALTOR® Membership” costs $511 annually, per Phoenix REALTORS® website.)
MLS Choice is explicitly described on the PAR website as a response to “recent brokerage settlements related to the Sitzer/Burnett case, which removed the requirement for brokerages to be a member of NAR.” The membership requirements of MLS access due to the Three-Way Agreement have become a contentious issue for some, heightened by lawsuits that have been facing the industry. In August 2024, several Michigan agents sued NAR and their own local association, arguing the NAR settlement reduced the value of having access to an MLS to real estate professionals.
The penultimate week of December saw a volley of conflicts between NAR and PAR over MLS Choice. On December 23, PAR officially refused to comply with the cease-and-desist, writing in a letter that: “PAR has experienced more and more real estate professionals interested in obtaining the products and services they value for their business without REALTOR® membership.”
In response, NAR now intends to revoke PAR’s charter, which is carried out in events where a state or local association is found to have violated NAR bylaws (per the association’s website). In a statement to RISMedia, PAR CEO Andy Fegley defended the association’s policy and decried NAR’s decision as a “disservice to the industry.”
