NYC Commission Suit Splinters Around NAR Settlement

With many Burnett copycat suits resolved or on a path to resolution due to a settlement agreement struck by the National Association of REALTORS® (NAR), one class-action lawsuit appears to be on a different, more contentious path.

The unique New York City real estate landscape is central to an ongoing battle between plaintiffs and a handful of defendants in March v. Real Estate Board of New York (REBNY), with plaintiffs vehemently disputing whether at least some entities they are targeting—including big brokerages like Christie’s International Real Estate (CIRE) and REBNY as an independent governing body—have garnered any immunity from separate settlements in NAR-focused cases.

In court filings yesterday, multiple defendants asked Judge Robert Lehburger in the Southern District of New York to pause proceedings with the expectation that final approval of the NAR settlement in the nationally-focused Gibson case (or separate agreements they signed with Gibson plaintiffs) will release them from any liability in the case. 

“The claims encompassed by the proposed NAR Settlement’s release include the claims asserted in this case,” wrote lawyers representing Engel & Völkers. “The NAR Settlement class includes ‘all persons who sold a home that was listed on a multiple listing service anywhere in the United States where a commission was paid to any brokerage in connection with the sale of the home’ with certain date ranges…and thus the NAR Settlement class encompasses the class that Plaintiffs here purport to represent.”

Plaintiffs, writing to oppose a separate but similar court filing by CIRE, made it clear they were not going to cede this point, and argued that New York City’s real estate market is vastly different from the rest of the country, including in the commission sharing and listing service practices central to both lawsuits.

“Other than a sole assertion that the Gibson and March actions concern residential real estate commissions, (CIRE’s filing) is devoid of evidence demonstrating that the March action is based upon the identical factual predicate as Gibson,” the March plaintiffs wrote. “NAR is not a named Defendant in March and for good reason. Plaintiffs in the March action allege that REBNY seceded from NAR so it could establish its own exclusive club.”

The back-and-forth illustrates what some experts and lawyers predicted in the wake of the NAR settlement—that many local commission class-actions are likely to play out based on specific facts and histories that transcend the broad generalizations made in national suits. Even as some copycat suits have seen plaintiffs agreeing to pause proceedings pending approval of the NAR settlement, others—like those in the March lawsuit—could seek to push forward based on a variety of factors.

In New York City, circumstances and history offer a particularly unique landscape for plaintiffs to explore. REBNY was for most of its history affiliated with NAR, but split in the 1990s after a long-running disagreement over member fees and benefits. It runs its own listing service, which it does not call an MLS (instead naming the platform the RLS, or Residential Listing Service), and does not adhere to NAR rules.

REBNY also sought to proactively change some commission policies in the middle of the Burnett trial, and has generally remained independent from the larger real estate landscape. At the same time, an NAR expert witness explicitly cited REBNY at the trial as an example of how similar commission rules arise without NAR’s influence.

All of this seems likely to ensure the March lawsuit is not going to just disappear with the NAR settlement, and could continue to affect the approximately 800 brokerages and 15,000 agents and brokers operating in the Big Apple despite national settlements. 

The March plaintiffs, in their letter opposing the stay, specifically cited a recent media appearance by Ryan Serhant, who runs a luxury developer in Manhattan.

“In New York, everything is a bit different,” Serhant said, adding that the city did not have an MLS—another key point of contention in the lawsuit.

Timing and liability

In the case of CIRE, the March lawsuit also brings up another potentially fraught area for companies navigating commission lawsuits—acquisitions and subsidiaries. 

One of the reasons plaintiffs are specifically opposing a pause in proceedings for CIRE is because their lawsuit would include transactions from the period before the company was bought by At World Properties in 2021. Whether or not At World Properties bears legal liability for transactions during this time, or whether its settlement covers these transactions, appears to be disputed.

According to CIRE, plaintiffs refused to agree to the stay unless CIRE attested the sale to At World Properties did not contain “a provision that CIRE is responsible for any liability or unlawful conduct in which it or its agents engaged prior to the transaction and/or CIRE will indemnify and hold (At World Properties) harmless from any such claim.”

“The issues raised by counsel for Plaintiffs are not relevant to whether a stay is appropriate here,” lawyers for CIRE argued, “where another court has granted preliminary approval of a nationwide class settlement agreement, including a release of claims asserted against CIRE for conduct during the full class period.”

Plaintiffs, for their part, disputed this at a fundamental level, and claimed that CIRE has not “definitively respond(ed)” to inquiries about the merger and liability.

“If transaction documents (in the At World Properties sale) indicate CIRE or a former affiliate was to be independently responsible for its unlawful conduct during this time period, treating CIRE as a released party would be inconsistent…inequitable and highly prejudicial,” the plaintiffs wrote.

These kinds of specific disputes seemingly could affect many other commission lawsuits, several of which also involve MLSs or companies unaffiliated with NAR, and therefore not automatically covered by the national settlement. At least three independent MLSs are currently facing commission suits—one in Pennsylvania, one in Massachusetts and another in California.

The Massachusetts suit, known as Nosalek v. MLS PIN, is notable due to the involvement of the Department of Justice, which has delayed a settlement in the case as it seeks potentially broader changes to the real estate industry. 

Another interesting point that seems likely to be disputed is whether Judge Stephen R. Bough, who recently approved final settlement agreements for Keller Williams, Anywhere and RE/MAX in the Burnett case, implied that REBNY and other March defendants were also covered.

In his final ruling, Bough wrote the “Realtors®” operating in regions or using listing services not controlled by NAR are still obligated to compensate buyer agents, and “(t)herefore, Plaintiffs adequately represented the nationwide class that is subject to the Settlements.” He also specifically mentioned REBNY as one of those regions.

But how this statement will apply to non-REALTORS® or entities like REBNY, or how another judge in another district might interpret the specific order and definitions was unclear. Bough more broadly rejected the argument that real estate rules were substantially different in different regions, even as a group in South Carolina specifically objected to the Burnett settlement, claiming their region simply didn’t have the same fundamental real estate practices.

REBNY, At World Properties and a lawyer representing the March plaintiffs did not immediately respond to requests for comment.

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