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Federal court dismisses commission-sharing case against NAR

But NAR faces the same issue in a different lawsuit

It is no secret that the National Association of Realtors is embroiled in multiple anti-trust lawsuits, but at least for now, there is one less on the trade organization’s plate.

An Illinois federal court dismissed a lawsuit seeking class-action status filed by Judah Leeder, a New Jersey homebuyer, in January 2021, against NAR, Realogy, Keller Williams, RE/MAX and HomeServices of America on Monday. The proposed class for the suit was any homebuyer who purchased residential real estate listed on a NAR affiliated multiple listing service after December 1996.

In the suit, Leeder alleged that the sharing of commissions between listing and buyer brokers is a conspiracy in restraint of trade in violation of the Sherman Antitrust Act for inflating buyer costs in the form of higher home prices.

Two other lawsuits filed against the same defendants (Moehrl and Sitzer/Burnett, which recently gained class action status), allege that commission-sharing inflates costs for the home seller.

Judge Andrea R. Wood, who presided over the case, found that the lawsuit is barred under the U.S. Supreme Court’s Illinois Brick ruling, which has generally limited federal antitrust claims under the Sherman and Clayton acts to “direct” purchasers of the price-fixed product or service, not “indirect” buyers further down the chain. Wood is also overseeing the Moehrl case

According to Wood, homebuyers are indirect purchasers of buyer brokers’ services because the services are paid for by the commission paid to the listing broker by the home seller.

“It is the home seller who agrees in their listing agreement to pay a single, total commission, and the buyer-broker’s compensation comes from that fund,” Wood wrote in the ruling. “By contrast, the homebuyer’s contract with their broker usually makes clear that the buyer-broker’s compensation comes from the total commission paid by the seller. In operation, the home seller is an intermediary in the flow of funds from homebuyer to buyer-broker — because the buyer never directly agrees to pay the buyer-broker, no portion of the buyer’s money would reach the buyer-broker absent the seller’s agreement to pay a total commission compensating both the seller-broker and the buyer-broker.”

In his lawsuit, Leeder requested that the court stop NAR from enforcing the rules that require listing brokers to offer a buyer broker commission in order to submit a listing to a NAR-affiliated MLS. Wood’s role as the judge overseeing the Moehrl suit helped inform her decision not to grant this request.

“The Court agrees that home sellers, as the direct purchasers of buyer-broker services, are necessarily more directly injured by Defendants’ alleged antitrust violations,” Wood wrote. “Moreover, home sellers are, in fact, vindicating the public interest in antitrust enforcement as they are actively challenging the same NAR rules as Leeder before this Court in Moehrl v. The National Association of Realtors. Not only are the plaintiffs in Moehrl asserting a claim for damages …, they are also requesting the exact injunction that Leeder requests here. Thus, denying Leeder antitrust standing to seek injunctive relief will not ‘leave a significant antitrust violation undetected or unremedied.’”

After receiving some disappointing rulings in the past few weeks, Mantill Williams, a spokesperson for NAR, said that the organization was “pleased with the judge’s decision to dismiss this baseless complaint.”

Williams continued: “The pro-competitive, pro-consumer local broker marketplaces serve the best interests of buyers and sellers. Sellers making offers of compensation to buyer brokers gives first-time, low/middle-income and all homebuyers a better shot at affording a home and professional representation to navigate this critical purchase.”

A spokesperson for RE/MAX added: “We are pleased with the court’s dismissal of the Leeder case and look forward to continuing to vigorously defend the related actions.”

Wood dismissed the lawsuit without prejudice, meaning that Leeder has the option to refile his complaint, however Wood stated that she thought it was unlikely that he would be able to “plead adequately that he is a direct purchaser of buyer-broker services.”

A request for comment sent to one of Leeder’s lawyers, Carol Lee O’Keefe, was not returned as of Thursday afternoon.