A federal judge in Illinois has granted class certification to a major commission lawsuit that could drastically change how agents are compensated across the country.
Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois ruled Wednesday that the “Moehrl case,” named after its lead plaintiff, had achieved class certification, nearly a year after a similar federal lawsuit known as Sitzer/Burnett received class certification.
Plaintiffs in the Moehrl case, filed in 2019, allege that commission sharing inflates the costs for sellers, in violation of the Sherman Act. A ruling against National Association of Realtors (NAR) and various franchisors, including Anywhere, HomeServices of America, RE/MAX and Keller Williams, could disrupt the brokerage commissions model across the country.
Wood’s ruling on Wednesday certifies two classes in 20 MLS markets across the country. In effect, certification opens the door for home sellers who paid a commission between March 6, 2015 and December 31, 2020 to a brokerage affiliated with a corporate defendant listed on a covered MLS and jurisdiction. It also makes eligible “current and future owners of residential real estate in the covered jurisdictions or are presently listing or will in the future list their home for sale on a Covered MLS,” Wood ruled.
Current and future homesellers could ask to be reimbursed for billions in commissions they paid or will pay to buyer agents.
It’s not immediately clear when a trial for the Moehrl case would begin; the Sitzer/Burnett case, the smaller of the two, was slated to begin in February but was postponed indefinitely at the request of Anywhere.
The plaintiffs in Moehrl allege that the NAR and the brokerages have engaged in a conspiracy by mandating the NAR’s “buyer broker commission rule” when listing a property on a MLS. Attorneys for Cohen Milstein argue that the conspiracy has saddled home sellers with a cost that would be borne by the buyer in a competitive market.
“Moreover, because most buyer brokers will not show homes to their clients where the seller is offering a lower buyer broker commission, or will show homes with higher commission offers first, sellers are incentivized when making the required blanket, non-negotiable offer to procure the buyer brokers’ cooperation by offering a high commission,” the plaintiffs argued.
In a statement, NAR spokesperson Mantill Williams said the industry group, which has more than 1.5 million members, “was disappointed.”
“Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Williams said. “The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and thus creates a larger pool of buyers for sellers. For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation and make homeownership possible for more people. In fact, the U.S. model of independent, local broker marketplaces is widely considered the best value and most efficient model in the world, with no hidden or extra costs and with more complete, verified information compared to other countries.”
Though the Moehrl certification is a blow for the industry, even if a jury finds in the plaintiff’s favor it will likely be awhile before any material changes go into effect for agents and the brokerages with which they hang their licenses.
“The case will go through appeals and unless there is an injunction requiring immediate action, it will be awhile before the ruling is final,” Steve Murray, senior advisor for RealTrends, said in reference to the Sitzer/Burnett case in late December.
In RealTrends’ Q1 BrokerPulse survey, a mere 3.45% of brokers surveyed felt like the “outcome of commission lawsuits” were a challenge or concern. When asked what they are doing to prep for a worst-case outcome, some 60% answered, “Nothing.” Other popular answers included, ‘implementing buyer representation agreements,” “full disclosure of client options,” and “more training on our value proposition.”
For more on how brokers and agents are preparing – or not – for a major change in commission structures, check out this piece.