Will the election impact NAR vs. DOJ? ’That settlement is going through’

Donald Trump has won the 2024 presidential election and will become the 47th President of the United States. But what could a change in administration mean for the real estate industry that is keeping a close eye on Nov. 26, when the National Association of Realtors’ (NAR) commission lawsuit settlement agreement is slated for a final approval hearing?

“I don’t think it is going to change the settlement at all,” said Chuck Cain, an attorney and the president of Alliance Solutions. “The Sitzer/Burnett lawsuit was filed during the Trump administration and it has been disclosed by the plaintiffs’ counsel that the Federal Trade Commission and the Department of Justice helped and participated in the plaintiffs’ case as far as evidentiary provisions, and that was the Trump DOJ and Trump FTC.”

Marx Sterbcow, the managing attorney of Sterbcow Law Group, is also confident that the settlement will be approved.

“That settlement is going through,” Sterbcow said. “That is a private civil action that these companies, plaintiffs and trade associations entered into independently, so it will have no impact, whatsoever.”

In addition to what lawyers think, Judge Stephen Bough’s track record on the commission lawsuits also indicate that the settlement’s track to final approval is already clear.

In the past six months, Bough has granted final approval to the settlements reached by Anywhere ($83.5 million), RE/MAX ($55 million) and Keller Williams ($70 million) in the Sitzer/Burnett suit.

He also approved settlements in the combined Gibson/Umpa suit for Compass ($57.5 million), The Real Brokerage ($9.25 million), At World Properties ($6.5 million), Douglas Elliman ($7.75 million, but may pay up to an additional $10 million), Redfin ($9.25 million), Engel & Völkers ($6.9 million), Realty ONE Group ($5 million), HomeSmart Holdings ($4.7 million) and United Real Estate ($3.75 million).

In his approval order for the Gibson suit, Bough addressed many of the objections filed against the settlement, which mirror those filed against the NAR settlement. In addressing objections about the effectiveness of the class notification, Bough noted that the settlement administrator was able to reach more than 97% of identified Gibson class members and that so far, more than 463,000 claims had been made.

Additionally, Bough highlighted that only eight objections were filed and only 46 class members chose to opt out of the settlement class.

Both the Gibson and NAR settlements have also received criticism for being nationwide settlements, when the claims involved originated in Missouri.

“A nationwide settlement was a necessary condition of obtaining any settlement for the benefit of the class, a nationwide settlement will conserve judicial and private resources, and Class members were fully apprised of the settlement class definition through the notice process,” Bough wrote.

Bough also addressed the inclusion of all MLSs in the deal, regardless of their affiliation with NAR. He called the choice “both justified and necessary to achieve any settlement for the Settlement Class. Moreover, the only way that the Settlements were possible was if they provided for a nationwide recovery and release.”

Objectors to the settlements have also taken issue with the small amount of monetary damages awarded to individual home sellers who are part of the class — especially after the plaintiffs’ attorneys take their 33% cut of the settlement pot. In response, Bough noted that no settlement amount would have provided class members with the full extent of damages they claim.

“The applicable standard is whether the settlements are fair, reasonable, and adequate — not whether they provide complete relief to all Class members,” he wrote. “The Settlements provide a significant financial recovery to the Settlement Class in light of the strengths and weaknesses of the case and the risks and costs of continued litigation, including appeal, and the Settling Defendants’ financial resources.”

And Bough highlighted the business practice changes outlined in the settlements, noting that these also had to be considered as part of the reparations being made to the settlement class.

Notably, Bough addressed the objections raised by James Mullis, who is a plaintiff in the Batton homebuyer commission lawsuits. The judge wrote that the claim that Mullis bought a home after selling a home, making him potentially part of two separate classes, is not unique.

“[E]very class member sold a home during the class period, and most also bought homes,” Bough wrote. “After all, few people sell a home without first buying it. And most home sellers then buy a different home with the proceeds because they need somewhere to live.

“Thus, most Class members had possible claims both as home sellers and home buyers. Yet Settling Defendants quite reasonably balked at paying large amounts in settlement only to have the same people they just paid sue them again for the same alleged antitrust conspiracy.”

Bough noted that class members had the ability to opt out of the settlement, writing that the homebuyer plaintiffs should not be able to sue the defendants “twice for the same wrong.”

While the Mullis and Batton plaintiffs have claimed that the settlement prevents them from pursuing their own litigation, Bough wrote that the “sole limitation imposed is that people who accept settlement benefits here cannot turn around and pursue a second recovery for the same conduct. This is not a case where anyone is releasing claims without compensation.”

Although Bough’s rulings should give the real estate industry some confidence heading into Nov. 26, real estate and legal experts don’t believe it is completely out of the woods yet, even with a new administration coming into office.

Given the industry’s current focus on NAR’s Clear Cooperation Policy and the still ongoing practice of cooperative compensation — despite the DOJ’s strong stance against it — experts believe future legal battles under the second Trump administration could focus on these issues.

“I fully expect the FTC and the DOJ to change, and I think they are going to be more focused on consumer harm,” Sterbcow said. “Where they may be forced to intervene is post-NAR settlement in creating some normalcy for the entire industry if NAR doesn’t. And I don’t think many of the big brokerages have much trust left in NAR.

“The first place will probably be in addressing cooperative compensation and then Clear Cooperation, because if that is handled poorly, it could lead to fair housing issues.”

While Cain shares a similar view to Sterbcow, he believes much of it will be tied to who is named as the next attorney general.

“We’ll have to see how vigorous this Department of Justice is, and a lot of that will have to do with who the new attorney general is and what their priorities are. And I don’t know that this will be a priority, but I don’t necessarily know if they will call off the dogs either,” Cain said.

Steve Murray, the co-founder of RealTrends Consulting, has a different take.

“Might the election head off the DOJ and their ’huff and puff and I’ll blow your house down if you don’t do what we tell you to do’ attitude? Yes, but the industry leadership needs to be stockpiling some cash right now so that when the DOJ comes back, which they will, they will be prepared to have a fight,” Murray said.

Some believe the second Trump administration will be more pro-business and lighter on enforcement. But Jeff Erlich, the former deputy enforcement director for the Consumer Financial Protection Bureau (CFPB), noted earlier this week that “in 2020, the last full year of the previous Trump Administration, the Bureau brought 48 enforcement actions; so far this year, it has brought only 21.”

“If history is any guide, a second Trump Administration might not be as friendly to the industry as many expect,” Ehrlich wrote in an email to HousingWire.

So, while NAR’s settlement may get the go-ahead from Bough, that doesn’t mean the real estate industry’s war with the DOJ has ended.