HomeServices appeal rejected as October commission trial looms

An October trial in federal court for one of the many commission lawsuits is imminent after HomeServices of America lost a recent appeal. The 8th Circuit Court of Appeals’ three-judge panel concurred with a lower district court’s decision that HomeServices is not permitted to enforce arbitration agreements signed by seller clients of franchisees under its authority.

Earlier this year, the defendants filed a motion to compel the plaintiffs into arbitration rather than have the court decide the case, but this motion was denied by Judge Stephen R. Bough of U.S. District Court in Western Missouri in July.

In response, HomeServices and its subsidiaries appealed the decision to the U.S. Court of Appeals for the Eighth Circuit. The recent ruling agreed with the lower court’s opinion, noting, “HomeServices is neither a party nor a third-party beneficiary of the Listing Agreements or the Arbitration Agreements.”

Lawsuit scheduled to go to court

The case, known as Sitzer/Burnett, named after the lead plaintiff, is scheduled to go to court October 16 in Missouri. Judge Bough will make a final decision about that date at a scheduled September 9 pretrial hearing.

Originally filed in 2019, the lawsuit won class-action status shortly after, and alleges that some NAR rules, including one that requires listing brokers to offer buyers’ brokers a commission in order to list a property in a Realtor-affiliated MLS, violate the Sherman Antitrust Act by inflating seller costs.

Through the class certification, hundreds of thousands of home sellers in four MLS markets in Missouri can ask the defendants, which include Keller Williams, RE/MAX, HomeServices of America and its subsidiaries BHH Affiliates and HSF Affiliates, as well as Anywhere (referred to as Realogy in the lawsuit) and NAR, to be reimbursed for the $1.3 billion in commissions they paid to buyers’ agents in the past eight years. However, potential treble damages could put the total damages in the case at around $4 billion.

MLSs under the gun

Real estate commissions have been scrutinized by The Department of Justice and multiple lawsuits concerning how buyers’ brokers get paid are in various stages.

Last month, as reported by HW Media Real Estate Reporter Brooklee Han, the nation’s second largest multiple listing service, Bright MLS, will begin allowing listing agents to put in a blanket offer of compensation for buyer brokers of zero dollars or more, starting on August 9.

This change appears to possibly diverge from a National Association of Realtors rule, which states that listing agents must make an offer of cooperative compensation to buyers’ brokers in order to list a property on the MLS.

Then, after years of litigation, in July, New England’s largest multiple listing service (MLS) signed off on a settlement agreement that would force it to pay $3 million, overhaul its policies and cooperate against the remaining real estate franchisor defendants in the suit.

The other defendants in the lawsuit, known as Nosalek after its lead plaintiff, include Anywhere, RE/MAX, Keller Williams and HomeServices of America.

Originally filed in December 2020, the lawsuit alleges that the broker-owned MLS Property Information Network (MLS PIN) is not directly required to abide by the National Association of Realtors (NAR) rules. However, it has nonetheless adopted a rule similar to an NAR rule requiring listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing to MLS PIN.

According to the proposed agreement, the brokers who own MLS PIN will be covered by the settlement unless they are defendants in the lawsuit. MLS PIN has 46,000 subscribers throughout New England and New York, as well as a staff of 60 employees.