Settlement agreement in buyer broker commission case hits a snag

A little over a month after filing an agreement in one of the ongoing buyer broker commission lawsuits, New England’s largest multiple listing service (MLS), MLS Property Information Network (MLS PIN)’s attempt to settle the Nosalek case, has hit a snag.

Originally filed in December 2020, the Nosalek lawsuit alleges that the broker-owned 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, which has over 46,000 subscribers.

Nosalek is one of three ongoing class action lawsuits deal with buyer broker commissions. However, unlike Moehrl and Burnett, NAR is not named as a defendant.

Judge Patti Saris, the U.S. District Court judge in Boston presiding over the Nosalek case, expressed skepticism over the financial portion of the proposed agreement during a preliminary hearing to consider approval of the agreement on Wednesday.

“I’ve never seen a settlement agreement like this in my 30 years,” Saris said.

In the proposed agreement MLS PIN said it would pay $3 million, change its commission policies, and cooperate against the remaining defendants in the suit, which include Anywhere, RE/MAX, Keller Williams and HomeServices of America.

According to the proposed settlement, of the $3 million MLS PIN has agreed to pay in the settlement, up to $900,000 will go toward attorney’s fees, up to $200,000 will go toward expenses, $250,000 will go toward notifying settlement class members, and each of the three named lead plaintiffs will get up to $2,500 for being class representatives. The remaining $1.6425 million would be used to pay for further expenses for the litigation against the remaining defendants “for the benefit of Settlement Class Members,” according to the filing.

With this payment structure, class members in the case will not be getting any money from the settlement agreement, however the plaintiffs’ class-action attorneys, “get fully funded for expenses to date, and they basically get a litigation fund open-ended for the future for as long as it takes, which may be another three to five years,” Saris said.

Saris asked the Robert Izard, an attorney for the plaintiffs, if there was a way to give some of the $3 million paid by MLS PIN to class members. She said that this was the part of the settlement she is “struggling with.”

According to Izard, there are well over 300,000 class members and if the court awarded the plaintiffs’ attorneys their expenses to date, plan a 30% fee that would add up to between $1.5 million and $2 million, meaning that class members would get less than $5 each.

While Saris said she found the argument “persuasive,” she questioned why the settlement would cover plaintiffs’ attorneys’ fees for dealing with all of the defendants and not just their costs for dealing with MLS PIN. In his response, Izard said it was unclear if there would be a way to fairly divide the time the plaintiffs attorneys spent with just MLS PIN.

Moving forward, Izard said the money would be held in an attorney trust account until his firm asked the court to approve the expenses at “an appropriate time.”

Saris said that she had never done something like that before, but said it was “very creative.” She also noted that she “loves” the proposed rule changes in the settlement, which would make the offering of compensation to buyer brokers optional. The changes are contingent on the settlement’s approval.

“I do love what you’ve accomplished,” Saris said. “I had problems with that [rule], so I denied the motion to dismiss and I think two other courts did as well.”

Saris added that she also “loves” the idea of ending the practice of requiring listing brokers to offer compensation to buyer brokers “so that at least it stops the damages. The other defendants might like that, too. It sort of caps it, if you will. I do think the rule change is important and congratulations. I’m just worried here about the fairness … of how you’ve structured it, which is the individual plaintiffs get no dollars.”

Instead of the proposed financial arrangement, Saris suggested that the plaintiffs’ attorney get paid some of their fees to date and take the rest of the money and put it in a pot. If the plaintiffs won the case, the post would grow and then it would be divided among the plaintiffs, and if the plaintiffs lost, the pot from the MLS PIN settlement would be what the plaintiffs received minus a “fair” attorney fee.

The plaintiffs’ attorneys have until September 5 to either redraft the settlement agreement or brief Saris on cases with similar settlements.

“I do ideally want to do this as quickly as possible because I actually think that the rule change is a good thing,” Saris said. “I don’t want to be the person who blows that up.”