What should other brokerages glean from Howard Hanna’s commission lawsuit dismissal?

In the nearly 12 months since a Missouri jury found the real estate industry liable for colluding to artificially inflate real estate agent commissions, much of the discussion has centered upon the settlement agreements that have followed and how the industry can move on from this verdict.

But while many of the industry’s major players — including the National Association of Realtors (NAR), RE/MAX, Compass, Anywhere, HomeServices of America, Keller Williams, Redfin, and eXp have settled the commission lawsuits, family-owned firm Howard Hanna Real Estate Services decided to take a different tack.

Despite other defendants trying and failing, Howard Hanna decided to file a motion to dismiss the Moratis case, formerly known as the Spring Way suit, filed late last year in Pennsylvania.

Like the nearly two dozen other copycat lawsuits filed in the wake of the Sitzer/Burnett verdict, the Moratis suit accuses real estate industry players of colluding to artificially inflate agent commissions. Most of the suits cite NAR’s Participation Rule, which required listing brokers to make a blanket offer of compensation to buyer’s brokers in order to list a property on an MLS. But West Penn MLS, the multiple listing service at the center of the Moratis suit, is owned by local brokers and not a Realtor association.

Despite not being Realtor-affiliated, West Penn MLS had a rule similar, but not identical, to NAR’s Participation Rule. This ultimately contributed to Howard Hanna’s successful bid at being dismissed from the suit with prejudice.

David Gringer, a partner at the law firm Wilmer Hale, which is representing Howard Hanna in the commission lawsuits, noted that while all of these cases share similarities, they are not identical.

While the Sitzer/Burnett suit has been used as a vehicle to facilitate nationwide settlements for its defendants — and countless other firms that have opted in via the NAR settlement —the case dealt with how real estate is transacted in four MLSs in Missouri.

“The first maxim of real estate is that all real estate is local,” Gringer said. “I’m in New York and I know the real estate market here is very, very different than it is outside of Pittsburgh, or in Ohio, or in Missouri. And so, you can’t look at a few counties in Missouri and extrapolate a national practice.”

“In fact, different regions do things differently,” Gringer added. “In West Penn MLS, they had a different set of rules and different practices than those at issue in Missouri. The plaintiff tried to argue that the different practices were the same as those in Missouri, but to the great credit of the court, he took the time to look at the arguments and realized that this isn’t how things are done here.”

According to Gringer, while the court’s ruling only takes Howard Hanna out of the Moratis suit, the outcome is still “significant.” He is not the only one who thinks so.

“There are an awful lot of the large regional realty companies who have not entered into settlements, and I think this will certainly give them a boost,” said Charles Cain, an attorney at Sterbcow Law Group and the president of Alliance Solutions.

Cain takes a similar view to Gringer by noting that real estate is not transacted the same way in every county across the country.

“So much of real estate is highly localized, and as these lawsuits move forward, we may see a real discrepancy about verdict or decisions by the courts,” he said. “The slightly different factual scenarios as to how the multiple listing services in question function could result in different verdicts.”

For Cain, the fact that the multidistrict litigation panel refused to consolidate multiple commission lawsuits was a key indicator that they are not as similar as they are often treated.

“West Penn MLS is independent of NAR and they don’t have the same rules as the MLSs at the center of the Sitzer/Burnett suit,” Cain said. “As each of these cases move forward and there are factual differences, we may see more of this.”

Paul Rogers, an antitrust law professor at Southern Methodist University, said it isn’t unusual for cases with similar issues to have different outcomes.

“Cases are fact driven and judges certainly try to apply the law consistently, so with different facts it is conceivable that they would reach different verdicts,” Rogers said. “On one level it is surprising, because we had the verdict and then we had everyone settling, but then West Penn MLS is an independent MLS that has its own rules that are distinct from NAR,

“So, with those differing facts, if you get a really good law firm to defend you, and you decide to litigate, yeah, the outcome could very well be different.”

While a differing outcome may be positive news for other defendants looking to potentially litigate these suits, Cain believes Howard Hanna’s dismissal will only cause more chaos and confusion for the industry.

As he sees it, if a brokerage like Howard Hanna succeeds in having a case against them dismissed, they could potentially still publish offers of buyer broker compensation on the MLS, if the local MLS still allows it. Importantly, however, franchised brokerages like Anywhere or RE/MAX — which have agreed to end this practice as part of their settlements — that operate in the same MLS would not be able to engage in the practice, creating a patchwork of regulations.

“It is just adding to the confusion. The clarity is not coming — at least not in the near future,” Cain said. “For the realty companies, any victory is a victory at this point, but it is really going to be about how things move forward from here for the next year or two as the industry sorts itself out.”