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NAR Moves to Dismiss Moehrl Suit

Posted by GCAR on July 8, 2019
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Filing demonstrates lawsuit misrepresents facts, ignores legal precedent, and fails to prove legal harm.

Two recently filed class-action antitrust lawsuits against the National Association of REALTORS® (NAR) and several major real estate franchisors allege falsely that consumers have no ability to negotiate commissions with real estate professionals, says Katie Johnson, NAR’s general counsel and chief member experience officer.

In Moerhl v. National Association of REALTORS®, Realogy Holdings, HomeServices of America, RE/MAX and Keller Williams (and another class action lawsuit with similar claims having Sawbill Strategic, Inc. as the plaintiff), home sellers who listed their properties on several multiple listing services are claiming that NAR’s MLS policies—which require all participants to cooperate with and compensate other participants—is a violation of antitrust law. “In fact, the commission offered to the buyer’s broker is not at all determined by NAR or the MLS,” says Johnson. “And, contrary to what the class action law firms allege, the commission is subject to negotiation.”

At the AE Institute in April, Johnson told the gathering of association leaders that NAR is preparing a motion to dismiss the Moerhl suit. She encouraged AEs to educate members on the issue so that they can have open conversations with their clients, and remind members of the importance of having buyers representative agreements with clients.

“The MLS has been around for well over 100 years and has contributed to an orderly and efficient marketplace,” says Johnson. “We are going to aggressively defend ourselves, along with the rights that enable home buyers and sellers to continue to have access to a highly efficient market.”

In May, NAR moved to dismiss the Moehrl v. NAR lawsuit on the basis that the complaint misrepresents NAR rules for the operation of Multiple Listing Services (MLSs), which have long been recognized by the courts across the country as protecting consumers and creating competitive, efficient markets that benefit home buyers and sellers. The filing was made in federal court in Chicago.

“In today’s complex real estate environment, REALTORS® and Multiple Listing Services promote a pro-consumer, pro-competitive market for home buyers and sellers, contrary to the baseless claims of these class action attorneys,” said John Smaby, President of NAR. “Our filing today shows the lawsuit is wrong on the facts, wrong on the economics and wrong on the law.”

NAR’s brief points out that, as the centerpiece of their case, the seven class action law firms who represent one plaintiff have resorted to fundamentally mischaracterizing NAR’s rules. That mischaracterization, according to the NAR’s filing, led the class action attorneys to “dream up” purportedly anticompetitive rules that simply do not exist in NAR’s Handbook or Code of Ethics. In reality, NAR rules specifically direct listing brokers to determine – in consultation with their clients – the amount of compensation to offer buyers’ brokers in connection with their MLS listings. Furthermore, under NAR rules, a buyer’s broker is free to negotiate a commission from the listing broker that is different from what appears in the MLS listing. Neither NAR nor any MLS has any say in setting broker commissions.

Ultimately, these rules create a system of highly competitive markets where consumers receive superior service.

Beyond misreading the facts, NAR’s filing to dismiss demonstrates the shaky legal grounds of the plaintiff’s case, pointing out that the lawsuit disregards legal precedents that have upheld the pro-competitive benefits represented by the MLS system. For example, past court rulings have noted that NAR rules provide a more transparent marketplace, and encourage REALTORS® to share listing information and cooperate in the sale of real estate.

In fact, when considering the structure of commission payments, NAR’s filing notes that listing brokers’ offers of commission to buyers’ brokers on MLSs has been shown to actually increase the number of potential buyers. “When a seller elects to permit their brokers to pay compensation to the buyer’s broker, it frees up buyer cash thereby potentially increasing the number of buyers able to bid for that home and the amount of funds available for the purchase price,” the filing states.

“The MLS system is designed to create competitive markets to facilitate the sale of residential property in a way that benefits both buyers and sellers,” said Smaby.

Contrary to the career class action attorneys’ manufactured rules and claims, the plaintiff’s transaction was subject to the same rules as all transactions facilitated via an MLS: commissions are agreed upon up front by the seller and listing broker – independent of NAR – and commissions are negotiable. These rules have been proven to promote competition and ensure that brokers act in the best interests of their clients.

On the basis of these fundamental arguments that refute the plaintiff’s allegations and reading of legal precedent, as well as a failure to demonstrate harm, NAR is seeking to dismiss the lawsuit “with prejudice.”

Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.