Commission suits hit Realtors, brokerages in 2 more states

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Homesellers in Florida and Pennsylvania are the latest to file lawsuits accusing real estate companies of conspiring to inflate broker commissions under a decades-old system they allege violates antitrust laws.

The suits were filed Monday, Dec. 4 and both seek class action status. They are the latest suits to generally attack the practice of requiring listing brokers to share commissions with buyer brokers in the wake of an Oct. 31 verdict in a case known as Sitzer | Burnett in which a Kansas City jury found the National Association of Realtors and major real estate franchisors conspired to inflate commissions and awarded damages that may end up costing the defendants nearly $5.4 billion.

Florida suit targets the state Realtor association and large brokerages

The suit in Florida was filed by Parker Holding Group, a Panama City-based company that sold homes in March and August 2021, in a state court, the Circuit Court of the 11th Judicial Circuit, in and for Miami-Dade County, Florida. The complaint names as defendants the Florida Association of Realtors, which is the largest state Realtor association in the U.S. at 238,000 members, and 16 large brokerages with agent counts ranging from 655 to nearly 4,000. They are:

  • The Keyes Company
  • LPT Realty
  • Charles Rutenberg Realty
  • Charles Rutenberg Realty – Orlando
  • United Realty Group
  • The K Company Realty
  • Florida Homes Realty & Mortgage
  • Dalton Wade
  • Avanti Way Realty
  • MVP Realty Associates
  • Florida Realty of Miami
  • Lifestyle International Realty
  • Watson Realty
  • Premiere Plus Realty
  • Future Home Realty
  • Michael Saunders & Company

The suit alleges the defendants conspired “to impose, implement, and enforce anticompetitive restraints that cause home sellers in Florida to pay inflated commissions in connection with the sale of their homes, in violation of the Florida Antitrust Act of 1980 and the Florida Deceptive and Unfair Trade Practices Act.”

“[T]hese allegations are absurd,” broker Juan Baixeras of Florida Realty of Miami told Inman via email.

“It’s just the local sharks trying to cash in on the previous success of the other [Sitzer | Burnett] lawsuit.”

Baixeras clarified that by “sharks” he meant “attorneys.” He said his brokerage is not a franchise, only operates in Miami, and is family-operated, with the only employees being himself, his daughter and his mother.

“We have never fixed prices,” he said. “Our commission has always been negotiable. I have training videos from 2017 of our instructor telling the Realtors that since we are a 100% commission office they can do whatever they want with their commission. They can charge whatever they negotiate with the seller.

“We get paid a flat fee of $355 no matter what commission comes in. So price fixing commission would not help us at all, we would still make $355. If our office receives a commission check for $20,000 we still only make $355. If we receive check for $2,000,000 we still only make $355. We do not gain anything from fixing commissions.

“We have thousands of transaction where our Realtors did not charge 6% which is what these people claim. They charged 5%, 4.5% etc. But that is the individual Realtors charging what they negotiated. Like I said, price fixing does not make sense in this type of operation. We get nothing out of it.”

According to the complaint, the defendants and their co-conspirators — including local Realtor associations, multiple listing services, and the brokerages’ employees and agents — use their control of Florida’s Realtor-affiliated MLSs to impose certain anticompetitive rules from the National Association of Realtors regarding commissions.

“In a raw demonstration of market power, the Florida Realtor MLSs overturn the natural order of a rational price system where home sellers and home buyers each separately bargain and pay for the services provided to each of them,” the complaint says.

The main rule at issue is NAR Policy Statement 7.23, also known as the Participation Rule or the Cooperative Compensation Rule, which says, “In filing property with the multiple listing service, participants make blanket unilateral offers of compensation to the other MLS participants and shall therefore specify on each listing filed with the service the compensation being offered by the listing broker to the other MLS participants. This is necessary because cooperating participants have the right to know what their compensation will be prior to commencing their efforts to sell.”

That rule is also the primary rule being challenged in Sitzer | Burnett. The Parker complaint mentions that verdict, noting that in response to that decision, some Florida MLSs have begun allowing listing brokers to offer zero in compensation to buyer brokers when submitting a listing.

The state association, which calls itself Florida Realtors, alerted its board of directors to the Parker suit on Tuesday.

“This appears to be the latest in a series of copycat lawsuits in the wake of the Burnett verdict,” Juana Watkins, Florida Realtors’ general counsel, told the directors in an email.

“Florida Realtors vehemently denies these allegations and will defend this action vigorously. Florida Realtors applauds the pro-consumer, pro-competitive real estate market in Florida and will do everything necessary to protect the association.”

Florida Realtors’ spokesperson Marla Martin told Inman the association doesn’t comment on pending litigation but will send a statement. Inman will update this story once the statement is received.

In the email, the association asked the directors to refer all of their questions to the association’s legal department “and that all directors, association executives and local association representatives refrain from all comments, including on social media, reading (sic) this matter, the Burnett case, or any other similar lawsuit.”

“That’s legal advice,” Martin told Inman. “There’s always a process for discovery.”

The Parker suit seeks to represent a class made up of “All Florida citizens who paid a broker commission on or after December 4, 2019 in connection with the sale of residential real estate listed on one of the Florida Realtor MLSs.”

The suit demands a jury trial and seeks damages and treble damages, costs of the suit, and “a permanent injunction to permanently enjoin and restrain Defendants from establishing the same or similar rules, policies, or practices as those challenged in this action in the future.”

Pennsylvania suit hits MLS and alleges ‘nationwide collusion’ in the industry

Homesellers Spring Way Center, John and Nancy Moratis, and Nancy Wehrheim brought the Pennsylvania suit in the U.S. District Court for the Western District of Pennsylvania. The suit names as a defendant West Penn MLS, which is broker-owned and not Realtor-affiliated, but nonetheless has adopted a similar rule to NAR’s Cooperative Compensation Rule. Like Sitzer | Burnett, the suit alleges the rule violates the federal Sherman Antitrust Act.

The Center complaint also names as defendants eight brokerages operating in western Pennsylvania:

  • Berkshire Hathaway HomeServices The Preferred Realty
  • NRT Philadelphia LLC which does business as Coldwell Banker Realty
  • Piatt Sotheby’s International Realty
  • NextHome PPM Realty
  • NextHome Dynamic
  • Realty One Group Gold Standard
  • Realty One Group Platinum
  • Realty One Group Horizon

The complaint alleges West Penn MLS’s rule “is manifestly anticompetitive because, among other ill-effects, it compels the seller to compensate the broker representing the purchaser even though that broker should be working for the purchaser, not the seller; it mandates a ‘blanket offer,’ meaning that the same compensation must be offered to every buyer’s broker, regardless of skill, experience, or the services provided; and it has the effect of encouraging ‘steering’ by buyer-brokers, because it incentivizes them to direct their clients to properties with higher commission offers.”

The complaint also mentions the Sitzer | Burnett verdict, saying “Defendants’ anticompetitive practices are not unique; rather, they are part and parcel of nation-wide collusion within the real estate industry to maintain inflated commissions” and highlighting the jury’s “historic ten-figure judgment on the defendants.”

The Center complaint names the local and state Realtor associations and “other brokerages operating within that geographic area” as co-conspirators and says “Defendants are jointly and severally liable for the acts of their co-conspirators whether or not those co-conspirators are named as defendants in this Complaint.”

The suit seeks to represent a class covering the same time period as the Parker complaint: “All persons or entities who, from December 4, 2019, through the present used a listing agent or broker affiliated with or employed by one of the Broker Defendants in the sale of a home listed on the West Penn MLS, and who paid a commission to the buyer’s broker in connection with the sale of the home.”

Also like the Parker complaint, the Center complaint demands a jury trial and asks for treble damages, costs of the suit, and a permanent injunction “enjoining Defendants from (1) requiring that sellers pay the buyer broker and (2) continuing to restrict competition among residential real estate brokers in the manner set forth above.”

Inman has reached out to all defendants in these cases and will update this story if and when responses are received.

Email Andrea V. Brambila.

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