Defendants Fight To Get Homebuyer Commission Suits Tossed

A. and I. Kruk 283022276 1024x576

A. and I. Kruk 283022276 1024x576

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The National Association of Realtors, Keller Williams, Anywhere, RE/MAX, Compass, eXp and other defendants in two massive antitrust commission suits lodged by homebuyers fired off a slew of arguments Monday attempting to get the cases tossed.

The cases, known as Batton 1 and Batton 2, were filed by buyers alleging some National Association of Realtors rules have inflated agent commissions and resulted in higher home prices paid by the buyers in violation of state and federal antitrust laws. Both suits seek class-action status and, like more ubiquitous suits filed by homesellers nationwide, target NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service.

While NAR and some real estate franchisors have reached proposed settlements in the homeseller suits, those deals would not cover the suits filed by homebuyers. Therefore, both Batton suits are proceeding. Batton 1 was originally filed by New Jersey homebuyer Judah Leeder in January 2021, but homebuyer Mya Batton later replaced Leeder as lead plaintiff.

In November 2023, right after homesellers won a nearly $2 billion verdict in a bombshell antitrust commission case known as Sitzer | Burnett, Batton, along with other homebuyer plaintiffs, filed a second suit with similar allegations to Batton 1 but against different defendants.

Both suits were filed in the U.S. District Court for the Northern District of Illinois Eastern Division in Chicago. In January, Judge Andrea R. Wood, who was already overseeing Batton 1 and another bombshell homeseller commission case known as Moehrl, also took on Batton 2, which had previously been assigned to a different judge in the same court. Contrary to some media reports, Batton 2 was reassigned to Wood, but the suits were not consolidated.

The defendants in Batton 1 were originally NAR, Anywhere (formerly, Realogy), Keller Williams, RE/MAX, HomeServices of America and three of the latter’s subsidiaries: BHH Affiliates, HSF Affiliates and The Long & Foster Companies.

The defendants in Batton 2 are Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate and Douglas Elliman. Howard Hanna Real Estate was dismissed as a defendant in March.

In February, the court released the HomeServices defendants from Batton 1 after dismissing the case’s claim under federal antitrust law but allowing most of the state law claims to survive. Wood dismissed the HomeServices defendants on the grounds that, without a federal claim under which the court can assert nationwide authority, the court has no personal jurisdiction over the HomeServices defendants because none of them are based in Illinois and the complaint does not include allegations connecting them to Illinois. Because the dismissal was made “without prejudice,” meaning the plaintiffs can re-file their claims, that ruling may ultimately not stand.

Still, that did not stop other defendants from asserting the same arguments that won HomeServices its dismissal. Anywhere, Keller Williams, RE/MAX, Weichert, eXp, United Real Estate and Douglas Elliman all filed motions to dismiss, alleging lack of personal jurisdiction.

“Because the jurisdictional facts pled as to the HomeServices Defendants are the same as those pled as to Defendant Anywhere, the remaining claims against Anywhere in the Amended Complaint must now also be dismissed,” attorneys for Anywhere wrote in their filing.

“Defendant Anywhere Real Estate Inc. is not subject to the Court’s jurisdiction for Plaintiffs’ surviving state law claims,” they added.

Similarly, attorneys for Keller Williams argued lack of personal jurisdiction on the grounds that KW is incorporated in Texas, based in Austin, the plaintiffs did not purchase homes or suffer alleged injuries in Illinois, and even if they had, those alleged injuries were not caused by any activities in which Keller Williams engaged in Illinois.

Attorneys for Weichert made their case on the same basis, noting that the same facts that apply to HomeServices apply to Weichert.

“WREA is not incorporated in Illinois, does not maintain its principal place of business there, has no offices, property, employees, or business operations in the State, is not a member of NAR, and played absolutely no role in enacting, enforcing, or implementing any NAR rule,” they wrote.

“Indeed, WREA’s only conceivable ‘contact’ to this forum is that it is the franchisor of certain independently owned and operated franchises in Illinois. Courts have consistently held that a franchisor relationship is insufficient to confer personal jurisdiction unless the franchisor exerts a high degree of control over the daily activities of the in-state franchises. [I]it is beyond dispute that WREA exerts no such control.”

NAR, which is based in Chicago, did not attempt to get the suit thrown out on the same jurisdictional premise. Instead, in an answer to the complaint, the 1.5-million-member trade group denied the allegations against it and requested the court dismiss the case, asserting 32 defenses.

One of these defenses reads: “Plaintiffs’ claims and the claims of any putative class members are barred, in whole or in part, because any injury to plaintiffs was caused by their own conduct, representations, failure to protect their interests, or the conduct of third persons, and not by the actions of NAR.”

The defendants in Batton 2 also submitted a joint motion to dismiss, putting forth four arguments:

– the plaintiffs lack standing to sue the defendants under the federal antitrust laws because they are buyers rather than sellers
– the complaint “fails to allege facts to plausibly suggest that the Defendants entered into any agreement” with NAR or among the defendants, which is the basis of an antitrust conspiracy
– the plaintiffs’ claims are “untimely,” given that they challenge a rule that has been in place since 1996
– the plaintiffs’ “fail to plead sufficient facts in support of certain state law claims” against the defendants

“Plaintiffs’ federal and state antitrust claims are based on allegations about Defendants’ unilateral conduct, not what they agreed to do,” attorneys for the defendants wrote.

“Plaintiffs do not plausibly allege that Defendants’ conduct is the product of any agreement between the Defendants and NAR as opposed to Defendants’ independent business decisions to participate in trade associations and local MLSs, and do not plausibly allege that any such agreement was anticompetitive.”

“The Complaint, however, does not allege that Defendants or their franchisees ever communicated or agreed with each other about the challenged NAR guidelines, let alone their potential impact on commission rates, or any private information about the market.”

The defendants’ lawyers also pointed out that the complaint does not allege that any of the named executives in the defendant companies “actually participated in drafting, developing, or promulgating any guidelines, let alone that they agreed with each other to draft, develop, or promulgate the Buyer Agent Commission Rule or other challenged NAR rules.”

The defendants also submitted a joint motion to strike the case’s class allegations, noting that the plaintiffs’ state claims encompass 25 “materially different” state antitrust statutes and 18 “materially different” state consumer protection statutes.

Inman has reached out to an attorney for the plaintiffs, Carol Lee O’Keefe of Korein Tillery, and will update this story if and when a response is received.

Email Andrea V. Brambila. Like me on Facebook | Follow me on Twitter.

At Inman Connect Las Vegas in July 2024, attendees can expect to have their questions answered and learn about new business opportunities in the real estate industry. Two large antitrust commission suits, known as Batton 1 and Batton 2, have been filed by homebuyers against the National Association of Realtors (NAR) and other defendants. These suits allege that NAR rules have led to inflated agent commissions and higher home prices for buyers, violating antitrust laws. While settlements have been reached in homeseller suits, the homebuyer suits are still ongoing. The defendants in both suits have filed motions to dismiss, arguing lack of personal jurisdiction and other legal grounds. The lawsuits raise important questions about the real estate industry and the influence of trade associations on commission rates.

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