In the News

“Home Sellers Blast ‘Fruitless’ Bid to Excise Class Members,” Law360

January 6, 2021

HomeServices of America can’t head off discovery with “a premature and fruitless” argument that some of the home sellers suing it and other real estate brokerages over National Association of Realtors commission rules belong in arbitration, the sellers told an Illinois federal judge Tuesday.

HomeServices of America Inc., a holding company whose affiliates include BHH Affiliates LLC, HSF Affiliates LLC and the Long & Foster Cos. Inc., can’t excise “thousands” of potential class members from the antitrust suit based on arbitration agreements included in their house listing agreements, said the home sellers, who contend they were duped into paying too high of a commission when they sold their houses.

What HomeServices really wants is to avoid its discovery obligations, according to the sellers, and any attack on the class definition belongs at the class certification stage to come, not here.

“HSA nonetheless makes the puzzling argument that plaintiffs are constitutionally barred from objecting to its position that some class members’ claims are subject to arbitration — regardless of how frivolous that position may be. This argument is not supported by Seventh Circuit authority,” they said. “For good reason — how could it be that, merely by invoking the word ‘arbitration,’ HSA is entitled to deprive absent class members of their right to representation in this action without affording the named plaintiffs an opportunity to dispute HSA’s arguments?”

HSA argued in December that the class definition should be downsized to limit discovery “to an appropriate scope.” According to the company, the named plaintiffs cannot try to represent class members who signed arbitration agreements, and they cannot challenge arbitration, because the named plaintiffs signed no such agreements.

The plaintiffs countered Tuesday that even if “some limited number of class members” are eventually forced into arbitration against HSA, the class composition and the company’s discovery obligations would remain unchanged.

“The antitrust laws make co-conspirators jointly and severally liable. As a result, class members who purchased services from HSA affiliates may pursue in litigation claims against the remaining defendants,” they said. “And the substantial majority of class members who purchased services from defendants aside from HSA may pursue in litigation claims against HSA even with respect to those affiliates that had arbitration agreements with their customers.”

. . . 

The National Association of Realtors and the brokerage defendants were already dealt a major blow in early October when U.S. District Judge Andrea R. Wood refused to toss the suit. Against arguments that the sellers hadn’t been able to show injury, Judge Wood said it was enough that the plaintiffs asserted that they had to pay more for the broker commissions than they would otherwise.

When homeowners want to sell their house, they contact a seller’s broker and list their home on what is known as a multiple listing service, or MLS. To list their home on the MLS, which makes the listing available to other agents but not home buyers, sellers are required to “make a blanket unilateral offer of compensation to any broker who finds a buyer for the home,” including brokers who represent the buyer, according to the ruling.

The seller is the one who pays both sets of brokers, not the home buyer, and NAR rules prohibit sellers from negotiating the buyer-broker commission rate once that buyer-broker’s client has seen the home.

This makes negotiating the commission that a buyer’s broker gets “a practical impossibility,” according to Judge Wood.

The proposed class members claim that the NAR rules keep them locked into a single rate no matter what quality of service they receive and illegally inhibit competition. According to the plaintiffs, total commissions for U.S. residential real estate sales have remained between 5% and 5.4%, with 2.5% to 3% commissions going to buyer-brokers. Those rates are sufficiently higher than in comparable international markets to warrant the antitrust claims, the plaintiffs said.

. . .

The proposed class is represented by Cohen Milstein Sellers & Toll PLLC, Susman Godfrey LLP and Hagens Berman Sobol Shapiro LLP.

The complete article can be viewed here.