COURT UPDATE: Closing Arguments Put Exclamation Mark on Burnett Trial

KANSAS CITY—Closing arguments in the landmark Burnett class action case were presented to an eight-person jury yesterday, with the possibility of a verdict that could rock the industry coming as early as today.

The plaintiffs’ case hinges on convincing a jury that the major corporate brokerages conspired with the National Association of REALTORS® (NAR) on rules that limited competition and harmed consumers, focused specifically on buyer agent compensation and the fact that sellers pay both agents. 

Along with NAR, HomeServices of America and Keller Williams are also defendants in the case, with RE/MAX and Anywhere settling before the trial.

After two weeks of often dramatic testimony, both sides summed up their cases, with the plaintiffs’ lead attorney Mike Ketchmark viciously attacking the defendants, calling real estate power players “the head of the snake.”

“This is a courtroom of accountability and you have the power,” Ketchmark boomed.

Meanwhile, taking a more decorous approach than Ketchmark, lawyers for the defendants each outlined a thorough argument for why the jury must vote against an alleged conspiracy. “Law, evidence and common sense” must be used to determine the verdict, said NAR lead attorney Ethan Glass.

Here are the highlights from the last day of the Burnett trial:

Ketchmark pulls no punches

-Colorful and theatrical throughout the course of the trial, Ketchmark did not hold back during an hour and a half of speaking, presenting the case dramatically as a David versus Goliath contest and emphasizing the incredibly high stakes of the verdict.

“Everything I have ever done in my life has prepared me to stand before you today,” he said.

-Ketchmark pulled a somewhat ancillary revelation from the trial as he began his attack, reminding the jury of when a former NAR president testified that the internet made it harder to buy homes, dismissing that as an obvious untruth.

“If they won’t be honest about that, can they be honest about one thing?” he asked. “I almost fell out of my chair when I heard that.”

He continued to attack the personal credibility of the defendant executives, later calling out Keller Williams Co-Founder Gary Keller for saying he didn’t know what it meant when he was picked as the most powerful person in real estate.

-On the more substantive side, Ketchmark sought to walk the jury through the elements needed to prove the conspiracy, including that the rule in question can be unwritten, and the players didn’t have to personally meet in some room to carry it out. Keller Williams, Ketchmark admitted, was formed as a company after the alleged conspiracy was formed, but they still participated in it, he claimed.

-Ketchmark also highlighted another key moment in the trial, when NAR CEO Bob Goldberg declined to say whether a verdict for the plaintiffs in this case would cause him to change rules regarding buyer compensation. Ketchmark argued that NAR is not some passive party, but rather, they “enforce” rules that allegedly harm homesellers.

-The relative stability of commissions—which was disputed by NAR’s expert witness—also was revived by Ketchmark, who called the fact that commissions are broadly invariant to market conditions and agent experience evidence that anti-competitive rules are steering the market.

“The data shows what it shows and they know it,” Ketchmark said.

He also again tried to undermine the aforementioned NAR expert witness, an experienced economist who has worked on antitrust matters, pointing out that NAR had input on his presentation.

-But Ketchmark was careful to exempt a few of the defendant’s more sympathetic witnesses, two of whom were born or grew up near where the trial is taking place in Missouri. Saying explicitly that these people were not part of the conspiracy, Ketchmark instead said the misconduct “starts at the top; it’s the head of the snake.”

-When speaking about damages, Ketchmark reminded the jury that they were only considering compensatory damages—that is, returning money that was allegedly taken from the class members. But he was also clear that he personally felt this didn’t go far enough.

“(The defendants) are lucky the law does not allow for (punitive damages),” he said. “I would ask for that.”

-And Ketchmark was less than sympathetic when talking about the potential negative effects of a major judgment against these big real estate players, saying that affordability issues for homebuyers were irrelevant.

“This is not a buyer’s side case,” Ketchmark stated, adding later that he thought first-time homebuyers would be against the “rigging of the system.”

He also compared the loss of real estate jobs to other obsolete industries—namely, video rentals, saying that people who worked at now-defunct Blockbuster Video found new jobs. 

Glass tells jury ‘evidence matters’

– Glass began his closing argument by reminding the jurors that the 1.6 million REALTORS who comprise NAR “bust their behinds” for others every day, and that the allegations of price fixing and steering could not be farther from the truth.

– “Evidence matters,” said Glass, claiming that the plaintiffs provided no proof of a conspiracy among NAR and the corporate defendants, other than a “cobbling together of various documents.”

– Glass also sought to discredit the testimony of economist Dr. Craig Schulman, telling the jury that even the expert who put in some 6,000 hours of investigating the home-sale transaction data over the seven year period ultimately had “no opinion” about a conspiracy.

– During Ketchmark’s opening statement on Oct. 16, he told the jury an NAR “whistle-blower” would take the stand during the trial. Glass pointed out that Linda O’Connor’s deposition was never played, planting a seed of doubt about the validity of her statements.

-In a key moment that was preceded by a sidebar called by Ketchmark, Glass informed the jury that state law in Missouri explicitly allows the sharing of commissions between real estate agents. Defendants were earlier shut down when they petitioned to introduce evidence of these laws during the trial.

– The rule at the center of the lawsuit, the mandatory offer of compensation, is not evidence of a conspiracy, said Glass. The rule is not a conspiracy, and the offer of compensation is not illegal, he stressed. While Ketchmark submitted volumes of documents, manuals and speeches into evidence over the course of the trial, Glass underscored that they do not reference the rule nor NAR.

The plaintiffs have failed to prove by a preponderance of evidence that a conspiracy exists, Glass told the jury.

– Glass also sought to dismantle the plaintiffs’ allegations of price fixing, again emphasizing NAR’s absence from any of the evidence presented, saying that there was no testimony, no document shown in which NAR discussed specific commission rates.

He reminded the jury of Schulman’s testimony surrounding price fixing in which an array of commissions were mentioned, saying that it changed based “on which way the wind blows.”

– The role of the buyer’s agent, also under attack during the trial, was supported by Glass who reminded the jury that buyer agency arose out of the market in order to provide homebuyers with their own representation. “(The plaintiffs) want to go back 30 years to a time when there were no buyer’s agents.”

– Glass also emphasized the purpose and mission of NAR, underscoring the value REALTORS receive for their annual dues; he reminded the jury that real estate professionals have a choice whether or not to join NAR, and that there are 3,000 agents in Missouri who are not NAR members. “Those agents were called ‘used bubblegum’ by the other side,” he recalled for the jury. “They have a choice not to join NAR…let’s not insult them.”

–Glass also called the almost $1.8 billion in estimated damages calculated by one of the plaintiff’s expert witnesses as “made up,” and pointed out again that NAR does not directly benefit from higher or stable commissions (plaintiffs have argued that NAR depends on annual dues, and a shrinking pool of agents would affect the organization’s bottom line).

MacGill says no proof of conspiracy

– Lead attorney for HomeServices of America Robert MacGill began his closing argument by telling the jury that conspiracy is a “very, very serious charge to make,” and that 1.6 million members of NAR is “a lot of people being accused of conspiracy.”

– MacGill reinforced the concept that cooperative compensation is an American market outcome that began in the late 1800s, and that the mandatory offer of compensation rule that arose in the real estate industry in the mid 1990s is a practice that “creates efficiency.”

– Like Glass, MacGill swiped at Schulman’s testimony, while emphasizing points made during Dr. Lawrence Wu’s testimony, saying that the proof is in the data. Schulman could not draw an inference of conspiracy from the data, while Wu claimed that conditions for price fixing did not exist, clustering is expected and steering is not practical nor economically reasonable.

Clustering does not establish the existence of conspiracy, said MacGill. “That is a market outcome.”

– MacGill also poked holes in the plaintiff’s demand for a refund of fees paid to buyer’s agents by members of the class over the seven-year period in question, telling the jury that the home sellers received everything they contracted for, and much more. “Every plaintiff made a decision,” he said. “‘We agree by contract to offer cooperative compensation,’ and they offered the amount.”

Further, said MacGill, the members of the class also benefitted on the flip side of the transaction as homebuyers.

Ray defends Keller Williams

– Keller Williams lead attorney Timothy Ray began his closing argument by telling the jury that “none of what you heard about Keller Williams is true,” taking offense that the company was characterized as “thieves,” and that the plaintiffs resorted to “personal attacks” of Keller Williams executives.

– Ray told the jury that Keller Williams market centers are independently owned and operated, that the company is not a member of NAR, and is not involved in negotiating commissions. “They haven’t put forth a single person or piece of evidence to refute that.”

– Ray also broke down the plaintiffs’ allegations that Gary Keller’s books and public appearances provided evidence of price fixing and collusion.  The speech is not a violation of antitrust law, and Keller is reporting historical evidence, said Ray. “Those historical averages have nothing to do with what happens right here in Kansas City,” he added.

He further claimed that Keller’s books include numbers in order to provide a sample success formula for agents, explaining the need to pick a “basic commission standard” for example purposes.

– Keller also never participated in any NAR activities nor forced agents to become part of an MLS, Ray said, explaining that it is in agents’ best interest to join, but exemptions are available.

– Like MacGill, Ray also pointed to Wu’s testimony on clustering, and that the trend is not evidence of a conspiracy. Just because everyone has an umbrella, Ray said, doesn’t mean there is a conspiracy. He described it instead as “parallel conduct.” “It just may mean it’s raining outside,” he said.

– Ray sought to dismiss the use of Australia as an example of a market that operates without buy-side commissions, calling it “completely different than the U.S.” and an arbitrary selection by the authors of the DANGER report.

Ketchmark gets final word

– Ketchmark wrapped up the trial with fire and brimstone in rebuttal to the defendants’ closing arguments, which claimed that Ketchmark failed to provide proper evidence overall. “I might not be the smartest guy in this courthouse, but I showed how,” he said.

– He concluded with his “man of the people” persona that was on display throughout the trial. “I’m accused of running a shell game?” he asked the jury. “I would never mislead you. My mother taught me to use my voice; I try to do (it) with integrity and honesty.”

He then, in turn, told the jury to do the same in order to stop the practices that are allegedly harmful to homesellers. “Use your voice; let them know.”

Stay tuned to RISMedia for more updates from the courtroom.

William Schmidt contributed to this reporting.