Judge Removes HomeServices, Two States From Mega Buyer Suit

In a split decision Feb. 20, the judge overseeing the goliath buyer-side commission case dismissed some state-level claims by plaintiffs—and dropped one of the defendants entirely—in an opinion that appears to be a relatively small victory for big real estate brokerages, with most claims in the lawsuit still moving forward.

Judge Andrea R. Wood, overseeing the case in the Northern District of Illinois, granted HomeServices’ request to be dropped from the suit, writing in a 30-page ruling that she agreed the court did not have jurisdiction based on Illinois law. She also dismissed plaintiffs’ claims in Kansas, and affirmed that they did not have standing to sue in Tennessee—something plaintiffs did not dispute.

But Wood is allowing most claims for damages to go forward, affirming that plaintiffs—recent homebuyers spread across a handful of states—have presented enough of a case, and have legal standing to sue at this point, calling the allegations that their commissions were inflated by rules created and implemented by the defendants “plausible.”

Defendants—which in this case include the National Association of REALTORS® (NAR) Keller Williams, HomeServices, RE/MAX, and Anywhere—had challenged whether plaintiffs had the right to refile their suit based on state law claims (after it was earlier dismissed when alleging federal antitrust violations), and whether plaintiffs had standing to sue in jurisdictions where none of them lived or bought a home.

“There is a single, straight-line path by which the commission is passed through to the homebuyer,” Wood wrote.

At the same time, though, Wood reaffirmed her earlier opinion that buyers are not the right group to seek injunctive relief against NAR and other big real estate companies, arguing that sellers are still in the best position to seek changes to the rules that govern real estate compensation.

That means that even a victory for these buyer plaintiffs would not result in any court-mandated rule changes by NAR or big brokerages, though they are still seeking damages.

“Ultimately, both the homesellers and the homebuyers are attacking the entire system of real-estate broker compensation and both seek to enjoin the core NAR rules underpinning that system,” Wood wrote. “To the extent that the home sellers successfully enjoin those foundational NAR rules, ancillary rules like those additional rules that Plaintiffs seek to enjoin will, in all likelihood, fall as well.”

But HomeServices—at least for now—will no longer be party to the litigation in Batton. Wood affirmed that because the company has no substantial connection or presence in the state of Illinois (where Batton was filed), the court has no jurisdiction over them as it relates to the plaintiffs’ claims.

“Plaintiffs contend that HomeServices (is) subject to personal jurisdiction…because HomeServices’ executives have served on the NAR’s board,” Wood wrote. “To find that a HomeServices defendant can be subject to personal jurisdiction based on the acts of an individual executive serving on the board of another company would erase the well-recognized distinction between the corporation and its officers.”

Chris Kelly, executive vice president for HomeServices, noted to RISMedia that the claims against his company were dismissed without prejudice, meaning plaintiffs could potentially take “additional action.” Kelly added the company could not provide additional comments pending those developments.

This lawsuit—known as Batton—is technically and functionally very different from most of the other Burnett copycat cases. It was initially dismissed by Wood, but refiled with new plaintiffs and using a foundation of alleged violations of antitrust laws in 35 states. Still, Batton focuses on mostly the same rules as lawsuits filed by sellers, mainly the Participation Rule (requiring mandatory offers of compensation to buyer agents).

In January, the case merged with a second suit filed by the same plaintiffs, adding several more large real estate companies as defendants. It is also notable because settlements agreed to by Keller Williams, RE/MAX and Anywhere in the seller lawsuits do not necessarily indemnify them from claims by buyers, and it remains unclear if those agreements will apply to Batton.

In her opinion, Wood also notably chose not to apply any particular antitrust analysis to the case—a very important omission, as certain types of legal framing could allow or disallow important evidence to be introduced.

The judge in Burnett chose to apply a narrower view, which defendants in that case have claimed was the incorrect choice and have cited in their appeals and post-trial motions.

Wood is also overseeing the Moehrl case, filed by sellers, which is currently the closest to trial. That case is likely to see much higher damages awarded than in Burnett, with an estimate of over $13 billion.