In a split decision, a panel of judges for the D.C. Circuit Court of Appeals today overruled a district judge who had previously prevented the Department of Justice (DOJ) from reopening its investigation into the National Association of REALTORS® (NAR), potentially allowing regulators to pursue further changes to policy and rules in the industry.
In a 2-1 decision, the appeals court ruled that District Court Judge Timothy Kelly had erred when he prevented the DOJ from continuing to investigate NAR’s rules. The DOJ wrote a letter back in 2020 in which it agreed to end the investigation in exchange for voluntary changes to some, but not all of the disputed NAR policies. It then sought to re-open the inquiry under a new presidential administration, but was blocked when NAR sued.
“The closing letter unambiguously permits DOJ to reopen its investigation of the Participation Rule and the Clear Cooperation Policy,” wrote Judges Florence Pan, with Judge Karen Henderson concurring.
Judge Justin Walker dissented, taking a much more narrow view and arguing the district court’s decision should have stood based on how the DOJ argued the case.
“The question presented is not whether DOJ’s promise to close an investigation means the investigation must stay closed forever. Nor is the question whether DOJ can reopen an investigation eight months after it contracts to close it, as DOJ did here. Rather, the sole question is whether DOJ is correct that it could have immediately reopened its investigation of the REALTORS® two remaining policies after contracting to close that investigation,” Walker wrote.
In a statement shared with RISMedia, an NAR spokesperson highlighted Walker’s dissent.
“As articulated by Judge Walker in his dissenting opinion, NAR believes that the government should be held to the terms of its contracts.,” the spokesperson said. “We are reviewing today’s decision and evaluating next steps.”
The full import of the ruling remains unclear, however. NAR could potentially appeal to the Supreme Court, and it is possible that the DOJ will not choose to pursue its investigation, as the recent NAR settlement covers many of the rules and issues that were investigated back in 2018 and 2019.
One notable exception: clear cooperation, the rule requiring REALTORS® to list properties on NAR-affiliated MLSs, was not touched by the settlement agreement. That policy was the subject of another lawsuit against major MLSs that was also recently settled, though the details of that agreement are still unknown.
In allowing the DOJ to back out of the initial agreement, Pan wrote that the “plain language” of the letter, as well as a “reservation of rights” clause were enough to justify that decision by the DOJ to reopen its investigation only eight months after officially closing it.
“The plain meaning of that provision is that DOJ closed its then-pending investigation and relieved NAR of its obligation to respond to two specifically identified (subpoenas). We discern no commitment by DOJ—express or implied—to refrain from either opening a new investigation or reopening its closed investigation, which might entail issuing new (subpoenas) related to NAR’s policies,” Pan wrote.
“Put simply, the fact that DOJ ‘closed its investigation’ does not guarantee that the investigation would stay closed forever,” she continued. “The words ‘close’ and ‘reopen’ are unambiguously compatible.”
Walker found this reasoning to be practically incongruous, comparing the DOJ’s action to comic strip character Dennis the Menace.
“Imagine a parent says, ‘Close the door when you leave for school.’ In that case, even if DOJ’s literalist reading works in the abstract, it fails to capture the command’s true meaning,” Walker wrote. “Perhaps Dennis the Menace would close the door and then immediately reopen it before he runs toward the school bus and mockingly calls back, ‘You didn’t say to keep it closed!’ But an obedient child would not.”
Editor’s note: this story was updated at 12:20 p.m. eastern time with a statement from NAR.
What is wrong with this Country? Does the DOJ have nothing better to do than destroy an industry? It’s the government who drove real estate prices up by keeping interest rates too LOW for TOO LONG! Allowing investors to buy homes to use as rentals, creating a huge demand that drove real estate prices sky high! Tell the DOJ to stop their nonsense!
I agree with you Marla! I’ll go a step further and encourage Congress to bring a bill that discourages these large REITS from buying so many SFH. These REITS will tell you they only own 2% of all the homes available, but how about breaking that down to desirable cities and tell us how many homes you’re purchasing there. I can assure you its waaay higher than 2%! Probably more like 25-30%. I don’t know what the solution is, but something does need to be figured out here to allow true home buyers a chance at buying a house. These REITS are also trying to tell us that Millennial buyers don’t want to buy a home they want to rent is pure BS! There might be some that think this way, but not the majority. I’m an investor myself. I do see both sides, but it has gotten out of hand.
We followed attorneys advise for over 100 years, attorneys developed our legal documents, now we are at the mercy of attorneys suing NAR represented by attorneys who failed to defend the real estate industry. I am sure they got paid plenty.
Attorneys change 10% to settle estates, they take 10% or more to defend you in a insurance compensation where is the fairness.
What attorney do you know who takes 10%? Every attorney I know takes 40% of any settlement.
I have my real estate license since 2002 and price was always negotiable and the rules didn’t change until today.
It makes no practical sense. You know what’s funny? That attorneys charge a good chunk, non negotiable retainer amount on any monies they can get for accident victims and insurance compensations. That is a whopping 10 to 30% commission and they bitch about a negotiated commission seller’s pay when selling a home. Sellers are not required to use an agent but when they do they are willing to pay and that is their choice. I don’t remember the last time I did not had to negotiate the commission I charged. Every listing is and wrestle match with the seller. How did we get from there to price fixing?
And about the REIT, I think it should be illegal for a REIT to purchase residential property as investment. We should only allow mom and pop investors, the regular consumer. This is how the middle class builds wealth and that should be protected. REITS are robing American’s their right to homeownership. You can’t compete!