A judge in the Southern District of New York paused two key commission cases on June 26 after an extensive back and forth between plaintiffs, defendants and the judge, in a decision that could resonate around the country as Burnett copycats play out in the shadow of the larger agreements struck by the National Association of REALTORS® (NAR) and corporate brokerages.
The two cases, known as March and Friedman, are unique in that they largely target entities independent of NAR—specifically, the Real Estate Board of New York (REBNY) and high-profile companies operating in the New York City market. Defendants in the cases had sought a stay until the NAR settlement receives final approval in November, with plaintiffs pushing back and urging Judge Robert Lehberger to consider right now whether their case is “identical” to the national lawsuits.
“(Plaintiffs) are saying that by granting the stay, the court would have to first address the issue of ‘identical factual predicate,’ and if the court grants a stay, it is essentially saying it is the ‘identical factual predicate.’ You are essentially trying to preserve that issue to be litigated elsewhere…or based on events, down the line,” Lehberger said.
REBNY split from NAR in the 1990s, and plaintiffs have argued that real estate is practiced differently enough to separate their litigation from national lawsuits. The March and Friedman lawsuits, which were filed after the Burnett verdict, are potential bellwethers for how copycat lawsuits will be handled both before and after any final approval of NAR’s agreement.
Judges have already been apt to disagree on how to treat these suits, especially when it comes to entities not affiliated with NAR.
In issuing his stay of the cases, Lehberger made it clear he was not ruling on the legal question of whether the New York City cases are in fact identical, rejecting the plaintiffs’ urging that he allow both sides to dispute the pause—and the underlying issues of the case—ahead of the NAR settlement hearing. Instead, he asked plaintiffs to make their arguments within two weeks of the final hearing on the NAR agreement.
“I don’t find there’s any prejudice from a stay pending determination on the issues they want to raise,” he said.
But the lengthy, complex and nuanced debate between two sets of plaintiffs’ lawyers and more than a dozen defendants showed how commission lawsuits can continue to affect those practicing real estate, as it remains unclear exactly how and when the many separate cases will individually resolve.
Michael Sibarium, a lawyer representing Engel & Völkers—which only recently struck a settlement in the national cases—claimed that every national suit explicitly included homesellers in a national class, and said that his company’s agreement explicitly mentions REBNY, meaning there should be no doubt about settlement coverage.
Other lawyers representing other companies who have settled made similar arguments, and noted that mailed notices informing New York residents they may be part of the national settlement class are already going out.
Defendants’ lawyers also argued that any dispute over whether or not a particular region or category of homesellers is covered by the national settlements should be decided by Judge Stephen Bough, who is overseeing the Burnett and Gibson cases—the two largest national seller lawsuits through which most settlement agreements so far have been negotiated.
Plaintiffs, for their part, argued that every individual settlement and lawsuit needed to be judged on its own content, context and merit based on whether it has an “identical factual predicate” to the New York lawsuits. They also cited precedent they claim allow Lehberger to interpret Bough’s rulings—many of which do in fact mention REBNY as being analogous to NAR and other MLSs—without overruling him.
“Every contract and settlement are circumscribed by…the identical factual predicate doctrine,” said a lawyer representing the Friedman plaintiffs. “If a defendant in one action price-fixed a ballpoint pen, and then was sued in another court for price fixing a yellow legal pen, they can’t settle the ballpoint pen conspiracy…and then obtain a release for a separate conspiracy on the yellow pen.”
Going national
The New York cases have their own impact, with an outsized number of real estate transactions taking place under the jurisdiction of REBNY, which has long differentiated itself from the national real estate market, referring to its listing service as the “REBNY Listing Service” or RLS. REBNY claimed there were over $54 billion in residential sales on the RLS in 2021, meaning damages or settlements are likely to be significant if the cases progress to that point.
It was not clear if REBNY itself, a defendant in the lawsuit, had opted into the NAR settlement, or if it even had the option. A REBNY spokesperson did not immediately respond to a request for comment.
But more broadly, how defendants, plaintiffs and the judge handles the case is potentially telling, or could set precedent for other litigation.
One of the biggest points of contention was whether or not Bough will be the one to decide all the issues at play. Lehberger asked both plaintiffs and defendants if they had actually gone to Bough, with David Rowe, an attorney representing The Agency, arguing that the onus is on plaintiffs to dispute these issues in Bough’s court if they believe their case should remain separated from the national litigation.
“If someone objects to the injunction and they don’t like it, they can’t go to a second court and ask that second court to interpret it. They have to go to that first court and ask the first court to interpret it or otherwise somehow challenge the scope,” he said. “Respectfully, I think that’s the only way we can proceed here.”
Bough has appeared reluctant to carve out exceptions to the settlements he has ruled on so far, specifically rejecting objectors who argued certain regions had different real estate markets (though no one objected as it relates to these New York cases).
As far as Bough’s jurisdiction in ruling on the disputes, one defense lawyer cited his final approval of agreements struck by Keller Williams, Anywhere and RE/MAX, in which he wrote that he “expressly retains continuing and exclusive jurisdiction over all matters relating to the administration and consummation of the Settlements and to interpret, implement, administer and enforce the Settlements.”
Plaintiffs argued that this obviously only applies to those people who are in fact part of the settlement, and if the REBNY region is determined to be different as far as that “factual predicate,” Bough would not have jurisdiction.
Another question that arose was how those who claim to be automatically released by the NAR agreement can demonstrate that to courts and plaintiffs. Cheryl Berger, a lawyer representing Serhant (owned by celebrity agent Ryan Serhant), claimed that the company qualified, but NAR had provided no substantive process to prove that they have immunity at least until after the August 17 deadline, when a brokerage must have implemented practice changes mandated by the agreement.
“Plaintiffs seem to suggest they get to decide whether or not a party falls under the scope of (automatically qualifying for the NAR settlement),” Berger said. “There are no affirmative steps by any brokerage that need to be taken (if they automatically qualify).”
Based on this dynamic, other defendants who believe they will qualify for the NAR settlement will simply have to ask courts and plaintiffs to trust them, or take additional steps to prove they are on track based on those practice changes (and having a certain sales volume).
Plaintiffs, though, continued to push Lehberger to focus on the “identical factual predicate” comparison between their cases and the national ones.
Lehberger appeared to agree generally that this issue can be considered, but sided with the defendants in seeing the question should be considered after Bough rules on the NAR agreement in November, leaving the question of whether the New York cases will continue beyond NAR’s agreement undecided.
“It’s really an issue, in the end, about whether the plaintiffs are encompassed by the settlement that presumably will be finally approved,” he said. “It all boils down to that big issue. All the more reason why a stay is appropriate…if there’s maybe a question of whether these actions are encompassed by those settlements…applications can be made at that time in that regard.
“And perhaps parties, either plaintiffs or defendants, may find it helpful to address their issues with Judge Bough,” he added.
