LegalReal Estate

Immunity or liability? Antitrust experts weigh in on commission lawsuit settlement outcomes

Experts discuss if becoming a RE/MAX or Anywhere franchisee may or may not protect an independent brokerage from commission lawsuits

Speculation is still swirling around the proposed commission lawsuit settlement agreements reached by RE/MAX and Anywhere in the Sitzer/Burnett, Moehrl and now Nosalek lawsuits.

The settlement agreements outline specific policy changes, including no longer requiring agents to be members of the National Association of Realtors or follow NAR’s Code of Ethics or the MLS Handbook, and informing agents that they don’t have to make or receive offers of cooperative compensation.

The agreements also release any RE/MAX or Anywhere subsidiaries and affiliates from lawsuit liability.

For industry analyst Rob Hahn, this would mean that an independent brokerage who becomes a RE/MAX or Anywhere franchisee prior to the settlement being approved would gain immunity from commission lawsuits. That’s because nothing in the settlement agreement mentions how long a franchisee must be part of the firm to qualify for immunity.

However, Hahn notes that the settlement only covers entities when they are part of RE/MAX or Anywhere, and that entities who were connected with another corporate defendant (either HomeServices of America or Keller Williams) are excluded from the settlement.

This means that if a Keller Williams franchise became a RE/MAX franchise, it would not be part of the settlement agreement.

Based on this rationale, in the Nov. 2 edition of his NotoriousROB email newsletter, Hahn postulates that if Compass were to become a Sotheby’s franchise (Sotheby’s Compass), assuming the settlement agreements are approved, it would be immune from the Gibson lawsuit, in which it is named as a defendant.

When asked how the settlement agreement will impact Anywhere franchises, spokespersons for the real estate conglomerate repeatedly highlight the inclusion of franchisees in the “released parties” clause under the agreement.

“The settlement releases our company, affiliated agents, and franchisees from liability related to these claims,” the firm wrote in a statement after the verdict in the Sitzer/Burnett suit last week. “The jury verdict, while disappointing, does not alter our settlement, and we look forward to obtaining court approval and implementing our settlement agreement.”

But antitrust law experts don’t think things are quite so simple.

“I don’t see how there is immunity,” Mike Ruggio, a partner at Taylor English Duma LLP and an antitrust law professor at Pittsburgh Law School, said. “Even if they were independent brokerages before that doesn’t free then from additional lawsuits down the road.”

According to Ruggio, while the settlement agreements may protect an independent firm that affiliates with RE/MAX or Anywhere from commission lawsuits related to their future behavior, everything prior to them joining RE/MAX or Anywhere could be fair game.

“The plaintiff’s counsel will look at when any brokerage became a franchisee and say ‘all that we are complaining about occurred when you weren’t a franchisee,’” Francis Riley, a partner at Saul Ewing LLP, said.

Under this interpretation, Compass would not be immune from the Gibson lawsuit if it joined Sotheby’s today, because the time frame for the lawsuit class is defined as Oct. 31, 2019, to the present.  

Additionally, if the settlements did provide immunity to brokerages who joined RE/MAX or Anywhere, one would expect to see a massive increase in franchisee agreements or even individual agents joining the firms to avoid being the next defendant in a commission lawsuit. However, this doesn’t appear to be the case.

Although RE/MAX did report that its franchise sales were up 35% year-to-date as of Sept. 30, its U.S. agent count has continued to drop in Q3, falling 6% year over year to 56,494 agents. This represents a 2,000-plus-agent decline since the start of the year.

With a preliminary hearing date for the settlement agreements set for Nov. 20, 2023, and an injunction still to come on the Sitzer/Burnett suit, brokerages will have to wait and see if they may gain protection from future commission lawsuits or if their names might appear on the next list of defendants.

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please