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Judge approves brokerage commission lawsuit settlement agreements

Settlements reached by Anywhere, RE/MAX and Keller Williams in the commission lawsuits were approved on Thursday

After months of uncertainty, the real estate industry has a reason to celebrate, at least a little bit. Judge Stephen Bough has granted final approval to the commission lawsuit settlement agreements reached by Anywhere, RE/MAX and Keller Williams on Thursday.

The settlement agreement will become effective following any appeals process, if applicable.

In his ruling, Judge Bough wrote that the court finds “that the Settlements
with Anywhere, RE/MAX, and Keller Williams, as set forth in the Settlement Agreements, are fair, reasonable and adequate. The Class Representatives have adequately represented the class, the Settlement Agreements were negotiated at arm’s-length by experienced counsel acting in good faith, including mediation with a nationally recognized and highly experienced mediator, and the Settlement Agreements were reached as a result of those negotiations; there has been adequate opportunity for discovery for experienced counsel to evaluate the claims and risks at this stage of the litigation.”

Based on these reasons, the court felt it was appropriate to grant final approval to the settlements.

“This Court’s Order granting final approval of the Settlements is informed by the
risks that the Settlement Class would have faced in continuing to litigate against Anywhere,
RE/MAX, and Keller Williams and the cost and complexity of continued litigation,” Judge Bough added.

As part of their settlement agreements, Anywhere, RE/MAX and Keller Williams have agreed to pay $83.5 million, $55 million and $70 million, respectively. In addition, the brokerage firms also agreed to various policy changes including provisions to no longer require agents to be members of the National Association of Realtors or follow NAR’s Code of Ethics or the MLS Handbook, as well as practice changes, including that the firm will require or encourage agents to make it clear to clients that commissions are negotiable, that agents will have the freedom to set or negotiate commissions as they see fit, and that agents will not be required to make offers of compensation or accept offers of compensation from cooperating brokers.

The final approval of the settlements did not come without hiccups. According to court filings 12 settlement class members filed objections to the settlements with the court. Of the 27 million email notices and 10 million-plus postcard notices sent out, nearly 200,000 claims have been filed and 61 class members have opted out of the settlement.

During Thursday’s hearing, Judge Bough allowed four of the objecting parties to speak for five minutes each. These parties included PulteGroup, attorneys from law firm Knie and Shealy who are representing home seller plaintiffs in a copycat suit in South Carolina, the Spring Way Center, an original home seller plaintiff in the Pennsylvania copycat suit, and attorneys from Korein Tillery LLC, who represented James Mullis, a plaintiff in the Batton home buyer commission lawsuit.

In a filing in mid-April, homebuilder PulteGroup explained that certain “procedural factors” have impacted the company’s decision to remain in the case’s settlement classes. Additionally, the firm noted that it was unsure of the “magnitude” of its potential recovery, as well as the work that would be required to receive it, and whether the settlement will survive due process considerations are key questions that could determine the company’s ongoing presence in the class.

“Because the deadline is here and Pulte has seen no answers to these questions, Pulte objects,” the filing reads, adding that the parties involved have not made the information available.

“Pulte has not seen any information about class size, expected claim rate, or the claim administrator’s evaluations in dividing up settlement funds,” the filing reads. “Most of this information typically would be provided in a Plan of Allocation, a document routinely provided before the opt-out date.”

The South Carolina objectors took a different tack and objected to some of the financial amounts of the settlement. In mid-April, attorneys for the objectors asked the court for permission to subpoena financial documents from Keller Williams “for the purpose of evaluating the objectors’ positions regarding any continuing objection and further to help provide the court with valuable evidence in ruling on whether to grant final approval of the proposed settlement entered into by and between Keller Williams Realty, Inc., and the Plaintiffs.”

The two parties have since gone back and forth, but the judge did not rule on their request for a subpoena.

In a document filed on Wednesday, the Spring Way Center, supported the South Carolina objector’s motion, writing that it was objecting to the “fairness and adequacy” of Anywhere’s settlement amount. Anywhere and the plaintiffs in the Sitzer/Burnett and Moehrl suit used the testimony of Karl Barth, Esquire to refute claims about the adequacy of Anywhere’s settlement amount made by the South Carolina objector’s expert, economist Charles Alford. In its filing, the Spring Way Center states that it believes Barth’s testimony is not appropriate because, although he as experience as a Certified Public Accountant, he is an attorney who has practiced at Hagens Berman Sobol Shapiro LLP, the firm representing the Moehrl plaintiffs, for over 20 years.

“It must be emphasized that Plaintiffs’ counsel could have engaged an outside forensic accountant if they believed it appropriate to do so—they clearly have made a substantial investment in experts in this litigation,” Spring Way’s filing states. “Their failure to engage an outside expert is therefore a tacit admission that an impartial expert would not be able to rebut Dr. Alford’s opinions.”

Judge Bough addressed these concerns in his ruling, noting that the plaintiffs used a forensic accountant “to confirm each defendant’s ability to pay while still maintaining a viable business.”

“This analysis was complicated by the recent and prolonged downturn in the real estate market,” the order continued. “The Settlements each capture a significant portion of the Settling Defendants’ available assets while still allowing them to continue operations.”

Finally, Mullis, who bought a home and sold a home, making him part of the settlement class, as well as a Batton plaintiff, filed his objection in mid-April, writing that the court should only approve the settlements “if the settling parties expressly carve out claims asserted in the Batton action from the definition of ‘Released Claims’ or otherwise clarify that the settlements do not release damages claims related to transactions in which class members purchased homes,” the filing states. “If not, the Court should reject the settlements as not fair and reasonable and as not providing adequate representation to class members who purchased homes.”

In addition to Mullis’ objection, the Batton 1 plaintiffs filed a motion for a temporary restraining order and preliminary injunction, on Wednesday. The motion sought to prevent Anywhere, Keller Williams and RE/MAX from filing a proposed order granting final approval of their settlement agreements.

The motion was filed in U.S. District Court in Chicago, as that is where the Batton 1 suit is being heard. On Wednesday afternoon, Judge Andrea R. Wood, who is overseeing the Batton suit as well as the Moehrl home seller commission lawsuit, said this request was “neither necessary nor appropriate.”

In her order, Wood wrote that the plaintiffs’ “goal is to prevent the fairness hearing duly set by the Burnett court from going forward according to that court’s orders. Such extraordinary action would be inappropriate.”

In their motion, the Batton plaintiffs argued that the three settling brokerage firms “did not reveal their intent to release homebuyer claims” until Friday, May 3, and didn’t reveal they planned to specifically prevent the Batton 1 plaintiffs from pursuing their claims until Tuesday, May 8.

When the settlement agreements were initially announced, it was generally understood that they only applied to claims brought by home sellers. But in court documents filed last week, Anywhere revealed that they had “insisted that the people in the Settlement Class release all their antitrust claims arising from the same alleged conspiracy, including claims they could assert as either sellers or buyers.”

In a press release on Thursday, Anywhere clarified that “releases by the sell-side class members will not eliminate the pending buy-side litigation, but will reduce the size of the potential, as yet uncertified, class by eliminating claims for buy-side damages by those individuals who also sold a property and are covered by the Anywhere settlement.”

In addition to RE/MAX, Anywhere and Keller Williams, NAR,  Douglas Elliman,  Realty One GroupAt World Properties, Compass, HomeServices of America and The Real Brokerage, have also reached settlement agreements. So far, the NAR settlement is the only one that has been granted preliminary approval. Its final approval hearing is slated for Nov. 26, 2024.

“We are pleased to hear of the court’s final approval of our settlement,” Darryl Frost, a Keller Williams spokesperson, wrote in an email. “We will continue to focus on what we do best: empowering real estate entrepreneurs so they can deliver exceptional value to their clients.”

RE/MAX CEO Erik Carlson was also pleased with the final approval news.

“Since entering into the settlement last fall, RE/MAX has been committed to obtaining final approval,” Carlson said in a statement. “We are thrilled to be leading the way in moving forward, maintaining our focus on supporting RE/MAX affiliates and continuing to foster greater transparency in the industry on behalf of homebuyers and sellers.”

Like Carlson, Anywhere CEO Ryan Schneider was also delighted by the news.

“This is a significant milestone on our path to put these claims behind us, begin to implement agreed upon practice changes, and move forward with our affiliated agents and franchisees as, together, we continue helping home buyers and sellers move to what’s next,” Schneider said in a statement.

This story is developing. Check back for updates.

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