Moehrl v. Nat'l Ass'n of Realtors

• Decision Date: 02 October 2020
• Docket Number: No. 19-cv-01610,19-cv-01610
• Citation: 492 F.Supp.3d 768
• Parties: Christopher MOEHRL, et al., on behalf of themselves and all others similarly situated, Plaintiffs, v. The NATIONAL ASSOCIATION OF REALTORS, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

492 F.Supp.3d 768

Christopher MOEHRL, et al., on behalf of themselves and all others similarly situated, Plaintiffs,

v.The NATIONAL ASSOCIATION OF REALTORS, et al., Defendants.

No. 19-cv-01610

United States District Court, N.D. Illinois, Eastern Division.

Signed October 2, 2020

Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Alexander Aiken, Pro Hac Vice, Matthew Berry, Pro Hac Vice, Susman Godfrey L.L.P., Seattle, WA, Alison Deich, Pro Hac Vice, Cohen Milstein Sellers & Toll PLLC, Washington, DC, DC, Beatrice Franklin, Pro Hac Vice, Susman Godfrey LLP, New York, NY, Benjamin D. Brown, Pro Hac Vice, Kit A. Pierson, Pro Hac Vice, Robert Abraham Braun, Pro Hac Vice, Daniel A. Small, Pro Hac Vice, Cohen, Milstein, Sellers & Toll PLLC., Washington, DC, Benjamin D. Elga, Pro Hac Vice, Brian James Shearer, Pro Hac Vice, Justice Catalyst Law, George Farah, Pro Hac Vice, Rebecca Chang, Pro Hac Vice, Handley Farah & Anderson PLLC, Brooklyn, NY, Daniel J. Kurowski, Whitney Kendall Siehl, Hagens Berman Sobol Shapiro LLP, Carol V. Gilden, Cohen Milstein Sellers & Toll PLLC, Chicago, IL, Marc M. Seltzer, Steven Gerald Sklaver, Susman Godfrey L.L.P., Los Angeles, CA, Marisa Katz, Pro Hac Vice, Vildan Teske, Pro Hac Vice, Teske Katz, PLLP, Minneapolis, MN, Rio Shaye Pierce, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, William Harold Anderson, Pro Hac Vice, Handley Farah & Anderson PLLC, Boulder, CO, for Plaintiff Christopher Moehrl.

Kit A. Pierson, Cohen Milstein Sellers & Toll PLLC, Washington, DC, for Plaintiffs Michael Cole, Jack Ramey, Daniel Umpa, Steve Darnell, Valerie Nager, Jane Ruh.

Jack R. Bierig, Adam J. Diederich, Schiff Hardin LLP, Chicago, IL, Robert J. Wierenga, Suzanne L. Wahl, Schiff Hardin LLP, Ann Arbor, MI, for Defendant The National Association of Realtors.

Kenneth Michael Kliebard, Heather Jean Nelson, Morgan Lewis & Bockius LLP, Chicago, IL, William T. McEnroe, Pro Hac Vice, Morgan, Lewis & Bockius LLP, Philadelphia, PA, Stacey Anne Mahoney, Pro Hac Vice, Morgan, Lewis & Bockius LLP, New York, NY, for Defendant Realogy Holdings Corp.

Denise A. Lazar, Barnes & Thornburg LLP, Erik Kennelly, James Daniel Dasso, Foley & Lardner LLP, Chicago, IL, Jay N. Varon, Jennifer M. Keas, Foley and Lardner LLP, Washington, DC, Karoline Elizabeth Jackson, Matthew B. Barr, Barnes & Thornburg LLP, Matthew Thomas Ciulla, Pro Hac Vice, Robert Dean MacGill, Pro Hac Vice, MacGill PC, Indianapolis, IN, for Defendant HomeServices of America, Inc.

Paula W. Render, Erin Lind Shencopp, Odeshoo Hasdoo, Jones Day, Chicago, IL, for Defendant Re/Max Holdings, Inc.

Timothy Ray, William Foster Farley, Martin G. Durkin, Holland & Knight LLC, Chicago, IL, Anna Pendleton Hayes, Pro Hac Vice, David C. Kully, Holland & Knight, LLP, Washington, DC, for Defendant Keller Williams Realty, Inc.

Paula W. Render, Erin Lind Shencopp, Jeremy John Gray, Megan Elizabeth Ryan, Odeshoo Hasdoo, Jones Day, Chicago, IL, Jeffrey A. LeVee, Jones Day, Los Angeles, CA, for Defendant Re/Max LLC.

Denise A. Lazar, Barnes & Thornburg LLP, James Daniel Dasso, Foley & Lardner, Chicago, IL, Jay N. Varon, Jennifer M. Keas, Foley and Lardner LLP, Washington, DC, Karoline Elizabeth Jackson, Barnes & Thornburg, Indianapolis, IN, for Defendants BHH Affiliates, LLC, HSF Affiliates, LLC, The Long & Foster Companies, Inc.

MEMORANDUM OPINION AND ORDER

Andrea R. Wood, United States District Judge Plaintiffs are seven individuals who sold their homes on a local database of properties for sale known as a Multiple Listing Service ("MLS"). As a condition of listing their home on an MLS, each Plaintiff had to include in their listing a single, set offer of compensation to any broker who found a buyer for their home. Plaintiffs then paid that offer amount in connection with the sale of their home. According to Plaintiffs, the requirement that a home seller make a set commission offer to the successful buyer-broker for their property to be listed on an MLS is anticompetitive and caused them to pay artificially inflated, supracompetitive commission rates. For that reason, they have brought the present antitrust action alleging that Defendant National Association of Realtors ("NAR"), along with Defendants Realogy Holdings Corp., HomeServices of America, Inc., HSF Affiliates, LLC, Long & Foster Companies, Inc., BHH Affiliates, LLC, RE/MAX LLC, and Keller Williams Realty, Inc. (collectively, "Corporate Defendants"), engaged in a conspiracy in restraint of trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Now, the NAR and the Corporate Defendants each bring motions to dismiss. (Dkt. Nos. 113, 115.) For the reasons that follow, the Court denies both motions.

BACKGROUND

For the purposes of the motions to dismiss, the Court accepts all well-pleaded facts in the Consolidated Amended Class Action Complaint ("CAC") as true and views the facts in the light most favorable to Plaintiffs as the non-moving parties. Killingsworth v. HSBC Bank Nev., N.A. , 507 F.3d 614, 618 (7th Cir. 2007).

Defendant NAR is a 1.2 million member trade association that advocates for the interests of real estate brokers. (CAC ¶ 32, Dkt. No. 84.) In addition, NAR also oversees 54 state and territorial realtor associations and over 1,200 local realtor associations, each of which are NAR members. (Id. ¶¶ 32, 50.) Those local realtor associations own and operate in their markets a centralized database of properties listed for sale in the region known as an MLS. (Id. ¶¶ 2, 50, 98.) Listing a property for sale on an MLS is essential to market that property effectively to prospective buyers. (Id. ¶ 2.)

The NAR Board of Directors and the Multiple Listing Issues and Policies Committee (which reports to the NAR Board of Directors) issues the policies governing MLSs that are set forth annually in the Handbook on Multiple Listing Policies ("Handbook"). (Id. ¶ 57.) Those policies are then enforced by the local realtor associations that own the MLSs, which the NAR requires to agree to adhere to and enforce the Handbook as well as the NAR's Code of Ethics. (Id. ¶¶ 58–59, 94, 97.) And given the commercial necessity of having access to an MLS, real estate brokers and individual realtors¹ must comply with the Handbook's provisions and all other NAR rules. (Id. ¶¶ 95–98.)

As relevant here, Section 2-G-1 of the Handbook requires any broker listing a property for sale on an MLS to make a blanket unilateral offer of compensation to any broker who finds a buyer for the home. (Id. ¶¶ 3, 51, 60; see also The NAR's Br. in Supp. of Mot. to Dismiss the CAC at 6–7, Dkt. No. 114.)² That offer must be expressed either as a percentage of the gross selling price or as a definite dollar amount. (CAC ¶ 60.) Section 2-G-1 further prohibits "general invitations by listing brokers to other participants to discuss terms and conditions of possible cooperative relationships." (Id. ) As a result of Section 2-G-1, a homebuyer does not have to pay any compensation to his broker. (Id. ¶ 47.) Indeed, the NAR's Code of Ethics permits and encourages buyer-brokers to tell clients that their services are free. (Id. ¶¶ 47, 79.) Buyer-brokers instead receive their commission out of the total commission paid by the seller. (Id. ) Specifically, in the listing agreement, the seller will set the total commission to be paid to the seller-broker with the expectation that a portion of the commission will be paid to the buyer-broker. (Id. ¶ 48.)

Section 2-G-1 works as follows. When a property is listed on an MLS, the listing will contain a set offer of compensation that the buyer-broker will receive if a buyer represented by that broker purchases the home. (Id. ¶ 51.) For example, if a homeowner agrees to pay 6% in total commissions to the seller-broker, the seller-broker will then list the property on an MLS with a promise of a 3% commission to buyer-brokers. (Id. ¶ 52.) Then, if the property is sold for $500,000, the seller pays the seller-broker the 6% commission, or $30,000. (Id. ) The seller-broker then pays 3% of the sale price, or $15,000, to the buyer-broker and retains the other $15,000 as their own commission. (Id. )

Because Section 2-G-1 requires a blanket offer, home sellers must provide the listed offer of compensation without regard to the buyer-broker's experience or the value of services the buyer-broker provides to the buyer client. (Id. ¶ 63.) Consequently, there is substantial uniformity in the compensation paid to buyer-brokers. (Id. ) Since Section 2-G-1 has been in effect, total commissions have remained stable at between 5.0% and 5.4% of the sale price, with between 2.5% and 3.0% of the sale price going to the buyer-brokers. (Id. ¶¶ 12, 65–66, 92, 125–26.) By contrast, in comparable international markets where buyer-brokers are paid directly by the home buyer, total commission rates are generally between 1% and 3% of the sale price, with buyer-brokers receiving less than half the commission rate received by buyer-brokers in the United States. (Id. ¶¶ 11, 125.)

According to Plaintiffs, Section 2-G-1 facilitates the stability of these allegedly supracompetitive commission rates by allowing buyer-brokers "to identify and compare the buyer-broker compensation offered by every seller in the MLS." (Id. ¶ 67.) In turn, that disincentivizes buyer-brokers from showing a home where the seller offers a buyer-broker commission substantially lower than the typical 2.5% to 3.0% rate. (Id. ¶ 68.) Similarly, Section 2-G-1 discourages sellers and seller-brokers from making buyer-broker commission offers significantly below the normal industry rate because doing so would significantly hinder their ability to sell the property. (Id. ¶¶ 65, 74.) Furthermore, some seller-brokers may face retaliation for attempting to offer discounted buyer-broker compensation. (Id. ¶ 68.)

In addition, Plaintiffs point to several other factors that work in conjunction with Section 2-G-1 to ensure the stability of commission rates. First, MLSs allow only brokers and realtors that...