Real Estate Settlement Appeals Probed for Fairness, Scope (1)

A panel of Eighth Circuit judges considered the pleas of plaintiffs challenging multimillion-dollar antitrust settlements with the National Association of Realtors and other real estate industry players as unfair, dismissive of their concerns, and improper for releasing homebuyers’ claims.

Judge Lavenski R. Smith dominated the panel’s questions, asking whether the settlements can be seen as a compromise without bringing the industry defendants to the brink of insolvency.

“That’s what class action settlements typically involve,” Smith said, adding that defendants are motivated to settle cases to ensure they don’t reach “economic destruction” that could reduce what anyone gets.

At issue are appeals to settlements that resolved antitrust claims that NAR and major brokers inflated commissions nationwide. The court heard a tangle of related cases, which included an appeal by homebuyers and two by other objectors.

A long list of attorneys spoke Wednesday during the hourslong hearing. The appeals seek to reshape antitrust settlements covering millions of plaintiffs nationwide.

A Missouri jury in 2023 returned a $1.8 billion verdict against NAR, finding it colluded to inflate commissions by requiring home sellers to pay the broker representing the buyer of their homes an inflated amount.

The NAR then agreed to pay $418 million and change several of its rules. Other brokers settled, including Keller Williams with $70 million. HomeServices, the brokerage of Warren Buffett’s Berkshire Hathaway, paid $250 million.

Judge Discretion

The court didn’t come close to abusing its discretion in approving the historic settlements, said Christopher G. Michel, attorney with Quinn Emanuel Urquhart & Sullivan LLP who represents NAR.

The NAR deal is among the largest in antitrust history and was entered into after carefully balancing competing considerations, Michel said.

“NAR strongly believes that plaintiffs’ claims are legally flawed and that if we were here today appealing the jury verdict we would have very persuasive arguments for reversal,” he said.

Daniel McArdle Booker is an attorney with Obermayer Rebmann Maxwell & Hippel LLP who represents plaintiff Spring Way Center, which specifically challenged the NAR deal. He acknowledged Smith’s comments about the considerations in such large settlement, saying “everybody takes a haircut.”

But the deal still doesn’t fairly compensate the nationwide class of home sellers, he said, adding that they provide plaintiffs with only a “pennies-on-the-dollar amount.”

“The clear case law in this circuit is that the judge has a fiduciary duty to ensure that the settlement is equitable and fair and treats absent class members fairly,” Booker said.

Homebuyer Claims

Central to the appeals are claims by James Mullis, who challenged the deals on behalf of homebuyers arguing that overcharged commissions impact buyers because they inflate the home price the seller paid for the home.

The purchaser claims don’t have the same factual questions as claims from sellers, who make up another group appealing the deals, said James R. Layton, an attorney with Tueth Keeney who represents Mullis. “Sure there’s some overlap but the issues are different; the nature of damages are different,” he said.

Smith asked Layton to specify the error of the district court and why these settlements shouldn’t be affirmed.

The error stems from improperly requiring Mullis and other class members to release their homebuyer claims, Layton said.

“It completely writes off the value of the claims that we want to litigate,” Layton said.

Another related case heard by the US Court of Appeals for the Eighth Circuit on Wednesday was brought by objectors who challenged specific multiple listing services defendants.

Judges Ralph R. Erickson and Jonathan A. Kobes were also on the panel.

Mullis is also represented by Korein Tillery LLC.

The cases are Burnett v. Spring Way Ctr. LLC, 8th Cir., No. 24-03444; Gibson v. Mullis, 8th Cir., No. 24-03473; and Burnett v. Nat’l Ass’n of Realtors, 8th Cir., No. 21-2143.