U.S. Department of Justice Calls for Commission Decoupling

In a court filing, the U.S. Justice Department asked the court overseeing the Nosalek lawsuit to reject pending defendant settlements and have the court consider an alternative injunction that would require buyers to negotiate their own compensation with their broker.

In a statement of interest filed on 16 February, the U.S. Justice Department (DOJ) urged the District Court for the District of Massachusetts to reject proposed defendant settlements in the Nosalek broker commission lawsuit and instead require the decoupling of sellers from the compensation process for buyer brokers. To do this, DOJ recommended the court require the MLS defendant in the case, MLS Property Information Network (PIN), to prohibit sellers and their broker from any involvement related to the compensation for a buyer’s broker. This announcement is the latest in a series of statements by DOJ in recent months criticizing attempts by MLS PIN and three major brokerages—Anywhere, Keller Williams Realty, and RE/MAX—to settle the Nosalek case.

As part of the proposed settlements in the case pending approval by the District Court, the brokerages would enact a range of process changes in addition to paying financial damages to class action plaintiffs, including the removal of any requirements that a seller must offer buyer broker compensation. DOJ, in its statement of interest, stated that these changes would not be sufficient and that a seller needed to be decoupled from the process of compensation for a buyer’s broker. “The critical issue is not how much a seller should offer a buyer broker, but whether a seller should set buyer-broker compensation at all,” said DOJ attorney Jessica Leal in the filing.

To achieve this outcome, DOJ asked the court to implement an alternative injunction that would prohibit involvement by a seller and their broker in compensating a buyer’s agent. In DOJ’s filing, Leal stated: “If MLS PIN rules prohibited sellers and listing brokers from deciding what buyer brokers would be paid, sellers would be responsible for determining only the compensation of their own broker in the listing contract, while buyers would be responsible for determining the compensation of their own broker in a buyer-broker representation contract.”

This filing is DOJ’s first significant intervention into a proposed settlement for a buyer broker compensation case. However, further interventions in pending settlements, including in the Sitzer/Burnett and Moehrl cases, could still occur as the applicable courts review those settlements. These actions are in addition to ongoing legal actions between the DOJ and the National Association of Realtors (NAR), which result from DOJ’s 2021 decision to withdraw from a settlement reached during the Trump administration to end DOJ’s investigations into antitrust practices. 

Potential actions by DOJ have been increasingly focused on in recent weeks. Inman News reported on 7 February that the new president of the NAR, Kevin Sears, was recorded on a video posted online of remarks made to a recent real estate conference saying that the actions of the U.S. Department of Justice, including the ongoing NAR vs. DOJ lawsuit, represent a “bigger problem” for the real estate industry than the Sitzer/Burnett verdict. He went on to say: “We had a settlement with them in 2020. In 2021, they reneged on the deal. We sued them and we won in court. So they’re pissed off at us, I mean, just candidly.” 

Case Background

The Nosalek case (Nosalek vs. MLS Property Information Network et. al), filed in the U.S. District Court for the District of Massachusetts, alleges that the MLS PIN, a broker-owned MLS network serving much of the New England region of the United States, and four major brokerages conspired to require home sellers to pay the buyer broker commissions via MLS PIN’s adoption of NAR’s cooperative compensation rule. 

In June 2023, MLS PIN announced a proposed settlement agreement of $3 million plus changes to its commission policies and cooperation against remaining defendants. Anywhere and RE/MAX both announced potential settlements in the case in September 2023, and Keller Williams announced its settlement in February 2024. An amended settlement was announced in December 2023 by the defendants party to the settlement at the time attempting to address remaining DOJ concerns. DOJ indicated its objection to the revised settlement, saying that it did not believe underlying concerns about anti-competitiveness had been fully remedied. The District Court then provided DOJ the opportunity to elaborate further via the statement of interest that was filed.

Additional information about key litigation can be found on WERC’s briefing article available here.

Potential Impacts

This filing not only highlights DOJ’s position on decoupling buyer broker compensation but also indicates a likely roadmap for the agency’s response to other ongoing cases. If successful, implementing decoupling would fundamentally transform the U.S. real estate industry and how it operates and would have significant ramifications for associated industries, including the talent mobility industry.

Additionally, if the District Court for the District of Massachusetts rejects the settlement in the Nosalek case, other settlements currently being reviewed by other courts could also be put into jeopardy. The court deciding to enact DOJ’s recommendation of an injunction decoupling commissions would also have the immediate impact of transforming the structure for real estate transactions within the six states in New England serviced by MLS PIN.

WERC and its new volunteer-led ad hoc group focused on the issue of U.S. buyer broker compensation litigation will continue to monitor developments and will provide additional updates as available on the Nosalek and other ongoing cases.

Michael T. Jackson is the vice president of member engagement and public policy with WERC.