An overview of key cases related to buyer broker compensation that have been filed and are currently working their way through the U.S. legal process.
This briefing article is part of a new resource series being developed by WERC and its members to help educate the talent mobility industry on the U.S. buyer broker compensation litigation and its potential mobility-related ramifications. This article, along with others in the series, are comprised of insights shared by WERC members representing a range of sectors within the talent mobility industry and will be updated as needed to reflect additional member insights and/or situational changes as they develop.
Litigation filed or ongoing in various jurisdictions across the United States is poised to bring about significant changes to the U.S. real estate system and transform how commissions for buyer brokers are handled. This, in turn, will have major ramifications for U.S. domestic relocations and the structures and operations within the talent mobility industry as a whole.
Below is an overview of key cases related to buyer broker compensation that have been filed and are currently working their way through the U.S. legal process.
Most U.S. real estate agents connected with residential transactions have been members of the National Association of Realtors (NAR), which has traditionally required as part of its Participant Rule for there to be “cooperative compensation” stipulating that a buyer’s agent will receive compensation before a property could be listed on a Multiple Listing Services (MLS). This practice became the subject of numerous legal cases filed related to buyer broker compensation, and in October 2023 NAR announced that it was shifting its interpretation of the rule to allow for zero percent buyer broker compensation with MLS listings.
In addition, requirement changes related to buyer broker compensation are being considered or have been enacted by state governments, local MLS entities, and regional realtor associations. Some of these actions, such as a new law in Washington related to broker service agreements and consumer disclosures related to fees and costs, were enacted in 2023 prior to the jury verdict in the Sitzer/Burnett case.
As of December 2023, at least 18 states require buyer agency agreements, with a varying range of requirements per state impacting areas such as dual agency, the requirement to offer cooperative compensation, and disclosure of associated fees, including referral fees. Additional legislation related to buyer agency agreements and fee transparency is likely to be introduced in more states in 2024.
Below is an overview of key litigation related to buyer broker compensation in the United States that is currently ongoing. Note: The information below is current as of February 2024.
Burnett et al vs. National Association of Realtors et al: This lawsuit, commonly referred to as the Sitzer/Burnett case, was filed in the U.S. District Court for Western Missouri and alleges that the National Association of Realtors (NAR) and four major brokerages* conspired to follow and enforce the cooperative compensation rule to artificially inflate and protect commissions paid to a buyer’s agent by the listing brokerage in a real estate transaction. This case was limited to the state of Missouri and some transactions in the neighboring states of Kansas and Illinois and transactions from the dates of April 2015 to June 2022. The case does not impact listings or transactions occurring outside of these areas.
On 31 October 2023, a jury found in favor of plaintiffs and ordered NAR and brokerages to pay $1.78 billion in damages, which, under antitrust law, may be tripled to nearly $5.4 billion. Defendants have indicated that they will appeal and ask for a reduction in damages, and post-trial motions were filed by the defendant brokerages in January 2024.
Moerhl vs. National Association of Realtors et. al: This lawsuit, commonly referred to as the Moerhl case, was filed in the U.S. District Court for Northern Illinois and alleges that NAR and four major brokerages* conspired to require home sellers to pay the buyer broker by following the cooperative compensation rule, which plaintiffs argued resulted in having to pay an inflated purchase amount and violated the Sherman Anti-Trust Act. This case covers transactions that occurred from 2015 to 2019 in 20 MLS systems covering metropolitan areas in the Mid-Atlantic, Mid-West, Mountain West, and Southeast regions of the United States.
A trial date for this case has not been set, but it is anticipated to occur sometime during 2024.
Nosalek vs. MLS Property Information Network et. al: This lawsuit, filed in the U.S. District Court for Massachusetts, alleges that the MLS Property Information Network (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. Final approval of that settlement is pending.
In June 2023, MLS PIN announced a proposed settlement agreement of $3 million plus changes to its commission policies and cooperation against remaining defendants. An amended settlement was announced in December 2023 to remedy concerns from the U.S. Department of Justice (DOJ). DOJ objected to new the settlement for not sufficiently addressing issues in the case, and the agency followed this up with a February 2024 statement of interest filing asking the District Court for Massachusetts to reject the settlement.
DOJ vs. NAR: Litigation is also ongoing related to the U.S. Department of Justice’s decision to reject a prior settlement made between the National Association of Realtors (NAR) and the U.S. Department of Justice in 2020 related to a settlement reached concerning DOJ’s investigation into antitrust practices related to the Participant Rule and Clear Cooperation Policy. In July 2021, DOJ announced it was withdrawing the settlement, and litigation was then commenced by NAR to prevent the DOJ from reopening the case. A U.S. District Court Judge ruled in favor of NAR in January 2023; however, the DOJ appealed that ruling and oral arguments on that appeal were held in December 2023.
Additional cases: In the wake of the Sitzer/Burnett decision, numerous new cases have been filed in various jurisdictions across the United States related to buyer broker compensation, including a new lawsuit filed by the plaintiff’s attorneys in the Sitzer/Burnett case in the District Court of Western Missouri against NAR and eight brokerages that were not defendants on the original case. Additional cases have been filed in locations such as California, Pennsylvania, Georgia, South Carolina, and Texas, and more cases are anticipated in the coming weeks and months. These cases have been broader in scope, reach, and class size than earlier cases. In fact, one case would make home sellers who listed a property on a MLS anywhere in the U.S. from 31 October 2019 until present eligible to join the class action suit. Further, the cases have increasingly expanded their scope to include not just national brokerages but also local teams, individual brokers, and regionally based realtor associations.
*Note: Two defendant brokerages, Anywhere and RE/MAX, reached preliminary settlements in the Sitzer/Burnett, Moehrl, and Nosalek cases in September 2023. A third defendant brokerage, Keller Williams, reached preliminary settlements in the three cases in February 2024.
Considerations for Talent Mobility
The evolving landscape related to buyer broker compensation is resulting, and will continue to result in, significant impacts for the talent mobility industry. The filing of new litigation is likely to continue for the foreseeable future, and varying changes to the practices and disclosures around buyer broker compensation and other real estate-related fees will likely continue to be seen in different parts of the United States. Although appeals of the Sitzer/Burnett verdict will take time to get through the court system, changes are imminent and are developing at different times as there is not a specific trigger date.
Many real estate brokerages and even some states are making changes now. WERC will be closely tracking developments related to this issue and will be providing additional resources to members to support them navigating this evolving landscape.