Opinion: Defendants have solid case for appeal in Sitzer

A few days ago, the three main defendants—National Association of Realtors, Keller Williams and HomeServices—in the Sitzer/Burnett case filed two motions with the court. The first was a motion for judgement as a matter of law and the second was a motion for a new trial. These actions by the three firms are all a matter of public record. I have read them and talked with one of the defendants to get some clarification and an explanation of the basis of the filings.

I am not an attorney, but I have served as an industry expert witness in three other Sherman Act federal-level cases, at least one state level restraint of trade case and over 60 other cases. So, while I make no claim as to the specific deep legal issues, I have some familiarity of antitrust actions and more in the conduct of legal actions in a courtroom.

So, with my modest experience in such matters let me comment on what I read in these motions.

No evidence of collusion

First, according to the filings, the plaintiffs in the case presented no evidence at trial as to any collusion or conspiracy among the defendants. There were no meeting notes, no emails, no joint or concerted actions by or between the defendants in the implementation of the Cooperative Compensation Rule. There was no evidence presented at the trial that excludes the possibility of independent action by any of the defendants. Even the plaintiffs’ own expert said that they found no evidence of any conspiracy or collusion. They also testified to the importance and value of the MLS as a core service that agents provide to sellers and buyers.

No evidence that plaintiffs suffered harm

According to the filings, there was no evidence that any of the plaintiffs suffered harm from the actions of the defendants. They entered into listing agreements with seller agents and agreed to the terms of those agreements without being under any duress to do so.

RealTrends research establishes that the use of real estate agents, using access to the Cooperative Compensation Rule, has become more attractive over time, not less, as evidenced by the increased use of agents in selling and buying property. The desire to use agents has gone up in the information age, not down.

Second, previous courts had found that the rule of reason should apply to MLS-focused cases, and not under the per-se standard. The per-se standard establishes that the defendants did operate a system that itself was collusive or whose outcome was to restrain trade. This court ignored all those precedents.

Issues with the damage award

The damage award was calculated by imputing that the entire “3%” was awarded to buyer agents by listing agents for the MLS regions in Missouri for the seven years of the class period. That is how they got to $1.8 billion. Even though evidence at trial showed that the actual cooperative commission paid was lower than this amount, the jury awarded all of it.

The jury and the court assigned no value to the services provided by buyer agents to any of the sellers in any of the tens of thousands of transactions contemplated in the award for damages. The court did not require the plaintiffs’ experts to run any actual calculations of damages, just handpicked a number based on a fictional commission rate that has not existed in the market for years.

Missouri law permits sellers and their agents to compensate buyer agents

One last item—Missouri state law it is permitted for sellers and their agents to compensate buyer agents. This evidence was not allowed to be presented to the jury.

I want to express what readers should know. At least at the Federal level, the U.S. Department of Justice and the Federal Trade Commission have had the Realtor organization and the industry in their sights for an exceedingly long time, and not in a favorable way. 

Various plaintiff bar members have had the same view. Also, there are a few economic experts who drafted expert reports that take the position that there must be some form of conspiracy or collusion to have commission rates of the level found in the U.S. and Canada.

There is much more that I could comment on, but readers have already seen and read all they need to. Should you be thinking, “How could this happen?” In my experience as an expert witness in federal and state courts on both antitrust matters and brokerage valuation issues, anything is possible when a judge pre-determines the outcome. It does happen.

For those who want to fault defense counsel for not running an adequate case, you might want to reconsider that line of thinking.

Steve Murray is founder of RTC Consulting, a company that specializes in real estate brokerage and team valuations, mergers and acquisitions.