Attend the event July 30-August 1 at Inman Connect in Las Vegas! Seize the moment and take control of the next era of real estate. Through immersive experiences, innovative formats and an unparalleled lineup of speakers, this gathering becomes more than just a conference, it becomes a collaborative force shaping the future of our industry. Grab your tickets now!
American HomeServices has asked a federal court to dismiss claims from plaintiffs in the explosive Burnett case, which requires the real estate franchise to pay $4.7 billion, the vast majority of damages awarded in jury verdicts this fall.
On April 1, lawyers for HomeServices, a subsidiary of Berkshire Hathaway, told the U.S. District Court for the Western District of Missouri that the plaintiff’s request, filed on March 18, Motion for judgmentis “premature” because the court has not yet approved the plaintiff’s settlement with the other defendants.
“The pending status of the settlement in this case leaves uncertainty as to the appropriate amount to be awarded to the plaintiffs in a judgment against HomeServices,” Objection Application by HomeServices read.
“The verdict proposed by the plaintiffs, regardless of style, will not be final.”
On Oct. 31, jurors found that the National Association of Realtors, Keller Williams, RE/MAX, Anywhere, HomeServices and two of its subsidiaries, BHH Affiliates and HSF Affiliates, conspired to inflate the rates of broker commissions paid by home sellers. Juries awarded $1.78 billion in damages to approximately 500,000 Missouri homeowners.
Anywhere and RE/MAX settled before Sitzer | Burnett trial for $83.5 million and $55 million, respectively. Keller Williams settled on February 1 for $70 million, and NAR settled on March 15 for $418 million. Combined, the transaction value reached $626.5 million. None of the settlements have received final court approval.
In their motion, attorneys for the home seller plaintiffs formally asked the court to triple the amount Sitzer | Burnett is seeking $5.36 billion in damages under federal antitrust law and holds the HomeServices defendants liable for the full amount, minus that amount from other settlement amounts: $4,729,432,616. This will be 88% of the triple bonus.
But Home Services argued that if the settlement was rejected or challenged, the calculation of the final judgment would change, causing “administrative chaos.”
“Plaintiff’s penciled-in amount of the jury award to be offset by settlement is provisional because the settlement is subject to objections by absent class members and is subject to judicial review before approval by this Court to ensure that the settlement complies with due process, “The opposition document said.
“Plaintiffs’ attempt to treat the settlement amount as a valid final amount ignores the fact that courts routinely reject class action settlements when reviewing their fairness, reasonableness and adequacy,” the filing added.
The franchisor made clear that it does not expect the settlement process to be “mechanical and uncontested,” and that the U.S. Department of Justice may seek to intervene, as it did in Nosalek, another major Commission proceeding.
“These so-called nationwide settlements were negotiated with attorneys representing only a small portion of the individuals nationwide affected by the settlements,” the filing states.
“The Department of Justice has opposed settlements of similar claims in other cases. Therefore, the judgment that plaintiffs seek from this court is necessarily provisional as it relates to the issues at issue.”
The plaintiff also seeks compensation for attorney’s fees and litigation costs, as well as interest on the damages at an annual rate of 5.4%, compounded annually, starting the day after the judgment (November 1). But HomeServices told the court that interest on the damages amount should start accruing on a different date: when the court makes its final judgment.
Furthermore, the franchisor argued that under the law the plaintiff must “demonstrate the danger of hardship if its request is not granted,” but the plaintiff failed to do so.
“Plaintiffs submit that they will suffer no hardship or prejudice if judgment is not entered until all claims of the parties in this case have been fully resolved,” the filing states.
“They also fail to take into account the fact that, by mutual agreement of the parties and subsequent order of the court, any judgment cannot be enforced until thirty days after the court has resolved all post-trial motions, for which briefs have not yet been released. Full .
“Even then, plaintiffs cannot enforce judgments with indeterminate damages—each settlement must first receive final approval.”
Lawyers for HomeServices stressed that nothing will come of the court’s final judgment until the settlement is finalized.
“(Plaintiffs) did not seek an expedited appeal, and it is difficult for them to have an immediate interest in appealing while the HomeServices defendants are still introducing their … posttrial motions,” the filing states.
“Plaintiffs will certainly not be prejudiced by withholding the money owed to them by HomeServices as they will not be entitled to those funds unless HomeServices’ appeal rights have been exhausted unsuccessfully.
“They will also not be harmed by withholding funds that the other defendants agreed to pay them in the settlement, because the receipt of those funds is triggered by the court’s final approval of the settlement, not the entry of judgment against HomeServices.”
Sitzer | Burnett’s plaintiffs told Inman the law does not require plaintiffs to prove hardship and objected to HomeServices’ characterization of the plaintiffs’ request as premature, lead attorney Michael Ketchmark said in a phone interview.
“We’re not asking for anything to be improved,” Ketchmark said. “We’re asking for the verdict to be tripled under the law. They think it’s complicated for us to take $5.4 billion and subtract what the other two defendants paid at trial. I have a calculator. Heck, I have one on my phone . I can do it. It only took me two minutes. I don’t know why they thought it was complicated.”
Michael Cagemark | Plaintiff’s Attorney
Ketchmark stressed that he hears daily from real estate brokerages who are settling commission lawsuits against them and agreeing to changes in their business practices, including no longer requiring franchisees and their affiliated agents to join or be members of the NAR, or comply with the REALTORS Code of Ethics or NAR’s MLS Policy Manual.
“Now is the time for Berkshire Hathaway to get on board,” Ketchmark said.
Additionally, as part of the NAR settlement, the 1.5 million-member trade group agreed to eliminate the NAR rule at the heart of the case. Known as the Cooperative Compensation Rule or Participation Rule, it requires listing brokers to provide comprehensive, unilateral compensation to buyer’s brokers for submitting listings in a real estate broker-affiliated Multiple Listing Service. If the proposed settlement is approved, NAR will implement the rule changes in July.
“What[HomeServices]doesn’t want to do is admit that they’re now in nearly half a billion dollars of trouble because they didn’t do the right things and follow these changes in practices and admit that what they were doing was wrong and change them like this. The way it’s done,” Ketchmark said.
“HomeServices and Berkshire Hathaway continue to defend the rules that the rest of the industry is abandoning,” he added. “Instead of arguing about what the final verdict will be, they should find a way to protect their agents and brokers.”
Ketchmark said that even if HomeServices’ objection application is successful and the final judgment is delayed by three to four months, “judgment day will come one day.” “They can’t delay this forever.”
HomeServices has been careful to keep its options open when it comes to resolving its ongoing council cases. Last week, when asked if HomeServices planned to resolve another explosive case, HomeServices executive vice president Chris Kelly told Inman, “HomeServices’ position remains unchanged as we are actively pursuing all options to resolve potential litigation in which we are involved. “
Read HomeServices’ objection document:
Send an email to Andrea V. Brambila.
