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CHANGING TIDES: Summary and Effects of Burnett et. al. v. National Ass’n of Realtors, et. al.

Client Alert
January 17, 2024

In April 2019, a class-action Complaint was filed in federal court for the Western District Court for Missouri arguing that the traditional payment agreements employed by many across the United States amounted to conspiracy resulting in the artificial increase in brokerage commissions. Plaintiffs, a class-action group comprised of sellers, argued that they paid excessive brokerage commissions upon the sale of their home as a result of the customary payment structure where Sellers agree to pay the full commission on the sale of their property, with Seller’s agent notating the portion of commission they are willing to pay to a Buyer’s agent at closing on the MLS or other similar system.

The Plaintiffs argument pivoted on the requirement that the National Association of Realtors (“NAR”) requires that agents could only list properties for sale if they provided the commission for Buyer as a percentage of the gross sale price of the property.  No provision or exception is allowed for Sellers or Seller’s agents willing to pay a flat fee to a Buyer’s agent, for Buyer’s paying their realtor’s commission, or for any other variation in the payment structure.

Like many markets throughout the United States, the Sellers lived in areas where the compensation for Buyers’ agents is solely derived based on the commission from the properties buyers actually purchase. As such, it behooves them to show only those properties that offer better commission to the buyers. Additionally, realtors agree that they cannot attempt to negotiate or modify commission arrangements through the purchase-sale contract. The Plaintiffs contended, while sellers are still able to negotiate the percentage commission in theory, any attempt to meaningfully do so could significantly undermine the seller’s effort as it can affect whether their property is presented to Buyers and artificially restraining price competition among real estate brokerages.

Re/Max Holdings, Inc., one of the defendants, ultimately entered into a settlement agreement for $55 million, and they further agreed to change their business practices to no longer require their agents to be members of NAR nor have minimum commission requirements. Anywhere Real Estate Inc. (parent company for Better Homes and Garden Real Estate, Century 21, Coldwell Bank Realty, Corcoran, and Sotheby’s International Realty) was another defendant in the case. They entered into a $83.5 million settlement that also prohibits them and their brokerages from sorting home listings by commission amount unless requested by the client.

On October 31, 2023, the National Association of Realtors, HomeServices of America, Inc., and Keller Williams Realty, Inc. received a verdict against them for $5.6 Billion.  The case has created additional ripple effects as at least 11 different suits have been filed in courts across the nation, including Florida, New York, Texas, Illinois, and Pennsylvania. Additionally, the Justice Department argued to re-open its investigation against the National Association of Realtors in front of an appellate court panel in Washington DC in mid-December 2023.

Even though it may be years before the Burnett verdict or any of the new cases result in a systemic change in the payment system for realtors, the landscape of real estate sales and commissions is already shifting as a result of these cases.  Immediate effects include the changes in policies that Re/Max and Anywhere’s brokerage have agreed to as part of their settlement agreement; RedFin requiring its brokers and agents to withdraw from NAR; and, the “clarification” released from NAR that brokers can list commissions at any amount, including $0. While some realtor boards are changing its policies, including the Real Estate Board of New York and Miami Association of Realtors, 2024 will likely see additional changes once the judge’s order detailing what injunctive relief he is granting is released and takes effect, expected no sooner than April 2024.

For more information, please contact BMD Senior Counsel Audrey Wanich at aswanich@bmdpl.com.

Real Estate
Client Alert

Changes to FFCRA Paid Leave: Congress’ Revisions to Employment COVID-19 Leave Benefits Signals the Light is at the End of the Tunnel

December 28, 2020Late in the evening on December 27th, President Trump signed into law the government’s $900 billion COVID-19 relief package (the “Stimulus Bill”). Among other economic stimulus benefits, the Stimulus Bill contains the $600 stimulus checks that will be issued to eligible individuals as well as, relevantly, changes to the Families First Coronavirus Response Act (“FFCRA”). The FFCRA was implemented in April 2020 and provided benefits to individuals who missed work as a result of an actual or suspected COVID-19 illness or to care for a child when their school or childcare service was closed because of COVID-19. Importantly, the Stimulus Bill extends eligibility for employer payroll tax refunds for leave payments made to employees on or before March 31, 2021 under the FFCRA, signaling to the American people that Congress believes many of the employed public will be vaccinated by this time, the light at the end of the tunnel. However, the Stimulus Bill does contain a caveat that employers are no longer required to provide FFCRA leave benefits after December 31, 2020, but if they do, they will receive the payroll tax credits, up to the maximums provided in the FFCRA, for payments made prior to April 1, 2021. Below we provide a list of questions and answers we received to date following the passage of the Stimulus Bill. We expect the U.S. Department of Labor (“DOL”) to issue additional questions and answers as the Stimulus Bill is implemented, and we will update this Client Alert as these are received.Client Alert

Healthcare Speaker Programs: New OIG Alert

December 11, 2020In a rare Special Fraud Alert issued on November 16, 2020 (the “Alert”), the Office of Inspector General (“OIG”) urged companies who host speaker programs to reassess their programs in light of the “inherent risks” associated with these activities. The Alert reports that, in the last three years, drug and device companies have reported paying nearly $2 billion to health care professionals for speaker-related services.Client Alert

Value-Based Care Advances – CMS Issues New Final Rules for Stark and Anti-Kickback Statutes

December 11, 2020The Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) issued two highly anticipated (and quite extensive) Final Rules to reform the Stark Law and Anti-Kickback Statute (“AKS”) regulations. The Final Rules generally take effect on January 19, 2021. The Final Rules include new safe harbors for the AKS and new exemptions to the Stark Law to allow for greater flexibility. According to the HHS, the goal of updating both laws is to make it easier for providers to engage in care coordination and value-based care programs without running afoul of the statutes. Please note that this client alert could not cover the full extent of the Final Rule changes so please contact your BMD Healthcare attorney with questions.Client Alert

Mandatory Filings Under CFIUS New Rules

December 11, 2020On September 15, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) promulgated a final rule modifying its mandatory declaration requirements for certain foreign investment transactions involving “TID US businesses” (sensitive U.S. businesses dealing in critical technologies, critical infrastructure and sensitive personal data) dealing in “critical technologies” – i.e., U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. The new rule also makes amendments to the definition of the term “substantial interest” (used to determine whether a foreign government has a substantial interest in an entity). The final rule became effective on October 15, 2020.Client Alert

IRS Guidance on Employee Retention Credit

December 11, 2020The Employee Retention Credit created under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Since the adoption of the CARES Act, employers have expressed concern that if one employer acquires another employer that previously received a PPP loan, the acquirer’s entire aggregated group may no longer be eligible to claim the Employee Retention Credit.
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