The hearing threatens the resolution of the NAR, raising the uncertainty of the industry

After the deal received final approval in late November 2024, several parties, many of whom had previously opposed the decision, filed petitions to appeal Judge Stephen Bough’s decision. The two central complaints filed are from Tanya Monestier, a law professor at the University of Buffalo, and James Mullis, a plaintiff in the Batton consumer commission cases.

Complaints in question

In his complaint, Monestier says the financial aid provided to members of the accommodation class is inadequate. According to his calculations, the approximately 40 million class members are expected to share about $650 million, resulting in a payout of about $16 per person. By comparison, Monestier estimates that the average damage per seller was just over $11,000.

Because of the amount of financial flexibility, Monestier says that the bulk of the settlement phase depends on the benefits it offers, which have come in the form of business reforms. However, he says that the business reforms are ineffective because they do not remove the cooperative compensation, which allows management to continue around the work of the agents, and that there is no real enforcement of the existing business reforms.

Furthermore, he argues that while the residential class consists of former home sellers, business reforms benefit future home sellers. According to Monestier, the plaintiffs admitted this in the first case, and as a constitutional problem, the federal court should not ignore it.

Although Mullis argued for and eventually applied for final approval of the Monestier-like agreement, the issues he has with the settlement are slightly different.

In his complaint, Mullis contends that the release of the settlement agreement is too vague and could be interpreted to settle the defendants that class members who are also homebuyers, including plaintiffs like the Battons, are exempt or barred from pursuing claims on the buyer’s side, even though the buyer’s lawsuits are tried separately. In his petition for review, he seeks to clarify the language so that the indemnities cannot be construed as relieving the Batton homebuyer’s claims.

It’s not over yet

Although very few would like to admit it, these appeals present a very real possibility that the approval of the settlement may be overturned, resulting in the case being sent back to the district court.

“The result of abandoning the NAR Settlement, will be chaos in the industry,” wrote Rob Hahn, an attorney and industry analyst. The NotoriousROB newspaper.

According to Hahn, if the amendment is reinstated, all the work done on implementing business reforms will go out the window and instead the industry will be consumed by the uncertainty of what the “new” rules will be.

In his memoir, Hahn focuses on Monestier’s arguments. If the appeals court agrees with his points, it says any new compensation would have to see a significant increase in monetary damages or business changes would have to be “extremely onerous and appropriate for real estate agents who were ‘overpaid’ under the old system.”

Improbable trading firms and NAR can pay more

If the damages awarded were to rise to just 10% of the $458 billion pool of commissions paid to home sellers, NAR and other major brokerages are expected to pay about $46 billion, an amount Hahn doubts the industry could collectively pay.

Bradley Weber, associate leader Troutman Pepper Locke’practice of dishonesty, agrees with Hahn that the NAR will likely find it challenging to pay the increased fee. As a result, he sees an easy argument for the defendants when pressed on the matter.

“I think their argument is they can’t afford to pay more,” Weber said. “The NAR is a commercial organization and it may mislead them into paying more than what they have agreed to and, in my opinion, the appellate court may be sympathetic to that and give discretion to the district court.”

As for the rest of Monestier’s argument, Weber sees the issue that the solution offers both financial and legal relief in the same category. He noted that a similar ruling was reversed by the Second Circuit to allow the district court to create two separate classes, and he said he could see something similar to this ruling, depending on how the Eighth Circuit views the issue.

Weber also feels that Mullis made some good points in his appeal.

“I think that would be a good argument if I was against settlement,” Weber said.

That said, if the Eighth Circuit agrees that the settlement covers both real estate sellers and real estate buyers, attorneys told HousingWire that anyone who was a buyer and real estate seller during the class settlement, will lose their rights to file a claim as a real estate buyer, which could have a major impact on the size of the potential class in the two Batton cases.

What happens next?

If the appellate court vacates the judgment, it will be sent back to the district court and the parties will have to address the reasons why the appellate court found it insufficient or unfair.

According to Charles Cain, attorney and president of the Alliance Solutionsthe appellate court’s decision will determine what kind of work the parties will have before them if the case is adjourned.

“It could be something as simple as, ‘The court throws out the agreement and sends the parties back to the district court.’ Either there is a lack of a decision or there are detailed instructions for the appellate court to see where it is.”

In the event that a new settlement cannot be reached, the case will be dismissed, but the lawyers do not see that as a possibility.

There is no turning back

However, even if the compensation is reversed, attorneys who spoke to HousingWire do not believe the industry will ever return to sharing cooperative offers in the MLS.

“My gut says they won’t go back because of the problems Department of Justice (DOJ) and the fact that it may still pursue claims under federal antitrust laws. If MLS goes back to the old way of doing things, I think it invites DOJ action,” Weber said.

The attorneys also raised the possibility that the DOJ could file an amicus brief in the Eighth Circuit as it has done in other commission claims and other complaints involving NAR rules, including the NAR rules. REX case over optional non-combined law.

For now, the future of NAR’s settlement and its corporate reforms remains bleak.

“I think there are good arguments for why settlement approval is likely to go too far,” Weber said. “It is not clear whether an appellate court can revisit any of these issues to find a reason to vacate certification and remand the decision to the district court.”

In an emailed statement, an NAR spokesperson wrote that the trade group “will continue to represent the court-mandated commission at future oral hearings and throughout the appeals process.”

“The post-settlement policy changes have empowered consumers to negotiate compensation and promote transparency in the marketplace. Importantly, appeal disputes, by themselves, do not change the policy changes or any part of the settlement approved by the court,” the spokesperson wrote.