Details Emerge from the Anywhere and RE/MAX Settlements
Going beyond the headlines
OCT 9, 2023
We have known for a while now that Realogy/Anywhere and RE/MAX have reached a settlement with the plaintiffs in both Burnett and Moehrl. I wrote about that initially after the RE/MAX settlement.
In that post, I said that I didn’t want to write about the settlements until we saw the actual settlement agreements, but that given the news, I had to comment briefly. Well, we now have the actual settlement agreements. At least, the RE/MAX settlement agreement — and I assume the Anywhere settlement is more or less identical.
The news is filled with stories about the details of the settlement, but none of them reveal anything new, because they’re simply rewrites of press releases.
We go beyond that here, so let’s do just that. Remember, I read these things so you don’t have to, but I am not your lawyer; please consult your own attorney for actual legal advice and valid legal opinions.
The Settlement Agreements
First of all, you can find these (probably) online somewhere but for the sake of ease, let’s embed them here:
RE/MAX Settlement Agreement
1.45MB ∙ PDF file
I do not have a copy of the Anywhere Settlement Agreement, but I assume it’s more or less identical to the RE/MAX Settlement Agreement.
The key provisions, you have likely already seen in media reports. Let me copy and paste that from Anywhere’s press release, as I think it’s a bit easier to read:
Third, Anywhere has agreed to several other practice changes:
Anywhere will not require company owned brokerages, franchisees, or affiliated agents to belong to the National Association of REALTORS® (NAR) or follow the NAR Code of Ethics or MLS Handbook.
Anywhere will require company owned brokerages and their agents to clearly disclose to clients that commissions are not set by law and are fully negotiable.
Anywhere will eliminate any minimum client commission requirements that company owned brokerages may have.
Finally, Anywhere has agreed to develop training materials for company owned brokerages, franchisees, and affiliated agents that support all the practice changes outlined in the injunctive relief.
Please do read RE/MAX’s own press releases (and its public filing) but I can say the two are more or less identical.
There is one interesting difference — RE/MAX includes this in the public filing and notice to its brokers and agents:
5. RE/MAX, LLC will remind you of your professional obligation to show and market properties regardless of what the
offer of cooperative compensation might be.
This is new, but… it isn’t particularly surprising on reflection. RE/MAX will “remind you” not to steer, because that’s unethical (not to mention illegal). I imagine that the plaintiff lawyers might have asked that RE/MAX and Anywhere require their agents not to steer — as in, “if you are caught steering, we will terminate you” — but we all know that’s not realistic in the way that brokerage business is structured today.
Since that “remind you” is in the actual Settlement Agreement for RE/MAX, one wonders if the Anywhere Settlement Agreement lacks such a term which is why the Anywhere press release is silent on it.
In any event, none of this is surprising; I thought the settlement would include changes to no longer requiring NAR membership (or compliance with the Code of Ethics) and changes to training. We got those. What else is in the details of the Agreement?
Let’s start with the easy to understand one.
In the RE/MAX Agreement (and therefore, I assume in the Anywhere Agreement), we find this under ¶ 55(iv):
iv. provide up to three (3) current officers or employees of RE/MAX, to be identified and agreed to via a good faith meet and
confer process, to participate as witnesses in the Moehrl action at Moehrl Plaintiffs’ determination, and provide access via
counsel to those witnesses prior to trial testimony for up to two (2) hours.
RE/MAX also agrees to other kinds of cooperation with the Plaintiffs to help them with their case against other defendants.
I kind of thought there would be such a term in the Settlement Agreement, based on similar terms in the Nosalek settlement with MLS PIN. It is now confirmed.
I found it interesting that there was not a similar cooperation requirement in the Burnett case. Not sure why that is.
I assume the same clause exists with Anywhere, which means that should Moehrl actually get to trial, we’ll see as many as six senior executives from RE/MAX and Anywhere taking the stand on behalf of the Plaintiffs.
If you think that won’t have an impact on the jury… I got news for you.
A huge deal in the Settlement Agreement, and one that bears some thinking, is this long paragraph (which I can’t copy and paste, so must type in manually):
“Settlement Class” means the class of persons that will be certified by the Court for settlement purposes only, namely, all
persons who sold a home that was listed on a multiple listing service anywhere in the United States where a commission was
paid to any brokerage in connection with the sale of the home in the following date ranges:
a. Moehrl MLSs: March 6, 2015 to date of notice;
b. Burnett MLSs: April 29, 2014 to date of notice;
c. MLS PIN: December 17, 2016 to date of notice;
d. All other MLSs: four year prior to (i) the date a new or amended complaint (if any) is filed in the Actions reflecting any
MLSs aside from the Moehrl MLSs, Burnett MLSs, and MLS PIN or (ii) the date of notice, whichever is earlier, up to the
date of notice.
This is, to say the least, huge.
If the court approves such a Settlement Class, then RE/MAX will have paid $55 million total to get out from under what is potentially hundreds of billions in liability. That $55 million covers not just Burnett and Moehrl but also Nosalek and all other MLSs. Again, I assume the same terms exist for Anywhere, but for $83.5 million instead.
Holy crap that’s cheap. It’s beyond cheap. It’s potentially unconscionable.
The Settlement Agreement talks about a “Plan of Allocation” that the plaintiff lawyers would file with the Courts; such a plan has not been filed, as far as I know, and there are no details available.
But let’s do some rough math here. For Moehrl, we’re talking 2015 to “date of notice” — which is to say, basically, 2023. Call it 8 years, 9 years for Burnett and 7 years for Nosalek — so let’s go with 8. Let’s say that’s 40% of the country. And 4 years for everybody else. With ~5.5 million homes sold per year on average, that’s 13.2 million sellers in 60% of the country, and say 17.6 million in the Moehrl/Burnett/Nosalek MLSs. 30 million people who sold homes using an MLS and paying a commission.
To date, $138.5 million has been the settlement amount. Say the lawyers take 30% for their troubles, leaving $97 million. Divided between 30 million home sellers, that comes to $3.23 per seller.
Obviously, the plaintiff lawyers here think they can get others to pony up more money into the Settlement Fund before it is distributed. But once they’ve set the precedent for Anywhere and RE/MAX — including all of their franchisees — at such a low price, I wonder how much they can really squeeze out of everyone else.
Say it gets to the $2 billion number that Ed Zorn has been talking about for a while now, then take away 30% for lawyers. Distributed among 30 million home sellers, that’s a paltry $46 per person.
I’m going to take another look in a future post on Settlement Classes, as there are some procedural hurdles the lawyers will have to clear to have the court approve them. But one factor that the court is supposed to look at is whether “the relief provided for the class is adequate.”
Whether the court would approve a settlement that gives the lawyers a payday in the tens of millions of dollars, while providing $3 and change to the affected home sellers is, at this point, an open question.
Whether potential plaintiffs would opt-out of the Settlement Class en masse, because getting not enough money for a tank of gas after being told that they overpaid commissions by tens of thousands of dollars puts a weird taste in their mouths, remains to be seen.
“All Other MLSs”
Also interesting is the specific mention of “all other MLSs” with that 4 year statute of limitations from filing either a new complaint, or an amended complaint.
But the entire sentence actually reads: “All persons who sold a home that was listed on any MLSs aside from the Moehrl MLSs, Burnett MLSs, and MLS PIN where a commission was paid to any brokerage in connection with the sale of the home four year prior to (i) the date a new or amended complaint (if any) is filed in the Actions reflecting or (ii) the date of notice, whichever is earlier, up to the date of notice.”
The clear implication is that the lawyers in Burnett and Moehrl plan to file new or amended complaints. Or send notice to sellers in other jurisdictions. That phrase “date of notice” is undefined so I assume it means the date of notice of the Settlement, because “the timing of any request to disseminate notice to the Settlement Class will be at the discretion of co-Lead Counsel.”
The proper way to read this, I suppose, is that RE/MAX and Anywhere are completely insulated from any lawsuits by any home seller in any MLS. The other way to read this is what I have long maintained: that no one is safe absent a settlement. Either via copycat lawsuits (if the other lawyers are quick enough) or these lawyers themselves will be bringing you to the table to pay up.
No More NAR
The big and foreseen concession is that Anywhere and RE/MAX will no longer require its franchisees and agents to join NAR or to comply with the Code of Ethics.
As I noted in the post about Redfin leaving NAR, that Anywhere and RE/MAX no longer require NAR membership or compliance with the Code of Ethics is largely symbolic. But symbolism can be important.
Let me remind you from that post that many (most?) REALTOR-MLSs require REALTOR membership in order to access the MLS. RE/MAX’s position going forward will be, “Hey, whether you choose to join NAR to get access to the MLS or not is between you and NAR” while knowing that most of them have to join to get access to the MLS.
But in that post, I pointed out that once these settlements make clear that the four largest real estate companies in the industry will no longer require NAR membership, we’ll be “getting to something approaching critical mass where real change can happen.”
There is additional important symbolism after critical mass is reached as well.
The REALTOR Brand Without the Biggest Mainline Brands
The whole brand identity of REALTOR, of NAR, has always been the idea that real estate licensees are unethical lying scumbags, while REALTOR members with the Code of Ethics are shining examples of ethical professionalism.
That plays if and only if a tiny minority of practicing real estate agents are not REALTOR members, and most of them in low-cost operations. NAR could always try to position Redfin as one of those low-cost discount operators.
It’s quite a different story to position Coldwell Banker and Sotheby’s as one of those low-cost low-ethics discount operators. These are flag bearers of the industry. Coldwell Banker predates NAR itself, having been founded in 1906 after the San Francisco fire. RE/MAX and Keller Williams and HomeServices of America represent not some odd tech-based discount model, but the heart and soul of traditional full-service real estate. It has long been pointed out by industry insiders — yours truly included — that a problem with the Code of Ethics is that it has not been updated as state laws have incorporate basically all of the ethical provisions of the Code. Today, the Code of Ethics does not require any more from an agent than does the laws and regulations of real estate and agency.
So what does the REALTOR brand mean when some of the most stalwart, most ethical, most professional brands in the industry no longer embrace it?
Finally… Guess Who’s Not in the Settlement Class?
Since I just wrote about this, I won’t belabor the point, but… I do need to point out the obvious: the United States is not a party to the Settlement.
I do not believe the DOJ would intervene in these settlements, because they’re only about money and not about the compensation rules, but it is relevant that the DOJ is not a party to these Settlements at all.
While the Settlements are explicit in not admitting any guilt or liability, they’re going to look like what they’re going to look like to a future jury. The DOJ is free to bring antitrust lawsuits against NAR as well as against the Corporate Defendants and impose criminal fines up to $100 million (or more).
Again, I do not today believe that the DOJ has anything against Anywhere or RE/MAX. But these settlements do provide the DOJ with some leverage should these companies refuse to cooperate with the DOJ against NAR.
“Be a shame if something were to happen to that beautiful super-cheap settlement you reached there….”
Not the End, But the Start
Let me leave off there, because I do think this is not the end by the beginning. Sure, it might be the end of these lawsuits and the incredible liabilities they bring for RE/MAX and Anywhere. But it is the start of something new, something different, something we as an industry have never seen before.
Future posts will start to explore some of those elements in speculative fashion. For example, I see real shifts in competitive dynamics based on who settled early vs. who will settle late. But as always, we will be informed by what is known. New facts demand new conclusions.
In ten days from today, the trial begins in Burnett v. NAR. These settlements are but the end of the beginning. We move into a new chapter, and new developments will be coming fast and heavy over the next several weeks and months.
I suspect the next chapter will be all confusion. Twists and turns. The expected and the unexpected. Stay tuned.