Could the commissions settlements be thrown out?
The lawsuits may seem like old news, but not everyone has moved on. An appeals court is reviewing objections that have the potential to invalidate the deals.
Key points:
- A brief submitted by law professor Tanya Monestier argues that the plaintiffs in Sitzer/Burnett did not have standing to pursue industry practice changes.
- If the appeals court agrees, the settlement could be tossed out, and "we are back to where we were a year and a half ago."
- Other objections have been filed with the court, which will accept briefs through July 21. It could then schedule a hearing and make a decision next year.
While much of the real estate industry has closed the chapter on commissions litigation, ongoing court battles over the settlements still have the potential to upend the deals.
The U.S. Court of Appeals for the Eighth Circuit is currently reviewing the settlements reached between brokerages and other industry players — led by the National Association of Realtors — and the home sellers in the Sitzer/Burnett case. In recent weeks, briefs were submitted by those appealing the case, including Tanya Monestier, a law professor at the University at Buffalo School of Law.
Monestier filed her brief earlier this month along with several others, including James Mullis, Benny Cheatham, Robert Friedman and Monty March, some of whom are also appealing the Gibson settlements.
Calling out damages, fees and rule changes
Monestier believes the damages were too low and the attorney fees — which totaled one-third of the $1 billion settlement fund — were too high. She previously laid out those concerns in a lengthy objection filed last October, which was ultimately dismissed by the judge overseeing the Sitzer/Burnett and Gibson cases.
In a recent interview with the University at Buffalo School of Law, she also contends that because the plaintiffs were past home sellers, they could sue over inflated commissions previously paid, but they should not be able to "pursue and settle for injunctive relief (what the settlement calls 'practice changes')" since they weren't at imminent risk of future harm.
"Lawsuits and settlements can only resolve actual 'cases or controversies.' They can't purport to change industry rules and then claim that those changes are a benefit to past home sellers. And that is exactly what happened here," Monestier said in the interview.
"If the Eighth Circuit accepts my argument, then they have to invalidate the settlement in its entirety — and we are back to where we were a year and a half ago."
The consequences of starting over
If the settlement were invalidated, industry observer Rob Hahn believes it would lead to significant turmoil within the industry.
"We just spent a year putting new rules into place, entirely new systems in many cases, new rules, changes to forms and millions of man-hours spent on training agents on how to do business under the Settlement," Hahn said on his NotoriousROB Substack. "All of that goes out the window, and uncertainty as to what the new new rules will be after the next Settlement negotiations happen."
Other issues presented to the appeals court
Monestier also alleged that the U.S. District court in Missouri instructed the plaintiffs' counsel to ghostwrite its approval order, as well as issue an "unprecedented order" requiring objectors to appear at the settlement hearing in person.
"When I found out about that, I couldn't believe it. In my view, the basic responsibility of the judge is to consider arguments and rule on them. It should not be outsourcing that responsibility to one side — and certainly not before hearing arguments and without telling all participants what is happening," Monestier said.
What's next
Any of the parties involved in the settlements have until July 21 to file a brief with the appeals court. An oral hearing could then be scheduled, with a decision possibly coming early next year.