While much remains unknown in the wake of the verdict in the Sitzer/Burnett commission lawsuit case, the one certainty is that all three defendants — National Association of Realtors, HomeServices of America and Keller Williams — all plan to appeal.
“This matter is not close to being final. We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition,” Tracy Kasper, NAR’s president, wrote in an email to the trade group’s members Tuesday afternoon. “We remain optimistic we will ultimately prevail.”
But appealing a civil lawsuit isn’t as simple as it sounds.
In order to appeal a case, Federal Rule Appellate Procedure requires the appellant to file a bond or provide other security to ensure payment of the award damaged on appeal.
In the Sitzer/Burnett trial verdict, the jury awarded the plaintiffs damages of nearly $1.8 billion, which Judge Stephen Bough has the option to triple in his final ruling, meaning that the defendants might be on the hook for more than $5 billion.
According to Kasper’s email to NAR members, the trade group does have the funds to post bond, but industry analyst Rob Hahn isn’t so sure. In his Oct. 31 edition of his email newsletter, NotoriousROB, Hahn took a deep dive into the defendants’ financials.
In 2021, according to NAR’s Form 990, it had $112 million in cash and cash equivalents on hand, as well as $113 million in real estate and $333 million in publicly traded securities. In all, this adds up to only $558 million.
Even with assets from all of the commission lawsuit’s defendants, including RE/MAX and Anywhere, who settled in September, Hahn estimates the defendants will come in at around $2 billion in total assets, well short of the potential $5 billion bond needed.
Hahn noted that sometimes a bond surety company will approve a bond with less than 100% collateral, but he was skeptical that any company would put itself on the line for that high of a bond.
In addition to posting bond, the defendants must also consider that an appeal is not a retrial. According to the American Bar Association, an appeals court doesn’t usually consider new witnesses or new evidence, and the appeal is typically based on arguments that there were errors in the trial’s procedure or in how the law was interpreted or applied.
If the appeal is picked up by the appellate court, which in the case of Sitzer/Burnett would be the Eighth Circuit of the U.S. Court of Appeals, all parties would have to file briefs and then return briefs.
“The court could and probably would, in a case of this magnitude, set it for oral argument based on the briefings,” said Paul Rogers, a professor of law who specializes in antitrust at Southern Methodist University’s Dedman School of Law.
According to Rogers, the panel of judges overseeing the appeal could then affirm, reverse or partially affirm the lower court’s ruling.
“It is not uncommon for the court of appeals to reverse rulings,” Rogers said. “It does happen fairly frequently, but some appellate courts are more or less friendly than others.”
However, getting the jury’s verdict reversed or even getting the case remanded and sent back down to the district court for a new trial, will be a tall order.
In the commission lawsuit, the plaintiffs claim that NAR and the brokerage defendants conspired to fix prices, which is a per se violation of the Sherman Antitrust Act, meaning that the act is inherently illegal, and no extrinsic proof or other defenses negate its illegality.
In order to reverse the jury’s verdict, the defendants would have to argue that the “rule of reason” should have been applied to NAR’s Clear Cooperation Policy instead of per se.
“If it isn’t per se then you are in rule of reason territory,” Eleanor Fox, a law professor at New York University, who specializes in antitrust, said. “In rule of reason territory, sometimes it looks like it is a price-fixing agreement, but you’re not sure and so you would say that it is presumptively illegal. Then the defendants get the chance to prove that it wasn’t anti-competitive and that these steps or certain rules did not lead to higher commissions.”
Fox noted that the defendants would then have to prove that the rule did not lead to higher commissions, or that the higher commissions were necessary to provide more services to clients.
In the appeal, the defendants may also try to get the case remanded and get a new trial. Hahn believes the best case for the defendants to get a new trial is the Tom Ferry Podcast video, which HomeServices claimed was grounds for a mistrial.
If the appeals court rules that allowing the video into the commission lawsuit trial influenced the jury, the case would be remanded, Fox said.
While this may be the outcome the defendants want, Hahn is not optimistic.
“What exactly is the hope that a new jury would see things differently? It isn’t as if [Michael] Ketchmark [the lead attorney for the plaintiffs] goes away; he’s not going to seat a jury of five Realtors, three MLS executives and one renter on the jury,” Hahn wrote in his newsletter.
He continued: “He’ll seat the same kind of jury he did this time around and probably get the same result on the same timeframe. And he’ll just make sure that the defendants know he’ll introduce the Allan Dalton video in evidence.”
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