Federal courts hand HomeServices a win (and a loss) in Sitzer | Burnett
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Federal courts handed setbacks to both sides in the bombshell commission case known as Sitzer | Burnett on Monday. The highest court in the land will not be weighing in on the case at the request of defendant HomeServices of America and the plaintiffs won’t be able to lay $4.7 billion in damages at HomeServices’ feet — at least not yet.
Regarding the former, the U.S. Supreme Court denied HomeServices’ petition for a “writ of certiorari,” asking the court to review an August ruling by the U.S. Court of Appeals for the Eighth Circuit affirming a lower district court ruling that the real estate franchisor can’t enforce arbitration agreements signed by seller clients of its franchisees because the contracts the sellers signed were not directly with HomeServices.
Chris Kelly (Credit: Ebby Halliday)
“While we firmly believed the arbitration issue we raised through our petition to the Supreme Court was an important matter, given the conflicting interpretation of the Federal Arbitration Act at the circuit court level, we certainly understood the odds and the very limited number of cases the Supreme Court selects each session,” Chris Kelly, executive vice president for HomeServices, told Inman in a statement.
“It was just one of many paths we believed were important to pursue.”
The Supreme Court denied the petition without comment on Monday, letting that lower court ruling stand. The ruling cleared the way for HomeServices and two of its subsidiaries, BHH Affiliates and HSF Affiliates, to be tried as defendants in a three-week trial in October — a trial HomeServices says should never have happened because the homeseller plaintiffs signed arbitration agreements waiving their right to pursue class action litigation.
The Supreme Court’s denial cuts off that avenue for undoing the trial’s historic jury verdict, which found that Keller Williams, RE/MAX, Anywhere, the National Association of Realtors, HomeServices, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates paid by homesellers, in violation of federal antitrust law. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners. If that award stands, it would be tripled by law to $5.36 billion.
Michael Ketchmark, lead plaintiffs’ counsel in the Sitzer | Burnett case, told Inman the Supreme Court’s decision was “the last nail in that coffin” for HomeServices.
“HomeServices has been desperate to try to avoid accountability in front of a jury,” Ketchmark said. “The United States Supreme Court has now made it clear its arguments lack merit.
Michael Ketchmark
“HomeServices now finds itself on an isolated island, defending a rule that the rest of the industry has abandoned. The time has come for the company to step up and protect its brokers.”
All other defendants in the Sitzer | Burnett case except for the HomeServices defendants have reached proposed settlements with the plaintiffs. As part of NAR’s proposed settlement, the 1.5 million-member trade group agreed to eliminate a NAR rule at the center of the case.
Known as the cooperative compensation rule or the Participation Rule, it requires listing brokers to make blanket, unilateral offers of compensation to buyer brokers in order to submit a listing in a Realtor-affiliated multiple listing service. If the proposed settlement is approved, NAR would implement rule changes in July.
On the other hand, the plaintiffs got their most recent petition in the case denied on Monday as well. Judge Stephen R. Bough of the U.S. District Court for the Western District of Missouri declined to order HomeServices to pay the vast majority of the damages awarded at the trial — at least for now.
On March 18, attorneys for the Sitzer | Burnett plaintiffs filed a motion for entry of judgment in which they formally asked the court to treble the Sitzer | Burnett damages award and to hold the HomeServices defendants liable for the full amount after subtracting the amount from the other settlements: $4,729,432,616. That would be 88 percent of the trebled award.
The plaintiffs also sought an award of attorneys’ fees and costs of the suit and interest on the damages amount, starting the day after the verdict, Nov. 1, at the rate of 5.4 percent per year, compounded annually.
But HomeServices hit back against the motion, telling the court earlier this month that it was too early in the litigation for such an order because the court had not yet approved plaintiffs’ settlements with the other defendants.
In his April 15 order, Bough agreed with HomeServices, noting that there is not yet a “final judgment pertaining to the HomeServices Defendants” and that the plaintiffs “do not assert a danger or hardship other than the settlement monies will not be available to Plaintiffs for a few months more.”
Judge Stephen R. Bough | Photo courtesy of the University of Kansas School of Law
“Given that this Court should seek to prevent piecemeal appeals and any appeal related to the settlements would relate to the judgment against the HomeServices Defendants, the Court finds that Plaintiffs have failed to show that certification of the judgment against the HomeServices Defendants is warranted at this time,” Bough added.
He denied the plaintiffs’ motion without prejudice, meaning that the plaintiffs can resubmit their motion at a later date to have it reconsidered.
Bough’s ruling “was expected,” Ketchmark said.
“The trial court has made it clear that it will revisit the tripling of damages once the other settlements are finalized,” he added. “This is not surprising.”
HomeServices is “pleased by the court’s decision that the entry of judgment was premature at this stage,” Kelly said.
“There are several outstanding issues yet to be resolved, including our post-trial motion for a judgment as a matter of law and our motion for a new trial.
“Additionally, the court acknowledged that the pending settlements have not received final approval, and objections to these settlements must still be addressed. These factors significantly influence any final judgment, and it is essential that they are resolved before any judgment is entered.”
Read Bough’s order denying the plaintiffs’ motion: