MASSACHUSETTS REAL ESTATE COMMISSIONS CASE | INTRODUCTION
In the case of Nosalek v. MLS Pin, lodged in Massachusetts, the MLS PIN, a Realtor®-owned multiple listing service, is a named defendant. Strikingly, the National Association of Realtors (NAR) is conspicuously absent from the list of defendants in this lawsuit. This absence is bewildering, given the fundamental premise of the anti-trust accusations: the supposed rules imposed by the NAR and subsequently enforced by MLS PIN allegedly necessitating the application of above-market fees on sellers. The absence of the NAR, as the originator of these contentious rules, introduces significant questions to the nature and direction of this litigation.
MASSACHUSETTS REAL ESTATE COMMISSIONS CASE | THE UNRAVELING OF CLAIMS | DELUSIONS OF DAMAGES
As with other class-action cases related to real estate commissions, we believe Plaintiff’s calculated damages are based on commission rates, not actual fees. Studies cite that US sellers are subjected to significantly higher fees, estimated at 1.5% of the transaction value based on “rates” in comparable foreign markets.
In our opinion, related to The Burnett case filed in Missouri, we expose fatally flawed attempts to cite rates as an economic yardstick; the study states in the relevant part:
“Burnett’s intent to conflate fees and rates is misleading and deceptive. While the lawsuit attempts to draw parallels between international markets, including Singapore and U.S. brokerage fees, it completely neglects the crucial aspect of average home values in the comparative markets. To illustrate this point, let us consider Singapore and claims that brokerage fees are significantly lower than in the U.S. The average value of a cluster house (townhome) in Singapore is approximately $2,504,215 when converted to U.S. dollars. Based on available data for 2020, Missouri’s average home value was approximately $210,000. A 3% commission in Singapore would yield a $75,126 fee, while a 6% commission in Missouri would result in a $12,600 fee.”
“Even if Realtors increased their rates to match the suspiciously similar average rate of 33% imposed by contingency-based law firms, the average fee is $69,300, which falls short of average selling fees in Singapore.”
MASSACHUSETTS REAL ESTATE COMMISSIONS CASE | PLAINTIFFS’ SETTLEMENT CLASS
The proposed class for this case includes all sellers involved in transactions since 1997, spanning a total of 26 years. By drawing from data regarding the number of sales pertaining to Massachusetts in 2022, which amounted to 65,880, and extrapolating that over the 26-year period, it’s conceivable that the number of transactions involved in this class action could exceed an astounding 1,712,880. When including New Hampshire, and Rhode Island, transactions may total 2,510,352. Plaintiffs voluntarily released claims in New Hampshire and Rhode Island.
MASSACHUSETTS REAL ESTATE COMMISSIONS CASE | PLAINTIFFS’ MEMORANDUM IN SUPPORT OF THEIR MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT AGREEMENT
Per “PLAINTIFFS’ MEMORANDUM IN SUPPORT OF THEIR MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT AGREEMENT, “Plaintiffs have engaged and continue to engage in substantial negotiations with all Defendants, including MLS PIN, concerning discovery, which remains ongoing. MLS PIN, in particular, has produced substantial documentation to date, including but not limited to historical iterations of the rule at issue, MLS PIN ownership interests, form participation agreements for brokers, and granular listing data for all transactions covered by Plaintiffs’ claims. At the same time, the Plaintiffs engaged in intensive and lengthy settlement discussions with MLS PIN. Beginning in September 2022 and through the following nine months, counsel for Plaintiffs and MLS PIN engaged in multiple rounds of phone conferences and correspondence, including exchanging several drafts of the Settlement Agreement and amendments to MLS PIN’s Rules and Regulations.”
“IN NEGOTIATING THE SETTLEMENT, PLAINTIFFS’ PRINCIPAL GOAL WAS TO END THE ALLEGEDLY ANTICOMPETITIVE BUYER-BROKER COMMISSION RULE ALTOGETHER, THEREBY PROTECTING ALL FUTURE HOME SELLERS (INCLUDING SETTLEMENT CLASS MEMBERS WHO MAY SELL THEIR CURRENT HOMES IN THE FUTURE) FROM POTENTIAL DAMAGE FROM SALES TRANSACTIONS.”
SETTLEMENT AGREEMENT | RESPONSE
Could there have been a pivot in the main goal? Earlier, the chief objective was believed to be securing financial redress for sellers involved in transactions since 1997, a sum supposedly amounting to billions in damages.
MASSACHUSETTS REAL ESTATE COMMISSIONS CASE | MONETARY RELIEF TO THE SETTLEMENT CLASS
Plaintiff’s counsel claims: “In addition to the foregoing injunctive relief, MLS PIN has agreed to pay $3,000,000.00 into a settlement fund. The plaintiffs’ Counsel anticipates filing a Fee, Expense, and Litigation Fund Application during the Final Approval process that will seek out of this fund up to $900,000 in attorneys’ fees as well as incurred costs and expenses of up to $200,000 and up to $2,500 to each of the named class representatives (for a total of $7,500) as lead plaintiff awards. In addition, Kroll Settlement Administration LLC (“Kroll”), the settlement administrator proposed by the parties, has estimated that the cost of the proposed Notice Plan (discussed below) will be approximately $250,000, which MLS PIN will advance and then be permitted to credit against and deduct from the total funds payable to Plaintiffs’ Counsel pursuant to any order of the Court concerning Plaintiffs’ Counsel’s Fee, Expense and Litigation Fund Application.”
If we interpret this correctly, the settlement class or sellers gain nothing from this agreement other than full compensation for their attorneys for past and future services. This represents an unusual departure from the standard contingency-based legal representation, where attorneys also bear some of the financial risks involved in litigation. It appears the attorneys are pursuing monetary relief for themselves.
JUSTIFICATION FOR SETTLEMENT WITH MLS PIN
“Furthermore, concerning the financial aspect of the Settlement, the Plaintiffs emphasize that, unlike the remaining Broker Defendants, MLS PIN does not directly profit from the disputed conduct…”
We concur that MLS PIN, much like The National Association of Realtors, derives its revenues from membership fees and does not directly reap profits from the contested conduct.
SIMULATED SETTLEMENT DISTRIBUTION
If we hypothetically distributed the settlement sum of $3,000,000 amongst the settlement class—consisting of the estimated number of transactions across Massachusetts, New Hampshire, and Rhode Island over the last 26 years, estimated as high as 2,510,352 closings—the proceeds would amount to a meager estimated $1.19 per transaction. This further underscores the insignificance of the proposed settlement and calls into question the veracity and underlying motives behind these class-action suits.
THE CY PRES SCAM
Cy pres awards represent a legal mechanism in class action settlements where, due to the impracticality or non-cost-effectiveness of distributing the settlement funds to all class members, the remaining money is directed towards a non-profit organization. This organization is typically one whose work indirectly benefits the class members and aligns with the lawsuit’s objectives. That being said, it is alarming to consider that Stephen Brobeck from The Consumer Federation of America could potentially benefit from cy pres awards, given his involvement in producing arguably misleading studies. These studies, which Brobeck authored, form the bedrock of all real estate commission-related lawsuits. It is deeply concerning that someone who played a pivotal role in shaping a narrative that might have potentially distorted the true picture of the real estate industry stands to gain from the ensuing legal proceedings.
The allocation of settlement proceeds to approximately 2.5 million sellers who have transacted over the last 26 years is both unfeasible and cost-inefficient. As a result, future settlements like this often end up being bestowed upon organizations like The Consumer Federation of America.
In our interpretation, the offer from the Plaintiffs’ counsel to settle for a token amount likely reflects a recognition of the case’s weak merits, serving as an effort to guarantee their compensation. Additionally, positioning the case’s main objective as the protection of FUTURE SELLERS, rather than seeking monetary restitution for previously “harmed” sellers, completely undermines attempts to secure substantial damages and nullifies claims of recovering treble damages.
The lion’s share of allegations present in real estate commission lawsuits appears to be fundamentally flawed. However, this seems irrelevant, as the perceived goal is to secure class-action status and settle for an amount within the insurance coverage limits of the defendants.
This is, quite frankly, disgraceful.