Real Estate

Berkshire Hathaway Energy Added To Growing Gibson Commission Suit

The moment has arrived — the moment to take charge. This summer, at Inman Connect Las Vegas, July 30-Aug 1, 2024, experience the complete reinvention of the most important event in real estate. Join your peers and the industry’s best as we shape the future — together. Learn more.

Plaintiffs in the first antitrust commission suit filed after a jury verdict in the Sitzer | Burnett case have expanded the scope of their complaint to include the parent company of HomeServices of America, Berkshire Hathaway Energy.

Attorneys for homesellers Don Gibson, Lauren Criss and John Meiners filed an amended complaint on March 4 naming Berkshire Hathaway Energy, a holding company that owns HomeServices and is a subsidiary of Warren Buffett’s Berkshire Hathaway, as a defendant in the case. The plaintiffs’ original complaint did not name HomeServices as a defendant.

Both complaints challenge a National Association of Realtors rule requiring listing brokers to offer compensation to buyer brokers in order to submit a listing to a multiple listing service, which the plaintiffs allege violates the Sherman Antitrust Act.

“Berkshire Hathaway Energy has engaged in price fixing by using our nation’s MLS system as a vehicle to fix, increase, raise, and stabilize the number of commissions that a homeowner has to pay to sell their home,” the amended complaint says.

On Oct. 31, Sitzer | Burnett jurors found that NAR, Keller Williams, RE/MAX, Anywhere, HomeServices and two of its subsidiaries, BHH Affiliates and HSF Affiliates, conspired to enforce the NAR rule, known variously as the cooperative compensation rule or the Participation Rule, and thereby inflate broker commission rates paid by homesellers. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners. If that award stands, it would be trebled by law to more than $5.3 billion.

The Gibson case was filed within minutes of that verdict. NAR, Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate and Douglas Elliman are also defendants in the case.

Michael Ketchmark

“Our continued investigation into this makes it clear that Berkshire Hathaway Energy is involved in this at the highest levels, and it’s now our intent to bring them in and hold them accountable for what happened on their watch,” lead plaintiffs’ counsel Michael Ketchmark of Ketchmark & McCreight told Inman in a phone interview.

“They’ve long touted this concept that they call the ‘Halo Effect,’ where, when they attach the name Berkshire Hathaway or Warren Buffett to a company or industry, people trust him and believe that and that’s exactly what they did with HomeServices in order to encourage homesellers in the United States to use their company.

“That was used as a way for furthering this conspiracy. We think it’s important that this is brought to light and that they’re held accountable for what they’ve done.”

HomeServices declined to comment for this story. Ketchmark is also lead counsel for the Sitzer | Burnett plaintiffs.

“We’re opening a new line of attack in this litigation by going farther up the chain,” Ketchmark said. “We’ve held HomeServices liable [in Sitzer | Burnett], as well as the subsidiaries for HomeServices. In this case, we’re going to show that you can go higher up the ladder than we originally suspected.”

Connections between BHE and HomeServices

The amended complaint alleges numerous ties between Berkshire Hathaway Energy and HomeServices, including shared leaders, mutual strategy meetings and combined books.

“Berkshire Hathaway Energy has played an active role in controlling the day-to-day operation and oversight of HomeServices and Berkshire Hathaway HomeServices,” the complaint says.

“Mr. [Greg] Abel, in his role as CEO and chairman of Berkshire Hathaway Energy and vice-president and board member of Berkshire Hathaway, has overseen and controlled the actions of Gino Blefari, the president and CEO of HomeServices of America.”

The complaint alleges BHE considers itself the joint employer of HomeServices employees, cites HomeServices workers as its own employees in public filings, provides millions of dollars worth of administrative services to HomeServices, and that the two companies “intermingle their expenses and profits.”

“Berkshire Hathaway considers Berkshire Hathaway Energy and HomeServices earnings as its own,” the complaint says. “Berkshire Hathaway also guarantees credit facilities for Berkshire Hathaway Energy and HomeServices.

“Thus, the finances of all three entities are intermingled and they do not observe corporate formalities when it comes to profits, names, brands, control or otherwise.”

The complaint notes that a BHE brochure says the company took in, through HomeServices, money from 305,229 real estate transactions adding up to a total volume of $168 billion in sales in 2023, of which an estimated $4.2 billion “overpayment” in commissions was the result of the alleged conspiracy.

“Since 2012, Berkshire Hathaway Energy has taken the ill-gotten financial gains from this conspiracy and has actively pushed to increase the size and scope of the plan,” the complaint says.

By snapping up HomeServices’ profits, “Berkshire Hathaway Energy has intentionally undercapitalized HomeServices,” the complaint adds. “Rather than ensure that HomeServices can return its ill-gotten home equity and/or pay the Burnett judgment, it accepts the profits of the conspiracy rather than leave the profits at the HomeServices level.”

Asked whether his firm decided to pursue BHE for its deeper pocket, Ketchmark said it’s important to “follow the money” in litigation.

“Where the money flowed from this conspiracy was straight into the pocketbooks of Berkshire Hathaway Energy,” Ketchmark said.”I found that if you’re going to try to bring about change in corporate America, you have to hit them in the pocketbook and that’s where this case is aimed.”

Connections between BHE, HomeServices and NAR

According to the complaint, BHE created the Code of Business Conduct that HomeServices and its personnel are required to follow, which encourages participation in trade associations, including NAR.

“HomeServices followed Berkshire Hathaway Energy’s directions to participate in trade associations through its executives’, employees’, and agents’ participation in NAR,” the complaint says.

The complaint alleges BHE requires its franchisees and agents to comply with NAR rules and regulations, including the aforementioned cooperative compensation rule, despite knowing about other lawsuits filed challenging the rule and did not direct HomeServices and its brokerage subsidiaries to stop following the rule in order to continue “to benefit from those activities through its receipt of cartel profits.”

“For example, the Real Living Franchise Disclosure Document makes clear that MLS membership and access is required for franchisees, and the agreement requires the franchisee to provide Real Living with access to the franchisee’s MLS data,” the complaint says.

“A Long & Foster Policy manual states that sales associates must agree to adhere to NAR’s Code of Ethics and Standards of Practice, and incorporates these NAR rules into the policy manual.

“A Berkshire Hathaway HomeServices Texas Realty Policy and Procedures Manual states that the company ‘support[s] the Realtor Code of Ethics [and] the Multiple Listing Rules,’ requires all associates to belong to a local Realtor association and MLS, and states that the company’s commission expectation will be calculated based on 3 [percent] for the listing broker and 3 [percent] on the selling side; a Berkshire Hathaway HomeServices Northwest Real Estate Policy Manual also requires associates to agree to maintain membership in the local Realtor association and MLS.”

The complaint also highlights ties between HomeServices and NAR, alleging that HomeServices executives “pushed for and succeeded” in getting the trade group to adopt a rule whose stated aim is to curb pocket listings, called the Clear Cooperation Policy.

“Berkshire Hathaway Energy leadership has explained its role as follows: ‘As an industry leader, we have a responsibility to actively participate in shaping our industry and its current and future business model. The HomeServices executive leadership and CEOs of our operating companies drive these important discussions as leaders within the National Association of Realtors … and at the regional and local levels of the MLS organizations,’” the complaint says.

The complaint points to an NAR advisory group called Real Estate Services (RES), which is made up of top representatives from large brokerage firms, at least 24 of whom also serve on NAR’s Executive Committee and board of directors. RES’s 2019 cohort included leaders from firms that are defendants in this case, such as:

  • Dottie Herman (CEO, Douglas Elliman)
  • Jim Imhoff (Chairman, First Weber, a HomeServices subsidiary)
  • Jeff Barnett (Executive Vice President, Compass)
  • Robert Reffkin (Founder and CEO, Compass)
  • Gino Blefari (CEO, HomeServices)
  • Ron Peltier (Executive Chairman, HomeServices of America, Inc.)
  • Jeffrey S. Detwiler (President and CEO, Long & Foster Companies, a HomeServices subsidiary)
  • Joan Docktor (President, Berkshire Hathaway HomeServices Fox & Roach, a HomeServices subsidiary)
  • Thomas Hosack (President and CEO, Berkshire Hathaway HomeServices The Preferred Realty, a franchise of BHH Affiliates)
  • Chris Kelly (President and CEO, Ebby Halliday Companies, a HomeServices subsidiary)
  • Rei Mesa (President and CEO, Berkshire Hathaway HomeServices Florida Realty, a HomeServices subsidiary)
  • Glenn Sanford (Founder and CEO, eXp World Holdings)
  • Denise D. Smith (President, Real Estate Services Group, Weichert Companies)

Like Sitzer | Burnett, the Gibson suit was filed in the U.S. District Court for the Western District of Missouri. But, in terms of scope, Gibson promises to be much bigger than either Sitzer | Burnett or another, bigger, similar suit known as Moehrl, neither of which aim to represent sellers in the entire country.

By contrast, the Gibson suit seeks class-action status on behalf of “all persons who listed properties on a Multiple Listing Service in the United States using a listing agent or broker affiliated with” the corporate defendants and who paid a buyer broker commission from Oct. 31, 2019 until the present.

While Howard Hanna was named as a defendant in the original Gibson complaint, the amended complaint drops the brokerage from the case.

According to Ketchmark, Howard Hanna did not settle with the Gibson plaintiffs. Rather, because his firm and attorneys from the Moehrl case are working together and the Moehrl attorneys have named Howard Hanna as a defendant in another commission case known as Umpa, “we did not want them in both,” he said.

Editor’s note: This story has been updated with details from the amended complaint and additional comments from the plaintiffs’ attorney Michael Ketchmark.

Read the amended complaint:

Email Andrea V. Brambila.

Like me on Facebook | Follow me on Twitter

What's your reaction?

In Love
Not Sure

You may also like

More in:Real Estate

Leave a reply

Your email address will not be published. Required fields are marked *