Real Estate

‘Not Warranted’: DOJ Pushes Back Against NAR Rehearing Request

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A rehearing of the U.S. Department of Justice‘s appeal to reopen its investigation into the National Association of Realtors is “not warranted,” the federal agency told an appeals court Monday.

In April 2024, the U.S. Court of Appeals for the District of Columbia ruled that the DOJ could reopen an investigation into NAR’s rules, including a controversial commission rule at issue in multiple antitrust lawsuits against the trade group.

On May 20, NAR petitioned for a rehearing “en banc,” meaning before all judges of the appeals court, not just the three who initially heard the appeal. On June 17, the DOJ responded.

“The panel decision is fact-bound and ‘narrow,’ correctly relying on the plain language of the three-sentence letter,” the DOJ’s response filing reads.

“The Petition does not identify any errors of law or fact meriting panel rehearing and falls far short of meeting the ‘demandingly high’ standards warranting rehearing en banc.”

The three-sentence letter refers to a document sent by the DOJ to NAR in November 2020, at NAR’s request, confirming that the DOJ “has closed” its investigation into the trade organization’s rules. The letter’s language suggested a backward-looking statement, while NAR had sought out future assurances, which the DOJ did not give, the agency said in its filing.

While NAR’s petition contends that the DOJ should be held to its alleged promise to close its investigation, the DOJ disagreed, noting that NAR itself suggested the backward-looking “has closed” language and that the DOJ did not immediately reopen the probe.

“[T]here was no false comfort here,” the DOJ’s response reads.

“Nor did the Division reopen the investigation ‘seconds later,’ but rather eight months later after re-evaluating the facts and the continuing anticompetitive effects of NAR’s rules on the real-estate industry.”

If the appeals court denies NAR’s petition for en banc review, the case returns to the district court. NAR’s petition specifically asked the district court to either set aside a civil investigative demand (CID) — a type of administrative subpoena — from the DOJ or modify it. Because the district court originally ruled on the former request and not the latter, the appeals court did not opine on the latter request. Therefore, NAR may attempt to have the district court modify the demand before the trade group is required to respond to it.

In November 2020, the DOJ and NAR agreed to a settlement following its investigation into NAR rules, which required NAR to increase industry transparency in relation to broker commissions and to stop claiming that buyer broker services are free of charge.

In July 2021, the DOJ withdrew from the settlement (also known as a “consent decree”), stating that the agreed-upon terms prevented regulators from continuing to investigate other NAR policies that they felt could harm homebuyers and sellers.

“[T]he Division decided that it was necessary to reopen its investigation into several NAR rules and practices—including the four rules in the withdrawn consent decree, the Participation Rule, and the Clear Cooperation Policy — in light of evidence of their continuing threat of anticompetitive effects in the residential real-estate market,” DOJ’s response filing reads.

Days later, the agency sent NAR another CID seeking new information on the trade group’s rules, including:

  • The Participation Rule, which requires listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing into a Realtor-affiliated multiple listing service.
  • The Clear Cooperation Policy, which requires listing brokers to submit a listing to their Realtor-affiliated MLS within one business day of marketing a property to the public.

Then in September 2021, NAR filed a petition for the DOJ to either modify or pause its investigation into NAR.

In January 2023, Judge Timothy Kelly of the U.S. District Court for the District of Columbia ruled in favor of NAR, stating that the earlier settlement terms were still valid. Later that spring, the DOJ appealed the ruling and the three-judge panel heard oral arguments from NAR and the DOJ in December 2023. In April 2024, the Court of Appeals reversed the decision of the district court, allowing the DOJ to continue its investigation.

NAR filed its rehearing petition in May 2024, stating that the court’s decision contained “far-reaching and exceptionally important” errors.

The DOJ’s response to that petition also states that the petition does not claim the panel’s decision “conflicts with any other court of appeals decision addressing similar facts and circumstances,” contrary to a point NAR made in its petition.

The petition stated, “The divided panel’s decision in this significant government-contract interpretation case goes ‘where no court has gone before,’ directly conflicts with precedents of this Court and the Supreme Court, and will reshape the landscape for all ‘who find themselves on the other side of the bargaining table’ with the government.”

The DOJ also noted that the three-judge panel had found NAR received significant benefits as a result of the DOJ’s three-sentence letter, including being able to present the letter to the court in its litigation with ThePLS.com over its pocket listing rule, the CCP.

“NAR may have wanted more from the letter than what it actually provided — including a forward-looking commitment — but that does not make the Division’s promise to provide the letter illusory,” the DOJ’s response reads. “Unable to extract a commitment not to reinvestigate from the Division in negotiation, NAR cannot now read unstated terms into the letter’s plain language to gain the exact same benefits the Division told NAR it would never grant.”

The DOJ’s response also shut down NAR’s suggestion in its petition that reopening the investigation would have “sweeping consequences for other private parties when dealing with the government in other contexts.”

The circumstances of the litigation between NAR and the DOJ are “specific” and “idiosyncratic,” which goes against NAR’s contention that the appeals court’s decision to allow the DOJ to reopen its investigation will have such consequences, according to the DOJ.

“Federal antitrust investigations and enforcement actions typically are resolved by a consent decree, without any letter like the one at issue here,” the filing reads.

Regardless, any such consent decree is subject to public comment and a judicial review process under the Tunney Act and could therefore merit modification before being finalized, the filing suggests.

“NAR’s unsupported rhetoric about the government repudiating its obligations and needing to turn ‘square corners’ is question begging, because it incorrectly assumes that the Division made a promise to refrain from future investigation — which never occurred and is not reflected anywhere in the proposed consent decree or closing letter,” the DOJ’s response stated.

“NAR’s argument that the Division ‘sought to diminish’ the promises made by the former administration fails for the same reason,” it continues. “To the contrary, the Division’s position then and now is the same — that it would not and could not promise to refrain from future investigation because of internal policies against restricting the future exercise of prosecutorial discretion.”

The DOJ also filed a statement of interest in February following a settlement in a major commission case known as Nosalek, which called for multiple listing service MLS Property Information Network (MLS PIN) to make changes in how commissions are agreed upon. How those arguments pan out could also have implications for how the government handles its case against NAR, should the DOJ’s investigation be allowed to continue. Last week, MLS PIN urged Judge Patti B. Saris of the U.S. District Court for the District of Massachusetts to reject the DOJ’s arguments against the settlement.

Read the DOJ’s response to NAR’s petition:

Editor’s note: This story has been updated with further details from the DOJ’s response filing.

Email Lillian Dickerson

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