The Sitzer/Burnett Battle Over Broker Commissions Isn’t Over

After just two and a half hours of deliberation, the jury in a landmark lawsuit over broker commissions released a verdict that could upend the nation’s home buying process.

The eight-member panel on Tuesday found the National Association of Realtors, Keller Williams and HomeServices of America guilty of conspiring to inflate commissions charged to home sellers and ordered them to pay $1.8 billion in damages.

The two-and-a-half-week trial landed some of the industry’s biggest names in a Kansas City courtroom, where both sides picked apart the finer points of the trade group’s influence and rules requiring brokers using Realtor-controlled MLSs to offer compensation to buyer’s agents.

Residential players like Keller Williams founder Gary Keller and NAR CEO Bob Goldberg testified as part of a bid to defend NAR’s Clear Cooperation Policy. The plaintiffs — more than 500,000 Missouri homesellers — alleged the rule is a vehicle for conspiracy to raise costs for home sellers.

From preventing commission sharing to shaking up the rules of the industry’s most powerful group, the verdict’s potential implications on the industry are vast. But the Missouri-based case, known as Sitzer/Burnett, is far from settled.

Breaking down the verdict

The jury’s ruling is still awaiting final approval from the judge. It’s unclear when the judge could deliver the final judgment, but the filing could confirm tripling the damages awarded to the plaintiffs in accordance with antitrust rules, which would push the total to more than $5 billion.

The money awarded will be distributed among the home sellers included as plaintiffs in the class-action suit, according to the plaintiff’s attorney Michael Ketchmark.

“If you take something that doesn’t belong to you, you should give it back,” Ketchmark said on CNBC’s Last Call hours after the verdict was announced.

The plaintiffs could also request that the judge mandate policy changes that could alter industry practices. It’s unclear what those changes could include, but settlement agreements proposed by former defendants in the case could pave the way for other recommendations.

Anywhere Real Estate and RE/MAX agreed to settle for $85 million and $55 million, respectively, in deals that also included rule changes to increase transparency around buyer’s agent fees and to no longer require agents to belong to NAR.

If approved by the judge, the settlement agreements, which do not include admission of wrongdoing, also excuse both companies from the upcoming Moehrl trial.

Defendants NAR, Keller Williams and HomeServices of America vowed to appeal the decision, which would likely extend for several years.

NAR has also said that it will ask the judge to reduce the damages, according to a statement from president Tracy Kasper. NAR will also post bond, which will allow the group to defer the damages payment while it moves forward with an appeal.

As for the potential financial toll on the group, “we also are financially prepared for any final judgment,” Kasper noted in the statement.

Legal troubles still to come

The defendants are also facing another lawsuit over broker commissions, known as Moehrl, which is headed to trial in Chicago early next year.

Though the case is similar to Sitzer/Burnett, the potential damages in the upcoming trial are significantly higher. If the plaintiffs prevail in the Moehrl case, and the judge rules to triple the damages, the defendants could be on the hook for $40 billion.

With billions on the line, the recent verdict also raises questions about whether the defendants will change their strategy for the upcoming Chicago trial, though NAR has said that the verdict will not affect the other lawsuit.

“Cases are tried separately, and we remain confident we will ultimately prevail because we have a strong case we’ll present on appeal and because our rules are pro-consumer and pro-business competitive,” Kasper wrote in the statement.

Minutes after Tuesday’s verdict, the plaintiff’s attorney Michael Ketchmark filed another nearly identical lawsuit against NAR and another set of major brokerages, including Douglas Elliman, Compass, eXp and Redfin.

The suit, brought on behalf of three sellers, alleges that NAR forces agents in areas with Realtor-run MLSs to comply with its participation rule and prevents sellers from negotiating lower commissions for fear buyer’s agents will steer their clients to homes with higher compensation offers.

A spokesperson for NAR referred to the new lawsuit as a “copycat” in an emailed statement, which reiterated the group’s support for its participation policy.

“We continue to assert that the practice of listing brokers making offers of compensation to buyer brokers is best for consumers. It gives the greatest number of buyers a chance to afford a home and professional representation, while also giving sellers access to the greatest number of buyers.”

If the new lawsuit follows its predecessor’s timeline, it could be more than four years before it heads to trial.

Ketchmark said on CNBC that the damages in the upcoming lawsuit could exceed $100 billion.