Justice Department Rejects Settlement In Commissions Case

The Department of Justice is not letting a Boston-based lawsuit over broker commissions go down without a fight.

The agency urged the court not to approve a proposed settlement agreement in the case known as Nosalek, according to a statement of interest reported by RISMedia.

The move reopened the case just hours after it was closed, following Judge Patti Saris’ decision to approve the plaintiffs’ motion to stay the lawsuit on Wednesday.

The DOJ claimed the settlement “merely prescribes cosmetic changes” to the commission-sharing policy at the center of the lawsuit against a broker-owned multiple listing service in the Northeast and four major brokerages.

“Far from curing the rule’s defects, the proposed settlement perpetuates the very same competitive concerns that trouble the current rule,” the department wrote in the statement. “The proposed settlement is not ‘fair, reasonable, and adequate.’”

A spokesperson for MLS PIN declined to comment, citing pending litigation.

The lawsuit claims that MLS Property Information Network, which operates in New York and six New England states, conspired with Keller Williams, HomeServices of America, RE/MAX and Anywhere to artificially hike agents’ commissions.

Though MLS PIN operates independently from the National Association of Realtors, it enforces compensation policies similar to the trade group’s participation rule, which is currently at the center of several lawsuits across the country.

MLS PIN initially reached a settlement with the plaintiffs, which included an agreement to pay $3 million, change its commission structure and cooperate against the other defendants. But the DOJ pushed back against the offer in September, arguing it didn’t do enough to meaningfully change its rules.

MLS PIN then renegotiated the terms of the settlement with the plaintiffs, but the DOJ once again intervened. The department’s trial attorney wrote a letter in December stating the agency still had “concerns.”

As part of the settlement, MLS PIN agreed to lower the minimum offer of compensation from sellers agents from one cent to $0. The update is similar to NAR’s revised interpretation of its own commission-sharing rule, which it touted in October.

But the DOJ argued in its statement filed earlier this week the change won’t deter sellers agents from pushing for inflated commissions out of fear that buyer’s agents won’t show their properties to clients.

“Virtually no one will exercise that option for the same reason that they don’t offer one cent now: The modified rule still gives sellers and their listing brokers a role in setting compensation for buyers’ brokers,” the statement reads.

Instead, the department pushed for the listing service to “prohibit sellers from making commission offers to buyer brokers at all,” according to the statement. “That injunction would promote competition by empowering buyers to negotiate directly with their own brokers.”

All of the brokerage defendants, with the exception of HomeSellers of America, have also proposed settlements that would apply to the Nosalek case and two other broker commissions lawsuits.

The judge presiding over the Sitzer/Burnett case in Kansas City preliminarily approved settlement offers from Anywhere and REMAX, which agreed to pay a combined $138.5 million. The final approval hearing is expected to take place on May 9.

Keller Williams agreed earlier this month to pay $70 million to settle the lawsuits, though the offer is still awaiting the judge’s preliminary approval.