Double Trouble: Second Commission Suit This Week Hits Cali Realtors

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For the second time in two days, a California plaintiff has sued a long list of some of the biggest companies and brokerages in real estate, alleging rules created and upheld by the local multiple listing service amounted to an illegal conspiracy that inflated agent commissions.

The new suit, filed on Thursday in the U.S. District Court in the Eastern District of California, targets 19 defendants, only one of which was also named in a similar lawsuit filed Wednesday in southern California

The new class action lawsuit in northern California is the latest in a rapidly growing list of legal challenges alleging Realtor associations, companies and multiple listing services enacted and enforced rules that amounted to an illegal conspiracy that inflated the cost of buying and selling homes. It is the third lawsuit filed in California in the past six weeks and joins others filed across the nation.

The new lawsuit was filed by a company called Willsim Latham, LLC, and targets Realtor associations and brokerages operating in counties served by the MetroList MLS.

“The gravamen of Plaintiff’s complaint is that Defendants agreed to, implemented, and enforced anti-competitive MetroList rules that require Class Members to make a blanket, unilateral, and effectively non-negotiable offer of buyer broker compensation when listing a property on MetroList,” the complaint said.

Willsim Latham is a limited liability company that is owned by attorneys at the Sacramento tax law firm Williams & Associates, according to documents filed with the state. Willsim Latham is managed by Betty Williams, founder of Williams & Associates. The law firm’s associate, Michael Pearson, is Willsim Latham’s registered agent.

The complaint doesn’t specify when or where anyone at Willsim Latham sold a home during the proposed class period. It said that Willsim Latham filed the lawsuit “on behalf of all persons and entities that listed homes for sale on MetroList Services, Inc.”

Williams declined to comment through a representative when contacted by Inman. The lead attorney representing Willsim Latham, Jill Manning from Pearson Warshaw, also declined to comment.

The proposed class includes anyone who paid a buyer broker in connection with a home sold on MetroList since Jan. 18, 2020, and the complaint estimated there are thousands of plaintiffs in the proposed class.

The new lawsuit takes aim at a few specific rules enacted and enforced by MetroList and complied with by the real estate firms whose agents listed and sold homes through the service.

Specifically, the suit alleges Rule 7.13 forces sellers to pay buyer broker commissions and Rule 9.5 prevents buyers from reducing their broker’s commission by making that reduction a condition of a purchase offer. 

“Rule 7.13 encourages and facilitates anticompetitive steering away from brokers who deviate from the standard commission practices and rates,” the complaint said. “It enables buyer brokers to identify and compare the buyer-broker compensation offered by every seller and then steer their clients toward homes offering higher commissions.” 

The lawsuit cited research that found commissions in the U.S. are higher than they are in other countries, at around 5 percent to 6 percent. The cited research, a study from 2002, suggested commissions in the U.S. should be closer to 3 percent, and the complaint said brokerages profited from the higher commissions.

The alleged conspiracy affected interstate commerce, the complaint said, because defendants like Keller Williams, eXp, RE/MAX and Anywhere are located out of state. 

The complaint notes that MetroList is owned and operated by local Realtor associations and the California Real Estate Brokers, Inc. Unlike the lawsuit filed on Wednesday in southern California, the National Association of Realtors is not named as a defendant in the northern California lawsuit.

MetroList didn’t immediately respond to a request for comment. Neither did the various local Realtor associations that were named in the complaint.

The allegations in the complaint largely track with the issues that were tried in a federal case in Missouri known as Sitzer | Burnett. A jury in that case found NAR and major real estate franchisors conspired to inflate commissions and awarded damages that may cost defendants nearly $5.4 billion. 

Keller Williams was a defendant in Sitzer and is also named in the Willsim Latham suit.

In a statement, Keller Williams spokesman Darryl Frost said the Latham lawsuit was filed as a result of “serious errors” and a “disturbing verdict” in the Sitzer case.

“Regarding the Sitzer trial, the court allowed the jury to believe that home sellers wouldn’t pay a buyers’ agent even one cent, failing to mention that this is the very practice allowed under Missouri statute,” Frost said. “That evidence was presented at trial but not admitted, which misinformed the jury.”

“We’re focused on our post-trial motions and our strong grounds for appeal,” Frost added.

EXp is the only defendant that was named in both the northern and southern California lawsuits.

In a statement, eXp said it was studying the complaint, but that it was able to make changes quickly.

“We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions,” eXp said. “Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction.”

The full list of defendants includes:

  • Sacramento Association of Realtors, Inc.
  • Placer County Association of Realtors, Inc.
  • El Dorado County Association of Realtors
  • Lodi Association of Realtors
  • Yolo County Association of Realtors
  • Central Valley Association of Realtors
  • Amador County Association of Realtors
  • Nevada County Association of Realtors, Inc.
  • Sutter-Yuba Association of Realtors, Inc.
  • RE/MAX Holdings, Inc.
  • Anywhere Real Estate Inc.
  • Keller Williams Realty, Inc.
  • eXp World Holdings, Inc.
  • Norcal Gold Inc.
  • Century 21 Select Real Estate, Inc.
  • William L. Lyon & Associates, Inc.
  • Paul M. Zagaris, Inc.
  • Guide Real Estate, Inc.

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