What Does/Should NAR’s Victory in NAR v. US Mean?

Since I posted my questions (really, more of a “I don’t get it”) about NAR’s victory in the NAR v. US lawsuit, I’ve gotten a few questions from brokerage CEOs and intelligent agents all over. More concerning are the victory laps being taken, and the idea that “The DOJ threat is now gone!”

I beg to differ. A friend asked me to write something up short and to the point, to explain what this ruling does and does not mean for the industry as my last law-nerd post was “heady” which I knew it to be. So, what follows is just one random dude’s opinion on what this ruling does and does not mean, or what it should and should not mean.

Please consult your own attorneys for actual legal advice.

The Ruling: What It Means (For Now)

First, what the ruling actually means is that NAR does not need to respond to the DOJ CID (“Civil Investigative Demand”) — which is kind of like a subpoena. The court writes:

At bottom, not setting aside the CID at issue would deprive NAR of the benefit for which it bargained: the closure of the Antitrust Division’s investigation into its Participation Rule and Clear Cooperation Policy. The government, like any party, must be held to the terms of its settlement agreements, whether or not a new administration likes those agreements. For this reason, the CID at issue must be set aside.

The “CID at issue” is the CID No. 30729 which “seeks information from NAR about the Participation Rule and the Clear Cooperation Policy and re-opens the very investigations the Antitrust Division previously agreed to close as part of its settlement with NAR” (NAR v. US, Petition to Set Aside).

Therefore, at least for now, the DOJ cannot investigate NAR on those two issues: Participation Rule (which is what they called all of the rules surrounding the mandatory offer of compensation) and Clear Cooperation Policy.

Second, what the ruling does NOT mean is that the DOJ is now forced to be done with NAR. Judge Kelly made that very clear in his opinion:

None of this is to say that the Antitrust Division has agreed to never investigate NAR or some future version or application of NAR’s Participation Rule and Clear Cooperation Policy. The Court holds only that the government, in committing to close an investigation into these policies one year and then reopening it the next—when the only intervening change was that in presidential administrations—violated the parties’ agreement.

So if the DOJ wanted to investigate any other NAR policy, it can go right ahead and do so. In fact, as Judge Kelly says, if NAR changes the Participation Rule or Clear Cooperation Policy, then the DOJ can investigate those new and improved versions. The DOJ can investigate NAR for anything it damn well pleases, as long as it does not investigate the current Participation Rule and Clear Cooperation Policy.

Hell, after this, I would not be shocked if the DOJ or the FTC or the IRS decides it needs to audit NAR’s books, purely out of spite. This ruling does nothing to stop such investigations.

This Ruling Has Zero Impact on Civil Lawsuits

This ruling has absolutely no impact on the various civil lawsuits against NAR and the industry as a whole.

Burnett v. NAR, Moehrl v. NAR, Rex v. Zillow and PLS v. NAR are all civil lawsuits. The DOJ is not involved, except as an uninvited partisan. The DOJ did file statements of interest with all of those courts, and likely will file additional briefs to help the plaintiffs in those cases. The DOJ has taken sides. The DOJ is completely free to do all of that. The DOJ is free to give free advice to lawyers, or write up law review articles or Facebook posts or whatever the hell they want to do.

As I mentioned in a response to a comment, in some ways this ruling might actually help the plaintiffs in those civil lawsuits: “Look how terrified NAR is of transparency! They literally took the federal government to court just to stop an investigation! What do they have to hide?”

This ruling is a very narrow one and has no impact on those big-ass scary civil lawsuits.

If the court in Burnett says that the “Participation Rule” is a violation of the antitrust laws, then it doesn’t much matter whether the DOJ can’t investigate that rule. Cooperation and Compensation will still be history.

This Ruling Has A Short Shelf-Life

Most importantly, in a sense… since this point was basically the thrust of my last post on this topic… this ruling is very likely to be reversed on appeal, and I don’t think it takes years to get there. I may very well be wrong, but I don’t see how the DOJ does not appeal this ruling to the DC Circuit Court of Appeals and up to the Supreme Court if necessary. Because what this ruling says essentially is that deals struck in order to get to an actual settlement with the DOJ are their own independent enforceable contracts… despite the fact that any settlement struck with the DOJ in an antitrust context is subject to the statutory requirements of the Tunney Act.

That makes the Tunney Act a nullity, and courts do not (and can not) nullify legislation by stealth. Courts nullify legislation by openly saying so for Constitutional reasons.

Perhaps more importantly, the Tunney Act isn’t about going after NAR. It’s really used more often in going after big mergers and acquisitions. Think about the attention that Big Tech is getting from the government. The DOJ just sued Google… again. The DOJ cannot have this ruling set some kind of precedent that interim deals struck are enforceable on their own. Ergo, the DOJ can’t just wait years to figure this out; they have to act on this right now so this ruling doesn’t become some kind of precedent.

Accordingly, I think this ruling has a rather short shelf life. It is likely to be reversed on appeal, and that appeal is likely to come very soon.

Don’t Get Distracted

It’s easy to get distracted here, because NAR is framing this as a “You breached a contract, so you have to live up to that contract.” That’s something that REALTORS understand very well, since they deal with contracts all the time. And it’s perfectly rational to point the finger at the DOJ; they did in fact back out of a done deal. There’s no question about that. And if we were talking about regular contract law, then NAR would win handily and that’s the end of that.

I call that whole argument a distraction because the appeal will be about the Tunney Act.

Basically what the Tunney Act does is convert every deal made with the DOJ in an antitrust situation into a “deal, pending judicial approval” thing. It’s like a short sale pending bank approval. It doesn’t matter how much the two parties want the deal — there’s a third party who gets ultimate approval.

You can have signed settlement agreements with the DOJ and even file the actual Consent Decree with a court. The DOJ doesn’t walk away; the DOJ wants the deal that they have struck with you. Even in that scenario, you don’t have a deal until the court signs off on it. And the court cannot sign off on a deal until certain requirements have been met — such as publication in the Federal Register, publication in newspapers, and the mandatory 60 day public comment period.

“We had a deal!” is irrelevant, because you didn’t have a deal absent judicial approval. There was no judicial approval here, and there can’t be judicial approval here, so… you didn’t have a deal.

Do not count these chickens just yet. NAR has won a battle; it has not won the war just yet. Continue to prep.

-rsh

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