Exceedant’s U.S. Real Estate Brokerage Industry Litigation Update.
Today, April 18, 2024, the Pulte Group, Inc. objected to preliminary class settlements with Anywhere Real Estate, RE/MAX and Keller Williams (“Settling Defendants”).
You couldn’t blame the Settling Defendants if after reviewing the objection, they thought:
“Just when I thought I was out, they pull me back in.”
Al Pacino, Godfather 3
Pulte Group, Inc. filed its objection to preliminary class settlements
On April 12th Pulte objected to preliminary settlements with Anywhere, RE/MAX and Keller Williams (Settling Defendants). Publicly traded Pulte (NYSE: PHM) is one of the leading home builders in the country. The settlements Pulte is objecting to are three of the most prominent settlements negotiated to date. Preliminary settlements have also been negotiated with the National Association of Realtors (NAR), Compass and others. It is important to note that not only are the settlements subject to final approval, but also to review and comment by the Department of Justice (DOJ). Despite these and other issues, each of the Settling Defendants welcomed the tentative resolution reached, in particular the opportunity to try and put the litigation behind them.
Given the potential for multi-billion dollar verdicts in Moehrl and Gibson that sentiment is understandable. The cramped legal landscape includes: a $1.78 billion verdict in Sitzer|Burnett (Sitzer); a full complement of post-trial issues remaining to be resolved in Sitzer, including trebling the jury’s verdict; the Moehrl trial, with counsel indicating their availability for a start date of January 21, 2025; the $200 billion Gibson case; the joinder of Berkshire Hathaway Energy in Gibson; the strong likelihood of DOJ filing a Statement of Interest on the NAR Settlement; resumption of the DOJ’s investigation into NAR’s Buyer Broker Commission Rule and Clear Cooperation Policy; litigation in 20+ class action lawsuits – with consolidation having been denied at this juncture; the potential for FTC rulemaking pursuant to Executive Order 10436; prospects for changes/clarification concerning buyers’ ability to finance buyer broker commissions; and much more.
For various reasons a seamless transition to a post-litigation landscape may not be what transpires. The impediments to such a transition may now include new home sellers who compensated buyer brokers.
On April 12th, Pulte objected to the Preliminary Class Settlements by the Settling Defendants. Pulte claims that several procedural factors hampered its efforts to ascertain whether remaining in the settlement classes is the right decision. Pulte cites various factors, including the agreements’ silence on information essential for the company to ascertain its anticipated recovery. Pulte contends that courts routinely reject class settlement agreements that fail to “advise a potential claimant of the amount of its recovery.” Pulte specifies information typically provided in a Plan of Allocation, contending that this is routinely provided before the opt-out date. This information includes class size, expected claim rate, and the claim administrator’s evaluations in dividing up settlement funds.
The importance of objections by home builders should not be underestimated
The importance of objections by home builders should not be underestimated. According to the U.S. Census Bureau, 822,000 new homes were sold in 2020. Pulte indicates that in 2023 alone it sold 28,603 new homes. Moreover, Pulte raises this objection on behalf of home builders who listed on the MLS and paid a commission to a buyer broker. In today’s supply constrained resale market, home builders are a vital source of homes for consumers, commissions for brokers, and a particularly important constituency in the housing market.
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