Last February, a Los Angeles federal judge flatly dismissed a lawsuit claiming that the powerful National Association of Realtors violated antitrust law with its ban on real estate “pocket” listings. But on Friday, a panel of three federal appeals court judges hinted that the dismissal could be overturned.
“The NAR and its affiliates said, ‘We got to put these guys out of business. It’s going to ruin us.’ And didn’t you do that?” U.S. 9th Circuit Court of Appeals Judge Milan Smith said to Ethan Glass, the lawyer representing NAR in court.
“You’re going back to the complaint again, I’m talking about reality,” Smith continued after Glass’s brief response. “These folks are looking to put them out of business. And it’s very successful. You put them out of business.”
The ‘them’ in this case is PLS.com, a listing service started by L.A. agents (and stars of Bravo’s “Million Dollar Listing”) Mauricio Umansky, James Harris and David Parnes, for which subscribers list homes that they don’t want on their local Multiple Listings Service.
Marketing a home for sale but not putting it on an NAR-sanctioned MLS is what is known as a pocket or “whisper” listing.
In May 2020, NAR implemented the “clear cooperation policy” (not to be confused with the cooperative compensation policy), a ban on pocket listings for its 1.5 million-member agents, claiming that it is unfair for consumers — and agents representing those consumers — to not know about a home for sale (MLS data is aggregated by Zillow, Realtor.com, Redfin and other consumer-facing websites). NAR deputized the nation’s hundreds of MLSs to enforce the ban.
The company PLS.com sued, arguing that by requiring agents to post homes on MLS, that effectively ruined their ability to create an alternative to the MLS, a service that allowed agents — who, like Umansky, Harris and Parnes, may have celebrity clients — to be more discrete in their listings.
But U.S. District Judge John Holcombe dismissed the case. Holcombe ruled that it didn’t really matter if agents were harmed by the pocket listings ban. What mattered was if consumers were, and for them, “At worst, the clear cooperation policy is neutral to competition.”
PLS.com appealed, and in June the U.S. Justice Department filed an amicus brief in support of the appeal. While not saying it necessarily believed NAR violated antitrust law, Biden administration lawyers argued that Holcombe erred in not considering the ban’s effects on agents.
That all lead to Friday’s oral arguments where lawyers for PLS.com, NAR and DOJ each made their case in front of judges Milan Smith, Stephen Murphy and Byron Owens.
The arguments were done remotely, leading to a Brady Bunch-type deliberation format with minor technical issues. For example, PLS.com attorney Chris Renner unwittingly muted himself for a few seconds, then joked he was dealing with “very 2020 and 2021 problems.”
Renner pointed out that, legal arguments aside, the pocket listings ban had a “very substantial impact” on PLS.com that had been previously nearing an agent base of 20,000 subscribers. “PLS essentially exited this market and pivoted,” Renner told the panel.
Smith appeared sympathetic to Renner’s argument that agents are a legitimate harmed party, and that PLS.com need not prove housing consumers are also hurt by the pocket listings ban. The judge drew a parallel to antitrust lawsuits collegiate athletes have filed against the National Collegiate Athletic Association. In those cases, the U.S. Supreme Court found that the burden is to show the athletes were harmed, and not ultimately prove that viewers watching the sports were also hurt.
The other judges were mostly silent, though Murphy asked NAR lawyer Glass if the complaint alleged a “group boycott” by NAR and affiliated MLSs. Glass argued it did not and that PLS has failed to define the proper market where NAR’s power has violated law.
The judges will issue a written ruling in the coming weeks. A ruling in favor of NAR ends the lawsuit, and a ruling for PLS.com returns the case to Los Angeles district court.
The pocket listings lawsuit is a separate antitrust matter from the numerous lawsuits NAR is facing about their policies on real estate commissions. Those legal battles resurfaced last week when an unsealed filing by Realogy revealed the company does not mandate its agents adopt NAR commission compensation policy.
NAR is also facing an open-ended investigation from the Justice Department’s Antitrust Division.
