As I am certain you all know by now, especially if you're a Notorious ROB reader, Compass has filed its lawsuit against CRMLS in California. Seems that everyone knew it was coming, what with CRMLS filing a pre-emptive lawsuit against Compass and all.
Now that we have the actual complaint, we can look at the arguments being made. There are a lot of them.
My personal take – and let's be honest, everything in this blog is my personal take – is likely to make everyone unhappy. But I gotta call it like I see it.
Compass makes some strong arguments, but they are difficult to make out. I'm sure a lot of that comes from litigators doing things they think are most likely to prevail in court. I suspect some of it comes from the lawyers who drafted the Complaint (Eimer Stahl), as they strike me as people who may be very good lawyers, but don't really know the industry or the history of some of the conflicts. I know Ethan Glass, Compass's GC, and I think he knows more of the industry and the history. But while Glass may have directed strategy and such, I doubt he drafted the actual document himself. I think it shows.
Let's get into the Complaint, analyze its major parts, and see where we get. Perhaps you will end up agreeing with me that there are some good arguments, but they are buried beneath layers and layers of trying to fit things into elements of a Sherman Antitrust action. Or, you might disagree and think that either (a) the arguments suck, or (b) the Complaint is a tour de force. We shall see.
Obviously, this is legal analysis from an industry point of view, and I am not your lawyer. None of this is legal advice. Please consult your own attorney for actual advice.
The Complaint
Here's the actual Complaint in case you also want to spend time and effort reading and analyzing it for yourself.
The Factual Background and Narrative Problems
It is important in a lawsuit to set the narrative. As my torts professor used to teach, litigation is actually just storytelling. You tell your side, the opponent tells his side, and either a judge or a jury decides which story makes more sense.
The Introduction begins by invoking consumers:
Homeowners should be free to choose how to sell their own homes without having a competition-killing real estate industry organization tell them how to do it.
Well if you're starting the entire narrative with consumers, then this fight is going to be about what is good for consumers. Compass will claim 3PM is, while CRMLS will claim that transparency, open market, something something is.
But what's weirder is that the narrative immediately says that some homeowners choose to use a MLS, which Compass just called a "competition-killing real estate organization" that tells them how to sell their homes. That's odd, isn't it?
The Introduction then moves swiftly into talking about how "every single member of CRMLS's Board of Directors is a direct competitor of Compass and its agents." Maybe something has changed recently, but CRMLS Board of Directors on the website has one Century 21 franchisee and one Coldwell Banker franchisee, not to mention one person from Redfin, a close ally of Compass in the whole exclusive listings fight. I mean... okay....
We then return back to homeowners once again talking about how pre-MLS public marketing helps with price discovery without "negative information" by getting "real-world feedback from agents and their clients." Then we are told that the "vast majority" of pre-marketed listings end up on the MLS anyhow.
Would that be the same competition-killing MLS that oppresses Compass and its agents?
Then we get a familiar litany from previous lawsuits about fiduciary duty of agents to follow client directions, but they can't because of MLS rules, which then results in huge fines, suspension, or expulsion from the MLS, etc.
We then get this statement, which makes me scratch my head:
Compass seeks treble damages, to the full extent allowed by the law, for every dollar of harm CRMLS and its co-conspirators caused Compass. Compass paid over $175 million to defend and settle lawsuits resulting from MLS policies it could not avoid because rules like CRMLS’s foreclosed the option for Compass’ agents to publicly market a home without giving it to CRMLS, thus forcing them to follow CRMLS’s policies.
Huh? Oh, we're talking about the Sitzer v. NAR Settlement, where Compass paid over $175 million to settle it since it was thrown under the bus by NAR along with the rest of the $2 Billion Club.
I guess the logic goes, if MLS did not have mandatory submission rules, so that Compass could have publicly marketed homes without submitting them to the MLS, then Compass would not have had to comply with commission-sharing rules (via MLS compensation rules), so Compass would not have paid the settlement? Something like that?
I guess the lawyers have to threaten massive financial damages in order to be taken seriously, but... boy, this confuses things quite a bit.
This argument requires ignoring the fact that prior to the Settlement, what the MLS did that was of unparalleled value was to guarantee compensation for buyer agents. Compass is actually claiming that their agents would not have wanted a guarantee of compensation prior to Sitzer? Really?
