Homebuyer plaintiffs allege that Hanna Holdings conspired to inflate commissions and that buyers are ultimately the ones who pay through higher home prices. A mixed ruling on Tuesday will allow the case to move forward.
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A judge overseeing a commission lawsuit brought by homebuyers who are suing Hanna Holdings delivered a mixed ruling this week that will allow the case to proceed.
Hanna Holdings had asked the court to dismiss the amended complaint, which alleges that the company used its status as one of the biggest privately held real estate brokerages in the country to enact rules and practices that inflated commissions and suppressed competition.
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The 40-page ruling was a dense web of legalese that served to determine that the far-reaching case could continue toward discovery.
“The named Plaintiffs have adequately pleaded that they have standing to sue under the laws of the states in which they reside or were injured,” Judge Wendy Beetlestone wrote. “Considering the foregoing allegations, Plaintiffs have sufficiently pleaded that Hanna and its coconspirators’ conduct has caused them antitrust injuries.”
Hanna attorneys argued that the buyers’ alleged injuries — higher home prices and lower quality buyer-broker services — were speculative and didn’t warrant an antitrust class action case.
Beetlestone ruled that Hanna could continue arguing against the plaintiffs’ claims, but that the homebuyers’ antitrust claims were sufficient to allow the case to proceed through its early status.
“Plaintiffs allege throughout their Amended Complaint that they, as home buyers, paid supracompetitive home prices and received lower quality buyer-broker services as a direct result of the NAR rules and guidelines in question,” Beetlestone wrote.
Beetlestone referenced a judge’s order in a separate commission case known as Moehrl that said: “It is easy to understand how [the NAR rules in question] could plausibly result in inflated commission rates.”
“It is also easy to understand how inflated commissions would result in inflated home prices — as Plaintiffs allege in their Amended Complaint,” Beetlestone continued.
The lawsuit was filed by a Pennsylvania homebuyer named Scott Davis last May. Davis, a North Carolina resident, bought a home in Greensboro in 2022 using a buyer broker from Hanna Holdings subsidiary Allen Tate Real Estate.
Davis is seeking class-action status. He was joined by 25 other plaintiffs, some of whom are also involved in other, similar, lawsuits.
The homebuyer plaintiffs argued that they suffered more than homesellers who actually paid the commissions under the alleged scheme, saying they received worse services while sellers recouped the commission fees through higher home prices.
The suit was filed before the sweeping changes that altered the real estate industry took effect in August. It takes aim at several rules that are no longer in effect.
“Because buyers believe their brokers are working for free, and because they do not know the commission rates involved in the transaction, they are highly unlikely to attempt to negotiate a lower buyer-broker commission,” Beetlestone wrote.
Hanna attorneys argued that the practice changes laid out in the settlement meant that Davis’ antitrust claims were moot. In her Tuesday ruling, Beetlestone disagreed, and she specifically took aim at rules that remain in place, such as the requirement that agents must be NAR members to access lock boxes.
“The NAR’s policy of limiting lockbox access to NAR members appears intact, as do its prescriptions governing modifications to commission offers,” the judge wrote. “As pleaded in the Amended Complaint, the lockbox and commission modification policies play a role in enabling the anticompetitive conspiracy Plaintiffs allege, and Plaintiffs pray for these policies to be enjoined.”
The judge also pointed out that the Department of Justice has signaled that the rules outlined in the settlement agreement could limit competition.
“For all these reasons, Hanna has not met its ‘formidable burden’ of showing that there is no longer a live controversy remaining between the parties,” Beetlestone wrote.
Hanna Holdings is a family-owned real estate business and is the seventh largest real estate enterprise in the U.S. with more than $37 billion in 2023 sales volume and 109,906 transaction sides from its nearly 14,000 franchise and brokerage agents. The Hanna Family of Companies is the largest privately owned brokerage in the U.S. Hanna Holdings includes the subsidiaries Howard Hanna Real Estate Services, Howard Hanna Financial Services and First Priority Mortgage.
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