NAR vs. DOJ: More Than a Legal Battle Over Real Estate Practices

The ongoing legal battle between the National Association of Realtors (NAR) and the U.S. Department of Justice (DOJ) over real estate practices may be escalating to the U.S. Supreme Court. After the appeals court denied NAR’s request for a rehearing in July 2024, the trade group announced its intention to file a writ of certiorari by October 10. The case stems from a 2020 settlement between the DOJ and NAR, which aimed to address concerns about transparency in broker commissions and agent compensation practices. The DOJ, under the Biden administration, withdrew from the settlement in 2021, citing the need to further investigate practices they believe harm consumers.

NAR argues that the withdrawal violates the terms of the original settlement, and a district court initially ruled in their favor in 2023, halting the investigation. However, the decision was overturned by the appeals court, which allowed the DOJ to resume its probe. Now, NAR is seeking relief from the Supreme Court, while simultaneously producing documents for related lawsuits as part of ongoing litigation. The outcome of this case could have broad implications for real estate practices and how settlement agreements with government agencies are handled in the future.

Legal Conflict: NAR’s Defense and Court Rulings

NAR challenged the DOJ’s decision to reopen the investigation, arguing that the original settlement had barred the DOJ from further probing these rules. NAR sought to block the new investigation, filing a petition to set aside the DOJ’s subpoena in federal court. In January 2023, a U.S. District Court sided with NAR, ruling that the DOJ had breached the settlement agreement by reopening the investigation and issuing new CIDs.

This victory for NAR was short-lived. The DOJ appealed the ruling, and in mid-2024, the U.S. Court of Appeals for the D.C. Circuit overturned the district court’s decision. The appeals court’s ruling hinged on the interpretation of the original settlement. The court emphasized that while the DOJ had “closed” the investigation in 2020, the settlement explicitly allowed the government to reopen it at a later date. The court noted that the DOJ had inserted “no inference” language in the settlement, meaning that the investigation could be resumed if necessary. This language, the court argued, allowed the DOJ to exercise its sovereign authority to pursue antitrust investigations even after a settlement agreement.

In the dissenting opinion, one judge raised concerns about the broader implications of this ruling, warning that it would create uncertainty in future settlements with the DOJ’s Antitrust Division. The dissent suggested that businesses negotiating with the government may no longer feel secure in reaching a settlement if there is a risk that the government can reopen investigations later. Effectively, this destroys the credibility of any agreement that closes an investigation going forward. Perhaps the government can develop new language to assuage these concerns going forward. The government could, for example,  use a phrase like “permanently close.” However, if a business were to use similar “gotcha”  language, it seems unlikely that many courts would be nearly as sympathetic.  

The Legal Precedents and Broader Implications

The court’s ruling is significant because it reaffirms the DOJ’s broad authority to reopen investigations, even after settlements have been reached. This principle is rooted in legal precedent, which allows government agencies to maintain the power to investigate ongoing or new violations of antitrust laws, even if they had previously agreed to close a case. The ruling draws from the DOJ’s long history of antitrust enforcement against NAR, which dates back to the 1940s and strengthens the DOJ’s hand in ensuring compliance with competition laws.

This legal precedent raises important questions for businesses negotiating settlements with government agencies. A key lesson from this case is that settlements with government enforcers, even when they “close” investigations, may not be permanent. Unless the settlement includes tightly defined language waiving the government’s right to reopen an investigation, businesses may find themselves back under scrutiny at a later date. This “buyer beware” warning from the dissent underscores the risks for businesses relying on settlement agreements to provide long-term legal protection.

Moreover, the court’s ruling may have ripple effects beyond real estate, affecting industries where antitrust concerns are common. If businesses feel that settlements offer little security, they may become more reluctant to negotiate, which could force the DOJ to allocate more resources to full-scale investigations rather than resolving cases through settlements.

NAR’s Next Steps and Supreme Court Appeal

Following the appeals court ruling, NAR announced its intention to appeal to the U.S. Supreme Court. The association is expected to file its writ of certiorari by mid-October. While the Supreme Court may or may not take up the case, the decision will likely have far-reaching implications for antitrust enforcement and settlement agreements in the future.

As the legal process unfolds, NAR has agreed to comply with the DOJ’s narrowed document requests, which focus on related class action lawsuits challenging real estate commission structures. NAR’s compliance with these discovery requests will continue as it navigates the Supreme Court appeal.

Read more: NAR settlement could hurt first time homebuyers

Franklin Carroll

Franklin Carroll is Kukun's VP of Modelling and Analytics; After finishing his studies at the University of Chicago, he worked at Fannie Mae where he helped build Collateral Underwriter, roll out the Value Verify initiative, and specialized in collateral related and credit related policy.

Published September 10, 2024