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The last real estate franchisor standing in a bombshell antitrust lawsuit known as Sitzer | Burnett wants to take its case to the highest court in the land.
On Friday, Feb. 2, HomeServices of America filed a petition to the U.S. Supreme Court for a “writ of certiorari,” asking the court to review an August ruling by the U.S. Court of Appeals for the Eighth Circuit affirming a lower district court ruling that HomeServices can’t enforce arbitration agreements signed by seller clients of its franchisees because the contracts the sellers signed were not directly with HomeServices.
That ruling cleared the way for HomeServices and two of its subsidiaries, BHH Affiliates and HSF Affiliates, to be tried as defendants in a three-week trial in October — a trial HomeServices says should never have happened because the homeseller plaintiffs signed arbitration agreements waiving their right to pursue class action litigation.
That trial ended in a historic verdict in which a jury found that Keller Williams, RE/MAX, Anywhere, the National Association of Realtors, HomeServices, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates paid by homesellers. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners. If that award stands, it would be trebled by law to more than $5.3 billion.
According to the petition, the question HomeServices wants the Supreme Court to resolve is who decides — the arbitrator or the courts — whether an entity that did not sign an arbitration agreement can enforce it when the agreement says it would be up to the arbitrator.
“The Eighth Circuit’s erroneous decision to usurp the arbitrator’s authority subjected HomeServices to an unwarranted class trial and a resulting jury verdict of $1.8 billion,” the petition reads.
“That trial should never have occurred because the plaintiffs are required to arbitrate their claims — and their arguments opposing arbitration must be resolved by the arbitrator, not a court.”
The circuit courts are split on the petition’s question, according to the filing. The First, Second, Third and Sixth Circuits have held that the court must leave the question of arbitrability — whether something can be arbitrated — to the arbitrator while the Fourth, Fifth, Eighth and Ninth Circuits have said the court may decide the question of arbitrability for itself, even if the contract has delegated that issue to the arbitrator, the petition said.
The petition is a long shot, but that circuit split may tip the scales in its favor. According to the federal government, four of the nine justices on the Supreme Court must vote to accept a case and the court only accepts a tiny percentage of the cases it’s asked to review each year: 100-150 of more than 7,000 cases. The court usually only agrees to hear a case if it “could have national significance, might harmonize conflicting decisions in the federal Circuit courts, and/or could have precedential value.”
Asked why HomeServices believes its arguments will be more successful in front of the Supreme Court than they were before the appeals court, HomeServices Executive Vice President Chris Kelly highlighted the mixed rulings by circuit courts.
“Our appeal is rooted in the principles of the Federal Arbitration Act, which clearly mandates that arbitration agreements be honored as they are written, including clauses that delegate interpretative authority to arbitrators,” Kelly told Inman in a statement.
Chris Kelly
“In the Sitzer-Burnett case, the court took upon itself the role of interpreting the arbitration agreement, a decision we believe was contrary to the Act’s stipulations. This appeal highlights a substantial inconsistency among circuit courts regarding the interpretation of arbitration agreements and delegation clauses.”
“By bringing this issue before the Supreme Court, we aim not only to seek a resolution for this specific case but given the split among the circuit courts, also to ensure the uniform application of the Federal Arbitration Act nationwide, thereby preserving the integrity and intended function of arbitration agreements,” Kelly added.
Sitzer | Burnett was originally filed in 2019 and won class-action status in April 2022. The suit alleges that some NAR rules — including one that requires listing brokers to offer buyer brokers a commission in order to list a property in a Realtor-affiliated multiple listing service — violate the Sherman Antitrust Act by inflating seller costs.
Anywhere, RE/MAX and Keller Williams have all had proposed settlements in the Sitzer | Burnett case preliminarily approved by the U.S. District Court in Western Missouri, the latter on Thursday. Therefore, NAR, HomeServices of America, BHH Affiliates and HSF Affiliates, are the remaining defendants in the case.
Kelly said HomeServices doesn’t know when the Supreme Court will make its decision on whether to grant the petition. Asked whether HomeServices plans to settle the case if its petition is not granted, Kelly said, “HomeServices remains committed to resolving this and the other cases in a manner that best protects the consumers we serve.”
Michael Ketchmark
Reached for comment, Michael Ketchmark, lead counsel for the plaintiffs in Sitzer | Burnett, told Inman, “We have reviewed Home Services’ filings and we feel confident in the underlying decision by the Eighth Circuit.”
