In June the Department of Justice filed a doozy of a first brief in its appeal of Judge Timothy J. Kelly’s late January ruling in favor of the National Association of Realtors (NAR). In turn, the trade group’s reply brief, filed last Friday, did not pull any punches.
In the recent court documents, NAR claims that the government’s arguments for resuming the probe into the trade group’s Participation Rule and Clear Cooperation Rule were “alarming” and would “destabilize the law” if accepted.
“The government settles vast numbers of enforcement actions against civil and criminal defendants,” NAR’s brief states. “Those defendants rely on the government to keep its word. A holding that an agency can escape its commitments as easily as DOJ claims it can here would call into question countless negotiated resolutions.”
In its early June brief, the DOJ argued that the lower court “made several serious errors of basic contract law.”
“First, the District Court brushed aside the plain language of a letter merely reporting that an investigation had been closed and read into the letter an unstated forward-looking commitment not to further investigate NAR,” the brief states. “This interpretation also improperly implied a waiver of a sovereign power against the United States and ignored several other textual indications that the Division had no intention to limit its investigative authority.”
The DOJ also said Kelly’s ruling led to an “absurd” result, which meant that after the DOJ withdrew from the proposed settlement agreement, NAR was released from any obligations under the agreement, but that the DOJ is not allowed to reopen its investigation into NAR’s commission and pocket listing policies. The DOJ claims that in order to forfeit this right, it needed to formally waive its right to reopen the investigation.
In last week’s brief, NAR fired back, stating that the “DOJ did not breach its agreement because of a subsequent legislative action or other similar development; it breached its agreement simply because it no longer wanted to be bound.”
Another point of contention is whether a change in presidential administrations can be used to justify the reopening of the DOJ’s investigation into NAR.
From DOJ: “The court’s implication that there is something improper about a prosecutor reopening an investigation that had reached no conclusion is wrong,” the brief states. “Whether as a result of changes in leadership, priorities, or other factors, in our constitutional system those decisions are well within the discretion of the Executive Branch. The Division insisted on maintaining the right to reopen its investigation precisely to preserve that prosecutorial discretion.”
NAR, however, sees things differently.
“Although a new administration is free to change the government’s policies, it is not free to repudiate the government’s contracts,” the brief states. “That is part of what it means to say that we have ‘a government of laws, and not of men.’”
In November 2020, the DOJ’s antitrust division agreed to a settlement after investigating the trade group’s listing and agent compensation policies. The settlement proposed at the time included requirements for NAR to boost transparency about broker commissions and stop misrepresenting that buyer broker services are free. In its July 2023 brief, NAR states that it only agreed to the proposed settlement in return for the DOJ’s closure of the investigation into its Participation Rule and Clear Cooperation Rule.
The DOJ ultimately withdrew the settlement agreement in July 2021 and two months later, in September 2021, NAR filed a petition to set aside or modify the DOJ’s probes into the trade group. In his ruling, Kelly stated that allowing the DOJ investigation to continue would take away the benefits NAR had negotiated in the original settlement.
Kelly ruled in late January that the earlier settlement terms reached by NAR and the DOJ were still valid.
“The government, like any party, must be held to the terms of its settlement agreements, whether or not a new administration likes those agreements,” Kelly, a Trump appointee, wrote in his ruling.
The DOJ appealed this ruling in March.
NAR’s point of view: “The district court’s careful decision that, “The government, like any party, must be held to the terms of its settlement agreements…” is correct, and it should be affirmed. As we say in our brief, after having signed an agreement previously, the Department of Justice’s (DOJ) argument that it can resume its investigation based solely on a change of leadership or change of heart lacks legal merit,” Mantill Williams, NAR’s vice president of communications, said in a statement. “NAR has upheld our end of the agreement, and we expect the DOJ to do the same. It is alarming that the DOJ would try to resume an investigation that the Department committed to closing more than two years ago. NAR guidance for local MLS broker marketplaces has long been recognized to ensure fair, transparent and competitive real estate markets for consumers and businesses.”
The DOJ did not return a request for comment by the time of publication.
The deadline for the DOJ to file an appeal brief is Aug. 11. Oral arguments in the case have not yet been scheduled.