A federal judge isn’t buying allegations that Howard Hanna Real Estate conspired with other real estate brokerages in a “horizontal agreement” to inflate commissions charged to homebuyers.
But lawyers seeking class action status to represent homebuyers nationwide will have a chance to argue that Howard Hanna engaged in a “vertical antitrust conspiracy” with the National Association of Realtors.
In a June 23 opinion and two related orders, Federal District Judge Wendy Beetlestone further whittled down the scope of a commission-related antitrust lawsuit filed last year against Hanna Holdings by dismissing claims of “unjust enrichment.”
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Beetlestone also dismissed claims tied to antitrust and consumer protection laws in multiple states, outlining procedural issues and perceived legal deficiencies in the Sept. 16 amended complaint against the family-owned brokerage.
All of the claims that were dismissed were dismissed without prejudice, meaning that the plaintiffs could potentially re-argue those claims if they amend their complaint.
A North Carolina homebuyer, Scott Davis, filed the suit in May 2024, and was joined by more than two dozen other plaintiffs.
Attorneys are seeking class action status to represent homebuyers nationwide, claiming that Howard Hanna conspired with other NAR-member brokerages to artificially inflate commission rates for buyer-brokers through rules, policies, and practices imposed on NAR members and MLS users.
That NAR members “are required to obey and enforce NAR rules … only plausibly suggests a vertical agreement between Hanna and NAR, not a horizontal agreement between Hanna and its competitors,” Beetlestone wrote in explaining her order dismissing claims that Howard Hanna conspired with other brokers.
But Beetlestone said the lawsuit presents enough of an argument that a vertical agreement exists between Howard Hanna and NAR to warrant further discovery of evidence and a trial.
“Plaintiffs plausibly allege a vertical agreement between Hanna and the NAR, where the former agrees to enforce the latter’s rules in exchange for the benefits of NAR membership,” Beetlestone wrote. “Those benefits include the ability to participate in NAR-controlled MLSs, where, due to the anticompetitive effects of a handful of NAR rules restraining normal competition among brokers, brokerage fees have allegedly ballooned to supracompetitive rates and non-NAR brokers have been iced out of the market.”
Attorneys for homebuyers allege that they “bear the brunt of these inflated commissions, since sellers pass the inflated rates on to buyers as part of the purchase price of the home,” Beetlestone noted.
Future fact finding “may — or may not” prove those allegations to be true, she said.
Beetlestone dismissed claims tied to state antitrust laws in Arizona, Hawaii, Nevada and Utah, saying those states require plaintiffs to provide notice to states before filing suit. Beetlestone dismissed those claims without prejudice, leaving the door open for plaintiffs to argue that state noticing requirements don’t apply in federal cases.
Attorneys for homebuyers also sought damages under consumer protection laws in 23 states. Beetlestone dismissed claims tied to consumer protection laws in Colorado, Michigan, New York, Oregon, Pennsylvania, Virginia and Wisconsin, saying those laws apply to conduct that involves fraud or deception.
“Nothing about the vertical relationship alleged by Plaintiffs plausibly suggests active concealment or deception,” Beetlestone ruled.
She also dismissed claims tied to Massachusetts’ consumer protection laws, saying plaintiffs failed to fulfill notification requirements.
Finally, Beetlestone dismissed claims tied to the doctrine of “unjust enrichment” without prejudice, saying attorneys for the plaintiffs failed to specify which states’ common laws provided a basis for those claims.
“This slim pleading is simply too vague to clear the bar … because the law of unjust enrichment varies from state to state,” Beetleston ruled.
Barring a settlement, the case will proceed to the discovery stage and trial in the Philadelphia-based U.S. District Court for the Eastern District of Pennsylvania.
Editor’s note: This story has been updated to note that all of the claims that were dismissed were dismissed without prejudice, meaning that the plaintiffs could potentially re-argue those claims if they amend their complaint.
