Tuesday, May 27, 2008

Overview of USA v. NAR proposed Final Judgment

Here's a quick overview of the proposed Final Judgment ("PFJ") filed earlier today in USA v. National Association of Realtors. Note that before Judge Kennelly will consider and potentially enter the judgment, one or both parties will need to formally file a motion requesting same with the Court.

For a period of ten years, the settlement would prohibit NAR from adopting, maintaining or enforcing any rule, or entering into or enforcing any agreement or practice, that directly or indirectly:
  • prohibits a Broker from using a VOW or prohibits, restricts, or impedes a Broker who uses a VOW from providing to Customers on its VOW all of the Listing Information that a Broker is permitted to Provide to Customers by hand, mail, facsimile, electronic mail, or any other methods of delivery;

  • unreasonably disadvantages or unreasonably discriminates against a Broker in the use of a VOW to Provide to Customers all of the Listing Information that a Broker is permitted to Provide to Customers by hand, mail, facsimile, electronic mail, or any other methods of delivery;

  • prohibits, restricts, or impedes the referral of Customers whose identities are obtained from a VOW by a Broker who uses a VOW to any other Person, or establishes the price of any such referral;

  • imposes fees or costs upon any Broker who operates a VOW or upon any Person who operates a VOW for any Broker that exceed the reasonably estimated actual costs incurred by a Member Board in providing Listing Information to the Broker or Person operating the VOW or in performing any other activities relating to the VOW, or discriminates in such VOW related fees or costs between those imposed upon a Broker who operates a VOW and those imposed upon a Person who operates a VOW for a Broker, unless the MLS incurs greater costs in providing a service to a Person who operates a VOW for a Broker than it incurs in providing the same service to the Broker; or

  • is inconsistent with the Modified VOW Policy (an exhibit to the PFJ).

Furthermore, NAR must (i) repeal the ILD Policy and direct each Member Board that adopted Rules implementing the ILD Policy to repeal such Rules; (ii) direct Member Boards that adopted Rules implementing the VOW Policy to repeal such Rules; (iii) adopt the Modified VOW Policy; (iv) direct Member Boards to adopt the Modified VOW Policy, and to thereafter maintain, act consistently with, and enforce Rules implementing the Modified VOW Policy; and (v) direct Member Boards not to adopt, maintain, or enforce any Rule or practice that NAR would be prohibited from adopting, maintaining, or enforcing pursuant to the PFJ. In other words, out with the VOW Policy and its successor, the ILD Policy. In with the Modified VOW Policy, a ten pager attached to the PFJ as an exhibit.

I haven't studied it yet, but the Modified VOW Policy appears to be based upon the original 2003 VOW Policy adopted by NAR on May 17, 2003. The 2003 VOW Policy was rescinded on August 31, 2005 in favor of the ILD Policy. If/when the Court enters the PFJ, I will highlight the changes contained in the Modified VOW Policy in a separate post.

The PFJ also gives NAR the green light to effectuate changes to the definition of “Participation” contained in the Statement of MLS Policy and previously adopted by NAR on 8/31/05 . This change impacts the definition of MLS Participant, which will now presumably read, in part, as follows:
[U]nder no circumstances is any individual or firm, regardless of membership status, entitled to MLS ‘Membership’ or ‘Participation’ unless they hold a current, valid real estate broker’s license and offer or accept cooperation and compensation to and from other Participants or are licensed or certified by an appropriate state regulatory agency to engage in the appraisal of real property. (emphasis added).
A "Note" accompanies the revised definition and directs that “[t]he requirement that an individual or firm ‘offers or accepts cooperation and compensation’ means that the Participant actively endeavors during the operation of its real estate business to list real property of the type listed on the MLS and/or to accept offers of cooperation and compensation made by listing brokers or agents in the MLS.” The PFJ prohibits member boards from suspending or expelling any broker on account of the new definition until May 27, 2009.

Here's a link to the DOJ's press release.

Settlement in USA v NAR?

A stipulation signed by attorneys for both parties and a proposed final judgment (not yet entered by Judge Kennelly) just appeared on the Court's online docket.

Perhaps the July 7 trial, which was to last approximately a month, has been averted? Keep in mind that a final judgment and/or other dispositive order has not yet been entered by the Court. In a related filing today, the United States stated that it will be filing a motion for entry of the proposed Final Judgment.

UPDATE: Read a summary of the proposed settlement.