Appeals Court Leans Toward Allowing DOJ to Reopen NAR Antitrust Investigation

Today, a Washington, D.C., federal appeals court heard oral arguments from lawyers from the Department of Justice (DOJ) and the National Association of REALTORS® (NAR) regarding a shuttered antitrust investigation ahead of a decision that could potentially have larger implications than any of the ongoing class action lawsuits.

Over the course of half an hour, the three-judge panel—Judge Justin R. Walker, an appointee of former President Donald Trump; Judge Florence Pan, an appointee of President Joe Biden; and Judge Karen Henderson, appointed by former President George H.W. Bush—seemed largely unsympathetic to NAR’s arguments, with Pan particularly skeptical.

The appeal is the culmination of almost five years of back-and-forth that has run parallel to lawsuits filed by homesellers and buyers and largely focused on the same issues and rules. The three judges will decide whether the DOJ will be allowed to reopen an investigation into whether NAR has violated antitrust statutes.

Originally, the investigation focused on a handful of NAR policies, including “clear cooperation,” which requires NAR members to list properties on MLSs simultaneous to marketing them elsewhere, as well as lockbox rules and mandatory offers of compensation for buyer agents—a rule that remains at the center of the class action lawsuits.

The current dispute is largely centered on a single piece of evidence—a letter written by the DOJ in late 2020 agreeing to close its investigation into NAR, after NAR changed some, but not all of the policies in question. Months later, the DOJ withdrew from that agreement and sought to reopen its investigation, but so far, other judges have disallowed that, and held the DOJ to the original terms.

In the circuit court appeal, defining the word “close” appeared to be a key point as the panel of judges decides whether or not the investigation can continue. The DOJ explicitly declined to say it would not reopen the investigation—both in the aforementioned letter or anywhere else—which Pan seemed to see as the most salient point.

“We’re talking about the word ‘closed.’ And the plain and ordinary meaning of ‘closed’ does not imply it will never reopen,” she said. “All I’m saying is that things get reopened. It’s not unusual.”

‘You lost the bet’

Representing NAR was attorney Christopher Michel, who focused on the holistic nature of the negotiations as broadly unfair, showing that the DOJ had violated the spirit or implicit boundaries of the agreement. 

Michel asked the court to use “common sense” and imagine if the roles were reversed, in other words, if NAR had quickly reversed the changes it made as part of the agreement.

“There’s a commitment in the closing, in the consent decree that NAR will adopt certain rules that correct the policies that the DOJ was objecting to,” he said. “If NAR had adopted that rule, and then repealed it the next day or the next week, I don’t think the DOJ would say the plain meaning of ‘adopt’ was satisfied in this case.”

Pan seemed entirely unimpressed with this line of reasoning, repeatedly reminding Michel that at no point was there any explicit mention of a time period, or a commitment not to reopen the investigation.

“I close the door, does that mean I’m never going to open it again?” she asked, in a somewhat testy exchange.

Following the analogy, Michel said that it would be “quite surprising” in some contexts for Pan to “immediately reopen the door.”

“But we’re not talking about immediately. You’re saying that this says ‘never again,’” Pan contended.

Michel clarified that it was NAR’s understanding that the DOJ could not reopen the investigation unless there were “material changes” to the policies at issue. 

“Where is that in this letter?” demanded Pan.

“I think that’s an interpretation of what it means,” Michel responded.

Another issue at stake was whether NAR had benefited from the letter, and the temporary closure of the investigation, as well as whether the DOJ was potentially setting a bad precedent. NAR has argued that allowing the investigation to reopen would “destabilize” the legal foundation of these types of cases.

Justice Walker asked attorney Fredrick Liu, representing the DOJ, whether allowing the investigation to continue would hamper future investigations. He wondered if other investigation targets might hesitate to enter into agreements with the DOJ because they can’t be sure the investigation “will stay closed for more than half a minute.”

Liu said that the DOJ is “not concerned,” as the department was “very clear” that it could reopen the investigation into NAR, and would have been clear if it was committing not to do so.

“The only reason this contract isn’t more specific is because NAR had no incentive to ask for more specificity. If they had, they already knew the answer,” Liu claimed.

The reason for having the agreement in the first place was because of the change in administrations, with the Trump DOJ happy to wrap up the investigation and take what they could get. But Liu claimed that a commitment not to reopen was “contrary to department policies” and “simply not a plausible reading of this record.”

Walker also questioned Liu on the value of the agreement to NAR, and the short window of the investigation being closed. Liu pointed out that NAR widely publicized the letter, and has entered it into evidence in some of the class action lawsuits, arguing that even if NAR didn’t get what it wanted, there was a benefit received. He also claimed there was “inertia” from the temporary closure, and NAR didn’t have to continue battling in court, even if it was for a short period of time. 

Michel did not dispute this, though he did cite the previous ruling, when a federal judge said the agreement would not be worth the paper it was written on, if the investigation were to reopen.

Walker disagreed, taking an entirely different perspective on what NAR was ostensibly hoping for when they signed an agreement that had no guarantees in the first place.

“You gained the benefit of being pretty confident that if the personnel in the antitrust division didn’t change after the election, you’d be good to go,” he claimed. “But you made that bet, and you lost the bet.”

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