Grace v. National Association of Realtors

Background

Christina Grace filed a putative class action against the National Association of Realtors, Bay Area Real Estate Information Services, Inc. (BAREIS), and other real-estate defendants. Her amended complaint no longer named the National Association of Realtors as a defendant. It alleged that the defendants participated in an agreement that required sellers to pay compensation to buyers’ brokers, allegedly resulting in inflated commissions and incentives for buyers’ brokers to steer clients toward listings offering greater compensation.

Grace alleged that BAREIS Rules 11.2 and 11.5 caused the challenged arrangement. She asserted claims under Section 1 of the Sherman Act, the California Cartwright Act, California’s Unfair Competition Law, and unjust-enrichment principles.

BAREIS’s Motion to Dismiss

BAREIS moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court considered BAREIS’s rules, including rules cited by BAREIS beyond Rules 11.2 and 11.5.

The court found a disconnect between Grace’s description of the rules and their text. Rule 11.2 described a blanket, unilateral offer of compensation “if any,” which meant the rule did not require an offer of compensation because an offer of zero dollars was possible. The court also read Rule 11.5 as preventing a buyer’s broker from using an already executed purchase offer to obtain an agreement changing compensation. The rule expressly allowed the listing broker and buyer’s broker to enter into a mutual agreement to change compensation.

The court held that Grace had not plausibly alleged that the challenged anticompetitive arrangement flowed from the language of BAREIS’s rules rather than from how the rules might be used in the real world. It therefore GRANTED BAREIS’s motion to dismiss. The court also granted Grace leave to amend because it could not rule out the possibility that she could reframe her allegations or add facts supporting an anticompetitive-practices claim. The amended complaint had to be filed within 28 days and could not assert new claims or name new defendants without the court’s permission.

Motions to Stay and Join

Certain Released Defendants—the specified Realtor defendants, Twin Oaks Real Estate, Inc., and Vanguard Properties, Inc.—asked the court to stay the entire case or, alternatively, the proceedings against them. Their request relied on a recently announced $418 million nationwide class-action settlement involving the National Association of Realtors and related subject matter. Windermere moved to join the stay request.

The court concluded that staying proceedings against the Certain Released Defendants was warranted because a stay would reduce duplicative litigation, conserve judicial resources, and conform to a Missouri court’s preliminary injunction concerning putative class members and released parties. The court declined to stay the entire case because Grace could continue pursuing claims against defendants not released by the National Association of Realtors settlement or other nationwide settlements.

The court therefore GRANTED IN PART and DENIED IN PART the Certain Released Defendants’ motion to stay and DENIED Windermere’s motion for joinder. It stayed proceedings against the Marin Association of REALTORS®, North Bay Association of REALTORS®, Northern Solano County Association of REALTORS®, Solano Association of REALTORS®, Inc., Twin Oaks Real Estate, Inc., and Vanguard Properties, Inc., until 30 days after the Western District of Missouri ruled on final approval of the National Association of Realtors settlement. The parties also had to file joint status reports every 90 days and notify the court within 48 hours of final approval and entry of judgment in that action.

Other Direction

The court ordered the parties, including the Realtor defendants, to show cause why two other motions to dismiss and join should not be terminated without prejudice to renewal if the National Association of Realtors settlement was not approved. The parties were directed to file a joint response of no more than one page by June 4, 2024.