A new legal filing could blow a $1 billion hole in the National Association of Realtors’ (NAR) landmark settlement over buyer agent commissions, and set off a legal and financial chain reaction the industry hasn’t truly reckoned with.
Last week, Tanya Monestier, a law professor and class member in the Sitzer/Burnett case, filed her reply brief in the 8th Circuit Court of Appeals. Her aim? To convince the court to vacate the settlement that promised modest payouts to home sellers and minor rule tweaks by NAR. Based on her arguments, she may have a real shot.
In plain English, Monestier is saying this: the settlement doesn’t hold up under the law, wasn’t fair to the class it was meant to help, and the court didn’t have the authority to approve it in the first place.
The first and most critical point is about Article III standing. That’s the constitutional requirement that someone asking a court to act must have a real, imminent harm to be addressed. Monestier argues, and backs it up well, that the plaintiffs in this case only proved they were harmed in the past by commission rules. They can’t show a future injury, which means they had no standing to ask the court for injunctive relief (like changing NAR’s rules). Without that standing, the court wasn’t allowed to approve that part of the deal.
Then there’s the issue of whether the settlement was actually fair and reasonable. According to Monestier, it wasn’t even close. On average, the 40 million sellers in the class would get about $16 each, or about 0.1% of the $10,000 in commissions they allegedly overpaid. Meanwhile, the attorneys would walk away with $333 million.
And the so-called “practice changes”? Monestier points out that the most significant rule change—removing offers of buyer broker compensation from the MLS—is both cosmetic and easily bypassed. The deal doesn’t prevent steering or enforce compliance in any meaningful way. In fact, she argues that the entire enforcement mechanism boils down to NAR giving itself a passing grade.
If the court agrees with Monestier and overturns the settlement, it wouldn’t just invalidate the $1 billion fund. It could also restart the clock on all the other copycat lawsuits the settlement was meant to resolve. And it would force NAR and the brokerages back to the table under far worse terms, if they can afford to come to the table at all.
It’s hard to overstate the stakes here. If the 8th Circuit throws out the settlement, the real estate industry could be staring down a financial burden that simply isn’t payable. That opens the door to bankruptcies, fire sales, or even a government-backed rescue, possibly with regulation attached.
Most in the industry are still betting the court won’t pull the trigger. But Monestier’s brief makes it harder to dismiss the possibility. At a minimum, smart brokers, MLSs, and franchise execs ought to be asking: what’s Plan B if the settlement gets tossed?
Because there’s now a very real chance that this isn’t over. Not even close.