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The trial that has the potential to shake up the real estate industry officially began Tuesday with opening statements from both sides, as well as heavyweights Keller Williams co-founder Gary Keller, HomeServices of America CEO Gino Belfalli, Bob Goldberg, CEO of the National Association of Realtors, testified.
In opening statements, both sides were tasked with educating the nine jurors, some of whom are homeowners and some of whom are not, about the ins and outs of the real estate industry. At the same time, he had to convince them of the merits of his NAR policy, known as the Rules of Participation. Participation rules require a listing agent to make an offer of compensation to a buyer agent in order to submit a property to a real estate agent. -Affiliated multiple listing service.
Plaintiffs’ attorney Michael Ketchmark of Ketchmark & McCreight began his opening statement.
“This is a refund case,” Ketchmark told a room of about 100 people.
The plaintiffs are asking the defendants to “return the money” they believe was illegally taken as a result of the alleged collusion between the defendants. According to Ketchmark, 265,297 homes were sold during the period, home sellers paid an average of $6,700 to buyer’s agents at the time of sale, and damages amounted to up to $1.78 billion. It is said that it has reached .
“Let the free market decide,” Ketchmark said. “Why is this a mandatory rule? If it’s so good, make it voluntary. Why not put it in MLS where everyone can see if it’s being followed?”
Ketchmark focused on Keller’s deposition testimony, which Ketchmark called “brazen.”
Ketchmark noted that Keller wrote in his book that the industry has evolved into a system of “cooperative competition” or “cooperative competition.”
“It’s not a competition,” Ketchmark said.
Later, when the plaintiffs were scheduled to begin their arguments, the first person Ketchmark called to testify was Keller, who appeared in court via video deposition. Keller confirmed that Keller Williams is seeking its affiliated agencies to join NAR in order to gain access to local MLS.
The exchange between Mr. Keller and Ketchmark during the deposition turned sour, with Mr. Keller pushing back, saying he had talked about the commission at a Keller Williams event.
Mr. Ketchmark showed Mr. Keller a video from the KW Family Reunion in which Mr. Keller showed a slide showing the average commission earned by KW agents between 2002 and 2019. Despite the slide, Keller said: “We didn’t talk about commissions.” I reported the numbers and got off stage. ”
He added that the presentation was not a “conversation about bills” but “a model to explain how money flows.”
Similarly, when Ketchmark points to a page in Keller’s book, millionaire real estate agent, noting that both sides of a real estate transaction receive an average 3% commission, Keller said: This is just a money flow model. ”
“Nowhere in the book does it mention fees other than to explain the money flow. And I say average,” Keller added.
Mr. Ketchmark asked whether Mr. Keller believed agents were wrong to steer buyers away from properties that offered lower buyer agent fees.
“I think that’s wrong,” Keller said.
“I haven’t seen any evidence of that,” he added.
In a similar antitrust case known as Mole, Ketchmark said Keller Williams’ training script was used by the Austin-based brokerage firm and franchisor to drive buyers away from listings offering low commissions and by sellers to induce them. This was cited as evidence that the company was dissuading buyers from offering lower broker fees. This keeps buyers’ brokerage fees at standard levels of around 3%.
Ketchmark presented to the jury Keller Williams University “Script Catalog” for “Seller Collaboration” It includes the following recommended scripts:
Keller Williams training script images
“I have never seen this document,” Keller said in his deposition. He adds that there’s nothing wrong with telling sellers that they may have a “singular agent” at the helm, and that agents should explain all contingencies and help sellers make the best decision for themselves. He added that it was “fair” to say it should be supported. .
“I’m really offended by your point about real estate agents trying to scare sellers, so I’m going to disagree with that,” Keller said.
He said the training script, one of perhaps dozens, does not tell agents how to do something, but is “an example of how someone has done something.”
Ketchmark asked Keller about the Inman article, which included data on commission rates from Keller Williams’ research division. He pointed to an email after the article was published in which Keller told staffers “well done,” and noted that the data came from the department.
“Why did you want Inman to publish this?” Ketchmark asked. “Did you want your competitors to know you were keeping a piece of the deal?”
“Um, no,” Keller replied.
Mr. Ketchmark noted that Mr. Keller had previously said that he and others in the industry should not discuss fees.
“So why are we releasing this information?” Ketchmark asked.
Mr. Keller responded that he did not know where Mr. Inman got the information, even though Mr. Inman himself sent the email.
Ketchmark also took deposition testimony from Brefalli. Mr. Ketchmark played a training video in which Mr. Blefali asked the agent if he had previously entered into a listing agreement with a 6% commission and whether the seller could negotiate the commission. If the price is negotiable, they say, “But all I can do is raise the price.”
“I showed them what I did so they could learn from it,” Brefali told Ketchmark in his deposition.
“I never believe that it is appropriate to fix fees. I believe that training is essential.”
Ketchmark asked whether it wasn’t “classic price manipulation” to gather competitors, train them to write 6% on their contracts, and then tell sellers they can only raise prices from there.
“No, we’re just negotiating,” Brefari said in his deposition.
“I’m going to prove that’s not the case,” Ketchmark told the jury.
Mr. Brefali then said he was working for a brokerage that had a minimum commission requirement of 6 percent at the time. Ketchmark later pointed out that he didn’t explain that to viewers of his training videos.
In a training video, Brefali told the agency, “The only way you can eliminate competition is to include it,” he added with a laugh. “Our legal team would like to say we remove consumers from consideration rather than physically disposing of them.”
In his affidavit, Mr. Ketchmark asked Mr. Brefali whether he agreed that a unilateral offer of compensation was the primary basis for MLS, to which Mr. Brefali responded, “Yes.”
He asked Brefali if he thought it was appropriate for HomeServices affiliates to charge only a 6% commission and split it with buyer agents, to which Brefali also replied, “Yes.”
During Mr. Goldberg’s deposition testimony, Mr. Ketchmark focused on NAR’s Real Estate Services (RES) group, which is listed as a committee on NAR’s website, but Mr. Goldberg is an advisory group, Ketchmark said.
RES members include senior executives from defendants and other industry participants. For example, in an April 2018 email in which Mr. Goldberg encouraged Mr. Keller to join the group, Mr. Goldberg said that Mr. Blefali, Sherry Criss of Better Homes and Gardens Real Estate, The members include Craig Cheatham, CEO of The Realty Alliance, and Mike Ryan of RE. /MAX.
Ketchmark said former NAR CEO Dale Stinton suggested that NAR itself should produce minutes of all committee meetings so that it could prove that: It noted that the group said the minutes of the meeting should not be kept to keep what happened at the meeting confidential. No illegal activity occurred.
“It’s easier to concoct a plot that doesn’t take minutes, right?” Ketchmark joked.
Goldberg denied the allegations, saying the decision not to keep minutes was “made to encourage candid conversation” and that “no malicious conversations took place within this group.” did.
Although it is not yet the defendant’s turn to defend himself in court, NAR attorney Ethan Glass argued in his opening statement that the NAR is a voluntary association of 1.6 million people, with the average member being 60 years old. An old lady with her own business.
“These are people who live and work in our community,” Glass said.
“NAR does not set fees of any kind,” Glass said, and does not force sellers to pay anything. “Everyone has the right to know how much they will be paid before doing the work.” he emphasized.
“This rule has been in existence and published for 25 years,” Glass said on the NAR website.
“What conspiracies are going around? There aren’t any.”
“They’re trying to come up with something good” that will benefit sellers by increasing demand for listings, he added.
Attorney Robert McGill made opening statements for HomeServices and its subsidiaries BHH Affiliates and HSF Affiliates.
He argued that the home service company never directed anyone to follow or enforce NAR’s commission rules, and that the rules themselves did not cause harm “of any kind.”
Attorney Timothy Ray, representing Keller Williams, said the home-sale plaintiffs entered into contracts that allowed them to benefit from the work of their agents, agreeing to a “fair commission,” which they agreed to pay with the buyer’s agent. He emphasized that he understood that it would be a 50-50 split.
“But in this case, the plaintiffs want a do-over,” Ray said.
Ray said Keller Williams did not cooperate with NAR or other defendants to enforce NAR’s rules.
“Keller Williams has always followed its own path in the industry,” he said.
“They claim that Gary Keller is telling thousands of agents how much they should charge,” Ray added.
“They want us to believe that the Missouri investigators are blindly following what Gary Keller says. Nothing can be any different from the truth.”
He said Keller Williams will ask the jury to award him zero dollars in damages.
The trial ended just after 5 p.m. and is scheduled to begin again Wednesday at 8:30 a.m.
“On behalf of 500,000 Missourians, I’m glad this case will finally go to trial,” Ketchmark told Inman in a phone interview after court adjourned for the day.
“It’s clear that the defendant companies are desperately trying to hang on to this system. A jury will have a chance to dismantle this cartel.”
At the end of the day, he said, a real estate agent in the audience came up to him, gave him a hug and said, “Thank you.”
“She asked if I would represent real estate agents in a class action lawsuit against these defendants,” Ketchmark said, adding that her current focus is on home seller clients.
“But the idea that these big companies or NAR are the voice of real estate agents is simply not true.”
Case in point: Ketchmark plans to release testimony from real estate broker and whistleblower Linda O’Connor on Wednesday. When O’Connor was a member of NAR’s Professional Standards Committee in 2012, she warned the industry group that the committee’s rules were “the ultimate.” It is a type of trade restriction” and should be abolished.
“In many ways, she is the true hero of this story,” Ketchmark said.
“She tried to stop this a long time ago, but it was shut down.”
