Appeals Court Allows DOJ to Reopen NAR Inquiry

WASHINGTON – The U.S. Circuit Court of Appeals in Washington, D.C., ruled Friday that the Department of Justice is not barred from re-opening its investigation into the National Association of Realtors.

That probe had looked at how real estate agents have been compensated under a longtime system that many critics say has led to higher home costs and more incidents of illegal price-fixing.

Judge Florence Pan wrote in the opinion, "As framed by the parties, the issue before us is narrow. DOJ argues only that the plain language of the closing letter does not bar it from reopening its investigation and issuing a new CID regarding the Participation Rule and the Clear Cooperation Policy. We agree."

NAR said it is "evaluating next steps."

"NAR believes that the government should be held to the terms of its contracts," NAR spokesman Mantill Williams said.

At issue was whether the DOJ could re-open an antitrust investigation into the NAR Cooperation and Participation Rule.

The National Association of Realtors agreed to a $418 million damages settlement in March to eliminate its rules on commissions. The DOJ, in turn, agreed to close its investigation.

The deal is pending a federal court approval decision.

According to court filings, a DOJ letter to the National Association of Realtors stated that DOJ's antitrust division "has closed its investigation into NAR's Clear Cooperation Policy and Participation Rule. Accordingly, NAR will have no obligation to respond" to DOJ's civil investigation demands.

Judge Pan wrote, "The fact that DOJ "closed its investigation" does not guarantee that the investigation would stay closed forever."

Referencing the DOJ letter, the opinion written by Pan added, "The plain meaning of that provision is that DOJ closed its then-pending investigation and relieved NAR of its obligation to respond to two specifically identified CIDs. We discern no commitment by DOJ – express or implied – to refrain from either opening a new investigation or reopening its closed investigation, which might entail issuing new CIDs related to NAR's policies."

So Friday's decision allows the DOJ to re-open its NAR investigation should it wish to do so.

In a dissenting opinion Circuit Court of Appeals Judge Justin Walker wrote, "The Realtors agreed to give up four policies that DOJ considered anticompetitive. In exchange, DOJ promised that it had "closed" its investigation into two other policies."

Walker said DOJ's agreement with the Realtors said it would close its investigation.

Walker added, "The sole question is – what did DOJ give up when it "closed" the investigation? Nothing, if we believe DOJ. As it sees things, it could immediately reopen its investigation because anything "closed" can be reopened at any time. No court identified by DOJ has endorsed such a reading. Nor should we. Because DOJ misreads one isolated word ("closed") to nullify what the Realtors gained from an otherwise comprehensive and comprehensible contract, I respectfully dissent."

Pan, however, said the dissent statements "overlook that NAR agreed to the term of the settlement agreement that gave DOJ the unfettered right to withdraw its consent at any time."

Friday's ruling could open a path for the DOJ to get involved in a Missouri lawsuit in which a jury found that the NAR and others conspired to artificially increase real estate commissions. That judgment also hinged on the NAR's Participation rule.

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