A Few Notes and Thoughts on the Sitzer Trial

A random collection of information, observations and thoughts

As we all know by now, if you’re in the real estate industry, the all-important case of Sitzer v. NAR is in court as I write this. Week two is underway and there have been minor fireworks already. And given how fast things could move, everything I write here could be outdated by the time you read it.

Nonetheless, lacking an overarching theme or decision or anything to consider, I did want to share a few observations, thoughts, and even some color from a source inside the courtroom.

I’ll keep this one public as I think most of the industry is interested and since I didn’t have to read any legal filings and such. Well, not many.

Color from Inside the Courtroom

I had a reader reach out who had been attending the actual trial in person. Said reader, who requested anonymity, relays the following:

Also, you mentioned not knowing much about the jury demographics. It is all male, except for one female juror. There was a second, but we lost her on day 3 or 4 due to her newborn needing surgery. It is also all white, if I remember correctly, save for one male juror. They all have a very mid-western vibe. 

The plaintiff's side of the courtroom is interesting. Ketchmark's elderly, midwestern parents are there every day. His son has been there. Children of folks who have worked on the case in different aspects come to observe the trial and meet a *real-life* judge. There are very few lawyers on that side, just *regular* people. And some of the lawyers that aren't up front are dressed a bit more casually. It feels like a small-town, town square on their side. 

The defendants side, however, is all corporate America. Three tables of 4-6ish lawyers  up front. Then 2-3 rows of suited lawyers behind the rail. There are typically very few people that aren't either a lawyer or a reporter on that side. It feels very imbalanced to me on that front. We look like "the man". 

Most of what I witnessed was the plaintiff's side, which was a bit brutal. All self-inflicted pain by the corporate defendants. NAR has had a great defense, honestly. If NAR stood alone, they might have a better chance. I will admit that I don't understand / haven't been able to ask if it is possible for defendants to end up with different verdicts. 

I find this fascinating color commentary — especially the highlighted parts.

I am not a litigator and never have been, but I have a friend from law school days who is a high level litigator. He once told me that he pays particular attention to how he dresses for court because coming off as a big New York sharpie in $3,000 suits is not necessarily what you want. Contrary to TV legal dramas, he said it isn’t the smartest lawyer who wins but the one most able to connect to the jurors.

Which leads to this observation from my source:

For some reason the HomeServices lead lawyer doesn't feel like he comes off well to the jury. He's too stiff, too old (no offense to him). KW's lead attorney and Glass [NAR’s lead attorney] connect much better. 

Not saying the defense team is not connecting or that the “midwestern vibe” jury has already decided… and Kansas City isn’t exactly rural America… but these are interesting observations from someone who’s been there.

But that color leads to…

If the Industry Loses, It’ll Be By Our Own Words and Deeds

As the source said, there was a lot of “self-inflicted pain by the corporate defendants.” Let me quote my source again:

You could tell none of the tapes of the corporate folks and their scripts played well with them. The tape of Gino Blefari telling his story on how to script commissions played horribly in the room. It felt smarmy, with the clip they played. I wasn't there for the Tom Ferry tape this week, which was a nightmare - and turned out not to have been admitted into evidence.

One of the more important pre-trial rulings and decisions was the one the plaintiffs made not to have over 600 telephone calls from REX introduced… except as a counter. Here’s the relevant page from the filing:

If they are anything like some of the telephone calls that Trelora — a now-defunct brokerage out of Denver who first did the “no compensation” thing — recorded, just playing a few of those for a Midwestern-values jury would have been incredibly damaging.

I say this because I also have personally seen brokers and agents saying all kinds of absolutely batshit crazy stuff all over social media… as if these lawsuits were not pending. They indict themselves with every post, and seem completely unaware of what they’re doing.

On the Tom Ferry podcast recording… I’ve already tweeted that Allan Dalton did immeasurable damage. In case you didn’t see the video on Inman or via my tweet, here it is:

I note that Tom Ferry took down the original video which looks all kinds of bad. Nothing says “guilty” quite like burying the evidence, which everyone has already seen. But whatever!

It is reported that the judge ordered the jury to disregard the Tom Ferry video. Of course, what that does is to make sure that the jury will consider the Tom Ferry video. Try it yourself — try super hard NOT to think about yellow roses. It’s impossible not to think about whatever you were told not to think about.

About that REX Excerpt Above

One observation I make now, because I missed it earlier, is why the plaintiff agreed not to introduce the REX recordings into evidence. Because “The Court has now ruled that the per se rule applies, not the rule of reason.”

I talked about this multiple times here, on Industry Relations, and elsewhere but if the judge really directs the jury to apply the per se rule… the defendants will lose.

It’s because under per se analysis, the only thing the plaintiff has to prove is the existence of the conspiracy. From the Department of Justice primer on antitrust:

Per Se Rule: Price fixing, bid rigging and market allocation are among the group of antitrust offenses that are considered “per se” unreasonable restraints of trade. The courts have reasoned that these practices, which invariably have the effect of raising prices to consumers, have no legitimate justification and lack any redeeming competitive purpose and should, therefore, be considered unlawful without any further analysis of their reasonableness, economic justification, or other factors.

So when I read (from Austin Alonzo on Twitter) that HomeServices called an expert witness who testified that “the current buyers agents payment process is necessary because people cannot pay for agents on their own and the process is too hard to navigate alone…” I think to myself… that is completely irrelevant under per se.

NAR could spend the next two weeks putting forth evidence upon evidence that the mandatory compensation rule in the MLS is pro-consumer, that the MLS is the best thing since sliced bread, and so on… and none of it would matter under per se.

The existence of the rule, created by a committee of competitors (because that’s what any trade association is), is evidence of a conspiracy.

About Conspiracy

And it isn’t “conspiracy” the way normal English speakers understand. Rodney Gansho, NAR’s Director of Engagement, is one of them. From Inman:

Ketchmark produced a 2018 email Gansho wrote in which he told attorney Mitch Skinner of the Council of Multiple Listing Services that “continued failure” to adopt the mandatory rules could lead to charter revocation for the local association that owns and operates the MLS. It could also lead the local association to remove officers from the MLS because they have “effective control” of the MLS.

Gansho also inadvertently provided Ketchmark with some ammunition. Gansho told him that when HomeServices’ Jon Coile or anyone else serves on a NAR committee they owe a fiduciary duty to NAR. Ketchmark seized on this aspect of the alleged conspiracy, to which Gansho angrily replied, “There’s no conspiracy here.”

Unfortunately for Rodney, for NAR, for Keller Williams and HomeServices, “conspiracy” in antitrust law doesn’t mean smoke filled back rooms. The DOJ’s Primer again:

In effect, the conspiracy must comprise an agreement, understanding or meeting of the minds between at least two competitors or potential competitors, for the purpose or with the effect of unreasonably restraining trade. The agreement itself is what constitutes the offense; overt acts in furtherance of the conspiracy are not essential elements of the offense and need not be pleaded or proven in a Sherman Act case.

…

The agreement need not be embodied in express or formal contractual statements. It must merely constitute some form of mutual understanding that the parties will combine their efforts for a common, unlawful purpose. The ultimate success of the venture is immaterial as long as the agreement is in fact formed.

It goes on. To be found liable/guilty under Sherman Antitrust Act, all you have to do to be liable is to join this “some form of mutual understanding” intentionally. Like joining an MLS that has the compensation rule. Or forcing your franchisees to become NAR members or comply with the NAR Code of Ethics. That’s all it takes to be part of the “conspiracy.”

On Steering

I read from Inman’s reporting that Krista Wilson, SVP at ReeceNichols, said steering doesn’t happen:

Krista Wilson, senior vice president of brokerage at ReeceNichols, also testified. She and Frazier told jurors commission-based steering doesn’t happen today because buyers can see homes online, sometimes even before their agents do.

“I would say it’s impossible,” Wilson said, referring to steering.

Still, Frazier [Mike Frazier, CEO of ReeceNichols] admitted that if a listing offered a lower commission that that would reduce buyer agents’ motivation to show a home. “That’s human nature,” he said. “There won’t be an incentive.” Plaintiffs’ attorney Michael Ketchmark then asked whether buyers assume that there’s something wrong with a home when it sits on the market. “In this market, yes,” Frazier said.

Since the plaintiffs reserved the right to introduce the 600 REX phone calls recordings if defendants claim steering doesn’t exist, I find it odd that they haven’t done that.

In fact, since I think this entire case turns on steering, I find it odd that Ketchmark hasn’t done more to hammer this point home.

Maybe he doesn’t think it’s necessary because steering is so obvious to the jury. Why argue something you’ve already won on, I guess?

Anyhow, let’s leave things there for this dispatch. We will, of course, be watching the conclusion of the trial closely and once there is a decision, we’ll be all over it.

-rsh

As there is no particular theme of any kind, the musical selection for this one is simply one of my favorite kpop bands with one of their best from the 90s. If you have teens who are into BTS or Blackpink, introduce them to Loveholic — a true musician rather than just dancers who can sing.