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Zillow is inviting nemesis REX Real Estate to join forces against a controversial National Association of Realtors’ rule, even as a battle of wills between the three rages on in court.
About two weeks ago, after reports that departing REX employees were allowed to keep their laptops as “severance” and that one employee wiped potential evidence from her laptop, Zillow asked a federal court to order the discount brokerage to turn over a list of the 250 or so employees who have left REX since January 2021 and to state whether they were allowed to keep REX-issued laptops.
On Tuesday, REX pushed back against Zillow’s motion to compel, telling the court that Zillow’s request is a “fishing expedition” that aims to embarrass REX before the court.
“Zillow has neither a legal nor factual basis to warrant this intrusive discovery,” attorneys for REX wrote in a legal filing. “What it wants is to harass REX and tarnish it in the eyes of the Court. Its attempt should be rebuffed.”
The brokerage added that the decision of former employee Angela Cook to “wipe” her REX-issued laptop in order to gift it to a relative did not result in any loss of documents or data because she uploaded “all of her REX work product” to REX’s cloud-based systems before she voluntarily left the company in March. In a legal filing, Cook said she purchased the laptop from REX at a discount upon her departure.
REX sued NAR and Zillow in March 2021, alleging antitrust violations for a NAR rule called the no-commingling rule which prompted Zillow to separate non-MLS listings from MLS listings on its website, including listings from REX. When reports indicated that REX was closing shop in May, REX blamed NAR and Zillow for the death of REX’s business model. REX currently has four employees, said Michael Toth in a Sept. 3 legal filing. Toth was REX’s general counsel until May.
According to Zillow spokesperson Viet Shelton, Zillow will be submitting a formal response to REX’s latest filing and Zillow continues to believe the claims in REX’s suit are “without merit,” he told Inman in an emailed statement.
But the real estate giant also suggested that REX and Zillow team up to rid the real estate industry of the no-commingling rule.
“[W]e continue to encourage REX to join Zillow in advocating for industry rule changes that would allow all for-sale listings displayed on Zillow to appear the way they were in the past,” Shelton said.
Inman recently published an op-ed, authored by Zillow Senior Director of Broker Operations Matt Hendricks, applauding a decision by the largest MLS in Colorado, REcolorado, to rescind the optional no-commingling rule and expressing the hope that other MLSs would follow suit.
“Zillow strongly supports updating policies like these because they empower consumers and provide a more accessible, transparent picture of what is on the market, helping them make better-informed real estate decisions,” Hendricks wrote.
Shelton told Inman that Zillow isn’t just pushing for MLSs to opt out of the no-commingling rule, but also wants NAR to eliminate the rule. Zillow, which is a broker member of NAR, has petitioned NAR’s MLS Technology and Emerging Issues Advisory Board, which is a subset of NAR’s Multiple Listing Issues and Policies Committee, to get rid of the rule, according to Shelton.
The advisory board typically reviews proposed MLS policy changes and decides whether to send them to the full committee for consideration. If the committee approves the proposed changes, they then go to NAR’s board of directors for a vote. NAR’s board typically meets twice a year and routinely votes on MLS policy changes. Zillow said details on the status of its petition were not immediately available.
Asked for comment on Zillow’s push to eliminate the no-commingling rule, NAR spokesperson Mantill Williams told Inman, “Per NAR guidelines, individual MLSs choose how their listings are displayed. MLSs provide consumers with the most accurate, transparent and up-to-date information on local home listings.”
Meanwhile, REX has filed two motions to compel against NAR in its case, demanding NAR produce documents related to two major antitrust commission lawsuits the trade group is fighting, known as Moehrl and Sitzer/Burnett, and that NAR add senior executives — including NAR CEO Bob Goldberg, NAR General Counsel Katie Johnson and NAR Chief Economist Lawrence Yun — to its list of data custodians required to turn over evidence during the case’s discovery phase.
According to one of REX’s filings, there is a “hand-in-glove relationship” between the no-commingling rule, which REX calls the segregation rule, and a NAR rule that requires listing brokers to offer buyer brokers a commission to list a property in a Realtor-affiliated MLS. That rule, which REX calls the buyer-broker commission rule, is the subject of Moehrl and Sitzer/Burnett.
Because of that alleged relationship, REX is asking the court to force NAR to fork over all documents relating to or produced by NAR in the Moehrl and Sitzer/Burnett cases.
“All three cases tell the same story: NAR, along with NAR’s co-conspirators, has crafted and enforced the Buyer-Broker Compensation Rule and associated anticompetitive rules to maintain artificially high real estate commissions,” attorneys for REX said in a motion to compel.
“In other words, there is substantial overlap in both facts and law across the three cases. While NAR will likely argue that this case challenges the Segregation Rule, not the Mandatory Buyer-Broker Commission Rule, the Segregation Rule does not exist in a vacuum. It serves to protect the Buyer-Broker Commission Rule from innovative and disruptive companies like REX.”
In a separate motion to compel NAR to comply with the court’s “electronically stored information” (ESI) order, REX’s attorneys requested that the court order NAR to add seven additional custodians to provide information relevant to the case:
- Bob Goldberg (NAR’s CEO)
- Katherine “Katie” Johnson (NAR’s general counsel and chief member experience officer)
- Kate Lawton (NAR’s vice president of membership experience)
- Kevin Milligan (NAR’s former vice president of board policy and programs)
- Diane Mosley (NAR’s director of training and policy resources)
- Clifford Niersbach (NAR’s former associate general counsel and vice president of board policy and programs)
- Lawrence Yun (NAR’s chief economist)
“Each of these individuals has had significant responsibility for NAR’s response to competition from internet-based providers and the development and enforcement of NAR’s rules and policies limiting both how homes are listed online and the negotiation of commissions,” REX’s attorneys wrote.
Regarding Goldberg specifically, an attorney for REX noted that Zillow had admitted in responses to written questions from REX that “Goldberg was involved with Zillow’s decision to join NAR.”
Therefore, the attorney said, he likely has information “relating to Zillow’s decision to join NAR and NAR’s assessments, strategies and activities directed at protecting its membership from competing technology-based platforms trying to offer discounted, direct, or more transparent real estate brokerage services. These are all matters relevant to this case.”
Zillow declined to comment on how Goldberg was involved in the company’s decision to join NAR.
According to REX’s filing, NAR has thus far only identified two custodians, Rodney Gansho and Rene Galicia, whom the filing describes as “two low-level executives who appear from NAR’s descriptions to have had no involvement in high-level policy decision-making and whose job responsibilities place them only on the periphery of the challenged anticompetitive conduct.” Gansho is NAR’s director of engagement and Galicia is NAR’s former director of MLS engagement.
The seven proposed custodians are already ESI custodians in the Moehrl and Sitzer/Burnett cases and all are affiliated with “highly relevant” committees and work groups at NAR, such as the Multiple Listing Issues and Policies Committee, the Strategic Business Innovation and Technology (SBIT) group and the Research group, according to the filing,
“At all times, NAR has complied with the court’s orders and rules, even when the plaintiff has not,” NAR’s Williams told Inman in an emailed statement. “We expect the court to agree with our well-founded positions.”
NAR filed its own motion to compel against REX insurer PIUS last month and that motion is still pending.