Nosalek v. MLS Property Information Network, Inc.

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

JENNIFER NOSALEK, RANDY

HIRSCHORN, and TRACY HIRSCHORN

individually and on behalf of all others

similarly situated,

Plaintiffs,

v. CIVIL ACTION NO. 20-12244-PBS

MLS PROPERTY INFORMATION

NETWORK, INC., REALOGY HOLDINGS

CORP., HOMESERVICES OF AMERICA,

INC., BHH AFFILIATES, LLC, HSF

AFFILIATES, LLC, RE/MAX, LLC, and

KELLER WILLIAMS REALTY, INC.,

Defendants.

MEMORANDUM AND ORDER ON PLAINTIFFS’ MOTION TO COMPEL

AS TO DEFENDANT REALOGY HOLDINGS CORP. (#129)

KELLEY, U.S.M.J.

I. Introduction.

This is a putative class action alleging that MLS Property Information Network, Inc.

(“MLS PIN”) and several large real estate brokerages, including defendant Realogy Holdings

Corp. (“Realogy”), conspired to artificially inflate the commissions paid to buyer-brokers in

violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiffs allege that the MLS PIN

rules—a set of rules governing Pinergy, a centralized database of property listings in

Massachusetts, Rhode Island and parts of New Hampshire (the “Covered Area”) that is owned and

operated by MLS PIN—prevent buyer-broker commission rates from falling to competitive levels

by facilitating steering away from brokers who attempt to offer their clients lower rates. In

particular, plaintiffs claim that Section 5 of the MLS PIN rules (“Section 5”) requires listing

brokers to specify the compensation rates offered to buyer-brokers as part of a home’s Pinergy

listing, effectively ensuring that only those listings that offer standard buyer-broker commission

rates will be shown to prospective buyers. Plaintiffs allege that Realogy and the other above-

captioned broker defendants joined the conspiracy by requiring their franchisees and agents to

participate in MLS PIN and follow Section 5.

Plaintiffs now seek discovery regarding the nationwide implementation of a nearly

identical rule promulgated by the National Association of Realtors (the “NAR Rule”), as well as

substantively identical rules governing geographic regions outside the Covered Area. Realogy

argues that discovery should be defined by the bounds of plaintiffs’ Amended Class Action

Complaint (#110), which is limited to the MLS PIN rules and the Covered Area. For the following

reasons, plaintiffs’ motion to compel (#129) is GRANTED in part and DENIED in part.

II. Background.

The facts of this case are complex and are set out here only to the extent necessary to put

the present discovery dispute in context. This court assumes familiarity with Judge Saris’s Order

and Memorandum on defendants’ motions to dismiss (#94), which summarizes the facts of the

case and analyzes plaintiffs’ claims in detail.

a. The Alleged Conspiracy.

MLS PIN owns and operates Pinergy, an electronic database of properties referred to as a

“Multiple Listing Service” or “MLS” that operates in the Covered Area. (#110 ¶ 9.) Because the

platform lists the “vast majority” of homes for sale in the Covered Area, plaintiffs claim that

“[l]isting a property for sale on Pinergy is essential to marketing a property effectively to

prospective buyers.” Id. ¶¶ 36-38.

MLS PIN promulgates the rules and regulations for Pinergy. Id. ¶¶ 35, 43. Section 5 of

the rules requires seller-brokers to offer compensation to the buyer-brokers on the other end of a

transaction. Id. ¶ 44. Under the rule, seller-brokers must publish on each listing a blanket,

unilateral commission offer to the buyer-broker, to be paid by the seller after the home is sold. Id.

¶¶ 44-46. Since buyer-brokers represent buyers and are adversarial to sellers, plaintiffs allege that

there is no rational basis for sellers to pay buyer-brokers’ fees, other than to artificially inflate

commission rates and impede lower-priced competition. Id. ¶¶ 64-66, 71. Moreover, plaintiffs

allege that if a commission offer is lower than “standard” on a property listing, many buyer-brokers

will “steer” home buyers away from that property and toward homes offering higher commission

rates. Id. ¶ 74. By “facilitating steering,” Section 5 “prevents rates from falling to competitive

levels and enables brokers to avoid doing business with or otherwise retaliate against brokers who

attempt to offer materially lower rates.” Id. ¶ 80.

Realogy is the nation’s largest real estate brokerage company. Id. ¶ 10. It owns, operates,

and franchises many real estate brokerage firms, including Century 21, Coldwell Banker,

Sotheby’s International Realty, The Corcoran Group, Better Homes and Garden RealEstate,

ZipRealty, ERA Real Estate Citi Habitats, and Climb Real Estate. Id. Its representatives sit on

the MLS PIN board, (id. ¶ 9) and are members of the National Association of Realtors. The other

broker defendants are similarly prominent in the residential real estate market across the Covered

Area and nationally. See id. ¶¶ 11-13; #130 at 4.

Plaintiffs allege that Realogy, along with the other broker defendants, joined MLS PIN’s

conspiracy by requiring its franchisees and agents in the Covered Area to participate in MLS PIN

and follow its rules. Id. ¶ 105. As a result, nearly all residential real estate brokers and their

affiliated agents in the Covered Area are Pinergy members and are obliged to follow Section 5.

Id. ¶¶ 36, 40.

b. The National Association of Realtors (“NAR”) Rule.

The National Association of Realtors (“NAR”) does not make a substantive appearance in

plaintiffs’ Amended Class Action Complaint—plaintiffs’ allegations challenge Section 5 and their

scope encompasses the Covered Area. See generally #110. Nonetheless, NAR is front and center

in this discovery dispute, so the court will briefly summarize the organization and its role here.

According to its website, NAR is “America’s largest trade association, representing 1.5

million members, including NAR’s institutes, societies, and councils, involved in all aspects of the

residential and commercial real estate industries” across the United States.1 According to

plaintiffs, since at least 1993 NAR has included a “cooperative compensation” rule (the “NAR

Rule”) in its nationwide Handbook on Multiple Listing Policy. (#130 at 3.) The NAR Rule is

currently the subject of two federal antitrust lawsuits, both of which name Realogy as a defendant

and both of which have survived motions to dismiss under Fed. R. Civ. P. 12(b)(6). See generally

Moehrl v. Nat’l Assoc. of Realtors, 492 F. Supp. 3d (N.D. Ill. 2020) (“Moehrl”); Sitzer v. Nat’l

Assoc. of Realtors, 420 F. Supp. 3d 903 (W.D. Mo. 2019) (“Burnett”).

NAR is a separate organization from the more localized MLS PIN, and membership in one

is not predicated on association with the other (though members may be, and allegedly are,

associated with both). For instance, plaintiffs allege that Realogy representatives are on the MLS

PIN board (#110 at ¶ 9) and are also members of NAR (#130 at 8). Based on this, and its alleged

1 About NAR, https://www.nar.realtor/about-nar (last visited Sept. 30, 2022).

market dominance, plaintiffs surmise that Realogy is likely active in the governance of both

groups. (#130 at 4.)

Plaintiffs concede that “MLS PIN is not operated by . . . NAR and brokers in the MLS PIN

Service Area are not directly required to follow the NAR Rule as such.” (#130 at 3.) Nonetheless,

plaintiffs allege that when MLS PIN was formed in 1996, it enacted a substantively identical rule—

Section 5. (#130 at 8.) Plaintiffs infer that Section 5 may have been modeled on the nationwide

NAR rule and may be perpetuated by the same anticompetitive goals that allegedly undergird the

national rule. (#130 at 8-9.)

III. The Motion to Compel.

On March 4, 2022, plaintiffs served their first set of requests for production on all

defendants. (#136-1.) Although plaintiffs’ allegations in the Amended Complaint concerned

Section 5 and the Covered Area, their requests were broader. Plaintiffs had defined the term

“Buyer-Broker Commission Rule” in the Amended Complaint as, essentially, Section 5, (#110 ¶ 1)

while in their requests, they defined “Buyer-Broker Commission Rule” as “a rule requiring brokers

or agents to make a specific unilateral blanket offer of compensation to other MLS participates

and includes, but is not limited to, the requirements on listing brokers set forth in Section 5 of the

MLS PIN Rules.” (#136-1 at 2 (emphasis added).) The expanded definition was meant to capture

documents discussing (i) the substantively identical NAR Rule, and (ii) substantively identical

rules enforced in other MLS service areas in which defendants operate (“cousin rules”). (#130 at

2.) Plaintiffs requested:

2. All documents produced by you in any investigation, regulatory

proceeding or lawsuit involving the Buyer-Broker Commission Rule or concerning

any other alleged or actual violations of federal, state, or international antitrust of

similar laws or regulations.

3. All communications with any governmental body or elected official

(or agent or employee thereof) concerning the Buyer-Broker Commission Rule,

including lobbying efforts or other attempts to influence governmental policy,

legislation, or rule-making concerning the Buyer-Broker Commission Rule.

23. All documents relating to the enforcement of the Buyer-Broker

Commission Rule with regard to any Defendant Affiliates.

24. All documents concerning any discussion, review, analysis or

consideration of whether the Buyer-Broker Commission Rule has any effect on the

amount of commissions offered by sellers, the determination or negotiation of the

amount, any revenues and profits generated therefrom, and the offering of

discounted commissions.

25. All documents concerning any discussion, review, analysis or

consideration of whether the Buyer-Broker Commission Rule should be modified

or changed in any way and any communications relating thereto.

26. All documents concerning any discussion, review, analysis or

consideration of whether the Buyer-Broker Commission Rule affects whether

buyer-brokers will “steer” home buyers to the properties that provide the higher

commission.

32. All documents relating to the development or use of standardized

listing agreements relating to the Buyer-Broker Commission Rule, or to the

inclusion of particular provisions in such agreements.

34. All documents that provide interpretations, guidelines or guidance

concerning the Buyer-Broker Commission Rule.

35. All documents relating to any complaints received from any

Defendant Affiliate, private individual, or governmental agency regarding the

Buyer-Broker Commission Rule or the setting of commissions on residential home

sales, and all documents reflecting the handling of and responses to such

complaints.

(#136-1 at 10, 13-14.)

Defendants objected to the requests’ definition of the “Buyer-Broker Commission Rule,”

arguing that, because plaintiffs’ claims challenged Section 5 and alleged injury only within the

Covered Area, discovery outside the Covered Area was irrelevant. (#130 at 5.) Instead, defendants

proposed limiting discovery to within the Covered Area and/or directly related to the MLS PIN

rules. Id. Plaintiffs countered that they were entitled to investigate Section 5 in “the broader

context in which Section 5 was developed,” including documents “concerning the parent NAR

Rule and any ‘cousin’ rules in other non-NAR markets [that] reasonably could lead to relevant

evidence in this action.” Id. In the alternative, plaintiffs requested all discovery produced in the

Moehrl and Burnett cases. (#130-1 at 3.)

After the parties conferred, all of the broker defendants except Realogy agreed to produce

documents concerning “(i) the specific MLS PIN Rule on offers of compensation, and (ii) any

discission as a general matter of rules requiring listing agents to offer cooperative compensation

to buyer agents (a) in MLS PIN’s service area; (b) nationally; or (c) in unspecified geographies

(and thus generally applicable).” (#130 at 5-6.) This compromise covered plaintiffs’ request for

nationwide discovery into the NAR Rule but did not include documents discussing only cousin

rules, unless those documents also discussed MLS PIN. (#130-1 at 1-2.) Further, plaintiffs agreed

that defendants need not replicate the Moehrl and Burnett productions. Id.

Unlike the other broker defendants, Realogy refused to produce any documents outside

the scope of MLS PIN’s jurisdiction. Plaintiffs filed this motion seeking to compel Realogy to

produce all discovery initially requested (all responsive documents concerning (i) Section 5, (ii)

the NAR Rule, and (iii) any cousin rules) or, in the alternative, to produce all discovery which the

other defendants had agreed to provide. (#129.) Realogy responded, claiming such discovery was

irrelevant and/or disproportionate to plaintiffs’ claims. (#136.) The court heard argument on

September 26, 2022. (#140.)

IV. Discussion.

Fed. R. Civ. P. 26(b)(1) permits parties to “obtain discovery regarding any nonprivileged

matter that is relevant to any party’s claim or defense and proportional to the needs of the case[.]”

Montrond v. Spencer, No. 17-cv-10505-ADB, 2022 WL 375297, at *2 (D. Mass. Feb. 8, 2022)

(internal quotes omitted). “On a motion to compel, the party seeking information in discovery

over an adversary’s objection has the burden of showing its relevance.” Controlled Kinematics,

Inc. v. Novanta Corp., No. 17-cv-11029-ADB, 2019 WL 2082354, at *2 (D. Mass. July 15, 2019)

(internal quotes omitted). At the discovery stage, relevance should be “broadly construed,” and

information should be deemed “discoverable if there is any possibility it might be relevant to the

subject matter of the action.” Cherkaoui v. City of Quincy, No. 14-cv-10571-LTS, 2015 WL

4504937, at *1 (D. Mass. July 23, 2015) (internal quotes omitted). Then, “[o]nce a showing of

relevance is made, the party opposing disclosure bears the burden of showing that the requested

discovery is improper.” Controlled Kinematics, 2019 WL 2082354, at *2.

a. Discovery Pursuant to the Agreement with All Defendants Except Realogy.

As set out above, the other broker defendants agreed to produce nationwide discovery

related to the NAR Rule. (#130 at 5-6.) Such discovery is relevant to plaintiffs’ claim, first,

because Section 5 and the NAR Rule are substantively identical and Section 5 almost certainly

was modeled on the NAR Rule. Id. Second, plaintiffs allege that Realogy was involved in, if not

the implementation, then at least the perpetuation of both rules2: (i) Realogy is the nation’s largest

real estate brokerage company, and it owns, operates, and franchises many real estate brokerage

firms in the Covered Area and nationwide (#110 at ¶ 10), (ii) its representatives sit on the MLS

2 Realogy argues that it did not come into existence until 2006, ten years after Section 5 was

promulgated. (#136 at 2.) Therefore, it claims, it cannot have any knowledge pertaining to Section

5’s establishment, and plaintiffs’ requests are otherwise irrelevant. Id. The court disagrees.

Plaintiffs’ requests are not limited to Section 5’s origin; they encompass information relevant to

defendants’ “motive and actions to conspire to maintain the unlawful buyer-broker commission

regime.” (#130 at 9) (emphasis added). Even if Realogy does not have discovery in its possession

or control relevant to Section 5’s creation in 1996, it may have relevant documents relevant

concerning its continued perpetuation after 2006.

PIN board (id. ¶ 9) and are members of NAR (#130 at 8), and (iii) it is a named defendant in two

ongoing litigations directly challenging the NAR Rule. See generally Moehrl and Burnett.

Considering plaintiffs have the burden at trial to show that defendants made “a conscious

commitment to a common scheme designed to achieve an unlawful objective,” (#94 at 15 (quoting

Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 753 (1984)), evidence that Realogy was

discussing such “a commitment to a common scheme” at the national level regarding the NAR

Rule could very well bear on plaintiffs’ claims regarding the nearly identical rule in the Covered

Area. Controlled Kinematics, 2019 WL 2082354, at *2.

Realogy asserts that “nationwide discovery is not relevant for a three state claim.” (#136

at 7.) It argues that the Amended Class Action Complaint challenges Section 5 (not the NAR rule)

and that it defines the relevant market as the Covered Area (not the United States nationally), so

discovery must be limited to those substantive and geographic areas. Id. In support of its

argument, Realogy cites to a number of cases from outside this circuit for the proposition that

courts presiding over antitrust cases “routinely limit discovery only to those markets defined by

the plaintiffs to be the relevant market for purposes of their claims.” Id. None of the cases cited

by Realogy require this court to limit discovery where, as here, plaintiffs have shown that the

discovery sought is relevant to their case.3

3 Each of the cases Realogy cites is distinguishable from the dispute here. See Motor Carriers v.

Trucking Mgmt., Inc., 711 F. Supp. 216, 222 (E.D. Pa. 1989) (noting court allowed defendant’s

motion to limit discovery to relevant market after plaintiffs twice attempted to amend scope of

claims); Bal Seal Eng’g, Inc. v. Nelson Products, Inc., 8:13-cv-01880-JLS-KESx, 2017 WL

10311212, at *1-2 (C.D. Cal. 2017) (directing parties to confer further before ruling on discovery

motions and guiding parties to discuss, inter alia, the relevance of discovery about geographic

locations outside the relevant market); Vident v. Dentsply Int’l, Inc., No. SA CV 06-1141 PSG

(ANx), 2008 WL 4384124, at *3 (C.D. Cal. Aug. 29, 2008) (upholding denial of motion to compel

Canadian discovery where “magistrate judge’s rulings implicitly found that documents pertaining

to [defendant’s] Canadian business were not relevant to help determine the state of [defendant’s]

United States business”); Heartland Surgical Specialty Hosp., LLC v. Midwest Div., Inc., No. 05-

Realogy claims that plaintiffs’ justification for nationwide discovery necessarily assumes

as true facts not yet established in the Moehrl and Burnett cases, namely that Realogy and the other

broker defendants exercise control over NAR and play a role in the implementation, enforcement,

and perpetuation of the NAR Rule. (#136 at 9-10.) Again, the cases Realogy cites for its argument

are inapposite. Both cases involve pleading standards at the motion to dismiss phase, not relevancy

standards in discovery.4 Plaintiffs need not prove their case at this stage; they need only show that

the requested discovery is relevant and proportional to the needs of their case. See Cherkaoui,

2015 WL 4504937, at *1. For the reasons stated above, plaintiffs have done so, and their

reasoning—namely, that Realogy and/or its representatives may have had substantive discussions

regarding the NAR Rule that illuminate anticompetitive sentiments—does not rise and fall with

the allegations in the Moehrl or Burnett cases.

Plaintiffs’ motion is therefore GRANTED to the extent it seeks discovery from Realogy

on the same terms to which the other broker defendants have agreed.

2164-MLB-DWB, 2007 WL 2668742, at *10-11 (D. Kan. Sept. 6, 2007) (limiting discovery to

Kansas City where party seeking discovery “never contended that the appropriate geographic

scope of this litigation spans the state is Missouri” and opposing party showed that discovery

would breach confidentiality contract with a third party); Schmidt v. Columbia Pictures Indus.,

Inc., No. CV LV 85-819 LDG, 1986 WL 13357, at *3 (D. Nev. Apr. 14, 1986) (balancing parties’

interests and allowing limited discovery outside the relevant geographic area).

4 See Jones v. Micron Tech. Inc., 400 F. Supp. 3d 897, 921 (N.D. Cal. 2019) (analyzing Sherman

Act allegations under Fed. R. Civ. P. 12(b)(6) and noting that “[a]llegations concerning past or

ongoing investigations are . . . not particularly helpful to suggest a contemporary conspiracy”); In

re Graphics Processing Units Antitrust Litig., 527 F. Supp. 2d 1011, 1024 (N.D. Cal. 2007)

(dismissing conspiracy claim under Fed. R. Civ. P. 12(b)(6) where plaintiffs did “not plead[] that

defendants ever met and agreed to fix prices”).

b. Discovery Outside the Scope of the Compromise.

At oral argument, plaintiffs essentially agreed to limit discovery sought from Realogy to

the discovery that the other broker defendants had agreed to provide. Thus, plaintiffs’ motion is

DENIED to the extent it seeks discovery outside the scope of the agreement with the other broker

defendants.

V. Conclusion.

For the above reasons, plaintiffs’ motion to compel (#129) is GRANTED in part and

DENIED in part. In responding to plaintiffs’ discovery requests, Realogy shall interpret the term

“Buyer-Broker Commission Rule” to reach documents concerning (i) the specific MLS PIN Rule

on offers of compensation, and (ii) any discussion as a general matter of rules requiring listing

agents to offer cooperative compensation to buyer agents (a) in MLS PIN’s service area; (b)

nationally; or (c) in unspecified geographies (and thus generally applicable).

/s/ M. Page Kelley

October 3, 2022 M. Page Kelley

Chief United States Magistrate Judge