D.C. Circuit Allows DOJ to Reopen NAR Investigation

The U.S. Court of Appeals for the D.C. Circuit recently held that the DOJ could reopen its investigation into NAR months after the parties had entered a Proposed Consent Judgment.  In doing so, it reversed the district court’s decision finding that the DOJ had breached the parties’ settlement agreement by reopening the investigation.

In 2018, the DOJ opened an investigation into NAR’s use of multiple-listing services (MLSs), which are online, subscription-based databases where listing agents post information about homes for sale.  As part of this investigation, the DOJ issued two Civil Investigative Demands (CIDs) relating to NAR’s “Participation Rule” “and “Clear Cooperation Policy.”  Under the Participation Rule, a listing agent was required to offer the same commission to a seller’s agent when listing a property on an MLS.  Under the Clear Cooperation Policy, a listing agent was required to post a property on an MLS within one day of marketing it.

In November 2020, the parties entered a Proposed Consent Judgment specifically addressing four NAR policies other than the Participation Rule and the Clear Cooperation Policy.  The Proposed Consent Judgment also included a Reservation of Rights Clause that stated, “Nothing in this Final Judgment shall limit the right of the United States to investigate and bring actions to prevent or restrain violations of the antitrust laws concerning any Rule or practice adopted or enforced by NAR or any of its Member Boards.”  On November 19, 2020, the DOJ filed the Proposed Consent Judgement along with a Complaint and a Stipulation and Order, which stated, “The United States may withdraw its consent at any time before the entry of the proposed Final Judgment.”  On that same day, the DOJ also provided NAR with a closing letter confirming that the DOJ had closed the investigation, and that NAR had no outstanding obligations under the two CIDs.  The closing letter stated, “No inference should be drawn, however, from the Division’s decision to close its investigation into these rules, policies or practices not addressed by the consent decree.”

In July 2021, the DOJ withdrew the Proposed Consent Judgment, and, five days later, issued a new CID relating to the Participation Rule and the Clear Cooperation Policy.  NAR moved to set aside the CID arguing that it violated the terms of the parties’ Proposed Consent Judgment and the closing letter.  On appeal, the Court of Appeals reversed the district court’s decision, finding that the plain language of the closing letter had not imposed any future prohibition on the DOJ to reopen the investigation and issue a new CID.  The Court of Appeals also found that the “no inference” clause confirmed the DOJ’s intent to not impose such a future prohibition.  In applying the unmistakability principle, the Court of Appeals found no explicit terms that exempted NAR from subsequent DOJ investigation, or that limited the DOJ’s ability to reopen investigations.

The Court of Appeals rejected NAR’s argument that it would not have entered the Proposed Consent Judgment without the DOJ’s commitment to not investigate the Participation Rule and the Clear Cooperation Policy.  It found that NAR had gained several benefits in doing so, including using the closing letter in private, antitrust litigation as evidence that the DOJ had closed the investigation.

WBK’s previous coverage of NAR can be found here.