DC Circuit Finds DOJ’s Investigative Subpoena to National Association of Realtors Allowed Despite Earlier Settlement

By Samuel Smith

On April 5, 2024, the United States Court of Appeals for the District of Columbia, in an opinion written by Judge Pan, reversed the district court order that granted the National Association of Realtors (“NAR”)’s petition challenging the Antitrust Division of the United States Department of Justice (“DOJ”)’s subpoena based on a preexisting executed settlement agreement. National Ass’n of Realtors v. United States of America, 97 F.4th 951, 953 (D.C Cir. 2024). The Court of Appeals held that the DOJ’s “closing letter” did not bar all future investigations stemming from the investigation that it settled. Id. at 961.

The DOJ Antitrust Division opened up a civil investigation against certain NAR policies in 2018. Id. at 953.?Eventually two subpoenas, or Civil Investigative Demands (“CIDs”), were issued to the NAR, one in April 2019 and the other in June 2020, regarding the NAR's “multi-listing services” (“MLSs”). Id. at 953-54. The April 2019 CID sought information about the NAR’s practices and procedures including its “Participation Rule.” Id. Essentially, the Participation Rule required listing brokers offer the same commission to all buyer-brokers when a property was listed on an MLS. The DOJ argued that this practice causes buyer-brokers to steer customers to higher-commission listings, restraining price competition. Id. The June 2020 CID sought information about the NAR’s “Clear Competition Cooperation Policy” that required listing brokers to post the property on an MLS within one day of when they market a property. Id. at 953-54. The DOJ believes that this rule restricts home-seller choices, thus, precluding new listing services from competing. Id. at 954.

The issue leading to the most recent opinion arose in July 2020 when the DOJ and NAR started to discuss possible resolutions. Id. The NAR asked the DOJ if they would refrain from investigating the Participation Rule for ten years and the DOJ refused, stating that they would never agree to a commitment to not bring challenges on NAR rules in the future. Id. The DOJ and NAR eventually came to an agreement to enter into a Proposed Consent Judgement that addressed four other NAR polices, but not the Participation Rule and Clear Cooperation Rule. Id. The Proposed Consent Judgment also included a “Reservation of Rights” clause that allowed the DOJ to bring later action against the NAR. Id. The NAR agreed to the closing letter on condition that the DOJ provide a closing letter that dealt with the pending Participation Rule and Clear Cooperation Policy investigation. Id.

On November 19, 2020, the DOJ filed the Proposed Consent Judgment and sent the closing letter to the NAR. Id. Though nothing in the DOJ’s complaint mentioned the Participation Rule or Clear Cooperation Policy, it alleged the other four policies subject to the Proposed Consent Judgement violated Section 1 of the Sherman Act and settlement terms. Id. at 955. It also provided that the United States was allowed to withdraw its consent before final judgement. Id.

The closing letter meanwhile read, “This letter is to inform you that the Antitrust Division has closed its investigation into [NAR’s] Clear Cooperation Policy and Participation Rule. Accordingly, NAR will have no obligation to respond to the CID Nos. 29935 and 30360 on April 12, 2019 and June, 2020, respectively. 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.” Id.

In reaching its decision, the Court applied general contract law, determining that if the closing letter is unambiguous then that is the end of the analysis, and no extrinsic evidence needs to be considered. Id. at 957. When the DOJ closed the then-pending investigation, no express or implied statements could be interpreted from the letter that would restrain the DOJ from issuing new CIDs at a later date. Id. The Court refused to enforce an implied term that would take away the DOJ’s power to reopen investigations unless the government unmistakably were to waive that right, and here the DOJ had clearly inserted a “no inference” clause, confirming no additional terms were to be interpreted than those that were expressly stated. Id. at 958. In the past, the DOJ has closed and reopened cases numerous times. Id. Thus, the NAR had no reasonable basis for believing that the DOJ closing the case would mean it could never be reopened. Id.

In addition, the Court also rejected the NAR’s attempted reliance on extrinsic evidence it had offered, stating that it would not even support their claim if it was to be considered. Id. at 959. The NAR argued the omission of the Participation Rule and Clear Cooperation Policy was a promise to never reopen the case, the DOJ’s Proposed Consent Judgment demonstrated an understanding on the part of the DOJ that it could not reopen, and the NAR would have never agreed without a future commitment to never reopen. Id. at 959-61. The court rejected these arguments as the DOJ explicitly declined earlier to accept any settlement that would restrict future investigations, the closing letter could remain enforceable after withdrawal of the Proposed Consent Judgment, and the NAR did not have to respond to the outstanding CIDs, that being the benefit the NAR obtained in the bargain. Id. at 960-61.

This decision affirms the DOJ’s right to reopen investigations that have been settled so long as they have not expressly promised not to do so in the closing letters. This is a significant victory for governmental enforcement powers. Notably, the Court did not in its opinion answer the question of whether the DOJ can reopen an investigation while still bound by the Proposed Consent Judgment. Id. at 958. In dissent, however, Judge Walker made it clear that this was in his view the real question at issue, basing his opinion on a consideration of whether the DOJ could have immediately reopened the closed investigations even before the DOJ withdrew the Proposed Consent Judgment. Id. at 962 (Walker, J., dissenting). Judge Walker answered that question in the negative, warning the public to be wary of negotiating with the Antitrust Division of the DOJ because of the possibility that the DOJ may not be required to live up to their portion of the deal, and ending the dissent with the statement, “Buyer Beware.” Id. at 962, 968.