In a split decision, a panel of judges for the D.C. Circuit Court of Appeals today overruled a district judge who had previously prevented the Department of Justice (DOJ) from reopening its investigation into the National Association of REALTORS® (NAR), potentially allowing regulators to pursue further changes to policy and rules in the industry.
In a 2-1 decision, the appeals court ruled that District Court Judge Timothy Kelly had erred when he prevented to DOJ from continuing to investigate NAR’s rules. The DOJ wrote a letter back in 2020 in which it agreed to end the investigation in exchange for voluntary changes to some, but not all of the disputed NAR policies. It then sought to re-open the inquiry under a new presidential administration, but was blocked when NAR sued.
“The closing letter unambiguously permits DOJ to reopen its investigation of the Participation Rule and the Clear Cooperation Policy,” wrote Judges Florence Pan, with Judge Karen Henderson concurring.
Judge Justin Walker dissented, taking a much more narrow view and arguing the district court’s decision should have stood based on how the DOJ argued the case.
“The question presented is not whether DOJ’s promise to close an investigation means the investigation must stay closed forever. Nor is the question whether DOJ can reopen an investigation eight months after it contracts to close it, as DOJ did here. Rather, the sole question is whether DOJ is correct that it could have immediately reopened its investigation of the REALTORS® two remaining policies after contracting to close that investigation,” Walker wrote.
The full import of the ruling remains unclear, however. NAR could potentially appeal to the Supreme Court, and it is possible that the DOJ will not choose to pursue its investigation, as the recent NAR settlement covers many of the rules and issues that were investigated back in 2018 and 2019.
One notable exception: clear cooperation, the rule requiring REALTORS® to list properties on NAR-affiliated MLSs, was not touched by the settlement agreement. That policy was the subject of another lawsuit against major MLSs that was also recently settled, though the details of that agreement are still unknown.
In allowing the DOJ to back out of the initial agreement, Pan wrote that the “plain language” of the letter, as well as a “reservation of rights” clause were enough to justify that decision by the DOJ to reopen its investigation only eight months after officially closing it.
“The plain meaning of that provision is that DOJ closed its then-pending investigation and relieved NAR of its obligation to respond to two specifically identified (subpoenas). We discern no commitment by DOJ—express or implied—to refrain from either opening a new investigation or reopening its closed investigation, which might entail issuing new (subpoenas) related to NAR’s policies,” Pan wrote.
“Put simply, the fact that DOJ ‘closed its investigation’ does not guarantee that the investigation would stay closed forever,” she continued. “The words ‘close’ and ‘reopen’ are unambiguously compatible.”
Walker found this reasoning to be practically incongruous, comparing the DOJ’s action to comic strip character Dennis the Menace.
“Imagine a parent says, ‘Close the door when you leave for school.’ In that case, even if DOJ’s literalist reading works in the abstract, it fails to capture the command’s true meaning,” Walker wrote. “Perhaps Dennis the Menace would close the door and then immediately reopen it before he runs toward the school bus and mockingly calls back, ‘You didn’t say to keep it closed!’ But an obedient child would not.”
