The Law of Holes – A NAR Commission Battle Story

Republished with permission via The Notorious ROB (Rob Hahn). Original Article Here. I frequently quote Rob in articles and suggest you subscribe to his content. He is an attorney, so he’s a good follow on this legal NAR commission battle legal storyline. Additionally, I love the way Rob tells a story, frequently tying in a great musical number – In this story, The Blues Brothers caught my ear, eyes and mind. Enjoy. – CFD

I debated all weekend whether to write this. Opinions, after all, are like… uh… noses; everyone has one. Especially when said opinions are not particularly constructive and almost entirely critical. Nobody likes being criticized; and believe it or not, I don’t love criticizing for the sake of criticism.

Ultimately, I decided to write this because there may be a need for the industry to change certain things, to become more aware of certain things, and to think about certain things going forward.

I speak of the unmitigated disaster that was the HousingWire “debate” between Michael Ketchmark, the lead attorney in Sitzer v. NAR, and Anthony Lamacchia, a broker in Massachusetts and a trainer. Though it was titled “Commission lawsuit debate” and billed as a debate where these two would go “toe to toe on the value of the buyer’s agent, the future of real estate commissions and much more” it ended up being not only an embarrassment for the industry but actually dangerous for the industry.

Let’s set a few things clear.

I don’t know either Ketchmark or Lamacchia.

Lamacchia said at the outset that he is not representing NAR, and is not a spokesman for NAR. But see below.

I like and respect HousingWire as an industry publication, as they do some truly great work of both journalism and analysis.

The idea of the debate was a great one.

Sarah Wheeler, the Editor in Chief of HousingWire, did a good job as moderator given the circumstances.

Having said that, what happened on Friday must never happen again… and certain institutions must take steps immediately to minimize the fallout.

The “Debate” That Wasn’t

First observation: what we saw was not a debate in any sense of the term. Debate implies a disagreement on some policy, some issue, some idea with both sides putting forth arguments for and against, attacking weaknesses in the other side’s argument and defending from attacks. That was not what we got.

What we were treated to was wall to wall personal attacks, sneering, and over the top emotional drama. At least from one side. The echo chamber in the comments made the whole thing feel like some kind of a religious meeting, maybe a particularly vitriolic political rally, or a pep rally before the big football game.

Lamacchia, from my memory, made personal attacks against Ketchmark himself, his firm, his son (who works at the firm), the federal court in Kansas City, Judge Stephen Bough, the senators who confirmed him, Ketchmark’s sister-in-law (who works in the legal field in Kansas City), the wives of the lawyers and judges involved, the legal profession, the contingency fee arrangement, and the Kansas City Chiefs. Ketchmark, for his part, lost his temper over and over again, but kept it mostly in check. I can’t recall Ketchmark making any personal insults against Lamacchia, for example. But he did raise his voice several times, and if he could have come through the screen, I think he might have.

There are real issues worthy of debate. Frankly, since the lawyers will be having all of the debates about the law, any public debate should be focused on the policy.

Should sellers pay buyer agents? Should there be mandatory rules? And so on.

Whenever the “conversation” threatened to ascend into an actual debate on policy… it was dragged right back down to more ad hominem bullshit.

The debate was recorded, and HousingWire said it would make it available sometime this week. It may be reserved for premium subscribers, but if you haven’t watched it… well, count yourself lucky. If you have a morbid fascination to watch car wrecks in slow motion, go ahead and find the recording when it’s available. And read the comments if you are into studying unhinged behavior.

The First Law of Holes

The Law of Holes states, “If you find yourself in a hole, stop digging.”

What I simply couldn’t understand is how Lamacchia — and the people in the comments — did not begin with the basic reality: NAR has already lost at trial. Sure, you can believe that NAR will win on appeal, you can believe that the injunction won’t be severe, you can believe there will be a settlement — but none of those are actual facts on the ground right now, today.

The facts on the ground, as I write this, is that NAR and the other defendants lost, and owe over $5 billion in damages.

Not only that, because of the Kenny Parcell affair, and the mysterious blackmail-induced-resignation of Tracy Kasper, not to mention the number of articles in New York Times and elsewhere about NAR’s sexual harassment and hostile workplace issues, NAR is not exactly in a strong position PR-wise.

If there is ever a situation one might describe as “being in a hole”, this is it. NAR and the real estate brokers and agents are in a hole. Right now. Today.

The first law of holes dictates that you stop making things worse.

How Lamacchia Made Things Worse

Let me count the ways.

Insulting the Judge and the Courts?

First, since you are a Notorious reader, you probably know that NAR is functionally insolvent right now. I’ve been talking about NAR’s total assets compared to the $5.3 billion judgment. You likely know that NAR cannot afford the bond to file an appeal if the judgment amount is $5.3 billion.

If you’ve been following the case — and if you haven’t, where have you been? — then you know that NAR and the defendants are right now, as I write this, asking Judge Bough to reduce the bond amount so that they can afford to appeal the ruling.

If you’re Judge Bough, and you heard Lamacchia attacking your integrity, your court’s honesty, your wife, your friends and the legal profession in general… are you more likely to be lenient to NAR or less?

If you’re one of the judges on the Court of Appeals, and you hear this unhinged ranting… of course you’ll try your best to be impartial, but… you are still a human being with emotions and biases. Are you more likely to carefully consider NAR’s arguments, or less?

Settlement, You Say?

Second, you may be aware that numerous industry leaders are asking — nay, demanding — that NAR settle all of these commission lawsuits. You might have seen the story in Inman where Ed Zorn, the General Counsel of CRMLS, laid out a pathway to potential settlements.

If you are Ketchmark, lead attorney for the plaintiff, and the lead attorneys in Moehrl, Nosalek, or the other 17 federal lawsuits filed so far, and you hear Lamacchia’s rants, are you more likely to try to reach a settlement with NAR or less? Even if you do want to settle, are you more or less likely to try to inflict maximum pain and damage because of this clown show?

Keep in mind that according to Ed Zorn, settlement is the only way that “real estate survives.”

Going After the Legal Profession?

Third, Lamacchia — and the people openly and publicly commenting on the stream, now preserved for all eternity — had a grand old time launching personal attack after personal attack against Michael Ketchmark.

Do they know that Ketchmark was not the first to file the antitrust lawsuit? Do they know that the really dangerous and really scary lawyers are from Cohen Milstein, Hagens Berman, and Susman Godfrey — you know, the firms that filed the first lawsuit, Moehrl v. NAR? The answer is, sadly, no — they have no idea about any of that.

Well, look up those firms. See who they have taken down. See the cases they’ve pursued and the damages they have won. Then look up these names:

Kit Pierson

Benjamin Brown

Robert Braun

Carol Gilden

Marc Seltzer

Steve Berman

Daniel Kurowski

Rio Pierce

Michael Ketchmark is a good lawyer, perhaps a great lawyer, and he has the scalps to prove it. But the above men and women are some of the best, most highly paid, most successful big-time litigators in the world. They make general counsels of Fortune 500 companies blanche, while the same general counsels would be like, “Michael who?”

And I haven’t even touched on the lawyers in the other 17 lawsuits, many of whom are ambulance chasers, but some of whom are serious big game hunters.

Now… a question to ponder. Do you think the lead attorneys in one of the 20 commission cases (to date, with more to come) might converse with the other lead attorneys on other cases? Do you think they might share notes, share thoughts, share strategies against a common opponent? Do you know that trial lawyers have conferences just like REALTORS do?

When Ketchmark emails a recording of this debacle to all of those lead attorneys, do you think they are going to back down, realize they had it all wrong all this time, and drop the lawsuits? Or are they more likely to go, “Fuck these guys!” and redouble their efforts.

Football coaches know not to give the other team “bulletin board material” because the last thing they want is for their opponents to be extra motivated to beat your ass on the field. Could we please learn the same lesson?

Who Might Be Watching?

Fourth, have Lamacchia and his fans ever considered who might be watching this public “debate”?

I tweeted immediately afterwards that I was so happy the audience was only real estate junkies. But then I thought about it. And I asked HousingWire to confirm that nobody from the Department of Justice had logged in to watch it. (They have not responded.)

It isn’t as if we don’t know that the DOJ and its compadre the FTC are not already going after NAR. They are. It’s plain and clear. It isn’t as if we all don’t know that the DOJ sent people to the Sitzer trial, to the Nosalek trial, and they read and watch all kinds of things.

The FTC is already under a presidential Executive Order to regulate real estate; that they have not done so to date is likely because they’re waiting to see how the lawsuits play out.

If you were a DOJ lawyer or a FTC staffer watching what we saw on Friday, are you now more likely or less likely to believe that the real estate industry is filled with ethical professionals who are trying to do the best for consumers? Are you more inclined or less inclined to keep any regulations relaxed, because REALTORS are rational businesspeople trying to do the right thing?

While I know — and the more experienced wiser heads in real estate know — that the crazy we saw on display on Friday is hardly representative of hardworking professionals in the industry… would a DOJ lawyer know that? Would a FTC Commissioner know that the insane comments are from the least informed, the most ignorant, and the most emotional people in the industry?

Or do they paint with a broad brush after this?

What To Do Now

Well, crying, spilled milk, and all that. What happened, happened. We can’t change the past.

What, if anything, can be done in terms of damage control?

First and foremost, NAR must loudly and clearly tell the whole world that Anthony Lamacchia does not speak for NAR, does not represent NAR’s views, and does not represent the opinions of the vast majority of NAR’s REALTOR members. That last point is probably a lie, but it is what one might call a white lie, or PR spin. Lamacchia himself stated that he is not a NAR spokesperson, but at one point in the insult-fest, he let slip that he was a Chair of an NAR Committee. Ketchmark wrote that down in his notes.

It is absolutely imperative that NAR along with every defendant in every one of the 20 (and counting!) lawsuits distance themselves from Lamacchia and the commenters. They might have to go so far as to condemn some of Lamacchia’s juvenile insults, especially against the integrity of Judge Bough, the federal courts, and the legal profession.

Second, NAR and other defendants should strongly consider having a second public debate between Michael Ketchmark and one of its own rational and informed advocates. They could debate real substance. The advocate can be forceful, but must be civil above all. They must convince federal judges, the DOJ, the FTC, and numerous other attorneys that the industry is filled with rational people trying to do the right thing, who do not think that they have done anything wrong, and would like to find a win-win solution.

Everything must be done to remove the bulletin board material. The opponents are plenty motivated already. They’re scary enough already. We really don’t need to give them extra motivation with trash talking and bullshit.

The Second Law of Holes

With all that said, assuming the industry somehow finds a way to stop digging, we can’t forget the second law of holes: “When you stop digging, you are still in a hole.”

We have to turn our efforts to climbing out of the hole. That could be a settlement, it could be a hearts-and-minds campaign to the public, it could be a big lobbying push… but it has to be something positive, aimed at improving the situation… rather than scoring points for an emotional sugar rush.

I completely understand where Lamacchia and his fans are coming from, emotionally. They want to hurt and embarrass those responsible for the hole we’re in. They feel great in the moment when Ketchmark loses his temper, in much the same way that a football fan feels great in the moment when their team’s linebacker sacks the opponent’s quarterback. They love the trash talking, the insults, the personal attacks in the moment. But guys, seriously… our collective goal here has got to be climbing out of the hole, not feeling good about some badass hit “our guy” put on “their guy.”

We all could be cheering our way straight to bankruptcy court. Please stop.

If there must be future debates, please let’s have them be about arguing over the best ways to climb out of the hole we find ourselves in. Through disagreement and vigorous debate, perhaps we all might find the path up and out.

But first, stop digging. Please.

-rsh

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