| Item 1.01. | Entry Into a Material Definitive Agreement. |
On April 26, 2024, Douglas Elliman Inc. (the “Company”) and its subsidiary, Douglas Elliman Realty, LLC (collectively, “Douglas Elliman”), entered into a settlement agreement (the “Settlement Agreement”) to resolve on a nationwide basis the pending class action litigations, Gibson v. NAR, No. 4:23-cv-00788-SRB (W.D. Mo.) and Umpa v. NAR, 4:23-cv-00945-SRB (W.D. Mo.) (the “Lawsuits”).
The settlement resolves all claims on a nationwide basis in the Lawsuits and similar claims in other lawsuits alleging claims on behalf of sellers against Douglas Elliman and its subsidiaries (collectively, the “Claims”), and releases Douglas Elliman, its subsidiaries, and affiliated agents from the Claims. The proposed settlement is not an admission of liability, nor does Douglas Elliman concede or validate any of the claims asserted against it.
Under the Settlement Agreement, Douglas Elliman agreed to pay, into an escrow fund, $7.75 million within 30 business days of preliminary approval of the settlement by the court, as well as two $5 million contingent payments subject to certain financial contingencies through December 31, 2027 (collectively, the “Settlement Amount”). Specifically, Douglas Elliman agreed as follows:
| | • | | an initial guaranteed payment of $7.75 million within 30 business days of the court’s preliminary approval of the Settlement Agreement, which the Company expects to be in the second quarter of 2024; |
| | • | | a contingent payment of $5.0 million (the “First Contingent Payment”) if, (i) as of December 31, 2025, Douglas Elliman’s Cash Balance (as defined in the Settlement Agreement) is at least $40.0 million, or (ii) if Douglas Elliman’s Cash Balance is less than $40.0 million as of December 31, 2025, but subsequently exceeds such threshold in any following month until December 31, 2027; and |
| | • | | a contingent payment of $5.0 million (the “Second Contingent Payment”, and together with the First Contingent Payment, the “Contingent Payments”) if, (i) as of December 31, 2026, Douglas Elliman’s Cash Balance is at least $40.0 million, or (ii) if Douglas Elliman’s Cash Balance is less than $40.0 million as of December 31, 2026, but subsequently exceeds such threshold in any following month until December 31, 2027; |
provided, that, if both of the Contingent Payments become due in the same month, Douglas Elliman will make the First Contingent Payment within 30 days of such Contingent Payment becoming due and the Second Contingent Payment by December 31, 2027. If Douglas Elliman’s Cash Balance does not exceed $40.0 million at any point from December 31, 2025 until December 31, 2027, then Douglas Elliman will not be responsible for either of the Contingent Payments. Douglas Elliman also agreed that any outstanding Contingent Payment(s) will be accelerated if Douglas Elliman enters into certain strategic corporate transactions, including, but not limited to, certain mergers and acquisitions or a sale of all or substantially all of its assets.
In addition, Douglas Elliman agreed to make certain changes to its business practices and emphasize certain practices that have been a part of Douglas Elliman’s longstanding policies and practices, including: reminding its brokerages and agents that Douglas Elliman has no rule requiring agents to make or accept offers of compensation; requiring its brokerages and agents to clearly disclose to clients that commissions are not set by law and are fully negotiable; prohibiting its brokerages and buyer agents from claiming buyer agent services are free; requiring its brokerages and agents to disclose to the buyer the listing broker’s offer of compensation for prospective buyers’ agents as soon as possible; prohibiting its brokerages and agents from using any technology (or manual methods) to sort listings by offers of compensation, unless requested by the client; reminding its brokerages and agents of their obligation to show properties regardless of compensation for buyers’ agents for properties that meet the buyer’s priorities; and developing training materials for its brokerages and agents that support all the practice changes outlined in the injunctive relief.
The Settlement Agreement remains subject to preliminary and final court approval and will become effective upon final approval by the court.
The foregoing description of the Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Settlement Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
| Item 7.01. | Regulation FD Disclosure. |
On April 29, 2024, the Company issued a press release regarding the Settlement Agreement. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference.
