Hello, everybody. It's Sam from the Financial Samurai Podcast. With me, I have a special guest, Mike Ketchmark, who is a trial attorney. You might have heard of him from winning the landmark lawsuit regarding real estate collusion against the National Association of Realtors, Keller Williams and Home Services of America.

Welcome to the podcast, Mike. Hey, great to be here. Thanks for having me. I saw the news and I was absolutely shocked at the amount, $1.78 billion. And then it talked about trouble damages of potentially over $5 billion. And I was wondering if you could share with the audience, how did those numbers come about?

And then as we go on, what could be next for the whole industry? Sure. Standing alone, it's a shocking amount of money, but if you break it down into what it involved, we represented 500,000 people across the state of Missouri who sold them over 260,000 homes over a seven-year time period.

On average, our clients were schemed and bilked out of $7,000. And so as an individual, it's not that much, but as it adds up, it's a tremendous amount. And actually what I described to the jury in this case, and I did during the jury selection process, talked about numbers can be these huge numbers.

And what I said during closing argument is the defendants talked about, "Well, so much money. Look how much money it is." But I said, "Look, if you rob one bank for $7,000, you don't get to keep it because you robbed 260,000 banks and it's just too much money to get back." And that's why it's a lot of money.

And that's why they've got away with it, in my opinion, for so long is because they just take little pieces of the American dream and of our home equity, but they do it so far and so vast and in such a large scale that it adds up to almost $70 billion a year in our country in wasted commission dollars.

That's unbelievable. And under the federal antitrust law, it's called the Sherman Antitrust Act. It was passed back in the late 1800s, a time when corporations had a lot of power, in a lot of ways they still do. But monopolies were really huge back then. And the law was passed.

And what it said is, "If you can prove price fixing, competitors getting together and fixing prices, we're creating a system like this was created to fix prices." And not only do you get your money back, it's effectively a refund case, but then they do what they call triple damages.

They triple the damages. And it's designed to punish the defendants, to stop them from engaging in behavior like this. And so that's what happened. And people thought that we stood very little chance of winning. It was a tough case. We had a group of, I think, four heroes. They stepped up and we had a retired police officer, a retired school teacher, a public school advocate, an attorney who works in elderly law, as our main plaintiffs.

And we, four years ago, filed this lawsuit on their behalf for a lot of the same reasons that you and I talked about offline, about the fact that what's happening in our country is wrong with forcing, when you sell your home in our country, it's one of the only countries in the world that does this.

You're forced as a seller of a home to pay the buyer's agent's commission in order to list your house on the internet. And the National Association of Realtors is functioning effectively as a cartel. They've carved our country up into 880 different regions for these multiple listing services. And the only way to list your house on the internet is through the MLS.

And the only way to do it is if you agree to pay the buyer's commission. You can't put your house on Zillow. You can't put it on realtor.com. You can't have it anywhere on the internet unless it's done that way. And it's designed by them to take control of the housing market.

Right, right. That's unbelievable. I was looking at a statistic for 2022, and it showed that the lobbyists, that the companies or groups that spent the most amount of money lobbying, and the National Association of Realtors was number one at around $88 million. What are they doing when they're spending all that money?

Is it whining and dining at the Capitol Grill? What are they up to with that money? Yeah, and that's one of the things we do a lot of to prepare for trials. I do something called a mock trial where we'll pull together jurors, and I'll put the plaintiff's case on, the defendant's will put, we'll have a defense lawyer put the defendant's case on.

And one of the things I kept hearing throughout this case is they kept referring to themselves as a not-for-profit, or not-for-profit, or not-for-profit. Well, what I didn't understand until I started getting into this and looking at these mock trials is when I think of a not-for-profit, I think of a 501(c)(3), like a church or the Boy Scouts or the Salvation Army.

But there's actually a 50(c)(6), and that's a special entity that the real estate industry, I kid you not, they've set them up with a special lobbying interest. So all it means is they don't pay taxes. And it's called a 50(c)(6) corporation, or 50(c)(6). And what they do with that money is they pass laws to protect their corporate interests.

And when you have, like in the Northwest MLS in Seattle, they tried to break away from the control of the National Association of Realtors. So they actually passed a law in the state of Washington that said that you don't have to show a house as a buyer's agent unless the seller agrees to pay your commission.

That's ridiculous. They break that into the contract, and they bake that into law. And it's just designed, I think, and I told this, explained this to the jury, that trade associations can be good things if they focus on ethics, they focus on education, like the American Medical Association, the American Bar Association, American Teachers Association.

But when they focus on money and commissions and getting competitors together to rig the system, that's where corruption happens. And that's when lobbyists become too powerful. And it was stunning to me. I mean, I always think of lobbyists and I think, you know, big pharma and the insurance industry and the Chamber of Commerce.

And when you realize that more money is being spent by this Realtor Association than anyplace else, it's mind-numbing. It's because they are literally pulling $300 million a year out of the pocket of local realtors and putting it into their corporate coffers at NARC. And doing that because local real estate agents have to blister houses on them less to make a living.

And so they have this whole thing propped up. And we saw what happened. That's what led to the president of the organization being run out on rampant charges of sexual harassment. At trial, we ended up not putting this in as evidence because the judge thought it was more prejudicial than probative.

But the CEO who just left the National Association of Realtors, he was making $3 million a year. And he had, he had, in his contract, they had to pay for him to be a member of a country club in Chicago, a country club in DC, first-class travel, pet service, first-class job for his wife, all of his living expenses.

And it's all on the backs of local realtors. And it is, it's just awful. And so when we got involved in this, we got a pretty small group of lawyers. I mean, there's only four attorneys in my firm, myself and three other people. And then the other firm we were with, he's just got two lawyers.

And we're like, you know, we want to take these folks on and we want to hold them accountable. And so it really kind of felt David and Goliath-eth, but it was a worthy fight and struggle. Definitely a worthy fight and struggle. I love to talk about probabilities. And what do you think, what was your thought in terms of the probability of you winning the case before you found the verdict?

And also, what were you thinking could be the potential damages or the win amount? I mean, I always felt from the first time that I got involved in this case that we would win. But my wife tells me sometimes that I put hope over experience. But look, I felt it's a righteous cause.

I felt factually we were right, legally we were right. So I just always said in my heart, I thought that we would win. And I told the jury that my mom and dad sat through the whole trial, one of the coolest things, having them sit in the front row during their mid-eighties.

And I told the jury that I learned every single thing that I needed to learn about this case from my mom when I was in kindergarten. If you take something that doesn't belong to you, you have to give it back. And we proved the trial that they were taking money that didn't belong to them.

And so we asked to have it refunded and give it back. And I really felt that we were going to win. But you know, the other, we got some really talented attorneys, probably at times we'd have 50 lawyers watching in trial on both sides. And a lot of my friends and colleagues and men and women who have practiced within Kansas City come and watch.

You'd ask them what odds they think we're winning. They'd say 60%, 65%. I always thought it was 9,800%. But maybe because it's my skill as an advocate. You know, you don't know because the hard part about federal court, a lot of people don't know this, is you have to have an unanimous jury.

And in our day and age, trying to get, we had eight people on the jury, trying to get eight people to agree on anything is difficult. But the cool thing about this is regardless of your politics, we had one of our expert witnesses used to be in the antitrust division, Deputy Attorney General under Donald Trump.

Another one of our experts who we worked with in this case worked in the Obama administration. We were working with advocates from the Cato Institute, a very libertarian, conservative think tank, and some housing advocates who were very much on the left-leaning side. Everyone universally agreed that corruption and fixing the prices in real estate is wrong.

And so I really believe that if I was able to distill this down into principles that a jury can understand that they would be disgusted. And they were. They were absolutely disgusted with their behavior. Yeah. I mean, now that the verdict is done, it seems obvious to a lot of people there was price fixing.

There was real estate collusion. I myself sold a house in 2017. I argued down to a 4.5% commission, but I had to pay 2.5% to the buyer's agent while the buyer's agent was hammering me down on price during the contingency process. It was like, "Give me $35,000 for the window credit and all that." And I was thinking to myself, "Why am I paying you a 2.5% commission while you're trying to hammer me down on price?

This is totally misaligned incentives." And so after I sold the house, I told myself, "I'm never going to sell a house again until there's a change in the real estate commission structure." So to me, it seemed really obvious there was some type of collusion, price fixing that wasn't fair to the consumer.

Why do you think this has lasted for so long, Mike? It's been around for a hundred years. The National Association of Realtors, when they first reformed, actually had price cards where they would pass it out and they would set the commissions at 6%. And then in the 1950s, the Supreme Court struck it down and said it was against the law.

And then for the longest time, what they did when my wife and I first bought our house in 1990 in a little small town outside of Kansas City called Lee's Summit, Missouri, we had a phone book and it was called an MLS book. And a lot of the people who are listening, you're certainly too young to remember this, but they used to be in big, thick books.

It was multiple listing book and there'd be pictures of homes and a description of houses. And we'd sit down with our agent at a local coffee shop and we'd go through and flag the houses in our price range. We'd go around and see open houses. And on the outside of those books, I actually introduced one of them at trial.

I had to go on eBay and buy it. It said, "Property of the National Association of Realtors, $1,000 fine to let this get into the wrong hands." And what the seller's agents would do is they'd pass them to the buyer's agents and they would control the information. And when they had control of the information, they could fix the prices.

But then the internet comes along and they're really worried about it shifting things. And the word that they use is disintermediate. They were worried about it getting in the middle and knocking them to the side. So what they did is they crafted this series of rules that said that you have 24 hours to list the house electronically and to put it into these portals that they have set up where they've carved the state of Missouri into four areas or the country in 880 areas.

And if you don't put it in there, you're not allowed to list on the MLS. 90% of the houses in our country are sold on the MLS. And then what we started uncovering and we introduced evidence to the jury and you kind of, at your core, you knew this, but we proved evidence.

We saw the emails and the training on this. What their agents are trained is to scare home sellers into, look, if you don't pay the buyer's agents commission, no one will show your house. And if they don't show your house, your house will go stale. People think something's wrong with it.

ISKRA: Right. MCLURKIN: And so they scare you. And then there's this whole concept called steering. And steering, a lot of your listeners may be familiar with it because it has this kind of racial history. And ironically with the national association of realtors had a real bad history with a lot of the racial problems we had in housing, but it used steering people away from certain neighborhoods is what people think of, but steering is used by buyer's agents who refuse to show houses where the commission is not being paid.

And if you think about it, it kind of makes sense. If you're a buyer's agent, you're going to want to work where you're getting paid. There's nothing like this evil for the buyer's agent. But what's happening is half the time, these corporations on the real estate, these big, large corporations like home services and Keller Williams and Remax and anywhere you name them, half the time they're making their commissions selling houses and half the time they're making their commissions buying.

So they've created this little club. ISKRA: Yeah. MCLURKIN: They're taking the money from the homeowners. They're giving half of it over here to the buyer's agents. And then half the time they're benefiting on their side. And it's just trading this money back and forth. And I really think that the last four and a half years, what I've learned about this case is what's unique about this is we just don't buy and sell houses enough where you become accustomed to it.

It's not like a car versus life. You're probably, you know, if you're lucky enough, you're going to own many cars. People might get a new car every six, seven years, but houses, maybe two houses in a lifetime. And that lack of knowledge creates this uncertainty. And then also what happens is there's so much paperwork and there's so much inspections and all these things these banks do that, that, that makes it kind of like mystifies it.

And so they use that to their advantage. But the reality is that we don't, I mean, buyers agents are really by and large, a thing of the past. And it's hard to say it. It's tough to say it because there's a lot of really nice buyers agents, but, but, but, but look, they just are.

And when I, you know, when I first started practicing law back in 1990, 30 some years ago, if I had to travel for work, I would use a travel agent. Remember travel agents? And if, if you wanted to book a plane or hotel, you'd call a travel agent and he or she would, would book a plane for you.

They charge you 10%. We don't use that. We use Orbitz or we use Expedia or we go directly online. Imagine now if every time you went online, if the national travels association sent you a bill, I mean, that's what they've done. And it's just, it's shocking. You know what we did, and I thought it was one of the cooler ideas that we had.

My, my partner, Ben Fadler, who's just this brilliant attorney who I work with. And he's, he's got some really, he's got real common sense about him. The national association realtors, they did this report. They called it the danger report. And they looked around the world where you don't have the, you don't have the MLSs.

And they looked and they said, look, we don't have buyers agents around the world. And I identified Australia as a country where the commission's between one and a half, 3%. So Ben and I picked up the phone and we started calling agents in Australia. And we, we found one of them to come as an expert witness.

We flew him to Kansas City, Missouri, and he testified to the jury. And I remember the very first time I talked to him, his name's Todd Reynolds. And he was a great dude, is a great dude. And I said, Hey, I was explaining what we were doing. And he's explaining, well, we don't have buyers agents in Australia.

And he actually asked me, he said, do you not have the internet in Missouri? And I said, we have it. He said, well, why would you pay somebody to find you a house? Don't you, can't you go online and look at videos and do? And so he came to trial and testified to the jury and they loved him because it's just, there's just a better way.

There's just a better way. And it's no knock against buyers agents, but it's like feeling sorry for the people who used to sell me movies at Blockbuster. I mean, they have to move. And if somebody wants to go and spend in Missouri, houses, aren't as expensive as they are around the rest of the country, but on average houses here, $300,000 house, a $9,000 commission.

We reviewed 130,000 transactions over a seven year time period in the Kansas City area. 98.2% of them were at 3% buyers commission. I mean, that's stunning evidence of price fixing. And the other thing too, I mean, and I know you know this because I've been thrilled after you reached out to me, I've been listening to your podcast and the level of expertise that you have, and you're got some very savvy listeners.

It was stunning to me because I was a major in philosophy and finance wasn't my background, but when I actually calculated it and had an expert calculate it, it takes an average homeowner seven years on paying their mortgage down until they just have paid it down enough to pay that 3% buyers commission.

So what we explained to the jury was this teacher we had, we had a single mom and had two boys when she first started her life down in Springfield with her house. By the time she went and sold her house, she'd been there 10 years and when she was moving out to South Carolina and she went to sell her house, the agents who were involved in the sale of her house and the buyer side took 42% of the equity out of the house.

It's not just 3%, it's 3% of the cost of the house, but it's not 3% of your equity and it's just because they're getting away with it. They're getting away with it. That's why they're doing it. Let me ask you this. I think you make a great point regarding people not familiar with buying and selling homes, maybe twice in their lifetime.

They're scared to do the wrong thing. They're scared to have a stale fish listing. They're scared to lose money. Do buyers not know that the 2.5% to 3% commission the buyer's agent earns is really the 2.5% to 3% of money out of their own pocket because they could have negotiated a lower price because if they didn't have that commission.

No, in fact, what they do is the National Association of Realtors and these real estate companies forever, they're training agents, buyer's agents to tell buyers it's free. It's free. If you go on Zillow and people don't even know this, but if you go on Zillow right now, go on zillow.com and do a search and it populates in Kansas City, it'll populate 7,000 houses for sale.

Every single house on Zillow is a house that's part of this system because the National Association of Realtors has a rule. It's called no co-mingling when Zillow or these aggregators like realtor.com or Zillow, or Trulia, when they get that information, the only way they'll feed it to them is that they refuse to put it in there for sale by owners or people who are not members of NAR.

When you click on that, you click on a house in Zillow and then you go to an agent and the agent says, "I'm not going to charge you anything." You think this is the greatest deal ever, but you're right. It's baking it into the cost of the house. If I'm trying to net out a house of a $300,000 house, I'm willing to pay $9,000 for a seller's commission, but I'm trying to net out $290,000.

If I didn't have to pay the buyer's commission, I'd drop the cost of my house. Right. Or everybody wins. You drop it a little, the buyer saves a little, the agent still earns this listing fee of 2.5%, 3%. Or what ends up really happening, and this is what they're terrified of, is if I have to write a check as a buyer and if you're doing a $500,000 house, am I ever going to give somebody $15,000 for helping me go over some paperwork that my bank is going to insist that – I mean, you think a bank is ever going to loan you $500,000 for a house without making sure that you have inspections and making sure that you have a free clear title?

No, they're never going to – what they're afraid of is that people are going to get in there and realize it's not worth what they're paying. That's why they fought us. That's why they had 200 lawyers from the largest law firms in the country that they just tried to crush us, because they know what they're doing here is fundamentally wrong, and they're just desperate to get away with it.

Right. Well, let's play devil's advocate a little bit here, because I've seen some decent arguments where it says, "Well, the buyer, if he or she had to cut a check to pay the buyer's agent, then he or she would find it even more difficult to afford a home." So what would you say to those people?

I'd say – well, I would say it's hogwash, and that's a legal term I guess I learned in law school in the Midwest. Why in every other country in the world that the National Association of Realtors looked at, that's not true. In the UK, Singapore, Germany, I mean, Australia, across the world, it's not true.

That's number one. Number two, what buyers then would do is they would pay for what it's worth. And the second thing is first-time homebuyers, what we forced their – they had a former HUD executive come in, the director of HUD, come in and testify on the defense side. He's part of the corporate real estate world now.

And I made him admit on the stand to the jury that every single state has something like a Missouri. It's called the Missouri Housing Development Commission. It's a first-time homebuyers program. And I don't know if your listeners know this, but every state has it. It's something you ought to do a podcast on sometime if you're not familiar with it.

In the state of Missouri, for families that are making less than $140,000 a year, you can get up to 4% of the value of a $400,000 home. And as long as you live there for seven years, you never pay it back. And they are actually having difficulty giving this money.

It has to be a first-time homebuyer. You have to meet the income qualifications, but $140,000 for a married couple, and that's 4% of the value. And one of the reasons they're having a hard time giving the money away is because buyer's agents don't even push people in that direction.

Because – I've never heard of it. Right. And type in any state and look at – do you like the state name, Housing Development Commission? And housing advocates started pushing this years back, and it's very prevalent and very common. So that's for first-time homebuyers. And the second thing is that what would happen is buyers would realize that they don't need to do that.

Because really what's happening is every one of our clients we had, who I met with, and all the documents we went through, because we went through all these documents, I mean, millions of different transactions. They're almost all on DocuSign now. And so any of your listeners who have purchased a home recently, some of them will never maybe even meet their agent because it's all on DocuSign.

And here's another radical point that I made at trial. Well, look, if you can't afford something, well, then don't buy it. I can't afford to go to a nice dinner when I'm first out of grad school. It doesn't mean I go and sit down next to you and make you pay for my meal.

I mean, so if somebody truly has difficulty paying for the buyer's agent, and the second thing that's just disturbing to me at my core, one of the single most important financial decisions you do is when you buy your house. If you don't have commission, like in Missouri, if you don't have four or $5,000 to pay for commission, then you ought to rethink whether or not you're going to get your house.

Because what are you going to do then when your air conditioner goes out or you have a leak in the roof? I just think it's a bunch of scare tactics that are designed to try to scare people. And I really believe that. I just don't think any of that's going to change.

And houses are still going to be very readily – prices are going to come down. And all we're going to see is that these corporations are making less and less money. And look, agents are nervous about it, but I call it corporate real estate for a reason because what's happened is when this came along, companies like Home Services, it's Home Services of America, it's a Berkshire Hathaway, Warren Buffett company.

They started going in and these big Wall Street corporate real estate brokers started gobbling up the local mom and pop real estate companies. And so that's why we are not dealing with local agents. The local agents were not even defendants in our case. It's the corporations that sat at the top.

And what they're doing is they've literally gone in and just gobbled up – Home Services has gone across the country and methodically gobbled up all of the local real estate agents in different cities and towns and states across the country. And the reason they're doing it is because they were pulling out billions and billions of dollars a year in these commissions.

It's going to change. I mean, I believe at the minute this verdict came in, we filed a new nationwide lawsuit. And if they want to change their ways, they got a chance to sit down and have a conversation. But if not, if they want to keep fighting like they're fighting, then we'll just continue to hobble them to their knees and hold them accountable across the country because this is what's happening here is wrong.

Yeah. How long do you think it'll take before real estate commissions materially decline, you think? Unfortunately, I think it's – Even if tomorrow, if the National Association of Realtors stop this illegal behavior and let's call it what it was, the jury found it's illegal price fixing. If they stop this illegal behavior, it's going to take a while for it to change.

I would think 10 to 15 years maybe. 10 to 15 years. You know, it's hard to think mentally it will change. Okay. But as far as where people – where it just doesn't happen anymore, because it is so baked into our culture that people think it's just a 6% commission.

I mean, it's just something that I always just thought, "Well, that's just the way it is." It's almost kind of like it's Americans just think, "Well, that's just what we do. We just pay that." To change that mindset when they've ingrained that pattern of behavior into us for so long, they're going to hang on to it as long as they can.

Interesting. Are you familiar with the game called Whack-A-Mole? Have you ever heard of that? Yes. Yeah. Right. So anybody who has kids, they were talking about – You know, your young children – When my children were younger, we used to take them to Chuck E. Cheese and they'd play Whack-A-Mole.

For your listeners who aren't familiar with this, a little mole will pop up out of 10 different holes and you hit it, then another one pops up. This has been a game of Whack-A-Mole with this industry forever. I think what I told the jury was that we want to unplug the machine.

They're going to keep trying to plug it back in. They're coming up with new creative ways to try to stop it. I think that this really is the first shift. My hope is that in my lifetime, that we'll look back and this will be a thing of the past.

Yes. When I'm over at some people's houses, this doesn't happen very often, but you're at someone's house and you see a phone that's hanging on the wall with a cord, right? We don't really remember when they – when it changed. When did we quit having those? But at some point, we did.

Yep. So that's what I'm hoping is going to happen here. I think it's going to be faster than 10 to 15 years and I think it's because of you and your team. I think we're underestimating the speed of change because after your verdict, your win – because I was talking to a real estate agent a month ago and she was like, "Well, what do you think?

Should I list your house at this 5.5% or 6%?" I said, "I would like to wait until this verdict comes out before I talk to you." So now when I'm going to go back, I'm going to talk to her and say, "Hey, what do you think about this verdict?

It does seem like there is some price fixing going on. How about 3.5%? How about 4% and not 6%?" I'm going to ask right away and I hope any seller who's thinking about this asks right away. Sure. I probably answered a question that wasn't really asked. What I was meant is, I think within 10 to 15 years, we will no longer see buyer's agents.

So I think we will no longer see that. I really think that that's going to be a relic of the past. But as far as open negotiations and commissions and all that, I think that significantly faster than that. I do agree with that. But also, unfortunately, and one of the beauties of programs like yours is we got to keep this fresh, but the public tends to have a relatively short attention span.

And this isn't the most, it's not like the sexiest, most interesting topic out there, right? Oh, this is pretty sexy, Mike. I mean, to people like me, it is, right? No, this is the most amazing topic I've come across recently. But it's one of those things where they're really desperate to hang on to this.

And I don't know, maybe it seems like this case has been going on four and a half years and they're going to try to drag it out on appeal. But I mean, look, I'd like to see a change tomorrow. I mean, I've called upon the new CEO of the National Association of Realtors to sit down with me and to sit down with me and to sit down with federal regulators, the Department of Justice, housing advocates, to come with a spirit of contrition and a spirit of willingness to bring about true change.

If they want to do that, that's what I want to do. Get this money back to the people it was taken from and find a path forward. But right now, all they've shown is a desire to continue to fight, which is okay. I'm a scrapper. I'm a fighter. Well, so once you won the verdict, you filed a new motion to sue other companies, other brokerages.

Right. A new lawsuit. So given that there's precedence that you won this massive trial, it seems to me as an observer, casual observer, well, you're going to win again because all the information is out there and you guys fought for four and a half years and you have all the evidence and the documentation and the witnesses.

What are your thoughts on going forward? Yeah. So I think the other companies kind of recognize that as well. But what people want to do, and I think a lot of these corporate real estate companies, they just want to throw money at it to make it go away and not change the way they're doing things.

And we're unwilling to do that. We've got a team of attorneys that maybe we're all kind of true believers. But until we can get the National Association of Realtors out of the business of allowing their system to be used to force homeowners or even to allow them to make these offers of commission to the buy side, I don't think anything's going to change.

And so there's two sides of a lawsuit. There's the money side and there's what's called the injunctive side, the change side. And we're not just going to take a payout and let it continue as business as usual. And I think that we've made some folks on their side believe us because they tried to get us to go away before trial and we wouldn't do it.

And these cases are very, very seldom for these antitrust cases to be tried. Someone told me this is the largest antitrust verdict in the history of the country. And very few of these cases go to trial because there's so much money at stake. But to me, this isn't about the, it sounds weird for a lawyer to say it, but really, I mean, I believe that this isn't just about the money.

I mean, the money's a piece of it, but it's not just about the money. It's about the need to change their behavior. And until they're willing to fundamentally change the way they're doing things, I don't see this lawsuit going away. I don't see the new one going away. And so, I don't know.

David reached into his pocket and pulled out a stone one time and we've got some more stones and we've got bigger pockets. So we're going to keep swinging. (00:36:15): When you talk to the regulators, I guess the government officials, folks looking at anti-monopoly, what do they say? Because again, to me, it seems obvious that there's an issue.

(00:36:25): So the department of justice has got an extremely dedicated, smart team of attorneys that they work in the antitrust division. And one of them sat through the opening statement, sat through the closing statement. And these are men and women who devoted their lives in the real estate area and to antitrust.

And there's been a real difficulty trying to hold these folks accountable. And I think there's a real sense of excitement and joy because now we know that you can take complex, complicated problems, but explain it and distill it down to where juries understand it. And I think that they fundamentally want to see change here.

And I feel that there's a real kindred connection with our trial team because they have lawyers on our side that we want to see real change as well. I feel like I went to law school, so I had the chance to make a difference in people's lives. And what an awesome, cool way to do it.

I mean, class actions get a bad name all the time, man. I used to personally hate class action lawyers and think about that they're the people, the men and women who are giving coupons and taking hundreds of millions of dollars in fees. And I think that this is a chance for us to show that that's not what it is.

It's a way when Americans, when the system, when a lobby becomes so strong and powerful that you can't get real change in DC. And you can get ordinary citizens, ordinary Missourians to band together and pull together a jury under the Seventh Amendment. I mean, it's there because people fought and died for a bill of rights and to get them together.

And for two and a half weeks, the most powerful men in real estate, and I'm using that word intentionally because that's exactly who it was. It was men in real estate were called to the stand in Kansas city and held accountable for their conduct. And they looked at what happened and they said, stop it, knock it off.

And that's why I went to law school and heady fun stuff. And so we'll do it again if they want us to. Now, I mean, I really think it's great as an outsider looking in. I like to complain against the government a lot because of the inefficiencies, the $500 paperclip example, all that fun stuff.

Is this a failing of the Department of Justice to not do what they should have done? So private citizens like you and other lawyers step in and you know, Missourians, juries. I never want to say it's a failing of the Department of Justice because I think that the Department of Justice has some really tremendously talented attorneys and there's a tremendously talented folks.

But look, it's all part of the executive branch and there's always politics and there's all kinds of politics at all different levels. And it is much easier when we're making a decision on our trial team, we've got, you know, I'm the lead trial attorney. I take input, but I make the decision, I make the call.

And it's a much more efficient way to make a decision about how we're going to act and what we're going to do. And it's a lot easier to massive undertaking to take on a trial, millions of documents, almost $10 million out of pocket expenses to litigate this case. You know, all kinds of, you know, 10,000 plus hours of time.

I don't know the amount of time, probably 20,000 hours of time of attorney time. But ultimately it's something that we were able to do and that's far easier than it is to get a piece of legislation through the house. Far easier than it is to navigate the intricacies, I believe, of the department of justice.

And that's why we have private rights. That's why the Sherman Act exists because if for whatever reason, I don't know if it's politics, if it's efficiencies, if it's whatever reason, but for whatever reason, if the governmental entities don't take down monopolies that collude, the private citizens have the ability to rise up and do so.

Got it. Wow. And that's what happened. And it is a really cool thing. I told the jury during closing argument, I mean, this is just a jury of normal folks. I said that the most powerful seats in the courthouse were the ones that are sitting as this big, beautiful, epic courthouse with an article three judge who's just a tremendously talented, brilliant man who's given his life to serve on the bench and all of the power and the magistrate of that courthouse.

But the most powerful seat was the truck driver and the nurse and the substitute teacher and the retired person from the park department. I won't go through all of their careers, but these are just real people, the stay at home mom. And they were sitting in seats in a criminal case, life or death, and in a murder case.

Someone goes to jail for the rest of their life or they walk free. And in this case, you had the most powerful corporations in the world. They can either hold them accountable or they could tell them to give back $5 billion of money that they wrongfully took. And that is a cool thing about our country.

If we can figure that out and we allow that to happen, why are we the only country in the world that pays 6% commissions when the rest of the world pays 1.5%? Right. It makes no sense to me. Change is coming. It is, man. It is. And really, thanks to you.

I'd love to understand more about the economics of being a trial lawyer, a personal injury lawyer, a lawyer such as yourself. How did the economics work? Because you said almost $10 million out of pocket. Yeah. To win this case over four and a half years, tens of thousands of hours.

How do you pay for that? How do you pay for that? And what if you lose? Well, yeah, it's a... What if you had lost? Are you just out $10 million? Yeah, that's exactly what it would be. So we've been blessed. We've got a small firm. It's my best friend from law school and one of my really good friends who I met who was a defense lawyer down here, my son, the four of us.

And we've had a lot of success. Four years ago, well, I guess the first big case I had was in early 2000. I had a case that went to trial that resulted in a multi-billion dollar verdict. And it was a pharmacist who was diluting chemotherapy drugs and killed about 1500 people.

But we've had a lot of success over the years. And we've decided when we're doing that, that we're just going to invest in causes we believe in. And the economics of it are that you, in a case like this, the reason this costs so much money, unlike a traditional personal injury case, which can be expensive, but the reason this case is so expensive is the data.

So we had to collect all of the data in these giant data dumps where you'd have 260,000 transactions coming from multiple different brokerages. And it would be very jumbled and difficult to understand and figure out. So we hired a team of statisticians and economists and their expert witnesses. And that's where all the money comes from.

I think they spent 10,000 hours on just expert witness time. And I remember when I first got involved in this and I got my first bill, and a brilliant, brilliant professor from Texas A&M, Dr. Craig Schulman is his name. And he's a brilliant antitrust bind. And he's just, he's extremely bright.

And Professor Roger Alford, who used to be in the antitrust division with Donald Trump. But when I first got my first bill from these expert witnesses, and I opened it up, it was $1.7 million. And I just, I'm like, okay. Then I guess at that point you're just kind of pot committed.

Pot committed. But yeah, had the trial come back and if the jury had ruled against us, we would have, that money would have been gone. And we had for the last four and a half years, this is the only thing that my firm's worked on. And the other people I've worked with, I mean, this has just consumed all of our lives.

And that's, you know, but you try to put that out of your mind because it can be kind of soul crushing if you don't. But that's the nature of it. But like in a traditional, if you just think about it, and people, you know, people knock lawyers all the time.

But if you think about it, like two of my closest friends in the world are lawyers here in Kansas City, they were just trying to case over in St. Louis, Missouri for a police officer who was paralyzed and it's a quadriplegic from a horrible car, from a roof crushing on a car.

Second case, they've taken a trial and it's resulted in, they called a hung jury where the jury couldn't resolve it. And they just, they don't get paid. But what you do is it, I think it increases the quality of cases because I wouldn't be filing cases and spending money and doing things like that if they were frivolous or if they were, first of all, I wouldn't do it because you should be filing frivolous cases, but you're not going to do cases unless you believe in them.

And isn't that just the essence of the free market? That if you have somebody like me and my team that's willing to invest our time and money and effort into this, hoping that we could prevail at trial, then we're going to work harder to get the story across, to define the evidence, to uncover the evidence, to invest in it, to put the best case forward.

And so that's the economics of it. But it's, I'm not sure what coach said it, but it's certainly true in litigation, it's better to win than to lose. So. Sure. So you've won, however, I'm sure the defense is going to appeal. Sure. So does that mean it could take years and years for you to actually collect a percentage of the winnings?

And so there's no pot of money right now. Nope. That's correct. And even when you win, it's not automatic. We keep track of our time. And it's one of the things I actually explained to the jury because a lot of people don't understand this. Maybe a lot of your listeners don't understand it, but it's not like this happens and that money's wired into, even when we collect and win, the money's not like wired into some bank account in my law firm.

When it happens, the money goes into the court, it's supervised by the court. We actually have to file a fee application with the court. We have to show the court the time that we spent, the money we spent, how we spent it. And we have to ask for the court's approval and permission to be paid anything.

And it's all subject to the oversight by the court. And that happens in all class action lawsuits, which is different than a typical personal injury case. But, so we won't, at the end of the day, there won't be any money that's paid unless we win the case. The money's been collected into the court system.

We file a motion, a hearing's held, and the court approves our time and expenses. And so that's how all that happens. Is there no, okay, you guys won the case. The defense have to pay at least the legal bills that you've incurred so far? Nope. Nothing. Nothing. Wow. So it's really a gamble of conviction.

Yeah. Yeah, right. It is something where you really need to believe in it. But yeah, it could be, and massive undertakings like this are harder. Big class action cases are harder. But you're right. But it has to, you know, you ride it out until the end. And then ultimately, the goal is to refund the money to get the money back to the people who it was taken from.

But yeah, that's how all that works. And that's true. Almost any case you hear, anytime there's a jury verdict, the lawyers are always doing that on a contingent basis. And he won't get paid unless they recover money for their clients. Right. That's amazing. You know, offline, we were talking about kids.

Yeah. And you talked about your son being born during your first case. Can you talk about that a little bit and how that affected the case and how it kept you going? I'll never forget it. My son, Steven, back in 1997, when my wife was in the hospital getting ready to go into pregnancy, and the doctor walks in and I'm reading this book, it's called "Trying Cases to Win." And he kind of looked at me, he's like, "Do I have something to be worried about?" And Steven was born.

And a week later, I went and tried my very first trial. I was 32 years old, and I had never stepped in front of a jury before in my life. And it was kind of a wild, wild thing. I had started my law firm in 1995. And for two years, we didn't make a dime.

I mean, literally, we didn't bring one dime in. And I decided at that time that this is the most logical time for my wife to get pregnant and for us to start our family. And we were in our new house. And so we went to trial, and thankfully I won.

But then I had my daughter shortly after him in '98, and I never pushed law on either one of my kids. I always kind of tried to stay out of the way and let them do what they wanted. And ironically, they both ended up wanting to go to law school.

And my daughter works for legal aid. And my son is an attorney now in our firm for the last year. And he poured his heart into this case. It was a really cool thing to be there at trial. And I was talking about both my parents in their 80s watched every day of trial.

But I'd look there and my son's sitting there, and my parents are there, and my daughter would come and watch, and my wife was there. And it provides a lot of, to me, it provides a tremendous amount of source of energy and a tremendous source of drive, which you need, right?

Because I think I was functioning usually on an average of three or four hours of sleep a night. But it was cool. It was fun. And he was a tremendous gift in this case. And thankfully, he gets a lot of his smarts from his mom. So let's say we fast forward, Mike, I don't know, four years from now, let's say it's finally over and you win and you collect, let's say it's not a 1.8 billion, but it seems to me that the final settlements generally are less.

I'm not sure why. Let's say it's $200 million. And let's say your firm collects 30% of that. What do you do? What do you and your partners do with that windfall? What are some things that come into mind with that type of life-changing money, which maybe it sounds like you were able to have that windfall in the past?

Yeah. Unfortunately, and that just shows you the difference in concept and scale, but I would view that kind of more as disastrous because if you think about it, by then we'll probably have been carrying a bank note on our client cash, we call them client cash advances, money we've paid out that we're paying interest on.

We've been carrying it by that point for probably seven or eight years. And I guess it might've amassed $20 million. And then you're also, we're supporting our internal structure and salary because people have to live, right? I mean, we have attorneys. And so typically what firms like mine will do is you'll run up a line of credit and you'll go to a bank and they'll loan you money.

And so people look at that and they think, "Oh, geez, you go and you collect, you made 25 or $30 million." Well, no, I actually didn't because I had to pay back 30 million. And so there's that business side of it. But what you end up doing when you do, if you do get a large amount that's collected, everyone's indifferent.

What I try to do is stay grounded and stay focused on the fact that I personally have seen money screw people up more than I've seen it be something that's beneficial to them if they're not grounded in it, right? And it can lead to false hubris and things like that.

So I just stay grounded and reinvest it. And then find the next case that you want to throw your money into and you want to throw your time into and throw your... But also there's a big team of people that are associated with it, other teams and so it never goes as far as you think.

People hear about like the... We had that pharmacist had a $2 billion verdict on, but your numbers were right in that case. I think at the end of the day that maybe our firm ended up making like $20 million, which would seem like a tremendous amount of money. But after you paid off, you did everything else.

I mean, nobody was... We weren't buying yachts and planes, I'll tell you that. You do that, but I don't know. It's a passion. It has to be a passion to grind that long to not know whether you... To grind that long without making any money and to know that you could lose.

That is an unbelievable passion. It's very respectful. But it's thrilling too. I mean, I'm not going to kid you. I don't want to act like it's just like Atticus Fenske and Killmonger. There's a tremendous amount of charge that there's a tremendous amount of adrenaline, a tremendous amount of... I'm not a guy who likes to gamble, but man, I tell you what, when that jury's out in this case and that jury's deliberating and they're coming back in that room and there's probably 300 people and all eyes are on that jury and they're going through and they're only answering five questions.

I mean, you want to talk about, that's a stand up on the edge of your seat kind of moment, and it makes you feel fully alive and it makes you feel... It makes you just embrace the beauty of your craft. Oh, yes. Based on this verdict, I'm assuming people are emailing you and knocking down your door asking for representation.

How do you deal with the publicity and the inquiries or is it just you have to focus on this real estate price fixing situation for the next several years? I let it get to my head and realize that I'm the same idiot that I was the day before. I mean, you're the same person and try not to let it get to you.

And I'm staying focused on it. There's a lot of unfairness, I think, in life and I see parts of it. The more success I've had as an attorney, and so I've, thankfully I've never lost a trial and I've never had a verdict less than a million dollars. And I've had a lot of really big verdicts because we work really hard and we do really well.

But the more success you have, the easier it is to be successful. And it's weird, but just like with your podcast, when I see the people who are on there, when you get bigger gets and then your audience grows and it's easier to get people. And so the same thing happened with me.

And what I have to remind myself of is don't get too full of yourself. Hey, but you know what? I know why you're so good at what you do because you're very easy to talk to. And where are you located at? We're in San Francisco. So it's a big deal, big prices and big commissions.

Yeah. Actually, I spent a fair amount of time out there taking depositions because the Anywhere, which used to be Realogy's, had a lot of their folks based out there and they used one of their big law firms was located there in San Francisco. But I was going to tell you, when you get out here to the Midwest, I'd love to take you out to some real Kansas City barbecue and get you to the Kansas City Chiefs game and let you see how real football is played.

I'd love that. I love Kansas City barbecue. It's the best. I would love it. Mike, thank you so much for your time. I really enjoyed it a lot and I'm looking forward to hearing this and you have a new fan of me. I'm definitely going to start following your podcast.

Thank you. Thank you so much. Take care of those kids. Bye-bye. Take care. I hope everyone enjoyed my interview with Mike Ketchmark. It was scintillating to hear him speak about how he was able to battle Goliath and win. And for those of you in the real estate industry, this is not an indictment on you by any means.

I know many of you are good folks. This is just about change and how technology and capitalism forces change and has forced the commission structure in almost every single industry closer to zero, if not zero. Change is inevitable and we've got to change with it. Also, shout out to Financial Samurai reader and fellow author, Jimmy Soni, who wrote the book, The Founders, The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley, for introducing me to Mike Ketchmark and enabling me to do this interview for all of you all.

Thank you so much, Jimmy. And if you enjoyed this podcast episode, I'd love a share, a positive review. It's what helps the show grow and it keeps me motivated. So thanks so much. Finally, if you want to keep in touch and know everything that I'm writing and recording, please subscribe to the Financial Samurai newsletter at financialsamurai.com/news.

Until next time.