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COMMITMENTS AND CONTINGENCIES | 12 Months Ended
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Dec. 31, 2023
COMMITMENTS AND CONTINGENCIES |
COMMITMENTS AND CONTINGENCIES | 13. COMMITMENTS AND CONTINGENCIES Contingencies From time to time, the Company is subject to potential liability under laws and government regulations and various claims and legal actions that may be asserted against us that could have a material adverse effect on the business, reputation, results of operations or financial condition. Such litigation may include, but is not limited to, actions or claims relating to sensitive data, including proprietary business information and intellectual property and that of clients and personally identifiable information of employees and contractors, cyber-attacks, data breaches and non-compliance with contractual or other legal obligations. Litigation and other legal matters are inherently unpredictable and subject to substantial uncertainties and adverse resolutions could occur. In addition, litigation and other legal matters, including class-action lawsuits, government investigations and regulatory proceedings can be costly to defend and, depending on the class size and claims, could be costly to settle. The Company believes that its defenses and assertions in pending legal proceedings have merit and the Company believes that it has adequately and appropriately accrued for legal matters that are estimable. However, substantial unanticipated judgments, penalties, sanctions, and fines do occur. As a result, the Company could from time to time incur judgments, enter into settlements, or revise its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and/or its cash flows in the period in which the amounts are paid. For the cases described below, management is currently unable to reasonably estimate the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in preliminary stages, (ii) specific damage amounts have not been sought, (iii) damages sought are, in our opinion, unsupported and/or exaggerated, (iv) there is uncertainty as to the outcome of pending appeals or motions in these and similar lawsuits affecting the industry, (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories presented. For the matters described below, we have not recorded any accruals as of December 31, 2023. However, the Company has determined that a material loss is reasonably possible in the near term, and facts could emerge through the course of the lawsuits that lead the Company to determine that a loss is estimable, resulting in an accrued liability that could be material. Since October 31, 2023, the Company and/or its subsidiaries have been named as defendants in numerous putative class action complaints brought in various U.S. district courts and the Federal Court of Canada relating to antitrust matters, which lawsuits are described below. The following lawsuits, brought by putative classes of residential property sellers, allege that defendants participated in a system that resulted in sellers of residential property purportedly paying inflated buyer broker commissions in violation of federal and state antitrust laws, as applicable: Gibson et. al. v. National Association of Realtors et. al., Case No. 4:23-cv-00788-FJG (filed in the United States District Court for the Western District of Missouri, Western Division); 1925 Hooper LLC, et al. v. The National Association of Realtors et. al., Case No. 1:23-cv-05392- SEG (United States District Court for the Northern District of Georgia, Atlanta Division); Grace v. The National Association of Realtors, et al., Case No. 3:23-cv-06352 (United States District Court for the Northern District of California, San Francisco Division); Umpa, et al. v. The National Association of Realtors et. al., Case No. 4:23-cv-00945 (United States District Court for the Western District of Missouri, Western Division); Gael Fierro et al. v. The National Association of Realtors, et al., Case No. 2:24-cv-00449 (United States District Court for the Central District of California); Willsim Latham, LLC, et al. v. MetroList Services, Inc., et al., Case No. 2:24-at-00067 (United States District Court for the Eastern District of California, Sacramento Division); Kevin McFall v. Canadian Real Estate Association, et al., Case No. T-119-24-ID 1 (Federal Court of Canada); and Nathaniel Whaley et al. v. The National Association of Realtors, et al., Case No. 2:24-cv-00105 (United States District Court for the District of Nevada). The following lawsuit, brought by a putative class of residential property buyers, alleges that defendants participated in a system that resulted in buyers of residential property purportedly paying inflated home prices as a result of sellers purportedly paying inflated buyer broker commissions in violation of federal and Illinois antitrust laws: Batton v. Compass, Inc., et. al., Case No. 1:23-cv-15618 (United States District Court for the Northern District of Illinois, Eastern Division). The plaintiffs in these lawsuits seek a permanent injunction enjoining the defendants from requiring home sellers to pay buyer-broker commissions or from otherwise restricting competition among brokers, an award of declaratory relief and damages or restitution on behalf of certain home sellers or buyers, as applicable, in those states or provinces, as applicable, as well as attorneys’ fees and costs of suit. Plaintiffs allege joint and several liability and seek treble or other multiple damages. Each antitrust lawsuit is in the pleadings phase and the Company intends to vigorously defend against all claims. The Company may become involved in additional litigation or other legal proceedings concerning the same or similar claims. Commitments In March and April 2022, an indirect subsidiary and unconsolidated joint venture of the Company, SUCCESS Lending, entered into Mortgage Warehouse Agreements and related ancillary agreements (the “Credit Agreements”) with Flagstar Bank FSB and Texas Capital Bank, which each provide SUCCESS Lending with a revolving warehouse credit line of up to $25 million. It is customary for mortgage businesses like SUCCESS Lending to obtain warehouse credit lines in order to enable them to close and fund residential mortgage loans for subsequent sale to investors. SUCCESS Lending will use the borrowing capacity under the Credit Agreements exclusively for such purposes and borrowings will generally be repaid with the proceeds received from the sale of mortgage loans. In connection with the Credit Agreements, the Company has entered into Capital Maintenance Agreements with each of Flagstar Bank FSB and Texas Capital Bank whereby the Company agrees to provide certain funds necessary to ensure that SUCCESS Lending is at all times in compliance with its financial covenants under the Credit Agreements. The Company’s capital commitment liability under the Capital Maintenance Agreement with Flagstar Bank FSB is limited to $2.0 million. The Company’s capital commitment liability under the Capital Maintenance Agreement with Texas Capital Bank is limited to $1.25 million. The Credit Agreements represent off-balance sheet arrangements for the Company.

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