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From Antitrust Law Daily, April 1, 2014

Boycott claims adequately alleged against real estate brokerage firm, parent company

By Jeffrey May, J.D.

An online real estate information service adequately stated antitrust claims against the largest real estate company in Minnesota and its parent company—the second-largest real estate brokerage firm in the United States, the federal district court in Minneapolis has ruled. A motion by Edina Realty, Inc. and its parent, HomeServices of America, Inc., to dismiss claims asserted by American Home Realty Network, Inc. was denied (Regional Multiple Listing Service of Minnesota, Inc. v. American Home Realty Network, Inc., March 31, 2014, Tunheim, J.).

American Home Realty Network (AHRN) owns NeighborCity, an online service displaying information about properties for sale, connecting prospective buyers with buy-side real estate agents, and providing information to assist buyers in selecting an agent. Regional Multiple Listing Service of Minnesota, Inc. (RMLS) initiated a copyright infringement action against AHRN. The suit alleged that AHRN used photographs and other copyrighted materials from RMLS’s real estate listing service without permission. In response, AHRN brought antitrust counterclaims against RMLS for conspiring to exclude AHRN from its network. AHRN later added antitrust claims against Edina Realty and HomeServices for their role in the alleged conspiracy to suppress competition in the marketplace.

In July 2013, the court denied a motion to dismiss the antitrust counterclaims against RMLS (2013-2 Trade Cases ¶78,452). In that decision, the court concluded that “[t]he gravamen of AHRN’s counterclaim is that RMLS and its member-brokers colluded to use RMLS as a vehicle to assert false copyright claims that impeded AHRN’s business model and to exclude companies like AHRN from accessing the universe of listings needed to compete.”

AHRN added Edina Realty—a member-broker of RMLS—and HomeServices as third-party counterclaim defendants prior to the ruling on RMLS’s motion to dismiss. The second amended counterclaim added Edina Realty and HomeServices to many of the allegations against RMLS. In addition, AHRN added new allegations about specific actions taken by both Edina Realty and HomeServices.

In light of the court’s prior analysis of very similar claims against RMLS, the court found that AHRN’s allegations against Edina Realty and HomeServices adequately stated antitrust claims under federal and state law.

Edina Realty and HomeServices challenged the adequacy of AHRN’s pleadings on two grounds: (1) an allegation that HomeServices sent a cease and desist letter (on Edina Realty’s behalf) did not alone adequately plead a restraint of trade; and (2) a group boycott allegation had to fail because AHRN had never sought licensing from Edina Realty, AHRN failed to allege that Edina Realty and HomeServices had sufficient market power, and it was not a violation of the Sherman Act for a competitor to refuse to share with a competitor. None of these arguments sufficed to dispose of AHRN’s claims at this point in the litigation, in the court’s view.

The new counterclaim defendants contended that sending a single cease and desist letter could not amount to an unreasonable restraint of trade or otherwise create antitrust liability. However, AHRN had sufficiently alleged that the cease and desist letter was part of a larger conspiracy intended to preclude it from doing business in the real estate brokerage industry in the area covered by RMLS. According to the court, AHRN’s allegations that the new counterclaim defendants participated in a scheme to limit AHRN’s access to real estate listing data by sending the cease and desist letter sufficiently stated a claim for a conspiracy in restraint of trade.

Boycott. In its earlier ruling, the court found that RMLS and its coconspirators (which included member-brokers such as Edina Realty) “cut off access to information that is critical to any business attempting to compete with them,” and dominated the “market and information regarding home listings,” to preserve the extant business model of referring customers to listing brokers. This analysis applied to Edina Realty and HomeServices, despite the new counterclaim defendants’ arguments that AHRN’s pleadings against them were insufficient.

Although Edina Realty argued that AHRN never asked it to license data, AHRN alleged that “Edina Realty and its parent, HomeServices, refused to even discuss a licensing agreement.” Further, market power could be plausibly inferred from Edina Realty’s purported status as the “largest real estate company in the state of Minnesota, and the largest member of RMLS,” and from the alleged fact that it had “three members on the RMLS Board of Governors, one of whom is its chairman, and is the largest member of RMLS.” It was alleged that Edina Realty and HomeServices had “significant influence over RMLS.”

Lastly, the court rejected Edina Realty’s suggestion “that it would turn antitrust law on its head to use it to compel one company to license its intellectual property to its competitors.” AHRN’s claims did not seek antitrust liability for Edina Realty’s refusal to provide access to its listing data via referral agreements alone, but rather for Edina Realty’s participation in a conspiracy with other brokers and with RMLS to collectively restrict all access to essential listing data, the court explained. Edina Realty and other member-brokers purportedly shared information with each other, but refused to share it with a business seeking entry into the market, it was noted.

Parent company liability. HomeServices also argued that it should not be held liable for the acts of its subsidiary. However, AHRN alleged that HomeServices took specific action, separate and apart from Edina Realty’s actions, that generally furthered the alleged conspiracy. AHRN’s allegation that HomeServices sent the cease-and-desist letter on behalf of Edina Realty and other subsidiaries to AHRN’s CEO could show “direct and independent participation in the alleged conspiracy,” and was sufficient to state a claim against HomeServices at this stage of the litigation.

This is Case 0:12-cv-00965-JRT-FLN.

Attorneys: Chad A. Snyder (Snyder Gislason Frasier LLC); Daniel E. Gustafson (Gustafson Gluek PLLC); and L. Peter Farkas (Farkas + Toikka LLP) for American Home Realty Network, Inc. Mark R. Bradford (Bassford Remele, PA) for Edina Realty, Inc. and HomeServices of America, Inc.

Companies: Regional Multiple Listing Service of Minnesota, Inc.; American Home Realty Network, Inc.; Edina Realty, Inc.; HomeServices of America, Inc.

MainStory: TopStory Antitrust MinnesotaNews

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