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From Antitrust Law Daily, November 4, 2013

Realtor evaluation service’s boycott claims proceed against National Association of Realtors

By Tobias J. Gillett, J.D., LL.M.

A real estate agent evaluation and referral service sufficiently pleaded counterclaims that the National Association of Realtors (NAR) and a multiple listings service engaged in anticompetitive conduct aimed at driving the evaluation and referral service out of the market, the federal district court in Greenbelt, Maryland, has ruled (Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., November 1, 2013, Williams, A.). However,Noerr-Pennington immunity barred the counterclaims to the extent that they were based on the filing and maintenance of the present litigation.

American Home Realty Network (AHRN) is a real estate brokerage referral service that provides information to home buyers and sellers. AHRN searches the Internet for data on real estate listings and identifies real estate agents most suitable to represent potential buyers and sellers in proposed transactions. Metropolitan Regional Information Systems, Inc. (MRIS), a multiple listing service (MLS) in the mid-Atlantic region, brought a copyright action against AHRN for copying copyrighted content from the MRIS database and preparing derivative works based that material for its products.

AHRN asserted conspiracy and monopoly counterclaims under the Sherman Act, false advertising counterclaims under the Lanham Act, and unfair competition counterclaims under Maryland and California law, among others, against MRIS and the NAR. AHRN alleged that the counterclaim-defendants instigated a program to register and obtain sham compilation copyrights for MLS listings, threatened to and actually enforced those copyrights against AHRN, refused to deal with and refused to license MLS data to AHRN, made false and misleading statements related to their copyrights and concerning AHRN, and passed anticompetitive MLS rules consistent with their goal of driving AHRN and similar innovators out of the market. On June 10, the court dismissed the Sherman Act and unfair competition claims without prejudice.

In its amended counterclaims, AHRN alleged that NAR encouraged MLSs to falsely claim that photographs of residential properties and text describing those properties in their databases were “works for hire” for purposes of the Copyright Act, even though the MLSs neither employed nor commissioned the photographers or writers. Moreover, AHRN claimed that the agents uploading the photographs and text did not own the copyrights to them, and that the MLSs’ recordkeeping with respect to them was ineffective to transfer copyright without a written assignment from the owner.

AHRN further alleged that NAR had started competitive real estate agent evaluation programs that it offered free of charge in an effort to drive AHRN out of the market. AHRN maintained that its evaluations were unbiased and algorithm-based, while NAR’s ratings depended on customer satisfaction surveys, an approach that helped realtors to “own the process.” NAR also allegedly encouraged regional boards of realtors to prevent their member agents from entering referral agreements with AHRN, to breach agreements already made, and to demand that their names be stricken from AHRN’s list of potential referral agents, causing local realtors to refuse to deal with AHRN.

Noerr-Pennington immunity. In its June 10 order, the court had held that Noerr-Pennington immunity barred AHRN’s claims to the extent they were “based on the filing of this litigation and the incidents of that litigation,” and that AHRN had not plausibly alleged a fraud on the Copyright Office that would abrogate that immunity. In its present decision, the court concluded that AHRN’s new allegations regarding false work-for-hire designation also did not state a plausible claim for fraud on the Copyright Office because MRIS’s copyright registrations, including the work-for-hire designations, applied to the MRIS database as a whole, and the court refused to find that MRIS’s designation of its database as a work-for-hire constituted an attestation that its employees or agents had composed the text and photographs within the database.

However, the court found it had committed clear error by dismissing AHRN’s claim that MRIS had committed fraud on the Copyright Office by failing to disclose in its copyright registrations that CoreLogic, not MRIS, was actually responsible for the selection and coordination of content in the MRIS database. AHRN’s claim was not merely an attempt to argue that MRIS’s database was sufficiently original to warrant copyright protection, but rather an argument that the copyright would belong to CoreLogic rather than MRIS. The court found it could not rely on a declaration by MRIS’s CEO that MRIS did not use CoreLogic because that evidence was outside the pleadings. Therefore, the court permitted AHRN to engage in limited discovery regarding the CoreLogic issue before treating MRIS’s motion as a motion for summary judgment.

Anticompetitive conduct. The court concluded that AHRN’s new allegations of anticompetitive conduct were sufficient to state a plausible conspiracy claim, unlike in its June 10 decision. AHRN offered specific examples of real estate agents declining to work with AHRN due to NAR’s efforts. AHRN also cited a provision in NAR’s MLS handbook requiring its MLS and broker members to immediately notify it whenever they were “confronted with a request or demand by an individual for access to the association’s multiple listing service without membership in the association.” AHRN also alleged that NAR’s entry into the real estate agent evaluation market was led by NAR’s General Counsel, Laurene Janik, who had previously urged NAR members to send cease and desist letters to AHRN and to fund lawsuits against AHRN.

“The allegations regarding NAR’s entry into the agent evaluation and ranking market, the concrete steps taken by NAR and its members in refusing to deal with AHRN, and the NAR Handbook notice provision—read in conjunction with the original allegations from the First Amended Counterclaims including, inter alia, the November 2011 NAR annual meeting, AHRN’s receipt of virtually identical refusal and repudiation letters from brokers nationwide, and the Janik-led cease-and-desist efforts and NAR-funding of lawsuits against AHRN—give rise to the plausible inference that NAR was a party to an anticompetitive agreement,” according to the court.

Moreover, the court found that AHRN had sufficiently pleaded that anticompetitive harm would result from NAR’s conduct. The court found it was “economically plausible” that the NAR-led boycott of AHRN “would have the effect of depriving consumers of the ability to select the most qualified real estate agents for their transactions, thereby making the market less efficient and driving up the costs of brokerage services.” AHRN also alleged that its services were unbiased and algorithm-based, unlike NAR’s ratings, and that NAR had expressed a desire to help realtors “own the process” out of a fear of ratings in the industry, indicating that consumers “would be deprived of valuable resources as a result of an NAR-led boycott.” Finally, AHRN alleged that NAR had successfully engaged in similar efforts with respect to other, similarly-situated companies, and thus alleged a harm that was not limited to AHRN’s ability to compete. Therefore, the court declined to dismiss AHRN’s Sherman Act and Maryland unfair competition claims.

California Unfair Competition Law. The court dismissed with prejudice AHRN’s claim under the California Unfair Competition Law, because that law did not apply to nonresidents where the allegedly wrongful conduct did not occur in California.

The case is Civil Action No. 12-cv-00954-AW.

Attorneys: Margaret Aldona Esquenet (Finnegan Henderson Farabow Garrett and Dunner LLP) for Metropolitan Regional Information Systems, Inc. Richard Scott Toikka (Farkas + Toikka LLP) for American Home Realty Network, Inc. Jack R Bierig (Sidley Austin LLP) for National Association of Realtors.

Companies: Metropolitan Regional Information Systems, Inc.; American Home Realty Network, Inc.; National Association of Realtors

MainStory: TopStory Antitrust StateUnfairTradePractices MarylandNews

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