Realcomp wins Round 1 with the FTC

Here's an excerpt from today's press release from the Federal Trade Commission:

In an initial decision filed on December 10, 2007 and announced today, Chief Administrative Law Judge (ALJ) Stephen J. McGuire dismissed a Federal Trade Commission complaint issued last year against a realtors’ group in southeast Michigan, ruling that “upon review of the totality of the evidence . . . it is determined that Complaint Counsel has not met its burden” of demonstrating that the policies of Realcomp II, Ltd. (Realcomp) have unreasonably restrained or substantially lessened competition in the relevant market. McGuire accordingly concluded that Complaint Counsel had not shown that the group’s policies resulted in “actionable consumer harm” in violation of Section 5 of the FTC Act.

Here's a link to ALJ McGuire's initial decision (be patient, it's a 144 page, 11mb file).

I have looked over the decision, and note the following-

• While the “dual-listing” option noted in the Initial Decision may get an Exclusive Agency listing on Realtor.com, it will not get such a listing on MoveInMichigan.com or Realcomp’s IDX feed, both popular methods for Michigan consumers to view listings. And as for that Realtor.com listing, it will be inferior to the same listing that would show up on Realtor.com if it was submitted directly by Realcomp. This is because different MLSs use different data fields, and certain local data (i.e., the names of appropriate schools) will not appear on such dual-listings. Perhaps most importantly, the dual-listing option is dependent upon the “bypass” MLS maintaining its current Realtor.com upload policies. Such policies are likely to change should this Initial Decision stand.
  

• I have a hard time accepting the procompetitive justifications offered by Realcomp for its Website Policy, in light of the National Association of Realtors’ prior statement that Exclusive Agency listings on IDX feeds “would not detract from the purposes of the MLS.”
  

• To sum it up, this ruling essentially concludes that Realcomp’s Website Policy reasonably restrains the public exposure of non-Exclusive Right to Sell listings. I don’t think there is very much reasonable about it.

Another MLS settles with the FTC over alleged anticompetitive practices

From the Federal Trade Commission's press release of earlier today:

The Federal Trade Commission today charged Multiple Listing Service, Inc. (MLS), a group of real estate professionals based in Milwaukee, Wisconsin, with violating the antitrust laws by adopting rules that withheld valuable benefits of the multiple listing service it controls from consumers who chose to enter into non-traditional listing contracts with real estate brokers. The rules blocked non-traditional, less-than-full-service listings from being transmitted by MLS to popular Internet web sites, but provided this important benefit for traditional forms of listings.

In settling the charges, MLS is barred from adopting or enforcing any rule that treats one type of real estate listing agreement more advantageously than any other, and from interfering with the ability of its members to enter into any kind of lawful listing agreement with home sellers. The order applies not only to MLS, but to other entities it controls, including MetroMLS and any affiliated Web site it operates. The settlement announced today follows the FTC’s 2006 announcement of a sweep alleging similar conduct by multiple listing services in other local areas in several states.

“The Commission action announced today reconfirms our commitment to ensuring that consumers can freely enter into lawful agreements with real estate brokers for help in selling their homes,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “Homeowners should be able to lawfully contract with a broker on the terms that they choose, without facing interference by the broker’s competitors.”

For those of you interested, here are links to the FTC's complaint, order and analysis.

Judgment entered against Idaho class on tying claims

It's been over six months since anything material has come out of the four class actions pending in federal district court in Idaho. You'll recall the court previously certified the following class in these cases, which allege that each defendant illegally tied the purchase of undeveloped land to payment of a commission based upon the value of the land plus anticipated development thereon:

All persons who: (1) bought an undeveloped lot in a subdivision in either Ada, Boise, Canyon, Gem or Owyhee county, Idaho between August 18, 2001 and February 28, 2006 in which Defendant has or had the exclusive right to market or sell the subdivision lots on behalf of the developer; (2) were required to build a house on the lot in order to buy the lot; and (3) were required to pay Defendant a commission based on the cost of the lot plus the actual or estimated cost of the house in order to buy the lot.

The wait is over. Last Friday District Judge Winmill granted summary judgment in favor of the four defendants on the state and federal tying claims. After identifying the relevant legal issue as "whether Defendants, in allegedly forcing Plaintiffs to buy Defendants' services on the sale of the subject homes built on the lots, foreclosed other brokerages from selling the same product to Plaintiffs," the court concluded that the defendants demonstrated that plaintiffs “lack evidence of foreclosure by pointing out that Plaintiffs did not want to purchase the tied product from any source.”

The plaintiffs' Idaho Consumer Protection Act claims remain before the court at this time.

Court denies majority of Missouri Real Estate Commission's Motion to Dismiss KCPA's complaint

After the defendants filed their motion to dismiss over the summer, it's been pretty quiet in Kansas City Premier Apartments v. Missouri Real Estate Commission, et al. [In a nutshell, KCPA filed suit earlier this year in a Missouri state court, seeking a declaration that MREC cannot require KCPA - which operates a website that displays apartments available for rent - to obtain a real estate license. For more details, check out my original, first follow-up and second follow-up posts.] Not any more.

Yesterday Judge Hull denied, in part, the defendants' motion to dismiss plaintiff’s complaint. While the court did dismiss Count II (alleging due process violations), and the individual MREC commissioners and executive director (as parties), the remaining claims survived (alleged violations of applicable statutory exemptions, free speech, equal protection, and procedural failings), and MREC remains as a defendant.

This case is far from over.

Court denies motion for arbitration in Home Quarters litigation

It has been several months since I last wrote about the Home Quarters v. Realcomp action pending in Michigan.

Last month, Magistrate Judge Whalen denied defendant MIRealSource's motion to compel arbitration and stay the litigation. The court relied in part on Judge Bucklo's recent decision in the Hackman suit pending in Illinois, stating that "[f]or virtually identical reasons, present Plaintiff's antitrust claims fall outside the 'disputes' contemplated by NAR's Manual, which, as in Hackman, was incorporated in its entirety into the arbitration agreement." (emphasis in original).

Accordingly we can expect this case to proceed in federal court, with the record available to the public for review.

Federal antitrust enforcer pursues another MLS

Perhaps you've already read about it over at the InmanBlog, but if not, I see that the Department of Justice has reached a tentative settlement with the Multiple Listing Service of Hilton Head. The agreement would require the rescission of discriminatory membership rules which burdened non-traditional brokers, minimum service requirements, and the authority of the MLSs' trustees to adopt rules that could directly regulate commissions. Unreal.

While the proposed settlement apparently has not yet been made public, a summary is contained in the DOJ's Competitive Impact Statement (see page 9 thereof), which was filed along with a civil complaint yesterday with the Clerk of the U.S. District Court for the District of South Carolina.

10/18/07 UPDATE: A kind media acquaintance has supplied me with a copy of the proposed final judgment (settlement) in this case. I'm looking forward to reviewing it.

Chicago Lawyers' Committee files appellate brief in Craigslist litigation

Complying with the recently announced filing deadline, the Chicago Lawyers' Committee has filed an appellate brief in its case against Craigslist, presently pending before the Seventh Circuit.

Buried in a footnote is where I found the only reference to the Ninth Circuit's now-benched Roommate.com decision. While the issues presented in the two Fair Housing Act cases are not identical, I would have expected CLC's counsel to try to make more of the Ninth Circuit's decision. I suppose it's basically a moot point now.

I'm very much looking forward to attending the oral argument in this one.

New federal website addresses competition in the real estate brokerage industry

Earlier today Inman News' InmanBlog posted on a new website created by the U.S. Department of Justice's Antitrust Division that is intended to shine some light on anticompetitive real estate brokerage practices. A DOJ press release accompanied the site's launch.

I see the new website includes a link for anticompetitive MLS practices, information on discriminatory state laws, and an email address for reporting questionable conduct. As you may recall, the joint FTC/DOJ report on industry competition issued last spring recommended, among other things, that DOJ "promote consumer understanding of marketplace options. . . . Competition in the real estate brokerage industry would likely be enhanced if consumers had better access to such information." Good to see the DOJ following through on this point.

Update on Chicago Lawyers' Committee v. Craigslist

For those of you unfamiliar with this case, check out my guest post that appeared on May It Please The Court just after Judge St. Eve ruled last year on Craigslist's motion for judgment on the pleadings. After the court denied plaintiff's subsequent motion to reconsider, plaintiff appealed, and for the last six months the Seventh Circuit has suspended briefing, presumably to allow for a negotiated resolution.

Apparently a quick settlement isn't in the cards. Late last week the Court of Appeals jump-started the case by issuing a briefing schedule. Appellant Chicago Lawyers' Committee for Civil Rights Under Law, Inc.'s ("CLC") brief is due October 9, Appellee Craigslist's brief is due November 20, and CLC's reply brief is due December 7, 2007.

It will be interesting to see how the the Ninth Circuit's Roommate.com decision figures in to the parties' briefs.

UPDATE: U.S.A. v. National Association of Realtors

District Judge Filip held a status hearing this morning in US v. NAR.

Discovery closes in a few months (November 21), and NAR's counsel stated that his client would "quite likely" be filing a motion for summary judgment thereafter. The court directed that such motion should be filed no later than January 14, 2008. The court set response and reply deadlines, and anticipated ruling on such motion (if filed) around April 25, 2008.

The parties expect a four week bench (non-jury) trial, and Judge Filip estimated that the trial would commence in early June 2008 (3 full days, one partial day, per week). Of course if NAR does file a motion for summary judgment, and the court rules in its favor, a trial would not be necessary.

A status hearing was scheduled for November 28, 2007 at 9:30 a.m. before Judge Filip.

Federal judge enters preliminary injunction against KREC Commissioners, rules certain state laws unconstitutional

I've written about River Oaks Management v. Kentucky Real Estate Commission on several occasions (most recently here), and about an hour ago an anonymous commenter to an earlier post advised me that the court had ruled on several pending motions. Whoever you are, thank you! Here is a link to today's Order and accompanying Opinion.

As you can see, Judge Simpson granted plaintiffs' request for a preliminary injunction, thereby prohibiting KREC's Executive Director and Commissioners from (1) enforcing the prohibition against splitting fees with or compensating a real estate broker licensed in another state for the interstate brokerage of Kentucky real estate, and (2) enforcing the prohibition against aiding and abetting a real estate broker licensed in another state in the interstate brokerage of Kentucky real estate.

The court also ruled that a statutory provision at issue and a related regulation were unconstitutional. To learn more, click on the "Opinion" link, above.

Significant rulings in Hackman v. Dickerson Realtors, et al

It has been some time since I last wrote about Greg Hackman's private antitrust lawsuit filed against multiple real estate players in Rockford, Illinois. But earlier today Judge Bucklo issued a 50 page opinion in the case, ruling on a number of motions that have been pending before her. Here's a summary of her decision, which is more or less broken down by the relevant defendants.

Century 21. Apparently plaintiffs have settled with Century 21 Country North, Inc. and dismissed it from the case.

Diane Parvin. Parvin asked the court to compel arbitration of plaintiffs' tortious interference claim, in light of an agreement Hackman made as a member of the Rockford Association of Realtors ("RAAR"). Plaintiffs had alleged that in August 2006 Parvin falsely told Hackman that a property was not available for his client to see, preventing Hackman from submitting an offer.

After analyzing the Federal Arbitration Act, Association bylaws, the Code of Ethics and Arbitration Manual, and determining whether Hackman's beef constituted a contract dispute, the court ruled that "[n]o matter how Hackman defines his own claim, disputes between realtors concerning violations of the MLS rules are 'contractual disputes' under Article XVII [of the RAAR bylaws]. Therefore, they are subject to arbitration."

However, the court ruled that Hackman's separate allegations that Parvin "interfered with his valid business relationships with potential clients by making derogatory statements about Hackman is . . . a tort claim . . . [and] is not subject to arbitration." But see my discussion below with respect to the inadequacy of the tort claim against Parvin. Finally, the court denied Parvin's request to suspend the entire judicial proceeding while the MLS rule matter is being arbitrated.

Rockford Association of Realtors/Illinois Association of Realtors. Dismissing Sherman Act and Illinois Antitrust Act claims against RAAR, the court relied in part on the U.S. Supreme Court's recent ruling in Bell Atlantic Corp v. Twombly, noting that "an allegation of encouragement is not a sufficient allegation of fact that raises Hackman's right to relief above a speculative level." Also, the court - citing lack of jurisdiction - dismissed requests by Hackman to enjoin RAAR and IAR from conducting an ethics hearing against Hackman and to grant declaratory relief.

Prudential/Jessica Licary. The court also dismissed Hackman's state and federal antitrust claims against Prudential and Licary, again referring to Bell Atlantic:

In the antitrust context, the holding of Bell Atlantic requires that an antitrust plaintiff pleading the existence of a conspiracy or agreement to monopolize or restrain trade do more than conclusorily plead the existence of an agreement or conspiracy, but rather “a complaint with enough factual matter (taken as true) to suggest that an agreement was made.”

Like above, the court found Hackman's complaint insufficient here, noting that he "presents no evidence of an agreement other than evidence of parallel conduct." The court also dismissed a claim for what turned out to be "tortious interference with prospective economic advantage," noting the absence of any specific allegations of wrongful conduct by Prudential or Licary. Such tort-like claim against Parvin was also dismissed. However, a defamation per se claim against Prudential and Licary survived the court's ruling.

Melissa Smith/Lori Reavis/Ray Young. The court denied motions to dismiss the tortious interference with prospective economic advantage claims against these defendants, finding that Hackman's allegations against them did not require an allegation that a contract existed. The court added that Hackman has acknowledged that he did not intend to include Ray Young in his defamation claim, and denied Reavis' request that Hackman elaborate on the tort claim.

Young/Michael Dunn/Smith/Dickerson Realtors. Requests to disaggregate compound allegations were denied as to the antitrust claims, but granted as to the defamation and tortious interference counts. Thus Hackman will presumably be filing an amended complaint in the near future, perhaps not just to comply with this final part of the opinion, but to strengthen, if possible, his antitrust claims against various defendants so that they comply with Bell Atlantic.

WHAT DOES THIS OPINION TEACH US? First, as expected, Bell Atlantic has some serious teeth. For a Section 1 claim, if you don't have good, preferably direct, evidence of an agreement, and instead are simply relying on observed, parallel conduct, your claim is unlikely to survive a motion to dismiss. But note the court cited Bell Atlantic when considering Hackman's Section 2 claim and his defamation claim as well. Bell Atlantic means business, in the Section 1 arena and beyond.

Second, this opinion should remind all nontraditional brokers/agents out there that the antitrust laws are not your only potential weapons against objectionable practices. The court sustained several defamation claims and claims of tortious interference with prospective economic advantage. As Judge Bucklo explained in detail, the latter has the benefit of not requiring proof of a contract, and both claims, of course, do not require proof of a conspiracy. Each can be used, when appropriate, against unilateral conduct. And in the Hackman case, neither claim appears to be subject to arbitration.

I know it was issued just in the last few hours, and I've only read through it once, but I think that Judge Bucklo's opinion is a must read for any and all brokers/agents who may be contemplating legal action against "difficult" brokers/agents in their area. While bylaws will vary from association to association, and the common law will vary from state to state (here Judge Bucklo looked to Illinois law when considering plaintiffs' tort claims), the applicability of Bell Atlantic, and the potential utilization of tort claims against actionable, unilateral conduct, should be considered by all potential plaintiffs, regardless of jurisdiction.

Online Liability Blog

This post is admittedly a little off topic. No antitrust/competition angle here, but there is a real estate connection. Perhaps you recall the forsalebyowner case and/or the pending zerobrokerfees and kcpremierapts cases, each implicating licensing laws and the First Amendment? Or maybe you read about the Roommate.com or craigslist decisions involving the Fair Housing Act and potential statutory immunity? Yes? No? Either way, I'll keep it short.

I recently created a new blog that focuses on online liability issues, i.e., the circumstances under which a website (and/or other Internet-related business) may be liable for certain online conduct. I thought I'd share a link to it here, and invite you to fire off any comments you might have. Soon I hope to have a static "Real Estate" page on the blog that highlights online liability issues relating to real estate-related websites. Stay tuned.

www.onlineliabilityblog.com

Certainly feel free to share the link with others who may be interested.

Thanks.

Realcomp knowingly violates NAR rule, its CEO offers after-the-fact explanations for suspect Website Policy

Last week the FTC (technically lawyers supporting the complaint) filed a post-trial brief in the FTC v. Realcomp matter. No surprises really, but I did come across two matters worth noting here.

First, in several prior posts on this blog, I have wondered how it could be that Realcomp was enforcing its Website Policy, which among other things prevents EA listings from being uploaded to Realtor.com, notwithstanding a NAR rule that prohibited such practices. The FTC’s brief shed some light on this inconsistency:

At the same time [Realcomp] voted to change the Search Function Policy, the Realcomp Board rejected a motion that would have eliminated the Website Policy. That motion proposed that Realcomp comply with a recently passed NAR rule that requires NAR associated MLSs to include all listings, regardless of listing type, in any feed to public websites and in the IDX. Compliance with this rule is mandatory, which means that NAR has determined that the rule is necessary for the proper operation of an MLS. Realcomp had urged NAR not to pass this mandatory rule, but NAR rejected Realcomp's arguments. [citations omitted].

Thus we now learn that Realcomp has been knowingly violating the NAR rule. The brief elaborates further-

The National Association of Realtors - the organization whose purpose is to promote the interests of Realtors such as Realcomp's members – considered and rejected Realcomp's arguments. NAR has made it mandatory for every one of its hundreds of associated MLSs to include all listings, regardless of listing type, in any feed to public and IDX websites. Realcomp tried to convince NAR not to do this, arguing the very same thing it does here - that allowing Exclusive Agency listings "is in direct conflict with the very purpose of the MLS" because the seller could avoid paying a commission. But NAR, through its general counsel, squarely rejected Realcomp's arguments. NAR explained that including Exclusive Agency listing on feeds to public websites and the IDX is not a problem because (1) "the seller had engaged the services of a real estate professional"; (2) these listings include "an offer of cooperation and compensation to MLS participants"; and (3) if a cooperating broker brings a buyer, "that broker is entitled to the compensation communicated to the MLS participants by the listing broker." Thus, concluded NAR, including Exclusive Agency listings on these feeds would not detract from the purposes of the MLS. [citations omitted].

Accordingly, Realcomp’s Website Policy has not only triggered an FTC enforcement action alleging anticompetitive conduct in violation of the Federal Trade Commission Act, it has also knowingly contravened, and continues to contravene, a NAR rule directly on point.

In this light, perhaps my second observation will not be too surprising. I noticed this paragraph in a footnote toward the end of the brief:

While Realcomp elicited testimony from Karen Kage [Realcomp’s CEO] regarding the reason the Board adopted the Website Policy, not a single member of the Board of Governors could testify as to these reasons. Moreover, Ms. Kage's testimony is not supported by a single contemporaneous document. Instead, the contemporaneous documents indicate that Realcomp wanted to exclude Exclusive Agency listings entirely. Realcomp's supposed reasons for the Website Policy should therefore be viewed as post hoc rationalizations, which deserve no weight. [citations omitted]

Thus Realcomp has not only (i) promulgated, and declined the opportunity to rescind, a policy that it knows is in violation of what appears to be a carefully considered NAR rule, and (ii) subsequently been charged by the Federal Trade Commission with anticompetitive conduct, it would appear that (iii) its CEO has offered justifications for the policy that the governing board couldn’t even recite, and, regardless, were “not supported by a single contemporaneous document.”

Amended Complaint filed in Louisville Price-Fixing litigation

Late last week the remaining plaintiff in the Louisville price-fixing class action filed an amended complaint with the Clerk. I have not had an opportunity to review the filing, but understand that the only changes relate to the identities of certain parties.

As you may recall, I previously wrote about the case here.

Realcomp update

Earlier this week Realcomp filed its post-trial brief in the FTC v. Realcomp matter.

You'll recall that this case relates to Realcomp's "Web Site Policy" and its "Search Function Policy". Perhaps sensing a weakness in its case, Realcomp confirmed in its brief that "[i]n April, 2007, Realcomp repealed the Search Function Policy. It also repealed the definitional requirement that ERTS listings be full-service brokerage agreements."

According to the brief, Realcomp's Web Site Policy "provides that Listing information downloaded and/or otherwise displayed pursuant to IDX (Internet Data Exchange) shall be limited to properties listed on an exclusive right to sell basis." In other words, "[t]he Web Site Policy limits the distribution of EA listings to certain Internet cites and the IDX." Realcomp can't just come out and say what this means - no EA listings on Realtor.com, among other popular sites. And how does Realcomp justify its policy? "Brokers Can Easily Obtain Exposure on Realtor.com by Dual-Listing" with another MLS. Furthermore, "Problems That EA Brokers Face in Southeast Michigan Are More Likely a Function of Their Business Model." Allow me to translate - #1, if some of you brokers want to innovate, it's going to cost you (and consumers), and, #2, you innovative brokers wouldn't have so much trouble (see #1) if you'd just knock off all the innovating. Pitiful.

In an Order entered yesterday by the ALJ, closing arguments are scheduled for September 6, 2007.

New complaint filed in RealComp private antitrust litigation

A few months ago I wrote about a private antitrust lawsuit filed against RealComp II, Ltd. and MiRealSource in Michigan.

For those of you following the case, I note that last Friday plaintiff filed an amended complaint. Unfortunately I have not had an opportunity to review the new pleading.

KCPA v. Missouri Real Estate Commission - Update

Today the court hearing Kansas City Premier Apartments, Inc. v. Missouri Real Estate Commission held a status conference, which was attended by attorneys for both parties. As you may recall, I have previously written about this case, which is presently pending in Platte County, Missouri.

Currently before the court is MREC's motion to dismiss the complaint, although the government really seems to be after various clarifications to the pleading, not dismissal. My guess is that briefing will be complete within the next few weeks, and the court will rule on the motion to dismiss - unless the parties reach some sort of stipulation - later this year.

Plaintiff is represented by Missouri attorney Edward F. "Chip" Walsh, IV.

Louisville Price-Fixing Class Action - Preliminary Ruling

In 2005 Casey W. Hyland, Graham Pullen and Christopher R. Burnette filed an antitrust class action complaint against numerous real estate brokerages in the United States District Court for the Western District of Kentucky. My understanding is that only Mr. Burnette remains as a named plaintiff in the case, per a December 22, 2006 order, which clarified an earlier ruling. The most recently filed complaint names the following entities as defendants:

1. HomeServices of America, Inc.
2. HomeServices of Kentucky, Inc.
3. Semonin Realtors
4. Rector Hayden Realtors
5. RE/MAX International, Inc.
6. RE/MAX Connections
7. RE/MAX Properties East
8. Century 21 Real Estate LLC (f/k/a Century 21 Real Estate Corporation)
9. Cendant Corporation
10. NRT Inc.
11. Coldwell Banker Real Estate Corporation
12. Coldwell Banker McMahan
13. RE/MAX Alliance

I have not reviewed the latest complaint, but note that it consists of a single count alleging a per se Section 1 violation. According to a recent ruling “the Plaintiffs are purchasers and sellers of real estate in . . . Kentucky sometime between January 1, 1991 through the present, and as such, the Plaintiffs seek to represent a class of persons and/or entities who purchased and/or sold real estate during this class period. The Purchaser-Plaintiffs allege that they each indirectly paid a 6% commission to their respective brokers. Both parties concur that the sellers of the real estate, not the Purchaser-Plaintiffs, paid the 6% commission to their agents, and the agents subsequently split the commissions with the brokers of the Purchaser-Plaintiffs following completion of the sales.

“The Plaintiffs characterize the dealings between the agents and brokers as illegal price-fixing, claiming that these transactions are violations of Section 4 of the Clayton Antitrust Act and Section 1 of the Sherman Act.”

On June 28, 2007, District Judge Russell ruled upon several pending motions to dismiss, most of which related to service and jurisdiction. The main exception though was the court's ruling upon a joint motion to dismiss the amended complaint. Therein the Defendants contended, in part, that the Plaintiffs have not properly pled an antitrust claim against them because the actual basis of the Plaintiffs' amended complaint stems from the state rebate regulation, which they argue implicates the state action doctrine.

In their response to the motion, the Plaintiffs argued that the crux of their amended complaint is not based on the Defendants' abiding by the state rebate regulation, but instead focuses on the claims that the Defendants allegedly engaged in illegal price fixing by conspiring to charge a 6% commission across the board, without any willingness to negotiate with customers, even though the costs of providing services has decreased while prices of real property in Kentucky has increased.

The Court stated that “[a]t this juncture, in construing the complaint in favor of the Plaintiffs, the Court finds that the Plaintiffs amended complaint has sufficiently set out an antitrust claim against the Defendants . . . the Plaintiffs have sufficiently pled an antitrust claim against the Defendants by properly alleging a conspiracy amongst the Defendants, who the Plaintiffs claim have a large share of the market, to illegally “price fix” within the Louisville real estate market by setting their commissions at 6%, while prohibiting any negotiations on the rate in order to eliminate price competition, and therefore, causing the class of plaintiffs financial harm . . . the Plaintiffs have pled a proper antitrust claim against the Defendants under FRCP 8, and that claim shall go forward at this time.”

Thus the complaint survived the defendants' motion to dismiss, and the parties will now presumably proceed with discovery. It remains to be seen whether plaintiff will file a motion for class certification (I tend to think he will), and, if so, whether he will first engage in class discovery before serving any substantive discovery requests. Because the court's ruling also barred certain claims as untimely under the Clayton Act's four year statute of limitations, the class definition would need to be narrowed. Once substantive discovery does commence, I would expect it to proceed much faster than it has, for example, in the USA v. NAR suit, mainly because of the per se standard that would likely apply, and because the case apparently only relates to transactions in the Louisville area.

Regardless, the is the only case presently pending that I am aware of that includes express price-fixing allegations against real estate brokers and agents relating to commissions. The court's denial of the defendants' motion to dismiss is a partial but impressive victory for plaintiff and the purported class. His complaint might also serve as a blueprint for future cases relating to alleged commission-fixing.

Inman News Innovator Awards - Most Innovative Blog Finalist

I know that few of you know me personally, but I hope you will accept my claim that, generally speaking, I am not one to boast, regarding professional acknowledgments or otherwise.

That said, I was pleased to see - and encouraged by others to share the fact - that Inman News, which annually bestows various "Innovator Awards" upon real estate industry participants, has named this blog as a Finalist for "Most Innovative Blog." Check out the announcement here.

I just wanted to share the good news with you, and thank you for visiting the blog.

Update on Marcus & Millichap litigation against the Kentucky Real Estate Commission

I noticed this article in this morning's Courier-Journal, which highlights yesterday's oral arguments on a pretrial motion in the Kentucky litigation I introduced in an earlier post. While the suit mainly involves commercial brokers and commercial real estate, the underlying issue presented - the reach of a state real estate commission and its regulations - is applicable to all real estate brokers. And, according to Kentucky Assistant Attorney General Stuart W. Cobb, you had better watch what you say if you are an out of state broker talking about Kentucky real estate, because “[r]eal estate brokerage is talking.” Check out the article to see what I mean.

Given positions taken by the California, New Hampshire, and, most recently, Missouri Real Estate Commissions as they relate to the operations of several innovative real estate websites, the issue of regulatory reach should be on everyone's radar.

Kansas City Premier Apartments v. Missouri Real Estate Commission - Update

Here is a copy of defendants’ Answer and Motion to Dismiss, apparently filed on June 8, 2007, in Kansas City Premier Apartments, Inc. ("KCPA") v. Missouri Real Estate Commission (“MREC”), et al. In the pleading, MREC asks the Court to deny KCPA’s prayers for relief and rule that KCPA's business activities constitute the practice of a real estate broker and/or a real estate salesperson and is the basis for an order to enjoin KCPA from engaging in such conduct. Alternatively, MREC seeks dismissal for failure to state a cause of action.

Interestingly, in response to the allegations contained in Paragraph 55 of the Petition, MREC states that it “believes that KCPA’s business activities are not fully described in its Petition . . . MREC believes discovery will be required to determine the extent and nature of KCPA’s business operations.” Funny how MREC thought it knew enough about KCPA to - on two occasions - tender a cease and desist letter to KCPA commanding it to cease its operations, but now, after KCPA has filed suit, MREC states that it needs discovery to “determine the extent and nature of KCPA’s business operations.”

Federal Trade Commission v. Realcomp Joint Stipulation

Barring some last minute settlement, the Realcomp trial is scheduled to kick off tomorrow in D.C.

Just posted on the FTC's website is the parties' jointly-filed Stipulation as to Law and Facts. While the stipulation consists of ten pages, the exhibit list filed along with the stipulation covers sixty-three (63) pages. I suppose this explains Realcomp's estimate of the trial's duration (two weeks). Realcomp has already filed its pretrial brief with the ALJ.

I noticed that the stipulation refers to "Realcomp's merger talks with MiRealSource" at paragraph 37. That's the first I have heard of such discussions.

Kansas City Premier Apartments v. Missouri Real Estate Commission

As first reported by columnist Dan Margolies of the Kansas City Star on May 21, 2007, Kansas City Premier Apartments, Inc. (“KCPA”) filed a Petition in the 6^th Judicial Circuit (Platte County) of Missouri on April 16 against the Missouri Real Estate Commission (“MREC”) and its five commissioners. Why? Well, first it was ForSaleByOwner.com. Then ZeroBrokerFees.com. Now it's KCPremierApts.com that is being told that, unlike newspapers circulating throughout the state, it must first obtain a brokerage license to advertise properties online.

KCPA operates an Internet website that “provides information content about current apartment, loft and house rentals” in the Kansas City metropolitan area. The company “contracts with local rental proprietors to advertise information about available apartment, loft and house rentals on the KCPA website . . . [t]he rental information shown on the KCPA website about available rentals units is provided by [the] rental proprietors.” The resulting database compiled by KCPA “is searchable by the general public at no cost.” It is my impression that KCPA, understandably, has never held a real estate brokerage license.

KCPA’s compensation system is just as innovative as its online display of rentals. “[F]ees are only payable by a proprietor at the time an individual who used the KCPA website search portal to find a potential rental property, then contacts the proprietor and voluntarily communicates that his/her interest arose after using the KCPA website, then signs a lease or rental agreement and then actually moves-in. At this juncture an agreed to advertising fee as set forth in the advertising contract is owed to KCPA.”

But too innovative, apparently, for the MREC. KCPA has received two cease and desist letters to discontinue its service. The latter of the two, dated March 22, 2007, was sent by counsel for the Missouri Department of Economic Development, Division of Professional Registration, on behalf of the MREC. The letter makes no mention of any investigation other than MREC’s review of KCPA’s website, and commands KCPA to “immediately cease and desist from operating as a real estate broker or salesperson in the state of Missouri without the required Missouri real estate license.” For good measure, counsel adds that “operating as a real estate broker or salesperson without a license is a criminal offense . . . [f]ailure to abide by this request will result in this matter being officially directed to the Missouri Attorney General’s Office and all applicable prosecuting authorities for official immediate legal action against [KCPA].” (emphasis in original). Counsel advises that the applicable real estate brokerage law “is valid and must be enforced by the Commission.”

Seeking guidance, KCPA filed suit, asking the Court to render declaratory judgments relating to MREC’s alleged violations of applicable statutory exemptions, due process, free speech, equal protection, and procedural failings. Defendants were granted an extension to file their Answer on or before today, June 8^th, and a preliminary hearing is scheduled for July 16, 2007.

I hope to follow this case closely. We know what happened in California, and my previous posts suggest how the New Hampshire case is going to be resolved. While I am not familiar with the Missouri statute at issue here, and have not seen the defendants' responsive pleading, this case would appear to present another strong basis for invalidating the subject statute on First Amendment grounds.

REALCOMP files pretrial brief with the Federal Trade Commission ALJ

As you may know, the FTC v. RealComp trial - scheduled to commence on June 19 in Washington D.C. - is just around the corner, the ALJ having dismissed RealComp's motion to dismiss. In a June 1, 2007 Inman News article, RealComp's CEO estimated the trial would last two weeks.

Earlier today the FTC posted on its website a pretrial brief filed on behalf of RealComp back on May 30. I've not yet read it, but presume it sets forth in significant detail RealComp's legal defenses to the FTC's allegations.

FTC/DOJ take position on new Michigan minimum service bill

“The FTC and DOJ continue to believe that no minimum-service legislation is necessary.”

-May 30, 2007 FTC/DOJ comments on Michigan HB 4416 at 5.

The Federal Trade Commission has approved the filing of joint FTC/U.S. Department of Justice comments with Michigan Governor Granholm regarding HB 4416, which relates to minimum service requirements for real estate brokers in Michigan.

The FTC’s press release notes that HB 4416 “is a revised version of 2005's HB 4849, which would have required Michigan real estate professionals to provide a specified array of services, requiring home sellers within the state to buy real estate brokerage services they may not want or need.”

While HB 4416 also requires real estate professionals to provide specified services, it allows consumers to waive the broker’s help in acceptance, presentation, development, and communication of offers and counteroffers; negotiations; and closings. However, the agencies advise “that there is still not evidence that any form of minimum-service law is needed to protect the state’s consumers.”

The comments also address a broker advertising provision contained in the bill, which provides that

A REAL ESTATE BROKER OR REAL ESTATE SALESPERSON REPRESENTING A SELLER UNDER A SERVICE PROVISION AGREEMENT SHALL NOT ADVERTISE THE PROPERTY TO THE PUBLIC AS "FOR SALE BY OWNER" OR OTHERWISE MISLEAD THE PUBLIC TO BELIEVE THAT THE SELLER IS NOT REPRESENTED BY A REAL ESTATE BROKER.

The comments include an interesting analysis of how this provision could affect yard signage. Bottom line, “[t]he FTC believes this provision could impose costs on certain non-traditional brokers, hindering their ability to compete.” As an aside, this provision reminds me some of recently enacted NAR MLS Policy Statement 7.87, which relates to potential restrictions that could be imposed by MLSs upon the upload of listings to websites like Realtor.com (e.g., certain listings where "the seller displays on the property a 'For Sale By Owner' sign or another sign or notice indicating that the seller is soliciting direct contact from buyers.")

The comments also address a concern relating to a provision that could require a broker acting under a service agreement to furnish, or cause to be furnished, a closing statement.

Tennessee governor signs anti-rebate bill into law

As a commenter on one of my prior posts has noted, and as reported on Tennessean.com, Governor Bredesen signed SB 1160, as amended, into law Wednesday evening, which immediately prohibits Tennessee real estate brokers from providing cash rebates, cash gifts or cash prizes to their customers. This law effectively overrules the judgment of the state's purported experts in the field - the TN Real Estate Commission - which was leaning toward the conclusion that such prohibition - embodied in a Commission regulation - was no longer desirable.

Specifically, Rule 1260-2-.33(2) of the Tennessee Real Estate Commission states that “[n]o cash rebates, cash gifts, or cash prizes may be paid to any person who does not hold a real estate license.” Yet the Commission was on the verge of repealing the rule. See page 2 of this Notice of Rulemaking Hearing pertaining to a May 2007 meeting of the Commission (“Rule 12602.33 Gifts and Prizes is amended by deleting paragraph (2).”). Thus with little if any meaningful debate before passing the bill (at the Tennessee Association of Realtors' urging), the legislature recently sent SB1160 as amended to the governor, who has made the bill law in Tennessee.

Not wanting to come across as opponents of price competition, it sounds like proponents of the bill, incredulously, are boasting of its purported pro-consumer justifications, none of which are cited in the law or, apparently, were meaningfully considered by either legislative body before passing the bill. Furthermore, both the state legislature and the governor chose to ignore the advice of the United States Department of Justice to reject the bill, the DOJ being one of the chief enforcers of the nation's antitrust laws that, along with the FTC, has no doubt heard similar "pro-consumer" justifications for such a prohibition from legislators and governors in other states.

Interestingly, I have come across an Arizona broker/blogger - apparently a traditional one mind you - that seems to acknowledge in a post that TAR's motives were anticompetitive and protectionist.

For what it is worth, I note that the law is limited to cash rebates, etc. I imagine that innovative Tennessee brokers will continue to find ways to effectively compete on price, much to the chagrin of those who fear to their core the idea of price competition.

RealComp, Strike two

You'll recall that earlier this month a private antitrust lawsuit was filed against RealComp in Michigan. Strike one.

In my most recent update on the Federal Trade Commission's case against RealComp, I noted that the MLS had filed a motion to dismiss. The Administrative Law Judge, in a May 21 ruling posted earlier today on the Commission's website, denied RealComp's motion.

Construing RealComp's motion as one for summary decision, the ALJ concluded that "it is abundantly clear that there are numerous genuine issues of material fact in dispute . . . [thus RealComp] has not demonstrated it is entitled to judment as a matter of law." Elaborating, the ALJ explained that "[t]he following are but a few of the relevant factual issues questions [sic] that must be resolved":

1. Whether participation in Realcomp is a service that is necessary for the provision of effective residential real estate brokerage services to sellers and buyers of real property in the Realcomp service area.

2. Whether [Realcomp] can hinder or exclude competitors in the market for real estate brokerage within its service area.

3. Whether Exclusive Agency brokers are able to continue to do business selling residential real estate in the Realcomp Service Area.

4. Whether Realcomp's Website Policy prevents information from being transmitted to various public real estate websites.

5. Whether the Website Policy and the Search Function Policy restrain competition in the provision of residential real estate brokerage services by discriminating in favor of Exclusive Right to Sell listing contracts and against "limited service" contracts.

In other words, Strike two.

RealComp's trial is scheduled to begin in June...

The Government's Concerns/Objectives in U.S.A. v. NAR

Front and center in the United States’ federal antitrust action against the National Association of Realtors (“NAR”) are NAR's Internet Listing Display (“ILD”) Policy and a revised NAR MLS membership policy (together referred to as the Modified VOW Policy in the government's Amended Complaint). The government is also challenging NAR’s initial VOW Policy, which was rescinded on August 31, 2005, but had been adopted by approximately 200 NAR-affiliated MLSs across the country at the time the lawsuit was filed here in Chicago.

Here are the government’s main concerns relating to the ILD Policy and the revised membership policy, as set forth in its Amended Complaint (with some minor modifications by me):

1. A blanket opt-out provision allows brokers to direct that their clients' listings not be displayed on any competitor's Internet site. When exercised, this provision prevents a broker from providing over the Internet the same MLS information that brick-and-mortar brokers can provide in their offices. Also, NAR's ILD specifically exempts its own "Official Site," Realtor.com, from the blanket opt out that applies to all Internet sites operated by brokers.

2. MLS membership and access to listings is denied to brokers operating referral services. This policy effectively forbids Internet-based brokers from referring their customers to other brokers for a fee.

3. MLSs are permitted to downgrade the quality of the data feed they provide brokers, effectively restraining brokers from providing innovative, Internet-based features to enhance the service they offer their customers.

4. MLSs are permitted to interfere with efficient "cobranding" relationships between brokers and entities that refer potential customers to the broker.

In its Amended Complaint, the government seeks, among other relief, the following (presumably to address allegedly anticompetitive elements of the ILD Policy and the revised MLS membership policy, as well as the initial VOW Policy):

• Restrain NAR from requiring or permitting its member boards or the MLSs with which they are affiliated to adopt rules implementing the opt-out provisions.
  
• Restrain NAR from requiring or permitting its member boards or the MLSs with which they are affiliated to adopt rules implementing the anti-referral provision contained in the initial VOW Policy or an MLS membership restriction that denies MLS access to operators of Internet-based referral services.
• Restrain NAR from requiring or permitting its member boards or the MLSs with which they are affiliated to adopt rules that restrict — or condition MLS access or MLS participation rights on — the method by which a broker interacts with his or her customers, competitor brokers, or other persons or entities.
  

As you probably know, last year the Court denied NAR’s motion to dismiss the Amended Complaint, and the parties are continuing with fact and expert discovery.

Not so fast, New Hampshire Real Estate Commission

I recently wrote about a motion for summary judgment filed by the defendants in the ZeroBrokerFees.com ("ZBF") federal lawsuit pending in New Hampshire. The motion referred to a April 19, 2007 New Hampshire Real Estate Commission meeting at which the Commission apparently indicated that ZBF was not subject to the New Hampshire Real Estate Practice Act. I (and perhaps the Commission and others) figured that was a victory for plaintiff, case closed. Not so fast.

An attorney with the Institute for Justice ("IJ"), which is representing ZBF in this matter (and represented ForSaleByOwner.com in its successful 2004 action against the California Real Estate Commissioner on a very similar free speech issue), recently shared a April 24 IJ press release with me that states that because the Commission's action is apparently not binding, and only applicable to ZBF, plaintiff and IJ intend to push forward with the case against the Commission officials. Here's an excerpt from the press release:

“The Real Estate Commission could have exempted ZeroBrokerFees.com and other for-sale-by-owner websites from the law at any time, but instead it has fought tooth-and-nail to stifle online entrepreneurs,” said Valerie Bayham, an IJ staff attorney representing ZeroBrokerFees.com. “The Commission only budged once it was facing a federal lawsuit. Real estate websites and the consumers who use them need stronger protection than a temporary and limited exemption.”

IJ and ZeroBrokerFees.com will go forward with their legal challenge in order to secure a ruling from the courts—or a stronger decision from the Commission—that New Hampshire’s licensing scheme violates the First Amendment right to free speech and cannot apply to real estate websites.

“We are trying to protect our First Amendment rights along with the rights of anyone else who wants to advertise their home without seeking the government’s permission,” said Frank Mackay-Smith, co-founder of ZeroBrokerFees.com.

It sounds like ZBF is not ready to stand down, and has very competent counsel representing it in this important case. Stay tuned.

Update on Tennessee anti-rebate bill

As of this afternoon it is my understanding that Tennessee Governor Phil Bredesen has neither signed nor vetoed the bill passed by both bodies of the Tennessee legislature earlier this month that would prohibit TN real estate brokers from giving rebates to their customers.

After digging around on the TN Assembly website, and speaking with the Governor's Office and State Senator Black's office, I believe this is a copy of the bill passed by the legislature and awaiting the Governor's attention.

Much thanks to Valerie of Senator Black's office for making sense of the Assembly's website for me!

To be continued.

ZeroBrokerFees.com Victory in New Hampshire?

Apparently on the heals of an April 19, 2007 ruling by the New Hampshire Real Estate Commission that the New Hampshire Real Estate Practice Act “does not apply to" ZeroBrokerFees.com, the defendants in the New Hampshire ZeroBrokerFees litigation – officials of the New Hampshire Real Estate Commission and the state Attorney General – recently filed a motion for summary judgment against plaintiff.

To summarize, the defendants again assert that the New Hampshire Real Estate Practice Act is constitutional on its face and as applied to Plaintiff, and is not the proper subject of a First Amendment challenge. Alternatively, defendants’ assert that the statute should be analyzed under the (permissive) commercial speech standard of review. Defendants maintain that the statute satisfies each element of that standard.

Defendants note the Commission’s finding regarding the inapplicability of the statute to ZeroBrokerFees.com, and add that “the plain, reasonable and common sense reasoning of the REPA shows that Plaintiff, like a newspaper, is exempt from regulation . . . [and] Plaintiffs’ admitted activities demonstrate that it does not act for another to qualify itself as a broker.”

Minutes from the Commission's April 19 meeting were attached to the motion as an Exhibit. They appear to show (starting at the bottom of page 2) that a state attorney petitioned the Commission to rule on the applicability of the Real Estate Practices Act to ZeroBrokerFees.com. If these minutes are accurate, approved, and the whole story, the defendants would appear to be correct that that most, if not all, of plaintiff’s allegations are moot in light of the Commission’s apparent finding that ZeroBrokerFees.com is not subject to the Real Estate Practices Act. Sounds like a victory for plaintiff.

FTC v. RealComp update

It has been some time since I last posted on the status of the FTC’s administrative action against RealComp. If you are interested in the nitty gritty, the FTC's complaint can be viewed here. Essentially the FTC is challenging RealComp's practice of withholding exclusive agency listings (typically used by non-traditional brokers) from its upload to Realtor.com.

Here is an update on the case:

In late April 2007 RealComp filed a Motion for Summary Decision, arguing that the FTC had failed to state a claim upon which relief can be granted. The FTC has filed a response to the Motion, and the ALJ will presumably rule upon same before the trial.

On May 7, 2007 the parties submitted another joint status report. Interestingly, the Report discloses that “Realcomp’s Board of Governors voted last week to change Realcomp’s Search Function Policy . . . Pursuant to this change, the Realcomp MLS search screen will no longer have a default with regard to listing type. The parties will address the import of this change in their respective pretrial briefs.”

A recently issued scheduling order makes no mention of a ruling on the motion to dismiss, or on the trial date, which was previously set for June 19, 2007.

Some thoughts on the FTC/DOJ Report

After reading the FTC/DOJ Competition Report cover-to-cover, one thing seemed quite clear to me: this is not the last we will be hearing from these two agencies on the subject of competition in the real estate brokerage industry. Undoubtedly Recommendations 1 and 2 of the Report are, in part, shots across the bow of continuing and future troublemakers:

1. “The Agencies should continue to monitor the cooperative conduct of private associations of real estate brokers, and bring enforcement actions in appropriate circumstances. While cooperation among brokers through a multiple listing service can provide consumers with important efficiencies, cooperation used to adopt rules that hinder rivals can be anticompetitive and, as recent Agency actions indicate, may violate the antitrust laws.” (emphasis added)

2. “The Agencies should continue to provide state legislators and industry regulators with information concerning the competitive consequences of state legislation and regulations that threaten to or already do restrict competition and consumer choice in the real estate brokerage industry, and take enforcement action in appropriate circumstances.” (emphasis added)

Also, for innovative brokers that find themselves the target of agreements among traditional brokers or others to restrain competition, remember that would-be prosecutors need solid EVIDENCE of such conduct before they will act. For example, note the quasi-invitation for evidence on page 69 of the Report (“Limiting the Effects of Steering”): “The agencies have recently investigated allegations of boycotts by groups of brokers. In those investigations, however, the Agencies have not found evidence sufficient to establish an agreement jointly to steer clients away from or boycott a particular rival and have declined to bring an antitrust case.” (emphasis added). In other words, no evidence, no case.

Private antitrust action filed against RealComp II, Ltd. and MiRealSource

On Monday a federal antitrust lawsuit was filed by Home Quarters Real Estate Group, LLC against RealComp II, Ltd. and MiRealSource in Michigan federal court. As you know, the FTC recently settled antitrust charges against MiRealSource, and is presently litigating against RealComp, in connection with allegations that the associations refused to forward certain MLS listings to public websites such as realtor.com

Plaintiff's suit explains that it is seeking damages as a result of the defendants' "prior unlawful actions and efforts to prevent [plaintiff] from providing to the public an efficient and cost-effective way to buy and sell real estate in the Detroit metropolitan area. [Plaintiff] previously operated as a licensed real estate brokerage engaged in the practice of assisting consumers with the purchase and/or sale of residential properties. [Plaintiff] provided services as an innovative realty company that developed faster and more efficient ways to provide realty services to prospective homebuyers and sellers utilizing modern internet technology. [Plaintiff] provided its customers with the same realty services and same information provided by other realtors in the State of Michigan. However, [plaintiff] did so using a different and more efficient way of doing business that passed the resulting cost savings on to its customers."

As to the defendants, whose respective memberships allegedly "overlap in substantial part," "[p]articipation in each of these MLSs, and access to MLS data provided by them, has been crucial at all relevant times for any realtor, including [plaintiff] to be able to effectively compete in the Southeastern Michigan residential real estate market (Wayne, Oakland, Macomb, Washtenaw, and Livingston Counties)."

The complaint includes individual counts against each defendant alleging violations of Section 1 of the Sherman Act, violations of the Michigan Antitrust Reform Act, and tortious interference with plaintiff's contractual relationships. Plaintiff claims that the "[d]efendants previously terminated and/or threatened to terminate [plaintiff's] right to access their MLS data as part of their efforts to destroy HQ's innovative business model and to thwart competition. Moreover, in furtherance of Defendant's boycotts denying [plaintiff] essential MLS data for conducting searches for listed properties, MiRealSource refused to permit any of [plaintiff's] listings to be posted on its MLS, and Realcomp threatened to terminate [plaintiff's] access to its MLS. These actions, among others, resulted in the cessation of [plaintiff's] business and thereby caused substantial damages to [plaintiff], including but not limited to lost market share, lost revenues and lost profits." Plaintiff asks for actual damages in excess of $10 million against each defendant, and that such amounts be trebled pursuant to federal and state law.

The complaint plus two exhibits (consisting of the defendants' rulebooks) is in excess of fifty pages, and was filed in two parts (Part One and Part Two).

Summary of the Roommates.com decision

The United States Court of Appeals for the Ninth Circuit ruled yesterday in Fair Housing Council of San Fernando Valley, et al v. Roommate.com, LLC. Signaling the differing viewpoints on the issues presented, the three judge panel - Circuit Judges Reinhardt, Kozinski and Ikuta - issued three separate opinions in the case. Circuit Judge Kozinski wrote for the Court.

Roommate.com, LLC operates an online roommate matching website - www.roommates.com (“Roommate” or “Roommates.com”). As the court explained, “[t]his website helps individuals find roommates based on their descriptions of themselves and their roommate preferences. Roommates.com has approximately 150,000 active listings and receives about a million page views per day.” Two California-based housing councils (“Councils”) alleged that Roommate violates the Fair Housing Act by (1) posting its questionnaires on its website and requiring individuals who want to take advantage of its services to complete them; (2) posting and distributing by email its members’ profiles; and (3) posting the information its members provide on a “Additional Comments” form. Thus the allegations are somewhat similar to those made in the craigslist case filed last year in Illinois and presently on appeal to the Seventh Circuit.

At issue before the Ninth Circuit was whether and to what extent the Communications Decency Act (“CDA”), 47 U.S.C. § 230(c), immunizes Roommate’s actions. Section 230(c) provides that “[n]o provider . . . of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Because the Councils do not deny that Roommate is a provider of an interactive service, “the question is whether Roommate is “responsible, in whole or in part, for the creation or development of [the] information” set forth in each category, and thus ineligible for immunity. In other words, immunity is available if Roommate “merely publishes information provided by its members[,]” but Roommate “is not immune for publishing materials as to which it is an “information content provider” (defined as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet.”)

Questionnaires. The Court concluded that Roommate is ‘responsible’ for the questionnaire because “it created or developed the forms and answer choices. As a result, Roommate is a content provider of these questionnaires and does not qualify for CDA immunity for their publication.” The Court left it to the district court to determine if same violates the Fair Housing Act.

Profiles. As for the user profiles, the Court declined to apply the rationale in the Ninth Circuit’s prior decision in Carafano, where (i) a prankster provided information about someone else that (ii) was not solicited by the operator of the website. Instead, the Court noted that Roommate’s “search mechanism and email notifications mean that it is neither a passive pass-through of information provided by others nor merely a facilitator of expression by individuals. By categorizing, channeling and limiting the distribution of users’ profiles, Roommate provides an additional layer of information that it is “responsible” at least “in part” for creating or developing.” Concluding that CDA immunity was not available, the Court remanded for a determination of whether the profile allegations, if proven, violate the FHA.

Additional Comments. As for the third category identified by the Councils, the Court concluded that because Roommate is not “responsible, in whole or in part, for the creation or development of its users’ answers to the open-ended 'Additional Comments' form,” it is immune from liability for publishing these responses.

We’ll have to wait and see what this means for the craigslist appeal. Of course a rehearing before the panel or en banc consideration may be forthcoming. However, to the extent the Seventh Circuit is persuaded by yesterday’s ruling (note that the Seventh Circuit is not often persuaded by the Ninth Circuit as to anything), it would seem that a careful comparison of the Roommates and craigslist mechanisms would be critical in resolving the craigslist case. Regardless, given some of the language and examples used in the Ninth Circuit’s opinion, certain sites that have garnered much attention recently – www.ripoffreport.com and www.dontdatehimgirl.com – for publishing user critiques of bad business and dating experiences, respectively, should study the Ninth Circuit's opinion carefully.

Ninth Circuit's Roommates.com ruling

While I have not yet reviewed the opinion, the Ninth Circuit has issued its decision in the Roommates.com case. Eric Goldman's very thoughtful and timely discussion of the opinion can be found here.

The Court determined that Section 230 "does not immunize Roommate for all of the content on its website and in its email newsletters." The Court remanded the case to the district court to ascertain whether Roommates.com's "non-immune publication and distribution of information violates the [Fair Housing Act]." The Court also vacated the dismissal of certain state law claims, thereby permitting the district court to reconsider whether to exercise its supplemental jurisdiction in light of" today's ruling on the federal claims.

I believe this is the first Court of Appeals to rule on the intersection of Section 230 (part of the C0mmunications Decency Act passed by Congress in 1996) and the Fair Housing Act. It will be interesting to see what happens with the Craigslist case which is presently pending before the 7th Circuit. There have not been any oral arguments yet, and the latest docket entry suggests that briefing has been suspended.

Status hearing in U.S. v. National Association of Realtors

I attended a status hearing this morning in U.S. v. National Association of Realtors. Judge Filip was primarily concerned with establishing certain deadlines ahead of the bench trial in this case, which could come in the first half of 2008. While there wasn’t anything of substance raised by the attorneys, some interesting statistics came out.

The DOJ attorney noted that the government had served 108 subpoenas in this matter, and taken 20 depositions. It was not clear whether any of these occurred during the DOJ’s pre-filing investigation. He also noted that NAR had served six subpoenas and taken one deposition. Of course each party is free to ask a deponent questions during a deposition – these figures simply refer to the number of subpoenas/depositions commenced by each party.

In support of his request for adequate time to respond to the government’s expert witness report, NAR’s attorney reminded the court that thirty-six (36) markets were at issue, the government had recently submitted a one hundred (100) page, single-spaced expert witness report, and that fifty depositions remained to be taken. The court granted NAR until August 1, 2007 to respond to the government’s report.

The next status hearing before Judge Filip will be on July 16, 2007.

TAR's antics in Tennessee (H.B. 2095)

The recently released FTC/DOJ Report on Competition in the Real Estate Brokerage industry notes that the Tennessee Real Estate Commisison has for some time been in the process of reversing its anti-rebate rule. The Report notes, at footnote 251, that the final repeal of the rule would likely take effect this month. In fact, the DOJ letter discussed below suggests that final repeal has already been achieved.

Obviously wise to the Commission's intentions, the Tennessee Association of Realtors has apparently been pressing the state legislature to counter the effect of a repeal by essentially codifying the rule in a state statute (Amendment 1 to House Bill 2095). Yesterday the Justice Department faxed a letter to the Speaker of the TN House of Representatives, emphasizing the anticompetitiveness of prohibiting rebates to consumers. DOJ's press release notes that passage would "deny Tennesseans the opportunity of receiving cash rebates from real estate brokers when they buy and sell their homes . . . [thereby] imped[ing] real estate brokers from competing on price and force Tennesseans to pay more in real estate commissions."

CommercialAppeal.com reports that TAR's lobbying efforts have paid off. Last night the Tennessee legislature apparently passed HB 2095 (including Amendment 1), which is now headed for the Governor's desk.

I don't know the Governor's intentions. But price competition may be about to take a hit in Tennessee, and I'll be not a single member of the Tennessee legislature that voted for this amendment could point to a single piece of evidence that rebates harm buyers, sellers, or, for that matter, brokers. Here's the best rationale a TAR official could offer: "Unfortunately rebates, in too many cases, take the form of cash incentives that could be used to lure consumers into risky real estate transactions. And in some cases, you could see a rebate used as part of a down payment, which could amount to mortgage fraud," said J.A. Bucy, director of governmental relations for the Tennessee Association of Realtors." (emphasis added).

ZeroBrokerFees.com lawsuit in New Hampshire

Concerned about the potential implications of a New Hampshire law compelling licensure, plaintiff Skynet Corporation, the operator of ZeroBrokerFees.com, filed a three-count federal lawsuit last year in New Hampshire against New Hampshire Real Estate Commission officials, asking the court to declare certain provisions of the New Hampshire Real Estate Practice Act unconstitutional restrictions on plaintiff’s rights to free speech.

ZeroBrokerFees.com apparently only displays properties for sale on its website, nothing more, and has asked the court to declare the relevant provisions - which prohibit plaintiff from "listing and advertising New Hampshire properties for sale on Internet websites and/or in print" - in contravention of the U.S. Constitution. Plaintiff also seeks an order prohibiting defendants from "enforcing New Hampshire's real estate licensing laws, policies, and regulations in a manner that impairs [plaintiff's] ability to disseminate information and to operate its business and from imposing fines or criminal penalties, or otherwise subjecting [plaintiffs] to harassment."

In March 2007, the Magistrate Judge assigned to the case denied the defendants’ motion to dismiss the suit, which was based upon a variety of purported procedural deficiencies.

Similar to the regulation at issue in the ForSaleByOwner.com litigation in California a few years ago (wherein the court ultimately ruled in favor of the website), the New Hampshire law allegedly requires any entity that charges a fee to disseminate information about properties being offered for sale to be licensed in New Hampshire. As did the California statute, the New Hampshire law provides an express exception for "newspaper[s] and other publication[s] of general circulation."

The court’s decision is not a substantive ruling on plaintiff’s claims. Instead it signals that the plaintiff may proceed with its case before the court. Shortly after the court's ruling, the commission officials answered the plaintiff's complaint. Their position, in part, seems to be that the subject provision is constitutional on its face and as applied, but that "it is likely that the Act does not apply to the Plaintiff."

The bench trial in this case, espected to last no more than five days, is scheduled to commence on November 6, 2007 (subject to rulings on any dispositive motions filed on or before July 16, 2007). In their revised discovery plan, the parties state that "settlement is unlikely, although not inconceivable." Presently the parties are conducting pre-trial discovery.