A decision by Florida’s state Realtor association to develop its own transaction management software and cancel a contract with a vendor that had been providing those services to its members for nearly a decade has triggered claims and counterclaims by both parties in U.S. District Court.
The vendor, Concepts In Data Management U.S. Inc. — better known to its customers as Instanet Solutions — alleges that a subsidiary of Florida Realtors Inc. utilized confidential information including software code to reverse engineer CDM’s Web-based transaction management services, TransactionDesk and Forms Online Gold.
CDM claims that Florida Realtors’ subsidiary, Real Estate Industry Solutions LLC (REIS), developed its own transaction management application, Form Simplicity, with the intention of not only replacing CDM as the provider of services to Florida Realtors, but to compete with CDM in the national market.
Attorneys for REIS deny those allegations, saying Form Simplicity was developed because some Realtors found TransactionDesk too difficult to use, and that CDM’s attempt to develop its own simplified version of TransactionDesk uses copyrighted forms without authorization.
CDM has been providing transaction management services to Florida brokerages and Realtor associations — using forms licensed from Florida Realtors — since 2001. In 2003, CDM entered into an agreement with the association to provide its Forms Online Gold service to Florida Realtors as a member benefit.
Not long after the agreement was renewed in 2005, Florida Realtors created a for-profit subsidiary, REIS — in part so that Florida Realtors could continue to operate as a tax-exempt, not-for-profit organization.
For many years, CDM said it had a close working relationship with Florida Realtors, including a cross-marketing agreement with REIS in which each company promoted the other’s products, and shared information and royalties.
Florida Realtors and REIS have enjoyed access to CDM’s usage numbers, product information, and marketing plans, attorneys for CDM said, and REIS employees received technical training that gave them "detailed and intimate knowledge" of the operation of CDM’s online services.
But by November 2008 — when CDM and REIS entered into a three-year agreement for CDM to continue providing transaction management services to Florida Realtors — the association and REIS allegedly "secretly planned to replace CDM’s services" with their own software, attorneys for CDM claim.
REIS made Form Simplicity available on April 1 of this year. On Aug. 29, the Florida Realtors’ board of directors voted to discontinue funding to provide CDM’s TransactionDesk service as a member benefit, effective Dec. 31.
On Sept. 2, REIS claimed more than 35 percent of Florida Realtors’ 115,000 members had used Form Simplicity, with the system handling four times as many transactions in August as it had in July (REIS President Joe Ballarino did not respond to a request for more recent statistics).
CDM, which has claimed that more than 75 percent of Florida Realtors were using TransactionDesk on a regular basis, plans to continue offering its services directly to Florida agents and brokers after Dec. 31.
After the April rollout of Form Simplicity, CDM worked to sign long-term agreements with multiple listings services and local Realtor associations in Florida in order to continue serving their members. In June, July and August, CDM announced it had signed multiyear agreements to provide services to members of five Florida MLSs and Realtor associations with a combined membership of about 54,000.
It was REIS that fired the first salvo in the legal battle, filing a copyright suit against CDM on July 13 alleging that a new version of TransactionDesk, called TransactionDesk Lite, incorporated forms developed by Florida Realtors, without the authorization of Florida Realtors.
REIS also claimed CDM breached the 2008 agreement by using the Florida Realtors database to market its services to the association’s members, and by allowing members to access TransactionDesk through a CDM website rather than through REIS or Florida Realtors.
CDM filed a countersuit on Oct. 20, claiming REIS acted in bad faith when negotiating the three-year agreement under which CDM was to continue providing TransactionDesk services and support to Florida Realtors until 2011.
The 2008 agreement included language allowing REIS to terminate the agreement if the Florida Realtors board of directors voted not to continue funding TransactionDesk as a member benefit.
"CDM agreed to this provision … without knowing that REIS was planning to develop and market a competing forms service and product," CDM claimed in its countersuit.
CDM alleged in its countersuit that executives at Florida Realtors and REIS engaged in a "smear campaign" against CDM, and claims that TransactionDesk was embraced by Florida Realtors.
REIS maintains that it developed Form Simplicity because TransactionDesk — the successor to Forms Online Gold that CDM rolled out in 2006 — was difficult to use. REIS says it developed Form Simplicity independently and "at great expense."
"The programmers who developed Form Simplicity had no access to the source or object code for TransactionDesk and no confidential information belonging to CDM was used to create Form Simplicity," REIS said in answering CDM’s counterclaim.
REIS argues that CDM’s Transaction Desk Lite — introduced at about the same time Form Simplicity made its debut — "mimics the look and feel" of REIS’ offering.
CDM says TransactionDesk Lite was developed in response to claims that TransactionDesk was too complex for some users, and is merely a new interface offering direct access to some of the more basic functions available in TransactionDesk.