One local Realtor trade group has filed a lawsuit against another group in California’s Silicon Valley area, charging that the group violated a contract and engaged in a plan to steal away its members.
The lawsuit, filed Aug. 4 in Santa Clara County Superior Court, alleges that the Silicon Valley Association of Realtors actively solicited members from the larger Santa Clara County Association of Realtors “to change their primary real estate board membership, or board of choice” to the Silicon Valley Association of Realtors.
Janet Case, executive officer for the 3,600-member Silicon Valley Association of Realtors, meanwhile, said, “The allegations are entirely without merit.” She added, “We’re very disappointed about this. It was a surprise. We’ve always had a good relationship with our neighbor associations.” Case said she could not discuss specifics about the lawsuit.
The dispute centers around a contract to provide Santa Clara association members access to online property forms through a subsidiary of the Silicon Valley association known as PRDS. While the California Association of Realtors, the state Realtor trade group, offers widely popular electronic real estate forms for its members, some local associations and brokers also use their own unique forms in real estate transactions. PRDS offers an online forms platform that subscribers can access through the Web.
This lawsuit provides a window into possible competition between local trade groups to bolster membership.
About 10 years ago, the National Association of Realtors trade group allowed Realtors to choose which local trade association to join, the lawsuit states, and this decision essentially put local trade associations in competition with one another for members. “The services each local trade association is able to offer its members is directly dependent upon the revenue stream it is able to generate from the fees paid by its membership,” the lawsuit states. “The size of the membership within each local trade association impacts its political clout and sphere of influence with respect to other real estate entities.”
An estimated 1,540 members of the Santa Clara association, which has a total membership of about 8,000, were using the PRDS forms until the Santa Clara association decided in May not to renew its contract allowing members to access the PRDS forms, Case said. Members of three local Realtor associations have access to PRDS forms, she said, and in every case the associations are charged the same per-member fee to access the system.
Case said that increasing numbers of Santa Clara association members had been using the PRDS online system prior to the association dropping the licensing agreement. “Their usage was growing,” she said. The PRDS forms are based on a “slightly different standard of practice” for Realtors in the region compared with other regions in the state, she added. “We do practice a little differently.”
The lawsuit alleges that the Santa Clara association had earlier requested to pay a per-member fee for online access to the PRDS forms because not all members used the forms, but the Silicon Valley association “emphatically refused this request” and required that the association pay a fee based on its total membership.
The Santa Clara association paid $61,000 for a one-year licensing agreement for all of its members to access the forms, the lawsuit states, and the Silicon Valley association later informed the group that it would cost $160,000 to renew the licensing agreement for the period starting in June 2005 and ending in May 2006. The Santa Clara Association decided not to renew the system because of this hike in cost, the lawsuit states.
As a part of its contract to allow its members to access the PRDS forms, the Santa Clara association agreed to furnish a list of names and e-mail addresses to the Silicon Valley association that were solely intended for use in allowing the members to access the forms, though the Silicon Valley association “made a conscious decision to misappropriate (this) membership list and the e-mail addresses of its members and to falsely solicit those members through misleading advertising and materials,” the lawsuit alleges.
Ron Rossi, the lawyer who is representing the Santa Clara association in the lawsuit, said that the state Realtor association has worked to supply electronic real estate forms that suit Realtors throughout the state, adding, “The need for a separate form has pretty much diminished.” Rossi said he actually helped to draw up some of the original language for the PRDS forms several years ago.
Members of the Santa Clara Association are in some cases requested by Realtors on the other side of a real estate transaction to use PRDS forms even if the Santa Clara members do not use the forms for their own real estate transactions, Rossi said. “If I’m a competitor and I want to service my client I may have to abide by your wishes,” he said.
The lawsuit alleges that the Silicon Valley association and its subsidiary “secretly hoped and intended that (the Santa Clara association) would not renew its licensing agreement so that (the Silicon Valley Association and its subsidiary) could misappropriate…proprietary and confidential information in order to solicit and steal its members so that it could increase its own membership and expand its sphere of influence.”
The lawsuit seeks a restraining order and permanent injunction relating to the use of the Santa Clara association’s member names and e-mail addresses, and other damages.
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