Appraisers who claim FNC Inc.’s AppraisalPort service mined their electronic reports to build a database of online property information are entitled to their day in court, a federal district judge has ruled, rejecting an argument by FNC that users of the service agreed to arbitrate any disputes.

Appraisers who claim FNC Inc.’s AppraisalPort service mined their electronic reports to build a database of online property information are entitled to their day in court, a federal district judge has ruled, rejecting an argument by FNC that users of the service agreed to arbitrate any disputes.

FNC Inc. argued that three appraisal firms that filed suit against the company in May 2007 accepted user agreements that included binding arbitration clauses. The user agreements appeared in pop-up boxes when the appraisers started using the AppraisalPort service, which allows lenders to order property valuations online.

Attorneys for the three appraisal firms — who are seeking class-action status to represent other appraisers — successfully argued that two user agreements employed by FNC Inc. between 2000 and 2005 were superseded by a third agreement, which did not include a binding arbitration clause.

In denying FNC Inc.’s motion to force the firms to submit to arbitration, Judge Robert Titus of the U.S. District Court for the District of Maryland did not rule on the appraisers’ claims that FNC acquired and compiled proprietary appraisal data into a "National Collateral Database," accessible to other subscribers.

Dismissing a motion by FNC to require the firms to submit to arbitration, Titus said the immediate subject at hand was "pop-up windows, notification banners, and Web site user acceptance agreements" and revisions to such agreements.

FNC maintained that three appraisal firms that originally filed suit — Harold H. Huggins Realty Inc., P.E. Turner & Co. Inc., and Residential Appraisal and Consulting Inc. — remained subject to the original 2000 and 2002 user agreements, which included binding arbitration clauses.

Although a new user agreement posted for 24 days on the AppraisalPort Web site in 2005 contained no such arbitration clause, FNC argued that it did not supersede previous agreements because existing subscribers were not required to acknowledge the change in user agreements through a pop-up box or other method.

Titus said there was no indication FNC believed it had failed to implement the new agreement until it was sued. The company never posted an announcement or created a pop-up window informing users that the 2002 agreement still applied, he said.

Titus questioned whether, if FNC were involved in some other legal dispute in which the 2005 agreement gave it some advantage, the company might instead argue that it had, in fact, superseded the previous agreements.

"FNC’s actions are like a man standing with one foot on a dock and one foot on an untethered boat drifting away and unable to choose whether to stay on land or shove off to the sea," Titus said in his Aug. 28 opinion. "When this case was filed, FNC’s time to choose ran out and it ended up in the water. As FNC’s predicament is wholly of its own making, the court will not now throw it a life preserver."

In allowing the lawsuit to proceed, Titus said he had not yet determined whether to grant the case class-action status. In addition to the three appraisal firms that originally filed suit, the lawsuit now includes a fourth plaintiff, Alfonso V. Torres, doing business as Front Door Appraisals.

When the suit was filed last year, FNC called the allegations "entirely without merit" and promised a vigorous defense (see Inman News story). The company said the lawsuit "tries to attack FNC’s core commitment of protecting the information we transmit between appraiser and lender."

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