Editor’s note: This story was updated on Oct. 4, 2012 to clarify that after MRIS requested and NAR approved funds to cover part of MRIS’ legal expenses in the suit against NeighborCity, MRIS decided not to accept the funds. NAR and NorthstarMLS have declined to comment on whether NorthstarMLS has accepted, or will accept, similar financial support approved by NAR.
The operator of NeighborCity.com alleges that copyright lawsuits filed against it by two multiple listing services with financial backing from the National Association of Realtors are part of a concerted effort by NAR to drive the company out of business and eliminate it as a provider of services to real estate brokers.
San Francisco-based American Home Realty Network, which is licensed as a brokerage in California, is a defendant in separate copyright infringement suits filed by two MLSs — mid-Atlantic multiple listing service Metropolitan Regional Information Systems Inc. (MRIS), which filed suit against American Home in March, and St. Paul, Minn.-based Regional Multiple Listing Service of Minnesota Inc. (NorthstarMLS), which sued in April.
The lawsuits were filed not long after American Home Realty Network updated profile pages for 850,000 agents on NeighborCity.com that feature agent scores and performance metrics based on their transaction history.
In May, NAR decided to cover a portion of the legal expenses incurred by MRIS and NorthstarMLS in their suits against NeighborCity. MRIS requested the funds before NAR’s decision, but has not accepted them. Through an attorney, NorthstarMLS declined to comment on whether it had accepted, or was planning to accept, NAR’s assistance.
In answering the complaint filed by MRIS, attorneys for American Home Realty Network filed a counterclaim against MRIS, NAR, and 25 unnamed defendants "thought to be brokers" and MLSs, alleging they have engaged in a "concerted anti-competitive group boycott" of the company.
American Home Realty Network’s counterclaim alleges that all of the defendants have violated federal anti-trust law and unfair competition laws in California and Maryland, and seeks injunctive relief preventing "NAR and MRIS from taking any actions to implement their plan to exclude (American Home Realty Network) from the market for Internet-based services to real estate brokers and buyers and sellers of residential real estate."
Although NorthstarMLS is not named in the counterclaim, it alleges that the lawsuits filed by MRIS and NorthstarMLS are both "in furtherance of NAR’s efforts to drive (American Home Realty Network) out of business and eliminate (the company) as a competitor in the market for real estate broker services."
Attorneys for American Home Realty Network claim that the alleged boycott predates the lawsuits by MRIS and NorthstarMLS. NAR’s annual meeting in Anaheim, Calif., in November 2011, "featured discussions of the perceived threat (the company) poses to the industry and what the industry could do to shut down" American Home Realty Network and NeighborCity.com, attorneys for the company allege.
Starting in November, just before the Anaheim meeting, American Home Realty Network "began to receive what would become a torrent of cease-and-desist letters from brokers and MLSs," attorneys for the company said in their answer and counterclaim to the MRIS lawsuit. "Substantially similar cease-and-desist letters in form and content, 20 in all, have continued into 2012 and uniformly allege copyright infringement and threaten legal action."
The company said it had also received letters from brokers repudiating previous referral agreements made with the NeighborCity.com site. The complaint alleges the cease-and-desist and repudiation letters were coordinated by NAR, MLSs and brokers.
An MRIS spokeswoman declined to comment, saying "the court documents speak for themselves." An attorney representing NorthstarMLS said it was the company’s policy "not to comment on ongoing litigation except in … (legal) briefs and prepared public statements."
NAR also declined to comment, saying the trade association had not yet received the counterclaim filed by American Home Realty Network.
NAR General Counsel Laurie Janik has previously said that such allegations were "baseless" and that "NAR is aware of both (MLS) suits, but did not orchestrate either of them."
Janik has also said NAR did not coordinate the cease-and-desist letters, saying many were sent before NAR was aware of the NeighborCity.com website.
"NAR has no desire to run American Home Realty Network out of business or to bankrupt the company," Janik said.
In a statement, Neighbor City CEO Jonathan Cardella said, "We continue to believe that this lawsuit is founded on an effort to put our company out of business through illegal anti-competitive activity."
Cardella said American Home Realty Network intends "to show that the present model used by MLSs across the country to assert exclusive rights in the contents of real estate listings is flawed, and MLSs have, without complying with copyright law, used their claim of copyright ownership as a club to beat down any company that they consider to be a threat to their monopolistic business methods.
"We will continue to vigorously defend our right to inform American consumers to assist them in making choices on the biggest purchases of their lives."
Cardella said the company was "following in the footsteps" of a suit the U.S. Department of Justice brought against NAR in 2005, alleging that NAR approved policies governing the online sharing and display of property listings information that were illegally restrictive. That suit was settled in 2008.
A preliminary injunction in the MRIS case, filed Aug. 27, denied American Home Realty Network’s motion to dismiss the MRIS case and enjoined the company "from unauthorized copying, reproduction, public display, or public distribution of copyrighted content from the MRIS database, and from preparing derivative works based upon the copyrighted content from the MRIS database."
On Sept. 10, American Home Realty Network filed an appeal and asked the court to reconsider the preliminary injunction at least partially on the basis that the injunction order does not specify exactly which listing content is owned and copyrighted by MRIS.
In both the motion to reconsider and its response to MRIS’ complaint, the company questions MRIS’ claims to have copyright over listing content entered into its database. The portal claims the subscriber agreement signed by MRIS member brokers stipulates that all right, title and interest in property listing information remains with the principal broker subscriber, not MRIS.
Meanwhile, American Home Realty Network’s liability insurer, Travelers Casualty Insurance Company of America, filed a complaint on May 22 against Cardella and his company. In the complaint, Travelers denies any duty to pay for American Home Realty Network’s defense against the MLS copyright suits, and asks for reimbursement of costs associated with the defense against the MRIS case. The complaint was amended last week to deny American Home Realty Network coverage under an additional Travelers’ insurance policy.
Travelers has declined to pay for the defense against the NorthstarMLS case at all. In August, further action on the Travelers’ case against NeighborCity was postponed until October.