A federal district judge in Minnesota has ruled that the operator of real estate listing portal and agent ratings website NeighborCity.com should be allowed to argue antitrust claims the company brought last year against St. Paul, Minn.-based NorthstarMLS.
NorthstarMLS filed a copyright infringement suit against NeighborCity.com operator American Home Realty Network in April 2012.
AHRN filed a countersuit in November 2012, alleging breaches of antitrust laws. In April, American Home Realty Network amended its counterclaim against NorthstarMLS to add brokerage giant HomeServices of America Inc. and its subsidiary, Edina Realty Inc., as defendants to the suit.
On Friday, July 5, Judge John R. Tunheim denied a motion from NorthstarMLS to dismiss the suit, saying American Home Realty Network “has sufficiently alleged counterclaims that survive a motion to dismiss.”
“The gravamen of AHRN counterclaim is that [NorthstarMLS] and its member-brokers colluded to use [NorthstarMLS] as a vehicle to assert false copyright claims that impeded [American Home Realty Network’s] business model and to exclude companies like AHRN from accessing the universe of listings needed to compete,” Tunheim wrote.
“Furthermore, AHRN has alleged that [NorthstarMLS] and its member-brokers dissuaded brokers and agents within [NorthstarMLS’] service area from entering referral agreements with AHRN. Through these allegations, AHRN has sufficiently alleged that [NorthstarMLS] and its co-conspirators engaged in concerted action under the Sherman (Antitrust) Act.”
John Mosey, CEO of NorthstarMLS declined to comment on the ruling, saying, “The judge stated his reasons and we respect that and the process. I can also say that we are very confident that it will all work itself out in time.”
The court found NeighborCity “adequately alleged” a conspiracy among NorthstarMLS, other MLSs and the National Association of Realtors, citing, in part, NAR’s decision to help NorthstarMLS cover the costs of its suit against NeighborCity. At NAR’s midyear meeting in May, the trade group agreed to contribute $135,000. NAR is not named as a defendant in the antitrust suit.
The Minnesota court’s ruling comes on the heels of a Maryland district court throwing out similar antitrust claims filed by NeighborCity against NAR and mid-Atlantic MLS Metropolitan Regional Information Systems Inc. (MRIS). NeighborCity filed the antitrust suit in September 2012, in response to a copyright infringement suit filed by MRIS in March 2012. The court dismissed all seven counts included in NeighborCity’s counterclaim on June 10, but allowed the company to amend three of the seven counts and resubmit them for reconsideration on June 24.
NeighborCity CEO Jonathan Cardella said the company is “very pleased and encouraged” by the Minnesota court’s “thorough and thoughtful analysis of the issues” and “deep understanding of the implications of the illegal conduct that is behind this litigation.”
“We continue to believe that these lawsuits and the increasing activity by large brokers such as HomeServices of America and others to discourage agents from dealing with us and to create a negative public image of our company are clear examples of an effort to put our company out of business through illegal anti-competitive activity,” Cardella said.
Cardella said the company was using the case to advance its claim that MLSs’ assertion of exclusive copyright rights to real estate listings is “legally flawed” and to show how MLSs use litigation to maintain a monopoly.
“NeighborCity’s claim is that the MLSs’ practices work to prevent consumers from gaining adequate knowledge about properties and about the success rate of brokers. NeighborCity believes that this industry practice is meant to, and in fact does, keep home sellers and buyers in the dark, and prevents them from doing as well as they could in housing transactions,” he said.
NorthstarMLS and MRIS filed copyright infringement lawsuits against NeighborCity not long after the site rolled out updated profile pages for 850,000 agents that feature agent scores and performance metrics based on their transaction history.
In the same legal filing Friday, Tunheim granted NorthstarMLS’ motion to hold NeighborCity in contempt of a preliminary injunction that prohibited NeighborCity from the unauthorized copying, displaying, use or public distribution of NorthstarMLS’s copyrighted photographs.
Tunheim noted that, despite the company’s declaration that it was in compliance, NeighborCity had displayed some of NorthstarMLS’ copyrighted photographs in violation of the order. Therefore, the judge ordered NeighborCity to pay for NorthstarMLS’s costs and fees incurred in bringing the motion for contempt in an amount to be determined later. The court declined to award compensatory damages without additional evidence of actual harm.
In order to make clear which photographs are subject to copyright by NorthstarMLS and therefore may not be displayed by NeighborCity, Tunheim modified the preliminary injunction to order NorthstarMLS to place watermarks on all photographs for which it owns copyrights within 30 days and to not include watermarks on any photographs for which it does not own a copyright. AHRN must remove all of NorthstarMLS’ watermarked photographs from NeighborCity.com within 45 days.
“The Court attempted to rectify the infirmity of the existing preliminary Injunction order by requiring [NorthstarMLS] to watermark all photos which it owned, and cautioned [NorthstarMLS] against watermarking any photos it did not own,” Cardella said. “The Court also refused to award damages against our company, signaling the view that it was highly unlikely that there were in fact any damages that could be proven.”
NorthstarMLS’ motion to find Cardella in contempt was denied. On Monday, NeighborCity filed a motion to compel NorthstarMLS to produce evidence on whether and how it came to own the copyrights it claims.