REX Secures Dismissal of Realtors’ Counterclaim in E-Real Estate Antitrust Feud

An order issued by Judge Thomas S. Zilly last Friday has, for now, freed Real Estate Exchange Inc. (REX) of the Lanham Act false advertising counterclaim levied against it by the National Association of Realtors (NAR). The opinion said that NAR did not show that the reputational harm it allegedly suffered was concrete and particularized as required to demonstrate constitutional standing.

REX filed the antitrust suit against NAR, a trade association, and co-defendant Zillow Inc., which operates an online real-estate marketplace also known as an “aggregator site,” last March. REX is a licensed real estate broker whose “innovative model uses technology to enhance efficiency and drastically reduce brokerage commissions, while delivering a full suite of personalized services to clients,” the amended complaint says.

The plaintiff’s progressive model has allegedly driven realtor commissions down and saved consumers millions, giving NAR and its traditional real estate agent members a reason to view it as a threat, though the two do not directly compete. As for anticompetitive conduct, the complaint accuses Zillow, once the source of listing information about all homes for sale, of joining NAR’s “cartel” and thereby agreeing to “segregate, conceal, and demote non-[Multiple Listing Service] listings” like REX’s.

Judge Zilly allowed most claims, including REX’s federal antitrust claims against Zillow and NAR, to proceed through a series of dismissal opinions, with the most recent, concerning NAR, issued last December.

NAR counterclaimed against REX for allegedly making false statements about REX’s own services and products on its website and averring that “NAR has enacted anticompetitive policies that artificially inflate fees in real estate transactions.” REX moved to dismiss, arguing that NAR failed to satisfy the Article III associational standing requirement and that NAR did not prove injury.

In last week’s opinion, Judge Zilly largely agreed. “The allegations in NAR’s counterclaim are insufficient to show that the reputational harm it has allegedly suffered is concrete and particularized,” the court wrote as to constitutional standing. The decision said that NAR’s allegations were conclusory and devoid of facts explaining how REX’s purportedly false advertisements have frustrated its mission, caused it to divert resources, or harmed NAR’s reputation and goodwill among its own members.

The court also addressed REX’s alternative arguments, including that under Rule 12(b)(6), NAR failed to state a claim for false advertising under the Lanham Act because it lacks statutory standing. Once again, Judge Zilly found NAR’s allegations dissatisfactory because the trade association failed to allege injury, and specifically that “any consumers or brokers have withheld trade from NAR itself.” 

NAR received leave to amend its counterclaim with a deadline of June 6. REX is represented by Foster Garvey PC, McCarty Law PLLC, and Lehotsky Keller LLP. Zillow is represented by Orrick, Herrington & Sutcliffe LLP and NAR by Quinn Emanuel Urquhart & Sullivan LLP.