Court Rejects Challenge to MLS Rules

Read the full decision: Platinum Realty 2.0, LLC v. Kansas City Reg’l Ass’n of REALTORS®

A Kansas court finds that a multiple listing service had the discretion to reject an application from a real estate brokerage firm (“Brokerage”) seeking to participate in the multiple listing service.

The Brokerage filed an application to join the Heartland Multiple Listing Service (“MLS”) as a non-REALTOR® participant.  The Kansas City Regional Association of REALTORS® (“Association”) owned the MLS.  The MLS rules allowed for non-members of the Association to apply for MLS participation, and in the application the Brokerage agreed to follow the MLS’s rules and pay all fees.  The supervising broker of the Brokerage completed the application for MLS participation and paid the application fee.

The Association notified the Brokerage that it had rejected the firm’s application for non-REALTOR® status because the Association still considered the supervising broker a REALTOR®, as he had been a member of the Association for 13 years and a firm could not receive non- REALTOR® status if its principal is a REALTOR®.  The supervising broker contacted the Association and told them that he had recently resigned his REALTOR® membership.  The Brokerage resubmitted its application for non-REALTOR® participation and the Association again rejected the application.

The Brokerage filed a lawsuit against the MLS and Association seeking a mandatory injunction allowing the firm to participate in the MLS as a non-REALTOR® firm.  The Association and MLS filed a motion to dismiss, arguing that the supervising broker remained the owner of another brokerage firm that was a member of the Association and so the Brokerage was ineligible for non-REALTOR® participation.

The District Court of Johnson County, Kansas, dismissed the Brokerage’s lawsuit.  The court first examined whether the Brokerage could claim injunctive relief.  In order to receive an injunction, a party must show: a substantial likelihood that the party will prevail on the merits; the party will suffer an irreparable injury unless the injunction is granted; a showing that the threatened injury outweighs whatever damage will be caused to the other parties; and finally, a showing that the injunction would not be against the public interest.  In addition, a party needs to demonstrate a violation of a legal right.

The court determined that the Brokerage had failed to allege that any of its legal rights had been violated and so an injunction was not appropriate.  The Association’s bylaws and the MLS rules gave the Association discretion in acceptance of non-REALTOR® applicants. Only the applicants had mandatory obligations under the MLS rules, such as requiring the applicants to follow the rules and pay the appropriate fees.  Therefore, the Association and MLS could reject the Brokerage’s application.

Next, the court considered whether the Brokerage had standing to seek a declaratory judgment.  When the Association and MLS had filed a motion for judgment, the Brokerage had sought leave to file an amended complaint seeking a declaratory judgment.  Standing is a judicially created doctrine that requires a party to demonstrate it has personal standing in the outcome entitling the party to judicial relief.  A third-party who is not a member of a corporation nor party to its bylaws can bring a suit against a corporation for violation of the corporation’s bylaws.

Since the Brokerage and the supervising broker were not members of the Association, they could not bring a declaratory judgment action because they lacked standing to challenge the actions of the Association and MLS.  Therefore, the court denied the Brokerage leave to amend the complaint and dismissed the lawsuit.

Platinum Realty 2.0, LLC v. Kansas City Reg’l Ass’n of REALTORS®, No. 16CV6579 (Kan. Dist. Ct. Mar. 22, 2017).  [Note: This opinion is not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]