Skynet Corp. v. Slattery: Advertising Website Does Not Need License

A New Hampshire federal court has considered a challenge to the constitutionality of its real license laws by a website that advertised “for sale by owner” (“FSBO”) listings.

Skynet Corporation d/b/a (“Website”) operated a website which provided information to buyers and sellers of real estate who did not want to utilize a real estate broker. In exchange for a flat fee, the Website allows sellers to advertise their home on its site, with the fee varying on the amount of details that the sellers included in the advertisement. The Website also included a number of useful tools for those thinking of entering into a real estate transaction, such as mortgage calculators, neighborhood information, and links to providers of real estate services. The Website does not receive any compensation from the sale of property and does not represent itself as a real estate professional.

The Website filed a lawsuit challenging the constitutionality of the State of New Hampshire’s (“State”) license laws. The lawsuit claimed the State’s laws would require the Website to hold a real estate license in order to operate and these laws were unconstitutional because these laws infringed upon the Website’s First Amendment rights. Specifically, the Website argued that it qualified as a “broker” under the State’s real estate license laws because the Website received an “advance fee” for listing property.

The state license laws require anyone providing brokerage services to obtain a real estate license. The statute contained an exemption for any “newspaper or other publication of general circulation” that charges an advance fee “solely for advertisement”, but the Website did not believe it qualified for this exception. A magistrate judge considered the constitutionality of the State’s licensing requirements.

The United States District Court for the District of New Hampshire found that the State’s licensing requirements did not apply to the Website and so the judge did not need to consider the Website’s constitutional arguments. The court first considered whether it was appropriate to consider the Website’s allegations.

The Website stated that it was unable to obtain a definitive answer from the State as to whether the licensing requirement applied to it. The State argued that the real estate commission had issued a declaratory ruling that the Website did not need to receive a real estate license to conduct its activities, but the court agreed that the Website still faced a threat of investigation by the State, as the commission’s ruling did not bind the State and so the State could later decide to pursue the Website. So, the court determined that the matter was appropriate for judicial review.

After looking at the statutory language, the court determined that the Website was exempt from the State’s real estate licensing requirements. The key terms that the court needed to examine were “broker” and “advance fees”.

“Broker” is defined as “any person acting for another…for…compensation”, and the statute goes on to a list a number of specific activities that real estate brokers undertake, including the listing of property for sale. However, the court found the important language in the statute was the “acting for another” language. Since the Website did not purport to represent buyers or sellers of real estate and only displayed advertisements for property on its site, the court ruled that the Website did not qualify as a “broker” and so was not required to have a license for its property advertisements.

Next, the court considered the definition of “advance fees” and determined that the exemption for newspapers applied to the Website. The Website argued that because it only listed real estate advertisements and provided other information related to a real estate transaction, the Website was different than a newspaper, which provides many other types of services and information.

The court disagreed with the distinction made by the Website, finding that an Internet website is like a “publication of general circulation” and, as a practical matter, newspapers are now available via the Internet, including the newspaper’s property listings. The court determined that the statute did not distinguish between the types of advertising medium and so ruled that the “advance fee” exemption applied to the Website. Because the State’s real estate licensing laws did not apply to the Website, the court did not need to consider the Website’s First Amendment challenge to the State’s license laws.

Skynet Corp. v. Slattery, No. 06-CV-218-JM, 2008 WL 924531 (D.N.H. Mar. 31, 2008). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].