A federal court has considered whether there was a restraint of trade by an association and an MLS over ethics complaints filed against a member.
Keith Castonguay (“Owner”) is the owner of the real estate brokerage firm MLSonline.com, Inc. (“Brokerage”). The Owner had started the firm in 2001 with a business model that focused on internet marketing. In addition to operating his own website, he also purchased a number of domain names containing “mls” and used these to drive traffic to his own website.
In 2004, Edina Realty (“MLS”), another real estate firm operating in the same market as the Brokerage, brought a lawsuit against the Brokerage over its purchase and use of “Edina Realty” as a keyword in search results. Click here to read a summary of the earlier case. The parties entered into a settlement which established how the Brokerage could use the words
“Edina Realty” in future online marketing.
Following the settlement, the Regional Multiple Listing Service (“RMLS”), a MLS in which both the Brokerage and Edina participated, enacted a rule which prohibited its members from using the term “mls” or “multiple listing service” in its name
or website name because it could mislead consumers. The Brokerage filed a lawsuit against RMLS. The parties settled this lawsuit, which allowed the Brokerage to continue using “mls” in its name and domain names so long as it was made clear to consumers that it was not a multiple listing service.
In 2010, Henry Brandis and Aaron Dickinson filed an ethics complaint against the Owner, alleging that he violated Article 12 of the NAR Code of Ethics. Article 12 (amended in 2008) requires REALTORS® to present a true picture in their advertising and other representations. Standard of Practice (“SOP”) 12-10 provides:
REALTORS® obligation to present a true picture in their advertising and representations to the public includes the URLs and domain names they use, and prohibits REALTORS® from:
- engaging in deceptive or unauthorized framing of real estate brokerage websites;
- manipulating (e.g., presenting content developed by others) listing content in any way that produces a deceptive or misleading result; or
- deceptively using metatags, keywords or other devices/methods to direct, drive, or divert Internet traffic, or to otherwise mislead consumers.
SOP 12-12 further provides:
REALTORS® shall not:
- use URLs or domain names that present less than a true picture, or
- register URLs or domain names which, if used, would present less than a true picture.
The Minnesota Association of REALTORS® (“Association”) heard the complaint in a bifurcated proceeding and concluded that the Owner had violated the Code of Ethics. The Association imposed a fine, issued a three-year letter of reprimand, and ordered the Owner to take certain classes.
Following the disciplinary sanctions, the Brokerage continued to use the same business name and website. In June 2011, Brandis and Dickinson filed a second ethics complaint against the Owner making the same allegations. The Association informed the Owner that it planning to conduct a second hearing. The Owner filed a lawsuit against the MLS, Association, Edina, and several individuals, alleging that the prior settlement agreements were violated and also alleged that the other parties were conspiring together to restrain trade. All the defendants filed motions to dismiss the lawsuit.
The United States District Court for the District of Minnesota dismissed the federal antitrust claims and relinquished jurisdiction over the remaining state law claims. In order to bring an antitrust complaint, a party must demonstrate an “antitrust injury,” which is the type of injury that the antitrust laws are designed to prevent and flows from the defendant (s) conduct.
The court ruled that the Owner had failed to demonstrate an antitrust injury and so dismissed the antitrust allegations. In order to allege an antitrust claim, a party must allege a “contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce.” The Owner alleged that the defendants had entered into a group boycott. However, the Owner had failed to show that the alleged group boycott had an anticompetitive in the relevant market. The antitrust laws require a showing of harm to competition, not merely harm to a competitor. Since the allegations of the Owner centered on alleged harms his business would suffer, the court dismissed with prejudice the antitrust allegations for failing to demonstrate an antitrust injury.
The antitrust claims were the only federal claims in the Owner’s lawsuit. Therefore, the court declined to exercise jurisdiction over the remaining state law claims and dismissed those allegations without prejudice, allowing the Owner to file a new lawsuit bringing those claims in state court.
TheMLSonline.com, Inc. v. Reg'l Multiple Listing Serv. of Minnesota, Inc., 840 F.Supp.2d 1174 (D. Minn. 2012) CIV. 11-2455 RHK/SER, 2012 WL 37144 (D. Minn. Jan. 5, 2012). [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].