PLS.com, LLC v. Nat'l Ass'n of Realtors

• Decision Date: 26 April 2022
• Docket Number: 21-55164
• Citation: 32 F.4th 824
• Parties: The PLS.COM, LLC, a California limited liability company, Plaintiff-Appellant, v. The NATIONAL ASSOCIATION OF REALTORS; Bright MLS, Inc.; Midwest Real Estate Data, LLC ; California Regional Multiple Listing Service, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

32 F.4th 824

The PLS.COM, LLC, a California limited liability company, Plaintiff-Appellant,

v.The NATIONAL ASSOCIATION OF REALTORS; Bright MLS, Inc.; Midwest Real Estate Data, LLC ; California Regional Multiple Listing Service, Inc., Defendants-Appellees.

No. 21-55164

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 14, 2022 Pasadena, California

Filed April 26, 2022

Christopher G. Renner (argued), Jenner & Block LLP, Chicago, Illinois; Douglas E. Litvack, Jenner & Block LLP, Washington, D.C.; David M. Gossett, Davis Wright Tremaine LLP, Washington, D.C.; Adam S. Sieff, Davis Wright Tremaine LLP, Los Angeles, California; Everett W. Jack Jr., John F. McGrory Jr., and Ashlee M. Aguiar, Davis Wright Tremaine LLP, Portland, Oregon; for Plaintiff-Appellant.

Jerrold Abeles (argued), Wendy Qiu, and Brian D. Schneider, Arent Fox LLP, Los Angeles, California, for Defendants-Appellees Bright MLS, Inc. and Midwest Real Estate Data LLC.

Robert J. Hicks (argued), Theodore K. Stream, and Andrea Rodriguez, Stream Kim Hicks Wrage and Alfaro PC, Riverside, California, for Defendant-Appellee California Regional Multiple Listing Service, Inc.

Ethan Glass (argued), William A. Burck, Derek L. Shaffer, Michael D. Bonanno, Peter Benson, and Kathleen Lanigan, Quinn Emanuel Urquhart & Sullivan LLP, Washington, D.C., for Defendant-Appellee National Association of Realtors.

Steven J. Mintz (argued), Daniel E. Haar, and Nickolai G. Levin, Attorneys; Richard A. Powers, Acting Assistant Attorney General; Antitrust Division, United States Department of Justice, Washington, D.C., for Amicus Curiae United States of America.

Laura M. Alexander, American Antitrust Institute, Washington, D.C., for Amicus Curiae American Antitrust Institute.

Christopher M. Wyant, K&L Gates LLP, Seattle, Washington; Andrew Mann, K&L Gates LLP, Washington, D.C.; for Amici Curiae Law Professors.

Before: MILAN D. SMITH, JR. and JOHN B. OWENS, Circuit Judges, and STEPHEN J. MURPHY, III,^** District Judge.

OPINION

M. SMITH, Circuit Judge:

OPINION

The PLS.com, a new entrant in the real estate network services market after decades of there being little or no competition in that market, alleges that its entrenched competitors violated the antitrust laws because they conspired to take anticompetitive measures to prevent it from gaining a foothold in the market. The district court dismissed PLS's complaint without leave to amend because it concluded PLS did not, and could not, adequately allege antitrust injury. We reverse.

FACTUAL BACKGROUND

Most people seeking to buy or sell a home hire a real estate agent to assist them with the process.¹ Agents assist sellers by marketing their homes, and they assist buyers by finding homes that match their preferences. To do so, most agents pay monthly fees to access multiple listing services (MLSs), which are databases of homes for sale in certain geographic areas. For example, the California Regional Multiple Listing Service (CRMLS) lists homes for sale in parts of California; the Bright MLS lists homes for sale in parts of New Jersey, Delaware, Maryland, Pennsylvania, West Virginia, Virginia, and Washington, D.C.; and Midwest Real Estate Data, LLC (MRED) lists homes for sale in parts of Illinois, Wisconsin, and Indiana.

Most MLSs are owned and controlled by members of the National Association of Realtors (NAR), a trade association to which the "vast majority" of residential real estate agents belong. There are approximately 600 NAR-affiliated MLSs in the United States, and CRMLS, Bright, and MRED each contain "over 65 percent of residential real estate listings marketed by licensed real estate professionals in their respective service areas." Residential real estate agents "regard participation in their local MLS as critical to their ability to compete."

Most sellers prefer to list their homes on NAR-affiliated MLSs to reach the widest possible range of buyers, but some sellers prefer not to do so because they do not wish to share all of the information NAR-affiliated MLSs require. For instance, a public figure may not wish to share certain details about his or her home with an entire MLS. Listings that are not shared on a NAR-affiliated MLS are sometimes called "pocket listings."

Historically, pocket listings were marketed through face-to-face communications, telephone calls, or email. In 2017, as "[d]emand for pocket listing[s] ... skyrocketed," a group of real estate agents created PLS, which was a database similar to an MLS, but that allowed sellers to choose how much information to share, and that included listings anywhere in the United States rather than just in a particular region. PLS was open to any agent who wished to join, and agents who joined were charged less than they were by the MLSs. PLS grew rapidly, and by late 2019 had 20,000 members who "were cooperating to sell billions of dollars of residential real estate listings nationwide."

Even before PLS was formed, NAR and several MLSs, including CRMLS, Bright MLS, and MRED, became concerned with the growth of pocket listings. A 2015 NAR study warned, "Off-MLS listings may contribute to the unraveling of the MLS as we know it, and its replacement by a private network that serves to benefit a certain group of participants." Another NAR study cautioned, "A number of industry initiatives suggest that the current MLS-centric era might be coming to an end. After half a century of operating as the only gateway, there is a strong likelihood that the MLS may lose its exclusive positioning as the principal source of real estate listings."

Two years after PLS launched, NAR's "MLS Technology and Emerging Issues Advisory Board" voted to recommend that NAR adopt a policy that would require agents posting listings on competing services to also post those listings on the appropriate MLS. A month later, CRMLS, Bright MLS, MRED, and other MLSs issued a white paper "that called for collective action to address the threat to the MLS system presented by the rise of pocket listings and the prospect of a competing listing network that would aggregate such listings." A month after that, Bright MLS adopted a policy consistent with the NAR board's recommendation, and CRMLS, Bright MLS, and MRED met with other NAR-affiliated MLSs "at a [Council of Multiple Listing Services] conference in Salt Lake City, Utah to discuss the competitive threat presented by pocket listings and the need for NAR to take action at the upcoming NAR Convention to eliminate that threat through adoption of" the policy nationwide. MRED's CEO "explained that the [policy] was motivated by concerns that pocket listings were ‘making the MLS less valuable.’ "

The next month, NAR adopted the Clear Cooperation Policy, which provides: "Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants." This new policy meant that members of a NAR-affiliated MLS who chose to list properties on PLS were required to also list those properties on an MLS. Agents who did not comply faced severe penalties, including in some cases several-thousand dollar fines, or suspension from, or termination of, their access to the MLS.

"NAR-affiliated MLSs and [the Council of Multiple Listing Services] have admitted that the purpose of the Clear Cooperation Policy was to maintain the market dominance of the NAR-affiliated MLS system, and specifically to exclude PLS." PLS alleges that the Clear Cooperation Policy has had its intended effect: After the Clear Cooperation Policy was adopted, "[l]istings were removed from PLS and submitted instead to NAR-affiliated MLSs," "[a]gent participation in PLS declined," and "PLS was foreclosed from the commercial opportunities necessary to innovate and grow" "a critical mass of members and listings to create a powerful network effect."

PLS also alleges that the Clear Cooperation Policy "harmed PLS and consumers in the relevant market by excluding PLS." Based on PLS's briefing, we initially understood this allegation to mean that PLS was driven from the market.² At oral argument, however, PLS conceded that it did not allege that the Clear Cooperation Policy drove it from the market, and instead directed us to a news article, which is not cited in the complaint, that suggests that PLS has exited the market. Although the parties seem to agree that PLS is no longer in the listing network services market, our analysis at this stage is confined to the allegations in the complaint, so we proceed on the understanding that the Clear Cooperation Policy injured PLS but did not drive it from the market.

PROCEDURAL BACKGROUND

Roughly seven months after the Clear Cooperation Policy was adopted, PLS filed suit, alleging that the Clear Cooperation Policy is an unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 16720(a)–(c) of California's Cartwright Act.³ PLS seeks treble damages for its "lost profits and damaged equity and goodwill" and a permanent injunction prohibiting Defendants from enforcing the Clear Cooperation Policy.

Defendants moved to dismiss, arguing that PLS failed to state a claim. The district court granted the motions to dismiss because it concluded that PLS did not allege antitrust injury, and it denied PLS leave to amend because it determined that PLS could not cure this deficiency. The district court also held that PLS did not adequately allege that MRED participated in the alleged conspiracy. PLS timely appealed.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the district court's dismissal of the complaint de novo. City of Oakland v. Oakland Raiders , 20 F.4th 441, 451 (9th Cir. 2021). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v....