REX - Real Estate Exch. v. Zillow Inc.
| Decision Date | 02 September 2021 |
| Docket Number | C21-312 TSZ |
| Court | U.S. District Court — Western District of Washington |
| Parties | REX - REAL ESTATE EXCHANGE INC., Plaintiff, v. ZILLOW INC.; ZILLOW GROUP INC.; ZILLOW HOMES INC.; ZILLOW LISTING SERVICES INC.; TRULIA LLC; and THE NATIONAL ASSOCIATION OF REALTORS, Defendants. |
THIS MATTER comes before the Court on the motion to dismiss filed by Defendants Zillow Inc., Zillow Group Inc., Zillow Homes Inc., Zillow Listing Services Inc., and Trulia LLC (“Zillow”), docket no. 83, and the motion to dismiss filed by the National Association of REALTORS® (“NAR”), docket no. 84. Having reviewed all papers filed in support of, and in opposition to, the motions, the Court enters the following Order.
NAR is the nation's largest trade association for real estate professionals, consisting of multiple listings services (“MLSs”), more than a thousand local associations, and around 1.45 million real estate agents. Compl. at ¶ 24 (docket no. 1). NAR promulgates rules governing how its members operate their businesses, which have allegedly become ubiquitous within the marketplace. Id. at ¶ 29. For example, NAR has adopted an optional rule, known as the Segregation Rule, [1] which requires members' listings that are obtained through MLSs' internet data exchange (“IDX”) feeds to be “displayed separately from listings obtained from other sources.” Id. at ¶¶ 83 & 85.
NAR has also adopted a mandatory rule, known as the Buyer Agent Commission Rule, which requires a seller's agent to include in any MLS listing a predetermined offer of commission to a buyer's agent, thereby prohibiting any party from later modifying that commission. Id. at ¶¶ 31 & 33. NAR's members allegedly encourage their customers to offer high commissions for buyers' agents, resulting in historically high, static commissions throughout the United States, with total commissions averaging about 5.5 percent of a home's sale price. See id. at ¶¶ 34 & 42.
Established in 2015, Plaintiff REX - Real Estate Exchange Inc. is a licensed broker that employs licensed real estate agents across the nation, including in Washington. Compl. at ¶¶ 40, 44, & 47. Plaintiff is not a member of NAR or any MLS and thus has not agreed to comply with any of NAR's rules. Id. at ¶ 35. Home sellers who choose Plaintiff's services are able to avoid paying a predetermined buyer agent commission and can instead negotiate that fee-as a result, Plaintiff's clients pay a total average commission of 3.3 percent of a home's sale price. Id. at ¶ 42.
Plaintiff has developed proprietary digital technology to market its customers' homes, allegedly saving customers more than $29 million in commissions over the past five years. Compl at ¶¶ 40-43. Plaintiff lists its customers' homes on various real estate aggregator websites, including two of Zillow's websites, Zillow.com and Trulia.com which are the first and fourth most visited real estate aggregator sites in the United States. Id. at ¶ 54. Zillow's websites are alleged to be a “dominant doorway into the residential real estate market.” Id. Plaintiff's listings were historically displayed on Zillow's primary search page alongside the listings of MLS participants. Id. at ¶ 63.
In 2018, Zillow launched its “Zillow Offers” business, allowing Zillow to “transact[] thousands of homes annually” as an “ibuyer” of homes. Compl. at ¶ 58. Based on Plaintiff's information and belief, “the growth and substantial inventory of Zillow-owned homes placed Zillow in a new position: Instead of focusing on being an open access point for consumers to display and access residential real estate listings Zillow's interests turned to its own substantial home inventory.” Id. In late 2020, Zillow announced that it would join forces with NAR and several MLSs, publicly committing that “all Zillow-owned homes will be listed on the MLSs with commissions paid to agents representing buyers.” Id. at ¶ 59. Plaintiff alleges that NAR's Buyer Agent Commission Rule, which is “now adopted by Zillow, is the paramount reason that real estate commissions are two to three times higher in the United States than in comparable international markets.” Id. Zillow also announced that it would begin to use MLS data feeds to populate its websites. Id. at ¶ 60.
In January 2021, Zillow unveiled its newly designed website display to be implemented nationwide on its websites to comply with the NAR and MLS “guidelines” or “rules.” Compl. at ¶¶ 64 & 70-71. The new display created a separate page or tab, called “Other listings, ” that is concealed behind the primary results page or tab, called “Agent listings ” as depicted below:
(Image Omitted)
Id. at ¶ 64. As a result of this new display, consumers see only a portion of the homes at one time, based on whether they are viewing the primary “Agents listings” tab or the secondary “Other listings” tab; and they must now move back and forth between these two tabs. Id. at ¶ 66. Although Plaintiff's customers' homes are all listed by licensed real estate agents, its listings are now being displayed in the “Other listings” category to comply with NAR and MLS rules, rather than in the “Agent listings” category. Id. at ¶¶ 67-68 & 71. Zillow allegedly knows that Plaintiff is a licensed broker with licensed agents, as Plaintiff pays Zillow to be a part of Zillow's Premier Agent Program. Id. at ¶ 69. Plaintiff alleges that this new display and labeling system “is not only inaccurate and nonsensical, it is misleading and deceptive, ” as it “degrades non-MLS listings” by placing them on the “Other listings” tab. Id. at ¶¶ 67 & 71.
After Zillow redesigned its websites, views of Plaintiff's listings “plummeted” on Zillow's websites, causing “a corresponding drop in sales and . . . lost brokerage service revenues to” Plaintiff. Compl. at ¶¶ 73-74 & 88. For example, views of one of Plaintiff's listings on Zillow.com dropped dramatically after January 2021, when Zillow added the “Other listings” tab to the website, as depicted below:
(Image Omitted)
Id. at ¶ 74. Zillow's and NAR's actions are also allegedly harming other non-MLS agents, see id. at ¶ 71, as well as the sellers of the homes that are listed on Zillow's “Other listings” tab, “causing them to list the home for more days on market and accept lower sales prices.” Id. at ¶ 73.
In March 2021, Plaintiff brought this action against Zillow and NAR, asserting four claims: (1) an unreasonable restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) false advertising in violation of the Lanham Act, 15 U.S.C. § 1125; (3) an unfair or deceptive act or practice in violation of the Washington Consumer Protection Act (“CPA”), RCW 19.86.020; and (4) conspiracy to restrain trade in violation of the CPA, RCW 19.86.030. Compl. at ¶¶ 114-64. Plaintiff simultaneously filed a motion for a preliminary injunction, docket no. 5, seeking to enjoin Defendants from implementing any rule requiring the segregation of Plaintiff's listings from MLS listings, excluding Plaintiff's listings from the “Agent listings” tab, and categorizing Plaintiff's listings as “Other listings” on Zillow's websites. The Court denied that motion, concluding that Plaintiff failed to satisfy its burden to show a likelihood of prevailing on its federal and state law claims, or a likelihood of suffering irreparable harm in the absence of an injunction. Order (docket no. 80 at 23).
Defendants now move to dismiss the claims asserted against them, see docket nos. 83 & 84. NAR also requests that the Court take judicial notice of certain documents, docket no. 85. Plaintiff partially opposes the request, docket no. 91, with respect to two of the documents, a complaint filed in a civil case, see Ex. C to request (docket no. 85-3), and the final judgment entered in that case, including a 2008 consent decree between NAR and the United States, see Ex. D to request (docket no. 85-4). The United States also filed a statement of interest, docket no. 95, asking this Court to decline to draw any inference in NAR's favor from the 2008 consent decree, which is now expired. See id. at 2. The Court previously noted the existence of that consent decree in ruling on the motion for a preliminary injunction, see docket no. 80 at 13. Because no one disputes the authenticity of these court records, the Court GRANTS NAR's request to take judicial notice of them (docket nos. 85-3 & 85-4), as well as the unopposed documents (docket nos. 85-1 & 85-2), in ruling on the instant motions.
NAR argues that Plaintiff fails to plausibly allege that its injury is traceable to NAR or that such injury is redressable. “[L]ack of Article III standing requires dismissal for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1).” Maya v Centrex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011). “[T]hose who seek to invoke the jurisdiction of the federal courts must satisfy the threshold requirement imposed by Article III of the Constitution by alleging an actual case or controversy.” Id. (quoting City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983)). “[T]o satisfy Article III's standing requirements, a plaintiff must show (1) it has suffered an ‘injury in fact' . . .; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Id. (quoting Friends of the Earth, Inc. v. Laidlaw Env't Servs., Inc., 528 U.S. 167, 180-81 (2000)). “For purposes of ruling on a motion to dismiss for want of standing, . . . courts must accept as true all material allegations of the complaint and must construe the complaint in favor of the...
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