‘Writing is on the wall’: Court tosses NAR counterclaim against REX

A federal district court has thrown out the National Association of Realtors’ false advertising counterclaim against discount brokerage REX Real Estate, though it did give the 1.5 million-member trade group permission to amend its suit.

In an April 22 ruling, Judge Thomas S. Zilly of the U.S. District Court in Western Washington found that NAR had failed to allege facts to show how it was specifically harmed by REX’s allegedly false statements, but did not agree with REX’s assertions that the case should be dismissed because REX’s statements on legal and policy issues are protected speech under the First Amendment.

“We are disappointed with the Court’s decision, but it is important to note that the Court did not address NAR’s allegations that REX made false and misleading statements comparing REX’s services to those provided by brokers who are also Realtors,” NAR spokesperson Mantill Williams told Inman in an emailed statement.

“NAR puts consumers first and will defend against any effort to deprive them of the pro-consumer, pro-competitive benefits provided by independent, local broker marketplaces. We will continue our efforts to educate consumers on how local broker marketplaces ensure equity and transparency, and are proven to lower transaction costs for consumers.”

NAR did not respond when asked whether it planned to amend its counterclaim.

Meanwhile, REX General Counsel Michael Toth pointed out the trade group’s legal setbacks this past week in other antitrust cases, including the commission lawsuit known as Sitzer/Burnett that won class certification and the pocket listing lawsuit filed by The PLS whose dismissal was reversed on appeal.

“NAR’s claims are an attempt to delay the inevitable,” Toth said in an emailed statement.

“Consumers are paying too much and have too little choice when they buy or sell a home,” he added in the statement. “And they know it’s because of the outdated rules that industry sets to protect itself. With the pocket listing loss, the class certification loss, and the dismissal of NAR’s counterclaim, the writing is on the wall — the days of real estate brokerage collusion are ending soon.”

REX sued NAR and Zillow in March 2021, alleging antitrust violations for a NAR rule, dubbed the “No-Commingling Rule,” that prompted Zillow to separate non-multiple listing service listings from MLS listings on its website, including listings from REX.

At the end of January, NAR filed a countersuit against REX alleging one count of false advertising in violation of the Lanham Act for a series of statements from REX that NAR alleged constituted a “campaign of lies” that had harmed NAR’s reputation.

The statements at issue are not only about NAR — alleging, for instance, that the trade group has committed antitrust violations and inflated agent commissions — but about REX’s own business model. REX has touted itself as a brokerage that — contrary to most Realtor-affiliated brokerages — charges homesellers a 2-percent listing fee, doesn’t use MLSs, finds buyers using artificial intelligence and social media targeting, and has a policy of never paying outside buyer’s brokers  — claims NAR’s countersuit challenges.

Three weeks later, REX filed a motion to dismiss the counterclaim, saying NAR lacked standing — the legal right to bring the suit — because the trade group did not allege facts sufficient to show that it had in fact been injured.

REX also alleged that the counterclaim “infringes on REX’s First Amendment right to express opinions on legal and policy matters.”

In its order Friday, the district court agreed with REX’s argument that NAR lacked standing, noting that NAR had failed to allege how REX’s allegedly false statements specifically and concretely damaged NAR’s reputation.

“NAR does not allege that any consumers or brokers have withheld trade from NAR as a result of the advertisements,” Zilly wrote.

“NAR has not … alleged facts explaining how REX’s purportedly false advertisements have frustrated its mission or caused it to divert its resources. Nor has NAR alleged sufficient facts to explain how REX’s advertisements to consumers harm NAR’s reputation and goodwill among its own members, who NAR does not claim were misled,” he added.

The court, however, did not buy REX’s contention that the case should be tossed because the statements NAR is challenging are protected speech.

“Although REX contends that its statements are constitutionally protected opinions about the legality of NAR’s business model, NAR has alleged that posts on REX’s website are false advertisements designed to promote REX’s business and influence consumers to use REX’s services,” Zilly wrote.

“NAR has identified specific statements that contain verifiable characteristics of REX’s business.

“That REX made certain statements to the media, and later posted those statements on its website … does not change the result at this stage of litigation. Indeed, republication and dissemination of statements made to the media can constitute commercial speech. NAR has plausibly alleged that the statements on REX’s website are false statements made in commercial advertising.”

The court granted REX’s motion to dismiss with leave to amend. NAR has until June 6 to file an amended counterclaim.

Read the order:

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Email Andrea V. Brambila.

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