JOHN R. TUNHEIM, District Judge.
Plaintiff Regional Multiple Listing Service of Minnesota, Inc. ("RMLS") brought this action for copyright infringement against Defendant American Home Realty Network, Inc. ("AHRN"). RMLS now brings two motions before this Court. First, RMLS moves the Court for a finding of contempt against AHRN and AHRN's Chief Executive Officer Jonathan Cardella for violations of the Court's September 27, 2012, preliminary injunction order. The Court will grant this motion, in part, because AHRN has displayed material copyrighted by RMLS without authorization. Second, RMLS moves to dismiss AHRN's counterclaims, including its counterclaim under the Sherman Act, 15 U.S.C. § 1. The Court will deny this motion because AHRN has sufficiently alleged counterclaims that survive a motion to dismiss.
Much of the background for this action is outlined in the Court's previous decision. See Reg'l Multiple Listing Serv. of Minn., Inc. v. Am. Home Realty Network, Inc., Civil No. 12-965, 2012 WL 4470286 (D.Minn. Sept. 27, 2012). The Court will repeat only some of those facts here.
RMLS is a Minnesota corporation with its principal place of business in St. Paul, Minnesota. (Compl. ¶ 3, Apr. 18, 2012, Docket No. 1.) RMLS is a multiple listing service company that serves more than 13,000 real estate brokers and agents in Minnesota and western Wisconsin. (Id. ¶ 8.) Like other multiple listing services ("MLSs") throughout the United States, RMLS is a local cooperative run by local member-brokers, affiliated with the National Association of Realtors ("NAR"), who pool and disseminate information on homes available for sale in their regions. (First Am. Countercl. ("Countercl.") ¶ 17, Dec. 21, 2012, Docket No. 73.) RMLS acts on behalf of its member-brokers within the relevant market and is governed by a Board of Governors whose members are appointed by those member-brokers. (Id. ¶ 15.)
RMLS provides information to brokers and real estate agents through NorthstarMLS. NorthstarMLS members enter into an agreement with RMLS to upload their real estate listings to NorthstarMLS. (Decl. of John Mosey ¶ 4, May 16, 2012, Docket No. 18.) The members upload photographs of a property, enter some factual information, such as list price, and also select other items from a dropdown menu of "field descriptors" allegedly created by RMLS, such as "Main Floor Full Bath," "Private Master," and "Whirlpool." (See Decl. of Tim Schirm, Ex. C at 6, May 17, 2012, Docket No. 17.) In return, RMLS sends to a member-broker's consumer-facing
AHRN is a Delaware corporation, with its principal place of business in San Francisco, California. (Decl. of Ali Vahabzadeh ¶¶ 1, 3-6, May 11, 2012, Docket No. 10.) AHRN owns NeighborCity, an online residential real estate service. (Supp. Decl. of Ali Vahabzadeh ¶ 3, June 7, 2012, Docket No. 26.) NeighborCity offers three primary services to its visitors. First, NeighborCity offers information to visitors about properties for sale, including listing prices, photographs, and descriptors of certain property features. (Supp. Decl. of John Mosey, Ex. R, June 1, 2012, Docket No. 21.) Second, NeighborCity connects prospective buyers with buy-side real estate agents. (See id.)
RMLS alleges in its complaint that AHRN has willfully infringed RMLS's copyrighted material, including photographs and narrative descriptors on NorthstarMLS, by displaying this material on NeighborCity. On September 27, 2012, this Court entered a preliminary injunction against AHRN. Reg'l Multiple Listing Serv. of Minn., 2012 WL 4470286, at *11. The Court found that RMLS was likely to succeed on the merits of its copyright infringement claims against AHRN. Id. at *7-10. In reaching this holding, the Court first found that RMLS had shown a likelihood that it owned the fifty photographs and narrative descriptors underlying its complaint against AHRN. Id. at *7-8. There was a rebuttable presumption that RMLS owned copyrights to this material because the material was registered with the Copyright Office. Id. at *8. Because AHRN had not challenged this rebuttable presumption,
As to the scope of the injunction, the Court stated:
Id. at *11 (emphases added). The Court then ordered the following:
Id.
The Court also addressed the issue of which photographs on NorthstarMLS were owned by RMLS. The Court noted that RMLS had stated that it did not own copyrights to all of the photographs on NorthstarMLS. Id. at *2 n. 3. It noted, however, "RMLS claims that it places watermarks on the photographs for which it owns copyrights." Id. The Court declined to delineate between those photographs that RMLS did or did not own, but stated that its injunction would "extend only insofar as copyrights are owned or co-owned by RMLS." Id.
After the entry of the Court's preliminary injunction order, Cardella submitted a declaration to this Court stating that AHRN "has ensured that its data gathering process does not copy, display, or permit public distribution of any of the data or other materials which are the subject of the Court's Order." (Decl. of Jonathan Cardella ("First Cardella Decl.") ¶ 5, Oct. 16, 2012, Docket No. 44.)
The current sanctions motion before the Court is based on AHRN's publication, during the period from October 16, 2012 through October 23, 2012, of seventy-seven photographs allegedly subject to a copyright owned by RMLS. (Decl. of Michael Bisping ("First Bisping Decl.") ¶ 3, Exs. 1-3, Nov. 15, 2012, Docket No. 51.) These are different photographs than the fifty photographs that underlie the original complaint brought by RMLS.
Each of the brokers for the four agents — Twin Oaks, Countryside, RE/ MAX, and Keller Williams — entered into a Participant License and Access Agreement with RMLS ("the Participant Agreement"). (See First Bisping Decl., Exs. C1-C4.) Under the Participant Agreement, each broker assigned to RMLS an undivided twenty-five percent interest in the copyrights for their photographic and other contributions to NorthstarMLS, including the contributions of their employees and contractors. (Id.)
AHRN maintains that, even if RMLS can prove that it co-owns copyrights to the seventy-seven photographs, AHRN nonetheless had permission from Keller Williams and RE/MAX to display photographs from their NorthstarMLS listings. As support, AHRN points to alleged agreements it has with Keller Williams and RE/MAX that state:
(Decl. of Jonathan Cardella ("Second Cardella Decl.") ¶ 4, Ex. 1, Dec. 6, 2012, Docket No. 67.) The alleged agreement between AHRN and RE/MAX is electronically signed by John Collopy and the alleged
The Vice President of RE/MAX wrote a letter to AHRN's CEO dated January 8, 2013, denying that it ever entered into an agreement with AHRN and demanding immediate removal of any and all RE/ MAX listings from AHRN's website. (Decl. of Chad Snyder, Ex. A, Feb. 8, 2013, Docket No. 85.) Specifically, the Vice President stated that he had reviewed the purported electronic contract between RE/ MAX and AHRN and denied that the contract was signed by an officer of RE/MAX. (Id.)
AHRN brings counterclaims against RMLS alleging violations of the Sherman Act (Count 1), Minnesota Antitrust Law (Count 2), the Cartwright Act (Count 3), and the Minnesota Deceptive Trade Practices Act (Count 4). (Countercl. ¶¶ 6-32.) RMLS moves to dismiss each of these counterclaims. The Court will outline below some of the primary allegations relevant to these counterclaims.
AHRN alleges that RMLS, other MLSs, the member-brokers of the MLSs, and the NAR
AHRN claims that these restrictions on who may receive the data feeds are meant to promote RMLS's anticompetitive business model. AHRN claims that RMLS's model is designed to "maximize brokerage commissions through their own referrals and dual-agency home sales — arrangements in which the broker who lists a property is also the broker for the buyer of that property, and so is entitled to the entire commission for the sale, as well as the referral fee for directing the buyer to the listing and/or selling agent through the broker's website." (Id. ¶ 13.) According to AHRN, because commissions are based on the sale price of the home, a broker and
Second, AHRN alleges that RMLS and other MLSs, including their member-brokers, have entered into a continuing agreement to assert sham copyright claims to real estate listing data, and to employ those sham copyright claims to intimidate businesses like AHRN that seek to compete with and challenge their existing business model. (Id. ¶ 26.)
AHRN claims that RMLS asserts copyrights over information that is "not copyrightable, not properly registered in compliance with the Copyright Act, or not owned by" RMLS. (Id. ¶ 42.)
To demonstrate a conspiracy regarding the sham copyrights, AHRN points to the November 11 to 14, 2011 NAR meeting that allegedly featured discussions regarding the perceived threat AHRN poses to the industry and what the industry could do to shut down AHRN. (Id. ¶ 33.) AHRN alleges that, following this meeting, AHRN received more than thirty similar cease and desist letters from MLSs and brokers across the country — including from RMLS. (Id. ¶¶ 33-34.) Each letter claimed that AHRN was improperly using information over which each respective MLS claimed a copyright. (Id. ¶ 34.)
AHRN further alleges a conspiracy based on the NAR Board's vote on Saturday, May 19, 2012, to institute new rules relevant to AHRN and to fund this legal action and a substantially similar action against AHRN in the United States District Court for the District of Maryland. (Id. ¶ 38.) Specifically, AHRN identifies the following statements in the meeting minutes as support:
(Id. ¶ 39.)
As further evidence of an alleged conspiracy, RMLS points to a December 22, 2011, email that John Mosey, the President of RMLS, sent to Mitchell Skinner, RMLS's counsel. (Id. ¶ 40.) Mosey's e-mail reads as follows:
(See Pl.'s Mem. in Supp. of Mot. to Dismiss First Am. Countercl., Ex. A, Jan. 11, 2013, Docket No. 81.)
The Court will first discuss RMLS's motion for contempt against AHRN and Cardella. "One of the overarching goals of a court's contempt power is to ensure that litigants do not anoint themselves with the power to adjudge the validity of orders to which they are subject." Chicago Truck Drivers Union Pension Fund v. Brotherhood Labor Leasing, 207 F.3d 500, 504 (8th Cir.2000). "A party seeking civil contempt bears the initial burden of proving, by clear and convincing
If the moving party satisfies its initial burden, the burden shifts to the alleged contemnor to show inability to comply. Id. To meet this burden, the alleged contemnor must do more than simply assert a present inability, and must instead establish: "(1) that they were unable to comply, explaining why categorically and in detail; (2) that their inability to comply was not self-induced; and (3) that they made in good faith all reasonable efforts to comply." Id. at 506 (citations and internal quotation marks omitted).
The Court must first determine if RMLS has proven, by clear and convincing evidence, that AHRN violated the preliminary injunction. To determine if AHRN violated the injunction, the Court must decide if the copyrights at issue were owned by RMLS, if AHRN displayed the copyrighted material, and if AHRN's display of the copyrighted material was authorized. Considering these factors, the Court finds that RMLS has proven that AHRN violated the preliminary injunction as to the photographs taken by John W. Anderson of Twin Oaks and Marty G. Ringham of Countryside.
First, RMLS has shown that it co-owns the seventy-seven copyrighted photographs. It has introduced evidence that four real estate agents took these photographs. These four agents were thus the original copyright holders to the photographs. See Natkin v. Winfrey, 111 F.Supp.2d 1003, 1008 (N.D.Ill.2000); United States Copyright Office, Copyright Basics Circular 1 at 2 (May 5, 2012), http:// www.copyright.gov/circs/circ01.pdf ("The copyright in the work of authorship immediately becomes the property of the author who created the work."). These real estate agents attested in affidavits to this Court that they assigned their interest in the photographs to their brokers.
The question thus becomes if AHRN's display of the photographs was unauthorized, as the preliminary injunction order only enjoined the "unauthorized" copying, displaying, use, and/or public distribution of RMLS's copyrighted photographic works. See Reg'l Multiple Listing Serv. of Minn., 2012 WL 4470286, at *11. The Court finds that RMLS has not shown by clear and convincing evidence that AHRN's display of RE/MAX and Keller Williams's photographs was unauthorized. As stated above, AHRN claims that it had agreements with John Collopy of RE/MAX and Michael C. Olsen of Keller Williams to display photographs and other listing information from RE/MAX and Keller Williams. The Court notes that it is unclear at this stage if John Collopy or Michael C. Olsen had the authority to sign such agreements with AHRN, and RMLS
The photographs by Twin Oaks and Countryside are another matter. There is no evidence that AHRN had permission from Twin Oaks or Countryside to display their copyrighted photographs. The Court finds that, by displaying Twin Oaks and Countryside photographs that are copyrighted by RMLS without permission from any copyright holder, AHRN violated this Court's order. The Court's order prohibited AHRN from displaying the "Plaintiff's
Because AHRN has displayed Twin Oaks and Countryside photographs that are copyrighted by RMLS, AHRN is in violation of this Court's order. AHRN has also published a false statement to this Court by stating that AHRN "has ensured that its data gathering process does not copy, display, or permit public distribution of any of the data or other materials which are the subject of the Court's Order." (First Cardella Decl. ¶ 5.) In addition, the
Because AHRN has violated this Court's order, the Court must next decide if AHRN should be found in contempt. As noted above, at this point, the burden shifts to AHRN to show an inability to comply with this Court's order. See Chicago Truck Drivers, 207 F.3d at 505. The Court finds that AHRN has not met this burden.
First, AHRN was required to show that it was unable to comply with the Court's order, "explaining why categorically and in detail[.]" See id. at 506. AHRN has not done so. In fact, at oral argument, the Court asked AHRN's attorney if AHRN was claiming an inability to comply, and AHRN's attorney responded that he did not know whether AHRN had the technological ability to comply with the Court's order. AHRN has thus not argued to this Court that it was unable to comply with the order, much less categorically and in detail. AHRN has the burden to explain why it could not comply with the Court's order, and it has not done so.
Furthermore, AHRN has not shown that it "made in good faith all reasonable efforts to comply" with the Court's order. See id. AHRN has never contacted this Court for any clarification of its order, and it never complained that it was unable to carry out this Court's order because it could not determine which photographs on NorthstarMLS were subject to an RMLS copyright. See Chase Indus., Inc., Durus Div. v. Frommelt Indus., Inc., 806 F.Supp. 1381, 1386 (N.D.Iowa 1992) ("The burden of avoiding infringement at the risk of contempt falls upon the one enjoined." (internal quotation marks omitted)). Accordingly, AHRN has not met its burden to show inability to comply with the Court's order and sanctions against AHRN are appropriate.
The Court must also determine whether to hold Cardella in contempt. "[A] court's contempt power extends to non-parties who have notice of the court's order and the responsibility to comply with it." Chicago Truck Drivers, 207 F.3d at 507. "[W]hile no court can make a decree that binds the world at large, a non-party may be punished if he either abets the defendant or is legally identified with him." Id. (internal quotation marks omitted). Although Cardella is the CEO of AHRN, the Court finds insufficient evidence in the record at this time to determine that Cardella abetted AHRN or that he is sufficiently identified with AHRN to be subject to contempt. Accordingly, the Court will find AHRN, but not Cardella, in contempt.
The Court must thus determine the appropriate sanctions against AHRN. "Civil contempt may be employed either to coerce the defendant into compliance with a court order or to compensate the complainant for losses sustained, or both." Id. at 505. A contempt sanction is considered "civil if it is remedial, and for the benefit of the complainant." Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 827, 114 S.Ct. 2552, 129 L.Ed.2d 642 (1994) (internal quotation marks omitted).
The Court will award RMLS its reasonable fees and costs incurred in bringing this motion. See Jake's, Ltd. v.
The Court will not award RMLS other compensatory damages, however, because there is insufficient information in the record regarding RMLS's actual loss. Compensatory damages "must of course be based on evidence of complainant's actual loss." United States v. United Mine Workers, 330 U.S. 258, 304, 67 S.Ct. 677, 91 L.Ed. 884 (1947). Here, RMLS has not shown actual loss from AHRN's continued publication of the Twin Oaks and Countryside photographs, beyond pointing to the Court's preliminary injunction order. While the Court found a significant threat of irreparable harm in its injunction order, it did not find actual harm. See Reg'l Multiple Listing Serv. of Minn., 2012 WL 4470286, at *10. Accordingly, without additional evidence of actual harm, the Court declines to award compensatory damages.
The Court will also decline to award sanctions to ensure compliance. In awarding a sanction for compliance,
Chaganti & Assocs., P.C. v. Nowotny, 470 F.3d 1215, 1224 (8th Cir.2006) (internal citations and quotation marks omitted). Much of the information that the Court would consider in determining the amount of sanctions to ensure compliance — such as the magnitude of harm caused by infringing the copyrights and the financial resources of AHRN — is not available in the record. Furthermore, the Court finds that sanctions are unnecessary to ensure compliance at this time. However, if AHRN continues to violate this Court's order and a subsequent motion for contempt is filed, the Court is likely to award sanctions to ensure compliance.
As stated above, AHRN has not met its burden of showing that it is unable to comply with this Court's order or that it made in good faith all reasonable efforts to comply with the order. Based on the information that has now been presented, however, the Court is nonetheless concerned that AHRN may find it difficult to determine which of the photographs on NorthstarMLS are subject to a copyright by RMLS. In its original preliminary injunction order, the Court noted that "RMLS claims that it places watermarks on the photographs for which it owns copyrights." See Reg'l Multiple Listing Serv. of Minn., 2012 WL 4470286, at *2 n. 3. It is now apparent, however, that RMLS does not place watermarks on all of the NorthstarMLS photographs that RMLS claims are copyrighted. Indeed, not all of the seventy-seven photographs subject to the contempt motion contained a watermark.
The Court will next address RMLS's motion to dismiss. First, the Court will explain why it will not dismiss AHRN's Sherman Act counterclaim. Second, for the same reasons, the Court will not dismiss AHRN's state law antitrust counterclaims. Finally, the Court will explain why it will not dismiss AHRN's counterclaim under the Minnesota Deceptive Trade Practices Act ("MDPTA").
RMLS first moves to dismiss AHRN's Sherman Act counterclaim. Under this claim, AHRN alleges that there is a conspiracy among RMLS, the NAR, other MLSs, and member-brokers of RMLS to unreasonably restrain trade. The claim alleges that this scheme of restraint of trade was effectuated in two main ways: (1) a "group boycott," that is, the concerted effort to refuse to engage in good faith negotiation with AHRN on licensing agreements for the data in real estate listing databases; and (2) the coordinated assertion of invalid copyright claims for the purpose of suppressing competition in the market for real estate brokerage referrals and the market for real estate agent services. AHRN alleges that this behavior has damaged AHRN because RMLS dissuades brokers and agents within RMLS's service area from entering referral agreements with AHRN and prohibits AHRN's access to information about properties on the market. AHRN further alleges that RMLS's anticompetitive conduct causes harm to consumers in the real estate market by suppressing information about and access to agents who are independent of listing brokers and agents and discouraging price competition for brokerage services and for home prices.
RMLS responds that it is protected by the Noerr-Pennington doctrine and that AHRN has not properly alleged the substantive elements of the Sherman Act. The Court will reject these arguments and deny RMLS's motion to dismiss for the reasons outlined below.
RMLS argues that the Sherman Act claim must be dismissed because
RMLS contends that all of AHRN's allegations under the Sherman Act counterclaim describe petitioning activity under the Noerr-Pennington doctrine. These activities include RMLS filing the complaint in this action, sending cease and desist letters regarding the copyrights identified in this action and regarding other copyrights, and refusing to grant AHRN a license to its copyrighted material.
The question then becomes whether these petitioning activities were properly alleged to be "sham and in fact solely intended to cause injury to competitors rather than to obtain governmental action." See South Dakota v. Kansas City S. Indus., Inc., 880 F.2d 40, 50-51 (8th Cir.1989) (internal quotation marks omitted). The sham exception applies where a defendant's petitioning activities are "so clearly baseless as to amount to an abuse of process." Id. at 51. "The sham exception is narrow, and the ... party attempting to invoke the exception bears a heavy burden of demonstrating that the [activities are] objectively meritless." CBS Interactive Inc. v. Nat'l Football League Players Ass'n, Inc., 259 F.R.D. 398, 413 (D.Minn.2009) (internal quotation marks omitted).
There is a two-part definition of sham petitioning activities. Prof. Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993). First, the activities must be objectively baseless in the sense that no reasonable person could realistically expect success on the merits of the right claimed. Id. The existence of probable cause to institute legal proceedings precludes a finding that a party has engaged in sham petitioning activities related to that litigation. Id. at 63, 113 S.Ct. 1920. Second, if the petitioning activities are objectively meritless, a court must examine the party's subjective motivation. Id. at 60, 113 S.Ct. 1920. Under this second prong, the Court focuses on whether the baseless activities conceal an attempt to interfere directly with the business relationships of a competitor through the use of the governmental process as an
Whether a petitioning activity is objectively baseless for Noerr-Pennington purposes may be decided as a question of law. See, e.g., Covad Commc'ns Co. v. Bell Atl. Corp., 398 F.3d 666, 677 (D.C.Cir. 2005). However, a denial of a motion to dismiss is appropriate if the plaintiff has properly alleged that a defendant's activities were a sham.
In this case, the Court finds that AHRN has sufficiently alleged that RMLS's petitioning activities were a sham. For example, AHRN alleges that, in the instant action, RMLS has asserted a copyright over the manner in which the facts and data are compiled on NorthstarMLS, even though the RMLS database is built on software RMLS did not design and does not own.
RMLS argues that its petitioning activities cannot be viewed as a sham because the Court issued a preliminary injunction in its favor. The Court rejects this argument at this stage of this litigation. The issue of whether RMLS in fact owned the copyrights underlying this action was not challenged at the preliminary injunction stage, and it is possible that AHRN will ultimately prove that RMLS does not own these copyrights. See FilmTec Corp. v. Hydranautics, 67 F.3d 931, 938 (Fed.Cir.1995) (stating that even a successful preliminary injunction "does not necessarily preclude a court from concluding that litigation was baseless"). Furthermore, AHRN has alleged a broad pattern of asserting sham copyrights beyond the copyrighted material specifically identified in this action. Accordingly, the Court will not dismiss AHRN's counterclaim under the Noerr-Pennington doctrine at this early stage.
RMLS next argues that the Court should dismiss AHRN's counterclaim because AHRN has not adequately alleged the elements of a Sherman Act violation. Section 1 of the Sherman Act provides that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1. To establish a claim under Section 1 of the Sherman Act a plaintiff must demonstrate (1) that there was a contract, combination, or conspiracy; (2) that the agreement unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis; and (3) that the restraint affected interstate commerce. Insignia Sys., Inc. v. News Am. Mktg. In-Store, Inc., 661 F.Supp.2d 1039, 1062 (D.Minn.2009).
RMLS challenges AHRN's counterclaim on several grounds. First, RMLS claims that AHRN has failed to allege a plausible conspiracy among RMLS, other MLSs, and the NAR. Second, RMLS argues that AHRN has failed to allege a conspiracy among RMLS and its member-brokers. Third, RMLS argues that AHRN has not alleged an unreasonable restraint in trade
RMLS argues that AHRN cannot demonstrate the first element of a Sherman Act claim, that there was a contract, combination, or conspiracy. To establish this element, the plaintiff must demonstrate concerted, as opposed to unilateral, action. Willman v. Heartland Hosp. E., 34 F.3d 605, 610 (8th Cir. 1994). "The antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to prove that [the defendant] and others had a conscious commitment to a common scheme designed to achieve an unlawful objective." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984) (internal quotation marks omitted); see also Minn. Ass'n of Nurse Anesthetists v. Unity Hosp., 5 F.Supp.2d 694, 704 (D.Minn. 1998) (quoting Monsanto, 465 U.S. at 768, 104 S.Ct. 1464). As the Supreme Court stated in Bell Atlantic Corp. v. Twombly:
550 U.S. 544, 556-67, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Furthermore, "conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
RMLS argues that AHRN has not alleged a plausible conspiracy among RMLS, other MLSs, and the NAR. Specifically, RMLS contends that AHRN's allegations about a conspiracy among these entities is merely indicative of "lawful parallel conduct" under Bell Atlantic Corp. v. Twombly, 550 U.S. at 556-67, 127 S.Ct. 1955.
The Court finds that AHRN's counterclaim provides a "suggestion of a preceding agreement" and thus satisfies the Twombly standard for alleging a conspiracy among RMLS, other MLSs, and the NAR. See Twombly, 550 U.S. at 556-67, 127 S.Ct. 1955. First, AHRN alleges that it received thirty similar cease and desist letters after NAR held its annual meeting in California. AHRN alleges that, at this meeting, there were discussions regarding the perceived threat that AHRN posed to the industry and what the industry could do to shut down AHRN. These allegations create a plausible relationship between the NAR meeting and the cease and desist letters. Second, AHRN alleges that Mosey sent an e-mail suggesting that AHRN should not think that MLSs were "unconnected, unserious, and more noise than threat." This e-mail could further suggest an agreement between RMLS and other MLSs.
RMLS further argues that the MLSs' conduct of sending cease and desist letters and not licensing their content to AHRN is as consistent with their unilateral interests in protecting their copyrighted material as it is with collective action. See Willman, 34 F.3d at 611 ("Conduct that is as consistent with a lawful motive as with an unlawful motive, standing alone, does not support the inference of an antitrust conspiracy."). The Court will not dismiss the counterclaim on this basis, however, because it is unclear if RMLS in fact owns copyrights to the majority of the material that it claims.
Finally, RMLS argues that it is inappropriate that AHRN states certain allegations "on information and belief." "[A]llegations `upon information and belief' may state a claim after Iqbal and Twombly, [but] a claim must still be based on factual content that makes liability plausible, and not be formulaic recitations of the elements of a cause of action." Klohs v. Wells Fargo Bank, NA, 901 F.Supp.2d 1253, 1259 n. 2 (D.Haw.2012) (internal quotation marks omitted). The Court finds that AHRN has alleged enough factual content to make liability plausible, for the reasons explained above. Accordingly, the Court finds that AHRN has adequately alleged a conspiracy among RMLS, other MLSs, and the NAR.
RMLS also claims that AHRN has not plausibly alleged a conspiracy between RMLS and its member-brokers because AHRN has not alleged the existence of concerted action. See Am. Needle, Inc. v. Nat'l Football League, 560 U.S. 183, 130 S.Ct. 2201, 2209, 176 L.Ed.2d 947 (2010) ("[A]n arrangement must embody concerted action in order to be a ... conspiracy under § 1." (internal quotation marks omitted)). For concerted action to exist, there must be a conspiracy between separate economic actors pursuing separate economic interests
RMLS claims that the alleged conspiracy between it and its member-brokers did not deprive the marketplace of independent centers of decisionmaking because RMLS's relationships with its member-brokers are governed by an agreement under which brokers "may make unfettered and unrestricted use of the [content related to their own NorthstarMLS listings] in perpetuity." (See Decl. of John Mosey, Ex. A at 2, May 17, 2012, Docket No. 18.) Brokers are therefore free to license their own listings to anyone, including AHRN. (See id.) Indeed, AHRN has stated that it has entered into licensing agreements with over 180 Minnesota brokers and agents, even though RMLS has declined to license AHRN. (See Second Cardella Decl. ¶ 4.) Accordingly, RMLS argues that the actions of it and its member-brokers do not deprive the marketplace of independent centers of decisionmaking and therefore do not violate § 1. See Am. Needle, Inc., 130 S.Ct. at 2212.
The Court need not, of course, decide at this stage whether the conduct of RMLS and its member-brokers in fact deprived the marketplace of independent centers of decisionmaking. The Court finds that AHRN has sufficiently alleged this element, however. The gravamen of AHRN's counterclaim is that RMLS and its member-brokers colluded to use RMLS as a vehicle to assert false copyright claims that impeded AHRN's business model and to exclude companies like AHRN from accessing the universe of listings needed to compete. See Sea Pines Real Estate Cos., 679 F.3d at 285. Furthermore, AHRN has alleged that RMLS and its member-brokers dissuaded brokers and agents within RMLS's service area from entering referral agreements with AHRN. Through these allegations, AHRN has sufficiently alleged that RMLS and its coconspirators engaged in concerted action under the Sherman Act.
RMLS next argues that AHRN has not alleged an unreasonable restraint in trade. As stated above, the second element of a Sherman Act claim is that that the agreement unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis. See, e.g., Insignia Sys., Inc., 661 F.Supp.2d at 1062. For the reasons outlined below, the Court finds that AHRN has alleged an agreement that unreasonably restrained trade under both a per se rule of illegality and a rule of reason analysis.
First, the Court must consider if AHRN has sufficiently alleged that RMLS's conduct runs afoul of a per se rule of illegality. AHRN alleges that its group boycott claim satisfies this per se rule by alleging a concerted refusal to deal by RMLS and its coconspirators that is, by its very nature, restrictive of competition.
A "group boycott" is a narrow category of per se violation. Group boycotts justify the per se designation where "the boycott ... cut[s] off access to a supply, facility, or market necessary to enable the boycotted firm to compete[,]" "the boycotting firms possess[] a dominant position in the relevant market," and "the challenged practices are generally not justified by plausible arguments that they were intended to enhance overall efficiency and make markets more competitive." Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 294, 105 S.Ct. 2613, 86 L.Ed.2d 202 (1985) (internal quotation marks omitted). "The economic consequences of a `group boycott' are that distinct economic entities no longer maintain the independence which is essential for the functioning of a free market." Worthen Bank & Trust Co. v. Nat'l Bank Americard Inc., 485 F.2d 119, 125 (8th Cir.1973). "Precedent limits the per se rule in the boycott context to cases involving horizontal agreements among direct competitors." Brookins v. Int'l Motor Contest Ass'n, 219 F.3d 849, 852 n. 3 (8th Cir.2000) (internal quotation marks omitted).
The Court finds, at this stage, that AHRN has sufficiently alleged a group boycott that amounts to a per se violation. First, AHRN alleges that RMLS and its coconspirators cut off access to the "supply... necessary to enable the boycotted firm to compete." See Nw. Wholesale, 472 U.S. at 294, 105 S.Ct. 2613. Specifically, AHRN alleges that RMLS and its co-conspirators have cut off access to information that is critical to any business attempting to compete with them. These allegations satisfy the element of cutting off a supply necessary for AHRN and similar businesses to compete.
Second, AHRN has alleged that "the boycotting firms possessed a dominant position in the relevant market." See id. As noted above, AHRN alleges that there is no practical way for it to compete without licensing information directly from RMLS because RMLS and its co-conspirators dominate the market and information regarding home listings. See Sea Pines Real Estate, 679 F.3d at 282 ("Particularly in an area served by only one MLS, access to MLS resources may be critical for a brokerage referrals service to successfully participate in the relevant real estate market.").
Third, AHRN has alleged that the challenged practices were "not justified by
It may become apparent at a later stage in the litigation that a per se rule does not apply to AHRN's Sherman Act counterclaim if, for example, the behavior of RMLS and its co-conspirators in fact has advantages for the market. See, e.g., Sea Pines Real Estate, 679 F.3d at 290 ("[T]he rule of reason [is] traditionally applied to joint venture cooperation that has possible procompetitive justifications."). However, at this very preliminary stage, the Court finds that AHRN has sufficiently pled a per se group boycott violation.
The Court will next consider, assuming that a per se violation does not apply, whether AHRN's allegations can withstand the rule of reason. Under a rule-of-reason analysis, AHRN must allege that:
Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 436 (6th Cir.2008) (internal quotations omitted). When assessing the legality of an alleged § 1 violation under the rule of reason, the Court focuses on whether the defendant's conduct had detrimental effects on competition. Flegel v. Christian Hosp., Ne.-Nw., 4 F.3d 682, 688 (8th Cir. 1993). RMLS argues that AHRN has failed to plead anticompetitive effects and cannot show an antitrust injury.
A plaintiff may demonstrate detrimental effects in two ways: by delineating "a relevant market and show[ing] that the defendant has enough market power to significantly impinge on competition" or by demonstrating "that the challenged practice has actually produced significant anti-competitive effects." Minn. Ass'n of Nurse Anesthetists, 5 F.Supp.2d at 706-07; see also F.T.C. v. Ind. Fed'n of Dentists, 476 U.S. 447, 460-61, 106 S.Ct. 2009, 90 L.Ed.2d 445 (1986). "Either showing — market power or actual detrimental effects — shifts the burden to the defendant to demonstrate pro-competitive effects." Flegel, 4 F.3d at 688. "If the defendant satisfies this burden, the burden
"Significant anti-competitive effects may include an actual increase in the price of the good or service, a decrease in output, or a decline in quality." Insignia Sys., Inc. v. News Am. Marketing In-Store, Inc., 2006 WL 1851137, at *5 (D.Minn. June 30, 2006). Harm to competition, not harm to competitors, constitutes an antitrust violation. Double D Spotting Serv. v. Supervalu, Inc., 136 F.3d 554, 561 (8th Cir.1998); Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962).
The Court finds that AHRN has alleged that RMLS's business model has anticompetitive effects. Specifically, AHRN alleges that RMLS and its co-conspirators promote "dual-agency home sales," wherein a seller and buyer's agent are associated with the same agency. According to AHRN, because commissions are based on the sale price of the home, a broker and agent relying on dual agency have little incentive to negotiate in the interests of either the buyer or the seller, and both the buyer and the seller lose any right to independent advice and representation from the agent and broker.
RMLS responds that AHRN's allegations regarding dual-agency home sales are "nonsensical" because the purpose of MLSs is to allow agents to cross company lines to sell one another's homes. See Mid-Am. Real Estate Co. v. Iowa Realty Co., No. 4:04-CV-10175, 2004 WL 1280895, at *2 (S.D.Iowa May 28, 2004), rev'd in part on other grounds, 406 F.3d 969 (8th Cir.2005) (explaining that MLSs exist "so agents can cross company lines to sell one another's homes and can show clients all houses on the market, not just those homes listed with their own company"). RMLS further points out that there will remain other real estate listing websites that compete in the marketplace regardless of whether AHRN survives. The Court finds, however, that AHRN has plausibly alleged that RMLS and its co-conspirators have attempted to restrict access to real estate listings to parties who will send potential home buyers to listing agents' companies, thereby eliminating competition from those that do not comply with RMLS's business model.
RMLS also argues that AHRN cannot state anticompetitive effects because agents' commissions and homes' initial listing prices are set prior to homes being listed on NorthstarMLS. However, AHRN has alleged that the dual-agency process results in less negotiation on behalf of customers after these initial prices are set. Thus, AHRN has plausibly alleged that the conspiracy has an effect on home prices and commissions.
RMLS also argues that AHRN has not alleged that its activities produced significant anticompetitive effects because it has not plausibly alleged market foreclosure. Specifically, RMLS claims that AHRN is able to access "for sale by owner" and foreclosure listings and has already shown that it has entered into licensing agreements with over 180 Minnesota licensed real estate brokers and approximately fifty Minnesota licensed real estate agents. The Court finds, however, that AHRN has plausibly alleged that there are no reasonable alternative sources of
RMLS also moves to dismiss AHRN's claim of violations of the Minnesota Antitrust Law of 1971, Minn.Stat. § 325D.49, and the California Cartwright Act, Cal. Bus. & Prof.Code § 16720. These statutes are modeled after the Sherman Act. See State v. Alpine Air Prods., Inc., 490 N.W.2d 888, 894 (Minn.Ct.App.1992); Vannelli v. NCAA, No. C3-87-2039, 1988 WL 35433, at *3 (Minn.Ct.App. Apr. 19, 1988); Corwin v. L.A. Newspaper Serv. Bureau, Inc., 4 Cal.3d 842, 852, 94 Cal.Rptr. 785, 484 P.2d 953 (Cal.1971). RMLS argues that these claims should be dismissed for the same reasons as the Sherman Act claim. Because this Court will not dismiss the Sherman Act claim, it will not dismiss these claims.
RMLS finally moves to dismiss AHRN's claim of violations of the MDPTA. The MDPTA permits an injured party to enjoin the disparagement of its "goods, services or business by false or misleading statements of fact." Minn.Stat. § 325D.44, subd. 1(8). A plaintiff seeking injunctive relief under the MDTPA must show a likelihood of confusion among consumers that has resulted from the defendant's violation of the MDTPA. See LensCrafters, Inc. v. Vision World, Inc., 943 F.Supp. 1481, 1489-90 (D.Minn.1996); Minn.Stat. § 325D.44, subd. 2.
AHRN alleges that, by advising its member-brokers that information obtained and used by AHRN on its NeighborCity website is subject to valid copyright protection, and that AHRN's use of such information is unlawful, RMLS has disparaged the services and business of AHRN with false and misleading statements.
RMLS argues, first, that AHRN failed to plead the contents of RMLS's disparaging statements with particularity as required by Fed.R.Civ.P. 9(b). The Court finds otherwise because AHRN has alleged that RMLS falsely asserted that AHRN was unlawfully using information copyrighted by RMLS.
RMLS next argues that, even if the allegedly disparaging statements were
Based on the foregoing, and all the files, records, and proceedings herein,
