Proximate cause and puffery in real estate agent's claim against real estate ranking site

McLaughlin v. HomeLight, Inc., No. 2:21-cv-05379-MCS-KES, 2021 WL 5986913 (C.D. Cal. Sept. 17, 2021)

Lexmark’s “commercial interest” standing requirement gives, and its proximate cause requirement takes away.

HomeLight allegedly analyzes home sales data to generate a list of the best-performing real estate agents in a given area. “The website presents certain representations about its ‘custom, unbiased, data-driven recommendations.’” But its lists of the top real estate agents in Agoura Hills, California do not include McLaughlin, who alleged that he is the agent with the highest number of transactions and gross sales in Agoura Hills over the past 20 years. McLaughlin alleges that HomeLight’s website falsely implies that it has no “pay-for-play” relationship with top agents on its lists, but the real estate agents share part of their commission with HomeLight if HomeLight refers them.

McLaughlin’s alleged injury by “the diversion of real estate customers to Defendants and their commercial partners and/or loss of Plaintiff’s goodwill” fell within the Lanham Act’s “zone of interests.” However, McLaughlin failed to plead that his injury “flow[s] directly from the deception wrought by the defendant’s advertising”—that is, that the “deception of consumers causes them to withhold trade from the plaintiff.” It was not enough to generally allege diversion of potential consumers, tarnishment of his goodwill, or that “he would have even more transactions but for the false and misleading statements of Defendants.”

Indeed, McLaughlin pled that he conducted 12 real estate transactions in Agoura Hills in 2021, and that only two of the agents appearing on HomeLight’s lists conducted real estate transactions in Agoura Hills this year. He didn’t plead facts suggesting that HomeLight “caused the buyers and sellers in those transactions to retain those agents over him, or that he lost any other transactions to other agents because HomeLight did not feature him on its website.” E.g., he didn’t plead facts demonstrating that any clients or prospective clients viewed HomeLight’s advertising, “let alone that the advertising influenced their decisions to retain him or another agent.” He also didn’t explain how HomeLight’s purported failure to disclose its “pay-for-play” relationships with featured agents injured him in any way.

This also meant that he didn’t plausibly plead damages.

Also, he didn’t plausibly plead falsity because “top,” “best performing,” and “top performing” “do not signify any quantifiable, objective measure of agent performance” and constituted nonactionable puffery. The website itself signaled that the terms were nonexhaustive: it claimed to identify “20 of the top REALTORS® and real estate agents in Agoura Hills,” didn’t rank the listed individuals, and didn’t order them by transaction count or gross sales. It presented “objective measures of agent performance, such as transactions completed, as well as subjective information, such as client reviews.” Nor did McLaughlin plead facts showing that his omission from the list disproved HomeLight’s representations that its lists are “data-driven,” “unbiased,” and the result of an analysis of “millions of home sales.”

Also, the website clearly stated that real estate agents HomeLight refers through its website provide a referral fee to HomeLight, so nondisclosure couldn’t support his claim.