National Ass'n of Realtors fails to show standing in false advertising counterclaim

REX – Real Estate Exchange, Inc. v. Zillow, Inc., 2022 WL 1203742, No. C21-312 TSZ (W.D. Wash. Apr. 22, 2022)

Part of a larger dispute; the National Association of Realtors (NAR) counterclaimed against REX for false advertising in violation of the Lanham Act. The court rejected the counterclaim on standing grounds but not on First Amendment/Noerr-Pennington grounds.

NAR challenged statements on REX’s website. NAR was counterclaiming on its own behalf, requiring it to demonstrate injury in fact for Article III standing. “An organization suing on its own behalf can establish an injury when it suffered ‘both a diversion of its resources and a frustration of its mission.’ ” TransUnion says that “various intangible harms,” such as reputational harm, can qualify as concrete injuries for standing purposes, but NAR didn’t sufficiently plead that. It failed to allege anything more than “generalized reputational harm,” not any concrete interference with its ability to carry out its purposes or diverted resources from regular activity.

NAR’s allegations were that REX harmed it through the following allegedly false claims: (i) REX offers low commissions and has superior technology, (ii) NAR has artificially inflated commissions and hindered the development of technology for home listings, and (iii) NAR has engaged in unlawful or unfair conduct. However, NAR didn’t allege that any consumers or brokers have withheld trade from NAR as a result of the advertisements. It only alleged, in a conclusory fashion, that its “goodwill and reputation, both with its own members and consumers, has been harmed.” But it didn’t allege 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.” This was insufficient to allege concrete and particularized harm.

Statutory standing: Also insufficient. Though NAR was within the Lanham Act’s zone of interests, it didn’t allege proximate cause. As a non-direct competitor, it not entitled to a presumption of commercial injury. Because NAR wasn’t counterclaiming on behalf of its members, it had to allege facts showing that its reputational injury flows directly from REX’s purportedly false advertisements and that REX’s “deception of consumers cause[d] them to withhold trade from [NAR].” Although NAR alleged harm to consumers, it didn’t allege that any consumers or brokers withheld trade from NAR itself.

However, the court declined to endorse REX’s argument that its statements were not statements of fact and weren’t made in commercial speech; “[t]hese are both factual inquiries that cannot be resolved on a 12(b)(6) motion.” Statements like “REX charges a low fee by totally eliminating the buyer side agent commission,” “[NAR’s rules and policies are responsible for] inflating consumer home prices by as much as $50 billion per year,” and claims to have innovative technology contained verifiable characteristics and were plausibly commercial advertising.

Under the Noerr-Pennington doctrine, “those who petition any department of the government for redress are generally immune from statutory liability for their petitioning conduct.” REX argued that its anti-NAR efforts before the courts, the Department of Justice, and Congress were protected speech, but the court wasn’t convinced that statements at issue in the counterclaim were incidental to/sufficiently related to REX’s petitioning activities to be covered.