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Court dismisses NAR’s countersuit against REX

Ruling is the latest major legal setback for NAR

A federal court has dismissed for now the National Association of Realtor’s false and misleading advertising claims against discount brokerage Real Estate Exchange, Inc. (REX), according to a court ruling issued April 22.

Judge Thomas S. Zilly’s ruling, which is part of an ongoing litigation saga between NAR, REX and Zillow in the U.S. District Court in Seattle, does give NAR permission to amend its lawsuit.

Zilly’s opinion is the cousin of a lawsuit Austin, Texas-based brokerage REX filed against Zillow (certainly, no relation to Zilly) and NAR, accusing the listings site and trade group of conspiring to marginalize listings by non-NAR agents on the Zillow website. That blockbuster case remains in litigation, as the judge shot down attempts to dismiss it.

The courtroom setback comes amid a veritable legal storm drenching NAR. Last week, a judge certified a class of hundreds of thousands of consumers in Missouri federal court in a lawsuit over NAR’s guidance on real estate commissions. Also, a federal appeals court revived a lawsuit challenging the legality of NAR’s ban on “pocket listings.”

In the ruling, Zilly found that NAR failed to allege facts to show how its reputation was specifically and concretely harmed by REX’s allegedly false statements.

“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.”

While the granted REX’s motion, Zilly did not agree with REX’s claims the case should be junked because REX’s statements are protected First Amendment speech and that the counterclaim “infringes on REX’s First Amendment right to express opinions on legal and policy matters.”

“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 in the ruling. “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,” the judge continued, “Does not change the result at this stage of litigation. Indeed, re-publication 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.”

REX filed an anti-trust lawsuit against NAR and Zillow in March of 2021. In January of 2022, NAR filed a countersuit alleging that REX makes false and misleading claims to deceive consumers, “discouraging them from obtaining the pro-consumer, pro-competitive benefits provided by NAR members and independent, local multiple listing services marketplaces.” NAR sought an injunction preventing REX from continuing its false and misleading practices, the monetary damages determined at the trial and the reimbursement of costs and attorneys’ fees

Three weeks later, in late February, REX filed a motion to dismiss, challenging the legality of the claims made by NAR in the countersuit.

NAR spokesperson Mantill Williams stated that NAR was disappointed in the court’s decision.

“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” NAR member agents, Williams emailed. “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 would not share if it plans to file an amended counter claim.

*For its part, REX said it is “really encouraged” by the decision and are viewing it as a win.

“The writing is on the wall,” Michael Toth, a spokesperson for REX said. “I think you seeing these decisions a real sense that the industry it not helping consumers by standing in the way on competition. Cases like this are about competition choice and I think all of these procedural debates are just delaying the inevitable.”

Toth also said that a trial date is set for less than a year from now.

According to the filing, NAR has until June 6 to file an amended counter claim.

*This story was updated on May 3, 2022, to include comments from REX Homes.