Zillow’s claims against Chicagoland MLS Midwest Real Estate Data (MRED) are heading to arbitration after U.S. District Court Judge John Tharp granted MRED’s motion to compel arbitration on Tuesday.
In addition to this, in a separate ruling, the court also denied Zillow’s request for a preliminary injunction to block MRED from suspending its listing feed.
These rulings come roughly four months after Zillow first filed its antitrust lawsuit against MRED and Compass International Holdings, alleging that the two firms conspired to withhold MRED’s listing feed from Zillow.
According to the rulings, the court felt Zillow’s antitrust claims rest on MRED’s enforcement of a provision that prohibits MRED participants from excluding any IDX or VOW listing from display based on a list of criteria, including “the identity of any Participant, brokerage firm, subscriber, licensee or representative.”
This provision is part of an agreement with MLS data feed provider MLS Grid, which contains a mandatory arbitration clause. While the agreement is not directly between MRED and Zillow, Tharp found that MRED could enforce the arbitration clause because the agreement expressly makes each MLS a third-party beneficiary entitled to enforce its terms.
Hitting pause
With the dispute between MRED and Zillow heading to arbitration, Tharp made the decision to stay the entire case in order to prevent inconsistent rulings.
“To say that the factual and legal issues underlying Zillow’s claims against Compass therefore substantially overlap with those that will be resolved in arbitration is an understatement — MRED and Compass are alleged to be coconspirators, and all of the conduct Compass is alleged to have undertaken will unquestionably be at issue in the arbitration of Zillow’s claims against MRED,” Tharp wrote in his ruling.
“What’s more, Zillow has no other claim against Compass that could be resolved without duplicating the work being done in the arbitration hearing.”
“I think the judge felt like the claims against MRED and Compass were so intertwined that if the judge continued the federal lawsuit, there may be rulings that are inconsistent with the arbitration, so he used his discretion to stay the case,” said Brad Weber, a partner at Troutman Pepper Locke.
Now that the claims are headed to arbitration, legal experts told HousingWire that it’s unlikely much, if any, information comes out regarding the proceedings.
“Arbitrations, for the most part, are private,” Weber said, “There will be no public filings, but companies may issue press releases if they win some big issue in arbitration, but you won’t be able to read the finer points of an order or something with arbitration.”
Closed doors
Given that Tharp granted MRED’s motion to compel arbitration, Weber was not surprised that he denied Zillow’s preliminary injunction.
In order to win a preliminary injunction motion, the plaintiff must show that it’s likely to win its case if the suit goes to trial.
“I think because the court granted the motion to compel arbitration, that made it even more likely that the court would deny this preliminary injunction,” Weber explained, “because now that the suit is going in front of an arbitrator, if I were the judge, I would want an even higher standard met in order to impose an injunction, because the judge would be reluctant to have an injunction out there while the case is stayed and him to not really have the ability to modify it if the circumstances changed.”
What does the crystal ball say?
Regardless of how Tharp was looking at this, according to his ruling, he did not find that Zillow had met the standard to be granted the preliminary injunction.
While he did feel it was plausible that MRED and Compass conspired, he felt that Zillow did not sufficiently distinguish that theory from the possibility that MRED and Compass were independently pursuing their own interests.
“The evidence does not sufficiently distinguish that inference from the competing inference that MRED and Compass independently pursued aligned interests,” he wrote.
Due to this ruling, legal experts feel the ruling is not good news for Zillow.
“Reading between the lines of the court’s decision, it shows a deep skepticism on the part of the court regarding the merits of the case,” said Harrison McAvoy, a partner at Mandelbaum Barrett PC. “The court found that there was not a sufficient showing of an alleged conspiracy between Compass and MRED.”
Central to this was what the court felt was a lack of evidence showing an agreement between the defendants to stage a group boycott of Zillow. But McAvoy said that not all may be lost for Zillow.
“This is not a final ruling, but courts can be reluctant to go back on things they have already said regarding the merits of a case, so rulings like this can be a strong indication of what the ultimate merits of the case will be. It is an important data point for the litigants, but it is not necessarily the end of the story.”
Due to this, legal experts told HousingWire it would not be unsurprising to see some sort of settlement, noting that whatever happens behind the closed doors of arbitration could help further inform any decision to settle.
“Settlements are pretty common in antitrust disputes, so they might try to work out some sort of agreement where they compromise on some of the positions they have taken,” Weber said.
“If this would benefit both sides, I could see them working out an agreement. But Zillow may be willing — if they feel this is a really important issue and one they can’t ignore — to go through the full arbitration and hope that the arbitrators come to a different conclusion than the judge.”
For now, however, the rest of the real estate industry will have to wait and see as MRED and Zillow prepare to head to arbitration.