Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc. et al

Filing 434

MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 3/17/2015. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
METROPOLITAN REGIONAL
INFORMATION SYSTEMS, INC.,
et al.

:
:

Plaintiff, and
Counterclaim Defendants

:

v.

:

Civil Action No. DKC 12-0954

:
AMERICAN HOME REALTY NETWORK,
INC.
Defendant, and
Counterclaimant

:
:
:

MEMORANDUM OPINION
Presently

pending

and

ready

for

resolution

in

this

copyright infringement and antitrust action are: (1) a motion
for

sanctions

filed

by

Counterclaim

Defendant

the

National

Association of Realtors (“NAR”) (ECF No. 403); (2) a motion to
withdraw as attorney filed by Farkas + Toikka, local counsel for
Counterclaimant American Home Realty Network, Inc. (“AHRN”) (ECF
No. 407); and (3) a motion to withdraw as attorney filed by
Gustafson Gluek PLLC, pro hac vice counsel for AHRN (ECF No.
421).

No hearing is necessary.

Local Rule 105.6.

For the

following reasons, NAR’s motion for sanctions will be denied.
The motions to withdraw will be denied without prejudice to

reconsideration

if

necessary

after

the

motion

for

summary

judgment is decided.
I.

Background
The factual and procedural background of this action was

extensively documented in previous opinions, thus only a brief
summary is necessary.
351).

The

(See ECF Nos. 34, 64, 159, 180-1, 239,

Metropolitan

Regional

Information

Systems,

Inc.

(“MRIS”) brought a copyright infringement action against AHRN
and Jonathan J. Cardella, AHRN’s Chief Executive Officer, on
March 28, 2012.1
“multiple
agents.

(ECF No. 1).

listing

service”

MRIS offers an online fee-based

(MLS)

to

real

estate

brokers

and

Subscribers upload their real estate listings to the

MRIS Database and agree to assign to MRIS the copyrights in each
photograph included in those listings.

AHRN takes listing data

from online database compilers like MRIS and makes it directly
available to consumers on its “real estate referral” website.
Specifically,

AHRN

(“NeighborCity”),

owns

which

and

operates

connects

potential

www.neighborcity.com
buyers

with

real

estate agents based on the types of properties in which a buyer
is interested.

The gravamen of MRIS’s lawsuit against AHRN was

that AHRN had displayed on its website real estate listings
containing copyrighted photographs taken from the MRIS Database.

1

The lawsuit was dismissed against Mr. Cardella for lack of
personal jurisdiction.
2

On September 24, 2012, AHRN answered MRIS’s complaint and
counterclaimed
Association

against

of

MRIS,

Realtors

Does

#

1-25,

(“NAR”),

a

and

trade

the

National

association

that

establishes and enforces policies and professional standards for
its over one million individual member real estate brokers and
their affiliated agents and sales associates and 1,600 local and
state member boards of realtors.

(See ECF No. 46).

AHRN later

filed first amended counterclaims, which MRIS and NAR both moved
to dismiss.

After Judge Williams2 issued

(See ECF No. 68).

several opinions (ECF Nos. 159 & 239), and AHRN was granted
leave to file second amended counterclaims (ECF No. 167),3 counts
I and III against MRIS and NAR remained the only counterclaims.
The

remaining

counterclaims

against

MRIS

were

dismissed

memorandum opinion and order issued on March 10, 2014.
Nos. 351 & 352).

by

(ECF

On September 12, 2014, MRIS and AHRN filed a

proposed permanent injunction and final order, which reflects,
inter

alia,

prejudice

that

all

MRIS

pending

and

AHRN

claims

have

between

agreed
them.

to

dismiss
The

with

permanent

injunction and final order was entered on September 15, 2014.
(ECF No. 420).

Consequently, what remains in the case are two

2

The case was transferred to the undersigned after Judge
Williams retired.
3

The second amended counterclaims asserted the following
causes of action against MRIS and NAR: (1) unfair competition
under Maryland law; (2) unfair competition under California law;
and (3) violation of the Sherman Act § 1. (See ECF No. 167).
3

counterclaims against NAR: (1) unfair competition in violation
of Maryland law (count I); and (2) violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1 (count III).
On August 11, 2014, NAR moved for sanctions pursuant to
Fed.R.Civ.P. 11.

(ECF No. 403).

Soon thereafter, counsel for

AHRN moved to withdraw as attorneys.
II.

(See ECF Nos. 407 & 421).

Analysis
A.

NAR’s Motion for Sanctions

NAR contends that the allegations contained in paragraphs
112,

114,

and

116

in

the

second

amended

counterclaims

are

without factual basis and thus should be stricken and AHRN and
its counsel should be ordered to pay all fees incurred by NAR by
virtue of their inclusion.

(ECF No. 403-1, at 2).

“[T]he central purpose of Rule 11 is to deter baseless
filings

in

District

Court

and

thus

.

.

.

streamline

administration and procedure of the federal courts.”
Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990).

the

Cooter &
Under Rule

11, by presenting a pleading or written motion to the court, an
attorney
knowledge,

“is

certifying

information,

that
and

to

the

belief,

best

formed

of

the

after

person’s

an

inquiry

reasonable under the circumstances,” the pleading or motion is,
among

other

nonfrivolous

things,
argument

“warranted
for

the

by

existing

extension,

law

or

by

modification,

a
or

reversal of existing law or the establishment of new law” and
4

that

its

“allegations

evidentiary support.”

and

other

factual

contentions

have

Fed.R.Civ.P. 11(b).

There is a difference between a losing case and a frivolous
case: “We have recognized that maintaining a legal position to a
court is only sanctionable when, in ‘applying a standard of
objective
attorney

reasonableness,
in

like

it

can

said

that

a

could

circumstances

be

not

have

believed

actions to be legally justified.’”

reasonable
his

Hunter v. Earthgrains Co.

Bakery, 281 F.3d 144, 153 (4th Cir. 2002) (quoting In re Sargent,
136 F.3d 349, 352 (4th Cir. 1998)).
“allegation

merely

must

be

Thus, to avoid sanctions, an

supported

by

some

evidence.”

Brubaker v. City of Richmond, 943 F.2d 1363, 1377 (4th Cir. 1991)
(emphasis in original).

Furthermore, “[m]otions for sanctions

are to be filed sparingly,” and “[t]he keynote is cooperation
and simple solutions, not paperwork and unnecessary expense to
clients.”

Thomas v. Treasury Mgmt. Ass’n, Inc., 158 F.R.D. 364,

366 (D.Md. 1994).

Whether “to impose Rule 11 sanctions, and the

quality and amount of sanctions imposed,” are all matters within
the discretion of the district court.

Miltier v. Downes, 935

F.2d 660, 663 (4th Cir. 1991); see also Fed.R.Civ.P. 11(c)(1)
(“If

.

.

violated,

.

the

the

court

court

determines
may

impose

(emphasis added)).

5

that
an

Rule

11(b)

appropriate

has

been

sanction”

The

crux

of

NAR’s

motion

for

sanctions

is

that

AHRN

included certain allegations in the second amended counterclaims
that it knew from the outset lacked evidentiary support and were
untrue.

Specifically, NAR contends that the court should strike

from the second amended counterclaims paragraphs 112, 114, and
116 because no factual bases exist to support these allegations:
Paragraph 112: In the Spring of 2013, with
NAR now a direct competitor of AHRN in the
national
market
for
real
estate
agent
ratings, on information and belief, NAR has
encouraged regional boards of realtors to
step up their efforts (1) to keep their
member agents from entering into referral
agreements with AHRN; (2) to breach or
repudiate referral agreements agents have
entered with AHRN; and (3) to pressure
agents into demanding that their names be
stricken from AHRN’s list of potential
referral agents.
Paragraph 114: On or about May 2, 2013, Kent
Meister, an agent with Keller Williams
Realty of Coon Rapids, Minnesota, informed
an AHRN customer service representative that
he wanted his name removed from the AHRN
referral list because he was contacted by
his local board of realtors, presumably
referring to the owner of Northstar MLS, and
the board warned him to request removal from
the AHRN list, citing Northstar’s Minnesota
lawsuit against AHRN.
Paragraph 116: On or about May 30, 2013,
Paulette Carroll, of Keller Williams Classic
Realty in Clear Lake, Minnesota refused a
customer referral from AHRN and advised an
AHRN customer service representative that
NAR had directly advised her brokerage not
to work with AHRN.
(ECF No. 167, at 42-43).
6

NAR challenges the factual allegations in these paragraphs,
stating

that

they

are

directly

contradicted

by

deposition

testimony and affidavits provided by Kent Meister and Paulette
Carroll during discovery.

Although NAR cites Paulette Carroll’s

declaration that she was never instructed by NAR, NorthstarMLS,
or her broker not to enter into referral agreements with AHRN,
(ECF No. 403-5), her declaration is contradicted by documents
reflecting AHRN’s conversations with Ms. Carroll.

Notes from

Alexander Gilbert, an AHRN staff member, reflect that he spoke
with Ms. Carroll in May 2013:
Paulette told me she had been advised not to
take referrals from NeighborCity.
I asked
if the National Association of Realtors was
the one who had said not to work with us, to
which she said yes.
When further inquiring
about how this is happening, she let me know
that her broker brings it up at their team
meeting every single week. . . . When asked
for the reason, Paulette said it was because
of the lawsuits that we are involved in, but
she did not know much more than that.
She
did not know many details other than the
fact that the NAR is directly advising their
brokerage to not work with us.
(ECF No. 403-24, at 10) (emphases added).
the allegation in paragraph 116.

This note supports

NAR has produced a transcript

of the purported phone conversation between Mr. Gilbert and Ms.
Carroll,

which

synopsis

of

the

it

interprets

as

conversation,

contradicting

(see

7

ECF

No.

Mr.

Gilbert’s

403-25),

but

it

cannot

be

said

that

AHRN

wholly

misconstrued

Ms.

Carroll’s

responses:
Alex Gilbert: [] And who was it that had
advised you not to take our referrals?
Paulette Carroll: Just out of our – out of
our office.
Alex
Gilbert:
association?

[]

Like

Paulette Carroll: Yeah.

the

national

Mmmhmmm.

Alex Gilbert: Oh.
Alright.
That’s very
strange.
Have they sent off and mailed to
you or something like that?
Paulette Carroll:
No.
It’s brought up in
our team meeting every week.
. . .
Alex Gilbert: . . . I’m not fully apprised
of what the whole lawsuit entails, but I’ve
actually never heard anybody been advised by
the
national
association
not
to
take
referrals from us.
Paulette Carroll: Yeah. Yeah. So, I don’t
know.
I mean, it’s our option.
It’s our
option in the end.
(Id. at 2-3).
NAR’s
supports

contention

the

overstatement.

that

allegations

in

“[n]othing
paragraphs

in
112

this
and

conversation
116”

is

(ECF No. 403—1, at 9) (emphasis added).

an
NAR

argues that Ms. Carroll confirmed during her deposition that
“she did not intend to convey to Mr. Gilbert during their call
that NAR had instructed her not to deal with AHRN.”
8

(Id. at

10).

The fact that Ms. Carroll and Mr. Gilbert were left with

different impressions of their telephone conversation and NAR
believes Ms. Carroll’s impression is more reasonable does not
establish that AHRN had no factual basis for the allegations in
paragraphs 112 and 116.

As AHRN pointed out to NAR in its May

13, 2014 response letter to the proposed motion for sanctions,
the

call

notes

from

Mr.

Gilbert

and

the

actual

call

transcription constitute “some factual basis” permitting AHRN to
make the allegations in paragraph 116, “regardless of how this
factual dispute may ultimately be decided.”

(ECF No. 403-24, at

7); see Brubaker, 943 F.2d at 1378 (“Rule 11 does not require
that a judge or jury agree with a plaintiff’s allegation.

For

Rule 11 purposes, the allegation merely must be supported by
some evidence.”).
Along the same lines, NAR submits a declaration from Kent
Meister (the agent referenced in paragraph 114 above), in which
he disputes the veracity of the allegation in paragraph 114.
(ECF No. 403-4 ¶ 7).

An email from Shannon Burns, an AHRN

AgentMatch Specialist, however, may support the allegation in
paragraph 114: “Kent says he wants to be removed from ou[r] list
because of the local lawsuit against us.

He says he has been

advised by his board o[f] realtors to do this.

He also says

that other agents in the area are recording calls like this to
‘use against us in a court of law.’”
9

(ECF No. 403-24, at 22)

(emphasis added).

Ms. Burns’s call notes further state, in

relevant part:
Kent Meister, an agent with Keller Williams
Classic
Realty
in
Minnesota
called
NeighborCity on Friday afternoon, May 3rd,
2013[.] . . .
[H]e said[,] “[w]e’ve been
contacted by our Board about [the lawsuit
against AHRN], so word of caution, you’re
peppering our agents with these emails and
I’m sure they’re getting logged and will be
used in
a court of law against you.”
He
asked to be removed from our system until
the lawsuits are resolved.
(Id. at 10).

NAR believes that “[t]he only logical reading of

this note is that any contact from the local board was to inform
agents of the lawsuits against AHRN – not to advise agents to
request removal from AHRN’s referral list,” but it cannot be
said that AHRN’s interpretation of the call with Mr. Meister is
wholly unreasonable.

(ECF No. 403-1, at 12).

AHRN correctly

explains that “NAR will [] be free to argue that Mr. Meister is
telling the truth and Ms. Burns was telling a lie, but that is a
credibility determination and factual finding more appropriate
for trial than summary judgment, let alone a Rule 11 motion.”
(ECF No. 403-24, at 7).

Weak evidentiary basis for certain

allegations is not the same thing as no evidentiary basis, and
the record does not reflect that the allegations in the above
paragraphs were frivolously asserted or lacked any evidentiary
support.
“NAR’s

As AHRN pointed out in its May 13, 2014 letter to NAR,

contentions

seek

resolution
10

of

questions

of

fact

by

claiming

that

AHRN’s

factual

allegations

are

‘false’

or

insufficiently detailed to support a finding in AHRN’s favor.”
(ECF No. 403-24, at 4).

NAR’s references to affidavits and

deposition testimony are unavailing.
pleading

may

be

undermined

by

At times allegations in a

evidence

ascertained

during

discovery, but that does not mean that purportedly contradicted
allegations

need

to

be

stricken

or

that

factual

assertions

uncovered at the initial stages of the case have to be confirmed
to an absolute certainty, which is what NAR’s motion suggests.
Moreover, NAR’s motion for sanctions suggests that Judge
Williams was misled into denying its earlier motion to dismiss
the counterclaims by the inclusion of paragraphs 112, 114, and
116,

which

NAR

believes

lacked

any

evidentiary

support.

Notably, the allegations which NAR believed to be untrue were
not the only bases for Judge Williams’s decision to deny NAR’s
earlier
Judge

motion

Williams

to

dismiss

referenced

the

second

multiple

amended

allegations

counterclaims.
in

the

second

amended counterclaims outside of the three paragraphs which form
the gravamen of NAR’s motion for sanctions.

Specifically, in

considering

to

whether

AHRN’s

counterclaims

as

NAR

dismissal, Judge Williams concluded:
The allegations regarding NAR’s entry into
the agent evaluation and ranking market, the
concrete steps taken by NAR and its members
in refusing to deal with AHRN, and the NAR
Handbook
notice
provision
–
read
in
11

survive

conjunction with the original allegations
from
the
First
Amended
Counterclaims
including, inter alia, the November 2011 NAR
annual meeting, AHRN’s receipt of virtually
identical refusal and repudiation letters
from brokers nationwide, and the Janik-led
cease-and-desist efforts and NAR-funding of
lawsuits against AHRN, see [ECF No. 167] ¶¶
90-95, 103-10, 123, 166-67 – give rise to
the plausible inference that NAR was a party
to an anticompetitive agreement.
Moreover,
AHRN’s
Second
Amended
Counterclaims
sufficiently
plead
the
existence of anti-competitive harm as a
result of NAR’s conduct. . . . [citing ECF
No. 167 ¶¶ 108, 171-172, 201] . . .
Therefore,
AHRN’s
allegations
of
anticompetitive harm are not limited merely
to AHRN’s ability to compete, which was the
primary deficiency of the First Amended
Counterclaims.
(ECF No. 239, at 15-17) (emphases added).
NAR’s arguments relate to the sufficiency of the evidence,
which are properly considered in the context of a motion for
summary judgment.

See, e.g., Mostofi v. Experian Information

Solutions, Inc., Civ. Action No. DKC 11-2011, 2014 WL 4384599,
at *2 (D.Md. Sept. 2, 2014) (“Despite the fact that Plaintiff
could not successfully establish FCRA liability on any of his
asserted

claims,

there

is

no

indication

on

the

record

that

Plaintiff acted with a dishonest purpose or with ill will, or
that

Plaintiff’s

claims

were

‘utterly

without

factual

foundation.’” (quoting Chaudhry v. Gallerizzo, 174 F.3d 394, 411
(4th Cir. 1999))).

Indeed, NAR filed the motion for sanctions

12

prematurely, considering that it had not yet moved for summary
judgment at that point and Judge Williams earlier denied NAR’s
motion to dismiss the counterclaims.

Based on the foregoing, it

is not apparent that a reasonable attorney in AHRN’s position
“could not have believed his actions to be legally justified.”
Hunter, 281 F.3d at 153.

The allegations in the second amended

counterclaims that NAR believes should be stricken do not meet
the high standard required for the imposition of sanctions and,
consequently, the court will exercise discretion not to award
sanctions.
B.

Motion to Withdraw as Attorney

The two law firms that represent AHRN in this litigation
are: (1) Farkas + Toikka (local counsel); and (2) Gustafson
Gluek PLLC (pro hac vice).
counsel.

Both firms have moved to withdraw as

(ECF Nos. 407 & 421).

Under Local Rule 101.1.a., only

individuals may represent themselves and “[a]ll parties other
than individuals must be represented by counsel.”

Moreover,

Local Rule 101.1.b. states that “[a]ny party represented by an
attorney

who

has

been

admitted

pro

hac

vice

must

also

be

represented by an attorney who has been formally admitted to the
Bar

of

excused

this
by

proceedings.”

Court
the

who

shall

presiding
(emphasis

sign

judge,
added).

all
be

documents
present

Because

and,

at
AHRN

any

unless
court

must

be

represented by counsel during the pendency of this action and
13

the summary judgment motion has not yet been adjudicated, both
motions

to

withdraw

reconsideration

if

will

necessary

be

denied

after

the

without
court

prejudice

to

adjudicates

the

motion for summary judgment.
III. Conclusion
For the foregoing reasons, NAR’s motion for sanctions filed
by NAR will be denied.

The motions to withdraw as attorneys

filed by Farkas + Toikka and Gustafson Gluek PLLC will be denied
without prejudice to reconsideration later in the litigation if
necessary.

A separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

14