Northwest MLS (NWMLS) on Thursday, defended its countersuit against Compass in the Western District of Washington, urging Judge Jamal N. Whitehead to allow the MLS’s fraud, Consumer Protection Act and tortious interference claims to proceed against the mega-brokerage in a high-profile battle over MLS policies that is likely to reverberate across the industry.
Responding to Compass’s characterization of the countersuit—brought around a year after Compass sued over NWMLS’s restrictions on private listings—NWMLS contends that it has “plausibly” identified likely violations of the law and harm, with factual disputes to be decided at a later point in the lawsuit.
And just one week after a new state law meant to ban private marketing of real estate listings went into effect in Washington, NWMLS is asking Whitehead to declare that Compass “Private Exclusives” violate that statute.
Compass previously claimed in court that its practices fully comply with the new law, which Washington Realtors® Policy Director Bill Clarke previously acknowledged was purposefully vague in its definitions.
‘Misleading’ listing data
On the fraud claim, NWMLS argues that Compass’s public promotion of its 3-Phased Marketing Strategy (3PM) does not cure the “deception” it alleges happened inside the MLS’s own database.
The alleged deception, NWMLS writes, is not that Compass concealed the existence of 3PM—it is that Compass submitted, or caused brokers to submit, listings into NWMLS’s database without material history reflecting that those properties had already been available for purchase and had already undergone private marketing, testing and possible price changes.
When the properties that had been privately marketed were eventually submitted to the NWMLS, the MLS contends, those listings arrived stripped of material history—days on market, price changes and prior exposure—that consumers, brokers and appraisers rely on.
NWMLS also rejected what it called Compass’s “semantic defense” of the “Private Exclusive” and “Coming Soon” labels, alleging that Compass marketed non-exclusive listings as private exclusives and marketed properties as coming soon when they were already available for purchase. Whether those labels were misleading, NWMLS argues, depends on how they were used, what consumers and brokers reasonably understood and what information was omitted—factual questions that cannot be resolved on a motion to dismiss.
On the Consumer Protection Act claim, NWMLS contends that knowing a failure to reveal something of material importance constitutes deceptive intent under the statute, and that Compass’s conduct—limiting access to properties to only Compass-affiliated brokers and selected buyers before submitting listings with artificially erased days-on-market history and suppressed exposure history—plausibly states conduct with the capacity to deceive a substantial portion of the public.
NWMLS further argued that Compass’s defenses—that 3PM was transparent, that any buyer could ask a Compass agent for information and that its marketing materials disclosed enough—are factual arguments that cannot be resolved at the pleading stage. A practice may be deceptive even when some information is publicly available, NWMLS wrote, particularly where Compass allegedly omitted material information from the very data channel on which market participants rely.
NWMLS also pushed back on Compass’s standing argument.
In its motion to dismiss, Compass had argued NWMLS was suing on behalf of the general public rather than asserting its own concrete injuries. NWMLS counters that it is suing to protect its own database and paid data products, and that the operational, compliance, enforcement and legal costs it incurred when Compass launched 3PM constitute a direct injury to its business.
The MLS further alleged that Compass explicitly told its brokers it would cover any fines they received for rule violations incurred while participating in 3PM.
Compass has contested the scale of that injury, arguing that its violations affected only a handful of listings and caused negligible degradation to the database. NWMLS says those arguments go to the scope of damages, not to whether its claims survive dismissal, pointing to Ninth Circuit precedent holding that organizations need only show minimal injury to establish standing.
The suit now plays against the backdrop of Washington’s private listing law that took effect June 11, which prohibits agents from marketing properties to exclusive groups of buyers or brokers unless the listing is concurrently marketed to the public. NWMLS has argued its rules align with the statute; Compass has maintained that 3PM fully complies.
Compass declined to provide any additional comments at this time.
The opposition is noted for hearing June 25.
