Home Show Tours, Inc. v. Quad City Virtual, Inc.

Citations: 827 F. Supp. 2d 924; 2011 U.S. Dist. LEXIS 140547; 2011 WL 6073317Docket: 3:08-cv-00127

Court: District Court, S.D. Iowa; March 23, 2011; Federal District Court

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Motions for summary judgment have been filed by Defendants Quad City Virtual, Inc. (QCFSBO) and Symmetry Mortgage Corp., which Plaintiff Home Show Tours, Inc. opposes. A hearing occurred on December 13, 2010, with respective legal representation for each party. QCFSBO, owned by co-founders Rebecca and Sam Banerjee since 1999, operates a for sale by owner (FSBO) real estate website, QCFSBO.com, and has a strict policy that prohibits its listings from being co-listed with realtors or other real estate websites. Conversely, Home Show, owned by Troy Vavrosky, operates a competing FSBO website, QCHomeshow.com, without such restrictions.

Symmetry, primarily owned by Greg and Erin Franich, provides mortgage services, with a quarter of its services directed toward FSBO buyers. It shares office space with QCFSBO in a building owned by Franich Properties, LLC. In June 2003, QCFSBO and Symmetry entered a mutual advertising/referral agreement (the QCFSBO-Sym Agreement), which restricted QCFSBO from referring clients to other mortgage providers and Symmetry from directing clients to other advertising venues. No monetary exchange occurred for this agreement, and it did not enforce mandatory use of each other’s services. Symmetry, holding a real estate broker license, occasionally provided QCFSBO with MLS information, but denies giving QCFSBO an advantage by informing them of upcoming MLS listing expirations. In the early 2000s, QCFSBO secured a sponsorship package with Clear Channel Communications, granting them exclusive sponsorship rights for specific radio shows and semi-exclusive advertising rights in the real estate category.

QCFSBO's sponsorship package allowed other companies in the real estate marketing sector, like Home Show, to purchase their own exclusive advertising without restriction, even during the same time slots on other Clear Channel-operated stations not airing the QCFSBO-sponsored show. Home Show claims it became aware of Clear Channel's exclusive sponsorship policy only after QCFSBO secured its sponsorship. On September 30, 2008, Home Show filed a complaint against QCFSBO alleging libel per se, libel per quod, false light, and violations of the Lanham Act. This complaint was amended on May 5, 2009, to include a claim for intentional interference with business relationships and again on October 7, 2009, to add an antitrust claim against QCFSBO and Symmetry under the Sherman Act. QCFSBO and Symmetry both moved for summary judgment on the various claims, arguing that Home Show failed to provide evidence of damage from the alleged conduct. Home Show contended it had established material factual questions regarding its claims.

Summary judgment is appropriate when evidence shows no material fact issues remain and the moving party is entitled to judgment as a matter of law. The existence of minor factual disputes does not defeat a summary judgment motion; rather, there must be no genuine issue of material fact. Home Show must provide substantiation for its claims with probative evidence rather than unsupported allegations. In addressing Counts One through Four, Home Show's complaint failed to clearly identify the specific statements supporting its Lanham Act, libel, and false light claims. Instead, it vaguely referenced false and defamatory statements made by QCFSBO on its website, supported by a cease and desist letter and screenshots from QCFSBO.com with annotations indicating Home Show's objections. The court is not required to investigate the record independently to find evidence supporting a party's claim.

The document lists various statements and claims made on the QCFSBO.com website, along with annotations that challenge their truthfulness and accuracy. Key points include:

1. **Claims of Popularity and Success**: QCFSBO.com asserts it is the "Most Popular. Successful FSBO Website in QCA," claiming extensive success in facilitating FSBO transactions, which is labeled as "Untrue and Unproven."

2. **Comparison with Competitors**: The site mentions receiving mailings from smaller local websites claiming to offer more exposure and presents a graph comparing listing volumes with a competitor, stating QCFSBO is preferred by the majority of FSBO sellers. These claims are described as "inaccurate, misleading, and completely untrue."

3. **Exposure Claims**: QCFSBO.com advertises that its visitors bring unparalleled exposure to properties, which is also deemed "Untrue and Unproven." Additionally, bar graphs displaying network traffic statistics are generated by "Trend" software, criticized for being unreliable and easily manipulated.

4. **Privacy Issues**: The site claims not to track individual visitor data, yet it allegedly tracks IP addresses and uses this information to monitor visits and messages, contradicting its stated privacy policy.

5. **Brick-and-Mortar Presence**: QCFSBO.com claims to be the only professional FSBO company with a physical office in the Quad Cities, asserting that other websites are operated by individuals working from home. This statement is made in the context of promoting its legitimacy and customer service capabilities.

Overall, the annotations highlight multiple inaccuracies, misleading statements, and potential privacy concerns associated with QCFSBO.com’s claims.

Claims of false advertising are made against QCFSBO.com, particularly regarding its comparison to home-based FSBO businesses. QCFSBO.com promotes the advantages of its enterprise-class phone system and experienced customer service, asserting that it can handle calls more effectively than smaller operations, which struggle due to limited staff. The document highlights that past clients of QCFSBO.com have expressed satisfaction with its service, contrasting it with the difficulties faced by one-person operations.

Allegations of misleading statistical representation include QCFSBO.com claiming to be the "Most Popular FSBO Destination in the OCA," which is described as untrue and unproven. A chart presented by QCFSBO.com inaccurately compares its listing volumes to a competitor, QCHomeshow.com, with claims of consistently higher volumes that are said to be manipulated. 

Additionally, QCFSBO.com’s claims regarding its sold section are challenged, noting that it obscures pertinent information about properties sold by Realtors, unlike QCHomeshow.com, which provides clarity on sales by both owners and Realtors. The document asserts that QCFSBO.com’s advertising practices involve deception and false claims about its popularity and success, including misleading descriptions of scenarios related to sold properties. It concludes with a warning about deceptive practices that can inflate perceived inventory on websites, asserting that no legitimate "tricks" exist.

When multiple lots in a subdivision are listed by a single seller, all lots are consolidated into one link to avoid excessive individual listings, which can lead to a significant increase in the number of advertisements on certain websites. Each subdivision is counted as a single sale. A common strategy involves listing properties as both commercial and residential to enhance the site's appearance without duplicating entries in the database. 

Concerns are raised regarding companies in the Quad City Area that allegedly falsify public records. For instance, QCFSBO.com inaccurately claims to have been helping sellers since 1999, despite its domain registration occurring in 2000. This claim is presented to undermine the credibility of QCHomeshow.com, which was operated as a sole proprietorship before becoming incorporated.

QCFSBO.com promotes itself as the leading FSBO website in the Quad Cities, claiming unmatched exposure and a physical office presence that facilitates customer interactions. However, these assertions are challenged as unproven. The site also emphasizes its convenience in handling sign returns compared to home-based businesses, suggesting that QCHomeshow.com has a history of operational challenges, despite QCHomeshow.com having implemented its sign deposit system earlier.

Additionally, QCFSBO.com has a disclaimer stating that it does not accept co-listings, requiring sellers to notify them if their properties are listed elsewhere, with no refunds on monthly fees.

A screenshot from the "Brick and Mortar Presence in QCA" link questions the advertising frequency of competitors, noting that QCHomeshow.com advertises often on radio and cable TV. QCFSBO seeks summary judgment against Home Show's claims of Lanham Act violations, libel, false light, and intentional interference, arguing that Home Show lacks evidence of false statements by QCFSBO and that mere belief in falsehoods does not suffice to counter summary judgment. Home Show counters that genuine disputes exist regarding QCFSBO's portrayal of it in a false light and the nature of QCFSBO’s exclusive contract with Symmetry.

Under the Lanham Act, any party using misleading representations in commerce can be liable if it causes confusion or deception regarding goods or services. To prove false advertising, Home Show must demonstrate that QCFSBO made false statements about its products, which misled a substantial audience, was material, entered interstate commerce, and resulted in harm to Home Show. A statement is deemed false if literally untrue or if it is true but misleading in context. Two types of actionable statements exist: literally false claims and true or ambiguous claims that imply falsehood. Non-actionable statements include puffery, which consists of exaggerated claims not relied upon by reasonable consumers or vague assertions of superiority.

Puffery and factual claims are distinguished by their ability to be proven true or false and empirical verification. A factual claim must be specific, measurable, and capable of objective verification to be actionable. In contrast, puffery is vague and lacks measurable benchmarks, allowing advertisers considerable leeway while still holding them accountable for their statements. Home Show challenges several statements made by QCFSBO regarding its market position and exposure, claiming they represent misleading superiority. Under the Lanham Act, comparative advertising claims can either assert that one product is better than another or that tests prove such superiority. For claims lacking express references to testing, the plaintiff must prove the claim is false rather than merely unproven. Home Show's challenge does not meet this standard, as Vavrosky's testimony did not provide factual evidence to substantiate claims of falsity, merely reflecting subjective disagreement. Moreover, Home Show's statements of "untrue" or "unproven" do not create a genuine issue of material fact to counter summary judgment. The Court concludes that QCFSBO's statements are mere puffery, not actionable under the Lanham Act, and even if considered factual, Home Show fails to demonstrate any deception or link to actual damages necessary for recovery.

QCFSBO is granted summary judgment on Home Show's Lanham Act claim. Regarding defamation, QCFSBO claims entitlement to summary judgment on Home Show's libel claims, asserting that Home Show has not demonstrated actual malice. Home Show contends that evidence shows it is subject to numerous false and damaging statements by QCFSBO, amounting to libel per se. Defamation encompasses written or oral statements damaging to reputation, divided into libel and slander, with libel further categorized into libel per se and libel per quod. Libel per se involves statements that inherently injure a party's reputation, while libel per quod requires additional context to establish defamation.

The court determines if a statement is libelous per se based solely on the statement's content, without considering the plaintiff's interpretation. If deemed libelous per se, reputational damage is presumed, and the burden shifts to the defendant to prove a different interpretation. Home Show argues QCFSBO's assertion that it falsified its origination date is libel per se, specifically citing a statement about Home Show's misleading claims regarding its operational history. However, Home Show admits the statement is not false, as its website was launched after the claimed date, which does not qualify as libel per se since it does not imply indictable crimes, diseases, incompetence, or unchastity.

Alternatively, Home Show claims that if not libel per se, it could be libel per quod, arguing that QCFSBO's statements could be perceived as factual and raise a material question for a jury. Libel per quod requires additional context to establish defamation and proof of cognizable injury, such as reputational damage.

In a libel per quod action, a plaintiff must demonstrate actual damage beyond emotional distress. To establish a prima facie case, the plaintiff, Home Show, must prove: (1) publication of a statement by QCFSBO, (2) the statement is defamatory, (3) it pertains to the plaintiff, and (4) it caused injury. The plaintiff typically needs to show that the statements were made with malice, were false, and resulted in damage. Substantial truth serves as a complete defense to defamation, meaning the defendant does not need to prove every detail of the statement's truth, only that the essence or "sting" is substantially true. The Iowa Supreme Court has outlined a four-factor test for assessing whether a statement is defamatory, which includes the precision of the statement, its provability, the context of the statement, and its broader social implications. A trial court must determine if the statement can bear a defamatory meaning without indulging in far-fetched interpretations. If it can, whether it is defamatory and false is a factual question for the jury. The Iowa Supreme Court also accepts that substantially true statements provide an absolute defense against defamation claims. In this case, Home Show did not establish a prima facie case of libel per quod, as it failed to show that the statements made were defamatory.

Home Show Tours, Inc. cannot pursue its libel per quod claim due to the substantial truth of statements made by QCFSBO, as Vavrosky, the sole employee, confirmed that he operates the business from home and has no other employees. Vavrosky admitted that he did not secure the QuadCityHomeShow.com domain until 2000 and incorporated in 2004. Home Show failed to provide evidence of damages, as customer letters indicated a switch to another website due to lack of results, not because of QCFSBO's statements. Vavrosky could not identify specific customers lost due to the allegations in the complaint. Although Home Show claims reputational harm and revenue decline, a CPA's report from 2004 to 2009 showed only a slight increase in revenue before a notable decline in 2008 and a rebound in 2009, without establishing a link to QCFSBO's statements. Additionally, Vavrosky's inability to name individuals influenced by QCFSBO's statements further weakens Home Show's case. To succeed in a defamation claim, the plaintiff must demonstrate a cognizable injury, such as harm to reputation, which Home Show has failed to do.

Home Show has not met the necessary elements for a prima facie case of libel per quod. Its false light claim, which relies on the same statements as its libel claims, asserts that QCFSBO's accusations are offensive to a reasonable person. In Iowa, false light invasion of privacy requires a false publication that is highly offensive to a reasonable person and knowledge or reckless disregard for its falsity, as defined by the Restatement (Second) of Torts. The tort overlaps with defamation law, necessitating proof of untruthfulness; however, the plaintiff does not have to prove defamation itself. Material and substantial false statements are required for actionability under false light. A successful claim allows for damages related to privacy invasion, mental distress, and special damages causally linked to the invasion. Home Show has failed to demonstrate the untruthfulness of QCFSBO's statements or any resulting damages, lacking sufficient evidence to create a genuine issue of material fact. Consequently, summary judgment in favor of the defendant is warranted, as Home Show has not advanced beyond its initial pleadings or depositions to show genuine disputes on material facts.

QCFSBO seeks summary judgment on Home Show's claims of intentional interference, asserting that its contract with Clear Channel was not intended to interfere with Home Show's business. Home Show alleges QCFSBO's actions were designed to harm its business interests. To prove intentional interference with an existing contract, a plaintiff must demonstrate: (1) the existence of a contract with a third party, (2) the defendant's knowledge of this contract, (3) intentional and improper interference by the defendant, (4) resulting hindrance or increased burden on the third party's performance, and (5) resulting damage to the plaintiff. Relevant factors in determining the impropriety of QCFSBO's conduct include the nature of the act, the actor's motives, the interests being interfered with, the actor's objectives, social interests in protecting contractual relations, the remoteness of the conduct from the interference, and the relationship between the parties. The Iowa Supreme Court emphasizes that if the actor's sole motive is to interfere, the interference is usually deemed improper. However, if interference is a consequence of actions taken for a different purpose, the motive is less significant. QCFSBO's sponsorship with Clear Channel granted it exclusive advertising rights during specific radio programs. Home Show did not possess an exclusive sponsorship at the time QCFSBO entered its agreement. An email from Clear Channel clarifies that the sponsorship policy grants exclusivity within industry categories, and there is no evidence suggesting QCFSBO's contract with Clear Channel was intended to interfere with Home Show's operations.

A sponsor for the Kingsley show within the same industry retains exclusive sponsorship rights and a first right of refusal upon the agreement's conclusion. The company policy mandates this exclusivity, and alternatives for the affected party will be explored. Home Show contacted Clear Channel regarding its contractual relationship with QCFSBO, but there is no evidence QCFSBO reached out to Clear Channel about Home Show’s existing contract. Home Show's claims of interference lack substantiation, relying only on speculation from Vavrosky. Clear Channel's exclusivity policy applies universally to its sponsorship contracts. Vavrosky acknowledged that Home Show could advertise at different times on other Clear Channel stations. To prove intentional interference with a contractual relationship, Home Show must show that QCFSBO's interference was improper and caused damages, neither of which has been demonstrated. Consequently, QCFSBO is entitled to summary judgment on this claim. For the claim of interference with a prospective business relationship, Home Show must establish a connection with Clear Channel that QCFSBO knowingly interfered with, causing damage. The essential element for this claim is that QCFSBO intended to financially harm Home Show, which has not been shown.

Home Show's claims of intentional interference with both existing and prospective business relationships have failed due to a lack of evidence supporting an improper purpose and damages, essential elements of such claims. Home Show did not establish any factual disputes regarding QCFSBO's exclusive sponsorship agreement with Clear Channel, which is necessary to substantiate its interference claims. Consequently, these claims are dismissed as a matter of law.

In its antitrust claim, QCFSBO and Symmetry seek summary judgment, arguing that Home Show has not demonstrated that their agreement was anti-competitive or that it suffered damages from the alleged violations. Home Show contends that there are material factual issues regarding the relationship and agreements between QCFSBO and Symmetry, including their exclusive referral agreement and customer contracts, as well as QCFSBO's motivations.

Under the Sherman Act, it is illegal to engage in contracts that restrain trade or commerce. However, antitrust laws protect competition rather than individual competitors, and mere disappointment in not obtaining a contract does not constitute an antitrust violation. The Sherman Act prohibits only unreasonable restraints, and the plaintiff bears the burden of proving such unreasonableness. The analysis of restraints can be done through rule of reason, per se, or quick look analysis, with the rule of reason being the prevailing standard. There is a presumption favoring this standard in evaluating the competitive effects of a restraint.

Most commercial arrangements are subject to antitrust laws and evaluated under the "rule of reason." This test assesses whether a restraint of trade is unreasonable by considering various factors, including the business's conditions before and after the restraint, as well as the restraint's history, nature, and effects. Home Show carries the burden to prove an antitrust violation, including demonstrating damages and the causal link between the violation and the injury.

Home Show contends that QCFSBO's position as the leading for-sale-by-owner website in the Quad City area, along with an exclusive referral agreement with Symmetry, restricts competition by directing clients to Symmetry and limiting property owners' access to necessary information for making informed choices. Home Show claims that the relationship entails exclusive advertising agreements, shared office space, and access to MLS listings, giving QCFSBO an anti-competitive advantage. However, Home Show fails to provide evidence that any agreement between QCFSBO and Symmetry is anti-competitive or that an exclusive advertising agreement is inherently illegal. Furthermore, the proximity of their leased spaces does not constitute a restraint of trade.

Despite claims backed by testimony indicating that QCFSBO receives the most website traffic and adds listings more frequently than competitors, Home Show does not demonstrate any resultant damages from QCFSBO and Symmetry's practices. Citing precedent, it is noted that a lack of established causal connection or evidence of damages led to the dismissal of similar claims in past cases.

To establish a monopolization claim under the Sherman Act, Home Show must prove that QCFSBO has monopoly power in the relevant market and that it willfully acquired or maintained that power. Even if QCFSBO is shown to have a dominant market share, Home Show has not provided evidence of intent to monopolize or any anti-competitive effects stemming from the QCFSBO-Symmetry agreement.

Home Show's dissatisfaction with not having an exclusive relationship does not constitute an antitrust violation under the Sherman Act, as established in Double D, 136 F.3d at 561. QCFSBO's actions are competitive, but the Sherman Act only prohibits unfair competition, not competitive conduct itself. The Act aims to protect the public from market failures rather than shield businesses from competition. The court concludes that both QCFSBO's and Symmetry's motions for summary judgment (ECF Nos. 37 and 42) are granted, resulting in the dismissal of the action. Additional notes clarify the geographic area involved, the financing activities of Symmetry, the operational separateness of Symmetry and QCFSBO, and the limited confirmations regarding MLS information sharing between the parties. Home Show's claims under the Lanham Act, specifically citing 15 U.S.C. 1125(a)(1)(B), are also acknowledged.

Under Section 43(c) of the Lanham Act, advertisers who utilize false or misleading representations about another's services can be held liable. Home Show's claim is categorized under Section 43(a) for unfair competition instead of trademark infringement. Home Show argues that Banerjee's acknowledgment of inaccuracies in her calculations undermines QCFSBO's claims, which are therefore deemed false. Banerjee's testimony reveals that the calculation errors generally favored Home Show, indicating that QCFSBO's listings were overstated. Additionally, Banerjee admitted to previously counting realtor-listed properties incorrectly, which further benefitted Home Show. The document also highlights that reduced revenue for small businesses can arise from various factors, including the nationwide economic downturn in 2008 affecting the real estate market. Home Show conceded that a "per se" analysis for anti-competitive restraints does not apply in this instance, noting that certain restraints are presumed unreasonable due to their clear negative impact on competition.