Zillow's antitrust battle against Chicagoland MLS Midwest Real Estate Data (MRED) will now move to private arbitration, following a decision by U.S. District Court Judge John Tharp. The court granted MRED's motion to compel arbitration on Tuesday, effectively pausing the federal lawsuit. In a separate ruling, Judge Tharp also denied Zillow's request for a preliminary injunction that would have prevented MRED from suspending its listing feed.
The dispute stems from Zillow's antitrust lawsuit, filed roughly four months ago, which alleged that MRED and Compass International Holdings conspired to withhold MRED's listing feed from Zillow. The court's decision to compel arbitration hinges on a provision within an agreement between MRED and MLS data feed provider MLS Grid. This provision prohibits MRED participants from excluding listings based on certain criteria, and it contains a mandatory arbitration clause. Judge Tharp found that MRED could enforce this clause as a third-party beneficiary.
Judge Tharp decided to stay the entire federal case, citing the substantial overlap between Zillow's claims against Compass and the issues to be resolved in arbitration. He noted that MRED and Compass are alleged co-conspirators, and all of Compass's alleged conduct would be examined in the arbitration. "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," Tharp wrote.
Legal experts suggest that the private nature of arbitration means that details of the proceedings will likely remain undisclosed. Brad Weber, a partner at Troutman Pepper Locke, explained that "Arbitrations, for the most part, are private." He added that while companies might issue press releases about major outcomes, the finer points of orders will not be publicly available.
Regarding the denial of the preliminary injunction, Weber noted that it was likely influenced by the court's decision to compel arbitration. To obtain an injunction, Zillow would have needed to show a likelihood of winning its case at trial. With the case moving to arbitration, the judge may have felt a higher standard was necessary to impose an injunction while the federal case is stayed.
Judge Tharp's ruling indicated skepticism regarding the merits of Zillow's case, stating that the evidence did not sufficiently distinguish the alleged conspiracy between MRED and Compass from the possibility that they were independently pursuing aligned interests. Harrison McAvoy, a partner at Mandelbaum Barrett PC, commented that "The court found that there was not a sufficient showing of an alleged conspiracy between Compass and MRED." While this is not a final ruling, experts suggest it is a significant indicator of the case's potential outcome.
Given the nature of antitrust disputes, legal experts anticipate that a settlement may be reached. Weber suggested that parties might compromise on their positions, but Zillow could also opt to proceed through the full arbitration process if it deems the issue critical.
