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At World Properties, LLC v. Baird & Warner Real Estate, Inc.

United States District Court, N.D. Illinois, Eastern Division

August 27, 2019

AT WORLD PROPERTIES, LLC, d/b/a @properties, Plaintiff,
v.
BAIRD & WARNER REAL ESTATE, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          ANDREA R. WOOD UNITED STATES DISTRICT JUDGE.

         Defendant Baird & Warner Real Estate, Inc. (“B&W”) and Plaintiff At World Properties, LLC, d/b/a @properties (“@properties”) are real estate brokerage companies serving the City of Chicago and the surrounding area. Beginning in February 2018, B&W launched a series of advertisements celebrating its accomplishments in 2017. Among B&W's 2017 achievements touted in those advertisements were its $8.8 billion in sales and 32, 000 transactions. However, according to @properties, B&W artificially inflated both of those figures. Therefore, @properties filed the present lawsuit against B&W for false advertising under both the Lanham Act, 15 U.S.C. § 1125(a), and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/2. Now before the Court is B&W's motion to dismiss the Second Amended Complaint (“SAC”) for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 77.) For the following reasons, B&W's motion to dismiss is denied.

         BACKGROUND

         Both B&W and @properties are residential real estate brokerage companies that compete with each other in the real estate brokerage market in the City of Chicago, its surrounding counties (known together with the City of Chicago as “Chicagoland”), and Wisconsin. (SAC ¶¶ 7- -9, 14, Dkt. No. 71.)[1] At issue in this action are statements that B&W made in several advertisements claiming that in 2017, B&W had $8.8 billion in sales and 32, 000 transactions. (Id. ¶¶ 20, 29, 31.)

         Contrary to B&W's representations, an industry real estate data aggregator and distributor known as Midwest Real Estate Data reported that in 2017, B&W's total volume for properties listed and sold was approximately $5.7 billion and its total number of sales was 17, 168. (Id. ¶¶ 10, 33.) Similarly, a survey ranking the “nation's Top 500 residential real estate firms by 2017 sales volume” reported that B&W's nationwide sales volume in 2017 for closed real estate transactions was approximately $5.8 billion and its total number of transactions that year was 17, 450. (Id. ¶ 34.) On the other hand, in 2017, "properties's total volume for properties listed and sold was approximately $8.5 billion and its total number of transactions was 17, 153. (Id. ¶ 35.) According to @properties, B&W inflated its sales and transactions figures by including not just its real estate brokerage sales and transactions, but also mortgage originations and refinances performed by its affiliate, Key Mortgage Services, Inc. (“Key Mortgage”), and title searches, title insurance services, and other title-related services performed by its affiliate, Baird & Warner Title Services, Inc. (“BWT”), as well as two other companies, Starck Title (“Starck”) and Landtrust National Title (“Landtrust”). (Id. ¶ 36.) Those figures also included property rentals and leases for which B&W acted as the agent. (Id.) Finally, @properties alleges that B&W inflated its sales and transactions figures by double- or triple-counting certain transactions.[2] (Id. ¶ 123.)

         The challenged representations first appeared in an advertisement published in an email distribution from Chicago Agent Magazine, a publication catering to Chicagoland's top real estate agents, brokers, developers, and mortgage professionals. (Id. ¶¶ 21-22.) The email's subject line states “Our 2017 Stats Are Pretty Interesting.” (Id. ¶ 26.) In the body of the email, B&W's advertisement touts “IT'S OFFICIAL. WE CRUSHED 2017.” (Id. ¶ 27.) Below that exclamation are two columns making several representations, including the challenged representations concerning $8.8 billion in sales and 32, 000 transactions. (Id. ¶¶ 28-32.) Nowhere in the advertisement does B&W qualify the sales and transactions figures, explain its calculation method, or provide a data source. (Id. ¶¶ 30, 32.) The advertisement also makes no mention of Key Mortgage, BWT, Starck, or Landtrust. (Id. ¶ 37.)

         The Chicago Agent Magazine advertisement also includes a hyperlink directing readers to a blog post on B&W's publicly-available website, titled “2017 Has Been Good to Us.” (Id. ¶¶ 68, 72.) That blog post again repeats the $8.8 billion in sales and 32, 000 transactions figures. (Id. ¶¶ 73, 77.) In the opening paragraph, the post celebrates B&W's 2017 as a year that “really seems to stand out.” (SAC, Ex. 2, Dkt. No. 71.) Continuing, the next sentence states that, “[i]t's almost hard to believe everything that happened, and not just with our residential sales company, but with our mortgage and title companies, too.” (SAC ¶ 78; SAC, Ex. 2.) The next paragraph states that B&W “won Top Workplace in our industry for the sixth year in a row from the Chicago Tribune and #1 Top Workplace in all of Chicago.” (SAC ¶ 79; SAC, Ex. 2.) It then claims that the “$8.8 billion in sales and more than 32, 000 transactions [B&W] did last year is evidence that [B&W's] clients and [B&W's] agents across Chicagoland are onto something.” (SAC ¶ 73; SAC, Ex. 2.) Again, B&W does not qualify those numbers, explain its calculation method, or provide a data source. (SAC ¶ 74.) Four paragraphs in, the blog post notes that “[t]he other businesses in our family had impressive results too, ” expressly identifying BWT and Key Mortgage and extoling accolades each company received in 2017. (SAC ¶¶ 81, 83; SAC, Ex. 2.) In particular, Key Mortgage was named a “top employer” by National Mortgage Magazine and BWT was rated among the “Top 3 Title Companies in Illinois” by Fidelity National Title Group. (SAC ¶ 83; SAC, Ex. 2.) The blog post does not mention Starck or Landtrust. (SAC ¶ 87.)

         In addition, B&W or its agents made one or both of the $8.8 billion in sales and 32, 000 transactions representations in several internet advertisements posted on publicly accessible websites and social media sites. (Id. ¶¶ 91-93.) On its Facebook page, B&W made a post on February 16, 2018 stating, “2017 has been good to us, from winning Chicago Tribune's Top Workplace in our industry for the sixth year in a row to doing $8.8 billion in sales. Seems like we're on to something, and we don't plan to stop here.” (Id. ¶ 98.) Similarly, a Facebook post on B&W's Oak Park/River Forest office read, “With over $8.8 billion in sales, over 500 new brokers, 3 new offices, No. 1 [sic] Top Workplace… the list goes on and on. It's official, we've crushed it in 2017. #bairdwarner #itseasierhere #joinbw.” (Id. ¶ 104.) That same B&W Office also posted on Instagram a photographic rendition of the body of the Chicago Agent Magazine advertisement with its representations of $8.8 billion in sales and 32, 000 transactions. (Id. ¶ 110.) Further, several B&W real estate brokers have made one or both of the $8.8 billion in sales and 32, 000 transactions representations on their personal websites or social media accounts. As with the Chicago Agent Magazine advertisement and the B&W blog post, none of these internet advertisements qualify the numbers, explain how they were calculated, or provide a data source. (Id. ¶¶ 99, 105, 111, 117.) Nor do any of the internet advertisements mention Key Mortgage, BWT, Starck, or Landtrust. (Id. ¶¶ 101, 107, 113, 119.)

         DISCUSSION

         To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual allegations, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This pleading standard does not necessarily require a complaint to contain detailed factual allegations. Twombly, 550 U.S. at 555. Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting Iqbal, 556 U.S. at 678). For claims under the Lanham Act alleging false advertising, the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) also apply. Conditioned Ocular Enhancement, Inc. v. Bonaventura, 458 F.Supp.2d 704, 709 (N.D. Ill. 2006). Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). This means that the plaintiff must plead “the who, what, when, where, and how” of the alleged fraud. Conditioned Ocular Enhancement, 458 F.Supp.2d at 709.

         In its SAC, @properties sets forth deceptive advertising claims under both the Lanham Act and the Illinois Uniform Deceptive Trade Practices Act. Specifically, @properties contends that B&W's claims of $8.8 billion in sales and 32, 000 transactions in 2017 were both false statements of fact because those figures included not just B&W's real estate brokerage sales but also property rentals, leases, and mortgage and title services, many of which were performed by Key Mortgage, BWT, Starck, or Landtrust.

         The Lanham Act prohibits the use of any “false or misleading representation of fact” in commercial advertising that “misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1). For a plaintiff to establish liability, it must prove that

(1) the defendant made a material false statement of fact in a commercial advertisement; (2) the false statement actually deceived or had the tendency to deceive a substantial segment of its audience; and (3) the plaintiff has been or is likely to be injured as a result of the false statement.[3]

Eli Lilly & Co. v. Arla Foods, Inc., 893 F.3d 375, 381-82 (7th Cir. 2018). There are two types of actionable statements under the Lanham Act: “those that are literally false and those that are literally true but misleading.” Id. at 382. Here, @properties has elected to proceed only on a theory of literal falsity. A literally false statement is one that is “bald-faced, egregious, undeniable, over the top.” Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc., 586 F.3d 500, 513 (7th Cir. 2009). “The inquiry asks whether the defendant made an explicit representation of fact that on its face conflicts with reality.” Eli Lilly, 893 F.3d at 382. Where a plaintiff contends that a statement of fact is ...


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