Last week, a federal judge denied a request from 10 apartment operators and Santa Barbara, California-based property management software company Yardi Systems to toss out an antitrust class-action lawsuit in the U.S. District Court for the Western District of Washington. Reuters first reported the story.
In the dismissal motion filed in December 2023, the defendants argued that the plaintiffs — two former tenants based in Washington state — didn't have standing and were “attempting to manufacture a Sherman Act violation on the mere basis that 10 property management companies independently decided to use a revenue management product licensed by Yardi.”
In his decision to deny the dismissal, U.S. District Judge Robert Lasnik said, “The fact that the lessor defendants did not meet as a group but rather used an intermediary, Yardi, to compile their commercially sensitive data and calculate the supracompetitive rental rate each participant would utilize does not preclude the existence of an agreement or change its unlawful nature.”
A spokesperson for Yardi told Multifamily Dive that the company’s software never uses confidential competitor pricing data in its rent recommendations. Instead, it relies on its clients’ property data and publicly available housing market information to help apartment communities make individualized pricing decisions.
“There is nothing illegal about Yardi’s revenue management product, and the allegations against the company are simply false,” the spokesperson said. “We stand behind our software and will continue to defend vigorously against this baseless litigation.”
The spokesperson said that the plaintiffs’ “made-up claims” don’t match the reality of how Yardi’s software works.
“The court did not find that Yardi’s software actually created an illegal price-fixing conspiracy, but, at this early procedural stage, it could only consider the plaintiffs’ allegations and not the defendants’ evidence,” the spokesperson said.
In the suit filed in September 2023, Washington state resident McKenna Duffy accused Yardi and the management companies of orchestrating a nationwide scheme to fix the cost of multifamily apartment rent.
The suit contends that Yardi exchanged competitively sensitive and non-public information with clients through its automated pricing software, Revenue IQ (formerly RENTmaximizer) and that the defendants engaged in direct conversations with their competitors about pricing through market surveys.
Per se ramifications
While the per se finding reduces plaintiffs’ burden on competitive harm and market definition, the judge acknowledges that there is a material question as to the factual proof and accuracy of the core elements of the alleged collusion, which remains the weakest part of plaintiffs’ case, according to Kenneth Racowski, an attorney with Tampa, Florida-based Holland & Knight LLP.
In another class-action antitrust case involving the multifamily industry, this one in the U.S. District Court for the Middle District of Tennessee, Judge Waverly Crenshaw rejected this per se reasoning. Defendant RealPage then used that as a basis to ask the U.S. District Court for the Middle District of North Carolina to dismiss the civil suit brought by DOJ and the eight states last week.
Unlike Crenshaw in the RealPage case, Lasnik found that the plaintiffs' "allegations that defendants colluded to fix prices at above-market rates and impose those prices on customers is per se anticompetitive conduct," Racowski and David C. Kully, another attorney with Holland & Knight LLP, said in an article on the law firm’s website.
“This ruling will not absolve the plaintiffs of the need to prove the existence of a conspiracy among Yardi and its customers, but if they establish the existence of the requisite conscious commitment to a common scheme, it will mean they will not need to show actual harm to competition under the ‘rule of reason,’” Kully and Racowski wrote.
However, Racowski told Multifamily Dive that it’s still early on in the algorithmic pricing cases that are hitting multifamily, hotel and other industries and that the per se designation will be revisited in the future.
“This is like the bottom of the second or top of the third inning,” Racowski said. “There's a lot of runway to go for these cases to play out what the appropriate legal standard is going to be.”
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