Date: Feb 28, 2011
Strange facts can make strange law. The Fifth Circuit yesterday issued a strange tutorial on Lanham Act prudential standing.*
Plaintiff real estate appraisers complain about two of Defendant's electronic platforms used by lenders of mortgage money.
One is AppraisalPort, which lenders use to electronically order appraisals from Plaintiffs and receive them from those appraisers when done. To participate, Plaintiffs must register and pay fees to Defendant. Here, Plaintiffs are customers.
Defendant's other platform is the National Collateral Database, which basically is a data base that lenders can use to obtain appraisals directly, without paying an appraiser to do work. Plaintiffs are competitors here.
The appraisers allege that Defendant falsely induced them to use AppraisalPort. Those allegedly actionable representations assured them that their e-appraisals would be seen only by the requesting lender.
Instead, they assert, Defendant extracted their work product in those appraisals and then sold it through Database to lenders who did not want to pay for a new appraisal. For example, Defendant allegedly sold their not-yet-stale appraisals for re-use and sold their valuations of comparable properties to lenders interested in them.
The district court dismissed for lack of standing. Basically, the alleged injury was found to be too remote from the alleged deception and, anyway, deceived consumers have no standing under the Act.
The Circuit court reversed in an opinion by the respected Judge Higginbotham. It found that the appraisers sued as competitors, not consumers, and they suffered the type of unfair competition injury the Act was intended to redress.
The court tried to limit the application of this case, saying it "presents unique facts, and we view it as falling just within the outer limits of the zone of interests protected by the Lanham Act."
* Harold H. Huggins Realty, Inc., et al. v. FNC, Inc. No. 09-60804 (5th Cir., Feb. 24, 2011).