Century 21, Coldwell Banker, and ERA Franchise Systems have filed a joint lawsuit against LendingTree in U.S. District Court of Newark, New Jersey on June 12th, 2003.

The suit began with a filing of a preliminary injunction to stop LendingTree's alleged trademark infringement. The three key allegations in the suit concern trademark infringement, false and deceptive advertising, and unfair competition under both federal and state law. A hearing is scheduled for July 24, 2003.

A Cendant spokesperson told Realty Times that the company does not comment on pending litigation, but he did clarify that it is the individual Cendant brands that are filing the lawsuit, not the Cendant corporation itself.

Lending Tree spokesperson Deborah Roth commented, "Cendant has falsely suggested that a lawsuit was necessary because Lending Tree failed to cooperate with it in trying to resolve issues. The truth is that LendingTree has been very cooperative indeed. We have even voluntarily made certain changes to our website. Clearly, it is Cendant that has no interest in resolving these matters in a friendly fashion. Cendant's allegations that we are somehow misusing its trademarks or are misleading consumers has no basis in fact or law, and we are confident that when the dust settles, we will prevail and be vindicated."

So what did LendingTree do that got the Cendant brands so riled up?

According to the complaint, the Cendant brands allege that LendingTree "has deliberately implemented a business strategy that provides the illusion that LendingTree participates in a network of real estate companies that includes Century 21, Coldwell Banker and ERA. LendingTree has no direct relationship with Century 21 Real Estate Corporation, Coldwell Banker Real Estate Corporation or ERA Franchise Systems Inc."

Translation?

LendingTree published the Cendant brands' logos on its site. While LendingTree has since removed the logos, and the implied endorsement that they represented, the corporate Cendant brand names in plain black type remain on LendingTree's site.

"Our lawyers are hard at work and intend to vigorously defend Cendant's ill-founded claims," Roth continues. "By its actions, Cendant has revealed that it is intent on doing whatever it can to interfere with and destabilize Lending Tree's growing business relationships with our partners, and its unfounded lawsuit was filed in pursuit of its improper objective. We believe that Cendant does not understand the value that the Internet can add to our partners' business and is threatened by the early innovation and success of our business partnership."

When asked if this declaration is suggestive of a possible counter-suit with anti-trust at issue, Roth responded, "We have no specific comment on the litigation."

LendingTree's entrance into the real estate brokerage business has been anything but smooth, and it isn't the first time the company's name has come up in a copyright infringement lawsuit, and further actions involving the company could be pending.

LendingTree is one of the targets of depositions to be obtained in a similar suit brought by The Real Estate Book against LendingTree's traffic partner 1RoofTechnologies, a strategic partner and possibly a subsidiary of Primedia. (A Primedia subsidiary, HPC Interactive, owns an undisclosed number of shares in 1RoofTechnologies.) The lawsuit depositions are supposed to uncover the who, what, when, where, why behind The Real Estate Book's listings ending up on Realestate.com and LendingTree.com without permission. The Real Estate Book claims and showed Realty Times evidence that the listing agent's name and contact information as well as The Real Estate Book's copyright, was missing from some Real Estate Book listings found on both Realestate.com and LendingTree.com. The lawsuit is still pending.

Though not specifically named, LendingTree and other referral fee business models were also a consideration in the National Association of Realtors' recent VOW policy vote. Cendant Real Estate Division CEO Richard Smith, along with other franchise leaders, including Dave Liniger of RE/MAX International and Bill Powers of Realty Executives, lobbied the NAR for a broker opt-out option that would enable brokers to choose which VOWs would be able to publish their listings. All spoke on the record to Realty Times about their concerns that VOW listings were being used by "third-party interlopers" to siphon off brokers' profits without giving something back of value. Liniger compared the situation to showing up at a potluck supper with nothing but a fork.

The upshot for companies like LendingTree is that VOW brokers can no longer share their MLS downloaded listings with third-parties for compensation if those companies charge referral fees back to the listing brokers from the listings and they aren't in the primary business of listing and selling real estate. Instead, if LendingTree wants to use listings to attract consumers, it must implement IDX listings (Internet Data Exchange - listings which have brokers' permission to be advertised on other brokers' sites) instead. IDX listings always include the listing brokers' contact information, which makes capturing leads for LendingTree affiliate brokers more challenging. LendingTree only gets paid from closed leads that come to the site. See NAR policy, click here.

LendingTree could also have problems in the future with the National Association of Realtors.

"NAR had no objections to LendingTree using the term REALTOR when we believed it was providing a free directory of individuals who were in fact REALTORS and were also affiliated with LendingTree," explains Laurie Janik, general counsel to the NAR. "After NAR became aware that LendingTree was deriving income from its "Find a Realtor" service (which was not evident nor disclosed when NAR's permission was first granted to use the term Realtor) NAR wrote to LendingTree to object to its commercial use of the term REALTOR. LendingTree's outside counsel has advised me that its use of NAR's mark is lawful. He says LendingTree does not need NAR's permission to use the mark "Realtor" and even questions whether the term is a valid mark. He also says that NAR's failure to understand that brokers were paying Lending Tree for the referrals from the Find a Realtor feature is "preposterous". We are still discussing our differences, but obviously the Cendant litigation is of great interest to me."

As if those problems aren't challenging enough, LendingTree is also in the middle of a merger. USA Interactive which just announced a name change to InterActiveCorp, announced on May 5th its intention to acquire "all the capital stock of LendingTree in a stock-for-stock transaction," worth up to $734 million. Following the announcement, LendingTree's stock prices have shot up more than 25 percent.

The Cendant brands lawsuit comes at an unwelcome time, because that deal hasn't closed yet. It is akin to a buyer's finding out just before closing that there is a lien on the house he wants to buy. The Cendant brands lawsuit may not kill the deal, nor may the potential for other suits, but the aggregate problems LendingTree is having getting along in its new industry could cause InterActiveCorp to question whether it is merging the right property.

Then again, a lawsuit could also mean nothing. In a conference call following the merger announcement, USA Interactive chairman Barry Diller said that the LendingTree move into financing and real estate is "the most important strategic foot we've put down in the last year." Does that mean he is willing to follow through with the purchase despite several potential "clouds over the title?"

When asked if the Cendant brands lawsuit against LendingTree will impact the pending merger, InterActiveCorp spokesperson Ron Soto told Realty Times, "It will have no effect."

Editor's note: The PDF file of the complaint is over 50 pages. Please be patient during such a large download.