McWhinney seeks dismissal of lawsuit alleging rent manipulation

SEATTLE — McWhinney Real Estate Services Inc. is among 18 companies caught up in a class-action lawsuit alleging that the software the company uses to manage its residential leases is part of a nationwide scheme to fix apartment rents at higher rates.

Seattle-based law firm Hagens Berman filed the lawsuit Nov. 3, and several of the companies responded with a motion to dismiss on Dec. 15.

The lawsuit filed in U.S. District Court for the Western District of Washington targets California-based Yardi Systems Inc., which markets a software system called “RentMaximizer.” The lawsuit alleges that the property-management companies, including McWhinney, use the software to illegally conspire to raise rents.

“Plaintiffs Mckenna Duffy and Michael Brett bring this action on behalf of themselves individually and on behalf of a class consisting of all persons who leased multifamily residential real estate units directly from a defendant or co-conspirator from Sept. 8, 2019, through the present, in the nationwide multifamily housing rental market,” Hagens Berman said in the lawsuit. “Plaintiffs bring this action for treble damages and injunctive relief under Section 1 of the Sherman Act. Plaintiff demands a trial by jury.”

The lawsuit alleged that Yardi uses a pricing algorithm into which users input rental rates, occupancy data, and market-specific information such as comparative rental rates. Yardi exchanges pricing information between competitors, the lawsuit contended, permitting landlords to raise rents without necessarily losing tenants.

The class action names multiple defendants, including: Bridge Property Management LLC, Calibrate Property Management LLC, Clear Property Management LLC, Dalton Management Inc., HNN Associates LLC, LeFever Matson, Manco Abbott Inc., Morguard Corp., Pillar Properties LLC, Summit Management Services Inc., Creekwood Property Corp., Legacy Partners Inc., Jones Lang Lasalle Inc., Alco Management Inc., McWhinney Property Management LLC, KRE Group Inc., Towne Properties and Tribridge Residential LLC.

“Our antitrust legal team has uncovered what we believe to be a clear gaming of the system through controlled, lockstep algorithmic increases to fix the cost of rent — one that has affected millions of renters,” Steve Berman, managing partner and co-founder of Hagens Berman, said in a press statement.

McWhinney, when contacted by BizWest, did not respond prior to publication of this report. The company did join in a motion to dismiss the case, an action filed Dec. 15.

In that motion, the companies said the lawsuit failed to show an agreement to abide by the rent recommendations that the Yardi software would kick out. Instead, the output from the system was a recommendation that landlords could accept, reject or modify.

The companies also said that the lawsuit failed to show evidence of an unlawful conspiracy. Instead, the lawsuit “manufactured a Sherman Act violation on the mere basis that 10 property management companies independently use a revenue management product licensed by Yardi, alleging they somehow conspired to inflate apartment rents nationwide.”

The case “is devoid of any allegation or even plausible inference that … defendants conspired with each other.”

There is “no such thing as a nationwide market for multifamily housing” and no agreement to fix rents, according to the motion to dismiss. 

The case is Mckenna Duffy and Michael Brett, individually and on behalf of others similarly situated vs. Yardi Systems Inc. et al filed Nov. 3 in U.S. District Court for the Western District of Washington.

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