Online Florida Real Estate Complaints Land in Court

A dispute between a Florida real estate broker and one of the nation’s largest home builders has mushroomed into a legal battle reaching all the way to Wall Street.

At the heart of the fight is a Web site started by Mike Morgan, the real estate broker, to collect complaints and dispense advice about what he considers shoddy workmanship on homes built by Lennar Corp.

“People tell me I am the Ralph Nader of the housing industry,” Mr. Morgan said in an interview.

Lennar, based in and serving the Miami housing market as well as much of the rest of the state and county, sees it differently.

The company has filed two lawsuits against Morgan - in Circuit Court in Martin County and in federal court in Florida’s Southern District - charging trademark infringement and defamation by spreading false information about the quality of its construction.

Lennar says many of Mr. Morgan’s complaints about its workmanship are false and that according to its federal complaint he was using his Web site to extort money from the company.

The home builder says Mr. Morgan launched the site after Lennar wouldn’t pay him as much as $225,000 in co-commissions on homes that he sold, but were later canceled.

Previously, companies might have felt free to ignore campaigns like these. But they’re increasingly taking them more seriously as the Internet makes it easier for campaigns to spread nationally.

Still, rarely do they spark such broad counterattacks from their targets and have the potential to reach so many Florida mortgage applicants like this one does.

“As a company with a 50-year history of exemplary customer service and integrity, we are left with no choice but to vigorously defend our company against those who attack our reputation with unfounded allegations,” Lennar’s CEO, Stuart Miller, said.

On Friday, Mr. Morgan was dealt a setback when a federal magistrate judge recommended a preliminary injunction preventing him, among other things, from using the word “Lennar” in Web-site domain names.

The magistrate wrote that while the Web site presents itself “for the sole purpose of advancing the public good, it actually appears” that Mr. Morgan sought to use the site for “private gain.” The magistrate added that Mr. Morgan “has a motive to harm Lennar” because of the real estate dispute.

Mr. Morgan, 51, says he is exercising his First Amendment right to free speech in trying to help Lennar customers.

This isn’t a typical real-estate broker. In recent years he moonlighted as a consultant to hedge funds and Wall Street analysts seeking information about the important Florida housing market.

He also runs a small Internet marketing company and has used his Internet savvy to attract hits to his site from Lennar buyers across the U.S.

It’s not uncommon for homeowners to gripe about builders even in the best of times. But this legal battle comes as U.S. home builders face mounting lawsuits and complaints from buyers wanting out of their contracts due to the softening real estate market.

In recent years, Mr. Morgan had gained a considerable measure of influence for his opinions on the Florida housing market.

Alex Barron, a former housing analyst at JMP Securities in San Francisco, said that Mr. Morgan led him and some of his hedge-fund and mutual-fund clients on an informational tour of Florida real estate projects.

Mr. Barron described himself as one of the “most bullish analysts on the Street,” but said Mr. Morgan “was instrumental in changing my views.”

Mr. Morgan says the legal battle has hurt this kind of consulting work.

In April, Ivy Zelman - formerly of Credit Suisse and a prominent housing-stocks analyst on Wall Street - stopped communicating with Morgan about the Florida market, saying in a deposition in one of the Lennar lawsuits that she had decided Mr. Morgan was “using me as a pawn in his bigger scheme of whatever he was attempting to do.”

Mr. Morgan says Lennar pressured Ms. Zelman to halt their discussions, an allegation Lennar denies. How this spills over into the travails of the individual Florida home mortgage applicants has yet to be seen.

Follow our link to continue reading this Wall Street Journal article on the perils of online Florida real estate and one court case that’s gone farther than anyone thought it would…