Uhlig, LLC v. PropLogix, LLC

District Court, D. Kansas·Decided December 6, 2023·No. 2:22-cv-02475·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

UHLIG, LLC d/b/a CONDOCERTSTM and ) WELCOMELINK®, ) ) Plaintiff, ) CIVIL ACTION v. ) ) No. 22-2475-KHV PROPLOGIX, LLC, ) ) Defendant. ) ____________________________________________)

MEMORANDUM AND ORDER

Uhlig LLC d/b/a CondoCertsTM and d/b/a WelcomeLink® brings suit against PropLogix, LLC. On October 3, 2023, the Court held an evidentiary hearing on Plaintiff’s Motion For Temporary Restraining Order And Preliminary Injunction (Doc. #93) filed July 19, 2023 and PropLogix’s Second Amended Motion For Temporary Restraining Order And Preliminary Injunction And Permanent Injunction (Doc. #119) filed September 1, 2023. At the conclusion of the hearing, counsel announced that the parties had reached an agreement which resolved the pending motions for injunctive relief. On October 26, 2023, the Court directed that the parties comply with the oral agreement as stated at the hearing. See Memorandum And Order (Doc. #168) at 3. On November 6, 2023, after a hearing, the Court held that the parties had not reached an enforceable oral agreement to resolve the pending motions for injunctive relief and do business as stated at the hearing on October 3, 2023. Order (Doc. #189) at 1. The Court therefore vacated its prior rulings in this regard and reinstated the parties’ motions for injunctive relief. Id. For reasons stated below, the Court overrules both parties’ motions for injunctive relief. Preliminary Injunction Standards Both parties seek a preliminary injunction.1 The purpose of a preliminary injunction is “to preserve the status quo pending the outcome of the case.” Tri–State Generation & Transmission Ass’n., Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 355 (10th Cir. 1986). In issuing a

preliminary injunction, a court is primarily attempting to preserve the power to render a meaningful decision on the merits. Id. Because a preliminary injunction is an extraordinary remedy, the right to relief must be clear and unequivocal. Schrier v. Univ. of Colo., 427 F.3d 1253, 1258 (10th Cir. 2005). To obtain a preliminary injunction, the movant must establish that (1) it will suffer irreparable injury unless the preliminary injunction issues; (2) the threatened injury outweighs whatever damage the proposed preliminary injunction may cause the non-movant; (3) if issued, the preliminary injunction will not be adverse to the public interest; and (4) the movant is substantially likely to ultimately prevail on the merits of its claims. Tri-State, 805 F.2d at 355. If the moving parties demonstrate that the first three factors “tip strongly” in their favor, the test is modified and the moving parties “may meet the requirement for showing success on the merits by

showing that questions going to the merits are so serious, substantial, difficult, and doubtful as to make the issue for litigation and deserving of more deliberate investigation.” Okla. ex rel. Okla. Tax Comm’n v. Int’l Registration Plan, Inc., 455 F.3d 1107, 1113 (10th Cir. 2006). Factual Background In a common interest residential community (“CIC”) such as a homeowner association,

1 Both parties also seek a temporary restraining order. A temporary restraining order is an emergency remedy, which is reserved for exceptional circumstances and lasts only until the Court can hear arguments and evidence regarding the controversy. West v. Derby Unified Sch. Dist. No. 260, 23 F. Supp. 2d 1220, 1221–22 (D. Kan. 1998); see Fed. R. Civ. P. 65(b). Because the parties have received notice and had an opportunity to present argument and evidence, their requests for a temporary restraining order are moot.

-2- condominium or co-op, real property deeds may be encumbered by obligations to the CIC. When a property owner sells or refinances a property, the owner, buyer, lender, title company or real estate attorney often must obtain an “estoppel certificate,” which indicates any outstanding monetary obligation to the CIC. In Florida, within ten days of a request from the owner, mortgagee

(i.e. lender) or designee of the owner or lender, a CIC or its authorized agent must provide an estoppel certificate. See Fla. Stat. §§ 718.116(8), 720.30851. Uhlig is a national provider of estoppel certificates for its clients, which include various CICs in Florida. Uhlig provides such certificates for client properties to parties such as property buyers, lenders, title companies and real estate due diligence service companies. PropLogix is a real estate due diligence service company. Its customers are primarily title companies and real estate attorneys.2 In 2010, PropLogix began as a company that provided municipal lien searches. In part because of a shortage of title agents, PropLogix clients eventually asked it to also obtain estoppel certificates for real estate transactions. Since at least 2016, PropLogix has used online platforms, including Uhlig web sites, to obtain estoppel certificates.

In real estate transactions, the buyers and sellers often hire title companies and real estate attorneys to perform various due diligence services. In turn, these companies or individuals often contract with third parties such as PropLogix to perform limited services including lien searches and obtaining estoppel certificates. Frequently, the buyer or seller does not know whether the title company or real estate attorney has hired contractors and if so, the names of those contractors. As a result, PropLogix may not have a direct relationship with the buyer or seller of a property. In these circumstances, when PropLogix requests an estoppel certificate from Uhlig, it acts as an

2 PropLogix rarely has clients who are lenders or property owners.

-3- agent of the title company or real estate attorney. PropLogix has ordered and received some 30,000 estoppel certificates from Uhlig at a cost of some eight million dollars. Uhlig has presented no evidence that PropLogix ever requested an estoppel certificate when it was not an authorized agent or subagent of a title company, real estate attorney or some other authorized designee of the

property owner or lender. When PropLogix obtains an estoppel certificate for a customer, it fronts the fee which Uhlig or other suppliers charge. PropLogix passes that charge to its customer and also charges for its services in researching the CIC and property management company, obtaining the estoppel certificate, preparing a cover page which provides a summary of the estoppel certificate and delivering the cover page and estoppel certificate to the customer. Beginning November 22, 2022, based on Uhlig’s opinion that PropLogix was improperly requesting CIC information from Uhlig web sites in order to “commercialize” that data, e.g., store, re-use and resell the data to customers for a fee, Uhlig blocked PropLogix from ordering its estoppel certificates on line. As a result, to obtain an estoppel certificate from Uhlig, PropLogix—

but no other customers of Uhlig—must complete a paper intake form which requires disclosure of its fee and detailed contact information for the property owner including the best time to contact the owner and numbers for the owner’s office phone, home phone and mobile phone.

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Uhlig, LLC v. PropLogix, LLC, (D. Kan. 2023).

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