U.S. v. Realty Multi-List, Inc.

• Decision Date: 14 November 1980
• Docket Number: INC,No. 78-2481,MULTI-LIS,78-2481
• Citation: 629 F.2d 1351
• Parties: 1980-81 Trade Cases 63,624 UNITED STATES of America, Plaintiff-Appellant, v. REALTY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1351

629 F.2d 1351

1980-81 Trade Cases 63,624

UNITED STATES of America, Plaintiff-Appellant, v. REALTY MULTI-LIST, INC., Defendant-Appellee.

No. 78-2481.

United States Court of Appeals, Fifth Circuit.

Nov. 14, 1980.

Gregory J. Leonard, Asst. U.S. Atty., Macon, Ga., Andrea Limmer, Dept. of Justice, Washington, D. C., for plaintiff-appellant.

Champion & Champion, Forrest L. Champion Jr., Columbus, Ga., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Georgia.

Before GOLDBERG, CHARLES CLARK and THOMAS A. CLARK, Circuit Judges.

GOLDBERG, Circuit Judge:

At least since the time in 1880 when a group of Irish tenants organized and refused to work on the estate managed by Captain Charles Cunningham Boycott (who, perhaps not so willingly, loaned his name to their tactic), the concerted refusal to deal, or group boycott, has been recognized as an effective means of achieving certain types of economic and political goals. To invoke Captain Boycott's name in the context of contemporary antitrust law, however, is generally to incur legal condemnation.

This case involves an action brought by the United States under the Sherman Act, 15 U.S.C. § 1 et seq., ¹ against Realty Multi-List, Inc. (RML), a Georgia corporation formed to operate a real estate multiple listing service. Although there are other issues raised, the basic question presented is whether the membership criteria promulgated by RML are illegal under either the per se rule or the rule of reason because they authorize RML to establish a group boycott of those real estate brokers who fail to qualify under them. ² The many nuances of antitrust law presented by this case have plagued the rulemakers, the decisionmakers, and the commentators for the reason that the issues raised fit no facile categories of the jurisprudence. We therefore feel compelled, after a recital of the facts, to attempt to harmonize the sometimes discordant strains that sound in the background of this case and to reach a result in accord with the policies embodied in the Sherman Act.

I.

A.

RML was organized in 1967 by eight state-licensed real estate brokers in Columbus (Muscogee County), Georgia. ³ Each broker initially paid $200 to purchase one share of stock in the corporation. All subsequent members of RML have also been state-licensed real state brokers in Muscogee County and have been required to purchase a share of RML stock at prices up to $3,000 per share. R.389. ⁴ Members pay additional fees for the maintenance of RML and for the provision of various services by RML. R.688a, 697a.

RML's central function-indeed, its raison d'etre -is to provide a multiple listing service for its members. R.686. Through the agreements which form the basis for this service, see Rules and Regulations of Realty Multi-List, Inc., R.686-692a, RML members have obligated themselves to attempt to obtain from sellers "exclusive" rather than "open" listings ⁵ of real estate ⁶ and to pool their exclusive listings through RML. RML itself is the hub of the multiple listing service; it acts as the "central processing and distributing point" for its members' listings. R.686. RML compiles the listings it receives from its members into a listing book, containing not only the listing data submitted by members, but often photographs of the property as well, and distributes copies to RML members. RML distributes a completely updated listing book each month and provides members with a daily update on new listings and new data on old listings. Using the information provided by RML, member brokers are able to cooperate in bringing together buyers and sellers. A broker may show a prospective purchaser all the properties contained in the RML listing book, identify those properties which meet the purchaser's needs and desires, and show those properties to the purchaser. If the selling broker succeeds in his efforts, he brings the purchaser, the listing broker and the seller together to consummate the transaction. R.690-691. The selling broker and the listing broker then determine, by their own agreement, how the commission on the sale shall be divided. Id.; R.686a.

In essence, a multiple listing service like RML functions as a trade exchange for the purchase and sale of real estate, an analogy that has not gone unnoticed in the cases and literature dealing with these institutions. See, e. g., Grillo v. Board of Realtors, 91 N.J.Super. 202, 219 A.2d 635, 644 (Ch.Div.1966); Austin, Real Estate Boards and Multiple Listing Systems as Restraints of Trade, 70 Colum.L.Rev. 1325, 1353-1359 (1970). The benefits offered by a multiple listing service are manifest:

Use of the multiple has had significant impact on the real estate industry as a whole. This impact is manifested in the reduction of the obstacles brokers must face in adjusting supply to demand: market imperfections are overcome in that information and communication barriers are reduced, along with the easing of the built-in geographical barrier confronting the buyer-seller relationship. Moreover, a realistic price structure is engendered. In effect, real estate becomes by virtue of the multiple "a more liquid commodity."

The use of the multiples has, in addition, had a significant positive impact on the individual sales transaction. The transactional benefits are fairly evenly distributed among the broker, the buyer, and the seller. In the absence of the multiple, a seller has three alternatives: first, he can sell the property himself, a course of action requiring facilities and expertise which most home owners do not possess; second, he can use an open listing; third, he can give a broker the exclusive right to sell. The multiple allows him to combine the advantages of the last two alternatives and to avoid the dangers of the first. The buyer benefits from the wider selection of purchase opportunities than would be available from the office of a single broker. In addition, there is a time-saving factor: "The buyer often has to spend only a short time in the office selecting properties to inspect, merely by carefully screening the MLS sheets." The broker is particularly benefited by having immediate access to a large number of listings and at the same time by being furnished with a method for quickly and expansively exposing his own listings to a broader market.

Id. at 1329-1330 (footnotes omitted). These factors may have a dramatic effect on the business of a member broker. One RML member testified that in the year following his admission to RML his firm's sales doubled and that approximately half of his listings are sold by other members of RML. Deposition of Donald A. Watson at 102-103.

In addition to these benefits and operational efficiencies, RML provides a number of other services to aid its members in the conduct of their business. An RML member may, for example, affix a lock box, containing a door key, to a listed property, allowing a potential selling broker easy physical access to the property without the consent or presence of the listing broker. The Government has provided a summary of other important advantages offered by RML:

Many other RML services keep members abreast of the real estate market and promote the professional development of the membership. Information concerning new homes and repossessed properties being offered for sale by the United States Veterans Administration is periodically circulated ..., as are mortgage rates being offered by local lenders ..., and comparable sales data for each RML listing sold. RML issues a monthly newsletter, operates a twice-weekly bus tour of homes to familiarize members with new listings ..., and maintains a rotational referral service for customers who call to obtain a broker .... Seminars and instructional clinics are offered .... An ethics and arbitration committee insures compliance with RML's rules and constitutes a forum in which its members can resolve disputes without the necessity for resort to litigation .... An appraisal committee acts when a member questions whether a property is priced at an appropriate level .... Most importantly RML provides a forum for closer cooperation and greater understanding among members of the same profession ....

Brief for United States at 7 n.8 (citations omitted).

From its inception as a group of eight cooperating brokers in 1967, RML had grown by 1976, at the time this suit was filed, to be a significant force in the Muscogee County real estate market. By its own admission, its members "constitute a vast majority of the active residential real estate brokers in Muscogee County Georgia." R.15. In 1976, RML's membership consisted of over 45 member firms with approximately four hundred sales associates. In that same year, it had more than 4,300 listings and over $50 million in sales. Although it had faced competition in the past from other multiple listing services in Muscogee County, ⁷ by the time suit was filed, RML stood alone as the sole multiple listing service in the county.

RML's Rules and Regulations limit the ability of nonmembers to share in the benefits it provides. They prohibit members from allowing a nonmember access to the listing book, its prime resource. ⁸ Further, while RML's rules allow members to cooperate with nonmembers on an individual sale of an RML-listed property, they prohibit any member, other than the listing broker, from responding directly to a nonmember's inquiries regarding a listed property, ⁹ and the RML office may not disclose any information to nonmembers. ¹⁰ Finally, nonmembers are barred from access to the other services provided by RML. R.686; Deposition of Betty Meroney at 37-39, 52.

B.

In August 1976, the United States filed suit against RML, ¹¹ alleging that, beginning in September 1967 and continuing to the present, RML and its members have conspired together to restrain interstate commerce unreasonably in violation of Section 1 of the Sherman Act, 15...