Appraisers Coalition v. Appraisal Institute, 93 C 913.

• Decision Date: 15 February 1994
• Docket Number: No. 93 C 913.,93 C 913.
• Court: U.S. District Court — Northern District of Illinois
• Parties: The APPRAISERS COALITION, Alan B. Blau, individually and d/b/a Alan Blau & Associates, W.S. Buckley, Buckley Appraisal Services, Inc., Vincent A. Solano, individually and d/b/a V.A. Solano & Associates, Plaintiffs, v. APPRAISAL INSTITUTE, an Illinois corporation, the American Institute of Real Estate Appraisers, an Illinois corporation, and Patricia Marshall, Bernard Fountain, Douglas Brown, C. David Matthews, Clifford E. Fisher, Jr., John R. Underwood, Jr., Bruce R. Willmette, Bonnie D. Roerig, David F. Peatfield, Donald L. Burke, Nancy M. Mueller, Gerald A. Teel, Norman E. Hall, Joe R. Price, Louie Reese III, and Ritch Le Grand, Defendants.

845 F. Supp. 592

The APPRAISERS COALITION, Alan B. Blau, individually and d/b/a Alan Blau & Associates, W.S. Buckley, Buckley Appraisal Services, Inc., Vincent A. Solano, individually and d/b/a V.A. Solano & Associates, Plaintiffs, v. APPRAISAL INSTITUTE, an Illinois corporation, the American Institute of Real Estate Appraisers, an Illinois corporation, and Patricia Marshall, Bernard Fountain, Douglas Brown, C. David Matthews, Clifford E. Fisher, Jr., John R. Underwood, Jr., Bruce R. Willmette, Bonnie D. Roerig, David F. Peatfield, Donald L. Burke, Nancy M. Mueller, Gerald A. Teel, Norman E. Hall, Joe R. Price, Louie Reese III, and Ritch Le Grand, Defendants.

No. 93 C 913.

United States District Court, N.D. Illinois, E.D.

February 15, 1994.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

MEMORANDUM OPINION AND ORDER

NORDBERG, District Judge.

This is an action arising out of alleged illegal competition in the non-residential real estate appraisal market. Plaintiffs filed suit on February 11, 1993, and filed a First Amended Complaint on March 3, 1993, before any response to the original complaint had been filed. The Defendants moved to dismiss that First Amended Complaint. On August 18, 1993, the Court issued a Memorandum Opinion and Order granting that motion. Appraisers Coalition v. Appraisal Inst., No. 93-C-913, 1993 WL 326671 (N.D.Ill. Aug. 18, 1993). With the permission of the Court, Plaintiffs filed their Second Amended Complaint, seeking relief in eleven counts. Before the Court is Defendants' Motion to Dismiss the Second Amended Complaint. For the following reasons, the Motion is denied in part and granted in part, without prejudice to the Plaintiffs filing a final amended complaint, if appropriate, consistent with this Memorandum Opinion and Order.

I. ALLEGATIONS OF FACT

Assuming as true the allegations in the Second Amended Complaint, and reasonable inferences therefrom, the Court summarizes the facts of the case as follows. The Plaintiffs are three individual non-residential real estate appraisers, Alan B. Blau, W.S. Buckley, and Vincent A. Solano, their respective businesses, Alan Blau & Associates, Buckley Appraisal Services, Inc., and V.A. Solano & Associates, and the Appraisers Coalition (the "Coalition"), a voluntary unincorporated association.¹ The individual Plaintiffs, through their businesses, and each member of the Coalition, is engaged in the profession of providing appraisals of non-residential real estate in the United States. Each of these appraisers is a member of an organization called the Society of Real Estate Appraisers, Inc. (the "Society").

The Society was founded in 1935 to establish, confer, and promote professional training, qualifications, and designations for real estate appraisers. Before January 1, 1991, the Society conferred one or more of three designations upon its individual members: (1) the SRPA, or Senior Real Property Appraiser, the Society's highest form of professional certification for appraisers of non-residential real estate; (2) the SRA, or Senior Residential Appraiser, which designated appraisers of residential real estate; and (3) the SREA, or Senior Real Estate Analyst, which pertains to financial analysis of income-producing real estate, but not necessarily appraisals. (Second Am.Compl. ¶¶ 16(a)-(c).) Each of the individual Plaintiffs and each member of the Coalition earned the Society's SRPA designation. (Id. ¶ 3.)

Until 1991, the Society, and its members, competed with Defendant American Institute of Real Estate Appraisers ("AIREA"), and its members. Like the Society, AIREA was organized in the 1930s to establish, confer, and promote professional training, qualifications, and designations for real estate appraisers. AIREA conferred two designations on its members: (1) the MAI, or "Member Appraisal Institute", which was conferred on AIREA members having top qualifications for appraising non-residential real estate; and (2) the RM, which was comparable to the Society's SRA. Thus, before 1991, the Society's SRPAs directly competed with AIREA's MAIs, and the SRAs directly competed with the RMs. Each of the individual Defendants is a holder of the MAI designation.

During the events leading to this lawsuit, a small percentage of Society members, having either an SRPA or SREA designation, also held an MAI designation, as was permitted by Society rules. Plaintiffs allege that "at some point prior to 1989" the "dual designation" MAI members of the Society managed to take control of that organization, despite the fact that such members made up less than four percent of the Society's voting members.

In 1989, AIREA representatives and Society representatives began discussing a "unification" of the two organizations. Under the initial "unification" proposal, AIREA's RM members would be given the option of automatically receiving the Society's betterknown and more widely-held SRA designation; the Society's small number of SREAs, some of whom were not appraisers, would be given the option of automatically becoming MAIs. The SRPA designation was to be phased out; but, SRPAs, unlike SREAs, were not automatically permitted to become MAIs. Upon learning of the terms of the initial proposal, many SRPAs protested the elimination of their designation. These protests resulted in the inclusion, in the organizations' "Final Plan of Unification" (the "Plan"), of a provision stating that "all existing designations" would be "retained indefinitely" and would be "promoted until such time as the Board of Directors deems it appropriate to cease." By October 15, 1989, the Plan was set for submission to the respective voting members of the Society and AIREA. The Plan was to be either approved or disapproved at special membership meetings held on January 19, 1990.

Plaintiffs allege that the Plan was not approved at the special membership meetings. However, in June 1990, the Defendants caused AIREA, but not the Society, to vote on the Plan again. On January 1, 1991, the Defendants caused the Plan to take effect, without the approval of the Society's membership. (Second Am.Compl. ¶ 26.)

Upon implementation of the Plan, the Defendants took several actions that devalued the SRPA. With this implementation came the creation of the Defendant "Appraisal Institute", a parent corporation that now controls AIREA and the Society. Plaintiffs assert that the Appraisal Institute's name promotes public awareness of MAIs at the cost of public awareness of the SRPA designation, creating the appearance that MAIs are superior to SRPAs. Plaintiffs claim that they were further discriminated against by the Defendants' creation of the General Appraisal Board (the "GAB"). The GAB became the Appraisal Institute's arm for conferring the MAI designation, for controlling the ability of SRPAs to attain that designation, and for promoting the SRPA designation. Plaintiffs claim that SRPAs were locked out of any voice in these matters when the Defendants filled 11 of the 12 GAB positions with MAI holders, and prohibited the single SRPA member from voting on any matter affecting the qualifications for MAI status or the ability of SRPAs to become MAIs, and by restricting the Appraisal Institute's directors' ability to alter GAB policies.

Plaintiffs assert that Defendants "established a set of arbitrary, onerous, and subjective criteria" for those SRPAs seeking to become MAIs, even though some of the previous requirements for becoming an MAI were less stringent than those necessary to become a SRPA. (Compl. ¶ 29.)²

Defendants failed to promote, and denigrated, the SRPA designation, despite their pre-unification promises to the contrary, by producing and disseminating materials, including advertisements, that tacitly disparaged SRPAs and that falsely implied that the SRPA designation was irrelevant, non-existent, inferior, or non-professional. (Compl. ¶¶ 30, 31.)

Plaintiffs claim that as a result of this discrimination: "the individual and business entity plaintiffs have been severely, if not irreparably, damaged in their business and property." (Compl. ¶ 33.) Plaintiffs complain that their SRPA designations have "become valueless at best" and, at worst, carry "a negative connotation in comparison with MAIs." (Id.)

Plaintiffs seek both legal and equitable remedies in their eleven count Second Amended Complaint. In Counts I-VI, Plaintiffs allege violations of federal law. Counts I, II, and III respectively assert claims for monopolization, attempted monopolization, and conspiracy to monopolize in violation of section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2 (1988). In Count IV, Plaintiffs allege that the Defendants agreed to a per se illegal restraint of trade in violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1988). Count V charges a violation of Section 7 of the Clayton Act, 15 U.S.C. § 18 (1988). In Count VI, Plaintiffs claim that the Defendants violated section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1988).

Counts VII-XI are pendent state law claims. In Count VII, Plaintiff Solano claims that the Defendants violated the Illinois Antitrust Act, 740 ILCS 10/1 to 10/11 (Smith-Hurd 1993). In Count VIII, Plaintiff Solano seeks relief for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 to 505/12 (Smith-Hurd 1993). In Count IX, Plaintiffs Blau, Solano, Buckley, and Buckley Appraisal Services, Inc. claim that they were defamed and commercial disparaged. In Count X, Plaintiffs Blau, Solano, and Buckley plead tortious interference with their property rights. In Count XI, Plaintiffs Blau, Solano, and Buckley claim a common law breach of fiduciary duty.

II. ANALYSIS

A. Associational Standing

Defendants challenge the Coalition's standing to sue. The Second Amended Complaint names the Coalition as a Plaintiff in the five federal antitrust counts (I-V) and the Lanham Act false advertising count (VI). Since the Plaintiffs have...