Cotillion Club, Inc. v. Detroit Real Estate Board

• Decision Date: 24 January 1964
• Docket Number: Civ. A. No. 22058.
• Citation: 303 F. Supp. 850
• Parties: The COTILLION CLUB, INC., a Michigan corporation; Associated Brokers, Inc., a Michigan corporation; James Del Rio and Wilbur Hughes, individually, and John S. Humphrey, individually and doing business as Humphrey Realty Company, on behalf of themselves and others similarly situated, Plaintiffs, v. DETROIT REAL ESTATE BOARD, a Michigan non-profit corporation; United Northwestern Realty Association, a Michigan non-profit corporation; and Michigan Real Estate Association, a Michigan non-profit corporation, jointly and severally, Defendants.
• Court: U.S. District Court — Western District of Michigan

303 F. Supp. 850

The COTILLION CLUB, INC., a Michigan corporation; Associated Brokers, Inc., a Michigan corporation; James Del Rio and Wilbur Hughes, individually, and John S. Humphrey, individually and doing business as Humphrey Realty Company, on behalf of themselves and others similarly situated, Plaintiffs, v. DETROIT REAL ESTATE BOARD, a Michigan non-profit corporation; United Northwestern Realty Association, a Michigan non-profit corporation; and Michigan Real Estate Association, a Michigan non-profit corporation, jointly and severally, Defendants.

Civ. A. No. 22058.

United States District Court E. D. Michigan, S. D.

January 24, 1964.

Richard Goodman and John Conyers, of Goodman, Crockett, Eden, Robb & Philo, Detroit, Mich., for plaintiffs.

Clark, Klein, Winter, Parsons & Prewitt, Detroit, Mich., Howard D. House, Detroit, Mich., Robert M. Myers, Ann Arbor, Mich., Everett R. Trebilcock, of Fraser, Trebilcock, Davis & Foster, Lansing, Mich., of counsel, for defendants.

RULINGS ON MOTIONS TO DISMISS

ROTH, District Judge.

The plaintiffs bring this action on behalf of themselves and all other Negro real estate agents, brokers, and salesmen in the City of Detroit, and all other Negro prospective real estate purchasers in the Detroit Metropolitan Area.

The plaintiff Cotillion Club is alleged to be a membership non-profit corporation, existing, among other things, for the purpose of promoting civic betterment and civil rights of its members — all of whom are Negro professional and business men, who are prospective real estate purchasers and sellers in the Detroit Metropolitan Area.

Each of the individual plaintiffs is said to be an American Negro, a member of the Cotillion Club, and employed or engaged in business as a real estate salesman, or broker, and licensed by the State of Michigan.

The plaintiff Associated Brokers is a corporation engaged in the business of real estate brokering and having as its employees real estate salesmen and brokers, each of whom is a Negro.

The defendants are alleged to be incorporated membership associations composed of persons, firms, and corporations licensed by the State of Michigan to engage in the customary business of real estate brokers and salesmen in the Detroit Metropolitan Area.

The original complaint in this case was premised on the claim that the defendants conspired and combined, in violation of the Federal Anti-Trust Statutes, the Federal Trade Mark Laws, and the common law and statutes of the State of Michigan (MSA 28.31 et seq. Comp.Laws Mich.1948, § 445.701), to create and carry out restrictions and restraints of interstate trade and commerce in the purchase, sale, transfer, financing, and occupancy of real estate, including federally financed and insured real estate and house accommodations in the Detroit Metropolitan Area.

The amended complaint seeks relief in this Court upon the following bases:

"1. Jurisdiction of this action is conferred upon this Court by the Federal Anti-Trust Laws (15 U.S.C.A. Sections 15 and 26); the Federal Civil Rights Act (42 U.S.C.A. Sections 1981-1988); 28 U.S.C.A. 1343; and Rule 23(a) (3) of the Federal Rules of Civil Procedure."

The complaints of the plaintiffs, as advanced at oral argument, are the following:

1. That defendants "are combining and conspiring together to exclude the plaintiff Negro brokers from their associations, from participation in their associations"; that is, "from membership."

2. That the defendants "are conspiring and combining together to set aside or set up and establish and maintain racial zones within the City of Detroit, State of Michigan, to exclude Negro buyers from competing for the purchase of houses within those zones and, consequently, to raise and tend to raise the prices for housing within those exclusive zones."

3. That the defendants have used and misused their privileges under the Federal Trade Mark Act and under the Trade Name and Emblem Acts of the State of Michigan by using "their trade marks for the purpose of establishing and maintaining a division of the housing market and allocated sections, assigned sections, of the City of Detroit and the State of Michigan, as all White or all Negro and attempted to prevent Negro purchasers from purchasing in those areas."

4. The defendants "have acted under color of state law to deny potential Negro purchasers of homes, as represented by the plaintiff Cotillion Club, access to them in certain areas in the City of Detroit and State of Michigan, contrary to the terms of the Federal Civil Rights Act."

5. The defendants "have acted in concert, combined together to deny the plaintiff access to federal mortgage insurance contracts and funds covering housing in zones which have been racially set aside by the activity of the defendants."

The first question is whether the amended complaint states a cause of action under the Federal Anti-Trust Laws. Section 4 of the Clayton Act, 15 U.S.C. § 15, provides:

"Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. Oct. 15, 1914, c. 323, § 4, 38 Stat. 731." 15 U.S.Code, § 15.

Section 1 of the Sherman Anti-Trust Act, 15 U.S.C. § 1, provides:

"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal ***."

The allegations of the amended complaint are that some members of the defendants receive and transmit information and listings to and from other states; that some members of the defendants make and file applications, reports, and other documents for transmittal to Washington, D. C., or other out-of-state offices of various Federal Housing Agencies; and that some members of the defendants make investigations, appraisals and surveys of federally financed or insured Michigan real estate to be transmitted to other states. Nowhere do the plaintiffs make any allegations concerning the extent or substantiality of these activities; nor do the plaintiffs allege any interstate activities of the defendant associations, as distinguished from their members. Plaintiffs' allegations fail to relate the alleged interstate activities of the members of defendant associations to be alleged restraints complained of in paragraphs 17 and 18 of the amended complaint. Having recited these incidental mailings across state lines, the remainder of the amended complaint is devoted to alleged restraints which are completely local in their nature and effects.

Such incidental activities across state lines, by members of the defendants, do not establish the jurisdiction of this Court. The critical question is whether the alleged restraints are operative in interstate commerce, and not whether the defendants' members engage, in the overall conduct of their business, in incidental activities across state lines.

As said in Page v. Work, 9 Cir., 290 F.2d 323, 330; cert. den. 368 U.S. 875, 82 S.Ct. 121, 7 L.Ed.2d 76:

"The test of jurisdiction is not that the acts complained of affect a business engaged in interstate commerce, but that the conduct complained of affects the interstate commerce of such business."

See also United States v. Oregon State Medical Society, 343 U.S. 326, 72 S.Ct. 690, 96 L.Ed. 978; Elizabeth Hospital Inc. v. Richardson, 8 Cir., 269 F.2d 167.

It is well settled that the Sherman Act was not designed to reach alleged restraints which are local in nature and do not substantially affect interstate commerce. In the early case of Hopkins v. United States, 171 U.S. 578, 600, 19 S.Ct. 40, 48, 43 L.Ed. 290, 299 (1898), the Court said:

"The act of congress must have a reasonable construction or else there would scarcely be an agreement or contract among businessmen that could not be said to have, indirectly or remotely, some bearing upon interstate commerce, and possibly to restrain it. We have no idea that the act covers, or was intended to cover, such kinds of agreements."

Hopkins has been consistently followed by such United States Supreme Court cases as Industrial Association of San Francisco v. United States, 268 U.S. 64, 45 S.Ct. 403, 69 L.Ed. 849 (1925); Levering and Garriques Company v. Morrin, 289 U.S. 103, 107, 53 S.Ct. 549, 77 L.Ed. 1062, 1065 (1933); United States v. Yellow Cab Company, 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947); and lower court cases such as Foster & Kleiser Company v. Special Site Sign Co. (CCA-9, 1936), 85 F.2d 742; United States v. Starlite Drive-In (CCA-7, (1953), 204 F.2d 419; Lawson v. Woodmere, Inc., 217 F.2d 148 (CA 4, 1954); 123 F.Supp. 251.

The case of United States v. South-Eastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, is relied upon heavily by the plaintiffs as authority for their claim that the activities here alleged are commerce and subject to regulation under the Sherman Anti-Trust Act. But what that case held is that a transaction between an insurance company organized in one state and a policyholder of another was commerce between the states and subject to the provisions of the anti-trust laws. This was recognized by Congress, through the enactment of what is now Section 1012, Title 15 U.S.C., which provides that the Sherman Act and other designated federal statutes regulating interstate commerce shall be applicable to the business of insurance. It appears to the Court that plaintiffs' reliance upon the South-Eastern case is misplaced. The activities here under scrutiny are not analogous to those involved in the typical insurance case. Here, except for incidentals, the activities are local and intrastate. And significantly, no case has been...