Freeman v. San Diego Assn. of Realtors
| Decision Date | 27 December 1999 |
| Docket Number | No. D030553.,D030553. |
| Citation | 77 Cal.App.4th 171,91 Cal.Rptr.2d 534 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Arleen FREEMAN et al., Plaintiffs and Appellants, v. SAN DIEGO ASSOCIATION OF REALTORS et al., Defendants and Respondents. |
Barry & Associates and David Barry, San Francisco, for Plaintiffs and Appellants.
Luce, Forward, Hamilton & Scripps, Charles A. Bird, Christopher J. Healey, John T. Brooks, San Diego, White and Bright, David S. Bright, Michael A. Friedrichs, Escondidio, Musick, Peeler & Garrett, William McD. Miller, III, Los Angeles, Michael J. Hickman, San Diego, and Jon F. McKinley, El Cajon, for Defendants and Respondents.
Defendant Sandicor, Inc. (Sandicor) operates a real estate sales multiple listing service (MLS) covering San Diego County. Real estate agents pay a monthly fee to access Sandicor's MLS listings. Plaintiff real estate agent Arleen Freeman filed this action, alleging that defendants Sandicor, San Diego Association of Realtors (SDAR) and several other real estate associations and individuals (collectively defendants)1 violated California's antitrust laws2 by charging excessive fees for access to Sandicor's MLS (the price fixing, tying and market exclusion claims) and refusing Freeman's request to become a service center for Sandicor (the group boycott claim). Freeman's lawsuit also asserted the excessive charges for MLS access violated an extant permanent injunction and entitled Freeman to damages. The trial court sustained defendants' demurrers to Freeman's third amended complaint and dismissed the action. Freeman timely filed a notice of appeal.
We evaluate whether the facts alleged by Freeman state causes of action against defendants.
The MLS is a computerized medium by which real estate agents exchange information on properties that are for sale or have been recently sold. Real estate agents who have listings to sell properties may submit information to the MLS to advertise the properties for sale, and real estate agents seeking properties for buyers can use the MLS to search for properties that meet the buyers' criteria for location, size, price and other characteristics.
Because Freeman's claims are based in substantial part on prior legal decisions that concluded certain MLS practices violated antitrust laws, we summarize those decisions.
In Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal.3d 920, 130 Cal.Rptr. 1, 549 P.2d 833 (hereafter Palsson) a realtors' association operated the only MLS for Marin County. The association permitted only members of the association to use the MLS and denied membership to persons who were only part-time real estate agents. Palsson concluded that denial of MLS access to nonmembers constituted a restraint of trade, and that the restrictions on access and membership did not pass the "rule of reason" test. (Id. at pp. 934-940,130 Cal.Rptr. 1, 549 P.2d 833.) Palsson ordered that the "rules denying access of nonmembers to the [MLS] must be eliminated, although nonmembers may be charged a reasonable fee for use of the service consistent with the per-capita costs of operation." (Id. at p. 940, 130 Cal.Rptr. 1, 549 P.2d 833.)
In People v. National Association of Realtors (1981) 120 Cal.App.3d 459, 174 Cal.Rptr. 728 (hereafter NAR I) this court concluded that certain policies of SDAR4 violated California's antitrust laws. NAR I held: (1) SDAR's rule that limited access to its residential MLS to SDAR members was an unlawful group boycott (id. at pp. 467-468, 174 Cal.Rptr. 728); (2) SDAR's rule permitting only "exclusive right to sell" listings on the MLS was an unlawful restraint on trade (id. at pp. 477-479, 174 Cal.Rptr. 728); and (3) certain SDAR policies and practices facilitated price fixing of brokers' commissions (id. at pp. 479-487, 174 Cal.Rptr. 728). NAR I remanded the case to the trial court with directions to issue an injunction "as generally contained in [paragraph 1(a) of] the prayer of the second amended complaint...."5 (120 Cal.App.3d at p. 488, 174 Cal.Rptr. 728.)
In NAR I the court also opined that SDAR's rule limiting access to its investment property MLS to SDAR members could constitute an unlawful tying arrangement and on remand directed the trial court to make a factual determination whether SDAR held sufficient economic power over the tying product (the investment property MLS) to restrain trade in the tied product (association membership). (Id. at pp. 469-473, 174 Cal.Rptr. 728.) On remand, the trial court found no unlawful tying arrangement. However, in the subsequent appeal this court in NAR II concluded that conditioning access to the investment property MLS on membership in SDAR was an unlawful tying arrangement. In NAR II we ordered that the injunction be modified to permit access to the investment property MLS on the same terms as access to the residential MLS. (155 Cal. App.3d at p. 589, 202 Cal.Rptr. 243.)
On remand of NAR II, the trial court issued its 1984 injunction ordering that access to SDAR's residential MLS and investment property MLS be available on an equal footing to all licensed real estate agents without regard to SDAR membership. The injunction permitted SDAR to impose reasonable charges for access to each MLS, including an allocation of overhead costs of operating the MLS, provided that charges to members and nonmembers were made on the same basis.
Prior to 1992 there were eleven regional associations of real estate agents in San Diego County. These associations operated three separate MLS's, each of which provided a partial and fragmented listing of the real estate for sale in San Diego County.
In December 1991 the local associations combined their separate MLS's and created a new product: a single, county-wide MLS listing all properties for sale throughout San Diego County. To create this new product, the local associations formed Sandicor, a corporate entity in which they were shareholders.6 Sandicor owns and operates a county-wide MLS. Sandicor's MLS is an essential tool for real estate agents, and nearly all real estate agents actively engaged in buying or selling real estate in San Diego County use Sandicor's MLS.
Real estate agents pay Sandicor a uniform monthly fee set by Sandicor to use Sandicor's MLS. The monthly fee is used to pay the costs of operating the MLS and Sandicor's service centers (see, infra at section D).7
Some local associations have contracted with Sandicor to act as service centers to perform services for Sandicor and its MLS subscribers that Freeman denominates as "Enhanced Services." Enhanced Services performed by the service centers include: processing enrollment forms and collecting enrollment fees for subscribers to Sandicor's MLS and maintaining records on these participants; billing and collecting monthly fees from subscribers and remitting fees to Sandicor; inputting MLS listings into Sandicor's MLS database when requested by a subscriber; monitoring listings for compliance with Sandicor's rules; providing forms for Sandicor's MLS complaints and forwarding complaints to Sandicor; distributing MLS books to subscribers; stocking and distributing Sandicor property data profile sheets and other Sandicor forms and supplies; providing staff to answer questions by subscribers; providing meeting facilities on request by Sandicor; processing reciprocal listings on properties within the local association's jurisdiction from subscribers to other MLS's that have reciprocity agreements with Sandicor; and, when a Sandicor subscriber has a listing on a property outside Sandicor's jurisdiction but within the jurisdiction of another MLS with which Sandicor has a reciprocity agreement, to process that listing with the other MLS.
Freeman alleged that these Enhanced Services, although forming a portion of the benefits available to Sandicor's MLS subscribers, augmented and supplemented the MLS but were unnecessary to the use of the MLS; they were instead distinct and separate services. Freeman also alleged that the Enhanced Services were almost entirely worthless to subscribers; that subscribers would not have purchased these services if given the choice; and that the subscribers paid for the Enhanced Services only because Sandicor would not sell access to the MLS separately from the Enhanced Services.
Freeman's tying claim alleged: Sandicor conditioned sale of access to its MLS (the tying product) on purchase of the Enhanced Services (the tied product); Sandicor had sufficient economic power to force real estate agents wishing to purchase MLS access to also purchase the Enhanced Services; and a not insubstantial amount of sales in the tied product was effected by the tying arrangement.
Freeman alleged Sandicor's corporate form was a sham that should be disregarded and treated instead as a partnership of the local associations. Based on this premise, Freeman alleged the local associations were separate entities holding competing economic interests and each agreed with the others to eliminate price competition for Sandicor's MLS by fixing the price for the MLS and Enhanced Services at a uniform rate.
Freeman alleged Sandicor's fee for access to its MLS is excessive and violates the antitrust laws by excluding brokers who cannot afford to subscribe; as a result trade is restrained by limiting the number of competing brokers.
Several months after Freeman filed this class action lawsuit, Freeman asked Sandicor to appoint her to act as a service center. She promised to provide the MLS and Enhanced Services to her customers at rates lower than those charged by the other service centers. Sandicor refused to appoint her as a service...
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...36. CAL. BUS. & PROF. CODE §§ 17203, 17204. 37. 1941 Cal. Stat., ch 526 § 1. 38. See, e.g. , Freeman v. San Diego Ass’n of Realtors, 77 Cal. App. 4th 171, 183 n.9 (Cal. Ct. App. 1999); Vinci v. Waste Mgmt., 36 Cal. App. 4th 1811, 1814 n.1 (Cal. Ct. App. California 6-5 decisions are not cont......