Lain v. Real Estate Board of New Orleans, Inc

Decision Date08 January 1980
Docket NumberNo. 78-1501,78-1501
Citation444 U.S. 232,62 L.Ed.2d 441,100 S.Ct. 502
PartiesJames Jefferson McLAIN et al., Petitioners, v. REAL ESTATE BOARD OF NEW ORLEANS, INC., et al
CourtU.S. Supreme Court
Syllabus

Petitioners, claiming individually and on behalf of a certain class of real estate purchasers and sellers, instituted this private antitrust action in Federal District Court against respondents, certain real estate firms and trade associations and a class consisting of real estate brokers who had transacted realty brokerage business in the Greater New Orleans area during the four years preceding the filing of the complaint. Petitioners alleged, inter alia, that respondents had engaged in a price-fixing conspiracy in violation of § 1 of the Sherman Act through an agreement to conform to a fixed rate of brokerage commissions on sales of residential property. The complaint also included allegations that respondents' activities were "within the flow of interstate commerce and have an effect upon that commerce," and that respondents assisted their clients in securing financing and title insurance which came from sources outside the State. Respondents moved to dismiss the complaint for failure to state a claim under the Sherman Act, contending that their activities were purely local in nature and did not substantially affect interstate commerce. The District Court granted the motion to dismiss the complaint, holding that under Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572, there must be a substantial volume of interstate commerce involved in the overall real estate transaction and the challenged activity must be an essential, integral part of the transaction, inseparable from its interstate aspects; and that here a broker's participation in the presumably interstate aspects of securing title insurance and financing was only incidental rather than indispensable. The Court of Appeals affirmed, holding that under Goldfarb v. Virginia State Bar, supra, Sherman Act jurisdiction did not exist because petitioners had failed to demonstrate that real estate brokers are either necessary or integral participants in the interstate aspects of residential real estate financing and title insurance.

Held: The complaint should not have been dismissed at this stage of the proceedings. Pp. 241-247.

(a) To establish jurisdiction under the Sherman Act, a plaintiff must allege the relationship between the activity involved and some aspect of interstate commerce and, if these allegations are controverted, must submit evidence to demonstrate either that the defendants' activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce. Here, petitioners may establish the jurisdictional element of a Sherman Act violation by demonstrating a substantial effect on interstate commerce generated by respondents' brokerage activity, and petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix commission rates, or by those other aspects of respondents' activity that are alleged to be unlawful. Pp. 241-243.

(b) The courts below misinterpreted Goldfarb v. Virginia State Bar, supra, as requiring that petitioners demonstrate that real estate brokers are either necessary or integral participants in the interstate aspects of residential real estate financing and title insurance. The Goldfarb holding was not addressed to the "effect on commerce" test of jurisdiction and in no way restricted it to those challenged activities that have an integral relationship to an activity in interstate commerce. Pp. 243-245.

(c) Here, what was submitted to the District Court shows a sufficient basis for satisfying the Act's jurisdictional requirements under the "effect on commerce" theory so as to entitle petitioners to go forward. The record makes it clear that there is a basis for petitioners to proceed to trial where there will be opportunity to establish that an appreciable amount of commerce is involved in the financing of residential property in the Greater New Orleans area and in the insuring of titles to such property, that this appreciable commercial activity has occurred in interstate commerce, and that respondents' activities which allegedly have been infected by a price-fixing conspiracy have, as a matter of practical economics, a not insubstantial effect on the interstate commerce involved. Pp. 245-247.

583 F.2d 1315, vacated and remanded.

Richard G. Vinet, New Orleans, La., for petitioners.

Frank H. Easterbrook, Washington, D. C., for the U. S., as amicus curiae, by special leave of Court.

Harry McCall, Jr., New

Orleans, La., for respondents.

Mr. Chief Justice BURGER delivered the opinion of the Court.

The question in this case is whether the Sherman Act extends to an agreement among real estate brokers in a market area to conform to a fixed rate of brokerage commissions on sales of residential property.

I

The complaint in this private antitrust action, filed in the Eastern District of Louisiana in 1975, alleges that real estate brokers in the Greater New Orleans area have engaged in a price-fixing conspiracy in violation of § 1 of the Sherman Act, ch. 647, 26 Stat. 209, as amended, 15 U.S.C. § 1. No trial has as yet been had on the merits of the claims since the complaint was dismissed for failure to establish the interstate commerce component of the Sherman Act jurisdiction.

The complaint asserts a claim individually and on behalf of that class of persons who employed the services of a respondent real estate broker in the purchase or sale of residential property in the Louisiana parishes of Jefferson or Orleans (the Greater New Orleans area) during the four years preceding the filing of the complaint. The respondents are two real estate trade associations, six named real estate firms, and that class of real estate brokers who at some time during the period covered by the complaint transacted realty brokerage business in the Greater New Orleans area and charged a brokerage fee for their services. The unlawful conduct alleged is a continuing combination and conspiracy among the respondents to fix, control, raise, and stabilize prices for the purchase and sale of residential real estate by the systematic use of fixed commission rates, widespread fee splitting, suppression of market information useful to buyers and sellers, and other allegedly anticompetitive practices. The complaint asserts that respondents' conduct has injured petitioners in their business or property because the fees and commissions charged for brokerage services have been maintained at an artificially high and noncompetitive level, with the effect that the prices of residential properties have been artificially raised. The complaint seeks treble damages and injunctive relief as authorized by §§ 4 and 16 of the Clayton Act, 38 Stat. 731, 737, as amended, 15 U.S.C. §§ 15, 26.

The allegations of the complaint pertinent to establishing federal jurisdiction are:

(1) that the activities of the respondents are "within the flow of interstate commerce and have an effect upon that commerce";

(2) that the services of respondents were employed in connection with the purchase and sale of real estate by "persons moving into and out of the Greater New Orleans area";

(3) that respondents "assist their clients in securing financing and insurance involved with the purchase of real estate in the Greater New Orleans area," which "financing and insurance are obtained from sources outside the State of Louisiana and move in interstate commerce into the State of Louisiana through the activities of the [respondents]"; and (4) that respondents have engaged in an unlawful restraint of "interstate trade and commerce in the offering for sale and sale of real estate brokering services."

Respondents moved in the District Court to dismiss the complaint for failure to state a claim within the ambit of the Sherman Act. This motion was supported by a memorandum and by the affidavits of two officers of respondent Real Estate Board of New Orleans. The affiants testified that real estate brokers in Louisiana were licensed to perform their function in that State only, that there was no legal or other requirement that real estate brokers be employed in connection with the purchase or sale of real estate within Louisiana, and that the affiants had personal knowledge of such transactions occurring without the assistance of brokers. The function of real estate brokers was described as essentially completed when buyer and seller had been brought together on agreeable terms. The affiants also stated that real estate brokers did not obtain and were not instrumental in obtaining financing of credit sales, save in a few special cases, nor were they involved with examination of titles in connection with the sale of real estate or the financing of such sales.

The memorandum in support of the motion to dismiss sought to distinguish this case from Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), in which we held that § 1 of the Sherman Act had been violated by conformance with a bar association's minimum-fee schedule that established fees for title examination services performed by attorneys in connection with the financing of real estate purchases. The respondents construed the applicability of Goldfarb as limited by certain language in the opinion that described the activities of lawyers in the examination of titles as an inseparable and integral part of the interstate commerce in real estate financing. 421 U.S., at 784-785, 95 S.Ct., at 2011-2012. In contrast, with respect to this case, respondents asserted on the basis of the affidavits that "the role of . . . real estate brokers in financing such purchases is neither integral nor inseparable." Respondents contended (1) that...

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