Marin County Bd. of Realtors, Inc. v. Palsson

• Decision Date: 24 May 1976
• Docket Number: S.F. 23365
• Citation: 549 P.2d 833,130 Cal.Rptr. 1,16 Cal.3d 920
• Parties: , 549 P.2d 833, 1976-1 Trade Cases P 60,898 MARIN COUNTY BOARD OF REALTORS, INC., Plaintiff, Cross-Defendant and Respondent, v. Eugene PALSSON, Defendant, Cross-Complainant and Appellant.
• Court: California Supreme Court

Page 1

130 Cal.Rptr. 1

16 Cal.3d 920, 549 P.2d 833, 1976-1 Trade Cases P 60,898

MARIN COUNTY BOARD OF REALTORS, INC., Plaintiff, Cross-Defendant and Respondent, v. Eugene PALSSON, Defendant, Cross-Complainant and Appellant.

S.F. 23365.

Supreme Court of California In Bank.

May 24, 1976.

Harold L. Howard and Quantz & Howard, San Francisco, for defendant, cross-complainant and appellant.

Evelle J. Younger, Atty. Gen., Warren J. Abbott and Anthony C. Joseph, Asst. Attys. Gen., Michael I. Spiegel and William S. Clark, Deputy Attys. Gen., John K. Van de Kamp, Dist. Atty., Harry B. Sondheim and Jay J. Becker, Deputy Dist. Attys., as amici curiae for defendant, cross-complainant and appellant.

Bianchi, Hoskins & Rosenberg and Bagley, Bianchi, Hoskins & Rosenberg, Albert Bianchi and Hugh J. Cadden, San Rafael, for plaintiff, cross-defendant and respondent. Broceck, Phleger & Harrison, San Francisco, Broceck, Phleger & Harrison, Saen Francisco, as amici curiae.

MOSK, Justice.

We decide here for the first time the extent to which the state antitrust law circumscribes the practices of a multiple listing service operated by a county board of realtors. We conclude that the Marin County Board of Realtors has violated the Cartwright Act (Bus. & Prof.Code, §§ 16720, 16726) by limiting its membership to persons primarily engaged in the real estate business and by denying nonmembers access to its multiple listing service.

The board is an incorporated real estate association affiliated with the California Real Estate Association and the National Association of Real Estate Boards. As of the time of trial in the present case, the board was composed of 777 associate members (salesmen), 255 active members (brokers), 50 affiliates and 4 honorary members. Three-fourths of the brokers actively engaged in selling residential real property in Marin County were members of the board.

The board provides a number of benefits to its members, the most important of which is the only multiple listing service for residential property operating exclusively in Marin County. ¹ The multiple listing service is a system for pooling each member's listing in a central registry. A member obtaining a client who desires to sell real property forwards the listing to the multiple listing service. If the sale is eventually made through another member broker, the commission is divided between the selling and the listing broker.

The listings are available only to active and associate board members, who are prohibited by the board's bylaws from disseminating published listings to nonmembers Although each active member may cooperate with nonmember brokers in selling his own listing, the actual extent of such cooperation is negligible. In 1972, out of 5,372 properties listed with the multiple listing service, only 51 were sold by nonmembers.

Eugene Palsson, a licensed real estate salesman, applied to the board for membership after obtaining employment with an active member. His application was denied because the board found that Palsson, an airline flight engineer, did not meet the requirements of one of the board's bylaws which provided that an associate member must be 'primarily engaged in the real estate business.' This provision was enforced through sanctions against an active member sharing offices with or employing a person denied membership in the board. Thus, a salesman denied membership was also denied employment with 75 percent of the residential brokers in Marin County. ²

When Palsson contested the board's decision, the board brought suit in superior court, seeking a declaration that his exclusion was valid. Palsson filed a cross-complaint seeking declaratory relief, injunctions granting him board membership and access to the multiple listing service, and damages. The court, after nonjury trial, ruled in favor of the board on all issues, finding that the regulations in question were reasonable.

Before reaching the merits, we confront two preliminary issues. We must determine whether the Cartwright Act applies to the real estate industry and we must consider the board's contention that the case is now moot.

I

While neither of the parties raise the issue, the California Association of Realtors (CAR), in an amicus brief, maintains that the Cartwright Act does not apply to the sale of services. This theory, raised here for the first time, appears to be contrary to federal and state authority. Indeed, the United States Supreme Court has expressly held that the Sherman Act applies to the activity of real estate brokers. (United States v. National Association of Real Estate Boards (1950) 339 U.S. 485, 490--491, 70 S.Ct. 711, 94 L.Ed. 1007.) A long line of California cases has concluded that the Cartwright Act is patterned after the Sherman Act and both statutes have their roots in the common law. Consequently, federal cases interpreting the Sherman Act are applicable to problems arising under the Cartwright Act. (See, e.g., Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 315, 70 Cal.Rptr. 849, 444 P.2d 481; Sherman v. Mertz Enterprises (1974) 42 Cal.App.3d 769, 775, 117 Cal.Rptr. 188; R. E. Spriggs Co. v. Adolph Coors Co. (1974) 37 Cal.App.3d 653, 659, fn. 5, 112 Cal.Rptr. 585; People v. Santa Clara Valley Bowling etc. Assn. (1965) 238 Cal.App.2d 225, 232, 47 Cal.Rptr. 570.)

Despite this line of authority, CAR contends the legislative history behind the Cartwright Act and its language contradict its application to a service-oriented industry. The state law, insists the CAR, was patterned not after the Sherman Act, but on the then existing identically worded antitrust statutes of a number of states, notably Michigan. CAR then cites a turn-of-the-century Michigan case for the proposition that that state's antitrust law does not apply to the sale of human services. (Hunt v. Riverside Co-operative Club (1905), 140 Mich. 538, 104 N.W. 40.)

It is highly debatable that CAR's version of legislative history is accurate. Although the Cartwright Act is worded identically to Michigan's law, both statutes are near carbon copies of an earlier proposed amendment to the Sherman Act. The record of Congressional debates reveals that this unsuccessful amendment was designed not to narrow the scope of the Sherman Act but to broaden it. Its author, Senator Reagan, declared, 'I confess to a little surprise at the suggestion . . . that the amendment which I have submitted is different in character from the measure which he has reported . . ..' (21 Cong.Rec. 2564 (Mar. 24, 1890).) Indeed, he explained, 'I have tried . . . to see if we could not devise a law that would arrest and prevent these trusts as far as the jurisdiction of Congress would go.' (21 Cong.Rec. 2645 (Mar. 26, 1890).) Thus, it is difficult to infer from the annals of legislative history an intent to enact a law narrower in scope than the Sherman Act.

Even if CAR is correct in advising that we must look to the case law in states with identically worded statutes, the result is not helpful to its underlying theory. Hunt, the Michigan case cited by CAR for the proposition that the antitrust law does not apply to the sale of human services, actually stands for the far more narrow holding that the antitrust law did not prevent employers from fixing the wages paid to plumbers. ³ A more recent Michigan opinion, commended by CAR in another portion of its brief as 'extensive and careful,' declared, "The Michigan Act is patterned after the Sherman Act . . ." and applied the state law to the activities of a multiple listing service operated by real estate brokers. (Barrows v. Grand Rapids Real Estate Board (1974) 51 Mich.App. 75, 214 N.W.2d 532, 536.) Other decisions construing statutes cast in the same language as the Cartwright Act have applied antitrust laws to realtors (Bratcher v. Akron Area Board of Realtors (6th Cir. 1967) 381 F.2d 723 and to insurance companies (State v. American Surety Co. (1912), 91 Neb. 22, 135 N.W. 365).

CAR also refers to the provisions of Business and Professions Code section 16720, which defines a trust as a combination of capital, skill or acts by two or more persons '(a) To create or carry out restrictions in trade or commerce.' While that language is as broad as any found in the Sherman Act, CAR observes that subsequent subdivisions, defining specific types of trusts, speak primarily of problems relating to 'merchandise' or 'commodities.' These terms refer to goods, not services, asserts CAR, and the broad language of subdivision (a) must be read in that light to exclude services from its scope.

This inhibiting interpretation is insupportable in California case law, which has broadly defined 'commodity' and just as liberally construed the provisions of the Cartwright Act. In Speegle v. Bd. of Fire Underwriters (1946) 29 Cal.2d 34, 172 P.2d 867, we applied the act to an agreement among insurance underwriters and agents, holding both that insurance is 'commerce' under subdivision (a) and a 'commodity' under subsequent subdivisions. We also applied the Cartwright Act in People v. Building Maintenance etc. Assn. (1953) 41 Cal.2d 719, 264 P.2d 31 to the building maintenance contracting business, although only the sale of services was involved. And in Messner v. Journeymen Barbers etc. International Union (1960) 53 Cal.2d 873, 886, 4 Cal.Rptr. 179, 187, 351 P.2d 347, 355, we stated flatly, 'Although human labor is not a 'commodity' under the act (§ 16703), a service consisting in the main of human labor is.'

The only limitation on the broad sweep of the Cartwright Act can be found in section 16703, which provides, 'Within the meaning of this chapter, labor, whether skilled or unskilled, is not a commodity.' This provision was apparently patterned after a similar portion of the federal Clayton Act (15 U.S.C. 17) that was passed in response to federal court decisions applying the Sherman Act to proscribe activities of labor unions. (Allen...