Market Force Inc. v. Wauwatosa Realty Co., 89-1674

• Decision Date: 11 July 1990
• Docket Number: No. 89-1674,89-1674
• Citation: 906 F.2d 1167
• Parties: , 1990-2 Trade Cases 69,094 MARKET FORCE INCORPORATED, Plaintiff-Appellant, v. WAUWATOSA REALTY COMPANY, Coldwell Banker Bruce Barry & Gleysteen, Incorporated, Four Seasons Realty, Incorporated, and Century 21 Properties Limited, 1 Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1167

906 F.2d 1167

59 USLW 2085, 1990-2 Trade Cases 69,094

MARKET FORCE INCORPORATED, Plaintiff-Appellant, v. WAUWATOSA REALTY COMPANY, Coldwell Banker Bruce Barry &amp Gleysteen, Incorporated, Four Seasons Realty Incorporated, and Century 21 Properties Limited, ¹ Defendants-Appellees No. 89-1674.

United States Court of Appeals Seventh Circuit.

Argued Sept. 25, 1989.

Decided July 11, 1990.

Edwin J. Hughes, Stafford, Rosenbaum, Rieser & Hansen, Madison, Wis., for plaintiff-appellant.

Walter F. Schmidt, Kent A. Tess-Mattner, Schmidt & Rupke, Marcia R. Rimai, Richard J. Sankovitz, Whyte & Hirschboeck, and Warren S. Blumenthal, Blumenthal, Jacquart, Blumenthal & Leib, Milwaukee, Wis., for defendants-appellees.

Before BAUER, Chief Judge, and RIPPLE and MANION, Circuit Judges.

RIPPLE, Circuit Judge.

Market Force began operations in 1986 as a real estate buyers' broker. In this case, it alleged that a group of realtors had conspired to drive it out of business in violation of Section 4 of the Clayton Act (15 U.S.C. Sec. 15) and Section 1 of the Sherman Act (15 U.S.C. Sec. 1).

Market Force's motion for a preliminary injunction was denied by the district court. Subsequently, the defendants individually filed motions for summary judgment. The district court granted these motions. Market Force now appeals the grant of summary judgment to the defendants. For the following reasons, we affirm.

I BACKGROUND

A. Facts

1. Market Force and the Real Estate Business

According to the record, residential real estate sales generally begin when a homeowner signs an exclusive marketing contract with a broker. The broker ("listing broker") then lists the property on a local "multiple listing service" (MLS). By listing on the MLS, the broker is making a general offer of subagency to any salesperson who can find a buyer to complete the sale. Other salespeople can show the house and try to arrange a sale with a prospective buyer. These individuals are called "selling brokers" or "selling agents" and, while working primarily with the buyer, are considered to be agents of the seller. In fact, their duty of loyalty lies with the seller. While commissions may vary, the traditional commission is 6% of the cost of the house, split so that the listing broker receives 60% (or 3.6% of the cost of the house) and the selling agent receives 40% (or 2.4% of the cost of the house).

Market Force began operations in 1986 as a "buyers' broker." It differed from traditional real estate firms in that it signed exclusive contracts with individuals seeking to purchase a house. The Market Force agent would find houses that the agent believed might interest clients, and show the houses to them. Most significantly, Market Force agents owed their duty of loyalty to the buyers. The contract between Market Force and the buyers specified that Market Force would receive a fee equal to 40% of the sales commission, or 2.4% of the selling price. The contract further anticipated that, at the time of sale, the buyer would request that the listing broker pay Market Force this commission. If the broker cooperated, the buyer would owe no further obligation to Market Force.

2. The Real Estate Community's Reaction to Market Force

For some time after Market Force began operation, other real estate firms treated Market Force in an inconsistent manner with respect to splitting commissions. Some firms paid a full 40% commission and others paid nothing. Mayfair Homes was the first real estate firm to adopt a concrete policy, deciding in September 1987 not to share any part of its sales commissions with Market Force. At the same time, Wauwatosa Realty Company (Wauwatosa), a large real estate firm in Milwaukee and throughout Wisconsin, occasionally split commissions and occasionally refused entirely to enter into sales contracts with Market Force buyers.

Before formulating a policy about splitting commissions with buyers' brokers, Joann Glawe, Wauwatosa's general sales manager, contacted Mayfair Homes and inquired about its policy. Wauwatosa subsequently issued its policy on October 23, 1987. Its policy was to pay a buyers' broker the same fee it paid to out-of-state or non-MLS brokers who refer a buyer to Wauwatosa. The district court noted that:

According to her affidavit, Ms. Glawe wrote the Wauwatosa policy with specific business reasons in mind: (1) Wauwatosa was paying the same 20% referral fee to out-of-state and non-MLS brokers who referred buyers to Wauwatosa; (2) Wauwatosa might have to pay a selling agent in a transaction even though a buyers' agent was involved, where, for example, a selling agent held an open house and the buyer represented by a buyers' agent toured the home; (3) Wauwatosa pays its listing agents more when a buyers' agent but not a selling agent is involved, on the theory that the listing agent must take on some of the duties of a selling agent, such as answering questions on behalf of the seller; and (4) buyers' agents have lower costs than selling agents because they do not list homes in the MLS.

The Market Force, Inc. v. Wauwatosa Realty Co., 706 F.Supp. 1387, 1390-91 (D.Wis.1989). Wauwatosa mailed a sheet describing its policy to all brokers listed in the MLS book--about 250 firms. Ms. Glawe testified at a deposition that she undertook this mailing following a conversation with Peter Shuttleworth, director of the MLS, who told her that "other brokers other than just buyer brokers were [acting as buyers' brokers] and it might be well to let everyone know." Id.

Coldwell Banker, which lists the second highest quantity of homes in Milwaukee after Wauwatosa, issued its policy on November 11, 1987, after reviewing Wauwatosa's policy. It set its commission rate at 20% of the total commission, a figure its chief operating officer may have believed mistakenly was the same as Wauwatosa's. ² It also mailed its policy to all MLS brokers. In subsequent months, several other firms issued policy statements about sharing commissions with buyers' brokers. The rates were the same as those offered by Wauwatosa or Coldwell--either 10% or 20% of the total sales commission. All the firms that eventually adopted commission policies for buyers' brokers together represented about 31% of the annual listings of homes for sale in the Milwaukee MLS.

Market Force had several negative experiences with other brokers. Several sales were lost due to intransigence about sharing commissions. R.52 at 2; R.54 at 7. One Market Force buyer was told not to work with Market Force and that she would not get the home she was viewing unless she worked with a sales broker instead of Market Force's agent. R.87 Ex. 15 (McGrew Affidavit). At one closing, an agent for Four Seasons Realty told the president of Market Force that "everyone is against you" and that Market Force should quit business. R.54 at 10.

Market Force advertised in local television and print media. In November 1986, as a result of other real estate firms' complaints, the editor of a magazine wanted to remove Market Force's advertisement. The other firms apparently threatened to remove their own advertisements from the magazine if Market Force's advertisement was not removed. R.54 at 5. ³ Several complaints also were made to the executive director of the MLS.

Market Force decided not to enforce its contracts with buyers-clients that would entitle Market Force to collect from them the difference between the amount actually paid as commissions by other brokers and 2.4% of the sale price (the amount guaranteed to Market Force in its contract with its buyers-clients). However, it paid its

agents the fee they would have received if Market Force had received 2.4% of the sale price. Despite the fact that Market Force absorbed this difference, all of its agents eventually left. The company ceased operations in the fall of 1988.

B. The District Court Opinion

Market Force sued under section 4 of the Clayton Act, which permits parties to seek redress for violations of the antitrust laws. Specifically, Market Force alleged that the defendants violated section 1 of the Sherman Antitrust Act. 15 U.S.C. Sec. 1. ⁴

As an initial matter, the district court noted that, in order to find antitrust liability on the part of the defendants, a jury would have to find that the defendants " 'had a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement....' " 706 F.Supp. at 1393 (quoting American Tobacco Co. v. United States, 328 U.S. 781, 810, 66 S.Ct. 1125, 1139, 90 L.Ed. 1575 (1946)). Proof of conspiracy, the district court noted, "requires parallel behavior plus additional facts or circumstances that raise the inference of agreement." Id. Furthermore, to defeat a motion for summary judgment, the court observed, the plaintiff must come forward with evidence that dispels the possibility that the defendants were acting for independent business reasons. Id. at 1394.

Applying these standards, the district court concluded that Market Force had not put forward evidence that would permit a jury to conclude that the defendants had engaged in a conspiracy in restraint of trade. The evidence of any agreement presented was circumstantial. Notably, the action of the defendants was not totally parallel ⁵ and involved no more than a third of all properties in the MLS computer. The district court determined that the evidence presented by Market Force of several instances of "hostility" failed to exclude the possibility that the defendants did not conspire. Id. at 1395. Moreover, several defendants had put forward evidence of independent business reasons for adopting a policy regarding buyers' brokers. The district court summarized its reasoning as follows:

Simply stated, coincidence does not a conspiracy make. And even drawing the inferences in favor of Market Force, a conspiracy is not the "compelling, if not exclusive, rational inference" from the record.

Id. (quoting Weit v....