McLain v. Real Estate Bd. of New Orleans, Inc., Civ. A. No. 75-3402.

• Decision Date: 31 May 1977
• Docket Number: Civ. A. No. 75-3402.
• Citation: 432 F. Supp. 982
• Parties: James Jefferson McLAIN et al. v. REAL ESTATE BOARD OF NEW ORLEANS, INC., et al.
• Court: U.S. District Court — Eastern District of Louisiana

432 F. Supp. 982

James Jefferson McLAIN et al. v. REAL ESTATE BOARD OF NEW ORLEANS, INC., et al.

Civ. A. No. 75-3402.

United States District Court, E. D. Louisiana.

May 31, 1977.

John P. Nelson, Jr., Ms. Patricia Saik, Nelson, Nelson & Lombard, Ltd., New Orleans, La., for plaintiffs.

Charles F. Barbera, for Stan Weber & Associates, Inc.

Arthur L. Ballin, for Real Estate Board of New Orleans, Inc.

Moise W. Dennery, J. W. Vaudry, Jr., for Latter & Blum, Inc.

Harry McCall, Jr., Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, La., for Isabelle C. McLeod.

Roy L. Price, for Jefferson Board of Realtors, Inc.

Harry S. Redmon, Jr., Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Gertrude Gardner, Inc.

Ms. Cynthia Samuel, for Sandra, Inc.

Edward F. Wegmann, for Waguespack, Pratt, Inc.

MEMORANDUM OPINION AND ORDER

BOYLE, District Judge.

This intended class action was brought on behalf of buyers and sellers of residential property in the New Orleans area who have used the services of real estate brokers. Plaintiffs allege that the defendant associations and realtors have conspired to fix and control the price of these services in violation of the Sherman Anti-Trust Act (15 U.S.C. §§ 1 et seq.). They seek declaratory and injunctive relief as well as the recovery of treble damages.

A motion to dismiss the action was filed by defendants on the ground the challenged brokerage activities are wholly intrastate in nature and, since they neither occur in nor substantially affect interstate commerce, are beyond the ambit of federal anti-trust prohibition.¹ We took the matter under submission and now, having considered the memoranda of counsel and the relevant documents of record, we conclude defendants' motion must be granted and the action dismissed.

Plaintiffs raised several arguments in initially opposing the motion, but we found these groundless save for the contention that brokers in this area participate in securing the financing and insurance necessary to consummate the sale/purchase of real estate.² We reasoned that, to the extent the financing and insurance aspects of real estate transactions may be shown to be interstate in nature, defendants' practical nexus therewith might satisfy the jurisdictional requirement of the Sherman Act pursuant to the Supreme Court holding in Goldfarb v. Virginia State Bar. See 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975). Accordingly, the parties were advised in conference that the issue at hand could be narrowed to the applicability of Goldfarb, and counsel were directed to engage in further discovery and submit additional memoranda addressed to this point. See Minute Entry of 9/3/76 Record Doc. # 26.³

The Goldfarb case, like this one, involved allegations of price-fixing violative of the Sherman Act — there, through a minimum fee schedule prescribed by the defendant bar association and applied to legal services for title examinations relative to residential real estate transactions. The Goldfarb defendant likewise argued that since these legal services were performed intrastate and were essentially local in nature, they did not substantially affect interstate commerce within the meaning of the Sherman Anti-Trust Act. The Supreme Court disagreed, however, noting that the transactions which created the need for the legal services in question were themselves interstate in character. Not only did the purchases involve financing through a significant amount of out-of-state funds, but a significant number of the loans were guaranteed by out-of-state government agencies. The Court went on to find that

the necessary connection between the interstate transactions and . . . the minimum fee schedule is present because, in a practical sense, title examinations are necessary in real estate transactions to assure a lien on a valid title of the borrower. . . . Thus a title examination is an integral part of an interstate transaction . . . . Given the substantial volume of commerce involved, and the inseparability of this particular legal service from the interstate aspects of real estate transactions we conclude that interstate commerce has been sufficiently affected.

Emphasis added.

95 S.Ct. at 2011-12.

It is clear that any inquiry based upon this decision must be twofold: 1) whether a "substantial" volume of interstate commerce is involved in the overall real estate transaction, and 2) whether the challenged activity is an essential, integral part of the transaction and inseparable from its interstate aspects. Yet in this case — even were it assumed arguendo, as plaintiffs purport to establish, that many title insurance companies issuing policies on local residential property are situated outside of Louisiana and, moreover, that the businesses providing the necessary financing in local real estate purchases extend across state lines — the second criterion of Goldfarb remains unsatisfied. Those real estate financing officials who were deposed consistently testified that, while brokers customarily contact mortgage companies to solicit financing information on behalf of clients and on occasion even transport clients to the company offices, the actual financing process involves only the lender and borrower and the brokerage service is in no way an integral aspect thereof. See, e. g., Dep. of Edmond G. Miranne, at 23-26 Record Doc. # 53; Dep. of Julian O. Hecker, Jr., at 32, 36-37 Record Doc. # 55. Stan Weber, Chairman of the Board of one of the defendant companies, essentially corroborated this testimony, stating that brokers might be asked by purchasers about the best financing available, but "cannot assist someone to secure financing." See Dep. of Stan Weber, at 40 Record Doc. # 61. With regard to title insurance, it also appears through deposition testimony that the actual procurement process takes place between the insurer and lending institution/purchaser, the only contact between an insurer and broker being that the former does provide information concerning its services to various realtors. See Dep. of James W. Mills, Jr., generally and at 15-16, 18 Record Doc. # 58.⁴

Plaintiffs correctly observe that a broker's commission usually is earned only after the buyer has been successful in securing financing⁵ and that, as a practical matter, title insurance is a precondition to execution of the loan. Nonetheless, the inescapable conclusion to be drawn from the evidence is that the participation of the broker in these (presumably interstate) phases of the real estate transaction is an incidental rather than indispensable occurrence in the transactional chain of events. We regard as still unrefuted the sworn statements of two brokers — filed in conjunction with defendants' motion — to the effect...