McLain v. Real Estate Bd. of New Orleans, Inc.

• Decision Date: 15 November 1978
• Docket Number: No. 77-2423,77-2423
• Citation: 583 F.2d 1315
• Parties: 1978-2 Trade Cases 62,341 James Jefferson McLAIN et al., Plaintiffs-Appellants, v. REAL ESTATE BOARD OF NEW ORLEANS, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1315

583 F.2d 1315

1978-2 Trade Cases 62,341

James Jefferson McLAIN et al., Plaintiffs-Appellants, v. REAL ESTATE BOARD OF NEW ORLEANS, INC., et al., Defendants-Appellees.

No. 77-2423.

United States Court of Appeals, Fifth Circuit.

Nov. 15, 1978.

John P. Nelson, Jr., Richard G. Vinet, New Orleans, La., for plaintiffs-appellants.

Moise W. Dennery, J. William Vaudry, Jr., New Orleans, La., David A. Donohoe, Edward F. Schiff, Washington, D. C., for Latter and Blum.

Roy L. Price, Metairie, La., Cynthia Samuel, Tulane University School of Law, New Orleans, La., for Sandra, Inc.

Arthur L. Ballin, Frank C. Dudenhefer, New Orleans, La., Harry McCall, Jr., Robert S. Rooth, New Orleans, La., for Real Estate Bd. of New Orleans.

Edward F. Wegmann, F. P. Westenberger, New Orleans, La., for Waguespack, Pratt, Inc.

Harry S. Redmon, Jr., Rutledge Clement, Jr., New Orleans, La., for Gertrude Gardner, Inc.

Charles F. Barbera, Metairie, La., for Stan Weber.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GEWIN, GODBOLD and MORGAN, Circuit Judges.

LEWIS R. MORGAN, Circuit Judge:

This is an alleged class action brought on behalf of buyers and sellers of residential property in the New Orleans area. Claiming that the defendant realty associations and realtors have conspired to fix the prices of their services, the plaintiffs seek declaratory and injunctive relief as well as the recovery of treble damages. In proceedings below, the defendants filed a motion to dismiss ¹ asserting that the challenged brokerage activities were wholly intrastate in nature and thus fell beyond the reach of federal antitrust prohibitions. Initially, the district court withheld ruling on this motion and prescribed further discovery limited to the question of whether the facts of this case could be brought within Goldfarb v. Virginia State Bar, 421 U.S. 733, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1974). After further discovery, the court concluded that the brokerage activity at issue neither occurs in nor substantially affects interstate commerce; accordingly, the defendants' motion to dismiss was granted. On appeal, a multi-faceted challenge is raised against the lower court dismissal. Examining the various contentions in light of the particular averments of the pleadings, we agree with the lower court.

Our starting point is the recognition that jurisdiction under the Sherman Act extends to the furthest reaches of congressional power to regulate commerce. United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 558-559, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944). The constitutional boundaries of congressional power vary according to the nature of the activity and regulatory scheme at issue. "There is no single concept of interstate commerce which can be applied to every federal statute regulating commerce." McLeod v. Threlkeld, 319 U.S. 491, 495, 63 S.Ct. 1248, 1250, 87 L.Ed. 1538 (1943). Under the Sherman Act, this vast, intractable expanse of federal jurisdiction is defined through a dual analysis. Jurisdiction is conferred if the acts complained of occur in the flow of commerce, or if these acts, though local in nature, substantially affect interstate commerce. Battle v. Liberty Nat'l Life Ins. Co., 493 F.2d 39, 395 (5th Cir. 1974), cert. denied, 419 U.S. 1110, 95 S.Ct. 784, 42 L.Ed.2d 807 (1975); Las Vegas Merchant Plumbers Ass'n v. United States, 210 F.2d 732, 739 n. 3 (9th Cir.), Cert. denied, 348 U.S. 817, 75 S.Ct. 29, 99 L.Ed. 645 (1954). With the "in commerce" test, the impact on interstate commerce is judged according to a qualitative standard even insubstantial activity placed directly in the flow of commerce satisfies the jurisdictional requisite. Radiant Burners, Inc. v. Peoples Gas, Light & Coke Co., 364 U.S. 656, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961). The "effect on commerce" test, however, requires a quantitative analysis of the substantiality of the impact on interstate commerce. Mandeville Island Farms v. United States, 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948). Thus, activity imposing merely an "incidental" or "insubstantial" effect on commerce may fall beyond federal power. Apex Hosiery Co. v. Leader, 310 U.S. 469, 510, 60 S.Ct. 982, 84 L.Ed. 1311 (1940).

In the present case, the appellants argue that in today's world, real estate brokerage activities meet both tests of jurisdiction. We emphasize, though, that with both the "in commerce" and "effect on commerce" tests, we do not consider all of the ramifications that real estate sales have on nation-wide commerce. Instead, we must focus on the impact of the particular activities challenged in the appellants' complaint. The test is not that "the acts complained of affect a business engaged in interstate commerce, but that the conduct complained of affects the interstate commerce of such business." Page v. Work, 290 F.2d 323, 330 (9th Cir.), Cert. denied,368 U.S. 875, 82 S.Ct. 121, 7 L.Ed.2d 76 (1961). Examining the specific acts complained of in this case, we hold that they fail to establish jurisdiction under the "in commerce" test. The complaint alleges price-fixing of fees for the defendants' services in connection with sales of residential real estate in the New Orleans area. Such activity is entirely local in character. Real property is itself the quintessential local product. Further, the only sales activity mentioned in the pleadings occurs wholly intrastate. In such circumstances lower courts have consistently held that real estate brokerage does not fall within the flow of interstate commerce. Marston v. Ann Arbor Property Mgt. Ass'n, 302 F.Supp. 1276, 1279-80 (E.D.Mich.1969), Aff'd,422 F.2d 836 (6th Cir. 1970); Cotillion Club, Inc. v. Detroit Real Estate Bd., 303 F.Supp. 850 (E.D.Mich.1964). Moreover, a Supreme Court decision considering real estate activities in Washington, D. C. noted, "(t)he fact that no interstate commerce is involved is not a barrier to this suit." United States v. National Ass'n of Real Estate Bds., 339 U.S. 485, 488, 70 S.Ct. 711, 714, 94 L.Ed. 1007 (1950). Within our circuit is the view that this dictum supports concluding that real estate brokers do not operate within the flow of commerce. Hill v. Art Rice Realty Co., 66 F.R.D. 449, 454 (N.D.Ala.1974), Aff'd, 511 F.2d 1400 (5th Cir. 1975). In denying jurisdiction under the "in commerce" test, we emphasize the limited scope of our holding. Here we are not considering pleadings that allege price fixing in appreciable sales of realty to out-of-state buyers. That might be a different matter. ² Instead, this complaint asserts only that some individuals victimized by the defendants are persons moving in and out of the New Orleans area, "(t)he cases uniformly hold that the mere movement of individuals from one state to another in order to utilize particular services does not transfer those services into interstate services within the meaning of the Sherman Act." (cites omitted). Diversified Brokerage Services, Inc. v. Greater Des Moines Bd. of Realtors,521 F.2d 1343, 1346 (8th Cir. 1975).

The more compelling jurisdictional argument advanced by the appellants is their contention that the controverted brokerage activities substantially affect interstate commerce. This question has spawned a significant conflict of authority. Cases finding an interstate commerce nexus include United States v. Atlanta Real Estate Bd. 1972 Trade Reg.Rep. P 73, 825 (N.D.Ga.1971); Knowles v. Tuscaloosa Bd. of Relators, No. 75-P-591 (N.D.Ala.) (unreported); Wiles v. Tampa Bd. of Realty, Inc., No. 74-136 Cir. T-K (M.D.Fla.) (unreported); United States v. Jack Foley Realty, Inc., (1977) Trade Reg.Rep. (D.Md.1977); Gateway Assoc. Inc. v. Essex-Costello, Inc., 380 F.Supp. 1089, 1094 (N.D.Ill.1974); Mazur v. Behrens, (1974-1) Trade Reg.Rep. P 75,070 (N.D.Ill.1972). ³ Among the decisions rejecting the sufficiency of the interstate commerce element are Manion v. Jefferson Bd. of Realtors, No. 73-2604 (E.D.La.1974), Aff'd, No. 74-1901 (5th Cir. 1975); Income Realty & Mortgage, Inc. v. Denver Bd. of Realtors, No. 77-2051, 578 F.2d 1326 (10th Cir. 1978) (opinion emphasized no Per se restraint involved); Bryan v. Stillwater Bd. of Realtors, No. 77-1111, 578 F.2d 1319 (10th Cir. 1977); Marston v. Ann Arbor Property Mgt. Ass'n, 302 F.Supp. 1276 (E.D.Mich.1969), Aff'd, 422 F.2d 836 (6th Cir. 1970); Cotillion Club, Inc. v. Detroit Real Estate Bd., 303 F.Supp. 850 (E.D.Mich.1964). Cf. Hill v. Art Rice Realty, 66 F.R.D. 449, 511 (N.D.Ala.1974), Aff'd 511 F.2d 1400 (5th Cir. 1975) (defendants' position had strong support). These diverse conclusions result in part from the varying factual gradations alleged. Instead of claiming to neatly reconcile these decisions though, we return to our polestar for analysis the specific allegations of the complaint in this case. One paragraph says that many of the defendants' customers are "persons moving into and out of the Greater New Orleans area." For the same reason that such movement does not thrust intrastate activity "in commerce," courts have held that the passage of people across state lines to procure services does not mean that those services have a substantial effect on interstate commerce. E. g., Cotillion Club, Inc. v. Detroit Real Estate Bd., supra. ⁴

The second and primary averment is that the defendants participate in securing home financing and title insurance "obtained from sources outside the State of Louisiana." Armed principally with this allegation, the appellants advance three arguments to overcome the district court's dismissal of their action. First, they contend that allegations of Per se violations, such as price fixing, give rise to a presumption of a substantial effect on commerce. Next, appellants argue that even without the benefit of this presumption, the facts and allegations of the present case are controlled by the Supreme Court's decision in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44...