People ex rel. Woodard v. Colorado Springs Bd. of Realtors, Inc.

• Decision Date: 17 December 1984
• Docket Number: No. 82SC209,82SC209
• Citation: 692 P.2d 1055
• Parties: 1985-1 Trade Cases P 66,327 The PEOPLE of the State of Colorado ex rel. Duane WOODARD, Attorney General, Plaintiff-Appellee, v. The COLORADO SPRINGS BOARD OF REALTORS, INC., Defendant-Appellant.
• Court: Colorado Supreme Court

Page 1055

692 P.2d 1055

1985-1 Trade Cases P 66,327

The PEOPLE of the State of Colorado ex rel. Duane WOODARD Attorney General, Plaintiff-Appellee, v. The COLORADO SPRINGS BOARD OF REALTORS, INC., Defendant-Appellant.

No. 82SC209.

Supreme Court of Colorado En Banc.

Dec. 17, 1984.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard Forman, Sol. Gen., Thomas P. McMahon, Asst. Atty. Gen., Denver, for plaintiff-appellee.

Darrell D. Thomas, Colorado Springs, Gorsuch, Kirgis, Campbell, Walker & Grover, John L. Ferguson, Denver, for defendant-appellant.

John R. Linton, Robert D. Butters, Chicago, Ill., for amicus curiae Nat. Ass'n of Realtors.

KIRSHBAUM, Justice.

Pursuant to C.A.R. 50, we granted certiorari to review the trial court's judgment after a trial to the court concluding that certain membership practices of the Colorado Springs Board of Realtors (the Board) constituted an unreasonable restraint of trade in violation of section 6-4-101, 2 C.R.S. (1984 Supp.), and ordering the Board to amend certain provisions of its bylaws. The Board argues that the trial court applied erroneous legal standards to the evidence, failed to enter sufficient findings of fact, and, alternatively, entered an injunction which is impermissibly broad. We reverse and remand for further proceedings.

A brief summary of the procedural history of this case and of the trial court's remedial order will prove helpful. On September 6, 1978, the State of Colorado filed a civil action against the Board seeking injunctive relief on the basis of two claims of alleged antitrust violations. The first claim asserted that the Board's refusal to publish flat fee listings in a Multiple Listing Service (MLS) it produced constituted price-fixing and an unreasonable restraint of trade. The second claim alleged that Board restrictions on access to the MLS also constituted an unreasonable restraint of trade. The complaint requested injunctive relief to restrain these alleged statutory violations. ¹

At the conclusion of the State's evidence, the trial court granted a motion by the Board to dismiss the first claim as moot. With respect to the second claim, the trial court concluded on the basis of all of the evidence that the Board's conduct constituted an illegal restraint of trade and enjoined the Board "from adopting, publishing or enforcing any requirement for ... membership not necessary to the efficient operation of the multiple listing service, and to refrain from imposing any initiation fee or membership dues to be [disbursed] for any purpose not necessary" to that end. ²

I

The following facts are material to the resolution of the legal questions posed by this appeal. The Board is a non-profit voluntary trade association whose membership in 1978 included approximately 1,800 ³ licensed real estate brokers (Class A members) and salespersons (Class B members). The Board is a member of the National Association of Realtors (NAR) and has as its primary trade area El Paso County, Colorado. Licensed real estate brokers may become Class A members of the Board by demonstrating compliance with the following requirements: (1) a valid real estate broker license; (2) a place of business within the Board jurisdiction and (3) in compliance with local zoning regulations; (4) a favorable business reputation; (5) a sound credit rating; (6) completion of the Board Indoctrination Course; (7) intent to abide by NAR's Code of Ethics; and (8) intent to abide by all rules of the local, state and national organizations. In recent years, no applicant has been denied Board membership for any reason.

By virtue of membership in the Board, one automatically becomes a member of the Colorado Board of Realtors and of NAR, and is, by virtue of the latter membership, entitled to use the trademark "REALTOR." Members agree to abide by NAR's Code of Ethics and to submit disputes with other Board members to binding arbitration. The Board provides certain services to its members, such as continuing educational programs, and operates the MLS. Only broker members may become members of the MLS; thus, access to the MLS depends upon compliance with the eight requirements for Class A Board membership. Nevertheless, participation in the MLS is open to non-broker members and to non-Board members who associate themselves with broker-members upon the payment of certain fees. ⁴

The MLS provides a medium for exchange of information about property for sale in El Paso County, including improved residential real estate. It publishes weekly catalogs containing descriptive listings of such real estate, as well as quarterly "sold properties" catalogs which state the sale price, days on the market and other information about listed properties that have been sold. MLS publications are available to all member brokers and to all salespersons employed in a member broker's office.

Within seventy-two hours of receiving an "exclusive right to sell" contract for single-family homes or buildings with four or fewer living units, an MLS member is required to submit a listing describing the property for MLS publication. ⁵ The listing constitutes an offer of subagency by the listing broker to other MLS members to procure a buyer in exchange for a percentage of the sale commission. Although MLS members may not disclose listings to non-members without the consent of the listing broker, non-members may participate in cooperative sales arrangements with members on listed properties. Not all Class A Board members choose to utilize the MLS.

Improved residential property sales constituted 73% and 83% of all real estate sales in El Paso County in 1978 and 1979, respectively. Property listed with the MLS accounted for 74.7% and 61% of all residential property sales in those respective years. Furthermore, "co-op sales," sales consummated by the joint efforts of two MLS members, constituted a large portion of the residential real estate sales in the county. ⁶

In its final order, the trial court concluded that the MLS is the most effective marketing device for the improved residential real estate market in El Paso County, is vital to the coordination of cooperative sales and is a necessary research tool for real estate agents. It then entered the following finding:

6. In El Paso County access to the Multiple Listing Service is tied to membership in the Colorado Springs Board of Realtors. This arrangement carries with it the power to regulate competition in the improved residential real estate market, and that power has been exercised in the past to discourage the use of fixed fee listings and to discourage the employment of part time agents.

Noting four general features of membership requirements which it deemed necessary for an MLS to "promote competition" in the improved residential real estate market, the trial court found the Board's actual membership criteria generally consistent with those standards. However, it also found that the requirement that members' offices must comply with local zoning regulations was immaterial to the efficient operation of the MLS and had "the anti-competitive potential of being used to exclude more marginal or part time brokers" from the MLS. The trial court then entered the following critical findings and conclusions:

11. Although no evidence showed that any application for membership in the Colorado Springs Board of Realtors has been refused in recent years for any reason, the power of that organization to tie membership in it to access to the multiple listing service is per se a combination restraining competition in the improved residential real estate market, unless that requirement can be justified under the rule of reason.

12. The great majority of the membership requirements and duties of membership adopted by the ... Board ... are necessary to the efficient operation of the multiple listing service. The proceeds realized from initiation fees and dues are primarily disbursed for purposes necessary to the efficient operation of the multiple listing service, and these benefits, along with the advantages of coordination and support by a nationwide organization, bring the t[y]ing arrangement within the scope of the rule of reason, providing that any requirements or expenditures not related to the efficient operation of the multiple listing service are eliminated.

Based on these findings, the trial court entered an injunction containing certain general guidelines for amendment of the Board's bylaws.

II

We first delineate the legal standards applicable to the question of whether the Board's membership practices or policies constitute an illegal restraint of trade under the provisions of section 6-4-101. The present Colorado antitrust statute, though directly based on the substantive provisions of its counterpart in Wisconsin, is rooted in the philosophy of unfettered economic competition articulated by Congress in the sweeping language of the Sherman Anti-Trust Act of 1890 (codified, as amended, at 15 U.S.C. § 1 et seq. (1982)), and its companion, the Clayton Act of 1914 (codified, as amended, at 15 U.S.C. § 12 et seq. (1982)). As we recently observed in People v. North Avenue Furniture & Appliance Inc., 645 P.2d 1291 (Colo.1982), because our statute is intended to protect the public from illegal restraints of trade beyond the reach of federal law, decisions of federal courts construing the Sherman and Clayton Acts, although not controlling, are entitled to careful scrutiny in resolving issues arising under Colorado's antitrust statute. Of course, decisions from other jurisdictions arising under antitrust statutes similar to Colorado's act also merit close analysis. ⁷

Section 6-4-101, 2 C.R.S. (1984 Supp.), states as follows:

Illegal restraint of trade. Every contract or combination in the nature of a trust or conspiracy in restraint of trade or commerce is declared illegal. Every combination, conspiracy, trust, pool, agreement, or contract...