People v. National Association of Realtors

• Decision Date: 08 May 1984
• Citation: 155 Cal.App.3d 578,202 Cal.Rptr. 243
• Court: California Court of Appeals Court of Appeals
• Parties: , 1984-1 Trade Cases P 66,020 The PEOPLE, Plaintiff and Appellant, v. NATIONAL ASSOCIATION OF REALTORS, et al., Defendants and Respondents. D000555. Civ. 26953.

Page 243

202 Cal.Rptr. 243

155 Cal.App.3d 578, 1984-1 Trade Cases P 66,020

The PEOPLE, Plaintiff and Appellant, v. NATIONAL ASSOCIATION OF REALTORS, et al., Defendants and Respondents.

D000555.

Civ. 26953.

Court of Appeal, Fourth District, Division 1, California.

May 8, 1984.

Hearing Denied Aug. 30, 1984.

John K. Van de Kamp, Atty. Gen., Andrea Sheridan Ordin, Chief Asst. Atty. Gen., Michael T. Spiegel, William S. Clark, and Patricia A. Cutler, Deputy Attys. Gen., Edwin L. Miller, Jr., Dist. Atty., Charles R. Hayes and Anthony D. Samson, Deputy Dist. Attys., Robert Fellmeth, San Diego, for plaintiff and appellant.

Lasky, Haas, Cohler & Munter, Moses Lasky, John E. Munter, Luce, Forward, Hamilton & Scripps, Robert G. Steiner, Philip D. Kopp, Procopio, Cory, Hargreaves & Savitch, John H. Barrett, San Diego, and William D. North, Chicago, Ill., for defendants and respondents.

GERALD BROWN, Presiding Justice.

The People appeal a judgment entered after remand from an earlier appeal (People v. National Association of Realtors, 120 Cal.App.3d 459, 174 Cal.Rptr. 728 (NAR I ) on their antitrust (Cartwright Act, Bus. & Prof.Code, § 16700, et seq.)) and unfair competition (formerly Civ.Code, § 3369, now Bus. & Prof.Code, § 17200 ¹ et seq.) actions for injunctive relief and civil penalties against defendants San Diego Board of Realtors (SDBR), a California corporation, National Association of Realtors (NAR), an Illinois corporation doing business in California, and California Association of Realtors (CAR), a California corporation. NAR and CAR cross-appeal.

With the approval of NAR and CAR, SDBR operated a combined residential and investment multiple listing service (MLS) to which only members of all three associations had access. SDBR allowed only exclusive right to sell listings on the MLS. SDBR encouraged its members to maintain uniform commission rates (6%) and to follow a uniform commission splitting formula (50/50) when using the MLS.

In 1976 the People sued SDBR, NAR and CAR, alleging the exclusion of nonmembers of the associations from using the MLS constituted an illegal group boycott and an illegal tying arrangement and encouraging maintenance of uniform commission rates constituted price-fixing. These activities were alleged to violate the Cartwright Act and the unfair competition statutes.

After trial on the original action the court found SDBR, with encouragement from NAR and CAR, unreasonably restrained access to the residential portion of the MLS by means of a group boycott. The court enjoined SDBR from continuing such restraint of access and received oral assurances from NAR and CAR they would voluntarily comply with the judgment. The court refused to impose any monetary civil penalties, finding it was without authority to do so. The court found limiting access to the investment MLS to members of the associations was not a group boycott, but did not rule on whether the practice constituted an unlawful tying arrangement. The court ruled in favor of SDBR on all other counts.

On appeal, in NAR I, this court (1) remanded for a determination whether "SDBR possessed sufficient economic power over the investment MLS to restrain free competition in the market for the tied product (membership in other local, state or national realty associations)" (NAR I, 120 Cal.App.2d 459, 471, 174 Cal.Rptr. 728), and therefore was involved in an unlawful tying arrangement, and if so, for determination of appropriate relief; (2) reversed the court's finding SDBR had not participated in price-fixing, held SDBR's pressuring brokers (like Twin Palms Realty) into complying with SDBR's fixed commission and commission splitting rates was illegal price fixing, and remanded for an appropriate injunction against price-fixing on terms "as generally contained in the prayer of the second amended complaint, paragraphs 1(a), (d), (e) and (f); 2, and 5. ² " (NAR I, at p. 488, 174 Cal.Rptr. 728); and (3) held the court had the authority to impose monetary civil penalties for violations of the Cartwright Act and remanded for the court to determine and impose such civil penalties if appropriate.

On remand, the trial court (1) found SDBR's limiting access to the investment MLS was not an illegal tying arrangement and therefore on that count granted no relief to the People; (2) enjoined SDBR from price-fixing; and (3) imposed $20,000 civil penalties on SDBR for price-fixing, no penalty on SDBR for its operation for the residential MLS and no penalties on NAR or CAR.

On appeal the People contend the court erred in finding SDBR's tying use of its investment MLS (the tying product) to membership in SDBR, NAR and CAR (the tied product) was not illegal. Such an arrangement is illegal when certain requirements are met. These requirements differ depending on which section of the Cartwright Act is alleged to have been violated. ³

A tie-in arrangement is per se illegal under Business and Professions Code section 16727 and Business and Professions Code sections 16720 to 16726 if (1) two separate products are tied and (2) the seller has sufficient economic power over the tying product to restrain free competition in the tied product. Under section 16727 the seller has "sufficient economic power" if (a) the seller has a dominant monopolistic position in the tying product or (b) the tie-in restrains a substantial volume of commerce in the tied product. Under sections 16720 to 16726, however, the seller has "sufficient economic power" only if both (a) and (b) are found. (NAR I, supra, 120 Cal.App.3d 459, 471-473, 174 Cal.Rptr. 728). In NAR I, 120 Cal.App.2d at pages 470-471, 174 Cal.Rptr. 728, we held two separate products had been tied.

On remand the trial court found SDBR (the seller) had a dominant monopolistic position in the tying product (the MLS) and a substantial volume of commerce in the tied product (membership in local, state and national realty associations) had been restrained. However, instead of finding SDBR was participating in an illegal tying arrangement, the court erroneously considered an additional element, actual restraint of competition in the tied product, finding such actual restraint did not exist, and erroneously concluded the tie-in was not illegal. While a minority of courts have required a finding of actual restraint of competition before a tie-in could be found illegal (see Hirsh v. Martindale-Hubbell, Inc. (9th Cir.1982) 674 F.2d 1343, 1347, fn. 16), California courts have not (NAR I, 120 Cal.App.2d at pp. 469-473, 174 Cal.Rptr. 728; see Suburban Mobile Homes, Inc. v. AMFAC Communities, Inc., 101 Cal.App.3d 532, 542, 161 Cal.Rptr. 811; Corwin v. Los Angeles News paper Service Bureau, Inc., supra, 4 Cal.3d 842, 856, 858, 94 Cal.Rptr. 785, 484 P.2d 953), the United States Court of Appeals, Ninth Circuit has not (see Roberts v. Elaine Powers Figure Salons, Inc. (9th Cir.1983) 708 F.2d 1476, 1479) and the United States Supreme Court has not (see Jefferson Parish Hospital Dist. No. 2 et al., v. Hyde, 52 U.S. Law Week 4385, 4387, 4389 (U.S. Mar. 27, 1984); Fortner Enterprises, Inc. v. U.S. Steel, Corp. (1969) 394 U.S. 495, 498, 89 S.Ct. 1252, 1256, 22 L.Ed.2d 495).

The People contend the court erred in not enjoining SDBR in terms sufficiently specific to effectively prevent future violations. The court has discretion to frame an injunction "as it may deem expedient" to deter defendants from future violations (§ 16754.5). The injunction granted here embodies in general terms the specific items the People requested with one exception: the court did not enjoin the defendants from discriminating against real estate brokers or salespersons because of their commission rates or commission split policy. In NAR I we directed the court to enjoin SDBR from such activity on "appropriate terms as generally contained in the prayer of the second amended complaint, paragraphs ... 5." (NAR I, 120 Cal.App.2d at p. 488, 174 Cal.Rptr. 728.) Therefore, the injunction must be modified to include such a provision. In addition, because we hold SDBR policies concerning the investment MLS constitute an illegal tying arrangement, the court's injunction and declaration of rights must be modified to include within its scope the investment MLS as well as the residential MLS.

The People contend the court abused its discretion in not imposing any civil penalties against NAR and CAR; not imposing any civil penalties against SDBR for restricting use of the residential MLS; not using a "per violation" analysis to fix SDBR's penalty for price fixing; fixing the penalties in an amount so low it neither punished the associations nor deterred them or others similarly situated from future violations; and considering the associations' good faith as a mitigating factor. In NAR I, 120 Cal.App.2d at page 476, 174 Cal.Rptr. 728, we held the associations were subject to civil penalties under Business and Professions Code section 17206 for their violations of the Cartwright Act.

Section 17206 states the court shall assess a civil penalty not to exceed $2,500 for each violation constituting unfair competition as prohibited under section 17200. In our order of remand, we directed the court to determine and impose the appropriate civil penalty, if any, for each act found to violate the Cartwright Act (NAR I, 488, 174 Cal.Rptr. 728). Not unreasonably, the trial court interpreted our mandate as permitting it not to impose a penalty for such violations if it found them unwarranted. Accordingly, it did not impose penalties against the SDBR for its acts of unfair competition in denying nonmember brokers access to the residential MLS (count I) because the unlawful acts were based upon "able legal advice," and there is no need to deter future violations. For the same reason, penalties were not imposed upon NAR AND CAR relating to their acts restraining access to the residential MLS.

While the court's interpretation of our remanding language is reasonable, a...