People v. National Association of Realtors

• Citation: 174 Cal.Rptr. 728,120 Cal.App.3d 459
• Court: California Court of Appeals
• Decision Date: 16 June 1981
• Parties: , 22 A.L.R.4th 79, 1981-1 Trade Cases P 64,102 The PEOPLE, Plaintiff and Appellant, v. NATIONAL ASSOCIATION OF REALTORS, etc., et al., Defendants and Appellants. Civ. 18380.

Page 728

174 Cal.Rptr. 728

120 Cal.App.3d 459, 22 A.L.R.4th 79,

1981-1 Trade Cases P 64,102

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

Civ. 18380.

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

June 16, 1981.

Hearing Denied September 23, 1981.

George Deukmejian, Atty. Gen., Michael I. Spiegel, William S. Clark, Deputy Attys. Gen., Edwin L. Miller, Jr., Dist. Atty., [120 Cal.App.3d 465] Charles R. Hayes, Robert C. Fellmeth, Deputy Dist. Attys., for plaintiff and appellant

Consumers Union of U.S., Inc., Harry M. Snyder, Luana L. Martilla, Clark K. Oshiro, San Francisco, amici curiae for plaintiff and appellant.

Lasky, Haas, Cohler & Munter, Moses Lasky, John E. Munter, San Francisco, William D. North, Luce, Forward, Hamilton & Scripps, Robert G. Steiner, Lee R. Rydalch, and Philip D. Kopp, San Diego, for defendants and appellants.

WORK, Associate Justice.

Reviewing a civil antitrust action against professional real estate organizations, we hold certain group conduct constituted both an unlawful restraint of trade permitting injunctive relief, and unlawful business activity allowing imposition of civil penalties. The additional issue of whether the associational policy of refusing to sell investment multiple listing service information to otherwise qualified persons unless they also purchase general memberships in the associations is an illegal tying arrangement was not decided below and should be remanded for further findings.

BACKGROUND

For 20 years San Diego Board of Realtors (SDBR) with the approval of the California Association of Realtors (CAR) and the National Association of Realtors (NAR) (collectively: the associations) openly encouraged its members to maintain uniform commission rates on residential sales (generally 6 percent) and a standard percentage at which to split sales commissions between listing and selling brokers (generally 50/50) within the greater San Diego market. The rates were originally set by an express agreement among members of the SDBR, the La Mesa Board of Realtors and the El Cajon Board of Realtors (all presently combined in a Multiple Listing Service.) SDBR publicized the uniform rate to its membership, consisting of competing real estate brokers and salespersons.

After similar actions were held to violate federal antitrust laws (Sherman Act), the associations each adopted an official "hands off" policy regarding the fixing of commission rates by their members. NAR formally adopted such a policy in November, 1971 and SDBR soon followed suit.

Detecting no appreciable change in the uniformity of commissions charged among competitors holding SDBR memberships over the next four years, the Attorney General and San Diego County District Attorney suspected anti-competitive artificial forces were preventing erosion of the uniform rate. Believing multiple policies of the associations were potentially chilling to those desiring to deviate from the standard rates, and with evidence of numerous harassing incidents by individual SDBR members directed at the only major commission price undercutter holding SDBR membership, they jointly filed this antitrust action asking for injunctive relief under the California equivalent to the Sherman Act (Cartwright Act, BUS. & PROF.CODE, S 16700¹ et seq.) and for civil penalties under the unfair competition statutes (formerly Civ.Code, § 3369, now Bus. & Prof.Code, § 17200 et seq.).

The original three-count complaint alleged: (1) unlawful restrictions of trade under the Cartwright Act through certain restrictive regulations of the Multiple Listing Service (MLS) operated by SDBR, including the fact only Board members were entitled to access to that necessary service; (2) restraint of trade because of commission rate price fixing; and (3) a charge the Cartwright Act violations were also acts of unfair competition, prohibited by Civil Code section 3369, and subject to civil penalties. The court struck the third cause of action because it believed the Cartwright Act exclusively regulated activities constituting restraints of trade.

The case was tried on an amended complaint containing six causes of action: Count One, alleging unlawful exclusion of non-SDBR members from the residential and investment MLS was both a group boycott and an illegal tying arrangement; Count Two, alleging antitrust violations through activities maintaining the uniform commission rate. Counts Three, Four and Five charged the associations with individually committing unfair business practices in the setting of dues structure prohibited by section 3369, Civil Code, however, these are not pursued on appeal. The Sixth Count charges SDBR with individually committing the acts complained of in Count Two (price fixing), referring to these as unfair business practices and for violating the unfair competition sections. (Counts three through six were alternative pleadings in response to the court's earlier ruling on exclusivity.)

On the first cause of action the court found a group boycott and issued an injunction guaranteeing access, on conditions, to the residential, portion of the MLS to all licensed brokers and their salespersons without regard to SDBR membership. The court found no such boycott as to the MLS investment property portion. All other MLS operating rules were found to be reasonable, including a requirement excluding all listings except exclusive-right-to-sell agreements.

Because the court found a boycott violation relating to the restrictions on access to the residential portion of the MLS, it did not rule on the People's alternative illegal tying theory. Although the court found SDBR, CAR and NAR policies jointly created the residential MLS unlawful group boycott it enjoined only SDBR on the oral assurance CAR and NAR would comply with its holding.

SDBR obtained judgment on all other counts. Even though it found the restriction on access to the MLS investment portion did not constitute a group boycott, the court did not make findings or rule on the alternative illegal tie issue.

All parties appeal.

RESTRICTING ACCESS TO THE RESIDENTIAL MLS ONLY TO MEMBERS OF THE SDBR CONSTITUTES A GROUP BOYCOTT.

The court's conclusion is foreordained by Marin County Bd. of Realtors, Inc. v. Palsson, 16 Cal.3d 920, 130 Cal.Rptr. 1, 549 P.2d 833.

In Palsson the court struck down two separate policies of the Marin County Board of Realtors as group boycotts. In restricting MLS access to the Board's own members Marin substantially stifled competition in the real estate market. Similar findings and conclusions of the trial court here are overwhelmingly supported by statistical exhibits and testimony.

However, the associations contend Palsson's holding was not based solely on the membership restriction of the MLS above but on that factor plus the fact Marin limited Board membership to persons "primarily engaged" in the real estate business. Palsson, a part-time salesperson, could not subscribe to the MLS though he were willing to join the association in order to do so. By contrast SDBR points to its non-restrictive membership access.

The associations have lately provided us with a copy of the recent decision of the Iowa Supreme Court in State v. Cedar Rapids Bd. of Realtors, (Iowa) 300 N.W.2d 127, interpreting Palsson as holding "the combination of two Board bylaws unreasonably denied nonmembers access to the Board's MLS." (Id., at p. 130; italics added.) We find this interpretation unpersuasive. The same argument was presented to the trial court which thoughtfully considered and correctly rejected it. (See also Glendale Bd. of Realtors v. Hounsell, 72 Cal.App.3d 210, 212, 139 Cal.Rptr. 830.) The court in Palsson first considered whether the appeal was moot because the "primarily engaged" bylaw was deleted before the hearing on appeal. The court noted even if this were so the appeal also separately attacked another Board policy limiting MLS access to members. This rule prevented MLS access to every non-member, even one primarily engaged in the real estate trade and eligible for membership. The court analyzed each restriction separately, found each to have anticompetitive effects far outweighing any possible business justification (the Rule of Reason test) and separately disapproved the MLS limitation for access to Board members only. (Marin County Bd. of Realtors v. Palsson, supra, 16 Cal.3d 920, 938, 130 Cal.Rptr. 1, 549 P.2d 833.)

THE COURT DID NOT ERR IN "SPLITTING OFF" THE INVESTMENT LISTINGS ² FROM RESIDENTIAL LISTINGS EVEN THOUGH BOTH WERE PRODUCTS OF A SINGLE MLS OPERATION.

The court's judgment effectively restructures the Board's MLS into two parts, one for residential and one for investment properties, with non-members now allowed access to only the residential portion. Practically speaking, the court's slicing off the investment portion is not so traumatic as to disrupt the MLS since it now publishes the investment property book separately from the residential. Although the case was tried and defended solely on the theory SDBR operated a single MLS and the evidence was presented with the People's expectation a finding of any group boycott would open the entire MLS as it existed at time of trial, we are cited to no authority limiting the power of the court to issue its injunction only against the residential MLS where, as here, that portion may be easily and completely bifurcated from the investment portion.

At the close of its case the People were put on notice the court was considering splitting its ruling on the group boycott theory between the investment and the residential portions of the MLS, and was concerned with the lack of evidence showing access to the investment portion is an economic necessity for brokers seeking to deal in investment properties in San Diego County. In spite of this warning the People made no request to reopen the evidence on this issue although...