Status hearing in USA v National Association of Realtors

Magistrate Judge Denlow held a status hearing yesterday morning in the USA v. National Association of Realtors (NAR) case pending in Chicago, the first time the parties have appeared before the Magistrate since Judge Filip issued his opinion late last year denying NAR’s motion to dismiss. Both parties were of course represented by counsel. NAR’s General Counsel Laurie Janik also attended the hearing, but did not address the Court. While nobody ever specified, I am assuming that all of the references made during the hearing to ‘opt-outs’ were intended to mean blanket (not selective) opt outs.

CURRENT/FUTURE NON-EXPERT DISCOVERY

According to NAR’s counsel, the government has served eighty-four document subpoenas (NAR’s attorney seemed to question the strength of the government’s case by noting that some subpoena recipients were located in seemingly inconsequential Marathon, Florida) and identified Zip Realty and two other competitors, and Laurie Janik (NAR’s General Counsel) as witnesses.

The Justice Department’s attorney advised the court of the present posture of discovery, indicating that the next major step would be non-expert depositions. The government reaffirmed that it intends to present evidence of anticompetitive effects in 36 cities, with proof thereof coming in the form of raw data, expert opinion and/or otherwise. To date the government is aware of at least forty-eight brokers nationwide that have opted out pursuant to the ILD Policy (more precisely, I suppose I should say pursuant to MLS rules promulgated in response to the ILD Policy). The government assured the court that it does not intend to depose all forty-eight of these brokers, but that it will depose a “significant number” of them.

The government also mentioned the working group referenced in the amended complaint, which apparently consisted of eighteen people. Instead of simply seeking to depose most/all of its members, the court instructed the government to identify the subject matters it was interested in, and submit same to NAR via subpoena. NAR will then need to identify the appropriate person(s) to be deposed (this is common practice under applicable federal rules).

The government noted that it intends to depose other competitors opt-out ‘targets’, and that presently it expects to conduct 45-50 depositions, excluding experts if the become necessary.

NAR’s outside attorney tried to gave the court the impression that NAR has essentially been unable to prepare for trial, given the government has not set forth any facts to support its allegations, or presented an exhaustive witness list. Until NAR gets the list, counsel explained, it will not know how many depositions it will need to take. NAR’s counsel added that NAR’s affirmative defenses were nationwide in nature, although I imagine that it will end up offering evidence of pro-competitive effects, or the absence of anti-competitive effects, in each market that the government presents evidence of anti-competitive effects.

NAR asked the court to limit the number of depositions (federal rules limit to ten the number of depositions a party can take without seeking leave of court). NAR’s counsel reminded the court that NAR had issued 57 civil investigative demands (CIDs) and conducted 40 interviews before filing suit (the government did not produce the interviews to NAR, citing the attorney work-product rule). Refusing to issue a cap, the Magistrate Judge Denlow reminded NAR’s attorney that it is the government that bears the burden of proof in this case. However, noting that the government has been examining the ILD Policy for years, the court reminded the DOJ that the depositions should mainly be for preserving evidence (say a witness can’t make it to Chicago for the trial), and not for discovering facts. He stated that the government cannot simply keep looking for ‘better’ witnesses. The court emphasized the importance of the government’s witness list disclosure, thereby permitting NAR to decide who it wishes to depose.

EMPORIA, KANSAS

NAR has already deposed one Emporia ‘victim’ (more on that term later) of the ILD Policy’s opt-out provision. The government’s lawyer intimated during the hearing that he was quite pleased with what that broker had to say, but added that DOJ intends to depose at least three Emporia brokers that elected to opt out per the ILD Policy.

Mocking the government’s case, NAR’s counsel suggested that the DOJ thought of Emporia as the ‘heart’ of the ‘evil conspiracy’, and intimated that he too was very pleased with what was said at the deposition. In fact, somewhat excitedly, NAR’s counsel offered to limit the entire case to the evidence acquired by the parties in Emporia. Of course the court did not take his offer seriously, nor did the DOJ attorney suggest he was amenable to such an arrangement.

USA’S TRIAL WITNESS LIST DUE 1/31/07

On or before January 31, the government is required to produce its witness list (those persons it intends to call at trial, be it via live or deposition testimony, as to issues the government carries the burden of proof). The court cautioned the DOJ not to produce a list of 400, 300 or even 200 names, which would arguably not be helpful to NAR. It also cautioned the government not to disclose a list of 30 names, only to ask for permission to add 30 more at a later date. Not satisfied with the court’s caution to avoid an especially long or especially short list, NAR’s counsel added that he didn’t want to receive a list of 50 witnesses, only later to learn that 10 of them will actually testify. The court did not directly comment on this concern. However, it did remind counsel that NAR cannot have it both ways – complain that a large number of markets is overly-burdensome on NAR, yet complain that too few markets would not suffice to prove anything (if the government were limited to producing evidence of anticompetitive effects in only two markets, NAR could counter that such effects were unique and limited to such markets, and do not justify enjoining the ILD Policy).

ZIP REALTY/NAR SUBPOENA DISPUTE

I believe that part of the government’s case will be to show that by withholding listings from VOW’s, discounters like Zip will be harmed because its customers will not have access to various listings when browsing Zip’s website. Presently before the court (but not taken up yesterday) is a motion to compel filed by NAR, seeking to compel third party Zip Realty (the recipient of a NAR documents subpoena) to produce certain documents. A hearing on the matter is scheduled before Judge Denlow later this month. Apparently there may be similar motions filed against other NAR-subpoena recipients, but may be heard in other jurisdictions (part of Zip’s argument is that the motion was not properly filed in Chicago).

Interestingly, according to the government’s lawyer, among Zip’s objections to producing certain documents are (i) whether Ms. Janik will have access to such documents, and (ii) NAR’s unwillingness to adequately keep such documents confidential.

TRIAL DATE

Probably being a little overly-optimistic, if not unrealistic given the number of depositions it desires to take, the government suggested the parties may be ready for trial as early as November 2007. NAR’s counsel responded that such date was much too early, and that a 2008 trial date was more likely. I would be very surprised if the case were tried this year.

TARGETS? VICTIMS?

Toward the end of the hearing, NAR’s counsel made known his displeasure with the use of the terms victim and target (used in connection with those brokers impacted by an opt-out or the ILD Policy in general), thinking of them as pejorative. I doubt this will be the last time we heard these terms used.

NEXT UP

The parties are scheduled to appear before both District Judge Filip and Magistrate Judge Denlow on February 7, 2007 in Judge Filip’s courtroom. Stay tuned.