Friday, August 31, 2007

Significant rulings in Hackman v. Dickerson Realtors, et al

It has been some time since I last wrote about Greg Hackman's private antitrust lawsuit filed against multiple real estate players in Rockford, Illinois. But earlier today Judge Bucklo issued a 50 page opinion in the case, ruling on a number of motions that have been pending before her. Here's a summary of her decision, which is more or less broken down by the relevant defendants.

Century 21. Apparently plaintiffs have settled with Century 21 Country North, Inc. and dismissed it from the case.

Diane Parvin. Parvin asked the court to compel arbitration of plaintiffs' tortious interference claim, in light of an agreement Hackman made as a member of the Rockford Association of Realtors ("RAAR"). Plaintiffs had alleged that in August 2006 Parvin falsely told Hackman that a property was not available for his client to see, preventing Hackman from submitting an offer.

After analyzing the Federal Arbitration Act, Association bylaws, the Code of Ethics and Arbitration Manual, and determining whether Hackman's beef constituted a contract dispute, the court ruled that "[n]o matter how Hackman defines his own claim, disputes between realtors concerning violations of the MLS rules are 'contractual disputes' under Article XVII [of the RAAR bylaws]. Therefore, they are subject to arbitration."

However, the court ruled that Hackman's separate allegations that Parvin "interfered with his valid business relationships with potential clients by making derogatory statements about Hackman is . . . a tort claim . . . [and] is not subject to arbitration." But see my discussion below with respect to the inadequacy of the tort claim against Parvin. Finally, the court denied Parvin's request to suspend the entire judicial proceeding while the MLS rule matter is being arbitrated.

Rockford Association of Realtors/Illinois Association of Realtors. Dismissing Sherman Act and Illinois Antitrust Act claims against RAAR, the court relied in part on the U.S. Supreme Court's recent ruling in Bell Atlantic Corp v. Twombly, noting that "an allegation of encouragement is not a sufficient allegation of fact that raises Hackman's right to relief above a speculative level." Also, the court - citing lack of jurisdiction - dismissed requests by Hackman to enjoin RAAR and IAR from conducting an ethics hearing against Hackman and to grant declaratory relief.

Prudential/Jessica Licary. The court also dismissed Hackman's state and federal antitrust claims against Prudential and Licary, again referring to Bell Atlantic:
In the antitrust context, the holding of Bell Atlantic requires that an antitrust plaintiff pleading the existence of a conspiracy or agreement to monopolize or restrain trade do more than conclusorily plead the existence of an agreement or conspiracy, but rather “a complaint with enough factual matter (taken as true) to suggest that an agreement was made.”
Like above, the court found Hackman's complaint insufficient here, noting that he "presents no evidence of an agreement other than evidence of parallel conduct." The court also dismissed a claim for what turned out to be "tortious interference with prospective economic advantage," noting the absence of any specific allegations of wrongful conduct by Prudential or Licary. Such tort-like claim against Parvin was also dismissed. However, a defamation per se claim against Prudential and Licary survived the court's ruling.

Melissa Smith/Lori Reavis/Ray Young. The court denied motions to dismiss the tortious interference with prospective economic advantage claims against these defendants, finding that Hackman's allegations against them did not require an allegation that a contract existed. The court added that Hackman has acknowledged that he did not intend to include Ray Young in his defamation claim, and denied Reavis' request that Hackman elaborate on the tort claim.

Young/Michael Dunn/Smith/Dickerson Realtors. Requests to disaggregate compound allegations were denied as to the antitrust claims, but granted as to the defamation and tortious interference counts. Thus Hackman will presumably be filing an amended complaint in the near future, perhaps not just to comply with this final part of the opinion, but to strengthen, if possible, his antitrust claims against various defendants so that they comply with Bell Atlantic.

WHAT DOES THIS OPINION TEACH US? First, as expected, Bell Atlantic has some serious teeth. For a Section 1 claim, if you don't have good, preferably direct, evidence of an agreement, and instead are simply relying on observed, parallel conduct, your claim is unlikely to survive a motion to dismiss. But note the court cited Bell Atlantic when considering Hackman's Section 2 claim and his defamation claim as well. Bell Atlantic means business, in the Section 1 arena and beyond.

Second, this opinion should remind all nontraditional brokers/agents out there that the antitrust laws are not your only potential weapons against objectionable practices. The court sustained several defamation claims and claims of tortious interference with prospective economic advantage. As Judge Bucklo explained in detail, the latter has the benefit of not requiring proof of a contract, and both claims, of course, do not require proof of a conspiracy. Each can be used, when appropriate, against unilateral conduct. And in the Hackman case, neither claim appears to be subject to arbitration.

I know it was issued just in the last few hours, and I've only read through it once, but I think that Judge Bucklo's opinion is a must read for any and all brokers/agents who may be contemplating legal action against "difficult" brokers/agents in their area. While bylaws will vary from association to association, and the common law will vary from state to state (here Judge Bucklo looked to Illinois law when considering plaintiffs' tort claims), the applicability of Bell Atlantic, and the potential utilization of tort claims against actionable, unilateral conduct, should be considered by all potential plaintiffs, regardless of jurisdiction.

Friday, August 24, 2007

Online Liability Blog

This post is admittedly a little off topic. No antitrust/competition angle here, but there is a real estate connection. Perhaps you recall the forsalebyowner case and/or the pending zerobrokerfees and kcpremierapts cases, each implicating licensing laws and the First Amendment? Or maybe you read about the or craigslist decisions involving the Fair Housing Act and potential statutory immunity? Yes? No? Either way, I'll keep it short.

I recently created a new blog that focuses on online liability issues, i.e., the circumstances under which a website (and/or other Internet-related business) may be liable for certain online conduct. I thought I'd share a link to it here, and invite you to fire off any comments you might have. Soon I hope to have a static "Real Estate" page on the blog that highlights online liability issues relating to real estate-related websites. Stay tuned.

Certainly feel free to share the link with others who may be interested.


Thursday, August 9, 2007

Realcomp knowingly violates NAR rule, its CEO offers after-the-fact explanations for suspect Website Policy

Last week the FTC (technically lawyers supporting the complaint) filed a post-trial brief in the FTC v. Realcomp matter. No surprises really, but I did come across two matters worth noting here.

First, in several prior posts on this blog, I have wondered how it could be that Realcomp was enforcing its Website Policy, which among other things prevents EA listings from being uploaded to, notwithstanding a NAR rule that prohibited such practices. The FTC’s brief shed some light on this inconsistency:

At the same time [Realcomp] voted to change the Search Function Policy, the Realcomp Board rejected a motion that would have eliminated the Website Policy. That motion proposed that Realcomp comply with a recently passed NAR rule that requires NAR associated MLSs to include all listings, regardless of listing type, in any feed to public websites and in the IDX. Compliance with this rule is mandatory, which means that NAR has determined that the rule is necessary for the proper operation of an MLS. Realcomp had urged NAR not to pass this mandatory rule, but NAR rejected Realcomp's arguments. [citations omitted].

Thus we now learn that Realcomp has been knowingly violating the NAR rule. The brief elaborates further-

The National Association of Realtors - the organization whose purpose is to promote the interests of Realtors such as Realcomp's members – considered and rejected Realcomp's arguments. NAR has made it mandatory for every one of its hundreds of associated MLSs to include all listings, regardless of listing type, in any feed to public and IDX websites. Realcomp tried to convince NAR not to do this, arguing the very same thing it does here - that allowing Exclusive Agency listings "is in direct conflict with the very purpose of the MLS" because the seller could avoid paying a commission. But NAR, through its general counsel, squarely rejected Realcomp's arguments. NAR explained that including Exclusive Agency listing on feeds to public websites and the IDX is not a problem because (1) "the seller had engaged the services of a real estate professional"; (2) these listings include "an offer of cooperation and compensation to MLS participants"; and (3) if a cooperating broker brings a buyer, "that broker is entitled to the compensation communicated to the MLS participants by the listing broker." Thus, concluded NAR, including Exclusive Agency listings on these feeds would not detract from the purposes of the MLS. [citations omitted].

Accordingly, Realcomp’s Website Policy has not only triggered an FTC enforcement action alleging anticompetitive conduct in violation of the Federal Trade Commission Act, it has also knowingly contravened, and continues to contravene, a NAR rule directly on point.

In this light, perhaps my second observation will not be too surprising. I noticed this paragraph in a footnote toward the end of the brief:

While Realcomp elicited testimony from Karen Kage [Realcomp’s CEO] regarding the reason the Board adopted the Website Policy, not a single member of the Board of Governors could testify as to these reasons. Moreover, Ms. Kage's testimony is not supported by a single contemporaneous document. Instead, the contemporaneous documents indicate that Realcomp wanted to exclude Exclusive Agency listings entirely. Realcomp's supposed reasons for the Website Policy should therefore be viewed as post hoc rationalizations, which deserve no weight. [citations omitted]

Thus Realcomp has not only (i) promulgated, and declined the opportunity to rescind, a policy that it knows is in violation of what appears to be a carefully considered NAR rule, and (ii) subsequently been charged by the Federal Trade Commission with anticompetitive conduct, it would appear that (iii) its CEO has offered justifications for the policy that the governing board couldn’t even recite, and, regardless, were “not supported by a single contemporaneous document.”

Monday, August 6, 2007

Amended Complaint filed in Louisville Price-Fixing litigation

Late last week the remaining plaintiff in the Louisville price-fixing class action filed an amended complaint with the Clerk. I have not had an opportunity to review the filing, but understand that the only changes relate to the identities of certain parties.

As you may recall, I previously wrote about the case here.

Thursday, August 2, 2007

Realcomp update

Earlier this week Realcomp filed its post-trial brief in the FTC v. Realcomp matter.

You'll recall that this case relates to Realcomp's "Web Site Policy" and its "Search Function Policy". Perhaps sensing a weakness in its case, Realcomp confirmed in its brief that "[i]n April, 2007, Realcomp repealed the Search Function Policy. It also repealed the definitional requirement that ERTS listings be full-service brokerage agreements."

According to the brief, Realcomp's Web Site Policy "provides that Listing information downloaded and/or otherwise displayed pursuant to IDX (Internet Data Exchange) shall be limited to properties listed on an exclusive right to sell basis." In other words, "[t]he Web Site Policy limits the distribution of EA listings to certain Internet cites and the IDX." Realcomp can't just come out and say what this means - no EA listings on, among other popular sites. And how does Realcomp justify its policy? "Brokers Can Easily Obtain Exposure on by Dual-Listing" with another MLS. Furthermore, "Problems That EA Brokers Face in Southeast Michigan Are More Likely a Function of Their Business Model." Allow me to translate - #1, if some of you brokers want to innovate, it's going to cost you (and consumers), and, #2, you innovative brokers wouldn't have so much trouble (see #1) if you'd just knock off all the innovating. Pitiful.

In an Order entered yesterday by the ALJ, closing arguments are scheduled for September 6, 2007.