Wells Real Estate, Inc. v. Greater Lowell Board of Realtors

850 F.2d 803, 12 Fed. R. Serv. 3d 118, 1988 U.S. App. LEXIS 8624, 1988 WL 63057
CourtCourt of Appeals for the First Circuit
DecidedJune 23, 1988
Docket87-1238
StatusPublished
Cited by152 cases

This text of 850 F.2d 803 (Wells Real Estate, Inc. v. Greater Lowell Board of Realtors) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wells Real Estate, Inc. v. Greater Lowell Board of Realtors, 850 F.2d 803, 12 Fed. R. Serv. 3d 118, 1988 U.S. App. LEXIS 8624, 1988 WL 63057 (1st Cir. 1988).

Opinion

COFFIN, Circuit Judge.

This is the anticlimactic end of a prolonged antitrust litigation involving two consolidated suits over the course of more than fifteen years. Although a number of interesting issues were argued on appeal, most of them fall by reason of the jury’s finding that plaintiff had failed to establish that defendants’ activities had a substantial effect on interstate commerce, a necessary element for liability under the Sherman Act. We affirm the judgments.

I. FACTS

The plaintiff, Wells Real Estate, Inc. (“Wells”), was a real estate brokerage located in Billerica, Massachusetts. Wells was started by George Livadas in 1959 in Burlington, Massachusetts. Its major focus of business was homes in the Lowell area, in particular those in the towns of Billerica and Tewksbury. Until 1966 or 1967, Wells prospered. In the early 1960s, Mr. Livadas attempted to expand the brokerage, through separate corporations, to other areas of Massachusetts. But in the middle of that decade, Wells was suddenly faced with the growing threat of serious competition from the defendant realtors comprising the Greater Lowell Board of Realtors (the “Lowell Board”), another defendant in this case 1 . In response to this competition, Livadas reconsolidated all of Wells’ operations in the Burlington office, which was later moved to Billerica.

Ever greater numbers of realtors were drawn to the area by the advantages offered by the Lowell Board. In particular, the Board provided a “multiple listing service” (“MLS”), which enabled member brokers to cooperate on the sale of a much larger number of houses than if they remained independent. Board members sub? mitted their procured listings for houses to the Board. The list of all of the members’ houses was then available to the entire membership to try to sell. When a house was sold, the profit would be split in some agreed upon percentage between the listing broker and the selling broker. The rate of commission was set by the listing broker. According to evidence submitted by the plaintiff at trial, the rate of commission was almost always about 6 percent, and the commission split between lister and seller was invariably 50 percent/50 percent of that rate. As a condition of membership in the Board, a realtor was required to adhere to the constitution and by-laws of the national sponsor of the local board, the National Association of Realtors (the “NAR”). 'Hie NAR, also a defendant here, establishes methods of arbitration between realtors, and a basic set of rules by which board practices, including the MLS, are to be run. The NAR also imposes on its member boards and realtors a national Code of Ethics for real estate sales.

The MLS dramatically increased the number of brokers in the greater Lowell area. Wells’ percentage of sales began to drop precipitously. Wells was further do- *806 advantaged by the fact that the listings in the MLS were all “exclusive right to sell” listings, wherein the homeowner agrees to pay the broker the commission rate even if the house is sold by another broker or by the homeowner. This practice effectively removed all MLS houses from the rest of the market, and thus precluded non-member realtors from attempting to broker those sales. 1

Wells chose not to join the Lowell Board. Mr. Livadas preferred the old fashioned method, whereby everyone hunted down his own listings and had to be quick to close sales in order to beat the other brokers to the punch. Wells had prospered as long as that was the prevailing method. Livadas eschewed the MLS, apparently because he did not share its members’ implicit belief in the benefits of cooperation. He testified that “[m]y job is to earn a living and not to facilitate other brokers to get listings.” The MLS, in his opinion, eliminated the rewards for the hard-working realtor by letting some realtors get by on simply collecting the commission split on sales without having to do the groundwork of procuring the listing. His description of the changing market revealed a nostalgia for the good old days, when profits were proportional to time and effort: “[Before the MLS] it was a real competition. And the good ones survived and the lazy ones would die. But today you have the opposite, ... the parasites. The lazy ones survive because the system allows them to survive.” Most of Wells’ listings remained open, because of the competitive pressures imposed by the MLS.

In part because of Livadas’ principled intransigence, Wells’ fortunes quickly evaporated. Its market share in the area was about 21% in 1965, with annual sales of 286 houses. By 1976, Wells could sell only 56 houses. Meanwhile, the Lowell Board MLS’s share of the market increased from approximately 36% in 1964 to about 53% in 1978. Wells was soon heavily in debt, and had to cease operations in 1979.

In 1972, Wells brought suit against the Lowell Board of Realtors and its individual members for various violations of the Sherman Anti-Trust Act, 15 U.S.C. §§ 1 & 2. Wells alleged both a boycott of Wells from the MLS and a conspiracy to monopolize the local real estate industry. Wells also claimed that the MLS constituted an illegal tying arrangement, wherein access to the listings (the tying product) was impermissi-bly conditioned on membership in the Board with all its attendent conditions (the tied “product”). In addition, Wells alleged various price-fixing violations, claims that were dismissed on summary judgment in 1984. This 1972 action also named as defendants the National Association of Real Estate Boards (now the NAR), and the state “parent” real estate boards of both Massachusetts and New Hampshire. The New Hampshire State Board was dismissed by the court in 1981.

In 1973, Wells instituted a similar action against all of the other local real estate boards in Massachusetts, on the theory that Wells effectively was deterred from entering those markets by similar MLS schemes statewide. The price-fixing claims were dismissed by the court at the outset of trial in January 1987, and shortly thereafter Wells filed stipulations of dismissal with respect to all claims against all but five of the local boards in the 1973 case.

Wells contended that the Boards restrained competition by preventing access to the exclusive listings of the MLS; that the MLS members conspired to set uniform commission rates throughout the market; and that the realtors on the boards illegally set uniform commission “splits” for distributing the profits made off of the MLS. Wells claimed that these practices effectively served as an illegal boycott against *807 those unwilling to join the boards. Plaintiff’s primary argument was that access to the MLS should not have been conditioned on joining the boards, adhering to the rules established by the boards, and acceding to the conditions of sales and commissions required by the boards for access to the MLS. Wells also contended that the brokers illegally conspired to exclude others from the market so as to achieve a monopoly therein. The conspiracies to boycott and monopolize allegedly caused a substantial reduction in competition amongst brokers in the area and unreasonably restrained a substantial amount of interstate commerce.

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Bluebook (online)
850 F.2d 803, 12 Fed. R. Serv. 3d 118, 1988 U.S. App. LEXIS 8624, 1988 WL 63057, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wells-real-estate-inc-v-greater-lowell-board-of-realtors-ca1-1988.