Robertson v. Sea Pines Real Estate, No. 11-1538
Decided May 14, 2012
In this case the Fourth Circuit affirmed the district court’s denial of the Defendants’ 12(b)(6) motion, holding that the plaintiff’s adequately alleged that the defendant real estate brokerages conspired to restrain trade in violation of § 1 of the Sherman Antitrust Act.
This litigation arose when a putative class of purchasers of real estate brokerage services in South Carolina brought suit against a number of real estate brokerage firms who had employees on the respective boards of two multiple listing services (MLS). Based in Columbia and Hilton Head Island, the MLS were incorporated joint ventures that maintained databases of properties listed for sale in the MLS service area and which its members have access to post and locate property listings. The complaints alleged that the Defendants used the MLS as a means of unfairly excluding competition from the non-MLS brokerages in the real estate market. More specifically, the boards of the MLS allegedly passed rules that were designed to illegally stabilize prices and raise entry barriers for competing brokers.
The U.S. District Court of South Carolina denied the Defendants’ motions to dismiss and “certified its order for interlocutory review under 28 U.S.C. § 1292(b).” The Fourth Circuit granted the Defendants’ interlocutory appeal and reviewed the trial court’s decision de novo. The Defendants’ principal arguments were that the pleadings had not alleged the existence of separate economic actors capable of conspiring as proscribed by § 1 of the Sherman Act; and that the Plaintiffs failed to satisfy the heightened pleading standards necessary to state a plausible claim for relief under the recent Supreme Court’s decisions in Bell Atlantic Corp. v. Twombley, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009).
The court noted that—even though the Defendants were sued for their actions on behalf of a single corporate entity—“agreements made within a firm can constitute concerted action covered by § 1 when the parties to the agreement act on interests separate from those of the firm itself….” Because the MLS consisted of individual brokerages that pursued distinct interests and were in competition with one another for real estate sales, the court held that the Plaintiffs’ complaint had adequately alleged a plurality of economic actors capable of illegal collusion. In reaching this conclusion, the court became one of the first courts of appeals to apply the Supreme Court’s widely publicized decision in American Needle, Inc. v. National Football League, 130 S. Ct. 2201 (2010).
In addition, the court held that the complaint alleged sufficient factual content to make out a plausible claim for relief as required to defeat the Defendants’ motions to dismiss under Twombley and Iqbal. The first element of the claim, that a conspiracy existed amongst the MLS members, was sufficiently plead because the MLS rules themselves constituted factual assertions of concerted conduct. The second element of the antitrust statute, that the Defendants’ concerted action “imposed an unreasonable restraint of trade,” was supported by specific allegations that the MLS rules created six anticompetitive effects in the areas served by the MLS. According to the court, the complaints contained nonconclusory facts indicating that the board rules were able to exclude “lower-priced” and certain “innovate” brokerages firms through,inter alia, restrictive MLS membership rules such as a physical location requirement, thus denying consumers the benefit of a more competitive real estate marketplace.
-John C. Bruton, III