The federal government and a broker-operated multiple listing service in Columbia, S.C., on Tuesday filed motions seeking a pre-trial judgment to resolve an antitrust lawsuit filed in May 2008 (see Inman News).
The U.S. Justice Department claims, in its motion for summary judgment filed Tuesday, that Consolidated Multiple Listing Service Inc. has "employed a variety of methods … to restrict entry by and competition from undesired innovative competitors."
DOJ officials also claim in their legal motion that CMLS "adopted a series of rules and practices that make joining and participating in CMLS unnecessarily costly and inconvenient for brokers without an established presence in the Columbia area."
But CMLS, in its own motion for summary judgment, claims a "complete defense" to the federal government’s antitrust charges, citing a legal protection known as the "intra-corporate immunity doctrine" or "intra-corporate conspiracy doctrine" in seeking a favorable ruling.
In a legal memorandum, CMLS charges that there is no "proof of a relationship between at least two legally distinct persons or entities" — namely real estate broker members of the CMLS board — in the lawsuit, and thus there is a "lack of proof of concerted action," such as a conspiracy by board members to violate antitrust laws.
CMLS argues in its filing that, under the legal doctrine it cites, a corporation cannot conspire with itself or with its agents, and therefore CMLS and the broker-members of its board are exempt from the DOJ lawsuit — though there are exceptions to this doctrine.
The CMLS filing notes that there is a "personal stake" legal exception under which an individual at a corporation may be shown to have an interest in an illegal activity that is independent of the individual’s relationship to the corporation.
But CMLS charges in its filing that it is "far too late" for DOJ officials to attempt to prove this exception in the lawsuit, as "DOJ would have already had to identify and join those board members, if any, with a controlling personal stake and prove the personal stake exception."
CMLS states that its board is composed of nine broker members who are elected for staggered terms — four board members "are from large companies to which DOJ has pointed … as having an unfair competitive advantage served up by the rules DOJ finds objectionable," with five other drawn from medium-size to small-size brokerages.
CMLS membership includes about 370 total broker members, and the "board controls the rules, but the membership controls the by-laws which ultimately control CMLS," the MLS states in its filing.
Meanwhile, the Justice Department charges that eight of CMLS’s nine board members in 2008 "represented traditional, high-end brokerage firms that do not employ discount or alternative business models," and "at least 20 brokers have testified that the CMLS rules either excluded them from the Columbia market entirely or impeded their competition."
And the DOJ also charges that CMLS has adopted rules that mandate a single form for contracts between brokers and consumers and ban other types of agreements, such as "exclusive agency" contracts under which sellers are not obligated to pay a fee if they find a buyer themselves.
The MLS also adopted an "active involvement" requirement preventing brokers from offering a less comprehensive set of services, according to DOJ’s filing. DOJ also alleges that CMLS banned members from operating out of a home office, and required that broker offices be located within the CMLS service area.
The MLS also charged applicants a $5,000 initiation fee "that was five times higher than the fees typically charged by other MLSs in South Carolina," according to the Justice Department’s court filing.
The Justice Department filing states, "No CMLS witness, including its own expert, testified that any of the CMLS rules is necessary for the MLS to function effectively. In fact, none of the other MLSs in South Carolina, and none of the 800 MLSs nationwide that are affiliated with the National Association of Realtors, have rules similar to those used by CMLS."
The Justice Department charges in the court filing that CMLS has already "abandoned a number of its worst rules in response to this lawsuit." For example, the MLS reduced its membership fee from $5,000 to $2,500 and opened up to exclusive-agency listing contracts (see Inman News).
The jury selection and trial process could begin in April, at the earliest, if the case is not settled before then.
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