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WHEATLEY HTS. NEIGHBORHOOD COALITION v. JENNA RESA

March 15, 1978

WHEATLEY HEIGHTS NEIGHBORHOOD COALITION, et al., Plaintiffs,
v.
JENNA RESALES CO., et al., Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

 NEAHER, District Judge.

 This is a class action brought to redress alleged violations of section 804 of the Fair Housing Act of 1968 (Title VIII), 42 U.S.C. § 3604; 42 U.S.C. §§ 1981 and 1982; and the thirteenth amendment. Jurisdiction is based on 42 U.S.C. § 3612 and 28 U.S.C. § 1343. Plaintiffs, the Wheatley Heights Neighborhood Coalition, an ad hoc group of white and black residents of the Wheatley Heights area of the Town of Babylon, New York, and individual homeowners in that area, assert that defendants, three real estate brokerage firms and their employees, and the Multiple Listing Service of Long Island, Inc. ("MLS"), have engaged in acts of "racial steering," acts which plaintiffs charge are unlawful and racially discriminatory.

 At the outset of this action, defendant MLS moved for summary judgment dismissing the complaint, claiming, in effect, that plaintiffs had failed to state a cause of action against it. MLS at that time argued that plaintiffs' theory of liability, based essentially on the doctrine of respondeat superior, was unsupportable because MLS does not control the conduct of its participating brokers. By memorandum order, dated May 3, 1976, this court denied the MLS motion as premature, because it could not then be said that plaintiffs would be unable, through discovery, to adduce facts requiring the imposition of liability on MLS. At that stage in the litigation it was not clear whether or to what extent MLS controls or shares responsibility for the conduct of participating brokers. *fn1"

 Plaintiffs now having had ample opportunity to conduct discovery, MLS has renewed its motion for summary judgment, asserting that plaintiffs have failed to develop a factual basis for their action against MLS. For purposes of this motion, MLS does not controvert any of the factual allegations set forth by plaintiffs in their opposing papers; it is the position of MLS that on the facts alleged it is entitled to judgment as a matter of law.

 MLS is a wholly-owned subsidiary of the Long Island Board of Realtors, Inc. ("LIBOR"), incorporated under section 402 of New York's Business Corporation Law. Participation in MLS is limited to licensed real estate brokers who are members in good standing of LIBOR and are active in the MLS business area of Queens, Nassau and Suffolk Counties. Participants are required to attend an MLS orientation course, and must agree to adhere to the MLS rules and regulations and code of ethics. For new participants there is generally an initiation fee of $500 for each office operated, and annual dues of $300. In addition, there is a $10 service charge for each listing a participant submits to MLS.

 MLS has divided the area it serves into 15 geographic zones. When an MLS participant obtains a listing for a residential property, he is typically required to use an "exclusive right to sell" listing form agreement approved by MLS. Within 48 hours after obtaining the seller's signature on the agreement form, the participating "listing broker" must submit the agreement, together with a photograph of the property and an information card, to MLS for dissemination of pertinent details to all MLS participants who have requested the daily listings for the zone in which the property is located. If, however, the seller has elected not to have his property listed through the MLS system, the participating broker may accept a so-called "office exclusive" listing, but he may do so only after informing the seller of the advantages of a multiple listing and obtaining the seller's acknowledgement on a form provided by MLS. The broker must then submit to MLS a copy of the office-exclusive agreement and the seller's acknowledgement, together with a filing fee. It should be noted that MLS brokers are prohibited from actively soliciting office exclusives, and that MLS does, in any event, reserve the right to reject listings deemed contrary to the public interest.

 Once a property has been listed through MLS, any participating broker may undertake to effect its sale, subject to certain rules established by MLS. Pursuant to these rules, the "selling broker" acts solely in the capacity of a subagent; the listing remains the property of the listing broker and it is he who has the right to determine how the commission is to be split if the sale is consummated as a result of the multiple listing (the most common split is 35% to the listing broker, 65% to the selling broker). Participants are, of course, prohibited from sharing listings obtained from MLS with non-participating brokers.

 The part played by MLS listings in the sale of residential properties within its business area is substantial. For the eleven-month period ending August 31, 1977, MLS listings accounted for the sale of over 9,000 homes, with sales prices totalling in excess of $400 million.

 From the inception of this lawsuit, MLS has maintained that it functions solely as a clearinghouse for information regarding residential properties listed with participating brokers, and that it is not otherwise involved with real estate transactions or sales activities within its jurisdiction. Plaintiffs, however, contend that MLS is more than an information exchange. Pointing to provisions in the MLS charter, by-laws, and rules and regulations, they argue that MLS exerts sufficient control over the sales practices of participating brokers to be held accountable, under Title VIII, for their acts of racial steering. Plaintiffs argue from a number of fronts that MLS is liable, both directly and vicariously, for the alleged racially discriminatory activities of the other defendants in this action, who make use of MLS listings in conducting their businesses. For the reasons which follow, this court holds that there is no genuine dispute as to any material fact and that defendant MLS is entitled to judgment dismissing the complaint against it. Rule 56, F.R.Civ.P.

 MLS claims no share of the commissions earned on sales of listed properties. Its substantial revenues -- over $800,000 in fiscal year 1976-1977 -- derive solely from initiation and listing fees, dues, and charges for extra copies of daily listings ordered by participants. As noted above, listings submitted to MLS remain the property of the listing brokers, and it is left to the listing broker to set the commission split for sales effected through the MLS system. Furthermore, the rules MLS has adopted with respect to the use of information disseminated by the service are generally concerned with preserving the rights of the parties involved -- that is, seller, listing broker, and selling broker, or with making the services it offers more attractive to eligible brokers.

 Plaintiffs, however, insist that those provisions which relate to conduct of participating brokers indicate that MLS "controls" their selling practices. None of these provisions, however, is inconsistent with MLS's contention that it functions as an information exchange. It is evident that without rules of this kind, the ability of MLS to achieve its professed objective -- to provide an efficient medium for the marketing of residential properties listed with participating brokers -- would be seriously impaired. Plaintiffs allege no facts which contradict the purposes set forth in the Preamble to the MLS "Rules and Regulations":

 
"Multiple Listing is meant to provide a means for Realtors to give maximum service to the buying and selling public, and through this cooperative effort to serve their community best. The Multiple Listing Service is not itself a selling organization, but endeavors to make real estate more readily marketable by establishing a centralized source of market data as well as enabling a cooperative effort in selling which of necessity requires participants to adhere to publicly announced standards of real estate practice."

 Plaintiffs' first line of attack is their most direct, and perhaps least tenable. Noting that Title VIII is to be liberally construed, see Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205, 212, 34 L. Ed. 2d 415, 93 S. Ct. 364 (1971), and that it is to be read as barring "all forms of discrimination, sophisticated as well as simple-minded," Williams v. Matthews Co., 499 F.2d 819, 826 (8 Cir. 1974), plaintiffs contend that in order to prevail, they need only show that "MLS's actions have a discriminatory effect or discriminatory consequence." Plaintiffs' Memorandum in Opposition at 16. Even assuming this to be a correct statement of the law, *fn2" plaintiffs point to no facts which ...


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