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UNITED STATES v. GREATER SYRACUSE BD. OF REALTORS

April 17, 1978

UNITED STATES OF AMERICA
v.
GREATER SYRACUSE BOARD OF REALTORS, INC.; GALLINGER REAL ESTATE, INC.; EAGAN REAL ESTATE, INC.; A. MENTER REAL ESTATE, INC.; CLARK REAL ESTATE ONONDAGA, INC.; DEWITT REAL ESTATE INC.; BLATCHFORD REALTY CO., INC.; LONGLEY-JONES ASSOCIATES, INC.; L. D. MARSHALL REAL ESTATE, INC.; OLSON-PECK, INC.; JOHN M. GALLINGER; THOMAS E. TEELIN; FRED E. WOODS; JOHN M. PEIFFER, JR.; and WALTER J. HANSEN, JR., Defendants



The opinion of the court was delivered by: MUNSON

MEMORANDUM-DECISION AND ORDER

 This is a criminal antitrust action in which defendants are charged with conspiring to fix, raise, maintain, and stabilize commissions charged for services rendered in connection with the sale of residential real estate in Onondaga County, New York, in violation of § 1 of the Sherman Act. 15 U.S.C. § 1. Presently before the Court are various motions made by defendants to dismiss the Indictment and for certain other forms of relief.

 I.

 Defendants move to dismiss the Indictment on the grounds that it fails to allege federal subject matter jurisdiction and fails to charge an offense. *fn1" Defendants contend that the allegations of the Indictment are not sufficient to satisfy the interstate commerce requirement of the Sherman Act.

 A.

 Conduct is prohibited by § 1 of the Sherman Act only if it is "in restraint of trade or commerce among the several States." 15 U.S.C. § 1. This requirement is both a jurisdictional basis and a substantive element of the offense. Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884, 890-91 (3d Cir. 1977).

 Congress, in passing the Sherman Act, intended to exercise the fullest extent of its constitutional power to regulate commerce. United States v. American Building Maintenance Industries, 422 U.S. 271, 278, 45 L. Ed. 2d 177, 95 S. Ct. 2150 (1975); United States v. Frankfort Distilleries, Inc., 324 U.S. 293, 298, 89 L. Ed. 951, 65 S. Ct. 661 (1945); United States v. South-Eastern Underwriters Association, 322 U.S. 533, 558, 88 L. Ed. 1440, 64 S. Ct. 1162 (1944); Taxi Weekly, Inc. v. Metropolitan Taxicab Board of Trade, Inc., 539 F.2d 907, 910 (2d Cir. 1976). Hence, defendants' conduct is within the reach of the Act if Congress has the power to proscribe that conduct under the Commerce Clause. Hudson Valley Asbestos Corporation v. Tougher Heating & Plumbing Co., Inc., 510 F.2d 1140, 1142-43 n.1 (2d Cir.), cert. denied, 421 U.S. 1011, 44 L. Ed. 2d 679, 95 S. Ct. 2416 (1975); Rasmussen v. American Dairy Association, 472 F.2d 517, 521 (9th Cir. 1972), cert. denied, 412 U.S. 950, 37 L. Ed. 2d 1003, 93 S. Ct. 3014 (1973). As the concept of Congressional power to regulate commerce has expanded over the years, so has the scope of the Sherman Act. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 743 n. 2, 48 L. Ed. 2d 338, 96 S. Ct. 1848 (1976); Gulf Oil Corp. v. Copp Paving Co., Inc., 419 U.S. 186, 201-02, 42 L. Ed. 2d 378, 95 S. Ct. 392 (1974).

 The interstate commerce requirement of the Sherman Act will be established if either of two tests is satisfied: (1) the "in commerce" test or (2) the "affecting commerce" test. Under the former test, the alleged anticompetitive conduct must occur within the flow of interstate commerce, while under the latter test, the conduct may occur wholly on an intrastate level but must substantially affect interstate commerce. Burke v. Ford, 389 U.S. 320, 321, 19 L. Ed. 2d 554, 88 S. Ct. 443 (1967); Greenville Publishing Company, Inc. v. Daily Reflector, Inc., 496 F.2d 391, 395 (4th Cir. 1974); Las Vegas Merchant Plumbers Association v. United States, 210 F.2d 732, 739 n. 3 (9th Cir.), cert. denied, 348 U.S. 817, 99 L. Ed. 645, 75 S. Ct. 29 (1954). While inconsequential, remote, or fortuitous effects are insufficient to establish jurisdiction, Lieberthal v. North Country Lanes, Inc., 332 F.2d 269, 272 (2d Cir. 1964), the effects do not have to be the result of conduct purposely directed toward interstate commerce. Hospital Building Co. v. Trustees of Rex Hospital, supra, 425 U.S. at 744.

 
The source of the restraint may be intrastate, as the making of a contract or combination usually is; the application of the restraint may be intrastate, as it often is; but neither matters if the necessary effect is to stifle or restrain commerce among the states. If it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze.

 United States v. Women's Sportswear Manufacturers Association, 336 U.S. 460, 464, 93 L. Ed. 805, 69 S. Ct. 714 (1949). See also Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 234-36, 92 L. Ed. 1328, 68 S. Ct. 996 (1948).

 Under both the "in commerce" and "affecting commerce" tests, there must be a nexus between the complained of conduct and the interstate commerce involved. Hospital Building Co. v. Trustees of Rex Hospital, supra, 425 U.S. at 742 n. 1; Boddicker v. Arizona State Dental Association, 549 F.2d 626, 629 (9th Cir. 1977). "The test of jurisdiction is not that the acts complained of affect a business engaged in interstate commerce, but that the conduct complained of affects the interstate commerce of such business." Page v. Work, 290 F.2d 323, 330 (9th Cir.), cert. denied, 368 U.S. 875, 7 L. Ed. 2d 76, 82 S. Ct. 121 (1961).

 There is not a bright line dividing cases in which the interstate commerce requirement of the Sherman Act is satisfied from those in which this requirement is not met. Rasmussen v. American Dairy Association, supra, 472 F.2d at 526. The existence of Sherman Act jurisdiction must be determined on a case-by-case basis by an evaluation of the relevant economic facts. J. P. Mascaro & Sons, Inc. v. William J. O'Hara, Inc., 565 F.2d 264, 269 (3d Cir. 1977); United States v. Finis P. Ernest, Inc., 509 F.2d 1256, 1258 (7th Cir.), cert. denied, 423 U.S. 893, 46 L. Ed. 2d 124, 96 S. Ct. 191 (1975); Doctors, Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48, 51 (3d Cir. 1973).

 B.

 A number of courts have considered the applicability of the Sherman Act to real estate transactions. In Goldfarb v. Virginia State Bar, 421 U.S. 773, 44 L. Ed. 2d 572, 95 S. Ct. 2004 (1975), the Supreme Court considered the Act's interstate commerce requirement as it applies to a minimum fee schedule for services rendered by attorneys in performing title examinations in connection with the financing of real estate purchases. Since a significant portion of the funds furnished to finance home purchases came from out-of-state and since many of the loans were guaranteed by agencies of the federal government located out-of-state, the Court regarded the underlying real estate transactions as being frequently interstate in nature. The Court found that a title examination, which could legally be performed in the State of Virginia only by a member of the Virginia State Bar, was an integral part of these interstate transactions, because lenders required, as a condition of making a loan, that title to the property in question be examined. The Court held,

 
Given the substantial volume of commerce involved, and the inseparability of this particular legal service from the interstate aspects of real estate transactions, we conclude that interstate commerce has been sufficiently affected.

 421 U.S. at 785 (footnote omitted). *fn2"

 The lower court cases considering the applicability of the Sherman Act to real estate transactions have reached divergent results. In Marston v. Ann Arbor Property Managers (Management) Association, 302 F. Supp. 1276 (E.D.Mich. 1969), aff'd, 422 F.2d 836 (6th Cir.), cert. denied, 399 U.S. 929, 26 L. Ed. 2d 796, 90 S. Ct. 2244 (1970), students at the University of Michigan brought a class action, alleging that defendants violated § 1 of the Sherman Act by conspiring to fix apartment rental rates and by attempting to control the supply of new apartments in the market. The facts that out-of-state students rented apartments and that material from out-of-state was used in the construction of the apartment buildings were found by the court to be insufficient to establish jurisdiction. In Cotillion Club, Inc. v. Detroit Real Estate Board, 303 F. Supp. 850 (E.D.Mich. 1964), plaintiffs alleged that defendants violated the Sherman Act by conspiring to prevent Blacks from purchasing homes in certain areas and by conspiring to exclude Black real estate brokers from membership in the defendant associations. Finding that the alleged restraints were purely local in nature and had only an incidental impact on interstate commerce, the court dismissed the Complaint for lack of jurisdiction. *fn3"

 In both Diversified Brokerage Services, Inc. v. Greater Des Moines Board of Realtors, 521 F.2d 1343 (8th Cir. 1975) and Bryan v. Stillwater Board of Realtors, 578 F.2d 1319 (10th Cir. 1977), the courts found that the interstate commerce requirement of the Sherman Act was not satisfied in cases where the plaintiffs alleged that they were illegally excluded from membership in the defendant board of realtors. In Diversified Brokerage, the only evidence offered by plaintiffs on the interstate commerce issue was that five real estate transactions involved persons residing outside the state. The court found that this evidence was insufficient to show that defendants' activities were in interstate commerce. In Bryan, the Complaint set forth a number of ways in which defendants were allegedly involved with interstate commerce, but the court held that there was no logical nexus between the interstate commerce allegations and defendants' alleged anticompetitive conduct.

 In McLain v. Real Estate Board of New Orleans, Inc., 432 F. Supp. 982 (E.D.La. 1977), plaintiffs brought a class action, alleging that defendants conspired to fix the commissions charged for brokerage services. The court stated that the requisite nexus between the complained of conduct and interstate commerce was not established by the mere interstate movement of prospective buyers or sellers or by defendants' participation in a national relocation service through which defendants received clients, referred by out-of-state brokers, and through which defendants referred individuals leaving the area to brokers in other states. Purporting to rely upon Goldfarb v. Virginia State Bar, supra, the court indicated that jurisdiction would be established only if brokers in the area played an essential or ...


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