The opinion of the court was delivered by: SPRIZZO
Plaintiffs, Paul W. Cantor and Charles Gilbride, licensed real estate brokers, commenced this antitrust action against the Multiple Listing Service of Dutchess County, Inc. ("MLS"), a not-for-profit corporation of which they are member-brokers, alleging that various MLS bylaws which restrict their right to post "Century 21" law signs on property listed with MLS violate sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2 (1976), and sections 340 and 349 of the New York General Business Law, N.Y. Gen. Bus. Law §§ 340, 349 (McKinney 1968 & Supp. 1982-1983). Plaintiffs seek a declaratory judgment that the aforesaid bylaws are invalid and unenforceable, an injunction enjoining their enforcement, and costs, disbursements and attorneys' fees. The parties have submitted their controversy to the Court upon an agreed statement of facts.
Plaintiffs are two of over six hundred licensed real estate brokers in the Dutchess County real estate market who compete for the right to list properties and to find buyers. See Agreed Statement of Facts at para. 19 ("ASF"); Trial Transcript at 6-7 ("Tr. ").
In 1976, plaintiffs and some of their competitors formed the defendant, whose stated purpose is to increase cooperation among Dutchess County licensed real estate brokers and to promote better relations with the public by maintaining a service for the exchange of listings and information. ASSF at paras. 4, 11, 16(a); Exhibit A to ASF, Article I, §§ 1-2. Defendant's members submit their listings to MLS which publishes them in a listing book which is disseminated to its more than 1,500 member-brokers and associated salespersons, all of whom may show and sell the property.
ASF at paras. 19, 24B, 24J; Tr. at 73-74.
MLS is a valuable marketing tool for the seller since it places at his disposal the services of over 1,500 brokers and salespersons, thus increasing the likelihood that his property will be sold. See Austin, Real Estate Boards and Multiple Listing Systems as Restraints of Trade, 70 Colum. L. Rev. 1325, 1353-59 (1970) (hereinafter "Austin"). It also benefits the buyer because the MLS compilation of listings provides him with a ready source of information regarding properties which may suit his needs. Id. Finally, MLS membership is also highly profitable for the brokers because they earn a share of the sales commission each time they locate a purchaser for a property listed with MLS or a property they have obtained the right to list is sold by another MLS broker or salesperson. See Tr. at 70-74. In fact, plaintiffs derive over ninety percent of their income from commissions earned in connection with himes listed with MLS. See id. at 22; ASF at para. 22.
Ever since its incorporation in 1976, MLS bylaws have, in one form or another, required that only the blue and white MLS sign be posted on property which is for sale. That sign contains, in bold letters, the words "For Sale," MLS" name and the listing broker's firm name and telephone number.
Id. at paras. 12, 21; Exhibit A to ASF, Article XIII, Prohibitions, § 3; Exhibits D and E to ASF; see Tr. at 33-34. These bylaws also provide for fines to be assessed against violators and for expulsion from membership for failure to pay such fines. ASF at paras. 13, 21; Exhibit A to ASF, Article XI, §§ 1-4; see Tr. at 29-30.
Plaintiffs also are parties to franchise agreements with "Century 21" ("Century 21"), a national organization of real estate brokers which has developed a brand image largely as a result of its advertising. ASF at paras. 2, 5; Tr. at 5-6. In connection with its advertising effort, Century 21 utilizes distinctive yellow, brown and white "For Sale" law signs which bear its name and distinctive logo and, in smaller print, the listing broker's firm name and telephone number.
ASF at para. 6; Exhibit E to ASF; Tr. at 10.
This action arises out of plaintiffs' efforts to utilize their Century 21 lawn signs, which they contend enhance their ability to capitalize on Century 21's brand image and constitute their most effective form of advertising.
Prior to instituting the instant action, plaintiffs challenged the lawfulness of a predecessor bylaw, which is similar to the bylaw at issue here, in the Supreme Court of the State of New York, County of Dutchess, on the grounds that it violated section 340 of the New York General Business Law ("Donnelly Act") and the Sherman Act.
See ASF at para. 20; Tr. at 34.Justice Quinn of the Supreme Court held that the bylaw did not violate the Donnelly Act since its purpose was to enhance sales opportunities for the collective membership rather than to permit any one member to gain an edge through separate advertising. Exhibit B to ASF at 7. He also stated that, since the activity involved was exclusively intrastate, the Sherman Act claims need not be reached. ID. at 7-8.
Following the disposition of the state court action, defendant amended its bylaws. Article XIII, Prohibitions, Section 3 of those bylaws ("Section 3") now provides, inter alia,
ADVERTISING SIGNS AND RESIDENTIAL PROPERTIES. Only the standard blue and white "For Sale" sign approved by the Multiple Listing Service of Dutchess County, Inc. may be erected or posted on any residential type property the listing of which has been submitted for distribution by the Multiple Listing Service and such sign may be erected only with the consent of the property owner. The listing member broker only shall have the responsibility and authority of erecting or posting said standard blue and white sign. It shall be a violation of these By-laws to erect or post any other type of advertising sign on any residential property the listing of which has been submitted for distribution by the Multiple Listing Service of Dutchess County, Inc.
For non-compliance with Section 3 a fine of $100.00 per infraction will be imposed, payable to the service.
Exhibit A to ASF, Section 3 to 12. Section 5 of Article XIII, as amended, also proscribes the posting of any non-MLS "Sold" sign on a property that has been listed by MLS. Exhibit A to ASF, Article XIII, Prohibitions, § 5 ("Section 5").
Thereafter, plaintiffs erected their Century 21 signs on residential properties isted with MLS. ASF at para. 17.As a result, plaintiff Cantor was charged with twenty-six violations of Section 3 and plaintiff Gilbride was charged with eighty. Id. Both plaintiffs were charged with violations of Article XI, section 1 through 4, as amended, which could result in their expulsion from membership in MLS in the event that any fines imposed as a consequence of these alleged violations are ...