Collins v. Main Line Board of Realtors

Opinion by

Mb. Justice Manderino,

Margaret Collins and Suburban Fair Housing, Inc. (Suburban), have taken this appeal from a final decree of the Court of Common Pleas of Montgomery County denying their request for mandatory injunctive relief and damages against the Main Line Board of Realtors. Margaret Collins, the individual appellant, is a vice president of Suburban, the corporate appellant.

In the three years of 1966, 1967 and 1968, Margaret Collins and Suburban Fair Housing, Inc., both real estate brokers licensed by the Commonwealth of Pennsylvania, sought membership in the Main Line Board of Realtors, a Pennsylvania non-profit corporation, which maintains a real estate multiple listing service exclusively for its members. In 1966, Collins’ and Suburban’s applications for membership were rejected and the reasons for the rejection were discussed with the applicants. In 1967, the applicants were again refused membership, but were given a formal notice and reasons for the denial, all of which dealt with an allegation that Collins and Suburban had “falsely, improperly and unethically” charged the Main Line Board of Realtors and some of its members with improper conduct. The applicants were again denied membership in 1968 but no additional reasons were given to them.

It was subsequent to their third denial of membership that Collins and Suburban brought an action in equity seeking an injunction to restrain the Main Line Board of Realtors from restricting its multiple listing service to members, an injunction against the Board’s denial of membership to Collins and Suburban, an injunction against the Board’s two-year waiting period for eligibility to participate in the multiple listing service, a mandatory injunction requiring the Board to *347 accept them as members, and $10,000 compensatory damages in addition to punitive damages. The Chancellor, in his adjudication, dismissed Collins’ and Suburban’s complaint, concluding that their membership applications had been denied for just cause, that they had no vested property right to membership in the Board, and that nothing in the Board’s rules, regulations or by-laws constituted a restraint of trade or a violation of Collins’ or Suburban’s constitutional rights. Exceptions were taken to the Chancellor’s adjudication and dismissed by the court en banc. Thereafter, this appeal was taken.

Appellants contend that the Main Line Board of Realtors is engaging in a restraint of trade which is unreasonable and, therefore, illegal. They contend that the multiple listing service maintained by the appellee corporation unreasonably restricts competition. We agree.

The multiple listing service of the Main Line Board of Realtors operates as a service to its members in the following way. Each member has “exclusive listings”— listings originally brought to the member’s office by prospective sellers of real estate. All exclusive listings of all members are then centrally pooled and made available to all other members to sell. The listing member and the selling member of any property share the sales commission.

Approximately 83 firms doing business in three townships of Montgomery and Delaware County are members of the appellee corporation. Sales through their multiple listing service in their first year of operation, 1965, amounted to $49 million. In 1969, the volume reached $75 million.

A real estate broker who is not a member of the appellee corporation cannot list properties for sale on the multiple list and does not receive the multiple listing service available to members showing all of the *348 properties available for sale by members. A member is also prohibited from listing property on the multiple list if there exists a co-exclusive listing with a nonmember.

A nonmember, who has a property for sale, is thus deprived of the benefits of the multiple listing which brings the property to the attention of member brokers for solicitation of purchasers of said property. The owner of said property, who lists with a nonmember, is thus deprived of the multiple listing benefit.

A nonmember is also deprived of the benefits of having available a list of properties to show to prospective purchasers dealing with a nonmember. Prospective purchasers do not have the benefit of seeing the wide range of properties available and appearing on the multiple list.

A nonmember and clients of a nonmember are restricted from advertising their products through the multiple listing service or from receiving significant information about available products on the market at any given time. In effect, a nonmember cannot compete in the buying and selling of real estate for clients as effectively as a member of the appellee corporation.

The courts of Pennsylvania have long recognized that agreements in unreasonable restraint of trade are invalid. See Sun Drug Company v. West Penn Realty Company, 439 Pa. 452, 268 A. 2d 781 (1970) ; Schwartz v. Laundry and Linen Supply Drivers’ U., Etc., 339 Pa. 353, 14 A. 2d 438 (1940); Cleaver v. Lenhart, 182 Pa. 285, 37 A. 811 (1897); and Nester v. Continental Brewing Company, 161 Pa. 473, 29 A. 102 (1894).

The United States Supreme Court has examined the problem of membership provisions in voluntary associations which have the effect of unreasonably restraining trade in Associated Press v. United States, 326 U.S. 1, 89 L. Ed. 2013 (1945). That case involved a co-operative association of newspaper publishes whose purpose *349 was to expedite the collection, assembly and distribution of news. The by-laws of the association prohibited all members from selling news to nonmembers and gave members the power to block membership to nonmembers. The government brought a suit against the Associated Press under the Sherman Act (26 Stat. 209, 15 USCA §1) alleging that the association constituted a combination in restraint of trade in news. The Associated Press case arose under the applicable federal law —the Sherman Anti-Trust Act. However, the theory of that case and the result is applicable here. This Court has previously recognized that the Sherman Act “. . . is merely the application of the common-law doctrine concerning the restraint of trade to the field of interstate commerce.” Schwartz v. Laundry & Linen Supply Drivers’ U., Etc., supra. In Associated Press v. United States, supra, the Court stated: “The Sherman Act was specifically intended to prohibit independent businesses from becoming ‘associates’ in a common plan which is bound to reduce their competitor’s opportunity to buy or sell the things in which the groups compete. Victory of a member of such a combination over its business rivals achieved by such collective means cannot consistently with the Sherman Act or with practical, everyday knowledge be attributed to individual ‘enterprise and sagacity’; such hampering of business rivals can only be attributed to that which really makes it possible —the collective power of an unlawful combination.”

The Associated Press case is particularly applicable to the present case. Here the Board consists of “associates”—or members—whose banding together has necessarily and significantly hampered an outsider’s opportunities to buy and sell in the Main Line area.

In Associated Press, supra, the agreement was held to be an unreasonable restraint of trade—illegal on its face. We think the same can be said of the agreement in this case unless all real estate brokers licensed by *350 Pennsylvania and in good standing under State law, operating in the area covered by the appellee corporation, are admitted to membership.

An agreement among 83 firms, doing $75 million in multiple listing business, not to do business in a significant manner with other properly licensed individuals in the same area per se restricts competition unreasonably. Economic or business competitors are not permitted to enter such agreements in restraint of trade because they are unreasonable. In Schwartz v. Laundry & Linen Supply Drivers’ U., Etc., supra, this Court said: “. . . the law will not permit an arrangement, understanding, agreement, or combination among all those in the trade in a given locality, the effect of which is to deprive others of the right to engage in that industry and to deprive the public of the benefits of fair competition therein. No group may enhance its own interests at the expense of the legal rights of others, nor, by acts or agreements violating public policy, interfere with the interests of the public. . . .”

It is not necessary to establish that competition has in fact been restricted by the monopolistic agreement. It is sufficient if the illegal bargain tends to create or has for its purpose to create a monopoly in prices or products. Restatement of Contracts Section 515; See also Associated, Press v. United States, supra, which said that, “. . . Combinations are no less unlawful because they have not as yet resulted in restraint. An agreement or combination to follow a course of conduct which will necessarily restrain or monopolize a part of trade or commerce may violate the Sherman Act, whether it be ‘wholly nascent or abortive on the one hand, or successful on the other.’ For these reasons the argument, repeated here in various forms, that AP had not yet achieved a complete monopoly is wholly irrelevant. . . .”

*351 The appellees contend that the members of the appellee corporation are free on an individual basis to collaborate with nonmembers in the sale of real estate. That the appellee corporation may permit such cooperation is totally irrelevant. Possible isolated acts of cooperation between members and nonmembers does not alter the fact that nonmembers are deprived of the use of the multiple listing service in the buying and selling of real estate.

The appellee corporation contends that it can properly establish rules and regulations for membership and can deny membership to a licensed real estate broker according to its own rules and regulations. This cannot be done in a field that has already been preempted by State regulation. Pennsylvania provides for the regulation and licensing of real estate brokers. A Real Estate Commission exists which has the power to refuse, suspend or revoke licenses after complaints have been filed and hearings held. The Commission also has formulated specific enumerated wrongful acts which are the basis for refusing, suspending or revoking a real estate broker’s license. See Real Estate Brokers License Act of 1929, Act of Miay 1, 1929, P. L. 1216, §1 et seq., as amended, 63 P.S. 431 et seq.

If the appellee corporation has evidence which would justify suspension or revocation of the appellants’ real estate licenses, that evidence should be presented to the Real Estate Commission of Pennsylvania for proper state action. The appellee corporation cannot privately decide that someone should not be a licensed broker. Such judgments are for the proper state agency. Neither the appellee corporation nor the courts should in the first instance usurp the prerogative of the Pennsylvania Real Estate Commission. Until that agency properly acts, a licensed real estate broker is entitled to be treated as an equal with all other licensed brokers in determining membership in the appellee corporation.

*352 The reasons given by the appellee for excluding the appellants from membership should be presented to the Real Estate Commission. If appellants’ licenses are suspended or revoked then, and only then, can appellants be barred from participating in a highly valuable economic and competitive tool such as multiple listing.

One of the reasons, for example, given by the appellee corporation for denying membership to the appellants centered around charges brought by appellants on behalf of a client against the appellee, charging it with discrimination before the Pennsylvania State Human Relations Commission. Although the charge was dismissed by the Commission, the Board felt that Collins had maligned its reputation by bringing the charge. We think it sufficient to say that Collins and Suburban should not now be permitted to be penalized for assisting a client in an attempt to assert his constitutional right to petition the government for a redress of grievances. The court below also listed various other reasons which it considered valid enough to justify the rejections. However, none of these reasons were ever given to Collins and Suburban and were, in fact, only superficially mentioned at trial. In any event, they were never the subject of any action against Collins or Suburban by the State Real Estate Commission.

The appellants are entitled to the equitable remedy of injunction to prevent the carrying out of the illegal contract or combination. See Schwartz, supra. The record, however, does not provide any legal basis for an award of damages.

The decree of the court below is reversed and the appellees are directed to modify membership regulations so that the appellants and all other persons meeting the requirements of the laws of the Commonwealth of Pennsylvania authorizing such persons to act as real estate brokers qualify for immediate membership and participation in the multiple listing service. In the *353 alternative, the appellees are directed to modify their regulations so that nonmembers may immediately participate in the multiple listing service on equal terms with members.

Decree of the court below reversed. Costs shall be paid by the appellees.