Share
An Idaho federal court has considered whether a class action lawsuit had properly alleged an unlawful tying arrangement when the buyers objected to paying a commission for transactions involving vacant land because the commission amounts were based on the properties projected value when fully developed.
Aspen Realty, Inc., Holland Realty, Sel-Equity, Co., and Park Pointe Realty, Inc. (collectively, “Brokerages”) were real estate brokerage firms that marketed a number of undeveloped lots in subdivisions on behalf of the builders. When purchasers would acquire these lots, they would agree to build a house on the lot. Brokerages would receive a commission from the sale based on a percentage of the projected value of the property as developed, not the actual sale price for the undeveloped lot.
Four separate class actions were brought against the Brokerages, alleging violations of the federal antitrust laws for an illegal tying arrangement. The purchasers claimed that they would have rather paid a commission only for the price of the undeveloped land. In response to these allegations, the Brokerages argued that the purchasers did not buy undeveloped lots, since each purchaser was required to enter into a construction contract at the time of purchase and it was the builders who imposed this requirement, not the Brokerages. The Brokerages also argued that it was the sellers who paid their commissions, not the buyers. The trial court certified the lawsuit as a class action- click here to read a summary of the earlier opinion. The Brokerages then filed a motion seeking judgment in their favor.
The United States District Court for the District of Idaho ruled in favor of the Brokerages. The court examined whether there was an illegal tying arrangement. In order to allege a tying violation, a party must demonstrate the following: (1) a tying arrangement between two identifiable products or services; (2) market power in the tying market to restrain competition in the tied product market; (3) a substantial effect on interstate commerce; and finally, (4) the tying company has an economic interest in the sales of the tied product. An “essential element” of a tying lawsuit is evidence that the tying arrangement has caused harm to commerce.
The court ruled that the purchasers had not demonstrated a sufficient antitrust injury because they had not identified any harm caused by the alleged tying arrangement. None of the purchasers testified that they wanted to purchase the homes to be built on the lots; instead, all of the purchasers testified that they sought to purchase only the undeveloped property. Therefore, the purchasers had offered no evidence of harm in the newly constructed home market (or, “the tied product market”) because there was no foreclosure of competition, since none of the purchasers were prohibited from buying such a home from another brokerage. Because the purchasers had not shown that the alleged tying arrangement had foreclosed any competition, the court entered judgment in favor of the Brokerages.
Bafus/Dudley v. Aspen Realty, Inc., Nos. CV-04-121-S-BLW, CV-06-059-S-BLW, CV-04-060-S-BLW, CV-04-061-S-BLW, 2007 WL 4261759 (D. Idaho Nov. 30, 2007). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].