A federal court has considered a motion filed by shareholder REALTOR® associations seeking dismissal from a lawsuit alleging antitrust violations against a regional multiple listing that the associations jointly owned.
A group of individuals (“Plaintiffs”) filed a class action antitrust lawsuit against Realcomp II Ltd. (“MLS”), a regional multiple listing service in southeast Michigan. The Plaintiffs were home sellers during the time that the MLS had policies in place that were later found anticompetitive by the Federal Trade Commission (“FTC”). The Plaintiff’s lawsuit seeks damages for the period of time these policies were in place. To learn more about the MLS’s interaction with the FTC and the subsequent appeal of the FTC’s order, please click here.
In addition to naming the MLS, the lawsuit also named the seven REALTOR® associations (“Shareholders”) who own 100% of the MLS. The MLS is a separately incorporated entity. The Shareholder formed the MLS as a joint venture, and only brokers who were members of the Shareholders’ associations could join the MLS as individual members. Each association appointed two individuals to serve on the MLS’s board of directors. The Shareholders filed a motion to dismiss the lawsuit, arguing that they could not be liable for the actions of a separate corporation.
The United States District Court for the Eastern District of Michigan, Southern Division, denied the Shareholders motion to dismiss the Plaintiff’s lawsuit and allowed the lawsuit to proceed. A court will grant a motion to dismiss if there is no relief it could grant based on the facts alleged in the complaint. The Plaintiffs alleged that the Shareholders had a role in the creation of the Policy.
The Shareholders argued that principles of corporate law protected them from liability, as the policies at issue were adopted by the MLS and not the Shareholders. However, the court noted that it will pierce the so-called “corporate veil” and hold shareholder(s) liable for the actions of the corporation if the court finds that the corporate form is being misused to accomplish an unlawful purpose. The court also stated that antitrust cases, in particular, heighten the concern over misuse of the corporate form.
The court determined that because the Shareholders primarily exist to implement the interests of their members and the members are competitors, the potential for anticompetitive conduct exists. The court found that this concern increased when a group of these associations acts collectively, as they did when the Shareholders formed the MLS. Looking at the facts, the court found the Shareholders represent a large group of competitors who have the power to keep certain forms of competition out of the marketplace, which could possibly be accomplished through the MLS.
The court ruled that the Plaintiffs had pled sufficient facts to survive the motion to dismiss, as it was possible that the decisions of the Shareholders were reflected in the policies challenged by the FTC. Therefore, the motion to dismiss was denied and the discovery process commenced.
Allan v. Realcomp II, Ltd., No. 10-cv-14046 (E.D. Mich. June 28, 2011). [Note: This opinion is not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]