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An Illinois federal court evaluates antitrust conspiracy arguments made by a broker against REALTOR® associations and competing brokerages.
Gregory Hackman (“Broker”) was the owner of Gregory Hackman REALTORS (“Brokerage”). The Broker was member of the Rockford Area Association of REALTORS® (“RAAR”) and the Illinois Association of REALTORS® (“IAR”).
In 2000, the Broker opened a new office where he charged a lower commission rate than other brokers allegedly used in the Rockford, Illinois market. The Broker also offered a lower commission split than other brokerages in the market allegedly offered. Because of these lower rates, the Broker claimed that five competing brokerages (collectively, “Competitors”) entered into an agreement to retaliate against him, such as refusing to show his listings and making disparaging comments about his business.
The Broker filed a lawsuit against the Competitors, RAAR, and IAR. The Broker claimed that all of the defendants entered into a conspiracy which harmed his business. He also sought an injunction preventing the REALTOR associations from holding a hearing on an ethics complaint RAAR transferred to IAR for a hearing. The defendants filed motions with the trial court either seeking to dismiss the allegations or seeking additional facts from the Broker prior to answering the Broker’s complaint.
The United States District Court for the Northern District of Illinois dismissed RAAR and IAR from the litigation, but allowed some the Broker’s allegations to proceed against the remaining defendants. The court first considered whether one of the defendants (also a member of RAAR) could compel arbitration of the “tortious interference with business expectancy” allegations against her. The defendant argued that by virtue of his membership in RAAR, the Broker had agreed to abide by Article 17 of NAR’s Code of Ethics and so he must submit to arbitration all contractual disputes (plus certain other specified non-contractual disputes) with other members arising out real estate transactions in the course of their relationships as REALTORS .
Finding that there was an agreement between the parties to arbitrate pursuant to Article 17, the court examined whether tortious interference with business expectancy constituted a contractual dispute. Looking at the Code of Ethics and Arbitration Manual, the court found that the term “contractual dispute” covered only covered disputes between parties about a specific contract, not disputes about contracts with third parties. The alleged tortious interference here involved interference in a transaction with one of the Broker’s clients. The defendant argued that the Broker’s allegations of contractual interference could constitute a violation of the multiple listing service rules and so would be subject to arbitration, since the RAAR bylaws covered participation in the multiple list service. The court agreed that the allegations concerning a violation of the MLS rules would be covered by the agreement to arbitrate because the behavior arose out of the members relationship as REALTORS , but found that the remaining arguments made by the Broker would not be subject to arbitration, since those allegations focused on the defendant’s alleged interference with a third party contract. Therefore, the court ordered to arbitration the allegations constituting an alleged violation of the multiple listing service rules, but allowed the remainder of the allegations to proceed.
Next, the court considered RAAR and IAR’s motion to dismiss the allegations against them. While the Broker argued that the associations violated federal and state antitrust laws, the court found that the Broker had failed to specifically identify any evidence of an agreement between the associations and the Broker to harm him. In order to successfully allege a claim for an antitrust conspiracy, a party must: first, demonstrate a contract, combination, or conspiracy; second, a resulting restraint of trade in the marketplace; and finally, injury. The only allegation made against the associations was that RAAR “encouraged” the other defendants to conspire against him. “Encouragement” alone is not sufficient to allege a conspiracy against a party, and so the court dismissed all of the allegations against RAAR and IAR, allowing the ethics hearing to proceed against the Broker.
Finally, the court considered the remaining allegations against the other defendants. While the court found that the Broker’s conspiracy allegations against the other defendants failed because he had failed to allege sufficient facts in support of those allegations, the court did find sufficient facts to allow some of his other allegations against the other defendants to proceed. Therefore, the court did not dismiss all of the allegations against the Competitors and so the lawsuit moved forward.
Hackman v. Dickerson REALTORS®, Inc., 520 F.Supp.2d 954, (N. D. Ill., 2007).