Jolley v. Texas Ass’n of REALTORS®: Antitrust Lawsuit against Association Dismissed

A Texas federal court has considered a motion to dismiss a lawsuit filed by a member containing antitrust violations over a REALTOR® association’s administration of a professional standards hearing.

Larry Jolley (“Member”) was a member of the San Angelo Association of REALTORS® (TX) and the Texas Association of REALTORS® (“Association”). In 2006, the Member listed for sale a home owned by Malcolm and Mary Koch (“Owners”). During the six-month term of the listing agreement, the Member and the Owners had a disagreement about the proper pricing for the property. The Owners accused the Member of being rude and also stealing water from their property.

The Owners filed an ethics complaint against the Member, alleging violations of Articles 1 and 9 of the Code of Ethics (“Code”). Article 1 requires a REALTOR® to promote a client’s interest in an honest manner, while Article 9 requires a REALTOR® to provide a copy of all agreements to his/her client. The Association conducted a hearing on the allegations, and as a result of the hearing expelled the Member for three years.

The Member filed a lawsuit claiming that he was denied a fair hearing because he did not receive adequate notice of the evidence that would be presented against him. Because of the failure to receive a fair hearing, he claimed that the Association violated section 1 of the Sherman Act, the federal antitrust laws. The trial court dismissed the lawsuit, but the court allowed the Member to file an amended complaint. The Association filed a motion to dismiss the amended complaint.

The United States District Court for the Western District of Texas again dismissed the Member’s lawsuit, although without prejudice. The Member repeated many of the same allegations in the second complaint that the court had dismissed earlier, and so the court did not reconsider his breach of contract and lack of due process allegations. The only remaining allegation was the alleged antitrust violation.

The court rejected the antitrust claim, and so again dismissed the Member’s lawsuit. In order to plead a Sherman Act violation, a party must show a contract, combination, or conspiracy that was used to restrain competition in the relevant market. The basis for the Member’s claims was that he did not receive notice of the evidence to be presented against him, including prior dropped criminal charges, and also that the sanction was not consistent with the alleged violation. The court had previously dismissed this allegation because the Member had failed to allege harm to any market. The Member now claimed that the discipline imposed on him will reduce the number of brokers entering the market, harming competition.
The court found that the Member had still failed to sufficiently allege any harm to competition, as there were no allegations that the Association had prevented any brokers from joining the Association or using its multiple listing service. While the Member has been expelled from the Association, this was because he was found to have violated the Association’s rules. Because the Member had failed to show any anticompetitive behavior by the Association, the court again dismissed the Member’s lawsuit, although without prejudice and so the Member could file another amended complaint.

Jolley v. Texas Ass’n of REALTORS®, No. A-08-CA-364-SS (W.D. Tex. Oct. 16, 2008). [Note: This opinion was not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]