Mainstreet Org. of REALTORS ® v. Calumet City: Association Lacks Standing to Challenge Ordinance

A federal appellate court has considered whether a REALTOR® association had standing to challenge a city ordinance requiring a property inspection prior to any property sale.

The Mainstreet Organization of REALTORS® (“Association”) brought a lawsuit against Calumet City (“City”), a municipality in the Association’s jurisdiction. The lawsuit challenged the constitutionality of City ordinances which: first, required a “point of sale” inspection without the owner’s consent and prevented the transfer of the property until a certificate of compliance was issued; second, prevented sales of multi-family housing unless the owners performed a “deconversion” to reduce the number of dwelling units to the amount that was permitted under current law; and finally, required an annual inspection of rental property units without first obtaining the consent of the tenants.

The trial court entered an injunction preventing enforcement of the point-of-sale and deconversion ordinances, but held that the Association did not have standing to challenge the rental inspection ordinance. The City then modified the two offending ordinances and moved to dissolve the injunction, but the trial court refused to dissolve the injunction. The City appealed.

The United States Court of Appeals for the Seventh Circuit reversed the trial court, determining that the Association lacked standing to challenge the ordinances. Standing is a judicially-created doctrine which requires that an actual "controversy" exist between the parties involved in the lawsuit. Special standing rules exist for an association bringing a lawsuit on behalf of its members. An association has standing to bring a lawsuit on behalf of its members when: (1) the members have standing to bring the lawsuit on their own; (2) the interests that the association is seeking to protect are related to the association's purpose; and (3) neither the claim asserted nor the relief requested require the participation of individual association members. In addition to the association standing rules, there are also two types of standing requirements: Article III standing and “prudential” standing.

Article III standing is the Constitutional basis for a party’s access to federal court. Article III standing requires a showing of an “injury-in-fact” by the party bringing the challenge. In this case, the Association argued that the City’s ordinances harmed its members because the inspection ordinance will make it more expensive to sell homes in the City and also will reduce the number of sales in the City. Both of these harms will likely cause a reduction in the amount of commission dollars collected by the Association’s members. Since Article III only requires that a party show a probability of harm, the court ruled that the Association had satisfied the requirements for Article III standing.

However, the court determined that the Association did not meet the requirements for “prudential” standing. Prudential standing is a judge-created doctrine. Part of this doctrine bars lawsuits brought by third parties who have derived their alleged harm from the actual victim. The reason for this doctrine is that damage suffered to one individual will have ramifications far beyond the original victim and this doctrine exists to protect the judicial system from being overwhelmed by lawsuits.

In this case, the City ordinances applied to homeowners, and the injury claimed by the Association for its members derived from the harm suffered by the homeowners and so the Association lacked standing. The court also pointed out that others in the real estate industry were also harmed by the City ordinances, such as title companies and moving companies, illustrating the need for this doctrine to protect the courts. Because the harm claimed by the Association derived from the homeowner’s injuries, the court ruled that the Association lacked standing to bring this third-party challenge to the City’s point-of-sale ordinances.

One judge concurred in the result of the case, but argued that the Association did not have Article III standing to challenge the City’s ordinances.

Mainstreet Org. of REALTORS®  v. Calumet City, 505 F.3d 742, (7th Cir. 2007).

Editor’s Note: NAR contributed financial support to the Association’s lawsuit, per the recommendation of NAR's Legal Action Committee.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement