State v. Hossan-Maxwell: Connecticut Supreme Court Finds List Back Agreements Illegal
In State v. Hossan-Maxwell, the Supreme Court of Connecticut addressed list back agreements under the Connecticut State Antitrust Act. The court held that list back agreements constitute tying arrangements, which when coupled with other prerequisites, become per se violations of the Act.
In 1966, Hartnett recorded a "Declaration of Covenants and Restrictions" on parcels of land in New Milford, CT. The restriction required a grantee of any of the 64 lots who sought to sell or lease the property to give exclusive brokerage rights to Hartnett for three months. Hartnett's successor in interest was Hossan-Maxwell, Inc. (Hossan). In 1976, Hossan informed an owner who sought to sell one of the lots that Hossan had exclusive brokerage rights and would take steps to stop sale through any other broker. The state brought action against Hossan under its Antitrust Act.
The Supreme Court of Connecticut defined a tying arrangement as an agreement by a party to sell one (tying) product but only on the condition that the buyer also purchase a different (tied) product. The court held that there was a tying arrangement in this case. The court found the applicable law to be that a tying arrangement is per se illegal if the seller has sufficient economic power with respect to the tying product to restrain free trade in the market for the tied product or where a "not insubstantial" amount of commerce was affected.
The Supreme Court of Connecticut then applied this law to the evidence and found that both requirements were established. As for the market power element, the court concluded that the uniqueness of residential property was adequate evidence that the defendant possessed sufficient economic power with respect to the tying product. As for the "not insubstantial" amount of commerce affected element, the court held that the dollar volume of the business, amounting to $21,000 per year into perpetuity, was not insubstantial. Thus, the list back agreement was held to be a tying arrangement and a per se violation of the Act.
State v. Hossan-Maxwell, 181 Conn. 655, 436 A.2d 284 (1980).
Several cases agreeing with the Hossan-Maxwell decision regarding sale-list back agreements or tying arrangements include:
King City Realty v. Sunpace Corp., 291 Or. 573, 633 P.2d 784 (1981); State v. Mililani, 1980-2 Trade Cases (CCH) P 63,503, 1980 WL 4680 (Haw. Cir. Ct. 1980); and State v. Candlewood Shores Estates, 1981 Trade Cases (CCH) P 63,881, 1981 WL 11423 (Conn. Super. Ct. 1981).