McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232 (1980)

McLain v. Real Estate Board of New Orleans, Inc.

No. 78-1501

Argued November 6, 1979
Decided January 8, 1980
444 U.S. 232

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Syllabus

Petitioners, claiming individually and on behalf of a certain class of real estate purchasers and sellers, instituted this private antitrust action in Federal District Court against respondents, certain real estate firms and trade associations and a class consisting of real estate brokers who had transacted realty brokerage business in the Greater New Orleans area during the four years preceding the filing of the complaint. Petitioners alleged, inter alia, that respondents had engaged in a price-fixing conspiracy in violation of § 1 of the Sherman Act through an agreement to conform to a fixed rate of brokerage commissions on sales of residential property. The complaint also included allegations that respondents’ activities were "within the flow of interstate commerce and have an effect upon that commerce," and that respondents assisted their clients in securing financing and title insurance which came from sources outside the State. Respondents moved to dismiss the complaint for failure to state a claim under the Sherman Act, contending that their activities were purely local in nature, and did not substantially affect interstate commerce. The District Court granted the motion to dismiss the complaint, holding that, under Goldfarb v. Virginia State Bar, 421 U.S. 773, there must be a substantial volume of interstate commerce involved in the overall real estate transaction and the challenged activity must be an essential, integral part of the transaction, inseparable from its interstate aspects; and that here a broker’s participation in the presumably interstate aspects of securing title insurance and financing was only incidental, rather than indispensable. The Court of Appeals affirmed, holding that, under Goldfarb v. Virginia State Bar, supra, Sherman Act jurisdiction did not exist, because petitioners had failed to demonstrate that real estate brokers are either necessary or integral participants in the interstate aspects of residential real estate financing and title insurance.

Held: The complaint should not have been dismissed at this stage of the proceedings. Pp. 241-247.

(a) To establish jurisdiction under the Sherman Act, a plaintiff must allege the relationship between the activity involved and some aspect of interstate commerce and, if these allegations are controverted, must submit evidence to demonstrate either that the defendants’ activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce. Here, petitioners may establish the jurisdictional element of a Sherman Act violation by demonstrating a substantial effect on interstate commerce generated by respondents’ brokerage activity, and petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix commission rates, or by those other aspects of respondents’ activity that are alleged to be unlawful. Pp. 241-243.

(b) The courts below misinterpreted Goldfarb v. Virginia State Bar, supra, as requiring that petitioners demonstrate that real estate brokers are either necessary or integral participants in the interstate aspects of residential real estate financing and title insurance. The Goldfarb holding was not addressed to the "effect on commerce" test of jurisdiction, and in no way restricted it to those challenged activities that have an integral relationship to an activity in interstate commerce. Pp. 243-245.

(c) Here, what was submitted to the District Court shows a sufficient basis for satisfying the Act’s jurisdictional requirements under the "effect on commerce" theory so as to entitle petitioners to go forward. The record makes it clear that there is a basis for petitioners to proceed to trial, where there will be opportunity to establish that an appreciable amount of commerce is involved in the financing of residential property in the Greater New Orleans area and in the insuring of titles to such property, that this appreciable commercial activity has occurred in interstate commerce, and that respondents’ activities which allegedly have been infected by a price-fixing conspiracy have, as a matter of practical economics, a not insubstantial effect on the interstate commerce involved. Pp. 245-247.

583 F.2d 1315, vacated and remanded.

BURGER, C.J., delivered the opinion of the Court, in which all other Members joined, except MARSHALL, J., who took no part in the consideration or decision of the case.