REX - Real Estate Exchange, Inc. v. Brown

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

REX – Real Estate Exchange, Inc., OPINION & ORDER

Plaintiff, No. 3:20-cv-02075-HZ

v.

KATE BROWN, in her individual and

official capacity as the Governor of

Oregon; STEVE STRODE, in his

individual and official capacity as the

Commissioner of the Oregon Real Estate

Agency; OREGON REAL ESTATE

AGENCY; OREGON REAL ESTATE

BOARD; MARIE DUE, DEBRA GISRIEL,

SUSAN GLEN, JOSE GONZALEZ,

DAVID E. HAMILTON, KIM

HEDDINGER, LAWNAE HUNTER,

PATRICIA IHNAT, and ALEX D.

MACLEAN III, in their official capacities

as members of the Oregon Real Estate

Board,

Defendants.

Herbert G. Grey

4800 SW Griffith Drive, Suite 320

Beaverton, OR 97005-8716

Michael C. Toth

REX - Real Estate Exchange, Inc.

3300 N. Interstate Hwy. 35, Ste. 149

Austin, TX 78705

Austin R. Nimocks

Christopher L. Peele

Cory R. Liu

Ashcroft Sutton Reyes LLC

919 Congress Ave., Ste. 1325

Austin, TX 78701

Attorneys for Plaintiff

David B. Markowitz

Harry B. Wilson

Stanton R. Gallegos

Markowitz Herbold PC

1455 SW Broadway, Suite 1900

Portland, OR 97201

Attorneys for Defendants

HERNÁNDEZ, District Judge:

Plaintiff REX – Real Estate Exchange, Inc. (“REX”) brings this action for antitrust

violation under Section 1 of the Sherman Act, violation of the Fourteenth Amendment Equal

Protection and Due Process Clauses, and violation of rights secured by Article I, section 20 of

the Oregon Constitution against Defendants Kate Brown in her individual and official capacity

as Governor of Oregon, Steve Strode in his individual and official capacity as Oregon Real

Estate Commissioner, the Oregon Real Estate Agency, the Oregon Real Estate Board (“Board”),

and each individual member of the Board in their official capacities. Currently before the Court

is Defendants’ Motion to Dismiss Plaintiff’s Complaint. For reasons stated below, the Court

grants Defendants’ Motion.

BACKGROUND

Plaintiff REX is a real estate technology company that connects real estate buyers and

sellers online. Compl. ¶ 4, ECF 1. Unlike most traditional brick-and-mortar real estate

companies, REX offers rebates to customers on commissions it receives. Id. at ¶ 5. Under its

Buyer Rebate Program, when one of its customers purchases a home, REX refunds half of its

buyer’s agent commission to the customer at closing. Id. at 6. REX contends that its Buyer

Rebate Program reduces the price of the average home in Oregon by $5,000 to $10,000 with no

impact on the seller’s revenue. Id.

Defendant Oregon Real Estate Agency (“Agency”) is an official agency of the State of

Oregon. Compl. ¶ 18. The Agency has the power to “[m]ake and enforce rules as necessary to

administer and enforce the provisions of . . . any law with the administration and enforcement of

which the agency is charged. Or. Rev. Stat. (“O.R.S”) § 696.385(3). The agency operates under

the supervision and control of the Oregon Real Estate Commissioner (“Commissioner”), who is

appointed by the Governor subject to confirmation by the Oregon Senate. O.R.S. 696.375(2). By

statute, the Commissioner must have been a real estate broker in Oregon “actively engaged in

business as such” for five years prior to the date of appointment. Id. The Commissioner “holds

office at the pleasure of the governor.” Id.

Defendant Oregon Real Estate Board exists within the Agency and is made of up nine

members appointed by the Governor to hold office for four years and serve at the pleasure of the

Governor. O.R.S. 696.405(1). Seven members must have held real estate licenses and have been

actively engaged in the real estate profession in Oregon for five years prior to their appointments.

Id. The other two Board members cannot be real estate licensees or have had any prior

connection to the Agency. Id. The Board is authorized to inquire into the needs of real estate

licensees, advise the Governor as to how the Agency may best serve the state and the licensees,

and make recommendations and suggestions of policy to the Agency regarding the regulation of

licensees and the real estate business in Oregon. O.R.S. 696.425(1).

REX received a real estate brokerage license and began doing business in Oregon in

January 2019. In March 2019, the Agency sent an “Education Letter of Advice” (“Letter”)

notifying REX that its Buyer Rebate Program violates an Oregon state law that prohibits sharing

real estate commissions with any person who does not have a real estate license. Id. at ¶ 59; see

O.R.S. 696.290 (“[A] real estate licensee may not offer, promise, allow, give, pay or rebate,

directly or indirectly, any part or share of the licensee’s compensation arising from or accruing

from any real estate transaction . . . to any person who is not a real estate licensee[.]”). The Letter

informed REX that offering rebates to its customers is grounds for discipline under Oregon law,

but that the Agency would not take action against REX’s license at that time. Compl. Ex. 1, ECF

1-1. Since receiving the letter, REX has not rebated any portion of its commissions to customers.

Compl. ¶ 63. REX contends that it has forgone transactions in Oregon and its revenue growth

has been slower compared to other markets because it cannot offer rebates to customers. Id.

REX asserts that the Agency’s anti-rebate policies bar new entrants to the brokerage

market and protect incumbent brokers who benefit from artificially high commissions. Id. at 62.

REX alleges that the Agency’s policies restrict competition and “injure buyers and sellers of

property throughout Oregon” by depriving them of price discounts, including cash rebates. Id. at

67. According to REX, “Defendants’ promulgation, adoption, maintenance, and enforcement of

the anti-rebate policies arises from and result in agreements, combinations, and conspiracies that

restrain competition . . . in violation Section 1 of the Sherman Act, 15 U.S.C. § 1.” Id. at 72.

REX also claims that Oregon’s anti-rebate policies violate its and its customers’ due process

rights and equal protection rights. Id. at ¶¶ 82-109. Finally, REX claims that by enforcing the

anti-rebate policies, Defendants violate the rights of REX and its customers under the Privileges

and Immunities Clause of the Oregon Constitution Article I, section 20. Id. at ¶¶ 112-124.

Plaintiff seeks damages and an injunction prohibiting Defendants from enforcing

Oregon’s anti-rebate policies. Defendants move to dismiss all claims.

STANDARDS

II. Rule 12(b)(6)

A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the claims. Navarro v.

Block, 250 F.3d 729, 732 (9th Cir. 2001). When evaluating the sufficiency of a complaint’s

factual allegations, the court must accept all material facts alleged in the complaint as true and

construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard

Co., 668 F.3d 1136, 1140 (9th Cir. 2012). A motion to dismiss under Rule 12(b)(6) will be

granted if a plaintiff alleges the “grounds” of his “entitlement to relief” with nothing “more than

labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]” Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “Factual allegations must be enough to raise a

right to relief above the speculative level on the assumption that all the allegations in the

complaint are true (even if doubtful in fact)[.]” Id. (citations and footnote omitted).

To survive a motion to dismiss, a complaint “must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (internal quotation marks omitted). A plaintiff must “plead[] factual content that

allows the court to draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Id. In other words, a complaint must state a plausible claim for relief and contain “well-

pleaded facts” that “permit the court to infer more than the mere possibility of misconduct[.]” Id.

at 679.

DISCUSSION

I. Claims Under the Sherman Act, 15 U.S.C. § 1

Plaintiff claims that Oregon’s Governor, Real Estate Commissioner, Real Estate Agency,

Real Estate Board, and each of the Board’s members acted pursuant to a “continuing agreement

among Defendants and co-conspirators to require home sellers to pay the buyer broker an

inflated amount,” and Defendants’ established, maintain, and implement Oregon’s anti-rebate

policies in furtherance of a contract, combination, or conspiracy to unreasonably restrain trade

and commerce in violation of Section 1 of the Sherman Act. Compl. ¶¶ 74-76. Defendants argue

that (1) Plaintiff’s Sherman Act claim is barred by state-action immunity; and (2) Plaintiff fails

to allege facts that make the Sherman Act claim plausible on its face. The Court addresses

Defendants’ arguments in turn.

A. State-Action Immunity

Section 1 of the Sherman Act makes unlawful “every contract, combination . . ., or

conspiracy, in restraint of trade or commerce among the several States.” Parker v. Brown, 317

U.S. 341, 350 (1943) (quoting 15 U.S.C. § 1). The Act serves to promote robust competition and

suppress “business combinations” that restrain competition. Id. at 351. But the Sherman Act

“gives no hint that it was intended to restrain state action.” Id. States may have an interest in

regulating occupations, conferring exclusive rights to dominate a particular market to certain

entities, or otherwise limiting competition to achieve public objectives. N.C. State Bd. of Dental

Exam’rs v. FTC, 574 U.S. 494, 503 (2015). Thus, a State acting in its sovereign capacity is

generally immune from federal antitrust laws. Deak-Perera Haw., Inc. v. Dep’t of Transp. 745

F.2d 1281, 1282 (9th Cir. 1984); see Dental Exam’rs, 574 U.S. at 503 (“If every duly enacted

state law or policy were required to conform to the mandates of the Sherman Act, thus promoting

competition at the expense of other values a State may deem fundamental, federal antitrust law

would impose an impermissible burden on the State’s power to regulate.”).

But “[s]tate-action immunity is the exception rather than the rule.” Chamber of Com. of

the U.S.A. v. City of Seattle, 890 F.3d 769, 781 (9th Cir. 2018). When a State delegates control

over a market to a non-state actor, the actor generally cannot assert state-action immunity. See id.

(“Closer analysis 1s required when the activity at issue is not directly that of the State itself, but

rather is carried out by other pursuant to state authorization.”) (internal quotations and citations

omitted).

Courts use three approaches to analyzing state-action immunity. First, true state action,

such as that of a state legislature or state supreme court, is ipso facto immune from antitrust

liability. Hoover v. Ronwin, 466 U.S. 558, 567-68 (1984). Second, municipalities and executive

state agencies are entitled to state-action immunity if they act pursuant to a “clearly articulated

and affirmatively expressed state policy” to replace competition. /d. at 568-69; see Town of

Hallie v. City of Eau Claire, 471 U.S. 34, 45 (1985). Third, private parties and state agencies that

are controlled by participants in the markets they regulate only receive immunity if their

anticompetitive acts are (1) taken pursuant to a clearly articulated state policy and (2) supervised

by the state. Dental Exam’rs, 574 U.S. at 506.

1. Oregon Governor

Defendants assert that Governor Brown is ipso facto immune from antitrust liability

under Parker. Plaintiff, on the other hand, claims that the ipso facto immunity afforded to state

7 —OPINION & ORDER

legislatures and supreme courts does not extend to governors. See Hoover, 466 U.S. at 568 n.17

(“This case does not present the issue whether the Governor of a State stands in the same

position as the state legislature and state supreme court for purposes of the state-action

doctrine.”). But while the issue was not before the Court in Hoover, the Ninth Circuit has held

that state executive branches are entitled to state-action immunity from antitrust suits. See Deak-

Perera, 745 F.2d at 1283, cert. denied, 470 U.S. 1053 (1985) (“We see no reason why a state

executive branch, when operating within its constitutional and statutory authority, should be

deemed any less sovereign than a state legislature, or less entitled to deference under principles

of federalism.”). As the head of the executive branch of Oregon, any actions taken by the

Governor are acts of the sovereign. Thus, Governor Brown is entitled to state-action immunity.

2. Oregon Real Estate Agency and Real Estate Commissioner

Non-state actors who engage in anti-competitive conduct pursuant to state authorization

do not receive ipso facto immunity from liability under the Sherman Act. Nevertheless, such

persons or entities may be immune if they satisfy a two-part test: (1) the anti-competitive

conduct was pursuant to “a clearly articulated and affirmatively expressed state policy to replace

competition with regulation”; and (2) the conduct is “actively supervised by the State itself.” Cal.

Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980); see Dental

Exam’rs, 574 U.S. at 506.

The supervision requirement ensures that immunity is conferred only to non-state actors

who “in the judgment of the State, actually further state regulatory policies.” Patrick v. Burget,

486 U.S. 94, 101 (1988). In Town of Hallie, the Supreme Court held that municipalities acting

pursuant to clearly articulated and affirmatively expressed state policies are protected by state-

action immunity without needing to show they are actively supervised by the state. 471 U.S. at

47. The Ninth Circuit has since held that state agencies may receive the same immunity as

municipalities without active state supervision because, as public bodies, state agencies are

unlikely to be involved in private arrangements to limit competition. Hass v. Oregon State Bar,

883 F.2d 1453, 1460 (9th Cir. 1989). “Once it is clear that state authorization exists, there is no

need to require the State to supervise actively the . . . execution of what is a properly delegated

function.” Hass 883 F.2d at 1460 (citing Town of Hallie, 471 U.S. at 47). In Hass, the Ninth

Circuit determined that the Oregon State Bar was a state agency because the Oregon legislature

had “expressly designated the Bar as the instrumentality through which the legislature will

implement its policies[.]” Id. at 1461. The Court held that the Bar need not satisfy the active

supervision requirement to be entitled to state-action immunity. Id. So long as a state agency

meets the requirements set forth in Hass and is acting pursuant to a clearly articulated state

policy, it is immune from liability under the Sherman Act.

Plaintiff argues that the Agency and the Commissioner cannot receive state-action

immunity without active state supervision because the Agency is “wholly controlled by a market

participant.” Compl. ¶ 60. When a state agency is composed of or controlled by actors who

participate in the same market they regulate, any anti-competitive agency actions must be

“actively supervised” by the State. Midcal, 445 U.S. at 105. The Midcal supervision rule stems

from the concern that “where a private party is engaging in anticompetitive activity, there is a

real danger he is acting to further his own interests, rather than the governmental interests of the

State.” Dental Exam’rs, 574 U.S. at 507 (internal quotations and citation omitted). Midcal

involved private businesses that restrained competition pursuant to state policy. 445 U.S. at 99-

101. But the supervision requirement extends to “[s]tate agencies controlled by active market

participants, who possess singularly strong private interests” because they “pose the very risk of

self-dealing Midcal’s supervision requirement was created to address. Id. at 1114.

Plaintiff asserts that the Commissioner is an active market participant because he “must

hold an active real estate broker license to qualify for the position.” Compl. ¶ 60. In its response

brief, Plaintiff acknowledges that Commissioner Strode deactivated his license. 1 Pl. Resp. 17,

ECF 38. But Plaintiff argues that the Commissioner’s “deep ties to the real-estate lobby” give

him “the same economic incentives to restrain competition as current active market participants.”

Id. at 17-18. Plaintiff relies on Dental Exam’rs, in which a majority of the North Carolina Dental

Board’s members were engaged in the active practice of dentistry—the profession they

regulated. 574 U.S. at 511. In that case, the Supreme Court held that because the board was

almost entirely composed of active market participants, it could only be entitled to state-action

immunity if it was actively supervised by the State. Id.

In contrast, Commissioner Strode does not have an active real estate license and thus

cannot engage in an active real estate practice while he is the head of the Agency. Even if the

Commissioner has an economic incentive to restrain competition because of a future intent to

participate in the market, this case is distinguishable from Dental Exam’rs. In Dental Exam’rs,

the board members were elected by other licensed dentists and were not removable by any public

official. Id. at 499-500. Here, the Commissioner is appointed by the Governor with Senate

confirmation and can be removed by the Governor at will. In that respect, the Agency is more

like a prototypical state agency—a fact that is not diminished by the requirement that the

1 O.R.S. 696.375(2) requires the Commissioner to have previously held a real estate license and

to have been active in the real estate business prior to appointment. The statute does not require

the Commissioner to have an active real estate license while holding office. Plaintiff

acknowledges its error after Defendants provided evidence that Commissioner Strode

deactivated his real estate license upon being appointed Commissioner.

Commissioner have formerly been an active market participant. As such, the Agency and the

Commissioner need not satisfy the “active supervision” requirement. So long as they acted

pursuant to a clearly articulated state policy, they are be entitled to state-action immunity. See

Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d 869, 876 (9th Cir. 1987)

(“When the state executive or executive agencies act within their lawful authority, their acts are

those of the sovereign.”).

Plaintiff also claims that the Agency did not act pursuant to a clearly articulated state

policy because O.R.S. 696.290(1)(a) does not clearly express a policy banning rebates to its

customers. Plaintiff argues that because other states allow rebates in the face of similar statutory

language, O.R.S. 696.290(1)(a) cannot be a “clearly” articulated ban on rebates. Pl. Resp. 9-15,

ECF 38.2

Clear articulation does not require a legislature to expressly state an anticompetitive

intent. Chamber of Com. of the U.S.A., 890 F.3d at 782 (citing FTC v. Phoebe Putney Health

Sys., Inc., 568 U.S. 216, 226 (2013). “The clear-articulation test is met if the anticompetitive

effect was the foreseeable result of what the State authorized.” Id. (internal quotations and

citations omitted); see City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 372 (1991)

(“We have rejected the contention that this requirement can be met only if the delegating statute

explicitly permits the displacement of competition.”).

2 The Court notes that the majority of state statutes cited by Plaintiff do not explicitly use the

word “rebate” as O.R.S. 696.290(1)(a) does. Whether, within a particular context, the term

“rebate” may be interpreted differently is not before the Court. The Court finds that the Agency’s

interpretation is consistent with the plain meaning of the statute.

Here, the Oregon legislature, in creating the Agency, expressly empowered the Agency to

enforce rules and regulations related to the business of real estate sales. The Agency’s authority

to regulate real estate sales derives from O.R.S. 696.385(3), which states that the “Real Estate

Agency shall have the power to . . . [m]ake and enforce rules as necessary to administer and

enforce the provisions of . . . any law with the administration or enforcement of which the

agency is charged.” In enacting an authorizing statute, the Oregon legislature clearly articulated a

policy empowering the Agency to suppress competition in Oregon as necessary to enforce

Oregon law. See Hass, 883 F.2d at 1458 (holding that statutory scheme that “clearly evinces a

legislative policy to supplant free market competition with regulation in the field” satisfies the

clear articulation test). Thus, the Agency, and the Commissioner as its head, are authorized to

enforce the provisions of O.R.S. 696.290(1)(a), which by its terms, states that a real estate

licensee “may not . . . rebate . . . any part or share of the licensee’s compensation . . . to any

person who is not a real estate licensee[.]” (emphasis added).3 Suppressing activity by real estate

licensees that does not comply with the plain language of O.R.S. 696.290(1)(a) is a “foreseeable

result” of what the legislature authorized.

The Court finds that in sending the Letter to REX, the Agency acted in a manner that was

within its authority as delegated by the Oregon legislature and that was pursuant to a clearly

articulated state policy. See id. (“Our task, therefore, is to determine whether the restraints in

question are a reasonable and foreseeable exercise of delegated powers within the scope of an

3 Under O.R.S. 696.290(1)(a), “any person who is not a real estate licensee” includes individuals

exempt from license requirements under O.R.S. § 696.030. Such persons include “[a]

nonlicensed individual transferring or acquiring an interest in real estate owned or to be owned

by the nonlicensed individual.” O.R.S. § 696.030(17). Thus, Oregon law specifically prohibits a

real estate licensee from providing “any part or share of the licensee’s compensation” to a person

who is the buyer or seller of the real property that is the subject of the transaction. O.R.S.

696.290(1)(a).

agency’s authority.”) (quoting Hybud Equip. Corp. v. City of Akron, 742 F.2d 949, 960 (6th Cir.

1984)). Under Hallie, the Commissioner and the Agency are entitled to state-action immunity

from antitrust liability.

3. The Oregon Real Estate Board and Board Members

Plaintiff argues that because the majority of Board members hold active real estate

licenses and are active market participants, they must meet both of Midcal’s requirements.

Defendants, on the other hand, argue that the Board and its members are immune from suit

because they lack any authority to adopt, establish, or enforce state policy. The Board exists

within the Agency and serves to “make recommendations and suggestions of policy.” O.R.S.

696.425(1). Defendants note that the Board did not sign the Letter to REX or engage in its

drafting. Def. Reply 14, ECF 40. Plaintiff alleges that the Board’s anti-competitive act was to

give “advice, recommendations, and/or assistance to the Agency concerning Oregon’s anti-rebate

law and . . . on enforcement activities, including the threatening letter sent to REX.” Compl. ¶61.

Even if Plaintiff can make credible allegations that the Board engaged in contract, combination,

or conspiracy to restrain competition, the Board is entitled to state-action immunity under

Midcal.

First, like the Agency, any recommendations made by the Board to prohibit rebates to

customers were made pursuant to a clearly articulated state policy. The Board’s role is to make

policy recommendations and suggestions to the Agency. And if the Board recommended that the

Agency notify REX that providing rebates to customers violates state law, then the Board

engaged in a reasonable interpretation of O.R.S. 696.290(1).

Second, the Board is actively supervised by the Agency as an arm of the State. The Board

lacks the authority to take any enforcement action and can only act through suggestions and

recommendations to the Agency and the Governor. Indeed, the Board was created as a subsidiary

of the Agency itself. See O.R.S. 696.405(1) (“The Real Estate Board is established within the

Real Estate Agency.”). Thus, by definition actions of the Board are supervised by the State.

Under Midcal, the Board is entitled to state-action immunity.

In summary, any alleged anti-competitive actions by the Governor, the Commissioner,

the Agency, and the Board were taken to enforce an anti-rebate law enacted by the state

legislature. All such actions are those of the State itself, and thus fall squarely within the

protection from antitrust liability justified by the reasoning in Parker.4

B. Plausible Claim under the Sherman Act

Even if Defendants were not entitled to state-action immunity, Plaintiff has failed to

allege facts that make its antitrust claim plausible on its face. To state a claim for violation of

Section 1 of the Sherman Act, a plaintiff must plead facts that show “(1) a contract, combination

or conspiracy among two or more persons or distinct business entities; (2) by which the person or

entities intended to harm or restrain trade or commerce among the several states, or with foreign

nations; (3) which actually injures competition.” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042,

1047 (9th Cir. 2008). A conspiracy as defined by Section 1 of the Sherman Act requires “an

agreement that joins together independent centers of decisionmaking.” Am. Needle, Inc. v. Nat’l

Football League, 560 U.S. 183, 196 (2010) (internal quotations and citation omitted). The

4 The Court declines to opine on the wisdom of Oregon’s anti-rebate policy. “The Court did not

suggest in Parker, nor has it suggested since, that a state action is exempt from antitrust liability

only if the sovereign acted wisely[.] The only requirement is that the action be that of the State

acting as a sovereign.” Hoover, 466 U.S. at 574 (internal quotations and citation omitted).

agreement need not be between two or more separate legal entities. But the Sherman Act requires

an agreement to restrain trade made between “separate economic actors pursuing separate

economic interests.” Id. at 195.

Defendants are all members of the executive branch of the Oregon state government. The

Governor appoints and may remove the Commissioner and each of the nine members of the

Board. The Commissioner and all of the Board members serve at the pleasure of the Governor.

The Board is authorized by state statute to advise both the Agency and the Governor on policy

regarding the real estate industry in Oregon. Thus, with respect to the Sherman Act, Defendants

are members of the same entity. And with the respect to the alleged anti-competitive action

taken, they are not separate decisionmakers. Plaintiff alleges no facts supporting an inference

that Governor Brown, the Agency, or the Board function as separate economic actors to restrain

competition. As such, even if Defendants were not entitled to state-action immunity, Plaintiff’s

claim that Defendants engaged in a contract, combination, or conspiracy to restrain competition

would fail.

II. Claims under 42 U.S.C. § 1983

Plaintiff brings three claims against Defendants under 42 U.S.C. § 1983 for violation of

constitutional rights. First, Plaintiff claims Defendants violated its due process rights under the

Fourteenth Amendment because O.R.S. 696.290, the law on which Oregon’s anti-rebate policies

are based, lacks “any rational relationship to a legitimate public purpose.” Compl. ¶ 88. Second,

Plaintiff claims that Defendants’ enforcement of the anti-rebate policies violates the Fourteenth

Amendment Equal Protection Clause by treating individuals and businesses that offer rebates

differently than those that do not. P. Resp. 23. Third, Plaintiff brings an equal protection claim

on behalf of its customers who do not have real estate licenses because they are prohibited from

receiving rebates, whereas home buyers who happen to possess real estate licenses are not.5

Compl. ¶ 104.

“To state a claim under § 1983, a plaintiff must both (1) allege the deprivation of a right

secured by the federal Constitution or statutory law, and (2) allege that the deprivation was

committed by a person acting under color of state law.” Anderson v. Warner, 451 F.3d 1063,

1067 (9th Cir. 2006). Legislative acts that do not impinge on fundamental rights or employ

suspect classifications are presumed valid, and this presumption is overcome only by a “clear

showing of arbitrariness and irrationality.” Kawaoka v. City of Arroyo Grande, 17 F.3d 1227 (9th

Cir. 1994). Because there is no fundamental right to give or receive rebates in real estate

transactions, government prohibition of rebates is presumptively valid under the Due Process

Clause if it is rationally related to a legitimate government interest. And because Plaintiff does

not allege discrimination based on a suspect classification, the anti-rebate policy will survive an

equal protection challenge “if there is a rational relationship between the disparity of treatment

and some legitimate government purpose.” United States v. Ayala-Bello, 995 F.3d 710 (9th Cir.

2021) (quoting Heller v. Doe, 509 U.S. 312, 320 (1993)). Thus, the fate of all three constitutional

claims hinge on whether there is a rational basis for Oregon’s anti-rebate policy.

Under rational basis review, a law or policy must be upheld if there is “any reasonably

conceivable state of facts that could provide a rational basis” for treating the plaintiff differently.

Jones v. Solis, 121 F. App’x 228, 230 (9th Cir. 1995) (quoting FCC v. Beach Commc’ns, Inc.,

5 Defendants do not challenge whether Plaintiff has third-party standing to assert claims on

behalf of its customers. The Court does not address this issue in detail but notes that federal

courts commonly recognize an exception to the rule against third-party standing when

commercial businesses assert the rights of their customers. See Craig v. Boren, 429 U.S. 190

(1976) (“[V]endors and those in like positions have been uniformly permitted to resist the efforts

at restricting their operations by acting as advocates of the rights of third parties who seek access

to their market or function.”).

508 U.S. 307, 313 (1993)). Even if a state statute or policy produces unequal or unfair results, it

does not necessarily fail rational basis review. United States v. Padilla-Diaz, 862 F.3d 856, 862

(9th Cir. 2017). A state law may be constitutional even if it is “unwise, improvident, or out of

harmony with a particular school of thought,” as long as it bears some a relationship to some

legitimate end. Nat'l Ass'n for Advancement of Psychoanalysis v. Cal. Bd. of Psych., 228 F.3d

1043, 1051 (9th Cir. 2000) (quoting Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 488

(1955)).

Plaintiff presents many compelling arguments that Oregon’s anti-rebate law hurts

consumers and artificially increases home prices. But Plaintiff alleges no facts to rebut the

presumption that O.R.S. 696.290 has a rational relationship to a legitimate government purpose.

Regulation of certain trades or professions is a legitimate objective of state governments. See id.

at 1054 (“It is properly within the state’s police power to regulate and license professions.”).

Oregon’s statutory scheme authorizes Defendants to regulate the business of real estate sales and

the professional activity of realtors. Defendants state a legitimate purpose in preventing

individuals without real estate licenses from receiving compensation for work that can only be

performed by licensed realtors under the state scheme.

Plaintiff makes the conclusory allegation that Oregon’s anti-rebate “policies

unconstitutionally infringe on the rights of consumers and their brokers to decide how to

transact.” Compl. ¶ 64. But regulating the interaction between sales professionals and consumers

falls squarely within the governing power of the State and provides a rational basis for

Defendants’ enforcement action here. In addition, Defendants’ application of O.R.S. 696.290 to

Plaintiff may be constitutional even if it prohibits more activity than is necessary to achieve its

goal. See Mendoza v. Garrett, 358 F. Supp. 3d 1145, 1175 (D. Or. 2018) (“[T]hat the statute may

be overinclusive by its enforcement . . . does not, under rational basis review, render it

unconstitutional.”). Because Plaintiff does not allege facts showing that Oregon’s statute

prohibiting compensation to unlicensed individuals lacks a rational basis, it fails to state a claim

for violation of the Fourteenth Amendment Due Process and Equal Protection Clauses.

III. Claims under the Oregon Constitution, Article 1, Section 20

Plaintiff brings claims under the Privileges and Immunities Clause of Article 1, section

20 of the Oregon Constitution.6 Plaintiff alleges that Oregon’s anti-rebate policies “violate

Plaintiff’s privileges by prohibiting Plaintiff from participating in the real estate market merely

because it provides rebates to non-real estate licensees[.]” Compl. ¶ 114. Plaintiff also brings a

claim on behalf of its customers, alleging that Oregon’s anti-rebate policies “limit the privilege

of receiving a rebate to real estate licensees and excludes non-licensees from receiving

rebates[.]” Compl. ¶ 120.

As a preliminary matter, the Court notes that there is no private right of action for

damages under the Oregon Constitution. See Hunter v. City of Eugene, 309 Or. 298, 303, 787

P.2d 881, 883 (1990) (“Oregon’s Bill of Rights provides no textual or historic basis for implying

a right to damages for constitutional violations.”). Thus, neither of Plaintiff’s claims under the

Oregon Constitution provide a mechanism to recover damages from Defendants in their

individual capacities.

Next, Defendants argue that the Eleventh Amendment bars suits brought in federal court

under state law against state officials. Federal courts have long recognized an exception to

Eleventh Amendment sovereign immunity when state officials are sued in their official

6 “No law shall be passed granting to any citizen or class of citizens privileges, or immunities,

which, upon the same terms, shall not equally belong to all citizens.” OR. CONST., art I, § 20.

capacities for prospective relief on federal law claims. Ex Parte Young, 209 U.S. 123 (1908). But

the Ex Parte Young exception does not apply when a suit against state officials is brought under

state law. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 106 (1984). Thus, the

Eleventh Amendment bars plaintiffs from bringing state law claims for both prospective and

retrospective relief against state officials in their official capacities. Pena v. Gardner, 976 F.2d

469, 473 (9th Cir. 1992) (citing Pennhurst, 465 U.S. at 106). Consequently, Plaintiff’s claims

under the Oregon Constitution against Governor Brown, Commissioner Strode, and members of

the Board in their official capacities are barred by the Eleventh Amendment.

Plaintiff correctly asserts that Pennhurst does not preclude it from bringing state law

claims against Defendants in their individual capacities. See id. at 472 (“[The Eleventh

Amendment] will not, however, bar claims against state officials in their personal capacities.”)

(emphasis in original). Though Plaintiff may bring damages claims against individual

defendants, Oregon law provides no mechanism to recover damages under the Oregon

Constitution. See Hunter, 309 Or. at 303, 787 P.2d at 883. Thus, Plaintiff’s state constitutional

claims must be dismissed.

In its extensive Complaint, Plaintiff makes compelling arguments that excessive fixed

broker commissions harm consumers and the housing market itself. Plaintiff notes that the U.S.

Department of Justice has begun to take action against the anti-competitive activity of traditional

real estate brokers and that many states allow commission rebates to home buyers. Plaintiff

points out that Oregon is one of the few remaining states that prohibit such rebates. But neither

the merits of traditional real estate brokers’ compensation scheme nor the prudence of Oregon’s

anti-rebate policies are before Court. The Court’s role here is to decide whether Plaintiff states a

plausible claim that the anti-rebate policies violates Section 1 of the Sherman Act, the Fourteenth

Amendment Due Process and Equal Protection Clauses, or the Oregon Constitution. In that

regard, Plaintiff does not meet its burden.

CONCLUSION

Construing all alleged facts in Plaintiff’s Complaint as true, the Court finds that Plaintiff

fails to adequately state claims on which relief may be granted. The Court grants Defendants’

Motion to Dismiss [22].

IT IS SO ORDERED.

DATED:___D_e_c_e_m__b_e_r_ 9_,_ _2_0_2_1_____.

______________________________

MARCO A. HERNÁNDEZ

United States District Judge