Casey Hyland v. HomeServices of America, Inc.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 14a0277p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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CASEY WILLIAM HYLAND, et al.,

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Plaintiffs,

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No. 12-5947

CHRISTOPHER R. BURNETTE; MYSTIC

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BURNETTE,

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Plaintiffs-Appellants,

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v.

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HOMESERVICES OF AMERICA, INC.;

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HOMESERVICES OF KENTUCKY, INC.;

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SEMONIN REALTORS; RECTOR-HAYDEN

REALTORS; MCMAHAN COMPANY, INC., d/b/a -

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Coldwell Banker MacMahan Company,

Defendants-Appellees.

Appeal from the United States District Court

for the Western District of Kentucky at Louisville.

No. 3:05-cv-00612—Thomas B. Russell, District Judge.

Argued: March 18, 2014

Decided and Filed: November 13, 2014

Before: COLE, Chief Judge; NORRIS and GIBBONS, Circuit Judges.

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COUNSEL

ARGUED: Christopher Lovell, LOVELL STEWART HALEBIAN JACOBSON LLP,

New York, New York, for Appellants. Robert D. MacGill, BARNES & THORNBURG

LLP, Indianapolis, Indiana, for Appellees HomeServices of America. Matthew C.

Blickensderfer, FROST BROWN TODD LLC, Cincinnati, Ohio, for Appellee McMahan

Company ON BRIEF: Christopher Lovell, LOVELL STEWART HALEBIAN

JACOBSON LLP, New York, New York, for Appellants. Robert D. MacGill, Karoline

E. Jackson, BARNES & THORNBURG LLP, Indianapolis, Indiana, for Appellees

HomeServices of America. Matthew C. Blickensderfer, FROST BROWN TODD LLC,

Cincinnati, Ohio, for Appellee McMahan Company.

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No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 2

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OPINION

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ALAN E. NORRIS, Circuit Judge. Class representatives Christopher and Mystic

Burnette appeal three rulings by the district court that resulted in judgment for defendant

real estate firms, all of which operate in Kentucky. The fourth amended complaint

alleged that defendants violated Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1,

by participating in a horizontal conspiracy to fix the commissions charged in Kentucky

real estate transactions at an anti-competitive rate. The certified class consists of people

who sold residential real estate in Kentucky from October 11, 2001, to October 11, 2005,

and used the services of defendants.

Plaintiffs contend that the district court erred 1) by granting summary judgment

to defendants; 2) by excluding the opinions of plaintiffs’ experts with respect to the

ultimate question of whether collusion among the defendants was the likely economic

explanation of the pricing of commissions; and 3) by finding that defendant

HomeServices of America, Inc., was not responsible for the acts of its subsidiary,

HomeServices of Kentucky, Inc.

For the reasons that follow, we affirm the judgment of the district court.

I.

Plaintiffs filed suit in October 2005. On November 7, 2008, the district court

certified the class alluded to above. We declined an invitation for interlocutory review

of that order.

The crux of the allegation brought by plaintiffs is that defendants violated the

Sherman Act by conspiring to charge a supra-competitive real estate broker commission

of 6% and thereby injured sellers of residential property.

Several of the original named defendants have reached settlement agreements.

The remaining defendants consist of the McMahan Company, Inc. (d/b/a Coldwell

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 3

Banker McMahan Co.) (“McMahan”); HomeServices of Kentucky, Inc. (“HSK”), which

owns and operates Kentucky realtor defendants Semonin Realtors and Rector-Hayden

Realtors; and HomeServices of America, Inc., (“HSA”), which is the parent company

of HSK.

To become a real estate agent in Kentucky, an individual must be licensed by the

Commonwealth’s Real Estate Commission (“KREC”). Agents typically join local

realtors’ boards, such as the Greater Louisville Association of Realtors, the Lexington-

Bluegrass Association of Realtors, and the Kentucky Association of Realtors (“KAR”).

In 1991, the KREC passed a regulation (the “Rebate Ban”) that prohibited

licensed real estate brokers in Kentucky from offering any item or thing of value,

including rebates, to induce clients to retain their services. The United States

Department of Justice filed suit in 2005 against the KREC alleging that the Rebate Ban

violated Section 1 of the Sherman Act.1 That suit was settled and the Rebate Ban was

abolished.

This action was filed shortly thereafter. The fourth amended complaint alleges

that defendants “combined, conspired and agreed to fix, maintain and inflate real estate

broker commissions and associated fees and refuse to compete on the basis of price.”

Specifically, defendants “have charged a real estate broker commission of 6%, have

described this 6% fee as the ‘standard’ or ‘typical’ fee, and have habitually refused to

negotiate a lower fee.” According to the complaint, this collusion resulted in sellers

being forced to pay artificially inflated commissions.

1

The Section reads as follows:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint

of trade or commerce among the several States, or with foreign nations, is declared to

be illegal. Every person who shall make any contract or engage in any combination or

conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on

conviction thereof, shall be punished by fine not exceeding $100,000,000 if a

corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding

10 years, or by both said punishments, in the discretion of the court.

15 U.S.C. § 1.

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 4

The district court relied upon plaintiffs’ expert, Dr. Gary French, to set out the

elements of the alleged conspiracy:

[T]he alleged conspiracy has two related elements: (1) fixing the buyer’s

broker commission at 3%; and (2) fixing the listing commission at a

minimum of 6%. According to Dr. French, due to the visibility of the

offered buyer’s broker commission on the MLS [Multiple Listing

Service], those listing brokers not offering at least 3% to a buyer’s broker

could be detected and policed. If a listing broker did not offer at least 3%

to a buyer’s broker, then a buyer’s broker would not be interested in

showing the property. . . . [T]he KREC Rebate Ban helped maintain

commission rates at the conspiratorial standard during the Class Period

by ensuring that Defendants did not cheat on their price-fixing agreement

by providing a rebate or discount off of the stated fee.

District Court Memorandum Opinion at 2-3, filed July 18, 2012 (citations omitted).

The record developed below is voluminous and contains evidence that supports

each side’s claims. Plaintiffs point to a number of evidentiary items that they believe the

district court improperly discounted. Unlike cases based solely upon circumstantial

inferences, plaintiffs contend that direct evidence supports a conclusion that defendants

actually agreed to fix prices. See In re Text Messaging Antitrust Litig., 630 F.3d 622,

627 (7th Cir. 2010) (Section 1 “does not require sellers to compete; it just forbids their

agreeing or conspiring not to compete.”); see also Re/Max Int’l, Inc. v. Realty One, Inc.,

173 F.3d 995, 1009 (6th Cir. 1999). In plaintiffs’ view, they submitted extensive

evidence of communications among defendants concerning breaches of the National

Association of Realtors’ rule regarding the ban against brokers discussing commission

levels, pricing structures, or marketing practices of other brokers. Specifically, they refer

to deposition testimony of principal brokers to the effect that realtors often discussed

fees and commissions when they met.

In addition, plaintiffs point to a KREC hearing held on November 28, 2000, in

Louisville. Among other things, Arvel “Jerry” McMahan, the principal broker for the

McMahan Company, spoke about the dangers to the profession of internet brokers who

offer cut-rate commissions. In his words, “the most unprofessional thing we can do in

this business is cut our commission. I think we ought to be worth what we charge in the

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 5

services that we offer.” Similar sentiments were expressed by a representative of

Semonin. In plaintiffs’ view, “[a] reasonable juror could easily find that the plain

meaning of Defendants CBMcMahan’s and Semonin/HSK’s improper words reflected

at the very least either (a) unity of purpose, or (b) a common design and understanding,

or (c) a meeting of the minds, between Defendants CBMcMahan and Semonin not to cut

commissions.” Appellant Brief at 10 (emphasis omitted). In short, plaintiffs contend

that they have produced direct evidence of price fixing in the form of the KREC hearing

transcript.

In further support of that contention, they point to the complaint against the

KREC filed by the Department of Justice challenging the Rebate Ban, in which the DOJ

averred that the ban “enabled Brokers to raise, fix, peg, or stabilize the prices and rates

at which Brokers are compensated. The Rebate Ban is the result of agreements,

combinations, or conspiracies among its Commissioners and others, and it unreasonably

restrains competition to the detriment of consumers.” DOJ Complaint at ¶ 4. As already

noted, this complaint resulted in the abolition of the Rebate Ban.

Plaintiffs paint the following general picture of the evolution of real estate

commissions in Kentucky from the 1970s through the class period. During the 1990s,

a shift occurred in the relationship between buyer’s brokers and listing agents.

Formerly, a buyer’s broker was essentially a cooperating broker working with the listing

agent. In the 1990s, however, a buyer’s broker’s role changed and he or she became a

fiduciary of the buyer while the listing broker’s allegiance was to the seller. Throughout

both periods, the typical commission remained at 6% despite the fact that persons in

other commission-driven occupations—e.g., travel agents and stockbrokers—saw their

commissions erode. An MLS listing and other sale-related documents, such as a HUD-1

form, permitted realtors to determine commission levels, thereby allowing the industry

to police those agents who might be providing rebates or other incentives to drum up

business. This impetus manifested itself in the Rebate Ban. At bottom, plaintiffs’

contention—supported by expert testimony, depositions, and documents—allegedly is

that defendant firms colluded to keep commissions at an artificially inflated rate.

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In response, defendant McMahan emphasizes that it considers itself a “full-

service” real estate broker with eleven offices in Kentucky during the class period. In

addition to listing property, it would suggest repairs to the owner in order to make the

home more attractive, hold open houses, and engage in advertising efforts. Unlike a cut-

rate internet broker, a full-service broker provided a wider range of services to the client,

thereby justifying a higher commission. Principal agent Jerry McMahan oversaw the

operation of the various offices, although the managing brokers in those locations had

responsibility for the day-to-day operations.

According to McMahan, commissions derive from both the cost of doing

business and historical context. In the past, the industry used a 6% commission for

homes and a 10% commission for vacant land. This policy was not derived from

consultation or agreement with other brokers. Agents with the firm were free to

negotiate commissions outside of the standard 6% if the transaction merited. For

instance, potential repeat customers might receive a favorable rate, as would those whose

homes required some “wiggle room” in order to close the sale. Coldwell Banker,

McMahan’s owner, often approved those reduced commissions.

For its part, HSK notes that it, too, is a full-service brokerage firm that owns both

Rector-Hayden and Semonin. Since 2003, it has done business in Louisville under the

“Semonin” name and in Lexington as “Rector-Hayden.” According to HSK, it needs to

compete for the best agents and, in order to pay them accordingly, must generate

maximum income from commissions. To refute a point made by plaintiffs, HSK argues

that it must continue to pay buyer’s brokers a commission of 3% or else risk losing them

to listing agents who pay better commissions. However, HSK does not require its agents

to charge the standard rate of 6%. Like McMahan, it will on occasion approve a

commission under that rate for deal-specific reasons. Moreover, it does not share its

internal pricing goals with other firms.

Finally, it contends that the real estate market is inelastic: homeowners do not

decide to sell their homes based upon commission rates but on other factors. Thus, HSK

cannot create more demand for its services by decreasing its commissions. Given this

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 7

consideration, there is no incentive for it to decrease its commission rate. In short,

legitimate, non-collusive reasons govern the setting of commission rates in Kentucky.

II.

1. Did the District Court Err in Granting Summary Judgment?

A. Standard of Review

The rule governing whether summary judgment is appropriate is familiar: “The

court shall grant summary judgment if the movant shows that there is no genuine dispute

as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(a). We review the grant of summary judgment de novo, but draw all

reasonable inferences in favor of the non-moving party. Pierson v. Quad/Graphics

Printing Corp., 749 F.3d 530, 535-36 (6th Cir. 2014). That said, if the non-moving party

is unable to present sufficient evidence to permit a reasonable jury to find in its favor,

summary judgment is appropriate. Id. at 536 (citing Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 252 (1986)).

In this case, plaintiffs contend that the district court erroneously held them to a

heightened standard by misreading Matsushita Electrical Industrial. Co. v. Zenith Radio

Corp., 475 U.S. 574 (1986). Indeed, in its discussion of the circumstantial evidence

presented by plaintiffs, the district court noted that a “stringent” summary judgment

standard is appropriate in Section 1 Sherman Act cases. Mem. Op. at 39 (Page ID

21942). In Matsushita the Supreme Court provided us with the following guidance:

To survive petitioners’ motion for summary judgment,

respondents must establish that there is a genuine issue of material fact

as to whether petitioners entered into an illegal conspiracy that caused

respondents to suffer a cognizable injury. This showing has two

components. First, respondents must show more than a conspiracy in

violation of the antitrust laws; they must show an injury to them resulting

from the illegal conduct. . . .

Second, the issue of fact must be “genuine.” Fed. Rules Civ.

Proc. 56(c), (e). When the moving party has carried its burden under Rule

56(c), its opponent must do more than simply show that there is some

metaphysical doubt as to the material facts. . . . Where the record taken

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 8

as a whole could not lead a rational trier of fact to find for the

non-moving party, there is no “genuine issue for trial.”

It follows from these settled principles that if the factual context

renders respondents’ claim implausible–if the claim is one that simply

makes no economic sense–respondents must come forward with more

persuasive evidence to support their claim than would otherwise be

necessary. . . .

Respondents correctly note that “[o]n summary judgment the

inferences to be drawn from the underlying facts . . . must be viewed in

the light most favorable to the party opposing the motion.” But antitrust

law limits the range of permissible inferences from ambiguous evidence

in a § 1 case. Thus, in Monsanto Co. v. Spray-Rite Service Corp., 465

U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984), we held that conduct

as consistent with permissible competition as with illegal conspiracy

does not, standing alone, support an inference of antitrust conspiracy.

Id., at 764, 104 S.Ct., at 1470. To survive a motion for summary

judgment or for a directed verdict, a plaintiff seeking damages for a

violation of § 1 must present evidence “that tends to exclude the

possibility” that the alleged conspirators acted independently.

Respondents in this case, in other words, must show that the inference of

conspiracy is reasonable in light of the competing inferences of

independent action or collusive action that could not have harmed

respondents.

Matsushita, 475 U.S. at 585-88 (citations and footnotes omitted).

In Spirit Airlines v. Northwest Airlines, Inc., we acknowledged that the Supreme

Court had observed that summary judgment is “appropriate where the antitrust claim

simply makes no economic sense,” but went on to note that Matsushia “does not

increase the non-movant’s burden on a motion for summary judgment.” 431 F.3d 917,

930-31 (6th Cir. 2005) (quotation omitted). Moreover, we have recently cautioned that

summary judgment is generally discouraged in the antitrust context “due to the critical

‘role that intent and motive have in antitrust claims and the difficulty of proving

conspiracy by means other than factual inference.’” In re Se. Milk Antitrust Litig., 739

F.3d 262, 270 (6th Cir. 2014) (quoting Expert Masonry, Inc. v. Boone Cnty., Ky.,

440 F.3d 336, 341 (6th Cir. 2006)).

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 9

While courts must continue to construe facts in favor of the non-movant, even

in the antitrust context, they cannot ignore the clear teaching of Matsushita that “conduct

as consistent with permissible competition as with illegal conspiracy does not, standing

alone, support an inference of antitrust conspiracy.” Matsushita, 475 U.S. at 588 (citing

Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984)). Moreover, we

have echoed that teaching: “[C]ircumstantial evidence alone cannot support a finding of

conspiracy when the evidence is equally consistent with independent conduct. . . . [It]

must tend to exclude the possibility of independent conduct in order that an antitrust

claim survive summary judgment.” Re/Max Int’l, Inc. v. Realty One, Inc., 173 F.3d 995,

1009 (6th Cir. 1999).

Although the district court’s allusion to a “stringent” summary judgment standard

in the antitrust context is imprecise, we are not overly troubled by the use of the

adjective in the course of a lengthy opinion. Rather, we now turn to ask, in the course

of our de novo review of its opinion, whether it applied the correct legal standard set out

in Matsushita, Re/Max International, and Spirit Airlines in reaching its decision. For the

reasons outlined below, we conclude that it did.

B. The District Court’s Reasoning

i. Basic Legal Concepts

The district court noted that the existence of an agreement is the hallmark of a

Section 1 Sherman Act claim. Mem. Op. at 5 (quoting In re Baby Food Antitrust Litig.,

166 F.3d 112, 117 (3d Cir. 1999), (Page ID 21908). This agreement, in turn, can be

found when the conspirators have a unity of purpose, common understanding, or a

“meeting of minds in an unlawful arrangement.” Am. Tobacco Co. v. United States,

328 U.S. 781, 810 (1946).

Antitrust cases under Section 1 involve two modes of analysis depending on the

nature of the claim. The “rule of reason” governs most allegations of restraints on trade.

Under this analysis the court evaluates specific information about the industry, “its

condition before and after the restraint was imposed, and the restraint’s history, nature,

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 10

and effect.” In re Cardizem CD Antitrust Litig., 332 F.3d at 906 (quotation omitted). A

“restraint” is unlawful it if is “unreasonable.” In re Se. Milk Antitrust Litig., 739 F.3d

at 270. In some cases, however, those restraints “are deemed unlawful per se because

they have such predictable and pernicious anticompetitive effect, and such limited

potential for procompetitive benefit.” In re Cardizem CD Antitrust Litig. 332 F.3d at

906 (quotation omitted). Horizontal price-fixing, which is alleged in this case, falls

generally under the per se category. Nat’l Coll. Ass’n v. Bd. of Regents, 468 U.S. 85,

100 (1984).

ii. Evidence of Conspiracy

An antitrust conspiracy can be established by either direct or circumstantial

evidence. Re/Max Int’l, 173 F.3d at 1009. We turn first, as did the district court, to

plaintiffs’ alleged direct evidence.

a. Direct Evidence

The district court began its review of the evidence by noting that direct evidence

in the Section 1 antitrust context “must be evidence that is explicit and requires no

inferences to establish the proposition or conclusion being asserted.” See In re Baby

Food Antitrust Litig., 166 F.3d at 118. In other words, direct evidence is “tantamount

to an acknowledgment of guilt” while circumstantial evidence includes “everything else,

including ambiguous statements.” In re High Fructose Corn Syrup Antitrust Litig., 295

F.3d 651, 662 (7th Cir. 2002).

The district court turned first to the public hearing mentioned earlier that was

held before the KREC on November 28, 2000. Plaintiffs maintain that the transcript of

this hearing represents direct evidence of illegal collusion. The purpose of the hearing

was ostensibly to share a survey of inducement laws in other states and to invite

comments on the possible repeal of the KREC Rebate Ban. At the hearing, Ray Rector

of Rector-Hayden expressed the opinion that the consumer pays for inducements in the

form of higher fees or a decreased level of service. Jerry McMahan spoke at greater

length and, as discussed earlier, supported maintaining commissions. Doug Myers of

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Semonin echoed these sentiments: “I’d like to see our competition based on our

professional performance, not upon our brokerage fees. . . .” Broker Barbara Campbell,

whose agency charged only a 4.5% commission, contended that her clients were

contacted by brokers who would tell them that other realtors “would not show my

clients’ homes to their buyers so long as they continue to do business with Campbell

Realty.” Another broker, Steven Gavin, reported harassment for offering only 2% to the

buyer’s broker.

The district court assessed this evidence and concluded that it did not constitute

“direct evidence that Defendants conspired to fix real estate commissions at a supra-

competitive 6%.” Mem. Op. at 13. The court observed that it had reviewed the

transcript of the KREC meeting and found that plaintiffs have taken remarks made by

individual realtors “out of context and construed them in a highly-strained manner.” Id.

at 14.

We agree with this assessment. Like the district court, we view Jerry

McMahan’s statements at the hearing as ambiguous at best and they therefore do not

establish direct evidence of a conspiracy. McMahan was highlighting the fact that his

“full-service” firm offered more to its clients than his internet rivals and thereby justified

its higher commission rate. Also absent in the record is any comment by McMahan

suggesting that brokers negotiate among themselves their respective commission rates.

With respect to those who spoke about having undergone harassment for offering lower

rates, the district court observed that these speakers are not parties to this action, nor did

they implicate defendants. Furthermore, “[a] finder of fact would need to infer that a

buyer’s broker fee of 3% always resulted in a supra-competitive full commission rate of

6% and that these individuals were harassed for failing to set a full commission rate of

6%.” Mem. Op. at 15.

In short, it is our assessment, consonant with that of the district court, that the

“direct” evidence relied upon by plaintiffs falls far short of the standard that it be

“explicit and require[] no inferences.” In re Baby Food Antitrust Litig., 166 F.3d at 118.

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 12

With that, we turn to the much closer issue of whether the proffered circumstantial

evidence precludes summary judgment for defendants.

b. Circumstantial Evidence

Evidence of “conscious parallelism,” also referred to as “oligopolistic price

coordination,” can support such a claim based upon circumstantial evidence. In re Baby

Food Antitrust Litig., 166 F.3d at 121. As the district court put it, “When competitors

in a [concentrated] market establish their prices, not by agreement, but rather in a

consciously parallel fashion, this may provide probative evidence of an understanding

between competitors to fix prices.” Mem. Op. at 16 (citations omitted). However, that

is not necessarily the case: “Because of their mutual awareness, oligopolists’ decisions

may be interdependent although arrived at independently.” Id. (citation on omitted).

Thus, “‘[t]he law is settled that proof of consciously parallel business behavior is

circumstantial evidence from which an agreement, tacit or express, can be inferred but

that such evidence, without more, is insufficient unless the circumstances under which

it occurred make the inference of rational, independent choice less attractive than that

of concerted action.’” Id. (quoting Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d

Cir. 1977)).

This court has set out the following considerations, sometimes referred to as

“plus factors,” in determining when circumstantial evidence amounts to a finding of

concerted action: 1) whether defendants’ actions, if taken independently, would be

contrary to their economic interests; 2) product uniformity; 3) whether the defendants

have been uniform in their actions; 4) whether the defendants have exchanged or have

had the opportunity to exchange information relative to the alleged conspiracy; and

5) whether the defendants have a common motive to conspire or have engaged in a large

number of communications. See Re/Max Int’l, 173 F.3d at 1009; Wallace v. Bank of

Bartlett, 55 F.3d 1166, 1168 (6th Cir. 1995). “However, circumstantial evidence alone

cannot support a finding of conspiracy when the evidence is equally consistent with

independent conduct.” Re/Max Int’l., 173 F.3d at 1009. The district court noted that

these five factors are considered to discern whether the “supra-competitive

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6% commission rate was conscious and not the result of independent business

decisions.” Mem. Op. at 17 (Page ID 21920).

The district court then reviewed evidence of parallel pricing behavior and the

plus factors. It found them to be insufficient to withstand summary judgment. In

reaching this conclusion, the court relied upon these conclusions:

o “Plaintiffs’ evidence of parallel pricing shows merely that each

Defendant had a policy of charging a minimum commission of 6% and

that each Defendant occasionally deviated from its respective policy for

various reasons.” Mem. Op. at 30 (Page ID 21933).

o “The prevalence of the 6% rate, then, is just as consistent with

independent pricing decisions. The existence of a conspiracy cannot be

inferred solely on the basis that Defendants tended to charge the same

amount for their services.” Mem. Op. at 30-31 (Page ID 21933-34).

o “The Sixth Circuit has unequivocally proclaimed that ‘setting

cooperative sales-commission rates is not price fixing: it has no relation

to the amount charged to clients for an agent’s service.’ Re/Max Int’l,

173 F.3d at 1025. . . . Thus, even if it was necessary for a listing broker

to offer a 3% buyer’s broker commission to the cooperating broker as an

incentive, the listing broker is free to charge his client 4%, 5%, 10%, or

even 3% plus a flat fee as [plaintiffs’ expert] Dr. Yavas has suggested

may occur in a perfectly competitive market.” Mem. Op. at 31-32 (Page

ID 21934-35).

o “Plaintiffs’ experts and Defendants both agree that real estate brokerage

services are inelastic in that the number of property listings does not

respond to changes in commission rates. . . . Accordingly, evidence that

Defendants have not decreased their commission rates is not evidence

that they acted contrary to their economic self-interest.” Mem. Op. at 32-

33 (Page ID 21935-36).

o “[T]he homogenous nature of real estate services, on its own, provides

no evidence to support an inference of collusion. The evidence shows

that Defendants’ commission rates did decrease by a small, though

statistically significant degree, as the price of a home [in]creased. . . .

Nevertheless, charging a standard commission rate across the board and

retaining increasing profits from the sale of higher priced homes is

consistent with rational business judgment and not probative of an illegal

agreement to fix commissions.” Mem. Op. at 34 (Page ID 21937).

o “[A]wareness of other real estate companies’ commission rates does not

tend to rule out independent conduct. As an initial matter, the evidence

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does not support Plaintiffs’ contention that, for at least part of the Class

Period, the full commission was listed on the MLS. Mr. McMahan

testified that he was unsure when this practice stopped, but that Lisa

Stephenson would know. Ms. Stephenson testified that the full

commission had not been listed at least since 1996. . . . Additionally

there is no evidence that individuals with pricing authority shared or

discussed their respective commission rates. . . . [M]ere awareness of

competitors’ commissions does not support an inference that Defendants

agreed to conspire.” Mem. Op. at 34-35 (Page ID 21937-38).

o “[Plaintiffs’ expert] Mr. French notes that brokers and agents must

cooperate with one another to facilitate real estate sales. . . . Thus,

cooperation and communication between Defendants and knowledge of

what other brokers charge is just as consistent with independent

conduct.” Mem. Op. at 36 (Page ID 21939).

o With respect to Jerry McMahan’s comment at the 2000 KREC meeting

that “the most unprofessional thing we can do in this business is cut our

commissions,” the court stated: “[A] consideration of Mr. McMahan’s

comments in the context of the purpose of the public hearing leads to a

more benign interpretation: that Mr. McMahan, in expressing his view

that relaxing the KREC Rebate Ban and allowing inducements will help

brokers compete with the Internet brokers, differentiates between

inducements which cut commission rates–which he views as

unprofessional–and non-monetary inducements such as home warranties.

A plausible inference is that Mr. McMahan thought full service brokers

should not compete with the Internet brokers by offering inducements in

the form of rebates, but should compete with the Internet brokers by

making their services worth what they charge–whatever that may be.”

Mem. Op. at 37 (Page ID 21940).

o “Plaintiffs have presented no evidence of any parallel change or impact

on Defendants’ pricing decisions after any alleged communication or

invitation that was made at the KREC public hearing or any other

meeting between Defendants.” Mem. Op. at 38 (Page ID 21941).

o “Plaintiffs contend that Defendants had a common motive to conspire.

However, Defendants’ motive to maximize profits cannot support an

inference of a conspiracy. . . . If this Court were to find that Defendants’

motive to maximize profits supported an inference of an illegal

conspiracy, then all businesses would be subject to anti-trust liability.”

Mem. Op. at 39 (Page ID 21942.)

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Having reviewed this evidence, which it characterized as circumstantial, the court held

that “[p]laintiffs have not presented sufficient evidence to meet the stringent summary

judgment standard in § 1 antitrust cases.” Id.

We quote from the district court’s memorandum opinion at length for two

reasons. First, after our own independent review of the record, we agree with its

conclusion that the circumstantial evidence is insufficient. As the above quoted material

makes clear, the evidence does not, as it must, eliminate a finding that the same actions

are “equally consistent with independent conduct.” Re/Max Int’l, 173 F.3d at 1009.

Second, the district court’s opinion was originally filed under seal and appears not to be

readily available on the most common legal databases. Since we rely upon its reasoning,

we feel obliged to quote it at some length here.

Finally, we are mindful that plaintiffs have come forward with a good deal of

circumstantial evidence that supports its theory of collusion. What is missing, however,

is the critical element mentioned in Matsushita and reiterated in Re/Max International:

countering the conclusion reached by the district court that the conduct at issue was also

consistent with permissible competition and therefore does not support an inference of

antitrust conspiracy. Matsushita, 475 U.S. at 588.

2. Did the District Court Err in Limiting Expert Testimony?

In this case, there were three expert witnesses: Drs. French and Yavas for

plaintiffs; and Dr. Kleinrichert for defendants. Both sides filed motions to exclude

testimony of these experts in whole or in part. In the end, the district court granted

defendants’ motion to exclude the expert testimony of Drs. French and Yavas with

respect to their ultimate opinions that a price-fixing conspiracy existed. Memorandum

Opinion & Order at 23, filed July 3, 2012.

With respect to Dr. French’s opinions, the district court held as follows:

[T]he Court will not allow Dr. French to testify as to his ultimate opinion

that a conspiracy likely existed among the defendants during the class

period. Such a conclusion embraces a legal conclusion which depends

on anti-trust doctrine in which Dr. French is not qualified to offer an

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 16

opinion. Further, Dr. French fails to differentiate between conscious

parallelism and illegal, collusive price-fixing.

Mem. Op. at 11 (citation omitted). The court reached an identical conclusion with

respect to Dr. Yavas.

Federal Rule of Evidence 704(a) states that “[a]n opinion is not objectionable just

because it embraces an ultimate issue.” Fed. R. Evid. 704(a). Nonetheless, a witness

may not testify to a legal conclusion. Berry v. City of Detroit, 25 F.3d 1342, 1353 (6th

Cir. 1994). Our review on this issue is for an abuse of discretion. Pluck v. BP Oil

Pipeline Co., 640 F.3d 671, 676 (6th Cir. 2011).

We detect no abuse of discretion on the part of the district court. For the most

part, the district court rejected defendants’ challenge to the expert testimony. Given that

the experts were free to testify at length as to all the other aspect of the real estate

market, the exclusion of the challenged testimony, which called for a legal conclusion,

is within the purview of the district court.

3. Alter Ego Liability of HSA

Among the other things considered by the district court was the liability of HSA

for actions taken by HSK in the alleged price-fixing conspiracy. The district court

rejected liability for HSA on these grounds:

The court . . . finds no evidence supporting Plaintiffs’ argument

that HSA controlled or encouraged Semonin or Rector Hayden’s alleged

anticompetitive conduct. There is no evidence that HSA discussed

commission policies with Semonin or Rector Hayden, set commission

policies for Semonin or Rector Hayden, or encouraged agreement or

consensus on commission policies between the two. Instead, the

evidence merely shows circumstances typical of any parent-subsidiary

relationship. Without incurring liability, a parent may articulate and

formulate general policies and procedures for its subsidiaries; may

coordinate and cooperate and regularly share financial and operating

information; may approve its subsidiaries’ budgets; and may be directly

involved in financing and micro-management of its subsidiaries. . . .

Next, Plaintiffs contend that HSA should be held liable for the

alleged conspiracy under an alter ego theory of liability. As an initial

No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 17

matter, Plaintiffs have not pled an alter ego or piercing the corporate veil

claim in their Fourth Amended Complaint and cannot now, when faced

with summary judgment, assert this new theory of liability.

Nevertheless, Plaintiffs have not produced evidence which would justify

piercing the corporate veil to hold HSA liable for the alleged actions of

Semonin and Rector Hayden. . . .

Here, Plaintiffs allege that HSA “refused to produce any

documentary evidence showing that its relevant ‘subsidiaries’ respected

basic corporate requirements such as holding regular Shareholder and

Board Meetings, promulgating By-Laws and Resolutions, maintaining

Minute Books, or requiring its Officers and Directors to know the duties

and responsibilities imposed by Kentucky law . . . .”

Plaintiffs have produced no evidence that HSA so dominated

HSK’s finances, business practices, and policies as to justify piercing the

corporate veil.

Mem. Op. at 44-46 (citation omitted).

This issue need not detain us long, particularly in light of the cursory argument

advanced by plaintiffs on appeal. First, because we hold that HSK did not engage in

price fixing, HSA has no derivative liability. Moreover, our independent review of the

record makes clear to us that, as the district court concluded, there is insufficient

evidence to support piercing the corporate veil.

III.

The judgment of the district court is affirmed.