Amicus Brief — McLain v. Real Estate Bd. of New Orleans, Inc.

IN THE

Supreme Court of The United States

Ocroser Term, 1979

No. 78-1501

JAMES JEFFERSON McLAIN, et al.,

Petitioners,

v.

REAL ESTATE BOARD OF NEW ORLEANS, INC. , et al.,

Respondents.

On Writ of Certiorari to

The United States Court of Appeals for

The Fifth Circuit

AMICUS CURIAE BRIEF OF THE

NATIONAL ASSOCIATION OF REALTORS®

. Wrumum D. Norra

-VaLentine A. Ween, JR.

Micuare, A. Kaun

Revusen & Proctor

Suite 2001

11 South La Salle Street

Chicago, Dlinois 60603

(312) 558-5500

Attorneys for Amicus Curiae

Dated: September 13, 1979

TABLE OF CONTENTS

PAGE

QUESTION PRESENTED >. hisvewes vcieccuvccers 1

INTEREST OF THE AMICUS CURTAE .......... 2

PT as Peet COK dvs ki aiks WOSNCAK CKO OSes Ss 2

The Interest of NAR in this Decision ............. 3

PURPOSE OF THIS BRIEF AMICUS CURIAE ... 6

SE 8 Ek) on AG, ce ka eke kode ace case Vinee 7

BR RIFE SST SE Sn 0 7

B. The Fifth Cireuit Has Developed Effective

Guidelines For Resolving Jurisdictional Dis-

putes in Antitrust Actions .................... 8

C. The District Court Correctly Distinguished

Goldfarb v. Virginia State Bar, 421 U.S. 773

COUN ats ft creek Saha photos nes 3 606Ga be bind ee 14

D. The District Court Correctly Narrowed the

Scope of Discovery to the Applicability of

PO race cca een +. vee hapanbs cdbsk chcsve 17

COETINIIIE oisis dicts onerinesscnseeinrs» er

TABLE GF AUTHORITIES CITED

Bryan v. Stillwater Bd. of Realtors, 578 F.2d 1319,

PEE STREET ED i 906 i044 ah vinsinee panes 20

Chatham Condominium Assn. v. Century Village, Inc.,

1979-2 Trade Cases { 62,742 (5th Cir. 1979) ...... 9

Cotillion Club, Inc. v. Detroit Real Estate Bd., 303

F.Supp. 850, 854 (E.D. Mich. 1964) ........... 12, 20, 21

Diversified Brokerage Services, Inc. v. Greater Des

Moines Bd. of Realtors, 521 F.2d 1348, 1346 (8th

Nea ens saiaie a Chip annie bko'ssh.o:nip 8p g000'5 00s 20

i

PAGE

Elizabeth Hospital v. Richardson, 269 F.2d 167 (8th.

Cir. 1959), cert. denied, 361 U.S. 884 (1959) ........ 20

Evanston Cab Co. v. City of Chicago, 325 F.2d 907 (7th

Cir. 1963), cert. denied, 377 U.S. 943 (1964) ........ 19

Feminist Women’s Health Center, Inc. v. Mohammad,

586 F.2d 530, 540 n.3 (3rd Cir. 1978) ............. 17,18

Gibbs v. Buck, 307 U.S. 66, 93 (1939) ................ 15

Goldfarb v. Virginia State Bar, 421 U.S. 773, 784 n.13,

FOR COPOR eb. cack s vg tkvanbes wl aamaeneis 11, 15, 19

Hayes v. Parkview-Gem Of Hawaii, Inc. 71 F.R.D.

606, 460: (>. Siow. WBA) cin a hagas: 16

Hill v. Gregory, 241 F.2d 612, 614 (7th Cir. 1957) ..... 16

Hoffman v. Lenyo, 433 F.2d 657, 658 (3rd Cir. 1970) .. 16

Hospital Building Co. v. Rex Hospital Trustees, 425

Uae Baek Fa Tee CAOTOT 6b wikwkeeccchy caus daenane 10, 19

Hotel Phillips, Inc. v. Journeymen Barbers, 195 F.Supp.

664 (W.D. Mo. 1961), aff’d. per curiam, 301 F.2d 443

CHE Cals REE BS os eVect ne ceduneeadeenss cee abies 20

Kallen v. Nexus Corp., 353 F.Supp. 33 (N.D. Til. 1973) 20

Krasnov v. Dinan, 465 F.2d 1298, 1299-1300 (3rd Cir.

DERE 6 ciwk5 inane dhs es babe dinhnae kt eae. alee 16

Lawson v. Woodmere, 217 F.2d 148, 149-150 (4th Cir.

SE cahawks ceds ScicW «o's beak te 8 anemia ew Mateereaene 20

Lieberthal v. North Country Lanes, Inc. 332 F.2d 269

(Send Cie, OGG ics pee xcdiwaviviedsinensiientenes 20

Mandeville Island Farms, Inc. v. American Crystal

Sugar Co., 334 U.S. 219, 234 (1948) ..........2006. 19

Marston v. Ann Arbor Property Managers Ass’n., 302

F.Supp. 1276, 1279-1280 (E.D. Mich. 1969), aff’d., 422

F.2d 836, 837 (6th Cir. 1970), cert. denied, 399 U.S.

92D CRETE? 0 5s cp idn dk Mion Vie eeees 19, 20, 21, 22

McBeath v. Intra-American Citizens for Decency Com-

mittee, 374 F.2d 359, 363 (Sth Cir. 1967), cert. denied,

SOP UB BUG CUBS) vies oe Seb stisackwtppedces vias 8,9

ili

PAGE

McLain v. Real Estate Bd. of New Orleans, Inc., 432

F.Supp. 982, 983 n.2, 984-985 (E.D. La. 1977), aff’d.,

583 F.2d 1315, 1322, 1823, 1325 (5th Cir. 1978), cert.

granted, 60 L.Ed.2d 1043 (1979) (No. 78-1501)

SL MATAR MEK heeds a aleb eaten ws 8, 9, 11, 15, 16, 17, 23

McNutt v. General Motors Acceptance Corp., 298 U.S.

Ry SEE VAR CEN hae ace sda LOR MWeee bon anbnls 14, 15

Mortensen v. First Federal Sav. and Loan Ass’n., 549

F.2d 884, 888, 896 (3rd Cir. 1977) .............. 13, 14

Page v. Work, 290 F.2. 323 (9th Cir. 1961) ........... 20

Reiter v. Sonotone Corp., 1979-1 Trade Cases {| 62,688

Cy CRAMER BL, TUE OP as 55 hd nee lv dssrenes 5

Rosemound Sand & Gravel Co. v. Lambert Sand &

Gravel Co., 469 F.2d 416 (5th Cir. 1972) ........... 8, 20

Spears Free Clinic and Hospital v. Cleere, 197 F.2d

eT ES fi Ccacavaut-caakayeaces die tens 20

Sun Valley Disposal Co. v. Silver State Disposal Co.,

420 F.2d S41 (Oth Cir. 1060) coca ccc ce sceaes 20

United States v. Employing Plasterers Assoc., 347 U.S.

SIE ORR, ck Cas va ded whine ob eked kwlnbe ead 19

United States v. Foley, 598 F.2d 1323 (4th Cir. 1979) .. 13

United States v. Greater Syracuse Bd. of Realtors, Inc.

449 F.Supp. 867 (N.D.N.Y. 197B) 060s asc cecc een 12

United States v. Oregon State Medical Society, 343 U.S.

STEED hic ok oe Gea nbisk inky Claw ewalviesss 16

United States y. Singer Mfg. Co., 374 U.S. 174, 194

CRU eR VAD baka eke Nae een See dN 5.cane's Fimo 16

United States v. United States Gypsum Co., 333 US.

BET Chasey Data clicg huurCkdin tema read. 16

United States v. Women’s Sportswear Assoc., 336 U.S.

SG eR, UE CLOUD 5 cc kn pcs cee'senunbeuas 19

United States v. Yellow Cab Co., 332 U.S. 218, 232-233

PRUE Pn S44 kG nah aed hea. c faMig wah pce 10, 11

iv

PAGE

Walden v. Broce Construction Company, 357 F.2d 242,

Se SN MIRED dicre tala Wis Cush ob ka ch eis Neca hs 16

Younger v. Harris, 401 U.S. 37, 44 (1971) ............ 21

Federal, Rules of Civil Procedure

ME SAP CAD 662 eae pa we eine ve 1, 6, 7, 8, 12, 13, 14

Statutes

La. Rev. Stat. Ann. §§ 37:1431 to 1464 (West Supp.

SEG caw Akh Vel gus Vhie bean RK Ne Ce ee out cea LN 21

La. Rev. Stat. Ann. §§ 37 :1432 to 1485 (West Supp.

NR ES SRO RY aE 9 DAN aa PCN ts eet Gora Cs Ce 21

La. Rev. Stat. Ann. $§ 51:121 to 152 (West) ....... 22

Re ON ER Re aul, ies tae hvateiae wane ov as 22

Treatises and Articles

SA Moore’s Federal Procedure, § 52.08 at 2738-2739 16

IN THE

Supreme Court of The United States

Octoser TERM, 1979

No. 78-1501

JAMES JEFFERSON McLAIN, et al.,

Petitioners,

Vv.

REAL ESTATE BOARD OF NEW ORLEANS, INC., et al.,

Respondents.

On Writ of Certiorari to

The United States Court of Appeals for

The Fifth Circuit

AMICUS CURIAE BRIEF OF THE

NATIONAL ASSOCIATION OF REALTORS®

QUESTION PRESENTED

Does Fed.R.Civ.P.12(b) (1) permit a district court to dis-

miss an action brought under the Sherman Act after ample

opportunity for discovery and an evidentiary hearing fail

to establish the requisite nexus between the alleged real

estate brokerage trade restraint and interstate commerce?

2

INTEREST OF THE

NATIONAL ASSOCIATION OF REALTORS® (NAR)!

Preliminary. NAR’s interest in this cause is direct, vital

and immediate. Founded in 1908 and headquartered in Chi-

eago, NAR is a non-profit professional association of

licensed real estate brokers and salespersons engaged in

all phases of the real estate business, including, particularly,

brokerage, appraising, management, and counseling.

NAR owns various registered service and collective

membership marks, including the mark REALTOR®. Over

the years NAR has promoted a public understanding of

the term REALTOR® as identifying a member of a mem-

ber Board of the NATIONAL ASSOCIATION OF REAL-

TORS®, engaged in the real estate business on a profes-

sional basis and subscribing to and bound by a reasonable

and non-discriminatory Code of Ethics.

NAR has been successful in promoting this understanding

and, as a consequence, it and its members are the beneficiaries

of “good will” which is recognized as extremely valuable by

the public and a large number of real estate practitioners.

Because of the value of the term REALTOR® and also

because of the many and varied services available from

NAR, real estate boards have sought affiliation with NAR

as Member Boards of REALTORS®. Affiliation is accom-

plished by the issuance of a charter by NAR according

membership privileges and granting the Board the right

to use the term REALTOR® in a specified geographic area

in exchange for the Board’s agreement to service its mem-

bers and the public, to enforce the Code of Ethies and to

assist in safeguarding the registered marks of NAR.

‘ NAR has filed this amicus brief pursuant to the written consent

of petitioners and respondents.

3

Today, NAR’s membership includes 50 State Associations

of REALTORS®, over 1700 Member Boards of REAL-

TORS®, and approximately 600,000 REALTORS® and

REALTOR-ASSOCIATES®.

NAR was created to promote and encourage the highest

and best use of the land, to protect and promote private

ownership of real property, and to promote professional

competence. In pursuit of these objectives, NAR is con-

cerned with a wide range of activities—equal opportunity

in housing, real estate licensing, public service neighborhood

revitalization, real estate education, home protection, arbi-

tration of member and public controversies and legislation

relating to the real estate busixess,

The Interest of NAR in This Decision. Despite the

admittedly local nature of real estate (Pet. Brief at 25)

and despite petitioners’ admitted failure to produce suff-

cient evidence of the requisite nexus between respondents’

brokerage activities and interstate commerce (Pet. at 7),

petitioners now contend the trial court erred in dismissing

their complaint for lack of subject-matter jurisdiction.

Petitioners’ grounds for appeal directly affect the in-

terests of the NAR and its members for the following

reasons:

First, to postpone until conclusion of trial a district

court’s determination of Sherman Act subject-matter juris-

diction may needlessly subject over 1700 local real estate

boards and more than 600,000 REALTORS®, each with

distinct factual situations, to the crushing costs and hard-

ships of a full-blown federal antitrust trial. This con-

cern of NAR and its members regarding the future im-

pact of an adverse decision here is hardly theoretical.

Petitioners’ attorneys, in their application for an extension

of time in which to file their petition [presented to Mr. Jus-

4

tice Rehnquist (acting as Circuit Justice for the Fifth Cir-

cuit) on March 14, 1979, one day in advance of the original

March 15 due date in disregard of Supreme Court Rule

34(2)], represented to this Court that, in early January,

“with the concurrence of our clients, who felt equally un-

able to support a continuation of this litigation” (emphasis

added), they were “inclined to abandon” this litigation. Pe-

titioners’ attorneys thereafter “received telephone calls

from attorneys involved in anti-trust work throughout the

United States. ... [A]ttorneys from Las Vegas, Washing-

ton, D.C., Atlanta and Mobile called” to urge application

for the writ. (Application, {’s XIX—XX).

NAR’s over 1700 member boards come in all shapes and

sizes, and are located in small, medium and large-size cities,

suburbs (“bedroom” communities), towns, rural villages

and unincorporated areas. A broadly applicable, adverse

ruling based on the meagre facts in the record here would

be most unfair and could trigger a flood of litigation, most

of which would be brought without any investigation into

the factual basis in a particular locality for broad, con-

clusory restraint of trade and jurisdictional allegations.

. Second, the decision will determine the extent to which

real estate boards and individual brokers, already governed

by state regulations and state antitrust laws, will be sub-

jected to federal antitrust lawsuits.

Third, the decision will vitally affect the nature and type

of real estate services which will be made available, the

manner in which those services will be performed, and the

cost of such services if federal antitrust trials are to be

continually confronted. Petitioners have made the follow-

ing representations regarding the role of REALTORS®:

Petitioners respectfully submit that the activities of’

REALTORS® are necessary to the survival and proper

5

functioning of local real estate markets. (Pet. Brief

at 46)

Further, and in a more general sense, REALTORS®,

by bringing together buyer and seller and by assist-

ing in the consummation of the transaction, actually

“make” the local market in realty. (Pet. Brief at 47)

* * *

In short, REALTORS® “merchandise” homes. If they

did not exist, they would have to be invented, or the

real estate market would cease to function on a con-

tinuing and viable basis. (Pet. Brief at 48)

If petitioners are correct, and REALTORS® are virtually

indispensable, then the increased legal costs of having to

defend, all the way through trial, class action cases such as

the instant case will inevitably be passed on to the consumer

in the form of higher commissions.’

In actuality, as petitioners make clear (Pet. Brief at 37),

of the 50,605 residential real estate transactions across the

nation studied in connection with a 1971 joint report of

the Department of Housing and Urban Development and

2 Relevant here is Justice Rehnquist’s concurring opinion in

Reiter v. Sonotone Corp., 1979-1 Trade Cases { 62,688 (U. S. Sup.

Ct., June 11, 1979) that “in the absence of any jurisdictional limit,

there is considerable doubt in my mind whether this type of action

is indeed ultimately of primary benefit to consumers themselves,

who may recover virtually no monetary damages, as opposed to the

attorneys for the class, who stand to obtain handsome rewards for

their services.” We note that petitioners’ attorneys are underwriting

the expense of preparing and presenting this appeal. (Application,

| X XI). We note further that two of the petitioners are lawyers

(Pet. Brief at 4, n. 1), and the classes have never been certified (Pet.

Brief at 8, n. 14). Given the makeup of the class representatives,

and the representation to this Court on March 14 that they were

“inclined to abandon”’ the litigation, there is, of course, a substantial

question whether or not the class will ever be certified. Neverthe-

less, respondents must still bear the substantial costs of the defense.

6

the Veterans Administration (HUD-VA Report), nearly

40% reported no payment of a real estate commission. That

statistic dramatically refutes the above-quoted representa-

tions that REALTORS® are “indispensable.” Indeed, if

REALTORS® were “indispensable” there would be no need

to indulge in the alleged restraint of trade which is the

subject of this case, as each REALTOR® could charge what-

ever the traffic will bear. Such is not the case, and sharply

increased legal expenses will no doubt have the effect of

driving REALTORS® from the business, and forcing con-

solidations. Ultimately, large organizations, who may be

able to better afford such costs and pass them along to

consumers, will take over smaller firms of REALTORS®,

thereby reducing competition.”*

PURPOSE OF THIS BRIEF AMICUS CURIAE

NAR’s purpose in submitting this brief is to present the

views of the chief national representative of the thousands

of local real estate boards and individual brokers as to the

effects of the position urged upon this Court by the United

States in its amicus brief. |

We shall not duplicate the statement of facts and legal

arguments presented in the brief for certain respondents.

Indeed, we support and adopt those statements and argu-

ments as our own. Nor do we propose to attack the various

arguments marshalled by petitioners in their brief. These

arguments are fully met elsewhere.

Instead, we focus on the profoundly disturbing implica-

tions of the position adopted by the United States in its

amicus brief. Essentially the Solicitor argues for the

virtual abolition of Fed.R.Civ.P.12(b)(1) in antitrust

actions and the concomitant expansion of Congressional

2a See, e.g., “Why Merrill Lynch Wants to Sell You a House,”

FORTUNE, January 29, 1979, pp. 86-89.

7

power under the Commerce Clause into one of the most local

types of business activity: the efforts of a state licensed real

estate broker or salesperson in New Orleans in bringing

together buyers and sellers of New Orleans residential real

property. The Solicitor’s argument fundamentally miscon-

ceives the local nature of the work for which licensed real

estate brokers are actually paid.

As the ensuing argument will demonstrate, the district

court correctly determined that the activities of the respond-

ents did not substantially and adversely affect commerce,

and this finding cannot be overturned unless “clearly

erroneous.”

ARGUMENT

A. INTRODUCTION

This case involves the constitutional confrontation be-

tween an immovable object and an irresistable force. The

immovable object is residentia! real estate in the New

Orleans area—an object of quintessential local nature. The

irresistable force is the steadily expanding scope of Con-

gressional power under the Commerce Clause-—a force that

already has absorbed entire fields of state law and clogged

the dockets of the federal courts with a multitude of disputes

once resolved in state forums. Here, this fundamental clash

over principles of federalism arises in the context of a

narrow procedural issue: does Fed.R.Civ.P. 12(b)(1) au-

thorize a district court to dismiss an action brought under

the Sherman Act after ample opportunity for discovery

fails to establish that the alleged activity occurs in or

substantially and adversely affects interstate commerce?

The Fifth Circuit answered that question in the affirmative,

on the facts adduced in the district court. The inherently

local nature of real estate brokerage activity, the full

8

panoply of state remedies for antitrust violations, the time

and expense involved in defending a federal antitrusc suit,

and the overloaded dockets of the federal district courts

are factors compelling this Court to affirm that decision.

B. THE FI: TH CIRCUIT HAS DEVELOPED EFFEC-

TIVE GUIDELINES FOR RESOLVING JURISDIC-

TION DISPUTES IN ANTITRUST ACTIONS

In an attempt to strike a balance between the hardships

and benefits of an antitrust action, the Fifth Circuit has

authorized a rather modest option for its district courts:

if the pre-trial discovery and hearings fail to establish the

requisite nexus between the allegedly anticompetitive ac-

tivity and interstate commerce the district court may enter-

tain a Fed.R.Civ.P. 12(b)(1) motion to dismiss the action

unless “the factual and jurisdictional issues are completely

intermeshed.” McLain v. Real Estate Bd. of New Orleans, |

Inc., 583 F.2d 1315, 13823 (5th Cir. 1978) ; Rosemound Sand

dé Gravel Co. v. Lambert Sand & Gravel Co., 469 F.2d 416

(5th Cir. 1972); McBeath v. Intra-American Citizens for

Decency Committee, 374 F.2d 359, 363 (5th Cir. 1967), cert.

denied, 389 U.S. 896 (1967). If jurisdiction and the merits

are inextricably bound, the Fifth Circuit requires “the juris-

dictional issues [to] be referred to the merits, for it is im-

possible to decide the one without the other.” McBeath,

supra at 363.

In the proceedings below the district court was able to

separate the jurisdictional issue from the substantive issue.

The Fifth Circuit approved, explaining as follows:

Here, the issues of jurisdiction could be readily sepa-

rated from the merits. The substantiality of particular

interstate commerce and the nature of the defendants’

role in such commerce comprise one issue. A separate

analytic concept is raised by the question of whether

these defendants conspired to fix the price for their

services. McLain, supra, 583 F.2d at 1323.

9

Having separa‘ed the issues, the district court allowed pe-

titioners months of discovery to establish the jurisdiction-

ally required interstate commerce nexus. The district court

carefully reviewed the results of this discovery and con-

cluded that subject-matter jurisdiction did not exist. The

Court of Appeals affirmed.® |

In its amicus brief the United States contends the dis-

trict court erred in dismissing the petitioners’ antitrust .

action despite that court’s finding that respondents’ alleged

activities did not substantially affect interstate commerce.

Even though these findings were made after the court pro-

vided petitioners with ampis opportunity to present evi-

dence of jurisdictional facts, the Solicitor argues that

petitioners should be giver: “an opportunity to prove [their]

allegations at trial.” (U.S, Assicus at 15). The Solicitor’s

position would virtually feree federal courts to passively

accept subject-matter jurisdiction over every complaint

alleging Shermaa Act violations, no matter how local the

allegedly anticompetitive conduct appears. Once filed, the

complaint would be transformed into a procedural barnacle

securely affixed to the court’s docket. The distrjct courts,

already overburdened, would be forced to postpone until

the conclusion of the trial their determination of subject-

matter jurisdiction. This is “notice” pleading with a ven-

geance. It ignores the time and crushing expense of

most antitrust trials and casually dismisses the State of

3 The Fifth Circuit has carefully policed pre-trial dismissals of

antitrust actions by its district courts. In McLain the court found

the “effective use of discovery” to be the “crucial feature” of the

ease that permitted dismissal. Supra, 583 F.2d at 1323 n. 9. In

other cases the Fifth Circuit determined tie factual and jurisdic-

tional issues to be so completely intermeshed that a pre-trial dis-

missal was improper. See McBeath, supra, at'363; Chatham Con-

dominium Assn. v. Century Village, Inc., 1979-2 Trade Cases { 62,

742 (5th Cir. 1979).

10

Louisiana’s genuine interest in the regulation and control of

the local activities of Louisiana real estate brokers.

The Solicitor cites Hospital Building Co. v. Rex Hospital,

425 U.S. 738 (1976), as authority for this position. How-

ever, Hospital Building plainly suggests that such pre-trial

dismissals may be proper after the plaintiff has conducted

adequate discovery. In that opinion this Court stated that

“in antitrust cases... dismissals prior to giving the plaintiff

ample opportunity for discovery should be granted very

sparingly.” Jd. at 746 (emphasis added). That a district

court could properly dismiss the action after “ample oppor-

tunity fox discovery” fails to establish the requisite juris-

diction was indicated in a footnote to the opinion:

/

It may, of cowrse, *® “est even though petitioner’s

complaint adequately almges an effect on interstate

commerce, further proceedings in this case will demon-

strate that respondents’ conduct in fact involves no

violation of law, or indeed no substantial effect on

interstate commerce. Id. at 746 n.5 (emphasis added).

Thus, while Hospital Building establishes a strong pre-

sumption against the dismissal of an antitrust complaint

prior to discovery, that decision plainly permits dismissal

of a complaint after “ample opportunity for discovery” has

failed to demonstrate the requisite nexus between the al-

leged restraint of trade and interstate commerce.

Curiously, the Solicitor stresses the interstate move-

ment of home-buyers and then tries to distinguish the one

Supreme Court decision most relevant to this type of

jurisdictional argument, United States v. Yellow Cab Co.,

332 U.S, 218 (1947). (U.S. Amicus at 16). In Yellow Cab,

this Court considered the scape of Sherman Act jurisdiction

in the context of two fact patterns: (1) a cab service operat-

ing exclusively between rail terminals in Chicago, carrying

people from one station to the next to continue their inter-

11

state journeys; and (2) a cab service serving the general

transportation needs of people in the Chicago area, includ-

ing movement to and from train stations. The former

activities were held to be “an integral part of interstate

transportation” while the latter operations were found to

be beyond the reach of the Sherman Act. Jd. at 232-233. That

Yellow Cab remains a significant guidepost for Sherman

Act jurisdiction is evidenced by this-Court’s use of that

decision in the recent opinion in Goldfarb v. Virginia State

Bar, 421 U.S. 773 (1975):

Indeed, it would be more apt to compare the legal

services here with a taxi trip between stations to change

trains in the midst of an interstate journey. In Yellow

Cab we held that such a trip was part of the stream of

commerce. Goldfarb, supra at 784 n.13.

In this case, the Court of Appeals applied this analogy and

found a parallel between the “local” cab operations in

Yellow Cab and the local brokerage activities before this

Court:

The distinction Yellow Cab draws between integral and

incidental activities corresponds to the distinction be-

tween Goldfarb and the present case. Like the first

cab operators in Yellow Cab, the attorneys were invari-

able and indispensable components of interstate com-

merce. And, as with the second cab activity in Yellow

Cab, real estate brokerage does not inherently com-

prehend the interstate aspects of their business. “To

the taxicab driver” or the real estate broker, “it is just

another local fare.” McLain, supra, 583 F.2d at 1322.

Having driven his jurisdictional argument to the brink

of Yellow Cab, the Solicitor attempts to avoid that precedent

on the ground that the alleged restraint of trade in this case

“affects’—rather than “occurs in”—-interstate commerce.

(U.S. Amicus at 16). Upon some obscure, ill-defined dis-

tinction between “affecting” and “occurring in” interstate

12

commerce this Court is urged to further expand into the

realm of traditional state power the reach of the Commerce

Clause. A similar attempt to extend Sherman Act jurisdic-

tion was rejected with language appropriate here:

This is an effort to utilize incidental minor activities ...

as a jurisdictional foundation for a substantive charge

of alleged federal anti-trust violations. The effort is

strained and, in this Court’s opinion, overreaching. The

foundation is patently incapable of supporting such a

structure. Cotillion Club, Inc. v. Detroit Real Estate

Bd., 303 F.Supp. 850, 854 (E.D. Mich. 1964).

In essence, the Solicitor is urging this Court to virtually

abolish the use of Fed.R.Civ.P. 12(b)(1) motions in actions

brought under the “affecting” interstate commerce theory of

Sherman Act jurisdiction. This extreme proposal goes well

beyond the opinions in the handfui of cases finding jurisdic-

tionally sufficient “affects” on interstate commerce caused by

real estate brokerage activities in factual contexts differing

from the record here. United States v. Greater Syracuse Bd.

of Realtors, Inc., 449 F.Supp. 889 (N.D.N.Y. 1978), found

Sherman Act jurisdiction over the allegedly anticompeti-

tive activities of a metropolitan real estate board; how-

ever, the court stressed that the “existence of Sherman Act

jurisdiction must be determined on a case-by-case basis by

an evaluation of the relevant economic facts.” 7d. at 891.

In distinguishing McLain, the district court in Greater

Syracuse stressed one “significant” factor that established

a jurisdictionally sufficient nexus between the brokerage ac-

tivities and interstate commerce: allegations of “interstate

movement of a substantial amount of money in the form of

referral commissions and relocation service commissions.”

Id. at 895. By contrast, petitioners here neither alleged nor

proved that respondents were substantially engaged in for-

warding or receiving substantial amounts of money derived

13

from interstate referral or relocation services. (Pet. App.

9a).

The Fourth Cireuit adopted this case-by-case analysis of

Sherman Act jurisdiction in an appeal by real estate bro-

kers of their felony convictions for antitrust violations.

United States v. Foley, 598 F.2d 1323 (4th Cir. 1979). Al-

through jurisdiction in this post-conviction appeal was im-

plied from a general jury finding cf guilt, the Foley court

felt compelled to further distinguish that case from cases

like McLain on the ground that an unusually high volume

of out-of-state buyers and sellers were invoived in the real

estate market of Montgomery County, Maryland, a pecul-

iarly transient urban area contiguous to Washington, D.C.

Td. at 1330 n. 4.

Mortensen v. First Federal Sav. and Loan Ass’n., 549

F.2d 884 (3rd Cir. 1977), adopted a highly skeptical stance

toward the use of Rule 12 motions in antitrust cases; never-

theless, that court left open the possibility of a pre-trial

dismissal where a plaintiff, as here, has been given “ample

opportunity for discovery.” Jd. at 896.4

Unlike the situations in Hospital Building, s: pra, and

Mortensen, supra, petitioners here were given “ample op-

portunity for discovery” and these “further proceedings”

failed to demonstrate a substantial affect on interstate

commerce. :

4In addition, the facts in Mortensen suggest that sympathy for

the plaintiff’s lawyer played a significant role in the reversal of the

trial court’s dismissal of the complaint. Discovery in the civil anti-

trust suit had commenced in December of 1974. One month later

the plaintiff moved for class certification and to amend the com-

plaint. The Rule 23 certification hearing was postponed. The fol-

lowing month the defendants filed a battery of motions seeking

dismissal under Rule 12(b) (1), Rule 12(b) (6), Rule 56, ete. Plain-

tiff’s attorney arrived at the hearing in April under the mistaken

14

C. THE DISTRICT COURT CORRECTLY DISTIN-

GUISHED GOLDFARB v. VIRGINIA STATE BAR,

421 U.S. 773 (1975)

To provide petitioners with an opportunity to meet their

burden of proving the existence of subject-matter jurisdic-

tion,® the district court ordered further discovery regard-

belief that only class certification was to be considered; he appar-

ently believed the defendants’ motions would be argued at a later

date. Consequently, he was unavle to discuss the defendants’ various

motions. None of the attorneys mentioned the 12(b)(1) motion at

the hearing. At the close of the hearing and after the judge indi-

cated he would take the case under advisement, the judge asked,

“Can anyone tell me what part of the market the defendants have?”

No one could answer, and no subsequent market information was

filed with the court. Mortensen, supra, Id. at 888 n.11.

In sharp contrast, plaintiffs here were amply prepared to argue

the issue of subject-matter jurisdiction, having been given months

to devote to the development of their evidence of Sherman Act

jurisdiction.

5 The party asserting federal jurisdiction has the burden of

showing that he is properly in federal court. McNutt v. General

Motors Acceptance Corp., 298 U.S. 178 (1936).

[The plaintiff] must allege in his pleading the facts essential

to show jurisdiction. If he fails to make the necessary allega-

tions he has no standing. If he does make them, an inquiry

into the existence of jurisdiction is obviously for the purpose of

determining whether the facts support his allegations, In the

nature of things, the authorized inquiry is primarily directed —

to the one who claims that the power of the court should be

exerted in his behalf. As he is seeking relief subject to this

supervision, it follows that he must carry throughout the liti-

gation the burden of showing that he is properly in court. The

authority which the statute vests in the court to enforce the

limitations of its jurisdiction precludes the idea that jurisdic-

tion may be maintained by mere averment or that the party

asserting jurisdiction may be relieved of his burden by any

formal procedure. If his allegations of jurisdictional facts are

15

ing the applicability of Goldfarb, explaining its order as

follows:

We reasoned that, to the extent the financing and insur-

ance aspects of real estate transactions may be shown

to be interstate in nature, defendants’ practical nexus

therewith might satisfy the jurisdictional requirement

of the Sherman Act pursuant to the Supreme Court

holding in Goldfarb v. Virginia State Bar. McLain,

supra, 423 F.Supp. at 983.

In Goldfarb, supra, this Court identified two factors that

could combine to transform the inhe@#ntly local nature of

the legal services involved in a real estate transaction into

activity sufficient to support Sherman Act jurisdiction:

(1) A “substantial volume” of interstate commerce was

involved in the overall transaction; and

(2) The challenged activity was an “integral” part of

' the transaction and “inseparab[le]” from its inter-

state aspect. 421 U.S. at 785.

The district court reviewed the results of months of dis-

covery and found that petitioners had failed to establish a

Goldfarb-type basis for jurisdiction under the Sherman Act.

Specifically, the court found that petitioners had been

challenged by his adversary in any appropriate manner, he

must support them by competent proof. And where they are

‘not so challenged the court may still insist that the jurisdic-

tional facts be established or the case be dismissed, and for

that purpose the court may demand that the party alleging

justify his allegations by a preponderance of evidence. /d.

at 189.

See Gibbs v. Buck, 307 U.S. 66, 93 (1939) (Black J., Dissenting) :

Rigid enforcement of the jurisdictional requirement will

limit the interference of Federal courts in State legislation and

will aceord with the policy of Congress in narrowing the juris-

diction of Federal courts by successive increases in the jurisdic-

tional amount.

16

unable to satisfy the second criterion of Goldfarb, 1.e., that

the real estate brokerage at issue constituted an integral

part of the interstate commerce of: title insurance and

realty financing. McLain, supra, 432 F.Supp. at 983. Further,

the district court found that petitioners had failed to estab-

lish evidence in support of their “affecting” commerce

jurisdictional theory. 7d. at 983 n.2, 985.°

The district court’s findings were clearly reasonable. The

four months of discovery produced essentially uncontra-

dicted evidence that the brokerage function terminates when

a home-buyer and seller are brought together. Though

petitioners produced some evidence that certain real estate

funds and title insurance policies are secured or guaranteed

by out-of-state sources, none of the evidence refuted testi-

mony that rea! estate brokers occupy no more than an

incidental informational role with respect to these arguably

interstate activities. McLain, supra, 432 F.Supp. at 984-985.

The actual financing and insurance processes involve only

the home-buyer and the lender or insurer; the brokerage

relationship has already terminated at this point.

®Such findings cannot be reversed unless clearly erroneous.

When a district court must determine facts in ruling on a Rule 12

motion, these findings are entitled to the “clearly erroneous” stand-

ard of review. United States v. Oregon State Medical Society, 343

U.S. 326, 338-339 (1952); 5A Moore’s Federal Procedure, { 52.08 at

2738-2739; Hayes v. Parkview-Gem of Hawaii, Inc., 71 F.R.D.

436, 440 (D.Haw. 1976); Krasnov v. Dinan, 465 F.2d 1298, 1299-

1306 (3rd Cir. 1972); Hoffman v. Lenyo, 433 F.2d 657, 658 (3rd

Cir. 1970) ; Walden v. Broce Construction. Company, 357 F.2d 242,

245 (10th Cir. 1966) ; Hill v. Gregory, 241 F.2d 612, 614 (7th Cir.

1957). The “elearly erroneous” standard applies even to “infer-

ences drawn from documents or undisputed facts.” United States

v. United States Gypsum Co., 333 U.S. 364, 394 (1948); United

States v. Singer Mfg. Co., 374 U.S. 174, 194 n.9 (1963).

17

D. THE DISTRICT COURT CORRECTLY NARROWED

THE SCOPE OF DISCOVERY TO THE APPLICABIL-

ITY OF GOLDFARB

In focusing the discovery on the issue of applicability

of the jurisdictional criteria established in Goldfarb, the

district court discarded petitioners’ allegations that move-

ment of home-buyers constituted an “effect” on interstate

commerce :

[T]he mere interstate movement of a prospective buyer

or seller—occurring either prior to or after the furnish-

ing of brokerage services—hardly infuses such services

with the requisite impact upon interstate commerce

McLain, supra, 432 F.Supp. at 983 n.2.

The Fifth Cireuit affirmed. McLain, supra, 583 F.2d at 1323.

Having failed to establish a Goldfarb-type jurisdiction the

petitioners now argue they should have been given a chance

to offer additional evidence concerning the interstate move-

ment of home-buyers. This contention goes to the core of

the growing conflict between the “expansive judicial con-

struction of the commerce clause” and “the growing spirit

of federalism manifested at all levels of judicial and legis-

lative decisionmaking.” McLain, 583 F.2d at 1324. Peti-

tioners seek to bootstrap into interstate commerce Louisi-

ana brokerage services involving the quintessential local

product: real property. The Fifth Cireuit balked at this

attempt to “thrust [the Sherman Act] past its commerce

clause anchagage into the residual expanse of state and

individual perogative.” Jd, at 1324,

One month later the Fifth Cireuit commented on its hold-

ing in McLain in a decision finding Sherman Act jurisdiction

over the activities of an abortion clinic located in a city

which was a regional, interstate center for the provision

of medical services. Feminist Women’s Health Center, Inc.

v. Mohammad, 586 F.2d 530 (1978). Noting that the flow

18

of persons crossing state lines to avail themselves of the

clinie’s services would cease if the clinic were forced to

close, the court stated that the holding in McLain was not

to the contrary:

The court [in McLain] applied the substantial effects

test and held that Sherman Act jurisdiction is not con-

ferred by the allegation “that many of the defendants’

customers are ‘persons moving into and out of the

Greater New Orleans area.’ ” 583 F.2d at 1320. We do

not read the McLain opinion to say that the flow of out-

of-state customers is not a factor to be considered in

the determining jurisdiction, nor even that jurisdiction

ean never attach on the sole basis of transactions with

out-of-state customers. The court held that residential

real estate brokerage activities do not substantially

affect interstate commerce because the interstate con-

sequences are remote or incidental. 583 F.2d at 1320 &

n.4. That conclusion 3s unassailable, because few people

cross state lines for the purpose of purchasing resi-

dential real estate. Feminist, supra, 586 F.2d at 540

n.3 (emphasis in original).

In the context of this case, if the Real Estate Board of New

Orleans, Inc. ceased doing business tomorrow, along with

each of the other real estate brokers who are respondents

herein, the likelihood that the flow of persons crossing state

lines to purchase real estate in the New Orleans area would

be curtailed is nil. There are thousands of licensed real

estate brokers in the New Orleans area, and in any event,

petitioners’ own statistics show that many sales of real

estate are made without the use of any broker whatsoever.

To put it bluntly, if all of the respondents ceased their

brokerage activities tomorrow, the flow of persons in and

out of New Orleans buying and selling real estate would

not be affected one iota. In any event, the effect, if any effect

at all, would not be “substantial and adverse”. Furthermore

petitioners have neither alleged nor proven any cause-and-

19

effect connection between petitioners’ alleged restraint of

trade and the flow of interstate commerce.

A reasonably clever attorney can always allege some.

“effect” on interstate commerce.’ But Sherman Act juris-

diction is not satisfied by some speculative “effect” on inter-

state commerce. In a line of decisions defining Sherman Act

jurisdiction this Court has consistently required that there

be a showing of “substantial and adverse” effects on inter-

state commerce. Hospital Bldg. Co. v. Rex Hospital Trustees,

425 U.S. 738, 743 (1976); Goldfarb v. Virginia State Bar,

421 U.S. 773, 758 (1975) ; United States v. Employing Plas-

terers Assoc., 347 U.S. 186, 187 (1954); United States v.

Women’s Sportswear Assoc., 336 U.S. 460, 464 (1949);

Mandeville Island Farms, Inc. v. American Crystal Sugar

Co., 334 U.S. 219, 234 (1948).§

When the district courts have found the nexus between

the alleged conduct and interstate commerce too slight to

support subject-matter jurisdiction, they have dismissed the

7 As one court noted, “the complexity of modern business leaves

little room for contracts, or business transactions, which cannnot

be said in some degree to affect interstate commerce.” Marston v.

Ann Arbor Property Managers Ass’n., 302 F.Supp. 1276, 1279

E.D. Mich. 1969), aff'd, 422 F.2d 836, 837 (6th Cir. 1970), cert.

denied, 399 U.S. 929. (1970).

8 For example, in Women’s Sportswear, supra, an association of

stitching contractors which handled fifty percent (50%) of all

sportswear produced in Boston had prevented price competition by

forcing jobbers to enter into agreements constituting restraints of

trade. In support of its conclusion that the unlawful restraint sub-

stantially affected interstate commerce, this Court stated:

The Boston area ranks fifth in this country’s production of

women’s sportswear. Its jobbers obtain 80% of the cloth used

from sources outside of Massachusetts. At least 80% of the

finished sportswear is sold and shipped to customers outside of

that state. 7d. at 461-62.

20

action prior to trial. Several courts have refused to recog-

nize subject-matter jurisdiction over alleged anticompetitive

activities relating to real estate transactions.® The consensus

of these decisions is that “mere movement of individuals

from one state to another in order to utilize particular serv-

ices does not transform those services into interstate serv-

ices within the meaning of the Sherman Act.” Diversified

Brokerage Services Inc. v. Greater Des Moines Bad. of Real-

. tors, 521 F.2d 13438, 1346 (8th Cir. 1975) ; Bryan v. Stillwater

Bd. of Realtors, 578 F.2d 1319, 1325-1326 (10th Cir. 1977) ;

Marston v. Ann Arbor Property Managers Ass’n., 302 F.

Supp. 1276, 1279, aff’d., 422 F.2d 836, 837 (6th Cir. 1970),

cert. denied, 399 U.S. 929 (1979); Cotillion Club, Ine. v.

Detroit Real Estate Bd.; 303 F.Supp. 850, 954 (E.D.Mich.

1964). In the case below the alleged restraints concerned the

® Cases refusing Sherman Act jurisdiction over actions unrelated

to real estate transactions include: Page v. Work, 290 F.2d 323 (9th

Cir. 1961) (conspiracy to exclude local newspapers from publishing

legal notices) ; Sun Valley Disposal Co. v. Silver State Disposal Co.,

420 F.2d 341 (9th Cir. 1969) (anticompetitive activities “directed

at” local incidents of victim’s garbage disposal business) ; Kallen

v. Nexus Corp., 353 F.Supp. 33 (N.D.IUl. 1973) (interstate adver-

tising, solicitation, preparation of course materials, competition for

lecturers, and movement of students did not alter local character

of bar review course); Elizabeth Hospital v. Richardson, 269 F.2d

167 (8th Cir. 1959), cert. denied, 361 U.S. 884 (1959) (hospital) ;

Spears Free Client and Hospital v. Cleere, 197 F.2d 125 (10th Cir.

1952) (hospital) ; Lieberthal v. North Country Lane, Inc., 332 F.2d

269 (2nd Cir. 1964) (operation of bowling alley is essentially loca}) ;

Evanston Cab Co. v. City of Chicago, 325 F.2d 907 (7th Cir. 1963),

cert, denied, 387 U.S. 943 (1964) (taxi cabs) ; Rosemound Sand &

Gravel v. Lambert Sand & Gravel, 469 F.2d 416 (5th Cir. 1972)

(sand and gravel mined and sold in Louisiana for Louisiana con-

struction projects is local activity) ; Lawson v. Woodmere, 217 F.2d

148 (4th Cir. 1954) (burial vaults) ; Hotel Phillips, Inc. v. Journey-

men Barbers, 195 F.Supp. 664 (W.D.Mo. 1961), aff’d. per curiam,

301 F.2d (8th Cir. 1962) (barbers in metropolitan area).

21

purchase and sale of real estate in the New Orleans area.

This is local commerce and the competition allegedly re-

strained is local in nature. Cotillion Club, Inc. v. Detroit

Real Estate Bd., supra at 854; Marston v. Ann Arbor P-op-

erty Managers Ass’n., 302 F.Supp. 1276, 1279 (E.D. Mich.

1969) ; aff’d., 422 F.2d 836, 837 (6th Cir. 1970), cert. denied,

399 U.S. 929 (1979).

Under our system of federalism the states have tradi-

tionally controlled and defined the legal rights and powers

attending the purchase, use, and sale of real estate. As this

Court has stated:

[Federalism embodies] a system in which there is

sensitivity to the legitimate interests of both State and

National Governments, and in which the National Gov-

ernment, anxious though it may be to vindicate and

protect federal rights and federal interests, always

endeavors to do so in ways that will not unduly inter-

fere with the legitimate activities of the States. It

should never be forgotten that this slogan, “Our Fed-

eralism,” born in the early struggling days of our Union

of States, occupies a highly important place in our

Nation’s history and its future. Younger v. Harris, 401

U.S. 37, 44-45 (1971).

As with all states, Louisiana regulates the activities of its

real estate brokers.!® In Louisiana a Real Estate Commis-

sion promulgates the standards and procedures for obtain-

ing a brokerage license and polices the activities of the

state’s brokers.'! A real estate transaction in Louisiana

must be consummated and perfected entirely in accordance

with Louisiana law, and Louisiana law alone. In addition,

Louisiana has enacted its own antitrust statutes that pro-

vide civil remedies for injured parties and establish criminal

10 La. Rev. Stat. Ann. §§ 37: 1431 to 1464 (West. Supp. 1979).

11 La. Rev. Stat. Ann. §§'37: 1432 to 1485 (West. Supp. 1979).

22

and civil sanctions for antitrust violations.’? Reflecting its

citizens’ vigorous opposition to anticompetitive activities

carried on within state boundaries, the Louisiana Constitu-

tion declares that “all combinations, trusts, or conspiracies

in restraint of trade, commerce or business, as well as ali

monopolies or combinations to monopolize trade, commerce

or business, are hereby prohibited in the State of Louisiana.

...’ La. Const. Art. XIX, §14. In short, the State of

Louisiana has a fundamental interest in regulating the

purchase and sale of real estate within its boundaries.

In Marston, supra, similar state concerns underpinned the

court’s finding that an alleged conspiracy to fix the price

level of rental apartments in Ann Arbor, Michigan, did not

have a substantially adverse effect on interstate commerce:

If the court were to assume that defendants’ actions,

indirect and remote as they may be to interstate com-

merce, were to affect interstate commerce, it wou!d

follow that all such acts, remote to the main stream of

interstate commerce, are subject to the federal anti-

trust laws, no matter how local may be their operations.

What then remains of state antitrust enforcement? The

State of Michigan specifically provides regulations for

and safeguards against “Restraint of Trade” through

its own and adequate laws....

The “Restraint of Trade”, if any, is strictly a local

problem. Plaintiffs should seek their remedy under

state law. Marston, supra, 302 F.Supp. at 1280.

In addition to the local nature of real estate, the full

panoply of state-law remedies for antitrust violations, and

the bottleneck of cases pending in the federal courts, anti-

trust suits frequently entail enormous expense:

Win, lose, or draw regarding the final outcome, the

very fact of trial may result in crushing costs and

12 La. Rev. Stat. Ann. §§ 51:121 to 152 (West).

a

23

hardships to the defendant. McLain, supra, 583 F.2d at

1323.

This combination of factors justified the district court’s

decision to discard the petitioners’ attempt to bootstrap

their local action into a Sherman Act case through allega-

tions of interstate movement of home-buyers.

CONCLUSION

For these reasons, NAR and its members urge this Honor-

able Court to affirm the judgment of the District Court and

the Court of Appeals.

Respectfully submitted,

Wiuiam D. Norts

VALENTINE A. WEprEr,, JR.

MicuareL, A. Kann

Revsen & Proctor

Suite 2001

11 South La Salle Street

Chicago, Illinois 60603

(312) 558-5500

Attoxneys for Amicus Curiae

Dated: September 13, 1979

24

CERTIFICATE OF SERVICE

I hereby certify that on this 15th day of September, 1979,

the undersigned counsel caused three copies of this Brief

Amicus Curiae to be hand delivered, or delivered by U.S.

mail, postage prepaid, to counsels for respondents, peti-

tioners, and the United States. I further certify that all

parties required to be served have heen served.

/s/ VaLENTINE A. WEBER, JR.

Valentine A. Weber, Jr.

Reuben & Proctor

11 South La Salle Street

Chicago, II]. 60603