# Petition — United Home Rentals, Inc. v. Texas Real Estate Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1984
- **Citation:** 466 U.S. 928

## Text

| | Ottice- Supreme Court US
83-136 hp hg
1 FE8 13 1984

No. ALEXA: iat

IN THE

Supreme Court of the Anited States

OcToBer TERM, 1983

UNITED HOME RENTALS, INC., ET AL.,
Petitioners,

Vv.

Texas REAL ESTATE COMMISSION, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

‘JOHN E. KENNEDY H. Bartow Farr III
3315 Daniel ONEK, KLEIN & Farr
Dallas, Texas 75275 2550 M. St. N.W.

(214) 692-2588 Washi n, D.C. 20037
(202) 775-0184
Of Counsel

* STEVE BRUTSCHE .
Jones & BRUTSCHE
3000 Turtle Creek Plaza #116
Dallas, Texas 75219
(214) 522-4870

* Counsel of Record
for Petitioners

February 13, 1984

he

i
QUESTIONS PRESENTED FOR REVIEW

1. Whether, in a civil rights action, the federal courts may
abstain under Railroad Commission v. Pullman Co., 312 US.
496 (1941), without identifying an important state interest to
be served by dismissal of the action?

2. Whether a federal court of appéals may use a de novo
standard of review to disregard the views of the district court
regarding abstention and to order the district court to abstain?

‘3

PARTIES TO THE PROCEEDINGS

The Petitioners are United Home Rentals, Inc., Michael A.
Livingston and W. Eugene Bushman. The Respondents are the
Texas Real Estate Commission and the State of Texas.

TABLE OF CONTENTS

PAGE

i
;
[i

1. A Feperat Court May Not AsstaiIn UNDER
PULLMAN N A Crvit RIGHTS ACTION WITHOUT
IDENTIFYING AN IMPORTANT STATE INTEREST TO BE
SERVED BY DISMISSAL 7

2. A Panesat Counr op Apress, Arm a Tea.

AND DECISION ON THE Merits, May Not EmpPLoy
A De Novo STANDARD OF REVIEW TO REVERSE

THE TRIAL JuDGe’s DECISION NOT TO ABSTAIN........ 14
CONCLUSION 19
APPENDIX

Appendix A (Opinion of the Court of Appeals for the

Fifth Circuit ) A-l
Appendix B (Opinion of the District Court for the

Northern District of Texas) A-24
Appendix C (Judgment of the Court of Appeals for the

Fifth Circuit) A-42
Appendix D (Order of the Court of Appeals for the

Fifth Circuit Denying Rehearing ) A-43

Appendix E (Tex. Rev. Civ. Stat. art. 6573(a)
$2(2)(D) and (H) and Texas Real Estate Commis-
sion Rule 402.03.02) A-45

ae?

OF eas

TABLE OF AUTHORITIES

CaSEs:

Babbitt vy. United Farm Workers National Union, 442 U.S.
289 (1979)

Baggett v. Bullitt, 377 U.S. 360 (1964)
Burford v. Sun Oil Co., 319 U.S. 315 (1943)

C-Y Development Co. v. City of Redlands, 703 F.2d 375
(9th Cir. 1983)

Canton v. Spokane School District No. 81, 498 F.2d 840
(9th Cir. 1974) ....

Cate v. Oldham, 707 F.2d 1176 (Lith Cir. 1983) .................

Central Hudson Gas & Electric Corp. v. Public Service
Commission, 447 U.S. 557 (1980) ............ccceesseecseeeseeeeeeees

Citizens Energy Coalition v. Sendak, 594 F.2d 1158 (7th
Cir. 1979), cert. denied, 444 U.S. 842 (1979) 0000.0...

City Investing Co. v. Simcox, 633 F.2d 56 (7th Cir. 1980) ..

Colorado River Water Conservation District vy. United
States, 424 U.S. 800 (1976)

Couny gf Allegheny v. Frank Mashuda Co., 360 US. 185
)

go cama ieaacnmeeb eases ste in: US. 406

On, County of Delaware, 592 F.2d 681 (3d Cir.

Dori Enterprises, Inc. v. Texas, CA No. H-80-291 (S.D.
Tex. Houston June 4, 1980

Duke v. James, 713 F.2d 1506 (11th Cir. 1983)...................

Fair Assessment in Real Estate Association, Inc. v.
McNary, 454 U.S. 100 (1981)

Fornaris v. Ridge Tool Co., 400 U.S. 41 (1970) BER id
EG Se Ve Se eR OE Mate pe OG eR ye Se geen, ET NE) Ou, RO

Ae like oe, > ime mF
bei: aR hes ot crue SARE ee % ial aad a ee Bi

A-26

ingston, through the sponsorship of Plaintiff Bushman, is
the holder of a salesman’s license issued by TREC.

D. According to interpretations by Defendant TREC
and its counsel, its Rules (Appendix 2) require that any
employee that performs on any occasion any of the
functions specified aforesaid in Paragraph VB be licensed
as a salesman or broker under the provisions of the Real
Estate License Act and the rules promulgated thereunder.

E. The Commission is currently demanding that such
functions be performed only by licensed people or that
Plaintiff United Home Rentals cease doing business. De-
fendant TREC has threatened (and in fact subsequent to
the filing of suit, instituted) administrative proceedings
against Plaintiffs Livingston and Bushman to revoke their
licenses based upon their association with persons per-
forming such functions who do not have licenses issued by
Defendant TREC.

F. The minimal educational requirements for obtain-
ing a real estate salesman’s license since 1976 and as
changed by the 1981 amendment w the law are as follows:

(1) January 1, 1976—30 classroom hours (plus

30 additional hours each for second and third annual

certification );

(2) January 1, 1977—6 semester hours (90
classroom hours);

(3) January 1, 1979—12 semester hours (180
classroom hours);

(4) January 1, 1981—21 semester hours (315
classroom hours);

‘(5) April 23, 1981—12 semester hours with 6
hours in core real estate courses including 2 hours in
Principles of Real Estate (plus additional semester
hours for second, third and fourth annual certifica-
tions ).

A-27

G. On April 23, 1980, Defendant TREC rejected
license applications by three employees of Plaintiff United
Home Rentals, Inc. on the basis they misrepresented their
activities either past or future in their application for
licensure to Defendant TREC. Specifically, the application
requires them to affirm under oath that they have not
performed activities requiring licensure and that they will
not perform activities requiring licensure until the license is
actually issued. Defendant TREC denied the applications
on the basis that in working for Plaintiff United Home
Rentals, Inc. each employee, necessarily and admittedly,
performed one or more of the functions specified in
paragraph VB, of the Rules (Appendix 2) without the
benefit of a license from Defendant TREC. Accordingly,
Defendant TREC has denied the applications on the basis
that “the Texas Real Estate Commission is not satisfied
that (employee) would conduct his real estate business
with honesty, trustworthiness and integrity as required by
... (the act)”.

H. Defendant TREC has informed Plaintiffs that the

act provides for and in fact has commenced administrative
actions to revoke the licenses of Plaintiffs Bushman and
Livingston (such commencement occuring April 24, 1980)
on the basis that they have “associated with unlicensed
persons”.
I. Defendant TREC has informed Plaintiffs that the
act provides for criminal prosecution of employees of
Plaintiff United Home Rentals, Inc. not holding real estate
licenses and performing any of the functions specified in
paragraph VB of the Rules.

J. Defendant TREC has advised Plaintiff's counsel
that it intends to immediately and vigorously prosecute
enforcement proceedings pursuant to its authority as to
Michael Livingston, Wesley Eugene Bushman, and United
Home Rentals, Inc.’s employees, James Godfrey, Gerald
Sheridan, and Kenneth Crain.

A-28

K. Companies in the rental information industries
have been the subject of consumer complaints such as:

(a) not having the permission of the landlord to
catalog property,

(b) cataloging property no longer available for
rent;

(c) advertising property that did not really exist
or that was no longer available;

(d) guaranteeing the results of a service and
then not honoring such guarantees;

(e) promising the availability of property meet-
ing the needs of a particular customer and then not
having any such property.

L. Plaintiff United Home Rentals, Inc. has been the
subject of such consumer complaints but has been respon-
sive to resolving such consumer complaints. In 1976,
Plaintiff United consented to an injunction against certain
of such acts without admitting it had performed them.
Mark McQuality and Joseph Chumlea, former Assistant
Attorney Generals to the State of Texas—Consumer Divi-
sion would testify that from October, 1976, to June, 1980,
they processed approximately 37 complaints involving
United Home Rentals, Inc. in the Dallas-Fort Worth area,
and that said attorneys cannot recall any of those com-
plaints that were not resolved to the satisfaction of the
consumer. Said attorneys’ personal knowledge is limited to
the period commencing October, 1977. In April, 1980,
Joseph Chumlea suggested that Plaintiff United put a
catalog reference in its advertising referring to the specific
piece of rental property being advertised so that consumers
could verify that a property advertised was in fact listed by
United. United Home Rentals immediately and volun-
tarily complied with that suggestion.

A-29

. After trial, in response to a query by the Court concerning
case or controversy under Article III, Section 2 of the Con-
stitution’ and abstention in the light of Gibson v. Berryhill, 411
U.S. 564, 574, the Parties entered into further stipulations.
Stipulations numbered two through seven of this series are
pertinent and recite:
2. State action has occurred.

Defendant TREC has rejected license appli-
cations by three employees of Plaintiff United Home
Rentals, Inc., and has commenced administrative ac-
tion to revoke the licenses of Plaintiffs Bushman and
Livingston. While these actions by TREC can be
appealed, they are final if no affirmative action is
taken by the affected parties.

3. Statute violated.

Plaintiff United Home Rentals, Inc., Michael A.
Livingston, and W. Eugene Bushman, have per-
formed acts requiring licensure under the Texas Real

4 Art. III, Sec. 2, reads:

The judicial Power shall extend to all Cases, in Law and Equity, arising
under this Constitution, the Laws of the United States, and Treaties made, or
which shall be made, under their Authority;—to all Cases affecting Ambassa-
dors, other public Ministers and Consuls;—to all Cases of admiralty and
maritime Jurisdiction;—to Controversies to which the United States shall be a
Party;—to Controversies between two or more States;—between a State and
Citizens of another State;—between Citizens of different States;—between
Citizens of the same State claiming Lands under Grants of different States,
and between a State, or the Citizens thereof, and foreign States, Citizens or
Subjects.

In all Cases affecting Ambassadors, other public Ministers and Consuls,
and those in which a State shall be a Party, the Supreme Court shall have
original Jurisdiction. In all other Cases before mentioned, the Supreme Court
Shall have appellate Jurisdiction, both as to Law and Fact, with such
Exceptions, and under such Regulations as the Congress shall make.

The trial of all Crimes, except in Cases of Impeachment, shall be by Jury;
and such Trial shall be held in the State where the said Crimes shall have
been committed; but when not committed within any State, the Trial shall be
at such Place or Places as the Congress may by Law have directed.

A-30

Estate License Act and the rules and regulations
promulgated thereunder. The acts performed to
provide an advance fee rentals information service
such as that provided by Plaintiffs are brokering
activities as defined By the Act and require a real
estate license under the Texas Real Estate License Act.
United Home Rentals employees have performed
such actions without licensure in violation of said Act.

4. No ambiguity in statute.

Provisions of the Texas Real Estate License Act,
art. 6573 (a), V.A.C.S., and the rules and regulations
promulgated thereunder are not ambiguous and clear-
ly cover the actions of Plaintiffs and their employees.
The statute is not fairly susceptible to a reading that
would avoid the need to decide the Constitutional
issue.

5. Only issue is Federal Constitutional issue.

The only disputed fact issues before the Court
are: (1) Whether the definition of real estate broker
and licensure requirements of the Texas Real Estate
License Act are so broad as to violate Plaintiffs’
Constitutional protection of free commercial speech
and press when applied to Plaintiffs’ activities as
advance fee rentals agent; (2) whether said require-
ments bear a rational relationship to the governmental
purpose for such licensure when applied to Plaintiffs’
activities; (3) whether the rules and regulations
regarding said requirements for activities performed
by Plaintiffs are so overly broad as to violate the
constitutional protection of free commercial speech
and press when applied io Plaintiffs’ activities as
advance fee rental agents; and (4) whether the statute
and regulations in fact impact Constitutionally pro-

tected rights of speech. and/or press or just impact

regulatable activities.

4

A-31

6. Waiver.

Defendants TREC and The State of Texas waive
their right to assert or demand abstention by the Court
in this cause.

7. Prescribed state administrative procedures have
been complied with in such a way that no other adminis-
trative remedies are applicable to this cause.

To the extent any available administrative re-
medies can be pursued by Plaintiffs, Defendants waive
any further application of the doctrine of exhaustion
of administrative remedies.

It does appear that the Parties have presented a live
controversy to this Court and have settled any questions of
abstention.

The paramount question in this case is whether the State of
Texas can subject Plaintiffs to licensure under the Texas Real
Estate License Act, Art. 6573(a), Vernon’s Ann.Civ.St. Plain-
tiffs say no because to do so would trample their rights of free
commercial speech and press.

As this is a commercial speech case, it is governed by the
Supreme Court’s decision in Central Hudson Gas v. Public
Service Commission, 447 U.S. 557 (1980).

The Court set out 2 four part test in that case. Those
components are:

(1) Is the speech protected by the First Amendment?
(2) Is the governmental interest asserted substantial?

(3) Does the regulation directly advance the govern-
mental interest asserted? and

(4) Is the regulation more extensive than is necessary
to serve that interest?

A-32

To answer the first question, it must first be decided just
who is speaking? In this instance, it is the apartment, duplex
and home renters who are seeking to disseminate information
about rental properties. Most assuredly, this is the sort of
information that is protected by the First Amendment.

In being a means of disseminating this information Plain-
tiff United Homes Rental is fulfilling the same function as a
newspaper which carries classified advertising.

Just as newspapers seek listings in their classified sections
for rental properties, so do Plaintiffs seek listings for rental
properties. Newspapers, after they receive a listing, then seek
to disseminate this information to a group limited only by the
individual’s willingness to purchase a subscription or an indi-
vidual edition of that paper. Plaintiffs, functionally, do the
same. They seek to disseminate the same information to a
group limited only by the individual’s willingness to purchase a
“policy” or “membership” for a stated time period. That
Plaintiffs choose to receive compensation for their services from
only those seeking housing and not those offering housing is a
distinction without a difference.

The Supreme Court in the case of Lovell v. Griffin, 303
U.S. 444 (1937) said at page 452: “The press in its historic
connotation comprehends every sort of publication which af-
fords a vehicle of information and opinion.” The Court also
said in Ex parte Jackson, 96 U.S. 727, at 733: “Liberty of
circulating is as essential to that freedom as liberty of publis-
hing; indeed, without the circulation, the publication would be
of little value.”

The best statement by The State of Texas as to the interest
asserted may be found at page one of its trial brief. There, it
has stated: “... the challenged statute does not restrict speech
in any way. Rather, it restricts the profession of real estate
brokering to licensed individuals.”

The legal counsel for the Texas Real Estate Commission
stated at trial that the purpose of licensure of these individuals

A-33

is consumer protection.5 The consumer is protected in that an
applicant for a license under the Texas Real Estate License Act
(“the Act”) must, as required by Sec. 6(b) of that act, show
“his honesty, trustworthiness, integrity, and competency.” Su-
rely, The State of Texas does have a substantial interest in
thusly protecting its citizens in such a vital commerce as the
market for housing, one of the fundamental needs of its citizens.

The Texas Real Estate License Act does directly advance
the interest asserted. Section 6 in paragraphs (b) & (c)
specifies that the competency of an applicant “shall be judged
soley on the basis of the examination referred to in Section 7 of
this Act.” Section 7(a) sets out nine “core real estate courses”
that an applicant must have studied before he or she may take
an examination for a real estate license. Those courses are
listed and described as:

(1) Principles of Real Estate (or equivalent) shall
include but not be limited to an overview of licensing as a
real estate borker and salesman, ethics of practice, titles to
and conveyancing of real estate, legal descriptions, law of
agency, deeds, encumbrances and liens, distinctions be-
tween personal and real property, contracts, appraisal,
finance and regulations, closing procedures, and real estate
mathematics.

(2) Real Estate Appraisal (or equivalent) shall in-
clude but not be limited to the central purposes and
functions of an appraisal, social and economic determinant
of value, appraisal case studies, cost, market data and
income approaches to value estimates, final correlations,
and reporting.

(3) Real Estate Law (or equivalent) shall include
but not be limited to legal concepts of real estate, land
description, real property rights and estates in land, con-

5 Transcript of the Preliminary Injunction hearing, p.62.

A-34

tracts, conveyances, encumbrances, foreclosures, recording
procedures, and evidence of titles.

(4) Real Estate Finance (or equivalent) shall include
but not be limited to monetary systems, primary and
secondary money markets, sources of mortgage loans,
federal government programs, loan applications, processes
and procedures, closing costs, alternative financial in-
struments, equal credit opportunity acts, community
reinvestment act, and state housing agency.

(5) Real Estate Marketing (or equivalent) shall
include but not be limited to real estate professionalism
and ethics, characteristics of successful salesmen, time
management, psychology of marketing, listing procedures,
advertising, negotiating and closing, financing, and the
Deceptive Trade Practices-Consumer Protection Act, as
amended, Section 17.01 et seq., Business & Commerce
Code.

(6) Real Estate Mathematics (or equivalent) shall
include but not be limited to basic arithmetic skills and
review of mathematical logic, percentages, interest, time-
valued money, depreciation, amortization, proration, and
estimation of closing statements.

(7) Real Estate Brokerage (or equivalent) shall
include but not be limited to law of agency, planning and
organization, operational policies and procedures, recruit-
ing, selection and training of personnel, records and con-
trol, and real estate firm analysis and expansion criteria.

(8) Property Management (or equivalent) shall in-
clude but not be limited to role of property manager,

A-35

(9) Real Estate Investments (or equivalent) shall
include but not be limited to real estate investment charac-
teristics, techniques of investment analysis, time-valued
money, discounted and nondiscounted investment criteria,
leverage, tax shelters depreciation, and applications to

property tax.

Section 7 in paragraph (k) also requires all applicants to have
taken further coursework as follows:

(k) All applicants for licensure must complete at least
three classroom hours of coursework on federal, state, and
local laws governing housing discrimination, housing credit
discrimination, and community reinvestment or as least
three semester hours of coursework on constitutional law.

The mere reading of these coursework requirements brings
home the desirability of ensuring the competence of the real
estate profession. It is more than reasonable for The State of
Texas to require real estate professionals to be licensed so that
the public can be assured that the members of that profession
are well versed in these complicated subject areas. Thus, on its
face, the Act directly advances the governmental interest that
has been asserted as its reason for existence.

The fourth part of the test required by the Supreme Court
in Central Hudson Gas, supra, is whether or not the regulation
is more extensive than necessary to serve the State’s interest? In
statute on its face but are challenging the gloss put on it by the
Texas Real Estate Commission.

As part of Plaintiff's Exhibit No. 11, a letter dated October
18, 1978, written by the Legal Counsel to the Texas Real Estate
Commission sets out the following rules of the Commission as
governing the requirements for licensure of persons in Plain-
tiffs’ field of endeavor:

A-36

Rule 402.03.02

.003.4 Real estate broker licensure is required for
the operation of a rental agency. This section does not
prohibit employment of an answering service which is
identified to callers as such and which provides infor-
mation concerning the size, price and terms of proper-
ty advertised.

.005.1 Locating and bringing together a buyer
and seller through correspondence or telephone con-
stitutes negotiation if done from within the borders of
Texas.

.005.5 Real estate licensure is required of rental
agents doing all solicitation by telephone unless such
agents are employees of the owner of the property
concerned.

.005.6 A clerical employee of a real estate broker
is not required to be licensed if such employee engages
in no solicitation work and does not hold himself or
herself out as authorized to act as a real estate agent.

.005.7 Answering of the telephone and acts of a
secretarial nature done in a broker’s office do not
require real estate licensure.

.010.1 (a) Real estate licensure is required for
the operation of an apaftment selector/locator service
or home-finding service in Texas.

.010.2 (b) The compilation and sale of listings of
rental vacancies available in an area is activity requi-
ring real estate licensure. This is true even if the
property is not shown, sold, leased or managed.

011.1 This section prohibits a person not licens-
ed as a Texas real estate broker or salesman from
receiving a referral fee from another concerning the
sale, exchange, purchase, rental or lease of real estate.

A-37

011.2 Real estate licensure is required for one to
procure or assist in the procuring of prospective
tenants of real property for compensation in any form,
including but not limited to rent bonuses, discounts,

- gifts or other things of value.

011.3 The referral of a prospective purchaser,
for compensation, is an act requiring real estate
licensure.

013.1 Real estate licensure is required of those
who advertise for others regarding real property,
accept calls received in response to such advertise-
ments, and refer the callers to the owner of the
property.

On the face, it would appear that these rules are resonable
and would legitimately cover the activities of the Plaintiffs.
They plausibly encompass activities which fall within the sweep
of Section 2(2) of the Act defining just who is a real estate
broker. That Subsection reads:

“Real estate broker” means a person who, for another
person and for a fee, commission, or other valuable
consideration, or with the intention or in the expectation or
on the promise of receiving or collecting a fee, commission,
or other valuable consideration from another person:

(A) sells, exchanges, purchases, rents, or leases
real estate;

(B) offers to sell, exchange, purchase, rent, or
lease real estate;

(C) negotiates or attempts to negotiate the list-
ing, sale, exchange, purchase, rental, or leasing of real
estate;
(D) lists or offers or attempts or agrees to list e
‘i

A-38

(E) appraises or offers or attempts or agrees to
appraise real estate;

(F) auctions, or offers or attempts or agrees to
auction, real estate;

(G) buys or sells or offers to buy or sell, or
otherwise deals in options on real estate;

(H) aids, attempts, or offers to aid in locating or
obtaining for purchase, rent, or lease any real estate;

(1) procures or assists in the procuring of pros-
pects for the purpose of effecting the sale, exchange,
lease or rental of real estate; or

(J) procures or assists in the procuring of proper-
ties for the purpose of effecting the sale, exchange,
lease, or rental of real estate.

So on its face, the Act and the Texas Real Estate Commis-
sion Rules promulgated under it, appear to meet Constitutional
muster. But let us look at prongs two, three and four of the
Central Hudson Gas, supra, test in the context of the situation
presently before this Court.

First of all, it is useful to distinguish between the business
of Plaintiffs and that of apartment locator services. The latter
sell their services to landlords and are compensated for each
tenant procured by the apartment locator services. These
also take prospective tenants around to various rental properties
and show the properties to them. Licensure would appear to be
appropriate as these services are really acting as agents for the
landlord in procuring tenants. F

But Plaintiffs’ business is different. They do not receive
compensation on the closing of a real estate sale or upon the
signing of a lease agreement. They receive their compensation
at the beginning, in advance of the furnishing of any informa-
tion to a prospective tenant. Plaintiffs also either allow their

ae iy = ‘ ee. vo ‘i £4 au" Aes ee o e. ‘iin . is
pips OR RM alee on gm Be Ses 7 etn, SAR ae ea ails , as

A-39

customers to read the informatior. about listings off of cards
maintained in their offices or read the information to their
customers over the phone, for a slight additional fee. Plaintiffs
do not counsel their customerr as to suitable properties nor do
they show rental properties t their customers. One might say
that locator services are selling to landlords the service of
procuring tenants and Plaintiffs are selling prospective tenants
the service of providing information about dwellings open for
rent.

Clearly, there is a meaningful distinction between these
two businesses. The services performed by apartment locator
services are much greater and of a different quality from those
performed by Plaintiffs.

It can readily be seen that apartment locator service
employees should be licensed to ensure that they are versed
with the coursework required in order to obtain a license under
the Act. Their livelihood depends on their ability to determine
the needs of prospective tenants and to persuade the prospec-
tive tenants to lease dwellings shown by them. Another reading
of the coursework requirements of the Act, supra, in and of
itself, shows the desirability of a locator service having knowl-
edge of at least some of this coursework. Surely, such an
employee would need knowledge of lease contracts and their
legal effects, real estate marketing and property management in
order to do their job.

This is in great contrast to Plaintiffs’ business. The
stipulations entered into by the Parties, the text of the Act and
the testimony at the Preliminary Injunction hearing show only
that it might be helpful for an employee in the rental service
information industry to be familiar with some of the terminol-
ogy of the real estate business. It is, no doubt, helpful for any
person who deals with information related to any field of
endeavor to be conversant with the terminology used in that
field. This reed is too slender to carry the weight of the
licensing requirements of the Act.

A-40

Both Fiaintiffs and Defendants appear to agree that the ills
of the rental information service industry are covered by the
Texas Deceptive Trade Practices-Consumer Protection Act,
V.T.C.A. Bus. & C. §17.41 et seq. Both Parties also agree that
Plaintiffs did have some problems with consumer complaints
when they started in business (see stipulation L, supra) but that
there have been no unresolved problems since 1976.

It is true that the coursework requirements of the Act do
require a familiarity with the D.T.P.-C.P.A. But this is an act of
general applicability. Any person who is dealing with the
public in the State of Texas should be familiar with the
consumer protection statutes, state and federal, that are appli-
cable.

The Legal Counsel to Defendants did testify that numer-
ous complaints had been made to the Attorney General of the
State of Texas and to Defendants about firms in the rental
information service industry. He also stressed that it is the
position of the Defendants that it is better to regulate this
industry in advance than to merely provide a remedy after
malfeasance, misfeasance or nonfeasance.

The Court will agree that usually this is a decision that a
state can make without running afoul of the Constitution. But
we are dealing with the First Amendment made applicable to
the States by the Fourteenth Amendment.

The whole question before this Court may be boiled down
to asking whether Plaintiffs are in the real estate business or in
the information business? It seems clear that Plaintiffs offer only
an exchange of information for a set fee. They or their
employees do not counsel either landlords or tenants. They do
not show properties. They get inviolved in neither lease
that newspapers do, an exchange of information. They just do
not appear to be in the real estate business any more than a
newspaper that solicits classified advertisements lising homes
for lease or sale is in the real estate business. Accord: Real

A-4l

Estate Commission of Maryland v. Phares, 268 Md. 334, 302
A.2d 1 (1973), North Carolina Real Estate Licensing Board v.
Aikens, 31 N.C. App. 8 (1976).

If Plaintiffs were carrying on such acitivities as counseling
prospective tenants, the substantial interest of the State of Texas
in regulating the real estate business in Texas would come into
play. This is also to say that the Texas Real Estate Commis-
sion’s attempt to regulate Plaintiffs’ business does not directly
advance that substantial interest and the regulation is much
more extensive than necessary.

That other persons or entities might run afoul of the Act by
providing more than pure information is without moment.
That Plaintiffs may have run afoul of the Texas Deceptive
Trade Practices-Consumer Protection Act some years ago and
other entities in the rental information industry may be present-
ly afoul of that law is insufficient reason to bring Plaintiffs under
the strictures of the Texas Real Estate License Act. Just as the
coursework requirements of the Act have minimal relevance to
Plaintiffs’ business, the moral character of them and their
employees is no more relevant that it is for anyone who deals
with the public in any way. Plaintiffs and their employees are
not fiduciaries to either prospective tenants or landlords; they
never hold funds in escrow; they do not negotiate contracts
involving the lease or sale of real estate nor do they ever have
an interest in such contracts. They just do not hold positions of
trust and confidence so that licensure would directly advance
the substantial interest of the State of Texas in protecting its
citizens from any unscrupulous dealings in real estate.

Judgment will be granted to Plaintiffs.

W. M. TaYLor

UNTTED STATES
District JuDGE

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APPENDIX C

Unrtep Home RENTALS, INC.,
MICHAEL A. LIVINGSTON and
W. EUGENE BUSHMAN,

Plaintiffs-Appellees
versus

Texas REAL EsTaTE COMMISSION
and THE STATE OF TEXAS

Defendants-Appellants.
Appeal from the United States District Court for the
Northern District of Texas

Before GEE, GARZA and TATE, Circuit Judges.

JUDGMENT

This cause came on to be heard on the record on appeal
and was argued by counsel;

On CONSIDERATION WHEREOF, It is now here ordered and
adjudged by this Court that the judgment of the said District

Court in this cause be, and the same is hereby, reversed end’

that this cause be and the same is hereby remanded to the said
District Court for proceedings consistent with this opinion;

It 1s FurTHER Orperep that plaintiffs-appellees pay to
defendants-appellants, the costs on appeal to be taxed by the
Clerk of this Court.

Octoser 3, 1983

A-43

APPENDIX D

Unrrep Home RENTALS, INC.,
MICHAEL A. LIVINGSTON and
W. EUGENE BUSHMAN,
Plaintiffs-Appellees,
versus :
Texas REAL Estate COMMISSION

and THE STATE OF TEXAS,
Defendants-Appellants.

Appeal from the United States District Court for the
Northern District of Texas

ON SUGGESTION FOR REHEARING EN BANC
(Opinion 10/3/83, 5 Cir., 198 , F.2d )
(October 31, 1983)

Before GEE, GARZA and TATE, Circuit Judges.

PER CURIAM:

(Y) Treating the suggestion for rehearing en banc as a
petition for panel rehearing, it is ordered that the petition for
panel rehearing is DENIED. No member of the panel nor
Judge in regular active service of this Court having requested
that the Court be polled on rehearing en banc (Federal Rules
of Appellate Procedure and Local Rule 35), the suggestion for
Rehearing En Banc is DENIED.

( ) Treating the suggestion for rehearing en banc as a
petition for panel rehearing, the petition for panel rehearing is
DENIED. The judges in regular active service of this Court
having been polled at the request of one of said judges and a
majority of said judges not having voted in favor of it ( Federal

A-44

a

Rules of Appellate Procedure and Local Rule 35), the sugges-
tion for Rehearing En Banc is DENIED.

ENTERED POR THE COURT:

THOMAS GILBERT, Jr.
Unrrep States Cirncurr JuDGE

Tate, Circuit Judge, dissenting.

A-45

APPENDIX E

TEXAS’ REAL ESTATE LICENSE ACT, TEX. REV.
CIV. STAT. ANN. art. 6573a, §2(2) (Vernon Supp. 1982),
provides in revelant part:

“Real estate broker” means a person who, for another
person and for a fee, commission, or other valuable
consideration, or with the intention or in the expectation or
on the promise of receiving or collecting a fee, commission,
or other valuable consideration from another person:

(D) lists or offers or attempts or agrees to list
real estate for sale, rental, lease, exchange, or trade;
[or]

(H) aids, attempts, or offers to aid in locating or
obtaining for purchase, rent, or lease any real estate;

Texas Real Estate Commission Rule 402.03.02:

.003.4 Real estate broker licensure is required for the
operation of a rental agency. This section does not
prohibit employment of an answering service which is
identified to callers as such and which provides informa- -
tion concerning the size, price and terms of property
advertised.

005.1 Locating and bringing together a buyer and
seller through correspondence or telephone constitutes
negotiation if done from within the borders of Texas.

005.5 Real estate licensure is required of rental
agents doing all solicitation by telephone unless such |
agents are employees of the owner of the property con- nd
cerned -

005.6 A clerical employee of a real estate broker is
Rot required to be licensed if such employee engages in no

A-46

solicitation work and does not hold himself or herself out
as authorized to act as a real estate agent.

.005.7 Answering of the telephone and acts of a
secretarial nature done in a broker’s office do not require

real estate licensure.

010.1 (a) Real estate licensure is required for the
operation of an apartment selector/locator service or
home-finding service in Texas.

010.2 (b) the compilation and sale of listings of
rental vacancies available in an area is activity requiring
real estate licensure. This is true even if the property is not
shown, sold, leased or managed.

011.1 This section prohibits a person not listed as a
Texas real estate broker or salesman from receiving a
referral fee from another concerning the sale, exchange,
purchase, rental or lease of real estate.

011.2 Real estate licensure is required for one to
procure or assist in the procuring of prospective tenants of
real property for compensation in any form, including but
not limited to rent, bonuses, discounts, gifts or other things
of value.

011.3. The referral of a prospective purchaser, for
compensation, is an act requiring real estate licensure.

.013.1 Real estate licensure is required of those who
advertise for others regarding real property, accept calls
received in response to such advertisements, and refer the
callers to the owner of the property.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_1430%3A1. Public record. Not legal advice.