Opinion ID: 763285
Heading Depth: 2
Heading Rank: 4

Heading: The District Court's Pretrial Rulings

Text: 43 On May 10, 1995, the district court entered an order dismissing three of Realty One's eight counterclaims. It reasoned as follows: First, Realty One did not have standing to pursue its claim that Re/Max franchisees illegally agreed not to recruit each other's agents ((2) above). In its claim, Realty One alleged no antitrust harm; in fact, it benefitted by the reduction in competition for remaining agents. Even if there were a harm to the market associated with this practice, it is primarily sales agents who would be harmed, and they would be the proper parties to bring suit, not Realty One. 44 Second, Realty One alleged no antitrust injury in its claim that Re/Max engaged in deceptive recruitment techniques ((3) above). The mere allegation that Re/Max bid more for Realty One's agents could not constitute an antitrust violation. 45 Third, Realty One did not state a valid claim in arguing under § 2 of the Sherman Act that the Re/Max franchises conspired to set commission splits with non-Re/Max brokerages ((1) above), because Realty One alleged no specific intent on the part of Re/Max to monopolize. Realty One's allegations, even if true, evidenced no more than Re/Max's intent to expand into northern Ohio at Realty One's expense. Additionally, Realty One failed to make sufficient allegations that Re/Max's alleged vertical commission-setting agreements between the franchisor and the franchisees violated § 1, and thus the district court did not consider Realty One's conclusory amended complaint in that regard. However, the court did find that Realty One stated a valid § 1 claim that the franchises had conspired horizontally to set the commissions they pay to non-Re/Max brokerages in cooperative transactions. 46 Fourth, the court dismissed Realty One's antitrust disparagement claim ((4) above), because [m]ere allegations of business disparagement are not the type of injuries to competition that the antitrust laws were designed to prevent. 47 Fifth, the court found that Realty One had stated a valid claim that the plaintiffs conspired to conduct sham litigation against Realty One in violation of § 1 of the Sherman Act ((6) above). Sixth, Realty One's state-law counterclaims contained allegations sufficient to survive a 12(b)(6) motion ((7) & (8) above). 48 Finally, regarding Re/Max's complaint, the district court discussed Re/Max International's, the franchisor's, standing to bring its antitrust claims. The court found that Re/Max International was indeed injured by the defendants' alleged anticompetitive conduct and was the proper party to assert the claim that the defendants were exercising monopoly power in the market for experienced real-estate agents. However, Re/Max International was not the proper party to prosecute the claim regarding the defendants' monopoly in the home-buying and selling market. Re/Max could not prosecute the brokerage-services claim because, as we shall discuss below, of the five factors enumerated by this court to be evaluated in determining antitrust standing, two weighed heavily against Re/Max International, one was neutral, and two weighed for the plaintiffs. On the other hand, the factors heavily favored standing on the competition-for-agents claim.
49 On September 11, 1995, the district court denied another motion by Realty One asking for summary judgment. This time, the defendant claimed that issues decided in Re/Max International, Inc. v. Donald Greif, No. 90-0166 (N.D.Ohio Mar. 14, 1990), precluded Re/Max from arguing for a different result in the present case. For reasons not important to this appeal, the district court denied Realty One's motion. Realty One has abandoned any issue-preclusion assignment of error by failing to discuss it on appeal.
50 Next, on September 18, the district court considered another round of the defendants' motions for summary judgment. This time, Realty One and Smythe Cramer contended that the four-year statute of limitations had run against many of the plaintiffs' claims, because the first act of the alleged conspiracy occurred in 1987. However, the district court found a genuine factual dispute whether the defendants had engaged in overt acts of conspiracy within the four years preceding January 1994, when the original complaint was filed. Specifically, the court noted record evidence tending to show that the defendants had instituted adverse commission splits against most of the plaintiffs after January 1990, and that the defendants thereafter engaged in other acts such as disparagement of the plaintiffs and disruption of the plaintiffs' efforts to show and sell homes listed by the defendants. Additionally, the plaintiffs' monopolization claims under § 2 had not expired, because the defendants acquired competitors in markets in which they allegedly had monopoly power, thereby injuring the plaintiffs within the limitations period. 51 Finally, the district court held that even if the four-year limitations period would have otherwise expired, evidence that the defendants fraudulently concealed their illegal activities equitably tolled the running of the statute. The plaintiffs had introduced evidence that one or both of the defendants had (1) denied their collusion, (2) instructed employees not to discuss the adverse splits, (3) obscured their targeting of Re/Max by putting other companies on their adverse-splits list, (4) failed to keep records of meetings during which the decisions regarding adverse splits were made, and (5) altered documents submitted to the Federal Trade Commission pursuant to the agency's investigation of the adverse-splits policy. The court found that this concealment prevented the plaintiffs from discovering, with due diligence, evidence that the defendants had conspired to adopt the adverse-splits policy.
52 On March 19, 1996, the district court granted summary judgment dismissing all of the plaintiffs' remaining claims, and four of Realty One's five remaining counterclaims. 53 The plaintiffs' § 2 monopolization claims were dismissed because the plaintiffs failed to meet their burden of defining the relevant geographic markets in which the defendants were alleged to wield monopoly power; nor had Re/Max met its burden of showing that the defendants had the power to set prices or exclude competition in the geographic markets plaintiffs claimed. First, the court rejected the plaintiffs' claim that each of 161 cities and towns in northeast Ohio was its own geographic market for real-estate agents and for brokerage services. The plaintiffs had introduced no evidence that home buyers or sellers obtain real-estate brokerage services exclusively or even largely from brokers within their own political subdivisions. Similarly, no evidence indicated that brokers did not cross political boundaries to show homes, or that brokerages did not cross such boundaries to recruit agents. 54 Moreover, the district court held, even if the 161 areas were geographic markets, the plaintiffs' expert, Dr. Martin, relied on questionable data in reaching his conclusions that the defendants exercised monopoly power. In calculating market share, the expert looked only at the dollar value of homes sold, rather than the number of homes. He reviewed data from 1993 through 1995 only, although the plaintiffs' suit sought damages back to 1987. And, in his analysis, the expert may have overlooked up to 40% of all homes sold. Thus, the plaintiffs' expert's report did not sufficiently support the § 2 monopolization claims. 55 Second, even if the expert's conclusions were accepted, the plaintiffs had not met their stiff burden to establish monopolization, conspiracy to monopolize, or attempted monopolization. Particularly telling was the relatively low market share that the plaintiffs contended Realty One and Smythe Cramer had in the relevant localities--in no case was it above 51%. Although there is no minimum market share required to make out a § 2 claim, the court thought that failing to meet a 50-60% threshold defeats a claim unless evidence is proffered showing, for instance, that a defendant's market share increased after initiating the anticompetitive activity or that there were true entry barriers to the relevant industry. Similarly, the attempted monopolization claims failed because there was no evidence that there was a dangerous probability that defendants would succeed in achieving monopolization--their market share had not grown since 1987, and new firms could enter the market easily to undercut monopolistic prices or policies. Likewise, the conspiracy-to-monopolize claims failed because the plaintiffs had offered no evidence of the defendants' specific intent to establish a monopoly. 56 The defendants were granted summary judgment on the plaintiffs' § 1 conspiracy claims, because there was insufficient evidence that the defendants mutually agreed to adopt adverse splits, rather than imposing them independently. The court recognized that a claim of conspiracy to fix prices need not include proof that the activity unreasonably restrains trade and that such an agreement if proven would be a per se violation of § 1 of the Sherman Act. However, in ruling against the plaintiffs, the court found that all of their proofs were equally consistent with independent action. 57 Most important to the court's analysis in this regard was its rejection of the findings of the plaintiffs' economic expert, Dr. Martin. Although the witness stated in his written report that unilateral imposition of adverse splits would be economically irrational, the district court held that Dr. Martin implicitly admitted in his deposition that independent adverse splits could have been in Smythe Cramer's (and thus Realty One's) best interest; that is, had Smythe Cramer not imposed the adverse splits, it would have lost agents to Re/Max or been forced to pay higher salaries. Although the court cited this economic benefit to the defendants of imposing the adverse-splits policy, notably, the court did not consider whether the plaintiffs' expert had admitted, implicitly or otherwise, that this benefit exceeded the costs of the policy in terms of lost business. Also, according to the court, the facts that the defendants imposed roughly the same splits at roughly the same times, that they exchanged information regarding their splits against Re/Max, and that they had opportunities to meet, could all be explained innocently. 58 Moreover, the court ruled that the testimony of Leo Lee--to the effect that Realty One's CEO admitted conspiring with Smythe Cramer to impose the adverse splits--was inadmissible. The court found the conversation between Lee and Realty One's CEO to be inadmissible hearsay, and not within the requirements of the coconspirator exclusion of Fed.R.Evid. 801(d)(2)(E), because there was insufficient evidence of a conspiracy and because the statement could not be construed as being in furtherance of the conspiracy even if one existed. The court apparently did not consider whether the statement was admissible against Realty One simply as an admission of a party opponent. Fed.R.Evid. 801(d)(2)(D). 59 The court also dismissed the plaintiffs' state-law claims for reasons that are not relevant here, as the plaintiffs have not appealed this aspect of the district court's judgment. 60 As for Realty One's remaining counterclaims, all were dismissed as unsupported by the evidence, save only the claim that the plaintiffs had engaged in sham litigation in violation of § 1. Although the court found evidence that Re/Max franchises had agreed to set broker-to-broker commission splits for non-Re/Max brokers, the court held that Realty One had not alleged a resulting injury to its business or property and thus had not stated a valid claim on that count. Realty One's tortious interference and unfair-competition claims--that the plaintiffs interfered with contractual relationships between Realty One and its agents and between Realty One and its customers listing homes for sale--were also dismissed. Re/Max could not illegally induce an at-will employee from leaving his position with Realty One, and Realty One had adduced no evidence of any customer contract with which any plaintiff had interfered. Lastly, Realty One's claim that the plaintiffs engaged in unfair competition by stealing lists of Realty One's agents failed, because there was no evidence that Ohio regards a list of brokers as a trade secret. 61 Because the central claims in the case had been dismissed, and because proceeding to trial on the sham-litigation claim would result in undue delay of the appeals from the several judgments as matters of law, the district court entered final judgment under Fed.R.Civ.P. 54(b). This timely appeal followed.