Opinion ID: 2038742
Heading Depth: 1
Heading Rank: 3

Heading: Tying Arrangement.

Text: In its decision, the Commission characterized Franich's marketing plan as a tying arrangement. Franich claims this finding is erroneous under the facts of this case, and, if the marketing plan is not a tying arrangement, then it cannot be prohibited by the Commission. Ordinarily, because the Commission is authorized to make factual findings with respect to charges brought against a licensee, see id. § 543B.41, our task on appeal would be to determine whether the Commission's finding is supported by substantial evidence in the record ... when that record is viewed as a whole, id. § 17A.19(10)( f ). If it is not adequately supported by the record, this court would then need to decide whether the Commission's interpretation of the law as prohibiting a practice that does not qualify as a tying arrangement is irrational, illogical, or wholly unjustifiable. See id. § 17A.19(10)( l ). We find it unnecessary to determine whether there is a factual basis for the Commission's finding, however, because even if Franich's proposed incentive is not a tying arrangement, the Commission's conclusion that a practice other than a tying arrangement could violate the applicable state law is not an irrational, illogical, or wholly unjustifiable interpretation of that law. A review of the regulatory basis for the Commission's prohibition of Franich's marketing plan explains our conclusion. The Commission is authorized to revoke or suspend the license of a real estate broker who engages in unethical conduct or [a] practice harmful or detrimental to the public. Id. § 543B.29(3). Pursuant to its rulemaking authority, the Commission has adopted the following rule, which we quote in pertinent part: Prohibited practices. .... A licensee participating in any of the practices described in this rule shall be deemed to be engaging in unethical conduct and a practice harmful or detrimental to the public within the meaning of Iowa Code section 543B.29(3). .... 1.31(6) Any arrangement in which a real estate licensee enters into an agreement with a mortgage broker, bank, savings and loan, or other financial institution pursuant to which the making of a loan is directly or indirectly conditioned upon payment of a real estate commission to the real estate licensee. 1.31(7) Any arrangement pursuant to which a real estate licensee who is affiliated with a mortgage broker, bank, savings and loan association or other financial institution benefits from the practice by the affiliated financial institution of granting mortgage loans or any other loan or financial services or the availability of other benefits directly or indirectly conditioned upon the use of the real estate services of the affiliated licensee. This rule is intended only to regulate the licensing of real estate licensees in the state of Iowa. Iowa Admin. Code r. 193E1.31(6), (7) (now Iowa Admin. Code r. 193E7.4(6), (7)). Franich's marketing plan was held to be a violation of this rule. As a review of rule 193E1.31(6), (7) reveals, the phrase tying arrangement does not appear in this regulation. Tying arrangements are often deemed per se violations of antitrust laws such as the Sherman Act. See N. Pac. Ry. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545, 549-50 (1958) (noting that certain agreements, including tying agreements, are often deemed unlawful as illegal restraints on trade). We find nothing in chapter 543B or the agency's rules that would limit the scope of unethical conduct or practice[s] harmful or detrimental to the public to those practices that violate federal antitrust law. We conclude, therefore, that the Commission's characterization of Franich's marketing plan as a tying arrangement was only thata characterization. The Commission does not define an unethical or harmful practice using that terminology and its borrowing of that term in its decision does not incorporate federal antitrust law into chapter 543B. Furthermore, the Commission's failure to limit prohibited practices as defined in rule 193E1.31 to practices that meet the test for a tying arrangement or other anticompetitive agreement under federal law is not irrational, illogical or wholly unjustifiable. The obligations of a licensee are much broader than simply avoiding anticompetitive conduct. See Iowa Code §§ 543B.29 (listing conduct by licensee that could warrant revocation or suspension of license),.56(2) (enumerating duties of licensee to client). As the Commission stated in its decision, one of the objectives of the rule at issue here was to ensure that licensees avoided situations giving rise to divided loyalties that might adversely affect a licensee's ability to fulfill his or her professional obligations to the client. See id. § 543B.56(2)( a ) (requiring licensee to place client's interests ahead of the interests of any other party); Menzel v. Morse, 362 N.W.2d 465, 474 (Iowa 1985) (The relationship between a broker or agent and his or her principal is confidential and fiduciary, including a strict duty of undivided loyalty and disclosure.). Because the Commission may prohibit practices that are not tying arrangements, it is irrelevant whether Franich's incentive plan is such an agreement. Therefore, we need not decide whether there is substantial evidence in the record to support the Commission's characterization of Franich's plan as a tying arrangement.