Court Opinion

ID: 9547501
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:48:07.828454+00
Date Added: 2024-06-11T15:17:48.941345
License: Public Domain

McInturff, J.
(dissenting)— I respectfully dissent because I disagree with the majority's characterization of *31Black, Stack and Mark as members of a joint venture who could legitimately fix prices on the lots in question.
The following additional facts are pertinent to my analysis: The sole function of Comstock Development Co. (CDC) was the development and sale of residential building lots. CDC never owned, built or sold any houses. In its early years, CDC was faced with low market demand and substantial mortgage payments. In order to meet its financial obligations from 1967 to the mid-1970's, CDC sold lots to the general public in competition with the builders who had purchased lots from it. These builders included the Stacks and Orville Mark, shareholders in CDC, and other, private builders.
Sometime during 1973 or 1974, the shareholders agreed CDC would no longer offer lots for sale to builders in general or to the public. From that time on, lot sales were restricted to the two shareholder builders and four non-shareholder builders.2 These builders met at least annually and allocated the lots then available on a rotation basis. Black, Stack and Mark met periodically to establish minimum prices at which the lots would be offered for sale, through the builders, to the general public. Simultaneously, a second price was established for each lot which reflected a 15 percent discount from the minimum offering price. It was understood and agreed that the minimum prices were the starting point for builder-consumer sales and were 15 percent higher than the amount CDC was willing to sell and the builders were willing to pay for the lots.
In the early years of CDC, if a consumer wanted to build a custom home, the only real estate commission involved would be a 6 percent commission paid by CDC to James S. Black, Inc. (Black, Inc.), based on the sale price of the lot. During these years, no commissions were paid on the value *32of a completed custom home. After 1973-74, lots were offered to consumers on two conditions: first, the consumer had to agree to have his custom home built by the builder who had been allocated the lot. Second, he had to agree to pay a 6 percent commission to Black, Inc., on the price of the lot and the estimated cost of the custom home. This 6 percent commission was charged even though the house was not constructed until after the consumer had purchased the lot, and in some instances, when Black, Inc., had performed no services beyond the initial lot sale. The admitted purpose of the 6 percent commission on custom homes was to equalize the prices of custom and speculative homes so that the custom home buyer did not enjoy an advantage over the speculative home buyer.3
The Comstock lot which the Ballos selected in 1977 was a lot that had been allocated to Stack, a shareholder builder. Previously, CDC had agreed to sell and Stack had agreed to pay $9,350 for the lot. The lot was offered to the Ballos for $11,000, the minimum price set by Black, Stack and Mark. The closing agent paid CDC $9,350 and paid Stack the $1,650 difference. The Ballos did not see the deed at closing and did not learn until later that CDC had previously agreed to sell the lot for $9,350.
The Ballos contracted with Stack to build them a custom home on their lot. To the contracted price, a commission of $5,500 was added which was split 50-50 between Black, Inc., and Sullivan Realty. Neither Black, Inc., nor Sullivan Realty, Inc., performed any services other than those connected with the sale of the lot.
*33The trial court concluded that Black, Mark and Stack and the other builders engaged in agreements and understandings which were contracts, combinations and conspiracies to fix prices of lots and new homes in Comstock, a per se violation of RCW 19.86.030, as well as an unfair method of competition in violation of RCW 19.86.020. The trial court based its conclusion on its findings that (1) Black, Stack and Mark established the minimum price at which the lots were offered to potential consumer buyers, (2) Black, Stack and Mark communicated with the other builders the minimum price of the lots for resede to consumers as well as informing them that their price was discounted 15 percent, (3) Black, Stack and Mark and the other builders understood and agreed that this minimum price was the guideline for builder-consumer sales and (4) Black, Stack and Mark agreed that all purchasers of custom houses would pay a 6 percent commission to Black, Inc., and they enforced this agreement with the other builders. In my judgment, the trial court's conclusions were correct.
Traditionally, the practices which the federal courts have deemed to be per se unlawful are price fixing, division of markets, group boycott, and tying arrangements. Arizona v. Maricopa Cy. Med. Soc'y, 457 U.S. 332, 73 L. Ed. 2d 48, 102 S. Ct. 2466 (1982). When conduct is found to fall within one of these categories, any explanation of why the act was done or what its effect might be in a particular case is of no consequence or materiality. Plymouth Dealers' Ass'n v. United States, 279 F.2d 128, 131 (9th Cir. 1960).
Categorically, restraints of trade are either horizontal, an agreement between competitors at the same level of the market structure, or vertical, agreements between competitors at different levels of the market structure, e.g., manufacturers and distributors, United States v. Topco Assocs., 405 U.S. 596, 31 L. Ed. 2d 515, 92 S. Ct. 1126, 1136 (1972). In price fixing cases, both horizontal and vertical agreements are per se antitrust violations. White Motor Co. v. United States, 372 U.S. 253, 9 L. Ed. 2d 738, 83 S. Ct. 696 (1963); United States v. Parke, Davis & Co., 362 U.S. 29, 4 *34L. Ed. 2d 505, 80 S. Ct. 503 (1960); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 95 L. Ed. 219, 71 S. Ct. 259 (1951).
The agreement between Black, Stack and Mark and the other builders, that the price they fixed for the lot would be the price at which all of the builders (horizontal competitors) would offer the lots for sale, shifted the defendants' activity from the arena of legitimate corporate decision-making into the realm of antitrust violations. In other words, Black, Stack and Mark set the prices at which Stack and Mark, as well as their horizontal competitors, the other builders, would charge a consumer for a lot in Comstock. It must be remembered that while setting these prices Stack and Mark retained their competitor identity and were competing with one another in Comstock.
There are no antitrust problems with the defendants forming CDC to market Comstock lots and setting the price at which CDC would sell its product. In fact, that is what was done when the defendants agreed that CDC would charge $9,350 to the builder who was allocated the Ballos' lot. The antitrust problems arose when the defendants and the other builders mutually agreed that the $11,000 price would be the agreed minimum price for builder-consumer sales. Thus, I would hold the agreement between Black, Mark and Stack and the other builders to set the price at which a builder would sell a lot purchased from CDC was an agreement between competitors and a per se violation of RCW 19.86.030.
The second agreement which directly affected the Ballos was the agreement between Black, Stack and Mark and the other builders to charge all custom home purchasers a 6 percent commission on the combined value of the lot and house. The admitted purpose of this agreement was to "equalize the prices of custom and speculative homes so custom home buyers did not enjoy any advantage over the speculative home buyer." This agreement clearly falls within the classical definition of price fixing:
*35[A] combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se.
United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223, 84 L. Ed. 1129, 60 S. Ct. 811 (1940). I would hold the agreement between Black, Stack and Mark and the other builders to equalize prices, by imposing a 6 percent commission on custom home buyers, is an agreement between horizontal competitors in restraint of trade and a per se violation of RCW 19.86.030.
I also agree with the trial court's conclusion that the agreements which constituted price fixing in per se violation of RCW 19.86.030 also constituted unfair methods of competition in violation of RCW 19.86.020.
Our State's unfair competition statute is RCW 19.86.020: "Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." In order to establish a per se consumer protection violation based on RCW 19.86.020 the conduct must meet a twofold test: (1) is the action illegal, i.e., is it unlawful; and (2) is it against public policy as declared by the Legislature or the judiciary. Salois v. Mutual of Omaha Ins. Co., 90 Wn.2d 355, 358, 581 P.2d 1349 (1978).
I have already opined that the defendants' actions constituted price fixing in per se violation of RCW 19.86.030 and were the proximate cause of the Ballos' damages. RCW 19.86.920 provides in part: "the purpose of this act is . . . to protect the public and foster fair and honest competition." Thus, the Ballos have established the elements necessary for a per se violation of the unfair methods of competition clause of the CPA.
The majority takes the position that CDC was a corporate joint venture and the actions condemned by the trial court were merely actions necessary to market the joint venture's product. I recognize that persons who would otherwise be competitors may legitimately pool their capi*36tal and share profits and losses. Maricopa, 457 U.S. at 355-57; see Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 441 U.S. 1, 60 L. Ed. 2d 1, 99 S. Ct. 1551 (1979). However, the fundamental flaw in the majority's position is that Black, Stack and Mark were not the only actors in the conspiracy. The antitrust problem arose when the joint venturers banded together with the other builders who were not corporate officers and agreed to set resale prices on lots and charge a 6 percent commission on the sale of custom homes. Once the defendants acquired the land from CDC and sought to resell it to the public while maintaining their separate and distinct economic identities as competitors, they were no longer acting solely as joint venturers. When the other builders were made a part of this scheme, the trial court properly found there was an agreement among horizontal competitors which constituted illegal price fixing.
The remaining issues raised by Black concern the Superior Court's (1) issuance of a permanent injunction which prohibited Black from participating in horizontal price fixing, (2) award of treble damages and (3) attorney fees, and (4) denial of Black's motion for an independent appraisal of the Bailo home and lot. Because I am in a dissenting position, I will not treat these issues at length. Suffice it to say that the facts and the pertinent law support a holding that the trial court did not abuse its discretion with regard to these items.
Finally, I turn to the Ballos' cross appeal which assigns error to rulings made by the Superior Court on the questions of certification and decertification of their class action.4 Again, these questions are ones left to the discre*37tion of the trial court, and I find no abuse of discretion on the record.
In summary, I would affirm the judgment of the Superior Court that Black, Stack and Mark engaged in illegal price fixing in violation of RCW 19.86.030 and thereby engaged in unfair methods of competition in per se violation of RCW 19.86.020. I would also affirm the Superior Court's award of treble damages, costs and attorney fees, and its rulings regarding certification and decertification of the class. Pursuant to the Consumer Protection Act, RCW 19.86.090, I would award the Ballos their reasonable attorney fees for this appeal.

These non-shareholder builders were Don O'Connell, who participated from 1974 to 1976, George Dullanty, who participated in 1974 and 1975, Dave Mark, who participated from 1974 to 1981, and Paul Rodeen, who participated from 1978.

In a letter on December 19, 1978, to the National Association of Realtors seeking their "legal muscle", Black explained the rationale underlying the commission on custom homes:
It is vitally important to this marketing program and to the builders involved that any custom houses built in the area carry the same costs of this marketing program as the speculative houses with which it competes. If this were not true, the builder would find that his speculative houses were being used as models to build custom houses. Thus, the speculative house would stand on the market while the customer saved the sales commission by going across the street to build a custom house.

After the trial court had sent notice of certification of a class action to the other purchasers of custom homes built by Stack or Mark in the subdivision, Black, Stack and Mark personally contacted most of the class members. This improper action by Black, Stack and Mark necessitated that the trial court appoint two special masters to investigate. They determined that the potential class members had been supplied with sufficient information to make a voluntary and intelligent decision, and that they had decided to opt out of the class.