Non-Member Access to REALTOR® Association Multiple Listing Services

2. This trend of successfully defending the right of REALTOR® associations to restrict MLS access to members was interrupted in 1977 and 1978 when two California courts held it to be a violation of the Cartwright Act (the California antitrust statute) for REALTOR® associations to exclude non-members from a REALTOR® association MLS³. In contrast, the Supreme Courts of Iowa and New Jersey subsequently held that the membership rule did not violate the antitrust laws of those states.⁴

3. The issue was also raised during this period in federal court in cases alleging that the membership requirement violated federal antitrust law. Two federal appellate courts⁵ and five federal district courts⁶ held that federal antitrust law was not violated by REALTOR® associations limiting MLS access to their members.

4. Given that most state and all federal courts to consider the issue had rejected challenges to the MLS membership requirement, it was a considerable surprise when in 1991 the 11th Federal Circuit Court of Appeals held, in Thompson v. Metropolitan Multilist, 934 F. 2d 1566 (11th Cir. 1991), that federal antitrust law is violated by restricting MLS access to association members if the MLS has “market power” and if a countervailing pro-competitive justification for that membership restriction cannot be established.

5. The plaintiffs in Thompson were an individual real estate licensee and the Empire Real Estate Board, which is the Atlanta-area Realtist chapter. The Realtist organization is predominantly comprised of African-American real estate professionals. The trial court granted summary judgment in favor of the defendants, the DeKalb Real Estate Board and its MLS, Metropolitan Multilist, based largely on the federal court decisions (noted above) holding that federal antitrust law does not require admission of non-REALTORS® to REALTOR®-association owned MLSs. That decision was appealed to the 11th Circuit, which reversed the trial court’s ruling.

The 11th Circuit held that restricting access to a REALTOR®-association operated MLS to REALTOR® members violates federal antitrust law as an unlawful group boycott and unlawful tying arrangement if the MLS has “market power” in the relevant geographic market. The court left open the opportunity for the MLS to offer legitimate pro-competitive justifications for the membership requirement, such as adherence to the Code of Ethics or specific provisions thereof. Such justification(s) would, if established, mean that the membership rule did not violate federal antitrust law. Accordingly, the 11th Circuit remanded the case to the trial court to determine the facts, and in particular, whether the MLS had “market power” or could offer other legitimate justifications for the membership requirement. Before trial, however, the case was settled with that settlement requiring the MLS to admit non-members to MLS participation.

6. The 11th Circuit ruling in Thompson remains the law in the Alabama, Florida and Georgia, the three states that comprise that federal appellate circuit. As a result, REALTOR®-association MLSs in those states, like those in California, cannot and do not require MLS participants to be REALTOR® members. NAR believes that the Thompson result is incorrect, and that the cases decided prior to Thompson, with the exception of those in California, reach the correct conclusion.

7. Following the Thompson decision a handful of cases were brought raising the same issue. The complaint in one case was a virtual copy of that filed in Thompson. Several of those cases were settled when the REALTOR® association defendants elected not to endure the expense and rigors of litigation and agreed to make MLS participation available to non-members. Another REALTOR® association opened its MLS to non-members in response to a threat to sue.

8. On the other hand, REALTOR® associations in cases in state courts in Las Vegas, New Jersey, Kansas City, Missouri and Long Island, New York elected to litigate the issue and ultimately prevailed on the merits or in a settlement, although only the New Jersey case resulted in a published opinion.⁷ Another case in Federal court in Long Island, New York was also settled on terms favorable to the MLS and association.

9. In 2004 a series of four cases were brought in Northern Kentucky, Madison, Wisconsin, Sarasota, Florida, and Spokane, Washington. In each case the plaintiff was a REALTOR® member and MLS participant who claimed he or she preferred not to be a member of the REALTOR® association, and who sought damages for the dues paid to the association for membership that he or she claimed not to want. David Barry was the plaintiffs’ attorney in each case.

10. The case in Sarasota was dismissed when the plaintiff suffered serious health problems, but the other cases proceeded to judgment. A judgment in each case was rendered on motion for summary judgment and without trial, and, fortunately, each was decided in favor of the REALTOR® association and MLS. The Buyer’s Corner case, in Northern Kentucky, and the Reifert case, in Madison, were appealed, and the decision of the District Court in favor of the REALTOR® association and MLS was affirmed in both⁸. The plaintiff in the Prencipe case in Spokane chose not to appeal that adverse decision to the Federal Circuit Court of Appeal.

11. In each of these three cases, the plaintiff alleged that the requirement to join a REALTOR® association as a prerequisite to MLS access was both an illegal tying arrangement and a group boycott. Regarding the first assertion, the defendants argued, and the court in Reifert held, that where a seller with “market power” in a particular product or service market requires purchasers to also purchase a second, separate second product or service (the “tied” product), that requirement is unlawfully anticompetitive only if there is actual competition in the tied product market. That is because the requirement to purchase the tied product injures or eliminates competition from other sellers of the tied product, since purchasers are required to purchase the latter (as a result of their need or desire for and purchase of the tying product), rather than possibly purchasing the product offered by a competitor. Where there are no other sellers of products or services in the tied product market, there is no such competition, and thus by definition no competitive injury arising out of the tying arrangement. In these cases, it was alleged that MLS participation, which the plaintiffs wanted, was the tying product, and REALTOR® association membership, which plaintiffs claimed they did not want, was the tied product. Because the courts found that there were no other sellers of association membership or services like those offered by the defendants REALTOR® association, there could by definition be no competition in that market, and therefore no unlawfully anticompetitive tying arrangement.

With respect to the group boycott claim, the courts each noted that, in effect, the various plaintiffs were members of the MLS and associations, and therefore were not excluded or the object of a “boycott” at all.

12. Since the 2006 trilogy of successful decisions in Reifert, Buyer’s Corner and Prencipe, there have been no other challenges or threats to sue local REALTOR® associations or MLSs claiming a right to MLS access without REALTOR® association membership. Although the U.S. Supreme Court has not considered the issue, 4 Federal Circuit Courts of Appeal (the 1st, 5th, 6th, and 7th) have now ruled in favor of REALTOR® association MLS’s on the issue. Only one (the 11th) has ruled against that principle, and even that case can fairly be characterized as an anomaly unique to its particular facts. It is hoped that potential plaintiffs will view the matter as settled law that REALTOR® associations may limit MLS participation to association members without violating federal law in all federal circuits and state courts but for the 11th Circuit and state of California.

NAR Policy Considerations

1. Following the Thompson decision, NAR changed its mandatory MLS policy at the 1994 NAR Mid Year Meeting to eliminate the requirement that participants in REALTOR®-association MLSs must be REALTOR® association members. As a result each MLS may determine for itself whether non-members will or will not be permitted to participate in the MLS. In either circumstance the MLS will be in compliance with NAR policy and thus covered by the NAR Professional Liability insurance policy coverage (assuming the association and MLS complies in all other respects with NAR mandatory policies.)

2. In order to assist MLSs who wish to admit non-members as MLS participants, the NAR Handbook on MLS Policy contains bylaw provisions and rules which, although not required, are specifically intended for use by such MLSs. Those rules impose on all MLS participants certain duties and obligations which are primarily derived from the NAR Code of Ethics. Among the most significant of these rules are those that require that all MLS participants, non-members as well as members, to arbitrate disputes with other participants, and that impose narrow limitations on the manner and extent to which seller-clients of other participants may be solicited.

3. A significant concern of associations in considering whether to retain or eliminate the requirement of association membership as a condition of MLS access is the potential impact on association membership. These associations often fear a substantial drop in membership if membership is no longer required as a condition of MLS access.

While the experiences of other associations are no guarantee of the effect on any particular association, it appears that those fears are without foundation. Most associations that have either voluntarily or involuntarily eliminated the requirement of association membership for MLS participation have experienced little or no substantial impact on membership. Certain large regional MLSs have lost as few as 2-4 members after deleting their REALTOR® membership requirement. In one case, it was reported to NAR that 2 firms who became MLS participants without membership later voluntarily became association members after their MLS participation gave them a better appreciation for the benefits of Board membership. In general, the impact on membership after the membership requirement was dropped has ranged from marginal to essentially non-existent.

4. Where an MLS permits participation by non-members, those non-members may be charged MLS participation fees that are higher than those paid by association members. There is no explicit formula by which to determine how much higher the fees may be. In general, the higher fee is justified because non-members do not pay dues to the association which may devote some part of its efforts or resources to the MLS or MLS-related matters. Thus, a non-member MLS fee is justified if it is are higher than that paid by members by an amount which is approximately equal to the pro rata amount of association dues devoted to the MLS. Careful analysis of Association expenditures to identify those which are related to the MLS is therefore useful to determining the appropriate non-member MLS fee amount, although it is not necessary to compute those amounts with painstaking precision.

5. The NAR Legal Action Committee supported the defendants in Buyer’s Corner and Reifert and, had such assistance been necessary, probably would have done so in Prencipe. The Committee remains available for requests for support of litigation challenging the MLS membership requirement. Each case is assessed on its own merits and, as in any type of case, Legal Action Committee assistance is never guaranteed. The understanding of some members that NAR no longer supports such cases is, however, unequivocally incorrect.

6. An issue which occasionally is raised is the nature or extent of the MLS services which must or may be provided to non-member MLS participants where MLS participation is required by law without association membership. The focus of non-member MLS access litigation, including Thompson, has been related to the current listing data displayed in the MLS. Even in the 11th Circuit under Thompson, and in California under Palsson and Hounsell, those decisions do not hold, and probably cannot be read to require, that non-members must be provided access to other MLS services. Such services might include, for example, comparable sales data reports or an MLS-owned lock-box system.

In most cases, it simply cannot be claimed or established that access to or participation in such other services is as necessary to effective and successful real estate brokerage as the current listing information portion of the MLS. Access to the lock box system, for example, provides a convenience by avoiding the need to obtain a key from the listing broker in order to show a property. A broker who is not permitted to participate in that lock box system loses only that convenience, however, but is able to continue to show houses listed in the MLS.

7. Those who threaten or actually initiate litigation often believe they are entitled to substantial damages if they are successful. Those damages are often claimed to be measured by the commission income the plaintiff claims he/she would have earned in transactions through the MLS if he had been permitted to participate.

NAR believes that damages analysis is incorrect. A line of antitrust decisions requires plaintiffs to “mitigate” any damages they might suffer as a result of the alleged antitrust violation. In this context, mitigation would require a potential plaintiff in an MLS membership access case to join an association and thereby become eligible to participate in the MLS. A plaintiff who was successful in persuading the court that the membership access rule violated the antitrust laws would then recover damages only in the amount of the membership dues and fees paid. This mitigation obligation would likely prevent a plaintiff who did not join an association to recover in damages the commission income he/she might have claimed to have lost because of the denial of access to the MLS. This argument probably explains why the plaintiffs in Reifert, Buyer’s Corner and Prencipe were all members of the association and participants in the MLS, seeking only reimbursement of association dues which they asserted they would not have had to pay had they not been compelled to become association members in order to gain access to the MLS.

8. Insurance coverage through the NAR provided professional liability insurance program is also available to help defray the cost of defense of litigation brought against an association and/or MLS.

9. NAR believes that limiting MLS access to REALTORS® is legitimate and lawful, and that litigation challenging the MLS membership access rule can be successfully defended. The outcome of litigation is always uncertain, however, and the particular facts involved may make success more or less likely. NAR has provided and will continue to provide assistance in a variety of ways, as described above, to associations and MLSs who face such litigation. Ultimately the association and MLS threatened with such litigation must make the business and legal judgment to defend such litigation or pursue another course of action, since they will bear the financial and operational implications of that judgment. The successes in recent cases are likely to further dampen the likelihood of and enthusiasm of plaintiffs who might initiate new litigation on this important issue.

¹Grempler v. Multiple Listing Bureau, Inc., 266 A.2d 1 (Md 1970); Blake v. H-F Group Multiple Listing Serv., 345 N.E. 2d 18 (Ill. App. Ct. 1976); Barrows v. Grand Rapids Real Estate Bd., 214 N.W. 2d 532 (Mich. Ct. App. 1974); Oates v. Eastern Bergen County Multiple Listing Serv., Inc., 273 A.2d 795 (N.J. Sup. Ct. Ch. Div. 1971). See also Custom Real Estate v. Long Island Board of Realtors, Inc., No. 31641/97 (May 20, 1998) and Metropolitan Kansas City Board of Realtors v. West, No. WD 56526 (Mo. Ct. App. June 30, 1999).

²Collins v. Main Line Bd. of Realtors®, 304 A.2d 493 (PA), cert. denied, 414 U.S. 979 (1973); Grillo v. Bd. Realtors®, 219 A.2d 635 (N.J. Sup. Ct. Ch. Div. 1966).

³Marin County Board of REALTORS® v. Palsson, 549 P. 2d 833 (Cal. 1976), Glendale Bd. of REALTORS® v. Hounsell, 139 Cal. Rptr. 830 (Cal. Ct. App. 1977); see also People v. National Association of Realtors®, 174 Cal. Rptr. 728 (Cal. Ct. App. 1981).

⁴State v. Cedar Rapids Board of Realtors®, 300 N.W. 2d 127 (Iowa 1981); Pomanowski v. Monmouth County Board of Realtors®, 446 A.2d 83, (N.J.), cert. denied, 459 U.S. 908 (1982).

⁵Wells Real Estate v. Greater Lowell Board of Realtors, 850 F.2d 803 (1st cir. 1988), Pope v. Mississippi Real Estate Commission, 872 F. 2d 127 (5th Cir. 1989)

⁶O’Riordan v. Long Island Board of Realtors®, 707 F. Supp. 111 (E.D. N.Y. 1989); Martin-Trigona v. National Association of Realtors® , 1978-1 Trade Cases ¶ 61,915 (E.D. Ill. 1978); Murphy v. Alpha Realty, Inc., 1978-2 Trade Cases ¶ 62,388 (N.D. Ill. 1978); Brown v. Indianapolis Board of Realtors®, 1977-1 Trade Cases ¶ 61,435 (S.D. Ind. 1977); ; see also Venture Resources Group, Inc. v. Greater New Jersey Regional Multiple Listing Service, Inc., 1996-1 Trade Cases ¶ 71,397 (D. N.J. 1996).

⁷Venture Resources Group, Inc. v. Greater New Jersey Regional Multiple Listing Service, Inc., 1996-1 Trade Cases ¶ 71,397 p. 76,994 (D.N.J. 1995).

⁸Reifert v. REALTORS® Association of South Central Wisconsin, South Central Wisconsin MLS Corporation, et al, 450 F.3d 312 (7th Cir. 2006); Buyer’s Corner Realty v. Northern Kentucky Association of REALTORS®, 410 F.Supp.2d 574 (E.D. Ky. 2006), aff’d 2006 WL 2827684 (6th Cir. Oct. 4, 2006)., Prencipe v. Spokane Association of REALTORS®, et al, No. CV-04-319-LRS, 2006 WL 1310402 (E.D. Wash. May 12, 2006)