MEMORANDUM Opinion and Order. Signed by the Honorable Andrea R. Wood on 2/20/2024. Mailed notice (lma, )
Batton v. The National Association of Realtors et al Docks. 125 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION MYA BATTON, et al., individually and on behalf of all others similarly situated, Plaintiffs, v. THE NATIONAL ASSOCIATION OF REALTORS, et al., Defendants. ) ) ) ) ) ) ) ) ) ) ) No. 21-cv-00430 Judge Andrea R. Wood
Plaintiffs each bought a home listed on a local database of properties for sale known as a Multiple Listing Service (“MLS”) with the assistance of a real estate broker. Like all sellers of homes listed on an MLS, the person selling each Plaintiff’s home was required to include in the listing a single, set offer of compensation to the buyer’s broker. According to Plaintiffs, restricting MLS access only to home sellers who make a set commission offer to the successful buyer-broker is anticompetitive and results in artificially inflated, supracompetitive commission rates being incorporated into purchase prices for homes.
In their Amended Class Action Complaint (“ACAC”), Plaintiffs allege that Defendants National Association of Realtors (“NAR”), Realogy Holdings Corp., HomeServices of America, Inc., HSF Affiliates, LLC, Long & Foster Companies, Inc., BHH Affiliates, LLC, RE/MAX LLC, and Keller Williams Realty, Inc. engaged in a conspiracy in restraint of trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and seek to enjoin Defendants’ antitrust violations. Further, Plaintiffs seek damages under various states’ antitrust and consumer protection statutes and common law.
Before the Court are Defendants’ motion to dismiss the ACAC pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (Dkt. No. 92) and Defendants HomeServices of America, Inc., HSF Dockets.Justia.com Affiliates, LLC, Long & Foster Companies, Inc., and BHH Affiliates, LLC’s (collectively, “HomeServices Defendants”) motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). (Dkt. No. 93.) For the reasons that follow, Defendants’ motion pursuant to Rules 12(b)(1) and 12(b)(6) is granted in part and denied in part, and HomeServices Defendants’ motion pursuant to Rule 12(b)(2) is granted.
This lawsuit was initiated by Judah Leeder, the sole named plaintiff in the original Class Action Complaint (“CAC”). The CAC alleged that the NAR, a 1.4 million member trade association that advocates for the interests of real estate brokers, conspired with the brokeragefirm Defendants and other co-conspirators to adopt and enforce anticompetitive rules applicable to the vast majority of real estate brokers, resulting in homebuyers like Leeder paying supracompetitive rates of commission to the brokers they retained to assist with their home purchases. Claiming that Defendants were engaged in a continuing contract, combination, or conspiracy to restrain price competition among real estate brokers unreasonably, Leeder asserted a claim against Defendants under § 1 of the Sherman Act, 15 U.S.C. § 1, on behalf of himself and a putative class of similarly situated homebuyers, along with a state-law claim for unjust enrichment.
At issue in the CAC (as well as the now-operative ACAC) are the NAR’s rules and policies governing MLSs, which are enforced by the local realtor associations that own the MLSs. Effectively, real estate brokers and individual realtors’ access to the MLSs is conditioned on their compliance with the NAR’s rules, and given the commercial necessity of MLS access, the brokers have little choice but to comply.
Summarized briefly,1 the central rule in the alleged antitrust conspiracy requires any broker listing a property for sale on an MLS to make a blanket unilateral offer of compensation to any broker who finds a buyer for the home (“Commission Rule”). In practice, the Commission Rule means that a homeowner’s listing agreement will typically set a total commission to be paid to the seller-broker, with a portion of that commission designated to be paid to the buyer-broker. Meanwhile, the buyer’s contract with their buyerbroker will provide that the buyer-broker’s compensation will come from the total commission paid by the seller. Consequently, in the typical home sale, the buyer-broker’s compensation will come from the total commissions paid by the home seller to the seller-broker.
Operating in tandem with the Commission Rule are several other NAR rules that serve to restrain negotiations over the broker commissions and create a system of one-sided transparency whereby buyers are prevented from knowing about their brokers’ commission offers, even as buyer-brokers can easily view and compare the full universe of compensation offers. Together, the Commission Rule and related NAR rules allegedly result in substantial uniformity in the compensation paid to buyer-brokers, with total commissions usually paid at between 5% and 6% of the home’s sale price. By contrast, in comparable international markets where buyer-brokers are paid directly by the homebuyer, total commission rates are between 1% and 3% of the sale price. While the commission is ostensibly borne by the home seller, Leeder contended that a portion of the supracompetitive commission rates is incorporated into a home’s sale price such that homebuyers pay artificially inflated prices for residential real estate.
Defendants moved to dismiss Leeder’s CAC. Their principal contention was that, because Leeder and the putative class are only indirect purchasers of buyer-broker services, they Plaintiffs’ allegations can be found in the Court’s previous ruling dismissing the CAC. (May 2, 2022 Mem. Op. and Order, Dkt. No. 81; Leeder v. The Nat’l Ass’n of Realtors, 601 F. Supp. 3d 301 (N.D. Ill. 2022).) 3 are barred from seeking damages under federal antitrust law by the Supreme Court’s decision in Illinois Brick Co. v. Illinois, 431 U.S. 720, 729 (1977). Specifically, Illinois Brick held that only “the overcharged direct purchaser, and not others in the chain of manufacture or distribution, is the party ‘injured in his business or property’” entitled to recover damages from antitrust violators. Id.
In granting the motion to dismiss, this Court found that homebuyers are indirect purchasers of their brokers’ services because it is the home seller that pays the buyer-broker and any cost borne by the homebuyer is only by virtue of the fact that the buyer-broker’s commission rate is “baked into” the home’s purchase price. (May 2, 2022 Mem. Op. and Order at 8–9, Dkt. No. 81.) And such a “pass on theory of damages” is squarely foreclosed by Illinois Brick. See Fontana Aviation, Inc. v. Cessna Aircraft Co., 617 F.2d 478, 480 (7th Cir. 1980).
Although Illinois Brick does not preclude indirect purchasers like Leeder and the putative homebuyer class from pursuing claims for injunctive relief under the Sherman Act, the Court also dismissed the CAC’s claim for such relief because the more directly injured home sellers are challenging the same rules and seeking the same injunction in a separate, related case before this Court, Moehrl v. The National Association of Realtors, No. 19-cv-01610 (N.D. Ill.). Finally, the Court dismissed the CAC’s unjust enrichment claim because, under the relevant state law, an antitrust claim barred by Illinois Brick cannot be repackaged as a claim for unjust enrichment.
Shortly after the Court dismissed the CAC, it granted Leeder leave to file the ACAC. (Dkt. No. 84.) The ACAC is essentially identical to the CAC with respect to its allegations regarding the alleged antitrust conspiracy. While the ACAC asserts a claim under § 1 of the Sherman Act, it does not attempt to revive the dismissed claim for damages but seeks only to enjoin Defendants’ purported violations of the Sherman Act pursuant to § 16 of the Clayton Act, 15 U.S.C. § 26. 4 However, the ACAC’s claim for damages is now presented as 43 causes of action under the antitrust or consumer protection laws of a total of 35 states.2 The ACAC also asserts unjust enrichment claims under the common law of those 35 states. Finally, the ACAC replaces Leeder with 8 new named Plaintiffs. (ACAC ¶¶ 20–27.) Those new Plaintiffs seek to represent both a nationwide injunctive relief class and a damages class limited to individuals who purchased homes in one of the 35 states whose law gives rise to a claim for damages.
Defendants move to dismiss the ACAC in its entirety, raising arguments under Rules 12(b)(1), 12(b)(2), and 12(b)(6). Defendants argue under Rule 12(b)(1) that Plaintiffs lack standing to assert those state-law claims that arise under the laws of states in which no Plaintiff resides or purchased a home. They further assert that the remaining state-law claims and the claim for injunctive relief based on the alleged violation of § 1 of the Sherman Act fail to state a claim and thus should be dismissed under Rule 12(b)(6). Finally, HomeServices Defendants contend that, if the federal antitrust claim is dismissed, there is no basis for the Court to exercise personal jurisdiction over them and thus they must dismissed under Rule 12(b)(2). Since HomeServices Defendants’ basis for dismissal is largely contingent on the dismissal of the federal antitrust claim, the Court will begin with the arguments applicable to all Defendants before turning to HomeServices Defendants’ motion.
Standing is an essential component of Article III’s limitation of federal courts’ judicial power only to cases or controversies. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). 5 “The doctrine limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). There are three elements that constitute the “irreducible constitutional minimum” of standing. Lujan, 504 U.S. at 560. A “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, 578 U.S. at 338 (internal quotation marks omitted). Where a plaintiff does not have Article III standing, a federal district court lacks subject-matter jurisdiction to hear their claims. Simic v. City of Chicago, 851 F.3d 734, 738 (7th Cir. 2017).
Under Rule 12(b)(1), a party may make either a factual or facial challenge to subjectmatter jurisdiction. Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015). A factual challenge occurs where “the complaint is formally sufficient but the contention is that there is in fact no subject[-]matter jurisdiction” such that the Court may look beyond the complaint and consider evidence as to whether subject-matter jurisdiction exists. Apex Digit., Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009) (internal quotation marks omitted). Here, Defendants raise a facial challenge, which requires “only that the court look to the complaint and see if the plaintiff has sufficiently alleged a basis of subject[-]matter jurisdiction.” Id. at 443. The standard for facial challenges under Rule 12(b)(1) is the same as that used to evaluate motions under Rule 12(b)(6). Silha, 807 F.3d at 174. Thus, the Court accepts all well-pleaded allegations in the complaint as true and draws all reasonable inferences in favor of the plaintiff. Scanlan v. Eisenberg, 669 F.3d 838, 841 (7th Cir. 2012).
According to Defendants, Plaintiffs reside and purchased their homes in one of seven states: Florida, Kansas, Massachusetts, Nevada, New Mexico, North Carolina, and Tennessee. Yet Plaintiffs’ state-law claims in the ACAC are not limited to those 7 states but also invoke the 6 antitrust or consumer protection laws of 28 other states. And Defendants contend that Plaintiffs do not have standing to assert claims under the laws of those 28 states because no Plaintiff could have suffered an injury-in-fact from any violation of the laws of a state in which they do not reside.
To have standing, “even named plaintiffs who represent a class ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.’” Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20 (1976) (quoting Warth v. Seldin, 422 U.S. 490, 502 (1975)). Some courts in this District have held that a named plaintiff does not allege an injury-in-fact sufficient to plead Article III standing with respect to state-law antitrust claims “for states in which they do not reside and/or did not purchase the products at issue.” In re Dairy Farmers of Am., Inc. Cheese Antitrust Litig., No. 09 CV 3690, 2013 WL 4506000, at *8 (N.D. Ill. Aug. 23, 2013) (Dow, J.); see also In re Plasma-Derivative Protein Therapies Antitrust Litig., No. 09 C 7666, 2012 WL 39766, at *6 (N.D. Ill. Jan. 9, 2012) (concluding that the plaintiff lacked standing to assert claims under the laws of states in which the plaintiff made no relevant purchases because it did not “suffer its own personalized injury by virtue of the defendants’ alleged violations of” those states’ laws).
However, the same district court that decided In re Dairy Farmers later reversed course, noting that the more recent “trend has been to treat the issue as one of statutory standing that can be deferred until class certification.” In re Dealer Mgmt. Sys. Antitrust Litig., 362 F. Supp. 3d 510, 548 (N.D. Ill. 2019) (Dow, J.). It observed that the “trend is consistent with recent Seventh Circuit caselaw holding that ‘the question of who is authorized to bring an action under a statute is one of statutory interpretation; 7 it does not implicate Article III or jurisdiction.’” Id. (quoting Woodman’s Food Mkt., Inc. v. Clorox Co., 833 F.3d 743, 750 (7th Cir. 2016)). Those courts that have found named plaintiffs have Article III standing to assert nonresident state-law claims have deemed it sufficient that the named plaintiffs generally alleged “an injury in fact by alleging that they paid inflated prices, which can be fairly traced to Defendants’ [antitrust vio
