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Grillo v. Board of Realtors of Plainfield Area

Decided: April 27, 1966.

RUDOLPH GRILLO, TRADING AS SOMERSET REAL ESTATE CO., PLAINTIFF,
v.
THE BOARD OF REALTORS OF THE PLAINFIELD AREA, ET AL., DEFENDANTS



Herbert, J.s.c.

Herbert

Plaintiff Rudolph Grillo is a real estate broker licensed by the State of New Jersey under N.J.S.A. 45:15-10. Since July 1958 he has been the proprietor of his own real estate brokerage business in Plainfield, trading as Somerset Real Estate Co. He alleges that defendants, who are The Board of Realtors of The Plainfield Area, Inc. (the Board) and its member firms, are engaged in illegal practices. He demands a judgment declaring the Board to be an unlawful combination in restraint of trade and declaring its constitution, by-laws and rules and regulations relating to the multiple listing system which it conducts to be contrary to public policy and invalid. He seeks injunctive relief against continuation of the allegedly wrongful practices and, in addition, asks for compensatory and punitive damages.

Plaintiff is not a member of the Board. For a time prior to 1958 he was affiliated with the Board, but only as an employee of a Board member. During the last eight years he has submitted several applications for membership, but each time he has been rejected. He does not demand a judgment compelling the Board to admit him, but he does assert that its restrictions upon membership are an important element in the success of those business methods which he says are illegal and harmful to him and to other licensed brokers who are not members of the Board.

The defendant Board was organized under Title 15 of the Revised Statutes as a nonprofit corporation. It is a "Member Board" of the National Association of Real Estate Boards

and is affiliated with the New Jersey Association of Real Estate Boards. The membership of the Board includes the great majority of active real estate brokers and salesmen in the territory of the Board. The jurisdiction of the Board, as approved by the national organization, covers portions of Union, Middlesex and Somerset Counties, including all of Plainfield, North Plainfield, Dunellen, Scotch Plains and Fanwood.

The Board has several classes of members, but only the "Active" class is important for present purposes. Art. III, § 2 of the Board's revised constitution sets out qualifications for "active" membership as follows:

" Active Members shall be brokers duly licensed by the State of New Jersey, who as principals, partners, corporate officers or trustees, are engaged principally in buying, selling, exchanging, renting or leasing, managing, appraising or financing Real Estate for others for compensation, whose principal place of business is located in the territory of the Plainfield Real Estate Board, as approved by the State and National Association of Real Estate Boards. Any individual having the above qualifications shall be eligible for active membership.

An applicant for Active Membership shall be required to have been for at least one year immediately preceding the date of application, a principal, partner, corporate officer or trustee with the office with which he is associated at the time he applies for membership (said office being in the territory of The Board of Realtors of The Plainfield Area); except in the case of an applicant who for the preceding two (2) years has been associated with a Plainfield Realtor as principal, partner, corporate officer, trustee or salesman with Salesman's Membership in the Board."

An applicant for "active" membership is required to fill out and sign a printed form which calls for considerable information about himself. He must furnish the Board with the names of three Board members to whom the Board may refer and three additional business references. The form must be accompanied by a check for $1,000 to pay the stipulated initiation fee. In the form is an express promise by the applicant to abide by the Board's constitution, by-laws and rules and regulations, and the Code of Ethics of the National Association of Real Estate Boards.

The procedure to be followed when an application for membership is received is provided by Art. IV, § 4 of the Board's constitution:

"* * * Upon receipt of an application for Active Membership, the Membership Committee Chairman shall advise the Board of Directors of the name of said applicant, who shall be voted upon by the Board at a meeting no sooner than sixty (60) days from receipt of said application. During this sixty (60) day period any Member of the Board may contact the Membership Committee to convey any information relative to the applicant. The Board Secretary shall within five (5) days of receipt of said application notify the Chairman of the Membership Committee who in turn within five days shall hold a meeting of his Committee and said Committee shall within thirty (30) days of such meeting, complete its investigation of and interview with the applicant and shall file a written report of its findings together with its recommendation to the Executive Committee. The Executive Committee shall consider the application within five days of receipt of report from the Membership Committee and if approved, the Secretary shall notify the active members as to the meeting at which the application will be voted upon. The applicant shall be advised in writing of the decision of the Board by the Board Secretary immediately upon the determination of such decision."

Although this quotation indicates an application can come to a vote by the members only after being approved by the executive committee, there is testimony in the record to the effect that the Board, recently at least, has eliminated the veto power of the executive committee.

An applicant is elected to the Board "when his written application has received the affirmative vote of a majority of the Board of Directors present * * *." The "Board of Directors" is defined by Art. VII, § 1 as "the elective officers and all active members of the Board."

The Board operates a service for the multiple listing of properties for sale. The function of this is to expose the listings obtained by each Board member to the sales efforts of every other Board member.

The Board has adopted official multiple listing rules and regulations. With minor exceptions any listing of a property for sale with a member of the Board must be by a standard form of agreement which gives to the listing broker and "all

active Realtor members of the Plainfield Real Estate Board the exclusive right to sell." A member who has obtained a multiple listing agreement from an owner is required to file that agreement within 24 hours in the multiple listing office maintained by the Board. The staff of that office then sends out information about the listed property and the terms of listing to all Board members. Every member and his sales staff then has knowledge that the particular property is being offered for sale and may offer it to prospective buyers.

A member who secures a listing is given discretion to choose between an exclusive or multiple one only if the property involved is a real estate development consisting of five or more individual dwelling units, a single structure containing five or more dwelling units, or a commercial, industrial or "management" property. There is an express provision that no property other than the exceptions just mentioned "may be exclusively listed by a Realtor member without prior approval of the Multiple Listing Committee." The rules and regulations state that commissions on the sale or rental of a multiple listing "must" be divided as follows: listing realtor 20%, selling realtor 75% and multiple listing service 5%.

Section 7 of the rules and regulations before February 1963 provided:

"Commission Agreement With Non-Members

(A) There shall be no cooperation with non-members located within The Board of Realtors of The Plainfield Area Territory on Multiple Listed properties.

(B) Multiple listed property within the Plainfield Area Board territory can only be shown and sold by Plainfield Area Board members. However, Realtors and brokers and other licensees outside the Plainfield Area Board territory can send or refer their prospects to any Plainfield Area Board member. In the event a sale is consummated and a commission paid, the Plainfield Area Board member effecting the sale and receiving the commission shall be obligated to pay 30% of the commission received to the sender."

On February 21, 1963 this section was amended to make it possible for local nonmembers to refer their "prospects" to members of the Board:

"Rule 7A -- There shall be cooperation with non-members located within the Board of Realtors of the Plainfield Area on Multiple Listing properties.

Rule 7B -- Multiple Listed property within the Plainfield Area Board can only be shown and sold by Plainfield Area Board Members. However, Realtors and brokers and other licensees within and outside the Plainfield Area Board territory may send or refer their prospects to any Plainfield Area Board Member. In the event a sale is consummated and a commission paid, the Plainfield Area Board Member effecting the sale and receiving the commission shall be obligated to pay thirty (30) per cent of the net commission received by the Selling Realtor (net commission is the amount after the Multiple Listing fee and the Listing Realtor's commission are deducted. This will also apply where it is the Selling Realtor's Multiple Listing.)."

Some witnesses testified that there was actually some participation on this limited basis with local nonmember brokers. However, the Board's edict against the showing of multiple listed homes by nonmember brokers was enforced. In 1962 a notice was sent to Board members in the name of the Board's president. It gave the text of section 7, as it then read, and closed with this warning:

"WE KNOW THAT Multiple Listings are being shown by local non-members. Any Realtor doing this is in violation of our rules. Any infringement will be dealt with severely."

In one instance, a member was fined $500 for permitting a local non-member to show and sell a multiple listed home. Concerning that incident the following entry appears in the minutes of the Board's executive committee for May 27, 1964:

"Infraction of Multiple Listing Rules a serious one Protect Home Rule and prevent leakage to outsiders If transaction does not go through, there would be no penalty -- therefore, fine $500."

If every licensed real estate broker in the Plainfield area could become a member of the Board for the asking, no nonmember would have cause for complaint about being excluded from the benefits of the multiple listing service. Anderson v. United States, 171 U.S. 604, 616-618, 19 S. Ct. 50, 43 L.

Ed. 300 (1898). However, from what has already been said it will be clear enough that restrictions upon admission to membership do exist. Several applications for membership, in addition to that of plaintiff, have been voted down; one, I am sure, because the applicant was a Negro. There is also the very substantial initiation fee of $1,000. The size of the fee is itself a restriction upon membership. There is a strong inference that the amount has been set as a barrier against applications which would otherwise be filed. No showing was made by the Board that such a fee bears any reasonable relation to the cost of admitting a new member. Hurdles are placed, too, in the way of newcomers. Art. III, § 2 of the Board's constitution (quoted above) fixes a waiting period of one year for the licensee who comes from elsewhere, opens his own office in the area and desires to apply for active membership.

Plaintiff contends that the great majority of all residential premises for sale within the Board's territory are offered through the Board's multiple listing service. He asserts that because a broker who is not a member of the Board is not permitted to participate in the benefits of the service he is precluded thereby from offering any of these premises for sale, and cannot compete successfully with Board member brokers. Plaintiff urges that the Board, in operating the multiple listing service to the exclusion of non-Board members, is engaged in an unlawful restraint upon the practice of the real estate profession and in an illegal restraint of trade.

I.

It is argued for the defense that the New Jersey Real Estate Commission, functioning under N.J.S.A. 45:15-1 et seq., has exclusive original jurisdiction over the subject matter involved in this litigation. Therefore, defendants urge, plaintiff must take his case to the Commission and exhaust his administrative remedies before asking a court to grant him relief.

Defendants' position is unsound. Jurisdiction of an administrative agency is exclusive when the remedy which the agency is empowered to grant is the only available relief for the given situation. The New Jersey Real Estate Commission has power to hear complaints against its licensees for the purpose of deciding whether licenses should be suspended or revoked. N.J.S.A. 45:15-17 and 18. There is nothing to indicate that the Legislature intended to displace all common law actions in the courts when it gave to the agency these powers over licenses. Contrast may be made to the provisions making a claim for workmen's compensation enforceable only by an original proceeding in the Division of Compensation. N.J.S.A. 34:15-49. See Bendler v. Bendler, 3 N.J. 161, 171 (1949). Plaintiff in this case has two avenues available to him: one by complaint against licensees in the administrative forum under the statute, and the other in the court under the common law. The jurisdiction of the Real Estate Commission in this field is not exclusive. See 2 Am. Jur. 2 d, Administrative Law, § 784, p. 684.

N.J.S.A. 45:15-17 ends with the following language:

"The commission is expressly vested with the power and authority to make, prescribe and enforce any and all rules and regulations for the conduct of the real estate brokerage business consistent with the provisions of this act."

From this it may be argued that the primary jurisdiction doctrine should be applied in this case, i.e., that even though there is a judicial remedy in this field, the situation is such that judicial relief cannot be supplied without a prior determination by the New Jersey Real Estate Commission concerning the activity of defendants in this case. This argument must also be rejected. The above language cannot be construed as a grant of power to inquire into and make decisions concerning legal liability of licensees for practices in the real estate brokerage business. Even if this provision could be so construed, it nevertheless would be appropriate at this time to decide all of the questions now before the court.

Plaintiff's right to relief depends substantially upon answers to questions of law and the findings of fact which are pertinent to those questions are not ones requiring the specialized knowledge and experience of the Commission. See 2 Am. Jur. 2 d, Administrative Law, § 793, p. 696.

II.

Does the plaintiff, a private citizen who says his business has been damaged by a combination of competitors have a cause of action which he can assert against them? The monopolistic effects of restraint of trade have been regarded historically as matters of public concern rather than as mere private wrongs to be remedied by private suits. Chief Justice White said in Standard Oil Company v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1910):

"Without going into detail, and but very briefly surveying the whole field, it may be with accuracy said that the dread of enhancement of prices and of other wrongs which it was thought would flow from the undue limitation on competitive conditions caused by contracts or other acts of individuals or corporations led, as a matter of public policy, to the prohibition or treating as illegal all contracts or acts which were unreasonably restrictive of competitive conditions, either from the nature or character of the contract or act, or where the surrounding circumstances were such as to justify the conclusion that they had not been entered into or performed with the legitimate purpose of reasonably forwarding personal interest and developing, trade, but, on the contrary, were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public and to limit the right of individuals, thus restraining the free flow of commerce and tending to bring about the evils, such as enhancement of prices, which were considered to be against public policy." (at p. 58, 31 S. Ct., at p. 515)

New Jersey has few authorities applicable to combinations in restraint of trade. The same comment can be made about state courts generally. Cases involving charges of malicious and deliberate actions by conspirators for the purpose of damaging a plaintiff's business are not in point. ...


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