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Oates v. Eastern Bergen County Multiple Listing Service Inc.

Decided: February 11, 1971.

SCOTT E. OATES, PLAINTIFF,
v.
EASTERN BERGEN COUNTY MULTIPLE LISTING SERVICE, INC., DEFENDANT



Lynch, J.s.c.

Lynch

[113 NJSuper Page 373] Plaintiff, a real estate broker with offices in Englewood, Bergen County, New Jersey, sues to compel defendant Eastern Bergen County Multiple Listing Service, Inc. (MLS) to admit him as a member of its multiple listing

service*fn1 He is a Negro.*fn2 He charges that in barring him from membership defendant is engaging in an illegal combination in restraint of trade. At the outset he points to the decision in Grillo v. Bd. of Realtors of Plainfield Area , 91 N.J. Super. 202 (Ch. Div. 1966), wherein it was held that the defendant multiple listing service there involved was an illegal combination.

Although this case was instituted, tried and briefed on common law principles with respect to restraints of trade, we must also consider the recently enacted New Jersey Antitrust Act (N.J.S.A. 56:9-1 et seq.) which became effective May 21, 1970. The acts here complained of all began before the effective date of this statute. But they are of a continuing nature. Therefore the court is constrained to decide this case in the context of the New Jersey Antitrust Act, as well as under the applicable common law principles.

I

THE MULTIPLE LISTING SERVICE

The benefits of a multiple listing service to a member are substantial. They are described in 52 Cornell L.Q. 570, in a note on the Grillo case.*fn3 See also Grillo, supra , at 222. In

addition, a multiple listing service may also improve competition by making properties available to more brokers than those who have actually acquired the listings.

The area covered by defendant MLS -- Eastern Bergen County -- consists of 24 communities, lying between the New York boundary line on the north, Hudson County on the south, the Hudson River on the east and the Hackensack River on the west. Included therein is Englewood, where plaintiff maintains his broker's office.*fn4

On April 5, 1968 plaintiff applied for membership in defendant organization. He was refused for the asserted reason that under the defendant's scheme of organization, and pursuant to a "Stockholders Agreement" entered into by all of defendant's stockholders, there were no vacancies to which plaintiff could succeed. His name was then placed on a waiting list on which there are now 12 names, plaintiff being third in order. None of such applications has been acted upon.

Under defendant's Title 14A corporate organization only stockholders can be members. Its certificate of incorporation

authorized the issuance of 100 shares of stock but only 54 have actually been issued.

Under the Stockholders agreement it is provided that stock may be "freely" [ sic ] transferred only among present stockholders, to any members of their immediate families or to principal stockholders or partners in a member's real estate firm. Such "non-family" business associate must (a) be a licensed broker, (b) have been with the firm for at least two years, and (c) have the transfer approved by at least two-thirds vote of stockholders present at a meeting (art. 1A). No stock may be transferred to persons other than the parties to the stockholders agreement without the written consent of all of such parties or their transferees (art. 1B). The agreement also provides that on the death of a stockholder, if his stock does not pass to one of the permissible transferees listed above, it is to be redeemed by the corporation and become treasury stock.

Article 7 of the stockholders agreement provides:

Issuance of New Stock: The corporation shall not issue any new stock or reissue treasury stock acquired by the corporation as long as this Stockholders Agreement is in effect. [Emphasis added]

The 54 shares originally issued by defendant went only to those who had been members of defendant's predecessor, Multiple Listing Service of the Board of Realtors of Eastern Bergen County, Inc. (hereafter Board of Realtors MLS). However, one of said members died before the present corporation was actually formed. His one share of stock was purchased by the president of the corporation and turned over to it as treasury stock. At a later date another member retired and turned his stock in to the corporation. Since those two shares of stock are now in the treasury, they have not been reissued, in obedience to article 7 of the stockholders agreement. Therefore, at present there are only 52 members on the roster of defendant, two less than originally anticipated. Further, in February 1970 another member indicated his intention to withdraw from the service, has not

paid his dues since March 1970, and has not been treated as an active member since that time. Two other members have announced their intention to resign or retire in the near future, all as evidenced in the minutes of defendant corporation of June 11, 1970 and November 13, 1970. If these last three people are deemed not to be members, then there are five fewer than originally contemplated. Yet, says defendant, there are now "no vacancies" in defendant's membership.

It is thus incontrovertible that defendant's organization has created an "exclusive club" whose membership is limited to the original stockholders, members of their immediate families, and former associates with the qualifications recited above. If the stockholders agreement is permitted to be literally enforced, no one other than those recited will become a member of defendant's organization.

Defendant asserts that since, under its stockholders agreement, it is prohibited from issuing any new or treasury stock and since plaintiff fails to meet the qualifications of article 1A and cannot acquire stock, he is barred from membership in defendant's organization.

II

The history and operation of defendant's multiple listing service

Defendant corporation was established in 1967, purportedly, so it is said, to avoid the effects of the Grillo decision in 1966.

Until 1967 the members of defendant corporation operated as an adjunct of the Board of Realtors of Eastern Bergen County (under the corporate name of Multiple Listing Service of the Board of Realtors of Eastern Bergen County, Inc.) -- hereafter Board of Realtors MLS. That board was a local branch of the New Jersey Association of Real Estate Boards (NJARB) which, in turn, was affiliated with the National Association of Real Estate Boards (NAREB).

In early 1966 the attorneys for NJARB advised the state president that a one-year waiting period for board members to be eligible for MLS membership (as required by defendant's predecessor, Board of Realtors MLS) was in violation of the law, by virtue of the then recent Grillo decision. In addition, the secretary of the New Jersey Association advised the Board of Realtors MLS that it should either (a) revert to a corporate status separate from the Board of Realtors and remove the term "Realtor" from its name or (b) become a complete adjunct of the Board of Realtors and permit all board members to participate in multiple listing. (This latter effect was what was ordered by Judge Herbert in the Grillo decision). The president of the state board in a subsequent letter affirmed this position. On May 11, 1966 a letter was received by the Board of Realtors MLS enclosing suggested by-laws which would make it completely subject to the Board of Realtors for Eastern Bergen County.

The members of defendant's predecessor rejected adoption of the latter form. They thereupon decided that a severance would be effected between the local Board of Realtors and its multiple listing service. Defendant's trial brief also asserts that it was the intent that the service would operate within the spirit as well as the dictates of the Grillo decision.

In early 1967 the Board of Realtors MLS was dissolved and the present defendant, Eastern Bergen County Multiple Listing Service, Inc., was organized. Each of the members of the prior organization elected to participate in the new corporation. One share of stock was issued to each of the members of the prior organization.

The Stockholders Agreement restricting transfer of stock, as set forth above, was signed and became a basic part of the corporate organization of defendant. More specifically relevant to the issue here, that agreement became the device whereby membership was limited to the original 54 members and to that select group to whom transfer was permitted. It furnishes the mechanism which has stood to bar

plaintiff and other new members from participating in the MLS in the area involved.

Article XII of the Operating Procedure originally adopted by the instant defendant provided that:

Listing in the service shall not be disclosed to brokers not associated with the service without the consent in writing of the listing broker; the broker is permitted to disclose his own listings to a broker not associated with the service. Brokers associated with the service are prohibited from cooperating with brokers not associated with the service for a period of ten days after publication date of the listing by the service.

In September 1968, after plaintiff had been denied admission to the service and after his attorney had written to defendant concerning the rejection, defendant amended the foregoing provision of article XII by eliminating the last sentence thereof. However, there persisted the provision that a listing broker could disclose only his own listings to a nonmember. A member broker still is prohibited from disclosing listings, other than his own, to nonmembers.

Defendant claims that, in fact, its members have fully cooperated with nonmembers, including plaintiff, and that such cooperation has accounted for approximately 5% of the gross sales per year by defendant's members, so that in the years 1969 and 1970 over $1,000,000 in sales were accomplished in cooperation with nonmember brokers. Of this "cooperation" more, infra (VI (A)).

Defendant also asserts that it ought to escape the condemnation of the Grillo decision because in Grillo the membership of the board included the great majority of the active real estate brokers and salesmen in the territory of the board. In the area here involved, i.e. , Eastern Bergen County, so it is said, defendant's members constitute only about 16% of the brokers' offices in the area. It is stipulated that approximately 20% of the total gross business in the area is consummated by defendant's members. Thus, argues defendant, the concept of "monopoly" which ran through

the Grillo decision is absent here.*fn5 But as to this argument, see VI (B)(1) below.

III

PLAINTIFF'S ...


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