Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 1 of 27 PageID #: 978
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
`
`QJ TEAM, LLC, AND FIVE POINTS
`HOLDINGS, LLC, individually, and on
`behalf of all others similarly situated,
`
` Plaintiffs,
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`__________________________________________
`
`v.
`
`TEXAS ASSOCIATION OF REALTORS,
`INC., et al.,
`
` Defendants.
`
`
`
`
`
`
`Case No. 4:23-cv-01013-SDJ
`(Consolidated with 4:23-cv-01104-SDJ)
`
`
`DEFENDANT J.P. PICCININI REAL ESTATE SERVICES, LLC, MEMORANDUM IN
`SUPPORT OF ITS MOTION TO DISMISS CONSOLIDATED AMENDED COMPLAINT
`PURSUANT TO FED. R. CIV. P. RULE 12(b)(6)
`___________________________________________
`
`

`

`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 2 of 27 PageID #: 979
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`TABLE OF CONTENTS
`
`
`Page
`
`
`INTRODUCTION ........................................................................................................................ 1
`
`FACTUAL ALLEGATIONS ....................................................................................................... 2
`
`ARGUMENT ................................................................................................................................ 5
`
`
`PLAINTIFFS’ UNSUPPORTED ALLEGATIONS MERELY CREATE
`A POSSIBILITY OF A CLAIM INSUFFICIENT TO WITHSTAND A
`MOTION TO DISMISS ....................................................................................... 5
`
`PLAINTIFFS DO NOT ALLEGE AN ACTIONABLE SECTION 1
`CONSPIRACY ..................................................................................................... 6
`
`I.
`
`
`
`II.
`
`
`
`A.
`
`B.
`
`C.
`
`The Consolidated Amended Complaint Fails to Allege Any
`Role in, Joining of or Furtherance of the Conspiracy. .............................. 7
`
`Membership in a Trade Association and Compliance with its
`Rules Fails to Allege a Section 1 Conspiracy ........................................... 10
`
`The Consolidated Amended Complaint Does not Allege a
`Horizontal Conspiracy among Real Estate Brokers.................................. 12
`
`A Plaintiff Cannot Allege a Conspiracy to Restrain Trade by
`Fixing Prices Cannot without Allegations of a Fixed Price ...................... 14
`
`THE ALLEGATIONS DO NOT STATE FACTS TO SUPPORT A PER
`SE NOR A RULE OF REASON ANTITRUST VIOLATION ............................ 15
`
`A.
`
`D.
`
`III.
`
`The Allegations Do Not Support a Conclusion of a per se Violation ....... 15
`
`A Defined and Plausible Geographic and Product Market must be
`Alleged to Support a Rule-of-Reason Claim and Plaintiffs do not
`Make Such Allegations ............................................................................. 18
`
`CONCLUSION ............................................................................................................................. 20
`
`
`B.
`
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`i
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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 3 of 27 PageID #: 980
`
`TABLE OF AUTHORITIES
`
`
`Page
`
`Cases
`Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 5
`
`Bailey Lumber & Supply Co. v. Ga.-Pac. Corp., No. 08-cv-1394, 2009 WL 2872307
`(S.D. Miss. Aug. 10, 2009) ......................................................................................................... 9
`
`Bank of Am., N.A. v. Knight, 725 F.3d 815 (7th Cir. 2013) ............................................................ 7
`
`Bathke v. Casey's Gen. Stores, Inc., 64 F.3d 340 (8th Cir. 1995) ................................................. 18
`
`Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ....................................................................... 6, 8
`
`Blomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan, 203 F.3d 1028 (8th Cir. 2000) ........ 13
`
`Concord Assocs., L.P. v. Ent. Properties Tr., 817 F.3d 46 (2d Cir. 2016) ................................... 18
`
`Consol. Metal Prods., Inc. v. Am. Petroleum Inst., 846 F.2d 284 (5th Cir. 1988) ....................... 10
`
`Craftsmen Limousine, Inc. v. Ford Motor Co., 363 F.3d 761 (8th Cir. 2004) ....................... 15, 16
`
`Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 797 F.3d 1248
`(11th Cir. 2015) ................................................................................................................... 19, 20
`
`Farm Credit Servs. v. Am. State Bank, 339 F.3d 764 (8th Cir. 2003) ............................................ 6
`
`Fayer v. Vaughn, 649 F.3d 1061 (9th Cir. 2011) ........................................................................ 5, 6
`
`Gonzales v. Key, 577 F.3d 600 (5th Cir. 2009) ............................................................................... 6
`
`Grace v. Re/Max Holdings, No. 23-cv-06352, 2024 WL 2761188
`
` (N.D. Cal. May 29, 2024) ................................................................................................... 14, 15
`
`Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) .......................................................................... 2
`
`In re Crop Inputs Antitrust Litig., ___ F. Supp.3d ___, 2004 WL 4188654
`(E.D. Mo. Sept. 13, 2024) ........................................................................................................... 7
`
`In re EpiPen Direct Purchaser Litig., 2022 WL 1017770 (D. Minn. Apr. 5, 2022) .................... 13
`
`In re Insurance Brokerage Antitrust Litigation, 618 F.3d 300 (3d Cir. 2010) ....................... 11, 12
`
`In re Jan. 2021 Short Squeeze Trading Litig., 105 F.4th 1346 (11th Cir. 2024) .......................... 16
`
`
`
`ii
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 4 of 27 PageID #: 981
`
`In re Online Travel Co. Hotel Booking Antitrust Litig., 997 F.Supp.2d 526
`(N.D. Tex. 2014) ......................................................................................................................... 8
`
`In re Processed Egg Prods. Antitrust Litig., 2019 WL 5656101
`(E.D. Pa. Oct. 31, 2019) ...................................................................................................... 13, 14
`
`Insulate SB, 797 F.3d at 546 ......................................................................................................... 16
`
`Jacobs v. Tempur-Pedic Int'l, Inc., 626 F.3d 1327 (11th Cir. 2010) ............................................ 18
`
`Kendall v. Visa U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) ........................................................ 11
`
`Kentucky Speedway, LLC v. Nat'l Ass'n of Stock Car Auto Racing, Inc., 588 F.3d 908
`(6th Cir. 2009) ........................................................................................................................... 20
`
`Kotteakos v. United States, 328 U.S. 750 (1946).......................................................................... 13
`
`L.A. Draper & Son v. Wheelabrator–Frye, Inc., 735 F.2d 414 (11th Cir. 1984) ......................... 19
`
`Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) ............................... 16
`
`Litovich v. Bank of America Corp., 568 F. Supp. 3d 398 (S.D.N.Y 2021)..................................... 8
`
`New Orleans Ass’n of Cemetery Tour Guides and Cos. v. New Orleans Archdiocesan
`Cemeteries, 56 F.4th 1046 (5th Cir. 2023) ................................................................................ 17
`
`O’Riordan v. Long Island Bd. of Realtors, Inc., 707 F. Supp. 111 (E.D.N.Y. 1988) ................... 17
`
`Ohio v. Am. Express Co., 585 U.S. 529 (2018) ............................................................................ 16
`
`Re/Max Int’l, Inc. v. Realty One, Inc., 173 F.3d 995 (6th Cir. 1999) ........................................... 17
`
`Realcomp II, Ltd. v. FTC, 635 F.3d 815 (6th Cir. 2011) .............................................................. 17
`
`Reifert v. S. Cent. Wis. MLS Corp., 450 F.3d 312 (7th Cir. 2006) ............................................... 17
`
`Robertson v. Sea Pines Real Estate Cos., Inc., 679 F.3d 278 (4th Cir. 2012) ........................... 8, 17
`
`SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412 (4th Cir. 2015) ...................................... 12
`
`Texaco Inc. v. Dagher, 547 U.S. 1 (2006) .................................................................................... 15
`
`Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566 (11th Cir. 1991) ......................................... 17
`
`U.S. v. Multi-List, Inc., 629 F.2d 1351 (5th Cir. 1980) ................................................................... 8
`
`United States ex rel. Riley v. St. Luke’s Episcopal Hosp., 355 F.3d 370 (5th Cir. 2004) ............. 14
`
`United States v. Realty Multi-List, Inc., 629 F.2d 1351 (5th Cir. 1980) ....................................... 17
`
`
`
`iii
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 5 of 27 PageID #: 982
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`White & White, Inc. v. Am. Hosp. Supply Corp., 723 F.2d 495 (6th Cir.1983) ...................... 19, 20
`
`Wilk v. Am. Med. Ass’n, 895 F.2d 352 (7th Cir. 1990) ................................................................. 10
`
`Worldwide Basketball & Sport Tours, Inc. v. NCAA, 388 F.3d 955
`
`
`
`(6th Cir. 2004) ..................................................................................................................... 18, 22
`Other Authorities
`ABA Antitrust Law Section, Antitrust Law Developments, p. 53 (9th Ed. 2022) ....................... 15
`Sherman Act........................................................................................................................ 1, 10, 13
`Rules
`FED. R. CIV. P. 12(b)(6) ......................................................................................................... passim
`
`
`
`
`
`
`iv
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 6 of 27 PageID #: 983
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`
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`Defendant J.P. Piccinini Real Estate Services, LLC a/k/a JPAR Real Estate
`
`(“JPAR”) submits this memorandum in support of its FED. R. CIV. P. 12(b)(6)
`
`Motion to Dismiss Plaintiff’s Consolidated Amended Complaint.
`
`INTRODUCTION
`
`The Court should dismiss the Consolidated Amended Complaint (ECF No.
`
`199) for the following reasons:
`
`Plaintiffs do not allege how JPAR joined the conspiracy that existed before it
`
`came into existence. Without specific allegations showing how JPAR joined and
`
`furthered the conspiracy, the Consolidated Amended Complaint fails to allege a
`
`claim.
`
`The Consolidated Amended Complaint fails to allege an actionable
`
`conspiracy between JPAR, on the one hand, and NAR, the Texas Association of
`
`REALTORS® and the local associations on JPAR’s markets. Several circuits have
`
`held that an allegation that members of a trade association have followed its rules is
`
`insufficient to plead a conspiracy in violation of Section 1 of the Sherman Act.
`
`In order to survive this motion, the Consolidated Amended Complaint must
`
`allege facts showing JPAR conspired with Plaintiffs’ listing brokers. The listing
`
`brokers allegedly charged Plaintiffs an inflated commission, which the listing
`
`brokers then split with buyer’s brokers. Plaintiffs do not plead facts sufficient to
`
`show that JPAR and Plaintiffs’ selling brokers communicated, much less that they
`
`
`
`1
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 7 of 27 PageID #: 984
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`
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`agreed to join each other in a conspiracy to overcharge Plaintiffs. Nor does the
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`Consolidated Amended Complaint adequately allege a horizontal conspiracy
`
`between JPAR and any other selling broker.
`
`Plaintiffs’ claim that JPAR committed a per se Section 1 violation should be
`
`dismissed. A court may not find per se violation when the courts lack considerable
`
`experience evaluating the alleged restrictions. Moreover, as noted immediately
`
`above, Plaintiffs have not alleged a cognizable horizontal conspiracy, which is the
`
`sine qua non for per se treatment.
`
`The Consolidated Amended Complaint fails to define viable geographic or
`
`product markets, which mandates dismissal of Plaintiffs’ Section 1 claim under the
`
`rule-of-reason.
`
`FACTUAL ALLEGATIONS
`
`The Consolidated Amended Complaint makes the following allegations, taken
`
`as true for purposes of this motion only.
`
`All Plaintiffs paid a commission to their listing brokers. Consol. Amend.
`
`Compl. ¶¶ 96-98 (ECF No, 199). Plaintiffs’ listing brokers then disbursed a portion
`
`of the commission received from the seller to the buyer’s broker[s] upon the
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`completion of the sale. Id. The Consolidated Amended Complaint does not name
`
`or identify the buyer’s brokers who allegedly received an inflated commission.
`
`
`
`2
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 8 of 27 PageID #: 985
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`
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`JPAR entered the business of real estate brokerage services in 2011, fifteen
`
`years after the adoption of the offer of compensation rule. Consol. Am. Comp. ¶ 69.
`
`Plaintiffs allege nothing about JPAR encouraging the rule or being involved in MLS
`
`or Association activity related to the rule. Plaintiffs rely on JPAR obeying the rule
`
`as the basis for their claim. All of JPAR’s alleged involvement with MLS and local
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`Associations comes from agents currently sitting on boards, but does not allege any
`
`action to implement or enforce the rule. Consol. Amend. Compl. ¶ 139.
`
`The Plaintiffs allege that a rule adopted in 1996 by a trade association
`
`named the National Association of Realtors (“NAR”) made them pay a
`
`commission to the buyer broker. Id. ¶¶ 103–04, 107. The Complaint repeatedly
`
`refers to the Mandatory Offer of Compensation Rule (the “Compensation
`
`Rule”), but never provides the text of the rule. The Plaintiffs allege that NAR
`
`included the Compensation Rule in its 2019 Handbook on Multiple Listing
`
`Policy. Id. ¶ 104. The plain language of the Compensation Rule does not
`
`mandate that listing brokers offer buyer agents a specific commission. The
`
`Compensation Rule states:
`
`In filing property with the multiple listing services, participants make
`
`blanket unilateral offers of compensation to the other MLS participants and shall
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`therefore specify on each listing filed with the service the compensation offered by
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`the listing broker to the other MLS participants. Handbook at 34.
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`
`
`3
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`

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`
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`The Handbook also states:
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`Multiple listing services shall not publish listings that do not include
`an offer of compensation expressed as a percentage of the gross selling
`price or as a definite dollar amount, nor shall they include general
`invitations by listing brokers to other participants to discuss terms and
`conditions of possible cooperative relationships.
`
`Id. at 35.
`
`The plain text of the Compensation Rule contemplates that a listing broker
`
`will offer to pay some level of commission to the buyer broker, but it does not
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`dictate an amount, leaving the amount up to market participants. The Complaint
`
`confirms that the Compensation Rule does not require that a seller offer a buyer
`
`agent any particular level of commission. The Plaintiffs quote a Texas
`
`Association of Realtors (“TAR”) rule that requires listing brokers to make an
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`unspecified offer of compensation to buyer’s brokers and disclose such offers. Id.
`
`¶ 122. The Plaintiffs also rely on a portion of a TAR form that discloses to the
`
`seller if the listing broker agrees to pay another broker to show the property to
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`buyers, and the form has blanks for the listing broker to complete, rather than
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`any mandatory commission level or percentage. Id. ¶ 126. Finally, the
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`Plaintiffs concede that prior to the Missouri verdict in late 2023, market
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`participants expressly “allowed offers of compensation [of] $.01 or more” and
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`merely required that listing brokers offer “some amount” to buyer brokers. Id. ¶¶
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`127–28.
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`
`
`4
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 10 of 27 PageID #: 987
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`
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`Plaintiffs identify JPAR in Paragraph 69 of the Consolidated Amended
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`Complaint. In the same paragraph, plaintiffs allege sales volume, number of agents,
`
`and REALTOR® association memberships of JPAR. Those are the only specific
`
`allegations regarding JPAR.
`
`I.
`
`ARGUMENT
`
`
`PLAINTIFFS’ UNSUPPORTED ALLEGATIONS MERELY CREATE
`A POSSIBILITY OF A CLAIM INSUFFICIENT TO WITHSTAND A
`MOTION TO DISMISS.
`
`To survive a Rule 12(b)(6) motion to dismiss, a complaint must state a
`
`plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (holding
`
`that the requirement to plead sufficient factual support of claims “asks for more than
`
`a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads
`
`facts that are merely consistent with a defendant’s liability, it stops short of the line
`
`between possibility and plausibility of entitlement to relief.”) (citations and internal
`
`quotation marks omitted.) “A pleading that offers ‘labels and conclusions’ or ‘a
`
`formulaic recitation of the elements of a cause of action will not do.’ Nor does a
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`complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
`
`enhancement.’” Id. at 678 (internal citations omitted).
`
`A court does not need to “assume the truth of legal conclusions merely
`
`because they are cast in the form of factual allegations.” Id. at 678; Fayer v. Vaughn,
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`649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (“[C]onclusory allegations of law
`
`
`
`5
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`
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`and unwarranted inferences are insufficient to defeat a motion to dismiss.”)
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`(quotation marks omitted); Farm Credit Servs. v. Am. State Bank, 339 F.3d 764, 767
`
`(8th Cir. 2003) (holding that a court is “free to ignore legal conclusions, unsupported
`
`conclusions, unwarranted inferences and sweeping legal conclusions cast in the form
`
`of factual allegations.”) (Internal citation omitted).
`
`Factual allegations must include enough specificity to allow the court to infer
`
`facts supporting a claim. “It follows that ‘where the well-pleaded facts do not permit
`
`the court to infer more than the mere possibility of misconduct, the complaint has
`
`alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Gonzales
`
`v. Key, 577 F.3d 600, 603 (5th Cir. 2009). As outlined in the introduction and more
`
`fully stated below, the allegations of the Consolidated Amended Complaint fail to
`
`reach the required standard.
`
`II.
`
`
`
`PLAINTIFFS DO NOT ALLEGE AN ACTIONABLE SECTION 1
`CONSPIRACY.
`
`For multiple reasons, the Amended Complaint does not adequately plead that
`
`JPAR was part of an illegal conspiracy. See generally Bell Atl. Corp. v. Twombly,
`
`550 U.S. 544, 591 n. 10 (2007) (upholding district court’s Rule 12(b)(6) dismissal
`
`because “a defendant seeking to respond to Plaintiffs' conclusory allegations in the
`
`§ 1 context would have little idea where to begin.”) (internal citations omitted).
`
`Twombly makes clear that at the pleading stage in an antitrust case, each defendant
`
`is entitled to know how it is alleged to have conspired, with whom, and for what
`6
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 12 of 27 PageID #: 989
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`
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`purpose. In re Crop Inputs Antitrust Litig., ___ F.Supp.3d ___, 2024 WL 4188654
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`(E.D. Mo. Sept. 13, 2024). “Each defendant is entitled to know what he or she did
`
`that is asserted to be wrongful,” from the allegations of the complaint and a
`
`“complaint based on a theory of collective responsibility must be dismissed.” Bank
`
`of Am., N.A. v. Knight, 725 F.3d 815, 818 (7th Cir. 2013). In other words, there must
`
`be facts sufficient to infer an actual combination with others to achieve the illegal
`
`goal.
`
`A. The Consolidated Amended Complaint Fails to Allege Any Role in,
`Joining of or Furtherance of the Conspiracy.
`
`
`The conspiracy allegations of the Consolidated Amended Complaint contain
`
`nothing specific as to JPAR. Essentially Plaintiffs allege that the brokers belonged
`
`to the same trade group and used multiple listing services. According to Plaintiffs,
`
`these two actions substantiate they acted together to artificially inflate real estate
`
`commissions. JPAR entered the business of real estate brokerage services in 2011,
`
`fifteen years after the adoption of the offer of compensation rule. Consol. Am.
`
`Comp. ¶ 69. The current owner of JPAR, Cairn Real Estate Holdings, LLC (“Cairn”)
`
`acquired JPAR 25 years after adoption of the rule. The Consolidated Amended
`
`Complaint alleges conspiracy to adopt an MLS rule going back to 1995-96.
`
`Plaintiffs allege nothing about JPAR encouraging the rule or being involved in MLS
`
`or Association activity related to the rule.
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`
`7
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`
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`Merely alleging parallel business conduct exists, even if done consistently,
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`without pleading a setting for a meeting of the minds to agree, cannot pass a Rule
`
`12(b)(6) challenge. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). If
`
`membership in a national trade organization and participation in a facility of
`
`commerce necessary to create a market (the MLS) are enough “factual
`
`enhancement” to make a plausible suggestion of conspiracy, then Twombly means
`
`nothing. Compare the allegations in the Consolidated Amended Complaint
`
`regarding JPAR to those in Robertson v. Sea Pines Real Estate Cos., Inc., 679 F.3d
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`278, 290 (4th Cir. 2012).
`
`In that case, plaintiffs alleged the brokerage defendant exercised control over
`
`an MLS board and enacted rules to create barriers to new brokers joining the MLS.
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`In this case, JPAR simply joined the MLS. The MLS rules complained of had been
`
`in effect for years. Membership in an MLS is necessary to compete in a residential
`
`real estate market. Id.; U.S. v. Multi-List, Inc., 629 F.2d 1351, 1367-68 (5th Cir.
`
`1980) (MLS database effectively responds to real estate market imperfections and
`
`membership is necessary to effectively compete). JPAR joined various MLS in its
`
`markets, a step necessary for it to compete. Combining this with REALTOR®
`
`association membership simply alleges neutral landscape facts that cannot support
`
`an antitrust conspiracy. See In re Online Travel Co. Hotel Booking Antitrust Litig.,
`
`997 F.Supp.2d 526, 539-41 (N.D. Tex. 2014). The Plaintiffs fail to allege facts
`
`
`
`8
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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 14 of 27 PageID #: 991
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`
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`showing when and how JPAR entered and joined an allegedly pre-existing
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`conspiracy. Bailey Lumber & Supply Co. v. Ga.-Pac. Corp., No. 08-cv-1394, 2009
`
`WL 2872307, *5 (S.D. Miss. Aug. 10, 2009) (Plaintiff’s failure to allege a time and
`
`method for a defendant joining the pre-existing conspiracy was one ground
`
`supporting dismissal of claims as to that defendant).
`
`NAR and its members developed the allegedly anti-competitive rule in 1994-
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`1996. MLS across the country adopted it during 1996-1998. It is not enough to
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`allege JPAR later became a member of NAR or of several MLS that enacted the rule.
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`Plaintiffs must come forward with evidence that JPAR engaged in activities within
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`NAR or the MLS that show a meeting of the minds with other members to keep the
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`rule in place or thwart attempts to change it.1
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`The broker defendants who lost Sitzer/Burnett provide a stark contrast. Keller
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`Williams formed in 1983 and participated in NAR from then forward. Re/Max
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`formed in 1973 also participated in NAR during the development and
`
`implementation of the allegedly anti-competitive rule. Anywhere Real Estate, Inc.
`
`is the parent of several well-known real estate brokerages/franchisors. Two of the
`
`
`
`1 Adding JPAR’s owner Cairn or its affiliates JPAR Franchise, LLC and Your Castle Real Estate,
`LLC (YCRE) as defendants will not change the analysis. Cairn came into existence four years ago
`and played no role in NAR or the MLS its subsidiaries joined. JPAR Franchise, LLC came into
`existence 10 years after JPAR. YCRE began in 2004. long after the alleged conspiracy led to the
`adoption of the rule and also never held leadership positions in NAR or MLS it joined.
`9
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`

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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 15 of 27 PageID #: 992
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`
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`best known, Century 21 founded in1971 and a NAR member during the relevant
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`time-period and Coldwell Banker formed in 1906 and active in NAR throughout the
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`development and implementation of the allegedly anti-competitive rule. While
`
`HomeServices of America only adopted its name in 1998. Its predecessor, AmerUs
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`Home Services, Inc., began providing real estate brokerage services under the
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`AmerUs Group umbrella in 1985. It was a NAR member throughout. JPAR, its
`
`owner, and its affiliates did not exist and did not participate in NAR’s formulation
`
`and implementation of the allegedly anti-competitive rule. There is no allegation
`
`beyond trade association and MLS membership of JPAR later combining with NAR
`
`and other brokers to protect or foster the rule.
`
`B. Membership in a Trade Association and Compliance with its Rules
`Fails to Allege a Section 1 Conspiracy.
`
`
`At bottom, Plaintiffs assert that JPAR’s membership in NAR – the largest
`
`trade association in the United States – and JPAR’s alleged adherence to NAR’s
`
`policies and guidelines is sufficient to plead a massive nationwide conspiracy
`
`between JPAR and NAR. “A trade association is not by its nature a ‘walking
`
`conspiracy.’” Consol. Metal Prods., Inc. v. Am. Petroleum Inst., 846 F.2d 284, 293-
`
`294 (5th Cir. 1988); see also Wilk v. Am. Med. Ass’n, 895 F.2d 352, 374 (7th Cir.
`
`1990). Indeed, several circuits have held that an allegation that trade association
`
`members have followed the association’s rules, without more, is insufficient to plead
`
`a conspiracy in violation of Section 1 of the Sherman Act.
`10
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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 16 of 27 PageID #: 993
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`For example, in Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1045-1048 (9th
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`Cir. 2008), merchants using credit card sales alleged that two consortiums of credit
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`card companies and banks conspired to fix fees for credit card sales. Plaintiffs
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`asserted that the defendants’ membership and participation in the consortiums
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`sufficed to show an agreement among the defendants to charge the fees set by the
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`consortiums. The lower court dismissed the case for failure to state a claim and the
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`Ninth Circuit affirmed. Id. at 1048. The appellate court explained that allegations
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`that the defendants merely “adopt[ed]” or “follow[ed]” a rule governing fees were
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`“insufficient as a matter of law” to plead a Section 1 conspiracy. Id.
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`In In re Insurance Brokerage Antitrust Litigation, 618 F.3d 300, 311-313 (3d
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`Cir. 2010), plaintiffs alleged that the defendants (insurance brokers) had conspired
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`to conceal fellow brokers’ receipt of commission payments in return for steering
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`customers to certain insurers. To support their conspiracy claim, plaintiffs alleged
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`that the defendants had conspired through their participation in a trade association,
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`by which they “adopted” an allegedly anticompetitive policy governing disclosure
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`of commission payments and adhered to that policy. Id. at 313, 349. The Third
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`Circuit upheld the dismissal of the complaint, explaining that “neither defendants’
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`membership in the [trade group], nor their common adoption of the trade group’s
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`suggestions, plausibly suggest conspiracy.” Id. at 349. Nor did allegations “that the
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`defendant brokers collaborated in crafting” the challenged policy “insofar as [they]
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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 17 of 27 PageID #: 994
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`allegedly ‘control[led] the affairs of [the trade association].’” Id. The Third Circuit
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`required far more than allegations of collaborative effort through an association to
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`plead an individual member’s conscious commitment to conspiracy. Id. at 350.
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`Similarly, in SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 435 (4th
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`Cir. 2015), a merchant alleged that members of trade groups conspired to impose
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`anticompetitive industry standards. The Fourth Circuit rejected the plaintiff’s
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`argument that the promulgation of these standards was sufficient to establish
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`concerted action. Id. at 436. “In the usual case,” the court explained, an
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`“organization nor its participants will run afoul of antitrust law when they use
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`ordinary processes to adopt unexceptional standards.” Id.
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`Alleging that the members of a trade association showed a general
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`commitment to follow its rules is, by itself, does not plausibly plead participation in
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`a conspiracy.
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`C. The Consolidated Amended Complaint Does Not Allege a Horizontal
`Conspiracy among Real Estate Brokers.
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`Even if the Court were to conclude that Plaintiffs have plausibly alleged an
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`agreement between JPAR and NAR, Plaintiffs still would fail to state a claim. The
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`Amended Complaint does not sufficiently allege that JPAR ever agreed or even
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`communicated with other brokers about the challenged NAR guidelines, let alone
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`their potential impact on commission rates. Plaintiffs’ allegations of horizontal
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`conspiracy between JPAR and other brokers rely on generic allegations of parallel
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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 18 of 27 PageID #: 995
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`conduct followed by “a bare assertion of conspiracy.” Twombly, 550 U.S. at 556.
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`Such “vague references to concerted action,” Insulate SB, 797 F.3d at 546, cannot
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`survive a motion to dismiss.
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`Without an alleged agreement between JPAR and other brokers (most notably,
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`the selling brokers who represented Plaintiffs), the alleged conspiracy fails because
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`it is, at most, a “rimless” wheel conspiracy. That form of agreement – which
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`resembles “separate spokes meeting at a common center . . . without the rim of the
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`wheel to enclose the spokes” – is not “a single conspiracy” at all but, rather, an
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`illustration of parallel conduct. See Kotteakos v. United States, 328 U.S. 750, 755
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`(1946).
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`Accordingly, all of the federal circuits that have addressed the question (the
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`Second, Third, Fourth, Fifth, and Sixth Circuits) have “uniformly held rimless hub-
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`and-spokes conspiracies do not violate § 1 of the Sherman Act” and dismissed
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`Sherman Act claims where plaintiffs failed to adequately plead a horizontal
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`agreement – that is, a “rim” connecting all of the spokes. In re EpiPen Direct
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`Purchaser Litig., 2022 WL 1017770, at *7 (D. Minn. Apr. 5, 2022). See also
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`Blomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan, 203 F.3d 1028, 1038 (8th
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`Cir. 2000) (“[C]ommon membership [with competitors] in a trade association . . . is
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`not probative of collusion as a matter of law.”); In re Processed Egg Prods. Antitrust
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`Litig., 2019 WL 5656101, at *6 (E.D. Pa. Oct. 31, 2019) (holding that, to plead a
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`Case 4:23-cv-01013-SDJ Document 234-1 Filed 10/15/24 Page 19 of 27 PageID #: 996
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`Section 1 conspiracy, “a plaintiff must evidence that alleged co-conspirators ‘acted
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`other than independently’ in adhering to the trade association’s programming or
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`guidelines.”) (citations omitted).
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`D. A Plaintiff Cannot Allege a Conspiracy to Restrain Trade by Fixing
`Prices Without Allegations of a Fixed Price.
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`Plaintiffs allege the conspiracy to restrain trade resulted in the Compensation
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`Rule and it mandates inflated real estate commission levels. Consol. Am. Compl.
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`¶¶ 3–4, 13–14, 99–100, 103, 109, 111–12, 118–19, 138, 143. A court cannot accept
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`the allegations contradicted by the actual text of documents relied upon by a plaintiff.
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`See Twombly, 550 U.S. at 568 n.13. If documents cited in a complaint that are central
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`to the claims made, contradict the allegations in a complaint, the “exhibit and not the
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`allegation controls.” United States ex rel. Riley v. St. Luke’s Episcopal Hosp., 355
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`F.3d 370, 377 (5th Cir. 2004).
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`According to the Consolidated Amended Complaint, the Compensation Rule
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`does not require a listing broker to offer a buyer’s broker a specific commission—
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`neither a specific do