The results of the NSDCAR and SDAR merger votes have been posted on the now aptly-named Saved NSDCAR website.
33% of the eligible NSDCAR members voted "no", and 22% of the SDAR members voted "yes".
The attempted merger has been rejected by the NSDCAR members.
Open letter to NSDCAR members:
George Santayana famously said that "Those who cannot remember the past are condemned to repeat it."
In the matter of proposing a merger of the San Diego Association of REALTORS with the North San Diego County Association of REALTORS, to create, in the words of San Diego Daily Transcript reporter Jen Lebron Kuhney, "one of the largest REALTOR organizations in the country", the relevant past is remembered, by some, simply as: "Freeman.”
“Freeman” refers to a series of lawsuits filed between 1997 and 2003 against (collectively) the San Diego Association of REALTORS (“SDAR”), the North San Diego County Association of REALTORS (“NSDCAR”), the then other three local Associations of REALTORS, the California Association of REALTORS, and many other individuals and firms.
Let’s take a moment to remember Freeman before casting our merger vote.
The Procedural Past:
Before 1992 there were three separate Multiple Listing Services (MLS’s) in San Diego County. Sandicor, the current MLS, was formed in 1991 to own and operate a single, countywide MLS to list all properties for sale throughout San Diego County. When there were five local Associations in San Diego County, all five were shareholders of Sandicor.
The first Freeman lawsuit was filed April 16, 1997 in San Diego County Superior Court alleging, among other things, that Sandicor, the five Associations, and others, violated California’s antitrust law by charging excessive fees for access to MLS data. This lawsuit was dismissed before trial, “on the pleadings”, when the trial court sustained the defendants’ demurrers to the complaint. This dismissal was upheld on appeal in December 1999, and again in April 2000 when the California Supreme Court declined to review the case.
While all of this was going on, the Freeman plaintiffs filed another suit, this time in Federal Court, against NSDCAR, the other four local Associations, the California Association of REALTORS, the National Association of REALTORS, and many others, alleging that the same actions complained of in their state-court action as having violated state antitrust law, also violated federal antitrust law. The Federal district court, in July 2001, entered summary judgment in the defendants’ favor.
So far, so good, for defendants: two lawsuits resulting in one dismissal and one summary judgment.
Thereafter, however, the Freeman plaintiffs appealed the Federal district court’s summary judgment to the U.S. Court of Appeals for the Ninth Circuit where, on March 10, 2003, the plaintiffs obtained a decision favorable to their cause. Within one month of the Ninth Circuit’s favorable (to the plaintiffs) decision, the Freeman plaintiffs filed yet another lawsuit based upon the same set of facts, again in Federal Court. This - their third - lawsuit was filed as a class action and named as parties most, if not all, of the attorneys who represented parties in the previous Federal district court lawsuit, and the Association Executives of the five local associations, and the California Association of REALTORS. (Many of the parties named in the third Freeman lawsuit were being sued for the second or third time.)
This third Freeman lawsuit sought damages in the approximate amount of $24 million dollars, and treble (punitive) damages of approximately $72 million dollars.
“Freeman I” was filed in 1997 in San Diego Superior Court and dismissed before trial. “Freeman III” was filed in 2003 in Federal District Court in San Diego and was dismissed on July 28, 2003. Yet Freeman II carried on.
The Federal Court of Appeals decision in Freeman II in favor of the Freeman plaintiffs was appealed by SDAR, NSDCAR, and the other affected defendants, to the United States Supreme Court, which upheld the Ninth Circuit’s decision by declining to review the case.
At that point, with all appeals exhausted, the defendants had expended more than six years of litigation effort and millions of dollars in costs and fees at the so-called “pleading stage.” There had been no trial, no certification of any class action, and no damage finding, but there had been a finding of liability by the Federal Court of Appeals.
Predictably, the matter then settled: a new class action was filed, a class was certified, and a settlement was reached, all at a cost of more millions of dollars.
The Liability Past:
The Freeman litigation was antitrust litigation. The key allegation was that the five local San Diego County REALTOR Associations, and others, had violated antitrust laws by charging excessive fees for access to MLS data.
Without rearguing the facts of Freeman II which, after all, were sufficiently arguable to take over six years of intensive litigation in state and federal courts in order to reach settlement status, the key holding of the Ninth Circuit Court of Appeals was that:
“The [REALTOR] associations engaged in price fixing, and plaintiffs have standing to sue them. The associations purposely fixed the support fee they charged Sandicor at a supracompetitive level. Sandicor passed on some portion of that inflated support fee to agents, who paid higher prices for the MLS as a result. This is precisely the type of injury the antitrust laws are designed to prevent.”
Freeman vs. San Diego Association of REALTORS, et al. (2003), 322 F.3d 1133, 1147, footnote omitted.
The local San Diego County REALTOR associations had been accused of violating and, in the eyes of the court, did violate antitrust laws; and the cost of this six-year lesson in antitrust was massive.
The Present:
The Freeman story provides a cautionary tale to the current Boards of Directors, and to the members, of SDAR and NSDCAR. Does merging the two largest San Diego County REALTOR organizations to create one of the largest REALTOR organizations in the country raise antitrust questions?
Yes, of course it does.
The Federal Trade Commission Antitrust Fact Sheet (pdf) has this to say to introduce the three core federal antitrust laws:
“The Sherman Act outlaws ‘every contract, combination, or conspiracy in restraint of trade,’ and any ‘monopolization, attempted monopolization, or conspiracy or combination to monopolize.’"
And,
“The Federal Trade Commission Act bans ‘unfair methods of competition’ and ‘unfair or deceptive acts or practices.’"
And,
“The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (that is, the same person making business decisions for competing companies).”
And,
“The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case.”
See: Federal Trade Commission Antitrust Fact Sheet (pdf), emphasis added.
Leaving courts to decide which ones are illegal based on the facts of each case? We’ve been down that road before. And we should go down that road again only for very, very good reasons, and based upon a careful review of all relevant information.
We know that the NSDCAR Directors are receiving highly competent legal advice on the obvious antitrust legal questions posed by merging the two largest REALTOR organizations in the county to create one of the largest REALTOR organizations in the country, because they are being advised by the same attorney that I hired (when I was NSDCAR president) to defend NSDCAR in the Freeman antitrust litigation after the filing of Freeman III.
Are they following this attorney’s advice?
We will never know.
Do we know what advice they are receiving from their attorney?
We will never know that, either.
Do we, as NSDCAR members have the right to know our Board of Directors’ opinion about whether risking antitrust litigation, let alone antitrust liability, by merging the two largest REALTOR Associations in the county to create one of the largest REALTOR Associations in the country is a good idea?
Yes, of course we do.
So, NSDCAR members, please remember Freeman when you attend town hall meetings where the merger proponents will attempt to convince you that it’s a good idea to merge the two largest REALTOR Associations in the county to create one of the largest REALTOR Associations in the country.
And ask the merger proponents what they think about the risk of antitrust litigation posed by such a merger. They will refuse to answer, no doubt based upon the advice of counsel, but ask them anyway. You are entitled to know what your Board of Directors thinks about the risk of antitrust litigation, because any risk incurred by your Board of Directors is being incurred on your behalf.
And please remember Freeman when you cast your vote on the merger being proposed by the SDAR and NSDCAR Boards of Directors.
Those who cannot remember the past are condemned to repeat it.
By JEN LEBRON KUHNEY, The Daily Transcript
Thursday, May 27, 2010
Bigger isn't always better for some San Diego County Realtors.
A member vote on June 30 will decide the fate of the proposed merger between two of the largest Realtor organizations in the county.
Board members of San Diego Association of Realtors (SDAR) and the North San Diego County Association of Realtors (NSDCAR) have hailed the organizations' merger as something that would "enhance both Associations' member's (sic) ability to succeed in our industry."
The merger would bring costs savings to members, increased member benefits and greater political input on local state and national levels, according to a joint e-mail statement from NSDCAR Chairman of the Board Jim Aldredge and SDAR President Mark Marquez.
According to SDAR's public relations firm, Bailey Gardner, Aldredge and Marquez would not make statements unless questions were e-mailed and sent back after being reviewed by the associations' legal team.
But not all the Realtor members are on board with the idea that a merger would be beneficial.
Kevin Forrester, a real estate attorney and former two-time NSDCAR president, launched SaveNSDCAR.org upon hearing about the merger.
The Save NSDCAR Facebook fan page had 331 members as of 5 p.m. May 27.
"In my view, it's a pure power grab at SDAR. They have 10,000 members. We have 5,000. If they can become 15,000 they'll swallow us up," he said.
Forrester said having a countywide Realtor association would "not be conducive to serving local needs" of members.
Currently, each Realtor organization is given a set number of representatives at the state and national level depending on how many members there are in each association.
Should SDAR and NSDCAR become one, Forrester said the local needs of North County Realtors would not be adequately represented.
"Smaller organizations have a voice right now; but if we merge, we'll only have San Diego's voice at the California and national levels," he said.
Marquez and Aldredge said in their statement that there would be equal representation for NSDCAR members on the new board of directors should the votes pass.
The two other Realtor organizations in the county stated they are against the merger.
Both the Pacific Southwest Association of Realtors (PSAR) and the East San Diego County Association of Realtors (ESDCAR) have open letters on the SaveNSDCAR.org site listing their reasons why they are against the merger.
One of the major reasons cited for members to vote "yes" for the merger are decreased costs.
However, at 5 p.m. Thursday, the official website promoting the merger, AssociationMerger.com, said the local dues for NSDCAR members is $25 for 2011 and 2012, but would be $65 in 2013.
Despite the information on the website, the Marquez and Aldredge statement said: "The local REALTOR dues for the Unified Association members, assuming the vote of each Association's members is to merge, will be dramatically lower than those currently charged by each of NSDCAR and SDAR. Any information to the contrary is absolutely false, misleading and incorrect."
An email from SDAR Director of Communications Molly Kirkland said NSDCAR dues are $95. No explanation was given about the discrepancy on the Web site.
A request through Bailey Gardner to clarify this information was not returned in time for publication.
Should the two associations merge, it would create one of the largest Realtor organizations in the country.
SDAR merged with the Coronado Association of Realtors in August 2009.
In 1994, NSDCAR was created through the merging of seven north county Realtor organizations.
Send your comments to Jennifer.Lebron@sddt.com
Source Code: 20100527czg
SAN DIEGO DAILY TRANSCRIPT. ONLINE Copyright 2010 by SAN DIEGO DAILY TRANSCRIPT. Reproduced with permission of SAN DIEGO DAILY TRANSCRIPT in the format Internet posting via Copyright Clearance Center.
I have been absent from this site for the last couple of months while spending time over at the SaveNSDCAR.com site and blog, working against the attempted hostile takeover of the North San Diego County Association of REALTORS by the San Diego Association of REALTORS.
If you are a North San Diego County REALTOR, or if you'd just like to follow along, please visit the SaveNSDCAR.com site or SaveNSDCAR.com blog.
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