Casey Hyland v. HomeServices of America, Inc.

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0277p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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CASEY WILLIAM HYLAND, et al.,
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Plaintiffs,
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No. 12-5947
CHRISTOPHER R. BURNETTE; MYSTIC
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BURNETTE,
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Plaintiffs-Appellants,
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v.
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HOMESERVICES OF AMERICA, INC.;
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HOMESERVICES OF KENTUCKY, INC.;
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SEMONIN REALTORS; RECTOR-HAYDEN
REALTORS; MCMAHAN COMPANY, INC., d/b/a -
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Coldwell Banker MacMahan Company,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 3:05-cv-00612—Thomas B. Russell, District Judge.
Argued: March 18, 2014
Decided and Filed: November 13, 2014
Before: COLE, Chief Judge; NORRIS and GIBBONS, Circuit Judges.
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COUNSEL
ARGUED: Christopher Lovell, LOVELL STEWART HALEBIAN JACOBSON LLP,
New York, New York, for Appellants. Robert D. MacGill, BARNES & THORNBURG
LLP, Indianapolis, Indiana, for Appellees HomeServices of America. Matthew C.
Blickensderfer, FROST BROWN TODD LLC, Cincinnati, Ohio, for Appellee McMahan
Company ON BRIEF: Christopher Lovell, LOVELL STEWART HALEBIAN
JACOBSON LLP, New York, New York, for Appellants. Robert D. MacGill, Karoline
E. Jackson, BARNES & THORNBURG LLP, Indianapolis, Indiana, for Appellees
HomeServices of America. Matthew C. Blickensderfer, FROST BROWN TODD LLC,
Cincinnati, Ohio, for Appellee McMahan Company.
1
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 2
_________________
OPINION
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ALAN E. NORRIS, Circuit Judge. Class representatives Christopher and Mystic
Burnette appeal three rulings by the district court that resulted in judgment for defendant
real estate firms, all of which operate in Kentucky. The fourth amended complaint
alleged that defendants violated Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1,
by participating in a horizontal conspiracy to fix the commissions charged in Kentucky
real estate transactions at an anti-competitive rate. The certified class consists of people
who sold residential real estate in Kentucky from October 11, 2001, to October 11, 2005,
and used the services of defendants.
Plaintiffs contend that the district court erred 1) by granting summary judgment
to defendants; 2) by excluding the opinions of plaintiffs’ experts with respect to the
ultimate question of whether collusion among the defendants was the likely economic
explanation of the pricing of commissions; and 3) by finding that defendant
HomeServices of America, Inc., was not responsible for the acts of its subsidiary,
HomeServices of Kentucky, Inc.
For the reasons that follow, we affirm the judgment of the district court.
I.
Plaintiffs filed suit in October 2005. On November 7, 2008, the district court
certified the class alluded to above. We declined an invitation for interlocutory review
of that order.
The crux of the allegation brought by plaintiffs is that defendants violated the
Sherman Act by conspiring to charge a supra-competitive real estate broker commission
of 6% and thereby injured sellers of residential property.
Several of the original named defendants have reached settlement agreements.
The remaining defendants consist of the McMahan Company, Inc. (d/b/a Coldwell
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 3
Banker McMahan Co.) (“McMahan”); HomeServices of Kentucky, Inc. (“HSK”), which
owns and operates Kentucky realtor defendants Semonin Realtors and Rector-Hayden
Realtors; and HomeServices of America, Inc., (“HSA”), which is the parent company
of HSK.
To become a real estate agent in Kentucky, an individual must be licensed by the
Commonwealth’s Real Estate Commission (“KREC”). Agents typically join local
realtors’ boards, such as the Greater Louisville Association of Realtors, the Lexington-
Bluegrass Association of Realtors, and the Kentucky Association of Realtors (“KAR”).
In 1991, the KREC passed a regulation (the “Rebate Ban”) that prohibited
licensed real estate brokers in Kentucky from offering any item or thing of value,
including rebates, to induce clients to retain their services. The United States
Department of Justice filed suit in 2005 against the KREC alleging that the Rebate Ban
violated Section 1 of the Sherman Act.1 That suit was settled and the Rebate Ban was
abolished.
This action was filed shortly thereafter. The fourth amended complaint alleges
that defendants “combined, conspired and agreed to fix, maintain and inflate real estate
broker commissions and associated fees and refuse to compete on the basis of price.”
Specifically, defendants “have charged a real estate broker commission of 6%, have
described this 6% fee as the ‘standard’ or ‘typical’ fee, and have habitually refused to
negotiate a lower fee.” According to the complaint, this collusion resulted in sellers
being forced to pay artificially inflated commissions.
1
The Section reads as follows:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint
of trade or commerce among the several States, or with foreign nations, is declared to
be illegal. Every person who shall make any contract or engage in any combination or
conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on
conviction thereof, shall be punished by fine not exceeding $100,000,000 if a
corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding
10 years, or by both said punishments, in the discretion of the court.
15 U.S.C. § 1.
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 4
The district court relied upon plaintiffs’ expert, Dr. Gary French, to set out the
elements of the alleged conspiracy:
[T]he alleged conspiracy has two related elements: (1) fixing the buyer’s
broker commission at 3%; and (2) fixing the listing commission at a
minimum of 6%. According to Dr. French, due to the visibility of the
offered buyer’s broker commission on the MLS [Multiple Listing
Service], those listing brokers not offering at least 3% to a buyer’s broker
could be detected and policed. If a listing broker did not offer at least 3%
to a buyer’s broker, then a buyer’s broker would not be interested in
showing the property. . . . [T]he KREC Rebate Ban helped maintain
commission rates at the conspiratorial standard during the Class Period
by ensuring that Defendants did not cheat on their price-fixing agreement
by providing a rebate or discount off of the stated fee.
District Court Memorandum Opinion at 2-3, filed July 18, 2012 (citations omitted).
The record developed below is voluminous and contains evidence that supports
each side’s claims. Plaintiffs point to a number of evidentiary items that they believe the
district court improperly discounted. Unlike cases based solely upon circumstantial
inferences, plaintiffs contend that direct evidence supports a conclusion that defendants
actually agreed to fix prices. See In re Text Messaging Antitrust Litig., 630 F.3d 622,
627 (7th Cir. 2010) (Section 1 “does not require sellers to compete; it just forbids their
agreeing or conspiring not to compete.”); see also Re/Max Int’l, Inc. v. Realty One, Inc.,
173 F.3d 995, 1009 (6th Cir. 1999). In plaintiffs’ view, they submitted extensive
evidence of communications among defendants concerning breaches of the National
Association of Realtors’ rule regarding the ban against brokers discussing commission
levels, pricing structures, or marketing practices of other brokers. Specifically, they refer
to deposition testimony of principal brokers to the effect that realtors often discussed
fees and commissions when they met.
In addition, plaintiffs point to a KREC hearing held on November 28, 2000, in
Louisville. Among other things, Arvel “Jerry” McMahan, the principal broker for the
McMahan Company, spoke about the dangers to the profession of internet brokers who
offer cut-rate commissions. In his words, “the most unprofessional thing we can do in
this business is cut our commission. I think we ought to be worth what we charge in the
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 5
services that we offer.” Similar sentiments were expressed by a representative of
Semonin. In plaintiffs’ view, “[a] reasonable juror could easily find that the plain
meaning of Defendants CBMcMahan’s and Semonin/HSK’s improper words reflected
at the very least either (a) unity of purpose, or (b) a common design and understanding,
or (c) a meeting of the minds, between Defendants CBMcMahan and Semonin not to cut
commissions.” Appellant Brief at 10 (emphasis omitted). In short, plaintiffs contend
that they have produced direct evidence of price fixing in the form of the KREC hearing
transcript.
In further support of that contention, they point to the complaint against the
KREC filed by the Department of Justice challenging the Rebate Ban, in which the DOJ
averred that the ban “enabled Brokers to raise, fix, peg, or stabilize the prices and rates
at which Brokers are compensated. The Rebate Ban is the result of agreements,
combinations, or conspiracies among its Commissioners and others, and it unreasonably
restrains competition to the detriment of consumers.” DOJ Complaint at ¶ 4. As already
noted, this complaint resulted in the abolition of the Rebate Ban.
Plaintiffs paint the following general picture of the evolution of real estate
commissions in Kentucky from the 1970s through the class period. During the 1990s,
a shift occurred in the relationship between buyer’s brokers and listing agents.
Formerly, a buyer’s broker was essentially a cooperating broker working with the listing
agent. In the 1990s, however, a buyer’s broker’s role changed and he or she became a
fiduciary of the buyer while the listing broker’s allegiance was to the seller. Throughout
both periods, the typical commission remained at 6% despite the fact that persons in
other commission-driven occupations—e.g., travel agents and stockbrokers—saw their
commissions erode. An MLS listing and other sale-related documents, such as a HUD-1
form, permitted realtors to determine commission levels, thereby allowing the industry
to police those agents who might be providing rebates or other incentives to drum up
business. This impetus manifested itself in the Rebate Ban. At bottom, plaintiffs’
contention—supported by expert testimony, depositions, and documents—allegedly is
that defendant firms colluded to keep commissions at an artificially inflated rate.
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 6
In response, defendant McMahan emphasizes that it considers itself a “full-
service” real estate broker with eleven offices in Kentucky during the class period. In
addition to listing property, it would suggest repairs to the owner in order to make the
home more attractive, hold open houses, and engage in advertising efforts. Unlike a cut-
rate internet broker, a full-service broker provided a wider range of services to the client,
thereby justifying a higher commission. Principal agent Jerry McMahan oversaw the
operation of the various offices, although the managing brokers in those locations had
responsibility for the day-to-day operations.
According to McMahan, commissions derive from both the cost of doing
business and historical context. In the past, the industry used a 6% commission for
homes and a 10% commission for vacant land. This policy was not derived from
consultation or agreement with other brokers. Agents with the firm were free to
negotiate commissions outside of the standard 6% if the transaction merited. For
instance, potential repeat customers might receive a favorable rate, as would those whose
homes required some “wiggle room” in order to close the sale. Coldwell Banker,
McMahan’s owner, often approved those reduced commissions.
For its part, HSK notes that it, too, is a full-service brokerage firm that owns both
Rector-Hayden and Semonin. Since 2003, it has done business in Louisville under the
“Semonin” name and in Lexington as “Rector-Hayden.” According to HSK, it needs to
compete for the best agents and, in order to pay them accordingly, must generate
maximum income from commissions. To refute a point made by plaintiffs, HSK argues
that it must continue to pay buyer’s brokers a commission of 3% or else risk losing them
to listing agents who pay better commissions. However, HSK does not require its agents
to charge the standard rate of 6%. Like McMahan, it will on occasion approve a
commission under that rate for deal-specific reasons. Moreover, it does not share its
internal pricing goals with other firms.
Finally, it contends that the real estate market is inelastic: homeowners do not
decide to sell their homes based upon commission rates but on other factors. Thus, HSK
cannot create more demand for its services by decreasing its commissions. Given this
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 7
consideration, there is no incentive for it to decrease its commission rate. In short,
legitimate, non-collusive reasons govern the setting of commission rates in Kentucky.
II.
1. Did the District Court Err in Granting Summary Judgment?
A. Standard of Review
The rule governing whether summary judgment is appropriate is familiar: “The
court shall grant summary judgment if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). We review the grant of summary judgment de novo, but draw all
reasonable inferences in favor of the non-moving party. Pierson v. Quad/Graphics
Printing Corp., 749 F.3d 530, 535-36 (6th Cir. 2014). That said, if the non-moving party
is unable to present sufficient evidence to permit a reasonable jury to find in its favor,
summary judgment is appropriate. Id. at 536 (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 252 (1986)).
In this case, plaintiffs contend that the district court erroneously held them to a
heightened standard by misreading Matsushita Electrical Industrial. Co. v. Zenith Radio
Corp., 475 U.S. 574 (1986). Indeed, in its discussion of the circumstantial evidence
presented by plaintiffs, the district court noted that a “stringent” summary judgment
standard is appropriate in Section 1 Sherman Act cases. Mem. Op. at 39 (Page ID
21942). In Matsushita the Supreme Court provided us with the following guidance:
To survive petitioners’ motion for summary judgment,
respondents must establish that there is a genuine issue of material fact
as to whether petitioners entered into an illegal conspiracy that caused
respondents to suffer a cognizable injury. This showing has two
components. First, respondents must show more than a conspiracy in
violation of the antitrust laws; they must show an injury to them resulting
from the illegal conduct. . . .
Second, the issue of fact must be “genuine.” Fed. Rules Civ.
Proc. 56(c), (e). When the moving party has carried its burden under Rule
56(c), its opponent must do more than simply show that there is some
metaphysical doubt as to the material facts. . . . Where the record taken
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as a whole could not lead a rational trier of fact to find for the
non-moving party, there is no “genuine issue for trial.”
It follows from these settled principles that if the factual context
renders respondents’ claim implausible–if the claim is one that simply
makes no economic sense–respondents must come forward with more
persuasive evidence to support their claim than would otherwise be
necessary. . . .
Respondents correctly note that “[o]n summary judgment the
inferences to be drawn from the underlying facts . . . must be viewed in
the light most favorable to the party opposing the motion.” But antitrust
law limits the range of permissible inferences from ambiguous evidence
in a § 1 case. Thus, in Monsanto Co. v. Spray-Rite Service Corp., 465
U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984), we held that conduct
as consistent with permissible competition as with illegal conspiracy
does not, standing alone, support an inference of antitrust conspiracy.
Id., at 764, 104 S.Ct., at 1470. To survive a motion for summary
judgment or for a directed verdict, a plaintiff seeking damages for a
violation of § 1 must present evidence “that tends to exclude the
possibility” that the alleged conspirators acted independently.
Respondents in this case, in other words, must show that the inference of
conspiracy is reasonable in light of the competing inferences of
independent action or collusive action that could not have harmed
respondents.
Matsushita, 475 U.S. at 585-88 (citations and footnotes omitted).
In Spirit Airlines v. Northwest Airlines, Inc., we acknowledged that the Supreme
Court had observed that summary judgment is “appropriate where the antitrust claim
simply makes no economic sense,” but went on to note that Matsushia “does not
increase the non-movant’s burden on a motion for summary judgment.” 431 F.3d 917,
930-31 (6th Cir. 2005) (quotation omitted). Moreover, we have recently cautioned that
summary judgment is generally discouraged in the antitrust context “due to the critical
‘role that intent and motive have in antitrust claims and the difficulty of proving
conspiracy by means other than factual inference.’” In re Se. Milk Antitrust Litig., 739
F.3d 262, 270 (6th Cir. 2014) (quoting Expert Masonry, Inc. v. Boone Cnty., Ky.,
440 F.3d 336, 341 (6th Cir. 2006)).
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 9
While courts must continue to construe facts in favor of the non-movant, even
in the antitrust context, they cannot ignore the clear teaching of Matsushita that “conduct
as consistent with permissible competition as with illegal conspiracy does not, standing
alone, support an inference of antitrust conspiracy.” Matsushita, 475 U.S. at 588 (citing
Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984)). Moreover, we
have echoed that teaching: “[C]ircumstantial evidence alone cannot support a finding of
conspiracy when the evidence is equally consistent with independent conduct. . . . [It]
must tend to exclude the possibility of independent conduct in order that an antitrust
claim survive summary judgment.” Re/Max Int’l, Inc. v. Realty One, Inc., 173 F.3d 995,
1009 (6th Cir. 1999).
Although the district court’s allusion to a “stringent” summary judgment standard
in the antitrust context is imprecise, we are not overly troubled by the use of the
adjective in the course of a lengthy opinion. Rather, we now turn to ask, in the course
of our de novo review of its opinion, whether it applied the correct legal standard set out
in Matsushita, Re/Max International, and Spirit Airlines in reaching its decision. For the
reasons outlined below, we conclude that it did.
B. The District Court’s Reasoning
i. Basic Legal Concepts
The district court noted that the existence of an agreement is the hallmark of a
Section 1 Sherman Act claim. Mem. Op. at 5 (quoting In re Baby Food Antitrust Litig.,
166 F.3d 112, 117 (3d Cir. 1999), (Page ID 21908). This agreement, in turn, can be
found when the conspirators have a unity of purpose, common understanding, or a
“meeting of minds in an unlawful arrangement.” Am. Tobacco Co. v. United States,
328 U.S. 781, 810 (1946).
Antitrust cases under Section 1 involve two modes of analysis depending on the
nature of the claim. The “rule of reason” governs most allegations of restraints on trade.
Under this analysis the court evaluates specific information about the industry, “its
condition before and after the restraint was imposed, and the restraint’s history, nature,
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 10
and effect.” In re Cardizem CD Antitrust Litig., 332 F.3d at 906 (quotation omitted). A
“restraint” is unlawful it if is “unreasonable.” In re Se. Milk Antitrust Litig., 739 F.3d
at 270. In some cases, however, those restraints “are deemed unlawful per se because
they have such predictable and pernicious anticompetitive effect, and such limited
potential for procompetitive benefit.” In re Cardizem CD Antitrust Litig. 332 F.3d at
906 (quotation omitted). Horizontal price-fixing, which is alleged in this case, falls
generally under the per se category. Nat’l Coll. Ass’n v. Bd. of Regents, 468 U.S. 85,
100 (1984).
ii. Evidence of Conspiracy
An antitrust conspiracy can be established by either direct or circumstantial
evidence. Re/Max Int’l, 173 F.3d at 1009. We turn first, as did the district court, to
plaintiffs’ alleged direct evidence.
a. Direct Evidence
The district court began its review of the evidence by noting that direct evidence
in the Section 1 antitrust context “must be evidence that is explicit and requires no
inferences to establish the proposition or conclusion being asserted.” See In re Baby
Food Antitrust Litig., 166 F.3d at 118. In other words, direct evidence is “tantamount
to an acknowledgment of guilt” while circumstantial evidence includes “everything else,
including ambiguous statements.” In re High Fructose Corn Syrup Antitrust Litig., 295
F.3d 651, 662 (7th Cir. 2002).
The district court turned first to the public hearing mentioned earlier that was
held before the KREC on November 28, 2000. Plaintiffs maintain that the transcript of
this hearing represents direct evidence of illegal collusion. The purpose of the hearing
was ostensibly to share a survey of inducement laws in other states and to invite
comments on the possible repeal of the KREC Rebate Ban. At the hearing, Ray Rector
of Rector-Hayden expressed the opinion that the consumer pays for inducements in the
form of higher fees or a decreased level of service. Jerry McMahan spoke at greater
length and, as discussed earlier, supported maintaining commissions. Doug Myers of
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Semonin echoed these sentiments: “I’d like to see our competition based on our
professional performance, not upon our brokerage fees. . . .” Broker Barbara Campbell,
whose agency charged only a 4.5% commission, contended that her clients were
contacted by brokers who would tell them that other realtors “would not show my
clients’ homes to their buyers so long as they continue to do business with Campbell
Realty.” Another broker, Steven Gavin, reported harassment for offering only 2% to the
buyer’s broker.
The district court assessed this evidence and concluded that it did not constitute
“direct evidence that Defendants conspired to fix real estate commissions at a supra-
competitive 6%.” Mem. Op. at 13. The court observed that it had reviewed the
transcript of the KREC meeting and found that plaintiffs have taken remarks made by
individual realtors “out of context and construed them in a highly-strained manner.” Id.
at 14.
We agree with this assessment. Like the district court, we view Jerry
McMahan’s statements at the hearing as ambiguous at best and they therefore do not
establish direct evidence of a conspiracy. McMahan was highlighting the fact that his
“full-service” firm offered more to its clients than his internet rivals and thereby justified
its higher commission rate. Also absent in the record is any comment by McMahan
suggesting that brokers negotiate among themselves their respective commission rates.
With respect to those who spoke about having undergone harassment for offering lower
rates, the district court observed that these speakers are not parties to this action, nor did
they implicate defendants. Furthermore, “[a] finder of fact would need to infer that a
buyer’s broker fee of 3% always resulted in a supra-competitive full commission rate of
6% and that these individuals were harassed for failing to set a full commission rate of
6%.” Mem. Op. at 15.
In short, it is our assessment, consonant with that of the district court, that the
“direct” evidence relied upon by plaintiffs falls far short of the standard that it be
“explicit and require[] no inferences.” In re Baby Food Antitrust Litig., 166 F.3d at 118.
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 12
With that, we turn to the much closer issue of whether the proffered circumstantial
evidence precludes summary judgment for defendants.
b. Circumstantial Evidence
Evidence of “conscious parallelism,” also referred to as “oligopolistic price
coordination,” can support such a claim based upon circumstantial evidence. In re Baby
Food Antitrust Litig., 166 F.3d at 121. As the district court put it, “When competitors
in a [concentrated] market establish their prices, not by agreement, but rather in a
consciously parallel fashion, this may provide probative evidence of an understanding
between competitors to fix prices.” Mem. Op. at 16 (citations omitted). However, that
is not necessarily the case: “Because of their mutual awareness, oligopolists’ decisions
may be interdependent although arrived at independently.” Id. (citation on omitted).
Thus, “‘[t]he law is settled that proof of consciously parallel business behavior is
circumstantial evidence from which an agreement, tacit or express, can be inferred but
that such evidence, without more, is insufficient unless the circumstances under which
it occurred make the inference of rational, independent choice less attractive than that
of concerted action.’” Id. (quoting Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d
Cir. 1977)).
This court has set out the following considerations, sometimes referred to as
“plus factors,” in determining when circumstantial evidence amounts to a finding of
concerted action: 1) whether defendants’ actions, if taken independently, would be
contrary to their economic interests; 2) product uniformity; 3) whether the defendants
have been uniform in their actions; 4) whether the defendants have exchanged or have
had the opportunity to exchange information relative to the alleged conspiracy; and
5) whether the defendants have a common motive to conspire or have engaged in a large
number of communications. See Re/Max Int’l, 173 F.3d at 1009; Wallace v. Bank of
Bartlett, 55 F.3d 1166, 1168 (6th Cir. 1995). “However, circumstantial evidence alone
cannot support a finding of conspiracy when the evidence is equally consistent with
independent conduct.” Re/Max Int’l., 173 F.3d at 1009. The district court noted that
these five factors are considered to discern whether the “supra-competitive
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6% commission rate was conscious and not the result of independent business
decisions.” Mem. Op. at 17 (Page ID 21920).
The district court then reviewed evidence of parallel pricing behavior and the
plus factors. It found them to be insufficient to withstand summary judgment. In
reaching this conclusion, the court relied upon these conclusions:
o “Plaintiffs’ evidence of parallel pricing shows merely that each
Defendant had a policy of charging a minimum commission of 6% and
that each Defendant occasionally deviated from its respective policy for
various reasons.” Mem. Op. at 30 (Page ID 21933).
o “The prevalence of the 6% rate, then, is just as consistent with
independent pricing decisions. The existence of a conspiracy cannot be
inferred solely on the basis that Defendants tended to charge the same
amount for their services.” Mem. Op. at 30-31 (Page ID 21933-34).
o “The Sixth Circuit has unequivocally proclaimed that ‘setting
cooperative sales-commission rates is not price fixing: it has no relation
to the amount charged to clients for an agent’s service.’ Re/Max Int’l,
173 F.3d at 1025. . . . Thus, even if it was necessary for a listing broker
to offer a 3% buyer’s broker commission to the cooperating broker as an
incentive, the listing broker is free to charge his client 4%, 5%, 10%, or
even 3% plus a flat fee as [plaintiffs’ expert] Dr. Yavas has suggested
may occur in a perfectly competitive market.” Mem. Op. at 31-32 (Page
ID 21934-35).
o “Plaintiffs’ experts and Defendants both agree that real estate brokerage
services are inelastic in that the number of property listings does not
respond to changes in commission rates. . . . Accordingly, evidence that
Defendants have not decreased their commission rates is not evidence
that they acted contrary to their economic self-interest.” Mem. Op. at 32-
33 (Page ID 21935-36).
o “[T]he homogenous nature of real estate services, on its own, provides
no evidence to support an inference of collusion. The evidence shows
that Defendants’ commission rates did decrease by a small, though
statistically significant degree, as the price of a home [in]creased. . . .
Nevertheless, charging a standard commission rate across the board and
retaining increasing profits from the sale of higher priced homes is
consistent with rational business judgment and not probative of an illegal
agreement to fix commissions.” Mem. Op. at 34 (Page ID 21937).
o “[A]wareness of other real estate companies’ commission rates does not
tend to rule out independent conduct. As an initial matter, the evidence
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 14
does not support Plaintiffs’ contention that, for at least part of the Class
Period, the full commission was listed on the MLS. Mr. McMahan
testified that he was unsure when this practice stopped, but that Lisa
Stephenson would know. Ms. Stephenson testified that the full
commission had not been listed at least since 1996. . . . Additionally
there is no evidence that individuals with pricing authority shared or
discussed their respective commission rates. . . . [M]ere awareness of
competitors’ commissions does not support an inference that Defendants
agreed to conspire.” Mem. Op. at 34-35 (Page ID 21937-38).
o “[Plaintiffs’ expert] Mr. French notes that brokers and agents must
cooperate with one another to facilitate real estate sales. . . . Thus,
cooperation and communication between Defendants and knowledge of
what other brokers charge is just as consistent with independent
conduct.” Mem. Op. at 36 (Page ID 21939).
o With respect to Jerry McMahan’s comment at the 2000 KREC meeting
that “the most unprofessional thing we can do in this business is cut our
commissions,” the court stated: “[A] consideration of Mr. McMahan’s
comments in the context of the purpose of the public hearing leads to a
more benign interpretation: that Mr. McMahan, in expressing his view
that relaxing the KREC Rebate Ban and allowing inducements will help
brokers compete with the Internet brokers, differentiates between
inducements which cut commission rates–which he views as
unprofessional–and non-monetary inducements such as home warranties.
A plausible inference is that Mr. McMahan thought full service brokers
should not compete with the Internet brokers by offering inducements in
the form of rebates, but should compete with the Internet brokers by
making their services worth what they charge–whatever that may be.”
Mem. Op. at 37 (Page ID 21940).
o “Plaintiffs have presented no evidence of any parallel change or impact
on Defendants’ pricing decisions after any alleged communication or
invitation that was made at the KREC public hearing or any other
meeting between Defendants.” Mem. Op. at 38 (Page ID 21941).
o “Plaintiffs contend that Defendants had a common motive to conspire.
However, Defendants’ motive to maximize profits cannot support an
inference of a conspiracy. . . . If this Court were to find that Defendants’
motive to maximize profits supported an inference of an illegal
conspiracy, then all businesses would be subject to anti-trust liability.”
Mem. Op. at 39 (Page ID 21942.)
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Having reviewed this evidence, which it characterized as circumstantial, the court held
that “[p]laintiffs have not presented sufficient evidence to meet the stringent summary
judgment standard in § 1 antitrust cases.” Id.
We quote from the district court’s memorandum opinion at length for two
reasons. First, after our own independent review of the record, we agree with its
conclusion that the circumstantial evidence is insufficient. As the above quoted material
makes clear, the evidence does not, as it must, eliminate a finding that the same actions
are “equally consistent with independent conduct.” Re/Max Int’l, 173 F.3d at 1009.
Second, the district court’s opinion was originally filed under seal and appears not to be
readily available on the most common legal databases. Since we rely upon its reasoning,
we feel obliged to quote it at some length here.
Finally, we are mindful that plaintiffs have come forward with a good deal of
circumstantial evidence that supports its theory of collusion. What is missing, however,
is the critical element mentioned in Matsushita and reiterated in Re/Max International:
countering the conclusion reached by the district court that the conduct at issue was also
consistent with permissible competition and therefore does not support an inference of
antitrust conspiracy. Matsushita, 475 U.S. at 588.
2. Did the District Court Err in Limiting Expert Testimony?
In this case, there were three expert witnesses: Drs. French and Yavas for
plaintiffs; and Dr. Kleinrichert for defendants. Both sides filed motions to exclude
testimony of these experts in whole or in part. In the end, the district court granted
defendants’ motion to exclude the expert testimony of Drs. French and Yavas with
respect to their ultimate opinions that a price-fixing conspiracy existed. Memorandum
Opinion & Order at 23, filed July 3, 2012.
With respect to Dr. French’s opinions, the district court held as follows:
[T]he Court will not allow Dr. French to testify as to his ultimate opinion
that a conspiracy likely existed among the defendants during the class
period. Such a conclusion embraces a legal conclusion which depends
on anti-trust doctrine in which Dr. French is not qualified to offer an
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 16
opinion. Further, Dr. French fails to differentiate between conscious
parallelism and illegal, collusive price-fixing.
Mem. Op. at 11 (citation omitted). The court reached an identical conclusion with
respect to Dr. Yavas.
Federal Rule of Evidence 704(a) states that “[a]n opinion is not objectionable just
because it embraces an ultimate issue.” Fed. R. Evid. 704(a). Nonetheless, a witness
may not testify to a legal conclusion. Berry v. City of Detroit, 25 F.3d 1342, 1353 (6th
Cir. 1994). Our review on this issue is for an abuse of discretion. Pluck v. BP Oil
Pipeline Co., 640 F.3d 671, 676 (6th Cir. 2011).
We detect no abuse of discretion on the part of the district court. For the most
part, the district court rejected defendants’ challenge to the expert testimony. Given that
the experts were free to testify at length as to all the other aspect of the real estate
market, the exclusion of the challenged testimony, which called for a legal conclusion,
is within the purview of the district court.
3. Alter Ego Liability of HSA
Among the other things considered by the district court was the liability of HSA
for actions taken by HSK in the alleged price-fixing conspiracy. The district court
rejected liability for HSA on these grounds:
The court . . . finds no evidence supporting Plaintiffs’ argument
that HSA controlled or encouraged Semonin or Rector Hayden’s alleged
anticompetitive conduct. There is no evidence that HSA discussed
commission policies with Semonin or Rector Hayden, set commission
policies for Semonin or Rector Hayden, or encouraged agreement or
consensus on commission policies between the two. Instead, the
evidence merely shows circumstances typical of any parent-subsidiary
relationship. Without incurring liability, a parent may articulate and
formulate general policies and procedures for its subsidiaries; may
coordinate and cooperate and regularly share financial and operating
information; may approve its subsidiaries’ budgets; and may be directly
involved in financing and micro-management of its subsidiaries. . . .
Next, Plaintiffs contend that HSA should be held liable for the
alleged conspiracy under an alter ego theory of liability. As an initial
No. 12-5947 Hyland, et al.v. HomeServices of Am., et al. Page 17
matter, Plaintiffs have not pled an alter ego or piercing the corporate veil
claim in their Fourth Amended Complaint and cannot now, when faced
with summary judgment, assert this new theory of liability.
Nevertheless, Plaintiffs have not produced evidence which would justify
piercing the corporate veil to hold HSA liable for the alleged actions of
Semonin and Rector Hayden. . . .
Here, Plaintiffs allege that HSA “refused to produce any
documentary evidence showing that its relevant ‘subsidiaries’ respected
basic corporate requirements such as holding regular Shareholder and
Board Meetings, promulgating By-Laws and Resolutions, maintaining
Minute Books, or requiring its Officers and Directors to know the duties
and responsibilities imposed by Kentucky law . . . .”
Plaintiffs have produced no evidence that HSA so dominated
HSK’s finances, business practices, and policies as to justify piercing the
corporate veil.
Mem. Op. at 44-46 (citation omitted).
This issue need not detain us long, particularly in light of the cursory argument
advanced by plaintiffs on appeal. First, because we hold that HSK did not engage in
price fixing, HSA has no derivative liability. Moreover, our independent review of the
record makes clear to us that, as the district court concluded, there is insufficient
evidence to support piercing the corporate veil.
III.
The judgment of the district court is affirmed.