Grempler v. Multiple Listing Bureau of Harford County, Inc.

Digges, J., delivered the opinion of the Court. “The Realtor should so conduct his business as to avoid controversies with his fellow-Real ⁴²² tors; but, in the event of a controversy between Realtors who are members of the same real estate board, such controversy should be submitted for arbitration in accordance with regulations of their board and not to a suit at law. The decision in such arbitration, should be accepted as final and binding.” Article 22, Brokers’ Code of Ethics. 1 Ignoring both the spirit and the letter of this directive, a group of realtors in Harford County have brought to court the question of whether a restrictive multiple listing service constitutes an unfair trade practice. The appellant would have done better to follow the code’s advice for we must uphold the trial court (Dyer, J.) in finding that the local practice of which she here complains is neither a monopoly nor an unlawful restraint of trade. Appellant Mary Bell Grempler, trading as Donald E. Grempler Realty, Inc., filed a complaint in the Circuit Court for Harford County, alleging that she is a real estate broker licensed by the State of Maryland and has been the operator of her own business in Towson, Baltimore County, since 1960; that she now operates a branch office for the sale of real estate in Joppatowne, Harford County; that defendant, the Multiple Listing Bureau of Harford County, Inc. (Bureau) and certain of its officers also named as defendants are engaged in the multiple listing system for selling real estate; that appellant has thrice made application to join the Bureau and thrice been rejected; that the rejections conformed to by-laws of the Bureau; that these by-laws are invalid as against public policy and that defendant’s continued refusal to admit appellant to membership constitutes a monopoly and an unlawful restraint of trade, causing private harm to her, and harm to the public generally.

She prayed for an order compelling the Bureau to admit her, and also sought ⁴²³ compensatory and punitive damages. The appellee Bureau responded to the bill with a demurrer which the lower court sustained without leave to amend. From the order dismissing the complaint Grempler appealed to this court. A demurrer admits the truth of relevant and well-pleaded facts, Myers v. Montgomery Ward & Co., 253 Md. 282 , 252 A. 2d 855 (1969), and in this case there is no actual dispute over the facts.

Both parties agree that Grempler has her main office in Baltimore County. When she first applied for membership in the Bureau she was rejected on the basis of a by-law which required that she be a member of the Harford County Board of Realtors. Subsequently she was successful in joining the Board and re-applied for membership in the Multiple Listing Bureau. She was again denied membership, this time because a by-law stated “participation is limited to Realtor Members whose main office is established within the boundaries of Harford County.

This limitation will apply against any Realtor Member, known to be a branch office or affiliate of some organization, whose main office is outside Harford County. Realtor Members participating in any other listing service, listing bureau, or listing group or organization in the State of Maryland, except the Multiple Listing Service of the statewide association, are not eligible to participate in this Bureau.” She then employed an attorney and made a third attempt to join, which was rebuffed on the identical ground that Grempler’s main office was not in Harford County. Multiple listing is a device used by the real estate broker to give wide exposure to properties listed for sale. Each co-operating broker informs all other participating brokers of the properties listed with him, thus an individual home for sale is available to purchasers at several different brokers’ offices.

As observed by the court in ⁴²⁴ Grillo v. Bd. of Realtors of Plainfield Area, 91 N. J. Super. 202, 219 A. 2d 635, 644 (1966) : “There is good in the multiple listing system. It provides an effective method for selling and buying properties. The seller benefits because his property is exposed in a number of offices, hence reaches a wider market in a shorter period of time. It is also useful and convenient to the prospective buyer who is seeking a house that will suit his needs and purse.

From one selling agent he can learn of many of the properties for sale in the area. In effect, the multiple listing service operates as an exchange for the sale of real estate. The multiple listing system can potentially stimulate competition in the real estate field by placing listings in the hands of all brokers in the area.” The broker’s fee is apportioned between the listing broker and the selling broker, with the Bureau receiving a small percentage. Conceding that she does not satisfy the requirements of the by-laws, Grempler nevertheless seeks to compel her admission.

She argues that the multiple listing service is a significant trade advantage in the highly competitive real estate field and that the restricted membership of the Bureau constitutes an unlawful restraint of trade under the common law. She also argues that the Bureau is a monopoly prohibited by Article 41 of the Declaration of Rights of the Maryland Constitution which reads “[t]hat monopolies are odious, contrary to the spirit of a free government and the principles of commerce, and ought not to be suffered.” This Article has been part of every Maryland Constitution since 1776. There seems to be some question as to whether its ban extends to anything other than monopolies in the strict sense, that is, an exclusive right or privilege granted by the sovereign. 2 We do not ⁴²⁵ resolve that question here, for we believe the concept of “restraint of trade” includes a practical or economic monopoly. Restraint of trade or unfair competition is a branch of the law of torts with roots deep in the common law.

Chafee, Unfair Competition, 53 Harv. L. Rev. 1289 (1940). Many states adopted this concept either reflexively by general constitutional provision declaring the common law of England as of July 4, 1776 to be in force, or by specific prohibition against illegal combinations or monopolies ; Maryland did both. Articles 5 and 41, Maryland Declaration of Rights.

Since the passage of the Sherman Anti-Trust Act (July 2, 1890) 26 Stat. 209 c. 647, 15 USCA sec. 1, 4 FCA title 15, sec. 1, the bulk of unfair competition cases have been decided under federal antitrust law, and the state law has become of correspondingly less significance. Appellant Grempler claims no violation of the Sherman Act and cases decided under that act are not therefore controlling, but they are highly persuasive because it is recognized that the act incorporates the common law restraint of trade principles. Apex Hosiery Co. v. Leader, 310 U. S. 469 (1940) ; Levin v. Sinai Hosp. of Balto., 186 Md. 174 , 46 A. 2d 298 (1946). Grempler complains that the multiple listing system attracts the great majority of customers in the real estate field, and that by her exclusion from the benefits of that system her competitors in the Bureau acquire an advantage that is unfair.

It is fundamental that mere competition by a business rival is not a tortious act; only unreasonable or unfair restraints of trade are proscribed. Standard Oil Co. v. United States, 221 U. S. 1 (1911) ; United States v. American Tobacco Co., 221 U. S. 106 (1911) ; 1 Harper and James, The Law of Torts, sec. 6.13 ⁴²⁶ (1956). On the simplest conceptual level, the law of unfair competition seeks to prevent “people from playing dirty tricks.” Rogers, Book Review 39 Yale L.J. 297 , 301 (1929). Thus a long line of cases holds that a contract not to compete may be valid and not against public policy if reasonably limited in time and space, so as to effect only a partial restraint.

Savon Gas Stations No. 6, Inc. v. Shell Oil Company, 203 F. Supp. 529 (D. Md. 1962) aff’d 309 F. 2d 306 (4th Cir. 1962); Griffin v. Guy, 172 Md. 510 , 192 A. 359 (1937); Tolman Laundry v. Walker, 171 Md. 7 , 187 A. 836 (1936); Guerand v. Dandelet, 32 Md. 561 (1870). The legal aspects of membership in private associations have been increasingly before the courts. See “Developments in the Law, Judicial Control of Actions of Private Associations,” 76 Harv. L. Rev. 983 (1963).

The expressed rule is that usually a private voluntary organization may accept or refuse members as it chooses, subject only to its own constitution, charter and by-laws. Baltimore Co. Hosp. v. Md. Hosp., 234 Md. 427 , 200 A. 2d 39 (1964); Levin v. Sinai Hosp. of Balto., supra. Early courts were reluctant to interfere with the internal affairs of voluntary organizations since the individual’s freedom to choose his associates was thought superior to any interest of the state in regulating that choice. With the growth of private associations from rather informal beginnings to positions of real economic power, judicial erosion of the principle of non-interference began.

Judicial Control of Actions of Private Associations, supra at 986-87. It has now reached the point that courts will compel admission to membership in associations when their control over a particular phase of commerce or professional practice has become so dominant, even in a circumscribed locale, that exclusion from membership unduly hinders or obstructs the natural flow of trade. Associated Press v. United States, 326 U. S. 1 (1945). To support the application of this principle to the case at hand Grempler relies on Grillo v. Bd. of Realtors of ⁴²⁷ Plainfield Area, supra.

There plaintiff was a realtor who had been repeatedly denied membership in his area multiple listing service. Members of the service were forbidden to divulge multiple listed properties to nonmembers and were punished if they did so. The expressed ground for denial of admission at trial was that appellant had violated unspecified ethical standards of the multiple listing board. The New Jersey court found that sanctions for ethical infringements were properly within the province of the state realty board; it held the multiple listing service amounted to a “concerted refusal to deal with plaintiff” with the result that he was unable to carry on his business.

The Superior Court there awarded plaintiff damages for his exclusion, and directed the Board to admit him. The Court in Grillo relied on Falcone v. Middlesex County Medical Soc., 34 N. J. 582, 170 A. 2d 791 (1961). This is a leading American case where plaintiff was a doctor who had received part of his medical training at a college of osteopathy. He attended his last year of school at and received his degree from a medical school recognized by the American Medical Association.

He passed the medical board examination for New Jersey and received an unrestricted license to practice medicine and surgery in that state. His entire professional practice was medicine and surgery and