JUDGMENTS ONLINE

Below are summaries of recent court cases affecting the real estate industry. For more detail and additional cases, visit "The Letter of the Law," NAR's online legal newsletter.

Appeals Court Rules Do-Not-Call Registry Constitutional

The Court of Appeals for the 10th Circuit upheld the constitutionality of the National Do-Not-Call Registry in a ruling that consolidated the appeals of various legal challenges brought against it. In effect since Oct. 1, 2003, the National Do-Not-Call Registry prohibits interstate telemarketing calls to consumer phone numbers registered on the list unless the consumers meet certain criteria.

In making its decision, the appeals court applied a three-part constitutionality test established in Central Hudson Gas & Electric v. Public Service Commission of New York to determine whether the registry violated the First Amendment of the U.S. Constitution.

Under Central Hudson:
1. The government must assert a substantial interest as the basis for its regulation.
2. The regulation must directly advance the stated governmental interest and must regulate no further than the stated governmental interest.
3. The regulation must be “narrowly” tailored to accomplish its stated objective.

The court found that the registry met all three criteria. It determined that the government's stated interests of protecting the residential privacy of consumers and shielding consumers from fraudulent and/or abusive solicitation were substantial governmental interests. The court also found that the registry rules advanced the government's stated interests by allowing consumers to block a significant number of telemarketing calls that they considered annoying.

Challengers to the registry argued that the do-not-call rules were unconstitutional because it only allowed consumers to bar commercial solicitations but not charitable or political solicitations. The court rejected this argument, stating that the regulation is not irrational in failing to exclude all calls.

The court also ruled that the registry was narrowly tailored to accomplish the government's stated goals. Since the registry did not regulate telephone solicitations generally but disallowed calls to individuals who had stated their preference not to receive such calls, the court determined that the registry did not attempt to overregulate solicitations.

In other challenges to the registry, the court also ruled that:

• The fees charged by the registry for access to more than five areas codes were permissible because the fees were incidental and designed to help the government defray the administrative costs of legitimate government regulations.
  
• The Federal Communications Commission did not violate the administrative procedures rule in its process of creating the established business relationship exception to the registry because it had requested comments during its rulemaking process and had considered different options in creating this exception.
  
• The Federal Trade Commission had the requisite statutory authority to administer and create the registry, and the subsequent actions by Congress explicitly granting the FTC such authority removed any doubt about the FTC’s authority.
  
  To read the entire summary, click here.
  
  
  Property Owner Cannot Seek Damages for Fear
  
  The Court of Appeals of Texas has ruled that a landowner cannot bring a nuisance lawsuit against a company based on fear of a lawful activity occurring on an adjoining property.
  
  In 1998, Eugene and Marjorie Cooper entered into an oil, gas, and mineral lease with Bayou Black Royalty Co. for a 50-acre tract of land on which their home was located. Bayou Black later assigned this lease to the Union Pacific Resources Co.
  
  In 2000, Union Pacific applied to the Texas Railroad Commission and received permission to drill a well on a neighbor's property, which was located 700 feet from the Coopers’ home. The commission required that Union Pacific develop an evacuation plan for the area, which Union Pacific did, in case the company encountered sulphide gas (a.k.a. "sour gas") during drilling.
  
  After Union Pacific began drilling in June 2000, the Coopers expressed concern that they wouldn't be able to evacuate the site quickly enough if an evacuation was ordered. The Coopers and Union Pacific reached an agreement where the company assisted the couple in moving to a nearby farmhouse and provided a monthly fee to the Coopers for the costs associated with living away from their home.
  
  In August 2000, the Coopers filed a lawsuit against Union Pacific and refused to accept the monthly payments. The next month, Union Pacific determined that no sour gas was present, so the Coopers moved back into their home.
  
  The Coopers’ lawsuit alleged nuisance based on their fear of sour gas. A jury awarded the couple $85,000 under the nuisance theory, and Union Pacific appealed.
  
  The Court of Appeals of Texas reversed the trial court's ruling, finding there was no evidence to support the allegations. Union Pacific argued that the nuisance allegations were based entirely on fear and apprehension, which is insufficient to support a nuisance claim.
  
  Using established legal standards in Texas for alleging a nuisance claim, the court found that the public policy of Texas does not allow fear or apprehension of lawful industrial activities to support a nuisance complaint. Looking at this case, the court found that Union Pacific’s activities were lawful industrial activities. Since the Coopers’ claims were solely based on their fear of a lawful activity, the court ruled that the evidence was insufficient to support a nuisance claim.
  
  To read the entire summary, click here.