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Orval Sheppard v. Valinda Freed: Federal Court Defines What Constitutes a Boycott

In Orval Sheppard v. Valinda Freed & Associates, the district court addressed the applicability of boycott law to the real estate brokerage industry. The court held that absent an express or implied agreement, defendants had not conspired to boycott the plaintiff when they independently decided not to co-broke with him after he went to a flat-fee commission.

Sheppard Real Estate (Sheppard) was one of twelve brokerage firms in Enterprise, Ala. The firms would cooperate with each other by "co-broking," or selling other firms listings and splitting the commissions. In an effort to increase its share of listings, Sheppard opted to charge sellers a flat fee of $1,995, regardless of the cost of the home. Sheppard indicated to area brokers that it would pay them $1,000 for each house they helped Sheppard sell, and that Sheppard would expect $1,000 for each house it helped others to sell. Almost immediately, several area brokers decided not to co-broke with Sheppard. Sheppard sued the defendants, alleging that they entered into a conspiracy not to co-broke with Sheppard, in violation of the Sherman Antitrust Act.

The district court stated that to recover under Section 1 of the Sherman Antitrust Act, the plaintiff must establish three elements: (1) the defendants entered into a contract, combination, or conspiracy, which was (2) in restraint of trade or commerce, and (3) that the plaintiff was damaged by the violation. With regard to the first element, the court held that an agency generally has a right to refuse to co-broke with a competing agency for reasons sufficient to itself, including because it thinks the other agency is acting unfairly in trying to undermine its trade, provided its refusal comes from independent decision and not from some agreement, tacit or expressed. The court was unable to find an agreement between any of the agencies, and held that their independent actions were not violations of the Act.

The district court then addressed the issue of parallel conduct by the defendants. The court stated that parallelism by itself does not establish an agreement, there must be parallelism accompanied by some other fact to support a finding of an agreement necessary to establish a violation of the Sherman Act. The court then found that the defendants refused to co-broke with Sheppard without consulting one another. It further held that they acted immediately, almost with no time to consult one another and engage in a concerted plan, and that the agencies acted in their economic self-interest.

Orval Sheppard v. Valinda Freed & Associates, 608 F. Supp. 354 (M.D. Ala. 1985), aff’d 800 F.2d 265 (11th Cir. 1986).