Richard Kline v. Coldwell, Banker & Co., Realtors
508 F.2d 226, 19 Fed. R. Serv. 2d 819 (1974)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An antitrust lawsuit is unsuitable for class action certification under Rule 23(b)(3) where individual questions of liability and injury predominate over common questions, and where the sheer scale and potential for staggering, punitive damages make the class action an unmanageable and inferior method of adjudication.
Facts:
- The Los Angeles Realty Board (Board), a trade association, published and distributed a recommended commission fee schedule to its broker members.
- The schedule suggested a commission of six percent of the total purchase price for real estate transactions.
- A foreword in the schedule stated that no member was in any way bound by the schedule and that commissions were a matter for the parties to the transaction.
- Richard and Margo Kline sold residential property in Los Angeles County.
- The Klines utilized the services of a real estate broker who was a member of the Board and paid a commission for the sale.
- The Klines alleged that this fee schedule was part of a conspiracy to fix commissions at an artificially high rate, causing financial injury to themselves and a potential class of over 400,000 other home sellers.
Procedural Posture:
- Richard and Margo Kline filed a lawsuit in federal district court against the Los Angeles Realty Board and 32 named brokers.
- The suit was brought on behalf of a proposed class of all persons who sold residential property in Los Angeles County and a proposed defendant class of all broker members of the Board.
- Plaintiffs moved in the district court to certify the lawsuit as a class action under Rule 23.
- The district court granted the motion in part, certifying both a plaintiff class of sellers and a defendant class of brokers.
- Finding that its order involved a controlling question of law with substantial grounds for disagreement, the district court certified the order for an immediate interlocutory appeal.
- The United States Court of Appeals for the Ninth Circuit granted the defendants (appellants) permission to appeal the district court's class certification order.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a lawsuit alleging an antitrust conspiracy among thousands of real estate brokers to fix commission rates qualify as a proper class action under Federal Rule of Civil Procedure 23?
Opinions:
Majority - Trask, Circuit Judge
No, this lawsuit does not qualify as a proper class action. To satisfy the requirements of Rule 23(b)(3), common questions of law and fact must predominate over individual ones, and the class action must be superior to other methods of adjudication. Here, individual questions predominate because proving liability requires individualized proof that each of the 2,000 defendant brokers 'knowingly, intentionally and actively participated' in the conspiracy; mere membership in the Board or parallel pricing is insufficient. Furthermore, the action is neither superior nor manageable due to the staggering number of plaintiffs and defendants, the need for individualized damage calculations for each of the 400,000 sales, and the potential for a 'horrendous' and punitive $750 million joint and several liability award against individual brokers, which is an 'ad absurdum' result not intended by the Clayton Act.
Concurring - Duniway, Circuit Judge
No, this case is not a proper class action. Beyond the reasons stated by the majority, this lawsuit represents a 'judicial juggernaut' that was likely not envisioned by the creators of Rule 23. It functions as a 'potent engine for the compulsion of settlements, whether just or unjust,' because the sheer cost and risk of litigation would force small business defendants to settle regardless of actual liability. Moreover, the creation of a defendant class is practically unworkable, as Rule 23(c)(2) allows any defendant to simply opt out, likely leaving only the named defendants and defeating the purpose of a defendant class action.
Analysis:
This decision significantly raises the bar for certifying large-scale antitrust class actions, particularly those with a defendant class. It establishes that generalized proof of conspiracy, such as distributing a price schedule, is insufficient to overcome the need for individualized proof of each defendant's knowing participation. The court's strong aversion to using the class action mechanism to impose 'staggering' and potentially ruinous joint and several liability on small businesses sets a powerful precedent, signaling that manageability and fairness concerns can outweigh the efficiency goals of Rule 23 in massive, high-stakes litigation.
