UNITED STATES DISTRICT COURT
UNITED STATES' MOTIONS IN LIMINE
Am. Med. Ass'n v. United States,
DuPre v. Columbia Bd. of Realtors, Inc. & The Consol. Multiple Listing Servs. of Greater Columbia, Inc.,
Fashion Originators' Guild of Am. v. Fed. Trade Comm'n,
Fed. Trade Comm'n v. Indiana Fed'n of Dentists,
Fiberglass Insulators, Inc. v. Dupuy,
Hopper v. Euclid Manor Nursing Home, Inc.,
Kason v. Amphenol Corp.,
Lyons P'ship. v. Morris Costumes, Inc.,
United States v. Concentrated Phosphate Exp. Ass'n,
United States v. Realty Multi-List, Inc.,
United States v. Trans-Missouri Freight Ass'n,
United States v. W.T. Grant Co.,
Federal Rule of Civil Procedure 68
Federal Rule of Evidence 402
Federal Rule of Evidence 403
Federal Rule of Evidence 408
Local Rule 16.08(C)
Local Rule 26.05(F)
S.C. Code Ann. § 40-57-10
S.C. Code Ann. § 40-57-60
This is a law enforcement action to stop Consolidated Multiple Listing Service, Inc. ("CMLS") from employing a broad array of anticompetitive conduct to ban innovative forms of competition, raise barriers to entry for new brokers, and injure consumers by limiting their choices and raising their commission fees. Unable to rebut the United States' evidence of its anticompetitive conduct, CMLS has turned to irrelevant arguments in an attempt to distract from its illegal conduct. Namely, CMLS has argued, and the United States anticipates CMLS will argue at trial, that: (1) South Carolina real estate law can justify some (but not all) of its illegal conduct; (2) CMLS's modification of some of its rules moots the United States' challenge to those rules and allows CMLS to evade the repercussions of its anticompetitive conduct; and (3) CMLS has been reasonable in its settlement demands. Each of these arguments has been soundly rejected by controlling precedent as irrelevant, and with respect to settlement discussions, privileged. To streamline the presentation of facts at trial, the United States moves, in limine, to have argument and evidence regarding these irrelevant subjects excluded from trial.
CMLS employs its interpretation of South Carolina real estate law as a defense for some of its anticompetitive conduct. It claims that certain of its rules are necessary to ensure compliance with state law and that CMLS is entitled to enforce its version of state law against competitors. For example, CMLS asserts its interpretation of, and quotes selected provisions of, South Carolina real estate law in its Answer and in its Opposition to the United States' Motion for Summary Judgment. See, e.g., Answer at ¶ 22 (Docket #6); Def.'s Mem. in Opp'n to Summ. J. at 5-8, 10 (Docket #47). Similarly, CMLS witnesses have offered their interpretation of South Carolina real estate law in defending certain rules.(1)
Pursuant to Federal Rule of Evidence 402 and 403, the United States objects to all argument and evidence regarding CMLS's interpretation of South Carolina law because Supreme Court precedent renders such argument and evidence irrelevant. Under this precedent, CMLS cannot defend its anticompetitive conduct as necessary to comply with state law. "That a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it." Fed. Trade Comm'n v. Indiana Fed'n of Dentists, 476 U.S. 447, 465 (1986); accord Fashion Originators' Guild of Am. v. Fed. Trade Comm'n, 312 U.S. 457, 467-68 (1941) (rejecting defense that their "boycott and restraint of interstate trade . . . protect[ed] the manufacturer, laborer, retailer and consumer against" practices defendants believed violated the law (internal quote omitted)); see also Am. Med. Ass'n v. United States, 130 F.2d 233, 249 (D.C. Cir. 1942) (footnotes omitted) (rejecting AMA's attempt to justify its illegal conduct as necessary to ensure compliance with state law because it is irrelevant "that the conspiracy may be . . . designed to eliminate unfair, fraudulent and unlawful practices"), aff'd 317 U.S. 519 (1943).
Even if CMLS's interpretation of South Carolina real estate law were correct, it cannot appoint itself as the "real estate police"(2) and use anticompetitive conduct to mete out punishment based on its view of the law.(3) CMLS admits it has no authority to regulate real estate law because that obligation lies with the State of South Carolina. See Ex. E at 35:14-36:20 (Rule 30(b)(6) Dep. of CMLS (Baucom July 18, 2008)). Title 40, Chapter 57 of the South Carolina Code expressly creates and empowers the South Carolina Real Estate Commission to enforce South Carolina real estate law.(4) None of the other South Carolina multiple listing services have taken real estate law enforcement into their own hands by enacting rules similar to the CMLS rules challenged in this case. To the extent that CMLS believes that certain actions by real estate brokers violate South Carolina law, it should refer such brokers to the Real Estate Commission for disciplinary action.
Under the authorities discussed above, CMLS cannot assert that South Carolina law justifies any of its illegal behavior. Accordingly, the United States asks the Court to exclude as irrelevant any argument and evidence regarding CMLS's interpretation of South Carolina real estate law. See, e.g., Fashion Originators' Guild of Am., 312 U.S. at 467-68 (affirming decision below not to hear evidence that state law justified defendant's conduct).
CMLS has argued that its changes to some of the rules challenged by the United States makes the United States' challenges to the former version of the rules moot. See, e.g., Def.'s Mem. in Opp'n to Summ. J. at 11-12 (Docket #47). Consistent with this strategy, CMLS's real estate industry expert offered opinions only on CMLS's modified rules, and not on the versions of CMLS's rules at issue in this case. See, e.g., Ex. F at 99:20-100:1, 153:9-20 (Allen Dep.).
Pursuant to Federal Rules of Evidence 402 and 403, the United States objects to argument and evidence that CMLS's rule changes moot any part of the United States' challenge to the CMLS rules as they existed when the United States completed its pre-complaint investigation and informed CMLS that it intended to bring this case. There is no legal basis for this argument and it is therefore irrelevant. Supreme Court precedent long ago foreclosed CMLS's anticipated defense. "Mere voluntary cessation of allegedly illegal conduct does not moot a case; if it did, the courts would be compelled to leave '[t]he defendant . . . free to return to his old ways.'" United States v. Concentrated Phosphate Exp. Ass'n, 393 U.S. 199, 203 (1968) (quoting United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953)); see also United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 307-10 (1897) (association's decision to dissolve did not prevent the Court from deciding whether its actions had illegally restrained trade); Lyons P'ship. v. Morris Costumes, Inc., 243 F.3d 789, 800 (4th Cir. 2001) (reversing district court for accepting "defendants' bald assertions that they would cease" illegal activity and remanding for issuance of injunction).
W.T. Grant, Concentrated Phosphate, and Trans-Missouri Freight each involved antitrust enforcement actions brought by the United States, and in each case the Supreme Court rejected attempts to use voluntary cessation to avoid antitrust liability. Moreover, the Fifth Circuit specifically applied this precedent to reject a multiple listing service's attempt to moot issues by abandoning rules challenged by the United States. United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1388 (5th Cir. 1980). The court held that a multiple listing service's "abandonment of the practices . . . and its disclaimer of any intention to revive them cannot serve to moot the issues they present." Id.(5) "The courts have rightly refused to grant defendants such a powerful weapon against public law enforcement." W.T. Grant, 345 U.S. at 632.
Accordingly, the United States asks the Court to exclude as irrelevant any argument and evidence that CMLS's modification of its rules moots consideration of the rules challenged in the United States' complaint.
The United States moves this Court to exclude any argument and evidence regarding settlement offers and statements made during settlement discussions or mediation proceedings. A number of federal and local rules proscribe use of such offers or statements. Settlement offers and statements made during settlement and mediation discussions are inadmissible under Federal Rule of Civil Procedure 68 and Federal Rule of Evidence 408. The parties are also prohibited from disclosing settlement negotiations to the Court in a nonjury trial under Local Rule 26.05(F), and communications made in connection with or during the mediation process are inadmissible and are not to be shared with the presiding judge pursuant to this Court's Standing Order to Conduct Mediation (Jan. 29, 2001) (Blatt, J.) and Local Rule 16.08(C).
CMLS has already placed before the Court (the finder of fact in this nonjury case) inadmissible evidence regarding settlement offers and negotiations. It filed with the Court two unaccepted offers of judgment in violation of Rule 68.(6) See Docket #s 33, 43. It also made arguments relying on settlement offers and negotiations in its Memorandum in Opposition to [the United States'] Motion for Summary Judgment. See Docket #47 at 4, 6, 11, 19.(7)
Because parties would be reluctant to enter into settlement talks if their negotiation positions could influence the finder of fact, Federal Rule of Evidence 408 makes inadmissible offers, conduct, and statements made in connection with settlement negotiations. Fiberglass Insulators, Inc. v. Dupuy, 856 F.2d 652, 654 (4th Cir. 1988) ("The public policy favoring and encouraging settlement makes necessary the inadmissibility of settlement negotiations in order to foster frank discussions"; affirming exclusions under Rule 408). Federal Rule of Civil Procedure 68 also makes inadmissable unaccepted offers of judgment. Hopper v. Euclid Manor Nursing Home, Inc., 867 F.2d 291, 294-95 (6th Cir. 1989) (Rule 68 "contemplates that whether jury or judge tries the case the decisionmaker will be unaware of the extraneous fact that an offer of judgment has been made. This ensures that the trier of fact will not be influenced in its evaluation of the case by any knowledge of a rejected offer or the consequences thereof."). Moreover, to ensure that the Court is not influenced by inadmissible evidence when presiding over a nonjury trial, Local Rule 26.05(F) prohibits parties from disclosing settlement negotiations in their trial briefs. Permitting CMLS to discuss settlement and mediation negotiations at hearings, at trial, or in court filings would render Local Rule 26.05(F) meaningless.
In order to ensure frank, good-faith negotiations during the mediation process, both parties and their counsel signed an Agreement to Mediate in which the parties agreed that "[a]ll statements made during the course of mediation are privileged, are made without prejudice to any party's legal position, and are non-discoverable and inadmissable for any purpose in any legal proceeding." Ex. G at 1, 3. CMLS expressly agreed not to seek to admit statements made by either party in the course of the mediation process. Id. It should be held to its word.
Based upon the foregoing, the United States respectfully requests that this Court exclude any evidence or argument of settlement offers and statements made during settlement and mediation proceedings.
For the reasons set forth above, the United States requests that the motions in limine be granted.
I, Jennifer J. Aldrich, certify that on this 18th day of March, 2009, I caused a copy of UNITED STATES' MOTIONS IN LIMINE AND MEMORANDUM IN SUPPORTto be served on the person listed below by ECF.
1. See, e.g., Ex. A at 107:10-21 (Rule 30(b)(6) Dep. of CMLS (Baucom Feb. 12, 2009)); Ex. B at 19:3-6 (Rule 30(b)(6) Dep. of CMLS (Derrick Aug. 22, 2008)); Ex. C at 34:19-35:9 (Rule 30(b)(6) Dep. of CMLS (Roe Aug. 22, 2008)). ("Ex. __" refers to exhibits to the Declaration of Nathan P. Sutton submitted in support of these motions in limine.)
2. See Ex. D (May 5, 2008 The State article).
3. See Am. Med. Ass'n, 130 F.2d at 249 ("Except for [the AMA's] size, their prestige and their otherwise commendable activities, their conduct in the present case differs not at all from that of any other extra-governmental agency which assumes power to challenge alleged wrongdoing by taking the law into its own hands. Although extreme situations may seem sometimes to have required vigilante action . . . this is not the American way of life.")
4. See S.C. Code Ann. § 40-57-10 (2008) ("There is created the South Carolina Real Estate Commission under the administration of the Department of Labor, Licensing and Regulation. The purpose of this commission is to regulate the real estate industry so as to protect the public's interest when involved in real estate transactions."); id. § 40-57-60 (enumerating certain powers and duties of the Real Estate Commission).
5. This Court, in DuPre v. Columbia Bd. of Realtors, Inc. & The Consol. Multiple Listing Servs. of Greater Columbia, Inc., Case No. C.A. 78-670-0, at 5-7, 24 (D.S.C. June 2, 1987) (Glass Decl., Ex. A (Docket # 37)), also enjoined CMLS from future enforcement of its then-existing version of its home office prohibition because it determined that, although CMLS had admitted the plaintiff, "[i]t cannot be said that the conduct of which the plaintiff complains is incapable of repetition."
6. Only if a Rule 68 offer of judgment is accepted does the rule permit the offer to be filed. "By strong negative inference, that latter reference to filing if and when the offer is accepted confirms the plain meaning of Rule 68's first sentence that no filing is permitted at the time of tender." Kason v. Amphenol Corp., 132 F.R.D. 197, 197 (N.D. Ill. 1990) (striking offer of judgment from court's file). Instead of filing its offer with the Court, CMLS should have done no more than "serve on an opposing party" its settlement offer. Fed. R. Civ. P. 68(a).
7. In addition to proffers by counsel, CMLS itself raised settlement offers and discussions when the government deposed it pursuant to Rule 30(b)(6). See Rule 30(b)(6) Dep. of CMLS (Baucom) at 57:19-60:21, 121:5-122:11, 127:2-10 (July 18, 2008); Rule 30(b)(6) Dep. of CMLS (Baucom) at 23:20-24:20, 99:7-100:20, 110:5-111:8, 121:15-122:6 (Feb. 12, 2009). In the interests of not presenting additional settlement discussions before the Court, the deposition excerpts are not attached, but referenced for the benefit of opposing counsel.