Demurrer Exercise

Law 11 Civil Litigation
Demurrer Exercise:
Instructions:
1. study the authorithy for filing a demurrer (below)
2. read the form and contents for a demurrer (below)
3. review the form for a demurrer
5. read the Facts of the Case (Arleen Freeman)
6. read the Applicable Principles
7. prepare a simple demurrer
(grounds: failure to state of cause of action)

Authority: When demurring to a complaint or cross-complaint, a party may demur to the entire complaint or cross-complaint or to any of the causes of action stated in
the pleading. [CCP §430.50(a)] A demurrer may be based on any one or more of the following grounds:

(a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading [CCP §430.10(a)];

(b) The party bringing suit does not have the legal capacity to sue [CCP §430.10(b)];

(d) There is a defect or misjoinder of parties [CCP §430.10(d)];

(e) The pleading does not state facts sufficient to constitute a cause of action [CCP §430.10(e)];

(f) The pleading is uncertain ("uncertain" includes ambiguous and unintelligible) [CCP §430.10(f)];

(g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct [CCP §430.10(g)]; and

(h) In an action arising from the professional negligence of a licensed architect, registered professional engineer, or a licensed land surveyor, no certificate of
reasonable and meritorious cause was filed as required by CCP §411.35 [CCP §430.10(h)].

Time for objecting by demurrer: A demurrer must be served and filed within 30 days after service of the pleading being demurred to. [CCP §430.40(a), CRC 1911(d)]
The time may be extended by court order or by stipulation. [CCP §§473, 1054] The filing of a motion to strike the complaint does not, however, extend the time within
which to demur. [CCP §435(d)]

Form and contents: A demurrer must contain a caption setting forth the name of the court and county in which it is filed and the title of the action. [CCP §§422.30,
422.40] A demurrer must state on the first page immediately below the number of the case the name of the party filing the demurrer and the name of the party whose
pleading is subject to the demurrer. [CRC 325(c)] The first page of a demurrer must also specify immediately below the number of the case (1) the date, time, and
location, if ascertainable, of any scheduled hearing; (2) the nature or title of any attached document other than an exhibit; and (3) the trial date, if set. [CRC 303(c),
311(b)] The grounds for the demurrer must be distinctly specified in the demurrer, otherwise the demurrer may be disregarded. [CCP §430.60] When the ground of a
demurrer is based on a matter of which the court may take judicial notice pursuant to Ev C §§452 or 453, such matter must be specified in the demurrer or in the
supporting points and authorities for the purpose of invoking judicial notice, except as the court may otherwise permit. [CCP §430.70] Additionally, each ground of
demurrer must be in a separate paragraph and must state whether it applies to the entire complaint, or to specified causes of action in the complaint. [CRC 325(a)] A
special demurrer for uncertainty must specify how and why the pleading is uncertain, and must include reference to the page and line numbers where the
uncertainty appears. [See Fenton v Groveland Community Services Dist. (1982, 5th Dist) 135 Cal App 3d 797, 185 Cal Rptr 758] A demurrer must be signed by the
party or his or her attorney. [CCP §446(a)] A party filing a demurrer must also serve and file with the demurrer a memorandum of points and authorities to be
relied upon at the hearing on the demurrer. [CRC 313(a)]

Form:

§ 9:20 Demurrer to entire complaint [CCP §§430.10, 430.50(a)]
__________ [Name, office
address, telephone number,
and state bar number
of attorney]
Attorney for Defendant

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF __________

Defendant __________ demurs to the complaint filed by plaintiff __________ on the following __________ [ground or grounds]:

__________ [Set forth in separate paragraphs grounds on which demurrer is based, such as:

1. The court has no jurisdiction of the subject of the __________ (cause or causes) of action alleged in the complaint.

2. The complaint does not state facts sufficient to constitute a cause of action against defendant.]

WHEREFORE, defendant requests that:

1. Defendant's demurrer be sustained without leave to amend;

2. The court enter an order dismissing the action;

3. Defendant be awarded the costs of this action; and

4. The court grant such other and further relief that the court considers proper.

Dated __________.

______________________________
[Signature of attorney]
Attorney for Defendant

[Attach supporting memorandum of points and authorities, notice
of hearing on demurrer, and proof of service]

FACTUAL BACKGROUND
A. The MLS
The MLS is a computerized medium by which real estate agents exchange information on properties that are for sale or have been recently sold. Real estate agents who have listings to sell properties may submit information to the MLS to advertise the properties for sale, and real estate agents seeking properties for buyers can use the MLS to search for properties that meet the buyer's criteria for location, size, price and other characteristics.

B. Palsson, NAR I and NAR II Because Freeman's claims are based in substantial part on prior legal decisions that concluded certain MLS practices violated antitrust laws, we summarize those decisions. In Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal.3d 920 (hereafter Palsson) a realtors' association operated the only MLS for Marin County. The association permitted only members of the association to use the MLS and denied membership to persons who were only part-time real estate agents. Palsson concluded that denial of MLS
access to nonmembers constituted a restraint of trade, and that the restrictions on access and membership did not pass the "rule of reason" test. (Id. at pp. 934-940.) Palsson ordered that the "rules denying access of nonmembers to the [MLS] must be eliminated, although nonmembers may be charged a reasonable fee for use of the service consistent with the per-capita costs of operation." (Id. at p. 940.)

In People v. National Association of Realtors (1981) 120 Cal.App.3d 459 (hereafter NAR I) this court concluded that certain policies of SDAR violated California's antitrust
laws. NAR I held: (1) SDAR's rule that limited access to its residential MLS to SDAR members was an unlawful "group boycott" (id. at pp. 467-468); (2) SDAR's rule permitting only "exclusive right to sell" listings on the MLS was an unlawful restraint on trade (id. at pp. 477-479); and (3) certain SDAR policies and practices facilitated price fixing of brokers' commissions (id. at pp. 479-487). NAR I remanded the case to the trial court with directions to issue an injunction "as generally contained in [paragraph 1(a) of] the prayer of the second amended complaint . . . ." (Id. at p. 488.) In NAR I the court also opined that SDAR's rule limiting access to its investment property MLS to SDAR members could constitute an unlawful tying arrangement and on remand directed the trial court to make a factual determination whether SDAR held sufficient economic power over the "tying product" (the investment property MLS) to restrain trade in the tied product (association membership). (Id. at pp. 469-473.) On remand, the trial court found no unlawful tying arrangement. However, in the subsequent appeal this court in NAR II concluded that conditioning access to the investment property MLS on membership in SDAR was an unlawful tying arrangement. In NAR II we ordered that the injunction be modified to permit access to the investment property MLS on the same terms as access to the residential MLS. (155 Cal.App.3d at p. 589.) On remand of NAR II, the trial court issued its 1984 injunction ordering that access to SDAR's residential MLS and investment property MLS be available on a "equal footing" to all licensed real estate agents without regard to SDAR membership. The injunction permitted SDAR to impose reasonable charges for access to each MLS, including an allocation of overhead costs of operating the MLS, provided that charges to members and nonmembers were made on the same basis.

C. The Creation of Sandicor
Prior to 1992 there were eleven regional associations of real estate agents in San Diego County. These associations operated three separate MLS's, each of which provided a partial and fragmented listing of the real estate for sale in San Diego County. In December 1991 the local associations combined their separate MLS's and created a
new product: a single, county-wide MLS listing all properties for sale throughout San Diego County. To create this new product, the local associations formed Sandicor, a corporate entity in which they were shareholders. Sandicor owns and operates a county-wide MLS service. Sandicor's MLS is an essential tool for real estate agents, and nearly all real estate agents actively engaged in buying or selling real estate in San Diego County use Sandicor's MLS. Real estate agents pay Sandicor a uniform monthly fee set by Sandicor to use Sandicor's MLS. The monthly fee is used to pay the costs of operating the MLS and Sandicor's "service centers" (see, infra at section D).

D. The Alleged Tying Arrangement: The "Enhanced Services" Some local associations have contracted with Sandicor to act as service centers to perform services for Sandicor and its MLS subscribers that Freeman denominates as "Enhanced Services." Enhanced Services performed by the service centers include: processing enrollment forms and collecting enrollment fees for subscribers to Sandicor's MLS and maintaining records on these participants; billing and collecting monthly fees from subscribers and remitting fees to Sandicor; inputting MLS listings into Sandicor's MLS database when requested by a subscriber; monitoring listings for compliance with Sandicor's
rules; providing forms for Sandicor's MLS complaints and forwarding complaints to Sandicor; distributing MLS books to subscribers; stocking and distributing Sandicor property data profile sheets and other Sandicor forms and supplies; providing staff to answer questions by subscribers; providing meeting facilities on request by Sandicor; processing reciprocal listings on properties within the local association's jurisdiction from subscribers to other MLS services that have reciprocity agreements with Sandicor; and, when a Sandicor subscriber has a listing on a property outside Sandicor's jurisdiction but within the jurisdiction of another MLS with which Sandicor has a reciprocity agreement, to process that listing with the other MLS.

Freeman alleged that these Enhanced Services, although forming a portion of the benefits available to Sandicor's MLS subscribers, augmented and supplemented the MLS service but were unnecessary to the use of the MLS service; they were instead distinct and separate services. Freeman also alleged that the Enhanced Services were almost entirely worthless to subscribers; that subscribers would not have purchased these services if given the choice; and that the subscribers paid for the Enhanced Services only because Sandicor would not sell access to the MLS service separately from the Enhanced Services. Freeman's "tying" claim alleged: Sandicor conditioned sale of access to its MLS (the tying product) on purchase of the Enhanced Services (the tied product); Sandicor had sufficient economic power to force real estate agents wishing to purchase MLS access to also purchase the Enhanced Services; and a "not insubstantial" amount of sales in the tied product
was effected by the tying arrangement.

1. Applicable Principles
A tying arrangement under antitrust laws exists when a party agrees to sell one product (the tying product) on the condition that the buyer also purchases a different product (the tied product), thereby curbing competition in the sale of the tied product. (Northern Pacific Railway Company v. United States (1958) 356 U.S. 1, 5-6.) Antitrust laws against tying arrangements seek to eradicate the evils that (1) competitors are denied free access to the market for the tied product not because the seller imposing the tying requirement has a better or less expensive tied product, but because of the seller's power or leverage in the market for the tying product; and (2) buyers are forced to forego their free choice between competing tied products. (Ibid.) Tying arrangements are illegal per se "whenever a party has sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product . . . " (id. at p. 6), and when "a total amount of business, substantial enough in terms of dollar-volume so as not to be merely de minimis, is foreclosed to competitors by the tie . . . ." (Fortner Enterprises v. U.S. Steel (1969) 394 U.S. 495, 501.)

The threshold element for a tying claim is the existence of separate products or services in separate markets. (Jefferson Parish Hospital Dist. No. 2 v. Hyde (1984) 466 U.S. 2, 21.) Absent separate products in separate markets, the alleged tying and tied products are in reality a single product. (Hirsh v. Martindale-Hubbell, Inc. (9th Cir. 1982) 674 F.2d 1343, 1350.) Assuming that separate products in separate markets exist, a plaintiff claiming an illegal tying arrangement must plead: "(1) a tying agreement, arrangement or condition existed whereby the sale of the tying product was linked to the sale of the tied product; (2) the party had sufficient economic power in the tying market to coerce the purchase of the tied product; and (3) a substantial amount of sale was effected in the tied product." (Suburban Mobile Homes, Inc. v. AMFAC Communities, Inc. (1980) 101 Cal.App.3d 532, 542.)

see case at ARLEEN FREEMAN, et al. v. SAN DIEGO ASSOCIATION OF REALTORS, et
al.