Herbert G. Grey Beaverton, OR 97005-8716 Phone: (503) 641 ...

Herbert G. Grey Oregon Bar No. 810250 4800 SW Griffith Dr., Ste. 320 Beaverton, OR 97005-8716 Phone: (503) 641-4908 Email: [email protected]

Michael C. Toth* Texas Bar No. 24100608 REX – Real Estate Exchange, Inc. 3300 N. Interstate Hwy. 35, Ste. 149 Austin, TX 78705 Phone: (855) 342-4739 Email: [email protected] Austin R. Nimocks* Texas Bar No. 24002695 Ashcroft Sutton Reyes LLC 919 Congress Ave., Ste. 1325 Austin, TX 78701 Phone: (512) 370-1800 Email: [email protected] Christopher L. Peele* Texas Bar No. 24013308 Ashcroft Sutton Reyes LLC 919 Congress Ave., Ste. 1325 Austin, TX 78701 Phone: (512) 370-1800 Email: [email protected] Cory R. Liu* Texas Bar No. 24098003 Ashcroft Sutton Reyes LLC 919 Congress Ave., Ste. 1325 Austin, TX 78701 Phone: (512) 370-1800 Email: [email protected] Attorneys for Plaintiff, REX – Real Estate Exchange, Inc. *Admitted pro hac vice

Case 3:20-cv-02075-HZ Document 29 Filed 03/24/21 Page 1 of 44

UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION

REX – Real Estate Exchange, Inc.,

Plaintiff, v. KATE BROWN, in her individual and official capacity as the Governor of Oregon; STEVE STRODE, in his individual and official capacity as the Commissioner of the Oregon Real Estate Agency; OREGON REAL ESTATE AGENCY; OREGON REAL ESTATE BOARD; MARIE DUE, DEBRA GISRIEL, SUSAN GLEN, JOSE GONZALEZ, DAVID E. HAMILTON, KIM HEDDINGER, LAWNAE HUNTER, PATRICIA IHNAT, and ALEX D. MACLEAN III, in their official capacities as members of the Oregon Real Estate Board, Defendants.

Case No. 3:20-CV-02075-HZ

PLAINTIFF’S OPPOSITION TO DEFENDANTS’

MOTION TO DISMISS


i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ........................................................................................................ iii

INTRODUCTION .........................................................................................................................1

BACKGROUND ............................................................................................................................3

ARGUMENT ..................................................................................................................................6

I. REX Has Stated Claims for Violations of the Sherman Antitrust Act ...........6

A. As an Affirmative Defense, Any Question Regarding State-Action Immunity is Premature at the Motion to Dismiss Phase of Litigation ...................................................6

B. The Defendants Are Not Entitled to State-Action Immunity from REX’s Antitrust Claims ...................................................................7

1. The Oregon Legislature Did Not Clearly Articulate a State Policy Prohibiting REX’s Buyer Rebate Program ...........8

2. The Agency, Commissioner, Board, and Board Members Were Not Actively Supervised ....................16

C. The Defendants Are Not Ipso Facto Immune from REX’s Antitrust Claims ......................................................................................17

D. REX Has Pleaded Facts Sufficient to Establish Violations of the Sherman Antitrust Act ................................................................18

II. REX Has Stated Claims for Violations of the U.S. Constitution Under 42 U.S.C. § 1983 .......................................................................................21

A. REX Has Sufficiently Pleaded Clearly Established Violations of the Equal Protection Clause ..............................................................21

B. REX Has Sufficiently Pleaded Clearly Established Violations of the Due Process Clause ......................................................................25

C. REX May Seek Injunctive Relief for its § 1983 Claims Against the Official-Capacity Defendants ...........................................27


ii

D. The Commissioner is Not Entitled to Absolute Prosecutorial or Judicial Immunity ..............................................................................27

III. REX Has Stated Claims Under Ex Parte Young Against the Governor and Board .............................................................................................................29

IV. REX Has Stated State-Law Claims That Are Not Barred by Pennhurst ......31 V. The Noerr-Pennington Doctrine Does Not Apply to REX’s Claims

Against the Board ...............................................................................................32 VI. To the Extent the Court Finds that REX’s Complaint is Deficient,

the Court Should Grant Leave to Amend .......................................................33

CONCLUSION ............................................................................................................................34


iii

TABLE OF AUTHORITIES

Cases

Abigail All. for Better Access to Developmental Drugs v. Von Eschenbach, 495 F.3d 695 (D.C. Cir. 2007) ................................................................................................. 23

Alexander v. Gladden, 288 P.2d 219 (Ore. 1955) ....................................................................... 15 AmeriTitle Inc. v. Gilliam Cty.,

No. CV 09-318-SU, 2011 WL 4760811 (D. Or. Apr. 26, 2011) ............................................ 25 Arizona v. Maricopa Cty. Med. Soc’y, 457 U.S. 332 (1982) ......................................................... 6 Armour v. City of Indianapolis, 566 U.S. 673 (2012).................................................................. 22 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................. passim Ashker v. Cal. Dep’t of Corr., 112 F.3d 392 (9th Cir. 1997)....................................................... 32 Bates v. Wisc. Dep’t of Workforce Dev., 375 F. App’x 633 (7th Cir. 2010) .............................. 32 Bell Atl. Corp. v. Twombly, 560 U.S. 544 (2007) .................................................................. 19, 21 Blank v. Black, 512 P.2d 1016, 1020 (Or. 1973) ........................................................................... 9 Brown v. Zavaras, 63 F.3d 967 (10th Cir. 1995) ........................................................................ 23 Business Brokerage Centre v. Dixon, 874 S.W.2d 1 (Tenn. 1994) ............................................. 14 California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) ........ 7, 16 Chamber of Commerce of the U.S.A. v. City of Seattle, 890 F.3d 769 (9th Cir. 2018) ................. 8 City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432 (1985) ............................................ 21, 25 Clayton v. Steinagel, 885 F. Supp. 2d 1212 (D. Utah 2012) ............................................... 25, 27 Coin Call, Inc. v. S. Bell Tel. & Tel. Co., Inc., 636 F. Supp. 608 (N.D. Ga. 1986) ...................... 7 Columbia Steel Casting Co. v. Portland Gen. Elec. Co., 111 F.3d 1427 (9th Cir. 1996) ............. 7 Cornwell v. Hamilton, 80 F. Supp. 2d 1101 (S.D. Cal. 1999) ............................................. 25, 27 Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937 (9th Cir. 1996) ............................. 8 Craig v. Boren, 429 U.S. 190 (1976) ............................................................................................ 22 Craigmiles v. Giles, 312 F.3d 220 (6th Cir. 2002) ................................................................ 25, 27 Deak-Perera Haw., Inc. v. Dep’t of Transp. of Haw., 745 F.3d 1281 (9th Cir. 1984) .................. 8 Diverse Power, Inc. v. City of LaGrange, Ga., 934 F.3d 1270 (11th Cir. 2019) .......................8–9 E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) .................... 32 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003) .................................... 33 Empress LLC v. City and County of San Francisco, 419 F.3d 1052 (9th Cir. 2005) ................. 33 Epic Sys. Corp v. Lewis, 138 S. Ct. 1612 (2018) ........................................................................... 8 FCC v. Beach Comm’ns, Inc., 508 U.S. 307 (1993) ............................................................... 22, 23 Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010) ......................... 28 FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216 (2013) ..................................................... 8 FTC v. Ticor Title Ins. Co., 504 U.S. 621 (1992) ........................................................................... 6


iv

Gambee v. Cornelius, No. 10-6265-AA, 2011 WL 1311782 (D. Or. Apr. 1, 2011) ............ 28, 29 Giarratano v. Johnson, 521 F.3d 298 (4th Cir. 2008) ................................................................. 23 Golta, Inc. v. Greater Orlando Aviation Auth., 761 F. Supp. 778 (M.D. Fla. 1991)................... 7 Guam Soc’y of Obstetricians & Gynecologists v. Ada, 962 F.2d 1366 (9th Cir. 1992) ............. 27 Guillemard-Ginorio v. Contreras-Gomez, 585 F.3d 508 (1st Cir. 2009) .................................... 32 Halderman v. Pennhurst State Sch. & Hosp., 446 F. Supp. 1295 (E.D. Penn. 1977) ............... 31 Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114 (9th Cir. 2013) ............................... 27 Heller v. Doe, 509 U.S. 312 (1993) .............................................................................................. 22 Hoover v. Ronwin, 466 U.S. 558 (1984) ...................................................................................... 18 Idaho v. Coeur d’Alene Tribe of Idaho, 521 U.S. 261 (1997) ....................................................... 31 Johnson v. City of S. Bend, 680 F. App’x 475 (7th Cir. 2017) ..................................................... 7 Kendall v. Visa, Inc., 518 F.3d 1042 (9th Cir. 2008) .................................................................. 19 Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951) ................................ 7 Los Angeles County Bar Association v. Eu, 979 F.2d 697 (9th Cir. 1992) ................................ 30 Mar. Grp., Inc. v. Bellar, 908 S.W.2d 956 (Tenn. Ct. App. 1995) ............................................ 14 Merrifield v. Lockyer, 547 F.3d 978 (9th Cir. 2008) ......................................................... 2, 24, 25 Mishler v. Clift, 191 F.3d 998 (9th Cir. 1999) ...................................................................... 28, 29 North Carolina State Board of Dental Examiners v. FTC, 574 U.S. 494 (2015) ................. passim Oregon Natural Resources Council v. Mohla, 44 F.2d 531 (9th Cir. 1991) ............................... 33 Patrick v. Burget, 486 U.S. 94 (1988) ............................................................................................ 6 Pena v. Gardner, 976 F.2d 469 (9th Cir. 1992) .......................................................................... 32 Pennhurst State School & Hospital v. Halderman, 465 U.S. 89 (1984) ...................................... 31 Plyler v. Doe, 457 U.S. 202 (1982) .............................................................................................. 25 Ports Auth. of Puerto Rico v. Compania Panamena de Aviacion (Copa), S.A.,

77 F. Supp. 2d 227 (D.P.R. 1999) ............................................................................................. 7 Rucci v. Cranberry Twp., 130 F. App’x 572 (3d Cir. 2005) ...................................................... 23 Shelby County v. Holder, 133 S. Ct. 2612 (2013)........................................................................ 26 Southern Pacific Transportation Co. v. Brown, 651 F.2d 613 (9th Cir. 1980)........................... 30 St. Joseph Abbey v. Castille, 712 F.3d 215 (5th Cir. 2013) ............................................. 22, 25, 27 Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014) ........................................................... 28 Taormina v. Corr. Dep’t, State of Cal., 132 F.3d 40 (9th Cir. 1997) .......................................... 32 Teladoc, Inc. v. Tex. Med. Bd.,

No. 1-15-CV-343, 2015 WL 8773509 (W.D. Tex. Dec. 14, 2015) .......................................... 7 Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) ............................................................. 6 United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965) ............................................ 33 United States v. Carolene Prods. Co., 304 U.S. 144 (1938) ........................................................ 26 Virginia v. Am. Booksellers Ass’n, Inc., 484 U.S. 383 (1988) ..................................................... 15 Will v. Mich. Dep’t of State Police, 491 U.S. 58 (1989) .............................................................. 27


v

Williamson v. Lee Optical, 348 U.S. 483 (1955) .......................................................................... 22 Wroblewski v. City of Washburn, 965 F.2d 452 (7th Cir. 1992) ................................................ 23 Yeager’s Fuel, Inc. v. Pa. Power & Light Co., 22 F.3d 1260 (3d Cir. 1994) ................................ 7

Statutes

LA. REV. STAT. § 37:1446 ............................................................................................................. 11 MD. CODE, BUS. OCC. & PROF. § 17-604 .................................................................................... 13 N.Y. REAL PROP. LAW § 442 ................................................................................................. 12, 13 ORS 696.290 ................................................................................................................. 9, 15, 31, 33 ORS 696.375 ................................................................................................................................. 30 S.D. CODIFIED LAWS § 36-21A-71 .............................................................................................. 10 TENN. CODE § 62-13-302 ............................................................................................................. 14 W. VA. CODE § 30-40-19(a)(14) .................................................................................................. 10

Other Authorities

Class Action Complaint for Violations of the Cartwright Act, the Sherman Act, the Cal. Unfair Competition Law, and Unjust Enrichment, Conti v. San Francisco Ass’n of Realtors, Civil Action No. 3:21-cv-01934 (N.D. Cal. Mar. 19, 2021) ......................................................................................................... 3

Class Action Complaint, Bauman et. al v. MLS Property Information Network, Inc., Civil Action No. 1:20-cv-12244 (D. Mass. Dec. 17, 2020) .................................................... 3

Class Action Complaint, Leeder v. Nat’l Ass’n of Realtors, Civil Action No. 21-cv-430 (N.D. Ill. Jan. 25, 2021) .............................................................. 3

Complaint, United States v. Kentucky Real Estate Comm’n, Civil Action No. 3:05CV188-H (W.D. Ky.) ............................................................................ 6

Frank H. Easterbrook, Text, History, and Structure in Statutory Interpretation, 17 HARV. J.L. & PUB. POL’Y 61 (1994) .................................................................................... 15

Incentives and Rebates – Real Estate Commission, Md. Dep’t of Labor (Dec. 14, 2010), available at https://www.dllr.state.md.us/license/mrec/mrecincentives.shtml ............................................................................................................. 14

Kenneth A. Shepsle, Congress is a “They,” Not an “It”: Legislative Intent as Oxymoron, 12 INT’L REV. L. & ECON. 239 (1992) ................................. 15

Letter From New York Dep’t of State re: Real Property Law Section 442 and Rebates, U.S. Dep’t of Justice (Feb. 6, 2008), available at https://www.justice.gov/atr/letter-new-york-dept-state-re-real-property-law-section-442-and-rebates ............ 13

National Archives at Fort Worth, Nat’l Archives, available at https://www.archives.gov/fort-worth .............................................................................. 12


vi

National Association of Realtors, 2020 Profile of Home Buyers and Sellers at 7, available at https://cdn.nar.realtor/sites/default/files/documents/ 2020-profile-of-home-buyers-and-sellers-11-11-2020.pdf .................................................. 4

National Association of Realtors, Quick Real Estate Statistics (Nov. 11, 2020), available at https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics ...................................................................................................................................... 4

Press Release, New York Att’y Gen., A.G. Schneiderman Urges Brokers and Home Buyers in New York to Take Advantage of Law Allowing Lower Commissons (Apr. 20, 2015), available at https://ag.ny.gov/press-release/ 2015/ag-schneiderman-urges-brokers-and-home-buyers-new-york-take- advantage-law......................................................................................................................... 13

Press Release, U.S. Dep’t of Justice, West Virginia Real Estate Commission Permits Real Estate Brokers to Offer Rebates and Other Discounts: Rescission of Regulation Will Benefit Consumers of Real Estate Services (May 4, 2006), available at https://www.justice.gov/archive/opa/pr/2006/ May/06_at_274.html .............................................................................................................. 10

Rebates and Inducements, S.D. Dep’t of Labor & Regulation, available at https://dlr.sd.gov/realestate/rebates_inducements.aspx .............................................. 11

S.D. ADMIN. R. 20:69:05:01, available at https://sdlegislature.gov/ api/Rules/20:69:05:01.html .................................................................................................. 11

Senate Bill 5693, New York Legislature 2013–14 Regular Sessions, New York State Assembly, available at https://assembly.state.ny.us/leg/ ?default_fld=&bn=S05693&term=2013&Summary=Y&Actions=Y&Text=Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y#jump_to_Text .................... 13

Rules

W. VA. CODE R. § 174-1-11 (2003), available at http://apps.sos.wv.gov/adlaw/csr/readfile.aspx?DocId=18815&Format=PDF.................................................................. 10

W. VA. CODE R. § 174-1-18.1 ...................................................................................................... 10

Constitutional Provisions

ORE. CONST. art. V, § 1 ............................................................................................................... 30


1

INTRODUCTION

Defendants’ motion to dismiss reveals the true nature of Oregon’s anti-rebate

regime: an indefensible affront to free competition and innovation in the name of naked

economic protectionism that serves no purpose other than to preserve the obsolete way

of doing business and prevent new market entrants. Defendants barely claim otherwise,

focusing their motion instead on hair-splitting technicalities that cannot overcome their

plainly unlawful market manipulation. But their arguments misstate the law and ask this

Court to make factual determinations well before Rule 12 allows. The motion to dismiss

should be denied.

Plaintiff REX is a classic “disruptor”—an innovative tech company that leverages

advanced machine learning and artificial intelligence to dramatically lower the

transactional costs associated with buying and selling homes. For decades, the real-estate

industry has been dominated by a cartel of agents and brokers who have banded together

to demand that consumers pay a now-ubiquitous 6% commission in connection with

every home sale. Whatever might have justified such price-fixing in the past is long

expired; home-buying nowadays begins with an Internet search, not a call to an agent.

Indeed, as consumers rely more and more on the Internet, real-estate agents work less—

yet keep pocketing that same 6% commission developed decades before the Internet’s

arrival. REX has found a better way—one that saves consumers thousands (if not tens of

thousands) of dollars on each transaction. Yet Defendants—all Oregon officials—are

intent on quashing REX to prop up the anti-consumer cartel.

Defendants’ actions violate two distinct bodies of law. First, Defendants violate

Section 1 of the Sherman Antitrust Act by engaging in a conspiracy to prevent free-market

competition over the price of real-estate services. Defendants attempt to hand-wave away

this concern by claiming both state-action and ipso facto immunities, but they

misapprehend both doctrines. Just as in North Carolina State Board of Dental Examiners v.

FTC, 574 U.S. 494 (2015), an industry-captured regulatory body is overextending an


2

unclear statute in the name of manipulating the market to harm competitors and

consumers. And in any event, their arguments improperly rest on premature factual

assertions far beyond the scope of a Rule 12 motion.

Second, Defendants’ actions violate the Constitution. The Ninth Circuit has long

held that the Fourteenth Amendment prohibits “mere economic protectionism for the

sake of economic protectionism.” Merrifield v. Lockyer, 547 F.3d 978, 991 n.15 (9th Cir.

2008). That is the case here: The anti-rebate regime protects the entrenched cartel while

deterring new market entrants—all to the detriment of consumers. Defendants offer no

path around that settled law, offering instead implausible defenses of their naked market-

distorting protectionism that this Court can and should readily reject as a matter of law.

Ultimately, Defendants’ motion shows not only contempt for innovators like REX,

but also disdain for the very consumers that state governments are supposed to protect.

The anti-rebate regime harms consumers’ choices and pocketbooks. It locks consumers

into funding the cartel’s sky-high profits, all to the detriment of middle- and low-income

Oregonians whose home-buying decisions are grossly distorted by the artificial market

the anti-rebate regime creates. A 6% sales commission is among the most expensive

purchases most of us make in our lives—yet when REX offers an alternative, Defendants

cry foul. Neither the Sherman Act nor the Constitution permits that behavior. REX’s

claims are well-pleaded.


3

BACKGROUND

In the real-estate market, rebate bans, such as Oregon’s policies challenged here,

prevent brokers and agents from reducing their commissions. This has a dramatic effect.

In the typical real-estate transaction, a separate broker represents both the buyer and the

seller of the home. Both the buyer broker and seller broker are paid a commission,

calculated as a percentage of the home’s selling price. Added together, these commissions

typically amount to 5 or 6 percent of the total sales price, roughly $30,000 on the

transaction of a $500,000 home.

Half of that amount—or 2.5 to 3 percent—is ordinarily paid to the buyer broker.

Further, the seller typically compensates the buyer broker. And the seller must specify

the amount that he or she is willing to pay the buyer broker as a condition of listing a

home on a Multiple Listing Service, or “MLS,” the network through which the vast bulk

of homes are currently sold.

As a result of MLS rules, buyer brokers are unlike service providers in other

industries. Brokers representing home buyers do not set their own fees in the first place.

Since they are not paid directly by buyers in most transactions, they cannot offer most

buyers a lower rate to attract more business. Rather, they are paid by the seller a

predetermined amount that is non-negotiable for all intents and purposes. Dkt. 1 ¶ 29.

Plaintiffs in numerous pending lawsuits—three new class actions were filed after this

matter—allege that mandating predetermined commission offers to buyer brokers

violates federal antitrust law and harms customers to the tune of tens of thousands of

dollars on every home sale.1

1 See Class Action Complaint, Bauman et. al v. MLS Property Information Network, Inc., Civil Action No. 1:20-cv-12244 (D. Mass. Dec. 17, 2020); Class Action Complaint, Leeder v. Nat’l Ass’n of Realtors, Civil Action No. 21-cv-430 (N.D. Ill. Jan. 25, 2021); Class Action Complaint for Violations of the Cartwright Act, the Sherman Act, the Cal. Unfair Competition Law, and Unjust Enrichment, Conti v. San Francisco Ass’n of Realtors, Civil Action No. 3:21-cv-01934 (N.D. Cal. Mar. 19, 2021); see also Dkt. 1 ¶¶ 41-46 (discussing earlier-filed private class actions seeking to recoup excessive commissions).


4

Commission rebate bans in real estate, such as the policies at issue here, put a

brazenly anti-consumer exclamation point at the end of the traditional real-estate

transaction. They prevent buyer brokers from reducing egregiously high transaction

costs, which cause U.S. consumers to pay two to three times more in real-estate

commissions than consumers in comparable international markets. Dkt. 27-1 at 2.

Oregon’s rebate bans prevent consumers buying homes from receiving cash back from

their brokers. In other words, the rebate bans make illegal pro-consumer price

competition among buyer brokers. The bans make it thousands of dollars more expensive

for Oregonians to buy homes. As a result, consumers who cannot afford inflated

commission costs are shut out of the housing market.

On top of being plainly anticompetitive, real-estate rebate bans are relics of the

pre-Internet past. Today’s buyers are doing the work themselves, yet rebates protect sky-

high commissions even when buyer brokers barely need to lift a finger.

The cartel’s own data is staggering and belies any notion that rebate bans are

defensible. Ninety-seven percent of home buyers search online for a home, while less

than thirty percent of buyers now find the home they purchase through an agent.2 Buyers

are doing the work themselves. Rebate bans, like Oregon’s, prevent them from earning

any cash back for that work.

Plaintiff REX is a tech-forward real estate company that uses breakthrough

artificial intelligence machine learning tools rather than traditional brokers to match

sellers to home buyers. REX’s model allows clients to sell and buy homes outside the MLS

cartel and avoid the inflated commissions that go with it. REX’s model resembles that of

other innovative “disruptors” who transform their industries and improve consumer

choice: Uber (transportation), Airbnb (lodging), Robinhood (stock trading), GrubHub

2 See National Association of Realtors, 2020 Profile of Home Buyers and Sellers at 7, available at https://cdn.nar.realtor/sites/default/files/documents/2020-profile-of-home-buyers-and-sellers-11-11-2020.pdf; National Association of Realtors, Quick Real Estate Statistics (Nov. 11, 2020), available at https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics.


5

(food), and so on. Since it launched in 2015, REX has saved consumers almost $29 million

in commissions, an average of $12,600 with each real-estate transaction.

REX is upending the real-estate industry by combining big data with an honest

approach to every consumer. When REX’s salaried brokers represent buyers that want to

buy a home on the MLS, REX gives thousands of dollars back to the buyer in the form of

a rebate. Simply put, REX puts its money where its mouth is. Having proven that its

digital and information technology can reduce real-estate commission costs, REX offers

money back to buyers, who are increasingly leveraging online tools to find homes.

REX’s data-driven, full-service model now extends to markets spanning nineteen

states and jurisdictions. Yet in one of these states—Oregon—REX is prohibited from

offering home buyers thousands to tens of thousands of dollars back in the form of

commission rebates to buyers who purchase homes listed on the MLS. Shortly after REX

launched operations in Oregon, the Oregon Real Estate Agency (the “Agency”) asserted

that REX is in violation of Oregon’s prohibition against reducing real-estate transaction

costs by offering rebates.

Oregon is one of a dwindling handful of states with a rebate ban. Regulators in

many states that once enforced similar policies have determined that state laws like

Oregon’s do not plainly and clearly prohibit pro-consumer competition. The persistence

of Oregon’s rebate bans further fuels the escalating cost of purchasing a home in the state,

pricing many Oregonians out of the housing market. Dkt. 1 ¶ 63. REX brings this case on

behalf of Oregon consumers seeking to pay less to buy a home.


6

ARGUMENT

I. REX Has Stated Claims for Violations of the Sherman Antitrust Act

The United Justice Department has determined that rebate bans are a form of

horizontal price fixing, which notwithstanding claims of government immunity, would

be illegal in any other market or industry. Complaint ¶ 4, United States v. Kentucky Real

Estate Comm’n, Civil Action No. 3:05CV188-H (W.D. Ky.). The Supreme Court has

repeatedly held horizontal price fixes to be per se illegal. Arizona v. Maricopa Cty. Med.

Soc’y, 457 U.S. 332, 347 (1982). Such agreements “cripple the freedom of traders and

thereby restrain their ability to sell in accordance with their own judgment.” Id. at 346

(quoting Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 213 (1951)).

Against this backdrop, Defendants launch a multi-pronged, immunity-laden

attack against REX’s price-fixing antitrust claims. However, not only are Defendants not

entitled to state-action immunity, that affirmative defense is inappropriate for

consideration at this stage of the litigation. The same can also be said regarding

Defendants’ claim that they enjoy ipso facto immunity by virtue of their relationship to

state government. Lastly, Defendants erroneously claim that REX has not offered

sufficient factual allegations to state a Sherman Act violation.

A. As an Affirmative Defense, Any Question Regarding State-Action Immunity is Premature at the Motion to Dismiss Phase of Litigation

Defendants claim state-action immunity from Plaintiff’s antitrust claims. This

argument asks the Court to rule prematurely on an affirmative defense that Defendants

have not proven.

The Supreme Court and Ninth Circuit have held that state-action immunity is an

affirmative defense that must be proven by the purported state actor. See, e.g., FTC v. Ticor

Title Ins. Co., 504 U.S. 621, 625 (1992) (describing state-action immunity as a “defense”);

Patrick v. Burget, 486 U.S. 94, 101 (1988) (concluding that respondents failed to prove

active supervision required for state-action immunity); Town of Hallie v. City of Eau Claire,


7

471 U.S. 34, 38–39 (1985) (stating that “municipalities must demonstrate” their

entitlement to state-action immunity); Columbia Steel Casting Co. v. Portland Gen. Elec. Co.,

111 F.3d 1427, 1435 (9th Cir. 1996) (describing the “state-action doctrine as an affirmative

defense”); see also Yeager’s Fuel, Inc. v. Pa. Power & Light Co., 22 F.3d 1260, 1266 (3d Cir.

1994) (“Cases since Parker, however, clarify that state action immunity is an affirmative

defense as to which [the defendant] bears the burden of proof.”); Ports Auth. of Puerto Rico

v. Compania Panamena de Aviacion (Copa), S.A., 77 F. Supp. 2d 227, 232 (D.P.R. 1999) (“State

action immunity is in the nature of an affirmative defense; the party claiming immunity

has the burden of proof.”); Golta, Inc. v. Greater Orlando Aviation Auth., 761 F. Supp. 778,

781 (M.D. Fla. 1991) (“[Defendants] bear the burden of proving the elements of state

action immunity.”); Coin Call, Inc. v. S. Bell Tel. & Tel. Co., Inc., 636 F. Supp. 608, 613 (N.D.

Ga. 1986) (“Because the immunity is an affirmative defense, the defendant has the burden

to satisfy its elements.”); Teladoc, Inc. v. Tex. Med. Bd., No. 1-15-CV-343, 2015 WL 8773509,

at *6 (W.D. Tex. Dec. 14, 2015) (“[I]n application state action immunity has been treated

as a defense to be proven by the purported state actor.”).

And “since plaintiffs need not anticipate affirmative defenses in a complaint, a

motion to dismiss under Rule 12(b)(6) is not the appropriate means for defendants to seek

dismissal based on [an affirmative defense].” Johnson v. City of S. Bend, 680 F. App’x 475,

478 (7th Cir. 2017) (citation omitted). Accordingly, Defendants must properly plead state-

action immunity and subsequently bear the burden of proving an entitlement thereto.

B. The Defendants Are Not Entitled to State-Action Immunity from REX’s Antitrust Claims

However, even if it were appropriate for the Court to consider state-action

immunity at this stage of the litigation, Defendants must satisfy both requirements of

“the two-part test set forth in California Retail Liquor Dealers Ass’n v. Midcal Aluminum,

Inc., 445 U.S. 97 (1980).” N.C. State Bd. of Dental Exm’rs v. FTC (N.C. Dental), 574 U.S. 494,


8

505 (2015).3 Defendant must show that: (1) “the State has articulated a clear . . . policy to

allow the anticompetitive conduct”; and (2) “the State provides active supervision of [the]

anticompetitive conduct.” Id. at 506 (quoting Ticor, 504 U.S. at 631). If Defendant fails to

satisfy either one of the two requirements, the defense does not apply. See id. at 504

(affirming that a state agency violated the Sherman Antitrust Act after finding only a lack

of active supervision). Because neither requirement is met in this case, Defendants are not

entitled to state-action immunity.

1. The Oregon Legislature Did Not Clearly Articulate a State Policy Prohibiting REX’s Buyer Rebate Program

The State of Oregon never “clearly articulated and affirmatively expressed” a state

policy authorizing the Oregon Real Estate Agency to prohibit REX’s Buyer Rebate

Program. FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, 225 (2013).

The clear-articulation requirement turns on whether the legislature “specifically

authorized the conduct” of the agency in a “plain and clear” manner. Chamber of Commerce

of the U.S.A. v. City of Seattle, 890 F.3d 769, 782 (9th Cir. 2018) (emphasis added) (quoting

Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 942 (9th Cir. 1996)). The clear-

articulation requirement is strict and exacting—given “the fundamental national values

of free enterprise and economic competition” embodied in federal antitrust laws, “state-

action immunity is disfavored, much as are repeals by implication.” N.C. Dental, 574 U.S.

at 504 (quoting Phoebe Putney, 568 U.S. at 225); cf. Epic Sys. Corp v. Lewis, 138 S. Ct. 1612,

1624 (2018) (noting a “stron[g] presum[ption]” against repeals by implication, which can

be overcome only by the legislature’s “clear and manifest” intent).

N.C. Dental was not a clear-articulation case and, regrettably, most litigation with

respect to the satisfaction of the Midcal test concerns the second prong—the presence of

“active supervision.” Thus, “[t]he clear-articulation requirement is itself anything but

3 To the extent Deak-Perera Haw., Inc. v. Dep’t of Transp. of Haw., 745 F.3d 1281 (9th Cir. 1984), or any other case suggests that Midcal does not apply, those cases cannot be reconciled with the Supreme Court’s teaching in N.C. Dental.


9

pellucid.” Diverse Power, Inc. v. City of LaGrange, Ga., 934 F.3d 1270, 1273 (11th Cir. 2019)

(footnote omitted).

Fortunately, extensive case law is not required to answer the clear-articulation

question in this matter. Plaintiff maintains that the State of Oregon never “clearly

articulated and affirmatively expressed” a state policy authorizing the Oregon Real Estate

Agency to prohibit REX’s Buyer Rebate Program. FTC v. Phoebe Putney Health Sys., Inc.,

568 U.S. 216, 225 (2013). This conclusion is easily reached, not only because ORS

696.290(1)(a) does not clearly articulate a policy of prohibiting price competition of the

sort in which REX engaged with its Buyer Rebate Program, see Dkt. 1 ¶¶ 5–6, 52–53, 68,

but also because of the interpretations of others with a similar law.

Many states with similar statutory language have concluded that their statutes did

not articulate a “plain and clear” policy of banning rebates to consumers. City of Seattle,

890 F.3d at 782.

West Virginia

West Virginia law reads that licensed real-estate professionals should not

“pay[] . . . any rebate, profit, compensation, commission or other valuable consideration,

resulting from a real estate transaction, to or from any person other than the licensee’s

principal.” W. VA. CODE § 30-40-19(a)(14). Initially, the West Virginia Real Estate

Commission interpreted the law unreasonably to ban rebates to consumers. See W. VA.

CODE R. § 174-1-11 (2003) (banning the giving of “anything of value” in “exchange for the

sale or listing of any real estate”).4 After the U.S. Department of Justice initiated an

antitrust investigation surrounding that interpretation, the Commission changed its

mind on how to interpret the law. See West Virginia Real Estate Commission Permits Real

4 W. VA. CODE R. § 174-1-11 (2003), available at http://apps.sos.wv.gov/adlaw/csr/readfile.aspx?DocId=18815&Format=PDF.


10

Estate Brokers to Offer Rebates and Other Discounts, U.S. DEP’T OF JUSTICE (May 4, 2006).5

Today, the Commission’s rules reasonably allow licensees to “offer, directly or indirectly,

to clients or consumers rebates of commission fees, inducements, or other discounts,” W.

VA. CODE R. § 174-1-18.1, while still protecting the public from unlicensed individuals

profiting from conducting real-estate activity.

South Dakota

South Dakota law provides that real-estate agents should not be “[p]aying

compensation or commission in connection with a transaction to any person who is not

licensed.” S.D. CODIFIED LAWS § 36-21A-71. Initially, the South Dakota Real Estate

Commission issued a declaratory ruling stating that “[p]ayment of compensation in the

form of a rebate or kickback to a buyer by a seller’s agent or to a seller by a buyer’s agent

is not permitted under existing statutes.”6 In response to a U.S. Department of Justice

antitrust investigation, the agency rescinded its declaratory ruling and announced a new,

appropriate policy: “All South Dakota licensees may offer consumers rebates of

commission fees.”7

Louisiana

Louisiana law states that “[n]o payment of a commission or compensation shall be

made by any licensee or registrant to any person who has not first secured a license or

registration under the provisions of this Chapter.” LA. REV. STAT. § 37:1446. Uncertain

that this language precluded rebates to customers, on March 4, 2021, the Louisiana Real

Estate Commission asked the Louisiana Attorney General for an opinion on “the legality

5 Press Release, U.S. Dep’t of Justice, West Virginia Real Estate Commission Permits Real Estate Brokers to Offer Rebates and Other Discounts: Rescission of Regulation Will Benefit Consumers of Real Estate Services (May 4, 2006), available at https://www.justice.gov/archive/opa/pr/2006/May/06_at_274.html. 6 S.D. ADMIN. R. 20:69:05:01, available at https://sdlegislature.gov/api/Rules/20:69:05:01.html. 7 Rebates and Inducements, S.D. Dep’t of Labor & Regulation, available at https://dlr.sd.gov/realestate/rebates_inducements.aspx.


11

of rebates of commissions in a real estate transaction.” Decl. of Austin R. Nimocks, Ex. 1.

Noting the “significant amount of litigation brought by the United States Department of

Justice as well as private parties concerning the enforcement of state laws seen to be

restrictive of price,” the Commission asked, “whether our laws allow a rebate to be given

to a party to the transaction since they are not providing real estate services.” Id.

In its Resolution authorizing the request for an opinion from the attorney general,

the Louisiana Real Estate Commission found, in pertinent part, as follows:

WHEREAS, offering “incentives” in Louisiana is not prohibited. In 1986 a Consent Decree and Injunction was entered into between Coldwell Banker and the Louisiana Real Estate Commission in a case entitled Coldwell Banker Residential Real Estate Services, Inc. v. Louisiana Real Estate Commission, 85-611(B) filed in the United States District Court for the Middle District of Louisiana. In that case Coldwell Banker had implemented a coupon program wherein persons who purchased homes through Coldwell Banker were provided a book of coupons permitting the buyer to purchase merchandise from Sears. Coldwell was a wholly owned subsidiary of Sears.; and WHEREAS, before attempting to institute the coupon program, Coldwell Banker requested the Commission to issue a declaratory ruling as to whether the Commission would deem the coupon program a violation of the law. At the hearing, the Commissioners strongly expressed the view that the program would violate the law. The Commission then ordered Coldwell Banker not to distribute or offer to distribute the coupon booklets under penalty of suspension of their license.; and WHEREAS, the Commission refused to alter its opinion on this issue, therefore, Coldwell Banker applied for relief in the Federal District Court. An agreement was reached and a Consent Order and Injunction was signed which stated that although [the] State, pursuant to its power to protect the public welfare, has a substantial interest in regulating the real estate profession, there is no evidence that the prohibition of the offering of coupons as inducements directly advanced the state’s substantial interest in the protection of the public. Therefore, all parties acknowledged that “the attempt to consider Coldwell Banker’s program as unlawful, violated the 1st and 14th Amendments of the United States Constitution. The constitutionality can be sustained only in the case of fraudulent, deceptive or misleading promotional schemes used as inducements to secure customers or clients, and the Commission may prohibit the use of such


12

schemes.”

Decl. of Austin R. Nimocks, Ex. 2.8

New York

New York law previously read that a real-estate broker may not “pay or agree to

pay any part of a fee, commission, or other compensation received by the broker, or due,

or to become due to the broker to any person . . . [who] is to be a party to the transaction”

in which the fee, commission, or compensation was generated. N.Y. REAL PROP. LAW

§ 442. In 2008, after receiving an inquiry from the U.S. Department of Justice about

whether this provision of law bans rebates to consumers, the New York Department of

State’s Division of Licensing Services explained that it interpreted the law to permit the

offering of a “cash rebate” to customers.9

Six years later, the Governor signed into law a bill that added language to

Section 442 to statutorily adopt the interpretation of the Division of Licensing Services

that that rebates to customers were permitted.10 Section 442 now reads:

[N]othing in this section shall prohibit a real estate broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant who is buying, selling, exchanging, leasing, renting or negotiating a loan upon any real estate including the resale of a condominium or cooperative apartment.

8 To honor Fed. R. App. P. 32.1(b), counsel for REX sought to obtain copies of relevant filings in “Coldwell Banker Residential Real Estate Services, Inc. v. Louisiana Real Estate Commission, 85-611(B) filed in the United States District Court for the Middle District of Louisiana,” as the case cannot be located on PACER or Westlaw. In our efforts to locate the case file, counsel for Plaintiff learned that the clerk’s office for M.D. La. no longer has the file in its possession and the court file is in the custody of the National Archives in Fort Worth, Texas. However, that office of the National Archives is currently closed for COVID-19 with no published date to open. See National Archives at Fort Worth, Nat’l Archives, available at https://www.archives.gov/fort-worth. 9 “Insofar as the statutory intent of Real Property Law section 442 is to discourage unlicensed activity, offering cash or promotional gifts, such as a cash rebate, in order to attract a new customer or client does not run afoul of the statute.” Letter From New York Dep’t of State re: Real Property Law Section 442 and Rebates, U.S. Dep’t of Justice (Feb. 6, 2008), available at https://www.justice.gov/atr/letter-new-york-dept-state-re-real-property-law-section-442-and-rebates. 10 Senate Bill 5693, New York Legislature 2013–14 Regular Sessions, New York State Assembly, available at https://assembly.state.ny.us/leg/?default_fld=&bn=S05693&term=2013&Summary =Y&Actions=Y&Text=Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y#jump_to_Text.


13

N.Y. REAL PROP. LAW § 442. The New York Attorney General issued a press release stating

that the bill “confirm[ed] that real estate agents may rebate a portion of their commissions

to clients,” and was passed to address “confusion over the legality of rebating.”11

Maryland

Maryland law states that a licensed real-estate professional “may not pay

compensation, in any form, for the provision of real estate brokerage services to any

person who is not licensed under this title.” MD. CODE, BUS. OCC. & PROF. § 17-604. In

2010, the Attorney General issued an opinion clarifying that a “person who is simply a

party to a real estate transaction is not providing real estate brokerage services within the

definitions in Section 17-101, and therefore may receive monies from a licensee.”12

Tennessee

Tennessee law states that “[a] real estate licensee shall not give or pay cash rebates,

cash gifts or cash prizes in conjunction with any real estate transaction.” TENN. CODE § 62-

13-302. On January 29, 2021, REX requested an informal opinion from the Tennessee Real

Estate Commission as to:

Whether Tenn. Code § 62-13-302(b) prohibits a Tennessee real estate licensee from giving or paying cash rebates to a customer following a real estate transaction. In other words, does REX act unlawfully by following its normal business practice of rebating real estate commissions to homeowners through its Buyer Rebate Program.

REX maintains that the law is not directed at actual homeowners or designed to

interfere with a buyer’s business arrangement with their licensed real estate agent. This

understanding was confirmed by the Tennessee Court of Appeals—that TENN. CODE

§ 62–13–302 precludes “a licensed broker [from] employ[ing] unlicensed agents in

11 Press Release, New York Att’y Gen., A.G. Schneiderman Urges Brokers and Home Buyers in New York to Take Advantage of Law Allowing Lower Commissions (Apr. 20, 2015), available at https://ag.ny.gov/press-release/2015/ag-schneiderman-urges-brokers-and-home-buyers-new-york-take-advantage-law. 12 Incentives and Rebates – Real Estate Commission, Md. Dep’t of Labor (Dec. 14, 2010), available at https://www.dllr.state.md.us/license/mrec/mrecincentives.shtml.


14

conducting a real estate agency.” Mar. Grp., Inc. v. Bellar, 908 S.W.2d 956, 959–60 (Tenn.

Ct. App. 1995). “The objectives of the real estate licensing act [are] to protect purchasers

against unfair and deceptive practices peculiar to the sale of real property. Id. (citing

Business Brokerage Centre v. Dixon, 874 S.W.2d 1 (Tenn. 1994)). While REX awaits the

informal opinion, REX maintains that Tennessee law does not exist to punish consumers.

These examples all demonstrate that laws purporting to prohibit rebates do not

articulate a “plain and clear” policy of specifically banning rebates to consumers. City of

Seattle, 890 F.3d at 782. Were such a policy “plain and clear,” regulation changes,

administrative interpretations, legislative clarifications, attorney general opinions, and

press releases would not be necessary. That numerous states have considered or adopted

reasonable narrowing limitations on anti-rebate statutes to clarify the legality of

consumer rebates to consumers conclusively demonstrates the absence of anything

resembling a “plain and clear” policy.

Against the lack of clarity of ORS 696.290, and the reasonable interpretations of

other states, Defendants offer an interpretation of ORS 696.290(1)(a) approximating a fig

leaf to the clear antitrust implications of the statute. Dkt. 22 at 29. If the Defendants’

interpretation of the statute is correct, real-estate licensees could never spend their

income on anything other than the services of other real-estate licensees.13 Under the

Defendants’ reading, every time real-estate brokers use their hard-earned compensation

to buy groceries or pay their bills, they violate ORS 696.290(1)(a). Nonsense.

And to support their interpretation, Defendants argue that pre-enactment

history—dating back to a 1944 Oregon Attorney General advisory opinion that preceded

the Oregon Legislature’s adoption of the current statutory language in 1947—establishes

that the only possible meaning of ORS 696.290(1)(a) is that it bans rebates to consumers.

13 After all, the statute says, “a real estate licensee may not . . . pay or rebate . . . any part or share of the licensee’s compensation arising or accruing from any real estate transaction . . . to any person who is not a real estate licensee.”


15

But the Court cannot rest its analysis on an attorney general’s non-binding opinion on an

issue of state law. Virginia v. Am. Booksellers Ass’n, Inc., 484 U.S. 383, 395 (1988); see also

Alexander v. Gladden, 288 P.2d 219, 383 (Ore. 1955) (noting that Oregon Attorney General

opinions are non-binding).

Moreover, the opinion of the Oregon Attorney General opinion is an advisory

opinion of an executive-branch official that pre-dates the Oregon Legislature’s statutory

change by several years. It, thus, cannot be evidence of the subjective intentions of the

legislators who enacted the change.14 Additionally, the legislators’ subjective intentions

are irrelevant because the only question is whether the Oregon Legislature expressed a

“plain and clear” policy of banning rebates to consumers. That question calls for an

examination of the statutory text, which in this case is hardly “plain and clear.”

ORS 696.290(1)(a) should be read as forbidding a real estate licensee from paying

(or rebating) any part or share of the licensee’s compensation to a non-licensed individual

for the performance of services that only licensees may perform. That interpretation of the

statute makes sense given the statute’s prohibition of payments to “any person who is

not a real estate licensee.” If licensees could split their compensation with non-licensees

who perform work that only licensees can perform, that could threaten the entire

regulatory scheme and the public in general.15 Indeed, the statute’s title, “Sharing

compensation with or paying finder’s fee to unlicensed person prohibited,” specifically

identifies the targeted problem as the “sharing” of compensation. However, it makes no

sense to describe REX as unlawfully “sharing” compensation when it merely rebates a

14 As scholars have pointed out, legislatures are comprised of many members who each have different subjective intentions, so it is incoherent to refer to a subjective “intent” of the legislature apart from the text that the legislature voted to adopt. See, e.g., Hon. Frank H. Easterbrook, Text, History, and Structure in Statutory Interpretation, 17 HARV. J.L. & PUB. POL’Y 61 (1994); Kenneth A. Shepsle, Congress is a “They,” Not an “It”: Legislative Intent as Oxymoron, 12 INT’L REV. L. & ECON. 239 (1992). 15 “A person licensed to deal in real estate under ORS ch. 696 occupies a position of trust in dealing with the public.” Blank v. Black, 512 P.2d 1016, 1020 (Or. 1973). “The purpose of ORS ch. 696 is to protect the public against improper conduct . . . .” Id.


16

portion of its commission to its customer—the person who is buying the home—and not

merely another person that is otherwise involved in the business or transaction. Nowhere

in the statute does it explicitly state that it is banning rebates to “customers” or

“consumers.”

The Oregon Legislature, like other states, rationally prohibits non-licensees from

being compensated for work that only licensees may perform. It is irrational and absurd

to prohibit licensees from spending their hard-earned money on anything other than real-

estate services, which is the logical conclusion of the Defendants’ position. The

Defendants’ tortured and nonsensical interpretation of ORS 696.290(1)(a) is the product

of their anticompetitive violation of federal antitrust law. It is not the clearly articulated

and affirmatively expressed policy of the Oregon Legislature. As such, the Defendants

are not entitled to state-action immunity.

2. The Agency, Commissioner, Board, and Board Members Were Not Actively Supervised

Having established that the Oregon Legislature did not expressed a “plain and

clear” policy of banning rebates to consumers, the Court can end its query as Plaintiff’s

Complaint survives Defendants’ motion to dismiss. However, the Plaintiff can also

prevail by demonstrating the absence of proper supervision.

The second element of the Midcal test is that the challenged policy “must be

‘actively supervised’ by the State itself.” Midcal, 445 U.S. at 105 (quoting City of Lafayette

v. La. Power & Light Co., 435 U.S. 389, 410 (1978)). N.C. Dental held that “the inquiry

regarding active supervision is flexible and context dependent.” N.C. Dental, 574 U.S. at

515. “In general . . . the adequacy of supervision . . . will depend on the all the

circumstances of the case.” Id.

The standard elucidated by N.C. Dental demands discovery and the development

of the facts since, at this early stage of the litigation, “all the circumstances of the case”

are not yet before the Court. Given the fact-intensive nature of the active-supervision


17

inquiry, an evidentiary record is required to determine whether an appropriate degree of

active supervision occurred. Resolving this fact-bound issue at the motion-to-dismiss

stage would be premature. See supra, Part II.B. (compiling cases holding that the

defendant must demonstrate an entitlement to state-action immunity).

The Defendants do not dispute that the Oregon Real Estate Board is comprised of

nine members, seven of which are active market participants. Because a “controlling

number of decisionmakers are active market participants in the occupation the board

regulates,” the Board and its members are subject to the requirement of active

supervision. N.C. Dental, 574 U.S. at 511–12.

The Court said that active supervision addresses the “structural risk of market

participants’ confusing their own interests with the State’s policy goals” and “agencies

controlled by market participants” are “similar to private trade associations vested by

States with regulatory power.” Id. at 510–11 (emphasis added). The crucial question that

the Court focused on was whether the state’s regulator had “economic incentives to

restrain competition” similar to those of private trade associations. Id. at 511.

Given the Oregon Real Estate Commissioner’s deep ties to the real-estate lobby,

Dkt. 1 ¶¶ 16–17, 60, the rationale for the active-supervision requirement applies with the

same force here as it did in N.C. Dental. While Commissioner Strode may, for the moment,

be an “inactive” market participant, crucial parts of N.C. Dental refer to “market

participants” generally without using the word “active.” Moreover, though

Commissioner Strode may have temporarily surrendered his license, the relationships he

built through his service as President of the Oregon Association of REALTORS® and as

a member of various committees for the National Association of REALTORS® cannot be

ignored. Dkt. 1 ¶ 17. Indeed, Commissioner Strode’s deep, abiding connections to the

very cartel that opposes REX’s business model cannot be turned “off,” like a switch.

Moreover, given his deep connections to the cartel, Commissioner Strode he has

the same economic incentives to restrain competition as current active market


18

participants. Successful professionals like Commissioner Strode, who enter government

service, are keenly aware that the knowledge and connections they develop in office will

lead to lucrative opportunities in the industry they previously regulated after leaving

government service. Therefore, he and the Agency, which he controls, must be actively

supervised by a politically accountable state official. See N.C. Dental, 574 U.S. at 505

(noting that the limits on state-action immunity are necessary “to ensure the States accept

political accountability for anticompetitive conduct they permit and control”).

C. The Defendants Are Not Ipso Facto Immune from REX’s Antitrust Claims

Defendants also argue that they are ipso facto immune to antitrust claims, but their

arguments misstate their jobs and misapprehend the law. Although the legislative and

judicial branches of state government may be ipso facto immune from antitrust claims,

executive branch officials—like Defendants here—are not. See Hoover v. Ronwin, 466 U.S.

558, 567–68 (1984). As the Supreme Court explained, “[c]loser analysis is required when

the activity at issue is not directly that of the legislature or supreme court, but is carried

out by others pursuant to state authorization.” Id. at 568. Thus, the Court declined to

extend ipso facto immunity to governors: “This case does not present the issue whether

the Governor of a State stands in the same position as the state legislature and state

supreme court for purposes of the state-action [immunity] doctrine.” Id. at 568 n.17.

In N.C. Dental, the Supreme Court held that ipso facto immunity does not apply to

state agencies: “State agencies are not simply by their governmental character sovereign

actors for purposes of state-actor immunity.” N.C. Dental, 574 U.S. at 505 (emphasis

added). Referring to state agencies as “nonsovereign actor[s]” to whom states have

“delegate[d] control over a market,” the Court said that a nonsovereign actor’s “conduct

does not automatically qualify as that of the sovereign State itself.” Id. “Immunity for

state agencies . . . requires more than a mere façade of state involvement, for it is

necessary . . . to ensure the States accept political accountability for anticompetitive


19

conduct they permit and control.” Id. Under N.C. Dental, the Agency, Commissioner,

Board, and Board members are not entitled to ipso facto immunity.

Given that the Supreme Court has not extended ipso facto immunity to governors,

this Court should not break new ground by extending ipso facto immunity to the

Governor. Hoover, 466 U.S. at 568 n.17. Perhaps in a suit focused on a governor’s approval

of legislation, they may be entitled to ipso facto immunity for exercising legislative-like

powers. But in the instant case, involving a N.C. Dental-style conspiracy (where the

Governor’s name appears on the threatening letter sent to REX), the same Midcal (see infra)

analysis that applies to the other Defendants also applies to the Governor.

D. REX Has Pleaded Facts Sufficient to Establish Violations of the Sherman Antitrust Act

To state a claim for a violation of Section 1 of the Sherman Antitrust Act, the

complaint must show (1) a contract, combination, or conspiracy among two or more

persons or distinct business entities (2) by which the persons or entities intended to harm

or restrain trade or commerce among the several States, or with foreign nations (3) which

injures competition. See Kendall v. Visa, Inc., 518 F.3d 1042, 1047 (9th Cir. 2008).

Defendants argue that REX’s allegations do not plausibly state a claim for relief

under the Sherman Act, but REX’s complaint confirms otherwise. REX’s complaint

contains factual allegations that, when taken as true, are “enough to raise a right to relief”

under Section 1 of the Sherman Antitrust Act “above the speculative level.” See Bell Atl.

Corp. v. Twombly, 560 U.S. 544, 555 (2007). The Court should therefore deny the

Defendants’ motion to dismiss REX’s antitrust claims.

Crucial evidence of an unlawful conspiracy among the Defendants to restrain

trade is attached as Exhibit A to Plaintiff’s Complaint. That letter from Deanna Hewitt,

an employee of the Oregon Real Estate Agency, is directed to REX. It is printed on the

Agency’s letterhead, contains the Agency’s contact information, and identifies the

Governor as Kate Brown. The letter advises that, pursuant to a complaint by Rena


20

Herring, a broker licensed by the Agency, the Agency investigated a licensed REX real

estate agent for “offering buyers a refund of 50% of the buyer’s agent’s commission

through [the] REX Buyer Rebate Program.” In addition to concluding that REX’s Buyer

Rebate Program was unlawful, the letter warned that REX’s Buyer Rebate Program was

“grounds for discipline” and a “sanction placed against your license.”

The harm extended by the letter and the Agency’s conclusions was not limited to

only REX’s employee. REX’s complaint alleges that:

Since receiving the letter, REX has not rebated any portion of the commission that it has received to consumers. As a result, REX continues to suffer economic damages. The company has foregone transactions and revenue growth in Oregon has been slower than in comparable markets. In Sacramento, California, for example, REX has helped consumers purchase 27 homes listed on the MLS since 2019. REX rebated the buyers of these homes a total of $188,000, or around $7,000 per transaction. By contrast, in Oregon, REX has represented only 7 buyers who purchased MLS-listed homes over the same period and rebated none of the commissions it received to consumers in compliance with the Agency’s protectionist policies.

Dkt. 1 ¶ 63.

The facts here are like those of N.C. Dental. In that case, an agency regulating

dentistry “issued at least 47 cease-and-desist letters on its official letterhead” to

nondentist teeth whiteners for violating a state law prohibiting the unlicensed practice of

dentistry. See N.C. Dental, 574 U.S. at 501. “These actions had the intended result.

Nondentists ceased offering teeth whitening services in North Carolina.” Id. An

Administrative Law Judge determined that the agency “unreasonably restrained trade in

violation of antitrust law,” and Fourth Circuit and Supreme Court affirmed. Id. at 502,

516. Just as the dental agency in North Carolina could be held liable for interfering with

free-market competition for teeth-whitening services, the Defendants in this case can be

held liable for their interference with free-market competition for real-estate services.

Exhibit A is evidence of a plausible N.C. Dental-style violation of the Sherman


21

Antitrust Act. That the letter was printed on the Agency’s letterhead with the Governor’s

name at the top gives rise to a “reasonable inference” that the Agency (which sent the

letter), Commissioner (who is the head of the Agency), Board (which advises the Agency),

and Governor (who is the head of the executive branch and who appointed the

Commissioner) were involved in the Agency’s decision to threaten and/or seek to

intimidate REX, a new entrant to Oregon’s real-estate market that threatened to disrupt

the industry with its low prices. See Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009) (“A claim has

facial plausibility when the plaintiff pleads factual content that allows the court to draw

the reasonable inference that the defendant is liable for the misconduct alleged.”).

The Defendants argue for dismissal based on numerous factual assertions about

their lack of involvement with the letter. Dkt. 22 at 22–26. But the Defendants’ factual

counternarrative is not entitled to consideration by this Court, as the Court must take

REX’s factual allegations “as true” in ruling on the Defendants’ motion to dismiss. See id.

at 678. This is not a “speculative” case based on conspiratorial imaginings. Twombly, 560

U.S. at 555. The threatening letter REX received paints a clear picture. When high-fee

brokers complain, the Agency takes action. But absent a clear policy and active

supervision, the Agency cannot lawfully function in the breach as the enforcement arm

of a private broker cartel. REX has presented evidence of a N.C. Dental-style violation of

the Sherman Antitrust Act and is now seeking to hold the state officials responsible for

governing the real-estate industry accountable. The Defendants’ motion to dismiss REX’s

antitrust claims should be denied.

II. REX Has Stated Claims for Violations of the U.S. Constitution under 42 U.S.C. § 1983

REX has pleaded plausible violations of its constitutional rights under the Equal

Protection Clause and Due Process Clause. As such, the individual-capacity Defendants16

are not entitled to qualified immunity from its claims for damages under 42 U.S.C. § 1983.

16 The individual-capacity Defendants are Governor Kate Brown and Commissioner Steve Strode.


22

Furthermore, REX is entitled to bring claims for injunctive relief under § 1983 against the

official-capacity Defendants, so those claims should not be dismissed either. Finally, the

Commissioner is not entitled to absolute immunity because this case does not involve a

formal agency adjudication that resembles a judicial proceeding.

A. REX Has Sufficiently Pleaded Clearly Established Violations of the Equal Protection Clause

“The Equal Protection Clause of the Fourteenth Amendment commands that no

State shall ‘deny to any person within its jurisdiction the equal protection of the laws,’

which is essentially a direction that all persons similarly situated should be treated alike.”

See City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985) (quoting Plyler v. Doe,

457 U.S. 202, 216 (1982)). When an allegation of discrimination does not involve a suspect

classification, the government’s action must still be “rationally related to a legitimate state

interest.” Id. at 440. REX’s complaint properly alleges two sets of violations of the Equal

Protection Clause.

First, the Defendants unlawfully discriminate between real-estate licensees who

choose to offer rebates and those who do not, denying the former their ability to earn a

living in the real-estate industry. The Defendants’ threatening letter to one of REX’s

employees stated that offering rebates was “grounds for discipline” and would place him

“at risk of a sanction being placed against your license.” By threatening to exclude real-

estate firms and agents that offer rebates to customers from participating in the real-estate

industry, the Defendants violated the equal-protection rights of those licensees.

Second, the Defendants unlawfully discriminate between customers who hold a

real-estate license and those who do not, allowing the former to receive rebates but not

the latter. As the Supreme Court has held, a business may sue to vindicate the

constitutional rights of its customers. See, e.g., Craig v. Boren, 429 U.S. 190 (1976) (allowing

a merchant to vindicate the rights of male customers not to be subjected to a higher age

requirement for purchasing beer). By allowing licensed members of the real-estate


23

profession to receive rebates but denying a similar opportunity to ordinary members of

the public, the Defendants violated the equal-protection rights of customers who are not

licensed members of the real-estate profession.

Defendants wrongfully assert that REX’s complaint fails to allege sufficient facts

demonstrating that their anti-rebate policy is not rationally related to a legitimate

government interest. Dkt. 22 at 28–29. Rational-basis review requires a court to uphold a

government policy “if there is any reasonably conceivable state of facts that could” justify

it. FCC v. Beach Comm’ns, Inc., 508 U.S. 307, 313 (1993). But that determination can be made

only after the development of a full evidentiary record, when REX has had an

opportunity to “negate a seemingly plausible basis for the [government action] by

adducing evidence of irrationality.” St. Joseph Abbey v. Castille, 712 F.3d 215, 223 (5th Cir.

2013). Historically, when the Supreme Court upheld policies with a rational basis, it did

so after reviewing records, not pleadings. See, e.g., Armour v. City of Indianapolis, 566 U.S.

673 (2012); Heller v. Doe, 509 U.S. 312 (1993); Williamson v. Lee Optical, 348 U.S. 483 (1955).

Though “[a] perplexing situation is presented when the rational basis standard

meets the standard applied to a dismissal under Fed. R. Civ. P. 12(b)(6),” Wroblewski v.

City of Washburn, 965 F.2d 452, 459 (7th Cir. 1992),17 REX can find no case holding that the

presumption of constitutionality embodied in rational-basis review requires a complaint

to allege every single fact necessary to negate “every conceivable basis” for the

government’s action. Beach, 508 U.S. at 315 (quoting Lehnhausen v. Lake Shore Auto Parts

Co., 410 U.S. 356, 364 (1973)). The question on a Rule 12(b)(6) motion in a case governed

by rational-basis review is the same as it is in every case: whether the “complaint states a

plausible claim for relief.” Iqbal, 556 U.S. at 679.

REX’s complaint laboriously alleges facts demonstrating that the Defendants’ anti-

17 See also Brown v. Zavaras, 63 F.3d 967, 971 (10th Cir. 1995) (“Competing standards . . . complicate our analysis . . . .”); Giarratano v. Johnson, 521 F.3d 298, 303 (4th Cir. 2008) (“dilemma”); Rucci v. Cranberry Twp., 130 F. App’x 572, 575 (3d Cir. 2005) (“tension”); Abigail All. for Better Access to Developmental Drugs v. Von Eschenbach, 495 F.3d 695, 712 n.20 (D.C. Cir. 2007) (“tension”).


24

rebate policy is not rationally related to a legitimate government interest. Paragraphs 52

through 71 exhaustively detail how Oregon’s anti-rebate policy harms consumers by

forcing them to pay artificially inflated real-estate commissions and provides no benefit

to the public. For example, Paragraph 53 alleges:

REX’s BRP [Buyer Rebate Program] typically reduces the cost of purchasing a home by 1.25 to 1.5 percent. For example, when a home is listed on the MLS with a predetermined 3 percent commission for the buyer, REX would rebate half—or 1.5 percent of the total sale price—to the buyer. A $500,000 home yielding a $15,000 commission to the buyer broker would produce a rebate of $7,500 for the homebuyer. The seller of this home, meanwhile, is no worse off and likely better off. Under the BRP, the seller nets the same revenue, though she may find a buyer sooner since the effective cost of buying her home for BRP buyers could be $5,000 to $10,000 lower than the sale price.

Paragraph 54 alleges:

[Anti-rebate policies] foreclose the only available pathway for competition over buyer broker commissions not already foreclosed by the NAR’s anticompetitive Buyer Broker Compensation Rules. . . . Rebate bans prohibit . . . competition and restore the anticompetitive fortress around buyer broker commission fees, driving up the cost of buying a home and transferring consumer savings to the pockets of market-dominant, conventional real estate brokerage firms.

Paragraph 55 quotes the Department of Justice’s analysis, which states:

Rebate bans artificially inflate the costs of real estate services. Consumers are forced to pay thousands of dollars more to buy a home than they would if rebates were allowed. In effect, rebate bans prohibit brokers from competing on price, forcing all brokers to charge—and all consumers to pay—the same inflated price.


[T]he policies unconstitutionally infringe on the rights of consumers and their brokers to decide how to transact. Absent a rational basis for regulation, consumers have a right to buy and sell their homes the way they want. Similarly, licensed real estate brokers like REX also have the right to determine the best way to deliver a positive experience to their customers . . . . There is no rational basis for dividing the universe of consumers into two categories—real estate licensees and everyone else—and allowing rebates for only consumers who happen to hold a real estate license.


25


The Oregon policies serve the private interests of a protectionist cartel at the expense of aspiring home buyers who are forced to pay thousands of dollars more than necessary to buy the same house. No cognizable public interest justifies such a conspicuous wealth transfer from consumers to self-dealing insiders, who have already benefited from a host of anticompetitive restrictions that limit price competition.

These factual allegations establish that the only possible justification for Oregon’s

rebate ban is economic protectionism. And “mere economic protectionism for the sake of

economic protectionism is irrational with respect to determining if a classification

survives rational basis review.” Merrifield v. Lockyer, 547 F.3d 978, 991 n.15 (9th Cir. 2008).

REX’s allegations, taken as true, establish that Oregon’s anti-rebate policy has no rational

relationship to a legitimate government interest and therefore violates the Equal

Protection Clause.

The individual-capacity Defendants are not entitled to qualified immunity on

REX’s equal-protection claims because the claims are based on clearly established law.

Government discrimination violates the Equal Protection Clause if it is not rationally

related to a legitimate government interest. See, e.g., City of Cleburne, 473 U.S. 472; Plyler,

457 U.S. 202. Moreover, licensing requirements with no rational relationship to a

legitimate government interest violate the Equal Protection Clause. See Merrifield, 547

F.3d at 992 (finding that a pest-controller licensing requirement was “not supported by a

rational basis review” and was therefore “unconstitutional”). To reiterate the Ninth

Circuit’s clear holding: “[M]ere economic protectionism for the sake of economic

protectionism is irrational.” Id. at 991 n.15.18

18 Other courts have similarly held that licensing requirements with no purpose other than economic protectionism violate the Equal Protection Clause. See St. Joseph Abbey, 712 F.3d at 215; Craigmiles v. Giles, 312 F.3d 220 (6th Cir. 2002); Clayton v. Steinagel, 885 F. Supp. 2d 1212 (D. Utah 2012); Cornwell v. Hamilton, 80 F. Supp. 2d 1101 (S.D. Cal. 1999). “[T]he law is well-established that the [challenged policy’s] purpose must be unrelated to economic protectionism.” AmeriTitle Inc. v. Gilliam Cty., No. CV 09-318-SU, 2011 WL 4760811, at *26 (D. Or. Apr. 26, 2011), report and


26

While economic protectionism surrounding licensing remains unlawful,

governmental sentiments designed to protect consumers can at least be understood.

Here, however, the economic protectionism here is more nefarious. Oregon’s anti-rebate

policy, instead of protecting consumers, exacts a direct harm upon them. Indeed, it is one

thing for the Oregon to real estate agents to be licensed, but establishing a floor on

commissions exacts a direct harm on consumers that is immeasurable. It would be akin

to a rule mandating that licensed attorneys accept no less than one-third of money

judgments or charge clients no less than a specified hourly rate. Only here, the harm to

Oregon homebuyers will continue to grow exponentially so long as innovative real estate

brokers like REX continue to have their business model outlawed by an unreasonable

interpretation of Oregon law.

REX’s equal-protection claims are based on clearly established law, and the

individual-capacity Defendants are not entitled to qualified immunity.

B. REX Has Sufficiently Pleaded Clearly Established Violations of the Due Process Clause

As previously discussed, the full weight of rational-basis deference should come

to bear only on a full record, and REX is required only to state “a plausible claim for

relief.” Iqbal, 556 U.S. at 679.

REX’s complaint plausibly alleges that the Defendants violated its due-process

rights to provide services in a legitimate occupation and to form contracts freely when

they threatened REX with “discipline” and “sanction against your license” for offering to

provide commission rebates to its customers. Paragraphs 52 through 71 of REX’s

complaint exhaustively detail how Oregon’s anti-rebate policy harms consumers by

forcing them to pay artificially inflated real-estate commissions and provides no benefit

to the public. The allegations are sufficient to establish that Oregon’s anti-rebate policy is

recommendation adopted, No. 2:09-CV-00318-SU, 2011 WL 4759385 (D. Or. Oct. 7, 2011) (citation omitted).


27

not rationally related to a legitimate governmental interest.

The Defendants deploy the same rational-basis arguments that they used with

respect to REX’s equal-protection claims. And, interestingly, the Defendants do not even

attempt to offer a rational basis as to why a licensed real estate agent cannot offer a rebate

to a home buyer. Defendants do contend that the policy is rational because it “prevent[s]

unlicensed individuals from receiving compensation for services that require a license.”

Dkt. 22 at 29. But that statement merely repeats the challenged policy’s requirements

without explaining how they are rationally related to a public interest such as health,

safety, or consumer protection.

Moreover, the Defendants skirt the important question raised by REX’s lawsuit:

whether a home buyer, who performed no services that require a license, can receive a

rebate of a portion of the commissions paid on the sale of the home. If a rational basis for

the policy existed, Defendants would have mentioned it in their 37-page motion to

dismiss. And if a rational basis for the law existed in 1947, whatever it may have been is

no longer. Indeed, changed circumstances can render a once-rational law

unconstitutional. See United States v. Carolene Prods. Co., 304 U.S. 144 (1938). Constitutional

questions look to the facts of the world today, not yesterday. See Shelby County v. Holder,

133 S. Ct. 2612, 2630 (2013) (“There is no valid reason to insulate” legislation from

constitutional scrutiny “merely because it was previously enacted [decades] ago.”).

The same cases providing clearly established law for REX’s equal-protection

claims also provide clearly established law for REX’s due-process claims. The Ninth

Circuit’s decision in Merrifield clearly established a plaintiff’s right to challenge irrational

occupational regulations under the Due Process Clause as well as the Equal Protection

Clause. 547 F.3d at 986–88. Other courts have similarly allowed due-process challenges

to occupational regulations along with equal-protection challenges. See St. Joseph Abbey,

712 F.3d 215 (finding a violation of both clauses); Craigmiles, 312 F.3d 220 (same); Clayton,

885 F. Supp. 2d 1212 (same); Cornwell, 80 F. Supp. 2d 1101 (same). REX’s due-process


28

claims are based on clearly established law. The individual-capacity Defendants are not

entitled to qualified immunity.

C. REX May Seek Injunctive Relief for its § 1983 Claims Against the Official-Capacity Defendants

REX does not dispute that damages may be unavailable under 42 U.S.C. § 1983

against state officers acting in their official capacities. See Will v. Mich. Dep’t of State Police,

491 U.S. 58 (1989). But state officers acting in their official capacities can be sued for

injunctive relief under § 1983. See id. at 71 n.10 (“Of course a state official in his or her

official capacity, when sued for injunctive relief, would be a person under § 1983 . . . .”);

see also, e.g., Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114, 1127 (9th Cir. 2013)

(denying a motion to dismiss § 1983 claims seeking injunctive relief); Guam Soc’y of

Obstetricians & Gynecologists v. Ada, 962 F.2d 1366, 1369–71 (9th Cir. 1992) (affirming a

grant of injunctive relief in a § 1983 claim against the Governor of Guam in his official

capacity). Because REX can obtain injunctive relief through its § 1983 claims against the

official-capacity defendants, those claims should not be dismissed.

D. The Commissioner is Not Entitled to Absolute Prosecutorial or Judicial Immunity

The Commissioner’s claim of absolute immunity from § 1983 damages fails

because this dispute involves a threatening letter from an agency rather than a formal

adjudicative process for the revocation of a license. The line of cases the Commissioner

cites granted absolute immunity from § 1983 damages to defendants who were alleged

to have acted unconstitutionally when they initiated, prosecuted, and adjudicated formal

agency proceedings to revoke the plaintiffs’ professional licenses. See Dkt. 22 at 33–34

(citing Mishler v. Clift, 191 F.3d 998 (9th Cir. 1999), and Gambee v. Cornelius, No. 10-6265-

AA, 2011 WL 1311782 (D. Or. Apr. 1, 2011)).

In this case, the Commissioner, acting through Agency staff, sent a threatening

letter to REX. The letter stated that REX was “in violation” of the law and informed REX

that if it did not cease its Buyer Rebate Program, its employees would be subject to


29

“discipline” and “sanction.” The letter stopped short of initiating a formal proceeding to

strip any employee’s license but noted that the Agency was only deciding not to take

enforcement action “at this time.” It concluded with a threat: “If it is determined that you

have, hereafter, engaged in similar conduct, you may be at risk of a sanction placed

against your license.”

The Supreme Court has recognized that plaintiffs who are threatened with

unconstitutional enforcement actions have suffered a cognizable injury that may be

challenged in court. See Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158–61 (2014)

(holding that a “credible threat of enforcement” is sufficient to confer standing); Free

Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 490 (2010) (“We normally

do not require plaintiffs to ‘bet the farm . . . by taking violative action’ before “testing the

validity of the law.”).

At the same time, a threat of future enforcement is not the sort of prosecutorial or

judicial conduct that the courts in Mishler and Gambee immunized. Those cases cited six

factors for granting immunity:

(a) the need to assure that the individual can perform his function without harassment or intimidation; (b) the presence of safeguards that reduce the need for private damages actions as a means of controlling unconstitutional conduct; (c) insulation from political influence; (d) the importance of precedent; (e) the adversary nature of the process; and (f) the correctability of error on appeal.

Mishler, 191 F.3d at 1003 (quoting Cleavinger v. Saxner, 474 U.S. 193, 202 (1985)); see also

Gambee, 2011 WL 1311782, at *3.

The following factors cut against immunity in this case: (1) REX was not given a

chance to contest the Commissioner’s legal determination in the threatening letter in an

adversary proceeding with due-process protections resembling those provided in court;

(2) REX was not given any opportunity to seek reconsideration or correction; (3) REX was

not given any ability to appeal the Commissioner’s determination either within the

agency or in a state-court proceeding; (4) the letter to REX contained no citation to


30

precedent (administrative or judicial); and (5) the Commissioner is subject to immense

political pressure from both the Governor, who has the constitutional powers to appoint

and fire the Commissioner, and the Oregon Legislature, which can alter the Agency's

structure, power, and budget, and even abolish the Agency entirely. But see Dkt. 22 at 34

(claiming wrongly that subjecting the Commissioner “to confirmation by the Senate”

ensures “insulation from political influence”).

It is clear from these factors that the Commissioner’s sending of a threatening letter

to REX bears no resemblance to the sorts of formal agency adjudications that courts have

immunized on account of their resemblance to judicial proceedings. The Commissioner

is not entitled to absolute immunity.

III. REX Has Stated Claims Under Ex Parte Young Against the Governor and Board

The Defendants’ argument for dismissing REX’s Ex Parte Young claims against the

Governor and Board members rely on the Defendants’ factual assertions about their lack

of involvement with the threatening letter sent to REX. See Dkt. 22 at 37 (claiming that the

Governor and Board members did not have “any direct connection to enforcement of

Oregon’s prohibition on rebates”). Those factual assertions appear to derive from the

Defendants’ reading of the constitutional and statutory powers of the Governor and

Board. See id. (“Although the Governor has general authority over the executive branch

and the Board Members have authority to make general recommendations to the

Commissioner and the Governor about policy, the power to enforce ORS 696.290 lies

solely with the Agency and the Commissioner.”).

The extent of the Governor and Board’s actual involvement in the decision to send

the threatening letter to REX is a factual issue that cannot be resolved by mere citations

to legal provisions defining the general scope of their powers. It is certainly a plausible

factual inference that the Governor, as the head of the executive branch with the power

to appoint and fire the Commissioner, can influence the Commissioner’s future


31

enforcement decisions, through either formal or informal means. See ORE. CONST. art. V,

§ 1 (describing the Governor as holding the chief executive power of the State); ORS

696.375 (stating that the Governor has the power to appoint the Real Estate Commissioner

and that the Commissioner “shall hold office at the pleasure of the Governor”). It is also

plausible that the Board, which is composed predominantly of active market participants,

would seek to influence the Agency’s interpretations of the law and enforcement

decisions. And all that is required for a claim to survive a motion to dismiss is “facial

plausibility.” Iqbal, 556 U.S. at 667.

The cases the Defendants cite are inapposite. Southern Pacific Transportation Co. v.

Brown, dealt with the injury-in-fact requirement of Article III standing—specifically,

whether the plaintiff had established a sufficiently likely “threat of enforcement.” 651

F.2d 613, 614 (9th Cir. 1980). Los Angeles County Bar Association v. Eu, dealt with an appeal

from a grant of summary judgment, not a motion to dismiss. 979 F.2d 697, 699 (9th Cir.

1992) (“The federal district court granted summary judgment . . . .”). Neither of those

cases states that a Court should grant a motion to dismiss an Ex Parte Young claim based

on the Defendants’ factual assertions about their innocence. Like the district court in Los

Angeles County Bar Association, this Court should not attempt to dispose of an Ex Parte

Young claim at the motion-to-dismiss stage.

IV. REX Has Stated State-Law Claims That Are Not Barred by Pennhurst

REX’s state-law claims are not foreclosed by Pennhurst State School & Hospital v.

Halderman, 465 U.S. 89 (1984). The plaintiffs in Pennhurst claimed the defendants failed to

follow a state statute requiring them to “assure within the State the availability and

equitable provision of adequate mental health and mental retardation services for all

persons who need them.” Halderman v. Pennhurst State Sch. & Hosp., 446 F. Supp. 1295,

1322 (E.D. Penn. 1977). Pennhurst rejected the argument “that injunctive relief could be

ordered against State officials for failing to carry out their duties under State statutes.”

Pennhurst, 465 U.S. at 109. It also held that “suit may not be predicated on violations of


32

state statutes that command purely discretionary duties.” Id. at 110. The Court went on

to state: “Since it cannot be doubted that the statutes at issue here gave petitioners broad

discretion in operating Pennhurst, the conduct alleged in this case would not be ultra vires

even under the standards of the dissent’s case.” Id. at 110–11 (citations omitted).

Importantly for this case, the Court recognized in footnote 11 that a claim could be

brought in a true ultra vires case: “[M]odern cases make clear that a state officer may be

said to act ultra vires . . . when he acts ‘without any authority whatever.’” Id. at 101 n.11;

see also Idaho v. Coeur d’Alene Tribe of Idaho, 521 U.S. 261, 270 (1997) (citing footnote 11 of

Pennhurst as recognizing the cognizability of claims alleging that “the acts of state

officials” are “ultra vires under state law itself”).

This case is not like Pennhurst. It does not involve an alleged failure to follow a

state statute that delegates broad discretion to the defendants to implement ambiguous

directives such as “equitable” and “adequate.” Instead, REX alleges that the Defendants

acted ultra vires when they shut down REX’s Buyer Rebate Program based on an absurd

and dubious interpretation of ORS 696.290(1)(a) that violates constitutional guarantees of

equal protection and due process. REX’s claims fall comfortably within the ultra vires

exception recognized in Pennhurst and Coeur d’Alene.

Additionally, the Ninth Circuit has held that plaintiffs can bring state-law claims

in federal court against state officers who are sued in their individual capacities. See

Ashker v. Cal. Dep’t of Corr., 112 F.3d 392 (9th Cir. 1997); Pena v. Gardner, 976 F.2d 469 (9th

Cir. 1992) (per curiam); Taormina v. Corr. Dep’t, State of Cal., 132 F.3d 40 (9th Cir. 1997)

(unpublished). Other courts have reached the same conclusion. See, e.g., Guillemard-

Ginorio v. Contreras-Gomez, 585 F.3d 508, 531–32 (1st Cir. 2009) (“Thus, despite defendants’

best attempts, nothing in our caselaw permits us to read Pennhurst as calling into doubt

the authority of federal courts to award relief on supplemental state law claims against

state officials” where monetary relief is not sought from the state’s treasury); Bates v. Wisc.

Dep’t of Workforce Dev., 375 F. App’x 633, 636 (7th Cir. 2010) (“But the Eleventh


33

Amendment does not bar a state-law claim against a state employee in an individual

capacity.”). To the extent the Defendants seek dismissal of REX’s state-law claims against

the individual-capacity Defendants, that argument is foreclosed by the Ninth Circuit.

V. The Noerr-Pennington Doctrine Does Not Apply to REX’s Claims Against the Board

The Board and its members’ invocation of the Noerr-Pennington doctrine is

misplaced, as that doctrine deals with the public’s right to petition the government,

whereas the Board and its members in this case—when exercising their powers and

duties as the Oregon Real Estate Board—are the government. Although N.C. Dental

imposes a requirement of active supervision on the Board because the Board is controlled

by private market participants, the Board is still a “[s]tate agency,” albeit one with “[d]ual

allegiances.” 574 U.S. at 494. To quote N.C. Dental, it is a “public [i.e., governmental],”

“nonsovereign entity.” Id. at 510. Its members are appointed by the Governor and are

statutorily charged with advising the Oregon Real Estate Agency.

Noerr dealt with a group of railroads that organized a publicity campaign “made

to appear as spontaneously expressed views of independent persons and civic groups”

to influence government officials to adopt allegedly anticompetitive policies. E. R.R.

Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 129–30 (1961). Pennington

dealt with a labor union’s requests for actions from the Secretary of Labor and Tennessee

Valley Authority. United Mine Workers of Am. v. Pennington, 381 U.S. 657, 669–72 (1965).

Those cases both involved members of the public exercising First Amendment rights.

Neither involved the board members of a state agency like the Oregon Real Estate Board.

The Ninth Circuit cases cited by the Defendants are equally inapposite. Oregon

Natural Resources Council v. Mohla dealt with an environmental non-profit that brought a

lawsuit in which it was “genuinely seeking judicial relief.” 944 F.2d 531, 535 (9th Cir.

1991). Empress LLC v. City and County of San Francisco dealt with a low-income housing

non-profit that wrote a letter to and subsequently had conversations with the San


34

Francisco Zoning Administrator. 419 F.3d 1052, 1056–57 (9th Cir. 2005). Again, those

cases involved members of the public interacting with their government. Neither

involved the board members of a state agency like the Oregon Real Estate Board.

The Noerr-Pennington doctrine might have some applicability if REX sued: (1)

members of the public who advocated for the passage of ORS 696.290(1)(a); or (2) Rena

Herring, the individual whose complaint led to the Agency’s investigation of REX’s

Buyer Rebate Program, or any other member of the public who advocated for interpreting

ORS 696.290(1)(a) as prohibiting rebates to customers. But the Board and its members fall

into neither of these groups. The Noerr-Pennington doctrine was designed to protect

members of the public seeking to influence their government. It does not apply to the

Board and its members because they are the government.

VI. To the Extent the Court Finds that REX’s Complaint is Deficient, the Court Should Grant Leave to Amend

Federal Rule of Civil Procedure 15(b) provides that courts “should freely give

leave” to amend a complaint “when justice so requires.” This “policy ‘is to be applied

with extreme liberality.’” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th

Cir. 2003) (quoting Owens v Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001).

To the extent REX’s complaint has deficiencies, REX asks this Court for leave to amend.

CONCLUSION

The motion to dismiss should be denied.

RESPECTFULLY SUBMITTED this the 24th day of March, 2021,

Herbert G. Grey Oregon Bar No. 810250 4800 SW Griffith Drive, Suite 320 Beaverton, OR 97005-8716 Phone: (503) 641-4908 Email: [email protected]


35

Michael C. Toth* Texas Bar No. 24100608 REX – Real Estate Exchange, Inc. 3300 N. Interstate Hwy. 35, Ste. 149 Austin, TX 78705 Phone: (855) 342-4739 Email: [email protected] /s/ Austin R. Nimocks Austin R. Nimocks* Texas Bar No. 24002695 Ashcroft Sutton Reyes LLC 919 Congress Ave., Ste. 1325 Austin, TX 78701 Phone: (512) 370-1800 Email: [email protected] Christopher L. Peele* Texas Bar No. 24013308 Ashcroft Sutton Reyes LLC 919 Congress Ave., Ste. 1325 Austin, TX 78701 Phone: (512) 370-1800 Email: [email protected] Cory R. Liu* Texas Bar No. 24098003 Ashcroft Sutton Reyes LLC 919 Congress Ave., Ste. 1325 Austin, TX 78701 Phone: (512) 370-1800 Email: [email protected]

Attorneys for Plaintiff, REX – Real Estate Exchange, Inc. *Admitted pro hac vice


CERTIFICATE OF SERVICE

In accordance with Fed. R. Civ. P. 5(b)(2)(E) and LR5-1, I hereby certify that on

March 24, 2021, I electronically filed the foregoing with the Clerk of Court using the

CM/ECF system, which will send a notification of such filing to all counsel of record.

/s/ Austin R. Nimocks Austin R. Nimocks


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