Cooperatives & Condominiums

Donnelly Act Claim

Benjamin of Forest Hills Realty, Inc. v. Austin Sheppard Realty, Inc.

NYLJ 9/28/06, p. 26, col. 1

AppDiv, Second Dept

(Opinion by Santucci, J.)

In an action by real estate broker against another broker and a co-operative corporation for violation of the Donnelly Act (General Business Law, sec. 340 et seq.), defendants appealed from Supreme Court's denial of their summary judgment motion. The Appellate Division reversed and dismissed the Donnelly Act claim, holding that plaintiff broker had not identified a relevant geographic market in which the defendants had restrained trade.

On a number of occasions, plaintiff broker had obtained prospective purchasers of co-op shares. On each occasion, the co-op board advised plaintiff broker that the purchaser would not be approved by the board unless defendant broker was the real estate broker for the transaction. Plaintiff broker then brought this action , alleging that the board and defendant broker had conspired to interfere with plaintiff broker's free exercise of trade, in violation of the Donnelly Act. Supreme Court denied defendants' summary judgment motion, concluding that evidence in the record raised questions of fact about whether defendants had conspired to restrain trade. Defendants appealed.

In reversing and granting summary judgment to defendants, the Appellate Division started by noting that the Donnelly Act is generally construed in accordance with the federal Sherman Act. The court then noted that one of the elements of a claim under the Donnelly Act is an allegation of how the economic impact of the alleged conspiracy would restrain trade in the market in question. Here, plaintiffs' complaint identified the relevant market as 'shares in defendant 108-46 70^th Road Owners, Inc. ' ' The court, however, noted that the relevant product market must include all products that are reasonably interchangeable and all geographic areas in which interchangeability occurs. The complaint failed to demonstrate how the alleged restrictions would impair competition in the local real estate market as a whole. Because the complaint did not allege injury to competition in the market as a whole, the plaintiff's allegations did not constitute a cognizable claim under the Donnelly Act. The court also held that the Donnelly Act requires a conspiracy among two or more competitors. Here, the only conspiracy alleged was between the defendant broker and the defendant co-op corporation, an entity that was not a competitor of plaintiff broker. As a result, the plaintiff had not alleged facts sufficient to support a Donnelly Act violation.

Donnelly Act Claim

Benjamin of Forest Hills Realty, Inc. v. Austin Sheppard Realty, Inc.

NYLJ 9/28/06, p. 26, col. 1

AppDiv, Second Dept

(Opinion by Santucci, J.)

In an action by real estate broker against another broker and a co-operative corporation for violation of the Donnelly Act (General Business Law, sec. 340 et seq.), defendants appealed from Supreme Court's denial of their summary judgment motion. The Appellate Division reversed and dismissed the Donnelly Act claim, holding that plaintiff broker had not identified a relevant geographic market in which the defendants had restrained trade.

On a number of occasions, plaintiff broker had obtained prospective purchasers of co-op shares. On each occasion, the co-op board advised plaintiff broker that the purchaser would not be approved by the board unless defendant broker was the real estate broker for the transaction. Plaintiff broker then brought this action , alleging that the board and defendant broker had conspired to interfere with plaintiff broker's free exercise of trade, in violation of the Donnelly Act. Supreme Court denied defendants' summary judgment motion, concluding that evidence in the record raised questions of fact about whether defendants had conspired to restrain trade. Defendants appealed.

In reversing and granting summary judgment to defendants, the Appellate Division started by noting that the Donnelly Act is generally construed in accordance with the federal Sherman Act. The court then noted that one of the elements of a claim under the Donnelly Act is an allegation of how the economic impact of the alleged conspiracy would restrain trade in the market in question. Here, plaintiffs' complaint identified the relevant market as 'shares in defendant 108-46 70^th Road Owners, Inc. ' ' The court, however, noted that the relevant product market must include all products that are reasonably interchangeable and all geographic areas in which interchangeability occurs. The complaint failed to demonstrate how the alleged restrictions would impair competition in the local real estate market as a whole. Because the complaint did not allege injury to competition in the market as a whole, the plaintiff's allegations did not constitute a cognizable claim under the Donnelly Act. The court also held that the Donnelly Act requires a conspiracy among two or more competitors. Here, the only conspiracy alleged was between the defendant broker and the defendant co-op corporation, an entity that was not a competitor of plaintiff broker. As a result, the plaintiff had not alleged facts sufficient to support a Donnelly Act violation.