Antitrust Law Daily Wrap Up, ANTITRUST—6th Cir.: Dismissal of realtor’s claims against Freddie Mac for exclusionary list upheld, (Jul 28, 2014)

By Linda O’Brien, J.D., LL.M.

A real estate and mortgage broker failed to sufficiently plead federal and state antitrust claims against the Federal Home Loan Mortgage Corporation for placing his name on its exclusionary list, the U.S. Court of Appeals in Cincinnati has ruled. The court determined that the broker did not identify the relevant geographic market suffering from the claimed anticompetitive effects. Thus, the district court’s order dismissing his complaint for failure to state a claim was affirmed (Elias v. Federal Home Loan Mortgage, July 25, 2014, Per Curiam).

William Elias owned Elias Real Estate LLC and Taxfaster LLC, real estate and mortgage broker businesses that were primarily involved in facilitating short sales of real estate as an alternative to foreclosure. In 2012, the Federal Home Loan Mortgage Corporation (Freddie Mac) notified Elias that he and his business entities were added to its Exclusionary List – a list identifying individuals and businesses suspected of engaging in fraud or business practices deemed to present undue risk. After an entity is placed on the list, it may no longer participate, directly or indirectly, in any mortgage transaction involving Freddie Mac. Elias filed suit against Freddie Mac, alleging violations of federal and state antitrust laws, among other claims. Elias contended that that his inclusion on the list caused his real estate business to collapse because third-party mortgage servicers would no longer do business with him. The district court granted Freddie Mac’s motion to dismiss, and Elias appealed.

The appellate court determined that Elias failed to plausibly plead that Freddie Mac’s actions harmed competition in the relevant market as required by the Sherman Act. The complaint focused almost exclusively on harm allegedly done to him and his business. Although Elias added that the public interest suffered when entities were excluded from the market and were unable to provide borrowers with short sale consultation services, he did not plead that prospective customers had been impeded from obtaining the services they required.

Additionally, Elias and Freddie Mac operated in related but distinct markets. The complaint did not state how Freddie Mac’s refusal to deal with certain real estate brokers allowed it to monopolize the market in secondary mortgages and mortgage-backed securities. Finally, the complaint did not allege how other real estate agencies and consumers were harmed by Freddie Mac’s actions, according to the court.

The case is No. 13-2392.

Attorneys: Danila V. Artaev (Law Office of Danila V. Artaev) for William Elias, Elias Real Estate LLC, Taxfaster LLC, and Moody, Keegan, Nelson, & Associates PLLC. Mark S. Landman (Landman, Corsi, Ballaine & Ford) for Federal Home Loan Mortgage Corp.

Companies: Elias Real Estate LLC; Taxfaster LLC; Moody, Keegan, Nelson, & Associates PLLC; Federal Home Loan Mortgage Corp.

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