Roy L. Price, Metairie, La., Cynthia Samuel, Tulane University School of Law, New Orleans, La., for Sandra, Inc.

Arthur L. Ballin, Frank C. Dudenhefer, New Orleans, La., Harry McCall, Jr., Robert S. Rooth, New Orleans, La., for Real Estate Bd. of New Orleans.

Edward F. Wegmann, F. P. Westenberger, New Orleans, La., for Waguespack, Pratt, Inc.

Harry S. Redmon, Jr., Rutledge Clement, Jr., New Orleans, La., for Gertrude Gardner, Inc.

Charles F. Barbera, Metairie, La., for Stan Weber.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GEWIN, GODBOLD and MORGAN, Circuit Judges.

This is an alleged class action brought on behalf of buyers and sellers of residential property in the New Orleans area. Claiming that the defendant realty associations and realtors have conspired to fix the prices of their services, the plaintiffs seek declaratory and injunctive relief as well as the recovery of treble damages. In proceedings below, the defendants filed a motion to dismiss1 asserting that the challenged brokerage activities were wholly intrastate in nature and thus fell beyond the reach of federal antitrust prohibitions. Initially, the district court withheld ruling on this motion and prescribed further discovery limited to the question of whether the facts of this case could be brought within Goldfarb v. Virginia State Bar, 421 U.S. 733, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1974). After further discovery, the court concluded that the brokerage activity at issue neither occurs in nor substantially affects interstate commerce; accordingly, the defendants' motion to dismiss was granted. On appeal, a multi-faceted challenge is raised against the lower court dismissal. Examining the various contentions in light of the particular averments of the pleadings, we agree with the lower court.

Our starting point is the recognition that jurisdiction under the Sherman Act extends to the furthest reaches of congressional power to regulate commerce. United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 558-559, 64 S. Ct. 1162, 88 L. Ed. 1440 (1944). The constitutional boundaries of congressional power vary according to the nature of the activity and regulatory scheme at issue. "There is no single concept of interstate commerce which can be applied to every federal statute regulating commerce." McLeod v. Threlkeld, 319 U.S. 491, 495, 63 S. Ct. 1248, 1250, 87 L. Ed. 1538 (1943). Under the Sherman Act, this vast, intractable expanse of federal jurisdiction is defined through a dual analysis. Jurisdiction is conferred if the acts complained of occur in the flow of commerce, or if these acts, though local in nature, substantially affect interstate commerce. Battle v. Liberty Nat'l Life Ins. Co., 493 F.2d 39, 395 (5th Cir. 1974), cert. denied, 419 U.S. 1110, 95 S. Ct. 784, 42 L. Ed. 2d 807 (1975); Las Vegas Merchant Plumbers Ass'n v. United States, 210 F.2d 732, 739 n. 3 (9th Cir.), Cert. denied, 348 U.S. 817, 75 S. Ct. 29, 99 L. Ed. 645 (1954). With the "in commerce" test, the impact on interstate commerce is judged according to a qualitative standard even insubstantial activity placed directly in the flow of commerce satisfies the jurisdictional requisite. Radiant Burners, Inc. v. Peoples Gas, Light & Coke Co., 364 U.S. 656, 81 S. Ct. 365, 5 L. Ed. 2d 358 (1961). The "effect on commerce" test, however, requires a quantitative analysis of the substantiality of the impact on interstate commerce. Mandeville Island Farms v. United States, 334 U.S. 219, 68 S. Ct. 996, 92 L. Ed. 1328 (1948). Thus, activity imposing merely an "incidental" or "insubstantial" effect on commerce may fall beyond federal power. Apex Hosiery Co. v. Leader, 310 U.S. 469, 510, 60 S. Ct. 982, 84 L. Ed. 1311 (1940).

In the present case, the appellants argue that in today's world, real estate brokerage activities meet both tests of jurisdiction. We emphasize, though, that with both the "in commerce" and "effect on commerce" tests, we do not consider all of the ramifications that real estate sales have on nation-wide commerce. Instead, we must focus on the impact of the particular activities challenged in the appellants' complaint. The test is not that "the acts complained of affect a business engaged in interstate commerce, but that the conduct complained of affects the interstate commerce of such business." Page v. Work, 290 F.2d 323, 330 (9th Cir.), Cert. denied,368 U.S. 875, 82 S. Ct. 121, 7 L. Ed. 2d 76 (1961). Examining the specific acts complained of in this case, we hold that they fail to establish jurisdiction under the "in commerce" test. The complaint alleges price-fixing of fees for the defendants' services in connection with sales of residential real estate in the New Orleans area. Such activity is entirely local in character. Real property is itself the quintessential local product. Further, the only sales activity mentioned in the pleadings occurs wholly intrastate. In such circumstances lower courts have consistently held that real estate brokerage does not fall within the flow of interstate commerce. Marston v. Ann Arbor Property Mgt. Ass'n, 302 F. Supp. 1276, 1279-80 (E.D.Mich.1969), Aff'd,422 F.2d 836 (6th Cir. 1970); Cotillion Club, Inc. v. Detroit Real Estate Bd., 303 F. Supp. 850 (E.D.Mich.1964). Moreover, a Supreme Court decision considering real estate activities in Washington, D. C. noted, "(t)he fact that no interstate commerce is involved is not a barrier to this suit." United States v. National Ass'n of Real Estate Bds., 339 U.S. 485, 488, 70 S. Ct. 711, 714, 94 L. Ed. 1007 (1950). Within our circuit is the view that this dictum supports concluding that real estate brokers do not operate within the flow of commerce. Hill v. Art Rice Realty Co., 66 F.R.D. 449, 454 (N.D.Ala.1974), Aff'd, 511 F.2d 1400 (5th Cir. 1975). In denying jurisdiction under the "in commerce" test, we emphasize the limited scope of our holding. Here we are not considering pleadings that allege price fixing in appreciable sales of realty to out-of-state buyers. That might be a different matter.2 Instead, this complaint asserts only that some individuals victimized by the defendants are persons moving in and out of the New Orleans area, "(t)he cases uniformly hold that the mere movement of individuals from one state to another in order to utilize particular services does not transfer those services into interstate services within the meaning of the Sherman Act." (cites omitted). Diversified Brokerage Services, Inc. v. Greater Des Moines Bd. of Realtors,521 F.2d 1343, 1346 (8th Cir. 1975).

The more compelling jurisdictional argument advanced by the appellants is their contention that the controverted brokerage activities substantially affect interstate commerce. This question has spawned a significant conflict of authority. Cases finding an interstate commerce nexus include United States v. Atlanta Real Estate Bd. 1972 Trade Reg.Rep. P 73, 825 (N.D.Ga.1971); Knowles v. Tuscaloosa Bd. of Relators, No. 75-P-591 (N.D.Ala.) (unreported); Wiles v. Tampa Bd. of Realty, Inc., No. 74-136 Cir. T-K (M.D.Fla.) (unreported); United States v. Jack Foley Realty, Inc., (1977) Trade Reg.Rep. (D.Md.1977); Gateway Assoc. Inc. v. Essex-Costello, Inc., 380 F. Supp. 1089, 1094 (N.D.Ill.1974); Mazur v. Behrens, (1974-1) Trade Reg.Rep. P 75,070 (N.D.Ill.1972).3 Among the decisions rejecting the sufficiency of the interstate commerce element are Manion v. Jefferson Bd. of Realtors, No. 73-2604 (E.D.La.1974), Aff'd, No. 74-1901 (5th Cir. 1975); Income Realty & Mortgage, Inc. v. Denver Bd. of Realtors, No. 77-2051, 578 F.2d 1326 (10th Cir. 1978) (opinion emphasized no Per se restraint involved); Bryan v. Stillwater Bd. of Realtors, No. 77-1111, 578 F.2d 1319 (10th Cir. 1977); Marston v. Ann Arbor Property Mgt. Ass'n, 302 F. Supp. 1276 (E.D.Mich.1969), Aff'd, 422 F.2d 836 (6th Cir. 1970); Cotillion Club, Inc. v. Detroit Real Estate Bd., 303 F. Supp. 850 (E.D.Mich.1964). Cf. Hill v. Art Rice Realty, 66 F.R.D. 449, 511 (N.D.Ala.1974), Aff'd 511 F.2d 1400 (5th Cir. 1975) (defendants' position had strong support). These diverse conclusions result in part from the varying factual gradations alleged. Instead of claiming to neatly reconcile these decisions though, we return to our polestar for analysis the specific allegations of the complaint in this case. One paragraph says that many of the defendants' customers are "persons moving into and out of the Greater New Orleans area." For the same reason that such movement does not thrust intrastate activity "in commerce," courts have held that the passage of people across state lines to procure services does not mean that those services have a substantial effect on interstate commerce. E. g., Cotillion Club, Inc. v. Detroit Real Estate Bd., supra.4

The second and primary averment is that the defendants participate in securing home financing and title insurance "obtained from sources outside the State of Louisiana." Armed principally with this allegation, the appellants advance three arguments to overcome the district court's dismissal of their action. First, they contend that allegations of Per se violations, such as price fixing, give rise to a presumption of a substantial effect on commerce. Next, appellants argue that even without the benefit of this presumption, the facts and allegations of the present case are controlled by the Supreme Court's decision in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1975). Finally, they urge that even if presently established facts are insufficient, they are entitled to a trial on the merits to more fully explore their jurisdictional allegations. With all three contentions, we must disagree.

Initially, we reject the argument that an allegation of a Per se violation creates presumptive federal jurisdiction. As the lower court correctly observed, the Per se rule bears solely on the merits of a claim by conclusively establishing the unreasonableness of a particular restraint. This principle does not eliminate the need for a jurisdictional determination of whether a restraint sufficiently impacts on commerce that is interstate. Supreme Court decisions have never said that a Per se allegation reduces jurisdictional requisites. On the contrary, the Court has analyzed jurisdiction without differentiating between Per se and rule of reason allegations. Compare Goldfarb v. Virginia State Bar, 421 U.S. 773, 783-785, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1975) With United States v. Women's Sportswear Mfg. Ass'n, 336 U.S. 460, 464, 69 S. Ct. 714, 93 L. Ed. 805 (1949).5

In asserting that Per se cases carry built-in jurisdiction, the appellants point to the seemingly abbreviated commerce clause analysis in Burke v. Ford, 389 U.S. 320, 88 S. Ct. 443, 19 L. Ed. 2d 554 (1967). The facts of that case, however, do not suggest a Per se short-cut through jurisdiction. Instead, the opinion follows a jurisdictional methodology reflected in such Supreme Court decisions as Goldfarb v. Virginia State Bar, supra; United States v. Women's Sportswear Mfg. Ass'n, 336 U.S. 460, 69 S. Ct. 714, 93 L. Ed. 805 (1949); Mandeville Island Farms v. American Crystal Sugar Co., 344 U.S. 219, 68 S. Ct. 996, 92 L. Ed. 1328 (1948); United States v. Yellow Cab Co., 332 U.S. 218, 67 S. Ct. 1560, 91 L. Ed. 2010 (1947).6 These opinions have not relied upon data showing a demonstrable and deleterious impact upon interstate commerce. Rather, the analysis entails an identification of a substantial quantity of interstate commerce and then a determination of whether the allegedly restrained activity plays a "necessary" or "integral" role in that substantial commerce. For example, in Burke v. Ford, the controverted interstate commerce was liquor. Because every bottle of liquor sold in Oklahoma was manufactured out-of-state, both the substantiality and the interstate character of this commerce was manifest. The next step in the analysis is to connect this substantial interstate commerce to the alleged restraints. The plaintiffs in Burke v. Ford Asserted that the liquor wholesalers in Oklahoma had conspired to effect horizontal territorial divisions. Because the entire liquor traffic was distributed through the wholesaler defendants, the alleged restraint operated in an activity that was clearly a "necessary" and "integral" part of interstate commerce. Thus, Burke v. Ford comports with a firmly entrenched mechanism for jurisdictional analysis and in no way imparts a reduced threshold for Per se cases.

Rejecting the contention that Per se Allegations provide automatic jurisdiction, we turn to appellants' claim that this case is controlled by Goldfarb v. Virginia State Bar, supra. Underlying the Supreme Court's determination of jurisdiction in Goldfarb was the two-fold analysis that identifies substantial interstate commerce, then ascertains whether the allegedly restrained activity is "integral" or "necessary" to that commerce. In Goldfarb, the commerce was the interstate business of title insurance and home financing. The record shows that millions of out-of-state dollars flowed into Virginia as a consequence of these transactions; accordingly, the substantiality of this commerce was beyond question. The activity charged in Goldfarb was price-fixing by attorneys of their fees for title examinations. To connect the alleged restraint to the interstate commerce, the Supreme Court affirmed detailed district court findings which established

(i)n financing realty purchases lenders require, 'as a condition of making the loan, that the title to the property involved be examined . . . . Thus a title examination is an integral part of an interstate transaction . . . .'

421 U.S. at 784, 95 S. Ct. at 2011, Quoting 355 F. Supp. at 494. By statute, title examinations could be performed only by attorneys. Therefore, the alleged price-fixing of fees for this service operated on an activity that was "integral" to interstate transactions of home financing and title insurance:

Given the substantial volume of commerce involved, and the Inseparability of this particular legal service from the Interstate aspects of real estate transactions, we conclude that interstate commerce has been sufficiently affected.

421 U.S. at 785, 95 S. Ct. at 2012 (emphasis added, cites omitted).

The lower court in the present case distinguished Goldfarb by finding that real estate brokerage constituted an incidental rather than integral part of the interstate commerce of title insurance and realty financing. Through ample discovery, the lower court heard essentially uncontradicted evidence that the brokerage function terminates when a home buyer and seller are brought together. This activity does not extend to the procurement of financing or title insurance. With respect to these latter transactions, the district court found that brokers occupy no more than an incidental, informational role. Therefore, unlike the attorneys in Goldfarb whose participation in title insurance was statutorily mandated, real estate brokers are neither necessary nor integral participants in the "interstate aspects" of realty financing and insurance.

This dichotomy between incidental and integral functions is based upon United States v. Yellow Cab Co., 332 U.S. 218, 67 S. Ct. 1560, 91 L. Ed. 2010 (1947).7 In Yellow Cab, the Supreme Court considered the relation of interstate commerce to two different cab operations. One service operated exclusively between rail terminals in Chicago carrying people from one station to the next to continue their interstate journeys. This taxi activity, and the trade restraint acting upon it, were held to be within the reach of the Sherman Act. A second cab service at issue was the general transportation of people within the Chicago area. Although this latter service frequently encompassed the movement of people to and from train stations, often to commence journeys out-of-state, the Supreme Court held that the general operation of cabs did not sufficiently implicate interstate commerce. "(W)hen local taxicabs merely convey interstate train passengers between their homes and the railroad station in the normal course of their independent local service, that service is not an integral part of interstate transportation." 332 U.S. at 233, 67 S.Ct. at 1568. "In short, their relationship to interstate transit is only casual and incidental." Id. at 231, 67 S.Ct. at 1567. The distinction Yellow Cab draws between integral and incidental activities corresponds to the distinction between Goldfarb and the present case. Like the first cab operators in Yellow Cab, the attorneys in Goldfarb were invariable and indispensable components of interstate commerce. And, as with the second cab activity in Yellow Cab, real estate brokerage does not inherently comprehend the interstate aspects of their business. "To the taxicab driver" or the real estate broker, "it is just another local fare." Id. at 232, 67 S.Ct. at 1567.

We endorse the lower court's conclusion that Goldfarb does not govern this case. The factual determinations underlying the holding that real estate brokerage does not substantially affect interstate commerce must be upheld unless clearly erroneous. United States v. Oregon Medical Society, 343 U.S. 326, 338-339, 72 S. Ct. 690, 96 L. Ed. 978 (1952). Thus, our posture contrasts with Goldfarb in which the Supreme Court reviewed factual determinations in support of an "integral" role for attorneys.8 In the present case, we find substantial evidence that real estate brokers occupy no more than an "incidental" role in interstate commerce. Therefore, jurisdiction is not established through analysis of Goldfarb.

Rejecting the appellants' theories of Per se jurisdiction and Goldfarb, we come to their claim that they are entitled to a trial on the merits to more fully develop their jurisdictional assertions. For many courts, the dazzling complexity of antitrust litigation rarely commends dismissal in advance of trial. See, e. g., Cherney Disposal Co. v. Chicago & Suburban Refuse Disposal Ass'n, 484 F.2d 751, 759 (7th Cir. 1973), Cert. denied, 414 U.S. 1131, 94 S. Ct. 870, 38 L. Ed. 2d 755 (1974). See also Mortensen v. First Federal Sav. & Loan Ass'n, 549 F.2d 884, 892-897 (3d Cir. 1977). Competing against this concern, however, is the reality that antitrust suits frequently entail enormous expense. Win, lose, or draw regarding the final outcome, the very fact of trial may result in crushing costs and hardships to the defendant. To balance both sides of the antitrust equation, this court authorizes pre-trial dismissal except "where the factual and jurisdictional issues are completely intermeshed . . ." McBeath v. Inter-American Citizens for Decency Committee, 374 F.2d 359, 363 (5th Cir.), Cert. denied, 389 U.S. 896, 88 S. Ct. 216, 19 L. Ed. 2d 214 (1967). If jurisdiction and the merits are inextricably bound, "the jurisdictional issues should be referred to the merits, for it is impossible to decide one without the other." Id. See also Battle v. Liberty National Life Ins. Co., 493 F.2d 39, 47 (5th Cir. 1974), Cert. denied, 419 U.S. 1110, 95 S. Ct. 784, 42 L. Ed. 2d 807 (1975).9

Applying this standard to the present case, we hold that pre-trial dismissal was proper. Here, the issues of jurisdiction could be readily separated from the merits. The substantiality of particular interstate commerce and the nature of the defendants' role in such commerce comprise one issue. A separate analytic concept is raised by the question of whether these defendants conspired to fix the price for their services. Confronting the discrete issue of the commerce nexus, the district court allowed the appellants months of discovery to develop their Goldfarb analogy, which was practically the sole jurisdictional argument proffered. The other interstate commerce theory to be derived from the pleadings, the movement of out-of-state home buyers into the New Orleans area, was correctly discarded as a matter of law. We therefore hold that it was not "impossible to decide the one without the other." In fact, the jurisdictional issue could be and was extricated from the merits, thoroughly aired in advance of trial, and correctly resolved by the district court. Compare McBeath v. Inter-American Citizens for Decency Committee, supra, with Rosemound Sand & Gravel v. Lambert Sand & Gravel, 469 F.2d 416 (5th Cir. 1972). Accordingly, we hold that pre-trial dismissal was warranted in this case.

With our endorsement of the district court's determination that this particular real estate activity neither occurs in nor substantially affects interstate commerce, we must ascertain the character of the adjudication to be rendered. The district court styled its judgment as a 12(b)(6) dismissal for failure to state a claim which was treated as a summary judgment insofar as matters outside of the pleadings were considered. Additionally, though, the court said that "the motion might properly be viewed as one for dismissal for lack of subject matter jurisdiction. We hold that this latter characterization reflects the proper disposition of this case. Because the sufficiency of the commerce nexus is both a substantive element and a jurisdictional requisite for an antitrust action, there are diverse if not disparate viewpoints on the proper procedural vehicle for resolving dismissal motions. See generally Mortensen v. First Federal Sav. & Loan Ass'n, 549 F.2d 884, 890-897 (3d Cir. 1977). And yet, whether the vehicle is a 12(b)(6) motion on the merits or a 12(b)(1) jurisdictional attack, the analysis of interstate commerce is the same. Hospital Bldg. Co. v. Rex Hospital Trustees,425 U.S. 738, 742 n. 1, 96 S. Ct. 1848, 48 L. Ed. 2d 338 (1976). In Rex Hospital, the court utilized Rule 12(b)(6) to hold that particular allegations adequately asserted the necessary commerce nexus. In such a case, the merits are properly reached because, with the substantive law determination that interstate commerce is sufficiently implicated, the adequacy of the jurisdictional predicate is also established. A markedly different situation arises, however, in the present case as we hold that the necessary relationship to commerce is missing. Although this conclusion might be viewed as a summary dismissal on the merits of appellants' claim, it also means that we lack subject matter jurisdiction of this action. This latter determination that jurisdiction is wanting must displace any conclusion as to the sufficiency of the appellants' claim because, where there is no jurisdiction, we do not reach the merits. E. g., Mitchell v. Maurer, 293 U.S. 237, 244, 55 S. Ct. 162, 79 L. Ed. 338 (1934). " It must be fundamental that if a court is without jurisdiction of the subject matter it is without power to adjudicate and the case could be properly disposed of only by dismissal of the complaint for lack of jurisdiction." Stewart v. United States, 199 F.2d 517, 519 (7th Cir. 1952). Accordingly, we hold that the proper disposition of this action requires a dismissal for lack of jurisdiction. Cf. Rosemound Sand & Gravel v. Lambert Sand & Gravel, supra.

In conclusion, we speak to the appellants' argument that the full realization of congressional policies mandates expansive judicial construction of the commerce clause. As the appellants observe, the acceptance of commerce clause limitations is an acknowledgment that the federal government is powerless to remedy alleged wrongs. Juxtaposed against this acknowledgment, however, is the growing spirit of federalism manifested at all levels of judicial and legislative decisionmaking.10 This momentum is fueled by the realization that state processes are available to combat the full gamut of wrong doing, often including alleged restraints of trade.

Even in the absence of state remedy, federal power cannot be extended simply because some wrong might otherwise be uncorrected. It is axiomatic that legislative laws and policies cannot bend principles of constitutional dimensions. Thus, no matter how beneficial, the Sherman Act cannot be thrust past its commerce clause anchorage into the residual expanse of state and individual prerogative. Such a limitation of federal authority, whether requiring the dismissal of an antitrust suit or the freeing of a criminal defendant, is a necessary concomitant of private freedoms. With this acceptance of the limits of judicial power, we hold that there is no jurisdiction to consider this action and therefore order the case

DISMISSED.