Legal Update 2020
Instructor: John Henderson
Nevada Out-of-State Broker Cooperation Rules Are Not Unconstitutional
Marcus & Millichap Real Estate Inv. Servs. of Nev. v. Decker, 2019 U.S. Dist. LEXIS 113257, D. Nev., Case No. 2:16-cv-01299 (July 8, 2019, appeal pend- ing) (2019)
United States District Court for the District of Nevada
Facts: Nevada’s real estate license laws authorize the issuance of “cooperative certificates” that allow out-of-state brokers to cooperate with Nevada brokers in transactions requiring a Nevada license [Nev. Rev. Stat. §645.605]. However, the rules prohibit out-of-state brokers from using a cooperative certificate to sell Nevada real estate to a Nevada resident. A cooperative certificate only allows the out-of-state broker (or salesman) to offer Nevada real estate for sale to non-residents [Nevada Administrative Code (NAC) §645.185(11)]. Marcus & Millichap, a nation- wide commercial real estate company, and several of its Nevada and out-of-state real estate licensees sued the Nevada Real Estate Division (NRED) and its Administrator and Real Estate Commissioners (the “state defendants”), seeking to halt NRED enforcement proceedings involving allegations that some of the plaintiff licensees assisted or engaged in unlicensed activities, and/or without required cooperative certificates. Among other assertions, the plaintiffs claimed that NAC §645.185(11) violates the “Dormant Commerce Clause”* of the U.S. Constitution. The state defendants moved for summary judgment.
Issue: Do the license laws violate the Dormant Commerce Clause?
Held: No. Summary judgment entered for the state defendants. Case dismissed. The Commerce Clause, Article 1, Section 8, Clause 3 of the U.S. Constitution empowers Congress to regulate interstate commerce. The “Dormant Commerce Clause” refers to precedents establishing that the provision prohibits states from discriminating against or improperly inhibiting interstate commerce, even in the absence of applicable congressional legislation. However, the license laws and rules do not, on their face, unconstitutionally impair interstate commerce because they permit out-of-state individuals to obtain a Nevada broker’s license, impose identical eligibility requirements on non-residents and residents, and grant to both the same authority to operate in Nevada. Nevada has “legitimate concern and authority to regulate professional practices and licensure within its borders,” which interests are particularly strong because states are uniquely empowered to establish real property transaction laws. The burden on interstate commerce is not excessive because the license laws ensure that real estate licensees engaged in Nevada real property transactions “are knowledgeable of the applicable state law and subject to professional standards that help prevent fraud and ensure mini- mum competence.” Permitting out-of-state licensed brokers to conduct real estate business in Nevada only under the limited circumstances granted by a co- operative certificate does not ipso facto create a constitutional requirement that they be granted the same authority as Nevada-licensed brokers. [The plaintiffs have initiated an appeal of this decision in the U.S. Court of Appeals for the Ninth Circuit.]