Goldfarb v. Virginia State Bar

• Decision Date: 05 January 1973
• Docket Number: Civ. A. No. 75-72-A.
• Citation: 355 F. Supp. 491
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Lewis H. GOLDFARB and Ruth S. Goldfarb, Plaintiffs, v. VIRGINIA STATE BAR and Fairfax County Bar Association, Defendants.

355 F. Supp. 491

Lewis H. GOLDFARB and Ruth S. Goldfarb, Plaintiffs, v. VIRGINIA STATE BAR and Fairfax County Bar Association, Defendants.

Civ. A. No. 75-72-A.

United States District Court, E. D. Virginia, Alexandria Division.

January 5, 1973.

Alan B. Morrison, Washington, D. C., for plaintiffs.

Stuart H. Dunn, Asst. Atty. Gen., Richmond, Va., for defendant Virginia State Bar.

T. S. Ellis, III, John H. Shenefield, Lewis T. Booker, Hunton, Williams, Gay, Powell & Gibson, Richmond, Va., for defendant Fairfax Bar Ass'n.

MEMORANDUM OPINION

ALBERT V. BRYAN, Jr., District Judge.

This is a class action brought under the Sherman Act, 15 U.S.C. § 1, for injunctive relief and damages as allowed by 15 U.S.C. §§ 15, 26. The agreement allegedly restraining trade or commerce is a minimum fee schedule adopted by the defendant Fairfax Bar Association, consistent violations of which may subject an attorney to disciplinary measures initiated by committees of the defendant Virginia State Bar.¹

The matter came on for hearing, on the issue of liability only, on December 13, 1972.

The Court adopts as part of its findings of fact the Stipulation of Facts entered into by the parties and filed on December 11, 1972,² the Proposed Findings of Fact submitted by the plaintiff numbered 1, 2, 3, 4, 5, 6, 7 and 8, the Proposed Findings of Fact submitted by the defendant, Virginia State Bar numbered 1 and 2, and Proposed Findings of Fact submitted by the defendant Fairfax Bar Association numbered 6, 9, 10, 11, 12, 13, 18, 20, 21, 24, 25, 28, 29, 33, 34, 35, 36, 37, 38,³ 49 and 54,⁴ copies of which are attached hereto.

Minimum fee schedules are a form of price fixing and therefore inconsistent with antitrust statutes prohibiting anti-competitve activities.

Price fixing is per se an unreasonable restraint of trade. It is not for the courts to determine whether in particular settings price-fixing serves an honorable or worthy end. An agreement, shown either by adherence to a price schedule or by proof of consensual action fixing the uniform or minimum price, is itself illegal under the Sherman Act, no matter what end it was designed to serve. United States v. Real Estate Boards, 339 U.S. 485, 489, 70 S.Ct. 711, 714, 94 L.Ed. 1007 (1950).

The scope of the statutory language in the Sherman Act is so expansive that courts have been reluctant to find exceptions. The language explicitly states that "every contract, combination or conspiracy which restrains commerce among several states is unlawful." (Emphasis supplied.) Illustrative of this reluctance is the refusal to extend baseball's exempt status to other professional sports. See Radovich v. National Football League, 352 U.S. 445, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957); United States v. International Boxing Club, 348 U.S. 236, 75 S.Ct. 259, 99 L.Ed. 290 (1955). The fact that specific exemptions are clearly delineated suggests that ambiguities should be resolved in favor of inclusion. This is especially true where price-fixing is involved since it has been declared both pernicious and lacking in any redeeming social value. Northern Pacific Ry. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1957); United States v. National Ass'n. of Real Estate Boards, supra; see also United States v. Trenton Potteries Company, 273 U.S. 392, 397, 47 S.Ct. 377, 71 L.Ed. 700 (1927):

The aim and result of every price-fixing agreement, if effective is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and fix arbitrary and unreasonable prices. The reasonable price fixed today may through economic and business changes become the unreasonable price of to-morrow. Once established, it may be maintained unchanged because of the absence of competition secured by the agreement for a price reasonable when fixed. Agreements which create such potential power may well be held to be in themselves unreasonable or unlawful restraints. . . .

The minimum fee schedule actually proposes a floor upon which professional fees should be set. This type of price-fixing has been held under other circumstances to be repugnant to the philosophy of the Sherman Act. Plymouth Dealers Ass'n. v. United States, 279 F.2d 128 (9th Cir. 1960). It is contrary to the spirit of competition which sustains a free enterprise system in that it prevents competitors from using their own judgment in determining the value of their own services. Kiefer-Stewart Co. v. Seagram and Sons, 340 U.S. 211, 213, 71 S.Ct. 259, 95 L.Ed. 219 (1951). Although attorneys can violate the proposed fee schedule (at the risk, of course, of being subjected to a charge of unethical conduct) a defendant's liability under the Sherman Act depends not on actual adherence to the schedule but rather on the mere existence of an agreement which restricts competition by price-fixing. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940); Plymouth Dealers Ass'n. v. United States, supra.

There is no distinction between the benefits ascribed to the minimum fee schedule by its advocates and those existing in a minimum sales price if, for example, the latter were to be adopted by General Motors and Ford Motor Company as to suggested sales prices for comparable automobiles. In each instance, a new dealer and a new lawyer, both unfamiliar with the customary charges in the field, would find such a minimum fee or sales price schedule helpful in setting charges. In each instance an adequate fee or price would insure a margin of profit adequate to assure further research and development or continued legal education. In each instance the public would be assured, by an examination of such schedule, that what was being charged was in line with what was generally charged in the field. Yet in none of these instances would a member of the public have any better idea that the fee or price was reasonable after he had seen the schedule than he did before. The minimum fee schedule for real estate settlements, based as it is on a percentage of the purchase price, is particularly hard to justify as having any relation to the labor involved. This is particularly so in view of the fact that the "responsibility" involved is assured by a separate charge for title insurance. The attorney's ultimate "responsibility" is illusory. See Footnote 3, supra. Such an across-the-board rate, coupled with the testimony of both Goldfarb as to his efforts to obtain legal services, and Attorney F. Shield McCandlish that a flat fee results in some overcharges which make up for undercharges, is sufficient for the Court to infer, which it does, that some damage resulted to the plaintiff.

Having concluded that it is a price fixing agreement, there remain the questions whether the activity constitutes or substantially affects interstate commerce, whether professional legal services are a trade within the meaning of the Sherman Act, and whether the activities involved constitute lawfully regulated state action not subject to the provisions of the Sherman Act under Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). All of these questions are raised as defenses by both remaining defendants. They will be considered in the order mentioned.

The facts found by the Court reveal (from what the Court considers a fair sampling of loans made on real estate in Fairfax County, Virginia, and the area generally serviced by the defendant Fairfax Bar Association, in which is located the subdivision of Reston whose residents make up the plaintiff class) that a significant portion of funds furnished for the purchasing of homes in Fairfax County comes from without the State of Virginia. All or nearly all of the lenders making such loans require, as a condition of making the loan, that the title to the property involved be examined and that title insurance be furnished and paid for by the home buyer-mortgagor. This alone warrants the conclusion that interstate commerce is sufficiently affected to sustain jurisdiction under the Sherman Act. There is also uncontradicted evidence that a large percentage of persons who live in Fairfax County work outside of Virginia and that significant amounts of loans on Fairfax County real estate are guaranteed by the United States Veterans Administration and Department of Housing and Urban Development, both headquartered in the District of Columbia. The fees charged for the title examination and insurance just mentioned are covered by the minimum fee schedule here in question. Accordingly, the Court concludes that the requirement of "commerce among the several states" of 15 U.S.C. § 1 is met.

Whether lawyers are exempt from the Sherman Act because they perform personal services as a learned profession has never been squarely met by the Supreme Court. Although the Supreme Court declined to intimate the correctness of applying the term "trade" to professions, it has declared the services of real estate brokers to be a commercial activity carried on for profit regardless of the fact that each is in business on his own. United States v. National Ass'n. of Real Estate Boards, supra, 339 U.S., at 490, 492, 70 S.Ct. 711.

The fact that the business involves the sale of personal services rather than commodities does not take it out of the category of "trade" within the meaning of § 3 of the Clayton Act. Id. at 490, 70 S.Ct. at 715.

Hence, despite dicta by that court, this Court is unwilling to rest its decision on such an exemption. The Court has some question whether the adoption of a minimum fee schedule is itself "professional." It seems to the Court that there is a basic inconsistency between the lofty position that professional services, not commodities, are here involved and the position that a minimum fee schedule is proper. The former properly contemplates differences in abilities, worth and energies expended of those rendering the services. Such...