421 U.S. 773 (1975), 74-70, Goldfarb v. Virginia State Bar

Docket Nº:No. 74-70
Citation:421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572
Party Name:Goldfarb v. Virginia State Bar
Case Date:June 16, 1975
Court:United States Supreme Court

Page 773

421 U.S. 773 (1975)

95 S.Ct. 2004, 44 L.Ed.2d 572

Goldfarb

v.

Virginia State Bar

No. 74-70

United States Supreme Court

June 16, 1975

Argued March 25, 1975

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Syllabus

Petitioners, husband and wife, contracted to buy a home in Fairfax County, Va. and the lender who financed the purchase required them to obtain title insurance, which necessitated a title examination that could be performed legally only by a member of respondent Virginia State Bar. Petitioners unsuccessfully tried to find a lawyer who would examine the title for less than the fee prescribed in a minimum fee schedule published by respondent Fairfax County Bar Association and enforced by respondent Virginia State Bar. Petitioners then brought this class action against respondents, seeking injunctive relief and damages, and alleging that the minimum fee schedule and its enforcement mechanism, as applied to fees for legal services relating to residential real estate transactions, constitute price-fixing in violation of § 1 of the Sherman Act. Although holding that the State Bar was exempt from the Sherman Act, the District Court granted judgment against the County Bar Association and enjoined the publication of the fee schedule. The Court of Appeals reversed, holding not only that the State Bar's actions were immune from liability as "state action," Parke v. Bown, 317 U.S. 341, but also that the County Bar Association was immune because the practice of law, as a "learned profession," is not "trade or commerce" under the Sherman Act; and that, in any event, respondents' activities did not have sufficient effect on interstate commerce to support Sherman Act jurisdiction.

Held: The minimum fee schedule, as published by the County Bar Association and enforced by the State Bar, violates § 1 of the Sherman Act. Pp. 780-793.

(a) The schedule and its enforcement mechanism constitute price-fixing, since the record shows that the schedule, rather than being purely advisory, operated as a fixed, rigid price floor. The fee schedule was enforced through the prospect of professional discipline by the State Bar, by reason of attorneys' desire to comply with announced professional norms, and by the assurance that other lawyers would not compete by underbidding. Pp. 781-783.

Page 774

(b) Since a significant amount of funds furnished for financing the purchase of homes in Fairfax County comes from outside the State, and since a title examination is an integral part of such interstate transactions, interstate commerce is sufficiently affected for Sherman Act purposes notwithstanding that there is no showing that prospective purchasers were discouraged from buying homes in Fairfax County by the challenged activities, and no showing that the fee schedule resulted in raising fees. Pp. 783-785.

(c) Congress did not intend any sweeping "learned profession" exclusion from the Sherman Act; a title examination is a service, and the exchange of such a service for money is "commerce" in the common usage of that term. Pp. 785-788.

(d) Respondents' activities are not exempt from the Sherman Act as "state action" within the meaning of Parker v. Brown, supra. Neither the Virginia Supreme Court nor any Virginia statute required such activities, and, although the State Bar has the power to issue ethical opinions, it does not appear that the Supreme Court approves them. It is not enough that the anticompetitive conduct [95 S.Ct. 2007] is "prompted" by state action; to be exempt, such conduct must be compelled by direction of the State acting as a sovereign. Here the State Bar, by providing that deviation from the minimum fees may lead to disciplinary action, has voluntarily joined in what is essentially a private anticompetitive activity, and hence cannot claim it is beyond the Sherman Act's reach. Pp. 788-792.

497 F.2d 1, reversed and remanded.

BURGER, C.J., delivered the opinion of the Court, in which all other Members joined except POWELL, J., who took no part in the consideration or decision of the case.

Page 775

BURGER, J., lead opinion

MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari to decide whether a minimum fee schedule for lawyers published by the Fairfax County Bar Association and enforced by the Virginia State Bar violates § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1. The Court of Appeals held that, although the fee schedule and enforcement mechanism substantially restrained competition among lawyers, publication of the schedule by the County Bar was outside the scope of the Act because the practice of law is not "trade or commerce," and enforcement of the schedule by the State Bar was exempt from the Sherman Act as state action as defined in Parker v. Brown, 317 U.S. 341 (1943).

I

In 1971 petitioners, husband and wife, contracted to buy a home in Fairfax County, Va. The financing agency required them to secure title insurance; this required a title examination, and only a member of the Virginia State Bar could legally perform that service.1

Page 776

Petitioners therefore contacted a lawyer who quoted them the precise fee suggested in a minimum fee schedule published by respondent Fairfax County Bar Association; the lawyer told them that it was his policy to keep his charges in line with the minimum fee schedule, which provided for a fee of 1% of the value of the property involved. Petitioners then tried to find a lawyer who would examine the title for less than the fee fixed by the schedule. They sent letters to 36 other Fairfax County lawyers requesting their fees. Nineteen replied, and none indicated that he would charge less than the rate fixed by the schedule; several stated that they knew of no attorney who would do so.

The fee schedule the lawyers referred to is a list of recommended minimum prices for common legal services. Respondent Fairfax County Bar Association published the fee schedule although, as a purely voluntary association of attorneys, the County Bar has no formal power to enforce it. Enforcement has been provided by respondent Virginia State Bar, which is the administrative agency2 through which the Virginia Supreme Court regulates the practice of law in that State; membership in the [95 S.Ct. 2008] State Bar is required in order to practice in Virginia.3 Although the State Bar has never taken formal disciplinary action to compel adherence to any fee schedule,

Page 777

it has published reports4 condoning fee schedules, and has issued two ethical opinions5 indicating that fee schedules cannot be ignored. The most recent opinion states that

evidence that an attorney habitually charges

Page 778

less than the suggested minimum fee schedule adopted by his local bar Association, raises a presumption that such lawyer is guilty of misconduct. . . .6

Because petitioners could not find a lawyer willing to charge a fee lower than the schedule dictated, they had their title examined by the lawyer they had first contacted. They then brought this class action against the State Bar and the County Bar7 alleging that the operation of the minimum fee schedule, as applied to fees for legal services relating to residential real estate transactions, constitutes price-fixing in violation of § 1 of the Sherman Act. Petitioners sought both injunctive relief and damages.

After a trial solely on the issue of liability, the District Court held that the minimum fee schedule violated the Sherman Act.8 355 F.Supp. 491 (ED [95 S.Ct. 2009] Va.1973). The

Page 779

court viewed the fee-schedule system as a significant reason for petitioners' failure to obtain legal services for less than the minimum fee, and it rejected the County Bar's contention that, as a "learned profession," the practice of law is exempt from the Sherman Act.

Both respondents argued that their actions were also exempt from the Sherman Act as state action. Parker v. Brown, supra. The District Court agreed that the Virginia State Bar was exempt under that doctrine because it is an administrative agency of the Virginia Supreme Court, and, more important, because its

minor role in this matter . . . derived from the judicial and "legislative command of the State and was not intended to operate or become effective without that command."

The County Bar, on the other hand, is a private organization, and was under no compulsion to adopt the fee schedule recommended by the State Bar. Since the County Bar chose its own course of conduct, the District Court held that the antitrust laws "remain in full force and effect as to it." The court enjoined the fee schedule, 15 U.S.C. § 26, and set the case down for trial to ascertain damages. 15 U.S.C. § 15.

The Court of Appeals reversed as to liability. 497 F.2d 1 (CA4 1974). Despite its conclusion that it

is abundantly clear from the record before us that the fee schedule and the enforcement mechanism supporting it act as a substantial restraint upon competition among attorneys practicing in Fairfax County,

id. at 13, the Court of Appeals held the State Bar immune under Parker v. Brown, supra, and held the County Bar immune because the practice of law is not "trade or commerce" under the Sherman Act. There has long been judicial recognition of a limited exclusion of "learned professions" from the scope of the antitrust laws, the court said; that exclusion is based upon the special form

Page 780

of regulation imposed upon the professions by the States, and the incompatibility of certain competitive practices with such professional regulation. It concluded that the promulgation of a minimum fee schedule is one of

those matters with respect to which an accord must be reached between the necessities of professional regulation and the dictates of the antitrust laws.

The accord reached by that court was to hold the practice of law exempt from the antitrust...

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