Surety Title Ins. Agency, Inc. v. Va. State Bar

• Citation: 431 F. Supp. 298
• Decision Date: 25 April 1977
• Docket Number: Civ. A. No. 76-0180-R.
• Court: U.S. District Court — Eastern District of Virginia
• Parties: SURETY TITLE INSURANCE AGENCY, INC., Plaintiff, v. VIRGINIA STATE BAR, Defendant.

431 F. Supp. 298

SURETY TITLE INSURANCE AGENCY, INC., Plaintiff, v. VIRGINIA STATE BAR, Defendant.

Civ. A. No. 76-0180-R.

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

April 25, 1977.

Stephen W. Bricker, Richmond, Va., Alan B. Morrison, Public Citizen Litigation Group, Robert B. Hummel, Washington, D. C., for plaintiff.

John Hardin Young, Stuart H. Dunn, Richmond, Va., for defendant.

MEMORANDUM

MERHIGE, District Judge.

Plaintiff, Surety Title Insurance Agency, Inc. (Surety), brings this action under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, to redress injuries to its business allegedly incurred by virtue of actions of the defendant, Virginia State Bar. Plaintiff seeks monetary, injunctive and declaratory relief. Jurisdiction is attained pursuant to 15 U.S.C. §§ 15 and 26 and 28 U.S.C. § 1337. The matter comes before the Court on cross-motions for summary judgment as to liability. The issues have been briefed and argued by counsel, and the matter is ripe for disposition.

The gist of the plaintiff's complaint is an allegation that the defendant's practice of issuing advisory opinions relating to ethics and the unauthorized practice of law, coupled with the threat of disciplinary proceedings,¹ illegally restrain commerce in the area of title insurance. Specifically, the plaintiff maintains that the defendant's actions constitute an illegal group boycott and an attempt to monopolize in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. Plaintiff does not challenge either the definition of the practice of law as enunciated by the Supreme Court of Virginia nor the correctness of any particular ethical or unauthorized practice of law opinion.² Rather, it is the method by which these opinions are issued that is alleged to be in violation of the federal antitrust laws.³ A description of the opinion issuing process as it relates to title insurance is appropriate to provide the factual predicate for the Court's conclusions.

The Supreme Court of Virginia is legislatively empowered to define what constitutes the practice of law. Va.Code Ann. § 54-48(a) (Repl.Vol.1974). Pursuant to this statute and its inherent authority, the Supreme Court of Virginia in 1938 defined the practice of law, in pertinent part, as follows:

"Generally, the relation of attorney and client exists, and one is deemed to be practicing law, whenever he furnishes to another advice or service under circumstances which imply his possession and use of legal knowledge or skill.

Specifically, the relation of attorney and client exists, and one is deemed to be practicing law, whenever —

(1) One undertakes for compensation, direct or indirect, to advise another, not his regular employer, in any matter involving the application of legal principles to facts or purposes or desires.

(2) One, other than as a regular employee acting for his employer, undertakes, with or without compensation, to prepare for another legal instruments of any character, other than notices or contracts incident to the regular course of conducting a licensed business. . . ."

Rules of the Supreme Court of Virginia, Part Six, Rule 6:I, 216 Va. 1062 (1976). This definition was first drafted by a special subcommittee of attorneys. The Supreme Court ordered release of the proposed definition and solicited public comments. These comments brought about one addition to the proposed definition. The definition as adopted in 1938 remains unchanged today.

The Supreme Court was also authorized to create the Virginia State Bar "to act as an administrative agency of the Court for the purpose of investigating and reporting the violation of such rules and regulations as are adopted by the Court under the article for such proceedings as may be necessary." Va.Code Ann. § 54-49 (1974 Repl. Vol.) The defendant, Virginia State Bar (State Bar), was created pursuant to this authority by the Rules of the Supreme Court of Virginia (Rules of the Court) in 1938. Each attorney practicing law in Virginia is required by statute and the Rules of the Court to be a member of the State Bar. Va.Code Ann. § 54-49 (1974 Repl.Vol.); Rules of the Supreme Court of Virginia, Part Six, Rule 6:IV, ¶ 2, 216 Va. 1141 (1976). The powers of the State Bar have been delegated by the Supreme Court of Virginia to a Council comprised of at least one attorney elected from each judicial circuit in Virginia and six attorneys appointed at large by the Supreme Court of Virginia. The current President, President-elect, and immediate past President of the State Bar serve as ex officio members of the Council. Rules of the Supreme Court of Virginia, Part Six, Rule 6:IV, ¶ 5, 216 Va. 1143 (1976). The Council currently consists of fifty-six elected or appointed members and the three ex officio members.

When the Virginia Supreme Court established the State Bar, it also promulgated rules governing the Bar's organization and government as well as those relating to the Council. Among the various powers vested in the Council is the power to render advisory opinions. Rules of the Supreme Court of Virginia, Part Six, Rule 6:IV, ¶ 9(i), 216 Va. 1146 (1976). Any active member of the State Bar may solicit an advisory opinion "on any question of contemplated professional conduct of such member, and upon such application the Council, or a Committee of the Council appointed for the purpose, shall render such an opinion. In the event the opinion is rendered by a Committee, such member shall have the right of appeal to the Council." Rules of the Supreme Court of Virginia, Part Six, Rule 6:IV, ¶ 10, 216 Va. 1147 (1976). The by-laws of the Council establish five-member committees, appointed by the President from its membership, for both Legal Ethics and Unauthorized Practice of Law. Rules of the Supreme Court of Virginia, Part Six, Rule 6:V, Art. VIII and IX, 216 Va. 1173-1174 (1976).

The advisory opinions are not rendered in an adjudicative or adversarial context. The advisory opinions relating to the unauthorized practice of law are deemed to be of general application. Accordingly, the State Attorney General has advised State Bar members that the Virginia Conflict of Interest Act, Va.Code Ann. § 2.1-352, does not preclude a practicing attorney from voting with respect to an advisory opinion concerning the unauthorized practice of law.⁴ Opinion of the Attorney General of the State of Virginia (July 24, 1974). There is also no provision made for review by any Court of the Unauthorized Practice of Law opinions. An amendment to the rules governing the State Bar to allow for judicial review of advisory opinions was proposed, but rejected by the State Bar in 1938. Accordingly, no opinion of the Ethics Committee or the Unauthorized Practice of Law Committee has ever been presented to or approved by the Supreme Court of Virginia. In short, advisory opinions are issued by lawyers in response to questions submitted by lawyers and no provision is made to inject the participation of non-interested parties into the process.

The area of unauthorized practice of law pertinent to the instant litigation relates to the activities of title insurance companies such as the plaintiff. In 1942, the Unauthorized Practice of Law Committee issued its opinion No. 17 in response to the following inquiry:

"Should definition sic of practice of law be changed so that title companies should certify the validity of real estate and personal property titles?"

The opinion, adopted by the Council, recommended that the definition of the practice of law not be amended so as to allow title insurance companies to certify titles. This opinion is premised upon the belief that the certification of a title constitutes the practice of law within the meaning of the definition articulated by the Supreme Court of Virginia. The absence of an attorney-client relationship between the company and a prospective purchaser of title insurance was viewed to be a source of potential abuse which greatly outweighed the possible benefits accruing to the public should title insurance companies be permitted to certify titles.

The Committee considered the problems associated with title insurance companies again in 1973. This consideration stimulated much debate⁵ within the profession and resulted in the issuance by the Committee of two opinions which were adopted by the Council. Unauthorized Practice of Law Opinion 43 states that a title company would be engaging in the unauthorized practice of law should it issue a title insurance policy to a non-lawyer based upon a title examination conducted by lay employees of the company. This conclusion rests upon the proposition that issuing title insurance constitutes the rendering of a legal opinion as to the sufficiency of a title and is taken to be such by a lay person. The underlying proposition was deemed to be unaffected by the title insurance company's disclaimer, to be issued with each commitment, policy or binder, to the effect that:

THIS IS A TITLE INSURANCE (COMMITMENT) (POLICY) (BINDER) AND IS NOT A TITLE OPINION. THERE MAY BE MATTERS OF RECORD OR NOT OF RECORD WHICH AFFECT THE PROPERTY DESCRIBED IN SCHEDULE A, WHICH ARE NOT LISTED IN SCHEDULE B, AND WHICH THE COMPANY HAS DETERMINED TO ACCEPT AS AN UNDERWRITING RISK.

The proposed practice, falling within the Virginia Supreme Court's general definition of the practice of law coupled with the absence of an attorney-client relationship and accompanying ethical protections was deemed to present an unacceptable risk to the unwary consumer. Unauthorized Practice of Law Opinion 44 holds that upon the request of an attorney, a title insurance company may search a title and furnish such title information to the attorney and issue a commitment, or binder to insure, to whomever the requesting attorney may designate. The presence of an attorney in the transaction, so that opinion holds, "eliminates the evils against which the proscription is directed:...