Goldfarb v. Virginia State Bar, 73-1247

• Citation: 497 F.2d 1
• Decision Date: 08 May 1974
• Docket Number: 73-1248.,No. 73-1247,73-1247
• Parties: Lewis H. GOLDFARB and Ruth S. Goldfarb, Appellants, v. VIRGINIA STATE BAR and Fairfax County Bar Association, Appellees. Lewis H. GOLDFARB and Ruth S. Goldfarb, Appellees, v. FAIRFAX COUNTY BAR ASSOCIATION, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

497 F.2d 1 (1974)

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

Lewis H. GOLDFARB and Ruth S. Goldfarb, Appellees, v. FAIRFAX COUNTY BAR ASSOCIATION, Appellant.

Nos. 73-1247, 73-1248.

United States Court of Appeals, Fourth Circuit.

Argued November 7, 1973.

Decided May 8, 1974.

COPYRIGHT MATERIAL OMITTED

Alan B. Morrison, Washington, D.C. (W. Thomas Jacks, Washington, D. C., on brief) for appellants in No. 73-1247 and for appellees in No. 73-1248.

Stuart Dunn, Asst. Atty. Gen. of Virginia, (Andrew P. Miller, Atty. Gen. of Virginia, and T. J. Markow, Asst. Atty. Gen., of Virginia, on brief) for appellee in No. 73-1247. Lewis T. Booker, Richmond, Va. (John H. Shenefield, T. S. Ellis, III, Hunton, Williams, Gay & Gibson, Richmond, Va., on brief) for appellant in No. 73-1248.

Before BOREMAN, Senior Circuit Judge, CRAVEN and FIELD, Circuit Judges.

BOREMAN, Senior Circuit Judge:

This is a class action brought by Lewis and Ruth Goldfarb on behalf of themselves and certain other homeowners in Reston, Virginia, against the Virginia State Bar (State Bar) and the Fairfax County Bar Association (Association)¹ to recover treble damages for violation of the federal antitrust laws. They allege that the State Bar and the Association have conspired to restrain interstate commerce through the use of fixed fees. Commencing with State Bar Opinion 98 issued on June 1, 1960, the State Bar announced its intention to discipline any attorney who repeatedly charged less than the fees set forth in the minimum fee schedule adopted by his local bar association when motivated by a desire to "increase his practice with resulting personal gain." In 1962 and again in 1969 the State Bar published a "Minimum Fee Schedule Report" intended for the guidance of local bar associations in establishing minimum fee schedules. On June 12, 1969, the Fairfax County Bar Association promulgated a "Minimum Fee Schedule" which closely followed the guidelines set forth by the State Bar. The "Minimum Fee Schedule" was described as "advisory" and was never circulated to Association members; members who desired a copy of the schedule had to specifically request it at the Fairfax County Courthouse. Nevertheless the fee schedule states that "consistent and intentional violation of the suggested minimum fee schedule for the purpose of increasing business can, under given circumstances, constitute solicitation" and result in disciplinary action as provided in State Bar Opinion 98. No disciplinary action has been brought against any member of the Association for failure to adhere to the fee schedule, although the right of the State Bar to do so was reaffirmed in State Bar Opinion 170 issued on May 28, 1971.

On October 26, 1971, the Goldfarbs contracted to purchase a home in Reston, Virginia. To finance the purchase of the home the Goldfarbs secured a home mortgage. The mortgagee required the Goldfarbs to purchase title insurance; this necessitated the employment of a Virginia attorney to conduct a title examination of the real estate to be purchased.

The Goldfarbs contacted numerous attorneys in Northern Virginia in an attempt to secure the necessary legal services at the lowest possible cost.² The record demonstrates that the Goldfarbs were unable to secure these services at a rate less than that prescribed by the "Minimum Fee Schedule." We accept the finding of the district court that "a significant reason for the inability of the Goldfarbs to obtain legal services for the examination of the title to their home for less than the fee set forth in the Minimum Fee Schedule . . . was the operation of the minimum fee schedule system."³

The district court severed the question of liability from that of damages. As to the State Bar the court found no liability and the Goldfarbs have appealed that decision. The court held that the Association had violated the federal antitrust laws and was liable for damages, if any, sustained by members of the plaintiff class. The Association has appealed from that decision.

These appeals have been consolidated for consideration by this court. We first address our attention to the contentions of the Goldfarbs with respect to the State Bar and then proceed to consideration of the issues raised by the Association in its appeal.

I. The Parker v. Brown Exemption Part A—The State Bar

The Goldfarbs complain of the issuance of the 1962 and 1969 fee schedule reports by the State Bar. They also question the validity of State Bar Opinions 98 and 170 which in effect state that it is unethical for an attorney to habitually charge less than the fee called for in an established fee schedule. Plaintiffs contend that the fees charged for legal services incident to the purchase of a home in Northern Virginia have been raised, fixed and maintained at an artificial and noncompetitive level by the State Bar's activities. It is asserted that such activities are in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1.⁴

The district court concluded that the State Bar had not violated the Sherman Act. The court held that the State Bar had acted within the scope of its statutory or rule created authority. Citing Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), in support of its determination that the State Bar was not liable under the Sherman Act, the district court stated:

"The rationale behind the holding of Parker v. Brown, supra, that the Sherman Act restrains only actions of private persons and not state action, applies equally to both a state\'s judicial actions and its legislative actions."

Goldfarb v. Virginia State Bar, 355 F. Supp. 491, 496 (E.D.Va.1973).

Prior to undertaking to apply the standards of the Parker exemption to the facts of this case we deem it advisable to consider the facts and holdings of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), as well as those in Asheville Tobacco Board of Trade, Inc. v. F.T.C., 263 F.2d 502 (4 Cir. 1959), and Washington Gas Light Co. v. Virginia Electric & Power Co., 438 F.2d 248 (4 Cir. 1971).

In Parker a state agricultural proration program for the raisin industry was alleged to be in conflict with federal antitrust laws. Noting the significance of the raisin industry and agriculture in general to the economy of the State, the California Legislature passed the California Agricultural Prorate Act⁵ to insure stability in the marketing of agricultural commodities produced in the State. Brown, a producer and packer of raisins, complained that the programs and policies initiated in response to the Prorate Act violated the Sherman Act. The Court held that the programs were permissible, even assuming the action would have been violative of the antitrust laws had the same plan been adopted by private individuals operating without a legislative mandate.

"But it is plain that the prorate program here was never intended to operate by force of individual agreement or combination. It derived its authority and its efficacy from the legislative command of the state and was not intended to operate or become effective without that command. We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature."

Parker v. Brown, 317 U.S. 341, 350-351, 63 S.Ct. 307, 313, 87 L.Ed. 315 (1943) (accent added). The Court emphasized that the Sherman Act prohibited individual action and not state action. Applying this principle to the facts of Parker, the Court noted that it was the State which had created the machinery for establishing the prorate program. It was the State, acting through the Agricultural Prorate Advisory Commission,⁶ which had adopted the program and enforced it with penal sanctions in the execution of a governmental policy.

The Parker decision contains cautionary language directed at the states. A state cannot grant immunity to those who violate the Sherman Act by authorizing the violations, or by declaring that their action is lawful.⁷ The question then arises : what factors are important in determining if state legislation creates a valid state action exemption or merely creates a shelter for immunity from the Sherman Act.

The Parker Court considered three factors in deciding that the California Agricultural Prorate Act was valid state action. First, the Court noted that the declared purpose of the Act was to conserve the agricultural wealth of the State and prevent its economic waste.⁸ Thus, the Act was for the benefit of the public ;⁹ its purpose was not to give an unfair advantage or monopolistic position to producers and sellers. Secondly, the Court stressed that the regulation of the industry was actively and continually supervised by the State through its Commission.¹⁰ Finally, the Court emphasized that the program received its authority and efficacy from the legislative command. The State conceived the theory of control and then created the machinery for the program.¹¹ The Act itself gave state officials the power to restrict competition among the growers and maintain certain price levels.¹² The satisfaction of these three factors is essential to establish and support a valid claim of the Parker exemption.

In Asheville Tobacco Board of Trade, Inc. v. F. T. C., 263 F.2d 502 (4 Cir. 1959), this court refused to apply the Parker exemption to local tobacco boards of trade. For many years tobacco boards of trade existed at common law in North Carolina by common consent or by contract among the interested individuals. The various boards exercised their power to promulgate regulations governing auction sales of tobacco. Finally the Legislature of North Carolina passed N.C.Gen.Stat. § 106-465¹³ authorizing local tobacco boards of trade to make reasonable rules and regulations for the economic and efficient handling of the sale of leaf tobacco...