Hester v. Martindale-Hubbell, Inc.

• Decision Date: 29 May 1980
• Docket Number: No. 76-0048-CIV-5.,76-0048-CIV-5.
• Citation: 493 F. Supp. 335
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: Oma H. HESTER, Jr., Plaintiff, v. MARTINDALE-HUBBELL, INC., American Bar Association and North Carolina State Bar, Defendants.

493 F. Supp. 335

Oma H. HESTER, Jr., Plaintiff, v. MARTINDALE-HUBBELL, INC., American Bar Association and North Carolina State Bar, Defendants.

No. 76-0048-CIV-5.

United States District Court, E. D. North Carolina, Raleigh Division.

May 29, 1980.

Noel Lee Allen, Barringer, Allen & Pinnix, Raleigh, N. C., for plaintiff.

W. F. Womble, Womble, Carlyle, Sandridge & Rice, Winston-Salem, N. C., for defendant Martindale-Hubbell.

John V. Hunter, III, Hunter & Wharton, Raleigh, N. C., for defendant American Bar Assoc.

H. D. Coley, Jr., Raleigh, N. C., for defendant N. C. Bar Assoc.

MEMORANDUM OF DECISION And ORDER

DUPREE, Chief Judge.

In this antitrust action, plaintiff Hester, an attorney and member of the North Carolina bar, claims he has been unlawfully discriminated against as a result of the advertising policy of defendant Martindale-Hubbell, Inc. According to the plaintiff, Martindale's policy and practice of listing attorneys in its Legal Directory has injured and continues to injure him in the establishment of his law practice. In his six-count complaint, plaintiff contends the American Bar Association ("ABA") conspired with Martindale-Hubbell to restrain trade in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and Sections 75-1 and 75-1.1 of the North Carolina General Statutes. Hester further alleges defendant North Carolina State Bar cooperated in and condoned the discrimination against him, and through the adoption and enforcement of DR2-102¹ of the Code of Professional Responsibility, has denied him due process and equal protection of law.

The case is before the court on the recommendation and supporting memorandum of United States Magistrate Logan D. Howell filed August 31, 1979, that Martindale's motion for summary judgment be denied as to all counts. Martindale-Hubbell has filed extensive objections to the Magistrate's findings, conclusions and recommendations.² Also before the court is the Magistrate's earlier memorandum and recommendation that the North Carolina State Bar's motion for summary judgment be denied.³ The parties have filed no response to this recommendation. For the reasons set forth herein, Martindale-Hubbell's motion for summary judgment is allowed, the North Carolina State Bar's motion for summary judgment is allowed and the action against the ABA is dismissed sua sponte.

FACTUAL SETTING

On August 11, 1973, plaintiff wrote Martindale-Hubbell and requested information concerning the publication of his professional card in the biographical section of the 1974 edition of the Martindale-Hubbell Law Directory (Plaintiff's Complaint, Exhibit D). By letter of December 10, 1973, Martindale-Hubbell informed Hester that an investigation undertaken pursuant to his request resulted in the finding that Hester did not have the necessary endorsements to support an "av", "bv" or "cv" rating (Plaintiff's Complaint, Exhibit H).⁴ In accordance with Martindale's uniform policy of requiring subscribers publishing their professional card in the biographical section of the Directory to have attained either an individual or law firm rating of "av" or "bv," Hester was told that he would appear only in the Directory's geographical section.⁵

COUNT 1

Plaintiff argues that the combined effect of Martindale's advertising policy and the regulation of legal advertising by the ABA and the North Carolina State Bar constitutes a conspiracy in restraint of trade and a violation of the Sherman Act. This conclusion is supported by Hester's analysis of former DR2-102 of the Code of Professional Responsibility.⁶ This disciplinary regulation states that attorneys may advertise in "reputable" law lists and that any law list "certified" by the ABA is conclusively presumed to be reputable. According to Hester, his ability to advertise in the Martindale Directory is subject to the combined regulation and control of Martindale-Hubbell, the ABA and the North Carolina State Bar. Plaintiff asserts the Section 1 conspiracy in restraint of trade is further evidenced by the alleged failure of the ABA and the North Carolina State Bar to "act on the merits" of his complaint against Martindale-Hubbell.

Section 1 of the Sherman Act states that:

"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal ...." 15 U.S.C. § 1.

Essential to jurisdiction over a Section 1 cause of action is that the conspiracy complained of be in restraint of trade or commerce among the several states. Gulf Oil Corporation v. Copp Paving Company, Inc., 419 U.S. 186, 95 S.Ct. 392, 42 L.Ed.2d 378 (1974). Thus, the allegedly illegal conduct must constitute either activities that are in the flow of interstate commerce or activities which, though occurring purely on a local level, substantially affect interstate commerce. Mandeville Island Farms, Inc. v. American Crystal Sugar Company, 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948); Harold Friedman, Inc. v. Thorofare Markets, 587 F.2d 127, 132 (3rd Cir. 1978). Martindale-Hubbell contends plaintiff has failed to show that his law practice is within the flow of interstate commerce or that it has a substantial effect on interstate commerce.

Responding to defendant Martindale's motion, plaintiff argues that the burden is upon the moving party to show that there is no effect on interstate commerce. Hester rests upon his initial assertion that interstate commerce has been affected and claims Martindale has offered no evidence to the contrary. Paragraph 20 of the complaint clearly focuses upon the effect of defendants' alleged illegal acts upon Hester's business and the "advertising of professional legal services available for sale and delivery to the public in the State of North Carolina and particularly in the 25th Judicial District . . .." While this allegation pertains to purely local impact, Hester has stated in paragraph 9 that the Directory is published and distributed in interstate commerce in such a manner and with contents calculated to restrain interstate commerce by affecting the sale and delivery of legal services. While Martindale has focused upon plaintiff's law practice and argued that he must show its effects on interstate commerce, Hester contends the pervasiveness of the Martindale Directory within the legal profession and its impact upon the availability of legal services is sufficient to establish the requisite effect on interstate commerce.

The proper perspective from which to judge the affecting commerce issue was reiterated in Greenville Publishing Company, Inc. v. Daily Reflector, Inc., 496 F.2d 391, 396 (4th Cir. 1974):

"Defendants urge us to hold that the only relevant inquiry is the victim's involvement in interstate commerce... The Supreme Court has not endorsed this theory.... The Supreme Court's approach strongly implies that the Sherman Act protects the market as well as the victim."

See Page v. Work, 290 F.2d 323 (9th Cir. 1961). Granting plaintiff an exceptionally liberal interpretation of his complaint, the court finds that it cannot hold the alleged unlawful acts do not affect interstate commerce as a matter of law. This finding is made solely for purposes of the instant motion.

Section 1 applies to combinations, contracts and conspiracies, express or implied, which restrain interstate trade. United States v. Parke, Davis & Company, 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). Essential to such a violation of the antitrust laws is an agreement or combination "the purpose and effect of which is restraint of trade and suppression of competition." Viking Theatre Corporation v. Paramount Film Distributing Corporation, 320 F.2d 285, 293 (3d Cir. 1963). In the present case, plaintiff argues that the defendant bar associations, through their codes of professional responsibility and the ABA's process of law lists certification,⁷ have conspired with Martindale-Hubbell to exclude him from advertising in the biographical section of the Directory and thereby unlawfully restrained interstate trade. According to Hester, the conspiracy is further evidenced by the fact that (a) for thirty years prior to 1974, the ABA provided its membership list to Martindale free of charge;⁸ (b) the ABA has been provided yearly copies of the Directory without cost; and (c) ABA members are so designated in the Directory.

In Harold Friedman, Inc. v. Kroger Company, 581 F.2d 1068 (3d Cir. 1978), the Court of Appeals for the Third Circuit analyzed the Supreme Court's opinion in Albrecht v. Herald Company, 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968), for guidance in determining when the concerted activity or conspiracy requirement of Section 1 has been met. The Friedman court identified the following crucial factors to test for "concerted activity" within the meaning of the Sherman Act:

"(1) All members of the combination knew of the defendant's purpose to restrain trade; (2) at least two members of the combination benefited by the restraint of trade and, in that sense, shared a common purpose in restraining trade; (3) the agreement by two members of the combination actually restrained trade, as opposed to merely facilitating the restraint; and (4) at least two members of the combination intended to restrain trade." Harold Friedman, Inc., 581 F.2d at 1073.

See also Quality Mercury, Inc. v. Ford Motor Company, 542 F.2d 466 (8th Cir. 1976), cert. denied, 433 U.S. 914, 97 S.Ct. 2986, 53 L.Ed.2d 1100 (1977); Cartrade, Inc. v. Ford Dealers Advertising Association, 446 F.2d 289 (9th Cir. 1971), cert. denied, 405 U.S. 997, 92 S.Ct. 1249, 31 L.Ed.2d 465 (1972).

Applying the Friedman analysis in the present case: first, Hester makes a sweeping accusation that Martindale-Hubbell "in combination and conspiracy with the American Bar Association ... planned, directed, controlled, published, and distributed ... the Martindale-Hubbell Law Directory in...