Lawline v. American Bar Ass'n, 90-2571
| Decision Date | 05 March 1992 |
| Docket Number | No. 90-2571,90-2571 |
| Citation | 956 F.2d 1378 |
| Parties | , 1992-1 Trade Cases P 69,726 LAWLINE, et al., Plaintiffs-Appellants, v. AMERICAN BAR ASSOCIATION, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Thomas Holstein (argued), Chicago, Ill., Alfred L. Levinson, Des Plaines, Ill., for plaintiffs-appellants.
Gillum Ferguson, Asst. U.S. Atty. (argued), Office of the U.S. Atty., Crim. Div., Darryl L. DePriest (argued), Alison P. Breslauer, A. Benjamin Goldgar, Richard L. Reinish, Robert A. Creamer (argued), Keck, Mahin & Cate, Chicago, Ill., Dennis A. Rendleman, Illinois State Bar Ass'n, Staff Counsel, Springfield, Ill., Janet M. Hedrick, Rene A. Torrado, Jr. (argued), Vedder, Price, Kaufman & Kammholz, Rosalyn B. Kaplan, Asst. Atty. Gen., Office of the Atty. Gen., Nancy K. Needles, Asst. U.S. Atty., Office of the U.S. Atty., Civ. Div., Appellate Section, Fred Foreman, U.S. Atty., Crim. Div., James J. Grogan, James S. Renfroe (argued), Attorney Registration & Disciplinary Comm'n, Chicago, Ill., for defendants-appellees.
Before CUMMINGS and RIPPLE, Circuit Judges, and REYNOLDS, Senior District Judge. *
This case presents antitrust and constitutional challenges to two legal ethics rules recommended by the American Bar Association and adopted by the Illinois Supreme Court and the United States District Court for the Northern District of Illinois. The disciplinary rules at issue forbid lawyers from assisting laypersons in the unauthorized practice of law (the "unauthorized practice rule") and also forbid lawyers from entering into partnerships with non-lawyers if any of the activities of the partnership consist of the practice of law (the "partnership rule"). Specifically, plaintiffs challenge ethics rules 5.4(b) and 5.5(b) contained in the ABA Model Rules of Professional Responsibility (the "Model Rules"). Model Rule 5.4(b) provides that "[a] lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law." Model Rule 5.5(b) states that "[a] lawyer shall not: assist a person who is not a member of the bar in the performance of activity that constitutes unauthorized practice of law." The Illinois Supreme Court and the Northern District of Illinois have adopted these rules verbatim. See Illinois Rules of Professional Conduct, effective August 1, 1990; Rules of Professional Conduct for the Northern District of Illinois, effective November 12, 1991, both containing the unauthorized practice rule at 5.5(b) and the partnership rule at 5.4(b). 1
Plaintiffs contend that these two rules violate Sections 1 and 2 of the Sherman Antitrust Act (15 U.S.C. §§ 1 and 2). Plaintiffs also claim that the adoption of these two rules violates their constitutional right to due process and equal protection, as well as the rights secured them by the First Amendment. As a result of this alleged deprivation of rights, plaintiffs base part of their suit on the Civil Rights Act of 1871 (42 U.S.C. § 1983). They seek an award of money damages and a declaratory judgment that the contested rules are unconstitutional.
The district court dismissed plaintiffs' complaint on a Federal Rule of Civil Procedure 12(b)(6) motion for failure to state a claim on which relief can be granted. This Court has jurisdiction pursuant to 28 U.S.C. § 1291. For the reasons discussed below, we affirm the judgment of the district court.
The first amended complaint describes the initial plaintiff, Lawline, as an unincorporated association of lawyers, paralegals and laypersons with its principal office in Chicago. The other three plaintiffs are Thomas Holstein, an Illinois lawyer who is the managing director and supervising attorney of Lawline; LeNore Nelson, a paralegal serving as Lawline's office manager and head paralegal; and Joyce Novak, a Chicagoan described as a general factory worker for Procter and Gamble Co. who received information from Lawline regarding Chapter 7 bankruptcy proceedings.
According to the plaintiffs, Holstein founded Lawline in 1978 to use law students, paralegals and lawyers to answer legal questions from the public without charge over the telephone and to assist them in representing themselves in routine legal matters. Lawline's other stated purposes are to refer members of the public without financial resources to agencies providing legal services and to refer them to young lawyers who charge reduced fees, thus creating a "prototype legal delivery system" subsidized by referral fees. In its ten years of existence, Lawline is said to have answered legal questions for more than 500,000 people, particularly in Illinois Indiana and Wisconsin, and also nationally through a toll-free telephone number.
Plaintiffs' first amended complaint consists of 109 pages and has 86 pages of exhibits. The complaint names as defendants the American Bar Association ("ABA"), the Illinois State Bar Association ("ISBA"), the Chicago Bar Association ("CBA"), the Justices of the Illinois Supreme Court, the members of its Committee on Professional Responsibility, the members of its Attorney Registration and Disciplinary Commission ("ARDC"), the United States Trustee for the Northern District of Illinois, the United States Trustee's Assistant, and five members of the executive committee of the court below.
The ABA House of Delegates adopted Model Rule 5.4(b) and Rule 5.5(b) in 1983. Plaintiffs allege that the adoption of the two ethics rules at issue was the result of a conspiracy among the ABA House of Delegates, ISBA Delegates, and CBA Delegates to protect traditional law firms and restrain trade. In pursuance of the conspiracy the defendants allegedly agreed to have the three bar associations issue advisory ethics opinions prohibiting non-lawyers from owning financial interests in law firms and prohibiting lawyers from forming partnerships with non-lawyers if any of the activities of the partnership consist of the practice of law.
The Northern District adopted Model Rule 5.4(b) and Rule 5.5(b) in its Rules of Professional Conduct. The district court's general rules have been amended from time to time and its most recent modifications came too late to be mentioned in the amended complaint. They were promulgated on October 29, 1991, and became effective November 12, 1991. The district court's rules still contain the same two assailed provisions. Similarly, the Illinois Supreme Court's Committee on Professional Responsibility proposed identical provisions in 1987, and Rules 5.4(b) and 5.5(b) were incorporated into the Illinois Rules of Professional Conduct effective August 1, 1990.
Plaintiffs further complain that in February 1988, defendants United States Trustee and his assistant reported to the Illinois Supreme Court's Attorney Registration and Disciplinary Commission that non-lawyers at Lawline were giving legal advice to debtors in Chapter 7 bankruptcy proceedings. According to the plaintiffs, this report resulted in an investigation of managing director Holstein. A few months later the United States Trustee filed a motion in a bankruptcy proceeding to enjoin Lawline from engaging in the practice of law in bankruptcy proceedings. He also filed an adversary proceeding against plaintiffs Lawline, Holstein and Nelson in furtherance of the supposed conspiracy.
In their pleadings, plaintiffs assail the partnership rule and the unauthorized practice rule and assert that these provisions resulted from a conspiracy between the courts and the organized bar to monopolize the dissemination of legal advice in violation of the Sherman Act (Count I) and to deprive plaintiffs of their First Amendment rights to freedom of speech and association as well as their rights of due process and equal protection in violation of the 1871 Civil Rights Act (Count II). Count III sought a declaratory judgment that the Northern District and Illinois rules are unconstitutional on their face. 2
Due to these alleged violations, plaintiffs contend that the defendants harmed Lawline by restricting it and other similar private law referral services from advertising. In addition plaintiffs allege that they were injured because Holstein and Nelson were prevented from forming a business entity to provide low-cost legal services, resulting in lost revenues of $650,000. In their prayers for relief, plaintiffs have sought treble damages, attorney's fees, and an injunction prohibiting the enforcement of the challenged rules and requiring defendants to adopt new rules permitting non-lawyers to own interests in law firms. They have also asked for an order requiring the establishment of a $1,000,000 research institute to promote "the development of interprofessional models for the cost-efficient delivery of legal information" and the "assistance of the general public in pro-se representations." Finally, they have sought an order enjoining adoption of a new Illinois Code of Professional Responsibility. However, that request became moot when, after the dismissal of plaintiffs' case, the Illinois Supreme Court repealed the Code of Professional Responsibility effective August 1, 1990, and substituted therefor the Illinois Rules of Professional Conduct. 3
The district court issued a memorandum opinion and order pursuant to Federal Rule of Procedure 12(b)(6) granting the defendants' motions to dismiss for failure to state a claim upon which relief can be granted. Judge Holderman thoughtfully addressed the merits of plaintiffs' claims. He also noted that the over-lengthy complaint was "often confusing, needlessly repetitious, and permeated with unnecessary evidentiary allegations" in violation of Rule 8 of the Federal Rules of Civil Procedure and constituted an alternate basis for dismissal of the complaint. Lawline v. American Bar Ass'n, 738 F.Supp. 288, 291 n. 1 (N.D.Ill.1990).
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