U.S. v. Texas State Bd. of Public Accountancy

• Decision Date: 09 April 1979
• Docket Number: No. 78-2205,78-2205
• Citation: 592 F.2d 919
• Parties: 1979-1 Trade Cases 62,546 UNITED STATES of America, Plaintiff-Appellee, v. TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 919

592 F.2d 919

1979-1 Trade Cases 62,546

UNITED STATES of America, Plaintiff-Appellee, v. TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY, Defendant-Appellant.

No. 78-2205.

United States Court of Appeals, Fifth Circuit.

April 9, 1979.

David M. Kendall, Jr., Asst. Atty. Gen., John L. Hill, Atty. Gen., Austin, Tex., for defendant-appellant.

Hays Gorey, Jr., Antitrust Div., William D. Coston, John J. Powers, III, John H. Shenefield, Asst. Atty. Gen., Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Before JONES, CLARK and GEE, Circuit Judges.

PER CURIAM:

The judgment appealed from is modified by deleting the paragraph numbered 3 providing:

That Defendant be required to cancel those provisions of its rules of professional conduct which have as their purpose or effect the suppression or elimination of price competition among Defendant's permit holders;

and as modified is affirmed on the basis of the opinions of the district court dated February 18, 1977, and May 5, 1978. 464 F.Supp. 400.

GEE, Circuit Judge, dissenting:

If it is true that the rule here invalidated is that of a "State as sovereign, or, by its subdivisions, pursuant to state policy to displace competition with regulation," then it is immune from antitrust attack. But the proper standard is somewhat more subtle than that ultimately applied by the district court below. Its opinion, adopted by my brothers, states:

Defendant relies upon the case of Parker v. Brown, 317 U.S. 338 (341, 63 S.Ct. 307, 87 L.Ed. 315) (1943), as authority for its assertion that it is immune from the provisions of the Sherman Act. Following the recent ruling of the Supreme Court in City of LaFayette v. La. Power and Light Co., this Court concludes that "the Parker doctrine exempts only anticompetitive conduct engaged in as an act of government by the State as sovereign, or, by its subdivisions, pursuant to state policy to displace competition with regulation or monopoly public service." 46 U.S.L.W. 4265, 4271 (435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364) (U.S. Mar. 28, 1978). In the instant case Rule 14 is not mandated by any state regulation or action. Section 5 of the Accountancy Act is cast in permissive, not mandatory, language and, furthermore, only allows adoption of rules appropriate for maintenance of high standards of integrity in the Accountancy profession. Nowhere in the Act does the State as sovereign mandate the anticompetitive conduct required by Rule 14, nor is such policy dictated by the State. Additionally, it cannot be said that Section 5 of the Act in any way concerns or contemplates "the kind of action complained of" here. 46 U.S.L.W. 4265, 4272 (435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364) (U.S. Mar. 28, 1978).

Accordingly, the Court finds that the State has not directed or authorized the anticompetitive practice at issue and that the Defendant is not exempt from federal antitrust laws.

This reasoning seems to me to miss the point of City of Lafayette in concluding that because the Texas State Board's authority is cast in permissive rather than mandatory language, the Board's action in establishing Rule 14 is not immune. As an agency of the State of Texas, established by the Public Accountancy Act of 1945, Tex.Rev.Civ.Stat.Ann. art. 41a (1969), the Board exercises the sovereign powers of the state or it has no powers at all. Thus, it does not signify, in determining whether the sovereign has acted, that section 5 of the Accountancy Act which delegates the Board rulemaking power permitted but did not mandate Rule 14. Nor is the permissive-mandatory distinction helpful in analyzing whether the Board's disputed action is performed pursuant to a state policy to replace competition with regulation.

The real inquiry required by City of Lafayette, La. v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978), is whether the state legislature Contemplated the challenged anticompetitive restraints in delegating to the State Board its generous powers "to establish and maintain a high standard of integrity in the profession of public accountancy." Tex.Rev.Civ.Stat.Ann. art. 41a, § 5. The Supreme Court explicitly stated that a political subdivision need not be able to point to a "specific, detailed legislative authorization" before it properly may assert a defense of...