Goldfarb V. Virginia State Bar: the Professions Are Subject to the Sherman Act

Missouri Law Review Volume 41 Issue 1 Winter 1976 Article 6 Winter 1976 Goldfarb v. Virginia State Bar: The Professions Are Subject to the Sherman Act Richard B. Tyler Follow this and additional works at: https://scholarship.law.missouri.edu/mlr Part of the Law Commons Recommended Citation Richard B. Tyler, Goldfarb v. Virginia State Bar: The Professions Are Subject to the Sherman Act, 41 MO. L. REV. (1976) Available at: https://scholarship.law.missouri.edu/mlr/vol41/iss1/6 This Article is brought to you for free and open access by the Law Journals at University of Missouri School of Law Scholarship Repository. It has been accepted for inclusion in Missouri Law Review by an authorized editor of University of Missouri School of Law Scholarship Repository. For more information, please contact [email protected]. Tyler: Tyler: Goldfarb v. Virginia State Bar: MISSOURI LAW REVIEW Volume 41 Winter 1976 Number 1 GOLDFARB V. VIRGINIA STATE BAR: THE PROFESSIONS ARE SUBJECT TO THE SHERMAN ACT Richard B. Tyler* I. INTRODUCTION "The nature of an occupation, standing alone, does not provide sanctuary from the Sherman Act ... nor is the public service aspect of professional practice controlling in determining whether § 1 includes professions. ..." With these words, the United States Supreme Court established the applicability of the Sherman Act 2 to the "learned professions." The import of the Court's holding has not been lost on the antitrust enforcement agencies. They have recently filed suit or announced in- vestigations of the activities of other professional organizations.3 Some professionals, on the other hand, have attempted to read the decision OAsst. Prof. of Law, University of Missouri-Columbia; B.S., United States Military Academy, 1954; M.S., Purdue University, 1960; J.D., University of Min- nesota, 1967. 1. Goldfarb v. Virginia State Bar, 95 S. Ct. 2004, 2013 (1975) (citations omitted). 2. Sherman Act ch. 647, 26 Stat. 209, as amended, 15 U.S.C. §§ 1-7 (1970). 3. On Sept. 22, 1975, the Justice Department filed suit (Civ. No. 75-4640) in the Federal District Court for the Southern District of New York against the American Society of Anesthesiologists, challenging the Society's promulgation of "relative value guides," which establish monetary values for particular pro- cedures by anesthesiologists and are used by the Society's members to determine fees. Wall Street Journal, Tuesday, Sept. 23, 1975, at 5, col. 2. The next day, the Federal Trade Commission announced that it is investigating restraints on price advertising by the eyeglass industry. Wall Street Journal, Wednesday, Sept. 24, 1975, at 14, col. 2. More recently, the Federal Trade Commission has begun an investigation of the practice of veterinary medicine, CCH TRADE REG. REP. f 10,167 (1976), and has brought suit against the physician's ethical bans on advertising, American Medical Assn, CCH TRADE REG. RE. ff 21,068 (1976). For its part, the Justice Department prevailed at the district court level in its suit challenging the Na- tional Society of Professional Engineers' ethical ban on price competition, United States v. National Soc'y of Prof. Engrs., 1975-2 TRA.DE CA.s. ff 60,604 (D.D.C. 1975), and is pursuing an investigation into possible agreements in restraint of trade among Texas accountants, Texas State Board of Public Accountancy, Dkt. 75-531, CCH TRADE REG. REP. ff 60,021 (1975). Published by University of Missouri School of Law Scholarship Repository, 1976 1 Missouri Law Review, Vol. 41, Iss. 1 [1976], Art. 6 MISSOURI LAW REVIEW [Vol. 41 even more narrowly than Chief Justice Burger appears to have written it, in an effort to salvage some practices of professional organizations. 4 Despite, or perhaps because of, the Chief Justice's attempt to limit the holding to the facts before the Court, the decision raises more ques- tions than it answers. For example, it is not certain that the decision can be interpreted restrictively. It dearly applies to other professions, as well as to attorneys. The actual scope of the Sherman Act's applicability to other types of professional practices also remains to be delineated in further litigation. Such practices as "advisory" fee schedules, professional licensing restrictions, limits on solicitation and advertising, and boycotts of other, closely related groups will almost certainly be challenged in time, although the present emphasis appears -to be on mandatory fee arrangements for professional services. This article will review briefly the holding and logic of Goldfarb, and consider some of its implications for practices com- mon to most professions. It should be recognized at the outset that there may be other bases on which to challenge particular professional practices, such as infringe- ment of first amendment rights5 or violation of section 1983 of the Civil Rights Act of 1871. 6 Such additional theories, however, are beyond the scope of this article. II. THE GOLDFARB HOLDING7 In 1971 Lewis and Ruth Goldfarb contracted to buy a house in Vir- ginia and contacted an attorney to have the title examined. After he quoted them a fee precisely equal to that suggested in the minimum fee schedule published by the Fairfax County Bar Association, they tried to find an attorney who would examine the title for -less. They wrote 36 attorneys, requesting quotations of their fees. Nineteen replied, none in- dicating that he would charge less than the minimum fee set forth in the schedule; some said that they knew of no attorney who would charge less. The Fairfax County Bar Association, a voluntary association, had no formal power to enforce the schedule. The Virginia State Bar Association, to which all attorneys practicing in Virginia are required to belong, pro- vided the enforcement. The State Bar is the administrative agency of the Virginia Supreme Court for the regulation of the practice of law in Vir- ginia. 8 "The State Bar had never taken formal disciplinary action to. com- pel adherence to any fee schedule, but it published reports in 1962 and 4. See, e.g., Jeffers, Goldfarb v. Virginia State Bar: A Narrow Decision, 38 TExAs B. J. 701 (1975). 5. See, e.g., Virginia Citizens Consumer Counsel, Inc. v. State Board of Pharmacy, 373 F. Supp. 683 (E.D. Va. 1974), cert. granted, 43 U.S.L.W. 3493 (Mar. 18, 1975) (a state statute forbidding advertising prescription drug prices held to.violate the first amendment). 6. See Gibson v. Berryhill, 411 U.S. 564 (1973). 7. 'The statement of facts and procedural history are taken from the Su- preme Court opinion, 95 S. Ct. at 2007-09. 8. VA. CoDE ANN. § 54.49 (Supp. 1974). https://scholarship.law.missouri.edu/mlr/vol41/iss1/6 2 Tyler: Tyler: Goldfarb v. Virginia State Bar: 1976]. : ANTITRUST AND THE PROFESSIONS 1969 condoning fee schedules, and issued two ethical opinions9 which in- dicated. that fee schedules could not be ignored. The second opinion stated that habitually charging less than the suggested minimum fee schedule adopted by a local bar association raised a presumption of professional misconduct. The Goldfarbs had the title examined by the attorney they had first contacted and then brought a class action against the State and County Bar Associations, charging that the minimum fee schedule was a contract, combination, or conspiracy in restraint of trade, in violation of Section 1 of the Sherman Act.10 The district court, trying the issue of liability, held that the minimum fee schedule did violate the Sherman Act and enjoined the use of the schedule, setting the case down for trial to ascertain damages.3" The United States Court of Appeals for the Fourth Circuit reversed as to liability.' 2 Although it agreed that the fee schedule and the enforcement mechanism supporting it substantially restrained competition among attorneys practicing in Fairfax County, it nevertheless exemt ted the State Bar on the ground that it was immuiie under the doc- trine of "'state action" set forth in Parker v. Brown.'3 The court held the County Bar immune because it found that the practice of law was not "trade or commerce," a prerequisite to the application of the Sherman Act.'The majority opinion also recognized a limited exclusion of "learned professions" from the antitrust laws, based upon the special regulation the states impose on the professions, and the fact that some normal com- petitive practices might be inconsistent with such regulation. The ap- pellate court concluded that the fee schedule was one area in which the needs of professional regulation conflicted with the requirements of the antitrust laws, and held the practice of law exempt from the Sherman Act. 'Alternatively, the Fourth Circuit found that the activities of the State and County Bar did not have sufficient impact on interstate commerce to support jurisdiction. The Supreme Court granted certiorari.1 4 The Court said that the issue was "whether the Sherman Act applies 'to services performed by attorneys in examining titles in connection with financing the purchase of real estate."' 5 The Court pursued a four- step analysis: (1) Did the challenged activities amount to price fixing?; (2) If so, were these activities in interstate commerce, or did they affect 9. Virginia State Bar Committee on Legal Ethics, Opinion No. 98 (June 1, 1960); Virginia State Bar Committee on Legal Ethics, Opinion No. 170 (May 28, 1971). 10. 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 hereby declared to be illegal. ... 15 U.S.C. § 1 (1970). 11. 355 F. Supp. 491 (E.D. Va. 1973). 12. 497 F.2d 1 (4th Cir.

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