Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975)

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Syllabus

Petitioners, husband and wife, contracted to buy a home in Fairfax County, Va. and the lender who financed the purchase required them to obtain title insurance, which necessitated a title examination that could be performed legally only by a member of respondent Virginia State Bar. Petitioners unsuccessfully tried to find a lawyer who would examine the title for less than the fee prescribed in a minimum fee schedule published by respondent Fairfax County Bar Association and enforced by respondent Virginia State Bar. Petitioners then brought this class action against respondents, seeking injunctive relief and damages, and alleging that the minimum fee schedule and its enforcement mechanism, as applied to fees for legal services relating to residential real estate transactions, constitute price-fixing in violation of § 1 of the Sherman Act. Although holding that the State Bar was exempt from the Sherman Act, the District Court granted judgment against the County Bar Association and enjoined the publication of the fee schedule. The Court of Appeals reversed, holding not only that the State Bar’s actions were immune from liability as "state action," Parke v. Bown, 317 U.S. 341, but also that the County Bar Association was immune because the practice of law, as a "learned profession," is not "trade or commerce" under the Sherman Act; and that, in any event, respondents’ activities did not have sufficient effect on interstate commerce to support Sherman Act jurisdiction.

Held: The minimum fee schedule, as published by the County Bar Association and enforced by the State Bar, violates § 1 of the Sherman Act. Pp. 780-793.

(a) The schedule and its enforcement mechanism constitute price-fixing, since the record shows that the schedule, rather than being purely advisory, operated as a fixed, rigid price floor. The fee schedule was enforced through the prospect of professional discipline by the State Bar, by reason of attorneys’ desire to comply with announced professional norms, and by the assurance that other lawyers would not compete by underbidding. Pp. 781-783.

(b) Since a significant amount of funds furnished for financing the purchase of homes in Fairfax County comes from outside the State, and since a title examination is an integral part of such interstate transactions, interstate commerce is sufficiently affected for Sherman Act purposes notwithstanding that there is no showing that prospective purchasers were discouraged from buying homes in Fairfax County by the challenged activities, and no showing that the fee schedule resulted in raising fees. Pp. 783-785.

(c) Congress did not intend any sweeping "learned profession" exclusion from the Sherman Act; a title examination is a service, and the exchange of such a service for money is "commerce" in the common usage of that term. Pp. 785-788.

(d) Respondents’ activities are not exempt from the Sherman Act as "state action" within the meaning of Parker v. Brown, supra. Neither the Virginia Supreme Court nor any Virginia statute required such activities, and, although the State Bar has the power to issue ethical opinions, it does not appear that the Supreme Court approves them. It is not enough that the anticompetitive conduct is "prompted" by state action; to be exempt, such conduct must be compelled by direction of the State acting as a sovereign. Here the State Bar, by providing that deviation from the minimum fees may lead to disciplinary action, has voluntarily joined in what is essentially a private anticompetitive activity, and hence cannot claim it is beyond the Sherman Act’s reach. Pp. 788-792.

497 F.2d 1, reversed and remanded.

BURGER, C.J., delivered the opinion of the Court, in which all other Members joined except POWELL, J., who took no part in the consideration or decision of the case.