Lewis H. GOLDFARB et al.
v.
VIRGINIA STATE BAR et al.

Supreme Court of the United States
Decided June 16, 1975.
421 U.S. 773, 95 S.Ct. 2004

Mr. Chief Justice BURGER delivered the opinion of the Court.

We granted certiorari to decide whether a minimum-fee schedule for lawyers published by the Fairfax County Bar Association and enforced by the Virginia State Bar violates s 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. s 1. ...

I

In 1971 petitioners, husband and wife, contracted to buy a home in Fairfax County, Va. The financing agency required them to secure title insurance; this required a title examination, and only a member of the Virginia State Bar could legally perform that service. [FN1] *776 Petitioners therefore contacted a lawyer who quoted them the precise fee suggested in a minimum-fee schedule published by respondent Fairfax County Bar Association; the lawyer told them that it was his policy to keep his charges in line with the minimum-fee schedule which provided for a fee of 1% of the value of the property involved. Petitioners then tried to find a lawyer who would examine the title for less than the fee fixed by the schedule. They sent letters to 36 other Fairfax County lawyers requesting their fees. Nineteen replied, and none indicated that he would charge less than the rate fixed by the schedule; several stated that they knew of no attorney who would do so.

FN1. Unauthorized Practice of Law, Opinion No. 17, Aug. 5, 1942, Virginia State Bar--Opinions 239 (1965).

The fee schedule the lawyers referred to is a list of recommended minimum prices for common legal services. Respondent Fairfax County Bar Association published the fee schedule although, as a purely voluntary association of attorneys, the County Bar has no formal power to enforce it. Enforcement has been provided by respondent Virginia State Bar which is the administrative agency [FN2] through which the Virginia Supreme Court regulates the practice of law in that State; membership in the State Bar is required in order to practice in YVirginia. [FN3] Although the State Bar has never taken formal disciplinary action to compel adherence to any fee schedule, *777 it has published reports [FN4] condoning fee schedules, and has issued two ethical opinions [FN5] indicating that fee schedules cannot be ignored. The most recent opinion states that 'evidence that an attorney habitually charges *778 less than the suggested minimum fee schedule adopted by his local bar Association, raises a presumption that such lawyer is guilty of misconduct . . ..' [FN6]

FN4. In 1962 the State Bar published a minimum-fee-schedule-report that listed a series of fees and stated that they 'represent the considered judgment of the Committee (on Economics of Law Practice) as to (a) fair minimum fee in each instance.' The report stated, however, that the fees were not mandatory, and it recommended only that the State Bar consider adopting such a schedule. Nevertheless, shortly thereafter the County Bar adopted its own minimum-fee schedule that purported to be 'a conscientious effort to show lawyers in their true perspective of dignity, training and integrity.' The suggested fees for title examination were virtually identical to those in the State Bar report. In accord with Opinion 98 of the State Bar Committee on Legal Ethics the schedule stated that, although there is an ethical duty to charge a lower fee in a deserving case, if a lawyer "purely for his own advancement, intentionally and regularly bills less than the customary charges of the bar for similar services . . . (in order to) increase his business with resulting personal gain, it becomes a form of solicitation contrary to Canon 27 and also a violation of Canon 7, which forbids the efforts of one lawyer to encroach upon the employment of another." App. 30.

In 1969 the State Bar published a second fee-schedule report that, as it candidly stated, 'reflect(ed) a general scaling up of fees for legal services.' The report again stated that no local bar association was bound by its recommendations; however, respondent County Bar again quickly moved to publish an updated minimum-fee schedule, and generally to raise fees. The new schedule stated that the fees were not mandatory, but tempered that by referring again to Opinion 98. This time the schedule also stated that lawyers should feel free to charge more than the recommended fees; and to avoid condemnation of higher fees charged by some lawyers, it cautioned County Bar members that 'to . . . publicly criticize lawyers who charge more than the suggested fees herein might in itself be evidence of solicitation . . ..'

FN5. 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.

FN6. Ibid. The parties stipulated that these opinions are a substantial influencing factor in lawyers' adherence to the fee schedules. One reason for this may be because the State Bar is required by statute to 'investigat(e) and report . . . the violation of . . . rules and regulations as are adopted by the (Virginia Supreme Court) to a court of competent jurisdiction for such proceedings as may be necessary . . ..' Va.Code Ann. s 54--49 (1972). Therefore any lawyer who contemplated ignoring the fee schedule must have been aware that professional sanctions were possible, and that an enforcement mechanism existed to administer them.

Because petitioners could not find a lawyer willing to charge a fee lower than the schedule dictated, they had their title examined by the lawyer they had first contacted. They then brought this class action against the State Bar and the County Bar [FN7] alleging that the operation of the minimum-fee schedule, as applied to fees for legal services relating to residential real estate transactions, constitutes price fixing in violation of s 1 of the Sherman Act. Petitioners sought both injunctive relief and damages. ...

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

(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.

(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 scheduled resulted in raising fees.

(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.

(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.]