Goldfarb v. Virginia State Bar
421 U.S. 773 (1975)
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Rule of Law:
A minimum fee schedule for legal services published by a bar association and enforced through the threat of professional discipline constitutes price-fixing in violation of the Sherman Act. The practice of law is not exempt from antitrust regulations under a 'learned profession' exception, nor is such price-fixing protected by the 'state action' doctrine unless it is compelled by the state acting as a sovereign.
Facts:
- In 1971, the Goldfarbs contracted to buy a home in Fairfax County, Virginia, which required a title examination by a member of the Virginia State Bar.
- A lawyer they contacted quoted them a fee of 1% of the property's value, which was the precise fee suggested in a minimum fee schedule published by the Fairfax County Bar Association.
- The Goldfarbs contacted 36 other lawyers in the county seeking a lower fee for the service.
- Of the 19 lawyers who replied, none indicated they would charge less than the fee fixed by the schedule.
- The Virginia State Bar, a mandatory organization for all practicing attorneys in the state, issued ethical opinions stating that an attorney who habitually charges less than the suggested minimum fee schedule could be presumed guilty of misconduct.
- Unable to find an attorney who would charge a lower rate, the Goldfarbs paid the scheduled fee to the first lawyer they had contacted.
Procedural Posture:
- The Goldfarbs filed a class-action lawsuit in the U.S. District Court for the Eastern District of Virginia against the Fairfax County Bar Association and the Virginia State Bar.
- After a trial on liability, the District Court held that the minimum fee schedule violated the Sherman Act and rejected the County Bar's 'learned profession' defense.
- The District Court, however, ruled that the Virginia State Bar was exempt from liability under the 'state action' doctrine.
- On appeal, the U.S. Court of Appeals for the Fourth Circuit reversed the District Court's finding of liability.
- The Court of Appeals held that the County Bar was exempt because the practice of law is a 'learned profession,' not 'trade or commerce,' and affirmed that the State Bar was immune under the 'state action' doctrine.
- The Goldfarbs (petitioners) were granted a writ of certiorari by the U.S. Supreme Court.
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Issue:
Does a minimum fee schedule for lawyers' services, published by a county bar association and enforced by the state bar through ethical opinions, constitute price-fixing in violation of Section 1 of the Sherman Act?
Opinions:
Majority - Mr. Chief Justice Burger
Yes, a minimum fee schedule for lawyers' services, enforced by the state bar, constitutes price-fixing in violation of Section 1 of the Sherman Act. The court rejected all three of the respondents' defenses. First, the fee schedule was not merely advisory; it created a rigid price floor enforced by the threat of professional discipline, making it a classic case of price-fixing. Second, the court rejected a blanket exemption for 'learned professions,' holding that the Sherman Act's language is comprehensive and does not exclude professional services, especially when they have a clear business aspect like the exchange of services for money. Third, the 'state action' exemption from Parker v. Brown did not apply because the anticompetitive activities were not compelled by the state of Virginia acting as a sovereign; rather, Virginia's Supreme Court rules explicitly stated that lawyers should not be controlled by fee schedules. The State Bar voluntarily joined a private anticompetitive activity and could not claim immunity.
Analysis:
This landmark decision eliminated the long-assumed 'learned profession' exemption from the Sherman Antitrust Act, bringing professionals like lawyers, doctors, and engineers within the scope of federal antitrust laws for their commercial activities. The ruling significantly curtailed the ability of professional organizations to engage in price-fixing and other anticompetitive behavior. Furthermore, the case clarified the 'state action' doctrine, establishing a strict standard that anticompetitive conduct must be compelled by the state, not merely prompted or permitted, to qualify for immunity. This decision fundamentally changed the business practices of professional services industries by subjecting them to the same competition rules as other commercial enterprises.
