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The fact that a state bar association is a state agency for some limited purposes does not create an antitrust shield that allows it to foster anticompetitive practices for the benefit of its members.
Petitioners, husband and wife, unable to retain an attorney willing to perform a real estate title examination for a fee less than that prescribed as the minimum fee for such service in the fee schedule published by the Fairfax, Virginia, County Bar Association, instituted a class action against the County and State Bars in the United States District Court for the Eastern District of Virginia, alleging that the operation of the minimum fee schedule, as applied to fees for legal services relating to residential real estate transactions, constituted price fixing in violation of 1 of the Sherman Act (15 USCS 1). The fee schedule was enforced by the State Bar by its issuance of fee schedule reports and ethical opinions which stated that deviation from minimum fee schedules might lead to disciplinary action. After a trial on the issue of liability only, the District Court held that the minimum fee schedule violated the Sherman Act. According to the trial court, although the actions of the State Bar were exempt from the Sherman Act as constituting state action, the actions of the County Bar were not so exempt. The United States Court of Appeals for the Fourth Circuit reversed, holding that the State Bar's actions were immune from Sherman Act proscriptions as constituting state action, and the County Bar was also immune since the practice of law was not "trade or commerce" under the Act but was a "learned profession" exempt from the Act, the challenged activities not having sufficient effect on interstate commerce to support Sherman Act jurisdiction in any event. Petitioners sought review by certiorari.
The Court held that the minimum-fee schedule, as published by the County Bar Association and enforced by the State Bar, violated § 1 of the Sherman Act. According to the Court, the schedule and its enforcement mechanism constituted fixing since the record showed 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. Since a significant amount of funds furnished for financing the purchase of homes in Fairfax County came from outside the State, and since a title examination was an integral part of such interstate transactions, the Court held that interstate commerce was sufficiently affected for Sherman Act purposes. Anent the second issue, the Court held that respondents’ activities were not exempt from the Sherman Act as "state action" within the meaning of Parker v. Brown, 317 U.S. 341. 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 did not appear that the Supreme Court approved them. According to the Court, it was not enough that the anticompetitive conduct was "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 was essentially a private anticompetitive activity and hence cannot claim it was beyond the Sherman Act's reach.