Senator TUNNEY. Our next witness was scheduled to be James A. Howard, Esq., president of the Virginia State Bar. This morning, however, I received a letter from Mr. Howard indicating that due to the lateness of the receipt of his invitation, he is unable to appear. That letter also indicates the Virginia State Bar's view that it is inappropriate to comment on the merits pending the litigation. I certainly would agree with that view. It is inappropriate to comment on the pending litigation, but I want the record to show that the subcommittee did invite the president of the Virginia State Bar here today to comment generally on the issue of minimum fees and what that organization plans for the future with regard to minimum fee schedules.

Mr. James Woodson, director of communications for the Virginia State Bar, has asked permission to read the State bar's letter for the subcommittee, and I ask him to do so at this time.

Mr. WOODSON. Thank you, Senator Tunney.

Ladies and gentlemen, I read this letter on behalf of James Howard, president of the Virginia State Bar and it is addressed to the members of the Senate Judiciary Subcommittee on Representation of Citizen Interests. And it reads:

Gentlemen: The Virginia State Bar appreciates your invitation to appear and testify regarding its views on minimum fee schedules. However, the lateness of the invitation precluded the appearance of our President, James H. Howard, from Norfolk, Virginia, or our President-Elect, Howard W. Dobson of Richmond, Virginia, since both have prior commitments either in court or out of state.

The Virginia State Bar is an administrative agency of the Supreme Court of Virginia, created by said court, pursuant to Rule of Court and companion legislation enacted by the Virginia General Assembly in 1938. As such, the Virginia State Bar is the agency of the Commonwealth of Virginia charged with the responsibility of regulating and discipling the practice of law in Virginia.

The subject of your Subcommittee inquiry are of vital interest to the Virginia State Bar and its Members, and certainly we are anxious to assist you in every way possible within the framework of our authority and the limitations thereon. However, we find ourselves in the peculiar position of being party defendants in pending litigation that goes to the heart of the subject you gentlemen are discussing today, to wit: minimum fee schedules.

As you know, Goldfarb v. Virginia State Bar, 355, F. Supp. 491, 1973, is currently on appeal to the Fourth Circuit Court of Appeals. Furthermore, unless reversed on appeal, a trial on the merits as to the issue of damages will follow. The Virginia Code of Professional Responsibility which, as a part of the Rules of Court of the Virginia Supreme Court, governs the conduct of attorneys in Virginia, prohibits extra-judicial statements or comments concerning pending litigation, 'other than a quotation from or reference to public records.' 2011 Va. 349 (1971), (Rules for the Integration of the Virginia State Bar, Rules of the Supreme Court of Virginia, Part 6, Section 2).

Accordingly, we do not feel that a representative of the Virginia State Bar could properly testify at an open meeting concerning either our views on minimum fee schedules or what, if any, future plans we may have in this respect. However, we are prepared to turn over to your Chief Counsel, Ms. Jane Frank and I have done so-a copy of our Appellate's Brief in the Goldfarb Case, which has been filed with the Fourth Circuit Court of Appeals.

We are informed the record of this hearing will be open for 30 days and we may wish to submit some other statement within that time period, subject to consideration by you in closed session.

Again we wish to express our appreciation for the opportunity to appear before you today.

Respectfully submitted, James A. Howard.

24-625-74- -9

Senator TUNNEY. Thank you.

May I ask whether the Virginia State Bar has a position on attaching this brief as a part of the record of this subcommittee.

Mr. WOODSON. Excuse me. "A position on attaching the brief as part of the record?"

Senator TUNNEY. Yes.

Mr. WOODSON. Yes, we are quite willing to do so.

Senator TUNNEY. All right, it will be made a part of the record. [Testimony resumes at p. 127.]

[Copy of the brief follows:]

United States Court of Appeals For The Fourth Circuit

73-1247

LEWIS H. GOLDFARB, ET AL., APPELLANTS,

V.

VIRGINIA STATE BAR, APPELLEE.

Appeal from the United States District Court for the Eastern District of Virginia, Alexandria Division.

BRIEF ON BEHALF OF APPELLEE VIRGINIA STATE BAR

ANDREW P. MILLER, Attorney General of Virginia. STUART H. DUNN

T. J. MARKOW

Assistant Attorneys General.

Supreme Court-Library Building 1101 East Broad Street

Richmond, Virginia 23219

STATEMENT OF THE CASE

Appellee, Virginia State Bar, agrees substantially with the statement of the case by the Goldfarbs. To the extent that it disagrees, e.g., with respect to their comparison of the minimum fee reports of the State Bar with the minimum fee schedule of the Fairfax County Bar Association, these matters will be addressed in argument.

Additionally, the following facts are pertinent to a consideration of the nature of the Virginia State Bar, although they are inclusive of some previously stated by appellants.

The State Bar is an administrative agency of the Supreme Court of Virginia created by the Supreme Court of Virginia pursuant to the laws of Virginia, including § 54-49 of the Code. The Supreme Court of Virginia has promulgated rules and regulations governing the conduct of attorneys and the operations of the State Bar which are found in §§ II and IV of Part VI of the Rules of the Supreme Court. (Stip. 9; J.A. 22.)

The powers of the State Bar have been delegated to the council of the State Bar, which is comprised of one person from each judicial circuit in Virginia, six persons appointed at large by the Supreme Court of Virginia, and the president, president-elect and immediate past president, all of whom serve as ex officio members. (Stip. 10; J.A. 22.)

Each attorney practicing law in Virginia is required by statute and by court rule to be a member of the State Bar. The State Bar is required by statute and rule to investigate alleged violations of the standards of conduct mandated by the Supreme Court Rules, and to report its findings to a court of appropriate jurisdiction for further disciplinary proceedings. (Stip. 11; J.A. 22.)

Pursuant to § 54-42 of the Code, the funds for operation of the State Bar are appropriated from a special fund of the State Treasury by act of the General Assembly. The special fund in the State Treasury consists of fees paid (121)

by members of the State Bar, the amounts of which are set, pursuant to statute, by the Supreme Court. (Stip. 12 ; J.A. 22.)

The State Bar has been given authority by the Supreme Court of Virginia to issue opinions on matters involving questions of ethics. (Stip. 16; J.A. 23.) The Supreme Court of Virginia has stated that suggested fee schedules and economic reports of the State Bar and of local bar associations involve questions of ethics. (Stip. 18; J.A. 23.) The State Bar has been given authority by the Supreme Court of Virginia to issue opinions on questions of ethics, such as Opinions 98 and 170 which relate to minimum fee schedules, and to disseminate minimum fee schedule reports. (Stip. 19; J.A. 24.)

In 1962 and 1969, attorneys who were members of the State Bar prepared on behalf of the State Bar minimum fee schedule reports. (Stip. 14; J.A. 23.) Minimum fee schedules of some type are published and circulated in at least thirty-four states and in the District of Columbia either by the voluntary bar or by a counterpart of the State Bar. (Stip. 26; J.A 25.)

The Supreme Court has delegated to the State Bar responsibility for investigating complaints of unprofessional conduct of any member of the State Bar. Such investigations are carried out by district committees which are comprised of attorneys. There is such a committee organized in each of the ten congressional districts of Virginia. (Stip. 22; J.A. 24.)

The State Bar has never received a communication from the defendant local bar association regarding the professional conduct of any member of said association or any member of the State Par, including failure of such members to follow a minimum fee schedule. (Stip. 21; J.A. 25.) The State Bar has never received a communication from any person regarding the professional conduct of any member of the State Bar with respect to minimum fee schedules. (J.A. 113.) The State Bar has never initiated or participated in any administrative or judicial action against an attorney for failure to adhere to a minimum fee schedule. (Stip. 25; J.A. 25.)

Virginia attorneys who provided legal services to prospective home buyers in Reston, Virginia, are specifically prohibited by the Code of Professional Responsibility promulgated by the Supreme Court of Virginia from advertising their services or their charges for these services either within or without the State of Virginia. (Stip. 23; J.A. 24.)

QUESTIONS PRESENTED

1. Whether the action of the Virginia State Bar, an administrative agency of the Supreme Court of Virginia, in distributing minimum fee reports and in issuing opinions with respect to ethical conduct of attorneys, constitutes "state action" exempt from Federal antitrust laws?

2. Whether the Virginia State Bar, an administrative arm of the Virginia Supreme Court, is immune from suit on account of the Eleventh Amendment of the United States constitution?

ARGUMENT
I.

THE ACTIONS OF THE VIRGINIA STATE BAR IN PUBLISHING MINIMUM FEE REPORTS AND CIRCUMSCRIBING CONDUCT OF ATTORNEYS WITH REGARD TO ADHERANCE TO LOCAL MINIMUM FEE SCHEDULES BY MEANS OF ETHICAL OPINIONS CONSTITUTE "STATE ACTION" EXEMPT FROM FEDERAL ANTITRUST LAWS

The seminal case with respect to "state action" is Parker v. Brown, 317 U.S. 341 (1943). The case involved an interpretation of the applicability of the Sherman Act to the actions of a State agency. The following language is instructive:

"We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature." 317 U.S. at 350-351.

*

"There is no suggestion of a purpose to restrain state action in the Act's legislative history. The sponsor of the bill which was ultimately enacted as the Sherman Act declared that it prevented only 'business combinations'." 317 U.S. at 351.

"The state in adopting and enforcing the prorate program made no contract or agreement and entered into no conspiracy in restraint of trade or to establish monopoly but, as sovereign, imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit." (Citation omitted.) 317 U.S. at 352.

As far back as 1895, it was ruled that a state was not a "person" within the meaning of the Sherman Act. Lowenstein v. Evans, 69 F. 908 (C.C.D.S.C. 1895). The Supreme Court subsequent to Parker had another opportunity to consider the "state action" exemption to the Sherman Act in Eastern Railroad President's Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), which held that efforts to restrain trade by obtaining passage of laws was "state action" within the meaning of Parker. Therein the Court stated:

. . the Sherman Act forbids only those trade restraints and monopolizations that are created, or attempted, by the acts of 'individuals or combinations of individuals or corporations.' Accordingly, it has been held that where restraint upon trade or monopolization is a result of valid governmental' action, as opposed to private action, no violation of the Act can be made out." 365 U.S. at 135-136.

Finally, the Supreme Court held in United Mine Workers of America v. Pennington, 381 U.S. 657 (1965), that the Noerr concept extended to the actions of a labor union and certain large coal producers in attempting to influence the Secretary of Labor to set a minimum wage in the industry so high as to drive out small producers. The common thread weaving its way through Parker, Noerr and Pennington is that the State cannot be held responsible for violation of the Sherman Act.

Typically, the cases in which the Parker defense has been asserted, have been suits by competitors against businesses regulated by the State in some manner, e.g. Washington Gas Light Co. v. Virginia Electric and Power Co., 438 F.2d 248 (4th Cir. 1971): Alabama Power Co. v. Alabama Electric Cooperative, Inc., 394 F.2d 672 (5th Cir. 1968) cert. denied, 393 U.S. 1000 (1968), or against businesses which have attempted to have governmental action taken which would restrain trade in some manner, e.g. Noerr, supra; George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25 (1st Cir. 1970), cert. denied, 400 U.S. 850 (1970).

In the former cases the issue has usually been whether there was sufficient regulation or in fact whether there was a governmental agency involved, e.g. Asheville Tobacco Board of Trade, Inc. v. Federal Trade Commission, 263 F.2d 502 (4th Cir. 1959). In those cases where insufficient regulation was found the immunity of the state has been found not to be conferred upon the private businesses acting under the state's direction. No case has been found in which the state or its agent has been found liable in these types of cases, however. In the latter cases, i.e. where the government is often a party to the action complained of, if not to the suit, the courts have almost without exception found, not only that the government was immune, but that its immunity extended to the private parties, sec e.g., Okefenokee Rural Electric Municipal Corp. v. Florida Power and Light Co., 214 F.2d 413 (5th Cir. 1954); United Mine Workers of America v. Penning, supra. This is true even where the government is an active party in the conspiracy, E. W. Wiggins Airways, Inc. v. Massachusetts Port Authority, 362 F.2d 52 (1st Cir. 1966), or where the governmental agent acted outside of his authority. Parmalee Transportation Co. v. Keeshen, 292 F.2d 794 (7th Cir. 1961); cf. Harman v. Valley Nat. Bank, 339 F.2d 546 (9th Cir. 1964).

It is significant that in no case has the government been found to violate the Sherman Act, even where it has been an active party to the scheme. As the Court said in Wiggins, supra:

"What was done here was in the exercise of a valid governmental function. The antitrust laws are aimed at private action, not at governmental action." 362 F.2d at 55.

The actions of the Virginia State Bar with respect to the subject matter of this suit do not fall neatly into the categories of any of the previous cases. It does not serve the function of a corporation commission in setting rates; and yet, it clearly has the power to regulate the legal fees to be charged through the rendering of ethical opinions, a duty imposed by statute. At the same time it is not acting as a party to any unlawful agreement or combination. While it published fee reports, this is clearly a very incidental part of the