# Petition — Surety Title Insurance Agency, Inc. v. Virginia State Bar

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1978
- **Citation:** 436 U.S. 941

## Text

IN THE MICHAEL RODAK, JR., CLERK _

Supreme Court of the United States i
OCTOBER TERM, 1977

No. ZZ-1510

SURETY TITLE INSURANCE AGENCY, INC.,
Petitioner,
Vv.

VIRGINIA STATE BAR,
Respondent.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

ALAN B. MORRISON
Suite 700
2000 P Street, N.W.
Washington, D.C. 20036
(202) 785-3704

ROBERT B. HUMMEL
1229 19th Street, N.W.

Washington, D.C. 29036
(202) 872-6761

Attorneys ,ur the Petitioner

a ood
THE CASILLAS PRESS, INC.—1717 K Sereet. N. W.—Washington, 0. C.-2273-1220

(i)

TABLE OF CONTENTS

OPINIONS BELOW
JURISDICTION .

QUESTION PRESENTED

STATEMENT OF THE CASE .

REASONS FOR GRANTING THE WRIT .
CONCLUSION

APPENDIX A (Court of Appeals Opinion)
APPENDIX B (District Court Opinion) .
APPENDIX C (District Court Order)

APPENDIX D (Court of Appeals Order)

TABLE OF AUTHORITIES
Cases:

Bates v. State Bar of Arizona,
433 U.S. 350 (1977) .

Cantor v. Detroit Edison Co.,
428 U.S. 579 (1976) .

City of Lafayette v. Louisiana Power & Light Co.,

__US. __, 46 U.S.L.W. 4265 (March 29, 1978) .

32a

(ii)

Commonwealth v. Jones & Robins, Inc.,
186 Va. 30, 41 S.E.2d 720 (1947)

Fashion Originators’ Guild v. Federal Trade Comm.,

312 U.S. 457 (1941) .

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

Hicks v. Miranda,
422 U.S. 332 (1975) .

Parker v. Brown,
317 U.S. 341 (1943) .

Railroad Comm. of Texas v. Pullman Co.,
312 U.S. 496 (1941) .

Ricci v. Chicago Mercantile Exch.,
409 U.S. 289 (1973) .

Younger v. Harris,
401 U.S. 37 (1971)

Vendo Co. v. Lektro-Vend Corp.,
433 U.S. 623 (1977) .
Statutes:

The Sherman Act,

15 U.S.C. § 15
15 U.S.C. $ 26

28 U.S.C. $1337 .
28 U.S.C. § 12541).
28 U.S.C. § 1292(a(1)

i

ao oo & 759

10

(iii)
Page
Virginia Code § 54-44 . 3
Other:
Virginia State Bar, Disciplinary Rule 3-101 . . . . . . 3,4

IN THE

Supreme Court of the United States

OCTOBER TERM, 1977

No.

SURETY TITLE INSURANCE AGENCY, INC.,
Petitioner,
v.

VIRGINIA STATE BAR,
Respondent.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

OPINIONS BELOW

The opinion of the District Court is reported at 431 F.
Supp. 298 (E.D. Va. 1977) and is reproduced beginning at
page 7a of the Appendix. The opinion of t \e Court of
Appeals is not yet reported, and is reproduced beginning
at page la. No opinion was issued in connection with
the order of the Court of Appeals denying rehearing and
rehearing en banc. (32a).

mm

2

JURISDICTION

The judgment of the Court of Appeals was entered on
March 1, 1978. A timely petition for rehearing with sug-
gestion for rehearing en banc was denied on April 3, 1978.
The jurisdiction of this Court is invoked under 28 U.S.C.
§1254(1). The jurisdiction of the District Court was in-
voked under 15 U.S.C. 8 15 and 26 and 28 U.S.C. § 1337.

QUESTION PRESENTED

In a federal antitrust action, when an issue is presented
as to the applicability of the state action exemption under
Parker v. Brown, 317 U.S. 341 (1943), does the doctrine
of abstention require a federal court to refer the question
to the local state courts for their views?

STATEMENT OF THE CASE

Petitioner, a small local agency engaged in the business
of selling title insurance for out-of-state insurance companies,
filed this action against respondent Virginia State Bar (the
“State Bar”) on April 26, 1976, in the United States Dis-
trict Court for the Eastern District of Virginia, seeking
treble damages and an injunction under the Sherman Act,
15 U.S.C. 8 15 & 26. In order to reduce the cost to
consumers and to provide a better product for less money,
petitioner decide to sell title insurance directly to home-
buyers and not to utilize the intermediary services of an
attorney, as is customary m Virginia. However, the State
Bar, in a series of Unauthorized Practice of Law opinions
(“UPLs’’), purported to include such direct sales of title
insurance by non-lawyers in the definition of the practice

3

of law.! Because those unilaterally-imposed Bar restrictions
seriously interfered with petitioner’s business, it filed this
antitrust action.

In 1938 the Virginia legislature had authorized the Vir-
ginia Supreme Court to define the practice of law, which
it promptly did with the assistance of the Bar and an op-
portunity for public comment. Those definitions have not
been amended or supplemented since then, but the State
Bar has issued a number of UPLs, which claim to interpret
these definitions, and which have as their primary purpose
‘he deterrence of lay persons from engaging in the conduct
which the Bar contends constitutes the practice of law. The
Bar issues such opinions by a majority vote of its elected
governing body, the Bar Council, with no public participa-
tion, with no rules of evidence or procedure, and with no
examination of, let alone active supervision over, the pre-
paration or substance of any UPL by the Virginia Supreme
Court. Because the unauthorized practice of law in Virginia
is a misdemeanor, Va. Code § 54-44, the desired effect of
deterring competition has occurred, and until petitioner be-
gan its business, no one had attempted to traverse the bounda-
ries that the State Bar had established in the three UPLs
relevant to this case.

In the real estate area particularly, the Bar has another
powerful weapon. Disciplinary Rule 3-101, which is bind-
ing on all attorneys in Virginia, prohibits any attorney from
participating in any transaction in which a lay person is en-
gaging in conduct which the Bar contends constitutes the
unauthorized practice of law. The Virginia Supreme Court
has ruled that only a member of the Bar may prepare a

| See UPLs 17, 43, and 44 (12a-14a).

4

real estate deed,? and therefore an attorney must partici-
pate in every sale of a residence. Because the Bar, through
DR 3-101, has directed its members to withhold their ser-
vices in any transaction in which a lay person is violating
any of their UPLs, attorneys are obliged not to prepare the
necessary deed if persons such as petitioner deal directly with
homebuyers in thé sale of title insurance, contrary to UPLs
17, 43, and 44. Thus, although the Virginia Supreme Court
has never spoken on the relationship between the practice of
law and the sale of title insurance, the State Bar on its own
has issued opinions the purpose and effect of which are to
keep this lucrative business for its members.

Following the filing of an amended complaint in the Dis-
trict Court, full discovery was undertaken, and a detailed
stipulation with 34 exhibits was submitted by the parties
on cross-motions for summary judgment on the issue of
liability under the antitrust laws. On April 25, 1977,
Judge Mehrige granted petitioner’s motion for summary
judgment and entered an order enjoining respondent “from
issuing any further opinions or documents purporting to
define the practice of law and [directing it] to expunge
from its records all such prior opinions . . . .”’ (30a-31a).
The Court analyzed the conduct of respondent, including
the process by which UPLs are issued, and concluded that
it constituted both a group boycott and an attempt to
monopolize under sections | and 2 of the Sherman Act,
under both the per se and rule of reason tests. (15a-18a).
In reaching that result, the Court recognized that the UPL
process “places attorneys in the unique posture of being
able to define the extent of their own monopoly.” (27a).

2 Commonwealth v. Jones & Robins, Inc., 186 Va. 30, 41 S.E.2d
720 (1947).

5

Next, it carefully considered the claimed state action
exemption under Parker v. Brown, 317 U.S. 341 (1943),
and concluded that, although the Virginia Supreme Court
had approved the Bar’s rules which provide for the issuance
of UPLs, respondent was not entitled to an exemption be-
cause “‘not only is the Unauthorized Practice of Law opin-
ion process tenuously related to the state interest it pur-
ports to advance, but it operates in a decidedly anticom-
petitive fashion offensive to notions of basic fairness. It
does not act to advance the consumer interest, but merely
that of the attorney. It is neither necessary to, nor are its
anticompetitive effects reasonable in light of, the justifying
state interest.’’ (28a-29a). The Court declined to rule at
that time on the availability of damages in light of the
pendency before this Court of Bates v. State Bar of Arizona,
433 U.S. 350 (1977), but did enter the injunctive relief
requested, and that order was appealed pursuant to 28
U.S.C. § 1292(a)(1).

In the Fourth Circuit, respondent submitted a detailed
brief raising a series of objections to the merits of the
decision below. Petitioner filed its brief answering each of
those points, and respondent filed a reply in which it added
several new arguments, including one rejected by the Dis-
trict Court (8a, n.3), that the Court should abstain to await
the outcome of a state-court civil action, which was brought
shortly before the hearing on the motions for summary
judgment in the District Court, and which alleged that pe-
titioner was engaged in the unauthorized practice of law
by selling title insurance directly to homebuyers. At the
request of respondent, because of the importance of the
case, the Court of Appeals held oral argument on an ex-
pedited basis on October 4, 1977.

On March 1, 1978, the Court issued an opinion written
by Senior District Judge Thomsen, joined in by Circuit
Judges Russell and Hall, which vacated the decision below
and remanded the case “‘with instructions to withhold fur-
ther action until the final decision of the Supreme Court
of Virginia in the case filed by the Attorney General against
the plaintiff herein. . . .” (6a). Without discussing the
merits of petitioner’s antitrust claims, the Court of Appeals
proceeded directly to the Parker issue. It quoted from,
but did not discuss, this Court’s decisions in Bates v. State
Bar of Arizona, supra, and Cantor v. Detroit Edison Co.,
428 U.S. 579 (1976), which indicate that the relationship
between organizations such as the State Bar and the State
itself (in this case the Virginia Supreme Court) in the ac-
tivity under challenge (here the UPL opinion issuing process)
was a vital aspect of the state action defense. It mention-
ed in passing this Court’s decision in Goldfarb v. Virginia
State Bar, 421 U.S. 773 (1975), which involved a similar
state action claim by this very respondent, but did not
even note the seminal decision in Parker itself. Then the
Court observed:

In the instant case the role of the Supreme Court
of Virginia is not so clear. It is unfortunate that
Virginia has not adopted a statute or rule which
would permit us to certify this question of state
law, crucial to a decision in this case, to the
highest court of the State of Virginia. (Sa).

The Court then pointed to the pending action in the Cir-
cuit Court of Virginia Beach and observed that the decision
in that case “will have to deal with the respective roles of
the Supreme Court of Virginia and [respondent] in the
adoption and enforcement of the disciplinary rules and
other issues presented by the case at bar.” (6a). From

that assertion, the Court concluded, without citation to
any authority, that the federal courts should withhold
judgment “until the Virginia courts have had an opportu-
nity to decide the disputed questions of state law.” Jd.
A timely petition for rehearing, with a suggestion for re-
hearing en banc, was filed on March 15, 1978, and denied
without opinion on April 3, 1978.

REASONS FOR GRANTING THE WRIT

The decision of the Court of Appeals represents a funda-
mental deviation from prior decisions of this and every
other court that have considered the applicability of the
state action exemption. Although the court below does
not use the term “abstention,” it has applied a new form
of it, for which it provided neither citation nor analysis,
in order to help it resolve the state action issue under
Parker v. Brown, supra. Although the meaning and effect
of state laws have been in dispute and of crucial importance
in cases such as Cantor v. Detroit Edison Co., supra, and
City of Lafayette v. Louisiana Power & Light Co., U.S.
__, 46 U.S.L.W. 4265 (March 29, 1978), the court below
is the first tribunal to suggest that these questions could
be resolved, or their resolution in any way aided, by an
interpretation by state courts of the scope of the antitrust

_ exemption. Moreover, since the state courts cannot finally

resolve any issue in the antitrust case, it is apparent that
the abstention ordered here is a different kind from that
employed in any previous decision.

That the abstention ordered is a different variety from
that involved in such cases as Younger v. Harris, 401 U.S.
37 (1971) and its progeny, is apparent from an analysis of
the issues in the federal and state cases here. Although

8

Younger-type abstention was urged upen both the District
Court and the Court of Appeals by respondent, it is appli-
cable only if the issue on which abstention is based is
identical to one pending in a state court. However, it is
undisputed that in this instance the state court action does
not involve the relationship between the State Bar and the
Supreme Court of Virginia in the issuance of UPLs, but is
solely concerned with whether petitioner violated the Su-
preme Court’s definitions of unauthorized practice, not the
Bar’s UPLs. Moreover, regardless of whether the issues
were identical, this Court has made it clear, most recently
in Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 637-
38 n. 8, and 662 (1977), that a plaintiff's violation of
state laws is irrelevant in determining its right to recover
damages resulting from a defendant’s violation of the anti-
trust laws. As this Court said in Fashion Originators’ Guild
v. Federal Trade Comm., 312 U.S. 457, 468 (1941): “...
even if [the charge which the antitrust defendants made
against those whose activities they were boycotting] were
an acknowledged tort under the law of every state, that
situation would not justify petitioners in combining together
to regulate and restrain interstate commerce in violation of
Federal law.”’ In addition, the state court action here in-
volves different parties, and it was commenced nearly eight
months after the antitrust action was brought and after the
hearing on the issue of liability had been scheduled. Com-
pare Hicks v. Miranda, 422 U.S. 332 (1975).

Thus, it is apparent that the ruling of the Court of Ap-
peals does not depend on the existence of a prior action
in a state court. Since no standards were offered by the
Court to indicate in what circumstances abstention would
be required, it must be assumed that an independent suit
must be brought in state court seeking a declaratory judg-

9

ment (or perhaps, more precisely, an advisory opinion) as
to the applicability of state law in every case of a claimed
Parker exemption, even in civil enforcement actions brought
by the Department of Justice. That kind of “abstention”
will produce inordinate delays in enforcing the federal anti-
trust laws since plaintiffs will be at the mercy of state
court backlogs as a precondition to proceeding with their
federal actions. Such delays are particularly indefensible

in cases such as this where there was a fully stipulated
record, clearly establishing the relation between the State
Bar and the Virginia Supreme Court for purposes of the
state action defense.

Conceivably, the result might be tolerable if the state
courts could decide anything, but there is no state law
question involved in this antitrust case, let alone a disposi-
tive one. Thus, after securing the judgment of the highest
court of Virginia, which itself created the State Bar and
established its rules on issuing UPLs, the case must return
to the federal courts because the question to be decided
is one of federal law, i.e., are the anticompetitive activities
of the State Bar shielded from the federal antitrust laws
because of the involvement of a sovereign state in them?
See Parker v. Brown, supra; Cantor v. Detroit Edison Co.,
supra, 428 U.S. at 592-97. Therefore, the abstention em-
ployed here cannot be analogized to that in Railroad Comm.
of Texas v. Pullman Co., 312 U.S. 496 (1941), where this
Court permitted a federal action to be deferred pending
potentially determinative proceedings in a state court, since
the state case here cannot resolve the Parker issue no matter
what its views are on the state law questions. Moreover,
even if the unauthorized practice issue is decided in peti-
tioner’s favor in the state courts, so that it will be free to
conduct its title insurance business free of the State Bar’s

10

boycott, its treble damage claim based on past acts of the
State Bar will remain, and that will require a full antitrust
determination in order to resolve. The futility of the ap-
pellate court’s direction to abstain is further underscored
by the fact that the state courts have no independent juris-
diction to determine the merits of antitrust cases. See,
e.g., Vendo Co. v. Lektro-Vend Corp., supra, 433 U.S. at
632 and 664 n. 38, and the cases cited therein.?

The decision of the Fourth Circuit severely interferes
with the vital Congressional objective of furthering the
private and public enforcement of the antitrust laws. It
will impose enormous burdens of cost and delay on all
antitrust plaintiffs and will create a new, uncertain, and
never before suggested role for state courts in the antitrust
area. Because of the potentially disastrous effects that this
decision will have on antitrust enforcement, and because
of the opportunities it presents for wholesale avoidance of
difficult questions by federal judges who will find in the
decision below an excuse to refer matters to the state
courts, this Court should grant the petition.

3 Nor would reference under the doctrine of primary jurisdiction
authorized in Ricci v. Chicago Mercantile Exch., 409 U.S. 289 (1973),
be proper. That doctrine applies only if Congress has enacted the
other legislation (409 U.S. at 300), if the reference will be of “ma-
terial aid in resolving the immunity question” (409 U.S. at 302),
and where there are disputed factual issues relating to “the customs
and practice of the industry and of the unique marketplace involved”
on which the agency’s views (not a court’s) are likely to be helpful
(409 U.S. at 305).

1]

CONCLUSION

For the reasons set forth above, the petition for a writ
of certiorari should be granted. In addition, because the
decision below is so lacking in authority and deviates so
far from accepted principles of antitrust law, summary
disposition would also be appropriate.

Respectfully submitted,

ALAN B. MORRISON
Suite 700
2000 P Street, N.W.
Washington, D.C. 20036
(202) 785-3704

ROBERT B. HUMMEL
1229 19th Street, N.W.
Washington, D.C. 20036
(202) 872-6761

Attorneys for the Petitioner
April 21, 1978

APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 77-1703

VIRGINIA STATE BAR,
Defendant-Appellant,
v.

SURETY TITLE INSURANCE AGENCY, INC.,
Plaintiff-Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, Richmond Division. Robert R. Merhige, Jr.,
District Judge

Argued October 4, 1978 Decided March 1, 1978

Before RUSSELL and HALL, Circuit Judges, and THOMSEN,*
Senior District Judge

John Hardin Young, Assistant Attorney General, and Anthony
F. Troy, Attorney General of Virginia, for Appellant; Alan B.
Morrison (Robert B. Hummel and Stephen W. Bricker, on
brief) for Appellee.

*Of the United States District Court for the District of Mary-
land, sitting by designation.

2a

Thomsen, Senior District Judge

Surety Title Insurance Agency, Inc. (Surety) filed this action
against the Virginia State Bar (VSB) in the district court,
claiming that certain advisory opinions issued by the VSB,
coupled with the threat of disciplinary proceedings against
those attorneys who disregard the advisory opinions, ille-
gally restrain commerce in tne area of title insurance and
constitute an illegal group boycott and an attempt to mono-
polize, in violation of sections 1 and 2 of the Sherman Act,
15 U.S.C. 8 1 and 2. The district court noted:

“Plaintiff does not challenge either the definition
of the practice of law as enunciated by the Su-
preme Court of Virginia nor the correctness of
any particular ethical or unauthorized practice of
law opinion. Rather, it is the method by which
these opinions are issued that is alleged to be in
violation of the federal antitrust laws.”

Surety Title Insurance Agency, Inc. v. Virginia State Bar, 431
F. Supp. 298, 300 (E.D. Va. 1977).

The VSB contended below and contends here that the re-
lief requested is barred, inter alia, by the state-action exemp-
tion to the Siierman Act.

Cross motions for summary judgment on the issue of lia-
bility were filed, accompanied by a stipulation of facts, which
included references to the appropriate statutes,' rules of the
Supreme Court of Virginia? and opinions of the VSB.?

| Va. Code Ann. 8§ 54-48 and 49 (Repl. Vol. 1974); see also § 54-44.

2 See, inter alia, Rules of the Supreme Court of Virginia, 171 Va.
xvii; 205 Va. 1038, et seq.; 216 Va. 1062, 1141, 1143, 1146-47, 1173-
74.

3 Unauthorized Practice of Law Opinions Nos. 17 (1942), 43 (1974),

and 44 and 46 (1975); and Ethics Committee Opinion 177 (1975).

3a

After argument, the district court concluded that the state
action exemption is not available to the VSB in this case.
The court noted, however, that the defense to monetary lia-
bility may be available to the VSB on notions of fairness;
with respect to that issue the court said:

“The issuing of the opinion resulting in the anti-
competitive activity here was required by the

state. The Court will request that the parties ad-
dress this issue further after the Court and coun-
sel have the benefit of the Supreme Court’s opinion
in the case of Bates v. State of Arizona which is
anticipated before the Court’s current term ends

in June.” 431 F. Supp. at 309.4

The decision in Bates v. State Bar of Arizona, U.S.
, 97 S. Ct. 2691 (1977), was indeed rendered on

4 The following order was entered by the district court:

“For the reasons stated in the Memorandum of the Court this day
filed and deeming it proper so to do, it is ADJUDGED AND ORDERED
as follows:

(1) Defendant’s motion for summary judgment be, and the same
is hereby denied; and

(2) The motion of the plaintiff for summary judgment be, and
the same is hereby, in part, granted in the following respects: (a) the
issuance by defendant of opinions [or] similar documents purporting to
define the practice of law is unlawful and in the instant case is vio-
lative of Sections 1 and 2 of the Sherman Act, 15 US.C. & 1 and 2;
(b) the defendant, Virginia State Bar, its officers, agents and employees
be, and they are hereby, enjoined from issuing any further opinions or
documents purporting to define the practice of law and said defendant
is directed to expunge from its records all such prior opinions; further,
the defendant, Virginia State Bar, through its appropriate officer shall
forthwith notify its membership of said expungement.

“All other matters in issue are hereby continued.”

4a

June 27, 1977. After distinguishing Goldfarb v. Virginia
State Bar, 421 U.S. 773 (1975), the Court held flatly that
“the challenged restraint [in Bates] is the affirmative com-
mand of the Arizona Supreme Court under its Rule 27(a)
and 29(a) and its Disciplinary Rule 2-10 (b). That Court is
the ultimate body wielding the State's power over the prac-
tice of law, see Ariz. Const. Art. 3; Jn re Bailey, 30 Ariz.
407, 248 P. 29 (1926), and, thus, the restraining is ‘com-
pelled by direction of the State acting as a sovereign.” 421
U.S., at 791.” (Slip. opinion p. 8), 97 S. Ct. at 2697. The
Court added a footnote (#11) at that point in the Bates
opinion, as follows: “We note, moreover, that the Court’s
opinion in Goldfarb concluded with the observation that
‘fiJn holding that certain anticompetitive conduct by law-
yers is within the reach of the Sherman Act we intend no
diminution of the authority of the State to regulate its
professions.’ 421 U.S. at 793. Allowing the instant Sher-
man Act challenge to the Disciplinary Rule would have pre-
cisely that undesired effect.” =» ~U.S. at __—_—s(slip opin-
ion p. 8), 97 S. Ct. at 2697.

After analyzing Cantor v. Detroit Edison Co., 428 U.S.
579 (1976), the Court said: “Here, the appellants’ claims
are against the State. The Arizona Supreme Court is the
real party in interest; it adopted the rules, and it is the
ultimate trier of fact and law in the enforcement process.
In re Wilson, 106 Ariz. 34, 470 P.2d 441 (1970). Al-
though the State Bar plays a part in the enforcement of
the rules, its role is completely defined by the court; the

5a

to protect the pul. “ndeed, this Court in Gold-
farb acknowledged see ‘[t]he interest of the
States in regulating lawyers is especially great
since lawyers are essential to the primary gov-
ernmental function of administering justice,
and have historically been “officers of the
courts.” ’ 421 U.S. at 792. See Cohen »v. Hur-
ley, 366 U.S. 117, 123-124 (1961). More spe-
cifically, controls over solicitation and advertis-
ing by attorneys have long been subject to the
State’s oversight. Federal interference with a
State’s traditional regulation of a profession is
entirely unlike the intrusion the Court sanc-

tioned in Cantor.” U.S. (slip opin-
ion p. 10), 97 S. Ct. at 2698.
“Finally, .... The disciplinary rules reflect

a clear articulation of the State’s policy with
regard to professional behavior. Moreover, as the
instant case shows, the rules are subject to point-
ed re-examination by the policy maker — the
Arizona Supreme Court — in enforcement pro-
ceedings. Our concern that federal policy is being
unnecessarily and inappropriately subordinated to
state policy is reduced in such a situation; we
deem it significant that the state policy is so
clearly and affirmatively expressed and that the
State’s supervision is so active.” Id.

appellee acts as the agent of the court under its continu- In the instant case the role of the Supreme Court of Vir-

ous supervision.” US. at (slip opinion p. 9). ginia is not so clear. It is unfortunate that Virginia has not
97 S. Ct. at [2] 697. Further distinguishing Cantor, the Court adopted a statute or rule which would permit us to certify
on this question of state law, crucial to a decision in this case,

to the highest court of the State of Virginia. However, as

“In contrast, the regulation of the activities the district court noted in a footnote to its opinion: “Sub-

of the bar is at the core of the State’s power

6a

sequent to the filing of this action, the Attorney General
of Virginia filed a Bill of Complaint against the plaintiff
charging it with the unauthorized practice of law. The Bill
and subpoena issued by the Clerk of the Circuit Court of
Virginia Beach were served on the plaintiff on December 16,
1976. A challenge to the substance of the State Bar’s
opinions on the unauthorized practice of law as they relate

to title insurance may be expected in the state court pro-
ceeding.”” 431 F. Supp. at 300 n.2. We are advised that
no decision has yet been rendered in that case, but coun-
sel have sent us copies of the pleadings therein, and stated
that the matter will be set for a docket call in April 1978.
The decision in that case, at nisi prius and on appeal, will
have to deal with the respective roles of the Supreme Court
of Virginia and the VSB in the adoption and enforcement
of the disciplinary rules and other issues presented by the
case at bar. We believe that it would be in accord with
appropriate federal-state relations for the federal courts to
withhold final decision on the issues presented by this case
until the Virginia courts have had an opportunity to de-
cide the disputed questions of state law. on

We, therefore, vacate the order of the district court, and
remand the case with instructions to withhold further ac-
tion until the final decision of the Supreme Court of Vir-
ginia in the case filed by the Attorney General of Virginia
against the plaintiff herein, referred to in footnote 2 of
the opinion of the district court, unless the Attorney Gen-
eral is responsible for any unreasonable delay in such de-
cision.

Vacated and Remanded,
with instructions.

7a

APPENDIX B
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION

[Filed April 25, 1977]

SURETY TITLE INSURANCE )
AGENCY, INC., )

Plaintiff, )
v. ) Civil Action

) No. 76-0180-R

VIRGINIA STATE BAR, )

Defendant. )

MEMORANDUM

Plaintiff, Surety Title Insurance Agency, Inc. (Surety),
brings this action under Sections | and 2 of the Sherman
Act, 15 U.S.C. 8 1 and 2, to redress injuries to its busi-
ness allegedly incurred by virtue of actions of the defen-
dant, Virginia State Bar. Plaintiff seeks monetary, injunc-
tive and declaratory relief. Jurisdiction is attained pursu-
ant to 15 U.S.C. 8 15 and 26 and 28 U.S.C. § 1337. The
matter comes before the Court on cross-motions for sum-
mary judgment as to liability. The issues have been briefed
and argued by counsel, and the matter is ripe for disposi-
tion.

The gist of the plaintiff's complaint is an allegation that
the defendant’s practice of issuing advisory opinions relating
to ethics and the unauthorized practice of law, coupled with

8a

the threat of disciplinary proceedings, ! illegally restrain com-
merce in the area of title insurance. Specifically, the plain-
tiff maintains that the defendant’s actions constitute an ille-
gal group boycott and an attempt to monopolize in viola-

tion of Sections | and 2 of the Sherman Act, 15 U.S.C.

8 1 and 2. Plaintiff does not challenge either the defini-
tion of the practice of law as enunciated by the Supreme
Court of Virginia nor the correctness of any particular

ethical or unauthorized practice of law opinion.” Rather,

it is the method by which these opinions are issued that
is alleged to be in violation of the federal antitrust laws.
A description of the opinion issuing process as it relates to

3

! Rules of the Supreme Court of Virginia, Part Six, Rule 6:11,
DR 3-101(A) subjects attorneys to disciplinary action should they
“aid a non-lawyer in the unauthorized practice of law.” 216 Va.
1090 (1976).

: Subsequent to the filing of this action, the Attorney General
of Virginia filed a Bill of Complaint against the plaintiff charging
it with the unauthorized practice of law. The Bill and subpoena
issued by the Clerk of the Circuit Court of Virginia Beach were
served on the plaintiff on December 16, 1976. A challenge to
the substance of the State Bar’s opinions on the unauthorized
practice of law as they relate to title insurance may be expected

in the state court proceeding.

3 Thus, there is no question of state law presented in this case
which would call for the invocation of the exceptional doctrine of
abstention. Colorado River Water Conservation Dist. v. United
States, US. , 44 U.S.L.W. 4372, 4376 (U.S., March 24, 1976).
Moreover, resolution of the issues presented in this case would not
interfere with the action brought by the Attorney General of Vir-
ginia against the plaintiff. The two actions simply present different
issues. Thus, Younger v. Harris, 401 U.S. 37 (1971) and its progeny
are not applicable. See Consumers Union of United States, Inc. v.
American Bar Ass'n, __F. Supp.___ ,C.A. No. 75-0105-R, SJ. Op.
11-15 (E.D. Va. 1976).

9a

title insurance is appropriate to provide the factual predi-
cate for the Court’s conclusions.

The Supreme Court of Virginia is legislatively empowered
to define what constitutes the practice of law. Va. Code
Ann. § 54-48(a) (Repl. Vol. 1974). Pursuant to this stat-
ute and its inherent authority, the Supreme Court of Vir-
ginia in 1938 defined the practice of law, in pertinent part,
as follows:

“Generally, the relation of attorney and client
exists, and one is deemed to be practicing law,
whenever he furnishes to another advice or serv-
ice under circumstances which imply his possession
and use of legal knowledge or skill.

Specifically, the relation of attorney and client
exists, ana one is deemed to be practicing law,
whenever —

(1) One undertakes for compensation, direct
or indirect, to advise another, not his regular em-
ployer, in any matter involving the application of
legal principles to facts or purposes or desires.

(2) One, other than as a regular employee act-
ing for his employer, undertakes, with or without
compensation, to prepare for another legal instru-
ments of any character, other than notices or con-
tracts incident to the regular course of conducting
a licensed business. . . .”

Rules of the Supreme Court of Virginia, Part Six, Rule 6:1,
216 Va. 1062 (1976). This definition was first drafted by
a special subcommittee of attorneys. The Supreme Court
ordered release of the proposed definition and solicited pub-
lic comments. These comments brought about one addition

10a

tc the proposed definition. The definition as adopted in
1938 remains unchanged today.

The Supreme Court was also authorized to create the
Virginia State Bar “to act as an administrative agency of
the Court for the purpose of investigating and reporting
the violation of such rules and regulations as are adopted
by the Court under the article for such proceedings as may
be necessary.”” Va. Code Ann. § 54-49 (1974 Repl. Vol.)
The defendant, Virginia State Bar (State Bar), was created
pursuant to this authority by the Rules of the Supreme
Court of Virginia (Rules of the Court) in 1938. Each at-
torney practicing law in Virginia is required by statute and
the Rules of the Court to be a member of the State Bar.
Va. Code Ann. § 54-49 (1974 Repl. Vol.); Rules of the
Supreme Court of Virginia, Part Six, Rule 6:1V, 4 2, 216
Va. 1141 (1976). The powers of the State Bar have been
delegated by the Supreme Court of Virginia to a Council
comprised of at least one attorney elected from each judi-
cial circuit in Virginia and six attorneys appointed at large
by the Supreme Court of Virginia. The current President,
President-elect, and immediate past President of the State
Bar serve as ex officio members of the Council. Rules of
the Supreme Court of Virginia, Part Six, Rule 6:1V, q 5,
216 Va. 1143 (1976). The Council currently consists of
fifty-six elected or appointed members and the three ex
officio members.

When the Virginia Supreme Court established the State
Bar, it also promulgated rules governing the Bar’s organiza-
tion and government as well as those relating to the Coun-
cil. Among the various powers vested in the Council is the
power to render advisory opinions. Rules of the Supreme
Court of Virginia, Part Six, Rule 6:1V, 4 9(i), 216 Va.
1146 (1976). Any active member of the State Bar may

lla

solicit an advisory opinion “on any question of contem-
plated professional conduct of such member, and upon such
application the Council, or a Committee of the Council ap-
pointed for the purpose, shall render such an opinion. In
the event the opinion is rendered by a Committee, such
member shall have the right of appeal to the Council.”
Rules of the Supreme Court of Virginia, Part Six, Rule
6:1V, ¢ 10, 216 Va. 1147 (1976). The by-laws of the
Council establish five-member committees, appointed by the
President from its membership, for both Legal Ethics and
Unauthorized Practice of Law. Rules of the Supreme Court
of Virginia, Part Six, Rule 6:V, Art. VIII and IX, 216 Va.
1173-1174 (1976).

The advisory opinions are not rendered in an adjudica-
tive or adversarial’context. The advisory opinions relating
to the unauthorized practice of law are deemed to be of
general application. Accordingly, the State Attorney Gen-
eral has advised State Bar members that the Virginia Con-
flict of Interest-Act, Va. Code Ann. § 2.1-352, does not
preclude a practicing attorney from voting with respect to
an advisory opinion concerning the unauthorized practice
of law. Opinion of the Attorney General of the State
of Virginia (July 24, 1974). There is also no provision
made for review by any Court of the Unauthorized Prac-

4 Thus, Council members who engage either in a real estate-
oriented practice or represent title companies were permitted to
pass on the question of whether issuing title insurance constitutes
the practice of law. As discussed infra, this issue can be of con-
siderable economic concern to both the attorneys and their clients.
The only disqualification that was mandated by the Council was
that of Council member Edward R. Parker who had formerly
represented the Northern Virginia Lawyers Association in the
proceedings which led to the issuance of UPL opinions 43 and
44, which are central to this case. See note 5, infra.

12a

tice of Law opinions. An amendment to the rules govern-
ing the State Bar to allow for judicial review of advisory
opinions was proposed, but rejected by the State Bar in
1938. Accordingly, no opinion of the Ethics Committee
or the Unauthorized Practice of Law Committee has ever
been presented to or approved by the Supreme Court of
Virginia. In short, advisory opinions are issued by lawyers
in response to questions submitted by lawyers and no pro-
vision is made to inject the participation of non-interested
parties into the process.

The area of unauthorized practice of law pertinent to
the instant litigation relates to the activities of title insur-
ance companies such as the plaintiff. In 1942, the Unau-
thorized Practice of Law Committee issued its opinion No.
17 in response to the following inquiry:

“Should definition [sic] of practice of law be
changed so that title companies should certify
the validity of real estate and personal property
titles?”

The opinion, adopted by the Council, recommended that
the definition of the practice of law not be amended so

as to allow title insurance companies to certify titles. This
opinion is premised upon the belief that the certification
of a title constitutes the practice of law within the mean-
ing of the definition articulated by the Supreme Court of
Virginia. The absence of an attorney-client relationship be-
tween the company and a prospective purchaser of title in-
surance was viewed to be a source of potential abuse which
greatly outweighed the possible benefits accruing to the pub-
lic should title insurance companies be permitted to certify
titles.

The Committee considered the problems associated with
title insurance compai«-es again in 1973. This consideration

13a

stimulated much debate* within the profession and resulted in
the issuance by the Committee of two opinions which were
adopted by the Council. Unauthorized Practice of Law Opin-
ion 43 states that a tithe company would be engaging in the
unauthorized practice of law should it issue a title insurance
policy to a non-lawyer based upon a title examination con-
ducted by lay employees of the company. This conclusion
rests upon the proposition that issuing title insurance con-
stitutes the rendering of a legal opinion as to the sufficiency
of a title and is taken to be such by a lay person. The un-
derlying proposition was deemed to be unaffected by the

title insurance company’s disclaimer, to be issued with each
commitment, policy or binder, to the effect that:

THIS IS A TITLE INSURANCE (COMMITMENT)
(POLICY) (BINDER) AND IS NOT A TITLE OPIN-
ION. THERE MAY BE MATTERS OF RECORD
OR NOT OF RECORD WHICH AFFECT THE PRO-
PERTY DESCRIBED IN SCHEDULE A, WHICH ARE
NOT LISTED IN SCHEDULE B, AND WHICH THE

5 A title insurance company proposed to provide title binders
(commitments to insure) to attorneys for a set fee on the basis
of title searches and abstracts conducted by the title company’s
employees. After reviewing the abstract, the attorney could then
certify the title to the title insurance company and the home
buyer and the company would issue commitment to insure. This
proposal was opposed by the Northern Virginia Lawyers Associa-
tion. The contending forces presented the issues to the UPL
Committee which proposed UPL opinion 41. The Council held
an open meeting on proposed UPL 41 on October 26, 1973, at
which time it was decided that the opinion should be broken
down into two opinions which subsequently became UPL 43
and 44. Opinions 43 and 44 were adopted June 20, 1974. The
latter opinion was not made effective until the adoption of
Ethics Opinion 177 which, along with UPL Opinion 46 was
adopted January 24, 1975.

14a

COMPANY HAS DETERMINED TO ACCEPT AS
AN UNDERWRITING RISK.

The proposed practice, falling within the Virginia Supreme
Court’s general definition of the practice of law coupled
with the absence of an attorney-client relationship and ac-
companying ethical protections, was deemed to present an
unacceptable risk to the unwary consumer. Unauthorized
Practice of Law Opinion 44 holds that upon the request of
an attorney, a title insurance company may search a title
and furnish such title information to the attorney and issue
a commitment, or binder to insure, to whomever the request-
ing attorney may designate. The presence of an attorney in
the transaction, so that opinion holds, “eliminates the evils
against which the proscription is directed: reliance by lay-
man upon services which are implicitly offered to him as
the product of legal knowledge or skili.” Related to Opin-
ion 44 was Ethics Opinion 177 which outlines an attorney’s
responsibility in situations arising under Opinion 44. The
Unauthorized Practice of Law Opinion 46 was also adopted
at the same time. That opinion approves of title companies
providing the results of their title searches directly to cus-
tomers with staff counsel who request the information. The
Unauthorized Practice of Law Opinions 44 and 46 as well
as the Ethics Committee Opinion 177 became effective on
January 25, 1975.

The plaintiff was organized in November of 1975 in order
to act as an agent on behalf of out-of-state companies sell-
ing title insurance directly to home buyers. The plaintiff
operates its business largely within the Tidewater area of
Virginia. The plaintiff proposes to lower the cost of title
insurance by eliminating the services of an attorney in a
transaction between the purchaser of such insurance and the
title insurance company. The purchaser of title insurance

15a

would deal directly with the plaintiff and would be able to
look only to the plaintiff if there were a defect in the title.
The plaintiff currently utilizes attorneys in conducting title
searches, but admittedly plans to utilize trained lay person-
nel should it prevail in this action. It is uncontroverted
that the plaintiff's business approach would result in the con-
sumer receiving greater services than presently offered at a
substantially lower cost. For example, the affidavits and ex-
hibits filed in this cause indicate that the consumer could
save as much as $211.00 on the charges typically made in
the Tidewater area for title insurance on a $30,000 home.
The contemplated savings for such insurance on a $60,000
and $100,000 home are stated to be $491.00 and $871.00,
respectively. It is further represented that additional serv-
ices such as surveying the tract would be included in the
insurance package.

In regard to the instant controversy, there are two essen-
tial elements involved in the transfer of real estate. First,
a deed must ve prepared. The Supreme Court of Virginia
has held that only an attorney may prepare this document.
Commonweaih v. Jones & Robins. 186 Va. 30, 41 S.E.2d
720 (1941). The plaintiff has no quarrel with that decision.
Secondly, title insurance is generally required by a lender
as a condition of the loan obtained whenever financing is
necessary. See Goldfarb v. Virginia State Bar, 421 U.S. 773,
784 (1975). The plaintiff proposes to sell title insurance
directly to the consumer and thereby exclude the attorney
and, concomitant therewith, the attorney’s fee, from the in-
surance transaction. The advisory opinions issued by the
defendant state that this exclusion of the lawyer places the
transaction in contravention of the prohibition agzinst the
unauthorized practice of law. Unauthorized Practice of Law,
Opinion No. 17, August 5, 1942; Unauthorized Practice of
Law, Opinion No. 43, June 20, 1975. The Supreme Court

16a

of Virginia, however, has not yet expressed its view on the
subject. The defendant’s opinions, nonetheless, raise the
powerful spectre of disciplinary action to any attorney who
participates in a real estate transaction wherein the title in-
surance is Obtained without the services of a lawyer. See
Goldfarb, supra, 421 U.S. at 791, n.21. The net effect,
predictably, is that attorneys, who are essential to the plain-
tiffs business, refuse to prepare deeds in transactions where
the plaintiff provides the title insurance under its proposed
method of doing business. Indeed, only ten of the approxi-
mately two hundred to three hundred attorneys contacted
by the plaintiff expressed any interset in performing serivces
for it.

To paraphrase Goldfarb, a more classic illustration of a group
boycott is difficult to conjure. See United States v. General
Motors Corp., 384 U.S. 127, 145-46 (1966); Silver v. New
York Stock Exchange, 373 U.S. 341, 347 (1963); Radiant
Burners v. Peoples Gas Co., 364 U.S. 656, 659 (1961); Klor’s
v. Broadway-Hale Stores, Inc., 359 U.S. 207, 211 (1959); As-
sociated Press v. United States, 326 U.S. 1, 12-14 (1945);
Fashion Originator’s Guild v. FTC, 312 U.S. 457 (1941).
The opinion issuing process has also resulted in the attempted
extension of a monopoly from an area sanctioned by the
Supreme Court of Virginia (drafting titles) to an area which
that Court has yet to address (title insurance). There is,
moreover, no question but that the transfer of real estate
in Virginia involves and substantially affects the flow of com-
merce between the states.© See Goldfarb, supra, 421 U.S.

6 In addition to plaintiff, there are numerous other agencies/
title insurance companies doing business in the Tidewater area.
Of the three largest companies, two are headquartered outside
of Virginia (Chicago Title Insurance Company and Pioneer Title
Insurance Company), and the net proceeds from all sales of those

(Continued)

17a

at 783-85. There is similarly no disputing that the defen-
dant’s issuance of Unauthorized Practice of Law opinions
has had an anticompetitive effect, if not purpose.’ Accord-

o (Continued)
two companies are transmitted to their headquarters outside of
Virginia. None of the other title insurance agencies or title insur-
ance companies offers packages of services similar to those of
plaintiff.
During the calendar year 1975, the United States Department of
Housing and Urban Development, which is headquartered in Wash-
ington, D.C., acting pursuant to 12 U.S.C. § 1706c, insured the
mortgages on | 342 single family homes in the Tidewater area in
the amount of $32,769,650. In fiscal year 1976, acting pursuant
to 38 U.S.C. $1810, the United States Veterans Administration,
which is also headquartered in Washington, D.C., guaranteed loans
on 5,410 homes in the Tidewater area in the amount of $179,952,
858. Most of the homes for which plaintiff has written title insur-
ance have been homes on which there was either a Veterans Ad-
ministration guarantee or insurance from the Housing and Urban
Development Department. In Virginia, as elsewhere, title insur-
ance is generally required by lenders in order to obtain a loan
for the purchase of a home.

7 The Court, at this juncture, is not in a position to reach any
conclusion with regard to the intent of the defendant. There are
sufficient indications in the record, however, to question whether
the UPL opinions concerning title insurance were based entirely on
considerations of public interest. UPL Opinion 17 decries title in-
surance companies of © .epriving the resident attorneys of a large
volume of such practice in which they would otherwise be em-
ployed.” Briefs submitted by the Northern Virginia Lawyers Asso-
ciation in connection with UPL Opinions 41, 43 and 44 warned of
title insurance companies placing in jeopardy the position of the
attorney in real estate transactions. In considering UPL Opinion
41, a Council member stated “[N]o one has to tell us what it
feels like to have one’s practice threatened by this type of thing.”
The opposition to title insurance companies issuing policies without
the services of an independent lawyer was characterized by another
as a concern over taking “bread out of our mouths.” Council Meet-
ing of the Virginia State Bar, In Re: UPL Opinion Number 41, pp.
10, 16 (October 26, 1973).

18a

ingly, the Court is satisfied that the conduct in issue, if ac-
complished by a wholly private enterprise, would violate
both Sections | and 2 of the Sherman Act.®

The defendant contends that it is exempt from federal
antitrust laws under the doctrine set out in Parker v. Brown,
317 U.S. 341 (1943).9 In Parker v. Brown, state officials
were held to be immune from liability under the federal an-
titrust laws for activity which would have constituted a vio-
lation of those laws had it been the product of private ac-
tion. At issue in Parker was a legislatively mandated market-
ing program whose purpose was to restrain price competition
in the raisin industry.

The Supreme Court explicated the Parker doctrine in two
recent cases. In Goldfarb v. Virginia State Bar, supra, the

8 Group boycotts are said to be per se violations of the Sherman
Act. Silver v. New York, supra, 373 U.S. at 347 and cases cited
therein. There is a split of authority as to whether the per se or
rule of reason test should be applied to substantive antitrust claims
involving the practices of professions. Compare United States v.
National Society of Professional Engineers, __F.2d__ , No. 76-
1023 (D.C. Cir. March 14, 1977) with Feminist Women’s Health
Center, Inc. v. Mohammad, 415 F. Supp. 1258, 1263 (N.D. Fia.,
1976). The Court need not reach this precise issue as it con-
cludes that the practice in question can not withstand the less de-
manding rule of reason analysis.

9 The Parker doctrine is frequently articulated in terms of being
an “exemption” from the antitrust laws. See, e.g., Goldfarb v. Vir-
ginia State Bar, supra, 421 U.S. at 780. The doctrine, however, is
founded on the concept that the Sherman Act was never intended
to apply to all state action in the first instance. See Handler, The
Current Attack on the Parker v. Brown State Action Doctrine, 76
Col. L. Rev. 1, 9 (1976). It is also clear that the doctrine predates
Parker v. Brown. See Olsen v. Smith, 195 U.S. 332, 344-45 (1904).
The Court, for the purposes of consistency, adopts the terminology
utilized by the Goldfarb Court.

19a

Court found a minimum fee schedule maintained by the
State and local bar associations and enforced through the
prospects of disciplinary action and professional norms to
constitute a classic illustration of price fixing. In rejecting
the state action immunity asserted by the defendants, the
Court noted

“[T]he threshold inquiry in determining if an anti-
competitive activity is state action of the type the
Sherman Act was not meant to proscribe is whether
the activity is required by the State acting as sover-
eign. . . Here we need not inquire further into the
state action question because it cannot fairly be
said that the State of Virginia through its Supreme
Court Rules required the anticompetitive activities
of either respondent ... It is not enough that

. anticompetitive conduct is ‘prompted’ by state
action; rather, anticompetitive activities must be
compelled by direction of the State acting as a
sovereign.” Goldfarb v. Virginia State Bar, supra,
421 U.S. at 790-791 (citations omitted and em-
phasis added).

The most recent Supreme Court pronouncement in this
area was in Cantor v. The Detroit Edison Co.,__US.__,
44 U.S.L.W. 5357 (U.S. July 6, 1976). In Cantor, the
defendant utility provided light bulbs to its customers
and included the costs of same in its operating costs. As
a result of this practice, the rates approved by the Michi-
gan Public Service Commission reflected the costs of the
light bulbs. The practice was both approved by and un-
alterable without the consent of the Michigan State Public
Service Commission. This Commission was legislatively em-
powered to regulate the distribution of electricity. Six Jus-
tices concurred to the effect that the state action exemption
from the antitrust laws was inapplicable. A plurality of four

20a

Justices rested this holding on the fact that the practice
was wholly, or at least predominantly, private conduct ini-
tiated by a non-public entity. Mr. Chief Justice Burger
concurred in part, preferring to base the decision solely on
the absence of a state policy governing the distribution of
light bulbs. Mr. Justice Blackmun concurred in the judg-
ment on the grounds that the anticompetitive harms of
the practice outweighed its benefits.

The precise scope of the state action exemption is not
entirely clear. It does appear that Goldfarb and Cantor
narrow the applicability of the Parker-doctrine from what was

once viewed as its parameters. See, e.g., Litton Systems, Inc.

v. Southwestern Bell Telephone, Inc., 539 F.2d 418, 423
(Sth Cir. 1976). The Court’s footnote 17 in Goldfarb
also indicates that practices of professions are not to be
viewed in precisely the same manner as the practices of
other business activities. Goldfarb v. Virginia State Bar,
supra, 421 U.S. at 787 n.17.'° Just how the antitrust
laws apply to the regulation of professions is an evolving
area of law.

10 That footnote reads:

The fact that a restraint operates upon a profession as dis-
tinguished from a business is, of course, relevant in deter-
mining whether that particular restraint violates the Sherman
Act. It would be unrealistic to view the practice of profes-
sions as interchangeable with other business activities, and
automatically to apply to the professions antitrust concepts
which originated in other areas. The public service aspect,
and other features of the professions, may require that a
particular practice, which could properly be viewed as a
violation of the Sherman Act in another context, be treated
differently. We intimate no view on any other situation
than the one with which we are confronted today.

2la

The Fifth Circuit Court of Appeals reasons that the ex-
emption applies only when the anticompetitive restraint in
issue lies within the intent of the authorizing mandate of
the State. City of Lafayette v. Louisiana Power & Light
Co., 532 F.2d 431, 434 (Sth Cir. 1976). Thus, that Court
reasoned that the minimum fee schedule in Goldfarb would
have enjoyed immunity if the Virginia Supreme Court had
required the same, and such action fell within the scope of
its authority to regulate the practice of law. City of Lafa-
yette v. Louisiana Power & Light Co., supra, 532 F.2d at
434 fn. 7 and 8. A similar approach has been adopted by
the Third Circuit Court of Appeals. Duke & Company, Inc.
vy. Foerster, 521 F.2d 1277, 1280 (3d Cir. 1975).

The Ninth Circuit Court of Appeals addressed the state
action exemption issue in the context of professional regu-
lation. That Court interpreted Cantor and Goldfarb as
meaning that “to survive a Sherman Act challenge a parti-
cular practice, rule, or regulation of a profession, whether
rooted in tradition or the pronouncements of its organiza-
tions, must serve the purpose for which the profession
exists, viz. to serve the public. That is, it must contribute
directly to improving service to the public. Those which
only suppress competition between practitioners will fail to
survive the challenge. This interpretation permits a harmo-
nization of the ends that both the professions and the Sher-
man Act serve.”” Boddicker v. Arizona State Dental Ass'n,
___-F.2d ___, 1977-1 Trade Case 4 61,258 at 70,797
(9th Cir. Jan. 6, 1977) (footnotes omitted). Recently, the

11 The Fourth Circuit Court of Appeals in a post-Cantor and
Goldfarb case found Parker v. Brown to be inapplicable where the
State took no action to compel the defendant to engage in the al-
leged illegal action. Ballard v. Blue Shield of Southern West Vir-
ginia, F.2d __ , No. 75-1982, Sl. Op. at 11-12 (4th Cir. October
19, 1976.

22a

District of Columbia Circuit Court of Appeals, while not
ruling on the state exemption issue, intimated that anticom-
petitive practices of professions taking the form of ethical
rules might survive a Sherman Act challenge where such
practices are “‘narrowly confined to interdiction of abuses.”
United States v. National Society of Professional Engineers,
__ -F.2d.__, No. 76-1023, SI. Op. at 11 (D.C. Cir. March
14, 1977).

From these cases, the Court cautiously discerns the follow-
ing analytical principles applicable to the instant controversy.
The “threshold inquiry” is whether the contested activity is
compelled by the state acting as sovereign. Goldfarb v. Vir-
ginia State Bar, supra, 421 U.S. at 790. State authorization,
approval, encouragement, or participation in restrictive acti-
vity does not confer antitrust immunity. Cantor v. The De-
troit Edison Co., supra, __ U.S. __, 44 U.S.L.W. at 5361.
A negative answer to this threshold question terminates the
analysis and no immunity would be afforded the defendant.
Goldfarb v. Virginia State Bar, supra, 421 U.S. at 790-91:
Ballard v. Blue Shield of Southern West Virginia, ___F.2d
___, No. 75-1782 , Sl. Op. pp. 11-12 (4th Cir. Oct. 19,
1976). The use of the terms “threshold inquiry,” “‘state
action of the type the Sherman Act was not meant to pro-

scribe,” and “further inquiry” by the Goldfarb Court strongly

suggest that an affirmative answer demands further analysis.
Goldfarb v. Virginia State Bar, supra, 421 U.S. at 790. See
Robinson, Recent Antitrust Developments: 1975, 76 Col.
L. Rev. 191, 212 (1976).

Just what further analysis is required is admittedly not
entirely clear. The plurality opinion in Cantor in which the
Chief Justice joined states that an exemption from the anti-
trust laws is not available unless “that exemption was neces-
sary in order to make the regulatory act work, ‘and even

ee

— et ee Se en

23a

then only to the minimum extent necessary.’ ” Cantor v.
The Detroit Edison Co., U.S. __, 44 U.S.L.W. at 5362-
63. This approach, articulated in the context of what was
deemed to be private conduct, involves a determination

of whether the anticompetitive activity is necessary to ac-
complish the regulatory purpose of that agency. Mr. Justice
Blackmun articulated a slightly different standard in his con-
curring opinion.

“I would apply, at least for now, a rule of reason,
taking it as a general proposition that state-sanc-
tioned anticompetitive activity must fall like any
other if its potential harms outweigh its benefits.
This does not mean that state-sanctioned and pri-
vate activity are to be treated alike. The former

is different because the fact of state sanction
figures powerfully in the calculus of such harm and
benefits . . . I would assess the justifications of such
enactments in the same way as is done in equal pro-
tection review, and where such justifications are at
all substantial (as one would expect them to be in
the case of most professional licensing or fee-setting
schemes, for example. . .) I would be reluctant to
find the restraint unreasonable.”” Cantor v. The De-
troit Edison Co., _U.S. ___, 44 U.S.L.W. at 5666-
67.

The Ninth Circuit Court of Appeals phrased the analysis in
terms of whether the anticompetitive activity contributes di-
rectly to improving service to the public or only to suppress
competition. Boddicker v. Arizona State Dental Ass'n, su-
pra. These different formulations share the common thread
of focusing on the relationship between the anticcmpetitive
activity and the state interest it purports to advance. If
that relationship is tenuous, the activity must fall. See Sla-

24a

ter, Antitrust and Government Action: A Formula for Nar-

rowing Parker v. Brown, 69 Nw. L. Rev. 71, 104-109 (1974).

The Court is of the view that the issuance of Unauthor-
ized Practice of Law and Ethical opinions by the defendant
is compelled by the Commonwealth of Virginia. Acting pur-
suant to statutory’? and inherent’? authority, the Supreme
Court of Virginia has created the State Bar and promulgated
the rules and by-laws from which the Ethical and Unauthor-
ized Practice of Law opinion processes have emerged. The
State Bar, acting through its Council or the appropriate Com-
mittees, is required to render, at the request of a member,
advisory opinions on contemplated professional conduct. See
Rules of the Supreme Court of Virginia, Part Six, Rule 6:IV,
q 10, Rule 6:V, Art. VIII, IX and XIII, 216 Va. at 1147,
1173-74 (1976).'* These directives are not couched in the

12 Va. Code Ann. 8 54-48, 54-49(1974 Repl. Vol.).

13 Button v. Day, 204 Va. 547, 132 S.E.2d 292 (1963) cited in
Goldfarb v. Virginia State Bar, supra, 421 U.S. at 789 n.18.

14 Rule 6:IV, | 10 reads as follows:

10. Advisory Opinions.—Any active member of the Vir-
ginia State Bar may apply to the Council for an advisory
opinion on any question of contemplated professional con-
duct of such member, and upon such application the Coun-
cil, or a Committee of the Council appointed for the pur-
pose, shall render such opinion. In the event the opinion
is rendered by a Committee, such member shall have the

right of appeal to the Council. (Emphasis added). 216
Va. 1147 (1976).

Rule 6:V, Art. IX reads as follows:
ARTICLE IX

Committee on Unauthorized Practice of the Law
(Continued)

— ee eee

a on comes oe

25a

permissive “‘may,”” but rather are expressed in the mandatory
phrase “shall render such opinion”. Thus, unlike the light
bulb distribution system of Cantor or the minimum fee
schedule in Goldfarb, the issuance of opinions on the unau-
thorized practice of law is the product of the command of
the state.

The Court finds, nonetheless, that this practice must fall
under the antitrust laws. While cognizant that the advisory
opinion process enjoys the sanction of the state, the harms
of the system greatly outweigh its purported benefits. The
states have “‘a compelling interest in the practice of profes-
sions within their boundaries, and that as part of their power
to protect the public health, safety and other valid interests,
they have broad power to establish standards for licensing
practitioners and regulating the practice of professions.”
Goldfarb v. Virginia State Bar, supra, 421 U.S. at 792. Re-

14 (Continued)

A Standing Committee of five members of the Council, to
be appointed by the President and to be known as the Com-
mittee on the Unauthorized Practice of the Law, is hereby
created. All powers and duties of the Council with respect
to the unauthorized practice of law, not otherwise delegated
or reserved, shall be exercised and discharged by the Commit-
tee. (Emphasis added). 216 Va. 1173 (1976).

Rule 6:V, Art. XIII reads as follows:
ARTICLE XIII

All committees, District or Standing, shall refer to the
standing committees on Professional Ethics, Unauthorized
Practice of the Law, and Judicial Ethics, such questions
arising before them as are appropriate for opinion by the
respective committees, and such committees shall render
advisory opinion upon which the Committee asking same
shall act. (Emphasis added). 216 Va. 1179 (1976).

26a

stricting the practice of law to persons licensed by the state
is both a legitimate and necessary exercise of this power.
The underlying rationale behind this grant of a monopoly is
twofold: (1) it insures that persons rendering legal services
are qualified to do so; and (2) it subjects persons rendering
such services to the Virginia Code of Professional Responsi-
bility, Rules of the Supreme Court of Virginia, Part Six,
Rule 6:II, 216 Va. 1064 (1976). See Commonwealth v.
Jones & Robbins, 186 Va. 30, 41 S.E.2d 720 (1941); Rich-
mond Ass'n of Credit Men v. Bar Ass'n of Richmond, 167
Va. 327, 189 S.E. 153, 159-61 (1937); Bryce v. Gillespie,
160 Va. 137, 168 S.E. 653, 656 (1933). Both of these
considerations serve to advance the interest of the consum-
ing public by insuring the quality of legal services and im-
posing upon lawyers a degree of accountability to the state.

The Unauthorized Practice of Law opinion process, as it
presently operates, is not, in the Court’s view, sufficiently
related to those interests to justify its anticompetitive ef-
fects. Criminal sanctions are available to deter and punish
laymen who might engage or have engaged in the unauthor-
ized practice of law. Va. Code Ann. § 54-44.5 The advis-
ory Opinion process, moreover, cannot reasonably be said
to deter those from whom the public may need protection
as Only licensed attorneys may obtain these opinions. The
layman contemplating conduct which might constitute the
practice of law, and hence from whom the public needs
protection, has no access to the defendant’s advisory opin-
ion process. Thus, it would appear that the persons who
the State desires to deter and who have the greatest need

15 Additionally, the Attorney General is authorized to employ
special counsel to investigate and prosecute any person engaged in
the unauthorized practice of law. Va. Code Ann. § 2.1-125 (1973
Repl. Vol.).

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27a

for advisory opinions are excluded from the process pre-
sently under attack. It may be argued that the disciplinary
rule pertaining to aiding the unauthorized practice of law'®
generates a need for advisory opinions. The irony of this
argument is manifest. One facet of the practice of law is
advising clients as to the legality of a proposed course of
conduct. Thus, lawyers are reputed to possess special ex-
pertise in interpreting statutes and judicial decisions and ap-
plying the distilled principles of law to future actions. At-
torneys as a class, therefore, should be the last segment of
society in need of advisory opinions pertaining to the Vir-
ginia Supreme Court’s definition of the practice of law. To
contend that attorneys require these advisory opinions is to
deny the very expertise which serves as partial justification
for placing restrictions on who may practice law.

The Unauthorized Practice of Law opinion process places
attorneys in the unique position of being able to define the
extent of their own monopoly. It belabors the obvious to
point out that lawyers in general would financially benefit
from an expansive definition of the practice of law. The
danger is crystalized under the facts of the instant case.!”
An attorney engaged in a real estate oriented practice
stands to lose substantial fees should the issuance of title
insurance be held to lie outside the parameters of the
Virginia Supreme Court’s definition of the practice of law.

16 Rules of the Supreme Court of Virginia, Part Six, Rule II:
DR 3-101(A), 216 Va. 1090 (1976).

17 The Court’s remarks here should not be taken as a comment
on the merits of any particular UPL opinion or a suggestion of
ethical impropriety on the part of any member of the bar. The
Court is merely pointing out the anticompetitive dangers inherent
in the UPL opinion process.

28a

This direct pecuniary interest highlights the infirmity of
the system as it now operates. Gibson v. Berryhill, 411
U.S. 564, 578-79 (1973). The absence of judicial parti-
cipation aggravates the anticompetitiveness of the Unau-
thorized Practice of Law opinion process. The State Bar

rules make no provision for court review of such opinions.

All of the opinions issued to date have become effective
without the consideration or approval of the Supreme
Court of Virginia. Thus, that organ of the State vested
with responsibility for defining the practice of law has
yet to intimate its authoritative views on the title insur-
ance issue.

There is nothing in the instant record, moreover, that
indicates that either the legislature or the Supreme Court
of Virginia intended to restrain competition between law-
yers and laymen in areas which arguably do not lie with-
in the definition of the practice of law. The state policy
behind restricting the practice of law to licensed attorneys
is to protect the public and not, as was the case in Parker
v. Brown, to financially benefit a particular segment of
society. That intent is thwarted when, as here, the regu-
latory activity serves an anticompetitive end without neces-

sarily improving the services rendered to the consuming
public.

In summary, not only is the Unauthorized Practice of
Law opinion process tenuously related to the state interest
it purports to advance, but it operates in a decidedly anti-
competitive fashion offensive to notions of basic fairness.
It does not act to advance the consumer interest, but
merely that of the attorney. It is neither necessary to,
nor are its anticompetitive effects reasonable in light of,-

Re ht a ee ee

~

29a

the justifying state interest. Accordingly, the state action
exemption is not available to the defendant.'®

Both the plurality opinion and that of Mr. Justice Black-
mun in Cantor indicate a defense to monetary liability may
be available to a defendant based on notions of fairness.
Cantor v. The Detroit Edison Co., U.S. at__and__; 44
U.S.L.W. at 5361-63 and 5366 n.6. Cf. Feminist
Women’s Health Center, Inc. v. Mohammad, 415 F. Supp.
1258, 1263 (N.D. Fla. 1976). The Court believes that
this may be an appropriate case for such a defense. The
issuing of the opinion resulting in the competitive activity
here was required by the state. The Court will request
that the parties address this issue further after the Court
and counsel have the benefit of the Supreme Court’s
opinion in the case of Bates v. State of Arizona which
is anticipated before the Court’s current term ends in
June.

An appropriate order will issue.

/s/ ROBERT R. MERHIGE, JR.
Robert R. Merhige, Jr.

United States District Judge
Date: April 25, 1977

18 The defendant argues that the McCarran-Ferguson Act, 15
U.S.C. 8 1011-1013 exempts the-regulation of title insurance from
the antitrust laws. Title 15 U.S.C. $ 1012(b) grants the business
of insurance a qualified exemption from the Sherman Act. This
exemption is specifically limited by 15 U.S.C. § 1013(b) which pro-
vides: “Nothing contained in this chapter shall render the said
Sherman Act inapplicable to any agreement to boycott, coerce,
or intimidate, or act of boycott, coercion or intimidation.” The
Court is satisfied that the type of boycott involved herein is the
type condemned by the McCarran-Ferguson Act. See Ballard v.
Blue Shield of Southern West Virginia, __F.2d___ , No. 75-1982,
Sl. Op. pp. 9-10 (4th Cir. October 19, 1976).

a Ce

30a
APPENDIX C

IN THE
UNITED STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION

SURETY TITLE INSURANCE AGENCY,

INC.,
Plaintiff, :
v. : Civil Action
: No. 76-0180-R
VIRGINIA STATE BAR, :
Defendant.
ORDER

For the reasons stated in the Memorandum of the Court
this day filed and deeming it proper so to do, it is ADJUDGED
AND ORDERED as follows:

(1) Defendant’s motion for summary judgment be, and
the same is hereby, denied; and

(2) The motion of the plaintiff for summary judgment
be, and the same is hereby, in part, granted in the following
respects: (a) the issuance by defendant of opinions or simi-
lar documents purporting to define the practice of law is
unlawful and in the instant case is violative of Sections 1
and 2 of the Sherman Act, 15 U.S.C. $8 1 and 2; (b) the
defendant, Virginia State Bar, its officers, agents and em-
ployees be, and they are hereby, enjoined from issuing
any further opinions or documents purporting to define

Oe Bt ew

3la

the practice of law and said defendant is directed to ex-
punge from its records all such prior opinions; further,
the defendant, Virginia State Bar, through its appropriate
officer shall forthwith notify its membership of said

expungement.

All other matters in issue are hereby continued.

Let the Clerk send copies of this Order and the accom-
panying Memorandum to all counsel of record.

Date: April 25, 1977

/s/ ROBERT R. MERHIGE, JR.
Robert R. Merhige, Jr.
United States District Judge

32a
APPENDIX D
IN THE

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 77-1703

SURETY TITLE INSURANCE AGENCY, INC.,

Appellee,
v.

VIRGINIA STATE BAR,
Appellant.

ORDER

Upon consideration of the appellee’s petition for rehear-
ing and suggestion for rehearing en banc, and no judge
having requested a poll on the suggestion for rehearing en

It is ADJUDGED and ORDERED that the petition for
rehearing is denied.

Entered at the direction of Judge Russell for a panel
consisting of Judge Russell, Judge Hall, and Judge Thomsen.

For the Court,

/s/ William K. Slate, II

Clerk

—_— ——————

33a

A True Copy, Teste:
William K. Slate, Il, Clerk

By /s/ EMILY RUEGER
Emily Rueger

[Filed April 3, 1978]

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0774%3A1. Public record. Not legal advice.