DID THE UNIFIED STATE BAR HAVE AN ANTITRUST PROBLEM?

By John W. Amberg

John W. Amberg is a partner in Bryan Cave LLP, and a member and former chair of LACBA's Professional Responsibility and Ethics Committee. The views expressed here are his own.

Lawyers with long memories will recall a previous administration with a disregard for the "reality-based community."[1] After 9/11, Secretary of Defense Donald Rumsfeld urged President Bush to bomb Iraq although that country had nothing to do with the worst domestic attack since Pearl Harbor. When counterterrorism coordinator Richard Clarke remonstrated, "No, no, al-Qaeda is in Afghanistan," Rumsfeld famously replied: "There aren't any good targets in Afghanistan."[2]

A similar sense of dislocation was produced by the recent dismemberment of the California State Bar. Long a political football, the State Bar presented a rich target. After years of frustration and amid fresh revelations of mismanagement in 2017, the legislature passed and Governor Brown signed SB 36 which radically restructured the Bar—and reduced the participation and influence of its 167,000 active lawyer members. After 90 years as a unified or "integrated" bar (in which membership was required to practice law), the State Bar was split in two, effective on January 1, 2018, with its practice sections spun off into a voluntary association, leaving the mandatory Bar a shrunken remnant retaining only core regulatory functions such as admission and discipline. The law reduced the Bar's governing body, the Board of Trustees, from 19 to 13 members, six of them non-lawyers, and eliminated the election of trustees by lawyers in districts throughout the state. Now all trustees will be appointed by the legislature, governor, and Supreme Court, and the Supreme Court will appoint the chair and vice chair.[3]

As reform, the new law seemed like overkill. It remains to be seen how political appointees will be more knowledgeable stewards of the profession than elected lawyers, or how severing practice sections will improve the Bar's under-resourced discipline system. These changes were sold not only as a cure for the Bar's management problems, but also as necessary to avoid what critics of the Bar claimed was looming antitrust exposure. They charged that the Bar was a self-regulating cartel of active market participants—practicing lawyers—that restricted competition by limiting the number of successful bar exam takers and suspending the licenses of practitioners who violated the Rules of Professional Conduct, putting the state at risk for millions of dollars in damages. Robert Fellmuth of the University of San Diego School of Law warned the legislature: "There is indisputably some risk of the state having to pay treble damages in a class action suit, which could run into many millions of dollars, especially if brought by a class of those rejected for practice by such a self-interested body."[4] Thus, the Bar's trade association functions had to be severed from its regulatory functions and the state's lawyers disenfranchised, lest they elect their fellow market participants to regulate the profession. Section 38 of the new law directed the State Bar to submit Board of Trustees decisions that raised antitrust concerns to the California Supreme Court for review. But did the State Bar really have an antitrust problem, or was SB 36 a missile in search of a target?

Evidence of an antitrust cartel was elusive. California does not lack for lawyers.[5] Complaints that too many first-time test takers were failing the California bar exam were rejected by the Supreme Court, which noted that the "cut score," or passing grade, had not been changed in three decades and the failure rate had risen and fallen over the years.[6]

If the State Bar were violating the antitrust laws, the rich potential for treble damages and attorneys' fees presumably would have motivated enterprising lawyers to sue—but where were the lawsuits? Except for frivolous claims by disgruntled test takers and disbarred lawyers, no serious antitrust suit was ever brought against the Bar. This is not surprising. Antitrust liability can arise only for actions that have an anticompetitive effect. As the Supreme Court noted, in a September 26, 2017 order setting forth a new State Bar antitrust policy: "Courts have held that individualized decisions on admissions or discipline do not impact overall competition in the market to sufficiently raise antitrust concerns."[7]

Also, states are immune from antitrust liability,[8] and state regulatory bodies, though comprised of private practitioners, are immune if they are under active state supervision and their challenged conduct is clearly articulated as state policy.[9] In California, the role of the State Bar as the Supreme Court's administrative arm for attorney admissions and discipline is defined in the State Constitution.[10] Public policy is clearly articulated. "Protection of the public shall be the highest priority for the State Bar of California and the board of trustees in exercising their licensing, regulatory, and disciplinary functions."[11] While details can be debated, no one disputes that protection of the public is served by requiring lawyers to pass a bar exam and to comply with the Rules of Professional Conduct.

Nevertheless, critics complained the Supreme Court was not actively supervising the bar exam and the discipline system. The U.S. Supreme Court rejected a similar challenge to Arizona's bar exam by a failed test-taker in Hoover v. Ronwin,[12] holding that the Arizona Supreme Court properly delegated the admission process to a bar committee, approved the grading formula, and retained sole authority to admit applicants.[13]  In California, the State Bar Act delegated the bar exam to a committee of bar examiners comprised of lawyers and public members.[14] Though the Board of Trustees appointed some members, it did not prepare, review, or grade the exam, and only the Supreme Court could admit applicants to the Bar. When even this tame regime was challenged in 2017, the Supreme Court adopted new rules under which it would appoint all bar examiners and determine the cut score.[15]

The Bar's trustees had even less input into the discipline system. The Office of Chief Trial Counsel is an independent prosecuting authority and the State Bar Court is an independent judiciary. The Chief Trial Counsel and members of the State Bar Court cannot engage in the private practice of law, and are not market participants.[16] The Supreme Court approves and adopts the Rules of Professional Conduct, and retains final authority to disbar or discipline members of the bar.[17] Antitrust concerns recede when the State Bar is routinely criticized for not working hard enough to remove unethical lawyers from the practice of law, by suspension or disbarment.

In sum, it is hard to see how any of these regulatory practices reflected a genuine antitrust violation, or required the radical reformation of SB 36.


[1] Ron Suskind, Certainty, Faith, and the Presidency of George W. Bush, New York Times Magazine, Oct. 17, 2004.

[2] Richard Clarke, Against All Enemies, (Free Press 2004).

[3] Press Release, State Bar of California, State Bar prepares to implement historic reforms following Gov. Brown signature on the agency's annual fees bill, Oct. 2, 2017.

[4] Robert Fellmuth, memo to Senate Judiciary Committee and Assembly Judiciary Committee, Aug. 19, 2016.

[5] ABA Lawyer Population Survey (2017).

[6] Maura Dolan, Passing the California bar exam shouldn't be made easier, court says, L.A. Times, Oct. 18, 2017.

[7] State Bar Antitrust Policy, Admin. Order 2017-09-20, California Supreme Court (en banc), filed Sept. 26, 2017.

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

[9] N.C. State Bd. of Dental Exam'rs v. FTC, ___U.S.__, 135 S.Ct. 1101 (2015).

[10] Cal. Const., art. VI, §9.

[11] Bus. & Prof. Code §6001.1.

[12] Hoover v. Ronwin, 466 U.S. 558 (1984).

[13] Id. at 573.

[14] Bus. & Prof. Code §§6040, 6046.

[15] State high court says it decides bar passage score, L.A. Daily Journal, July 3, 2017.

[16] Bus. & Prof. Code §§6079.1(b); 6079.5(a).

[17] Bus. & Prof. Code §§6076; 6087.