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HOOVER ET AL. v. RONWIN ET AL.

decided: May 14, 1984.

HOOVER ET AL
v.
RONWIN ET AL.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

Powell, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan and Marshall, JJ., joined. Stevens, J., filed a dissenting opinion, in which White and Blackmun, JJ., joined, post, p. 582. Rehnquist, J., took no part in the decision of the case. O'connor, J., took no part in the consideration or decision of the case.

Author: Powell

[ 466 U.S. Page 560]

 JUSTICE POWELL delivered the opinion of the Court.

This case presents the question whether the state-action doctrine of immunity from actions under the Sherman Act applies to the grading of bar examinations by the Committee appointed by, and according to the Rules of, the Arizona Supreme Court.

I

Respondent Ronwin was an unsuccessful candidate for admission to the Bar of Arizona in 1974. Petitioners were four members of the Arizona Supreme Court's Committee on Examinations and Admissions (Committee).*fn1 The Arizona

[ 466 U.S. Page 561]

     Constitution vests authority in the court to determine who should be admitted to practice law in the State. Hunt v. Maricopa County Employees Merit System Comm'n, 127 Ariz. 259, 261-262, 619 P. 2d 1036, 1038-1039 (1980); see also Ariz. Rev. Stat. Ann. § 32-275 (1976). Pursuant to that authority, the Arizona Supreme Court established the Committee to examine and recommend applicants for admission to the Arizona Bar.*fn2 The Arizona Supreme Court Rules, adopted by the court and in effect in 1974,*fn3 delegated certain responsibilities to the Committee while reserving to the court the ultimate authority to grant or deny admission. The

[ 466 U.S. Page 562]

     Rules provided that the Committee "shall examine applicants" on subjects enumerated in the Rules and "recommend to [the] court for admission to practice" applicants found to have the requisite qualifications. Rule 28(a) (1973).*fn4 They also authorized the Committee to "utilize such grading or scoring system as the Committee deems appropriate in its discretion,"*fn5 and to use the Multi-State Bar Examination. Rule 28(c) VII A (1973), as amended, 110 Ariz. xxvii, xxxii (1974). Even with respect to "grading or scoring," the court did not delegate final authority to the Committee. The Rules directed the Committee to file the formula it intended to use in grading the examination with the court 30 days prior to giving the examination.*fn6 Also, after grading the examination and compiling the list of those applicants whom it considered

[ 466 U.S. Page 563]

     qualified to practice law in the State, the Committee was directed to submit its recommendations to the court for final action. Rule 28(a). Under the Rules and Arizona case law, only the court had authority to admit or deny admission.*fn7 Finally, a rejected applicant was entitled to seek individualized review of an adverse recommendation of the Committee by filing a petition directly with the court.*fn8 The

[ 466 U.S. Page 564]

     Rules required the Committee to file a response to such a petition and called for a prompt and fair decision on the applicant's claims by the Arizona Supreme Court.

Ronwin took the Arizona bar examination in February 1974.*fn9 He failed to pass, the Committee recommended to the Arizona Supreme Court that it deny him admission to the Bar, and the court accepted the recommendation. Ronwin petitioned the court to review the manner in which the Committee conducted and graded the examination. In particular, he alleged that the Committee had failed to provide him with model answers to the examination, had failed to file its grading formula with the court within the time period specified in the Rules, had applied a "draconian" pass-fail process, had used a grading formula that measured group, rather than individual, performance, had failed to test applicants on an area of the law on which the Rules required testing, and had conducted the examination in a "pressure-cooker atmosphere." He further alleged that the Committee's conduct constituted an abuse of discretion, deprived him of due process and equal protection, and violated the Sherman Act.*fn10 The court denied his petition and two subsequent petitions for rehearing.*fn11 Ronwin then sought review of the Arizona

[ 466 U.S. Page 565]

     Supreme Court's action in this Court. We denied his petition for certiorari. 419 U.S. 967 (1974).

Some four years later, in March 1978, Ronwin filed this action in the United States District Court for the District of Arizona. Petitioners were named as defendants in the suit in their capacity as individual members of the Committee.*fn12 Ronwin renewed his complaint that petitioners had conspired to restrain trade in violation of § 1 of the Sherman Act, 26 Stat. 209, 15 U. S. C. § 1, by "artificially reducing the numbers of competing attorneys in the State of Arizona."*fn13 The gist of Ronwin's argument is that the Committee of which petitioners constituted a majority had set the grading scale on the February examination with reference to the number of new attorneys they thought desirable, rather than with reference to some "suitable" level of competence. Petitioners moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which

[ 466 U.S. Page 566]

     relief could be granted, and under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction. In particular, petitioners alleged that, acting as a Committee, they were immune from antitrust liability under Parker v. Brown, 317 U.S. 341 (1943). Petitioners also argued that Ronwin suffered no damage from the conduct of which he complained and that the Committee's conduct had not affected interstate commerce. The District Court granted petitioners' motion after finding that the complaint failed to state a justiciable claim, that the court had no jurisdiction, and that Ronwin lacked standing.*fn14

The Court of Appeals for the Ninth Circuit reversed the dismissal of the complaint. Ronwin v. State Bar of Arizona, 686 F.2d 692 (1982). The Court of Appeals read the District Court's ruling that Ronwin had failed to state a claim as a holding that bar examination grading procedures are immune from federal antitrust laws under Parker v. Brown. It reasoned that, although petitioners ultimately might be able to show that they are entitled to state-action immunity, the District Court should not have decided this issue on a Rule 12(b)(6) motion. See 686 F.2d, at 698. The court stated that under Parker and its progeny, the mere fact that petitioners were state officials appointed by the Arizona Supreme Court was insufficient to confer state-action immunity on them. 686 F.2d, at 697. Relying on its reading of several recent opinions of this Court,*fn15 the Court of Appeals noted that the petitioners might be able to invoke the state-action

[ 466 U.S. Page 567]

     doctrine, but reasoned that they first must show that they were acting pursuant to a "clearly articulated and affirmatively expressed . . . state policy." Id., at 696. Therefore, dismissal for failure to state a claim was improper. The court also held that Ronwin had standing to bring this action. The case was remanded to the District Court for further action.*fn16

We granted certiorari to review the Court of Appeals' application of the state-action doctrine. 461 U.S. 926 (1983). We now reverse.

II

The starting point in any analysis involving the state-action doctrine is the reasoning of Parker v. Brown. In Parker, the Court considered the antitrust implications of the California Agriculture Prorate Act -- a state statute that restricted competition among food producers in California. Relying on principles of federalism and state sovereignty, the Court declined to construe the Sherman Act as prohibiting the anticompetitive actions of a State acting through its legislature:

"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. In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress." 317 U.S., at 350-351.

Thus, under the Court's rationale in Parker, when a state legislature adopts legislation, its actions constitute those of

[ 466 U.S. Page 568]

     the State, see id., at 351, and ipso facto are exempt from the operation of the antitrust laws.

In the years since the decision in Parker, the Court has had occasion in several cases to determine the scope of the state-action doctrine. It has never departed, however, from Parker 's basic reasoning. Applying the Parker doctrine in Bates v. State Bar of Arizona, 433 U.S. 350, 360 (1977), the Court held that a state supreme Court, when acting in a legislative capacity, occupies the same position as that of a state legislature. Therefore, a decision of a state supreme court, acting legislatively rather than judicially, is exempt from Sherman Act liability as state action. See also Goldfarb v. Virginia State Bar, 421 U.S. 773, 790 (1975). Closer analysis is required when the activity at issue is not directly that of the legislature or supreme court,*fn17 but is carried out by others pursuant to state authorization. See, e. g., Community Communications Co. v. Boulder, 455 U.S. 40 (1982) (municipal regulation of cable television industry); California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) (private price-fixing arrangement authorized by State); New Motor Vehicle Board of California v. Orrin W. Fox Co., 439 U.S. 96 (1978) (new franchises controlled by state administrative board). In such cases, it becomes important to ensure that the anticompetitive conduct of the State's representative was contemplated by the State. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 413-415 (1978) (opinion of BRENNAN, J.); see New Mexico v. American Petrofina, Inc., 501 F.2d 363, 369-370 (CA9 1974). If the replacing of entirely free competition with some form of regulation or restraint was not authorized or approved by the State then the rationale of Parker is inapposite. As a result, in cases

[ 466 U.S. Page 569]

     involving the anticompetitive conduct of a nonsovereign state representative the Court has required a showing that the conduct is pursuant to a "clearly articulated and affirmatively expressed state policy" to replace competition with regulation. Boulder, supra, at 54. The Court also has found the degree to which the state legislature or supreme court supervises its representative to be relevant to the inquiry. See Midcal Aluminum, supra, at 105; Goldfarb, supra, at 791. When the conduct is that of the sovereign itself, on the other hand, the danger of unauthorized restraint of trade does not arise. Where the conduct at issue is in fact that of the state legislature or supreme court, we need not address the issues of "clear articulation" and "active supervision."

Pursuant to the State Constitution, the Arizona Supreme Court has plenary authority to determine admissions to the Bar.*fn18 Therefore, the first critical step in our analysis must be to determine whether the conduct challenged here is that of the court. If so, the Parker doctrine applies and Ronwin has no cause of action under the Sherman Act.

III

At issue here is the Arizona plan of determining admissions to the bar, and petitioners' use thereunder of a grading formula. Ronwin has alleged that petitioners conspired to use

[ 466 U.S. Page 570]

     that formula to restrain competition among lawyers.*fn19 His argument is that, although petitioners qualified as state officials in their capacity as members of the Committee, they acted independently of the Arizona Supreme Court. As a result, the argument continues, the Committee's actions are those of a Supreme Court representative, rather than those of the court itself, and therefore are not entitled to immunity.

We cannot agree that the actions of the Committee can be divorced from the Supreme Court's exercise of its sovereign powers. The Court's opinion in Bates v. State Bar of Arizona, 433 U.S., at 360, is directly pertinent.*fn20 In Bates, two

[ 466 U.S. Page 571]

     attorneys were suspended temporarily from the practice of law in Arizona for violating a disciplinary rule of the American Bar Association (ABA) that prohibited most lawyer advertising. The Arizona Supreme Court had incorporated the ABA's advertising prohibition into the local Supreme Court Rules.*fn21 Those Rules also provided that the Board of Governors of the Arizona State Bar Association, acting on the recommendation of a local Bar disciplinary committee, could recommend the censure or suspension of a member of the Bar for violating the advertising ban. Under the Rules, the Board of Governor's recommendation automatically would become effective if the aggrieved party did not object to the recommendation within 10 days. If the party objected, he was entitled to have the Arizona Supreme Court review the findings and recommendations of the Board of Governors and the local committee. The plaintiffs challenged the Rule on Sherman Act and First Amendment grounds. This Court ultimately concluded that the ABA Rule violated the First Amendment, but it first held that the State Bar Association was immune from Sherman Act liability because its enforcement of the disciplinary Rules was state action. In reaching this conclusion, the Court noted that, although only the State Bar was named as a defendant in the suit, the suspended attorneys' complaint was with the State. The Court stated:

"[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

[ 466 U.S. Page 572]

     Ariz. 34, 470 P. 2d 441 (1970). Although the State Bar plays a part in the enforcement of the rules, its role is completely defined by the court; the [State Bar] acts as the agent of the court under its continuous supervision." Id., at 361.

The opinion and holding in Bates with respect to the state-action doctrine were unanimous.

The logic of the Court's holding in Bates applies with greater force to the Committee and its actions. The petitioners here were each members of an official body selected and appointed by the Arizona Supreme Court. Indeed, it is conceded that they were state officers. The court gave the members of the Committee discretion in compiling and grading the bar examination, but retained strict supervisory powers and ultimate full authority over its actions. The Supreme Court Rules specified the subjects to be tested, and the general qualifications required of applicants for the Bar. With respect to the specific conduct of which Ronwin complained -- establishment of an examination grading formula -- the Rules were explicit. Rule 28(c) VII A authorized the Committee to determine an appropriate "grading or scoring system" and Rule 28(c) ...


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