Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

HOOVER ET AL. v. RONWIN ET AL.

SUPREME COURT OF THE UNITED STATES


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) VII B required the Committee to submit its grading formula to the Supreme Court at least 30 days prior to the examination.*fn22 After giving and grading the examination, the Committee's authority was limited to

[ 466 U.S. Page 573]

     making recommendations to the Supreme Court. The court itself made the final decision to grant or deny admission to practice. Finally, Rule 28(c) XII F provided for a detailed mandatory review procedure by which an aggrieved candidate could challenge the Committee's grading formula.*fn23 In light of these provisions and the Court's holding and reasoning in Bates, we conclude that, although the Arizona Supreme Court necessarily delegated the administration of the admissions process to the Committee, the court itself approved the particular grading formula and retained the sole authority to determine who should be admitted to the practice of law in Arizona. Thus, the conduct that Ronwin challenges was in reality that of the Arizona Supreme Court. See Bates, 433 U.S., at 361. It therefore is exempt from Sherman Act liability under the state-action doctrine of Parker v. Brown.*fn24

[ 466 U.S. Page 574]

     At oral argument, Ronwin suggested that we should not attribute to the Arizona Supreme Court an intent to approve the anticompetitive activity of petitioners in the absence of proof that the court was aware that petitioners had devised a grading formula the purpose of which was to limit the number of lawyers in the State. This argument misconceives the basis of the state-action doctrine. The reason that state action is immune from Sherman Act liability is not that the State has chosen to act in an anticompetitive fashion, but that the State itself has chosen to act. "There is no suggestion of a purpose to restrain state action in the [Sherman] Act's legislative history." Parker, 317 U.S., at 351. The Court did not suggest in Parker, nor has it suggested since, that a state action is exempt from antitrust liability only if the sovereign acted wisely after full disclosure from its subordinate officers. The only requirement is that the action be that of "the State acting as a sovereign." Bates, supra, at 360. The action at issue here, whether anticompetitive or not, clearly was that of the Arizona Supreme Court.*fn25

IV

The dissenting opinion of JUSTICE STEVENS would, if it were adopted, alter dramatically the doctrine of state-action immunity. We therefore reply directly. The dissent concedes, as it must, that "the Arizona Supreme Court exercises sovereign power with respect to admission to the Arizona Bar," and "if the challenged conduct were that of the court, it would be immune under Parker." Post, at 588. It also is conceded

[ 466 U.S. Page 575]

     that the members of the court's Committee on Examinations and Admissions -- petitioners here -- are state officers. These concessions are compelled by the Court's decision in Bates, and we think they dispose of Ronwin's contentions.

In its effort to distinguish Bates, the dissent notes that the Arizona Supreme Court "is not a petitioner [in this case], nor was it named as a defendant in respondent's complaint," and "because respondent is not challenging the conduct of the Arizona Supreme Court, Parker [v. Brown] is simply inapplicable." Post, at 588, 589. The dissent fails to recognize that this is precisely the situation that exsited in Bates. In that case, that case, the Supreme Court of Arizona was not a party in this Court, nor was it named as a defendant by the complaining lawyers. Yet, in our unanimous opinion, we concluded that the claims by appellants in Bates were "against the State," and that the "Arizona Supreme Court [was] the real party in interest; it adopted the rules, and it [was] the ultimate trier of fact and law in the enforcement process." Bates v. State Bar of Arizona, supra, at 361; see supra, at 571.*fn26

The core argument of the dissent is that Ronwin has challenged only the action of the Committee and not that of the Arizona Supreme Court. It states that "there is no claim that the court directed [the Committee] to artificially reduce the number of lawyers in Arizona," and therefore the Committee cannot assert the sovereign's antitrust immunity. Post, at 592 (emphasis in original). The dissent does not acknowledge that, conspire as they might, the Committee could not reduce the number of lawyers in Arizona.*fn27 Only

[ 466 U.S. Page 576]

     the Arizona Supreme Court had the authority to grant or deny admission to practice in the State.*fn28 As in Bates "[t]he Arizona Supreme Court is the real party in interest." 433 U.S., at 361.

The dissent largely ignores the Rules of the Arizona Supreme Court.*fn29 A summary of the court's commands suggests why the dissent apparently prefers not to address them. The Arizona Supreme Court established the Committee for the sole purpose of examining and recommending applicants for admission to the Bar. Rule 28(a). Its Rules provided: "The examination and admission of applicants . . . shall conform to this Rule. . . . The committee shall examine applicants and recommend [qualified applicants] to this court. . . . Two examinations will be held each year. . . ." Ibid.; Rule 28(c) VI (1973), as amended, 110 Ariz. xxxii (1974) (emphasis added). The Rules also specified the subjects to be tested and required the Committee to submit its grading formula to the court in advance of each examination. Rule 28(c) VII (1973), as amended, 110 Ariz. xxxii (1974).

As a further safeguard, a disappointed applicant was accorded the right to seek individualized review by filing a petition directly with the court -- as Ronwin did unsuccessfully. Pursuant to Rule 28(c) XII F, Ronwin filed a complaint with the court that contained a plethora of charges

[ 466 U.S. Page 577]

     including the substance of the complaint in this case. The court denied his petition as well as two petitions for rehearing. See supra, at 564. Thus, again there was state action by the court itself explicitly rejecting Ronwin's claim.*fn30 Finally, the

[ 466 U.S. Page 578]

     case law, as well as the Rules, makes clear that the Arizona Supreme Court made the final decision on each applicant.*fn31 See n. 6, supra. Unlike the actions of the Virginia State Bar in Goldfarb, the actions of the Committee are governed by the court's Rules. Those Rules carefully reserve to the court the authority to make the decision to admit or deny, and that decision is the critical state action here.*fn32 See Bates, 433

[ 466 U.S. Page 579]

     U.S., at 359-361. Our opinion, therefore, also is wholly consistent with the Court's reasoning in Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978) and Community Communications Co. v. Boulder, 455 U.S. 40 (1982).*fn33

Our holding is derived directly from the reasoning of Parker and Bates. Those cases unmistakably hold that, where the action complained of -- here the failure to admit

[ 466 U.S. Page 580]

     Ronwin to the Bar -- was that of the State itself, the action is exempt from antitrust liability regardless of the State's motives in taking the action. Application of that standard to the facts of this case requires that we reverse the judgment of the Court of Appeals.

The reasoning adopted by the dissent would allow Sherman Act plaintiffs to look behind the actions of state sovereigns and base their claims on perceived conspiracies to restrain trade among the committees, commissions, or others who necessarily must advise the sovereign. Such a holding would emasculate the Parker v. Brown doctrine. For example, if a state legislature enacted a law based on studies performed, or advice given, by an advisory committee, the dissent would find the State exempt from Sherman Act liability but not the committee. A party dissatisfied with the new law could circumvent the state-action doctrine by alleging that the committee's advice reflected an undisclosed collective desire to restrain trade without the knowledge of the legislature. The plaintiff certainly would survive a motion to dismiss -- or even summary judgment -- despite the fact that the suit falls squarely within the class of cases found exempt from Sherman Act liability in Parker.*fn34

[ 466 U.S. Page 581]

     In summary, this case turns on a narrow and specific issue: who denied Ronwin admission to the Arizona Bar? The dissent argues, in effect, that since there is no court order in the record, the denial must have been the action of the Committee. This argument ignores the incontrovertible fact that under the law of Arizona only the State Supreme Court had authority to admit or deny admission to practice law:

"[It] is not the function of the committee to grant or deny admission to the bar. That power rests solely in the Supreme Court. . . ." Application of Burke, 87 Ariz. 336, 338, 351 P. 2d 169, 171 (1960) (see n. 30, supra).

Thus, if the dissent's argument were accepted all decisions made with respect to admissions and denials of those who took the examination in February 1974 are void. Ronwin did not allege that he alone was a victim: his complaint avers

[ 466 U.S. Page 582]

     that he "was among those artificially prevented from entering into competition as an attorney in the state of Arizona" by the Committee's action with respect to the February 1974 examination. We are unwilling to assume that the Arizona Supreme Court failed to comply with state law, and allowed the Committee alone to make the decisions with respect to the February 1974 examination. In any event, the record is explicit that Ronwin's postexamination petition complaining about his denial was rejected by an order of the Arizona Supreme Court. That there was state action at least as to Ronwin could not be clearer.

V

We conclude that the District Court properly dismissed Ronwin's complaint for failure to state a claim upon which relief can be granted. Therefore, the judgment of the Court of Appeals is

Reversed.

JUSTICE REHNQUIST took no part in the decision of this case. JUSTICE O'CONNOR took no part in the consideration or decision of this case.

Disposition

686 F.2d 692, reversed.

JUSTICE STEVENS, with whom JUSTICE WHITE and JUSTICE BLACKMUN join, dissenting.

In 14th-century London the bakers' guild regulated the economics of the craft and the quality of its product. In the year 1316, it was adjudged that one Richard de Lughteburghe "should have the punishment of the hurdle" because he sold certain loaves of bread in London; the bread had been baked in Suthwerke, rather than London, and the loaves were not of "the proper weight."*fn1 Thus Richard had violated

[ 466 U.S. Page 583]

     a guild restriction designed to protect the economic interests of the local bakers*fn2 as well as a restriction designed to protect the public from the purchase of inferior products.

For centuries the common law of restraint of trade has been concerned with restrictions on entry into particular professions and occupations. As the case of the Suthwerke baker illustrates, the restrictions imposed by medieval English guilds served two important but quite different purposes. The guilds limited the number of persons who might engage in a particular craft in order to be sure that there was enough work available to enable guild members to earn an adequate livelihood.*fn3 They also protected the public by ensuring that apprentices, journeymen, and master craftsmen would have the skills that were required for their work. In numerous occupations today, licensing requirements*fn4 may serve

[ 466 U.S. Page 584]

     either or both of the broad purposes of the medieval guild restrictions.

The risk that private regulation of market entry, prices, or output may be designed to confer monopoly profits on members of an industry at the expense of the consuming public has been the central concern of both the development of the common law of restraint of trade and our antitrust jurisprudence. At the same time, the risk that the free market may not adequately protect the public from purveyors of inferior goods and services has provided a legitimate justification for the public regulation of entry into a wide variety of occupations. Private regulation is generally proscribed by the antitrust laws; public regulation is generally consistent with antitrust policy. A potential conflict arises, however, whenever government delegates licensing power to private parties whose economic interests may be served by limiting the number of competitors who may engage in a particular trade. In fact private parties have used licensing to advance their own interests in restraining competition at the expense of the public interest. See generally Gellhorn, The Abuse of Occupational Licensing, 44 U. Chi. L. Rev. 6 (1976).

The potential conflict with the antitrust laws may be avoided in either of two ways. The State may itself formulate the governing standards and administer the procedures

[ 466 U.S. Page 585]

     that determine whether or not particular applicants are qualified. When the State itself governs entry into a profession, the evils associated with giving power over a market to those who stand to benefit from inhibiting entry into that market are absent. For that reason, state action of that kind, even if it is specifically designed to control output and to regulate prices, does not violate the antitrust laws. Parker v. Brown, 317 U.S. 341 (1943). Alternatively, the State may delegate to private parties the authority to formulate the standards and to determine the qualifications of particular applicants. When that authority is delegated to those with a stake in the competitive conditions within the market, there is a risk that public power will be exercised for private benefit. To minimize that risk, state policies displacing competition must be "clearly and affirmatively expressed" and must be appropriately supervised. See Community Communications Co. v. Boulder, 455 U.S. 40 (1982); California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 103-106 (1980).

In this case respondent has been unable to obtain a license to practice law in Arizona. He alleges that this is not because of any doubts about his competence as a lawyer, but because petitioners have engaged in an anticompetitive conspiracy in which they have used the Arizona bar examination to artificially limit the number of persons permitted to practice law in that State. Petitioners claim that the alleged conspiracy is not actionable under § 1 of the Sherman Act, 15 U. S. C. § 1, because it represents the decision of the State. But petitioners do not identify any state body that has decided that it is in the public interest to limit entry of even fully qualified persons into the Arizona Bar. Indeed, the conspiracy that is alleged is not the product of any regulatory scheme at all; there is no evidence that any criterion except competence has been adopted by Arizona as the basis for granting licenses to practice law. The conspiracy respondent has alleged is private; market participants are allegedly

[ 466 U.S. Page 586]

     attempting to protect their competitive position through a misuse of their powers. Yet the Court holds that this conspiracy is cloaked in the State's immunity from the antitrust laws. In my judgment, the competitive ideal of the Sherman Act may not be so easily escaped.

I

Petitioners are members of the Arizona Supreme Court's Committee on Examinations and Admissions. The Arizona Supreme Court established the Committee to recommend applicants for admission to the Arizona Bar; it consists of seven members of the State Bar selected from a list of nominees supplied by the Arizona State Bar Association's Board of Governors.*fn5 Petitioners administered the 1974 bar examination which respondent took and failed. In his complaint, respondent alleged that after the scores of each candidate were known, petitioners selected a particular score which would equal the passing grade. The complaint alleges that the petitioners would adjust the grading formula in order to limit the number of persons who could enter the market and compete with members of the Arizona Bar. In this manner, respondent was "artificially prevented from entering into competition as an attorney in the State of Arizona."*fn6

The Arizona Supreme Court has instructed petitioners to recommend for admission to the Bar "[all] applicants who receive a passing grade in the general examination and who are found to be otherwise qualified. . . ."*fn7 There is no indication that any criterion other than competence is appropriate under the Supreme Court's Rules for regulating admission to the Bar.*fn8 Indeed with respect to respondent's application

[ 466 U.S. Page 587]

     for admission, the Arizona Supreme Court wrote: "The practice of law is not a privilege but a right, conditioned solely upon the requirement that a person have the necessary mental, physical and moral qualifications." Application of Ronwin, 113 Ariz. 357, 358, 555 P. 2d 315, 316 (1976), cert. denied, 430 U.S. 907 (1977). In short, one looks in vain in Arizona law, petitioners' briefs, or the pronouncements of the Arizona Supreme Court for an articulation of any policy beside that of admitting only competent attorneys to practice in Arizona.

Thus, respondent does not challenge any state policy. He contests neither the decision to license those who wish to practice law, nor the decision to require a certain level of competence, as measured in a bar examination, as a precondition to licensing. Instead, he challenges an alleged decision to exclude even competent attorneys from practice in Arizona in order to protect the interests of the Arizona Bar.

As we have often reiterated in cases that involve the sufficiency of a pleading, a federal court may not dismiss a complaint for failure to state a claim unless it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief.*fn9 The allegations of the complaint must be taken as true for purposes of a decision on the pleadings.*fn10

A judge reading a complaint of this kind is understandably somewhat skeptical. It seems highly improbable that members of the profession entrusted by the State Supreme Court

[ 466 U.S. Page 588]

     with a public obligation to administer an examination system that will measure applicants' competence would betray that trust, and secretly subvert that system to serve their private ends. Nevertheless, the probability that respondent will not prevail at trial is no justification for dismissing the complaint. "Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court does not purport to justify dismissal of this complaint by reference to the low probability that respondent will prevail at trial. Instead, it substantially broadens the doctrine of antitrust immunity, using an elephant gun to kill a flea.

II

If respondent were challenging a restraint of trade imposed by the sovereign itself, this case would be governed by Parker v. Brown, 317 U.S. 341 (1943), which held that the Sherman Act does not apply to the sovereign acts of States. See id., at 350-352. As the Court points out, the Arizona Supreme Court exercises sovereign power with respect to admission to the Arizona Bar; hence if the challenged conduct were that of the court, it would be immune under Parker. Ante, at 567-569.*fn11 The majority's conclusion that the challenged action was that of the Arizona Supreme Court is, however, plainly wrong. Respondent alleged that the decision to place an artificial limit on the number of lawyers was made by petitioners -- not by the State Supreme Court. There is no contention that petitioners made that decision at the direction or behest of the Supreme Court. That court is not a petitioner, nor was it named as a defendant in respondent's complaint. Nor, unlike the Court, have petitioners suggested that the Arizona Supreme Court played any part in establishing the grading standards for the bar examination

[ 466 U.S. Page 589]

     or made any independent decision to admit or reject any individual applicant for admission to the Bar.*fn12 Because respondent is not challenging the conduct of the Arizona Supreme Court, Parker is simply inapplicable.

Any possible claim that the challenged conduct is that of the State Supreme Court is squarely foreclosed by Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). There an antitrust action was brought challenging minimum-fee schedules published by a county bar association and enforced by the State Bar pursuant to its mandate from the Virginia Supreme Court to regulate the practice of law in that State. After acknowledging that the State Bar was a state agency which had enforced the schedules pursuant to the authority granted it by the State Supreme Court, we stated a simple test for antitrust immunity:

"The threshold inquiry in determining if an anticompetitive 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 sovereign. 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. Respondents have pointed to no Virginia statute requiring their activities; state law simply does not refer to fees, leaving regulation of the profession to the Virginia Supreme Court; although the Supreme Court's ethical codes mention advisory fee schedules they do not direct either respondent

[ 466 U.S. Page 590]

     to supply them, or require the type of price floor which arose from respondents' activities." Id., at 790 (emphasis supplied) (citations omitted).

In Bates v. State Bar of Arizona, 433 U.S. 350 (1977), the Court applied the Goldfarb test to a disciplinary rule restricting advertising by Arizona attorneys that the Supreme Court itself "has imposed and enforces," 433 U.S., at 353:

"In the instant case . . . the challenged restraint is the affirmative command of the Arizona Supreme Court under its Rules 27(a) and 29(a) and its Disciplinary Rule 2-101(B). That court is the ultimate body wielding the State's power over the practice of law, see Ariz. Const., Art. 3; In re Bailey, 30 Ariz. 407, 248 P. 29 (1926), and, thus, the restraint is 'compelled by direction of the State acting as a sovereign.' 421 U.S., at 791 (footnote omitted)." Id., at 359-360.

The test stated in Goldfarb and Bates is that the sovereign must require the restraint. Indeed, that test is derived from Parker itself: " 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 [or supreme court]." 317 U.S., at 350-351 (emphasis supplied). Here, the sovereign is the State Supreme Court, not petitioners, and the court did not require petitioners to grade the bar examination as they did.*fn13 The fact that petitioners are part of a state agency under the direction of the sovereign is insufficient to cloak them in the sovereign's immunity; that much was also decided in Goldfarb :

[ 466 U.S. Page 591]

     "The fact that the State Bar is a state agency for some limited purposes does not create an antitrust shield that allows it to foster anticompetitive practices for the benefit of its members. The State Bar, by providing that deviation from County Bar minimum fees may lead to disciplinary action, has voluntarily joined in what is essentially a private anticompetitive activity, and in that posture cannot claim it is beyond the reach of the Sherman Act." 421 U.S., at 791-792 (footnotes and citation omitted).

" Goldfarb therefore made it clear that, for purposes of the Parker doctrine, not every act of a state agency is that of the State as sovereign." Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 410 (1978) (plurality opinion). Rather, "anticompetitive actions of a state instrumentality not compelled by the State acting as sovereign are not immune from the antitrust laws." Id., at 411, n. 41. See also id., at 425 (opinion of BURGER, C. J.); Cantor v. Detroit Edison Co., 428 U.S. 579, 604 (1976) (opinion of BURGER, C. J.). An antitrust attack falls under Parker only when it challenges a decision of the sovereign and not the decision of the state bar which indisputably is not the sovereign. See California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 104-105 (1980).*fn14 Here no decision of the sovereign, the Arizona Supreme Court, is attacked;*fn15 only a

[ 466 U.S. Page 592]

     conspiracy of petitioners which was neither compelled nor directed by the sovereign is at stake. Since there is no claim that the court directed petitioners to artificially reduce the number of lawyers in Arizona, petitioners cannot utilize the sovereign's antitrust immunity.*fn16

The majority's confused analysis is illustrated by its difficulty in identifying the sovereign conduct which it thinks is at issue here. To support its conclusion that the challenged action is that of the Arizona Supreme Court, the majority suggests that what respondent challenges is the court's decision to deny respondent's application for admission to the Bar. Ante, at 577-578, n. 30. I find nothing in the record to indicate that the court ever made such a decision. Respondent's complaint alleges only that petitioners "announced the results" of the bar examination. App. 9. In their answer, petitioners admitted this and added nothing else of significance. Id., at 17. The Rules of the Supreme Court do not call for the court to deny the application of a person who has failed the bar examination; rather they state only that any "applicant aggrieved by any decision of the Committee . . . may within 20 days after such occurrence file a verified petition

[ 466 U.S. Page 593]

     with this Court for a review." Ariz. Sup. Ct. Rule 28(c) XII. Yet the Court disavows reliance on the Supreme Court's denial of Ronwin's petition, ante, at 577-578, n. 30,*fn17 and with good reason, see n. 15, supra.*fn18 Thus, if the Supreme Court did not itself deny Ronwin's application, if its denial of Ronwin's petition for review is irrelevant, and if the only criterion it ever required petitioners to employ was competence, it is difficult to see why petitioners should have immunity from the requirements of federal law if, as alleged, they took the initiative in employing a criterion other than competence. "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, 421 U.S., at 791.

III

It is, of course, true that the Arizona Supreme Court delegated to petitioners the task of administering the bar exam, and retained the authority to review or revise any action taken by petitioners. However, neither of these factors

[ 466 U.S. Page 594]

     is sufficient to accord petitioners immunity under the Sherman Act.

In Bates, the Court held that the State Bar's restrictions on attorney advertising qualified for antitrust immunity, 433 U.S., at 359-362, because "the state policy requiring the anticompetitive restraint as part of a comprehensive regulatory system, was one clearly articulated and affirmatively expressed as state policy, and that the State's policy was actively supervised by the State Supreme Court as the policymaker." Lafayette, 435 U.S., at 410 (plurality opinion) (footnote omitted). This Court has since "adopted the principle, expressed in the plurality opinion in Lafayette, that anticompetitive restraints engaged in by state municipalities or subdivisions must be 'clearly articulated and affirmatively expressed as state policy' in order to gain an antitrust exemption." Community Communications Co. v. Boulder, 455 U.S., at 51, n. 14 (quoting Midcal, 445 U.S., at 105).*fn19

Here there is nothing approaching a clearly articulated and affirmatively expressed state policy favoring an artificial limit on the number of lawyers licensed to practice in Arizona. Indeed, the majority does not attempt to argue that petitioners satisfy this test. The only articulated policy to be found in Arizona law is that competent lawyers should be admitted to practice; indeed this is the only policy petitioners articulate in this Court. An agreement of the type alleged in respondent's complaint is entirely unrelated to any "clearly articulated and affirmatively expressed" policy of Arizona. While the Arizona Supreme Court may have permitted petitioners to grade and score respondent's bar examination as they did, Parker itself indicates that "a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful. . . ." 317 U.S., at 351. The Arizona Supreme Court

[ 466 U.S. Page 595]

     may permit the challenged restraint, but it has hardly required it as a consequence of some affirmatively expressed and clearly articulated policy. What we said of a state home-rule provision that permitted but did not require municipalities to adopt a challenged restraint on competition applies fully here:

" [Plainly] the requirement of 'clear articulation and affirmative expression' is not satisfied when the State's position is one of mere neutrality respecting the municipal actions challenged as anticompetitive. A State that allows its municipalities to do as they please can hardly be said to have 'contemplated' the specific anticompetitive actions for which municipal liability is sought. . . . Acceptance of such a proposition -- that the general grant of power to enact ordinances necessarily implies state authorization to enact specific anticompetitive ordinances -- would wholly eviscerate the concepts of 'clear articulation and affirmative expression' that our precedents require." Boulder, 455 U.S., at 55-56 (emphasis in original).

Unless the Arizona Supreme Court affirmatively directed petitioners to restrain competition by limiting the number of otherwise qualified lawyers admitted to practice in Arizona, it simply cannot be said that its position is anything more than one of neutrality; mere authorization for anticompetitive conduct is wholly insufficient to satisfy the test for antitrust immunity. See Midcal, 445 U.S., at 105-106; Lafayette, 435 U.S., at 414-415 (plurality opinion).*fn20 No

[ 466 U.S. Page 596]

     affirmative decision of the Arizona Supreme Court to restrain competition by limiting the number of qualified persons admitted to the Bar is disclosed on the present record. The alleged conspiracy to introduce a factor other than competence into the bar examination process is not the product of a clearly articulated and affirmatively expressed state policy and hence does not qualify for antitrust immunity.*fn21

IV

The conclusion that enough has been alleged in the complaint to survive a motion to dismiss does not warrant the further conclusion that the respondent is likely to prevail at

[ 466 U.S. Page 597]

     trial, or even that his case is likely to survive a motion for summary judgment. For it is perfectly clear that the admissions policy that is described in the Arizona Supreme Court's Rules does not offend the Sherman Act. Any examination procedure will place a significant barrier to entry into the profession; moreover, a significant measure of discretion must be employed in the administration of testing procedures. Yet ensuring that only the competent are licensed to serve the public is entirely consistent with the Sherman Act. See Goldfarb, 421 U.S., at 792-793.*fn22

The Court is concerned about the danger that because thousands of aspirants fail to pass bar examinations every year, "affirmance of the Court of Appeals in this case could well invite numerous suits" questioning bar examiners' motives; the Court fears that the burdens of discovery and trial and "the threat of treble damages" will deter "'able citizens' from performing this essential public service." Ante, at 580-581, n. 34. The Court is, I submit, unduly alarmed.*fn23 A

[ 466 U.S. Page 598]

     denial of antitrust immunity in this case would not necessarily pose any realistic threat of liability, or even of prolonged litigation. Respondent must first produce sufficient evidence that petitioners have indeed abused their public trust to survive summary judgment, a task that no doubt will prove formidable.*fn24 Moreover, petitioners' motives will not necessarily be relevant to respondent's case. If the proof demonstrates that petitioners have adopted a reasonable means for regulating admission to the Arizona Bar on the basis of competence, respondent will be unable to show the requisite adverse effect on competition even if the subjective motivation of one or more bar examiners was tainted by sinister self-interest. Indeed, even if respondent can show that he was "arbitrarily" denied admission to the Bar for reasons unrelated to his qualifications, unless he can also show that this occurred as part of an anticompetitive scheme, his antitrust claim will fail.

In any event, there is true irony in the Court's reliance on these concerns. In essence, the Court is suggesting that a special protective shield should be provided to lawyers because they -- unlike bakers, engineers, or the members of any other craft -- may not have sufficient confidence in the ability of our legal system to identify and reject unmeritorious claims to be willing to assume the ordinary risks of litigation associated with the performance of civic responsibilities. I do not share the Court's fear that the administration of bar

[ 466 U.S. Page 599]

     examinations by court-appointed lawyers cannot survive the scrutiny associated with rather ordinary litigation that persons in most other walks of life are expected to endure.

The Court also no doubt believes that lawyers -- or at least those leaders of the bar who are asked to serve as bar examiners -- will always be faithful to their fiduciary responsibilities. Though I would agree that the presumption is indeed a strong one, nothing in the sweeping language of the Sherman Act justifies carving out rules for lawyers inapplicable to any other profession. In Goldfarb we specifically rejected such parochialism. Indeed, the argument that it is unwise or unnecessary to require the petitioners to comply with the Sherman Act "is simply an attack upon the wisdom of the longstanding congressional commitment to the policy of free markets and open competition embodied in the antitrust laws." Boulder, 455 U.S., at 56. We should not ignore that commitment today.

Denial of antitrust immunity in this case would hardly leave the State helpless to cope with felt exigencies; should it wish to do so, the Arizona Supreme Court remains free to give petitioners an affirmative direction to engage in the precise conduct that respondent has alleged. The antitrust laws hardly create any inescapable burdens for the State; they simply require that decisions to displace the free market be made overtly by public officials subject to public accountability, rather than secretly in the course of a conspiracy involving representatives of a private guild accountable to the public indirectly if at all. See id., at 56-57; Lafayette, 435 U.S., at 416-417 (plurality opinion). "The national policy in favor of competition cannot be thwarted by casting such a gauzy cloak of state involvement over what is essentially a private price-fixing arrangement." Midcal, 445 U.S., at 106.

The practical concerns identified by the Court pale when compared with the principle that should govern the decision

[ 466 U.S. Page 600]

     of this case. The rule of law that applies to this case is applicable to countless areas of the economy in which arbitrary restraints on entry may impose the very costs on the consuming public which the antitrust laws were designed to avoid.*fn25 Experience in the administration of the Sherman Act has demonstrated that there is a real risk that private associations that purport merely to regulate professional standards may in fact use their powers to restrain competition which threatens their members.*fn26 It is little short of irresponsible to tear a gaping hole in the fabric of antitrust law simply because we may be confident that respondent will be unable to prove what he alleges.

[ 466 U.S. Page 601]

     Frivolous cases should be treated as exactly that, and not as occasions for fundamental shifts in legal doctrine.*fn27 Our legal system has developed procedures for speedily disposing of unfounded claims; if they are inadequate to protect petitioners from vexatious litigation, then there is something wrong with those procedures, not with the law of antitrust immunity. That body of law simply does not permit the Sherman Act to be displaced when neither the state legislature nor the state supreme court has expressed any desire to preclude application of the antitrust laws to the conduct of those who stand to benefit from restraints of trade. A healthy respect for state regulatory policy does not require immunizing those who abuse their public trust; such a thin veneer of state involvement is insufficient justification for casting aside the competitive ideal of the Sherman Act. The commitment to free markets and open competition that has evolved over the centuries and is embodied in the Sherman Act should be sturdy enough to withstand petitioners' flimsy claim. That claim might have merited the support of the 14th-century guilds; today it should be accorded the "punishment of the hurdle."

I respectfully dissent.

Counsel FOOTNOTES

* Briefs of amici curiae urging reversal were filed for the National Conference of Bar Examiners by Kurt W. Melchior, Allan Ashman, and Jan T. Chilton; and for the State Bar of California by Henry C. Thumann, Herbert M. Rosenthal, Truitt A. Richey, Jr., and Robert M. Sweet.

A brief of amici curiae was filed for the State of Colorado et al. by Stephen H. Sachs, Attorney General of Maryland, Charles O. Monk II and Linda H. Jones, Assistant Attorneys General, Duane Woodard, Attorney General of Colorado, Thomas P. McMahon, First Assistant Attorney General, Thomas J. Miller, Attorney General of Iowa, John R. Perkins, Assistant Attorney General, Robert Abrams, Attorney General of New York, Lloyd Constantine, Assistant Attorney General, William M. Leech, Jr., Attorney General of Tennessee, William J. Haynes, Jr., Deputy Attorney General, Jim Mattox, Attorney General of Texas, David R. Richards, Executive Assistant Attorney General, Bronson C. La Follette, Attorney General of Wisconsin, and Michael L. Zaleski, Assistant Attorney General.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.