Mr. MORRISON. No, I am not admitted to practice in Northern Virginia, but insofar as the closings are concerned, fees are not determined on an hourly basis in Northern Virginia or elsewhere in Virginia. They are determined as a percentage of the purchase price. Senator TUNNEY. I understand that. But, I was trying to put it into a frame of reference comparing what the hourly charges are and with the minimum fee.

Mr. GOLDFARB. I can suggest that, around the time I filed my lawsuit, the Department of Housing and Urban Development published a study supporting its recommendation that the legal fees for handling the typical closing be set at approximately $150 to $180, which is what HUD considered to be value of legal services for such closing. This is $300 to $100, below what the Northern Virginia bar charges.

Senator TUNNEY. It is fair to say the hourly charge ranges from $30 to $50?

Mr. GOLDFARB. That is correct, but you have to also realize that nonlawyers perform many settlement services.

Senator TUNNEY. I realize that but I have never had cause to search a title in Virginia, although I used to be a member of the Virginia Bar. I took the Virginia Bar when I was at Virginia Law School. I have never had the opportunity, however, to do a title search.

How difficult is it to do a title search in Virginia with the way the records are kept?

Mr. GOLDFARB. I have never performed a title search in Virginia but I do know that, in the case of a new development, the lawyer has very little additional work to do for the homebuyer. A complete title search was required by the developer when he obtained construction financing. The title search performed for the homebuyer consists merely of updating the examination for the brief period between the developer's acquisition of the land and the consumer's purchase of the completed house. Unfortunately, the consumer is made to pay for the full 60-year search.

Senator TUNNEY. There is a double charge then?

Mr. GOLDFARB. There is a single charge for title examination to the homebuyer but what I am saying is that this charge, in many cases, includes the fee for title examination that was originally done to obtain construction financing for the developer.

Senator TUNNEY. Was the homebuyer charged for the title search that was initially done?

Mr. GOLDFARB. According to a 1970 report prepared by the Northern Virginia Subcommittee of the Real Estate Committee of the Virginia State Bar, it is common for a developer to receive legal services for no charge or a minimal charge in exchange for an agreement to require all buyers from that development to have their settlements handled by the same attorney. So there is some evidence the developer pays almost nothing for that service.

Senator TUNNEY. Did you have any conversations with the attorneys that you contacted, asking them if they would be willing to charge you less than the minimum? If so, did you have any sense as to why they felt that they had to charge the minimum aside from possible ethical violations?

Did any say that there was peer pressure not to charge less?

Mr. GOLDFARB. I received phone calls from three attorneys. One of them indicated just that; that he felt it was his duty, if he was aware of an attorney who consistently charged below the minimum fee schedules, to report this to the State bar. There were two other attorneys who indicated that if I would agree to consider myself a long-term client of theirs, they may be able to fit me into one of the exceptions to the fee schedule and charge me less. I didn't want to do that.

Senator TUNNEY. On page 7 of your statement, you indicate that the Virginia State Bar issued you a legal ethics opinion, disagreeing with the ABA position. According to your statement, the Virginia State Bar continues to believe if an attorney is consistently charging less than the minimum fee, it raises the presumption that the attorney is guilty of misconduct.

Now, have you had any opportunity to discuss this matter with the representatives of the Virginia Bar and why it is that they have this feeling?

Mr. GOLDFARB. I haven't had an opportunity to discuss it with representatives of the State Bar. I have had an opportunity to discuss it with young lawyers, practicing in northern Virginia and they suggestedthey were opposed to this-and they suggested maybe it may be the result of pressures from certain segments of the bar to insure high income in this area in real estate; the real estate area, particularly, is known as the bread and butter of the law and they suggested they wanted to maintain that status.

Senator TUNNEY. Well, a number of arguments have been put forward on behalf of minimum fees. For example, it is argued that such fees help a young practitioner in knowing what to charge. It is also argued by having a minimum fee schedule that you eliminate cutthroat competition and, thereby, provide better quality service for clients. It is also argued that minimum fees could, under some circumstances, be considered protective of lawyers who might price themselves out of the market by charging too much, if they didn't know what other lawyers in the community were charging.

Now what are your thoughts with respect to those specific arguments?

Mr. GOLDFARB. I have several. I think as far as lawyers pricing themselves out of the market, I prefer to rely on free market forces to determine what will be charged for legal services.

As far as peer pressure, I think we should rely on attorneys to make a good judgment as to what they should charge for their services. This should not be based on what their peers tell them, or what some committee of the State bar tells them, but on their own experience and this applies even to young attorneys, too. This would be especially true with young attorneys who may be motivated by considerations other than money. These are the attorneys who would be more available to lower income citizens were it not for the minimum fee schedules.

Senator TUNNEY. You are a young lawyer, aren't you?

Mr. GOLDFARB. Yes.

Senator TUNNEY. Do you go by the minimum fee schedule?

Mr. GOLDFARB. No. I am not in private practice. I work for the Federal Government.

Senator TUNNEY. You concluded your statement by listing a number of practices by the organized bar which, in your opinion, restrains citizen access to lawyers. If the bar were to change its view on advertising and solicitation, for example, how much better do you think citizens interest would be represented?

Mr. GOLDFARB. How much better?

Senator TUNNEY. Yes.

Mr. GOLDFARB. I think that citizens whose interests lie in those areas that are now restricted from advertising would be better represented. For example, there are certain groups of lawyers who would be willing to take on clients in the areas of poverty law and consumer protection law. They would be able to make it known to people that, their services are available and, that aggrieved persons can bring their problems to their attention and possibly obtain relief. I think this would be very valuable.

Senator TUNNEY. Well, I certainly appreciate your testimony today, and I want to thank you very much.

Do you have any questions you would like to ask?

Mr. DAWAHARE. Yes.

Senator TUNNEY. This is minority counsel.

Mr. DAWAHARE. There is one question that kind of bothers me when I was reading over your statement. You are a lawyer?

Mr. GOLDFARB. Yes.

Mr. DAWAHARE. And yet when you went to the developer or the builder and he told you that he had to use his attorney, didn't this kind of rub you the wrong way, or did you feel compelled to go on with it for any reason?

Mr. GOLDFARB. I am sorry, I don't understand your question.

Mr. DAWAHARE. Well, when the builder-developer told you that you had to use his attorney, that you couldn't get your own attorney, did that raise any questions in your mind? Did you feel compelled to use his attorney the way he required you to do for any reason?

Mr. GOLDFARB. Well, the developer didn't orally say I had to use the services. It was part of the printed contract I had to sign. While I did notice it didn't strike me as enforceable. Although it did bother me that many people would feel required to abide by it. I didn't feel compelled to do so.

Mr. DAWAHARE. But you just did say it was part of the contract? Mr. GOLDFARB. I thought I could find a lawyer who would charge less, but since I couldn't, I abided by that provision.

Mr. DAWAHARE. And you mentioned in here that you discovered that such an arrangement as this was illegal?

Mr. GOLDFARB. That it violates a provision in the Virginia Code. Mr. DAWAHARE. Did you report this to the Virginia State Bar? Mr. GOLDFARB. It was reported. Around the time I brought this suit, there was a series of articles in the Washington Post about settlement fees and fee schedules and there was a quote from the Commonwealth's attorney that stated he was aware of this problem, but would not enforce this provision of the law, unless he received specific complaints from the State Bar.

I also wrote a letter to the State attorney general's office, pointing this out.

Mr. DAWAHARE. In other words, you specifically pointed out this illegal or fairly unethical charge. You say, they did not perform any of their own investigations on this or prosecute?

Mr. GOLDFARB. They didn't inform me of any investigation or any desire to investigate.

Mr. DAWAHARE. As far as you know, there haven't been any?

Mr. GOLDFARB. As far as I know, there have been no prosecutions under that provision of the State Code.

Mr. DAWAHARE. Thank you.

Senator TUNNEY. Thank you very much. We appreciate it. [Testimony resumes at p. 119.]

LEWIS H. GOLDFARB AND RUTH S. GOLDfarb, Plaintiffs,

v.

VIRGINIA STate Bar and FAIRFAX COUNTY BAR ASSOCIATION,

Defendants.

Civ. A. No. 75-72-A.

United States District Court, E. D. Virginia, Alexandria Division.

Jan. 5, 1973.

Alan B. Morrison, Washington, D.C. for plaintiffs.

Stuart H. Dunn, Asst. Atty. Gen. Richmond, V., for defendant Virginia State Bar.

T. S. Ellis, III, John H. Shenefield, Lewis T. Booker, Hunton, Williams, Gay, Powell & Gibson, Richmond, Va., for defendant Fairfax Bar Ass'n.

MEMORANDUM OPINION

ALBERT V. BRYAN, JR., District Judge.

This is a class action brought under the Sherman Act, 15 U.S.C. § 1, for injunctive relief and damages as allowed by 15 U.S.C §§ 15, 26. The agreement allegedly restraining trade or commerce is a minimum fee schedule adopted by the defendant Fairfax Bar Association, consistent violations of which may subject an attorney to disciplinary measures initiated by committees of the defendant Virginia State Bar.1

The matter came on for hearing, on the issue of liability only, on December 1, 1972.

The Court adopts as part of its findings of fact the Stipulation of Facts entered into by the parties and filed on December 1, 1972,2 the Proposed Findings of Fact submitted by the plaintiff numbered 1, 2, 3, 4, 5, 6, 7 and 8, the Proposed Findings of Fact submitted by the defendant Virginia State Bar numbered 1 and 2, and Proposed Findings of Fact submitted by the defendant Fairfax Bar Association numbered 6, 9, 10, 11, 12, 13, 18, 20, 21, 24, 25, 28, 29, 33, 34, 35, 36, 37, 38,3 49 and 54 copies of which are attached hereto.

[1] Minimum fee schedules are a form of price fixing and therefore inconsistent with antitrust statutes prohibiting anti-competitive activities.

Price fixing is per se an unreasonable restraint of trade. It is not for the courts to determine whether in particular settings price-fixing serves an honorable or worthy end. An agreement shown either by adherence to a price schedule or by proof of consensual action fixing the uniform or minimum price, is itself illegal under the Sherman Act, no matter what end it was designed to serve. United States v. Real Estate Boards, 339 U.S. 485, 489, 70 S.Ct. 711, 714, 94 L.Ed. 1007 (1950).

The scope of the statutory language in the Sherman Act is so expansive that courts have been reluctant to find exceptions. The language explicitly states

1 The Fairfax Bar Association and the Virginia State Bar are the remaining defendants in the case. Two other defendants, the Alexandria Bar Association and the Arlington County Bar Association have agreed to a consent judgment, by virtue of which they are directed to cancel their existing minimum fee schedules and enjoined from adopting, publishing or distributing any future schedules of minimum or suggested fees.

2 Stipulation No. 16 is actually a conclusion of law rather than a fact, and the Court does not adopt it or feel it necessary to the decision in this case.

3 Although the title insurance companies have a right to look to the individual attorney who examined the title for indemnification, the evidence is that there is no known case where such indemnification was ever actually sought. Of course, the specific fee complained of here by the plaintiffs, which is the title examination fee of 1% of the first $50,000 of purchase price plus %% of all over $50,000, is in addition to the title insurance premium.

Since the hearing on December 13 was devoted solely to the issue of liability, it was understood in advance that no testimony with regard to the amount of any damages would be presented.

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