On The Case

DOJ to state bars: Don’t assume you’re safe from antitrust suits

(Reuters) - On Monday, the Justice Department’s Antitrust Division filed a warning shot at state bars that think they’re immune from antitrust claims just because they’re an arm of their state supreme courts.

The warning came in the form of a statement of interest in a Miami federal court antitrust suit by a startup called TIKD Services. TIKD, which was founded and is operated by a non-lawyer, is a mobile phone app that matches drivers who have received traffic tickets with lawyers who agree to defend them for a fixed price. Almost as soon as the service launched in Miami in late 2016, according to TIKD’s complaint, the state bar association launched an investigation to determine if the service was an unlicensed practice of law. TIDK sued the Florida Bar and several other defendants in November 2017, claiming that the state bar conspired with a lawyer-run TIKD rival to scare lawyers away from working with the startup. (A couple of months after TIKD filed its suit, the Florida Bar brought a petition seeking an injunction to stop TIKD from advertising services that, according to the bar, tricked drivers into believing the app provides legal services.)

The state bar, represented by Holland & Knight, quickly moved to dismiss the case. Chief among its arguments: Under both the 11th Amendment and the state action doctrine, the Florida Bar is immune from antitrust claims because it is an arm of the Florida Supreme Court and therefore an agency of the State of Florida. As precedent, the bar’s motion cited the 11th U.S. Circuit Court of Appeals’ 2017 decision in Ramos v. Tomasino, which said state action immunity barred monopoly allegations by a disbarred lawyer.

TIKD’s lawyers at Graves Dougherty Hearon & Moody and Sedgwick countered that the bar association was ignoring the U.S. Supreme Court’s 2015 precedent in North Carolina State Board of Dental Examiners v. Federal Trade Commission, in which the justices said the state dental board was not immune from antitrust claims by non-dentists offering tooth-whitening services. Groups self-regulating their own professions under state auspices, the Supreme Court said, must meet two conditions to invoke state action immunity: They must be exercising a clearly articulated state policy and they must be acting under the active supervision of the state. The dental board’s exclusion of non-dentists wasn’t actively supervised by North Carolina, the Supreme Court found, so the board was exposed to the suit.

Ironically, as TIKD pointed out, the Florida Bar had very good reason to understand the consequences of the Supreme Court’s ruling in Dental Examiners. Along with the North Carolina, West Virginia and Nevada state bars, the Florida Bar filed an amicus brief warning the Supreme Court that if it sided against the dental board, “state bars will have to defend expensive antitrust actions even though states explicitly authorize the state bars to regulate the conduct being challenged.” Obviously, the TIKD brief said, the justices didn’t heed the warning, and the Florida Bar ought to have taken note.

“Having come out on the losing side of Dental Examiners, the bar should know better,” the TIKD brief said.

In February, with briefing on the state bar’s dismissal motion still under way, TIKD lawyer Peter Kennedy of Graves Dougherty got an out-of-the-blue call from the Justice Department. Kennedy told me he had no inkling that DOJ lawyers knew about his case, but they said they’d seen media reports and were interested in the issue of state action immunity for bar groups. A few weeks later, DOJ filed its statement backing TIKD – a “validation,” Kennedy said, of his arguments.

The Justice Department said quite emphatically that Dental Examiners precludes absolute immunity for a state bar, solidifying the Supreme Court’s previous holding, in 1975’s Goldfarb v. Va. State Bar that state bars can’t rely on state action immunity if they foster anticompetitive practices for the benefit of their members. The 11th Circuit’s Ramos ruling, which came after the Supreme Court’s Dental Examiners decision, doesn’t apply in the TIKD case because Ramos was suing over a disciplinary rule directly approved by the Florida Supreme Court.

The TIKD statement of interest is apparently the first time since Dental Examiners that the Justice Department has involved itself in an antitrust case against a state bar, although it has previously issued statements reminding bar associations not to adopt rules restricting competition from non-lawyers in areas that don’t require specialized legal knowledge. Kennedy told me he’s not aware of any previous DOJ statement of interest in a case raising the issue of state action immunity for a state bar. The Justice Department and the FTC did previously file a 2016 amicus brief at the 5th Circuit in Teledoc v. Texas Medical Board, calling for limited state action immunity for the medical board under Dental Examiners precedent.

I asked a DOJ spokeswoman if the TIKD statement was DOJ’s first foray into litigation against a bar association but didn’t hear back immediately. A spokeswoman for the Florida Bar declined to comment on the case.

Kennedy said the Justice Department’s statement in his case resolves any doubt that the federal government is keeping an eye on professional self-regulators who attempt to restrict competition from outsiders. That February phone call from DOJ may have been a surprise, he said, but it was a good one.

“The lesson: If your phone says the Justice Department is calling, pick it up,” he joked.