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Bates v. State Bar of Arizona

June 27, 1977

JOHN R. BATES AND VAN O'STEEN, APPELLANTS,
v.
STATE BAR OF ARIZONA



Court Below: 113 Ariz. 394, 555 P.2d 640

SYLLABUS BY THE COURT

Appellants, who are licensed attorneys and members of the Arizona State Bar, were charged in a complaint filed by the State Bar's president with violating the State Supreme Court's disciplinary rule, which prohibits attorneys from advertising in newspapers or other media. The complaint was based upon a newspaper advertisement placed by appellants for their 'legal clinic,' stating that they were offering 'legal services at very reasonable fees,' and listing their fees for certain services, namely, uncontested divorces, uncontested adoptions, simple personal bankruptcies, and changes of name. The Arizona Supreme Court upheld the conclusion of a bar committee that appellants had violated the rule, having rejected appellants' claims that the rule violated ss 1 and 2 of the Sherman Act because of its tendency to limit competition and that it infringed appellants' First Amendment rights. Held:

1. The restraint upon attorney advertising imposed by the Supreme Court of Arizona wielding the power of the State over the practice of law is not subject to attack under the Sherman Act. Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315, followed; Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572; Cantor v. Detroit Edison Co., 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141, distinguished. Pp. 2696-2698.

2. Commercial speech, which serves individual and societal interests in assuring informed and reliable decisionmaking, is entitled to some First Amendment protection, Virginia Pharmacy Board v. Virginia Consumer Council, 425 U.S. 748, 96 S.Ct. 1817, 48 L.Ed.2d 346, and the justifications advanced by appellee are inadequate to support the suppression of all advertising by attorneys. Pp. 2698-2709.

(a) This case does not involve any question concerning in-person solicitation or advertising as to the quality of legal services, but only the question whether lawyers may constitutionally advertise the prices at which certain routine services will be performed. Pp. 2700-2701.

(b) The belief that lawyers are somehow above 'trade' is an anachronism, and for a lawyer to advertise his fees will not undermine true professionalism. Pp. 2701-2703.

(c) Advertising legal services is not inherently misleading. Only routine services lend themselves to advertising, and for such services fixed rates can be meaningfully established, as the Arizona State Bar's own Legal Services Program demonstrates. Although a client may not know the detail involved in a given task, he can identify the service at the level of generality to which advertising lends itself. Though advertising does not provide a complete foundation on which to select an attorney, it would be peculiar to deny the consumer at least some of the relevant information needed for an informed decision on the ground that the information was not complete. Pp. 2703-2704.

(d) Advertising, the traditional mechanism in a free-market economy for a supplier to inform a potential purchaser of the availability and terms of exchange, may well benefit the administration of justice. Pp. 2704-2705.

(e) It is entirely possible that advertising will serve to reduce, not advance, the cost of legal services to the consumer, and may well aid new attorneys in entering the market. Pp. 2705-2706.

(f) An attorney who is inclined to cut quality will do so regardless of the rule on advertising, the restraints on which are an ineffective deterrent to shoddy work. P. 2706.

(g) Undue enforcement problems need not be anticipated, and it is at least incongruous for the opponents of advertising to extol the virtues of the legal profession while also asserting that through advertising lawyers will mislead their clients. Pp. 2706-2707.

3. The First Amendment overbreadth doctrine, which represents a departure from the traditional rule that a person may not challenge a statute on the ground that it might be applied unconstitutionally in circumstances other than those before the court, is inapplicable to professional advertising, a context where it is not necessary to further its intended objective, cf. Bigelow v. Virginia, 421 U.S. 809, 817-818, 95 S.Ct. 2222, 2230, 44 L.Ed.2d 600, and appellants must therefore demonstrate that their specific conduct was constitutionally protected. Pp. 2706-2708.

4. On this record, appellants' advertisement (contrary to appellee's contention) is not misleading and falls within the scope of First Amendment protection. Pp. 2707-2708.

(a) The term 'legal clinic' would be understood to refer to an operation like appellants' that is geared to provide standardized and multiple services. Pp. 2707-2708.

(b) The advertisement's claim that appellants offer services at 'very reasonable' prices is not misleading. Appellants' advertised fee for an uncontested divorce, which was specifically cited by appellee, is in line with customary charges in the area. P. 2708.

(c) Appellants' failure to disclose that a name change might be accomplished by the client without an attorney's aid was not misleading since the difficulty of performing the task is not revealed and since most legal services may be performed legally by the citizen for himself. See Faretta v. California, 422 U.S. 806, 95 S.Ct. 2525, 45 L.Ed.2d 562. P. 2708.

113 Ariz. 394, 555 P.2d 640, affirmed in part and reversed in part.

The opinion of the court was delivered by: Mr. Justice Blackmun

Argued January 18, 1977

As part of its regulation of the Arizona Bar, the Supreme Court of that State has imposed and enforces a disciplinary rule that restricts advertising by attorneys. This case presents two issues: whether ss 1 and 2 of the Sherman Act, 15 U.S.C. ss 1 and 2, forbid such state regulation, and whether the operation of the rule violates the First Amendment, made applicable to the State through the Fourteenth.*fn1

I.

Appellants John R. Bates and Van O'Steen are attorneys licensed to practice law in the State of Arizona.*fn2 As such, they are members of the appellee, the State Bar of Arizona.*fn3 After admission to the bar in 1972, appellants worked as attorneys with the Maricopa County Legal Aid Society. App. 221.

In March 1974, appellants left the Society and opened a law office, which they call a 'legal clinic,' in Phoenix. Their aim was to provide legal services at modest fees to persons of moderate income who did not qualify for governmental legal aid. Id., at 75. In order to achieve this end, they would accept only routine matters, such as uncontested divorces, uncontested adoptions, simple personal bankruptcies, and changes of name, for which costs could be kept down by extensive use of paralegals, automatic typewriting equipment, and standardized forms and office procedures. More complicated cases, such as contested divorces, would not be accepted. Id., at 97. Because appellants set their prices so as to have a relatively low return on each case they handled, they depended on substantial volume. Id., at 122- 123.

After conducting their practice in this manner for two years, appellants concluded that their practice and clinical concept could not survive unless the availability of legal services at low cost was advertised and in particular, fees were advertised. Id., at 120-123. Consequently, in order to generate the necessary flow of business, that is, 'to attract clients,' id., at 121; Tr. of Oral Arg. 4, appellants on February 22, 1976, placed an advertisement (reproduced in the Appendix to this opinion, infra, at 2710) in the Arizona Republic, a daily newspaper of general circulation in the Phoenix metropolitan area. As may be seen, the advertisement stated that appellants were offering 'legal services at very reasonable fees,' and listed their fees for certain services.*fn4

Appellants concede that the advertisement constituted a clear violation of Disciplinary Rule 2-101(B), incorporated in Rule 29(a) of the Supreme Court of Arizona, 17A Ariz.Rev.Stat., p. 26 (Supp. 1976). The disciplinary rule provides in part:

'(B) A lawyer shall not publicize himself, or his partner, or associate, or any other lawyer affiliated with him or his firm, as a lawyer through newspaper or magazine advertisements, ratio or television announcements, display advertisements in the city or telephone directories or other means of commercial publicity, nor shall he authorize or permit others to do so in his behalf.'*fn5

Upon the filing of a complaint initiated by the president of the State Bar, App. 350, a hearing was held before a three-member Special Local Administrative Committee, as prescribed by Arizona Supreme Court Rule 33. App. 16. Although the committee took the position that it could not consider an attack on the validity of the rule, it allowed the parties to develop a record on which such a challenge could be based. The committee recommended that each of the appellants be suspended from the practice of law for not less than six months. Id., at 482. Upon further review by the Board of Governors of the State Bar, pursuant to the Supreme Court's Rule 36, the Board recommended only a one-week suspension for each appellant, the weeks to run consecutively. App. 486-487.

Appellants, as permitted by the Supreme Court's Rule 37, then sought review in the Supreme Court of Arizona, arguing, among other things, that the disciplinary rule violated ss 1 and 2 of the Sherman Act because of its tendency to limit competition, and that the rule infringed their First Amendment rights. The court rejected both claims. In re Bates, 113 Ariz. 394, 555 P.2d 640 (1976). The plurality*fn6 may have viewed with some skepticism the claim that a restraint on advertising might have an adverse effect on competition.*fn7 But, even if the rule might otherwise violate the Act, the plurality concluded that the regulation was exempt from Sherman Act attack because the rule 'is an activity of the State of Arizona acting as sovereign.' Id., at 397, 555 P.2d at 643. The regulation thus was held to be shielded from the Sherman Act by the state-action exemption of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943).

Turning to the First Amendment issue, the plurality noted that restrictions on professional advertising have survived constitutional challenge in the past, citing, along with other cases, Williamson v. Lee Optical Co., 348 U.S. 483, 75 S.Ct. 461, 99 L.Ed. 563 (1955), and Semler v. Dental Examiners, 294 U.S. 608, 55 S.Ct. 570, 79 L.Ed. 1086 (1935).*fn8 Although recognizing that Virginia Pharmacy Board v. Virginia Consumer Council, 425 U.S. 748, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976), and Bigelow v. Virginia, 421 U.S. 809, 95 S.Ct. 2222, 44 L.Ed.2d 600 (1975), held that commercial speech was entitled to certain protection under the First Amendment, the plurality focused on passages in those opinions acknowledging that special considerations might bear on the advertising of professional services by lawyers. See Virginia Pharmacy Board v. Virginia Consumer Council, 425 U.S., at 773 n. 25, 96 S.Ct., at 1831; id., at 773-775, 96 S.Ct. at 1831-1832 (concurring opinion); Bigelow v. Virginia, 421 U.S., at 825 n. 10, 95 S.C., at 2234. The plurality apparently was of the view that the older decisions dealing with professional advertising survived these recent cases unscathed, and held that Disciplinary Rule 2-101(B) passed First Amendment muster.*fn9 Because the court, in agreement with the Board of Governors, felt that appellants' advertising 'was done in good faith to test the constitutionality of DR 2- 101(B),' it reduced the sanction to censure only.*fn10 113 Ariz., at 400, 555 P.2d, at 646.

Of particular interest here is the opinion of Mr. Justice Holohan in dissent. In his view, the case should have been framed in terms of 'the right of the public as consumers and citizens to know about the activities of the legal profession,' id., at 402, 555 P.2d, at 648, rather than as one involving merely the regulation of a profession. Observed in this light, he felt that the rule performed a substantial disservice to the public:

'Obviously the information of what lawyers charge is important for private economic decisions by those in need of legal services. Such information is also helpful, perhaps indispensable, to the formation of an intelligent opinion by the public on how well the legal system is working and whether it should be regulated or even altered. . . . The rule at issue prevents access to such information by the public.' Id., at 402-403, 555 P.2d, at 648-649.

Although the dissenter acknowledged that some types of advertising might cause confusion and deceptin, he felt that the remedy was to ban that form, rather than all advertising. Thus, despite his 'personal dislike of the concept of advertising by attorneys,' id., at 402, 555 P.2d, at 648, he found the ban unconstitutional.

We noted probable jurisdiction. 429 U.S. 813, 97 S.Ct. 53, 50 L.Ed.2d 73 (1976).

II.

The Sherman Act

In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), this Court held that the Sherman Act was not intended to apply against certain state action. See also Olsen v. Smith, 195 U.S. 332, 344-345, 25 S.Ct. 52, 54-55, 49 L.Ed. 224 (1904). In Parker a raisin producer-packer brought suit against California officials challenging a state program designed to restrict competition among growers and thereby to maintain prices in the raisin market. The Court held that the State, 'as sovereign, imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit.' 317 U.S., at 352, 63 S.Ct., at 314. Appellee argues, and the Arizona Supreme Court held, that the Parker exemption also bars the instant Sherman Act claim. We agree.

Of course, Parker v. Brown has not been the final word on the matter. In two recent cases the Court has considered the state-action exemption to the Sherman Act and found it inapplicable for one reason or another. Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975); Cantor v. Detroit Edison Co., 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976). Goldfarb and Cantor, however, are distinguishable, and their reasoning supports our conclusion here.

In Goldfarb we held that s 1 of the Sherman Act was violated by the publication of a minimum-fee schedule by a county bar association and by its enforcement by the State Bar. The schedule and its enforcement mechanism operated to create a rigid price floor for services and thus constituted a classic example of price fixing. Both bar association argued that their activity was shielded by the state-action exemption. This Court concluded that the action was not protected, emphasizing that 'we need not inquire further into the stateaction question because it cannot fairly be said that the State of Virginia through its Supreme Court Rules required the anticompetitive activities of either respondent.' 421 U.S., at 790, 95 S.Ct., at 2015. In the instant case, by contrast, 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, 95 S.Ct., at 2015.*fn11

Appellants seek to draw solace from Cantor. The defendant in that case, an electric utility, distributed light bulbs to its residential customers without additional charge, including the costs in its state-regulated utility rates. The plaintiff, a retailer who sold light bulbs, brought suit, claiming that the utility was using its monopoly power in the distribution of electricity to restrain competition in the sale of bulbs. The Court held that the utility could not immunize itself from Sherman Act attack by embodying its challenged practices in a tariff approved by a state commission. Since the disciplinary rule at issue here is derived from the Code of Professional Responsibility of the American Bar Association,*fn12 appellants argue by analogy to Cantor that no immunity should result from the bar's success in having the Code adopted by the State. They also assert that the interest embodied in the Sherman Act must prevail over the state interest in regulating the bar. See 428 U.S., at 595, 96 S.Ct., at 3119. Particularly is this the case, they claim, because the advertising ban is not tailored so as to intrude upon the federal interest to the minimum extent necessary. See id., at 596 n. 34, and 597, 96 S.Ct., at 3119, and 3120.

We believe, however, that the context in which Cantor arose is critical. First, and most obviously, Cantor would have been an entirely different case if the claim had been directed against a public official or public agency, rather than against a private party.*fn13 Here, 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 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 appellee acts as the agent of the court under its continuous supervision.

Second, the Court emphasized in Cantor that the State had no independent regulatory interest in the market for light bulbs. 428 U.S., at 584-585, 96 S.Ct., at 3114; id., at 604-605, 612-614, 96 S.Ct., at 3123-3124, 3127-3128 (concurring opinions). There was no suggestion that the bulb program was justified by flaws in the competitive market or was a response to health or safety concerns. And an exemption for the program was not essential to the State's regulation of electric utilities. In contrast, the regulation of the activities of the bar is at the core of the State's power to protect the public. Indeed, this Court in Goldfarb acknowledged that '(t)he interest of the States in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been 'officers of the courts." 421 U.S., at 792, 95 S.Ct., at 2016. See Cohen v. Hurley, 366 U.S. 117, 123-124, 81 S.Ct. 954, 958, 6 L.Ed.2d 156 (1961).*fn14 More ...


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