The Fee Fracas

The rumbling from Washington has been growing louder for months. "These fee arrangements," said Bruce Wilson, the Justice Department's No. 2 antitrust man, "can be viewed as little more than cartels." Added Keith Clearwaters, a deputy assistant attorney general: "There are no defenses that will save them." The target of that legal wrath is the practice among many state and local bar associations of establishing "minimum fee schedules." Now the warnings and threats have ended in action: the Justice Department has charged the Oregon State Bar Association with an illegal conspiracy "to raise, fix, stabilize and maintain fees charged for rendering legal services." Added Clearwaters last week: "There will probably be other cases as well."

Published fee schedules became popular 30 years ago after winning the support of the American Bar Association. The purpose was to provide lawyers with a guide to what was reasonable and protect the public from outrageous prices or cut-rate fees charged by attorneys who would do a shoddy job. Variations in set minimums exist from place to place. But there is often no hope of breaking through the price floor in a particular area. Further, some bar groups have either hinted or stated that a lawyer who undercuts the suggested minimums could be subject to disbarment.

The practice has been the target of private litigation. In Reston, Va., for instance, Lewis and Ruth Goldfarb needed routine legal assistance in buying a $54,500 house. Though they shopped around, 20 attorneys all said they would not do the necessary title search for less than the prescribed minimum of approximately 1% of the purchase price, despite the fact that the builder had done a title search of his own and the new work was a simple matter of updating. The Goldfarbs reluctantly paid, but they also brought suit in Federal District Court on grounds of price fixing. They won the first round against the local bar association.

Because of that initial decision and Justice Department warnings, the legal profession has begun to pull back. At least 16 state bar associations have jettisoned their formal guidelines in the past year. The A.B.A. now endorses the "withdrawal or cancellation of all schedules of fees."

Graham Bartlett, president-elect of the Tennessee bar, explained the recent canceling of minimums in his state by saying, "We felt that they had served the purpose, because through surveys we have taken, we knew that the income of the lawyers had been raised tremendously." All too clearly, that simple mercantile motivation has been a force behind fee schedules from the beginning.

But the legal fight over minimum charges is far from over. Handing down its own ruling in the Goldfarb case this month, the Fourth Circuit Court of Appeals held that the Virginia state bar association, as a quasi-official body, is immune from such suits. The court also endorsed two other defenses: that local lawyers making title searches do not sufficiently affect interstate commerce and that the law and other "learned professions" are exempt from antitrust regulation. The Oregon bar will rely on similar defenses. Justice lawyers are undeterred. "We simply believe the Fourth Circuit is wrong," says Bruce Wilson. "So it's clear that we have to have a definitive U.S. Supreme Court resolution of this question."

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