State bar associations and other licensing boards were left like bleeding seals in shark-infested waters following the United States Supreme Court’s landmark decision this February in North Carolina State Board of Dental Examiners v. Federal Trade Commission, 135 S. Ct. 1101. The decision held that a state agency controlled by active participants in the market regulated by the agency—a description that fits pretty much every state bar association and other licensing board in areas such as medicine, nursing, cosmetology, etc.—must be “actively supervised” by a politically accountable state official in order to enjoy state-action immunity from federal antitrust laws. As few state licensing boards enjoy such supervision, but rather are self-regulated by committees of private practitioners, the Dental Examiners case effectively leaves them stripped of the immunity they had previously taken for granted. It was just a matter of time before the plaintiffs’ bar went in for the kill. The first such attack happened last Wednesday with the filing of a complaint by the website LegalZoom against the North Carolina State Bar and its officers.
LegalZoom’s complaint accuses the North Carolina State Bar and its officers of violating the Sherman Act through “anticompetitive, exclusionary, and monopolistic conduct” in the market for legal services—specifically arising from the State Bar’s refusal to allow LegalZoom to offer its prepaid legal services plans for sale in the state. The complaint further alleges that the State Bar used its committee on the unauthorized practice of law (the body that voted to reject registration of LegalZoom’s prepaid plans) as a vehicle to intimidate and ward off LegalZoom and other potential competitors. The complaint further alleges that the State Bar exceeded the scope of its legislative authorization while not being actively supervised. As the complaint previews in its footnote 4, the case will likely turn on whether the North Carolina Supreme Court’s certification procedures—a process to review the rules and policies promulgated by the State Bar—amounts to active supervision satisfying Dental Examiners. LegalZoom names each of the committee’s members, all of whom are private attorneys, as co-conspirators who are jointly and severally liable for LegalZoom’s alleged $10.5 million in damages.
LegalZoom’s complaint poses a serious problem for the State Bar, which foresaw that it would face antitrust lawsuits under the Dental Examiners decision. In fact, the State Bar filed an amicus brief before the Supreme Court arguing that a decision against the Board of Dental Examiners would open the State Bar to antitrust lawsuits based upon its unsupervised regulation of the state’s legal-services market. And, in the wake of the Dental Examiners decision, the State Bar immediately sponsored legislation to require the North Carolina Attorney General to act as its “supervisor.” Unfortunately for the State Bar, that bill remains pending.
A wave of similar lawsuits can and should be expected—not only against state bar associations but against licensing boards of every stripe. And, even if legislation such as that proposed by the North Carolina State Bar is eventually adopted, that legislation would only save the boards from antitrust liability going forward. It would not cleanse past actions the licensing boards have taken during periods without active state supervision. Nor will the licensing boards be able to defend on the basis that their exclusionary actions were necessary for the public health, safety, or welfare. As Justice Kennedy, writing for the majority in Dental Examiners, stated, “[t]he question is not whether the challenged conduct is efficient, well-functioning, or wise.” Rather, a licensing board’s immunity depends solely on whether it acted under the banner of active state supervision. And, for most state licensing boards, the answer to that question is not a good one.