LegalZoom files federal antitrust lawsuit against the North Carolina State Bar citing 2015 USSC dental board case
Hello everyone and welcome to this Ethics Alert which will discuss the recentantitrust lawsuit filed on June 3, 2015 by LegalZoom against the North Carolina State Bar alleging antitrust violations. The case is LegalZoom.com, Inc. v. North Carolina State Bar, et al, (U.S. Middle District, North Carolina) Case No.: 1:15-CV-439. The formalComplaint (WSJ link) is at http://online.wsj.com/public/resources/documents/2015_0604_legalzoom.pdf.
The Complaint was filed on June 3, 2015 and seeks injunctive relief for antitrust violations as well as damages, claiming that the North Carolina State Bar is has “engaged in unauthorized and anticompetitive conduct illegally and unreasonably restraining trade in the Relevant Market” by prohibiting LegalZoom from offering prepaid legal services plans in that state. As support for the claims, the Complaint cites a recent U.S. Supreme Court decision on the prohibition of non-dentists from providing teeth whitening services in North Carolina.
According to the Complaint, in 1991, the North Carolina state legislature “removed from the State Bar any power over prior and continuing approval of prepaid legal services plans, leaving to the State Bar only the ministerial task of keeping a registration list of plans sold in North Carolina. The State Bar, however, defied the Legislature. Over time, the State Bar unilaterally and ultra vires reassumed and exercised the power the Legislature had removed. The State Bar adopted – without legislative authority or active State supervision – a restrictive definition of what constitutes a prepaid legal services plan, and then began to refuse to ‘accept’ for registration plans that purportedly did not meet its own definition, excluding those plan providers from the Relevant Market.” The Complaint states that the Bar rules require the prepaid plans to be paid in advance of any immediate need, and any legal services provided must be provided by lawyers licensed in the state.
In support of the allegations, the Complaint cites the February 2015 U.S. Supreme Court decision North Carolina State Board of Dental Examiners v. Federal Trade Commission, which is here: https://www.supremecourt.gov/opinions/14pdf/13-534_19m2.pdf. The North Carolina State Board of Dental Examiners opinion held that a dental regulatory board made up mostly of dentists does not have state-action immunity in an antitrust action and authorized a Federal Trade Commission challenge to the dental board’s prohibition of the provision of teeth whitening services by non-dentists. The opinion also found that when a state board is controlled by market participants in the occupation that it regulates, state-action antitrust immunity does not accrue unless the restraint of trade that is being challenged is affirmatively expressed as state policy and the policy is actively supervised by the state.
Bottom line: It should be very interesting to watch this case unfold. When the USSC opinion in North Carolina State Board of Dental Examiners v. Federal Trade Commission was rendered on February 25, 2015, there was much analysis/commentary in the media regarding the potential vulnerability of state Bars to an antitrust challenge if it could be shown that they were controlled by market participants (lawyers) in the occupation being regulated (the law). This appears to be the first shot across the bow. Stay tuned…
…and be careful out there.
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