Massachusetts School Of Law At Andover, Inc. v. American Bar Association

This case is before this court on appeal from an order of the district court granting summary judgment on all counts to the appellees in this antitrust action brought against them by the Massachusetts School of Law at Andover, Inc. ("MSL"). The district court had jurisdiction under 28 U.S.C. §§ 1331 and 1337, and this Court has jurisdiction under 28 U.S.C. § 1291. This appeal principally presents a number of questions regarding the scope of immunities from the antitrust laws and related antitrust discovery issues. An examination of the parties and conduct in question is first necessary.

MSL has been operating a law school in Massachusetts since 1988. The Board of Regents of Massachusetts authorized MSL to grant the J.D. degree in 1990. This authority allowed MSL's graduates to take several bar examinations, including that in Massachusetts. MSL has the stated policy of providing low-cost but high quality legal education and attracting mid-life, working class, and minority students. MSL facilitates this policy with its admissions procedure and a tuition of $9,000 per year. Many of MSL's policies and practices conflict with American Bar Association ("ABA") accreditation standards, and MSL aggressively has sought changes in those standards.

The ABA, a national professional organization of attorneys whose membership is open to members of any bar in the United States, has been concerned with legal education and bar admissions throughout its history. In 1921, through its Section of Legal Education and Admissions to the Bar (the "Section"), the ABA first developed standards of accreditation for legal education programs. The ABA petitioned state supreme courts to rely on its accreditation decisions in connection with bar admission decisions. Now, all 50 states and the District of Columbia consider graduation from an ABA-accredited law school sufficient for the legal education requirement of bar admission. App. at 1396-1409. The United States Secretary of Education considers the Council of the Section to be the national agency for accreditation of professional schools of law and a reliable authority concerning the quality of legal education. App. at 3378. The ABA informs the states of its accreditation decisions and annually sends them the Review of Legal Education in the United States, the ABA accreditation standards, and any proposed revisions of the standards. During the period at issue, there were 177 ABA-accredited law schools in the United States and over 50 unaccredited schools with some form of state approval such as MSL enjoys. The ABA consistently has opposed attempts to change or waive bar admission rules to allow graduates of schools not accredited by the ABA to take the bar examination. See, e.g., app. at 3623-53.

Many states have methods of satisfying the legal education requirement other than graduation from an ABA-accredited school. These methods include legal apprenticeship, practice in another state, and graduation from a school approved by the American Association of Law Schools ("AALS") or a state agency. The AALS is an association of 160 law schools which serves as a learned society for law schools and legal faculty and as a representative of the law school community with the federal government and other education organizations. Furthermore, in every state, a bar applicant or law school can petition the bar admission authority for revision or waiver of the rules. MSL won a waiver of New Hampshire's rules to allow its graduates to take the bar in 1995, and has filed petitions seeking similar relief in Connecticut, Maine, New York, and Rhode Island. Maryland and Washington, D.C. have granted petitions of graduates of MSL to take the bar. MSL graduates can take the bar examination immediately after graduation in California, Massachusetts, New Hampshire, Vermont and West Virginia, and in 12 other states after practicing in another state first.

The ABA allows graduates of non-accredited schools to join the ABA once they are admitted to a bar and does not prohibit its members from hiring or otherwise dealing with graduates of such schools. The ABA does not prevent its members from teaching at non-ABA-accredited schools, but it does not allow its accredited schools to let students transfer credits from unaccredited schools or to accept graduates of unaccredited schools into graduate programs.

ABA accreditation is open to any law school that applies and meets the ABA standards. The ABA grants provisional accreditation to schools that substantially comply with its standards and promise to comply fully within three years. An Accreditation Committee makes an initial evaluation of a school for provisional accreditation and gives a recommendation to the Council of the Section. The Council then makes a recommendation to the ABA House of Delegates, which has the ultimate decisionmaking authority.

A law school must have been teaching students for five years and graduated three classes to be eligible for AALS membership. The AALS holds an annual meeting, professional conferences and workshops,1 and publishes the Journal of Legal Education. All of its current members are ABA-accredited, but accreditation is neither necessary nor sufficient for membership approval. The AALS accredits schools in the sense that it determines whether a school meets its membership requirements, but it has accreditation standards and procedures separate from those of the ABA. The AALS conducts a site visit, independently of the ABA, when a school applies for membership, and it conducts periodic visits after membership, usually jointly with the ABA if the school is ABA-accredited. The AALS is not involved with site inspections for provisional ABA accreditation, such as the one the ABA undertook at MSL.

The Law School Admissions Council, Inc. ("LSAC") is the successor organization to the Law School Admission Council and Law School Admission Services, Inc. The LSAC, as have its predecessors, administers the Law School Admissions Test ("LSAT"). The LSAC is not affiliated formally with either the ABA or the AALS and does not participate in the ABA accreditation process. Membership in the LSAC is open to any United States law school that (1) requires that "substantially all of its applicants for admission take the Law School Admission Test," and (2) is ABA-accredited or an AALS member. App. at 2552. MSL does not require the LSAT, never has applied for AALS membership, and is not ABA-accredited, so thus is not eligible for LSAC membership.

In addition to administering the LSAT, the LSAC performs a number of other services. The Candidate Referral Service ("CRS") provides lists of names and addresses of people who have taken the LSAT. Use of the CRS is open to any school which has degree granting authority from a state, regardless of LSAC membership or ABA accreditation, and MSL has made use of this service. App. at 2410-12, 2511-12, 2427-29. The Law School Data Assembly Service ("LSDAS") provides a summary of a law school applicant's college record and LSAT score. LSDAS is also open to all schools and has been used by MSL. App. at 2410-12. The LSAC publishes a handbook, The Official Guide to U.S. Law Schools, with a two-page description of each United States LSAC member school, and two appendices with the names and addresses of Canadian LSAC members and unaccredited United States law schools, including MSL, known to the LSAC. The LSAC also sponsors regional recruiting forums for law school applicants and conferences of pre-law advisors which are only open to LSAC members.

MSL applied for provisional ABA accreditation during the fall of 1992 and early 1993. MSL never claimed it was or would be in compliance with ABA standards, but instead asked for a waiver under Standard 802 which allows the Council to grant variances from the standards. Following the established process, a seven-member site evaluation team appointed by and representing only the ABA visited MSL and then prepared a 76-page report which was sent to MSL. MSL sent a 90-page response to the site team report.

The Accreditation Committee, after reviewing the site report and the MSL materials, and hearing a presentation from six MSL representatives, recommended denial of MSL's accreditation application because it did not meet the ABA requirements. The Committee also recommended denial of the waiver request. In a letter to MSL explaining its denial recommendation, the Committee listed 11 areas where MSL failed to comply with ABA standards. App. at 837-48. These areas included the high student/faculty ratio, over reliance on part-time faculty, the heavy teaching load of full-time faculty, the lack of adequate sabbaticals for faculty, the use of a for-credit bar review class, the failure to limit the hours students may be employed, and the failure to use the LSAT or give evidence validating its own admission test.2 App. at 845-46. The body of the letter discussed the inadequacy of MSL's law library, but the letter did not cite that inadequacy as one of the reasons for the denial recommendation. App. at 842-43; see app. at 845-46. The letter did not discuss the salaries of MSL's faculty. Invoking ABA procedures, MSL appealed but, after a full review at which MSL had the opportunity to make a presentation, the denial of accreditation was upheld on February 8, 1994.

MSL filed this action on November 23, 1993, alleging that the ABA, AALS, LSAC, and 22 individuals combined and conspired to organize and enforce a group boycott in violation of section 1 of the Sherman Act and conspired to monopolize legal education, law school accreditation, and the licensing of lawyers, in violation of section 2 of the Sherman Act. 15 U.S.C. §§ 1-2. The complaint basically alleged that the appellees conspired to enforce the ABA's anticompetitive accreditation standards by: (1) fixing the price of faculty salaries; (2) requiring reduced teaching hours and non-teaching duties; (3) requiring paid sabbaticals; (4) forcing the hiring of more professors in order to lower student/faculty ratios; (5) limiting the use of adjunct professors; (6) prohibiting the use of required or for-credit bar review courses; (7) forcing schools to limit the number of hours students could work; (8) prohibiting ABA-accredited schools from accepting credit transfers from unaccredited schools and from enrolling graduates of unaccredited schools in graduate programs; (9) requiring more expensive and elaborate physical and library facilities; and (10) requiring schools to use the LSAT.3 MSL alleged that enforcement of these anticompetitive criteria led to the denial of its application for provisional accreditation and caused MSL to suffer a "loss of prestige" and direct economic damage in the form of declining enrollments4 and tuition revenue.

After MSL filed its complaint, the Antitrust Division of the United States Department of Justice ("DOJ") began an investigation of the ABA's accreditation process and on June 27, 1995, filed suit against the ABA in the United States District Court for the District of Columbia alleging violations of section 1 of the Sherman Act. The ABA entered into a consent decree with the DOJ on June 25, 1996, settling that case.

After a period of discovery under Rule of Reason standards, the district court granted the appellees summary judgment on both counts. The court held MSL did not suffer a cognizable antitrust injury; any disadvantage it incurred was attributable to the decision by the individual states to preclude graduates of unaccredited schools from taking bar examinations, and such injury "cannot be the basis for antitrust liability" under Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961). Massachusetts School of Law v. American Bar Ass'n, 937 F.Supp. 435, 441 (E.D.Pa.1996). The court also held that to the extent that the unaccredited status creates a stigma which injures MSL, Noerr precludes recovery for the injury because it is "incidental to the primary, protected injury resulting from governmental decisions to preclude MSL graduates from taking certain bar examinations." Id. at 442. In the alternative, the court held that even if the stigmatic injury were not incidental to Noerr-protected conduct, the claim still would fail because the ABA has done nothing more than express its opinion, which is speech protected by the First Amendment, and not conduct for which there can be antitrust liability. Id. at 442-46.

MSL appeals from the order for summary judgment and a number of prior orders related to discovery, the dismissal of the individual appellees for lack of personal jurisdiction, the denial of a motion to recuse Judge Ditter, and the disqualification of MSL's inside counsel. The DOJ has filed an amicus brief arguing that the district court erred in holding that any stigmatic injury from non-accredited status was incidental to a Noerr-protected injury to the extent that there was no actual petitioning of government in this case. The DOJ also argues that the district court erred in holding that the First Amendment immunizes anticompetitive effects brought about through speech.

We review a district court order granting summary judgment de novo both as to factual and legal questions. Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 632 (3d Cir.1996); Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1230 (3d Cir.1993). We review discovery orders under an abuse of discretion standard. Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 90 (3d Cir.1987); Marroquin-Manriquez v. INS, 699 F.2d 129, 134 (3d Cir.1983). As germane here, MSL has to show that the district court's denial of discovery "made it impossible to obtain crucial evidence, and implicit in such a showing is proof that more diligent discovery was impossible." In re Fine Paper Antitrust Litig., 685 F.2d 810, 818 (3d Cir.1982) (citation omitted). We review the district court's denial of the motion for recusal for abuse of discretion. Blanche Road Corp. v. Bensalem Township, 57 F.3d 253, 265 (3d Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 303, 133 L.Ed.2d 208 (1995); United States v. Antar, 53 F.3d 568, 573 (3d Cir.1995).

MSL argues that a district court order of May 20, 1994, which held that the ABA standards were not price fixing and per se unlawful and that discovery would proceed under a Rule of Reason analysis, Massachusetts School of Law v. American Bar Ass'n, 853 F.Supp. 837 (E.D.Pa.1994), is contrary to law and should be reversed. MSL contends that the district court held in this order that "the ABA had not fixed prices," and that that holding is contrary to settled law. MSL br. at 40. This argument mischaracterizes the district court's holding. As the district court correctly noted, ABA Standard 405(a) (considering faculty salaries as part of school's ability to attract and retain quality faculty) is somewhat vague. Although not dispositive, the lack of a specific price floor or ceiling suggests that the standard represents something other than a classic price-fixing arrangement. MSL, 853 F.Supp. at 840. The court, however, did say that the standard was "price-affecting," which in many cases is sufficient for a per se approach. Id. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 221-24, 60 S.Ct. 811, 843-46, 84 L.Ed. 1129 (1940).

The court properly then went on to consider the context of the case. In this regard, it is significant that the ABA is a professional society and the Supreme Court has indicated that it has "been slow to condemn rules adopted by professional societies as unreasonable per se," even when the behavior resembles conduct usually subject to a per se approach. FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 458, 106 S.Ct. 2009, 2018, 90 L.Ed.2d 445 (1986) (Rule of Reason approach even though behavior resembled group boycott); see also National Soc'y of Prof. Eng. v. United States, 435 U.S. 679, 692-94, 98 S.Ct. 1355, 1365-66, 55 L.Ed.2d 637 (1978) (using Rule of Reason analysis even though agreement affected prices); Goldfarb v. Virginia State Bar, 421 U.S. 773, 788 n. 17, 95 S.Ct. 2004, 2013 n. 17, 44 L.Ed.2d 572 (1975) (distinguishing between practice of professions and other business activities); United States v. Brown Univ., 5 F.3d 658, 672 (3d Cir.1993) (Rule of Reason approach used even though behavior resembled price fixing).

MSL nevertheless argues that the price fixing aspect of the ABA standards has infected the entire conspiracy, justifying a per se approach, and that the Supreme Court has discouraged finding new exceptions to the per se standard. See FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411, 428-31, 110 S.Ct. 768, 778-79, 107 L.Ed.2d 851 (1990). We, however, do not apply a new exception to the per se approach here. Rather, the use of the Rule of Reason is appropriate here because where "a conspiracy of this sort is alleged in the context of a profession, the nature and extent of [the] anticompetitive effect are too uncertain to be amenable to per se treatment." Wilk v. American Medical Ass'n, 719 F.2d 207, 221 (7th Cir.1983).

MSL also appeals the district court's July 20, 1994 discovery order which held that MSL had not been injured by the alleged price fixing, and therefore denied discovery as to the faculty salary standard except insofar as it related to MSL's accreditation application. MSL, 857 F.Supp. 455 (E.D.Pa.1994). Contrary to MSL's argument, this order did not hold as a final matter that the alleged salary fixing had no impact on MSL. It merely stated that "the evidence presently at hand does not support MSL's contention that one of the reasons the ABA declined to accredit MSL was noncompliance with the salary standard[ ]." Id. at 458. The court allowed MSL to continue discovery to ascertain whether salary was a factor in accreditation denial, but barred broader discovery as to the development and implementation of that standard.

MSL did find evidence that the ABA had data on its salaries (collected as part of general fact-finding about the school) and evidence that the ABA had warned other schools about low salaries. Nevertheless, MSL is not able to point to any evidence, or draw a reasonable inference, that the ABA actually used salary as a factor in denying MSL's accreditation or that the ABA's stated reasons for denying it accreditation were pretextual. In fact, the evidence and inferences point the other way, demonstrating that the ABA explicitly states low salaries as a factor when it is one. Thus, we cannot find that the district court's limitation of discovery in this manner was an abuse of discretion.

MSL argues that the district court denied it the discovery necessary to prove its allegations of conspiracy. MSL complains generally about the lack of usefulness of the materials it did receive during discovery, but largely confines its argument to the materials the ABA turned over to the DOJ, some 544,000 pages. MSL cites a number of cases, including Golden Quality Ice Cream Co. v. Deerfield Specialty Papers, Inc., 87 F.R.D. 53 (E.D.Pa.1980), for the proposition that civil antitrust plaintiffs can obtain discovery of documents produced for government antitrust cases. Br. at 37. In these cases, however, the government case had begun before the civil case, and the civil plaintiffs sought copies of the material given to the government at the outset of discovery in their cases. See Golden Quality, 87 F.R.D. at 59.5

In the present case, the government's investigation began after MSL's, and MSL sought all of the documents given to the government after the court set the confines of discovery in MSL's case. Thus, the district court held in an order dated August 6, 1996, that a request for all documents given to the government was an attempt "to do an end run around" the existing discovery framework. The court found that MSL could have obtained all those documents which were relevant through the existing discovery framework. See Board of Educ. of Evanston Township v. Admiral Heating and Ventilation, Inc., 513 F.Supp. 600, 603-04 (N.D.Ill.1981) (denying complete turnover of all materials collected by grand jury investigation). Given the context of this case, the court did not abuse its discretion in this ruling.

MSL also argues that it was not given sufficient opportunity to conduct discovery to withstand the appellees' summary judgment motion. MSL cites several cases for the proposition that granting summary judgment before the opposing party has had sufficient opportunity for discovery can be reversible error. See, e.g., Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564, 568 (3d Cir.1986); Mannington Mills, Inc. v. Congoleum Indus., Inc., 610 F.2d 1059, 1073 (3d Cir.1979). Br. at 4. These cases are in tension with another line of cases which encourages the use of summary judgment in order to avoid burdensome litigation expenses when the allegations are theoretical or speculative. See, e.g., Pennsylvania ex. rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 182 (3d Cir.1988); Pennsylvania Dental Ass'n v. Medical Serv. Ass'n, 745 F.2d 248, 262 (3d Cir.1984). While the present case fits neither paradigm exactly, the district court, by allowing fairly extensive discovery and then closing discovery and entertaining the summary judgment motion, did not abuse its discretion.

MSL asserts three types of injury resulting from the ABA's allegedly anticompetitive conduct. The first is that MSL is at a competitive disadvantage in recruiting students because graduates of unaccredited schools cannot take the bar examination in most states. Second, MSL says that denial of accreditation creates a stigma, independent of the bar examination issue. Finally, MSL contends that the ABA's enforcement of its accreditation standards injures it directly by increasing the cost of faculty salaries and creating a boycott of unaccredited schools.

In granting summary judgment to the appellees, the district court held that they were not subject to antitrust liability for MSL's principal alleged injury, a competitive disadvantage in recruiting students, to the extent that the decisions of the individual states to prohibit graduates of unaccredited schools from taking their bar examinations caused the injury. MSL, 937 F.Supp. at 441. The court based this holding on the principles of Noerr, 365 U.S. 127, 81 S.Ct. 523. MSL argues on appeal that the Noerr principles do not apply here because private anti-competitive conduct is immunized only where it is (1) clearly and affirmatively authorized by state policy, and (2) actively supervised by the state. California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233 (1980). See also FTC v. Ticor Title Ins. Co., 504 U.S. 621, 112 S.Ct. 2169, 119 L.Ed.2d 410 (1992); Patrick v. Burget, 486 U.S. 94, 108 S.Ct. 1658, 100 L.Ed.2d 83 (1988). The DOJ, in its amicus brief, does not challenge this aspect of the district court's holding.

In Parker v. Brown the Supreme Court held that the Sherman Act does not prohibit an anticompetitive restraint imposed by a state as an act of government. 317 U.S. 341, 352, 63 S.Ct. 307, 314, 87 L.Ed. 315 (1943). The decision in Noerr reaffirmed the Parker doctrine in stating "where a restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action, no violation of the Act can be made out." 365 U.S. at 136, 81 S.Ct. at 529. Noerr went on to hold that any attempt to petition or influence the government to impose an anticompetitive restraint is immune from antitrust action.6 Id. Further, even if the anticompetitive restraint results directly from private action, it is still immune if it is an "incidental effect" of a legitimate attempt to influence governmental action. Id. at 143-44, 81 S.Ct. at 533. As the Supreme Court put it, "Parker and Noerr are complementary expressions of the principle that the antitrust laws regulate business, not politics; the former decision protects the States' acts of governing, and the latter the citizens' participation in government." City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 383, 111 S.Ct. 1344, 1355, 113 L.Ed.2d 382 (1991). Thus, the initial substantive issues on this appeal are whether state or private conduct caused the injury MSL alleges it suffered because its graduates could not take the bar examination in most states, and whether, if MSL suffered an injury as a result of the ABA's conduct, the injury was an incidental effect of the ABA's attempt to influence the states with respect to establishing criteria for bar admission. We will discuss each alleged injury separately.

Each state retains the authority to decide what applicants may take its bar examination and may be admitted to the bar.7 Accordingly, MSL's argument that the ABA received "carte-blanche delegated authority to decide who can take bar exams," MSL reply br. at 19, is simply wrong. See cases cited supra note 7. Many, but not all, states consider the accreditation decisions of the ABA in their legal education requirement (one of many requirements) for taking the bar examination. Yet, every state retains the final authority to set all the bar admission rules, and individual applicants or law schools can petition the states for waivers or changes.

To the extent that MSL's alleged injury arises from the inability of its graduates to take the bar examination in most states, the injury is the result of state action and thus is immune from antitrust action under the doctrine of Parker v. Brown, 317 U.S. at 352, 63 S.Ct. at 314. The ABA does not decide who can take the bar examinations. Rather, it makes an accreditation decision which it conveys to the states, but the states make the decisions as to bar admissions. Without state action, the ABA's accreditation decisions would not affect state bar admissions requirements. Because the states are sovereign in imposing the bar admission requirements, the clear articulation and active supervision requirements urged by MSL are inapplicable. See Quinn v. Kent Gen. Hosp., Inc., 617 F.Supp. 1226, 1240 (D.Del.1985). In short, this case does not involve a delegation of state authority. To the contrary, the states use the ABA to assist them in their decision-making processes. Thus, we have here a government action case.

Our holding is consistent with current antitrust jurisprudence. The Supreme Court held in a challenge to Arizona's bar admissions policies that the conduct in question "was in reality that of the Arizona Supreme Court," and thus immune under Parker. Hoover v. Ronwin, 466 U.S. 558, 573-74, 104 S.Ct. 1989, 1998, 80 L.Ed.2d 590 (1984). Further, the Supreme Court has held that when a state supreme court adopts a state bar rule banning legal advertising, and retains final enforcement authority over it, Parker immunity applies. Bates v. State Bar of Arizona, 433 U.S. 350, 361, 97 S.Ct. 2691, 2697,