December 6, 2004

Re: Computerized Legal Research Request for Proposals

Dear Mr. Bobzien and Mr. Edmonds:

I represent Geronimo Development Corporation, publisher of CaseFinder, a computerized legal research service used by many Virginia attorneys. I am writing in connection with the Virginia State Bar’s recent request for proposals for a computerized legal research service service covering primarily Virginia law and the VSB’s proposed plan to distribute that service to its members free of charge.

It appears that the Virginia State Bar seeks to replace ordinary marketplace competition among suppliers selling to individual Virginia attorneys and law firms with a system in which Virginia lawyers band together through their membership in the Virginia State Bar to purchase a single legal research system collectively, and then distribute that system at no additional charge to all Virginia State Bar members. This is a clear violation of federal and state antitrust laws.

Because Virginia Code § 54.1-3910 requires that attorneys join the Virginia State Bar, the Virginia State Bar controls all or virtually all potential purchasers of the product my client manufactures — a computerized legal research system with a specific focus on Virginia law and authority. VSB’s decision to purchase such a system for all of its members collectively is an agreement to monopolize the buyers’ side of this market and is per se illegal. In antitrust terms, the VSB’s plan constitutes a collusive monopsony, an agreement among all or almost all of the buyers of a product to set prices, purchase collectively, and refuse to deal with all but one chosen supplier.

The United States Supreme Court established more than fifty years ago that it is per se illegal for all of the buyers in a market to agree among themselves to purchase collectively or to collectively determine the price and non-price terms under which they will deal with suppliers. Mandeville Island Farms v. American Crystal Sugar, 334 U.S. 219 (1948). In 1985, the United States Supreme Court revisited the issue, holding that if a buying cooperative does not control a substantial portion of the buyers in the market, its activities are subject to "rule of reason" analysis and are not per se illegal. Northwest Wholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284 (1985). Here, since the VSB controls all or virtually all buyers in the market for Virginia-specific computerized legal research services, the legality of its actions would be determined under the per se standard. The Northwest Wholesale Stationers decision, and a host of lower court decisions make clear that agreements among buyers who control a market are just as illegal as agreements among sellers who control a market, assuming that the other prerequisites for an antitrust claim are present.

As you know, this is not the Virginia State Bar’s first experience with conduct that violates the antitrust laws. In a 1975 case involving the Virginia State Bar, the United States Supreme Court made clear that the Virginia State Bar constituted an agreement or conspiracy among its individual lawyer members and that the "state action doctrine" provides no shield for activities that violate the antitrust laws and are not absolutely necessary to fulfill the narrow mission mandated for the Virginia State Bar by the Virginia legislature. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). Similarly, it is clear here that the state action doctrine would not provide any exemption from liability under the antitrust laws.

It can hardly be said that the collective purchase of legal research services for its members is part of the core mandated functions of the Virginia State Bar. In 1995, the General Assembly instructed its Joint Legislative Audit and Review Commission to study the role and mission of the Virginia State Bar. In its 1996 report, the JLARC cited the provision of computerized legal research services to members as one of several “commercial activities . . . which are unusual for State agency involvement” and noted that "(t)he provision of these services has no direct link to the Bar's central mission of regulating the legal profession." The JLARC went on to conclude that “VSB involvement in soliciting subscribers for these services does not appear suitable for a State agency for several reasons,” including the fact that such action “raises potential issues regarding unfair competition” and may “place other vendors at a competitive disadvantage due to the mandatory nature of the Bar’s membership.”

I write this letter prior to the December 15, 2004 deadline for the receipt of bids in response to the request for proposals in order to provide the Virginia State Bar an opportunity to reverse its planned course of action and avoid a violation of the antitrust laws. It would appear that any supplier of computerized legal research services whose bid is accepted and who enters into a contract with the Virginia State Bar for these services would immediately become a part of this illegal agreement and would also be violating the antitrust laws. Therefore, Geronimo does not intend to submit a bid in response to the request for proposals.

If the Virginia State Bar goes forward with its plan to purchase this service collectively and distribute it free to all VSB members, it is likely that Geronimo’s business, which consists entirely of marketing its Virginia-specific legal research service, will be completely destroyed. There is no reason to displace the competitive, free-market system that now provides a variety of suppliers and services to Virginia lawyers and encourages innovation, customer service, reasonable pricing and all of the benefits that competition ordinarily provides. The replacement system that the VSB proposes to put in place would: (1) award a single company an exclusive agreement for at least three years, (2) completely eliminate potential competition among suppliers, (3) leave the winning bidder little or no incentive to invest in innovation and customer service, and (4) leave the Virginia State Bar in the position a few years down the road of negotiating a new contract for these services with only one viable bidder that could unilaterally impose price and non-price terms.

Finally, I am disturbed that the Virginia State Bar has already publicly disclosed that it is exploring plans to offer Virginia's lawyers “free” access to an online legal research database. Such statements have likely caused some VSB members to believe that they are entitled to a “free” online legal research database as a result of the VSB’s illegal plan to eliminate competition and thus need not continue to pay to acquire this service from my client in the open marketplace. If and when the VSB complies with the antitrust laws and puts a stop to this plan, any attempt to blame my client for the absence of this “free” illegal service will simply cause further damage to my client.

I would appreciate a prompt reply to this letter and stand ready to work with VSB’s lawyers to address the substantial concerns of my client.

Very truly yours,
LINDQUIST & VENNUM P.L.L.P.

Mark A. Jacobson