The opinion of the court was delivered by: SIRICA
This case presents an antitrust challenge to the ethical canons of a professional organization. Plaintiff Aram H. Mardirosian, an architect, filed the action in July 1977 after being suspended from membership in the American Institute of Architects (AIA). Mardirosian seeks treble damages against both the AIA, which found him guilty of violating two of its ethical standards, and Seymour Auerbach, the architect who filed charges of ethical misconduct with the AIA. Plaintiff also seeks injunctive relief against the AIA. An amended complaint was filed on May 18, 1978.
Count I of the amended complaint alleges that Standard 9 of the AIA's Code of Ethics constitutes an unreasonable restraint of trade in violation of sections 1 and 3 of the Sherman Act, 15 U.S.C. §§ 1 & 3 (1976). It is stated solely against the AIA. Count II alleges that both defendants
violated the Sherman Act by enforcing AIA Ethical Standards 9 and 10 against the plaintiff, and by utilizing unreasonable and unfair disciplinary procedures to do so. Plaintiff seeks treble damages and injunctive relief under each of the first two counts. The final Sherman Act claim is stated in Count III, which alleges a continuing antitrust violation through the maintenance and enforcement of Standard 9 and requests a permanent injunction against its utilization. Counts IV and VI state common law tort claims against the AIA; Count V does the same for defendant Auerbach.
The action is presently before the Court on Mardirosian's motion for partial summary judgment confined to the issue of the AIA's Liability on Count I.
The motion has been extensively briefed and has been argued to the Court. For the reasons that follow, the Court has concluded that there is no genuine dispute
over any fact material to a resolution of the question of the AIA's liability under Count I and that Mardirosian is entitled to a partial summary judgment as a matter of law.
A. The National Visitor Center Project
The dispute between the two architects in this case arose in connection with the provision of architectural services for the alteration and refurbishing of historic Union Station in Washington, D.C., as the National Visitor Center.
Pursuant to the National Visitor Center Facilities Act of 1968, 40 U.S.C. §§ 801-831 (1976), the Secretary of the Interior was authorized to enter into agreements with the railroad owners of Union Station for the alteration of the building to provide facilities for a National Visitor Center and to construct a new railroad passenger station and parking facilities. 40 U.S.C. §§ 801 & 802 (1976). Congress appropriated funds for the project, and provided that the United States would lease the renovated Union Station facilities from the owners.
In 1968, the federal government, through the Secretary of the Interior, reached an agreement with the railroad owners pursuant to the legislation. The following year, the railroads contracted with defendant Auerbach for the provision of basic architectural services on the project. Under the contract, which was later amended, Auerbach was to prepare design and contract documents for the Visitor Center, the parking garage, and the new railroad station.
The authorizing legislation and the agreements between the railroad owners and the federal government contemplated that the government would monitor the work of the railroads' architects, engineers, and contractors to assure that it was in the government's interest and that costs were kept within proper limits. Accordingly, in September 1972, the government contracted with plaintiff Mardirosian for performance of certain consultative services with respect to the design and construction of the Visitor Center and parking garage. His responsibilities included oversight and coordination of the architect, the contractor, and the numerous private and government entities involved in the project.
In 1973, additional governmental involvement was authorized by statute. In that year, Congress amended the Act to authorize the Secretary of the Interior to "supplement" the alterations and construction being performed by the railroad owners by himself undertaking such activities. Pub.L. No. 93-62, 87 Stat. 146, 40 U.S.C. § 802(c) (1976). As a result, in 1974, the Secretary and the railroads executed an agreement whereby the government assumed direct responsibility for further construction on the Visitor Center (often referred to as project 1) and the railroads were relieved of any further responsibility therefor. By April 1975, the point at which the formal construction bids which had been solicited on Auerbach's design plans were opened, the government, through the Secretary of the Interior, was completely in control of the Visitor Center project, including Auerbach's contract for architectural services.
That contract contained a detailed termination provision under which Auerbach could be discharged either for cause or for the convenience of the "owners." As amended in April 1974, the critical provision of Auerbach's contract stated: "The Owners may, by written notice to the Architect, terminate this contract in whole or in part at any time, either for the Owners' convenience or because of the failure of the Architect to fulfill his obligations under this contract." Plaintiff's Motion for a Preliminary Injunction, exhibit A-12, at 5.
The choice of termination method was to result in very different impacts on Auerbach. If the termination were for the owners' convenience, the contract provided a formula for computing full compensation for architectural services performed to the termination date. But if the termination were for cause, no compensation rights were provided, Id., thereby limiting the architect to periodic payments and reimbursements received prior to termination.
By April 1975, the same month in which the Visitor Center construction bids were opened, the responsible government officials had in fact decided to terminate the portion of Auerbach's contract relating to the Visitor Center; they requested Mardirosian to undertake such additional design and construction coordinating services as were necessary to complete the project by July 4, 1976. Although Auerbach learned unofficially of the termination decision in mid- or late April 1975, his contract was not formally terminated as to project 1 (the Visitor Center) until July 3, 1975.
At that point, Auerbach was terminated under the "convenience of the Owners" clause of his contract and fully paid for his work on project 1 in the amount of approximately $ 700,000; he remained under contract on the parking garage and the new railroad station projects. Mardirosian's contract with the government was amended on July 29, 1975, to include design and construction management work on project 1.
B. The AIA's Disciplinary Actions
The American Institute of Architects, of which both Mardirosian and Auerbach were members, is the principal American professional organization of architects. Founded in 1857, it is organized as a membership corporation and comprises at least 27,500 licensed architects throughout the United States.
To persons engaged in the business and profession of architecture, membership in the AIA is a valuable asset which enhances their ability to compete for and obtain architectural business. Members of the AIA normally use the insignia "AIA" following their names to denote membership. About half of the registered architects in the United States do, however, engage in the business of architecture without the benefit of AIA membership.
The AIA carries on a wide variety of activities at the national level, including devising and publishing handbooks, forms, codes, and guidelines relating to the practice of architecture and the marketing of architectural services; promulgating and enforcing ethical standards; and publishing a monthly magazine and semi-monthly newsletter.
Each applicant for membership in the AIA receives a copy of the AIA's Standards of Ethical Practice, and must sign an application form which contains a declaration of compliance with the standards. The AIA enforces compliance by adjudicating charges of disciplinary violations brought by member architects or by state or local chapters of the AIA. Its adjudicative body is currently called the National Judicial Committee (formerly the National Judicial Board).
The AIA's 1977 Code of Ethics states that AIA members "shall not knowingly associate in practice with other architects who violate or intend to violate this Code." The corresponding paragraph of the 1978 Code provides that an architect "shall not knowingly practice with or be employed by others who act contrary to this code in the normal course of business." According to the affidavit of the AIA Secretary filed in support of the AIA opposition to plaintiff's motion, both these provisions were intended "to prohibit AIA members from joining with non-AIA members and firms in a deliberate effort to get around the requirements of the Code of Ethics." Lawrence Affidavit, para. 4. They do not, however, prohibit such association merely on the basis of Past ethical violations. Id.
Since at least 1963, the AIA has maintained, in one form or another, an ethical standard which in May 1975 was known as Standard 9. The version of Standard 9 in effect in May 1975 provided:
An architect shall not attempt to obtain, offer to undertake or accept a commission for which the architect knows another legally qualified individual or firm has been selected or employed, until the architect has evidence that the latter's agreement has been terminated and the architect gives the latter written notice that the architect is so doing.
Subsequently, Standard 9 was amended on two occasions. On June 20, 1975, the notice requirement was changed to "written or other equivalent notice." On July 1, 1977, the language "or other equivalent" was deleted. The current version of Standard 9, which appears as Rule 605 of the AIA's Code of Ethics and Professional Conduct, adopted July 1, 1977, is virtually identical to the May 1975 version of Standard 9 set out above.
Over the past 15 years, the AIA has enforced compliance with Standard 9 through its disciplinary proceedings and the imposition of sanctions. From 1963 through 1977, the AIA processed 79 cases of alleged violations of Standard 9. Sanctions were imposed in 28 of these cases.
Mardirosian's replacement of Auerbach on the National Visitor Center project led to charges that he had violated Standard 9 and eventually resulted in another case in which the AIA imposed sanctions.
As noted in part I-A, Supra, the government had decided to dispense with Auerbach's services by April 1975. On May 2, 1975, prior to the formal termination of his contract, Auerbach filed charges of ethical misconduct against Mardirosian with the AIA. The charges stated, in part:
I have learned that Mr. Aram Mardirosian, A.I.A., practicing architecture as a principal in the firm known as "The Potomac Group" Has undertaken or is in the process of negotiating for certain architectural and engineering responsibilities for The National Visitor Center for which we have a contract in force.
Mr. Mardirosian has been acting in an advisory capacity on this project under contract with The National Park Service and in such capacity has full knowledge of the status of our contract.
Plaintiff's Motion for a Preliminary Injunction, exhibit A-15 (emphasis added). Auerbach also charged Mardirosian with a violation of AIA Ethical Standard 10 because Mardirosian had allegedly failed to give proper attribution to Auerbach in drawings prepared by the Mardirosian firm which allegedly incorporated Auerbach's designs.
Eventually, following lengthy disciplinary proceedings, the AIA's National Judicial Board issued a report on Auerbach's charges. The Board's seven findings of fact can be summarized as follows:
1. Auerbach was under Contract to design modifications of Union Station to be used as a National Visitor Center; the United States was the real party in interest under this contract; and the National Park Service was responsible for the final decision concerning Auerbach's work;
2. Mardirosian, a former Park Service employee, contracted with the Service to coordinate Auerbach's and other's work;
3. Beginning in July 1973, Mardirosian issued various highly critical reports on Auerbach's work, including a recommendation, in August 1973, that he be replaced;
4. Auerbach's contract documents for the Visitor Center were completed in late February 1975. The bids received on these drawings were substantially higher than the available budget and the Visitor's Center was held in abeyance until about March 1975. Meanwhile, Auerbach modified his plans to bring them within the available budget and Mardirosian was so informed;
5. "In April, 1975, or earlier, after being instructed by National Park Service representatives "not to contact Mr. Auerbach,' Mr. Mardirosian entered into negotiations with the National Park Service to provide architectural and engineering responsibilities for the National Visitor Center, and his firm commenced work on that project. At that time Mr. Auerbach's contract for the same work was still in effect and Mr. Mardirosian, having full knowledge of that fact, did not give Mr. Auerbach written or other equivalent notice that Mr. Mardirosian's firm was negotiating with the National Park Service to take over Project (1), and he did not advise Mr. Auerbach that his firm had commenced work on Project (1);"
6. Auerbach's services on the Visitor Center were terminated on July 3, 1975. Mardirosian's firm entered into an amendment to its earlier contract on July 29, 1975, under which it was to provide full professional services on the Visitor Center;
7. Some of Mardirosian's plans contained design elements from Auerbach's work without attribution. See Report of the National Judicial Board, Plaintiff's Motion for a Preliminary Injunction, Exhibit A-21.
On the basis of these findings, the Board concluded, without explanation, that Mardirosian was guilty of violating AIA Ethical Standards 9 and 10 and recommended that his membership in the AIA be terminated.
Mardirosian appealed the decision to the AIA's Executive Committee. On July 21, 1977, the Committee adopted the Board's report, but modified the sanctions against Mardirosian to a one-year suspension of his AIA membership for the violation of Standard 9 and censure for the violation of Standard 10.
This action immediately followed thereafter.
Under the AIA's rules pertaining to suspensions, Mardirosian was prohibited from using the initials "AIA" after his name, from holding himself out to the public as a member of the AIA, and from attending meetings or participating in any way in AIA activities, but was required to continue to pay dues.
Pursuant to AIA bylaws, a ...