A Rule for All Reasons: the Professional Services Exemption to Liability Under Connecticut's Unfair Trade Practices Act

Publication year2021
Connecticut Bar Journal
Volume 85.


Connecticut Bar Journal
Volume 85, No. 4, Pg. 366
December 2011



Connecticut's Unfair Trade Practices Act ("CUTPA")(fn1) prohibits any "person"(fn2) from engaging in "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce."(fn3) This language is modeled on Section 5(a)(1) of the Federal Trade Commission ("FTC") Act,(fn4) to which Connecticut's courts and Commissioner of Consumer Protection are explicitly directed for interpretative guidance.(fn5) CUTPA, however, differs from its federal analogue in several significant respects. One important distinction is that CUTPA, unlike Section 5, provides a private right of action to those it seeks to protect.(fn6) Another is that CUTPA creates a comprehensive and flexible remedial scheme designed to deliver an appropriate measure of relief for a broad array of economic harms.(fn7)

A curious jurisdictional phenomenon is rooted in another, less obvious distinction: CUTPA's use of the terms "in the conduct of any trade or commerce" in lieu of Section 5's "in or affecting commerce." CUTPA defines "'[t]rade' and 'commerce'" as "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state."(fn8) In contrast, the FTC Act defines "[c]ommerce" as "commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation."(fn9) As the language of the latter suggests, the FTC Act's use of the terms "in or affecting commerce" is "specifically designed . . . to make [the FTC's jurisdiction] coextensive with the constitutional power of Congress under the Commerce Clause."(fn10) In contrast, CUTPA, as state law, does not need to clear this jurisdictional hurdle. Thus, CUTPA's "in the conduct of any trade or commerce" necessarily cannot serve the same function as the FTC Act's "in or affecting commerce."(fn11)

The inability to construe "trade or commerce" consistently with Section 5 standards, as is mandated by CUTPA's declaration of legislative intent, explains the inclusion of a specific definition for "trade or commerce" in the statutory text. It is particularly shocking, then, to discover that Connecticut's courts have largely ignored the details of that definition. Indeed, despite the legislature's effort to reach a broad spectrum of economic activity, the courts have formulated doctrines that point to the requirement that conduct occur "in the conduct of any trade or commerce" as grounds to restrict CUTPA's reach.(fn12) This article focuses on one such doctrine: The professional services exemption to liability under CUTPA.

The professional services exemption distinguishes the "professional" actions of some individuals and entities from their "business" activities-immunizing the former from liability while the latter remain exposed. The Connecticut Supreme Court first recognized the exemption in 1997,(fn13) and has since re-articulated its basic mechanics in six more decisions.(fn14) A close look at these decisions, however, reveals fundamental defects that cast doubt on the exemption's legitimacy and calls for careful consideration of its value as a component of Connecticut's trade regulation mechanism. This article endeavors to answer the call. Part I examines the exemption's background, including its initial formulation, its evolution in other jurisdictions, and its adoption in Connecticut. Part II examines some of the practical problems that have arisen in Connecticut's exemption cases, while Part III explains why those problems have arisen. Part IV explores the exemption's relationship to CUTPA's statutory text. The article concludes by summarizing the exemption's legacy in Connecticut and by encouraging appropriate adjustment.


A. Rejection

The question of whether professional services constitute "trade or commerce" can be traced back to a debate on the extent to which the "learned professions" should be deemed subject to federal antitrust law. At one time, the United States Supreme Court had suggested a functional distinction between "trades" and "professions" for the purposes of federal liability. For instance, the Court once observed that the concept of "trade" included "any occupation, employment, or business . . . carried on for the purpose of profit, or gain, or a livelihood," but excluded the "liberal arts" and the "learned professions."(fn15) It also once stated that "personal effort, [not] related to production, [was] not a subject of commerce."(fn16) Elsewhere, it specifically suggested that "commerce" did not include the practice of law,(fn17) and that the practice of medicine did not constitute a "trade."(fn18) Based on these remarks, some Circuit Courts concluded that certain "learned professions" were immune to antitrust liability.(fn19) They reasoned that "enhancing profit [was] not the goal of professional activities," but rather, that these professions sought "to provide services necessary to the community."(fn20) They did not, however, extend this immunity to acts lying beyond the actual practice of learned professions. In 1974, the Fourth Circuit described the distinction as follows:

The [learned professions] exemption is not a personal immunity from prosecution, but is rather a recognition that the Sherman Act prohibits only those restraints which are upon trade or commerce. The occupation of one who violates the Sherman Act is irrelevent [sic]. If a group of doctors conspire to obstruct the interstate sale of health insurance their professional status would be no defense. On the other hand, if a group of doctors conspire to restrain the practice of another doctor there is no Sherman Act violation because that which is restrained (i.e., the practice of a learned profession, medicine) is neither trade nor commerce.(fn21)

This passage is significant for two reasons: First, because it characterizes the commercial nature of a professional's conduct as dispositive of immunity status. Specifically, the conduct giving rise to the claim must be scrutinized to determine whether it constitutes: (a) professional practice-i.e., activity that is part of a professional's delivery of a service; or (b) business conduct-i.e., commercial activity that relates to, but is distinct from, a professional's delivery of a service. This inquiry is precisely that mandated to determine whether conduct is immune to CUTPA under the professional services exemption.(fn22)

Second, the passage is significant because it is drawn from the Fourth Circuit's overruled opinion in Goldfarb v. Virginia State Bar.(fn23) There, the plaintiffs had tried to find a lawyer to examine a land title for a house they intended to purchase, but were unable to find one who would deviate from a minimum-fee schedule published by the Fairfax County Bar Association and enforced by the Virginia State Bar.(fn24) They sued both organizations, alleging that the minimum-fee schedule constituted price-fixing in violation of Section 1 of the Sherman Act.(fn25) The Fourth Circuit disagreed, explaining that only the legal profession itself was restrained by the minimum-fee schedule, but not "trade"- i.e., commercial activity by lawyers.(fn26) The Supreme Court reversed, unambiguously rejecting the proposition that the public service aspect of professions warranted any measure of immunity from antitrust law.(fn27) Rather, the Court reasoned that "the activities of lawyers play an important part in commercial intercourse, and . . . anticompetitive activities by lawyers may exert a restraint on commerce."(fn28) Most significantly, the Court explained that a lawyer's "examination of a land title is a service; the exchange of such a service for money is 'commerce.'"(fn29) In other words, the Court took the position that professional practice is, in fact, commerce.(fn30 )This simple pronouncement necessarily foreclosed any further distinction between professional practice and business conduct in assessing antitrust liability under federal law. Accordingly, since Goldfarb, federal courts have consistently held professionals subject to the Sherman and FTC Acts without preliminarily characterizing the scrutinized conduct as "commercial."(fn31)

B. Rebirth

After Goldfarb, some states harmonized their trade regulation rules with federal law,(fn32) but others resisted.(fn33) Key among the latter group is Frahm v. Urkovich,(fn34) a 1983 decision by the Appellate Court of Illinois. There, the plaintiffs had sued their former attorney under the Illinois Consumer Fraud and Deceptive Business Practices Act for losses caused by his professional negligence in real estate transactions.(fn35) Their appeal focused on whether or not his legal services constituted "trade or commerce" under Illinois law.(fn36) Looking to Goldfarb, the Appellate Court acknowledged that the United States Supreme Court had "refused to apply a blanket exemption from federal anti-trust laws to the 'learned professions,'" but concluded that Goldfarb, given its facts, had "dealt only with commercial aspects of the legal profession . . . and not with the practice of law itself."(fn37) Principally on that basis, the Appellate Court held that "'trade or commerce' in defining the application of the Act...

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