Antitrust Law Daily FTC declines stay of antitrust challenge to Louisiana real estate appraisal regulation
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Friday, June 8, 2018

FTC declines stay of antitrust challenge to Louisiana real estate appraisal regulation

The FTC has refused to halt an administrative proceeding challenging a Louisiana Real Estate Appraisers Board (LREAB) regulation as an unlawful restraint. LREAB offered no good cause to stay the case—which is scheduled to begin trial this October—pending appellate review of the agency’s determination that state action immunity did not apply to shield LREAB from the antitrust suit, the Commission found. The respondent did not argue that the state action issues upon which its claim of immunity relied were wrongly decided, and its contention that a stay would avoid potentially unnecessary litigation expenses was not persuasive, in the FTC’s view. The motion to stay proceedings pending appellate review was therefore denied (In the Matter of Louisiana Real Estate Appraisers Board, FTC Dkt. 9374, June 6, 2018).

Administrative action. The action began last year with the FTC’s issuance of a complaint accusing LREAB—a body that regulates the practice of real estate appraisals in Louisiana—of unreasonably and thus unlawfully restraining price competition for appraisal services provided to appraisal management companies (AMCs) by adopting a rule requiring AMCs to pay appraisers a customary and reasonable fee for real estate appraisal services. The rule, Rule 31101, provides that AMCs can demonstrate compliance with the customary and reasonable requirement by using objective third-party information such as government agency fee schedules, academic studies, and independent private sector surveys or by using a schedule of fees established by LREAB.

The FTC alleged in its complaint that Rule 31101 amounted to an unlawful restraint of competition on its face because it prohibited AMCs from arriving at an appraisal fee through the operation of the free market. It also alleged that LREAB unlawfully restrained price competition through its enforcement of the Rule, because it effectively required AMCs to set rates at least as high as those set forth in a specified survey. LREAB responded by invoking the state action defense.

Following the complaint, Louisiana implemented a series of administrative changes, intended to increase the level of supervision over LREAB’s actions. LREAB revoked the original Rule 31101, reissued it in identical form under the new procedures, and entered into a contract with a state administrative agency to review certain of its enforcement decisions. LREAB then argued that the complaint should be dismissed as moot, since the state had established additional review procedures for the enforcement of Rule 31101. LREAB argued that the state actively supervised the reissuance of Rule 31101, because the state Commissioner of Administration had reviewed the rule and LREAB had submitted the proposed rule to the appropriate legislative oversight committees.

This past April, however, the Commission decided that the LREAB’s demonstration of active supervision was insufficient for state action immunity to apply, declaring the Commissioner of Administration’s participation in the review process a "rubber stamp" and finding that the legislation had not played an active role in supervising the reissuance of the rule by allowing its adoption as proposed, without hearings or questions.

Denial of stay. In the instant ruling, the FTC found no cause for a stay and no reason why the April 10 order should be overturned. The Commission noted that its April 10 order had already "comprehensively addressed applicability of the state action doctrine to this proceeding." LREAB’s briefing did not identify purported failures in the Commission’s findings or reasoning, the agency said.

Moreover, a stay would not avoid potentially unnecessary litigation expenses, because discovery and other pretrial proceedings were almost complete, their expenses having already been borne. Given that a stay "would stop the progress of this litigation just before it reached its culmination," the general maxim that "routine expenses of litigation are insufficient grounds for staying proceedings" applied, the Commission stated. Lastly, the FTC said, the public interest supported denying a stay "to avoid what may be ongoing anticompetitive conduct" and to resolve the Commission’s complaint more expeditiously.

The case is FTC Docket No. 9374.

Attorneys: Lisa Kopchik for the FTC. W. Stephen Cannon (Constantine Cannon LLP) for Louisiana Real Estate Appraisers Board.

Companies: Louisiana Real Estate Appraisers Board

MainStory: TopStory Antitrust FederalTradeCommissionNews

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