By Jody Coultas, J.D.
A Louisiana district court erred in holding that national private court reporting service Veritext Corporation failed to state Sherman Act antitrust claims against the Louisiana Board of Examiners of Certified Shorthand Reporters based on its prohibition of contracts between court reporters and party litigants, including volume-based discounts and concessions to frequent customers, the U.S. Court of Appeals in New Orleans has held. The court reversed and remanded the lower court’s decision based on evidence that the Board’s conduct restrained trade, and that the Board did not qualify for immunity from antitrust suits (Veritext Corporation v. Bonin, August 17, 2018, Ho, J.).
The Louisiana Board of Examiners of Certified Shorthand Reporters enforces Louisiana law regarding the relationship of court reporters to litigants. Article 1434(A)(1) provides that "deposition[s] shall be taken before an officer authorized to administer oaths, who is not an employee or attorney of any of the parties or otherwise interested in the outcome of the case." The Board declared Article 1434 to prohibit all contracts between court reporters and party litigants, including volume-based discounts and concessions to frequent customers. Veritext alleged that the Board’s regulatory efforts were actually "rent-seeking" and that local providers were using the regulatory power of the state to prevent competition from national and regional court reporting firms.
A district court dismissed Veritext’s Sherman Act and constitutional claims. Veritext appealed.
Sherman Act claim. Because Veritext provided sufficient evidence to support a finding that the Board’s conduct restrained trade, the appellate court reversed the lower court’s decision to dismiss the Sherman act claim. Veritext argued that the Board was composed of active market participants who "are highly engaged in setting the agenda of the Board and its committees and in directing the Board’s business," who actively sought to "discourage a perceived trend of freelance court reporters leaving the profession," and who took regulatory actions calculated to "deter and delay entry by national and regional court reporting firms." This was sufficient to state a prima facie case.
Immunity. The Board was not immune from an antitrust suit, according to the court. Anticompetitive conduct by a state is generally immune from federal antitrust law. To qualify for immunity, the Board needed to show that the challenged regulation was clearly articulated and affirmatively expressed as state policy, and that the policy was actively supervised by the state of Louisiana. Active supervision includes "review [of] the substance of the anticompetitive decision, not merely the procedures followed to produce it," and "the power to veto or modify particular decisions to ensure they accord with state policy." While the ban was clearly articulated, Veritext did not meet the active state supervision requirement. There was no evidence that elected or appointed officials oversaw or reviewed the Board’s decisions or modified the Board’s enforcement priorities. The fact that the legislature could amend the law in this area or veto proposed rules was insufficient to show supervision given that state legislatures always possess those powers.
The Board’s arguments that the active supervision requirement did not apply because Veritext has not pleaded sufficient facts to show that the Board’s members are active market participants, and because the Board does not advance private interests by enforcing the terms of state law, were unavailing. Louisiana law requires that six of the Board’s nine members be certified shorthand reporters, making them active market participants. It "strains credulity to regard the Board’s conduct as strictly public-minded, in light of its decision to convene a meeting that included ‘How to increase rates?’ as one of its agenda items," the court pointed out.
Constitutional claims. The district court did not err in dismissing the constitutional claims, according to the court. Veritext alleged that the Board’s decision to ban volume-based discounts and concessions to frequent customers lacked a rational basis, and thus violated both substantive due process and equal protection. The Board’s stated reasoning was that its efforts furthered the State’s legitimate government interest in ensuring and protecting the integrity of legal proceedings by protecting against "any appearance of impropriety or bias on the court reporter’s behalf." This was sufficient under rational basis review. Veritext also failed to clearly identify a burden on interstate commerce imposed by the Board’s enforcement of Article 1434 that exceeds its local benefits. Thus, the district court properly dismissed the Dormant Commerce Clause claim.
The case is No. 17-30691.
Attorneys: Mark Aaron Cunningham (Jones Walker, LLP) for Veritext Corp. James M. Garner (Sher Garner Cahill Richter Klein & Hilbert, LLC) for Paul A. Bonin.
Companies: Veritext Corp.
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