By Nicole D. Prysby, J.D.
The Louisiana regulatory body was controlled by market participants and failed to demonstrate active supervision by the state that would entitle it to immunity.
Claims against the Louisiana Board of Examiners of Certified Shorthand Reporting (CSR Board), a state regulatory body, would go forward because it was controlled by market participants and failed to demonstrate that it was actively supervised by the state and therefore entitled to immunity against the restraint of trade claims, held the federal district court in New Orleans in denying the Board’s partial motion for summary judgment. A court reporting service filed the claims against the CSR Board, alleging that it conspired to restrain trade by working to disallow volume-based discounting to court reporting firms. The CSR Board was composed of active market participants who, the Fifth Circuit held in an earlier appeal, "are highly engaged" in perceived anticompetitive conduct. This revealed the presence of a genuine issue of material fact concerning the conspiracy element of the Sherman Act claim. In addition, the defendants were not entitled to immunity from the Sherman Act as a matter of law. While they did present evidence that the state clearly articulated a policy that contracts between private court reporting services and party litigants are barred, they failed to show that the Board was actively supervised by the state (Veritext Corp. v. Bonin, July 10, 2020, Lemelle, I.).
Plaintiffs Veritext Corporation provides court reporting services, with negotiated discount rates for customers that enter into nonexclusive preferred-provider agreements with Veritext. Veritext alleged that the Louisiana Court Reporter’s Association (LCRA), a private trade association in Louisiana, illegally conspired with the CSR Board, a state regulatory body, to restrain trade by working to disallow volume-based discounting to court reporting firms. The LCRA engaged in the lobbying of the CSR board to enforce Louisiana Code of Civil Procedure Article 1434, which prohibits court reporters from offering volume-based discounts to customers. The Board moved for partial summary judgment, requesting "dismiss[al] [of] all Sherman Act claims of [plaintiffs] seeking to enjoin the enforcement of [La. Code Civ. Proc. Art.] 1434" and "all Sherman Act claims seeking to recover alleged monetary damages resulting from the enforcement of Article 1434."
The court held that the restraint of trade claims would go forward, as the defendants failed to demonstrate the absence of a material fact issue. The Fifth Circuit already held in an earlier appeal of this case that Veritext alleged sufficient facts to make out a prima facie Sherman Act claim. As articulated by the Fifth Circuit, the CSR Board was composed of active market participants who "are highly engaged" in perceived anticompetitive conduct, which revealed the presence of a genuine issue of material fact concerning the conspiracy element of the Sherman Act claim. The parties to the current motion clearly disputed the existence of a contract, combination, or conspiracy that restrained the court reporting profession, thus there was a genuine issue of material fact on this question.
In addition, the defendants were not entitled to immunity from the Sherman Act as a matter of law. While anticompetitive conduct by the state generally is immune from liability under the Sherman Act, this immunity is not absolute. Six out of nine members of the CSR Board constitute a controlling number of decisionmakers who actively participate in the court reporting profession. The state delegated its regulatory power to active market participants, and active market participants cannot regulate their own markets free from antitrust accountability—the state must actively supervise anticompetitive restraints in order to invoke immunity, according to the court.
The Fifth Circuit previously held that the CSR Board demonstrated that the state clearly articulated a state policy that contracts between private court reporting services and party litigants were barred, but failed to show that the Board was actively supervised by the state. The defendants failed to present any additional evidence demonstrating that the CSR Board was subject to active supervision that could support judgment as a matter of law. The parties clearly disputed whether the CSR Board was subject to active supervision by the state in connection with the CSR Board’s enforcement of Article 1434. Thus, whether the CSR Board was actively supervised by the state or subject to unsupervised control of active market participants presented a genuine issue of material fact and foreclosed summary disposition as a matter of law, the court ruled.
This case is No. 2:16-cv-13903-ILRL-DPC.
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.
MainStory: TopStory Antitrust GCNNews LouisianaNews
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