Veritext Corp. v. Bonin

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

VERITEXT CORP. CIVIL ACTION

VERSUS NO. 16-13903 C/W

17-9877

REF: ALL CASES

PAUL A. BONIN, ET AL. SECTION: “B”(2)

OPINION

Before the court are defendants CSR Board’s “Motion for

Partial Summary Judgment” (Rec. Doc. 141), plaintiffs Esquire

Deposition Solutions, LLC and Veritext Corporation’s response in

opposition (Rec. Doc. 159) and defendants’ reply to plaintiffs’

opposition (Rec. Doc. 178).

I. FACTS AND PROCEDURAL HISTORY

Plaintiff, Veritext Corporation, is a Delaware corporation

that provides court reporting services to clients in depositions,

arbitrations, and other legal proceedings in Louisiana and across

the United States. Rec. Doc. 4. Plaintiff’s business provides

negotiated rates for court reporting services to insurance

companies, larger companies, government agencies, regulatory

authorities, educational institutions, and other high-volume

entities. Rec. Doc. 4. The negotiated rates are discounted because

customers enter into nonexclusive preferred-provider agreements

with Plaintiff. Rec. Doc. 4. The nonexclusive preferred-provider

agreements generally provide that customers agree to utilize

Plaintiff’s services for all or some of their court reporting

needs. Rec. Doc. 4.

Plaintiff Esquire is a Delaware corporation with its principal

place of business in Atlanta, Georgia. Rec. Doc. 1 at ¶ 11 (17-9877).

Esquire provides court-reporting services to several states across

the nation, including Louisiana, in depositions, arbitrations, and

other proceedings. Id.

Defendant CSR Board is a regulatory body created to maintain and

police the shorthand reporting profession as well as establish a

standard of competency for those persons engaged in the profession.

See Rec. Doc. 1 at ¶ 13 (17-9877). The CSR Board members are “active

market participants” as six of the nine members are practicing court

reporters. Id. at ¶ 15.

The court reporting profession is regulated by the Louisiana

Board of Examiners of Certified Shorthand Reporters (the “Board”).

Rec. Doc. 4. The Board is vested with enforcement authority in

addition to its regulation of court reporters. Rec. Doc. 4. In or

about 2012, the Board publicly announced its intention to begin

enforcing Article 1434(A)(2). To wit, La. Code. Civ. Proc. Art.

1434(A)(2):

(1) prevents court reporters from entering into long term

or volume-based contracts with frequent users of court

reporting services; (2) concerns potential bias issues in

connection with court reporting firms who hold contracts

with lawyers and the judiciary; and (3) attempts to

mitigate conflicts of interest when in connection with

the creation of official records.

Rec. Doc. 4. Following the announcement, many certified court

reporters refused assignments from national and regional firms out

of fear that the Board might take disciplinary action against them.

Rec. Doc. 4.

On August 17, 2016, plaintiff Veritext filed a complaint

against defendants, certain members of the Board in both their

official and individual capacities, challenging Louisiana Code of

Civil Procedure Article 1434(A)(2). Rec. Doc. 4.1 Plaintiff

specifically challenged the law’s constitutionality, alleging that

it insulates court reporters in Louisiana from competition in

violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Rec.

Doc. 4.

On April 10, 2017, this Court granted in part and denied in

part defendant’s motion to dismiss pursuant to Federal Rule of

Civil Procedure 12(b)(6). Rec. Doc. 44. As to the constitutional

challenges, this Court dismissed plaintiff Veritext’s claims. Rec.

Doc. 44. Further, plaintiff Veritext’s claims under the Sherman

Act were found “legally viable and the Amended Complaint has

alleged facts that [were] sufficient to defeat” defendants’ motion

to dismiss. Rec. Doc. 44. On May 4, 2017, Defendants filed a motion

for partial reconsideration regarding the Sherman Act claims,

1 Plaintiff Esquire filed their respective claim against defendants on

September 29, 2017. The cases were consolidated on February 25, 2019 (Rec.

Doc. 75) (17-9877). Plaintiff Veritext subsequently amended their complaint

to mirror that of Esquire’s complaint. Rec. Doc. 117.

which this Court granted on August 2, 2017. Rec. Docs. 48,73.

Plaintiff thereafter appealed to the United States Fifth Circuit

Court of Appeals. Rec. Doc. 75.

On appeal, the Fifth Circuit affirmed this Court’s dismissal

of plaintiff Veritext’s constitutional law claims. Rec. Doc. 82-

1. However, the panel reversed the dismissal on reconsideration of

plaintiff Veritext’s Sherman Act claims and remanded the matter

for further proceedings. Id. Thereafter, defendants CSR filed

instant motion for partial summary judgment on October 14, 2019,

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.” Rec. Doc. 141-1 at 1.

II. PARTIES’ CONTENTIONS

In their motion, defendants reiterate this Court’s and the

Fifth Circuit’s findings that Article 1434 is constitutional and

clearly prohibits “all contractual agreements between party

litigants and court reports.” Rec. Doc. 141-1, at 5,10. In light

of these constitutional findings, defendants contend that Article

1434 is not subject to scrutiny under the Sherman Act and the Board

“cannot run afoul of the Sherman Act.” Id. at 9-12. Defendants

also contend that the CSR Board is the appropriate state agency

vested with regulatory jurisdiction and enforcement authority

pertaining to the court reporting profession. See id. at 11-12.

Accordingly, defendants assert that the CSR Board “cannot be

subject to scrutiny under the Sherman Act . . . and . . . cannot

be enjoined or cause damages recoverable under the Sherman Act.”

Id. at 2. Thus, defendants assert that damages sought by plaintiffs

are not recoverable damages due the CSR Board’s authority to

enforce Article 1434, which renders the purported damages

“illicit.” Id. at 11.

In its opposition, plaintiffs assert that defendants “do not

seek summary judgment on liability, but rather argue that

[p]laintiffs would not be entitled to damages or injunctive relief

even if they prevailed on liability.” Rec. Doc. 159 at 6.

Plaintiffs argue that defendants have merely reasserted their

previous immunity defense, despite the Fifth Circuit’s ruling that

defendants have not fully satisfied the standard. Rec. Doc. 159 at

6-8. Moreover, plaintiffs contend that Article 1434 generally does

not prohibit “all contracts between court reporters and out-of-

state court reporting firms.” Rec. Doc. 159 at 9.

III. LEGAL STANDARD

Under Federal Rule of Civil Procedure 56, summary judgment is

appropriate when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as

a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986) (quoting Fed. R. Civ. P. 56(c)); see also TIG Ins. Co. v.

Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002). “As to

materiality, the substantive law will identify which facts are

material. Only disputes over facts that might affect the outcome

of the suit under the governing law will properly preclude the

entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248 (1986). A genuine issue of material fact exists if

the evidence would allow a reasonable jury to return a verdict for

the non-moving party. Anderson, 477 U.S. at 248. “When reviewing

a summary judgment, we construe all facts and inferences in favor

of the nonmoving party.” Deshotel v. Wal-Mart Louisiana, LLC, 850

F.3d 742, 745 (5th Cir. 2017). Mere conclusory allegations are

insufficient to defeat summary judgment. Eason v. Thaler, 73 F.3d

1322, 1325 (5th Cir. 1996).

The movant must point to “portions of ‘the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any,’ which it believes

demonstrate the absence of a genuine issue of material fact.”

Celotex, 477 U.S. at 323. If and when the movant carries this

burden, the non-movant must then go beyond the pleadings and

present other evidence to establish a genuine issue. Matsushita

Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586

(1986). However, “where the non-movant bears the burden of proof

at trial, the movant may merely point to an absence of evidence,

thus shifting to the non-movant the burden of demonstrating by

competent summary judgment proof that there is an issue of material

fact warranting trial.” Lindsey v. Sears Roebuck & Co., 16 F.3d

616, 618 (5th Cir. 1994). “This court will not assume in the

absence of any proof that the non-moving party could or would prove

the necessary facts and will grant summary judgment in any case

where critical evidence is so weak or tenuous on an essential fact

that it could not support a judgment in favor of the [non-movant].”

McCarty v. Hillstone Rest. Grp., 864 F.3d 354, 357 (5th Cir. 2017).

IV. LAW AND ANALYSIS

A. Scrutiny under the Sherman Act

Defendants fail to demonstrate an absence of a genuine issue

of material fact pertaining to the Sherman Act claims against them.

Section 1 of the Sherman Act provides that “every contract,

combination in the form of trust or otherwise, or conspiracy, in

restraint of trade or commerce among the several States, or with

foreign nations, is declared to be illegal.” 15 U.S.C. § 1. In

order to prevail under a Section 1 violation, a plaintiff “must

show a contract, combination, or conspiracy that imposed an

unreasonable restraint on trade.” Veritext Corp. v. Bonin, 901

F.3d 287, 291 (5th Cir. 2018) (citing Am. Needle, Inc. v. Nat’l

Football League, 560 U.S. 183, 189 (2010)); see also Abraham &

Veneklasen Joint Venture v. Am. Quarter Horse Ass'n, 776 F.3d 321,

327 (5th Cir. 2015) (“plaintiffs must show that the defendants (1)

engaged in a conspiracy (2) that produced some anticompetitive

effect (3) in the relevant market”). Further, a plaintiff must

demonstrate an injury-in-fact (e.g., an injury to plaintiff

proximately caused by defendant's conduct) and an antitrust injury

resulting from an anticompetitive effect. See Jebaco, Inc. v.

Harrah's Operating Co., Inc., 587 F.3d 314, 318 (5th Cir.

2009)(explaining that injury should reflect anti-competitive

effect either of the violation itself or of anticompetitive acts

enabled by the violation) (citing Zenith Radio Corp. v. Hazeltine

Research, Inc., 395 U.S. 100, 125 (1969)).

Defendants have merely reasserted an identical state action

immunity defense. On appeal, the Fifth Circuit held that

Plaintiff’s Sherman Act claim should proceed on remand. Veritext

Corp., 901 F.3d at 291. In its reasoning, the Fifth Circuit

concluded that this Court “was correct the first time when it

observed that Veritext alleged sufficient facts that ‘the board’s

actions do not resemble a municipality under active supervision

but instead represent an unbridled regulatory environment.’” Id.

at 293. The Fifth Circuit further stated:

Veritext pled facts sufficient to support a finding that

the Board’s conduct does indeed restrain trade. Among

other allegations, Veritext argued that the Board is

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.” On the record before us, we agree with the

district court that Veritext has alleged facts

sufficient to make out a prima facie Sherman Act claim.

Id. at 292 (emphasis added).

Defendants argue that Article 1434 “prohibits all contractual

agreements between party litigants and court reporters.” Rec. Doc.

141-1 at 10. Whereas plaintiffs assert that Article 1434 does not

prohibit contracts generally, provided that the firm “has no

agreement with the party-litigant,” and point to the former chair

of the CSR Board’s deposition testimony to support this contention.

Rec. Doc. 159 at 8-9. Moreover, as articulated by the Fifth

Circuit, the CSR Board is composed of active market participants

who “are highly engaged” in perceived anticompetitive conduct,

which reveals the presence of a genuine issue of material fact

concerning the conspiracy element of the Sherman Act claim in the

instant lawsuit. Veritext Corp., 901 F.3d at 287.

Accordingly, parties to the current motion clearly dispute

the existence of a contract, combination, or conspiracy that

restrains the court reporting profession. Rec. Doc. 141-1; Rec.

Doc. 159. Thus, whether a contract, combination, or conspiracy

restraining the profession presents a genuine issue of material

fact, regarding the CSR Board, and does not support a finding that

defendant is judgment as a matter of law.

B. Immunity

Defendants are not entitled to immunity from the Sherman Act.

Anticompetitive conduct by the State generally is immune from the

liability under the Sherman Act, but this immunity is not absolute.

Veritext Corp. v. Bonin, 901 F.3d 287, 292 (5th Cir. 2018)(citing

Parker v. Brown, 317 U.S. 341, 351 (1943)). A defendant’s ability

to avail themselves of this type of state action immunity is

contingent on whether anticompetitive conduct is performed by

sovereign or non-sovereign actors. N. Carolina State Bd. of Dental

Examiners v. FTC, 135 S.Ct. 1101, 1111-12 (2015) (“The question is

not whether challenged conduct is efficient, well-functioning, or

wise. Rather, it is whether anticompetitive conduct engaged in by

nonsovereign actors should be deemed state action and thus shielded

from the antitrust laws.”)(internal citations and quotations

omitted). “The resulting asymmetry between a state policy and its

implementation can invite private-self dealing.” Id. at 1112.

Thus, in order to avail itself of state action immunity as a

“nonsovereign (sic) actor controlled by active market

participants,” two requirements must be satisfied: (1) “the

challenged restraint ... [must] be one clearly articulated and

affirmatively expressed as state policy” and (2) “the policy . .

. [must] be actively supervised by the State.” Dental Examiners,

135 S.Ct. at 1110.

Limitations on state action immunity are critical when the

State delegates its regulatory power to active market

participants, as “established ethical standards may blend with

private anticompetitive motives in a way difficult even for market

participants to discern.” Id. at 1111. Active market participants

might include any non-sovereign entity, public or private, or

individual decisionmakers that are participants in the market

affected by the challenged conduct. See id. at 1113-15 (holding “a

state board on which a controlling number of decisionmakers are

active market participants in the occupation the board regulates

must satisfy Midcal's active supervision requirement in order to

invoke state-action antitrust immunity”). Notably, active market

participants cannot regulate their own markets free from antitrust

accountability. Id. at 1111.

“Active supervision [by the State] might include

‘establish[ing] prices [and] review[ing] the reasonableness of the

price schedules,’ ‘regulat[ing] the terms of fair trade

contracts,’ ‘monitor[ing] market conditions,’ and ‘engag[ing] in

‘pointed reexamination’ of the program.’” Veritext Corp. v. Bonin,

901 F.3d 287, 292 (5th Cir. 2018) (citing Midcal, 445 U.S. at 105–

06). Although any inquiry into what constitutes active supervision

necessarily turns on the circumstances of a particular case, active

supervision must entail “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.” Dental Examiners, 135

S.Ct. at 1110. Accordingly, the State must actively supervise

anticompetitive restraints in order to invoke immunity. Id. at

1117 (holding the Sherman Act “does not authorize the States to

abandon markets to unsupervised control of active market

participants”).

Defendants cannot insulate themselves from Sherman Act

liability by re-asserting state action immunity. Despite their

arguments, the Fifth Circuit held that the CSR Board satisfied the

first requirement but failed the second requirement precluding

state action immunity. Veritext Corp., 901 F.3d at 292. The Court

noted that Article 1434 clearly articulates and affirmatively

expresses as state policy that “contracts between private court

reporting services and party litigants” are barred. Rec. Doc. 82-

1. However, the court further noted that “the Board fails under

the second requirement of active state supervision.” Id. In its

assessment of the active state supervision requirement, the Fifth

Circuit reasoned:

To begin with, Louisiana law requires that six of the

Board’s nine members be “certified shorthand

reporter[s]”—the very individuals most likely to be

impacted by Veritext’s involvement in the market. La.

Rev. Stat. § 37:2551(B)(1). The Board attempts to

differentiate “freelance” and “official” court

reporters, but the boundary between these categories is

porous: an individual serving as an official court

reporter may readily go freelance if he so chooses. It

is sufficiently clear from the record that the members

of the Board qualify as active market participants. And

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.

Id. at 293. Accordingly, Six out of nine members of the CSR Board

constitute a controlling number of decisionmakers who actively

participate in the court reporting profession. See id.

In the current motion for partial summary judgment,

defendants reassert a nearly identical state action immunity

defense and fail to demonstrate that there are no genuine issues

of material fact regarding the active supervision requirement.

Instead, defendants merely assert legal conclusions that “Article

1434 is outside of the reach of antitrust law and is not preempted

by the Sherman Act.”2 Rec. Doc. 141-1 at p. 10. Notably, Defendants

did not point to any proof demonstrating that the CSR Board is

subject to active supervision that might support judgment as a

matter of law. See Rec. Doc. 141-1.

The parties clearly dispute whether the CSR Board is subject

to active supervision by the State in connection with the CSR

Board’s enforcement of Article 1434. Rec. Doc. 141-1; Rec. Doc.

159. Thus, whether the CSR Board is actively supervised by the

2 Defendants rely on First American Title Co. of S.D. v. S.D. Land Title Assoc.

714 F.2d 1439 (8th Cir. 1983) to support this conclusion. However, the Fifth

Circuit concluded that defendants failed to satisfy the state action immunity

standard by citing the Supreme Court’s decision in N. Carolina State Bd. of

Dental Examiners v. FTC, 135 S.Ct. 1101, 1111-12 (2015). Veritext Corp. 901

F.3d at 292–93.

state or subject to unsupervised control of active market

participants presents a genuine issue of material fact and

forecloses summary disposition as a matter of law.3

For the foregoing reasons,

IT IS ORDERED that CSR Defendants’ Motion for Partial Summary

Judgment (Rec. Doc. 141) is DENIED.

New Orleans, Louisiana this 10th day of July, 2020.

___________________________________

SENIOR UNITED STATES DISTRICT JUDGE

3 Considering the foregoing determination, we need not address at this time the

issue of “illicit” damages.