Veritext Corp. v. Bonin

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

VERITEXT CORP., ET AL. CIVIL ACTION

VERSUS NO. 16-13903

C/W 17-9877

REF: ALL CASES

PAUL A. BONIN, ET AL. SECTION “B”(2)

ORDER AND REASONS

Before the Court is defendants’ motion to dismiss pursuant to

Rule 12(b)(1) of the Federal Rules of Civil Procedure (Rec. Docs.

247), plaintiffs’ response in opposition (Rec. Doc. 250), and

defendants’ reply in further support of motion to dismiss (Rec.

Doc. 253).

For the reasons discussed below,

IT IS ORDERED that defendants’ motion to dismiss (Rec. Doc.

247) is DENIED.

I. FACTS AND PROCEDURAL HISTORY

On February 25, 2019, this Court consolidated plaintiff

Esquire Deposition Solutions, LLC (“Esquire”) and plaintiff

Veritext Corp.’s actions against defendants John J. Lee, Jr.,1

Vincent P. Borrello, Jr., Milton Donegan, Jr., Suzette Magee, Kimya

M. Holmes, John H. Anderssen, May F. Dunn, Elizabeth C. Methvin,

and Laura Putnam. See Rec. Doc. 91. Veritext and Esquire are both

1 On January 11, 2019, the Court granted plaintiffs’ motion to substitute John

J. Lee, Jr., in his official capacity as a member of the Louisiana Board of

Examiners of Certified Shorthand Reporters, for Paul A. Bonin. Rec. Doc. 89.

Delaware corporations providing court-reporting services to

clients across the United States, including in Louisiana. Rec.

Docs. 1 at 5, 117 at 5. Both companies also consume court reporting

services in Louisiana. Id. Plaintiffs provide negotiated rates and

discounts for court reporting services to frequent customers who

agree to utilize plaintiffs’ services for all or some of their

court reporting needs. Rec. Doc. 117 at 8.

Defendants are current and former members of the Louisiana

Board of Examiners of Certified Shorthand Reporters (“Board”),

which is a regulatory body created “for the purpose of encouraging

proficiency in the practice of shorthand reporting as a profession,

promoting efficiency in court and general reporting, and . . .

establishing a standard of competency for those persons engaged in

it.” LA. STAT. ANN. § 37:2551(A) (2021). The Board is authorized to

enforce Louisiana Code of Civil Procedure Article 1434, the

provision under scrutiny in this matter, which prohibits

a person who has a contractual relationship with a party

litigant to provide shorthand reporting or other court

reporting services . . . [or] a person employed part or

full time under contract or otherwise by a person who

has a contractual relationship with a party litigant to

provide shorthand reporting or other court reporting

services.

LA. CODE CIV. PROC. ANN. art. 1434(A)(2) (2021); see also Rec. Doc.

117 at 6, 17.

In 2012, the Board began enforcing Article 1434 against all

court reporters who entered into volume-based discount contracts

with party litigants. Id. at 13. Plaintiffs consequently brought

Constitutional claims under the dormant Commerce Clause and the

Fourteenth Amendment, as well as a claim under Section 1 of the

Sherman Act, 15 U.S.C. § 1. Rec. Docs. 1, 4. The Court dismissed

plaintiffs’ constitutional challenges, and subsequently dismissed

the Sherman Act claim on reconsideration. Veritext Corp. v. Bonin,

259 F. Supp. 3d 484 (E.D. La. 2017), on reconsideration, 2017 WL

3279464 (E.D. La. Aug. 2, 2017). On appeal, the Fifth Circuit

confirmed the dismissal of Veritext’s Constitutional claims but

reversed the dismissal of its Sherman Act claim because it found

that “Veritext pled facts sufficient to support a finding that the

Board’s conduct does indeed restrain trade.” Veritext Corp. v.

Bonin, 901 F.3d 287, 292 (5th Cir. 2018). Additionally, the Court

held that the Board members were not entitled to Parker immunity

because the active supervision requirement of that doctrine was

“not met.” Id.; see also Parker v. Brown, 317 U.S. 341, 351 (1943).

Plaintiffs then filed a motion for partial summary judgment

on the affirmative defenses of unclean hands, in pari delicto,

indemnification, contribution, and allocation of fault. Rec. Docs.

229, 231, 234. The Court granted summary judgment for the

affirmative defenses of unclean hands and allocation of fault and

dismissed as moot the affirmative defenses of in pari delicto,

indemnification, and contribution. Rec. Docs. 237, 238. Defendants

next filed a motion for reconsideration of plaintiffs’ motion for

summary judgment.2 Rec. Docs. 240, 242, 246. Shortly after their

motion for reconsideration, defendants filed this instant motion

to dismiss for lack of subject matter jurisdiction. Rec. Docs.

247, 250, 253.

II. LAW AND ANALYSIS

A. Motion to Dismiss Standard

Rule 12(b)(1) of the Federal Rules of Civil Procedure allows

a party to move for dismissal of a complaint for lack of subject

matter jurisdiction. Fed. R. Civ. P. 12(b)(1). The court’s “subject

matter jurisdiction” defines its power to hear cases under

statutory or constitutional authority. See Steel Co. v. Citizens

for Better Env’t, 523 U.S. 83, 89 (1998). “Sovereign immunity

implicates subject matter jurisdiction.” Chapa v. U.S. Dep’t of

Just., 339 F.3d 388, 389 (5th Cir. 2003). “Because sovereign

immunity deprives the court of jurisdiction, the claims barred by

sovereign immunity can be dismissed only under Rule 12(b)(1) and

not with prejudice.” Warnock v. Pecos Cty., Tex., 88 F.3d 341, 343

(5th Cir. 1996).

A party may raise an objection that the federal court lacks

subject matter jurisdiction at any stage of litigation. Arbaugh v.

Y&H Corp., 546 U.S. 500, 506 (2006). But even without a challenge

2 This Court denied defendants’ motion for reconsideration on October 22, 2021.

Rec. Doc. 262.

from any party, courts have an independent obligation to determine

whether subject matter jurisdiction exists. Ruhrgas AG v. Marathon

Oil Co., 526 U.S. 574, 583 (1999). When the court lacks subject

matter jurisdiction, the court does not have the authority to hear

and determine a particular matter and must dismiss the case. See

Kontrick v. Ryan, 540 U.S. 443, 455 (2004) (quoting Fed. R. Civ.

P. 12(h)(3)).

B. Eleventh Amendment Immunity Differs from State Action

Immunity3

The Eleventh Amendment bars a private citizen from suing a

state in federal court, unless the state consents to suit, Congress

has abrogated the state’s sovereign immunity, or the Ex parte Young

exception applies. 209 U.S. 123 (1908); Freedom from Religion

Found. v. Abbott, 955 F.3d 417, 424 (5th Cir. 2020). This

protection from suit “extends to any state agency or entity deemed

an alter ego or arm of the state.” Perez v. Region 20 Educ. Serv.

Ctr., 307 F.3d 318, 326 (5th Cir. 2002). A court considers many

factors in determining whether a state agency is an “arm of the

state,” including:

(1) whether the state, through statutes or case law,

views the entity as an arm of the state; (2) the source

of the entity’s funding; (3) whether the entity is

concerned with local or statewide problems; (4) the

entity’s degree of authority independent from the state;

(5) whether the entity can sue and be sued in its own

name; and (6) whether the entity has the right to hold

and use property.

3 State action immunity is also known as Parker immunity. See Parker v. Brown,

317 U.S. 341 (1943).

Earles v. State Bd. of Certified Pub. Accts. of La., 139 F.3d

1033, 1037 (5th Cir. 1998).

In contrast, state action immunity derives from “statutory

construction, legislative intent, and judicial deference to

federalism,” not the Eleventh Amendment. Rodgers v. La. Bd. of

Nursing, 665 F. App’x 326, 329 (5th Cir. 2016) (citing Cmty.

Commmc’ns Co. v. City of Boulder, Colo., 455 U.S. 40, 53 (1982)).

It was first recognized in Parker v. Brown, 317 U.S. 341 (1943).

See id. at 1040. There, the court held that both state agencies

and private individuals are exempt from activities that might

otherwise violate federal antitrust law. Id. But the state cannot

automatically invoke this immunity. Id. at 1040-41. Generally, two

criteria must be satisfied: (1) “the challenged restraint must be

one clearly articulated and affirmatively expressed as state

policy to displace competition with state regulation” and (2) “the

anticompetitive conduct must be actively supervised by the state

itself.” La. Real Est. Appraisers Bd. v. U.S. Fed. Trade Comm’n,

976 F.3d 597, 603 (5th Cir. 2020).

Accordingly, Eleventh Amendment immunity and state action

immunity are two distinct protections that defendants may raise

when sued. See Earles, 139 F.3d at 1036-44 (distinguishing between

Eleventh Amendment Immunity and state action immunity when

ruling). In the instant motion, defendants assert they are entitled

to Eleventh Amendment immunity. Rec. Doc. 247-1 at 2. But

plaintiffs contend that the Fifth Circuit already ruled defendants

are not immune from plaintiffs’ claims. Rec. Doc. 250 at 2.

Plaintiffs misunderstand that the Fifth Circuit only ruled on

defendants’ pursuit of state action immunity, not Eleventh

Amendment immunity. See Veritext Corp. v. Bonin, et al., 901 F.3d

287, 292 (5th Cir. 2018). In this prior proceeding, the Court ruled

that plaintiffs were not entitled to Parker immunity because the

active supervision requirement, prong two of the aforementioned

test, was not met. Id. at 292. Because the Fifth Circuit only ruled

on whether defendants were entitled to state action immunity, and

this doctrine is distinct from Eleventh Amendment immunity,

defendants are not barred from moving to dismiss on these new

grounds.

C. Ex parte Young Exception

Although the prior Fifth Circuit decision does not bar

defendants from moving to dismiss based on Eleventh Amendment

immunity, defendants are not necessarily entitled to that

protection. The aforementioned exceptions to Eleventh Amendment

immunity must be inapplicable. Defendants posit that none are

relevant, and emphasize in particular that plaintiffs’ injunctive

relief claims do not fall within the Ex parte Young exception.

Rec. Doc. 247-1 at 14. Under Ex parte Young, “a litigant may sue

a state official in his official capacity if the suit seeks

prospective relief to redress an ongoing violation of federal law.”

Williams on behalf of J.E. v. Reeves, 954 F.3d 729, 736 (5th Cir.

2020). For this exception to apply, “three criteria must be

satisfied: (1) A plaintiff must name individual state officials as

defendants in their official capacities; (2) the plaintiff must

allege an ongoing violation of federal law; and (3) the relief

sought must be properly characterized as prospective.” Green

Valley Special Util. Dist. v. City of Schertz, Tex., 969 F.3d 460,

471 (5th Cir. 2020) (citing Verizon Md., Inc. v. Pub. Serv. Comm’n

of Md., 535 U.S. 635, 645 (2002)) (other citations omitted).

Here, plaintiffs satisfy each criterion of the Ex Parte Young

exception. First, plaintiffs name defendants in their official

capacity. See Rec. Doc. 247-1 at 1. Second, plaintiffs claim an

ongoing violation of federal law. They assert that the Board

members’ enforcement of Louisiana Code of Civil Procedure Article

1434 violates the Sherman Act, 15 U.S.C. § 1. See Rec. Doc. 117 at

21-22. The Fifth Circuit even affirmed that “Veritext has alleged

facts sufficient to make out a prima facie Sherman Act claim.”

Veritext Corp., 901 F.3d at 292.

Defendants emphasize that the Ex parte Young exception cannot

apply because the Fifth Circuit deemed Article 1434

constitutional. See Rec. Doc. 247-1 at 14-16. They maintain that

the Ex parte Young exception only bars suit “when the plaintiff

seeks to restrain enforcement” of an “unconstitutional” state law.

Rec. Doc. 247-1 at 14. But the exception is not limited to when a

state law may violate the Federal Constitution. If a plaintiff

alleges a state law violates a federal statute, then the Ex parte

Young exception still applies. See Pennhurst State Sch. & Hosp. v.

Halderman, 465 U.S. 89, 102 (1984) (“[T]he rule permitting suits

alleging conduct contrary to the supreme authority of the United

States has survived.”) (internal quotation marks omitted); see

also Air Evac EMS, Inc. v. Tex. Dep’t Ins., Div. of Workers Comp.,

851 F.3d 507, 520 (5th Cir. 2017) (applying the Ex parte Young

exception when the plaintiff alleged a violation of the Americans

with Disabilities Act (ADA)). Thus, even though the Fifth Circuit

determined plaintiffs’ constitutional claims lacked merit, its

affirmation of plaintiffs’ Sherman Act claim confirms plaintiffs

right to seek relief for an ongoing violation of that Act.4

Lastly, plaintiffs seek injunctive relief, and thus, satisfy

the third criterion of the Ex parte Young exception. See Rec. Doc.

117 at 21-22; see also Verizon , 535 U.S. at 645 (including

injunctive relief as a form of prospective relief under the Ex

parte Young exception). Defendants claim plaintiffs’ requested

relief “would be impossible to enforce.” Rec. Doc. 247-1 at 22. A

4 Defendants rely on Idaho v. Coeur d’Alene Tribe of Idaho, 521 U.S. 261 (1997),

to argue that plaintiffs’ claims against state officials are the functional

equivalent of a claim against the state, and thus, not privy to the Ex parte

Young exception. Rec. Doc. 247-1 at 18-20. But the Fifth Circuit has “never

before applied the holding of Coeur d’Alene in a context outside of the unique

land rights challenge in that case.” Williams, 954 F.3d at 739.

court, nevertheless, only conducts a “straightforward inquiry” in

determining whether Eleventh Amendment immunity applies. Verizon,

535 U.S. at 645. After determining the requested relief is

prospective, the Court need not consider “the scope of any eventual

relief.” Air Evac EMS, 851 F.3d at 520.

Upon satisfying the criteria for the Ex parte Young exception,

plaintiffs may sue defendants in their official capacity for

prospective relief and defendants are not entitled to Eleventh

Amendment immunity.

New Orleans, Louisiana this 30th day of November, 2021

___________________________________

SENIOR UNITED STATES DISTRICT JUDGE