LA Real Estate Appraiser Board v. FTC

Case: 19-30796 Document: 00515588518 Page: 1 Date Filed: 10/02/2020

United States Court of Appeals

for the Fifth Circuit United States Court of Appeals

Fifth Circuit

FILED

No. 19-30796 October 2, 2020

Lyle W. Cayce

Clerk

Louisiana Real Estate Appraisers Board,

Plaintiff—Appellee,

versus

United States Federal Trade Commission,

Defendant—Appellant.

Appeal from the United States District Court

for the Middle District of Louisiana

3:19-CV-214

Before Jones, Elrod, and Higginson, Circuit Judges.

Edith H. Jones, Circuit Judge:

This is an appeal of a district court order staying administrative

proceedings that were initiated by appellant the Federal Trade Commission 1

against appellee the Louisiana Real Estate Appraisers Board (the “Board”)

pursuant to the Federal Trade Commission Act. Because the district court

1

We refer to the FTC acting in its role as complaint counsel as the “FTC” and the

FTC acting in its adjudicatory capacity as the “Commission.”

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lacked jurisdiction, we vacate its stay order and remand with instructions to

dismiss.

I. BACKGROUND

The Board is a state agency tasked with licensing and regulating

commercial and residential real estate appraisers and management

companies in Louisiana. La. Stat. Ann. §§ 37:3395; 37:3415.21. Each of the

Board’s ten members is appointed by the Governor and confirmed by the

state senate, and members are removable by the Governor for cause. Id.

§ 37:3394. Of the ten members, eight must be “licensed as certified real

estate appraisers.” Id. § 37:3394(B)(1)(c), (b).

In 2010, Congress enacted the Dodd-Frank Wall Street Reform and

Consumer Protection Act, which requires lenders to compensate fee

appraisers “at a rate that is customary and reasonable for appraisal services

performed in the market area of the property being appraised.”

15 U.S.C. § 1639e(i)(1). In response, the Louisiana legislature amended its

own law, the Appraisal Management Company Licensing and Regulation Act

(the “AMC Act”), to require that appraisal rates be consistent with

Section 1639e and its implementing regulations. See La. Stat.

Ann. § 37:3415:15(A). The legislature also gave the Board the authority to

“adopt any rules and regulations in accordance with the [Louisiana]

Administrative Procedure Act necessary for the enforcement of [the AMC

Act].” Id. § 37:3415.21.

Accordingly, the Board adopted Rule 31101, requiring that licensees

“compensate fee appraisers at a rate that is customary and reasonable for

appraisal services performed in the market area of the property being

appraised and as prescribed by La. Stat. Ann. § 34:3415.15(A).” La. Admin.

Code tit. 46 § 31101. Unlike the federal regulations, which instruct that

appraisal fees are “presumptively” customary and reasonable if they meet

certain market conditions, Rule 31101 prescribed its own methods by which

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a licensed appraisal management company can establish that a rate is

customary and reasonable. Compare id., with 12 C.F.R. § 226.42(f)(2), (3).

In 2017, the FTC filed an administrative complaint against the Board,

asserting the Board had engaged in “concerted action that unreasonably

restrains trade” in violation of the FTC Act’s prohibition on unfair methods

of competition. The complaint alleged Rule 31101 “unlawfully restrains

competition on its face by prohibiting [appraisal management companies]

from arriving at an appraisal fee through the operation of the free market.”

The FTC also alleged that the Board’s enforcement of Rule 31101 unlawfully

restrained price competition. In response, the Board denied the FTC’s

allegations and argued that it was entitled to immunity from antitrust liability

under the state action doctrine.

Following the FTC’s initiation of proceedings against the Board, the

Governor of Louisiana issued an executive order purporting to enhance state

oversight of the Board. The Board also revised Rule 31101 in accordance with

the Governor’s executive order. Based on those changes, the Board moved

to dismiss the FTC’s complaint in the administrative proceedings, arguing

that the executive order and revision of Rule 31101 mooted the FTC’s claims.

The same day, the FTC cross-moved for summary judgment on the Board’s

state action immunity defense. On April 10, 2018, the Commission denied

the Board’s motion and granted the FTC’s, rejecting the Board’s assertion

of state action immunity.

The Commission has not issued a final cease and desist order, but the

Board has twice challenged the April 10, 2018 order in federal court to claim

immunity. First, in late April, the Board petitioned this court directly for

review of the Commission’s order. In a published opinion, this court

dismissed the petition for lack of jurisdiction. La. Real Estate Appraisers Bd.

v. F.T.C., 917 F.3d 389, 393 (5th Cir. 2019) (LREAB I). Second, and relevant

here, the day after this court denied the Board’s petition for en banc

rehearing, the Board sued the FTC in a federal district court, alleging the

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Commission’s April 10, 2018 order violated the Administrative Procedure

Act. The Board also moved to stay the ongoing Commission proceedings.

The district court granted the Board’s motion and stayed the Commission

proceedings pending the resolution of the Board’s APA claim. On appeal,

the FTC principally contends that the district court lacked jurisdiction.

II. DISCUSSION

We review questions of jurisdiction de novo, with the “burden of

establishing federal jurisdiction rest[ing] on the party seeking the federal

forum.” Gonzalez v. Limon, 926 F.3d 186, 188 (5th Cir. 2019).

The FTC contends the district court lacked jurisdiction over the

Board’s lawsuit because the FTC Act vests exclusive jurisdiction to review

challenges to Commission proceedings in the courts of appeals.

15 U.S.C. § 45(d) (“Upon the filing of the record with it the jurisdiction of

the court of appeals of the Unites States to affirm, enforce, modify, or set

aside orders of the Commission shall be exclusive.”). The Board counters

that the district court had jurisdiction pursuant to the APA’s default review

provision, 5 U.S.C. § 704, regardless of the FTC Act’s judicial review

scheme. We agree with the FTC that the district court lacked jurisdiction

but for a different reason: Even if the FTC Act does not preclude Section 704

review—an issue we need not address—the Board fails to meet Section 704’s

jurisdictional prerequisites.2

Section 704 of the APA permits non-statutory judicial review of

certain “final agency action.” 5 U.S.C. § 704 (“Agency action made

reviewable by statute and final agency action for which there is no other

2

The Board also argues we lack jurisdiction over the merits of the FTC’s appeal,

but because the district court lacked jurisdiction, we do not address the merits. See

Arizonians for Official English v. Arizona, 520 U.S. 43, 73, 117 S. Ct. 1055, 1072 (1997)

(recognizing that when a district court “lack[s] jurisdiction, we have jurisdiction on appeal,

not of the merits but merely for the purpose of correcting the error of the lower court in

entertaining the [matter]”).

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adequate remedy in a court are subject to judicial review.”). Absent a

showing of finality, a district court lacks jurisdiction to review APA

challenges to administrative proceedings. Am. Airlines, Inc. v. Herman,

176 F.3d 283, 287 (5th Cir. 1999). Here, the Board relies on the collateral

order doctrine as an expansion of the finality requirement of Section 704.

Because the April 10, 2018 order meets the doctrine’s predicates, the Board

contends, the order should be treated as final and subject to challenge under

the APA. The FTC disagrees with this approach, and so do we.

The collateral order doctrine is a judicially created exception to the

“final decision” requirement of 28 U.S.C. § 1291, which governs appellate

jurisdiction over appeals of final district court decisions. See Exxon Chemicals

Am. v. Chao, 298 F.3d 464, 469 (5th Cir. 2002). The doctrine provides that

an interlocutory decision is immediately appealable “as a final decision under

§ 1291 if it (1) conclusively determines the disputed question; (2) resolves an

important issue completely separate from the merits of the action; and (3) is

effectively unreviewable on appeal from a final judgment.” Acoustic Sys., Inc.

v. Wenger Corp., 207 F.3d 287, 290 (5th Cir. 2000). This court has

recognized that “the requirement of ‘final agency action’ in [Section 704]”

is analogous “to the final judgment requirement of 28 U.S.C. § 1291.” Am.

Airlines, 176 F.3d at 288; see also LREAB I, 917 F.3d at 392 (“[C]ourts have

recognized that the [APA’s] ‘final agency action’ requirement is analogous

to § 1291’s ‘final decision’ requirement.”).3 We assume arguendo that

equating finality under Sections 1291 and 704 imports the collateral order

3

Other circuits concur. See, e.g., Chehazeh v. Attorney Gen., 666 F.3d 118, 135 (3d

Cir. 2012) (“A provision analogous to Section 704’s ‘final agency action’ requirement is

found in 28 U.S.C. § 1291, which permits appellate review only of ‘final decisions’ of a

district court.”); DRG Funding Corp. v. Sec’y of Hous. & Urban Dev., 76 F.3d 1212, 1220

(D.C. Cir. 1996) (Ginsburg, J., concurring) (“Our analysis of the finality requirement

imposed by the APA is properly informed by our analysis of that requirement in § 1291.”).

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doctrine into the Section 704 analysis.4 Nevertheless, the Board fails to show

that the Commission’s interlocutory denial of state action immunity in this

case meets the doctrine’s requirements. As to the first prong of the doctrine,

there is no dispute that the Commission’s rejection of state action immunity

was “conclusive.” Problems arise concerning the second prong, whether the

issue of state action immunity is “completely separate from the merits” of

the FTC’s antitrust action, and the third prong, whether the decision is

“effectively unreviewable on appeal.”

The parties square off in differing interpretations of our case law that

has applied the collateral order doctrine to denials of claims of state action

immunity. To begin our analysis, however, the background of the substantive

issues must be briefly recapitulated. “The state action doctrine was first

espoused by the Supreme Court in Parker v. Brown, 317 U.S. 341,

63 S. Ct. 307 [] (1943) as an immunity for state regulatory programs from

antitrust claims.” Acoustic Systems, 207 F.3d at 292. In Parker, the Court

considered whether a state statute that authorized state officials to issue

regulations restricting certain agricultural competition violated antitrust law.

317 U.S. at 350–51, 63 S. Ct. at 313–14. The Court found “nothing in the

language of the Sherman Act or in its history which suggests that its purpose

was to restrain a state or its officers or agents from activities directed by its

legislature.” Id. Accordingly, the Court concluded that state regulatory

programs cannot violate the Sherman Act because the “Act makes no

mention of the state as such, and gives no hint that it was intended to restrain

state action or official action directed by a state.”5 Id. at 351.

4

Note that this is a significant theoretical stretch, as it (a) means the appeal to the

district court of an interlocutory order under the APA, which normally requires “final”

agency action, and (b) supersedes the FTC Act’s direction of appeals to the courts of

appeals.

5

The state action analysis applies to FTC actions as well as to federal antitrust

litigation. See F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 635, 112 S. Ct. 2169, 2177 (1992)

(applying the state action analysis in a case arising only under the FTC Act). We also note

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“In subsequent cases, the Court extended the state action doctrine to

cover, under certain circumstances, acts by private parties that stem from

state power or authority . . . as well as acts by political subdivisions, cities,

and counties.” Martin v. Memorial Hosp. at Gulfport, 86 F.3d 1391, 1397 (5th

Cir. 1996) (citing Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.,

445 U.S. 97, 100 S. Ct. 937 (1980); Town of Hallie v. City of Eau Claire,

471 U.S. 34, 105 S. Ct. 1713 (1985)). But immunity for such actors is not

automatic because they are not sovereign.6 Id. Rather, to invoke state action

immunity, private parties must meet two requirements set forth in Midcal.

First, “the challenged restraint must be one clearly articulated and

affirmatively expressed as state policy.” Patrick v. Burget, 486 U.S. 94, 100,

108 S. Ct. 1658, 1663 (1998) (quoting Midcal, 445 U.S. at 105,

100 S. Ct. at 943). Second, “the anticompetitive conduct must be actively

supervised by the state itself.” Id. Municipalities and other political

subdivisions need only satisfy the first Midcal prong; they need not show

active supervision. Town of Hallie, 471 U.S. at 45–46, 105 S. Ct. at 1720.

Following this framework, this court has twice addressed whether the

collateral order doctrine authorizes interlocutory appeals from a district

court’s denial of state action immunity. In Martin v. Memorial Hospital at

Gulfport, 86 F.3d 1391, 1396–97 (5th Cir. 1996), this court held that “the

denial of a state or state entity’s motion for dismissal or summary judgment

on the ground of state action immunity” is immediately appealable. The

that, although “the state action doctrine is often labeled an immunity, that term is actually

a misnomer because the doctrine is but a recognition of the limited reach of the Sherman

Act . . . .” Acoustic Sys., 207 F.3d at 292 n.3. Consistent with our prior opinions, however,

we continue to refer to the doctrine as one of immunity. See generally Veritext Corp. v.

Bonin, 901 F.3d 287 (5th Cir 2018).

6

“For purposes of Parker, a nonsovereign actor is one whose conduct does not

automatically qualify as that of the sovereign State itself.” N.C. St. Bd. of Dental Examiners

v. F.T.C., 574 U.S. 494, 505, 135 S. Ct. 1101, 1111 (2015). Pardon the circularity of this

direct quotation.

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defendant was a municipal hospital, which this court ultimately held immune

under the state action doctrine. Drawing an analogy with principles that

animate interlocutory appeals of government officials’ claims of absolute or

qualified immunity, or the Eleventh Amendment, this court reasoned that

making a “state or state entity” go to trial to claim immunity renders the

defense effectively unreviewable on appeal. Id. at 1396–97.

In Acoustic Systems, however, we clarified that Martin’s extension of

the collateral order doctrine was limited “to the denial of a claim of state

action immunity ‘to the extent that it turns on whether a municipality or

subdivision [of the state] acted pursuant to a clearly articulated and

affirmatively expressed state policy.’” Acoustic Systems, Inc. v. Wenger,

207 F.3d 287, 291 (5th Cir. 2000) (quoting Martin, 86 F.3d at 1397). The

defendant in Acoustic Systems was a private party whose status did not

implicate the concerns underlying other immunity doctrines. Therefore,

although the defendant could invoke the state action doctrine as a defense to

liability, it could not obtain interlocutory review of the issue to avoid suit. Id.

at 293–94. Likewise, because a defense to liability is effectively reviewable

on direct appeal, the denial of state action immunity to a private party “is not

an immediately reviewable collateral order.” Id.

Neither Martin nor Acoustic Systems fits this case. In neither of those

cases was the collateral order doctrine being invoked as an appendage to APA

Section 704, thus neither case involved interlocutory interference with an

ongoing federal regulatory proceeding. Further, in each case, applying the

Supreme Court’s test for state action immunity was relatively

straightforward: Martin rested on Town of Hallie, 471 U.S. at 45-46,

105 S. Ct. at 1720 (holding that municipal entities, though not sovereign, may

avail themselves of the immunity if their actions spring from governing state

authority); Wenger, the Acoustic Systems defendant, could only rely on

private party immunity pursuant to Midcal’s two-part test.

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Here, the jurisdictional issue is more complex, as it concerns both an

action by the FTC rather than private litigation, and it involves the Supreme

Court’s comparatively recent decision in North Carolina State Board of

Dental Examiners v. F.T.C., 574 U.S. 494, 135 S. Ct. 1101 (2015).

Taking the Supreme Court case first, apprehension over placing

private practitioners in regulatory agencies constituted like this Board

animated Dental Examiner’s application of the Midcal test. The Court

explained that “[l]imits on state-action immunity are most essential when the

State seeks to delegate its regulatory power to active market participants, for

established ethical standards may blend with private anticompetitive motives

in a way difficult even for market participants to discern.” Id. at 504. Hence,

it was necessary to apply Midcal’s active supervision prong, which “demands

‘realistic assurance that a private party’s anticompetitive conduct promotes

state policy, rather than merely the party’s individual interests.’” Id. at 507

(quoting Patrick, 486 U.S. at 101, 108 S. Ct. at 1663).

The Board nevertheless argues that it is entitled to immunity from suit

as a state agency, not a “purely private part[y].” But the Court has rejected

such a “purely formalistic inquiry.” See Town of Hallie, 471 U.S. at 39,

105 S. Ct. at 1716. Instead, in Dental Examiners, the Court distinguished

“specialized boards dominated by active market participants” from

“prototypical state agencies” because of the private incentives inherent in

their structure. Id. at 511. Such “agencies controlled by market participants

are more similar to private trade associations vested by States with regulatory

authority . . . .” Id. Thus, while the Board may rightly defend its entitlement

to state action immunity, it invokes the state action doctrine as a private

party. See also S.C. St. Bd. of Dentistry v. F.T.C., 455 F.3d 436, 439 (4th Cir.

2006); SmileDirectClub, LLC v. Battle, No. 19-12227, 2020 WL 4590098, at

*11 (11th Cir. 2020) (Jordan, J., concurring) (“Even if we assume that a state

is able to immediately appeal the denial of Parker immunity, an interlocutory

appeal should not be available to private parties like the members of the

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Georgia Board of Dentistry, whose status does not implicate sovereignty

concerns.”).

As a private party, the policy imperatives behind relieving the Board

from suit as well as liability do not apply. See Acoustic Systems, 207 F.3d at

292–94. To summarize, the collateral order doctrine must be deployed

narrowly and “with skepticism,” and state action immunity, in particular,

though it may extend to private parties, exists principally to secure the full

scope of political activity for state actors. Id. Dental Examiners has intensified

our skepticism of allowing an interlocutory appeal. This court aptly stated,

in reference to the state action “immunity” doctrine, that “[t]he price of the

shorthand of using similar labels for distinct concepts is the risk of erroneous

migrations of principles.” Surgical Care Center of Hammond, LC v. Hospital

Serv. Dist., 171 F.3d 231, 234 (5th Cir. 1999) (en banc).

Another reason for rejecting the Board’s quest for collateral review is

that this regulatory case was initiated by the FTC. Even if the Board were a

sovereign actor, it is paradigmatic that “[s]tates retain no sovereign

immunity as against the Federal Government.” West Virginia v. United

States, 479 U.S. 305, 312 n.4, 107 S. Ct. 702, 707 n.4 (1987); see also Bd. of

Dentistry, 455 F.3d at 447 (rejecting collateral order appeal of a Parker

immunity claim in a suit brought by the federal government; “because such

suits do not offend the dignity of a state, sovereign immunity is no defense to

such an action”).

In sum, case law does not support jurisdiction based on the collateral

order doctrine as applied through Section 704 of the APA. Specifically, the

second and third prongs of the doctrine are not satisfied here. Parker

immunity concerns the boundaries of federal antitrust law set against the

principles of federalism and the states’ authority over their economies. This

court explained, “[w]hile thus a convenient shorthand, ‘Parker immunity’ is

more accurately a strict standard for locating the reach of the Sherman Act

than the judicial creation of a defense to liability for its violation.” Surgical

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Care Center, 171 F.3d at 234. In this case, where the FTC challenges aspects

of rate setting by the Board as restraining price competition, and the FTC

rejects the sufficiency of overarching governmental supervision, an

interlocutory ruling on state action immunity by this court would inevitably

affect the question of liability. The issues relevant to immunity in this case

pertain to the reach of the Sherman Act, consequently, a judicial decision at

this point would not resolve an issue “completely separate from the merits

of the action,” as required by the second prong of the collateral order

doctrine. Acoustic Systems, 207 F.3d at 290. Nor, obviously, is the state action

immunity issue “effectively unreviewable on appeal from a final judgment.”

Id.;7 see N.C. State Bd. of Dental Exam’rs, 717 F.3d 359, 366 (4th Cir. 2013)

(considering the applicability of state action immunity in a petition for

review), aff’d, 574 U.S. 494 (2015).

For the foregoing reasons, the April 10, 2018 order does not constitute

final agency action under Section 704, and the collateral order doctrine does

not apply. Consequently, the district court lacked jurisdiction over the

Board’s lawsuit.

7

The Board relies perfunctorily on a finality test articulated in Bennett v. Spear,

520 U.S. 154, 117 S. Ct. 1154 (1997). Bennett pronounced two conditions that “must be

satisfied for an agency action to be ‘final’”: (1) the action must “mark the consummation

of the agency’s decision making process,” and (2) the action must be that “by which rights

or obligations have been determined or from which legal consequences will flow.”

520 U.S. at 177–78, 117 S. Ct. at 1168. The Board argues that the April 10, 2018 order is

“independently reviewable as a ‘final’ order under the test articulated in Bennett” because

the order “reflects a consummation of the decision making process” from which “legal

consequences will flow, including [the Board’s] legal right to immunity from trial.” This

is incorrect. Not only is the Board not entitled to immunity from suit, but the

Commission’s denial of state action immunity will affect the Board adversely only if the

Commission ultimately finds the Board liable for antitrust violations. Put differently, the

April 10, 2018 order “does not itself adversely affect [the Board] but only affects [its] rights

adversely on the contingency of future administrative action.” Am. Airlines, 176 F.3d at

288 (quoting Rochester Tel. Corp. v. United States, 307 U.S. 125, 130, 59 S. Ct. 754, 757

(1939)). The April 10, 2018 order does not constitute final agency action under Bennett.

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III. CONCLUSION

We VACATE the district court’s stay order and REMAND with

instructions to DISMISS the Board’s lawsuit for lack of jurisdiction.

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