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.
12