Veritext Corp. v. Bonin et al
ORDER AND REASONS: IT IS ORDERED that the Defendants' 22 Motion to Dismiss Pursuant to Federal Rule and 12(b)(6) is GRANTED IN PART AND DENIED IN PART and the 20 Motion to Dismiss Pursuant to 12 (b)(1) is DISMISSED AS MOOT. Signed by Judge Ivan L.R. Lemelle on 4/10/2017. (mmv)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PAUL A. BONIN, ET AL.
ORDER AND REASONS
NATURE OF MOTION AND RELIEF SOUGHT
Before the court are Defendants’ “Motion to Dismiss Amended
Complaint for Declaratory Relief, Injunctive Relief, and Damages
Under Federal Rule of Civil Procedure 12 (b)(6)” (Rec. Doc. 22),
Plaintiff’s “Opposition to Motion to Dismiss Amended Complaint for
Declaratory Relief, Injunctive Relief, and Damages Under Federal
Rule of Civil Procedure 12 (b)(6)” (Rec. Doc. 30) and Defendants’
“Reply Brief in Support of Motion to Dismiss Amended Complaint
Under Federal Rule of Civil Procedure 12 (b)(6) (Rec. Doc. 43);
and Defendants’ “Motion to Dismiss Claims for Damages Against
Members CSR Board in their Official Capacities Under Rule of
“Opposition to Motion to Dismiss Claims for Damages Against Members
of CSR Board in their Official Capacities Under Federal Rule of
Civil Procedure 12 (b)(1)” (Rec. Doc. 31) and
“Reply in Support
of Motion to Dismiss Claims for Damages Against Members of the CSR
Board in their Official Capacities Under Federal Rule of Civil
Procedure 12(b)(1)” (Rec. Doc. 42). For the reasons set forth
below, IT IS
Defendants’ Motion to Dismiss
Pursuant to Federal Rule and 12(b)(6) is GRANTED IN PART AND DENIED
IN PART and the Motion to Dismiss Pursuant to 12 (b)(1) is
DISMISSED AS MOOT.
FACTS AND PROCEDURAL HISTORY
Plaintiff, Veritext Corp., is a Delaware corporation that
arbitrations and other legal proceedings in Louisiana and across
the United States (Rec. Doc. 4). In the instant lawsuit the
Plaintiff challenges a state statute, La. Code. Civ. Proc. Art.
1434(A)(2), which prevents court reporters from entering into long
term or volume based contracts with frequent users of court
reporting services (Rec. Doc. 4). The law creates two categories
of court reporting firms: court reporting firms that regularly
contract with party litigants and court reporting firms that do
not regularly contract with party litigants. The law is concerned
with potential bias issues relating to court reporting firms who
hold contracts with lawyers and the judiciary and may feel a
conflict of interest when creating work product (Rec. Doc. 4).
Plaintiff claims that this law impermissibly prohibit its ability
to enter into contracts in Louisiana (Rec. Doc. 4).
Plaintiff also alleges that it faces the threat of prosecution
Reporters began an investigation of it as a prelude to enforcement
of Article 1434 after it attempted to contract in violation of the
law (Rec. Doc. 4). The Board has the authority to suspend or revoke
the certified court reporter certificate that a person must hold
to practice court reporting in Louisiana (Rec. Doc. 4).
Plaintiff currently has a pending hearing regarding suspending or
revoking their certification that has been continued without date
(Rec. Doc. 4). Plaintiff sues defendants Paul A. Bonin, Vincent P.
Borrello, Jr., Milton Donegan, Jr., Suzette Magee, Kimya M. Holmes,
John H. Andressen, May F. Dunn, Elizabeth C. Methvin, and Laura
Putnam in their official capacities as members of the Louisiana
Board of Examiners of Certified Shorthand Reporters (Rec. Doc. 4).
Plaintiff also sues defendants Borrello, Donegan, Andressen, Dunn,
Magee, and Methvin in their individual capacities (Rec. Doc. 4).
III. FACTUAL AND LEGAL FINDINGS
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted. Such a motion is rarely
granted because it is viewed with disfavor. See Lowrey v. Tex. A
& M Univ. Sys., 117 F.3d 242, 247 (5th Cir.1997) (quoting Kaiser
Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d
1045, 1050 (5th Cir. 1982)).
When reviewing a motion to dismiss, courts must accept all
favorable to the non-moving party. Baker v. Putnal, 75 F.3d 190,
196 (5th Cir. 1996). However, “[f]actual allegations must be enough
to raise a right to relief above the speculative level.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). “To survive a motion
to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on
(2009))(internal quotation marks omitted). The Supreme Court in
Iqbal explained that Twombly promulgated a “two-pronged approach”
to determine whether a complaint states a plausible claim for
relief. Iqbal, 129 S.Ct. at 1950. First, courts must identify those
pleadings that, “because they are no more than conclusions, are
not entitled to the assumption of truth.” Id. Legal conclusions
recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. at 1949.
Upon identifying the well-pleaded factual allegations, courts
“assume their veracity and then determine whether they plausibly
give rise to an entitlement of relief.” Id. at 1950. A claim has
facial plausibility when the plaintiff pleads factual content that
defendant is liable for the misconduct alleged.” Id. at 1949. This
is a “context-specific task that requires the reviewing court to
conceivable to plausible.” Twombly, 550 U.S. at 570.
1. EQUAL PROTECTION CLAIM
provides that no state shall “deny to any person within its
jurisdiction the equal protection of the law.”
The Supreme Court
essentially a direction that all persons similarly situated should
be treated alike.” City of Cleburne v. Cleburne Living Ctr., 473
U.S. 432, 439 (1985). Furthermore, the Supreme Court has explained,
constitutional power despite the fact that, in practice, their
laws result in some inequality. Accordingly, this Court's cases
are clear that, unless a classification warrants some form of
heightened review because it jeopardizes exercise of a fundamental
characteristic, the Equal Protection Clause requires only that the
classification rationally further a legitimate state interest.”
Nordlinger v. Hahn, 505 U.S. 1, 10 (1992) (internal citations and
creates a legislative classification that distinguishes between
court reporting firms that contract with party litigants and court
reporting firms that do not. Given that this distinction does not
involving fundamental rights nor proceeding along suspect lines is
accorded a strong presumption of validity” under the rational basis
test. Heller v. Doe, 509 U.S. 312, 319 (1993). The Heller court
further explained that a classification “must be upheld against
equal protection challenge if there is any reasonably conceivable
classification” and that “the burden is on the one attacking the
legislative arrangement to negative every conceivable basis which
(internal quotations and citations omitted). This is an untenable
burden for the Plaintiff in this case.
The Defendants have argued that the classifications should
pass the rational basis test because they “(1) ensure that court
reporters provide comparable service to all participants in a
deposition and treat all parties fairly (2) ensure that court
reporters maintain the confidentiality of sensitive information
contained in depositions; (3) to protect the integrity of the
record; (4) to maintain the court reports integrity; (4) to avoid
any appearance of impropriety or bias on the court reporter’s
behalf.” (Rec. Doc. 22-1). These are all rationales that survive
the relevant equal protection analysis. The Plaintiff argue that
in the Fifth Circuit laws that are protectionist or create an
economic preference cannot pass constitutional scrutiny under an
equal protection analysis. St. Joseph Abbey v. Castille, 712 F.3d
215, 221 (5th Cir. 2013). However, this Court finds this case to
be inapposite. The law in question may have economic implications
for court reporting firms but the primary motivation is related to
Article 1434 may have collateral consequences on court reporting
businesses but it’s primary effect is one ensure that the court
reporters in the state of Louisiana do not face professionally
constitutional analysis under the Equal Protection Clause unless
the Plaintiff could negate every potential rationale for Article
1434. Failing that, Plaintiff’s claims under the Equal Protection
Clause should be dismissed for failure to state a claim.
2. DUE PROCESS CLAUSE CLAIM
Under the Due Process Clause of the Fourteenth Amendment there
are two potential avenues for a violation, procedural due process
and substantive due process. Jones v. La. Bd. of Supervisors of
Univ. of La. Sys., Case No. 14-31255, 2015 U.S. App. LEXIS 21471,
at*10 (5th Cir. 2015); Conroe Creosoting Co. v. Montgomery County,
249 F.3d 337, 340-341 (5th Cir. 2001).
The Amended Complaint does not specify the nature of the
alleged due process violation (Rec. Doc. 4). However, as Plaintiff
points out, any procedural due process claim would be premature
because there was no hearing on the Rule to Show Cause.
this Court will analyze whether there was a substantive due process
In the Fifth Circuit, “substantive due process analysis is
appropriate only in cases in which government arbitrarily abuses
its power to deprive individuals of constitutionally protected
rights.” Simi Inv. Co. v. Harris County, 236 F.3d 240, 249 (5th
Cir. 2000). Constitutionally protected rights in this context are
fundamental rights such as the right to marriage, contraception
and marital privacy. Wash. v. Glucksberg, 521 U.S. 702, 719-720
(1997). This case does not involve such purported rights and
therefore a substantive due process analysis is not appropriate.
The Due Process claim should be dismissed.
3. DORMANT COMMERCE CLAUSE CLAIM
The constitution gives congress the authority to regulate
commerce. U.S. CONST., art. I, § 8, cl. 3. The dormant Commerce
Clause doctrine arises from the inversion of this principle, in
other words, “the negative aspect of Commerce Clause prohibits
economic protectionism -- that is, regulatory measures designed to
benefit in-state economic interests by burdening out-of-state
(internal quotations and citations omitted). The Supreme Court
further explained, “when a state statute clearly discriminates
against interstate commerce, it will be struck down...unless the
unrelated to economic protectionism.”
Wyoming v. Oklahoma, 502
“differential treatment of in-state and out-of-state economic
Or. Waste Sys. v. Dep't of Envtl. Quality, 511 U.S. 93, 99 (1994).
effectuate a legitimate local public interest, and its effects on
interstate commerce are only incidental, it will be upheld unless
the burden imposed on such commerce is clearly excessive in
relation to the putative local benefits.” Pike v. Bruce Church,
397 U.S. 137, 142 (1970). This Court finds that this claim should
also be dismissed because the complaint does not allege that Act
1434 discriminates against interstate commerce through treating
in-state and out of state corporations differently.
Court reporting firms and the Plaintiff are subject to the same
requirements and in the Amended Complaint the Plaintiff does not
against out of state court reporting firms, there is still not a
valid claim because the law has a justification that is unrelated
to economic protectionism. There is a legitimate state interest in
reporter’s work product. Article 1434 aids the state of Louisiana
achieve its goal and the Plaintiff in its complaint does not allege
sufficient facts to demonstrate that this burden on interstate
commerce is “clearly excessive in relation to the putative local
benefits.” Plaintiff quotes in its Opposition various manners in
which it believes that Article 1434 raise a dormant Commerce Clause
claim. However, “threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.”
Iqbal, 556 U.S. at 678. Consequently, Plaintiff’s dormant Commerce
Clause claims should be dismissed.
4. SHERMAN ACT CLAIM
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.A. § 1.
order to establish a Section 1 violation, “plaintiffs must show
that the defendants (1) engaged in a conspiracy (2) that produced
some anticompetitive effect (3) in the relevant market.” Abraham
& Veneklasen Joint Venture v. Am. Quarter Horse Ass’n, 776 F. 3d
321, 327 (5th Cir. 2014). Additionally, in order to seek relief
for anti-competitive conduct under the Sherman Act, the plaintiff
must show both an actual injury and an “antitrust injury”—i.e.,
the plaintiff must show that “the defendants’ activities caused an
injury to competition.” Jebaco, Inc. v. Harrah’s Operating Co.,
587 F. 3d 314, 318-19 (5th Cir. 2009); Doctor’s Hosp. of Jefferson,
Inc. v. Se. Med. Alliance, 123 F. 3d 301, 307 (5th Cir. 1997).
Nonetheless, anti-competitive conduct by a state is generally
immune from federal antitrust law. As the Supreme Court has held
“nothing in the language of the Sherman Act or in its history . .
. suggests that its purpose was to restrain a state or its officers
or agents from activities directed by its legislature.” Parker v.
Brown, 317 U.S. 341, 350-51 (1943). However, this Court finds that
the Plaintiff’s Sherman Act claims survives the Defendants’ Motion
to Dismiss for Failure to State a Claims.
First, the Amended Complaint alleges sufficient facts for a
violation of the Sherman Act. The Amended Complaint satisfies the
first element of a Sherman Act claim through alleging that the
Board acted in concert and that the Board Member Court Reporters
conspired among themselves to take actions independently of the
Board in their efforts to exclude national competition and raise
rates for court reporting services. (Rec. Doc. 4 ¶¶ 2-3, 34-37).
Specifically, the Amended Complaint alleges that the Board Member
information and common competitors for the purpose of increasing
prices and deterring and delaying entry by national and regional
court reporting firms” and points to a specific example of such a
meeting where “How to increase rates?” was on the agenda (Rec.
Doc. 4 ¶ 36.).
Second, the Amended Complaint alleges another element on the
Sherman Act through detailing actions that would satisfy a factual
basis for unreasonable restraint. The Amended Complaint alleges
that the Court Reporter Board has established committees and
working groups “to discuss and develop strategies for raising the
rates for court reporting services in Louisiana and creating
artificial barriers to entry in order to insulate court reporters
in Louisiana from competition.” (Rec. Doc.4 ¶¶ 34-37.). These
actions sufficiently alleged unreasonable restraint.
competition, the final element of a Sherman act claim. In the
Amended Complaint the Plaintiff alleges that Article 1434 “has had
the anticompetitive effect of raising court reporting rates in
Louisiana which are higher than the rates charged in many other
states with higher costs of living and has denied consumers access
to the non-price advantages of working with national and regional
court reporting firms” (Rec. Doc.4 ¶ 37.).
In addition, Defendants argue that the Sherman Act claim
should be dismissed because they are entitled to state action
regulatory boards and their members are not entitled to immunity
for violations of the Sherman Act unless they are acting pursuant
to a clearly articulated state policy and their anticompetitive
actions are subject to active supervision. N.C. State Bd. of Dental
Exam'rs v. FTC, 135 S. Ct. 1101, 1110, (2015). Defendants argue
that the Fifth Circuit has found that the active supervision
requirement for state action immunity has been met in similar
Accountants, 139 F.3d 1033, 1041 (5th Cir. 1998). However, this
Court finds the Fifth Circuit case to be inapposite given that the
Court in that case found that the “Board is functionally similar
to a municipality and is also exempted from the active-supervision
prong.” Id. The board in that case did not
meet the active
supervision prong but was exempt from it because of its resemblance
to a municipality.
Defendants further argue that even if active supervision is
required, the standard in this case has been met because the
Louisiana legislature has the power to intervene and overturn any
anticompetitive decisions of the board. However, in Goldfarb, the
Virginia Supreme Court had the power to intervene in decisions
regarding a mandatory minimum fee schedule set by the state Bar
Association. Goldfarb v. Va. State Bar, 95 S. Ct. 2004, 2016
implications of the minimum fee schedule, the United States Supreme
Court did not find this ability to intervene to constitute active
supervision Id. Without being able to establish active supervision
the Defendants cannot claim immunity. In addition, Plaintiff has
alleged sufficient facts in its complaint that the board’s actions
do not resemble a municipality under active supervision but instead
Consequently, the Plaintiff’s claims are legally viable and the
Amended Complaint has alleged facts that are sufficient to defeat
the Defendants’ Motion to Dismiss the Sherman Act claim.
5. QUALIFIED IMMUNITY
The Defendants raise the same arguments for their damages
claim that they do for the state action immunity claim. Given that
based on the facts alleged in the complaint, the Plaintiff has
alleged legally sufficient causes of action, these claims should
also not be dismissed. Furthermore, qualified immunity is an
affirmative defense and the Board Members must both plead and
establish their entitlement to that defense. Gomez v. Toledo, 100
S. Ct. 1920, 1923(1980). Furthermore, in order to receive qualified
official duties or discretionary authority. Garris v. Rowland, 678
F.2d 1264, 1271 (5th Cir. 1982). The Defendants have not met this
burden or argued this point of law. Based on the face of the
Amended Complaint and the applicable law this Court does not find
that the Defendants are entitled to qualified immunity.
Defendants’ Motion to Dismiss Claims for Damages Against
Members CSR Board in their Official Capacities Under Rule
of Civil Procedure 12(b)(1)
The Defendant filed a motion to dismiss claims for damages
against the members of the CSR Board in their official capacities
under rule of civil procedure 12(b)(1). Plaintiff argues that this
motion to dismiss is moot because Plaintiff has not brought claims
capacities. Given the facts alleged in the complaint, the Court
finds this contention to be compelling and the Defendants’ motion
to dismiss should be dismissed as moot in view of Plaintiff’s above
noted judicial admission.
New Orleans, Louisiana, this 10th day of April 2017.
SENIOR UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?