Veritext Corp. v. Bonin

• Citation: 901 F.3d 287
• Decision Date: 17 August 2018
• Docket Number: No. 17-30691,17-30691
• Parties: VERITEXT CORPORATION, Plaintiff-Appellant v. Paul A. BONIN, in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Vincent P. Borrello, Jr., individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Milton Donegan, Jr., individually and in their official capacity as Member of the Louisiana Board of Examiners of Certified Court Reporters; Suzette Magee, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Kimya M. Holmes, in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; John H. Anderssen, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; May F. Dunn, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Elizabeth C. Methvin, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Laura Putnam, in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters, Defendants-Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

901 F.3d 287

VERITEXT CORPORATION, Plaintiff-Appellant

v.Paul A. BONIN, in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Vincent P. Borrello, Jr., individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Milton Donegan, Jr., individually and in their official capacity as Member of the Louisiana Board of Examiners of Certified Court Reporters; Suzette Magee, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Kimya M. Holmes, in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; John H. Anderssen, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; May F. Dunn, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Elizabeth C. Methvin, individually and in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters; Laura Putnam, in their official capacity as a Member of the Louisiana Board of Examiners of Certified Court Reporters, Defendants-Appellees

No. 17-30691

United States Court of Appeals, Fifth Circuit.

FILED August 17, 2018

Mark Aaron Cunningham, Alexander N. Breckinridge, Jones Walker, L.L.P., New Orleans, LA, for Plaintiff-Appellant.

James M. Garner, Esq., Joshua Simon Force, Brandon Keay, Esq., David A. Marcello, Sher Garner Cahill Richter Klein & Hilbert, L.L.C., New Orleans, LA, John Elliott Baker, Covington, LA, for Defendants-Appellees.

Before KING, SOUTHWICK, and HO, Circuit Judges.

JAMES C. HO, Circuit Judge:

The Louisiana Board of Examiners of Certified Shorthand Reporters enforces Louisiana law regarding the relationship of court reporters to litigants. This law provides, in relevant part, that "deposition[s] shall be taken before an officer authorized to administer oaths, who is not an employee or attorney of any of the parties or otherwise interested in the outcome of the case." La. Code Civ. Proc. Ann. art. 1434(A)(1). The law further provides that "an employee includes a person who has a contractual relationship with a party litigant to provide shorthand reporting or other court reporting services and also includes 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).

In 2012, the Board began enforcing Article 1434 more aggressively, declaring that the law prohibits all contracts between court reporters and party litigants, including volume-based discounts and concessions to frequent customers. Veritext, a national private court reporting service regulated by the Board and doing business in Louisiana, filed suit.

Veritext alleges, in sum, that these regulatory efforts reflect nothing more than rent-seeking. As Veritext sees it, local providers are simply harnessing the regulatory power of the state to prevent competition from national and regional court reporting firms, and thereby increase business opportunities and raise prices for freelance court reporters.

To vindicate its concerns, Veritext brought a variety of constitutional claims—substantive due process, equal protection, and the Dormant Commerce Clause—as well as a claim under the Sherman Act. The district court dismissed the constitutional claims, and subsequently dismissed the Sherman Act claim on reconsideration. Veritext Corp. v. Bonin , 259 F.Supp.3d 484, 488 (E.D. La. 2017), on reconsideration , 2017 WL 3279464 (E.D. La. Aug. 2, 2017). Veritext appeals on all these grounds.

We conclude that none of the constitutional claims presented by Veritext have merit, but that the Sherman Act claim should proceed on remand.

I.

The district court was correct to dismiss all of the constitutional claims brought by Veritext as a matter of Supreme Court precedent.

Veritext argues that the Board’s 2012 decision to ban volume-based discounts and concessions to frequent customers lacks a rational basis, and thereby violates both substantive due process and equal protection under established precedent. The Board responds that these regulatory efforts further the State’s legitimate government interest in ensuring and protecting the integrity of legal proceedings. As the Board explains, "[c]ommon sense dictates that court reporters might be more inclined to alter a deposition transcript in favor of party litigants that provide them with long-term financial benefits."

This rationale may find a skeptical audience in certain quarters. But it is legally sufficient to support the Board’s action under rational basis review. As the Supreme Court has long recognized, "[a] classification does not fail rational-basis review because it is not made with mathematical nicety or because in practice it results in some inequality." Heller v. Doe by Doe , 509 U.S. 312, 319, 113 S.Ct. 2637, 125 L.Ed.2d 257 (1993) (citation and quotations omitted). This is an expansive standard, and the Board’s stated goal of protecting against "any appearance of impropriety or bias on the court reporter’s behalf" meets it. Veritext Corp. , 259 F.Supp.3d at 490.

A similar analysis applies to Veritext’s Dormant Commerce Clause argument. "When ... a statute has only indirect effects on interstate commerce and regulates evenhandedly," we consider "whether the State’s interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits." Brown-Forman Distillers Corp. v. New York State Liquor Auth. , 476 U.S. 573, 579, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986). Here, as previously stated, Louisiana’s interest in the integrity of its court reporting system is legally sufficient. And Veritext has failed to clearly identify a burden on interstate commerce imposed by the Board’s enforcement of Article 1434 that exceeds its local benefits. Veritext’s Dormant Commerce Clause claim therefore fails as well.

II.

Although we agree that the constitutional claims lack merit, we remand this case so that Veritext can proceed on its Sherman Act claim.

To prevail under the Sherman Act, Veritext must show a contract, combination, or conspiracy that imposed an unreasonable restraint on trade. Am. Needle, Inc. v. Nat’l Football League , 560 U.S. 183, 189, 130 S.Ct. 2201, 176 L.Ed.2d 947 (2010). "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).

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.

This raises the question of immunity. As the district court noted, "anticompetitive conduct by a state is generally immune from federal antitrust law." Veritext Corp. , 259 F.Supp.3d at 492. See also Parker v. Brown , 317 U.S. 341, 351, 63 S.Ct. 307, 87 L.Ed. 315 (1943) ("The Sherman Act makes no mention of the state as such, and gives no hint...