Author: Jarod Bona
The United States Court of Appeals for the Fifth Circuit agreed on July 17, 2018 to stay the FTC’s Action against the Louisiana Real Estate Appraisers Board.
The Fifth Circuit’s one-line decision rejects the FTC’s opposition to the Board’s requested stay and allows immediate appellate review of the FTC’s significant state-action-immunity rejection.
This FTC administrative action arises out of allegations that a Louisiana board of appraisers required appraisal management companies to pay appraisers what it described as a “customary and reasonable” fee for real estate appraisal services. The FTC argues that this is illegal price-fixing, which, of course, violates Section 5 of the FTC Act.
What is particularly interesting about this case is that it addresses one of the most significant applications of the active supervision prong of the state-action-immunity doctrine since the US Supreme Court decided NC Dental.
You might recall that, in most cases, entities that want to claim state-action immunity must satisfy both prongs of the Midcal test: (1) the challenged restraint must be clearly articulated and affirmatively expressed as state policy; and (2) the policy must be actively supervised by the state itself.
As we described in our prior article, Commissioner Ohlhausen effectively addressed important factual and legal issues that make up the active-supervision standard, offering useful guidance to boards and those that challenge them under the antitrust laws.
For example, the FTC applied three elements that it held—in this case—form part of active supervision: (1) the development of an adequate factual record; (2) a written decision on the merits; and (3) a specific assessment of how the private action compares with the substantive standard from the legislature.
While the Fifth Circuit’s stay decision is not good news for the FTC’s current action, it may be good news for state boards and others that want guidance on the active-supervision requirements of state-action immunity.
The Supreme Court’s NC Dental decision offered some parameters of what doesn’t constitute active supervision, mostly from prior cases. But at this point, the law is light on the specifics. A federal appellate decision that fully engages on these issues will help state boards, victims of state boards, district courts, and, in fact, the Federal Trade Commission.
Besides the substantive active supervision issue, this case presents the drama of the Louisiana governor trying to get around the state-supervision deficiencies through executive order in response to the FTC’s initial antitrust complaint. The board argued that the executive order made the FTC’s case moot. The FTC, of course, rejected that argument.
So it is possible that the Fifth Circuit could decline to rule on substantive issues and instead decide that the Louisiana governor’s maneuvering solves the antitrust problem by restoring immunity from antitrust liability.
But, despite that possibility, those that have a stake in the future constitution of the active-supervision requirement or state-action immunity itself should consider filing an amicus brief so they can be heard.
It will likely take a few years for multiple federal appellate courts to address the active supervision issue, but I wouldn’t be surprised to see the US Supreme Court eventually take it up again, as there are a lot of gaps left to fill in and the various circuits may not agree on exactly how to do it.
In any event, it looks like the Fifth Circuit will have the first real shot at it. I hope they get it right.