UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION ...

262 Pages·2017·14.61 MB·English

PUBLIC
UNITED STATES OF AMERICA
BEFORE THE FEDERAL TRADE COMMISSION 02 26 2018
589778
COMMISSIONERS: Maureen K. Ohlhausen, Acting Chairman
Terrell McSweeny
_______________________________________
)
In the Matter of )
)
Louisiana Real Estate Appraisers Board, ) Docket No. 9374
Respondent )
_______________________________________)
MEMORANDUM OF RESPONDENT
LOUISIANA REAL ESTATE APPRAISERS BOARD
IN OPPOSITION TO COMPLAINT COUNSEL’S
MOTION FOR PARTIAL SUMMARY DECISION
ON RESPONDENT’S FOURTH AFFIRMATIVE DEFENSE
W. Stephen Cannon
Seth D. Greenstein
Richard O. Levine
James J. Kovacs
Allison F. Sheedy
J. Wyatt Fore
Constantine Cannon LLP
1001 Pennsylvania Avenue, NW
Suite 1300 N
Washington, DC 20004
Phone: [phone]
[email protected]
Counsel for Respondent, Louisiana
Real Estate Appraisers Board
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TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................................. i 
TABLE OF AUTHORITIES .......................................................................................................... ii 
TABLE OF AFFIDAVITS ........................................................................................................... vii 
INTRODUCTION .......................................................................................................................... 1 
SUMMARY OF MATERIAL FACTS ........................................................................................... 3 
LREAB ................................................................................................................... 3 
Federal and State Regulation Over AMC Payments of Customary and
Reasonable Residential Appraisal Fees ................................................................. 4 
1. Federal Law provides for State regulation of residential appraisal
fees paid by Appraisal Management Companies. ...................................... 4 
2. The Appraisal Subcommittee ...................................................................... 6
3. The Good Faith Regulatory Compliance of the Louisiana Legislature
and the Board ............................................................................................. 8 
The Pleadings ........................................................................................................ 13 
STANDARD FOR SUMMARY DECISION ............................................................................... 13 
ARGUMENT ................................................................................................................................ 14 
I.  Good Faith Regulatory Compliance Is a Complete Defense to Antitrust Liability. ......... 14 
A.  Good Faith Regulatory Compliance Is Not an Implied Immunity. ...................... 15 
B.  The Challenged Conduct Does Not Need to Be “Compelled” by a
Regulatory Agency to Invoke the Regulatory Compliance Defense. ................... 18 
C.  The Regulatory Compliance Defense is Not Premised on “Active Federal
Supervision.” ......................................................................................................... 23 
II. Congress Passed Dodd-Frank to Prohibit Specific Marketplace Conduct. ....................... 25
A.  Congress Intended to Constrain the Pricing of Residential Appraisals. ............... 26 
B.  The Antitrust Savings Clause in Dodd-Frank Supports, Rather Than
Precludes, the Regulatory Compliance Defense. .................................................. 28 
CONCLUSION ................................................................................................................. 30 
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TABLE OF AUTHORITIES
Cases
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242 (1986) .....................................................................................................14
Cantor v. Detroit Edison Co.,
428 U.S. 579 (1976) ...............................................................................................17, 24
Credit Suisse Securities (USA) LLC v. Billing,
551 U.S. 264 (2007) ...............................................................................................16, 17
Ford Motor Credit Co. v. Milhollin,
444 U.S. 555 (1980) .....................................................................................................27
In re Currency Conversion Antitrust Litig.,
265 F. Supp. 2d 385 (S.D.N.Y 2003) ...........................................................................27
Jacobi v. Bache & Co.,
520 F.2d 1231 (2d Cir. 1975).......................................................................................15
Kennett-Murray Corp. v. Bone,
622 F.2d 887 (5th Cir. 1980) .......................................................................................14
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986) .....................................................................................................14
Mautz & Oren, Inc. v. Teamsters, Chauffeurs, and Helpers Union, Loc. No. 279,
882 F.2d 1117 (7th Cir. 1989) .....................................................................................16
Mayfield v. Gen. Elect. Capital Corp.,
1999 WL 182586, No. 97 CIV. 2786(DAB) (S.D.N.Y. Mar. 31 1999) ......................27
MCI Commc’ns Corp. v. AT&T,
708 F.2d 1081 (7th Cir. 1983) .........................................................................16, 19, 24
Mid-Texas Commc’ns Sys., Inc. v. AT&T,
615 F.2d 1372 (5th Cir. 1980) ................................................................................16, 19
Nat’l Gerimedical Hosp. and Gerontology Ctr. v. Blue Cross of Kansas City,
452 U.S. 378 (1981) ...............................................................................................16, 24
Nat’l Socy’ of Prof’l Eng’rs v. United States,
435 U.S. 679 (1978) ...............................................................................................25, 26
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Northeastern Tel. Co. v. AT&T,
651 F.2d 76 (2d Cir. 1981)...........................................................................................16
Pechinski v. Astoria Fed. Savings & Loan Ass’n,,
238 F. Supp. 2d 640 (S.D.N.Y. 2003) ....................................................................27, 28
Phonetele, Inc. v. American Telephone & Telegraph Co.,
664 F.2d 716 (9th Cir. 1981) ............................................................................... passim
Phonetele, Inc. v. American Telephone & Telegraph Co.,
889 F.2d 224 (9th Cir. 1989) ............................................................................... passim
Silver v. New York Stock Exch.,
373 U.S. 341 (1963) .....................................................................................................16
Sound, Inc. v. AT&T,
631 F.2d 1324 (8th Cir. 1980) .....................................................................................16
Southern Pacific Commc’ns Co. v. AT&T,
740 F.2d 980 (D.C. Cir. 1984) ............................................................................. passim
United States v. Nat’l Ass’n of Sec. Dealers,
422 U.S. 694 (1975) .....................................................................................................17
Verizon Commc’ns v. Law Offices of Curtis V. Trinko, LLP,
540 U.S. 398 (2004) .....................................................................................................29
Statutes
12 U.S.C. § 3331 et seq..........................................................................................................3, 6
12 U.S.C. § 3332(a)(1)(A) .........................................................................................................6
12 U.S.C. § 3332(a)(1)(B) .........................................................................................................6
12 U.S.C. § 3338(a) ...................................................................................................................6
12 U.S.C. § 3347(a) .........................................................................................................6, 7, 19
12 U.S.C. § 3347(a)5 .................................................................................................................7
12 U.S.C. § 3347(a)(1-5) .......................................................................................................7, 8
12 U.S.C. § 3353 ......................................................................................................................28
12 U.S.C. § 3353(a) ...................................................................................................................1
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12 U.S.C. § 3353(a)(1) ...............................................................................................................8
12 U.S.C. § 5303 ......................................................................................................................28
15 U.S. C § 1639e ............................................................................................................ passim
15 U.S.C. § 1639e(i) ..............................................................................................................1, 4
15 U.S.C. § 1639e(i)(1)............................................................................................................13
15 U.S.C. § 1639(e)(a) through (i) ...................................................................................7, 8, 21
Public Law
Dodd-Frank Wall Street Reform and Consumer Protection Act,
Pub. L. No 111-203 (2010) .................................................................................. passim
State Regulations
La. Adm. Code tit. 46, § 31101 et seq. ............................................................................ passim
La. Adm. Code tit. 46, § 31101(A)(1) and (3) .........................................................................12
La. Adm. Code tit. 46, § 31101(B)-(C) ....................................................................................12
State Statutes
La. R.S. 37:3391 et seq. .............................................................................................................3
La. R.S. 37:3391-3413 ...............................................................................................................8
La. R.S. 37:3394 ........................................................................................................................3
La. R.S. 37:3395 ........................................................................................................................3
La. R.S. 37:3415 et seq. .............................................................................................................2
La. R.S. 37:3415 ..............................................................................................................3, 9, 12
La. R.S. 37:3415.14 .................................................................................................................12
La. R.S. 37:3415.15(A) ..............................................................................................................9
La. R.S. 37:3415.21(B) (2013) (repealed) ...............................................................................11
La. R.S. 37:3419 ........................................................................................................................9
La. R.S. 37:3420 ........................................................................................................................9
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La. R.S. 37:3421 ........................................................................................................................9
La. R.S. 49:968(D)-(F).............................................................................................................11
La. R.S. 49:970 ........................................................................................................................12
Rules
Fed. R. Civ. P. 56 .....................................................................................................................13
Fed. R. Civ. P. 56(d) ................................................................................................................14
FTC Rule 3.24 ..........................................................................................................................13
Regulations
12 C.F.R. § 226.42(f)(2) ............................................................................................................4
12 C.F.R. § 226.42(f)(3) ............................................................................................................4
12 C.F.R. pt. 34 ..........................................................................................................................6
12 C.F.R. pt. 323 ........................................................................................................................6
12 C.F.R. pt. 1026 ......................................................................................................................6
12 C.F.R. pt. 1222 .....................................................................................................................6
12 C.F.R. § 34.213(a)...............................................................................................................12
12 C.F.R. § 34.213(b) ..............................................................................................................12
12 C.F.R. § 226.42(f) ...............................................................................................................12
12 C.F.R. § 226.42(f)(3)(iii) ....................................................................................................27
12 C.F.R. § 34.213(a)(6) ..........................................................................................................28
75 Fed. Reg. 66,554 (Oct. 28, 2010) ..................................................................................26, 27
79 Fed. Reg. 19,521 (Apr. 9, 2014) ................................................................................. passim
80 Fed. Reg. 32,658 (June 9, 2015) ...........................................................................................5
82 Fed. Reg. 43,966 (Sept. 20, 2017) ..................................................................................8, 21
Other Authorities
P. Areeda & H. Hovenkamp, Antitrust Law ¶ 246a (4th ed. 2013) ................................1, 15, 17
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P. Areeda & D. Turner, Antitrust Law ¶ 223d (1978) .............................................................24
Appraisal Subcommittee, Federal Financial Institutions Examination Council, Bulletin
No. 2015-01 at (June 17, 2015), available at https://www.asc.gov/StaticFiles/
Bulletin%20No.%202015-01%20to%20States%20-%20AMC%20Rules.pdf....................7, 20
10A C. Wright, A. Miller et al., Federal Practice and Procedure § 2712
(4th ed. & Apr. 2017 update) ...................................................................................................13
10A Wright & Miller et al., Federal Practice and Procedure § 2725 ....................................14
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TABLE OF AFFIDAVITS
Affidavit of Bruce Unangst
Affidavit of Cheryl B. Bella
Affidavit of Gayle Boudousquie
Affidavit of Michael A. Graham
Affidavit of Roland Hall
Affidavit of Heidi C. Lee
Affidavit of Clayton Lipscomb
Affidavit of Gary Littlefield
Affidavit of Leonard E. Pauley, Jr.
Affidavit of Wayne Pugh
Declaration of James J. Kovacs
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INTRODUCTION
The Louisiana Real Estate Appraisers Board (“LREAB”) promulgated and enforced its
“customary and reasonable” residential appraisal fee regulation1 in good faith, with an
objectively and subjectively reasonable belief that its actions fulfilled the requirements of the
Dodd-Frank Act,2 federal regulation, and Louisiana statutes. Complaint Counsel’s Motion does
not seriously contest these facts, and abundant evidence shows why they cannot.3
The law is equally clear: A regulated entity acting in good faith to comply with a
regulatory scheme has a complete defense to antitrust liability. See, e.g., S. Pac. Commc’ns Co.
v. AT&T, 740 F.2d 980 (D.C. Cir. 1984). The commentators concur: “Antitrust condemnation of
conduct that properly implements policies lawfully adopted by the regulators would be repugnant
to the regulatory regime.”4 This good faith regulatory compliance defense fits this case to a T.
To counsel’s knowledge, this is the first time that the Commission asserts a State agency can be
liable under Section 5 for attempting to comply with obligations Congress imposed on a State;
indeed, on that specific agency respondent.
But rather than address the evidence of reasonableness or good faith, or the actual legal
elements of LREAB’s affirmative defense, the Motion for Partial Summary Decision attempts to
foreclose LREAB’s ability to present this defense at trial by importing requirements from the
separate body of case law pertaining to implied immunity. However, both the relevant
precedents from multiple circuits and the analyses of antitrust scholars hold regulatory
1 La. Adm. Code tit. 46, pt. LXVII, Chapter 311 “Compensation of Fee Appraisers,” Sec. 31101, “General
Provisions; Customary and Reasonable Fees; Presumptions of Compliance” (hereinafter, “Rule 31101”).
2 Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 1639e(i), 12 U.S.C. § 3353(a).
3 See infra, Statement of Facts; Affidavits of Bruce Unangst and LREAB Board members.
4 P. Areeda & H. Hovenkamp, Antitrust Law ¶ 246a (4th ed. 2013).
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compliance distinct from immunity. What matters for purposes of a regulatory compliance
affirmative defense is whether the actor undertook the conduct at issue in an objectively and
subjectively reasonable good faith attempt to comply with the regime that regulates it, assessed
at the time the challenged actions were taken; here, what LREAB understood the Dodd-Frank
Act and the Louisiana AMC Act5 to require.
The Louisiana Legislature, as part of the federal scheme, in 2012 imposed upon LREAB
the obligation to monitor and enforce Appraisal Management Company (“AMC”) compliance
with Dodd-Frank’s requirements. Federal law and regulation required Louisiana to assign these
obligations to register and regulate AMCs to LREAB, as the established state appraiser licensing
agency. LREAB reasonably believed its implementation of the customary and reasonable fee
regulation was required to comport with federal and state law, to protect the mortgage services
market in Louisiana. And LREAB understood the federal government, through the Appraisal
Subcommittee of the Federal Financial Institutions Examination Council (“ASC”), monitored
and supervised state appraisal agencies, including agencies’ regulation of AMCs, and had the
authority to impose sanctions on non-compliant states. Policy statements from this same
regulatory body defined the “State boards” that regulate appraisers and AMCs as composed of
the categories of market participants that comprise LREAB.6
The regulatory compliance defense is a fact-intensive inquiry, appropriate for decision
here only upon a fully-developed record. As set forth in the attached Affidavits from LREAB’s
Executive Director and Board members, any material assertions in Complaint Counsel’s
“Statement of Undisputed Facts” are genuinely disputed, if not refuted outright.7 In any event,
5 Appraisal Management Company Licensing and Regulation Act, La. R.S. 37:3415, et seq (“the AMC Act”).
6 Infra pp. 7, 30.
7 See, e.g., LREAB’s Response to Complaint Counsel Statement of Undisputed Facts ¶¶ 13, 22-48.
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