PUBLIC UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION 11 27 2017 _______________________________________ 588835 In the Matter of Louisiana Real Estate Appraisers Board, Docket No. 9374 Respondent _______________________________________ MOTION TO DISMISS COMPLAINT Pursuant to Rule 3.22 of the Commission Rules of Practice, Respondent Louisiana Real Estate Appraisers Board (“LREAB” or the “Board”), through undersigned counsel, hereby moves the Commission to dismiss the Part 3 Administrative Complaint, dated May 30, 2017. Oral argument is requested. To summarize the grounds for this Motion set forth in the accompanying Memorandum of Points and Authorities, the Board states as follows: 1. The actions of the Board are State actions that are immune from federal antitrust scrutiny under Cal. Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 105-06 (1980). Louisiana law clearly articulates the intent to displace competition in the market for residential real estate appraisal fees by requiring enforcement of the obligation of Appraisal Management Companies (“AMCs”) to compensate residential appraisers at “customary and reasonable” (“C&R”) rates, and the State of Louisiana actively supervises the Board’s regulatory activities. 2. Under an Executive Order issued by the Governor of the State of Louisiana on July 11, 2017, the Board has repromulgated its C&R fee rule under newly-required active supervision of the Commissioner of Administration—who has authority to approve, reject, or modify the 1 PUBLIC Board-proposed regulation—in addition to supervision by oversight subcommittees of the Louisiana Senate and House Commerce Committees and the Governor. Through this active supervision, the State of Louisiana reaffirmed that the Board’s C&R fee regulation serves Louisiana’s policy of protecting the integrity of residential mortgage appraisals by requiring that AMCs pay customary and reasonable fees for such appraisals. Further, all proposed actions by the Board to enforce its repromulgated C&R regulation, from initiation of an investigation through hearing, are subject to prior review and active supervision by an independent Administrative Law Judge of the Division of Administrative Law, who is empowered to approve, reject, or modify such proposed enforcement actions. 3. The Board has eliminated any ongoing or prospective effects of its prior regulation. 4. Accordingly, none of the contemplated relief sought in the Complaint can be granted under the doctrines of State action immunity and mootness. Wherefore, the Board respectfully asks the Commission to grant this Motion and dismiss the Complaint with prejudice. A proposed Order is appended. Dated: November 27, 2017 Respectfully submitted, /s/ W. Stephen Cannon W. Stephen Cannon Seth D. Greenstein Richard O. Levine James J. Kovacs Kristen Ward Broz Constantine Cannon LLP 1001 Pennsylvania Avenue, NW, Ste. 1300N Washington, DC 20004 Phone: 202-204-3500 [email protected] Counsel for Respondent, Louisiana Real Estate Appraisers Board 2 PUBLIC UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION _______________________________________ In the Matter of Louisiana Real Estate Appraisers Board, Docket No. 9374 Respondent _______________________________________ [PROPOSED] ORDER ON RESPONDENT’S MOTION TO DISMISS THE COMPLAINT This matter comes before the Commission on Respondent’s November 27, 2017 Motion to Dismiss the Complaint. Having considered the Motion to Dismiss, any opposition thereto, and the Commission being fully informed, it is hereby, ORDERED that the Motion to Dismiss the Complaint is GRANTED and the Complaint is dismissed with prejudice. By the Commission. ISSUED: _________________ ___________________________ Donald S. Clark Secretary PUBLIC UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION _______________________________________ In the Matter of Louisiana Real Estate Appraisers Board, Docket No. 9374 Respondent _______________________________________ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF RESPONDENT LOUISIANA REAL ESTATE APPRAISERS BOARD TO DISMISS THE COMPLAINT W. Stephen Cannon Seth D. Greenstein Richard O. Levine James J. Kovacs Kristen Ward Broz Constantine Cannon LLP 1001 Pennsylvania Ave. NW, Ste. 1300N Washington, DC 20004 Phone: 202-204-3500 [email protected] Counsel for Respondent, Louisiana Real Estate Appraisers Board November 27, 2017 PUBLIC Table of Contents Table of Contents ............................................................................................................................. i Table of Authorities ....................................................................................................................... iii Table of Exhibits ............................................................................................................................ vi INTRODUCTION .......................................................................................................................... 1 STANDARD OF REVIEW ............................................................................................................ 3 BACKGROUND OF FEDERAL, STATE, AND BOARD REGULATION OF AMCS AND CUSTOMARY AND REASONABLE RESIDENTIAL APPRAISAL FEES..................... 3 A. LREAB ................................................................................................................... 3 B. Pleadings ................................................................................................................. 4 C. 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. Louisiana’s AMC Act and initial promulgation of Rule 31101 ................... 6 D. Executive Order 17-16 and Additional Supervision Over the Readoption and Enforcement of Replacement Rule 31101 .............................................................. 7 1. Executive Order of the Governor of Louisiana........................................... 7 2. LREAB implementation of Executive Order 17-16 ................................... 8 3. Initiating repeal of Prior Rule 31101 and promulgation of Replacement Rule 31101 .................................................................................................. 9 4. LREAB contracts for DAL supervision over enforcement of Replacement Rule 31101. ......................................................................... 11 5. Further LREAB acts to eliminate potential future effects under Prior Rule 31101 ................................................................................................ 13 6. Final supervisory review and adoption of Replacement Rule 31101 ....... 13 ARGUMENT ................................................................................................................................ 14 I. LREAB’s Promulgation and Implementation of Replacement Rule 31101 are Immune From Antitrust Liability Under the State Action Doctrine. .............................................. 14 A. The Louisiana Legislature has Clearly Articulated its Policy to Displace Competition in the Market for Residential Real Estate Appraisal Fees. .............. 15 i PUBLIC B. The State of Louisiana Actively Supervises the Board’s Activities Related to Customary and Reasonable Fees. ......................................................................... 18 II. All Contemplated Relief Sought in the Commission’s Complaint Has Been Achieved and is Moot. ...................................................................................................... 22 A. The Board Resolution and Subsequent Events Eradicate all Potential Effects of Alleged Past Conduct. ...................................................................................... 23 B. There is No Reasonable Expectation That the Alleged Violation Can Recur. ..... 24 C. The “Voluntary Cessation” Exception to the Mootness Doctrine Does not Apply. ............................................................................................................. 26 CONCLUSION ............................................................................................................................. 29 ii PUBLIC Table of Authorities Cases Already LLC v. Nike, Inc., 568 U.S. 85 (2013) ............................................................................. 26 Am. Cargo Transp., Inc. v. United States, 625 F.3d 1176 (9th Cir. 2010) ................................... 27 Ayyoubi v. Holder, 712 F.3d 387 (8th Cir. 2013) ......................................................................... 26 Bahnmiller v. Derwinski, 923 F.2d 1085 (4th Cir. 1991) ............................................................. 27 Bench Billboard Co. v. City of Cincinnati, 675 F.3d 974 (6th Cir. 2012) .................................... 27 Brown v. Buhman, 822 F.3d 1151 (10th Cir. 2016) ...................................................................... 27 Burlington N. R.R. Co. v. Crow Tribal Council, 940 F.2d 1239 (9th Cir. 1991).......................... 22 Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) ...... 15, 20, 22, 25 Campbell v. Greisberger, 80 F.3d 703 (2d Cir. 1996) .................................................................. 23 Citizens