By Robert B. Barnett Jr., J.D.
The FTC argues that the Alabama board is trying to end-run the administrative process by filing suit to stop an FTC investigation into the board’s alleged antitrust practices.
The FTC has filed a motion to diFRANCHISING &smiss a suit brought by the Board of Dental Examiners of Alabama in the federal district court in Birmingham, Alabama, asserting that the Board’s proper remedy is to assert its rights administratively with the FTC rather than to file a separate suit asking an Alabama federal court to halt the investigation. The federal courts, the FTC argues, have no jurisdiction to hear challenges to preliminary, non-final agency actions, such as investigation into the Board’s alleged antitrust practices (Board of Dental Examiners of Alabama v. FTC, Case No. 2:20-cv-01310-SGC).
Background. The Board of Dental Examiners of Alabama, which regulates dental practices in Alabama, enacted a rule prohibiting non-dentist personnel from taking pictures inside a patient’s mouth unless they were supervised by an on-site dentist. The Board then sent a cease-and-desist leader to SmileDirectClub, LLC, a leading teledentistry provider.
The FTC launched an investigation into whether the Board harmed competition and consumers by restricting access to services offered by teledentistry platforms such as SmileDirectClub. To begin the investigation, the FTC issued a civil investigative demand (CID) to the Board. Those who receive a CID have 20 days to respond. Rather than respond to the CID, the Board filed a declaratory judgment action in Alabama federal court, seeking to stop the investigation by having the court declare that the Board had the right to issue the rule. The Board’s key argument was that, as an arm of the state, it was immune from suit under the state-action doctrine. The FTC’s motion to dismiss asserted both that the Alabama federal court had no subject matter jurisdiction and that the Board’s complaint failed to state a claim.
Subject matter jurisdiction. The lack of subject matter jurisdiction claim was based on two arguments. First, under the Administrative Procedures Act (APA), the federal courts have no jurisdiction to hear challenges to non-final agency actions. The proper remedy, the FTC argues, would be for the Board to respond to the CID and contest the investigation with the FTC. At present, all that exists is a preliminary investigation that may or may absolve the Board. Second, the Board has not exhausted its administrative remedies prior to filing suit, as is required by the APA. The Board will have every opportunity to raise its arguments, including state immunity, in future proceedings. Only when those administrative remedies are exhausted can the Board seek redress in the federal courts.
Failure to state a claim. The FTC contends that the Board’s complaint failed to state a claim because the state-action doctrine argument is wrong as a matter of law. Although it might provide immunity from liability, it provides no protection from an investigation, which is all that exists at present. Furthermore, court resources could be wasted in adjudicating the declaratory judgment action, given that the FTC investigation could reveal no wrongdoing by the Board.
This case is No. 2:20-cv-01310-SGC.
Attorneys: Robert Ashby Pate (Lightfoot Franklin & White LLC) for Board of Dental Examiners of Alabama. Mariel Goetz for the FTC.
Companies: Board of Dental Examiners of Alabama
MainStory: TopStory Antitrust FederalTradeCommissionNews AlabamaNews GCNNews
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