Antitrust Law Daily Supreme Court to consider dental board’s right to state action immunity in FTC suit
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Monday, March 3, 2014

Supreme Court to consider dental board’s right to state action immunity in FTC suit

By Jeffrey May, J.D.

The U.S. Supreme Court today agreed to consider whether a North Carolina state dental board should be considered a “private” actor for purposes of the state action immunity doctrine, simply because the majority of its board members are market participants elected by other market participants. The Court will review a decision of the U.S. Court of Appeals in Richmond, Virginia (717 F.3d 359, 2013-1 Trade Cases ¶78,406), upholding an FTC finding that the North Carolina State Board of Dental Examiners was not immune under the state action doctrine for excluding non-dentist providers from the market for teeth whitening services in violation of Sec. 5 of the FTC Act (North Carolina State Board of Dental Examiners v. FTC, Dkt. 13-534).

The North Carolina State Board of Dental Examiners filed its petition for certiorari on October 25, 2013. In its petition, the board questioned the appellate court’s holding that state agencies “in which a decisive coalition (usually a majority) is made up of participants in the regulated market,” chosen by and accountable to their fellow market participants, are private actors that are entitled to state action immunity only where their challenged conduct is both pursuant to a “clearly articulated and affirmatively expressed” state policy and “actively supervised by the State itself.”

The petitioner contends that the Fourth Circuit erred by imposing the active-supervision requirement on the board. The holding is said to conflict with decisions of the Fifth Circuit (Earles v. State Bd. of Certified Public Accountants of Louisiana, 139 F.3d 1033, 1998-1 Trade Cases ¶72,135), and the Ninth Circuit (Hass v. Oregon State Bar, 883 F.2d 1453, 1989-2 Trade Cases ¶68,732). Those cases held that the active-supervision requirement does not apply to an official state agency’s acts, even though the agency’s officers were required under state law also to be private market participants whose selection for office was caused by other private market participants, according to the petitioner.

According to the board, the Supreme Court in Town of Hallie v City of Eau Claire (471 U.S. 34, 1985-1 Trade Cases ¶66,484), suggested that a state agency would not be required to demonstrate active state supervision for state action immunity.

The petitioner also cited the Supreme Court’s recent decision in FTC v. Phoebe Putney Health System, Inc. (133 S. Ct. 1003, 2013-1 Trade Cases ¶78,269), for the proposition that the antitrust laws “should not be read to bar States from imposing market restraints ‘as an act of government.’” The Court in Phoebe Putney reversed an Eleventh Circuit decision (663 F.3d 1369, 2011-2 Trade Cases ¶77,722) holding that the effective merger of the only two competing hospitals in the Albany area was immune under the state action doctrine from an FTC challenge. The appellate court was found to have “applied the concept of ‘foreseeability’ from our clear-articulation test too loosely.”

Support for petitioner

The American Dental Association, the American Medical Association, and other professional associations had urged the Court to take the case. Last November, the groups filed a friend-of-the-court brief, supporting the dental board’s petition.

“The importance of this case to our members is that permitting the FTC to challenge the actions of dental boards, which are agencies of the state, severely restricts the ability and the willingness of the boards to do what they were constituted to do, including regulating the practice of dentistry,” said American Dental Association General Counsel Craig Busey. “Moreover, one of the real issues here is whether the federal government should be allowed to assert itself in matters that are clearly within the domain of the states.”

In addition, 10 states asked the Court to review the appellate court’s decision. A bipartisan group of attorneys general—representing the states of Alabama, Colorado, Delaware, Florida, Kansas, Maryland, North Carolina, Ohio, South Carolina, and West Virginia—argued that the Fourth Circuit’s ruling not only creates a circuit split, but also creates an uneven playing field between states. The ruling will force states to create more levels of bureaucracy, which will add costs and unnecessary delays, it was argued.

“This case is incredibly important to licensing boards in West Virginia because the Fourth Circuit’s ruling would force the state to review practically every decision a board makes,” West Virginia Attorney General Morrisey said. “If West Virginia chooses in state code to establish boards made up of professionals in specific areas to regulate and license their peers, the state should be able to do so without fearing the federal government will come in and tell us we are doing it wrong or violating antitrust laws.”

Attorneys: Glen D. Nager (Jones Day) for North Carolina Board of Dental Examiners. Donald B. Verrilli Jr., Solicitor General, for FTC. Jack R. Bierig (Sidley Austin LLP) for American Dental Assn. and American Medical Assn.

Companies: North Carolina Board of Dental Examiners; American Dental Assn.; American Medical Assn.

MainStory: TopStory Antitrust FederalTradeCommissionNews

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