Boddicker v. Arizona State Dental Ass'n, 75-1846
| Decision Date | 06 January 1977 |
| Docket Number | No. 75-1846,75-1846 |
| Citation | 549 F.2d 626 |
| Parties | , 1977-1 Trade Cases 61,258 Vernon S. BODDICKER, Richard W. Peay, Hugh L. Thompson and Dwight G. Hudson, Plaintiffs-Appellants, v. ARIZONA STATE DENTAL ASSOCIATION, an Arizona Non-Profit Corporation, Central Arizona Dental Society, an Arizona Non-Profit Corporation, American Dental Association, an Illinois Non-Profit Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Carl W. Divelbiss, Phoenix, Ariz. (argued), Erhard, Cox & Ruebel, Dallas, Tex., Divelbiss & Gage, Phoenix, Ariz., for plaintiffs-appellants.
Peter M. Sfikas (argued), of Peterson, Ross, Rall, Barber & Seidel, Chicago, Ill., David L. White (appeared), of Jennings Appeal from the United States District Court for the District of Arizona.
Strouss, & Salmon, Phoenix, Ariz., for defendants-appellees.
Before GOODWIN and SNEED, Circuit Judges, and FITZGERALD, * District Judge.
This case comes before us as an appeal from a dismissal by the district court of plaintiffs' amended complaint for lack of subject matter jurisdiction under §§ 1 and 2 of the Sherman Act 1 and for failure to state a claim upon which relief could be granted. 2 Plaintiffs, licensed dentists within the State of Arizona, alleged that the American Dental Association (hereinafter referred to as the "ADA"), the Arizona State Dental Association (hereinafter referred to as the "ASDA"), and the Central Arizona Dental Society (hereinafter referred to as the "CADS"), have agreed among themselves to require membership in the ADA as a condition precedent to membership in the ASDA and the CADS, thus creating an anticompetitive tying arrangement by coupling participation in the local organizations' beneficial programs to membership in the ADA. Plaintiffs contend that this practice violates §§ 1 and 2 of the Sherman Act. The case involves two questions: whether plaintiffs' amended complaint adequately alleges a restraint of trade substantially affecting interstate commerce, and whether dentistry as a "learned profession" is exempt from the application of the Sherman Act. 3
For the purposes of a review of a dismissal on the pleadings, we accept as true plaintiffs' material allegations in their first amended complaint. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976); Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948).
Defendants ASDA and CADS are nonprofit corporations organized under the laws of Arizona. Briefly summarized, the identical objectives and purposes of the ASDA and the CADS are to improve public health and the profession of dentistry by encouraging research, disseminating new knowledge in the profession, advancing the standard of dental education, enlightening the public in relation to oral hygiene and advanced dental service, and promoting and maintaining a high order of professional excellence. Membership in the ASDA and the CADS is not a prerequisite to the practice of dentistry in Arizona; plaintiffs, however, derive substantial benefits from such membership including participation in continuing education programs, group insurance, the exchange of information with and the referral of patients by fellow members, and the entry into various specialty organizations of dentistry. Pursuant to the by-laws of the ADA and the ASDA, a dentist may not become or remain a member in good standing in the ASDA or the CADS without also being a member of the ADA. The by-laws of the ADA designate the ASDA as a constituent society; the by-laws of the ASDA designate the CADS as a component society. The ASDA and the CADS remit the dues which they collect on behalf of the ADA to the ADA at its central office in Illinois. Plaintiff Vernon S. Boddicker tendered the annual dues for the ASDA and the CADS, excluding the annual dues for the ADA; the CADS rejected this tender and with the ASDA dropped him from their rolls. Plaintiffs Richard W. Peay and Hugh L. Thompson paid under protest the annual dues of all three organizations in order to retain their status as members in good standing of the ASDA and the CADS.
Defendant ADA is a non-profit corporation organized under the laws of the State of Illinois. It provides a large range of services for dentists across the nation. A sampling of its nationwide activities is as follows: the publication and dissemination of journals, a newspaper, and newsletters, the conducting of dental aptitude tests, the accreditation of dental programs for hospitals, the providing of insurance programs for its members, and the dispatch of speakers to various states. As a result of its system of designating local organizations as constituent societies, which in turn require membership in it as a condition precedent to constituent society membership, the ADA collected in annual dues for 1972 an amount in excess of $6,000,000.
According to the amended complaint, expulsion from the local societies for failure to pay the ADA's dues will impair the ability of plaintiffs to practice dentistry in that they will be prevented from participating in the programs and activities of the ASDA and the CADS. Moreover, plaintiffs alleged that payment of dues to the ADA for which they receive no benefit is an unreasonable condition to membership in the ASDA and the CADS, and that this financial burden is passed on to the consumer in the form of increased dental costs. They also allege that the practice of dentistry throughout the nation is similarly affected.
In enacting the Sherman Act, Congress intended that the jurisdictional reach of the Act be coterminous with Congress' constitutional power to regulate commerce. Mandeville Island Farms, Inc. v. American Crystal Sugar Co., supra; United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944); Rasmussen v. American Dairy Ass'n, 472 F.2d 517 (9th Cir. 1972), cert. denied, 412 U.S. 950, 93 S.Ct. 3014, 37 L.Ed.2d 1003 (1973).
This court has traced the history of the coordinated expansion of the Commerce Power and the reach of the Sherman Act many times. We need not retrace it here. The presence of Sherman Act jurisdiction depends on whether it is within the power of Congress to regulate the defendants' conduct of which the plaintiffs complain. The answer is clearly affirmative. Congressional power exists when the conduct exerts a "substantial economic effect" on interstate commerce. Wickard v. Filburn, 317 U.S. 111, 125, 63 S.Ct. 82, 87 L.Ed. 122 (1942); Rasmussen v. American Dairy Ass'n, supra. Viewed from the jurisdictional standpoint of the Sherman Act, the Supreme Court recently indicated that the critical inquiry is "the adequacy of the nexus between (defendant's) conduct and (the) interstate commerce that is alleged in the complaint." Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. at 742, 96 S.Ct. at 1851 n.1. The nexus is unquestionably adequate here. The multistate scope of the ADA's membership, programs, and dues arrangements with local societies demonstrates this. These activities make possible a flow of funds, both from the individual dentists to the ADA and from the ADA to others, that substantially affects interstate commerce. 4 Moreover, the exclusion of the plaintiffs from the ASDA and the CADS pursuant to the dues arrangement can be considered "an inseparable element of a larger program dependent for its success upon activity which affects commerce between the states." 5 In any event, at this stage of the proceedings, we cannot say that the challenged practices are more tenuous and remote from interstate commerce than were the practices of lawyers successfully challenged under the Sherman Act in Goldfarb v. Virginia State Bar, 421 U.S. 773, 781-85, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975).
Therefore, we hold that the allegations contained within the first amended complaint set forth practices not beyond the reach of the Sherman Act.
To dispose of the second question which this case presents, viz. whether dentistry is exempt from the Sherman Act as a "learned profession," we must consider primarily two recent Supreme Court decisions.
The first is Goldfarb v. Virginia State Bar, supra, in which the Court renounced an unlimited exemption from the Sherman Act for "learned professions." It stated:
The nature of an occupation, standing alone, does not provide sanctuary from the Sherman Act . . . . Congress intended to strike as broadly as it could in § 1 of the Sherman Act, and to read into it so wide an exemption as that urged upon us would be at odds with that purpose. 421 U.S. at 787, 95 S.Ct. at 2013.
In addition, it held that attorneys engaged in "commerce" when, under the circumstances of the case, they examined land titles in exchange for money and that the conduct of the Fairfax County Bar and the Virginia State Bar in publishing and enforcing minimum fee schedules amounted to price fixing in violation of section 1 of the Sherman Act.
The Court, however, did not hold that professions and their practices should be analyzed for Sherman Act purposes precisely as are ordinary commercial enterprises. This is made clear by the opinion's footnote 17 which reads as follows:
The fact that a restraint operates upon a profession as distinguished from a business is, of course, relevant in determining whether that particular restraint violates the Sherman Act. It would be unrealistic to view the practice of professions as interchangeable with other business activities, and automatically to apply to the professions antitrust concepts which originated in other areas. The public service aspect, and other features of the professions, may require that a particular practice, which could properly be viewed...
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