California Dental Assn. v. California Dental Hygienists' Assn.

• Decision Date: 17 July 1990
• Docket Number: No. B,B
• Citation: 222 Cal.App.3d 49,271 Cal.Rptr. 410
• Court: California Court of Appeals Court of Appeals
• Parties: , 1990-2 Trade Cases P 69,202 CALIFORNIA DENTAL ASSOCIATION et al., Plaintiffs and Appellants, v. CALIFORNIA DENTAL HYGIENISTS' ASSOCIATION et al., Defendants and Respondents. 040189.

Page 410

271 Cal.Rptr. 410

222 Cal.App.3d 49, 1990-2 Trade Cases P 69,202

CALIFORNIA DENTAL ASSOCIATION et al., Plaintiffs and Appellants, v. CALIFORNIA DENTAL HYGIENISTS' ASSOCIATION et al., Defendants and Respondents.

No. B 040189.

Court of Appeal, Second District, Division 2, California.

July 17, 1990.

Paul Lombardo, Sacramento, Mandel & Norwood, S. Jerome Mandel and Marleigh A. Kopas, Los Angeles, for plaintiffs and appellants.

Kathleen Lucas-Wallace, San Francisco, McDermott, Will & Emery, Donald A. Goldman, Los Angeles, and Timothy J. Waters, Washington, D.C., for defendants and respondents.

FUKUTO, Associate Justice.

The decisive issue in this case is whether the labor exemption to California's Cartwright antitrust Act (Bus. & Prof.Code, § 16703) extends to concerted efforts by certain licensed professionals, acting through voluntary associations not presented as conventional labor unions, to increase and fix the levels of compensation paid them by other licensed professionals, under whose supervision they are legally required to work. Holding the exemption applicable, the superior court sustained without leave to amend the demurrer of respondents, a group of dental hygienists, to the second amended complaint of the California Dental Association and two individual dentists, which alleged respondents had conspired--by exchange of information, agreement, and boycott--to fix and inflate the compensation paid by dentists to hygienists serving under them. As will be explained, we agree that respondents' alleged "price-fixing" activities are exempt from the Cartwright Act, and accordingly we affirm the dismissal.

FACTS

The material allegations of the second amended complaint are as follows. ¹ Plaintiff California Dental Association (hereafter CDA) is an incorporated voluntary association that includes about 70 percent of licensed California dentists. Its purposes generally include representing the interests of dentists in matters affecting their profession. Plaintiffs Robert Brundin and Frank Satinover are licensed dentists who separately practice in Los Angeles County.

Defendant California Dental Hygienists' Association (hereafter CDHA) is an incorporated voluntary association of dental hygienists Having identified the parties, ² plaintiffs expound the "market." Under California law dental hygienists not only must be licensed but also--with rare exceptions in the form of pilot programs--may provide services only under the supervision of a licensed dentist (albeit the level of supervision may vary depending upon the procedures performed). ³ To this end, dentists "typically" retain hygienists to assist in providing dental services to the dentists' patients, including procedures commonly known as cleaning of teeth. Dentists most often contract for a hygienist's services on a "temporary" basis, e.g., two days a week; "[i]t is unusual for a dentist to retain an individual hygienist on a full time, 5 days a week basis." Hygienists usually are paid either a per diem (e.g, $180 a day) or a percentage commission, such as 40 percent of the dentist's charges to the patient for the hygienist's procedures. Because of the requirements of supervision, hygienists cannot themselves directly bill patients; rather, they bill the dentist who supervises their work, while the dentist charges the patient a dentist's fee that "covers" the services provided by the hygienist. Hygienists "compete among themselves" to work in dental offices "for a fee and at a price to be paid by the dentist or dental office directly to the hygienist." From the foregoing, plaintiffs conclude that dentists are purchasers or consumers of dental hygienist services, and hygienists are sellers or providers of services to the dentists, albeit that "[i]n this setting dental hygienist services rendered to a patient must be provided under the supervision of a licensed dentist." ⁴

                who are licensed to practice by the Board of Dental Examiners.  On information and belief, "CDHA members constitute a significant, if not majority, share of the market power of the dental hygienist services providers in California."   Defendant Shea Shannon is a licensed dental hygienist and a past president of CDHA.  She is alleged to have acted, in part, independently of that position.  Finally, each of defendants Los Angeles Dental Hygienists Society and San Francisco Component of the California Dental Hygienists' [222 Cal.App.3d 54] Association (hereafter "LA Hygienists" and "SF Hygienists") is alleged to be "a component or local society of CDHA ... [but] a business entity legally separate, distinct and apart from CDHA."   Again on information and belief, plaintiffs allege that CDHA, LA Hygienists, and SF Hygienists "are not unions or collective bargaining representatives under state or federal law, and have never negotiated a single collective bargaining agreement with any employer or representative of an employer of dental hygienists."
                

Plaintiffs proceed to allege that within the preceding four years, the defendants "have combined, conspired, and agreed together to restrain trade and fix and maintain the price and/or commission at which dental hygienists will and do provide services to dentists and dental offices throughout the State of California." In summary, defendants have eliminated competition for "the cost and price of dental hygienist services provided to dentists," and have "clandestinely exchanged" information as to the fees of hygienists in 24 areas of the state served by CDHA, with the intent and effect of increasing those prices throughout the state. The next paragraph of the complaint, including a set of exhibits incorporated by reference, describes the following actions taken in pursuance of the alleged combination and conspiracy.

(1) Defendants have conducted "secret" surveys of their members and others, thereby ascertaining the fees ("salaries" in the original two complaints) paid hygienists in CDHA's 24 geographic regions. The (2) Defendants have conducted seminars and workshops at which they disseminate the survey results to CDHA members, with the purpose and effect of fixing or at least increasing prices and costs of hygienist services. CDHA has told its members that participating in these activities and "adherence" to the survey results will increase the price and cost of their services, and conversely that those who do not participate will not earn increased fees.

survey results have been circulated to CDHA's individual members and local components, with the purpose and effect of "restraining trade and artificially increasing the fees and/or commissions for dental hygienist services provided by dental hygienists to dentists...." Attached as exhibits are exemplary copies of defendants' survey materials. They include forms for reporting hygienists' salaries or commissions, fees for particular procedures, fringe benefits, and number of patients seen, with respect to each dental office served by the responding hygienist. The survey results consist of a one-page table summarizing the average daily income of hygienists for the years 1985, 1986, and 1987, listed by reference to 23 of CDHA's 24 geographical "components."

(3) CDHA, LA Hygienists, SF Hygienists, and certain Doe defendants have conducted employment referral programs for their hygienist members, with the purpose and effect of restraining trade and artificially increasing hygienist fees. On information and belief, attendance at the employment workshops is a precondition to using these referral services; plaintiffs attach 1985 board minutes of SF Hygienists, reciting that "anyone who wants to use the employment service must take the workshop," offered by defendant Shannon. Apparently through these referral programs, the association defendants either have refused to refer member hygienists to dentists who will not pay the fixed prices demanded, or have encouraged their members not to provide services to (in the first amended complaint, "not to work for") or interview with dentists who will not meet the price demands.

(4) Shannon has encouraged hygienists, at seminars she conducts, to refuse to work for dentists who do not pay the cost or price ("salaries," in the first amended complaint) fixed by defendants, and to exchange information about the rates hygienists charge, with the goal and effect of "artificially" elevating the price of hygienist services. On information and belief, CDHA as well as Shannon have encouraged hygienists to exchange such price information orally, to conceal the exchange and avoid antitrust liability.

(5) Finally, CDHA has conspired with non-defendant entities, including commercial employment agencies, to suppress competitive price and commission information. To this effect, plaintiffs attach a newsletter from a Los Angeles employment agency serving dental offices, which listed salary averages for dental hygienists and other dental office personnel in California, the Midwest, and the Southeast, and a responsive letter from then CDHA president Shannon. The letter stated that publication of these rates threatened either the jobs or the salary levels of hygienists earning more, and urged either that such figures not be published and instead be disclosed orally, or that no "ceiling" be placed on them.

Concluding their statement of cause of action, plaintiffs allege that as a consequence of defendants' alleged acts: (a) competition for the price of hygienist services has been restrained and eliminated; (b) the price at which those services are provided (in the first amended complaint, "i.e., salaries of dental hygienists") has been maintained at "a high and artificial level;" and (c) dentists have been "deprived of the benefit of free, competitive negotiations" for the purchase of such services (in the first amended complaint, "determination of salary levels") and have been forced to accept artificially high fee terms (in the first amended complaint, "salari...