Nat'l Ass'n Of Optometrists & Opticians v. Brown

• Decision Date: 28 April 2010
• Docket Number: No. CIV. S-02-1464 LKK/DAD.,CIV. S-02-1464 LKK/DAD.
• Citation: 709 F.Supp.2d 968
• Court: U.S. District Court — Eastern District of California
• Parties: NATIONAL ASSOCIATION OF OPTOMETRISTS & OPTICIANS; LENSCRAFTERS, INC; and Eye Care Centers of America, Inc., Plaintiffs,v.Edmund G. BROWN, Jr., in his official capacity as Attorney General of the State of California; and Charlene Zettel, in her official capacity as Director of the Department of Consumer Affairs, Defendants.

709 F.Supp.2d 968

NATIONAL ASSOCIATION OF OPTOMETRISTS & OPTICIANS; LENSCRAFTERS, INC; and Eye Care Centers of America, Inc., Plaintiffs,v.Edmund G. BROWN, Jr., in his official capacity as Attorney General of the State of California; and Charlene Zettel, in her official capacity as Director of the Department of Consumer Affairs, Defendants.

No. CIV. S-02-1464 LKK/DAD.

United States District Court E.D. California.

April 28, 2010.

Barry Evan Friedman, New York University School of Law, New York, NY, Lori A. Schechter, Morrison & Foerster LLP, San Francisco, CA, for Plaintiffs.

Linda K. Schneider, Sherry Lynn Ledakis, State of California, Office of the Attorney General, San Diego, CA for Defendants.

ORDER

LAWRENCE K. KARLTON, Senior District Judge.

This case concerns the constitutionality of certain California statutes and regulations. These statutes and regulations prohibit optical companies from offering prescription eyewear at the same location in which eye examinations are provided and from advertising that eyewear and eye examinations were available in the same location. Plaintiffs, an association of optometrists and opticians and two out-of-state optical companies, contend that these statutes and regulations violate the dormant Commerce Clause because their burden on interstate commerce excessively outweighs the local benefits of the law. Plaintiffs and defendants each bring cross-motions for summary judgment. For the reasons described below, plaintiffs' motion is denied and defendants' motion is granted.

I. BACKGROUND¹

In 2002, plaintiffs, the National Association of Optometrists and Opticians (“NAOO”) and two out-of-state optical companies, LensCrafters, Inc. (“LensCrafters”) and Eye Care Centers of America, Inc. (“ECCA”), filed a complaint against defendants, the Attorney General of California and the Director of the California Department of Consumer Affairs, seeking declaratory and injunctive relief. Plaintiffs challenge Sections 655, 2556, and 3130 of California's Business & Professions Code and their companion regulations, 16 California Code of Regulations, Title 16, Sections 1399.251 and 1514. These provisions prohibit optical companies from offering prescription eyewear at the same location in which eye examinations are provided and from advertising that eyewear and eye examinations are available at the same locations. Optometrists and ophthalmologists who are unaffiliated with optical companies, however, may offer prescription eyewear at the same location in which eye examinations are provided and may advertise these services.

Plaintiffs allege that these statutes and regulations violate the dormant Commerce Clause because local optometrists and ophthalmologists may offer “one-stop shopping” of both eyewear and eye examinations, which they contend is the preferred or dominant business model, and out-of-state optical companies are prohibited from providing the same one-stop shopping. Defendants argue that these statutes and regulations do not violate the dormant Commerce Clause because they promote the health of Californians by protecting the optometric profession from being taken over by large business interests.

In 2003, plaintiffs and defendants filed their first cross-motions for summary judgment. On March 10, 2004, before the court issued an order on these motions, the case was stayed pending resolution of People v. Cole, 38 Cal.4th 964, 44 Cal.Rptr.3d 261, 135 P.3d 669 (2006). This court then granted plaintiffs' motion for summary judgment and denied defendants' motion on the ground that “the challenged laws substantially effect and discriminate against interstate commerce and therefore are subject to strict scrutiny under the dormant Commerce Clause.” Nat'l Ass'n of Optometrists & Opticians v. Lockyer ( “Lockyer” ), 463 F.Supp.2d 1116, 1138 (E.D.Cal.2006). This court continued to hold that, “Although California has legitimate interests in regulating the provision of health services, defendants have failed to meet [their] burden of showing that [they have] no other means to advance [their] interests.” Id. As such, this court concluded that the laws and regulations violate the dormant Commerce Clause.

Defendants appealed. On May 28, 2009, the Ninth Circuit reversed this court's decision and remanded the case for the court to conduct the Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), balancing test. Nat'l Ass'n of Optometrists & Opticians v. Brown ( “Brown” ), 567 F.3d 521, 528 (9th Cir.2009). The Ninth Circuit held that the challenged laws and regulations are not discriminatory under the dormant Commerce Clause because opticians, including optical chains like LensCrafters, are not similarly situated to optometrists and ophthalmologists.

The Ninth Circuit first concluded that “the dormant Commerce Clause is applicable to this case because the retail sale of eyewear involves and affects interstate commerce such that Congress could regulate in that area.” Id. at 524. The court continued, however, to reverse this court's ruling that the laws and regulations were discriminatory. Specifically, the court reversed this court's ruling (based upon the statement of the chief sponsor of the challenged provisions) that the regulatory scheme was intended as economic protectionism favoring California business. Id. at 525. Rather, the Ninth Circuit decided that, “[T]he statement is clear that the sponsor's objective was to protect California's optometric profession from being taken over by large business interests, as had been experienced in eastern states.” Id. Thus, the Ninth Circuit held that the challenged provisions did not have a discriminatory purpose.

The Circuit then looked to whether the laws and regulations had a discriminatory effect on interstate commerce. This question turned on the definition of similarly situated entities. Plaintiffs argued, and this court held, that optometrists and ophthalmologists were similarly situated to opticians, including optical chains, because they “compete in the same market, with the same produces, for the same customers.” Lockyer, 463 F.Supp.2d at 1129. The Ninth Circuit, however, decided that optometrists and ophthalmologists are not similarly situated with opticians. That court held that, “As health care providers, optometrists and ophthalmologists clearly have special responsibilities that opticians do not, and as commercial concerns, opticians have business structures available to them that optometrists and ophthalmologists do not.” Brown, 567 F.3d at 527.

The Court of Appeals continued to apply Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 125-26, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978), to conclude that optometrists and ophthalmologists are not similarly situated to opticians. This court previously held that Exxon “is clearly distinguishable.” Lockyer, 463 F.Supp.2d at 1127. Specifically, this court reasoned,

Unlike Exxon, in the instant case, California has enacted a statutory scheme which has the practical effect of barring all out-of-state entities from offering one-stop shopping, while reserving for the principal in-state competitors the right to provide the competitive advantage. [¶] In Exxon, the Court found that interstate dealers were able to compete in the same manner as in-state service station owners under the Maryland law. Only gasoline refiners could no longer compete in the Maryland retail market. Unlike the case at bar, in Exxon, other interstate firms could compete in the Maryland market. Under these circumstances, the Court held, the dormant Commerce Clause was not violated.

Id. The Court of Appeals, however, found that Exxon is controlling here and, as such, optometrists and ophthalmologists are not similarly situated to opticians. The court interpreted Exxon to “distinguish[ ] between ... entities based on their business structures, holding that a state may prevent businesses with certain structures or methods of operation from participating in a retail market without violating the dormant Commerce Clause.” Brown, 567 F.3d at 527. Accordingly, the Ninth Circuit held, “Because states may legitimately distinguish between business structures in a retail market, a business entity's structure is a material characteristic for determining if entities are similarly situated.” Id. The court then applied Exxon to “reject LensCrafters' argument that competition in the same market renders it similarly situated to optometrists and ophthalmologists.” Id. As such, “opticians are not the same as optometrists or ophthalmologists.... Because the California laws make no geographical distinctions between similarly situated entities, they are not invalidated by the dormant Commerce Clause.” Id. at 527-28.

When discussing the government interest in the challenged provisions, this court previously held that, “defendants fail[ed] to establish that the public's health is in greater danger when receiving care from an optometrist affiliated with a chain as compared to receiving care from a dispensing optometrist” Lockyer, 463 F.Supp.2d at 1136-37. The Court of Appeals, however, disagreed with this analysis, and stated that

Here through the challenged laws, California has sought to protect optometrists and ophthalmologists as health care professionals from being affected by subtle pressures from commercial interests. The pressures of co-ownership and profit sharing prohibited by the statutes are more obvious, but potentially even a landlord-tenant relationship could undermine health care quality if the landlord required a certain level of performance to maintain the lease. It is true that an optometrist or ophthalmologist would still be bound by professional and ethical standards. However, it is the subtle pressure to conform to commercial desires that the statutes seek to avoid. These subtle pressures would be difficult to regulate as violations of professional or ethical standards. Thus, the California laws in this case

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