North Carolina State Bd. of Dental Examiners v. Fed. Trade Comm'n, 5:11–CV–49–FL.

• Decision Date: 03 May 2011
• Docket Number: No. 5:11–CV–49–FL.,5:11–CV–49–FL.
• Citation: 768 F.Supp.2d 818
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS, Plaintiff,v.FEDERAL TRADE COMMISSION, Defendant.

768 F.Supp.2d 818

NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS, Plaintiff,

v.FEDERAL TRADE COMMISSION, Defendant.

No. 5:11–CV–49–FL.

United States District Court, E.D. North Carolina,Western Division.

May 3, 2011.

Alfred P. Carlton, Jr., Catherine Elizabeth Lee, M. Jackson Nichols, Noel L. Allen, Allen and Pinnix, P.A., Raleigh, NC, for Plaintiff.Seth Morgan Wood, U.S. Attorney's Office, Raleigh, NC, for Defendant.Brian C. Vick, M. Keith Kapp, Williams Mullen, Raleigh, NC, for Amicus.

ORDER

LOUISE W. FLANAGAN, Chief Judge.

This matter comes before the court upon defendant's motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (DE # 17). Also before the court is the motion of the North Carolina Medical Board, North Carolina Board of Nursing, North Carolina Board of Pharmacy, and North Carolina Board of Physical Therapy Examiners (collectively, the “State Boards”) for leave to file an amicus brief (DE # 24). These motions have been fully briefed and the issues raised now are ripe for review. For the reasons that follow, defendant's motion to dismiss is granted and the State Boards' motion for leave to file an amicus brief is denied.

STATEMENT OF THE CASE

Plaintiff filed complaint on February 1, 2011, requesting declaratory and injunctive relief. Plaintiff, in this action, seeks a declaration that defendant does not have antitrust jurisdiction over plaintiff's conduct (Count I); that defendant is constitutionally barred from exercising jurisdiction over plaintiff in pending administrative proceedings (Count II); and that defendant is constitutionally barred from attempting to preempt state law regarding the composition of a state regulatory board (Count III). Plaintiff also alleges that defendant has violated its right to constitutional due process under the Fifth Amendment by denying it the right to an impartial proceeding (Count IV); that defendant has violated the Administrative Procedure Act (“APA”) by engaging in arbitrary and capricious conduct (Count V); and that defendant has violated the Tenth Amendment, the Commerce Clause, and Article III of the Constitution in bringing the administrative proceedings.¹

At the heart of this case is the ongoing administrative proceeding initiated by defendant on June 17, 2010, pursuant to the Federal Trade Commission (“FTC”) Act, 15 U.S.C. §§ 41–58. See In re The North Carolina Board of Dental Examiners, Docket No. 9343 (F.T.C.), available at http:// ftc. gov/ os/ adjpro/ d 9343/ index. shtm (last accessed May 2, 2011). In that proceeding, defendant has alleged that plaintiff, a North Carolina regulatory agency composed of six licensed dentists and two non-dentists, is improperly excluding non-dentists from providing lower-cost teeth whitening services by issuing cease-and-desist letters. Defendant alleges in the administrative proceedings that these activities are not authorized by statute and circumvent the review and oversight process required by state law.

On November 3, 2010, plaintiff moved in the administrative proceeding to dismiss the complaint against it, arguing that it was exempt from federal antitrust liability under the state action doctrine. On February 3, 2011—a few days after the instant lawsuit was filed—defendant denied this motion, concluding that plaintiff did not qualify for the state action exemption because it had not shown sufficient state supervision as required by California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). See Opinion of the Commission, In re The North Carolina Board of Dental Examiners, Docket No. 9343 (F.T.C. Feb. 8, 2011), available at http:// ftc. gov/ os/ adjpro/ d 9343/ 110208 commopinion. pdf (last accessed May 2, 2011). Following this decision, an administrative law judge (“ALJ”) held an evidentiary hearing between February 17, 2011, and March 16, 2011. The ALJ's decision on plaintiff's liability has not yet been issued.

On February 28, 2011, defendant filed the instant motion to dismiss, arguing that this court lacks jurisdiction over plaintiff's action. Defendant contends that plaintiff may not bring this collateral challenge to the ongoing administrative action, and that plaintiff's remedy is limited to a direct appeal to the Fourth Circuit if it is unsuccessful in the administrative proceedings. In its memorandum in opposition to the motion to dismiss, filed March 24, 2011, plaintiff attempts to distinguish its declaratory judgment action and constitutional challenge from an administrative appeal. It maintains that it is not required to exhaust the administrative process where it alleges that defendant is acting in “brazen defiance” of its statutory authorization. Defendant addressed these arguments in a reply filed April 7, 2011.

On March 31, 2011, while briefing on the motion to dismiss was ongoing, the State Boards requested leave to file an amicus brief. The State Boards contend that they have a special interest in this case because they perform regulatory and licensing duties similar to those performed by plaintiff. In their proposed amicus brief, filed April 22, 2011, the State Boards urge the court to hold that state regulatory boards in North Carolina are exempt from federal antitrust laws under the state action doctrine. They do not take a position on the merits of defendant's motion to dismiss.

DISCUSSION

A. Standard of Review

Subject matter jurisdiction may be challenged at any time, and if it is lacking the case must be dismissed. See Fed.R.Civ.P. 12(h)(3). When challenged by a motion under Rule 12(b)(1), the plaintiff has the burden of establishing jurisdiction. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991). Where, as here, defendant does not challenge the factual prerequisites set forth in the complaint but instead makes a facial challenge to jurisdiction, “the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction.” Kerns v. United States, 585 F.3d 187, 192 (4th Cir.2009).

B. Analysis

The basis for this lawsuit is the “state action exemption” in antitrust law. In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court held that federal antitrust laws, by their own terms, did not apply to the activities of a sovereign State. Id. at 350–51, 63 S.Ct. 307. The exemption is restricted to the States themselves, although the Court held in later cases that municipalities could invoke the exemption if their activities were authorized by the State pursuant to official state policy. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985); City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 412, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). Private actors also enjoy the exemption when they act pursuant to a “clearly articulated and affirmatively expressed” state policy, but only if those private actors are also “actively supervised” by the State itself. See Midcal, 445 U.S. at 105, 100 S.Ct. 937. The Supreme Court has thus far expressly declined to determine whether active state supervision is required for a state agency to invoke the Parker exemption. See Town of Hallie, 471 U.S. at 46 n. 10, 105 S.Ct. 1713.

In the administrative proceedings, defendant has taken the position that active state supervision is a requirement for the exemption to apply to regulatory agencies that are composed primarily of market participants. Plaintiff's action before this court essentially seeks a declaration that defendant's position is incorrect as a matter of law and that it is exempt from defendant's enforcement of federal antitrust laws under that exemption. It also seeks injunctive relief that would prevent defendant's continued exercise of jurisdiction in the administrative proceedings.

It is well-settled that this court lacks jurisdiction to enjoin ongoing administrative enforcement proceedings such as the one at issue here. See Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594, 598, 70 S.Ct. 870, 94 L.Ed. 1088 (1950); Gallanosa ex rel. Gallanosa v. United States, 785 F.2d 116, 119 (4th Cir.1986). Defendant has not yet issued a final agency determination subject to review, and the appropriate forum for plaintiff's arguments is in the administrative proceedings, followed by a potential appeal to the Fourth Circuit Court of Appeals. See F.T.C. v. Standard Oil Co. of Cal., 449 U.S. 232, 241–42, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980); see also 15 U.S.C. § 45(c), (d) (establishing exclusive jurisdiction over appeals from defendant's administrative decisions under the FTC Act with the courts of appeals).

Indeed, in South Carolina State Board of Dentistry v. F.T.C., 455 F.3d 436 (4th Cir.2006), the Fourth Circuit explicitly held that the denial of an administrative respondent's state action exemption claim is not one which is subject to interlocutory review by the court of appeals. The administrative respondent in that case had asserted that such a denial of “ Parker immunity” was a collateral order subject to review despite a lack of finality. See id. at 438–39. The Fourth Circuit disagreed, concluding that a Parker analysis is intertwined with the merits of the antitrust action and that the state action exemption is not an “effectively unreviewable” immunity from suit, but rather a question of statutory interpretation. See id. at 441–45.

Plaintiff attempts to distinguish South Carolina Board of Dentistry by arguing that this court does not have before it an “interlocutory appeal,” but rather a “direct” federal suit for declaratory and injunctive relief. This is a distinction without a difference. A declaratory judgment or mandamus action cannot be used to substitute for an appeal.² See In re United Steelworkers, 595 F.2d 958 (4th Cir.1979); Travelers Ins. Co. v....