Antitrust Law

Texas Medical Board Immune From Antitrust Suit

By Lisl J. Dunlop, Partner, Antitrust and Competition | Shoshana S. Speiser, Associate, Litigation

In 2015, the Supreme Court injected great uncertainty into the operation of state medical boards with its ruling in North Carolina Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015), that when a state board is controlled by active market participants, that entity must be actively supervised to enjoy state action immunity. Later that year, the Supreme Court’s decision was applied to deprive the Texas Medical Board (TMB) of state action immunity in Teladoc, Inc. v. Texas Medical Board, No. 1-15-CV-343 RP (W.D. Tex. Dec. 14, 2015).

A recent decision about the TMB from the Western District of Texas provides new insights into the scope of sovereign immunity and state action protection from the antitrust laws. In granting the TMB’s motion to dismiss a physician’s antitrust claims, the court held that the TMB is a state agency entitled to sovereign immunity under the Eleventh Amendment and any gap left by that immunity was covered by the state action doctrine. (Allibone v. Texas Medical Board, 17-cv-00064 (W.D. Tex. Oct. 20, 2017)) This case provides a road map for understanding the interplay between sovereign and state action immunity when applied to state boards. Compared with the Teladoc decision, the case also highlights that state action immunity may apply to some actions taken by a state board, but not others.

Background

Dr. George Allibone filed suit against the TMB and its individual board members on January 30, 2017, after they initiated formal disciplinary proceedings against him following complaints from former patients and a former employee. The complaint sought an injunction, declaratory judgment and damages. According to Dr. Allibone, the defendants conspired to benefit conventional allopathic physicians at the expense of physicians who, like him, offer complementary and alternative medicine. Dr. Allibone alleged that the defendants used illegitimate complaints to threaten and recommend disciplinary proceedings against him, as well as improperly selected conventional physicians to review the complaints. As a result, the plaintiff argued that these actions not only damaged his practice but also limited consumer choice by restricting access to complementary and alternative medicine services in Texas. In response, the defendants argued that, as a state agency and state officials, they were immune from being sued, and the court agreed.

The Court’s Opinion

Relying on Fifth Circuit precedent, Judge Sam Sparks held that the TMB is a state agency entitled to sovereign immunity under the Eleventh Amendment. Because the individual board members were sued in their official capacity, the suit against them is also construed as against the state. Sovereign immunity, however, does not extend to claims for prospective, declaratory or injunctive relief. Despite that finding, Judge Sparks found that any immunity gap left by the Eleventh Amendment is covered by state action immunity.

Under the Supreme Court’s decision in Parker v. Brown, 317 U.S. 341 (1943), the party seeking immunity must demonstrate that (1) the challenged collaboration was undertaken pursuant to a “clearly articulated” affirmative state policy to supplant competition with regulation and (2) the state actively supervises the implementation of its policy. Judge Sparks found that the board members satisfied both requirements because their actions in investigating complaints were within a clearly articulated and affirmatively expressed state policy, which described part of the TMB’s purpose as disciplining physicians and other medical professionals. Next, Judge Sparks found that because the disciplinary proceedings are conducted before an independent administrative law judge, subject to judicial review, and required to comply with requirements set by the Texas Legislature, the state retained active supervision, and those protections promoted state policy rather than individual interests.

Takeaways

As we previously reported, back in 2015, the Supreme Court decided North Carolina Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015), holding that when a non-sovereign entity, such as a state board, is controlled by active market participants, that entity must be actively supervised to enjoy state action immunity. Following that decision and its limited guidance on what constitutes “active supervision,” the FTC issued guidance and suits against state licensing boards increased. In one case, Teladoc, Inc. v. Texas Medical Board, No. 1-15-CV-343 RP (W.D. Tex. Dec. 14, 2015), the TMB was sued for allegedly violating the antitrust laws by introducing a rule that effectively limited telemedicine. The TMB argued that it was entitled to state action immunity, but the court disagreed, finding that the board was not actively supervised because the avenues for review simply reflected the presence of some state involvement and monitoring. (Click here for a more detailed discussion of this case.)

In light of the contrast between the Teladoc and Allibone cases, state boards should be mindful that their conduct may not be insulated from judicial scrutiny and should consult with antitrust counsel where they are uncertain of how their actions may be perceived.

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