A federal court in Alabama, in an April 2 decision, dismissed most claims of a group of plaintiffs challenging a cease-and-desist letter from the state's dental board informing them that their tele-dentistry practice was violating state unlicensed practice laws. The court, however, did allow claims brought under the federal Sherman Antitrust Act and the U.S. Constitution's Dormant Commerce Clause to proceed.
(Leeds v. Board of Dental Examiners of Alabama).
The two principal plaintiffs in the case are SmileDirect, a company that operates an Internet-based tele-dentistry business that connects patients with licensed dentists who remotely assess and devise alignment treatment, and dentist D. Blaine Leeds (collectively, the SmileDirectClub). Leeds, who is licensed in Alabama but lives in Tennessee, is one of the dentists working through SmileDirect to provide treatment for Alabama
A patient using SmileDirect first visits a physical location where company employees without dentist licenses take photographs of their teeth. Those photographs are then used to construct a 3D model of the patient’s mouth; that model is sent to a licensed dentist who then analyzes the 3D model and writes a prescription for clear aligner therapy (a form of clear braces), which is then fabricated and shipped to the patients.
In September 2018, the Alabama Board of Dental Examiners sent SmileDirect a cease-and-desist letter, explaining that the company’s retail employees were engaged in the unauthorized practice of dentistry. Alabama dental regulations limit the use of “digital imaging machines” to licensed dentists or those working under the supervision of a licensed dentist, and actual insertion of a device device into a patient’s mouth may only be done under the direct supervision of a licensed dentist, meaning the dentist must be physically present.
Using these definitions, the board had determined that SmileDirect employees taking photographs of patients’ mouths—accomplished, in part, through the use of a camera inserted into their mouths—is the practice of dentistry. Because no licensed dentist was present at the facilities, that practice was thus unauthorized
In reaction to the letter, SmileDirect and Leeds brought suit against the board and its individual members, citing the federal Sherman Antitrust Act and the U.S. Constitution’s Due Process, Equal Protection, and Dormant Commerce Clauses. The plaintiffs claim that the board’s members were wrongly acting to restrict SmileDirect in order to protect licensed Alabama dentists from competition.
The first issue addressed by the court was the potential immunity of the board from lawsuits. Although, under previous Alabama law, the board had been declared an arm of the state and was thus protected by the sovereign immunity provided to the states by the Eleventh Amendment, the plaintiffs argued that the board’s actions leading to issuance of the cease-and-desist letter are not subject to that immunity because, under the particular circumstances of this case, the board cannot be considered a protected state entity.
One of the key factors courts weigh when deciding whether a state agency is an arm of the state for purposes of a lawsuit is the amount of control the state’s other governmental bodies exert over the agency. The plaintiffs argued that the state had very little control over the board’s creation of regulations and enforcement of unlicensed practice.
The earlier case in which the board had been found to be an arm of the Alabama state government was a labor case involving one of the board’s employees; it was thus distinguishable from the current case, in which the board was acting as a policymaker, not an employer.
Judge David Proctor, hearing the case, disagreed. “Indeed, if anything, it seems likely that the state exercises more control over the Board’s rulemaking and enforcement decisions than it does over its wage payments to employees.” For instance, the judge noted, Alabama statute exerts considerable control over the board’s rulemaking authority, defines the practice of dentistry, and limits the fines that the board may levy for unlicensed practice.
“In short, the state has established a number of mechanisms by which it exercises a degree of control over the Board’s rulemaking and enforcement functions.” Thus, the board, in its enforcement aspect, was an arm of the state protected by sovereign immunity. The court had no jurisdiction to hear lawsuits against it.
The plaintiffs’ suits against the individual board members were a different matter. Under U.S. Supreme Court precedent, Judge Proctor wrote, “the Eleventh Amendment does not bar suit against state officials to prevent them from violating federal law.”
Reviewing the substance of the plaintiffs’ claims against the board, Judge Proctor ruled that Sherman Antitrust Act claims could thus proceed. Although the U.S. Supreme Court has created a sovereignty-based exception to the Act which allows states to purposely implement anti-competitive behavior, state entities comprised of market participants—such as the board—must be subject to review of any potentially anti-competitive actions in order to take advantage of that exception.
Drawing comparisons to the 2015 decision of the U.S. Supreme Court in North Carolina State Board of Dental Examiners v. Federal Trade Commission, Judge Proctor held that the Alabama dental board—being comprised almost entirely of dentists—was such a potentially anti-competitive actor and would either need to show that it was implementing an explicit statutory prohibition when it sent its cease-and-desist letters, or was sufficiently supervised by the state to meet the exception to the antitrust laws.
In an attempt to show that the board was simply implementing such an explicit state statutory directive, the board defendants argued that, because state statute requires the supervision of a licensed dentist when dental staff use “digital imaging machines,” and because SmileDirect employees used a digital camera inserted into patients’ mouths to take the pictures that would be sent to an off-site dentist for analysis, the board was only implementing such an explicit state directive by informing SmileDirect that it was engaged in the unlicensed practice of medicine.
However, Judge Proctor held that the question of whether the cameras used by SmileDirect employees are “digital imaging machines” and thus subject to the prohibition, was a question of fact that could not be determined on the board’s motion to dismiss. The level of supervision the state exerted over the board’s authority to police such conduct was also an undetermined question of fact.
The board defendants provided documents they claimed showed oversight of the board’s promulgation of the relevant regulations. But Judge Proctor did not find them adequate to prove the board’s case for summary review, so the case would be heard by a trier of fact.
In addition to the Sherman Act, Judge Proctor also ruled that the plaintiffs had adequately pleaded a potential violation of the Dormant Commerce Clause, the section of the U.S. Constitution that prohibits states from unduly interfering with interstate commerce in order to advantage in-state actors.
Given that the board’s policies prohibited out-of-state dentists from practicing remotely even within the state, and that the plaintiffs had raised a sufficient question of whether the board’s prohibition of SmileDirect’s sought to further a legitimate state interest, the claim could not be dismissed in a summary judgment, explained the judge.
Last, Judge Proctor dismissed the plaintiffs’ equal protection and due process claims. The “rational basis” test under which such claims are tested in a case such as the one brought by the plaintiffs is overwhelmingly favorable to state policy decisions: as long as a legitimate goal for the legislation conceivably existed, the state would only need to prove that a rational basis existed for the state to believe that the legislation will further that goal.
As the judge noted, the state was able to identify several conceivable public health and safety goals that could be furthered by the requirement that a licensed dentist be present during SmileDirect’s imaging procedure, thus the state could mandate that dentist’s presence without violating the plaintiffs’ constitutional rights.
The court closed the case by dismissing all the complaints except those against the individual board members under the Sherman Antitrust Act and the Dormant Commerce Clause.