United States District Court For The Western District Of Texas Grants Motion To Dismiss Antitrust Claims Brought By Physician Against Texas Medical Board
10/31/2017On October 20, 2017, Judge Sam Sparks of the United States District Court for the Western District of Texas granted a motion to dismiss antitrust claims filed against the Texas Medical Board (“TMB”) and certain of its individual members. Allibone v. Texas Medical Board, et al., No. A-17-CA-00064-SS (W.D. Tex. Oct. 20, 2017). Judge Sparks’s opinion provides a clear articulation of how the doctrines of sovereign immunity and the state action defense interact in antitrust cases in which state regulatory boards that include the plaintiff’s competitors are involved.
This case arose out of disciplinary proceedings brought by the TMB against the plaintiff, Dr. George Allibone. Dr. Allibone is a physician licensed by the TMB to practice medicine in Texas. The TMB initiated formal disciplinary proceedings against Dr. Allibone in response to complaints by former patients and a former employee. In response, Dr. Allibone filed a lawsuit against the TMB and its individual members alleging antitrust, constitutional, and dormant Commerce Clause violations. At the heart of Dr. Allibone’s complaint is the defendants’ alleged conspiracy to benefit conventional allopathic physicians at the expense of Dr. Allibone and other physicians offering complementary and alternative medicine.
Defendants moved to dismiss Dr. Allibone’s antitrust claims based on a combination of sovereign immunity under the Eleventh Amendment and the state action antitrust defense, as first articulated in Parker v. Brown, 317 U.S. 341 (1943). In summary fashion, Judge Sparks ruled that the TMB was entitled to sovereign immunity, since it acted as an “arm” of the state. In so ruling, Judge Sparks noted that “numerous courts including the Fifth determined the TMB a state agency entitled to sovereign immunity under the Eleventh Amendment.” Slip op. at 4.
Judge Sparks engaged in a more thorough analysis in considering whether the individual board members were also entitled to dismissal under sovereign immunity or the state action doctrine. Judge Sparks explained that generally “Eleventh Amendment immunity applies equally to state agencies and state officials when sued in their official capacities because official capacity suits are construed as suits against the state.” Slip op. at 5 (quoting Gilbert v. Perry, 302 F. Appx. 320, 321 (5th Cir. 2008)). Thus, the Court found that the board members were entitled to dismissal of the antitrust claims for damages based on Eleventh Amendment immunity. Under the Ex Parte Young rule, however, Eleventh Amendment immunity does not extend to individuals with respect to claims for prospective relief, i.e., declaratory and injunctive relief, which made up part of Dr. Allibone’s lawsuit. Therefore, it was necessary to determine whether the individual defendants were protected from claims for prospective relief by the state action doctrine.
The state action defense is an affirmative defense to antitrust claims that originates from “statutory construction, legislative intent, and judicial deference to federalism.” While Judge Sparks referred to the state action doctrine as “Parker immunity” or “state action immunity” in his opinion, the Fifth Circuit has cautioned that characterizing the state action doctrine as an “immunity” is “inapt” because the doctrine is “more accurately a strict standard for locating the reach of the Sherman Act” than a true absolute or qualified immunity for public officials. Surgical Care Ctr. of Hammond, L.C. v. Hosp. Serv. Dist. No. 1 of Tangipahoa Par., 171 F.3d 231, 234 (5th Cir. 1999) (en banc). To establish the state action defense, a party must show that (1) the alleged anticompetitive action was taken pursuant to a clearly articulated and affirmatively expressed state policy to displace competition with state regulation; and, (2) the state actively supervises the implementation of its policy. Judge Sparks found that both requirements had been met here. First, the statutes governing the TMB and its board members grant broad power to regulate the medical profession and to investigate and pursue complaints against medical professionals, and thus fall within a clearly articulated and affirmatively expressed state policy, satisfying the first element of the test. Judge Sparks found that the second element – active supervision of the TMB’s disciplinary actions – was also met because (1) TMB’s disciplinary proceedings must be conducted before an independent administrative law judge; (2) the proceedings are subject to judicial review; and (3) the proceedings must comply with requirements prescribed by the Texas Legislature. Thus, the Court dismissed all the antitrust claims against both the TMB and the individual defendants based on lack of subject matter jurisdiction. The Court also dismissed Plaintiffs’ bad faith prosecution and constitutional claims.
A potential conflict between an individual regulator’s personal interests and the state’s regulatory goals can always arise when the regulator is also a competitor of the regulated, yet the expertise of such individuals, such as medical professionals, is often necessary to effectively regulate. The active supervision requirement of the state action doctrine plays an important role in ensuring that such regulators further state policy and not their individual interests. Where the decisions of a regulator are subject, as here, to the scrutiny of an independent administrative law judge, it will be difficult for a plaintiff to overcome the state action defense in challenging regulatory decisions on antitrust grounds.