Case: 16-50017
Document: 00513553389
Page: 1
Date Filed: 06/17/2016
No. 16-50017
In the United States Court of Appeals for the Fifth Circuit
Teladoc, Incorporated; Teladoc Physicians, Physician
Assistant; Kyon Hood; Emmette A. Clark,
Plaintiffs-Appellees,
v.
Texas Medical Board; Michael Arambula, M.D., Pharm. D., in his
official capacity; Manuel G. Guajardo, M.D., in his official capacity;
John R. Guerra, D.O., M.B.A., in his official capacity; J. Scott
Holliday, D.O., M.B.A., in his official capacity; Margaret McNeese,
M.D., in her official capacity; Allan N. Shulkin, M.D., in his official
capacity; Robert B. Simonson, D.O., in his official capacity; Wynne
M. Snoots, M.D., in his official capacity; Karl Swann, M.D., in his
official capacity; Surendra K. Varma, M.D., in his official capacity;
Stanley Wang, M.D., J.D., MPH, in his official capacity; George
Willeford, III, M.D., in his official capacity; Julie K. Attebury, M.B.A.,
in her official capacity; Paulette Barker Southard, in her official capacity,
Defendants-Appellants.
On Appeal from the United States District Court
for the Western District of Texas, Austin Division
BRIEF FOR APPELLANTS
Ken Paxton
Attorney General of Texas
Scott A. Keller
Solicitor General
Jeffrey C. Mateer
First Assistant Attorney General
J. Campbell Barker
Deputy Solicitor General
[email protected]
Office of the Attorney General
P.O. Box 12548 (MC 059)
Austin, Texas 78711-2548
Tel.: (512) 936-1700
Fax: (512) 474-2697
Counsel for Defendants-Appellants
Case: 16-50017
Document: 00513553389
Page: 2
Date Filed: 06/17/2016
Certificate of Interested Persons
No. 16-50017
Teladoc, Incorporated; Teladoc Physicians, Physician
Assistant; Kyon Hood; Emmette A. Clark,
Plaintiffs-Appellees,
v.
Texas Medical Board; Michael Arambula, M.D., Pharm. D., in his
official capacity; Manuel G. Guajardo, M.D., in his official capacity;
John R. Guerra, D.O., M.B.A., in his official capacity; J. Scott
Holliday, D.O., M.B.A., in his official capacity; Margaret McNeese,
M.D., in her official capacity; Allan N. Shulkin, M.D., in his official
capacity; Robert B. Simonson, D.O., in his official capacity; Wynne
M. Snoots, M.D., in his official capacity; Karl Swann, M.D., in his
official capacity; Surendra K. Varma, M.D., in his official capacity;
Stanley Wang, M.D., J.D., MPH, in his official capacity; George
Willeford, III, M.D., in his official capacity; Julie K. Attebury, M.B.A.,
in her official capacity; Paulette Barker Southard, in her official capacity,
Defendants-Appellants.
The undersigned counsel of record certifies that the following listed persons and
entities as described in the fourth sentence of Rule 28.2.1 have an interest in the outcome of this case. These representations are made in order that the judges of this
Court may evaluate possible disqualification or recusal.
Defendants:
Texas Medical Board;
Michael Arambula, M.D., Pharm. D., in his official capacity;
Manuel G. Guajardo, M.D., in his official capacity;
John R. Guerra, D.O., M.B.A., in his official capacity;
J. Scott Holliday, D.O., M.B.A., in his official capacity;
Margaret McNeese, M.D., in her official capacity;
Allan N. Shulkin, M.D., in his official capacity;
Robert B. Simonson, D.O., in his official capacity;
Wynne M. Snoots, M.D., in his official capacity;
Karl Swann, M.D., in his official capacity;
i
Case: 16-50017
Document: 00513553389
Page: 3
Date Filed: 06/17/2016
Surendra K. Varma, M.D., in his official capacity;
Stanley Wang, M.D., J.D., MPH, in his official capacity;
George Willeford, III, M.D., in his official capacity;
Julie K. Attebury, M.B.A., in her official capacity;
Paulette Barker Southard, in her official capacity
Counsel for Defendants:
Ken Paxton
Jeffrey C. Mateer
Scott A. Keller
J. Campbell Barker
James Carlton Todd
Sean P. Flammer
Office of the Attorney General
Plaintiffs:
Teladoc, Incorporated;
Teladoc Physicians, Physician Assistant;
Kyon Hood;
Emmette A. Clark
Counsel for Plaintiffs:
Leah O. Brannon
George S. Cary
Drew Anthony Navikas
Cleary Gottlieb Steen & Hamilton, L.L.P.
James Matthew Dow
Sean Daniel Jordan
Dudley D. McCalla
Joshua Abraham Romero
Jackson Walker, L.L.P.
/s/ J. Campbell Barker
J. CAMPBELL BARKER
Counsel of Record for Defendants-Appellants
ii
Case: 16-50017
Document: 00513553389
Page: 4
Date Filed: 06/17/2016
Statement Regarding Oral Argument
Appellants believe that oral argument will assist the Court in resolution of this
appeal, which raises an issue likely to have a significant effect on the ability of state
medical boards and other occupational-licensing agencies to carry out their duly assigned governmental functions without facing the burdens and uncertainties of federal antitrust litigation.
iii
Case: 16-50017
Document: 00513553389
Page: 5
Date Filed: 06/17/2016
Table of Contents
Page
Certificate of interested persons ..............................................................................i
Statement regarding oral argument ........................................................................ iii
Table of authorities ................................................................................................ vi
Introduction ............................................................................................................ 1
Statement of jurisdiction ......................................................................................... 2
Statement of the issue ............................................................................................. 3
Statement of the case .............................................................................................. 3
I. Texas regulation of the practice of medicine .............................................. 3
II. The Texas Medical Board’s licensing and disciplinary authority ............... 6
III. The Texas Medical Board’s rulemaking authority .....................................8
IV. The challenged telemedicine rules ........................................................... 12
A. Statutory background ........................................................................ 12
B. The rules at issue .............................................................................. 13
1. “New Rule 174”......................................................................... 13
2. “New Rule 190.8” ..................................................................... 16
V. Procedural history ................................................................................... 18
Summary of the argument ..................................................................................... 19
Standard of review ................................................................................................ 21
Argument.............................................................................................................. 22
I. State-action antitrust immunity applies to all regulations that are
the State’s own. ....................................................................................... 22
A. The Supreme Court recognized state-action immunity
because federal antitrust laws were never intended to
interfere with the States’ actions as sovereign regulators. .................22
B. The clear-articulation and active-supervision requirements
ensure that state-action immunity applies to regulations and
policies that are the State’s own. ....................................................... 24
1. Clear articulation ........................................................................ 25
2. Active supervision ...................................................................... 27
a. Private nonsovereign actors ................................................. 27
b. Governmental nonsovereign actors ...................................... 30
i. Municipalities ............................................................... 30
ii. Regulatory agencies....................................................... 30
iv
Case: 16-50017
Document: 00513553389
Page: 6
Date Filed: 06/17/2016
II. The clear-articulation requirement is met here. ....................................... 33
III. The active-supervision requirement is met here. ..................................... 35
A. Features of the Board’s membership minimize the risk that it
will forego its mandate and act with only a private purpose. .............. 38
B. Texas’s good-government laws and reporting requirements
further reduce the risk that the Board will shirk its official
duties and pursue only private interests. ........................................... 41
C. State-court judicial review provides sufficient active
supervision of the Board’s rulemaking. ............................................. 45
D. Legislative oversight contributes to active supervision. ..................... 50
E. Finding a lack of active supervision would intrude on the
State’s sovereignty and alter the balance of cooperative
federalism. ........................................................................................ 52
Conclusion ............................................................................................................ 54
Certificate of service ............................................................................................. 56
Certificate of compliance ...................................................................................... 56
v
Case: 16-50017
Document: 00513553389
Page: 7
Date Filed: 06/17/2016
Table of Authorities
Page(s)
Cases:
342 Liquor Corp. v. Duffy,
479 U.S. 335 (1987) ........................................................................................ 28
Acoustic Sys., Inc. v. Wenger Corp.,
207 F.3d 287 (5th Cir. 2000) ............................................................................ 2
Acker v. Tex. Water Comm’n,
709 S.W.2d 299 (Tex. 1990) ........................................................................... 42
Bellegie v. Tex. Bd. of Nurse Exam’rs,
685 S.W.2d 431 (Tex. App.—Austin 1985, writ ref’d n.r.e.)........................... 49
Cal. Dental Ass’n v. FTC,
526 U.S. 756 (1999) ........................................................................................ 52
Cal. State Bd. of Optometry v. FTC,
910 F.2d 976 (D.C. Cir. 1990)......................................................................... 52
California v. Thompson,
313 U.S. 113 (1941) ......................................................................................... 24
Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.,
445 U.S. 97 (1980) ....................................................................27, 28, 31, 32, 34
City of Columbia v. Omni Outdoor Advert.,
499 U.S. 365 (1991) ........................................................................................ 41
City of Lafayette v. La. Power & Light Co.,
435 U.S. 389 (1978) ........................................................................................ 30
Cmty. Commc’ns Co. v. City of Boulder,
455 U.S. 40 (1982).......................................................................................... 26
Dent v. West Virginia,
129 U.S. 114 (1889)........................................................................................... 3
Earles v. State Bd. of Certified Pub. Accountants of La.,
139 F.3d 1033 (5th Cir. 1998) .............................................................. 20, 33, 34
E.R.R. Presidents Conf. v. Noerr Motor Freight, Inc.,
365 U.S. 127, 141 (1961) .................................................................................. 54
Exxon Corp. v. Gov. of Md.,
437 U.S. 117 (1978) ........................................................................................... 1
Filarsky v. Delia,
132 S. Ct. 1657 (2012) ..................................................................................... 53
vi
Case: 16-50017
Document: 00513553389
Page: 8
Date Filed: 06/17/2016
FTC v. Phoebe Putney Health Sys., Inc.,
133 S. Ct. 1003 (2013). .................................................................................... 26
FTC v. Ticor Title Ins. Co.,
504 U.S. 621 (1992) ............................................................ 21, 29, 32-33, 40, 50
Fuchs v. Rural Elec. Convenience Co-op, Inc.,
858 F.2d 1210 (7th Cir. 1988) ......................................................................... 45
Goldfarb v. Va. State Bar,
421 U.S. 773 (1975) ......................................................................................... 26
Granek v. Tex. State Bd. of Med. Exam’rs,
172 S.W.3d 761 (Tex. App.—Austin 2005, no pet.) ........................................ 42
Gregory v. Ashcroft,
501 U.S. 452 (1991) ........................................................................................ 52
Gulf Coast Coal. of Cities v. PUC,
161 S.W.3d 706 (Tex. App.—Austin 2005, no pet.)........................................ 46
Hoover v. Ronwin,
466 U.S. 558 (1984) ............................................................................. 19, 24, 41
Howell v. Mauzy,
899 S.W.2d 690 (Tex. App.—Austin 1994, writ denied) .................................. 9
Liberty Mut. Ins. Co. v. Griesing,
150 S.W.3d 640 (Tex. App.—Austin 2004, pet. dism’d) ................................ 11
Lambright v. Tex. Parks & Wildlife Dep’t,
157 S.W.3d 499 (Tex. App.—Austin 2005, no pet.) .................................. 11, 12
Martin v. Mem’l Hosp. at Gulfport,
86 F.3d 1391 (5th Cir. 1996) ...................................................................2, 21, 34
N.C. State Bd. of Dental Exam’rs v. FTC,
135 S. Ct. 1101 (2015) ............................................................................... passim
Nat’l Ass’n of Indep. Insurers v. Tex. Dep’t of Ins.,
925 S.W.2d 667 (Tex. 1996) ........................................................................... 10
Nixon v. Mo. Mun. League,
541 U.S. 125 (2004) ........................................................................................ 54
Parker v. Brown,
317 U.S. 341 (1943) ................................................................................... passim
Patrick v. Burget,
486 U.S. 94 (1988) ....................................................... 19, 28, 29, 32, 45, 48, 49
Patel v. Tex. Dep’t of Licensing & Regulation,
469 S.W.3d 69 (Tex. 2015) ............................................................................. 11
vii
Case: 16-50017
Document: 00513553389
Page: 9
Date Filed: 06/17/2016
Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc.,
506 U.S. 139 (1993) .......................................................................................... 2
R. Ernest Cohn, D.C., D.A.B.C.O. v. Bond,
953 F.2d 154 (4th Cir. 1991)............................................................................ 37
R.R. Comm’n v. Tex. Citizens for a Safe Future,
336 S.W.3d 619 (Tex. 2011) ....................................................................... 11, 12
Rivera-Nazario v. Corporacion del Fondo del Seguro del Estado,
No. 14-cv-1533, 2015 WL 9484490 (D.P.R. Dec. 29, 2015) ....................... 40, 43
Saenz v. Univ. Interscholastic League,
487 F.2d 1026 (5th Cir. 1973) ......................................................................... 39
S. Motor Carriers Rate Conf., Inc. v. United States,
471 U.S. 48 (1985) ............................................................................... 27, 37, 52
Teladoc, Inc. v. Tex. Med. Bd.,
453 S.W.3d 606 (Tex. App.—Austin 2014, pet. denied) ............................. 8, 17
TEC Cogeneration Inc. v. Fla. Power & Light Co.,
76 F.3d 1560 (11th Cir. 1996) ................................................................... 48, 49
Tex. Bd. of Chiropractic Exam’rs v. Tex. Med. Ass’n,
375 S.W.3d 464 (Tex. App.—Austin 2012, pet. denied) ...................... 10, 11, 47
Tex. Med. Ass’n v. Tex. Workers Comp. Comm’n,
137 S.W.3d 342 (Tex. App.—Austin 2004, no pet.) ....................................... 46
Tex. Orthopaedic Ass’n v. Tex. State Bd. of Podiatric Med. Exam’rs,
254 S.W.3d 714 (Tex. App.—Austin 2008, pet. denied)...................... 10, 11, 47
Town of Hallie v. City of Eau Claire,
471 U.S. 34 (1985) ......................................................................... 25, 30, 35, 42
Constitutional Provisions and Statutes:
Tex. Const. art. XV, § 9(a) ..................................................................................... 4
Tex. Const. art. XVI, § 1(a)-(b) ............................................................................... 4
15 U.S.C. § 1 ......................................................................................................... 18
28 U.S.C. § 1331 ..................................................................................................... 2
28 U.S.C. § 1337 ..................................................................................................... 2
1939 Cal. Stat. ch. 894, § 15, p. 2494 ..................................................................... 23
Tex. Gov’t Code:
§ 301.104(a).................................................................................................... 50
§ 301.104(c) ................................................................................................... 51
viii
Case: 16-50017
Document: 00513553389
Page: 10
Date Filed: 06/17/2016
§ 301.028(b) ................................................................................................... 51
§ 318.001(1)...................................................................................................... 3
§ 318.002(3) ..................................................................................................... 5
§ 325.007(a)(1) ................................................................................................. 5
§ 325.008 ....................................................................................................... 51
§ 325.010 ........................................................................................................ 51
§ 325.011 ........................................................................................................ 43
§ 325.011(5) ................................................................................................ 5, 51
§ 325.012 ........................................................................................................ 51
§ 325.015 ........................................................................................................ 51
§ 325.015(a)...................................................................................................... 5
§ 531.001(7).................................................................................................... 13
§ 531.001(8) .............................................................................................. 13, 14
§ 531.0216(a) .................................................................................................. 12
§ 531.0216(f) .................................................................................................. 44
§ 531.0217(i) ............................................................................... 7, 19-20, 35, 44
§ 531.0217(i)(1) .............................................................................................. 12
ch. 551 ........................................................................................................... 4-5
§ 551.001(3)(A) .............................................................................................. 42
ch. 552 .............................................................................................................. 5
§ 552.003(1)(A)(i) .......................................................................................... 42
ch. 572 ........................................................................................................ 5, 42
§ 2001.030 ....................................................................................................... 9
§ 2001.032(a) ....................................................................................... 9, 44, 50
§ 2001.032(c) ................................................................................................... 9
§ 2001.033(a)(1) ............................................................................................... 9
§ 2001.033(a)(1)(B) .......................................................................................... 9
§ 2001.033(a)(2)............................................................................................... 9
§ 2001.038(a) ................................................................................................. 10
§ 2001.058(e) ................................................................................................... 7
§ 2001.171 ........................................................................................................ 8
§ 2001.174 ........................................................................................................ 8
§ 2001.901(a) ................................................................................................... 8
§ 2003.041(c) ................................................................................................... 7
ix
Case: 16-50017
Document: 00513553389
Page: 11
Date Filed: 06/17/2016
§ 2006.002(c)(1) ............................................................................................ 10
§ 2051............................................................................................................. 42
§ 2101 ............................................................................................................. 42
Tex. Health & Safety Code § 62.1571(a) ............................................................... 12
Tex. Occ. Code:
§ 111.004(1) ......................................................................................... 13, 20, 35
§ 151.002(13) ............................................................................................. 13, 14
§ 151.004 .......................................................................................................... 5
§ 152.001(a)...................................................................................................... 4
§ 152.002(a) ..................................................................................................... 4
§ 152.003(d) ..................................................................................................... 4
§ 152.004(a) ..................................................................................................... 4
§ 152.004(c) ............................................................................................... 4, 42
§ 152.010(b)(7)-(8) ........................................................................................... 5
§ 152.055 ....................................................................................................... 42
§ 153.001 ...................................................................................................... 4, 8
§ 153.001(3)...................................................................................................... 6
§ 153.002(a) ..................................................................................................... 6
§ 153.004 ......................................................................................... 7, 12, 20, 35
§ 153.008 .......................................................................................................... 5
§ 153.010 .......................................................................................................... 6
§ 153.013 .......................................................................................................... 8
§ 154.051 .......................................................................................................... 6
§ 155.001 ...................................................................................................... 1, 6
§ 155.002(a) ..................................................................................................... 6
§ 164.001 .......................................................................................................... 1
§ 164.001(a) ..................................................................................................... 6
§ 164.003.......................................................................................................... 7
§ 164.007.......................................................................................................... 7
§ 164.007(a) ..................................................................................................... 7
§ 164.007(a-1) .............................................................................................. 7, 8
§ 164.009.......................................................................................................... 8
§ 164.051 .......................................................................................................... 1
§ 164.051(a)(6) ............................................................................ 6, 13-14, 19, 35
x
Case: 16-50017
Document: 00513553389
Page: 12
Date Filed: 06/17/2016
§ 204.102(b) ..................................................................................................... 4
§ 204.151 .......................................................................................................... 6
§ 205.101(b) ..................................................................................................... 4
§ 206.101 .......................................................................................................... 4
§ 206.201 ......................................................................................................... 6
§ 601.0522 ........................................................................................................ 4
§ 602.151(a) ...................................................................................................... 4
§ 602.201 ......................................................................................................... 6
§ 603.152 .......................................................................................................... 4
§ 603.251 .......................................................................................................... 6
Tex. Civ. Prac. & Rem. Code § 104.004(a) ............................................................. 5
Tex. Ins. Code § 1455.002-.003 ............................................................................ 13
Tex. Ins. Code § 1455.004(a) ................................................................................ 13
Regulations:
22 Tex. Admin. Code:
§§ 174.1-174.12 ............................................................................................... 15
§ 174.2(2) ....................................................................................................... 15
§ 174.2(3)-(4) ............................................................................................ 16, 18
§ 174.6 ............................................................................................................ 15
§ 174.7 ........................................................................................................... 16
§ 174.8(a)(2)................................................................................................... 15
§ 175.8(a)(2) ................................................................................................... 16
§ 178.7(b) ......................................................................................................... 7
§§ 190.1-190.16 .............................................................................................. 16
§ 190.8 ........................................................................................................... 16
§ 190.8(1)(L) ............................................................................................. 17, 18
§ 190.8(1)(L)(i)(II) ......................................................................................... 18
§ 190.8(1)(L)(i)(III) ........................................................................................ 18
Miscellaneous:
29 Tex. Reg. 3909 (Apr. 23, 2004) ........................................................................ 16
29 Tex. Reg. 6092 (July 4, 2004)........................................................................... 17
35 Tex. Reg. 3390-93 (Apr. 30, 2010) .................................................................... 14
xi
Case: 16-50017
Document: 00513553389
Page: 13
Date Filed: 06/17/2016
35 Tex. Reg. 6175-77 (July 16, 2010) ...................................................................... 14
35 Tex. Reg. 9085-91 (Oct. 8, 2010) ...................................................................... 15
35 Tex. Reg. 9090 (Oct. 8, 2010)........................................................................... 15
40 Tex. Reg. 1018-19 (Mar. 6, 2015)...................................................................... 17
40 Tex. Reg. 3159 (May 29, 2015) ......................................................................... 17
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (2013) ............................ 41
Frank H. Easterbrook, Antitrust and the Economics of Federalism,
26 J. Law & Econ. 23 (1983) .......................................................................... 26
Final Commission Opinion and Order, In re N.C. Bd. of Dental Exam’rs,
152 F.T.C. 640, 2011 WL 11798463 (Dec. 2, 2011) ......................................... 31
Merrick B. Garland, Antitrust and State Action, 96 Yale L.J. 486 (1987) ................ 37
Herbert Hovenkamp & John A. MacKerron, Municipal Regulation and
Federal Antitrust Policy, 32 U.C.L.A. L. Rev. 719 (1985).................................. 22
David A. Johnson & Humayun J. Chaudhry, Medical Licensing and
Discipline in America (2012) .............................................................................. 3
Earl W. Kintner, Federal Antitrust Law (1994) ...................................................... 36
Richard Squire, Antitrust and the Supremacy Clause,
59 Stan. L. Rev. 77 (2006) .............................................................................. 22
Texas Medical Board, Healthcare Provider Search,
https://public.tmb.state.tx.us/HCP_Search/searchinput.aspx ......................40
Texas Medical Board, Self-Evaluation Report (Aug. 2015),
https://www.sunset.texas.gov/public/uploads/files/reports/
Medical%20Board%20SER%20Sept%201%202015.pdf%20%20Adobe%20Acrobat%20Pro_0.pdf.............................................................. 44
Lawrence H. Tribe, American Constitutional Law (2d ed. 1988) ............................ 54
xii
Case: 16-50017
Document: 00513553389
Page: 14
Date Filed: 06/17/2016
Introduction
The States’ sovereign regulation of their economies has never been subject to scrutiny under federal antitrust law. Instead, the States are free to pursue their own policy goals. Exxon Corp. v. Gov. of Md., 437 U.S. 117, 133 (1978).
Thus, when a State uses an expert agency to carry out its regulatory policies,
the State’s antitrust immunity applies to its agency’s conduct so long as it “result[s] from procedures that suffice to make it the State’s own.” N.C. State
Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101, 1111 (2015). In this context, that
requires that the State has clearly articulated a policy allowing professional
regulation and provides for active supervision giving realistic assurance that
the regulations accord with state policy. Id. at 1112.
The Texas Medical Practice Act regulates the practice of medicine in
Texas by requiring that physicians maintain licenses that can be terminated or
curtailed for practices inconsistent with public health and welfare. Tex. Occ.
Code §§ 155.001, 164.001, 164.051. Texas created the Texas Medical Board
as the state agency to administer that Act, and Texas authorized judicial review of the Board’s regulations and disciplinary actions.
Here, the Board issued rules concerning standards of care in telemedicine.
Plaintiffs disagree with those standards. But they did not bring a rule challenge
in state court. Instead, they alleged that the physician officers on the Board
violated federal antitrust law by voting, in their official capacity, to issue the
rules. This claim should not be allowed to proceed because the State’s antitrust immunity applies to the Board’s official rulemaking.
Case: 16-50017
Document: 00513553389
Page: 15
Date Filed: 06/17/2016
Statement of Jurisdiction
Defendants are sued in their official capacity as officers of the Texas Medical Board, an agency of the State of Texas. ROA.2372. They appeal from a
district-court order denying their motion to dismiss a federal antitrust claim
as barred by the doctrine of state-action immunity. ROA.2372-93; see Parker v.
Brown, 317 U.S. 341 (1943) (articulating doctrine).
Appellate jurisdiction exists under the collateral-order doctrine. See Martin v. Memorial Hosp., 86 F.3d 1391, 1395, 1394-97 (5th Cir. 1996) (a denial of
state-action immunity is appealable under the collateral-order doctrine because “Parker v. Brown state action immunity shares the essential element of
absolute, qualified and Eleventh Amendment immunities—an entitlement not
to stand trial under certain circumstances”) (quotation marks omitted); see
also Acoustic Sys., Inc. v. Wenger Corp., 207 F.3d 287, 293 (5th Cir. 2000) (“the
reasoning that underlies the immediate appealability of an order denying absolute, qualified or Eleventh Amendment immunity indicates that the denial
of state action immunity to a state, its officers, or its agents should be similarly
appealable”).
The district court’s jurisdiction over plaintiffs’ antitrust claim rested on
28 U.S.C. §§ 1331 and 1337 and the Ex parte Young exception to defendants’
Eleventh Amendment sovereign immunity. See Puerto Rico Aqueduct & Sewer
Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144-46 (1993). The district court
denied defendants’ motion to dismiss on December 14, 2015. ROA.2372-93.
Defendants timely noticed an appeal on January 8, 2016. ROA.2394.
2
Case: 16-50017
Document: 00513553389
Page: 16
Date Filed: 06/17/2016
Statement of the Issue
The question presented is whether state-action immunity applies because
Texas law (1) clearly articulates a policy allowing the Board to regulate standards of medical practice and (2) provides for adequate supervision to ensure
that the Board has not departed from its mandate to pursue state policy.
Statement of the Case
I. Texas regulation of the practice of medicine
Texas has long regulated the practice of medicine within its borders. Although licensure goes back to the colonies, the modern system traces to the
second half of the nineteenth century. See David A. Johnson & Humayun J.
Chaudhry, Medical Licensing and Discipline in America 3-4, 23 (2012). Recognizing the value of a licensing system to promote reliable care and public welfare, Texas adopted its medical licensing authority in 1873, later moving from
county boards of medical examiners to a state board of examiners. Id. at 23.
Many other States followed suit before the turn of the century. Id.; see, e.g.,
Dent v. West Virginia, 129 U.S. 114 (1889) (rejecting due-process challenge to
medical licensing law).
Today, the Texas Legislature has continued to find that “the interests of
the residents of the state are served by the regulation of certain professions
and other occupations.” Tex. Gov’t Code § 318.001(1). Accordingly, Texas
regulates the practice of medical professionals including physicians, physician
assistants, surgical assistants, acupuncturists, medical radiological physicists,
3
Case: 16-50017
Document: 00513553389
Page: 17
Date Filed: 06/17/2016
and perfusionists. Tex. Occ. Code chs. 151-165, 204-206, 601-603. Rulemaking authority for all of those occupations is vested in the Texas Medical Board
(“the Board”). Id. §§ 153.001, 204.102(b), 205.101(b), 206.101, 601.0522,
602.151(a), 603.152.
The Board is “an agency of the executive branch of state government,”
id. § 152.001(a), consisting of nineteen members appointed by the Governor
of Texas and confirmed by the Texas Senate, id. § 152.002(a). With the Senate’s approval, the Governor may also remove any board member he appoints.
Tex. Const. art. XV, § 9(a).
Of the nineteen Board members, nine must be alleopathic physicians,
three must be osteopathic physicians, and the remaining seven must come
from public life. Tex. Occ. Code § 152.002(a). Each physician member must
have been practicing for the prior five years, with at least three years as a medical peer reviewer. Id. § 152.003(d). No Board member may be an officer or
employee of any “association of business or professional competitors in this
state designed to assist its members and its industry or profession” in promoting their common interests. Id. § 152.004(a), (c).
As state officers, Board members must take the oath required by the Texas
Constitution, solemnly swearing to faithfully execute the duties of office and
swearing that they had not given money or anything of value in exchange for
the office. Tex. Const. art. XVI, § 1(a)-(b). Each member must also follow
Texas’s open-government and ethics laws, including its open-meetings law,
open-records law, and conflict-of-interest and financial-disclosure laws. Tex.
4
Case: 16-50017
Document: 00513553389
Page: 18
Date Filed: 06/17/2016
Gov’t Code chs. 551, 552, 572; Tex. Occ. Code § 153.008. Indeed, members
must receive training regarding those laws before they can vote on the Board.
Tex. Occ. Code § 152.010(b)(7)-(8). As public servants, Board members are
entitled to representation by the Attorney General of Texas. Tex. Civ. Prac.
& Rem. Code § 104.004(a).
In evaluating whether to regulate “a profession or occupation,” the Legislature has required consideration of least-restrictive-means factors, such as
“whether the regulation would have the effect of directly or indirectly increasing the costs of any goods or services and, if so, whether the increase would be
more harmful to the public than the harm that might result from the absence
of regulation.” Tex. Gov’t Code § 318.002(3). Not only must state actors consider those factors in evaluating professional regulation, but the Legislature
has created a process to reevaluate the need for regulatory agencies to exist.
Under this “sunset review” process, agencies cease to exist after a specified
period of time unless the Legislature affirmatively continues the agency. See
id. § 325.015(a). The Texas Medical Board is subject to sunset review, which
will next occur in 2017. Tex. Occ. Code § 151.004. As part of that process, an
agency must report on listed criteria, Tex. Gov’t Code § 325.007(a)(1), including “whether less restrictive or alternative methods of performing any
function that the agency performs could adequately protect or provide service
to the public,” id. § 325.011(5). This reporting requirement reinforces the
Legislature’s mandate that state actors consider potential costs in considering
occupational regulation.
5
Case: 16-50017
Document: 00513553389
Page: 19
Date Filed: 06/17/2016
II. The Texas Medical Board’s licensing and disciplinary authority
For professions regulated by the Board, the Legislature has displaced the
model of unrestrained competition with a system of regulation. For example,
the Texas Medical Practice Act directs: “A person may not practice medicine
in this state unless the person holds a license issued under this subtitle.” Tex.
Occ. Code § 155.001; accord, e.g., id. §§ 204.151, 206.201, 602.201, 603.251
(similar licensing requirements to practice as a physician assistant, surgical assistant, medical radiologist physicist, and perfusionst).
The Legislature thus empowered the Board to issue licenses to practice
medicine, id. § 155.002(a), and to “regulate the practice of medicine in this
state,” id. § 153.001(3). The Legislature then cabined that power to accommodate certain avenues of competition. For example, the Legislature prohibited “rules restricting advertising or competitive bidding by a person regulated
by the board” and prohibited “a fee schedule for medical services.” Id.
§§ 153.002(a), 153.010.
The Legislature also assigned the Board duties regarding complaints
against physicians. Either a private person or the Board itself may file a complaint charging a physician with grounds for discipline, see id. § 154.051, such
as “a violation of [the Medical Practice Act] or a board rule,” id. § 164.001(a).
The Medical Practice Act authorizes disciplinary action for various misconduct, including failing “to practice medicine in an acceptable professional
manner consistent with public health and welfare.” Id. § 164.051(a)(6). The
Board is authorized to “ensure that appropriate care, including quality of care,
6
Case: 16-50017
Document: 00513553389
Page: 20
Date Filed: 06/17/2016
is provided to patients who receive telemedicine medical services.” Tex.
Gov’t Code § 531.0217(i); accord Tex. Occ. Code § 153.004.
The Board investigates each complaint filed and, if it pursues the complaint, first conducts an internal “informal proceeding” to seek resolution. See
Tex. Occ. Code § 164.003; 22 Tex. Admin. Code § 178.7(b). If that does not
settle the complaint, a formal hearing is held by “an administrative law judge
employed by the State Office of Administrative Hearings” (SOAH), which is
an independent state agency. Tex. Occ. Code § 164.007(a). That agency’s administrative law judges are “not responsible to or subject to the supervision,
direction, or indirect influence” of anyone outside SOAH. Tex. Gov’t Code
§ 2003.041(c). At the formal hearing, the administrative law judge takes evidence and determines whether the statute or rule at issue was violated. Tex.
Occ. Code § 164.007.
Most state agencies in Texas have authority to modify or vacate on policy
grounds a SOAH administrative law judge’s findings and conclusions. Tex.
Gov’t Code § 2001.058(e). But the Texas Medical Board does not. That authority is specifically withheld. Tex. Occ. Code § 164.007(a) (“the board shall
dispose of the contested case by issuing a final order based on the administrative law judge’s findings of fact and conclusions of law”), (a-1) (“the board
may not change a finding of fact or conclusion of law or vacate or modify an
order of the administrative law judge”). The Board’s discretion extends only
to determining the appropriate sanction for any violation found by the administrative law judge. Id. § 164.007(a-1).
7
Case: 16-50017
Document: 00513553389
Page: 21
Date Filed: 06/17/2016
If the Board disagrees with the SOAH administrative law judge’s findings
or conclusions, the Board’s recourse is judicial review in a state district court.
Id. (“The board may obtain judicial review of any finding of fact or conclusion
of law issued by the administrative law judge ....”); see id. § 153.013 (“The
board shall be represented in court proceedings by the attorney general.”). In
that review, the court will review the administrative law judge’s findings of
fact deferentially and legal conclusions de novo. See Tex. Gov’t Code
§ 2001.174. The district court’s decision can then be appealed, as with civil
actions generally. Id. § 2001.901(a).
If the SOAH administrative law judge concludes that the physician violated a statute or rule, the physician “is entitled to judicial review” in state
district court. Id. § 2001.171; accord Tex. Occ. Code § 164.009. Again, the district court reviews the independent administrative law judge’s findings of fact
deferentially and conclusions of law de novo, see Tex. Gov’t Code § 2001.174,
with further judicial review available by appeal, id. § 2001.901(a).
III. The Texas Medical Board’s rulemaking authority
The Board has authority to adopt rules in order to perform its duties under the Medical Practice Act and regulate the practice of medicine. Tex. Occ.
Code § 153.001. Under the Texas Administrative Procedure Act, a number of
requirements attend the Board’s rulemaking. First, unlike the federal system,
Texas law generally requires that even interpretive rules be issued through
notice-and-comment procedure. Teladoc, Inc. v. Tex. Med. Bd., 453 S.W.3d
606, 616 n.48 (Tex. App.—Austin 2014, pet. denied) (“the Texas APA differs
8
Case: 16-50017
Document: 00513553389
Page: 22
Date Filed: 06/17/2016
from its federal counterpart in making ‘rules’ that ‘interpret’ law or policy—
the so-called ‘interpretive rules’—subject to notice-and-comment rulemaking
requirements”); see Howell v. Mauzy, 899 S.W.2d 690, 705 n.33 (Tex. App.—
Austin 1994, writ denied) (“Interpretive rules are those that interpret and apply the provisions of the statute under which an agency operates. No sanction
attaches to the violation of an interpretive rule as such; the sanction attaches
to the violation of the statute, which the rule merely interprets.”) (quotation
marks and citation omitted).
Second, “before the rule is adopted,” it must be referred for review “to
the appropriate standing committee” of the Legislature. Tex. Gov’t Code
§ 2001.032(a). The committee “may send to a state agency a statement supporting or opposing adoption of a proposed rule.” Id. § 2001.032(c). If the
agency proceeds, the agency must state on request its “reasons for overruling
the considerations urged against adoption,” allowing the Legislature to evaluate whether to overturn the rule. Id. § 2001.030. And in all cases the agency
must give a “reasoned justification for the rule.” Id. § 2001.033(a)(1). That
requires a statement of “the particular statutory provisions under which the
rule is adopted and of how the agency interprets the provisions as authorizing
or requiring the rule,” as well as establishing “a rational connection between
the factual basis for the rule and the rule as adopted.” Id. § 2001.033(a)(1)(B),
(a)(2). If a rule would have an adverse economic effect on a small business, the
agency must also prepare an “economic impact statement” that describes the
agency’s consideration of “alternative methods of achieving the purpose of
9
Case: 16-50017
Document: 00513553389
Page: 23
Date Filed: 06/17/2016
the proposed rule.” Id. § 2006.002(c)(1). Together, these procedural requirements “promote public accountability and facilitate judicial review” of a
rule’s substance. Nat’l Ass’n of Indep. Insurers v. Tex. Dep’t of Ins., 925 S.W.2d
667, 669 (Tex. 1996) (adherence to rulemaking procedure “allows interested
parties to better formulate ‘specific, concrete challenges’ to a rule”).
Third, an interested party can bring a declaratory judgment action in state
court to invalidate a rule. Tex. Gov’t Code § 2001.038(a). Judicial review is
available as to both procedure and substance. Some cases involve only a procedural challenge. In that event, the reviewing court asks whether the agency
substantially complied with the required rulemaking procedure. E.g., Nat’l
Ass’n of Indep. Insurers, 925 S.W.2d at 669.
Other challenges involve the substance of a rule. In substantive-challenge
cases, Texas courts ask whether the rule was authorized and “in harmony with
the general objectives of the various statutes involved.” Tex. Orthopaedic Ass’n
v. Tex. State Bd. of Podiatric Med. Exam’rs, 254 S.W.3d 714, 722 (Tex. App.—
Austin 2008, pet. denied) (holding licensing board’s rule substantively invalid); accord Tex. Bd. of Chiropractic Exam’rs v. Tex. Med. Ass’n, 375 S.W.3d 464,
475-88 (Tex. App.—Austin 2012, pet. denied) (after reviewing expert testimony introduced in district court, holding licensing board’s regulation substantively invalid).
Reviewing courts look to the duties “expressly conferred” on an agency,
as well as powers “reasonably necessary to fulfill its express functions or du-
10
Case: 16-50017
Document: 00513553389
Page: 24
Date Filed: 06/17/2016
ties.” Tex. Orthopaedic Ass’n, 254 S.W.3d at 719. When statutes confer authority in broader terms, reviewing courts do not ask whether a rule’s substance
accords with the court’s own policy preferences; instead, courts require harmony with the objectives set by the Legislature. Lambright v. Tex. Parks &
Wildlife Dep’t, 157 S.W.3d 499, 510 (Tex. App.—Austin 2005, no pet.).
Not only must an agency’s rules fall within the Legislature’s design, but
its “rules and regulations must be consistent with the constitution ... of this
state.” Liberty Mut. Ins. Co. v. Griesing, 150 S.W.3d 640, 648 (Tex. App.—
Austin 2004, pet. dism’d). That includes the Texas Constitution’s duecourse-of-law provisions, which “protect[] individual rights that the United
States Supreme Court determined were not protected by the federal Constitution” under the Fourteenth Amendment’s Due Process Clause. Patel v. Tex.
Dep’t of Licensing & Regulation, 469 S.W.3d 69, 87 (Tex. 2015) (invalidating
professional-licensing statutes and regulations under Texas Constitution).
Finally, the Texas judiciary has “never expressly adopted the Chevron or
Skidmore doctrines for our consideration of a state agency’s construction of a
statute.” R.R. Comm’n v. Tex. Citizens for a Safe Future, 336 S.W.3d 619, 625
(Tex. 2011). The analysis can be similar: “in certain circumstances courts may
be required to defer to an administrative agency’s construction of its own statutory authority.” Tex. Med. Ass’n, 375 S.W.3d at 474-75 (citing Tex. Citizens,
336 S.W.3d at 624-25). But those deference principles “apply only where the
statute in question is ambiguous and only to the extent that the agency’s interpretation is one of those reasonable interpretations,” and “may be subject
11
Case: 16-50017
Document: 00513553389
Page: 25
Date Filed: 06/17/2016
to further qualifications where the subject matter is not within any specialized
expertise of the agency and where ‘a nontechnical question of law’ is involved.” Id. at 475 (citing Tex. Citizens, 336 S.W.3d at 630). The “determining factor” in a substantive challenge to rules “is whether the rules are in harmony with the general objectives of the legislation involved,” and that “is a
question of law” that Texas courts decide de novo. Lambright, 157 S.W.3d at
510 (quotation marks omitted).
Plaintiffs did not pursue either a procedural or substantive challenge to
the Board rules at issue here.
IV. The challenged telemedicine rules
A. Statutory background
The Texas Legislature has specifically directed the Texas Medical Board
to ensure that appropriate medical care is delivered to telemedicine patients.
First, the Legislature expanded the Texas Medicaid program to include
reimbursement for “telemedicine medical services.” Tex. Gov’t Code
§ 531.0216(a); see also Tex. Health & Safety Code § 62.1571(a) (similar law for
state-funded children’s health insurance program). The Legislature directed
that the Texas Medical Board, in consultation with the state health agency,
adopt rules as necessary to “ensure that appropriate care, including quality of
care, is provided to patients who receive telemedicine medical services.” Tex.
Gov’t Code § 531.0217(i)(1); accord Tex. Occ. Code § 153.004.
12
Case: 16-50017
Document: 00513553389
Page: 26
Date Filed: 06/17/2016
Second, the Legislature directed that certain health plans regulated by the
Department of Insurance, see Tex. Ins. Code § 1455.002-.003, may not exclude medical services due to their telemedicine nature, id. § 1455.004(a). The
Legislature directed that the Texas Medical Board, in consultation with the
insurance commissioner, adopt rules as necessary to “ensure that patients using telemedicine medical services receive appropriate, quality care.” Tex.
Occ. Code § 111.004(1).
As a matter of statutory terminology, “‘Telemedicine medical service’
means a health care service that is initiated by a physician ... , that is provided
for [patient assessment, diagnosis, consultation, treatment, or medical-data
transfer], and that requires the use of advanced telecommunications technology, other than telephone or facsimile.” Tex. Gov’t Code § 531.001(8).
“‘Telehealth service’ means a health service, other than a telemedicine medical service,” delivered in the same remote manner. Id. § 531.001(7). Thus,
“telemedicine” generally corresponds to the practice of medicine, see Tex.
Occ. Code § 151.002(13) (defining “practicing medicine”), while “telehealth” corresponds to other health-related services.
B. The rules at issue
Plaintiffs challenge two Board rules, one adopted in October 2010 and one
adopted in April 2015. ROA.2374-75.
1.
“New Rule 174”
By statute, physicians must “practice medicine in an acceptable professional manner, consistent with public health and welfare.” Tex. Occ. Code
13
Case: 16-50017
Document: 00513553389
Page: 27
Date Filed: 06/17/2016
§ 164.051(a)(6). Thus, if the professional standard of care for a given medical
service does not require examining the patient, that service can be rendered
remotely over the telephone. Conversely, if the standard of care requires examining a patient as part of a given medical service, then the physician can
perform that service on a remote patient only using technology that allows an
effective examination, tantamount to what the patient would receive in person. See Tex. Gov’t Code § 531.001(8) (“telemedicine medical service” is a
medical service “that requires the use of advanced telecommunications technology, other than telephone or facsimile”). For example, the Board has long
enforced the professional standard that physicians prescribing medication
must examine a patient and not just review information self-reported by the
patient. E.g., ROA.1170 (discipline for prescribing antibiotics over Internet
without examining patients); accord ROA.1055-82, 1153-77 (similar disciplinary orders in the five years before the Legislature’s last sunset-review continuance of the Board, in 2005).
In 2010, the Board proposed rule revisions to define with more particularity what remote equipment and staffing is needed to perform medical services
for which the standard of care requires that a remote patient be examined, thus
requiring “advanced” telecommunications allowing real-time audio-visual
communication. 35 Tex. Reg. 6175, 6175-77 (July 16, 2010) (proposed rules);
35 Tex. Reg. 3390, 3390-93 (Apr. 30, 2010) (proposed rules). The Board ad-
14
Case: 16-50017
Document: 00513553389
Page: 28
Date Filed: 06/17/2016
dressed comments and adopted the final rules codified in Texas Administrative Code title 22, chapter 174. See 35 Tex. Reg. 9085, 9085-91 (Oct. 8, 2010)
(adopting rules).
Plaintiffs label those 2010 revised rules as “New Rule 174” and allege that
the rules violate federal antitrust law. ROA.1910, 1922. Those rules have been
slightly revised since 2010, see 22 Tex. Admin. Code §§ 174.1-174.12, and the
current rules are cited here because plaintiffs seek only injunctive relief.
Under those rules, if the standard of care requires examining a remote patient contemporaneously with the medical service, that examination is permitted to occur at any “established medical site,” meaning any location where
there is diagnostic equipment and space for a site presenter (a health professional such as a nurse) to assist with the treating physician’s remote examination of the patient. 22 Tex. Admin. Code §§ 174.2(2), 174.6. When a patient
examination required by the standard of care occurs at a such a distant site,
the rules require that the physician still “establish[] a diagnosis through the
use of acceptable medical practices, including documenting and performing
patient history, mental status examination, and physical examination.” 22
Tex. Admin. Code § 174.8(a)(2) (definition of current term “defined physician-patient relationship”); see 35 Tex. Reg. at 9,090 (definition in 2010 rule
version of “proper physician-patient relationship”).
Hence, a contemporaneous patient examination required by the standard
of care can be performed either at the same location as the doctor (“in-per-
15
Case: 16-50017
Document: 00513553389
Page: 29
Date Filed: 06/17/2016
son”) or at a remote site where the patient is located with diagnostic equipment and a health professional to assist the treating doctor and is connected
with the treating doctor by real-time communication (“face-to-face”). 22
Tex. Admin. Code §§ 174.2(3)-(4), 175.8(a)(2). The rules also allow for telemedicine services that involve a patient examination in certain other ways. Id.
§ 174.7.
Teladoc alleges that “New Rule 174” caused it to eliminate the use of
“video consultations” in Texas and offer a more limited set of services.
ROA.1910. This allegation appears to reflect Teladoc’s understanding that its
physicians were performing services for which the professional standard of
care required actually examining the patient and not just talking by videoconference. It is unclear why such substandard practices would comply with the
Medical Practice Act before New Rule 174, and Teladoc did not seek a preliminary injunction of New Rule 174. ROA.167.
2. “New Rule 190.8”
Apart from the Board’s telemedicine-specific rules, the Board has promulgated general disciplinary guidelines. See 22 Tex. Admin. Code §§ 190.1190.16. As relevant here, Rule 190.8 provides guidance on what practices the
Board considers to be “violations of the [Medical Practice] Act.” Id. § 190.8.
As of 2011, that rule memorialized the Board’s view that the Medical Practice
Act is violated by “prescription of any dangerous drug or controlled substance
without first establishing a proper professional relationship with the patient.”
29 Tex. Reg. 3908, 3909 (Apr. 23, 2004) (proposed Rule 190.8(1)(L)), adopted
16
Case: 16-50017
Document: 00513553389
Page: 30
Date Filed: 06/17/2016
by 29 Tex. Reg. 6092, 6092 (July 4, 2004). The disciplinary guidelines stated:
“[A] proper relationship, at a minimum requires ... establishing a diagnosis
through the use of acceptable medical practices such as patient history, mental
status examination, physical examination, and appropriate diagnostic and laboratory testing. An online or telephonic evaluation by questionnaire is inadequate.” Id.
In 2011, the Board wrote a letter to Teladoc stating that its physicians
would be subject to discipline if they prescribed medication without first conducting an examination of the patient face-to-face, i.e., either at the same location or using telemedicine. ROA.172-74. The letter stated that a telephone
conversation is not an examination that satisfies the standard of care for prescribing medication. ROA.173.
Teladoc challenged the letter as itself a “rule” under the Texas Administrative Procedure Act. A state court agreed and held that the letter’s guidance
had to go through notice-and-comment procedure. Teladoc, 453 S.W.3d at
619-20.
The Board ultimately engaged in notice-and-comment rulemaking to issue a revised Rule 190.8(1)(L). See 40 Tex. Reg. 1018, 1018-19 (Mar. 6, 2015),
adopted by 40 Tex. Reg. 3159, 3159 (May 29, 2015). This “New Rule 190.8”
makes clear the Board’s interpretation that the Medical Practice Act subjects
physicians to discipline for the unprofessional practice of prescribing medication without performing a patient history, mental-status examination, and
17
Case: 16-50017
Document: 00513553389
Page: 31
Date Filed: 06/17/2016
physical examination. 22 Tex. Admin. Code § 190.8(1)(L)(i)(II). The examination can either be in person, or the patient can be present at a remote location that has diagnostic equipment and a health professional to allow an equivalent examination. Id. (cross-referencing 22 Tex. Admin. Code § 174.2(3)(4)). The revised rule makes clear the Board’s view that an online questionnaire or telephone conversation is not an examination adequate to satisfy the
standard of care for prescribing medication. Id. § 190.8(1)(L)(i)(III).
V. Procedural history
Teladoc did not seek review in state court of either of those rules. Instead,
Teladoc filed a federal lawsuit against the Texas Medical Board and its members who voted for the rules. Teladoc alleged that defendants conspired to unreasonably restrain trade or commerce among the States, in violation of the
Sherman Antitrust Act, 15 U.S.C. § 1, and also violated the dormant Commerce Clause. ROA.1921-22. Teladoc later dismissed as defendants the Board
itself and the Board members in their individual capacities, ROA.1942, leaving
as defendants the Board members in their official capacities. This brief describes defendants collectively as the Board because they assume its identity.
E.g., ROA.1774.
Teladoc seeks only injunctive relief. It moved for and received a preliminary injunction of Rule 190.8. ROA.1774-93. The Board then moved to dismiss
the antitrust claim under the doctrine of state-action immunity. ROA.1956-84.
The district court denied dismissal. ROA.2372-93. It reasoned that the State’s
processes did not show supervision sufficient to provide reasonable assurance
18
Case: 16-50017
Document: 00513553389
Page: 32
Date Filed: 06/17/2016
that the Board’s regulatory actions promote state policy. ROA.2383-88. The
The Board defendants now appeal.
Summary of the Argument
1.
The Sherman Antitrust Act was never meant to affect the States’ abil-
ities to regulate their economies. Hence, to express considerations of federalism and sovereignty, the Supreme Court has recognized state-action immunity from federal antitrust law. Under that doctrine, a state legislature’s direct
actions are ipso facto immune from federal antitrust review. Hoover v. Ronwin,
466 U.S. 558, 567-68 (1984). For other actors, state-action immunity requires
examining whether their conduct “should be deemed state action and thus
shielded from the antitrust laws.” Patrick v. Burget, 486 U.S. 94, 100 (1988).
That test requires, first, that the challenged conduct is “pursuant to a clearly
articulated and affirmatively expressed state policy to replace competition
with regulation.” Hoover, 466 U.S. at 569. Second, that test requires an inquiry
into whether the State actively supervises the conduct with “procedures that
suffice to make it the State’s own.” Dental Exam’rs, 135 S. Ct. at 1111-12.
2. The clear-articulation requirement is met here. Texas law directs the
Texas Medical Board to license physicians and take disciplinary action when
they fail to comply with professional standards. See Tex. Occ. Code
§ 164.051(a)(6). Indeed, Texas law specifically directs the Board to ensure
that patients using telemedicine receive quality care. Tex. Gov’t Code
19
Case: 16-50017
Document: 00513553389
Page: 33
Date Filed: 06/17/2016
§ 531.0217(i); Tex. Occ. Code §§ 111.004(1), 153.004. Binding circuit precedent on a comparable statute confirms that the Texas Medical Practice Act is
a clear articulation of a policy to displace unbridled competition with a system
of regulation and enforcement of professional standards of care. Earles v. State
Bd. of Certified Pub. Accountants of La., 139 F.3d 1033, 1042-43 (5th Cir. 1998).
3. The active-supervision requirement is met here. That “flexible and
context-dependent” standard requires assessing the “risk that active market
participants will pursue private interests” instead of faithfully implementing
state policy. Dental Exam’rs, 135 S. Ct. at 1114. The degree of that risk in a
given context informs what sort of procedures create a “realistic assurance”
that agency regulations promote state policy and thus “suffice to make [the
agency action] the State’s own.” Id. at 1112, 1116. One degree of supervision
might be sufficient for a government official acting through official channels,
while a greater degree of supervision might be required to show that a private
agreement between two firms somehow implements state policy.
Determining the necessary degree of supervision requires first determining the degree of the risk at issue, and that risk is low here. Three features of
the Board’s membership minimize the risk that it will forego its official mandate and act with only a private purpose: (1) the Governor’s appointment of
Board members, as opposed to their election by physicians; (2) the Governor’s concomitant power to remove Board members; and (3) the breadth of
the Board’s regulatory mission and the diverse practice types of the Board’s
physician members. Three other aspects of Texas law further reduce the risk
20
Case: 16-50017
Document: 00513553389
Page: 34
Date Filed: 06/17/2016
that shapes the active-supervision requirement: (1) Texas’s sunshine and ethics laws; (2) Board members’ oaths to the State; and (3) the Legislature’s reporting requirements for sunset review and other purposes.
Given those considerations, state-court judicial review constitutes active
supervision of the Board’s formal rulemaking for purposes of state-action immunity. The reviewing state-court judges are disinterested officials. Judicial
review is not theoretical, but available as of right. Texas courts review the substance of a rule for harmony with the policy objectives expressed by the Legislature. And Texas courts enjoin as invalid rules not in harmony with those
policy objectives. Moreover, legislative oversight reinforces the supervision
provided by judicial review. Finding a lack of active supervision in this context
would not only intrude on the State’s sovereignty and alter the balance of cooperative federalism, but lead to several other negative consequences.
Standard of Review
The Board’s entitlement to state-action immunity presents a question of
law reviewed de novo. Martin v. Mem’l Hosp. at Gulfport, 86 F.3d 1391, 1397
(5th Cir. 1996) (holding that the clear-articulation prong of the immunity test
“is a question of law”); see FTC v. Ticor Title Ins. Co., 504 U.S. 621, 639-40
(1992) (deciding without deference whether state-agency oversight constituted “active supervision” for immunity purposes).
21
Case: 16-50017
Document: 00513553389
Page: 35
Date Filed: 06/17/2016
Argument
I. State-action antitrust immunity applies to all regulations that are
the State’s own.
A. The Supreme Court recognized state-action immunity because federal antitrust laws were never intended to interfere
with the States’ actions as sovereign regulators.
As originally enacted, the Sherman Antitrust Act of 1890 did not even arguably implicate the States’ traditional sovereign functions of regulating professions operating within their borders. See Herbert Hovenkamp & John A.
MacKerron, Municipal Regulation and Federal Antitrust Policy, 32 U.C.L.A. L.
Rev. 719, 725 (1985) (“[To] any constitutional lawyer in 1890, ... if the state
regulation was constitutional, it was beyond the reach of Congressional power
under the Sherman Act ....”). The expansion of the Supreme Court’s Commerce Clause jurisprudence after the turn of the century, however, raised the
question whether the Sherman Act could permissibly reach broad swaths of
traditional intrastate regulation, including state regulation that “restrain[ed]”
the manner in which occupations could be practiced within a State’s borders.
See Richard Squire, Antitrust and the Supremacy Clause, 59 Stan. L. Rev. 77, 98
(2006).
The Supreme Court answered that question in Parker v. Brown, 317 U.S.
341 (1943), holding that the Sherman Act does not “restrain state action.” Id.
at 351. In Parker, a raisin producer sued to enjoin the California director of
agriculture from enforcing a program, adopted under California’s Agricultural
Prorate Act, that ordered raisin producers to hold raisins off the market. Id. at
22
Case: 16-50017
Document: 00513553389
Page: 36
Date Filed: 06/17/2016
346-51. Establishing such a marketing program under California’s law first required the petition of at least 10 producers of a particular crop. Id. at 346. If
the State’s Agricultural Prorate Commission agreed that a marketing program
was warranted, the Commission was then “required to select a program committee from among nominees chosen by the” interested producers, to which
two processors could be added. Id. That committee of market participants
would then formulate a program of price-enhancing marketing restrictions,
which the Commission had to approve if “‘reasonably calculated to carry out
the objectives of this act.’” Id. at 347 (quoting 1939 Cal. Stat. ch. 894, § 15, p.
2494). The marketing program would then automatically become effective
upon a favorable referendum of the interested producers. Id.
The Supreme Court held that the raisin prorate program did not violate
the Sherman Act for reasons of statutory history and language and based on
federalism concerns. The Court first found that “nothing in the language of
the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.”
Id. at 350-51. The Court noted that it “abundantly appears” from the Sherman
Act’s legislative history that “its purpose was to suppress combinations to restrain competition and attempts to monopolize by individuals and corporations,” not “state action or official action directed by a state.” Id. at 351.
The Court also deemed its holding necessary on federalism grounds. The
Court noted that the States have authority to regulate their economies “in the
interest of the safety, health, and well-being” of their residents, id. at 362, and
23
Case: 16-50017
Document: 00513553389
Page: 37
Date Filed: 06/17/2016
may pursue any “legitimate state end,” id. at 367 (citing California v. Thompson, 313 U.S. 113, 115 (1941) (upholding state licensing requirement for transportation brokers)). The Court thus found its view of the Sherman Act necessary to protect the States’ coordinate role in government: “In a dual system
of government in which, under the Constitution, the states are sovereign, save
only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state’s control over its officers and agents is not
lightly to be attributed to Congress.” Id. at 351.
B. The clear-articulation and active-supervision requirements
ensure that state-action immunity applies to regulations and
policies that are the State’s own.
Parker state-action immunity requires “determining whether anticompetitive policies and conduct are indeed the action of a State in its sovereign capacity.” Dental Exam’rs, 135 S. Ct. at 1112. When “a state legislature adopts
legislation, its actions constitute those of the State and ipso facto are exempt
from the operation of the antitrust laws.” Hoover v. Ronwin, 466 U.S. 558, 56768 (1984) (citation omitted). The same is true for “a decision of a state supreme court, acting legislatively,” a realm in which it is the ultimate policymaker. Id. at 568.
“Closer analysis is required when the activity at issue is not directly that
of the legislature or supreme court,” for it “becomes important to ensure that
the anticompetitive conduct of the State’s representative was contemplated
by the State.” Id. Hence, in cases “involving the anticompetitive conduct of a
24
Case: 16-50017
Document: 00513553389
Page: 38
Date Filed: 06/17/2016
nonsovereign state representative,” the Supreme Court “has required a
showing that the conduct is pursuant to a clearly articulated and affirmatively
expressed state policy to replace competition with regulation” and “also has
found the degree to which the state legislature or supreme court supervises its
representative to be relevant to the inquiry.” Id. at 569 (quotation marks omitted); Dental Exam’rs, 135 S. Ct. at 1111-12.
1.
Clear articulation
In Town of Hallie v. City of Eau Claire, the Supreme Court held that the
clear-articulation standard is satisfied where anticompetitive conduct by a
nonsovereign actor is “a foreseeable result” of state law. 471 U.S. 34, 41-44
(1985). There, the defendant city operated a sewage-treatment facility and refused to provide sewage service to nearby townships, which sued under the
Sherman Act. Id. at 36-37. State law “authorized the City to provide sewage
services and also to determine the areas to be served.” Id. at 42. That met the
clear-articulation standard: “We think it is clear that anticompetitive effects
logically would result from this broad authority to regulate.” Id. And the cleararticulation standard does not require that the challenged action have been
“compelled” by the State. Id. at 45. Hence, a state legislature need not “describe ... in detail” the implementation of a clearly articulated policy to displace competition because doing so would make “it difficult to implement [the
policy] through regulatory agencies ... th[at] are able to deal with problems
unforeseeable to, or outside the competence of, the legislature.” S. Motor Carriers Rate Conf., Inc. v. United States, 471 U.S. 48, 64-65 (1985).
25
Case: 16-50017
Document: 00513553389
Page: 39
Date Filed: 06/17/2016
Of course, clear articulation is lacking if a State’s competition-neutral delegation of authority might merely “inadvertently authoriz[e]” the nonsovereign actor’s conduct. FTC v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003,
1016 (2013). Hence, in Phoebe Putney, the State’s grant to a public hospital authority of “simple permission to play in a market” by making contracts did
not “foreseeably entail” permission to contract for hospital mergers in restraint of trade. Id. at 1013 (quotation marks omitted); accord, e.g., Cmty.
Commc’ns Co. v. City of Boulder, 455 U.S. 40, 51 (1982) (home-rule constitutional amendment granting a city general power to enact ordinances did not
imply a choice to effectuate the State’s anticompetitive policies “through the
instrumentality of its cities and towns”); Goldfarb v. Va. State Bar, 421 U.S.
773, 790 (1975) (no immunity where “it cannot fairly be said” that a state supreme court’s rules authorized a state bar’s ethics opinions endorsing an attorney fee schedule).
But when the subject of the State’s delegation of authority is “an anticompetitive regulatory program,” then “the State’s failure to describe the implementation of its policy in detail” is irrelevant in recognizing its “clear intent
to displace competition.” S. Motor Carriers, 471 U.S. at 64 (clear-articulation
test met by law authorizing state agency to set industry prices); see Frank H.
Easterbrook, Antitrust and the Economics of Federalism, 26 J. Law & Econ. 23,
23 (1983) (“Regulation displaces competition. Displacement is the purpose,
indeed the definition, of regulation.”).
26
Case: 16-50017
Document: 00513553389
Page: 40
Date Filed: 06/17/2016
2. Active supervision
State-action immunity requires “more than a mere facade of state involvement” in the conduct at issue, “for it is necessary in light of Parker’s
rationale to ensure the States accept political accountability for anticompetitive conduct they permit and control.” Dental Exam’rs, 135 S. Ct. at 1111. Consequently, state-action immunity requires that the conduct of nonsovereign
actors “result from procedures that suffice to make it the State’s own.” Id.
Those procedures vary according to the nature of the actors whose conduct is
challenged.
a. Private nonsovereign actors
The Supreme Court has long dealt with the active-supervision requirement in the context of private nonsovereign actors. Four cases define the
Court’s approach, and they are reviewed here to show the private nature of
the action involved in each.
First, in California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., a
California liquor-control statute required that state-licensed wine merchants
could not sell wine below the prices posted with a state agency by either a wine
producer or, failing that, by wholesalers of the wine producer’s brands. 445
U.S. 97, 99 (1980). The Court emphasized that “the State neither establishes
prices nor reviews the reasonableness of the price schedules.” Id. at 105. Instead, the State simply “enforces the prices established by private parties.”
Id. The Court held that “what is essentially a private price-fixing arrange-
27
Case: 16-50017
Document: 00513553389
Page: 41
Date Filed: 06/17/2016
ment” was not sufficiently supervised by the State to qualify as its own sovereign regulation. Id. at 106. In so holding, the Court drew a contrast between
the liquor agency’s failure to review the privately set rates and the facts of
Parker, in which the agriculture commission “appointed by the Governor”
approved the proposed marketing program. Id. at 104.
Second, the Supreme Court’s next active-supervision case also involved
private fixing of alcohol resale prices. 342 Liquor Corp. v. Duffy, 479 U.S. 335,
342 (1987) (the conduct “is essentially similar to the violation in Midcal”).
Liquor prices were posted by private parties and enforced by the state’s liquor
authority, but neither that agency nor the state legislature “exerts any significant control over retail liquor prices or markups.” Id. at 345 n.7. “As in
Midcal,” the State “neither establishes prices nor reviews the reasonableness
of the price schedules.” Id. at 344-45 (quotation marks omitted). So the Court
found no active supervision of the private parties’ activity. Id.
Third, the Supreme Court in Patrick v. Burget, confronted a surgeon’s
claim that other physicians on a private hospital’s peer-review committee violated the Sherman Act by conspiring to revoke his hospital privileges. 486
U.S. at 96-98. The defendants claimed state-action immunity by arguing that
Oregon actively supervised private peer review through the state health
agency, the state medical board, and the state judicial system. Id. at 101. The
Court rejected that claim because the defendants did not show “that any of
these actors reviews—or even could review—private decisions regarding hos-
28
Case: 16-50017
Document: 00513553389
Page: 42
Date Filed: 06/17/2016
pital privileges to determine whether such decisions comport with state regulatory policy and to correct abuses.” Id. As to judicial review, the Court expressly declined to “decide the broad question whether judicial review of private conduct” can constitute active supervision, id. at 104, because no Oregon
law even appeared to afford such review and because the state court that had
entertained the possibility of such review indicated that it would not “review
the merits of a privilege termination decision to determine whether it accorded
with state regulatory policy,” as to “convert the action of a private party in
terminating a physician’s privileges into the action of the State,” id. at 105.
Finally, the Supreme Court most recently addressed active supervision of
private nonsovereign actors in FTC v. Ticor Title Insurance Co., 504 U.S. 621
(1992). There, six of the nation’s largest title companies used a private association to establish uniform fees for title searches and title examinations,
which were filed with state insurance offices and became effective automatically unless the State rejected them. Id. at 628-29. The Court faulted the private companies’ claim to state-action immunity because the state insurance
agencies did not actually review the rates. Id. at 638 (describing state-agency
practices). The Supreme Court stated that no antitrust violation is “more pernicious than price fixing” and that the Court’s ruling “should be read in light
of the gravity of the antitrust offense, the involvement of private actors
throughout, and the clear absence of state supervision.” Id. at 639. Hence, the
decision “do[es] not imply that some particular form of state or local regulation is required to achieve” other regulatory ends. Id.
29
Case: 16-50017
Document: 00513553389
Page: 43
Date Filed: 06/17/2016
b. Governmental nonsovereign actors
The requirement of active state supervision “serves essentially an evidentiary function: it is one way of ensuring that the actor is engaging in the challenged conduct pursuant to state policy.” Town of Hallie, 471 U.S. at 46. Because the active-supervision requirement “is flexible and context-dependent,” Dental Exam’rs, 135 S. Ct. at 1116, it applies differently to different types
of governmental actors.
i.
Municipalities
“Cities are not themselves sovereign; they do not receive all the federal
deference of the States that create them.” City of Lafayette v. La. Power & Light
Co., 435 U.S. 389, 412 (1978). Because municipal action does not implicate
“‘a state’s control over its officers and agents’ in activities directed by the
legislature,” a municipality’s immunity from antitrust law requires that it is
engaging in the challenged activity pursuant to clearly expressed state policy.
Town of Hallie, 471 U.S. at 38 (quoting Parker, 317 U.S. at 351). A municipality’s governmental character, however, means that it need not also show active state supervision. Id. at 47.
ii. Regulatory agencies
Last year, in North Carolina State Board of Dental Examiners v. FTC, 135
S. Ct. 1101, the Supreme Court took up whether a state regulatory agency invoking state-action immunity must show active supervision of its conduct.
That case involved North Carolina’s licensing board for dentists. Six of its
eight members are “elected by other licensed dentists in North Carolina,” and
30
Case: 16-50017
Document: 00513553389
Page: 44
Date Filed: 06/17/2016
its organic statute “does not create any mechanism for the removal of an
elected member of the Board by a public official.” Id. at 1108. The FTC challenged the dental board’s conduct of sending cease-and-desist letters ordering
nondentist teeth-whitening providers to stop performing that service, which
the board viewed as the unlicensed practice of dentistry. Id. at 1108-09.
The FTC entered an administrative order that barred the dental board
from sending such letters but “explicitly permit[ted] the Board to bring (or
cause to be brought) judicial proceedings against non-dentist providers, to
bring administrative proceedings against dentists, and to send bona fide litigation warning letters to targets of investigation.” Final Commission Opinion
and Order, In re N.C. Bd. of Dental Exam’rs, 152 F.T.C. 640, 2011 WL
11798463, at *37 (Dec. 2, 2011). The FTC explained that its proceeding “does
not involve a challenge to a state law or regulation.” Id. at *38. “Rather, this
proceeding challenges actions, including sending cease and desist letters to
non-dentists, that were not authorized by the Dental Practice Act.” Id. at *28;
accord id. at *37.
On appeal, the Supreme Court rejected the dental board’s claim to stateaction immunity from federal antitrust law. Dental Exam’rs, 135 S. Ct. at 1117.
The Court held that the two Midcal requirements provide “a proper analytical
framework” to resolve the “ultimate question whether an anticompetitive
policy is indeed the policy of a State.” Id. at 1112. The “first requirement—
clear articulation—rarely will achieve that goal by itself,” and “the second
31
Case: 16-50017
Document: 00513553389
Page: 45
Date Filed: 06/17/2016
Midcal requirement—active supervision—seeks to” ensure that the challenged conduct is the State’s own. Id.
Although the dental board argued that it was “exempt from Midcal’s second requirement” as a state agency, the Court held that “the need for supervision turns not on the formal designation given by States to regulators but on
the risk that active market participants will pursue private interests in restraining trade.” Id. at 1113-14. The Court that the supervision requirement turned
on the “structural risk of market participants’ confusing their own interests
with the State’s policy goals.” Id. at 1114. Applying that structural approach,
the Court held that “a state board on which a controlling number of decisionmakers are active market participants in the occupation the board regulates must satisfy Midcal’s active supervision requirement in order to invoke
state-action antitrust immunity.” Id.
The Court did not apply the active-supervision test in Dental Examiners
because the dental board did “not contend in this Court that its anticompetitive conduct was actively supervised by the State or that it should receive Parker immunity on that basis.” Id. at 1116. However, the Court noted in dicta
that its prior cases on active supervision of private conduct had “identified
only a few constant requirements of active supervision,” namely: (1) review
of the substance of the decision and not just the procedures producing it, id.
(citing Patrick, 486 U.S. at 102-03); (2) power to veto or modify decisions that
do not accord with state policy, id. (citing Patrick, 486 U.S. at 102-03); (3) actual and not merely potential review by the supervisor, id. (citing Ticor, 504
32
Case: 16-50017
Document: 00513553389
Page: 46
Date Filed: 06/17/2016
U.S. at 638); and (4) a supervisor not itself an active market participant, id. at
1117.
The Court also noted that the active-supervision test “is flexible and context-dependent.” Id. at 1116. “Active supervision need not entail day-to-day
involvement in an agency’s operations or micromanagement of its every decision.” Id. The Court explained that the ultimate focus of both the clear-articulation and active-supervision test “is not whether the challenged conduct is
efficient, well-functioning, or wise.” Id. at 1111. “Rather, it is whether anticompetitive conduct engaged in by nonsovereign actors should be deemed
state action and thus shielded from the antitrust laws.” Id. (quotation and alteration marks omitted). 1
II. The clear-articulation requirement is met here.
Under binding Fifth Circuit precedent, the Texas Medical Practice Act is
a clear articulation of a policy to displace unbridled competition with a system
of regulation and enforcement of professional standards of care. See Earles v.
State Bd. of Certified Pub. Accountants of La., 139 F.3d 1033, 1042-43 (5th Cir.
1998). Earles is unaffected on this point by the Supreme Court’s recent decision in Dental Examiners, which expressly did not adjudicate the clear-articulation issue. 135 S. Ct. at 1110 (“The parties have assumed that the clear articulation requirement is satisfied, and we do the same.”). The district court here
1
By invoking state-action immunity, the Board of course is not relinquishing its
right to object to the merits of plaintiffs’ claim, including on the issues of conspiracy
and anticompetitive effect. But those merits issue are not presented in this appeal.
33
Case: 16-50017
Document: 00513553389
Page: 47
Date Filed: 06/17/2016
also did not decide the clear-articulation issue. ROA.2389. But resolution of
that issue is necessary to recognize state-action immunity, and the issue is
properly resolved by this Court on appeal because it is a “question of law.”
Martin, 86 F.3d at 1397.
Earles involved Louisiana’s licensing board for certified public accountants, which issued rules barring licensed accountants from working on commission and from the “incompatible profession” of simultaneously selling securities. 139 F.3d at 1034. This Court held that state-action immunity foreclosed an antitrust challenge to those rules, as the Midcal clear-articulation requirement was met. Id. at 1034, 1041-44. The relevant Louisiana statutes gave
the accounting board “broad power to regulate the profession of accounting.”
See id. at 1042-43 (quoting statutes). The plaintiffs argued that the Louisiana
statutes did not “expressly state an intention to displace competition in the
accounting profession by restricting the practice of ‘incompatible professions’
and the acceptance of commissions”—as the challenged rules did. Id. at 1043.
But this Court rejected that critique, because the test does not require that
level of specificity. Id.
As Earles held, Louisiana’s decision that the board should regulate the
practice of accounting according to professional standards had the “foreseeable result” of rulemaking “that has anticompetitive effects.” Id. That satisfies
Midcal’s clear-articulation requirement. Id. at 1042-43 (“It is enough ... if suppression of competition is the foreseeable result of what the statute authorizes.”) (quotation marks omitted).
34
Case: 16-50017
Document: 00513553389
Page: 48
Date Filed: 06/17/2016
That holding applies here. Similar to the Louisiana accounting statutes,
Texas law directs the Texas Medical Board to license physicians and take disciplinary action when they fail to comply with professional standards. See Tex.
Occ. Code § 164.051(a)(6). Indeed, Texas law is more specific in expressly directing the Board to ensure that patients using telemedicine receive quality
care. Tex. Gov’t Code § 531.0217(i); Tex. Occ. Code §§ 111.004(1), 153.004.
Earles correctly holds that this meets the clear-articulation test. To require the
Legislature to minutely “catalog all of the anticipated effects” of a regulatory
statute would take “an unrealistic view of how legislatures work and of how
statutes are written.” Town of Hallie, 471 U.S. at 43. Indeed, such a “close
examination of a state legislature’s intent” would be “undesirable also because it would embroil the federal courts in the unnecessary interpretation of
state statutes.” Id. at 44 n.7 (“Besides burdening the courts, it would undercut
the fundamental policy of Parker and the state action doctrine of immunizing
state action from federal antitrust scrutiny.”).
III. The active-supervision requirement is met here.
The Supreme Court has not adopted a one-size-fits-all approach to active
supervision. Rather, when a State staffs its agencies as Dental Examiners described, the active supervision required for the agency’s conduct to receive
state-action immunity is “flexible” and “context-dependent.” 135 S. Ct. at
1116. That requires a context-specific assessment of the “risk that active market participants will pursue private interests” instead of faithfully pursuing
state policy. Id. at 1114.
35
Case: 16-50017
Document: 00513553389
Page: 49
Date Filed: 06/17/2016
The degree of that risk in a given context informs what sort of governmental procedures create a “realistic assurance” that agency regulations promote
state policy and thus “suffice to make [the agency action] the State’s own.”
Id. at 1111, 1112. One degree of supervision might be sufficient for a government officer acting through official channels, while a greater degree of supervision might be required to show that a private agreement between two firms
somehow implements state policy. See, e.g., Earl W. Kintner, Federal Antitrust
Law § 76.12, at 179 (1994) (“There may be situations in which the line between [state] agencies and purely private actors is not clear.... In these circumstances, it has been held that a lower level of ‘active supervision’ should be
required than would be appropriate for clearly ‘private’ parties.”).
The state-court judicial review provided as of right in Texas constitutes
sufficient active supervision for the Board’s formal rulemaking. Indeed, the
federal government told the Supreme Court in Dental Examiners that the dental board’s challenged conduct there failed the active-supervision test and was
“subject to antitrust scrutiny only because [the dental board] chose not to exercise the powers granted to it under North Carolina law, and instead utilized
coercive measures that state law did not authorize.” Resp. Br. 51, Dental
Exam’rs, 135 S. Ct. 1101 (2015); see Dental Exam’rs, 135 S. Ct. at 1116 (“the
Board relied upon cease-and-desist letters threatening criminal liability, rather
than any of the powers at its disposal that would invoke oversight by a politically accountable official”). In contrast, the Board rules here were issued
through formal channels, subject to judicial review and legislative oversight.
36
Case: 16-50017
Document: 00513553389
Page: 50
Date Filed: 06/17/2016
If that were not sufficient to immunize the Board from a federal antitrust
lawsuit for its formal rulemaking, an antitrust lawsuit could be threatened for
almost every disciplinary action taken by the Board. That would seriously impair not only the Board but any number of Texas agencies and agencies in
other States—impairing those agencies’ fulfillment of their duties by subjecting them to federal antitrust scrutiny of official conduct to which the Sherman
Act was never meant to apply. State officials’ resources are strained enough
without the extra burden of serving as witnesses in civil litigation and responding to allegations that they did not do their job. See R. Ernest Cohn, D.C.,
D.A.B.C.O. v. Bond, 953 F.2d 154, 159 (4th Cir. 1991) (noting that one of the
“underlying purposes” of the state-action doctrine is to free government from
the “dehabilitating effects of antitrust actions”); Merrick B. Garland, Antitrust and State Action, 96 Yale L.J. 486, 510 (1987) (“If antitrust concepts developed for private restraints are applied to state action, regulations as disparate as zoning and occupational licensing, exclusive franchises and rent control,
minimum wages and minimum hours could all be overturned.”). Fortunately,
that is not the law: “Congress, in enacting the Sherman Act, did not intend to
compromise the States’ ability to regulate” their economies. S. Motor Carriers, 471 U.S. at 56.
37
Case: 16-50017
Document: 00513553389
Page: 51
Date Filed: 06/17/2016
A. Features of the Board’s membership minimize the risk that
it will forego its mandate and act with only a private purpose.
For purposes of its motion to dismiss, the Board accepts that its stateaction immunity requires some type of active supervision under Dental Examiners because a majority of the Board’s members are physicians and because
the Board regulates physicians, among several other professions. The Supreme Court appears to have held that this structure precludes exempting the
Board from the active-supervision requirement. 135 S. Ct. at 1113-14. But see
id. at 1123 (Alito, J., dissenting) (noting open questions about the relationship
between “the jurisdiction of the entire agency” and specific fields in which
officers practice).
After that threshold issue, however, one must determine what type of active supervision suffices in the specific context here. That requires assessing
the magnitude of the risk that a majority of the Board members would disregard the Board’s public mission and focus only on advancing their personal
interests. To begin with, three features of the Board’s membership mitigate
that risk: (1) the Governor’s appointment of Board members, as opposed to
their election by physicians; (2) the Governor’s concomitant power to remove
Board members; and (3) the breadth of the Board’s regulatory mission and the
diverse practice types of the Board’s physician members. All of those features
stand in contrast to the board at issue in Dental Examiners.
1.
First, the risk that the Board would depart from its public mission is
mitigated here because members of the Board are appointed by the Governor
38
Case: 16-50017
Document: 00513553389
Page: 52
Date Filed: 06/17/2016
and confirmed by the Senate. See supra p. 4. Consequently, they are accountable to Texas state government—not to private physicians.
In contrast, the board in Dental Examiners was “elected by other licensed
dentists in North Carolina.” 135 S. Ct. at 1108. Indeed, that fact was a significant part of the government’s argument: “Because petitioner’s dentist-members are chosen by other dentists rather than by the public or by any elected
official, no official of North Carolina can be held politically accountable for
petitioner’s unsupervised anticompetitive conduct.” Resp. Br. 20, Dental
Exam’rs, 135 S. Ct. 1101 (2015); accord id. at 30 (“elected by and accountable
to no one but other dentists”); id. at 35 (“that feature distinguishes petitioner
from the vast majority of its counterparts in other States, whose members are
appointed by the Governor or another disinterested state official”). And this
Court too has placed emphasis on that consideration. Saenz v. Univ. Interscholastic League, 487 F.2d 1026, 1028 (5th Cir. 1973) (holding an entity immune
from antitrust scrutiny as a state actor in part because its executive committee
“is appointed by the President of the University”).
2. Second, and relatedly, the Board’s members can be removed by the
Governor with the consent of the Senate. See supra p. 4. That only confirms
the Board members’ political accountability to the State compared to nongovernmental actors making private business agreements. In contrast, the Supreme Court in Dental Examiners noted that the law creating the dental board
there “does not create any mechanism for the removal of an elected member
of the Board by a public official.” 135 S. Ct. at 1108.
39
Case: 16-50017
Document: 00513553389
Page: 53
Date Filed: 06/17/2016
3. Third, unlike the narrow profession of dentistry, the Texas Medical
Board regulates not only numerous fields of medical practice, but several other
distinct occupations such as acupuncture, perfusion, and surgical assistantship. See supra pp. 3-4. As the Supreme Court reasoned in Dental Examiners, the breadth of a regulator’s mandate “reduc[es] the risk that it would
pursue private interests while regulating any single field.” 135 S. Ct. at 1113.
Moreover, the twelve physician members of the Board are all specialists,2
which reduces the likelihood of being distracted from their official charge by
any common interest in avoiding competition with each other. See, e.g., Rivera-Nazario v. Corporacion del Fondo del Seguro del Estado, No. 14-cv-1533,
2015 WL 9484490, at *8 (D.P.R. Dec. 29, 2015) (finding less risk than in Dental Examiners where the majority of a regulatory body “could be gynecologists,
neurologists, gastroenterologists, or many others that do not compete with
chiropractors”).
The question here is not the risk that a regulation will benefit some or even
all physicians. The question is the risk that an agency’s regulation cannot be
fairly deemed the State’s—i.e., that common private interests supplant public
service and sever the regulation’s link to the State. See Ticor, 504 U.S. at 635
2
Eleven of the twelve are shown at ROA.296-98, 303-05, 310-12, 316-18, 322-24,
329-31, 341-43, 347-49, 355-57, 362-64, 369-71. Dr. Holliday’s specialty in anesthesiology is shown at https://public.tmb.state.tx.us/HCP_Search/searchinput.aspx, under
license number L7756.
40
Case: 16-50017
Document: 00513553389
Page: 54
Date Filed: 06/17/2016
(“Much as in causation inquiries,” the question is “whether the anticompetitive scheme is the State’s own.”); City of Columbia v. Omni Outdoor Advert.,
499 U.S. 365, 378 (1991) (noting that a government official’s monetary selfinterest “has no necessary relationship to whether the governmental action is
in the public interest”). The Texas Medical Board is not tantamount to a business group submitting privately fixed prices for rubber-stamping into law. Due
to its political accountability and structure, the Board presents much less of a
risk that its rulemaking does not pursue state policy. That context is relevant
in determining the necessary degree of active supervision. See Phillip E.
Areeda & Herbert Hovenkamp, Antitrust Law ¶ 227a, at 221 (2013) (“the kind
of supervision appropriate for a public body, even of the kind involved in Hoover, could well be far less than for an entirely private party”) (discussing Hoover, 466 U.S. 588, which involved a public body staffed by licensed lawyers
regulating entrance into the legal profession).
B. Texas’s good-government laws and reporting requirements
further reduce the risk that the Board will shirk its official
duties and pursue only private interests.
In addition to the membership features discussed above, three other features of Texas law show the gulf between the degree of risk shaping the active
supervision required for private parties and the degree of risk shaping the active supervision needed for the Board’s rulemaking: (1) Texas’s sunshine and
ethics laws; (2) Board members’ oaths to the State; and (3) the Legislature’s
reporting requirements for sunset review and other purposes.
41
Case: 16-50017
1.
Document: 00513553389
Page: 55
Date Filed: 06/17/2016
The Supreme Court has recognized that being “subject to ‘sunshine’
laws or other mandatory disclosure regulations” may provide “greater protection against antitrust abuses than exists for private parties.” Town of Hallie,
471 U.S. at 45 n.9; see also Acker v. Tex. Water Comm’n, 709 S.W.2d 299, 300
(Tex. 1990) (“[The Texas Legislature] recognized the wisdom contained in
the words of Justice Brandeis that: ‘Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.’”) (citation omitted). That is
true here. The Board is subject to numerous obligations and limitations that
apply only to government officials, not private actors. These include:
•
Texas’s open-meetings law. Tex. Gov’t Code § 551.001(3)(A); see
Acker, 709 S.W.2d at 300 (“The executive and legislative decisions
of our governmental officials as well as the underlying reasoning must
be discussed openly before the public rather than secretly behind
closed doors.”).
•
Texas’s open-records law, allowing public access to Board records.
Tex. Gov’t Code § 552.003(1)(A)(i).
•
Board-specific conflict-of-interest requirements. Tex. Occ. Code
§§ 152.004(c), 152.055.
•
Texas’s statewide requirements for ethics, conflicts of interest, and
accounting. Tex. Gov’t Code chs. 572 (personal financial disclosure,
standards of conduct, and conflicts of interest), 2101 (accounting procedures), 2051 (government documents, publications, and notices).
•
Due process, equal protection, free speech, and other constitutional
requirements not applicable to a private actor. E.g., Granek v. Tex.
State Bd. of Med. Exam’rs, 172 S.W.3d 761, 772 (Tex. App.—Austin
2005, no pet.) (“The due process protections of our federal and
Texas constitution apply to agency proceedings.”).
42
Case: 16-50017
Document: 00513553389
Page: 56
Date Filed: 06/17/2016
All of these give further assurance that the risk of abuse of state power is
minimal. And Dental Examiners does not preclude consideration of these factors, because the dental board there did not make a supervision argument and
the Court did not rule on what degree of supervision is required in any specific
context.
2. Second, Board members must swear an oath to fulfill the duties of
their office and uphold the laws of Texas. See supra p. 4. That solemn oath
further distinguishes regulatory decisions by a state official from those that
might be made by a purely private party. And that oath is reinforced by the
Governor’s appointment power. See Rivera-Nazario, 2015 WL 9484490, at *8
(holding that a regulatory system “reduces the risk that [a regulatory body’s]
members would pursue private interests [when] the Governor should appoint
individuals he believes will carry out state interests, and he can remove a member for failing to do so”).
3. Third, the Legislature has imposed reporting requirements that further ensure that the Board will adhere to state policy expressed by the Legislature. As part of an agency’s sunset review, the Legislature requires the
agency to submit a comprehensive report to a state commission, detailing the
agency’s mission, effectiveness, conflict-of-interests rules, openness to the
public, and rulemaking process, and describing whether any less restrictive
means could satisfy agency functions and while adequately serving the public.
Tex. Gov’t Code § 325.011. The Board’s recent sunset-review report was well
43
Case: 16-50017
Document: 00513553389
Page: 57
Date Filed: 06/17/2016
over 100 pages, with telemedicine one of the top issues identified. 3 Moreover,
on an ongoing basis, the Board must also refer any proposed rule to the appropriate standing committee of the Legislature for review. Id. § 2001.032(a).
These reporting requirements have a disciplining effect on the Board given its
dependency on the Legislature.
Finally, the state health agency with which the Board must consult before
adopting rules to ensure that telemedicine patients receive appropriate care,
see id. § 531.0217(i), must submit biennial reports to the Legislature on a number of telemedicine metrics concerning Medicaid, including the number of
physicians providing telemedicine and the number of patients receiving it. Id.
§ 531.0216(f). Again, the requirements to keep the Legislature informed of the
Board’s telemedicine rules and their effects create a strong ex ante incentive
for the Board not to shirk its official duties. The point is not simply that the
political process is available to any affected party to try to overturn any regulation. The point is that, unlike a private association of business actors, the
Board is dependent on the Legislature for its existence, and that is a potent
incentive that defines and shapes the Board’s actions. Of course, the way the
State has staffed the Board may give rise to some offsetting structural risk that
requires active supervision for state-action immunity to attach. But the degree
of that risk is much less than for a private business that is simply given a blank
3
Texas Medical Board, Self-Evaluation Report (Aug. 2015), https://www.sunset.
texas.gov/public/uploads/files/reports/Medical%20Board%20SER%20Sept%201%20
2015.pdf%20-%20Adobe%20Acrobat%20Pro_0.pdf.
44
Case: 16-50017
Document: 00513553389
Page: 58
Date Filed: 06/17/2016
slate on which to write the State’s laws. See, e.g., Fuchs v. Rural Elec. Convenience Co-op, Inc., 858 F.2d 1210, 1217 (7th Cir. 1988) (holding that a governmental entity’s state-action immunity required some supervision because the
entity “is not subject to public scrutiny through sunshine laws or the political
process,” but that its other governmental characteristics required “some
lower level of supervision” than for private actors).
C. State-court judicial review provides sufficient active supervision of the Board’s rulemaking.
State-court judicial review of the Board’s rulemaking constitutes active
supervision for purposes of state-action immunity. The reviewing state-court
judges are elected officials in Texas. Judicial review is not merely theoretical
but, rather, available as of right. Texas courts review the substance of a rule
for harmony with the Legislature’s general objectives expressed in its laws.
And Texas courts enjoin as invalid rules not in harmony with those policy objectives. See supra pp. 10-11.
The Supreme Court has noted the open question whether judicial review
can constitute active supervision for state-action immunity purposes. Patrick,
486 U.S. at 103. And Dental Examiners did not address this question. Because
the active-supervision requirement is context-specific, and based on the
Board’s membership and the other relevant features of Texas law noted
above, state judicial review of the Board’s formal rulemaking provides active
supervision sufficient to show “realistic assurance” that the rulemaking accords with state policy expressed by the Legislature.
45
Case: 16-50017
Document: 00513553389
Page: 59
Date Filed: 06/17/2016
Teladoc and the district court asserted three objections to that conclusion, but none are persuasive, and none consider the difference in the degree
of risk that governmental actors, as opposed to private parties, are acting without regard to state policy. Teladoc also raised a fourth objection, which was
not accepted by the district court and is without merit.
1.
First, the district court noted Dental Examiners’ statement that active
supervision must examine the substance of the agency decision, not merely
the procedures used to produce it. 135 S. Ct. at 1116. But the Texas APA allows
both procedural and substantive rule challenges. E.g., Tex. Med. Ass’n v. Tex.
Workers Comp. Comm’n, 137 S.W.3d 342, 346 (Tex. App.—Austin 2004, no
pet.) (“Appellants assert substantive and procedural challenges to the Commission’s rule ....”).
2. Second, the district court pointed, ROA.2385, to the statement in
Dental Examiners that a supervising entity “must have the power to veto or
modify particular decisions to ensure they accord with state policy,” 135 S.
Ct. at 1116 (citing Patrick, 486 U.S. at 102-03). And the district court stated
that Texas courts do not “decide matters of policy.” ROA.2384-85 (quoting
Gulf Coast Coal. of Cities v. PUC, 161 S.W.3d 706, 712 (Tex. App.—Austin
2005, no pet.)). But the quoted language means that Texas courts do not create
state policy. They do, however, ensure that agency rules are in accord with the
policy objectives set by the Legislature. Gulf Coast, 161 S.W.3d at 711 (“The
determining factor in whether a particular administrative agency has exceeded
46
Case: 16-50017
Document: 00513553389
Page: 60
Date Filed: 06/17/2016
its rulemaking authority is whether the rules are ‘in harmony’ with the general
objectives of the legislation involved.”).
The district court wrongly dismissed that system as insufficient. When
the Legislature sets policy objectives and a state agency implements them,
judicial review in state court will ensure that the agency’s interstitial rules are
in harmony with the Legislature’s policy objectives, as opposed to the court’s
own policy goals. That requires the reviewing court’s independent judgment
in interpreting the Legislature’s objectives and weighing their fit with the
agency’s regulations. At times, the mismatch may be evident to the court. E.g.,
Tex. Orthopaedic Ass’n, 254 S.W.3d at 722 (invalidating board’s rule on substantive grounds); Tex. Med. Ass’n, 375 S.W.3d at 475-88 (same). And a reviewing court can afford deference to the expert agency’s view on matters
such as professional standards of care and still screen out the extreme instances in which a potential incentive for self-dealing has manifested itself in
a rule not grounded in the Legislature’s objectives. In this case, that conclusion is reinforced by the low risk of such a breach of duty.
3. The district court also faulted state-court judicial review for lacking
the power to “veto or modify” a rule to ensure it accords with state policy;
the district court reasoned that state courts cannot “modify” a rule.
ROA.2385. But the Supreme Court has not held that active supervision of
even private action requires both a power to veto and a power to modify. In
Parker itself, the reviewing Agriculture Prorate Commission could decline to
47
Case: 16-50017
Document: 00513553389
Page: 61
Date Filed: 06/17/2016
approve a marketing program but could not modify and implement a marketing program by itself; that step required a favorable referendum of producers.
317 U.S. at 347. And, in Patrick, the Supreme Court simply noted that the state
medical board did not have “the power to disapprove private privilege decisions” and thus could not satisfy the active-supervision requirement. Patrick,
486 U.S. at 103. Perhaps that is why Dental Examiners’ dicta used the disjunctive in stating that its cases had looked for the power to “veto or modify” particular decisions. 135 S. Ct. at 1116. And Texas courts undoubtedly have power
to “veto” a rule by declaring it invalid and enjoining its application. That is
the greater power from a supervision perspective, as it keeps the policy under
review from taking any effect.
4. Teladoc also objected that judicial review of rulemaking is inadequate
because courts cannot “initiate sua sponte review of agency rules.” ROA.2147.
The district court did not adopt this objection, see ROA.2383-88, and active
supervision is not precluded when the supervisor “exercises its powers only
when called upon to do so.” TEC Cogeneration Inc. v. Fla. Power & Light Co.,
76 F.3d 1560, 1569 (11th Cir. 1996). In TEC, the Eleventh Circuit found active
supervision where “the doors to the [reviewing entity] were open to all with
standing to complain.” Id. at 1570 (“Whether or not [the agency] ... exercises
its control sua sponte is not material....”). The Eleventh Circuit drew an analogy to its own powers: “For example, the decisions of this circuit govern or
control a plethora of legal issues—but if a particular issue is never brought
48
Case: 16-50017
Document: 00513553389
Page: 62
Date Filed: 06/17/2016
before us—it doesn't mean we don’t have control. We don’t have opportunity—but we still have control. We still have active supervision.” Id. at
1570. If judicial review could never constitute active supervision of preceding
conduct, the Supreme Court would have held that in Patrick, rather than moving on to examine the nature of the judicial review available, if any. See Patrick,
486 U.S. at 104-05.
Teladoc’s argument below, ROA.2148, took out of context the Supreme
Court’s statement in Ticor that the “mere potential for state supervision is not
an adequate substitute for a decision by the State.” 504 U.S. at 638, quoted in
Dental Exam’r, 135 S. Ct. at 1116. Ticor involved “private pricefixing arrangements” embodied in rates filed with state agencies. 504 U.S. at 633. Ticor contrasted “the mere potential” for state supervision with an actual “decision by
the State,” and Ticor then pointed out that “at most the rate filings were
checked for mathematical accuracy” and “[s]ome were unchecked altogether.” Id. at 638. Ticor used “potential” to refer to mere statutory authority
for review as opposed to whether that review was actually undertaken. Id. at
629 (rejecting a mere “theoretical mechanism for substantive review”).
In contrast, Texas courts must adjudicate the merits of a substantive rule
challenge—and are reversed on appeal if they do not. Bellegie v. Tex. Bd. of
Nurse Exam’rs, 685 S.W.2d 431, 433, 435 (Tex. App.—Austin 1985, writ ref’d
n.r.e.) (where nurses alleged that a professional regulation “is not reasonably
related to or necessarily referable to any specific statutory provision,” they
“were entitled to a judgment from the district court declaring the law with
49
Case: 16-50017
Document: 00513553389
Page: 63
Date Filed: 06/17/2016
respect to the contentions”). That guarantees an actual decision to anyone
affected by a rule. Ticor did not address such a system, much less hold it inadequate. Indeed, Ticor did not address supervision of governmental conduct at
all. It addressed private price-fixing, the most “pernicious” of all antitrust violations. Id. at 639 (“Our decision should be read in light of the gravity of the
antitrust offense, the involvement of private actors throughout, and the clear
absence of state supervision. We do not imply that some particular form of
state or local regulation is required ....”).
D. Legislative oversight contributes to active supervision.
The active supervision provided by judicial review of the Board’s rulemaking is reinforced by the Texas Legislature’s oversight of the Board in two
ways.
First, the Texas Administrative Procedure Act requires that each proposed state-agency rule must be referred to the appropriate standing committee of the Texas Legislature. Tex. Gov’t Code § 2001.032(a). Unlike with private action, therefore, proposed rulemaking by a state agency such as the
Board will necessarily be placed before a committee of the Texas Legislature
for review. And the Legislature has assigned each such committee the duty to
investigate all matters within its purview and draft any necessary legislation in
response. Id. § 301.104(a) (“Each standing committee shall ... conduct a continuing study of any matter within its jurisdiction and of the instrumentalities
of government administering or executing the matter ... [and] initiate, draft,
50
Case: 16-50017
Document: 00513553389
Page: 64
Date Filed: 06/17/2016
and recommend to the appropriate house any legislation the committee believes is necessary and desirable.”). To achieve those ends, a standing committee has the power to inspect the records of each state agency. Id.
§ 301.104(c). And the Legislature requires state agencies to assist legislative
committees in their work. Id. § 301.028(b).
The district court did not address these legislative committees’ duty to
investigate proposed rules and propose any necessary responsive legislation.
ROA.2387-88 (stating that a committee’s only power is to send the agency a
statement supporting or opposing a proposed rule). In any event, even if this
legislative review of proposed rules does not amount to active supervision on
its own, it buttresses the supervision provided by judicial review.
Second, the Texas Legislature oversees the Board’s conduct through the
sunset-review process. Not only must a state agency report to the State’s Sunset Commission, see supra p. 43, but the Sunset Commission must conduct a
review of the agency based on statutory criteria, Tex. Gov’t Code § 325.008,
including “whether less restrictive or alternative methods of performing any
function that the agency performs could adequately protect or provide service
to the public,” id. § 325.011(5). The Sunset Commission must present its findings and recommendations to the Legislature. Id. §§ 325.010, 325.012. And
the Legislature then decides whether the agency should continue to exist at all
and, if so, whether any “legislation relative to a state agency” is warranted. Id.
§ 325.015.
51
Case: 16-50017
Document: 00513553389
Page: 65
Date Filed: 06/17/2016
The district court reasoned that sunset review is insufficient oversight because the Sunset Commission “does not have the power to veto or modify any
rule.” ROA.2387. Of course, the Sunset Commission reports to the Texas
Legislature, which does have that power. But, again, even if sunset review is
not by itself sufficient to constitute active supervision, it reinforces components of the active supervision provided by judicial review and legislativecommittee review of proposed agency rules.
E. Finding a lack of active supervision would intrude on the
State’s sovereignty and alter the balance of cooperative federalism.
State regulation of the practice of medicine “is a quintessentially sovereign act.” Cal. State Bd. of Optometry v. FTC, 910 F.2d 976, 982 (D.C. Cir.
1990). And a State’s choices about the individuals who serve in its government
are decisions “of the most fundamental sort for a sovereign entity.” Gregory
v. Ashcroft, 501 U.S. 452, 460 (1991).
In exercising that power, Texas has chosen to staff many of its licensing
boards with active members of the profession being licensed because those
professionals ordinarily have “specialized knowledge” that the “lay public,”
career bureaucrats, and legislators lack. Cal. Dental Ass’n v. FTC, 526 U.S.
756, 772 (1999); S. Motor Carriers, 471 U.S. at 64 (“Agencies are created because they are able to deal with problems unforeseeable to, or outside the competence of, the legislature.”). Doctors, nurses, attorneys, and many other pro-
52
Case: 16-50017
Document: 00513553389
Page: 66
Date Filed: 06/17/2016
fessions go through years of advanced study, certification, and continuing education. It is not often that persons with such hard-won and often expensive
knowledge and expertise will be willing to give up their entire trade to serve as
a full-time government regulator.
Moreover, active professionals maintain a current knowledge base that inactive individuals with similar training will not have. Thus, even if sufficiently
qualified professionals could be convinced to join full-time employment in
some fields, that would not necessarily be desirable. See, e.g., Filarsky v. Delia,
132 S. Ct. 1657, 1662-63, 1665 (2012) (noting that practicing professionals’
“specialized knowledge or expertise” as well as the normal reasons to reduce
the size of the full-time “bureaucracy,” explains the longstanding government
practice of employing “public servant[s]” who only “temporarily or occasionally discharge[] public functions” and are otherwise “permitted to carry on
some other regular business”). Highly specialized fields such as medicine
change quickly. It is often individuals who practice in those fields who are best
situated to spot emerging threats to public welfare.
Here, Texas chose to staff its agency with practicing professionals and
built in accountability to the State through appointment and removal powers,
solemn oaths, ongoing financial dependency on the Legislature, and ethics,
conflict-of-interests, and open-government laws. It would undermine Texas’s
sovereign regulatory choices to hold that state-action immunity from federal
antitrust law requires more active supervision than the judicial review and legislative oversight already provided by Texas. Indeed, the Supreme Court has
53
Case: 16-50017
Document: 00513553389
Page: 67
Date Filed: 06/17/2016
directed that federal legislation threatening to trench on the States’ arrangements for conducting their own governments should be treated with great
skepticism and read in a way that preserves a State’s chosen disposition of its
power. Nixon v. Mo. Mun. League, 541 U.S. 125, 140 (2004); see also E.R.R.
Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127, 141 (1961) (“The
proscriptions of the [Sherman] Act, tailored as they are for the business world,
are not at all appropriate for application in the political arena.”).
Texas has carefully crafted mechanisms to ensure that state governmental
bodies—including regulatory boards—are staffed with appropriate officials
and exercising their delegated powers. The district court’s ruling violates state
sovereignty because it would subject this state-designed regime to intrusive
federal-court review in almost every antitrust action concerning an agency set
up and supervised like this one. This invades on the States’ authority to determine which of their agencies “exercise[s] [which] of [their] governmental
powers.” Lawrence H. Tribe, American Constitutional Law § 6-25, at 480 (2d
ed. 1988) (“to give the state-displacing weight of federal law to mere congressional ambiguity would evade the very procedure for lawmaking on which
Garcia relied to protect states’ interests”).
Conclusion
The Court should reverse the district court’s order and direct dismissal
of plaintiffs’ antitrust claim as barred by defendants’ state-action immunity.
54
Case: 16-50017
Document: 00513553389
Page: 68
Date Filed: 06/17/2016
Respectfully submitted.
Ken Paxton
Attorney General of Texas
Scott A. Keller
Solicitor General
Jeffrey C. Mateer
First Assistant Attorney General
/s/ J. Campbell Barker
J. Campbell Barker
Deputy Solicitor General
[email protected]
Office of the Attorney General
P.O. Box 12548 (MC 059)
Austin, Texas 78711-2548
Tel.: (512) 936-1700
Fax: (512) 474-2697
Counsel for Defendants-Appellants
55
Case: 16-50017
Document: 00513553389
Page: 69
Date Filed: 06/17/2016
Certificate of Service
On June 17, 2016, this brief was served via CM/ECF on all registered
counsel and transmitted to the Clerk of the Court. Counsel further certifies
that: (1) any required privacy redactions have been made in compliance with
Fifth Circuit Rule 25.2.13; (2) the electronic submission is an exact copy of the
paper document in compliance with Fifth Circuit Rule 25.2.1; and (3) the document has been scanned with the most recent version of Symantec Endpoint
Protection and is free of viruses.
/s/ J. Campbell Barker
J. Campbell Barker
Certificate of Compliance
This brief complies with: (1) the type-volume limitation of Federal Rule
of Appellate Procedure 32(a)(7)(B) because it contains 13,303 words, excluding the parts of the brief exempted by Rule 32(a)(7)(B)(iii); and (2) the typeface requirements of Rule 32(a)(5) and the type style requirements of Rule
32(a)(6) because it has been prepared in a proportionally spaced typeface (14point Equity) using Microsoft Word (the same program used to calculate the
word count).
/s/ J. Campbell Barker
J. Campbell Barker
56