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Supreme Court rules against North Carolina dental board

February 25, 2015

Editor’s note: The ADA Division of Legal Affairs provided the following analysis.

In a 6 to 3 decision issued Feb. 25, the U. S. Supreme Court ruled that a dental board that includes “market participants,” i.e., dentists, who control its decisions must be subject to “active supervision” by the state if the boards and their individual members are to enjoy immunity from federal antitrust laws under the State Action Doctrine.

The American Dental Association believes the decision constitutes a radical departure from the court’s established law, and throws into question the regulatory, licensing, and disciplinary authority of thousands of professional boards across the country.

The underlying case involved the Federal Trade Commission’s view that the North Carolina board violated the antitrust laws when it sent cease and desist notices to nondentists offering teeth whitening services. For its part, the board took the position that it was acting under its authority to prohibit the unlicensed practice of dentistry and relied on the state’s Dental Practice Act, which includes “removing stains and accretions from the teeth,” in its definition of dental practice. After FTC administrative proceedings concluded, the board appealed the unfavorable rulings by the FTC to the U.S. Court of Appeals for the 4th Circuit.

Seeming to focus on the fact that the dentist members of the North Carolina board are elected by other dentists — in accordance with state statute — the 4h Circuit upheld the findings of the FTC and ruled that the board had acted improperly. At the time the decision was handed down, many professional boards expressed the view that the 4th Circuit’s ruling would not affect them because their members were not elected by their peers, but were appointed by the governor, selected by a professional panel, or chosen by some other means.

The Supreme Court subsequently granted the board’s request for review of the 4th Circuit’s decision. Concerned about the negative impact that the lower court’s ruling could have ability of professional boards to regulate their respective professions, the ADA spearheaded an effort, joined by the American Medical Association as well as a host of other health care organizations, to submit a friend of the court brief urging reversal of the 4th Circuit.

The amicus argued that that the members of the North Carolina board, as a state agency established by state legislation and pursuing the responsibilities assigned to it by state statute, were immune from federal antitrust law liability under the State Action Doctrine as enunciated by the Supreme Court in its 1943 landmark decision, Parker v. Brown, 317 U.S. 341. Parker involved a challenge on antitrust grounds to California’s establishment of a state agency to oversee and regulate certain agricultural products. This agency’s power included imposing quality standards, sales quota and pricing on the raisin industry.

The court rejected the antitrust challenge to the California agency lodged by a group of raisin producers. In its decision, the court conceded that the agency’s complained of actions were anticompetitive and would likely violate federal antitrust laws if those laws applied. But the court found that the state of California acted as a “sovereign” in creating the agency. The court held that anticompetitive conduct by a state may serve public health and safety concerns that override the interests served by imposition of the federal antitrust laws and that it is the state that should be able to make that decision for itself. Applying its newly created State Action doctrine the Supreme Court ruled that the agriculture regulatory was a state agency acting as the state. Who the members of the body were or how they were chosen did not concern the court. The members’ exemption from enforcement of the antitrust laws existed by virtue of the fact that they were serving on a state agency created by the sovereign state of California.

The ADA believes that the well-established, 70-year-old precedent announced in Parker should have applied in the North Carolina case, where the board is unquestionably a state agency created by the sovereign state of North Carolina. The court’s analysis should not have gone any further than this in the ADA’s opinion.

Unfortunately, what the court did instead was to impose on a bona fide state agency a rule that in the past it only applied to nonstate bodies. The court held “active supervision by the state” is required in order to shield the board and its members from federal antitrust liability. But as the ADA’s general counsel, J. Craig Busey, explains, “The court’s decision leaves professional boards across the country in a quandary, with no explanation as to what level of active supervision is necessary to invoke immunity for each board. In addition, boards are likely to be extremely reluctant to take actions that may subject them to legal exposure, and individual members may be justifiably concerned about possible liability. We will be working with other organizations to provide some kind of guidance for the boards, but it will not be an easy task. We are extremely disappointed with the Supreme Court’s decision.”