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Leeds DDS v. Board of Dental Examiners of Alabama

United States District Court, N.D. Alabama, Southern Division

April 2, 2019

D. BLAINE LEEDS DDS, et al., Plaintiffs,
v.
BOARD OF DENTAL EXAMINERS OF ALABAMA, et al., Defendants.

          MEMORANDUM OPINION

          R. DAVID PROCTOR, UNITED STATES DISTRICT JUDGE.

         In September 2018, the Board of Dental Examiners of Alabama (“Board” or “Dental Board”) sent a cease-and-desist letter to SmileDirectClub, LLC (“SmileDirect”). The letter and subsequent communications from the Board informed SmileDirect that certain services it performs for customers at its Alabama shop can only be performed at facilities where a licensed dentist is physically present. Because SmileDirect does not have a licensed dentist physically present at its facility, the Board considers SmileDirect's nondentist personnel to be engaged in the unauthorized practice of dentistry. It therefore ordered SmileDirect to immediately cease performing those services without a supervising dentist present at the facility.

         SmileDirect and one of its affiliated dentists, Dr. Blaine Leeds, claim that the Board's actions violate federal and state law. They filed this action against the Board and its members (in their official and individual capacities). SmileDirect and Dr. Leeds (“Plaintiffs”) seek (1) an injunction forbidding the Board and its members (“Defendants”) from requiring SmileDirect to have a dentist physically present at its facility and (2) a declaration that Defendants' conduct is unlawful. (Doc. # 29 at 46). Defendants have moved to dismiss Plaintiffs' claims for lack of subject matter jurisdiction and failure to state a claim. (Doc. # 32); see Fed. R. Civ. P. 12(b)(1), 12(b)(6). After careful consideration, and for the reasons explained below, the court concludes that the motion (Doc. # 32) is due to be granted in part and denied in part.

         I. Background [1]

         SmileDirect operates a web-based teledentisry platform that connects patients seeking clear aligner therapy with licensed dentists. (Doc. # 29 at ¶ 23). Dentists like Dr. Leeds contract with SmileDirect to provide certain support services that enable them to treat patients remotely, often across state lines. (Id.). The platform enables Dr. Leeds, who has an Alabama dental license but resides in Nashville, Tennessee, to provide corrective teeth realignment for patients in Alabama who have mild to moderate malocclusion (i.e., improperly positioned teeth when the jaws are closed). (Id.).

         SmileDirect's business model operates as follows. A prospective patient considering clear aligner therapy first visits one of SmileDirect's physical locations, known as “SmileShops.” (Id. at ¶ 29). There, SmileDirect employees use an iTero device__ described by Plaintiffs as “essentially a wand with a camera” -- to rapidly take thousands of digital photographs of the patient's teeth and gums. (Id. at ¶ 30). The iTero is inserted into the patient's mouth “at varying angles to photograph the teeth and tissue.” (Id. at ¶ 92).[2] The iTero does not use ionizing radiation, x-rays, or gamma rays; instead, it simply takes digital photographs. (Id. at ¶¶ 29-30). After each use of the iTero, SmileDirect employees remove and discard the disposable cover on the device and clean the wand with a disinfecting wipe. (Id. at ¶¶ 95-96). SmileDirect employees also take standard digital photographs of the patient's teeth and gums using a regular digital camera. (Id. at ¶ 31).

         The iTero images are then sent to a dental lab, which creates a three-dimensional model of the prospective patient's teeth, bite, gums, and palate. (Id. at ¶¶ 32, 87). Dr. Leeds or another Alabama-licensed dentist then reviews the three-dimensional model -- along with the standard digital photographs, the patient's health and dental histories, and other pertinent information __ to decide whether clear aligner therapy may be appropriate. (Id. at ¶¶ 32-36). The dentist reviews these materials to identify any periodontal disease, cavities, or other conditions that would require further clearance or prevent the patient from receiving clear aligner therapy through SmileDirect. (Id. at ¶ 31). If the dentist determines clear aligner therapy is appropriate and the patient agrees, the dentist writes a prescription to a lab to have the clear aligners fabricated and shipped. (Id. at 2). The patient then receives a series of custom-made removable plastic retainers that are placed on the patient's teeth to move them in small increments until the desired positioning is achieved. (Id. at ¶ 23).

         On September 20, 2018, the Board sent SmileDirect a cease-and-desist letter stating that SmileDirect was engaged in the unauthorized practice of dentistry. (Id. at ¶ 59). Plaintiffs allege the letter was sent in response to a complaint the Board received from a competing Alabama-licensed dentist about SmileDirect's operations. (Id. at ¶ 58). On October 3, 2018, representatives from SmileDirect met with the Board to explain the function of the iTero and their belief that its use does not constitute a dental procedure that would require the presence of a licensed dentist on site. (Id. at ¶ 61). Six days later, the Board emailed the following message to counsel for SmileDirect: “Thank you for coming by the Board office last week to discuss Smile Direct Club. I reviewed the situation with the Board last Friday in detail. I was directed to inform you that your client immediately must cease and desist performing the services that are considered the practice of dentistry (i.e. digital imaging) without a supervising dentist present.” (Id. at ¶ 62). SmileDirect and Dr. Leeds responded by filing this lawsuit. (Doc. # 1).

         The Board's cease-and-desist letter and subsequent communications were based on certain provisions of the Alabama Dental Practice Act, Ala. Code § 34-9-1 et seq., and a regulation promulgated by the Board pursuant to its authority to “[a]dopt rules and regulations to implement” the Act, id., § 34-9-43(a)(10). The Act defines what constitutes the practice of dentistry in Alabama, stating in relevant part:

Any person shall be deemed to be practicing dentistry who does any of the following:
(7) Uses a roentgen, radiograph, or digital imaging machine for the purpose of making dental roentgenograms, radiographs, or digital images . . . .

Id., § 34-9-6. However, the Act goes on to exempt certain practices that would otherwise fall within this definition from being considered the practice of dentistry:

Nothing in this chapter shall apply to the following practices, acts, and operations:
(5) The use of roentgen machines or other means for making radiographs, digital images, or similar records, of dental or oral tissues under the supervision of a licensed dentist or physician . . . .

Id., § 34-9-7(a).

         The Board contends the iTero is a “digital imaging machine” and that the images it produces are “digital images” within the meaning of Alabama Code § 34-9-6. (Doc. # 29 at ¶¶ 2, 62-68). It therefore understands persons who use the iTero to be practicing dentistry-unless they do so “under the supervision of a licensed dentist or physician.” Ala. Code § 34-9-7(a)(5).

         The Board also claims SmileDirect's use of an iTero violates one of the Board's regulations. (Doc. # 29 at ¶¶ 2, 62-68). The regulation defines dental hygienists, dental assistants, and dental laboratory technicians as “[a]llied dental personnel” and identifies certain dentistry-related duties they are permitted to perform. Ala. Admin. Code 270-X-3-.10. Under the regulation, dental assistants and dental hygienists may “[m]ake dental radiographs or digital images.” Id. Importantly, however, all of the duties listed-including making digital images- are “[s]ubject to the prohibition that no intra-oral procedure can be performed unless under the direct supervision of a duly licensed dentist as defined by Board rule.” Id. “Direct supervision” is defined by another Board regulation as “supervision by a dentist who authorizes the intraoral procedure to be performed, is physically present in the dental facility and available during performance of the procedure, examines the patient during the procedure and takes full professional responsibility for the completed procedure.” Ala. Admin. Code 270-X-3-.06. Because SmileDirect employees make intraoral digital images using an iTero at a facility where no licensed dentist is physically present, the Board understands them to be engaged in the unauthorized practice of dentistry, in violation of Alabama Administrative Code 270-X-3-.10.

         Plaintiffs contend that the Board's actions against SmileDirect are not motivated by a desire to protect the public from the unauthorized practice of dentistry. Instead, Plaintiffs argue the Board __ which by statute consists of six dentists and one dental hygienist who are all selected by other members of the dental profession, Ala. Code § 34-9-40 __ seeks to protect Alabama dentists from competition by innovators like SmileDirect and Dr. Leeds, who provide clear aligner therapy at lower prices than traditional dentists. They claim that use of the iTero poses no health or safety risks and that the Board's requirement that SmileDirect have a licensed dentist physically present at its SmileShops cannot be justified by anything besides economic protectionism. Plaintiffs therefore filed this lawsuit against the Board and each of its members (in their individual and official capacities), asserting claims under the Sherman Antitrust Act, U.S. Constitution, and Alabama Constitution. (Doc. # 29 at ¶¶ 107-185).

         The Board and its members, for their part, claim that the physical-presence requirement serves important public health and safety purposes and that all of Plaintiffs' claims are due to be dismissed.

         II. Legal Standard

         The Federal Rules of Civil Procedure require that a complaint provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The complaint must include enough facts “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Pleadings that contain nothing more than “a formulaic recitation of the elements of a cause of action” do not satisfy Rule 8, and neither do pleadings that are based merely upon “labels and conclusions” or “naked assertion[s]” without supporting factual allegations. Id. at 555, 557. In deciding a Rule 12(b)(6) motion to dismiss, courts view the allegations in the complaint in the light most favorable to the nonmoving party. Watts v. Fla. International Univ., 495 F.3d 1289, 1295 (11th Cir. 2007).

         In considering a motion to dismiss, a court should “1) eliminate any allegations in the complaint that are merely legal conclusions; and 2) where there are well-pleaded factual allegations, ‘assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.'” Kivisto v. Miller, Canfield, Paddock & Stone, PLC, 413 Fed.Appx. 136, 138 (11th Cir. 2011) (quoting Am. Dental Assn. v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010)). That task is context specific, and to survive the motion, the allegations must permit the court, based on its “judicial experience and common sense . . . to infer more than the mere possibility of misconduct.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). If the court determines that well-pleaded facts, accepted as true, do not state a claim that is plausible, the claims must be dismissed. Twombly, 550 U.S. at 570.

         III. Analysis

         Plaintiffs assert claims under (1) the Sherman Antitrust Act, (2) the U.S. Constitution's Dormant Commerce, Equal Protection, and Due Process Clauses, and (3) the Alabama constitutional provisions guaranteeing due process of law. They also request a declaratory judgment that the Board's challenged conduct exceeded its authority under the Alabama Dental Practice Act. For the reasons explained below, the court concludes that Plaintiffs may proceed with their Sherman Act and Dormant Commerce Clause claims against the Board members in their official capacities. Before addressing Plaintiffs' various claims, the court first deals with several threshold issues concerning sovereign immunity.

         A. The Board of Dental Examiners is Entitled to Sovereign Immunity

         As a threshold matter, the Board argues it is entitled to sovereign immunity under the Eleventh Circuit's decision in Versiglio v. Bd. of Dental Examiners of Alabama, 686 F.3d 1290 (11th Cir. 2012). The court agrees. Plaintiffs' claims against the Board itself are barred by sovereign immunity and must therefore be dismissed.

         In Versiglio, the Eleventh Circuit held that the Board of Dental Examiners was an arm of the State of Alabama and therefore entitled to Eleventh Amendment immunity from a claim asserted under the Fair Labor Standards Act. 686 F.3d at 1291-93. The Eleventh Circuit based its decision on a ruling by the Alabama Supreme Court that the Board was an arm of the state entitled to immunity from a breach-of-contract claim under Alabama's constitution. See Ex parte Bd. of Dental Examiners of Alabama, 102 So.3d 368, 370, 386 (Ala. 2012). Though “[w]hether an agency qualifies as an arm of the state is a federal question with a federal standard, ” the Eleventh Circuit observed that “whether that standard is met [is] determined by carefully reviewing how the agency is defined by state law.” Versiglio, 686 F.3d at 1291. Because the Alabama Supreme Court had defined the Board as an arm of the state for purposes of immunity under the Alabama constitution, and because federal courts give “great deference to how state courts characterize the entity in question, ” the Eleventh Circuit held the Board immune from suit on a federal claim in federal court. Id. at 1292-93.

         Plaintiffs argue that Versiglio does not bar their claims against the Board because the Board's challenged conduct in this case (enforcing a state statute and regulation) differs from its challenged conduct in Versiglio (incorrectly paying Board employees and miscalculating overtime wages). Plaintiffs are correct that under Eleventh Circuit precedent, “[w]hether an entity is an ‘arm of the state' must be assessed in light of the particular function in which the entity was engaged when taking the actions out of which liability is asserted to arise.” Walker v. Jefferson Cty. Bd. of Educ., 771 F.3d 748, 757 (11th Cir. 2014) (quoting Manders v. Lee, 338 F.3d 1304, 1308 (11th Cir. 2003) (en banc)) (internal quotation marks and brackets omitted). In Walker, for example, the Eleventh Circuit held that local school boards in Alabama were not arms of the state with respect to employment-related decisions like hiring, assignment, and compensation. Id. Thus, they were “not immune under the Eleventh Amendment from suits challenging those decisions under federal law.” Id. But the function-specific nature of Eleventh Amendment immunity does not help Plaintiffs in this case.

         The Eleventh Circuit “uses four factors to determine whether an entity is an ‘arm of the State' in carrying out a particular function: (1) how state law defines the entity; (2) what degree of control the State maintains over the entity; (3) where the entity derives its funds; and (4) who is responsible for judgments against the entity.” Manders, 338 F.3d at 1309. Though it did not expressly apply this four-factor test, the Eleventh Circuit in Versiglio squarely held that the Dental Board is immune from suits challenging the Board's payment of overtime wages to its employees. See Versiglio, 686 F.3d at 1291-93; see also Versiglio v. Bd. of Dental Examiners of Alabama, 2010 WL 11520474, at *1 (N.D. Ala. Aug. 27, 2010) (district court opinion describing Versiglio's claim as one “for alleged unpaid overtime” under the FLSA). Thus, the only question even arguably presented here is whether the four-factor test calls for a different result with respect to the Board's function of enforcing state statutes and regulations, which is the conduct Plaintiffs challenge in this lawsuit.

         It is difficult to see how the first, third, and fourth factors could call for a different result when applied to the Board's function of enforcing statutes and regulations instead of paying its employees. Plaintiffs have not suggested that state law defines the Board differently with respect to its regulatory and enforcement functions than it does with respect to its employee-payment functions. Nor have they argued that the source of the Board's funds or the party responsible for judgments against it differ when the challenged conduct is the Board's enforcement of statutes and regulations rather than its payment of employees. Instead, Plaintiffs argue the degree-of-control factor makes all the difference and “weighs decisively against a finding that the Dental Board is an arm of the state” when engaged in the conduct challenged in this lawsuit. (Doc. # 44 at 3). The court is unpersuaded.

         Plaintiffs marshal a variety of arguments to show that the State of Alabama exercises little to no control over the Board with respect to the challenged activities in this lawsuit, namely, promulgating regulations and issuing cease-and-desist letters to enforce statutes and regulations. (Id. at 3-5). But given the Eleventh Circuit's holding in Versiglio, the critical issue is not the absolute degree of control the state exercises over the Board's challenged activities, considered in the abstract. The decisive question is whether the state exercises any less control over the Board's rulemaking and enforcement functions than it does over the Board's payment of its employees. After all, Versiglio necessarily held that whatever degree of control the state exercises over the Board with respect to its wage payments to employees is sufficient to render the Board an arm of the state as to that function.

         Plaintiffs have offered no reason to think that the state exercises any less control over the Board's rulemaking and enforcement functions than it does over the Board's payment of employees, such that Versiglio can be persuasively distinguished-and the court is unable to think of one. Indeed, if anything, it seems likely that the state exercises more control over the Board's rulemaking and enforcement decisions than it does over its wage payments to employees. For example, the Board's rulemaking and enforcement authority is constrained by legislative guidelines. See Ala. Code § 34-9-43(a) (granting the Board authority to adopt rules and regulations “subject to” the provisions of Chapter 9 of the Alabama Code). The Alabama Legislature has defined what constitutes the practice of dentistry, id., §§ 34-9-6 and 34-9-7, and Board regulations defining and regulating the practice of dentistry must “not conflict with any statute which defines the practice of dentistry, ” id., § 34-9-43.2(c). The Legislature has also limited the fine that may be imposed for violating a Board regulation to “not more than five thousand dollars . . . for each offense.” Id., § 34-9-5. Finally, the Legislature has directed the Legislative Services Agency to engage in some form of review of the Board's regulations, though the parties dispute the nature and extent of that review. See id., § 41-22-22.1; (Docs. # 29 at ¶ 56; 33 at 6-9). In short, the state has established a number of mechanisms by which it exercises a degree of control over the Board's rulemaking and enforcement functions.

         The Eleventh Circuit has found similar considerations relevant in concluding that a state exercised sufficient control over an entity to render it an arm of the state for sovereign immunity purposes. See Miccosukee Tribe of Indians v. Fla. State Athletic Comm'n, 226 F.3d 1226, 1232 (11th Cir. 2000) (“[Florida] has provided [legislative] guidelines to limit the Commission's ability to make regulations and, consequently, has some control over the Commission's rule making powers.”). But again, the question is not whether the measures described above would give Alabama sufficient control over the Board to render it an arm of the state as a matter of first principles. The question is how Alabama's control over the Board's rulemaking and enforcement functions compares to its control over the Board's payment of employees, a function for which the Eleventh Circuit has already held that the Board is entitled to sovereign immunity. See Versiglio, 686 F.3d at 1291-93. A review of the Alabama Code reveals that the state has provided scant guidance to the Board on the subject of how it should pay its employees. Indeed, the only direction the Legislature has apparently given is that Board members “shall receive as compensation a sum to be fixed by the board”; that the secretary and secretary-treasurer shall each “receive such compensation as may be fixed by the board”; and that “[t]he board is authorized to expend such funds as shall be necessary . . . to pay salaries.” Ala. Code § 34-9-41. Thus, there can be no doubt that the control Alabama maintains over the Board's rulemaking and enforcement functions is at least as great as (probably greater than) the control it exercises over the Board's payment of its employees. Versiglio therefore controls this case.

         Because Versiglio held the Board immune from a claim based on its payment of employees, that decision compels the conclusion that the Board is also immune from claims based on its rulemaking and enforcement decisions. The four-factor Eleventh Amendment immunity test does not yield a different result. If anything, the Board has a stronger claim to Eleventh Amendment immunity in this case than it did in Versiglio. Accordingly, all of Plaintiffs' claims against the Board itself are due to be dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction. See Edelman v. Jordan, 415 U.S. 651, 678 (1974) (“[T]he Eleventh Amendment defense . . . partakes of the nature of a jurisdictional bar . . . .”); Silver v. Baggiano, 804 F.2d 1211, 1213 (11th Cir. 1986) (describing Eleventh Amendment immunity as “a jurisdictional issue”). As discussed below, however, some of Plaintiffs' claims may proceed against the Board members in their official capacities.

         B. Plaintiffs' Federal Claims Against the Board Members in Their Official Capacities Are Not Barred by Sovereign Immunity

         In addition to barring suits against the state itself, the Eleventh Amendment also bars suits against state officials “when the state is the real, substantial party in interest.” PennhurstState Sch. & Hosp. v. Halderman, 465 U.S. 89, 101 (1984) (internal quotation marks omitted). The state is the real party in interest “if the effect of the judgment would be to restrain the Government from acting.” Id. at 101 n.11 (internal quotation marks omitted). That is exactly what this lawsuit seeks to do. Plaintiffs seek an injunction forbidding the enforcement of state law against them and a declaration that the Board members' official conduct in this case is unlawful. (Doc. # 29 at 46). Thus, though Plaintiffs have nominally asserted their claims ...


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