in the united states district court for the northern … · v. smiledirect’s antitrust claim is...

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION SMILEDIRECTCLUB, LLC,

Plaintiff,

v. GEORGIA BOARD OF DENTISTRY, et al.,

Defendants.

Case No. 1:18-CV-02328-WMR

DEFENDANTS’ MEMORANDUM OF LAW

IN SUPPORT OF THEIR MOTION TO DISMISS

CHRISTOPHER M. CARR Attorney General Georgia Bar No. 112505 ROGER A. CHALMERS Senior Assistant Attorney General Georgia Bar No. 118720 BRYON A. THERNES Senior Assistant Attorney General Georgia Bar No. 373098 STATE LAW DEPARTMENT 40 Capital Square SW Atlanta, Georgia 30334 Tel: (404) 463-8850 Fax: (404) 651-5304 [email protected] [email protected]

JAMES W. COBB Georgia Bar No. 420133 MICHAEL A. CAPLAN Georgia Bar No. 601039 CAPLAN COBB LLP 75 Fourteenth Street NE Suite 2750 Atlanta, Georgia 30309 Tel: (404) 596-5600 Fax: (404) 596-5604 [email protected] [email protected] Special Assistants Attorney General

Counsel for Defendants

Case 1:18-cv-02328-WMR Document 29-1 Filed 11/21/18 of 48

TABLE OF CONTENTS

TABLE OF AUTHORITIES ..................................................................................... i

FACTUAL BACKGROUND ................................................................................... 3

ARGUMENT AND CITATION TO AUTHORITIES ............................................ 9

I. Sovereign immunity bars each of SmileDirect’s claims. ............................. 10

A. Sovereign immunity bars SmileDirect’s declaratory-judgment claim. .............................................................. 10

B. Sovereign immunity bars SmileDirect’s antitrust and constitutional claims against the Board, as well as those against the Board Members and the Executive Director in their official capacities. ...................... 14

II. SmileDirect has not alleged plausible antitrust or constitutional claims. ................................................................................ 16

A. SmileDirect has not alleged a plausible antitrust claim under Twombly .......................................................... 16

B. SmileDirect has failed to allege plausible constitutional claims. .......................................................... 19

III. State-action immunity bars SmileDirect’s antitrust claim against the Board and the Board Members. ........................................ 24

A. The Board and its Members are entitled to ipso facto immunity. ........................................................................... 26

B. The Board and its Members are entitled to state-action immunity even if Midcal or Hallie scrutiny applies. ....................................................................... 29

IV. Qualified immunity bars SmileDirect’s antitrust and constitutional claims against the Board Members in their individual capacities. ........................................................................ 31


V. SmileDirect’s antitrust claim is barred by the intracorporate-immunity doctrine. ................................................................ 33

CONCLUSION ....................................................................................................... 34


i

TABLE OF AUTHORITIES

CASES

Affiliated Capital Corp. v. City of Houston, 735 F.2d 1555, 1570 (5th Cir. 1984) (en banc) ................................................... 32

Ala. Optometric Ass’n v. Ala. State Bd. of Health, 379 F. Supp. 1332 (M.D. Ala. 1974) ................................................................... 15

Almanza v. United Airlines, Inc., 851 F.3d 1060 (11th Cir. 2017) ........................................................................... 17

Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212 (4th Cir. 2004) ............................................................................... 34

Am. Needle, Inc. v. NFL, 560 U.S. 183 (2010) ............................................................................................ 33

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................ 9, 34

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ................................................................................. 16-18, 34

Brown v. Newton Cnty. Sheriff’s Office, 273 F. Supp. 3d 1142 (N.D. Ga. 2017) ............................................................... 16

Burnett v. Fulton Cnty. Sch. Dist., No. 1:07-CV-0300-JTC-AJB, 2008 WL 11407394 (N.D. Ga. May 6, 2008) ..... 23

Builders Flooring Connection, LLC v. Brown Chambless Architects, LLC, No. 2:11CV373-MHT, 2014 WL 197679 (M.D. Ala. Jan. 16, 2014) ............ 27-28

California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 973 (1980) ............................................................................ 25-26, 29-31

Carr v. City of Florence, 916 F.2d 1521 (11th Cir. 1990) ........................................................................... 14

Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d 869 (9th Cir. 1987) ............................................................................... 26


ii

Clark v. Bd. of Dental Examiners of Georgia, 240 Ga. 289 (1977) ........................................................................................ 22, 30

Colindres v. Battle, No. 2:15-CV-2843-SCJ, 2016 WL 4258930 (N.D. Ga. June 6, 2016) ............... 20

Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 797 F.3d 1248 (11th Cir. 2015) .............................................................................................................. 7

Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 946 F. Supp. 2d 1321 (S.D. Fla. 2013) ................................................................ 17

Earles v. State Bd. of Certified Pub. Accountants, 139 F.3d 1033 (5th Cir. 1998) ............................................................................. 15

Edelman v. Jordan, 415 U.S. 651 (1974) ............................................................................................ 13

Edinboro Coll. Park Apartments v. Edinboro Univ. Found., 850 F.3d 567 (3d Cir. 2017) ........................................................................... 24-26

Ex Parte Young, 209 U.S. 123 (1908) ............................................................................................ 10

F.C.C. v. Beach Commc’ns, Inc., 508 U.S. 307 (1993) ...................................................................................... 20, 21

Fouche v. Jekyll Island–State Park Auth., 713 F.2d 1518 (11th Cir. 1983) ................................................................ 11, 13-14

Gary v. City of Warner Robins, Georgia, 311 F.3d 1334 (11th Cir. 2002) ........................................................................... 19

Georgia Cemetery Ass’n, Inc. v. Cox, 353 F.3d 1319 (11th Cir. 2003) ..................................................................... 20, 21

Georgia State Bd. of Dental Examiners v. Daniels, 137 Ga. App. 706 (1976) ........................................................................... 3, 12, 28

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) ............................................................................................ 22


iii

Gonzalez v. Lee Cnty. Hous. Auth., 161 F.3d 1290 (11th Cir. 1998) ........................................................................... 32

Green v. Mansour, 474 U.S. 64 (1985) .............................................................................................. 10

Harden v. Adams, 760 F.2d 1158 (11th Cir. 1985) ........................................................................... 15

Heller v. Doe by Doe, 509 U.S. 312 (1993) ............................................................................................ 21

Holcomb v. Johnston, 213 Ga. 249 (1957) ........................................................................................ 22, 30

Holton v. Battle, No. 1:14-CV-03824-LMM, 2017 WL 5236147 (N.D. Ga. Feb. 1, 2017) .......... 20

Hortman v. Yarbrough, 214 Ga. 693 (1959) ........................................................................................ 22, 30

In re ING Groep, N.V. ERISA Litig., 749 F. Supp. 2d 1338 (N.D. Ga. 2010) ............................................................... 28

In re Musical Instrs. & Equip. Antitrust Litig., 798 F.3d 1186 (9th Cir. 2015) ............................................................................. 18

Jemsek v. N.C. Med. Bd., No. 5:16-CV-59-D, 2017 WL 696721 (E.D.N.C. Feb. 21, 2017) ....................... 15

Jones v. Fransen, 857 F.3d 843 (11th Cir. 2017) ............................................................................. 31

Live Oak Consulting, Inc. v. Dep’t of Cmty. Health, 281 Ga. App. 791 (2006) ............................................................................... 12, 14

Locke v. Shore, 634 F.3d 1185 (11th Cir. 2011) ........................................................................... 19

Lynn v. Amoco Oil Co., 459 F. Supp. 2d 1175 (M.D. Ala. 2006) .............................................................. 17


iv

Manders v. Lee, 338 F.3d 1304 (11th Cir. 2003) ...................................................................... 11-12

N.C. State Bd. of Dental Examiners v. F.T.C., 135 S. Ct. 1101 (2015) ............................................................................ 25, 31, 33

N.C. State Bd. of Dental Examiners v. F.T.C., 717 F.3d 359 (4th Cir. 2013) .......................................................................... 33-34

Neo Gen Screening, Inc. v. New England Newborn Screening Program, 187 F.3d 24 (1st Cir. 1999) ................................................................................. 26

Nicholl v. Bd. of Regents of Univ. Sys. of Georgia, 706 F. App’x 493 (11th Cir. 2017) .......................................................... 11, 15, 24

Nichols v. Alabama State Bar, 815 F.3d 726 (11th Cir. 2016) ........................................................................ 10-11

Panama City Medical Diagnostic Ltd. v. Williams, 13 F.3d 1541 (11th Cir. 1994) ............................................................................. 19

Parker v. Brown, 317 U.S. 341 (1943) ............................................................................................ 24

R. Ernest Cohn, D.C. v. Bond, 953 F.2d 154 (4th Cir. 1991) ............................................................................... 33

Robinson v. Ga. Dep’t of Transp., 966 F.2d 6370 (11th Cir. 1992) ........................................................................... 15

Rowe v. City of Ft. Lauderdale, 279 F.3d 1271 (11th Cir. 2002) ........................................................................... 32

Saenz v. Univ. Interscholastic League, 487 F.2d 1026 (5th Cir. 1973) .................................................................. 24, 26-29

SD3, LLC v. Black & Decker Inc., 801 F.3d 412 (4th Cir. 2015) .......................................................................... 17-18

Seminole Tribe of Fla. v. Fla. Dep’t of Revenue, 750 F.3d 1238 (11th Cir. 2014) ........................................................................... 11


v

Tapley v. Collins, 211 F.3d 1210 (2000) .......................................................................................... 32

Taylor v. Dep’t of Pub. Safety, 142 F. App’x 373 (11th Cir. 2005) ...................................................................... 14

Tindol v. Ala. Dep’t of Rev., 632 F. App’x 1000 (11th Cir. 2015) .................................................................... 19

Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) ................................................................................... 25, 29-31

U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986 (11th Cir. 1993) ................................................................................. 16

Udick v. Fla., 705 F. App’x 901 (11th Cir. 2017) ...................................................................... 10

Universal Express, Inc. v. U.S. S.E.C., 177 F. App’x 52 (11th Cir. 2006) .......................................................................... 7

Versiglio v. Bd. of Dental Examiners of Alabama, 686 F.3d 1290 (11th Cir. 2012) ................................................................ 11-12, 15

Will v. Mich. Dep’t of State Police, 491 U.S. 58, (1989) ............................................................................................. 19

Wrzesinski v. State, 271 Ga. 659 (1999) ........................................................... 22, 30

STATUTES

15 U.S.C. § 1 ........................................................................................................... 33

42 U.S.C. § 1983 ................................................................................................. 3, 19

O.C.G.A. § 43-1-3(a)(6) ............................................................................... 4, 12, 29

O.C.G.A. § 43-1-14 ...................................................................................... 4, 12, 29

O.C.G.A. § 43-1-16 ...................................................................................... 4, 12, 29

O.C.G.A. § 43-1-17 ...................................................................................... 4, 12, 29


vi

O.C.G.A. § 43-1C-1 .................................................................................................. 8

O.C.G.A. § 43-1C-3 ................................................................................ 8, 12, 30, 31

O.C.G.A. § 43-3-4(a) ................................................................................................ 5

O.C.G.A. § 43-11-1 .................................................................................................. 3

O.C.G.A. § 43-11-1(6) .............................................................................................. 5

O.C.G.A. § 43-11-2 .................................................................................................. 4

O.C.G.A. § 43-11-2(b)(1) ....................................................................................... 29

O.C.G.A. § 43-11-2.1 ............................................................................................. 18

O.C.G.A. § 43-11-2.1(a) ..................................................................................... 4, 12

O.C.G.A. § 43-11-2.1(b) ........................................................................................... 4

O.C.G.A. § 43-11-2.1(d) ........................................................................................... 4

O.C.G.A. § 43-11-2.1(h) ........................................................................................... 4

O.C.G.A. § 43-11-2.1(i) ............................................................................................ 4

O.C.G.A. § 43-11-2.1(j) ............................................................................................ 4

O.C.G.A. § 43-11-2.1(k) ........................................................................................... 4

O.C.G.A. § 43-11-6 ............................................................................................ 4, 12

O.C.G.A. § 43-11-7 ................................................................................ 4, 12, 30, 33

O.C.G.A. § 43-11-7(1) .............................................................................................. 6

O.C.G.A. § 43-11-7(3) .............................................................................................. 6

O.C.G.A. § 43-11-7(5) .............................................................................................. 6

O.C.G.A. § 43-11-7(8) .............................................................................................. 4

O.C.G.A. § 43-11-9 ......................................................................................... passim


vii

O.C.G.A. § 43-11-17 ................................................................................................ 5

O.C.G.A. § 43-11-17(a)(2) ................................................................................. 5, 21

O.C.G.A. § 43-11-17(a)(5) ....................................................................................... 6

O.C.G.A. § 43-11-17(a)(6) ....................................................................................... 6

O.C.G.A. § 43-11-80(b) ............................................................................................ 6

O.C.G.A. § 43-11-81 ................................................................................................ 6

O.C.G.A. § 43-15-3(b) .............................................................................................. 5

O.C.G.A. § 43-24A-5(a) ........................................................................................... 5

O.C.G.A. § 43-26-4(c) .............................................................................................. 5

O.C.G.A. § 43-33-6 .................................................................................................. 5

O.C.G.A. § 43-38-4(a) .............................................................................................. 5

O.C.G.A. § 43-40-2(a) .............................................................................................. 5

O.C.G.A. § 43-50-20(a) ............................................................................................ 5

O.C.G.A. § 50-13-4 .................................................................................................. 6

O.C.G.A. § 50-13-10(a) .................................................................................... 10, 13

O.C.G.A. § 50-13-10(b) .......................................................................................... 13

RULES

Ga. Comp. R. & Regs. R. 150-9-.02(1) .................................................................... 6

Ga. Comp. R. & Regs. R. 150-9-.02(3) .................................................................... 7

Ga. Comp. R. & Regs. R. 150-9-.02(3)(aa) ........................................................ 7, 11

OTHER AUTHORITIES

Minutes of Board’s Dec. 1, 2017 Meeting ............................................................... 7


viii

Notice of Intent to Amend Rule of the Board ........................................................... 8

Minutes of Board’s Jan. 12, 2018 Meeting ............................................................... 8

Minutes of Board’s Jan. 24, 2018 Conference Call ................................................. 8

In re N.C. Bd. of Dental Examiners (F.T.C. July 14, 2011) .................................. 29

In re N.C. Bd. of Dental Examiners (F.T.C. Dec. 7, 2011) ................................... 29

Hye-Ran Park, et al., Changes In Views on Digital Intraoral Scanners Among Dental Hygienists after Training in Digital Impression Taking, BMC Oral Health ...................................................................................................... 7

Am. Dental Ass’n, Resolution 50H-2017 ............................................................... 23

Am. Dental Ass’n, ADA Discourages DIY Orthodontics through Resolution ..... 23

Ga. House of Representatives, Budget & Research Office, General Appropriations Act ................................................................................................................... 4, 12


INTRODUCTION

Plaintiff SmileDirectClub, LLC (“SmileDirect”) asks this Court to declare

that a Georgia dental rule—a rule properly adopted by Defendant the Georgia Board

of Dentistry (the “Board”) and explicitly approved by Georgia’s Governor—is

invalid because it supposedly violates federal antitrust and constitutional law.

SmileDirect’s principal complaint is that the rule is unnecessary and bad policy. But

a federal district court is not the proper forum—and SmileDirect’s claims are not the

proper mechanism—for challenging the merits of state policy decisions like this

one.

The rule in question (the “Rule” or the “Orthodontic Scan Rule”) relates to an

important part of dentistry: the diagnosis and treatment of malpositioned teeth.

Under the Rule, digital scans of a patient’s mouth that are made for fabricating

orthodontic appliances must be performed by a trained and qualified expanded-duty

dental assistant (“EDDA”). At SmileDirect, so-called “technicians”—who do not

hold the minimum qualifications of regular-duty dental assistants, let alone of

EDDAs—do exactly what the Rule governs; they create digital scans of customers’

mouths for the purpose of fabricating orthodontic appliances. SmileDirect thus

violates the Orthodontic Scan Rule each time its technicians perform a scan.

SmileDirect challenges the rule on a number of grounds: first, by asking the

Court to declare that the Board exceeded its authority when it promulgated the Rule;


2

second, by contending that promulgation of the Rule violated the Sherman Antitrust

Act; and third, by contending that the Rule violates the U.S. Constitution’s Equal

Protection and Due Process clauses. But all of these claims fail as a matter of law.

Count I (declaratory judgment). SmileDirect’s claim for a declaratory

judgment is barred by sovereign immunity. As Georgia’s Court of Appeals first

recognized over 40 years ago, the Board is an arm of the State of Georgia and is

protected by sovereign immunity. This Court, therefore, does not have jurisdiction

to consider SmileDirect’s declaratory-judgment claim unless Georgia has

consented—which it has not done here.

Count II (Sherman Antitrust Act). SmileDirect’s antitrust claim fails for a

number of reasons. First, SmileDirect does not (and cannot) plausibly allege an

unlawful agreement to restrain trade. At bottom, all SmileDirect alleges is that the

Board Members did what Georgia law empowers them to do—vote on a rule

relating to the practice of dentistry. State officials like the Board Members do not

violate federal antitrust law when they fulfill their statutory duty to regulate a

profession. Indeed, a contrary conclusion would imperil Georgia’s entire system for

regulating professions—a system that Georgia’s General Assembly has put in place

for over 40 different professions, from medicine to electrical contracting.

Second, SmileDirect’s antitrust claim is barred (in whole or in part) by at least

four immunity doctrines. The Board itself, as well as the Board Members and the


3

Executive Director in their official capacities, are protected by sovereign immunity.

All Defendants are protected by state-action immunity. Qualified immunity protects

the Board Members in their individual capacities. And the entire antitrust claim is

barred by intra-corporate immunity.

Counts III and IV (Equal Protection and Due Process). The Court should

also dismiss SmileDirect’s constitutional claims under 42 U.S.C. § 1983.

SmileDirect has not alleged sufficient facts to state a plausible claim under either the

Equal Protection Clause or the Due Process Clause. The Board had a rational basis

for adopting the Orthodontic Scan Rule—among other things, the protection of

public health and welfare—and SmileDirect cannot show to the contrary.

SmileDirect’s § 1983 claims also fail because they are barred by sovereign and

qualified immunity.

The Court should grant this Motion and dismiss SmileDirect’s Complaint in

its entirety and with prejudice.

FACTUAL BACKGROUND

The Board and its Members. The Board is an arm of the State of Georgia.1

It was created by statute—the Georgia Dental Practice Act, O.C.G.A. § 43-11-1 et

seq.—and is responsible for “control[ling] and regulat[ing] the practice of dentistry”

1 Georgia State Bd. of Dental Examiners v. Daniels, 137 Ga. App. 706, 707 (1976) (confirming the Board is an instrumentality of the State of Georgia that is entitled to sovereign immunity).


4

in Georgia to protect “the public health.” Id. § 43-11-7. The Board is a division of

Georgia’s Department of Community Health. Id. § 43-11-2.1(a). The State of

Georgia maintains significant control over the Board—Georgia’s Governor, for

example, appoints (and may remove) all of the Board’s members. Id. §§ 43-11-2,

43-1-14, 43-1-17. Likewise, Georgia’s Senate must confirm all Board appointees.

Id. § 43-1-16. And Georgia’s Dental Practice Act refers to Board Members as state

officials. Id. § 43-11-6.2

The Board is funded through state appropriations. See, e.g., Ga. House of

Representatives, Budget & Research Office, General Appropriations Act,

https://tinyurl.com/yb7u5snj (appropriating funds in the amount of $833,125 to the

Board for fiscal year 2018) (last visited Nov. 21, 2018). Any licensing fees

collected by the Board must be remitted to the state treasury. O.C.G.A. § 43-1-

3(a)(6). And Georgia’s Law Department is providing the Board’s defense in this

case.

The Board is one of over 40 professional licensing boards in Georgia, all of

which are composed primarily of individuals who are members of the profession

2 The Board’s Executive Director is responsible for various administrative duties. See O.C.G.A. § 43-11-2.1(d), (h)-(k); see id. § 43-11-2.1(b). She is hired by the Board “to implement” the Dental Practice Act and to provide support. Id. ¶ 43-11-7(8)


5

they regulate.3 The members of these other professional boards, like the members

of the Board here, are appointed by the Governor, confirmed by the Senate, and

vested by Georgia law with rulemaking authority.

The Board’s Authority. Georgia’s General Assembly, through the Dental

Practice Act, has given the Board significant authority to regulate the practice of

dentistry, including by defining “dentistry” broadly:

“Dentistry” means the evaluation, diagnosis, prevention, or treatment, or any combination thereof, whether using surgical or nonsurgical procedures, of diseases, disorders, or conditions, or any combination thereof, of the oral cavity, maxillofacial area, or the adjacent and associated structures, or any combination thereof, and their impact on the human body provided by a dentist, within the scope of his or her education, training, and experience, in accordance with the ethics of the profession and applicable law, including, but not limited to, the acts specified in Code Section 43-11-17.

Id. § 43-11-1(6). Section 43-11-17, in turn, sets out a non-exclusive list of acts that

“constitute prima-facie evidence of the practice of dentistry.” Especially relevant

here, that list includes “attempt[ing] to correct a malposition” of the teeth (such as

through the use of orthodontic appliances). Id. § 43-11-17(a)(2). The practice of

dentistry also includes the examination of “any human oral cavity, teeth, gingiva . . .

or associated structures . . . for the purpose of diagnosing, treating, or operating

3 See, e.g., O.C.G.A. § 43-3-4(a) (accountants); id. § 43-15-3(b) (engineers and land surveyors); id. § 43-24A-5(a) (massage therapists); id. § 43-26-4(c) (nurses); id. § 43-33-6 (physical therapists); id. § 43-38-4(a) (private detectives and private security agencies); id. § 43-40-2(a) (real-estate brokers and salespersons); id. § 43-50-20(a) (veterinarians and veterinary technicians).


6

upon the same . . . .” Id. § 43-11-17(a)(5). Similarly, a person practices dentistry if

she “[s]upplies, makes, fits, repairs, adjusts, or relines” any appliance that is usable

on human teeth. Id. § 43-11-17(a)(6).

The General Assembly has also given the Board rulemaking authority—

specifically, the authority “[t]o adopt, amend, and repeal rules and regulations to

carry out the performance of its duties,” “[t]o make all necessary . . . rules for the

governance of the board and the performance of its duties,” and “[t]o establish rules

regarding licensure.” Id. § 43-11-7(1), (3), (5); see also id. § 43-11-9 (“[T]he board

shall prescribe by rule or regulation those acts, services, procedures, and practices

which may be performed by . . . dental assistants . . . at the direction of and under

the supervision of a licensed dentist . . . .”); id. § 43-11-80(b); id. § 43-11-81.4

Finally, the Board sets qualifications and regulates the duties of certain non-

dentists who work in the dentistry field, such as dental hygienists, dental assistants,

EDDAs, and others. Id. § 43-11-9.

The Orthodontic Scan Rule. The Board’s Rule 150-9-.02, which was first

promulgated in 1992, establishes a category of dental assistants known as “expanded

duty dental assistants.” To qualify as an EDDA, a dental assistant must satisfy

certain special requirements. Ga. Comp. R. & Regs. R. 150-9-.02(1). Subsection

4 Section 50-13-4 of Georgia’s Administrative Procedures Act (“APA”) sets forth the process for adoption of rules. That process includes, among other things, a public notice and comment period. See generally O.C.G.A. § 50-13-4.


7

(3) of Rule 150-9-.02 identifies several duties only an EDDA may perform (i.e., the

“expanded duties”). R. 150-9-.02(3). Among other things, expanded duties include

taking certain impressions of patients’ teeth and recording patients’ vital signs. Id.

In 2017, the Board considered ten amendments to Rule 150-9-.02(3) and

began the formal rulemaking process under Georgia’s APA.5 On December 1,

2017, the Board voted to amend Rule 150-9-.02(3). Among other things, the Board

added the Orthodontic Scan Rule, providing that only EDDAs may perform

“[d]igital scans for fabrication [of] orthodontic appliances and models.” R. 150-9-

.02(3)(aa).

The Rule governs a crucial component of the diagnosis and treatment of

patients with malpositioned teeth: creating a comprehensive image of a patient’s

teeth and gums. These digital scans are akin to traditional physical impressions of a

patient’s teeth and gums.6 They are used to assess malpositions, determine a

5 Minutes of Board’s Dec. 1, 2017 Meeting, https://tinyurl.com/y9rec9d7 (last visited Nov. 21, 2018). On a motion to dismiss, a court may “consider [a document] and the facts therein” that “was referenced in the complaint” and is “central to the plaintiff’s claim . . . .” Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 797 F.3d 1248, 1267-68 (11th Cir. 2015) (internal quotation marks omitted). The Board’s rulemaking process is both referenced in and central to SmileDirect’s complaint. See, e.g., Dkt. 1 ¶¶ 34-45. That process is also a matter of public record that is “among the permissible facts” this Court may consider. Universal Express, Inc. v. U.S. S.E.C., 177 F. App’x 52, 53 (11th Cir. 2006). 6 See Hye-Ran Park, et al., Changes In Views on Digital Intraoral Scanners Among Dental Hygienists after Training in Digital Impression Taking, BMC Oral Health, https://tinyurl.com/ybo2w2lv (last visited Nov. 21, 2018) (referring to an


8

treatment plan, and fabricate appliances used in the treatment plan (such as the

“clear aligners” described in SmileDirect’s Complaint). See, e.g., Dkt. 1 ¶¶ 3, 20,

28, 30, 32, 47.

Following its December 1, 2017 meeting, the Board notified the public and all

interested parties of its intention to adopt the Orthodontic Scan Rule.7 The Board

also solicited and received written submissions from interested parties.8 Finally, on

January 24, 2018, the Board held a meeting where it considered and approved the

Orthodontic Scan Rule.9

Soon thereafter, the Board transmitted the Rule, along with supporting

materials, to Georgia’s Governor in accordance with Georgia’s Professional

Regulation Reform Act. See O.C.G.A. § 43-1C-1 et seq. That statute requires,

among other things, that the Governor actively supervise Georgia’s professional

licensing boards. Id. § 43-1C-3. The Governor issued a formal Certificate of Active

intraoral scanner as a “digital impression-taking” method or technique); see also Dkt. 1 ¶¶ 25-27. 7 Notice of Intent to Amend Rule of the Board, https://tinyurl.com/y8szbojn (last visited Nov. 21, 2018). 8 Minutes of Board’s Jan.12, 2018 Meeting, https://tinyurl.com/y9x4l2sr (last visited Nov. 21, 2018). 9 Minutes of Board’s Jan. 24, 2018 Conference Call, https://tinyurl.com/ybqngm8h (last visited Nov. 21, 2018).


9

Supervision, confirming that he had actively supervised the Board’s rulemaking

process and expressly approved the Orthodontic Scan Rule.10

ARGUMENT AND CITATION TO AUTHORITIES

Defendants bring this motion under Federal Rules of Civil Procedure 12(b)(6)

and 12(b)(1). Rule 12(b)(6) requires dismissal if the allegations, taken as true,

would not entitle the plaintiff to relief. To survive a 12(b)(6) motion, “the factual

allegations in a complaint must possess enough heft to set forth a plausible

entitlement to relief . . . .” Fin. Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276,

1282 (11th Cir. 2007) (internal quotation marks omitted). Allegations that are

“labels and conclusions,” “naked assertion[s],” “[t]hreadbare recitals of the

elements,” or “mere conclusory statements” should be ignored. Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (internal quotation marks omitted); see also Next Cent.

Commc’ns Corp. v. Ellis, 171 F. Supp. 2d 1374, 1378 (N.D. Ga. 2001).

Rule 12(b)(1) requires dismissal when the court lacks subject-matter

jurisdiction—such as when sovereign immunity bars a claim. Again, the Court

should look to the Complaint’s factual allegations and ignore “conclusory

allegations or legal characterizations.” Frazer v. IPM Corp. of Brevard, 767 F.

10 A true and accurate copy of the Governor’s “Certificate of Active Supervision” is attached to this Motion as Exhibit A. SmileDirect did not attach the Certificate of Active Supervision to its Complaint, but the Court may nevertheless consider it here because the certificate was referenced in SmileDirect’s Complaint and is central to SmileDirect’s claims. See, e.g., Dkt. 1 ¶ 45; see also footnote 5, supra.


10

Supp. 2d 1369, 1371-72 (N.D. Ga. 2011) (internal quotation marks omitted).

I. Sovereign immunity bars each of SmileDirect’s claims.

A. Sovereign immunity bars SmileDirect’s declaratory-judgment claim.

Count I of SmileDirect’s Complaint seeks a declaration that the Orthodontic

Scan Rule is invalid because, SmileDirect contends, creating digital scans for the

fabrication of orthodontic appliances “does not constitute the practice of dentistry or

dental hygiene . . . .” Dkt. 1 ¶ 87. SmileDirect seeks this declaration under

O.C.G.A. § 50-13-10, a provision of Georgia’s APA stating that “[t]he validity of

any rule . . . may be determined in an action for declaratory judgment . . . .”

O.C.G.A. § 50-13-10(a); see also Dkt. 1 ¶ 83. But this claim is barred by sovereign

immunity.

Under the Eleventh Amendment, “States may not be sued in federal court

unless they consent to it in unequivocal terms . . . .” Green v. Mansour, 474 U.S.

64, 68 (1985). This immunity applies regardless of the relief sought—including to

claims for a declaratory judgment.11 See Nichols v. Alabama State Bar, 815 F.3d

11 Ex parte Young, 209 U.S. 123 (1908), creates an exception to Eleventh Amendment immunity for certain suits seeking prospective relief against state officials, but that exception does not apply here. See Udick v. Fla., 705 F. App’x 901, 904 (11th Cir. 2017) (“The Ex Parte Young doctrine is a ‘narrow’ ‘exception’ to state sovereign immunity; ‘[i]t applies only to prospective relief, does not permit judgments against state officers declaring that they violated federal law in the past, and has no application in suits against the States and their agencies, which are barred regardless of the relief sought.” (internal quotation marks omitted) (alteration in original). SmileDirect’s declaratory-judgment claim is asserted exclusively


11

726, 731 (11th Cir. 2016); Seminole Tribe of Fla. v. Fla. Dep’t of Revenue, 750 F.3d

1238, 1243 (11th Cir. 2014). And Eleventh Amendment immunity extends to “arms

of the state,” including state agencies, just as if the state itself were named to the

suit. See, e.g., Nicholl v. Bd. of Regents of Univ. Sys. of Georgia, 706 F. App’x 493,

495 (11th Cir. 2017) (citing Fouche v. Jekyll Island–State Park Auth., 713 F.2d

1518, 1520 (11th Cir. 1983)); Versiglio v. Bd. of Dental Examiners of Alabama, 686

F.3d 1290 (11th Cir. 2012) (extending Eleventh Amendment immunity to

Alabama’s dental board).

Whether an entity is an arm of the state for sovereign-immunity purposes

depends on the entity’s function and character, as determined by state law. See

Manders v. Lee, 338 F.3d 1304, 1309 (11th Cir. 2003). The Manders court

identified four relevant factors to consider: (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. Id. In

addition, federal courts should give “great deference” to how state courts have

characterized the entity. Versiglio, 686 F.3d at 1292.

Here, the Board is an arm of the State of Georgia entitled to sovereign

immunity. Notably, the Georgia Court of Appeals has already held as much.

against a state agency (the Board). Dkt. 1 ¶¶ 81-88. Additionally, the claim seeks a declaration that the Board’s prior action of promulgating Rule 150-9-.02(3)(aa) is invalid, and does not allege a present or ongoing violation of any federal law. Id.


12

Daniels, 137 Ga. App. at 707 (holding that the Board is entitled to sovereign

immunity). That decision should be given “great deference.” Versiglio, 686 F.3d at

1292. Moreover, the Manders factors all support applying sovereign immunity

here:

• How state law defines the entity. The Board is created by statute, and its purpose is to “control and regulat[e] the practice of dentistry” to protect “the public health.” O.C.G.A. § 43-11-7. The Board is also part of Georgia’s Department of Community Health. Id. § 43-11-2.1(a).12 And Georgia’s Dental Practice Act refers to Board Members as state officials. Id. § 43-11-6 (“Each member of the board shall receive the expense allowance . . . and the same mileage allowance . . . as that received by other state officials and employees . . . .”) (emphasis added).

• Degree of control maintained by the State. Georgia’s Governor has the power to appoint (and remove) all of the Board’s members. Id. §§ 43-11-2, 43-1-14, 43-1-17. Georgia’s Senate also must confirm all Board appointees. Id. § 43-1-16. And Georgia’s Governor actively supervises the Board and approves its acts and decisions, including its rules. Id. § 43-1C-3.

• Funding. The Board is funded through state appropriations. See, e.g., Ga. House of Representatives, Budget & Research Office, General Appropriations Act, https://tinyurl.com/yb7u5snj (last visited Nov. 21, 2018). Licensing fees collected by the Board are remitted to the state treasury. Id. § 43-1-3(a)(6).

• Responsibility for defense of this lawsuit. Georgia’s Law Department, along with additional counsel retained and paid by the State, is providing the defense in this case.

Sovereign immunity applies, and the Court should dismiss SmileDirect’s claim for a

12 Georgia’s Department of Community Health is protected by sovereign immunity. See Live Oak Consulting, Inc. v. Dep’t of Cmty. Health, 281 Ga. App. 791 (2006).


13

declaratory judgment.

SmileDirect may argue Georgia has waived sovereign immunity as to the

declaratory-judgment claim by enacting O.C.G.A. § 50-13-10, which allows for

certain declaratory-judgment actions under state law. See Dkt. 1 ¶¶ 83-88 (relying

on O.C.G.A. § 50-13-10). But that is wrong. A waiver of sovereign immunity must

be set forth “by the most express language” or “by such overwhelming implications

from the text as will leave no room for any other reasonable construction.” Edelman

v. Jordan, 415 U.S. 651, 673 (1974) (internal quotation marks and alteration

omitted). And importantly, a state’s consent to suit in its own courts does not waive

immunity from suit in federal court. Id. In Fouche, for example, the Eleventh

Circuit held that a Georgia statute establishing venue in “the Superior Court of

Fulton County” for suits against a Georgia park authority only waived immunity for

suits filed in the designated venue—i.e., the Superior Court of Fulton County. 713

F.2d at 1522-23. The statute did not waive immunity to suits brought in federal

court. Id.

O.C.G.A. § 50-13-10(a) does not waive the Board’s sovereign immunity for

suits in federal court. Section 50-13-10(a) provides that “[t]he validity of any rule

. . . may be determined in an action for declaratory judgment when it is alleged that

the rule . . . interferes with or impairs the legal rights of the petitioner.” But

O.C.G.A. § 50-13-10(b) goes on to state that such actions “shall be brought in the


14

Superior Court of Fulton County or in the superior court of the county of residence

[or principal place of business] of the petitioner . . . .” Under Fouche, this venue

statute does not consent to suit in federal court; at most, it consents to suit in certain

of Georgia’s superior courts. See 713 F.2d at 1522-23; see also Live Oak

Consulting, Inc. v. Dep’t of Cmty. Health, 281 Ga. App. 791, 796 (2006) (“[I]t is

only pursuant to O.C.G.A. § 50-13-10 . . . that the state has specifically consented to

be sued and has explicitly waived its sovereign immunity as to declaratory judgment

actions in which the rules of its agencies are challenged.”). Count I of the

Complaint should be dismissed.

B. Sovereign immunity bars SmileDirect’s antitrust and constitutional claims against the Board, as well as those against the Board Members and the Executive Director in their official capacities.

Sovereign immunity also bars SmileDirect’s antitrust and § 1983 claims

(i) against the Board and (ii) against the Board Members and the Executive Director

in their official capacities.

“[A]n unconsenting state is immune from lawsuits brought in federal court by

the state’s own citizens,” and that rule applies equally to claims “against a state

official in his or her official capacity . . . .’” Carr v. City of Florence, 916 F.2d

1521, 1524 (11th Cir. 1990); see also Taylor v. Dep’t of Pub. Safety, 142 F. App’x

373, 374-75 (11th Cir. 2005) (holding that § 1983 claim against arm of the state was

barred entirely by Eleventh Amendment and that Georgia has not consented to be

sued under § 1983 or waived its sovereign immunity). The Eleventh Circuit has


15

already applied sovereign immunity to claims against a dental board, see Versiglio,

686 F.3d at 1292-93, as well as to claims against members of a state board, see

Harden v. Adams, 760 F.2d 1158, 1163-64 (11th Cir. 1985). And the analysis does

not change based on the type of claim at issue—sovereign immunity, for example,

bars antitrust claims because “[t]he antitrust laws do not supersede the Eleventh

Amendment . . . .” Ala. Optometric Ass’n v. Ala. State Bd. of Health, 379 F. Supp.

1332, 1340 n.3 (M.D. Ala. 1974).13 Section 1983 claims are also barred. See, e.g.,

Robinson v. Ga. Dep’t of Transp., 966 F.2d 637, 640 (11th Cir. 1992) (“Congress, in

passing § 1983, did not intend to override” sovereign immunity).

Sovereign immunity applies to the antitrust and § 1983 claims asserted here

against the Board, as well as to the official-capacity claims against the Board

Members and the Executive Director. As explained above, the Board is an arm of

the State of Georgia. See supra at Part I.A. Thus, suits against the Board, along

with those against its Members in their official capacities, are suits against the State

itself. See, e.g., Earles v. State Bd. of Certified Pub. Accountants, 139 F.3d 1033,

1039 (5th Cir. 1998); see also Nicholl, 706 F. App’x at 495 (“The Board is

considered a state entity that is an arm of the state of Georgia for purposes of the

Eleventh Amendment . . . .”). The same reasoning protects the Executive

13 See also Jemsek v. N.C. Med. Bd., No. 5:16-CV-59-D, 2017 WL 696721, at *5 n.1 (E.D.N.C. Feb. 21, 2017), aff’d, 697 F. App’x 234 (4th Cir.) (collecting cases).


16

Director—who serves in an administrative capacity and did not vote on the Rule. Cf.

Brown v. Newton Cnty. Sheriff’s Office, 273 F. Supp. 3d 1142, 1160 (N.D. Ga.

2017) (“[C]ourts in this circuit have determined that when a sheriff is acting as an

arm of the state, his deputies are also entitled to Eleventh Amendment immunity.”)

(quotation marks omitted). The Court should dismiss SmileDirect’s antitrust and §

1983 claims against the Board, as well as the official-capacity claims against the

Board Members and Executive Director.

II. SmileDirect has not alleged plausible antitrust or constitutional claims. A. SmileDirect has not alleged a plausible antitrust claim under

Twombly.

The Court should dismiss SmileDirect’s antitrust claim because the

Complaint does not plausibly allege an unlawful agreement among the Defendants.

See Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). SmileDirect merely alleges

that the Board Members voted in favor of the Orthodontic Scan Rule. Dkt. 1 ¶¶ 34-

38. But that, at most, is an allegation of parallel conduct—which, in the absence of

some additional plus factor, is not sufficient to state an antitrust claim.

To state a claim under Section 1 of the Sherman Act, a plaintiff must allege

sufficient facts to give rise to a plausible inference of an unlawful agreement to

restrain trade. See, e.g., U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986,

1001 (11th Cir. 1993). Allegations of “parallel conduct,” without more, “stop[]

short of the line between possibility and plausibility of entitlement to relief.”


17

Twombly, 550 U.S. at 557 (internal quotation marks and alteration omitted); see also

Almanza v. United Airlines, Inc., 851 F.3d 1060, 1069 (11th Cir. 2017) (allegations

of “parallel conduct and interdependence” are “insufficient to pass the plausibility

threshold”).14 And allegations of “consistent votes”—which is all SmileDirect

alleges here—merely reflect “parallel conduct . . . equally consistent with legal

behavior.” SD3, LLC v. Black & Decker Inc., 801 F.3d 412, 437 (4th Cir. 2015),

cert. denied, 136 S. Ct. 2485 (2016).

The Fourth Circuit’s decision in SD3 is instructive. The SD3 plaintiffs

manufactured a safety device for table saws and alleged, among other things, that

the defendants conspired to cause a standard-setting organization to reject a

proposed rule calling for the plaintiff’s technology to be adopted industry-wide. Id.

at 419. Notably, the plaintiffs’ allegations of parallel conduct were similar to (but

more detailed than) SmileDirect’s allegations here. Among other things, the SD3

plaintiffs alleged that “a collective decision was made,” that defendants “agreed to

vote as a bloc,” and that defendants’ actions “were a smokescreen.” Id. at 437. But

the Fourth Circuit nevertheless affirmed dismissal, reasoning that the alleged

parallel conduct was “equally consistent with legal behavior.” Id.

14 See also Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 946 F. Supp. 2d 1321, 1329 (S.D. Fla. 2013) (“[A]llegations of parallel conduct coupled with bare assertions of conspiracy will not suffice.”); Lynn v. Amoco Oil Co., 459 F. Supp. 2d 1175, 1182 (M.D. Ala. 2006) (same).


18

The same rationale applies here. SmileDirect alleges no specific facts

concerning any agreement among Defendants. See generally Dkt. 1.15 Instead, it

merely alleges the Board voted on a proposed rule pursuant to its statutory duty to

regulate the practice of dentistry. Dkt. 1 ¶¶ 34-38. These are precisely the type of

allegations that Twombly, SD3, and other courts have held to be insufficient.16

SmileDirect has not pled any facts showing who agreed to what, when they did so,

or how they did so. See generally Dkt. 1. The Court should dismiss the antitrust

claim.17

15 SmileDirect alleges an “agreement” among Defendants in three paragraphs, see Dkt. 1 ¶¶ 91, 94, and 97, but these conclusory allegations are simply a recitation of the formulaic elements of an antitrust claim, and do not allege any plausible agreement. 16 Other courts have also dismissed antitrust claims containing substantially more detailed allegations than SmileDirect’s. See, e.g., In re Musical Instrs. & Equip. Antitrust Litig., 798 F.3d 1186, 1189, 1194 (9th Cir. 2015) (affirming dismissal where plaintiffs pleaded that “guitar manufacturers each adopted similar advertising policies,” “shared a common motive to conspire,” “acted against their self-interest,” “simultaneously adopted substantially similar [minimum advertised price] policies,” participated in a trade association, had entered into a consent decree with the FTC, and where “retail prices for guitars and guitar amplifiers rose during” the period at issue even “as the number of units sold fell.”). But even with those allegations, the court dismissed the plaintiffs’’ claims. Id. at 1198. 17 SmileDirect broadly alleges its Sherman Act claim against “[a]ll [d]efendants.” Dkt. 1 at 28. But the Executive Director does not have the power to vote on Board decisions. See generally O.C.G.A. §§ 43-11-2, 43-11-2.1. Accordingly, SmileDirect has not, and cannot, state an antitrust claim against the Executive Director.


19

B. SmileDirect has failed to allege plausible constitutional claims.

SmileDirect asserts two § 1983 claims, one challenging the Rule under the

Equal Protection Clause and a second under the Due Process Clause.18 Both claims

fail for at least two reasons.

First, the Board, as well as the Board Members and the Executive Director in

their official capacities, are not “persons” subject to suit under 42 U.S.C. § 1983.

See, e.g., Will v. Mich. Dep’t of State Police, 491 U.S. 58, 71 (1989) (“[N]either a

State nor its officials acting in their official capacities are ‘persons’ under § 1983.”);

Tindol v. Ala. Dep’t of Rev., 632 F. App’x 1000, 1001 (11th Cir. 2015) (per curiam).

Second, as SmileDirect concedes (see, e.g., dkt. 1 ¶¶ 44, 104, 109), rational-

basis review applies to the Equal Protection and Due Process § 1983 claims.19 See,

e.g., Locke v. Shore, 634 F.3d 1185, 1195 (11th Cir. 2011); Panama City Medical

Diagnostic Ltd. v. Williams, 13 F.3d 1541, 1545 (11th Cir. 1994); see also Gary v.

City of Warner Robins, Georgia, 311 F.3d 1334, 1338 n.10 (11th Cir. 2002). Both

18 SmileDirect contends that the Orthodontic Scan Rule violates the Equal Protection Clause because the Rule supposedly discriminates “between persons and entities who offer digital scans by technicians (such as [SmileDirect]), and persons and entities who offer digital scans by licensed dentists or orthodontists or by expanded duty dental assistants, acting under the direct supervision of a licensed dentist or orthodontist.” Dkt. 1 ¶ 102. In its Due Process challenge, SmileDirect contends that the rule unconstitutionally “deprives [SmileDirect] of its liberty and property interests.” Id. ¶ 110. 19 SmileDirect concedes that both of its constitutional claims should be analyzed under rational-basis review. Dkt. 1 ¶¶ 44, 104, 109 (alleging that the Orthodontic Scan Rule does not have a rational basis).


20

claims fail under this standard.

“In areas of social and economic policy, a statutory classification that neither

proceeds along suspect lines nor infringes fundamental constitutional rights must be

upheld against equal protection challenge if there is any reasonably conceivable

state of facts that could provide a rational basis for the classification . . . .” F.C.C. v.

Beach Commc’ns, Inc., 508 U.S. 307, 313 (1993); see also Holton v. Battle, No.

1:14-CV-03824-LMM, 2017 WL 5236147, at *9 (N.D. Ga. Feb. 1, 2017) (applying

rational-basis review and finding that the Board had a rational basis for prohibiting

certain individuals from performing teeth-whitening services); Colindres v. Battle,

No. 1:15-CV-2843-SCJ, 2016 WL 4258930, at *5-6 (N.D. Ga. June 6, 2016) (same).

Such classifications are entitled to a “strong presumption of validity” and a plaintiff

challenging the classification must “negat[e] every conceivable basis which might

support it.” Beach Commc’ns, 508 U.S. at 314-15 (internal quotation marks

omitted) (emphasis added).

While the defendant must offer a conceivable rational basis for the challenged

rule, the reviewing court may not look past the proffered reason and subject the

regulation to “courtroom fact-finding.” Id. at 315. The reviewing court, for

example, cannot explore “[w]hether the conceived reason was in fact the reason for

the legislation” or “[w]hether substantial evidence supports the conceived rationale.”

Georgia Cemetery Ass’n, Inc. v. Cox, 353 F.3d 1319, 1321 (11th Cir. 2003) (per


21

curiam). And importantly, “[a] State . . . has no obligation to produce evidence to

sustain the rationality of a statutory classification.” Heller v. Doe by Doe, 509 U.S.

312, 320 (1993). Moreover, even if the Rule is based on “faulty premises,” it should

still be deemed constitutional as long as there is “any conceivable rational basis” for

it. Georgia Cemetery, 353 F.3d at 1321 (internal quotation marks omitted)

(emphasis added and removed). Because of these highly deferential standards for

state economic and policy regulations, the Supreme Court has described regulations

that involve “scope-of-coverage” line drawing, like the Orthodontic Scan Rule, as

“virtually unreviewable.” Beach Commc’ns, 508 U.S. at 316.

Against this deferential backdrop, the Orthodontic Scan Rule survives

constitutional review. The Rule ensures that an essential aspect of dentistry—the

diagnosis and treatment of malpositioned teeth—is performed by an adequately

trained, qualified, and supervised EDDA. Indeed, Georgia’s General Assembly has

explicitly defined the practice of dentistry to include “attempt[ing] to correct a

malposition” of the teeth. O.C.G.A. § 43-11-17(a)(2)

The scans at issue are essentially impressions made digitally, thanks to

advancement in technology.20 Impressions of patients’ mouths are critical to

determining the degree of malpositioning, whether a patient qualifies for particular

forms of treatment, the proper course of treatment, creating orthodontic appliances,

20 See footnote 6, supra.


22

and for determining whether treatment has been effective. And, importantly,

Georgia law has long recognized that making impressions is one aspect of the

practice of dentistry. See Holcomb v. Johnston, 213 Ga. 249, 253 (1957) (“The

operations performed by this defendant in taking impressions and fitting dental

prosthetics for a fee are clearly acts required to be performed by a licensed dentist

. . . .”) (emphasis added); see also Wrzesinski v. State, 271 Ga. 659, 659 (1999)

(rejecting constitutional challenges of a criminal defendant convicted for “t[aking]

impressions of teeth for the purpose of making appliances usable as teeth”);

Hortman v. Yarbrough, 214 Ga. 693, 694-98 (1959).21

The Board has more than a rational basis for promulgating the Rule—it has a

compelling interest in doing so. See Holcomb, 213 Ga. at 252 (“There can be no

doubt that the practice of dentistry is affected with the public interest, and to insure

protection of the public health and welfare the profession of dentistry is a logical

subject for regulation . . . .”).22 The Rule ensures that scans are performed safely,

21 See also Clark v. Bd. of Dental Examiners of Georgia, 240 Ga. 289, 293 (1977) (“The trial judge did not err . . . in finding as a matter of law that the appellant examined and treated conditions of human teeth and gums. By the appellant’s own testimony, he admitted that he had . . . made impressions for the purpose of making appliances usable on teeth or as teeth, for which he charged a fee . . . . [This] constitutes the practice of dentistry . . . .”). 22 Accord Goldfarb v. Virginia State Bar, 421 U.S. 773, 792 (1975) (“We recognize that the States have a compelling interest in the practice of professions within their boundaries, and that as part of their power to protect the public health, safety, and other valid interests they have broad power to establish standards for licensing practitioners and regulating the practice of professions.”).


23

consistently, and correctly throughout the State of Georgia. It allows for licensed

dentists and orthodontist to assess tooth mobility—which has a direct impact on the

success or failure of orthodontic treatment and which can be determined only by an

examination and diagnosis by a dentist or orthodontist. And the Rule ensures that if

a pathology or abnormality is observed during the scan process, a licensed medical

practitioner is readily available to assess the patient and provide medical guidance.

There is a rational basis for the Board’s determination that the process for

making digital impressions should, at the very least, be performed by an EDDA.23

SmileDirect’s § 1983 claims should be dismissed.24

23 The American Dental Association agrees with the Board’s rationale, and has stated its “belie[f] that supervision by a licensed dentist is necessary for all phases of orthodontic treatment including . . . study models of scans of the mouth . . . .” Am. Dental Ass’n, ADA Discourages DIY Orthodontics through Resolution, https://tinyurl.com/y7vn5k4y (last visited Nov. 21, 2018); see also Am. Dental Ass’n, Resolution 50H-2017. 24 SmileDirect’s Equal Protection claims also fails because the Complaint does not identify a similarly situated person or entity from whom SmileDirect is being treated differently. By its terms, the Rule treats everyone in Georgia the same—anyone who wants to conduct digital scans for the purpose of fabricating orthodontic devices must do so with an EDDA or a licensed dentist or orthodontists. See, e.g., Burnett v. Fulton Cnty. Sch. Dist., No. 1:07-CV-0300-JTC-AJB, 2008 WL 11407394, at *10 (N.D. Ga. May 6, 2008) (“A party establishes a violation of the Equal Protection clause by showing that: (1) the plaintiff was treated differently from similarly situated persons in all relevant respects; and (2) the different treatment was a result of discriminatory intent or purpose.”) (citing, inter alia, Jones v. Ray, 279 F.3d 944, 946-47 (11th Cir. 2001)).


24

III. State-action immunity bars SmileDirect’s antitrust claim against the Board and the Board Members.

Even if SmileDirect had stated a cognizable antitrust claim (which it has not),

the Court should dismiss Count II of the Complaint because the Board and Board

Members are protected by state-action immunity.25

State-action immunity, sometimes referred to as “Parker immunity,” arises

because federal antitrust law does not prohibit the states, their agencies, and their

officers from engaging in anticompetitive conduct. Parker v. Brown, 317 U.S. 341

(1943). “States possess a significant measure of sovereignty” under the U.S.

Constitution, and “States may ‘impose restrictions on occupations, confer exclusive

or shared rights to dominate a market, or otherwise limit competition to achieve

public objectives” without running afoul of federal antitrust laws. Edinboro Coll.

Park Apartments v. Edinboro Univ. Found., 850 F.3d 567, 572 (3d Cir. 2017)

(providing a detailed description of the doctrine) (internal quotation marks omitted).

State-action immunity is absolute; it protects against all antitrust liability. See id.;

see also, e.g., Saenz v. Univ. Interscholastic League, 487 F.2d 1026, 1028 (5th Cir.

1973); Nicholl, 706 F. App’x at 496.

There are three approaches to analyzing state-action immunity: (1) ipso facto

25 The Executive Director is entitled to state-action immunity for the same reasons she is entitled to sovereign immunity—her role is administrative and she did not vote on the Rule.


25

immunity, (2) Midcal scrutiny, and (3) Hallie scrutiny. See N. Carolina State Bd. of

Dental Examiners v. F.T.C., 135 S. Ct. 1101, 1110-13 (2015) (“NC Dental Board”);

Edinboro Coll. Park Apartments, 850 F.3d at 572. Which approach applies depends

on nature of the challenged conduct and the relevant actor.

The first approach, ipso facto immunity, applies where the challenged

conduct is “an undoubted exercise of state sovereign authority” and the actor’s

conduct “automatically qualifies as that of the sovereign state itself.” Edinboro

Coll. Park Apartments, 850 F.3d at 572 (internal quotation marks and alteration

omitted). There is no need for further analysis, as obvious state actors are fully

immune from antitrust liability. Id.

The second approach, Midcal scrutiny, applies where the relevant actor is

either a private actor or a state agency that is deemed functionally private because it

is “controlled by active market participants.” Id. at 573. Actors subject to Midcal

scrutiny must satisfy two requirements: (1) the challenged restraint must be clearly

articulated and affirmatively expressed as state policy, and (2) the policy must be

actively supervised by the state. See NC Dental Board, 135 S. Ct. at 1110.

The third approach, Hallie scrutiny, applies where a municipality or a

prototypical state agency performed the challenged restraint. Edinboro Coll. Park

Apartments, 850 F.3d at 572. Under Hallie scrutiny, the actor is entitled to state-

action immunity if it can satisfy the first requirement of Midcal scrutiny (conformity


26

with a clearly articulated state policy). Id. at 573. The defendant-actor is not

required to satisfy the second requirement (active supervision by the State). Id.26

A. The Board and its Members are entitled to ipso facto immunity.

Ipso facto immunity applies here. As an initial matter, the action at issue in

this case—the Rule—was explicitly approved by Georgia’s Governor. See Exhibit

A; see, e.g., Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d

869, 876 (9th Cir. 1987) (“We conclude that state executives . . . are entitled to

Parker immunity for actions taken pursuant to their constitutional or statutory

authority, regardless of whether these particular actions or their anticompetitive

effects were contemplated by the legislature.”).27

The Fifth Circuit’s decision in Saenz is also instructive on this point. There,

court held that the defendants—a subdivision of the University of Texas that

coordinated an academic competition, as well as the subdivision’s director—were

entitled to state-action immunity, using an ipso facto analysis. 487 F.2d at 1028.

The plaintiff alleged the defendants had conspired to promulgate regulations

26 The intermediate Hallie scrutiny is based on the notion that municipalities and prototypical state agencies are politically accountable “arms of the state” and, therefore, are entitled to a stronger presumption that they are acting in the public interest. 471 U.S. at 45; see also Edinboro Coll. Park Apartments, 850 F.3d at 573. 27 See also Neo Gen Screening, Inc. v. New England Newborn Screening Program, 187 F.3d 24, 28-29 (1st Cir. 1999) (noting that the circuits that have faced the issue, including the First, Fifth, and Ninth Circuits, “have extended Parker’s ordinary [i.e., ipso facto] protection to actions of the state executive branch”).


27

effectively prohibiting the use of the plaintiff’s product (a slide rule) during the

academic competition, and giving preferential treatment to a competing product. Id.

at 1027. The plaintiff alleged the scheme was driven by the director’s financial

relationship with the producer of the competing product. Id. The court applied ipso

facto state-action immunity, observing that the subdivision was part of the

University of Texas, which is “inarguably a state agency or governmental body.”

Id. In so ruling, the court placed significant weight on these factors: the subdivision

was organized and administered by another division of the university; the university

president appointed the subdivision’s executive committee; the subdivision’s

employees were paid by the university; the subdivision’s office space and facilities

were provided by the university; the subdivision’s budget was prepared and

approved by the university; and the subdivision’s funds were controlled and

administered by the university, which itself was a state agency. Id. at 1028. The

court thus concluded the subdivision and its director were state actors, immune from

antitrust liability. Id.28

This Court should apply ipso facto immunity to the Board and Board

28 In 2014, the Middle District of Alabama considered the Saenz decision in light of more recent state-action immunity cases. See Builders Flooring Connection, LLC v. Brown Chambless Architects, LLC, No. 2:11CV373-MHT, 2014 WL 197679 (M.D. Ala. Jan. 16, 2014) (“BFC”). Specifically, the BFC court considered whether the vice-chancellor of financial affairs for a state university was entitled to state-action immunity from an antitrust claim arising from purported bid rigging. Id. at *5. Similar to Saenz, the plaintiff in BFC alleged that the vice-


28

Members for the same reasons. The Board, like the university subdivision in Saenz,

is an arm of the state. 487 F.2d at 1028. The Board Members are appointed by the

Governor and confirmed by the legislature—again similar to Saenz, where the

subdivision’s executive committee was appointed by the university president. Id.

And just as the university in Saenz provided the subdivision with office space and

facilities, the Board is “housed with the Department of Community Health”29—

meaning the State provides the Board with its office space and facilities. Id.

Likewise, Georgia controls the Board’s funding and budget and is defending the

Board in this action. See supra at Part I.A. Moreover, the Board has already been

determined to be an arm of the State of Georgia. Daniels, 137 Ga. App. at 707. The

Board and Board Members are state-level executive actors, just like the defendants

chancellor had conspired to rig bid specifications in favor of the plaintiff’s competitor. Id. at *1-2. The court found that, under Saenz, state-level executive agencies and their officials are entitled to ipso facto immunity and that there is no need to engage in more searching Hallie scrutiny or Midcal scrutiny. Id. at *3. Accordingly, the court found the defendant was entitled to ipso facto immunity, without attempting to identify any clearly articulated state policy or active supervision by the state. Id. 29 See Georgia Board of Dentistry, Contact Us, https://gbd.georgia.gov/contact-us (last visited Nov. 21, 2018); see also id. (describing the Board’s website as “[a]n official website of the State of Georgia”); Dkt. 16 (returns of service noting that the Defendants were served at the address listed on the Board’s website). This Court may take judicial notice of the address the Board shares with Department of Community Health. See, e.g., In re ING Groep, N.V. ERISA Litig., 749 F. Supp. 2d 1338, 1343-44 (N.D. Ga. 2010).


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in Saenz, and are entitled to state-action immunity.

B. The Board and its Members are entitled to state-action immunity even if Midcal or Hallie scrutiny applies.

SmileDirect may argue the Supreme Court’s decision in NC Dental Board

requires the Court to apply Midcal scrutiny to the Board. NC Dental Board,

however, is inapposite on this point because of several key differences between the

structure, powers, and alleged conduct of the Board here and the North Carolina

Dental Board. For example:

• In NC Dental Board, the ALJ’s conclusion that the N.C. Board violated antitrust law was based largely on his determination that the N.C. Board acted ultra vires when it issued a cease-and-desist order to a non-dentist. See In re N.C. Bd. of Dental Examiners, 15, 116-17 (F.T.C. July 14, 2011) (available at https://tinyurl.com/yaq3ywd2) (last visited Nov. 21, 2018).30 There is no such allegation here; Georgia’s Board unquestionably has the authority to promulgate and adopt rules, and, specifically, to adopt rules defining the scope of duties that can be performed by dental assistants. See, e.g., O.C.G.A. § 43-11-9.

• Georgia Board members are appointed by the Governor and confirmed by the Senate, while North Carolina’s board members are selected by the state’s private dentists. Compare O.C.G.A. §§ 43-11-2(b)(1), 43-1-14, 43-1-16, 43-1-17, with In re N.C. Bd. of Dental Examiners, 11, ¶¶ 15-17 (F.T.C. July 14, 2011).

• The Georgia Board is funded through state appropriations, and licensing fees collected by the Board must be remitted to the state treasury. The N.C. Board, by contrast, is funded through fees paid by private dentists. Compare O.C.G.A. § 43-1-3(a)(6), with In re N.C. Bd. of Dental Examiners, 19, ¶¶ 13-14 (F.T.C. July 14, 2011).

30 The FTC ultimately adopted the Administrative Law Judge’s findings. See In re N.C. Bd. of Dental Examiners, 2, 34 (F.T.C. Dec. 7, 2011) (available at https://tinyurl.com/yd5aspkz) (last visited Nov. 21, 2018).


30

• The Georgia Board is actively supervised by Georgia’s Governor, see O.C.G.A. § 43-1C-3; the N.C. Board is not.

Simply put, the Georgia Board is an arm of the State even if the N.C. Board is not.

Nevertheless, even if the Court applies Midcal or Hallie scrutiny, Defendants

are still entitled to state-action immunity. The Board promulgated the Orthodontic

Scan Rule in conformity with Georgia’s clearly articulated and affirmatively

expressed policy—protecting and promoting public health and welfare through the

control and regulation of the practice of dentistry. O.C.G.A. § 43-11-7. And as part

of that policy, the Board has been clearly and affirmatively delegated the authority

to promulgate and adopt rules defining the practice of dentistry and the scope of

duties that can be performed by dental assistants. See, e.g., id. § 43-11-9. Likewise,

a long line of Georgia cases establishes that making impressions—especially when

done in conjunction with the fabrication of orthodontic appliances—is the practice

of dentistry. See, e.g., Wrzesinski, 271 Ga. at 659; Clark, 240 Ga. at 293; Hortman,

214 Ga. at 694-98; Holcomb, 213 Ga. at 252. Therefore, the first prong Midcal

scrutiny, and the entire test for Hallie scrutiny, has been met.

As for the second prong of Midcal scrutiny—active supervision by the state—

SmileDirect concedes the Governor signed a “Certification of Active Supervision,”

pursuant to the Georgia Professional Regulation Reform Act. Dkt. 1 ¶ 45; see also

Exhibit A. That Certificate confirms that a politically accountable actor—the


31

Governor— expressly approved the Rule. The Board and Board Members are

entitled to state-action immunity.31

IV. Qualified immunity bars SmileDirect’s antitrust and constitutional claims against the Board Members in their individual capacities. SmileDirect’s antitrust and constitutional claims against the Board Members

in their individual capacities should be dismissed on qualified-immunity grounds.32

A government official acting within her discretionary authority is entitled to

qualified immunity unless she “violate[s] clearly established federal statutory or

constitutional rights . . . .” Jones v. Fransen, 857 F.3d 843, 851 (11th Cir. 2017)

(reversing denial of qualified immunity) (internal quotation marks omitted). Here,

in promulgating the Orthodontic Scan Rule, Board Members were acting in their

31 SmileDirect contends the State failed to actively supervise the Board’s promulgation of the Rule because (1) the Board’s minutes did not include a “complete summary of objections to the Board’s action expressed during official Board meetings,” (2) the Board “failed to explain to the State of Georgia the impact [the Orthodontic Scan Rule] will have on consumers,” and (3) the Board failed to identify purported conflicts of interests of the Defendants. See Dkt. 1 ¶ 45. But these types of allegations, even if true, are not sufficient to destroy Defendants’ state-action immunity. See NC Dental Board, 135 S. Ct. at 1116 (holding a defendant invoking state-action immunity need only show a “realistic assurance” of supervision, which involves state review of the substance of defendant’s decision and state veto power over defendant). Here, the Governor received the proposed rule change, the minutes from the Board’s meetings, and written submissions from interested parties. See O.C.G.A. § 43-1C-3. The Governor then stated he had actively supervised and approved adoption of the Rule. See Exhibit A. The Governor also had the absolute ability to veto the Board’s decision. O.C.G.A. § 43-1C-3. 32 The Executive Director has not been sued in her individual capacity. See Dkt. 1 at 1 (case caption).


32

discretionary authority, and no law clearly established that their votes violated the

Sherman Act.

“[O]nly a decision of the United States Supreme Court, [the Eleventh Circuit],

or the highest court of the state in which the case arose” can “clearly establish” a

right. Rowe v. City of Ft. Lauderdale, 279 F.3d 1271, 1280 (11th Cir. 2002). “For

qualified immunity to be surrendered, pre-existing law must dictate, that is, truly

compel . . . the conclusion for every like-situated, reasonable government agent that

what defendant is doing violates federal law . . . .” Id. (internal quotation marks

omitted). Although qualified immunity is most commonly applied to constitutional

claims, the Fifth Circuit applied qualified immunity to an antitrust claim in Affiliated

Capital Corp. v. City of Houston, 735 F.2d 1555, 1570 (5th Cir. 1984) (en banc),

abrogated in part on other grounds by City of Columbia v. Omni Outdoor Adver.,

Inc., 499 U.S. 365, 383-84 (1991). And the Eleventh Circuit has relied on the

Affiliated Capital decision twice in dismissing statutory claims. See Gonzalez v. Lee

Cnty. Hous. Auth., 161 F.3d 1290, 1299-300 & n.34 (11th Cir. 1998) (Fair Housing

Act); Tapley v. Collins, 211 F.3d 1210, 1214-16 & n.9 (2000) (Wiretapping Act).

Indeed, in Tapley, the Eleventh Circuit explained that “the qualified immunity

defense is so well-rooted in our jurisprudence that only a specific and unequivocal

statement of Congress [in a statute] can abolish the defense.” 211 F.3d at 1216

(emphasis added). The Sherman Act contains no such statement. See generally 15


33

U.S.C. § 1. This Court should hold that qualified immunity is available here.

SmileDirect concedes that the Board Members acted under color of state law.

See, e.g., Dkt. 1 ¶ 111 (“Defendants enacted [the Rule] under color of State law

. . . .”). And in promulgating the Rule, the Board Members were exercising

statutory discretionary authority. See, e.g., O.C.G.A. § 43-11-7; id. § 43-11-9.

Moreover, when the Board Members acted, no law clearly established their conduct

to be illegal. To the contrary, Georgia caselaw clearly established that making

impressions is the practice of dentistry. Qualified immunity thus applies, and

SmileDirect’s antitrust and § 1983 claims against the Board Members in their

individual capacities should be dismissed.

V. SmileDirect’s antitrust claim is barred by the intracorporate-immunity doctrine.

Finally, SmileDirect’s Sherman Act claim should also be dismissed on

intracorporate-immunity grounds. An antitrust conspiracy claim cannot be based on

actions taken by individuals within the same entity. See, e.g., R. Ernest Cohn, D.C.

v. Bond, 953 F.2d 154, 159 (4th Cir. 1991). This rule applies to claims against

members of a state professional board. N.C. State Bd. of Dental Examiners v.

F.T.C., 717 F.3d 359, 371 (4th Cir. 2013), aff’d, 135 S. Ct. 1101.

“Agreements made within a firm can constitute concerted action covered by

§ 1 [only] when the parties to the agreement act on interests separate from those of

the firm itself.” Am. Needle, Inc. v. NFL, 560 U.S. 183, 200 (2010) (emphasis


34

added). SmileDirect, in other words, may state a claim against the Board and Board

Members only if it satisfies a “narrow exception to the intracorporate immunity

doctrine—the independent personal stake exception.” Am. Chiropractic Ass’n v.

Trigon Healthcare, Inc., 367 F.3d 212, 224 (4th Cir. 2004). This “narrow

exception” would apply only if SmileDirect has sufficiently alleged that the various

Board Members “had a personal financial interest” in promulgating the Orthodontic

Scan Rule. See N.C. State Bd. of Dental Examiners, 717 F.3d at 371.

SmileDirect’s Complaint does not allege facts that plausibly demonstrate the

Board Members have a personal financial interest in this particular rule. At most,

SmileDirect alleges that according to unidentified websites, two of the Board

Members are affiliated with dental practices that offer alignment services, without

alleging any specific personal financial interest for those two Defendants, or any

interest whatsoever for the numerous other Board Members.33 See Dkt. 1 ¶¶ 5-15.

That is not enough to overcome intra-corporate immunity, and SmileDirect’s

antitrust claim against the Board Members should be dismissed.

CONCLUSION

For the foregoing reasons, Defendants respectfully request that the Court

dismiss SmileDirect’s claims with prejudice.

33 SmileDirect also vaguely alleges that “conflicts of interest” existed, but fails to allege any facts to support the allegation. See Dkt. 1 ¶ 45. This is precisely the type of “conclusory statement” that must be ignored under Twombly. See Iqbal, 556 U.S. at 678.


35

Respectfully submitted, this 21st day of November, 2018.

/s/ Christopher M. Carr CHRISTOPHER M. CARR Attorney General Georgia Bar No. 112505 ROGER A. CHALMERS Senior Assistant Attorney General Georgia Bar No. 118720 BRYON A. THERNES Senior Assistant Attorney General Georgia Bar No. 373098 STATE LAW DEPARTMENT 40 Capital Square SW Atlanta, Georgia 30334 Tel: (404) 463-8850 Fax: (404) 651-5304 [email protected] [email protected]

/s/ James W. Cobb JAMES W. COBB Georgia Bar No. 420133 MICHAEL A. CAPLAN Georgia Bar No. 601039 CAPLAN COBB LLP 75 Fourteenth Street NE Suite 2750 Atlanta, Georgia 30309 Tel: (404) 596-5600 Fax: (404) 596-5604 [email protected] [email protected] Special Assistants Attorney General

Counsel for Defendants


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LOCAL RULE 7.1(D) CERTIFICATION

The undersigned counsel certifies that the foregoing document has been

prepared with one of the font and point selections approved by the Court in

LR 5.1(B).

This 21st day of November, 2018.

/s/ James W. Cobb James W. Cobb Georgia Bar No. 420133 CAPLAN COBB LLP 75 Fourteenth Street, NE, Suite 2750 Atlanta, Georgia 30309 (404) 596-5600 – Office (404) 596-5604 – Facsimile [email protected]


37

CERTIFICATE OF SERVICE I hereby certify that, on this day, I caused a true and correct copy of the

foregoing document to be filed with the clerk’s office using this Court’s CM/ECF

system, which will automatically send notice of such filing to all counsel of record.

This 21st day of November, 2018.

/s/ James W. Cobb James W. Cobb Georgia Bar No. 420133 CAPLAN COBB LLP 75 Fourteenth Street, NE, Suite 2750 Atlanta, Georgia 30309 (404) 596-5600 – Office (404) 596-5604 – Facsimile [email protected]


in the united states district court for the northern … · v. smiledirect’s antitrust claim is...

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