AAI Tells Court to Dismiss State Action Appeal (Teladoc v. Texas Medical Board)

The American Antitrust Institute (AAI) filed an amicus brief in the Fifth Circuit Court of Appeals urging the court to dismiss an appeal of a lower court ruling denying state action “immunity” to the Texas Medical Board in connection with an antitrust challenge to the Board’s rules limiting telemedicine in Texas.  If the court does not dismiss the appeal, AAI’s brief offers guidance on how the “clear articulation” and “active supervision” prongs of the state action defense should be applied to regulatory boards controlled by market participants in light of the Supreme Court’s recent decision in North Carolina State Board of Dental Examiners.

According to the brief, orders rejecting a state action defense should not be automatically appealable under the collateral order doctrine.  Rather, they should be treated like most other interlocutory orders, which can be appealed only under certain conditions, in the court’s discretion.   The brief argues that to the extent Fifth Circuit case law permits automatic appeals of state action denials involving a certain category of public officials, state boards controlled by market participants are not in that category.

If the Court of Appeals decides to hear the appeal, the AAI urges the court to carefully apply the requirement that the State clearly articulate a policy to allow the anticompetitive conduct at issue.  A prior Fifth Circuit decision, relied on by the Board, holds that a board’s general authority to regulate a profession clearly articulates such a policy.  The AAI argues that this case has been effectively overruled, however, and that the requisite legislative intent to displace competition is not clearly articulated in a general grant of authority. The anticompetitive conduct must instead be the “inherent, logical, or ordinary result” of the agency’s authorizing legislation.  The brief expresses doubt as to whether the Board has met that standard, particularly since the Board’s rules seem to ignore a legislative dictate to consider less restrictive alternatives.

As for active supervision, the AAI argues that, in theory, judicial review of agency rules may constitute active supervision if judicial review is sufficiently rigorous and may be readily obtained prior to the rule going into effect.  While there is some prospect that judicial review under Texas law would meet this standard, the brief contends that it is unclear whether such rigorous review would be likely and hence the Board failed to satisfy its burden of proof on this point.
The brief was written by AAI’s Rick Brunell and Randy Stutz, with able assistance from research fellows Michael Altebrando and Kyle Virtue and intern Jonathan Wright.