9th Circuit aligns with SmileDirectClub's antitrust claims

The James R. Browning U.S. Court of Appeals Building, home of the 9th U.S. Circuit Court of Appeals, is pictured in San Francisco
The James R. Browning U.S. Court of Appeals Building, home of the 9th U.S. Circuit Court of Appeals. REUTERS/Noah Berger
  • Online orthodontist alleges campaign of harassment, intimidation
  • Regulatory role of board is not a ‘free pass’ to restrain trade, says appeals court

(Reuters) - Tele-dentistry pioneer SmileDirectClub can sue traditional dentists and orthodontists who serve on the California Dental Board for allegedly conspiring to block it from competing against them, a federal appeals court held Thursday.

The 9th U.S. Circuit Court of Appeals revived the central claim of the complaint filed by lawyers at Foley & Lardner on behalf of SmileDirectClub, which sells clear plastic dental aligners prescribed by doctors who review digital images of customers’ teeth online and oversee treatment from afar.

SmileDirectClub and its chief clinical officer, Jeffrey Sulitzer DMD, sued the board members for violation of the Sherman Act, a federal antitrust law, in 2019. The complaint alleged that the board members and employees had agreed to use their licensing and investigatory powers to conduct a “campaign of harassment and intimidation” to protect the teeth-straightening market in California from disruption.

U.S. District Judge George Wu dismissed the lawsuit in July 2020, ruling that any such agreement would have been “consistent with the Dental Board’s regulatory purpose.”

However, Wu’s ruling “effectively grants the (board members) a free pass under the Sherman Act,” Circuit Judge M. Margaret McKeown wrote for the panel. She was joined by Circuit Judge Jacqueline Nguyen and U.S. District Judge Royce Lamberth of Washington, D.C., sitting on the panel by designation.

The 9th Circuit said the board members’ alleged “concerted action can be unreasonable under the Sherman Act — even if they seek to achieve their anticompetitive aims through the exercise of valid regulatory authority.”

Chief Legal Officer Susan Greenspon Rammelt said in an emailed statement Thursday that SmileDirectClub “is pleased with the 9th Circuit’s decision allowing our case to proceed against the members and investigator of the California Dental Board for antitrust violations.” She also thanked the U.S. Justice Department, which filed an amicus brief questioning Wu’s interpretation of the Sherman Act.

A spokesman for the California Dental Board declined to comment because the case is still in litigation.

The California case was one of three SmileDirectClub filed against licensing boards made up of industry professionals, rather than state regulators, in 2018 and 2019. District court judges in Alabama and Georgia allowed those cases to proceed, and the 11th Circuit affirmed last year.

The Georgia case is proceeding on remand. The Alabama case settled in August, after that state’s dental board signed a consent decree with the Federal Trade Commission agreeing not to “restrict or impede … clear aligner therapy through remote treatment.”

The case decided Thursday is SmileDirectClub and Jeffrey Sulitzer DMD v. Joseph Tippins et al., 9th U.S. Circuit Court of Appeals No. 20-55735.

For SmileDirectClub and Sulitzer: Byron McLain and James Dasso of Foley & Lardner

For Tippins et al.: Sharon O'Grady of the California Attorney General's Office

For the U.S. Justice Department, amicus: Andrew DeLaney

SmileDirectClub presses antitrust appeal against Calif. dental board

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