Teladoc Receives Support from the Feds

Earlier this week, the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) filed an amicus brief with the Fifth Circuit stating that the Texas Medical Board's (the “Board”) appeal was inappropriate and the Court does not have jurisdiction over the appeal. But the government did not stop there. The brief goes on to argue that if the Court does in fact find that it has jurisdiction, it should affirm the district court’s order denying the Board’s motion to dismiss and allow the case to proceed.

The Government’s Interests

The DOJ and FTC, both responsible for enforcing federal antitrust laws, assert that they have a “strong interest” in both:

• Whether interlocutory orders refusing to dismiss an antitrust claim under the state action doctrine are immediately appealable under the collateral order doctrine; and
• Proper application of the state action doctrine.

Because of these interests, they urge the Court to (1) dismiss the appeal for lack of jurisdiction, and (2) if the Court finds jurisdiction, reject application of the state action doctrine because the active supervision requirement of the doctrine is not satisfied.

Lack of Jurisdiction

The government argues that an order denying a motion to dismiss an antitrust claim under the state action doctrine does not satisfy the narrow requirements of the collateral order doctrine (which allows interlocutory appeal of an order that would otherwise be “effectively unreviewable” on appeal). They explain that:

State action is a defense to antitrust liability predicated on the absence of any indication in the text or history of the Sherman Act that Congress sought to condemn state-imposed restraints of trade. Unlike qualified or sovereign immunity, the state action doctrine does not create a right to avoid trial…and thus does not satisfy the requirement that an order rejecting its application be “effectively unreviewable” on appeal from a final judgment. Orders denying a state action defense also do not qualify for review under the collateral order doctrine because state action issues are not completely separate from the merits of the underlying antitrust action.”

State Action Doctrine Not Satisfied

With regard to the state action doctrine itself, the government argues:

If this Court does find that it has jurisdiction, however, it should hold that the state action doctrine does not shield the [Board’s] rules from federal antitrust scrutiny because the [Board] did not carry its burden to show active supervision. There is no evidence that any disinterested state official reviewed the [Board] rules at issue to determine whether they promote state regulatory policy rather than the [Board] doctors’ private interests in excluding telehealth – and its lower prices – from the Texas market. The legislative and judicial review mechanisms cited by the [Board] do not satisfy the ‘constant requirements of action supervision.’"

Why is this important?

This amicus brief is particularly noteworthy because the FTC has worked for a number of years to narrow the application of the state action doctrine. In the last few years, they have succeeded in doing so through two recent Supreme Court cases.  FTC v. Phoebe Putney Health System, Inc. narrowed the state action doctrine and essentially its application to political subdivisions of states, holding that “clear articulation” requires that a state not only permit the conduct at issue, but also affirmatively contemplate displacing competition in order for the challenged anticompetitive effects to be attributed to the state.  North Carolina State Board of Dental Examiners vs. FTC made clear that the antitrust laws would apply to — and the state action exemption would not protect — activities of state agencies or boards made up of market participants, absent active state supervision of the Board’s challenged conduct.  The Teladoc case is the first litigated case testing the parameters of the active supervision requirement as recently established in North Carolina Dental Examiners.

Check out our recent blog post for a complete update on the issues involved in the Teladoc case against the Board.

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