The surprising First Amendment angle (and easy workaround) in the Dental Examiners antitrust case

January 31

For now, this is going to be the last in my series of posts about the North Carolina Board of Dental Examiners v. FTC case. Those of you who are interested in reading the previous post can see Monday’s post about the antitrust state-action immunity doctrine, Tuesday’s post about the facts of the North Carolina Board of Dental Examiners case, Wednesday’s post about the three-way circuit split on what it takes to get state-action immunity, and Thursday’s post about why I like the Fourth Circuit’s approach.

Today, I’m going to focus on a potential weirdness of the case, which might make antitrust liability inappropriate on these (or very similar) facts, and which in any event gives the Board an easy way out of the FTC’s injunction.

First, a simple example. Suppose I lobby the legislature to give “people like me” a monopoly in an industry and shut out “people like you”. Can you bring an antitrust suit against me for my anticompetitive conduct? No, because it’s petitioning the government for redress of grievances, which is protected by the First Amendment. You could think of it as an external constraint the First Amendment imposes on antitrust law, but technically courts have simply read antitrust law to not extend to this kind of activity as a matter of statutory interpretation (informed, of course, by the constitutional right). The same is true if you petition an executive agency, because this is petitioning the executive rather than the legislative. The immunity of petitioning activity from antitrust law is known as the Noerr-Pennington doctrine, in honor of Eastern Railroad Presidents Conference v. Noerr Motor Freight (1961), which arose in the legislative context, and United Mine Workers v. Pennington (1965), which arose in the executive context.

Now suppose I sue you (and perhaps others) for some reason or other (perhaps multiple times). Can you argue that my lawsuit is anticompetitive behavior that violates federal antitrust law, perhaps a pattern of cases to drive me out of the industry? Also, generally no. In California Motor Transport Co. v. Trucking Unlimited (1972), the Supreme Court extended the Noerr-Pennington doctrine to lawsuits, which after all are just petitions addressed to the judicial branch: when you sue, what are you doing but asking the government to redress some grievance of yours? Of course, lawsuits have some coercive effect on the other party that lobbying doesn’t necessarily have, so there are some limitations here (for instance, sanctions for frivolous lawsuits presumably don’t violate the petition right), but the basic point remains.

O.K., now suppose I send you a “demand letter”, saying “I think you’ve violated my rights or done some illegal [or similar], and if you don’t stop I’ll sue”? I don’t think the Supreme Court has ever said so explicitly, but demand letters are also protected as “conduct incidental to a petition”; certainly, it makes little sense to say that suing is protected from antitrust liability but announcing the intent to sue isn’t. Not that threats to do something legal should always be legal (witness the debate over whether and why blackmail should be illegal); but demand letters are such standard, natural, and usually desirable pre-litigation behavior (why sue when you can get the result you want with an out-of-court settlement?) that it seems to make little sense to not immunize them. (See this Ninth Circuit case for one discussion of conduct incidental to a petition.)

In North Carolina, teeth-whitening without a license from the Board of Dental Examiners is made illegal by statute, and the Attorney General of North Carolina, any district attorney, the Board, or “any resident citizen” can sue. So suppose a citizen of North Carolina sues such a non-dentist teeth-whitener for operating without a license, or sends a demand letter that effect: that, too, is protecting petitioning behavior and immunized from antitrust liability by the Noerr-Pennington doctrine.

Now consider the conduct of the North Carolina Board of Dental Examiners here, which was sending cease-and-desist letters to non-dentist teeth whiteners, advising them that whitening teeth without a license was illegal. How is this different than sending regular demand letters, which is protected by Noerr-Pennington?

*     *     *

The FTC issued (and the Fourth Circuit upheld) an order prohibiting the Board from continuing with its practice of hounding non-dentists out of the teeth-whitening business. The FTC directed the Board to stop ordering non-dentists to cease providing teeth-whitening services, stop communicating to non-dentists that their practice violates the law, and the like. But the FTC’s order also preserves the Board’s authority to investigate and sue non-dentists for suspected statutory violations, as well as to tell them of its “belief or opinion” regarding whether a teeth-whitening method violates the law. The order even preserves the Board’s ability to give the non-dentists “notice of its bona fide intention” to sue, provided it includes a disclaimer clarifying, for instance, that “[o]nly a court may determine” whether there’s been a violation.

Perhaps the FTC might have been complaining about the tone of the letters: rather than merely informing the non-dentists that they were breaking the law and could expect a lawsuit, the Board was demanding that they cease providing the illegal services. The requirement that the Board include a disclaimer in future letters suggests that some non-dentist providers may have been confused about the extent of the Board’s authority, not understanding that its authority was only to investigate and to bring ordinary lawsuits in court. The FTC’s/Solicitor General’s brief in opposition to certiorari suggests something along those lines:

The distinction between petitioner’s “orders” and mere threats of litigation is critical here, as in many contexts.  In Sackett v. EPA (2012), for example, [the Supreme] Court recognized that the issuance of an administrative “order” generally connotes the imposition of some “legal obligation” in a way the mere articulation of a legal position in a demand letter sent as a prelude to judicial action would not.

I don’t know if that’s right: an administrative “order” indeed connotes the imposition of a legal obligation, but that’s because such an order generally comes from agencies that have that sort of power. If something with the word “order” came from an agency that lacked such power but only had the power to initiative litigation in a court, I would interpret the order as being a threat to comply or face litigation. As I noted above, maybe some non-dentists weren’t legally savvy and interpreted it otherwise, but I didn’t see that the FTC found that people were actually confused on this point.

But the substance of the old letters seemed mostly unobjectionable, reciting the statute, stating that the non-dentists were engaged in the illegal practice of dentistry, and threatening various legal activity. Is the difference between an illegal “cease now” letter and a legal “expect a lawsuit” letter a bit too fine?

*     *     *

Here’s another possibility: maybe state enforcement agencies lack Noerr-Pennington immunity, because they lack rights under the Petition Clause. Perhaps the Petition Clause is meant to protect individuals trying to protect their interests in court, and perhaps these concerns aren’t relevant for governments.

To go there, we need to overcome two barriers. Here’s the first barrier: The Fourth Circuit found the Board to be private for purposes of state-action immunity because it’s composed of market participants who are only electorally accountable to other market participants. If the Board is really private, then it seems like Petition Clause concerns, and thus Noerr-Pennington immunity, become newly relevant.

To overcome this barrier, we can recognize that “public” and “private” aren’t just binary terms: they’re fuzzy terms that each denote a certain degree of similarity to some idealized set of characteristics, and whether someone is “public” or “private” can be highly contextual and can even be different for different areas of the law. Thus, maybe the Board is private for antitrust purposes in the sense that it makes sense to hold it liable for anticompetitive activity if it acts without sufficient supervision, but public for Petition Clause purposes in the sense that, as an entity designated as the state’s dentistry enforcement agency, it doesn’t (or shouldn’t) have the sorts of private redress-of-grievance interests that the Petition Clause is meant to protect.

Here’s the second barrier: Is it really clear that (even core) governmental entities lack First Amendment (whether free speech or petition) rights? What if a state wanted to express a particular message, like opposition to a particular federal policy, and Congress wanted to prohibit it from doing so: is it obvious that the state can’t assert a First Amendment right to express its view? My First Amendment consultant tells me this is actually (surprisingly) an unresolved area of the law and points me to State Actors as First Amendment Speakers, a 2006 article in the Northwestern University Law Review by David Fagundes. (By the way, it’s not even obvious to me that the Board is a state actor, in the constitutional “state action” sense, in its non-dentist-teeth-whitener-suing role, though it’s certainly a state actor in its license-granting role.) Fagundes writes:

Courts have varied in their receptivity to the notion that the First Amendment may extend to government speech.  The majority of courts have reflexively rejected the notion, relying on the assumption that the First Amendment can only restrict, not protect, state actors.  A minority of courts, in contrast, have arrived at different conclusions.  Pointing to the increasing importance of government speech in the modern American polity, these courts have held that public entities’ expression, like that of any other speaker, merits protection under the Speech Clause. A small few have reached the narrower conclusion that the speech of a particular state or municipal agency merits constitutional status without taking on the broader implications of such a holding.

And if state governments can have free-speech rights against federal infringement, conceivably they can also have petition rights that they can assert against enforcers of federal antitrust law, even when it’s one branch of state government is petitioning another branch of state government. That’s the whole point of separation of powers: the branches are independent of each other, so one branch often has to ask another if it wants to get something done.

*     *     *

In the end, I think Noerr-Pennington immunity doesn’t apply on these facts for a fairly narrow reason. Consider the text of one of these cease-and-desist letters, which I quoted in Tuesday’s post:

To Whom It May Concern:

The North Carolina State Board of Dental Examiners is investigating a report that you are engaged in the unlicensed practice of dentistry. Practicing dentistry without a license in North Carolina is a crime. [Citation to statutes.]

You are hereby ordered to CEASE AND DESIST any and all activity constituting the practice of dentistry or dental hygiene as defined by [statutes] and the Dental Board Rules promulgated hereunder.

Specifically, [statute] states that: [citing relevant statutory provisions].

The North Carolina State Board of Dental Examiners is the state agency charged with regulating the practice of dentistry in North Carolina and is the proper agency to conduct this investigation. The Board may use any legal means at its disposal to conduct this investigation including, but not limited to, interviews with current and former patients, surveillance, and the hiring of undercover agents.

The Board requests that you cooperate in the current investigation by calling the Board’s office and arranging to be interviewed by the Board’s investigator and by submitting a written response to this notice and order within fifteen (15) days of the receipt of this letter.

Amazingly, the letter threatens to do many things: interviews, surveillance, and hiring undercover agents. But the one thing it doesn’t threaten to do is initiate legal action. Why? I don’t know. The FTC found that the Board lacked authority to issue these extra-judicial letters, and this seemed relevant to its finding that this was an antitrust violation, but a lack of authority is a state-law matter, and I’m not sure that should affect the Board’s petition rights (if it has them). In my view, the bottom line here is that these letters can’t be read as preludes to litigation, because they simply fail to threaten litigation. Therefore, they’re not conduct incidental to a petition, and therefore they’re not covered by Noerr-Pennington immunity.

But this points to an easy way for the Board to be able to continue doing what it was doing. Merely rephrase the letters in trivial ways to threaten legal action. This one weird trick will allow it to bypass the FTC’s order, both because the order explicitly preserved the Board’s ability to do this and because, regardless of the FTC’s order, a letter phrased in this way might benefit from Noerr-Pennington immunity.

So does that mean we shouldn’t care about the Fourth Circuit’s opinion? No: the opinion isn’t limited to just these sorts of letters. The Board is private for purposes of state-action immunity, which means that it’ll have to satisfy “active supervision”, Midcal’s second prong, even when it does other things, like issue rules regulating dentistry, that have nothing to do with petitioning behavior. So the Board is right to care about this case, and we are too; and a cert grant by the Supreme Court would be beneficial.

Sasha Volokh lives in Atlanta with his wife and three kids, and is an associate professor at Emory Law School. He has written numerous articles and commentaries on law and economics, privatization, antitrust, prisons, constitutional law, regulation, torts, and legal history.
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Eugene Volokh | January 31