Jeffrey Sulitzer v. Joseph Tippins ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SMILEDIRECTCLUB, LLC, a No. 20-55735
Tennessee limited liability company;
JEFFREY SULITZER, D.M.D., an D.C. No.
individual and a California 2:19-cv-08902-
Professional Corporation, GW-MAA
Plaintiffs-Appellants,
v. OPINION
JOSEPH TIPPINS, individually; KAREN
M. FISCHER, M.P.A., individually;
FRAN BURTON, M.S.W., individually;
STEVEN MORROW, DDS, MS
individually; STEVEN CHAN, DDS;
YVETTE CHAPPELL INGRAM, M.P.A.,
individually; ROSS LAI, DDS;
ABIGAIL MEDINA, individually, in her
official capacity as a Member of the
Dental Board of California;
ROSALINDA OLAGUE, RDA, B.A.,
individually, and in her official
capacity as a Member of the Dental
Board of California; JOANNE
PACHECO, RDH, M.A.O.B.,
individually and in her official
capacity as a Member of the Dental
Board of California; THOMAS
STEWART, DDS, individually and in
his official capacity as a Member of
2 SMILEDIRECTCLUB, LLC V. TIPPINS
the Dental Board of California;
BRUCE WHITCHER, DDS, individually
and in his official capacity as a
Member of the Dental Board of
California; JAMES YU, DDS, M.S.,
individually and in his official
capacity as a Member of the Dental
Board of California; DOES, 1–10;
MEREDITH MCKENZIE, individually
and in her official capacity as a
Member of the Dental Board of
California; JOSEPH TIPPINS, in his
official capacity as an Investigator in
the Enforcement Unit of the Dental
Board of California; KAREN M.
FISCHER, M.P.A., in her official
capacity as Executive Director for the
Dental Board of California; FRAN
BURTON, M.S.W., in her official
capacity as a Member of the Dental
Board of California; STEVEN
MORROW, DDS, MS, in their official
capacities as Officers and or Members
of the Dental Board of California;
STEVEN CHAN, DDS, in their official
capacities as Officers and/or Members
of the Dental Board of California;
YVETTE CHAPPELL-INGRAM, MPA, in
their official capacities as Officers
and/or Members of the Dental Board
of California; ROSS LAI; LILIAN
LARIN, DDS, individually and in their
official capacities as Officers and/or
Members of the Dental Board of
SMILEDIRECTCLUB, LLC V. TIPPINS 3
California; HUONG LE, DDS, M.A,
individually and M.A., and in his
official capacity as a Member of the
Dental Board of California,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and Submitted July 26, 2021
San Francisco, California
Filed March 17, 2022
Before: M. Margaret McKeown and Jacqueline H.
Nguyen, Circuit Judges, and Royce C. Lamberth, *
District Judge.
Opinion by Judge McKeown
*
The Honorable Royce C. Lamberth, United States District Judge
for the District of Columbia, sitting by designation.
4 SMILEDIRECTCLUB, LLC V. TIPPINS
SUMMARY **
Antitrust
The panel affirmed in part and reversed in part the
district court’s dismissal of an action brought under antitrust
and constitutional law by a dentist, his professional
corporation, and the teledentistry company
SmileDirectClub, LLC, against members and employees of
the Dental Board of California.
The SmileDirect parties alleged that after they developed
on online service model for patients to access certain
orthodontic services, namely clear teeth aligners, defendants
conspired to harass them with unfounded investigations and
an intimidation campaign, with hopes of driving them out of
the market.
The panel held that the SmileDirect parties sufficiently
pled Article III standing because they alleged an injury in
fact that was fairly traceable to defendants’ challenged
conduct and was judicially redressable.
The panel concluded that the SmileDirect parties
sufficiently alleged anticompetitive concerted action, or an
agreement to restrain trade, to meet the pleading standards
of Federal Rule of Civil Procedure 12(b)(6). The panel
therefore partially reversed the district court’s dismissal of
the SmileDirect parties’ antitrust claim under § 1 of the
Sherman Act. The panel rejected the broad proposition that
regulatory board members and employees cannot form an
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
SMILEDIRECTCLUB, LLC V. TIPPINS 5
anticompetitive conspiracy when acting within their
regulatory authority. As to certain other defendants, the
panel affirmed dismissal because the SmileDirect parties
failed to plead facts sufficient to tie them to the alleged
conspiracy.
The panel affirmed the district court’s dismissal of the
SmileDirect parties’ claim under the Dormant Commerce
Clause, which prohibits states from discriminating against
interstate commerce.
The panel affirmed the district court’s dismissal of the
SmileDirect parties’ claim that defendants subjected them to
disparate treatment in violation of the Equal Protection
Clause. The panel held that to plead a class-of-one equal
protection claim, plaintiffs must allege facts showing that
they have been intentionally treated differently from others
similarly situated and that there is no rational basis for the
difference in treatment. Joining other circuits, the panel held
that a class-of-one plaintiff must be similarly situated to the
proposed comparator in all material respects. The
SmileDirect parties fell short of this showing because, rather
than claiming that they stood on the same footing as others,
they instead touted their uniqueness.
COUNSEL
James D. Dasso (argued), Foley & Lardner LLP, Chicago,
Illinois; Byron J. McLain, Foley & Lardner LLP, Los
Angeles, California; for Plaintiffs-Appellants.
Sharon L. O’Grady (argued), Deputy Attorney General;
Mark R. Beckington, Supervising Deputy Attorney General;
Thomas S. Patterson, Senior Assistant Attorney General;
6 SMILEDIRECTCLUB, LLC V. TIPPINS
Rob Bonta, Attorney General of California; Office of the
California Attorney General, San Francisco, California; for
Defendants-Appellees.
Andrew N. DeLaney (argued), Daniel E. Haar, and Nickolai
G. Levin, Attorneys; Makan Delrahim, Assistant Attorney
General; Michael F. Murray, Acting Principal Deputy
Assistant Attorney General; Daniel S. Guarnera, Counsel to
the Assistant Attorney General; United States Department of
Justice, Washington, D.C.; for Amicus Curiae United States
of America.
Joshua Polk and Anastasia Boden, Pacific Legal Foundation,
Sacramento, California, for Amicus Curiae Pacific Legal
Foundation.
OPINION
McKEOWN, Circuit Judge:
It is easy to recall examples of consumer-oriented
business models in the medical field that were once resisted
by incumbents but ultimately—through litigation,
regulation, and legislation—resulted in cheaper and more
accessible services. Take, for example, eyeglass
prescriptions. At one time, the consumer had to purchase
eyeglasses from the prescribing doctor. Now doctors must
provide a copy of the prescription, so consumers can get
their eyeglasses at Costco, Warby Parker, or a host of online
suppliers. Hearing aids represent another consumer
advance. Once approved by the Food and Drug
Administration, certain over-the-counter hearing aids can be
purchased without seeing a healthcare professional. In the
dental field, hygienists in some states can sometimes provide
services without the supervision of a dentist. In each case,
SMILEDIRECTCLUB, LLC V. TIPPINS 7
entrenched interests fought to preserve the status quo and to
stifle the innovators’ entry into the market.
In a similar vein, this appeal involves a company that
developed an online service model that, according to the
company, makes it cheaper, easier, and more convenient for
patients to access certain orthodontic services, namely clear
teeth aligners. The company alleges that incumbents in the
dental and orthodontia markets have illegally conspired to
shut down its disruptive business model. What distinguishes
this case from most run-of-the-mill antitrust lawsuits is that
it involves not only business competitors, but competitors
who sit on a regulatory board that oversees the practice of
dentistry.
A dentist, his professional corporation, and the
teledentistry company SmileDirectClub, LLC (together, the
“SmileDirect parties”) are the newcomers. Members and
employees of the Dental Board of California—largely made
up of traditional dentists and orthodontists who have a
financial motive to view the newcomers as competition—
allegedly conspired to harass the SmileDirect parties with
unfounded investigations and an intimidation campaign,
with hopes of driving them out of the market.
We conclude that the SmileDirect parties sufficiently
alleged anticompetitive concerted action to meet the
pleading standards of Federal Rule of Civil Procedure
12(b)(6). We thus partially reverse the district court’s
dismissal of the Sherman Act claim and reject the broad
proposition—offered up by the board members and the
district court—that regulatory board members and
employees cannot form an anticompetitive conspiracy when
acting within their regulatory authority. As to certain other
defendants, we affirm dismissal—not because of their
regulatory authority—but because the SmileDirect parties
8 SMILEDIRECTCLUB, LLC V. TIPPINS
failed to plead facts sufficient to tie them to the alleged
conspiracy. We also affirm dismissal of the Equal Protection
Clause and Dormant Commerce Clause claims.
BACKGROUND 1
Instead of traditional wire-and-bracket braces, some
orthodontic patients choose clear teeth aligners, which are
supposedly more cosmetically appealing. SmileDirectClub,
LLC (“SmileDirect”) sells these clear aligners through a
proprietary direct-to-consumer online platform. Their
telemedicine model allows SmileDirect-affiliated dentists to
treat out-of-state patients, subject to state licensure
requirements.
Dr. Jeffrey Sulitzer is one such dentist. He lives in
Washington State but is licensed in California and often
treats California-based patients. Through his professional
corporation, Sulitzer P.C., he owns the only SmileDirect-
affiliated dental practice in California. Sulitzer has several
brick-and-mortar “SMILESHOP stores” where technicians
gather images of patients’ teeth and gums. He also operates
a “SmileBus” with technicians onboard who do the same sort
of imaging. As a third option, patients can go online, order
an impression kit from SmileDirect’s website, receive the kit
from a lab in Tennessee, then make the impressions at home.
When the patient returns the impressions to the lab, a dentist
1
This background draws from the First Amended Complaint, which
we refer to as the Complaint for ease of reference. Because the district
court dismissed the Equal Protection Claim before the SmileDirect
parties amended the complaint, we also recount factual allegations from
the original complaint, as supplemented by the SmileDirect parties’
Offer of Proof.
SMILEDIRECTCLUB, LLC V. TIPPINS 9
reviews the treatment plan, the aligners are manufactured,
and then SmileDirect mails the aligners to the patient.
This appeal arises out of a dispute between the
SmileDirect parties and the Dental Board of California (the
“Board”). By statute, the Board regulates the practice of
dentistry in California. See Cal. Bus. & Prof. Code
§§ 1600–1621. It enforces dental regulations, administers
licensing exams, and issues dental licenses and permits. Id.§ 1611. The Board is made up of fifteen members: “eight
practicing dentists, one registered dental hygienist, one
registered dental assistant, and five public members.” Id.
§ 1601.1(a). Since many of its members compete in the
market for teeth-straightening services, they allegedly view
SmileDirect as a “competitive threat.” The Complaint
alleges that certain members of the Board, motivated by their
private desires to stifle competition, mounted an aggressive,
anti-competitive campaign of harassment and intimidation
designed to drive the SmileDirect parties out of the market.
Complicating matters a bit, the SmileDirect parties have
not sued the Board itself; the Complaint instead names
sixteen individuals, plus ten unnamed “Doe” defendants,
who were at some point affiliated with the Board (together,
the “Board Actors”). Most are current or former board
members; one (Joseph Tippins) is an investigator employed
by the Board; and one (Karen M. Fischer) is the Board’s
Executive Director. Many of the board members maintain
“traditional dental and orthodontic practices” in California.
Several have shops within blocks of SMILESHOP stores.
And some belong to the American Dental Association and
the California Dental Association, trade associations that
have allegedly “opposed [SmileDirect’s] business model.”
The Complaint alleges that the Board Actors “have
agreed, combined and conspired to pursue an aggressive,
10 SMILEDIRECTCLUB, LLC V. TIPPINS
anti-competitive campaign of harassment and intimidation
against” the SmileDirect parties. It alleges that “[t]he
campaign includes, among other things, coordinated
statewide raids; false statements; misconduct in front of
consumers; and a retaliatory accusation filed in response to
[this] lawsuit.” The Complaint contends that these actions
violated the Sherman Antitrust Act; the Dormant Commerce
Clause; the Equal Protection Clause; the Due Process
Clause; 2 and California’s Unfair Competition Law.
The district court dismissed the federal claims and
declined to exercise supplemental jurisdiction over the state
law claim. With respect to the Sherman Act claim, the
district court first rejected the Board Actors’ argument that
they were entitled to state-action antitrust immunity under
Parker v. Brown, 317 U.S. 341 (1943). After a second round
of briefing, the district court nonetheless dismissed the
Sherman Act claim, holding that the Complaint only pled
“an agreement consistent with the Dental Board’s regulatory
purpose,” and that the alleged investigation “is to be
expected of a regulatory body given the authority to
investigate those regulated.”
We disagree. In rejecting the allegations as insufficient,
the district court went astray on two important principles.
First, it indirectly imported a summary judgment standard at
the motion to dismiss stage. And second, it absolved the
Board Actors because they acted “consistent with the Dental
Board’s regulatory purpose,” effectively granting them
antitrust immunity without holding them to the strictures of
the state-action immunity doctrine. See N.C. State Bd. of
Dental Exam’rs v. FTC, 574 U.S. 494, 504–05 (2015). We
2
The SmileDirect parties do not seek to resuscitate their Due
Process claim on appeal.
SMILEDIRECTCLUB, LLC V. TIPPINS 11
conclude that with respect to certain defendants, the
Complaint plausibly alleged anticompetitive concerted
action under the Sherman Act.
I. Standing
As a threshold matter, we reject the Board Actors’
argument that the SmileDirect parties lack standing to sue.
To adequately allege Article III standing, the SmileDirect
parties must plead that they “have (1) suffered an injury in
fact, (2) that is fairly traceable to the challenged conduct of
the defendant, and (3) that is likely to be redressed by a
favorable judicial decision.” Spokeo, Inc. v. Robins, 578
U.S. 330, 338 (2016). The SmileDirect parties allege that
the Board’s campaign of harassment and intimidation
injured their “business, revenue, goodwill, employee
relations, and reputation in the marketplace.” The intrusive
raids allegedly interrupted business operations and
intimidated customers visiting SmileDirect stores. These
injuries are fairly traceable to the Board Actors, who
allegedly authorized the campaign. And the Board Actors
do not dispute that this harm is judicially redressable through
an injunction or other appropriate remedy. The net result—
the Board Actors have sufficiently pled standing.
II. Sherman Act Claim
We review de novo the district court’s dismissal for
failure to state a claim, accepting as true all nonconclusory
allegations in the Complaint. In re Musical Instruments &
Equip. Antitrust Litig., 798 F.3d 1186, 1191 (9th Cir. 2015).
Section 1 of the Sherman Act prohibits “[e]very contract,
combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce.” 15 U.S.C. § 1. To state
a claim under § 1, plaintiffs must plead “(1) ‘a contract,
12 SMILEDIRECTCLUB, LLC V. TIPPINS
combination or conspiracy among two or more persons or
distinct business entities’; (2) which is intended to restrain
or harm trade; (3) ‘which actually injures competition’; and
(4) harm to the plaintiff from the anticompetitive conduct.”
Name.Space, Inc. v. Internet Corp. for Assigned Names &
Nos., 795 F.3d 1124, 1129 (9th Cir. 2015) (quoting Brantley
v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th Cir.
2012)). In the district court, the Board Actors moved to
dismiss the Sherman Act claim on just the first two elements.
Though they argue the other elements on appeal, we only
consider whether the Complaint plausibly pled (1) an
agreement (2) to restrain trade. See G & G Prods. LLC v.
Rusic, 902 F.3d 940, 950 (9th Cir. 2018) (issues not raised
before the district court are forfeited on appeal).
On the first element, we hold that the SmileDirect parties
plausibly pled concerted action, but we affirm dismissal as
to those defendants with insufficient allegations tying them
to the alleged conspiracy. On the second element, consistent
with the Supreme Court’s observation that the Sherman Act
prohibits “anticompetitive self-regulation by active market
participants,” N.C. State, 574 U.S. at 505, we hold that
agreements are not always lawful simply because they are
“consistent with” the purpose of a regulatory Board
dominated by market participants.
By requiring the SmileDirect parties to plead facts
inconsistent with the Board’s regulatory purpose, the district
court applied a standard more appropriate at the summary
judgment stage, where § 1 plaintiffs must offer “evidence
that tends to exclude the possibility” of lawful independent
conduct. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S.
752, 764 (1984). Rule 12(b)(6) does not require this
heightened showing. See Erie Cnty. v. Morton Salt, Inc., 702
F.3d 860, 869 (6th. Cir. 2012) (explaining that, at the motion
SMILEDIRECTCLUB, LLC V. TIPPINS 13
to dismiss stage, a § 1 “plaintiff need not allege a fact pattern
that ‘tends to exclude the possibility’ of lawful, independent
conduct”). We apply the standard that applies to all § 1
complaints: a plaintiff must plausibly allege an agreement
that is unreasonable “per se” or under the “rule of reason.”
Ohio v. Am. Express Co., 138 S. Ct. 2274, 2283–84 (2018).
Analyzing the allegations within that framework, we hold
that the Complaint plausibly pleads that the agreement was
anticompetitive. We note, however, that we make no
judgment on the merits of the claims and whether those
claims will withstand scrutiny in the next phase of the
litigation.
A. Contract, Combination, or Conspiracy
The SmileDirect parties allege they suffered a series of
anticompetitive acts committed by the Board members and
various agents. The Complaint does not, however, name the
Board as a defendant. Instead, the Complaint names various
Board members and employees. 3 None of these
defendants—apart from Tippins—are alleged to have
directly caused harm to the SmileDirect parties. Rather, the
Board Actors purportedly acted together to use the Board to
inflict anticompetitive injury on their behalf. That
circumstance distinguishes this case from those where
conspiracy may be inferred from the parallel conduct of
several ostensibly independent actors. See, e.g., In re Citric
Acid Litig., 191 F.3d 1090, 1102 (9th Cir. 1999) (firms
following similar pricing strategies). Here conspiracy must
3
The Board Actors do not argue, and we therefore do not consider,
whether they are a single entity incapable of conspiring within the
meaning of § 1. See, e.g., N.C. State Bd. of Dental Exam’rs v. FTC, 717
F.3d 359, 371–72 (4th Cir. 2013), aff’d on other grounds, 574 U.S. 494(2015); Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 191–
92 (2010).
14 SMILEDIRECTCLUB, LLC V. TIPPINS
be inferred, if at all, as stemming from the actions of one
entity (the Board) and thereafter imputed to its members.
Our review of the Complaint reveals the SmileDirect
parties have adequately alleged the active participation of
many—but not all—of the Board Actors in the conspiracy.
The Complaint plausibly alleges that certain Board Actors
agreed to launch a “campaign . . . to protect the economic
interests of the traditional orthodontia market,” primarily
because of alleged private economic motives. As the
Supreme Court has remarked in denying blanket antitrust
immunity to state regulatory boards, allowing “active market
participants . . . to regulate their own markets free from
antitrust accountability” poses a significant risk that those
entities might engage in “self-dealing” to promote their
private interests. N.C. State, 574 U.S. at 505, 510. The
Board members who are dentists fall squarely within this
realm. Their governance role is sufficient, when coupled
with the congruence between the Board’s actions and their
own self-interest, to allow a plausible inference of active
participation. See Osborn v. Visa Inc., 797 F.3d 1057, 1067
(D.C. Cir. 2015) (holding plaintiffs did “more than allege
‘mere membership’” where complaint alleged defendants
used their governance role to force association to take
anticompetitive actions that served their economic interests);
cf. SmileDirectClub, LLC v. Ga. Bd. of Dentistry, 1:18-CV-
02328-WMR, 2019 WL 3557892, at *4 (N.D. Ga. May 8,
2019) (denying a motion to dismiss Sherman Act claims
against state dental board members, because the allegations
“are sufficient to plausibly allege concerted action”), aff’d
on other grounds sub nom. SmileDirectClub, LLC v. Battle,
969 F.3d 1134 (11th Cir. 2020), on reh’g en banc, 4 F.4th
1274 (11th Cir. 2021).
SMILEDIRECTCLUB, LLC V. TIPPINS 15
Our conclusions draw from the circuit’s caselaw
regarding anticompetitive conduct by membership
organizations, which provide a close analog in this
circumstance. We recognize that membership is not enough,
standing alone, to allow a plausible inference that an
organization’s members are engaged in an antitrust
conspiracy. Kline v. Coldwell, Banker & Co., 508 F.2d 226,
232 (9th Cir. 1974); see also Kendall v. Visa U.S.A., Inc.,
518 F.3d 1042, 1048 (9th Cir. 2008) (“[M]embership in an
association does not render an association’s members
automatically liable for antitrust violations committed by the
association.”). And “[e]ven participation on the
association’s board of directors is not enough by itself.”
Kendall, 518 F.3d at 1048.
Ultimately, we require some showing—direct or
circumstantial—that the defendants “actively participated in
an individual capacity in the scheme.” Kline, 508 F.2d at
232 (quoting N. Cal. Pharmaceutical Ass’n v. United States,
306 F.2d 379, 388–89 (9th Cir. 1962)). But the allegations
only go so far. In referring to the defendants collectively,
the Complaint alleges that the SmileDirect parties’ business
model poses a competitive threat to the dentist Board
members’ “dental practices;” that several Board members
belong to powerful trade groups; and that they collectively
have “an economic incentive” to drive SmileDirect out of the
market. These allegations logically apply only to the dentists
and orthodontists who allegedly view SmileDirect as
competition. We therefore affirm dismissal as to defendants
Chappell-Ingram, McKenzie, Medina, Pacheco, and Olague.
The Complaint pleads nothing (besides their presence on the
Board) to implicate these defendants in the alleged
conspiracy. See Kendall, 518 F.3d at 1048.
16 SMILEDIRECTCLUB, LLC V. TIPPINS
Although defendants Tippins, Fischer, and Burton are
not dentists or dental professionals, at this stage their alleged
involvement in the conspiracy withstands the motion to
dismiss. Tippins is the investigator who allegedly executed
the raids and sent document requests. Fischer is the
Executive Director who allegedly attended Enforcement
Committee meetings and dispatched Tippins to the
SmileBus. Burton is a member of the Enforcement
Committee, which, according to the Complaint, has some
authority over investigators and their enforcement activities.
Given these defendants’ close involvement in the alleged
anticompetitive acts, the Complaint plausibly alleges their
active participation, thus satisfying the concerted action
element.
B. Unreasonable Restraint of Trade
Concerted action is not enough to sustain a § 1 violation.
The agreement or conspiracy must be “intended to restrain
or harm trade.” Name.Space, 795 F.3d at 1129. Because the
Supreme Court has interpreted § 1 “to outlaw only
unreasonable restraints” on trade, courts must consider
whether a restraint falls into the “small group of restraints
[that] are unreasonable per se” or is otherwise unreasonable
under a “fact-specific assessment” known as the “rule of
reason.” Ohio, 138 S. Ct. at 2283–84 (internal citations and
quotations omitted). No per se violation is alleged here, so
we ask whether the alleged “restraint’s harm to competition
outweighs its procompetitive effects.” Tanaka v. Univ. of S.
Cal., 252 F.3d 1059, 1063 (9th Cir. 2001).
Noting that the Board Actors could not demonstrate
active state supervision, the district court rejected their
argument that they were home free under Parker v. Brown’s
state-action immunity doctrine. See 317 U.S. at 352 (holding
that restraints imposed by the state “as an act of government”
SMILEDIRECTCLUB, LLC V. TIPPINS 17
are immune from antitrust liability). However, in the same
breath, the district court appeared to hold that conduct within
the Board’s regulatory authority cannot be anticompetitive.
In their motion to dismiss, the Board Actors argued that the
actions of a state regulatory board could not be unreasonable
if the board was “functioning in” its “ordinary regulatory
capacity.” The district court took this rationale one step
further and held that an agreement “consistent with the
Dental Board’s regulatory purpose” cannot be unreasonable.
But rejecting Parker immunity—then turning around and
blessing the same conduct because it falls within the Board’s
authority—effectively grants the Board Actors a free pass
under the Sherman Act. That analysis is at odds with the
Supreme Court’s view, our precedent, and that of our sister
circuits. We hold that the Board Actors’ 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.
Like professional trade associations, members of a
regulatory agency “act[] unlawfully” when their actions “are
unduly anticompetitive and without adequate redeeming
virtues.” Phillip E. Areeda & Herbert Hovenkamp, 4
Antitrust Law ¶ 1477 (4th & 5th eds. 2011). As the Supreme
Court has stressed, “[t]he similarities between agencies
controlled by active market participants and private trade
associations are not eliminated simply because the former
are given a formal designation by the State, vested with a
measure of government power, and required to follow some
procedural rules.” N.C. State, 574 U.S. at 511.
The district court viewed the allegations in the
Complaint as nothing more than an ordinary investigation
that “is to be expected of a regulatory body.” As alleged,
this was no standard or ordinary investigation; it was an
18 SMILEDIRECTCLUB, LLC V. TIPPINS
abusive, aggressive, retaliatory, and targeted campaign
designed to intimidate the SmileDirect parties and to drive
them out of the market. Cf. N.C. State Bd. of Dental Exam’rs
v. FTC, 717 F.3d 359, 373 (4th Cir. 2013), aff’d on other
grounds, 574 U.S. 494 (2015) (“[T]he lengthy consistent
campaign of sending letters and cease-and-desist orders is
suggestive of coordinated action.”).
According to the SmileDirect parties, a letter from a
trade association prompted the investigation, not a
dissatisfied consumer or patient who had been harmed.
Indeed, patient safety is not a focus of the proceedings here.
The Complaint alleges that the trade association has
advocated against SmileDirect’s business model, and that
Board representatives communicated with the association
about the supposedly confidential investigation behind the
scenes. Once the investigation was underway, the Board’s
investigators conducted aggressive and unreasonable “raids”
that were “designed to maximize . . . interference,
disruption, and public spectacle.” And they allege that, in
response to this lawsuit, the Board Actors began a
“retaliatory” administrative proceeding to possibly revoke
Sulitzer’s dental license.
Although each of those actions may independently fall
within the Board’s authority—which the Complaint does not
concede—they could still be illegal if their anticompetitive
effects outweighed their legitimate regulatory justifications.
See Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc.,
9 F.4th 1102, 1108 (9th Cir. 2021). It may well be, as the
Board Actors argue, that the investigation was conducted
“dutifully” and “by the book,” based on legitimate
complaints, or that the Board was screened off from ongoing
investigations, thus defeating any claim of a conspiracy. But
because we do not consider the Board Actors’ competing
SMILEDIRECTCLUB, LLC V. TIPPINS 19
facts at the pleadings stage, and because Rule 12 does not
require the Complaint to exclude the possibility of lawful
conduct, see SD3, LLC v. Black & Decker (U.S.) Inc., 801
F.3d 412, 425–26 (4th Cir. 2015), we hold that the
Complaint plausibly alleges a conspiracy to restrain trade.
The Fourth Circuit’s analysis in a similar case is
instructive. N.C. Dental, 717 F.3d 359. In that case, the
Federal Trade Commission found that the state dental board,
largely comprised of practicing dentists, worked to “shut
down” non-dentist teeth whitening services. Id. at 365. In
furtherance of that conspiracy, the Board issued several
cease-and-desist letters threatening that the non-dentists
were committing a misdemeanor by offering teeth-
whitening services. Id. That intimidation campaign
“successfully expelled non-dentist providers from the North
Carolina teeth-whitening market.” Id. After making clear
that the state dental board was capable of conspiring under
the Sherman Act, id. at 371–73, the Fourth Circuit proceeded
to ask whether the FTC properly found that the board’s
actions “amounted to an unreasonable restraint of trade,” id.
at 373. Applying the rule of reason and the related “quick
look doctrine,” the court affirmed the FTC’s factual finding
of unreasonableness. Id. at 373–75.
We do not share the district court’s concern that
permitting the case to go forward at this stage will expose
state regulatory board members to a lawsuit “every single
time such an investigation commences.” Nor do we suggest
that every investigation suggests the existence of a
conspiracy. But neither can we say that members of
regulatory bodies who conspire against competition are
automatically immune from antitrust allegations even when
the body does not meet the requirements for state-action
20 SMILEDIRECTCLUB, LLC V. TIPPINS
immunity. The SmileDirect parties have sufficiently alleged
anticompetitive concerted action for a § 1 claim.
III. Dormant Commerce Clause Claim
We affirm the district court’s dismissal of the
SmileDirect parties’ Dormant Commerce Clause claim. The
Commerce Clause empowers Congress to “regulate
Commerce. . . . among the several States.” U.S. Const. art.
I, § 8, cl. 3. “Courts have long read a negative implication
into the clause, termed the ‘dormant Commerce Clause,’ that
prohibits states from discriminating against interstate
commerce.” Yakima Valley Mem’l Hosp. v. Wash. State
Dep’t of Health, 731 F.3d 843, 846 (9th Cir. 2013). In other
words, the Dormant Commerce Clause “prohibits economic
protectionism—that is, regulatory measures designed to
benefit in-state economic interests by burdening out-of-state
competitors.” New Energy Co. of Ind. v. Limbach, 486 U.S.
269, 273 (1988).
The SmileDirect parties have not pled a per se violation
of the Dormant Commerce Clause, because the regulations
governing the Board do not “facially discriminate against
out-of-state interests.” Yakima Valley, 731 F.3d at 846; see
Cal. Bus. & Prof. Code §§ 1600–1621. Nor does the
investigation itself establish a per se violation: the
Complaint only alleges an investigation of one company’s
entirely in-state conduct.
The Complaint also falls short of pleading a Dormant
Commerce Clause violation through the investigation’s
“‘incidental’ impacts on interstate trade.” Yakima Valley,
731 F.3d at 846 (quoting Hughes v. Oklahoma, 441 U.S. 322,
336 (1979)). As the Supreme Court has stated: “Where the
statute regulates even-handedly to effectuate a legitimate
local public interest, and its effects on interstate commerce
SMILEDIRECTCLUB, LLC V. TIPPINS 21
are only incidental, it will be upheld unless the burden
imposed on such commerce is clearly excessive in relation
to the putative local benefits.” Id. at 846 (quoting Pike v.
Bruce Church, Inc., 397 U.S. 137, 142 (1970)). The Board
has a legitimate interest in regulating and investigating
California-licensed dentists, and the Board’s conduct
targeted only a handful of California stores and a SmileBus
parked in California. See Great Atl. & Pac. Tea Co. v.
Cottrell, 424 U.S. 366, 371 (1976).
IV. Equal Protection Claim
The SmileDirect parties allege that the Board Actors
subjected them to disparate treatment in violation of the
Equal Protection Clause of the Fourteenth Amendment.
They claim that Sulitzer is like every other California-
licensed dentist who can prescribe clear aligner therapy and
who is subject to the Board’s regulatory authority. But they
say that the Board Actors have not subjected any other
California dentists or dental corporations to similar
investigations, and have singled out Sulitzer and the other
SmileDirect parties on the basis of “economic protectionism
and animus.”
As the Supreme Court has recognized, “an equal
protection claim can in some circumstances be sustained
even if the plaintiff has not alleged class-based
discrimination, but instead claims that she has been
irrationally singled out as a so-called ‘class of one.’”
Engquist v. Or. Dep’t of Agric., 553 U.S. 591, 601 (2008).
To plead a class-of-one equal protection claim, the
SmileDirect parties must allege facts showing that they have
been “[1] intentionally [2] treated differently from others
similarly situated and that [3] there is no rational basis for
the difference in treatment.” Village of Willowbrook v.
Olech, 528 U.S. 562, 564 (2000) (per curiam).
22 SMILEDIRECTCLUB, LLC V. TIPPINS
We have not had occasion to determine what degree of
similarity makes a plaintiff “similarly situated” to others in
the class-of-one context, and the Supreme Court has offered
little guidance on that front. In Olech, a homeowner alleged
that the village demanded a 33-foot easement to connect her
property to the municipal water line, but only required a 15-
foot easement from other property owners in the same
position. Id. at 565. We have interpreted Olech to permit a
class-of-one claim by a property owner alleging that a
county arbitrarily denied her a permit for a road approach but
allowed other property owners to build road approaches
without incident. Gerhart v. Lake County, 637 F.3d 1013,
1022 (9th Cir. 2011). Neither case required extended
reflection on what made the plaintiffs “similarly situated”
with the comparator class: same neighborhood block; same
type of property; same city water line (Olech); same type of
road approach (Gerhart)—but different treatment by
government officials.
Our sister circuits, in defining what it means to be
“similarly situated,” have largely determined that a class-of-
one plaintiff should be similar to the proposed comparator in
all “relevant” or “material” respects. For example, in
assessing a claim by a land developer who alleged
differential treatment, the Second Circuit explained that
“class-of-one plaintiffs must show an extremely high degree
of similarity between themselves and the persons to whom
they compare themselves.” Clubside, Inc. v. Valentin, 468
F.3d 144, 159 (2d Cir. 2006). Likewise, the Seventh Circuit
has held that class-of-one plaintiffs must be “directly
comparable . . . in all material respects” to the comparator.
Reget v. City of La Crosse, 595 F.3d 691, 695 (7th Cir.
2010); accord. PBT Real Est., LLC v. Town of Palm Beach,
988 F.3d 1274, 1285 (11th Cir. 2021) (“The entities being
compared must be prima facie identical in all relevant
SMILEDIRECTCLUB, LLC V. TIPPINS 23
respects.” (internal quotation marks, alterations, and citation
omitted)); Superior Commc’ns v. City of Riverview, 881 F.3d
432, 446 (6th Cir. 2018) (adopting the “all material respects”
formulation); Gianfrancesco v. Town of Wrentham, 712 F.3d
634, 640 (1st Cir. 2013) (“[A] class-of-one plaintiff bears the
burden of showing that his comparators are similarly situated
in all respects relevant to the challenged government
action.”).
We join our sister circuits in holding that a class-of-one
plaintiff must be similarly situated to the proposed
comparator in all material respects. The SmileDirect parties
fall far short of this showing. Rather than claiming that they
stand on the same footing as others, they instead tout their
uniqueness, hailing their platform as “revolutionary,”
“unique,” “cutting-edge,” and “more convenient and
affordable” than traditional orthodontia models. Because
they operate a materially different business model, at a
significantly different price point, using new and different
technology, the SmileDirect parties cannot establish that
they are “similarly situated” to all other licensed dentists and
orthodontists in California. The district court properly
dismissed their equal protection claims without leave to
amend because it was “clear that the complaint could not be
saved by amendment.” Cooper v. Ramos, 704 F.3d 772, 783
(9th Cir. 2012).
AFFIRMED IN PART; REVERSED and
REMANDED IN PART.
The parties shall each pay their own costs on appeal.