The Eleventh Circuit Divided Over State-Action Appeals

Update, December 8, 2020: The Eleventh Circuit has ordered rehearing en banc in this case. See Rehearing En Banc Granted in State-Action Antitrust Appeal for more.

In SmileDirectClub, LLC v. Battle, the Eleventh Circuit heard an interlocutory appeal from the denial of state-action (or “Parker”) immunity. A circuit split exists on whether state-action appeals are available under the collateral-order doctrine. The Eleventh Circuit has held that they are.

The decision nevertheless produced three opinions with varying views on appealability. The majority opinion and Judge Tjoflat’s dissent debated the application of the rule for state-action appeals—specifically, whether the district court in SmileDirectClub had conclusively denied immunity. Concurring, Judge Jordan suggested that the Eleventh Circuit reexamine its law in this area. And he’s not the only one potentially interested in the issue. The Supreme Court was set to resolve this circuit split a few years ago in Salt River Project v. Tesla Energy Operations. But the case settled before argument. SmileDirectClub ultimately rejected the defendant’s request for state-action immunity, so the appellate-jurisdiction issue is not dispositive. Still, we might not have seen the last word on jurisdiction in this appeal.

The SmileDirectClub Litigation

SmileDirectClub involved antitrust claims brought by SmileDirect. Simplifying a bit, SmileDirect provides discount orthodontic services. It does not offer in-person treatment. It instead operates “SmileShops” where a technician scans a patient’s teeth. The scan is sent to a lab, which creates a model for treatment, which is sent to a licensed dentist for review. The dentist then prescribes SmileDirect’s product to the patient, which the patient receives through the mail.

Orthodontic services in Georgia are regulated by the Georgia Board of Dentistry. The Board is a creature of state law and primarily consists of dentists. A few years ago, the Board amended its rules to require that dentists supervise digital scans. These rules would require a dentist at a SmileShop, undercutting SmileDirect’s business model. After the governor approved the rule change, SmileDirect brought claims against the Board and its members under, among other things, the Sherman Antitrust Act.

State-Action Immunity

In response, the Board members sought state-action immunity. This defense comes from the Supreme Court’s decision in Parker v. Brown, which interpreted the Sherman Act to not reach anticompetitive conduct by the states. Parker assumed that Congress could have applied the Sherman Act to the states. But the Court saw no indication that Congress intended to do so, concluding that “nothing in the language of the Sherman Act or in its history . . . suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.” Subsequent cases extended this holding to municipalities and private parties acting for the state.

The district court in SmileDirectClub denied the Board members’ request for immunity. The members then appealed.

State-Action Appeals

A divided Eleventh Circuit held that it had jurisdiction over the Board members’ appeal. And the court of appeals ultimately affirmed the denial of state-action immunity. But in doing so, the court produced three separate opinions that touched on appellate jurisdiction.

The Majority & Dissent: A Dispute Over Application

The Eleventh Circuit has long held that denials of state-action immunity are immediately appealable via the collateral-order doctrine. That rule holds even when the defendants seeking immunity are private parties. The majority viewed SmileDirectClub as a straightforward application of this rule. The district court had denied the defendants’ motion to dismiss seeking immunity, giving them a right to appeal.

Judge Tjoflat dissented, contending that the district court had not conclusively denied immunity. Appeals via the collateral-order doctrine require (among other things) that the district court conclusively resolve the appealed issue. And as Judge Tjoflat saw things, the district court had “never conclusively determined that the Board members could not avail themselves of Parker state-action immunity.” The district court instead said that “a definitive ruling on Parker immunity would be premature at [the motion-to-dismiss] stage,” and discovery was necessary to decide the issue. The district court would accordingly revisit the issue later. And that, Judge Tjoflat said, deprived the Eleventh Circuit of appellate jurisdiction:

[T]here simply is no “fully consummated decision” regarding the Board members’ entitlement to state-action immunity—no “complete, formal, and . . . final rejection” of the immunity defense—which we can review at this stage of the litigation.

The majority responded to Judge Tjoflat’s dissent in an extended footnote. As the majority saw things, the district court had conclusively denied state-action immunity at the motion-to-dismiss stage. And the Eleventh Circuit has held that state-action immunity (like qualified immunity) is a protection from litigation, not just from liability. So by denying immunity, the district court had conclusively denied this protection and ordered the Board members to proceed to discovery. That was enough for an immediate appeal.

Judge Jordan: Reexamining State-Action Appeals

Judge Jordan wrote a separate concurring opinion to suggest that the Eleventh Circuit reexamine its law governing state-action appeals. According to Judge Jordan, state-action immunity is not an immunity from suit. Parker interpreted the Sherman Act; it did not recognize “a constitutional (or common-law) right to avoid trial,” nor did it express a “concern about special harms that might result from litigation.” This so-called immunity is instead a mere defense to liability. It’s also a defense that can be vindicated in an appeal from a final judgment. That’s why several courts of appeals have held that denials of state-action immunity are not immediately appealable collateral orders.

Further, even if defendants could generally appeal the denial of state-action immunity, Judge Jordan contended that private parties should not. Private parties’ appeals do not implicate any state sovereignty interests that might warrant an immediate appeal. And the substantive law of state-action immunity often means that private parties’ appeals are not entirely separate from the merits. Indeed, the Eleventh Circuit is the only court to hold that private parties can appeal from the denial of state-action immunity. Other circuits who allow these appeals limit them to government defendants.

SmileDirectClub, LLC v. Battle, 2020 WL 4590098 (11th Cir. Aug. 11, 2020), available at the Eleventh Circuit and Westlaw.