No More “Parker Immunity” Appeals in the Eleventh Circuit

Last summer, the Eleventh Circuit heard an immediate appeal from a district court’s denial of what’s often called “Parker immunity.” This so-called immunity provides that the Sherman Act generally does not cover a state’s anticompetitive conduct. The case—SmileDirectClub, LLC v. Battle—produced three separate opinions on appealability. The majority and dissent argued over the application of the the rule allowing these appeals via the collateral-order doctrine. Judge Jordan concurred to question whether denials of Parker immunity should be immediately appealable at all.

The Eleventh Circuit decided to rehear the case en banc. On Tuesday, the court unanimously overruled its cases permitting these appeals. As the Eleventh Circuit explained, Parker immunity is not a true immunity from suit. It’s instead a defense from liability. So Parker immunity might better be called the Parker defense, or simply antitrust’s state-action defense. And a district court’s rejection of this defense is effectively reviewable in an appeal from a final judgment.

The courts of appeals remain split on this issue, thought I think SmileDirectClub leaves only the Fifth Circuit holding that rejections of the Parker defense are immediately appealable collateral orders. And while the Supreme Court almost resolved this split a few years ago, the Court might not be interested in SmileDirectClub.

The SmileDirectClub Litigation

SmileDirectClub involved antitrust claims brought by a company called 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. The lab sends this model 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 consists primarily 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.

Antitrust’s State-Action Defense

In response, the Board members invoked antitrust’s state-action defense. This defense comes from the Supreme Court’s decision in Parker v. Brown, and it’s sometimes called “Parker immunity.” In Parker, the Court 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 rejected the Board members’ invocation of the defense. The members then appealed to the Eleventh Circuit.

The Panel Opinion

The appeal produced three separate opinions.

The majority held that it had jurisdiction over the appeal and ultimately affirmed the denial of the state-action defense. The Eleventh Circuit had long held that denials of this defense were immediately appealable via the collateral-order doctrine. The majority viewed SmileDirectClub as a straightforward application of this rule. After all, the district court had denied the Board members’ motion to dismiss, which invoked the state-action defense. When the district court denied that motion, the Board members had a right to appeal.

Judge Tjoflat dissented. As he read the district court’s decision, that court had not conclusively rejected the state-action defense. And one requirement for an appeal under the collateral-order doctrine is that the district court conclusively resolve the appealed issue. With no conclusive rejection of the defense, Judge Tjoflat contended, the district court’s decision was not immediately appealable.

The third opinion came from Judge Jordan, who concurred in the majority opinion. His separate opinion suggested that the Eleventh Circuit reexamine its caselaw governing these appeals. Several months later, the court took Judge Jordan up on that suggestion. Apparently on its own initiative (that is, without a motion from one of the parties) the Eleventh Circuit ordered that the case be reheard en banc.

The En Banc Court Reverses Course

The en banc Eleventh Circuit unanimously overruled its precedent allowing for immediate appeals from rejections of the state-action defense.

The opinion focused on the collateral-order doctrine’s third requirement: that the appealed order be effectively unreviewable in an appeal from a final judgment. When it held that rejections of the Parker defense were immediately appealable, the Eleventh Circuit saw the defense as an immunity from suit. Immunities from suit, such as qualified and absolute immunity, protect defendants from the burdens, inconveniences, and uncertainties of litigation. If a district court wrongly rejects an immunity from suit and the defendant proceeds through litigation, the immunity’s protection is effectively lost. And nothing on appeal can rectify that loss. So denials of an immunity from suit are effectively unreviewable in an appeal after a final judgment. The Eleventh Circuit reasoned that since the state-action defense is an immunity—indeed, it’s often called “Parker immunity,” even by the Supreme Court—denials of it were effectively unreviewable in a final-judgment appeal.

The en banc SmileDirectClub court saw things differently. Parker held simply that the Sherman Act did not reach state action. The decision concerned Congress’s intent and the Act’s scope. In other words, Parker merely interpreted the Sherman Act. It did not create a right to avoid litigation or recognize any pressing interest in protecting states from litigation. And although the Supreme Court’s interpretation was influenced by federalism concerns, those concerns were not significant enough to create a need for immediate appellate review via the collateral-order doctrine.

With no immunity from suit, there was no special interest that would be lost absent an immediate appeal. Denials of the state-action defense were thus effectively reviewable in a final-judgment appeal. The Eleventh Circuit accordingly dismissed the appeal for a lack of jurisdiction.

Chief Judge Pryor concurred to discuss the circumstances in which a court should overrule its precedent. Judge Tjoflat also concurred. Although he thought that the district court had not conclusively rejected the state-action defense, he acknowledged that a district court’s deferring decision on an immunity defense is immediately appealable. It was accordingly necessary to hold that the state-action defense is not an immunity for the court to dismiss the appeal.

A Few Thoughts on State-Action Appeals

I have three thoughts on SmileDirectClub.

First, I think the Eleventh Circuit got this one right. Parker does not provide an immunity from litigation like qualified or absolute immunity do. It instead holds only that the Sherman Act doesn’t apply to certain conduct. That means the state-action defense is a simple defense to liability, not an immunity from suit. Absent some interest that would be irrevocably harmed without an immediate appeal, I agree that denials of the state-action defense are not effectively unreviewable.

Second, I think this leaves the Fifth Circuit as the only court to allow for immediate appeals from denials of antitrust’s state-action defense. That court said in Martin v. Memorial Hospital that the state-action defense “shares the essential element of absolute, qualified and Eleventh Amendment immunities—‘an entitlement not to stand trial under certain circumstances.’”

Third and finally, I wonder whether the defendants in SmileDirectClub will bother seeking cert. For one thing, the panel held against them on the merits of their state-action defense. A cert petition would thus need to address both appellate jurisdiction and the merits of the defense. For another, I’m not sure the Supreme Court would be interested. Granted, the Supreme Court was set to resolve this split a few years ago (the case settled before argument). But the split is narrowing and is now fairly one sided. It might be worth waiting to see if the Fifth Circuit follows the Eleventh and overrules its own caselaw allowing these appeals.

SmileDirectClub, LLC v. Battle, 2021 WL 3045358 (11th Cir. July 20, 2021), available at the Eleventh Circuit and Westlaw.