Jeffrey Sulitzer, D.M.D, et al v. Joseph Tippins et al

COMPLAINT, filed by Plaintiffs Jeffrey Sulitzer, D.M.D., Jeffrey Sulitzer, SmileDirectClub, LLC.

Central District of California, cacd-2:2019-cv-08902

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3 Page ID #:1 1 Byron J. McLain (CA Bar No. 257191) 2 Nicholas J. Fox (CA Bar No. 279577) 3 FOLEY & LARDNER LLP 4 555 South Flower Street, Suite 3300 Los Angeles, CA 90071 5 TELEPHONE: 213.972.4500 FACSIMILE: 213.486.0065 6 Attorneys for Plaintiffs Jeffrey 7 Sulitzer, D.M.D; Jeffrey Sulitzer, D.M.D., P.C.; and SmileDirectClub, 8 LLC 9 IN THE UNITED STATES DISTRICT COURT 10 FOR THE CENTRAL DISTRICT OF CALIFORNIA 11 WESTERN DIVISION 12 13 JEFFREY SULITZER, D.M.D., an) Case No.: 2:19-CV-08902 14 individual; JEFFREY SULITZER,) D.M.D., a California Professional) COMPLAINT FOR DAMAGES AND 15 Corporation; and) INJUNCTIVE RELIEF AS TO 16 SMILEDIRECTCLUB, LLC, a) CLAIMS FOR: Tennessee limited liability) 17 company,) (1) Violations of Federal 18) Sherman Antitrust Act (15 Plaintiffs,) U.S.C. § 1, et seq.) 19) v. 20) (2) Violations of Dormant 21 JOSEPH TIPPINS, individually and) Commerce Clause (U.S. in his official capacity as an) Const., art. I, § 8, cl. 3) 22 Investigator in the Enforcement) pursuant to 28 U.S.C. § 1343 23 Unit of the Dental Board of) and 42 U.S.C. § 1983 California; KAREN M. FISCHER,) 24 M.P.A., individually and in her) (3) Violations of Equal 25 official capacity as Executive) Protection Clause (U.S. Director for the Dental Board of) Const., amend. XIV) pursuant 26) to 28 U.S.C. § 1343 and 42 California; and FRAN BURTON, 27 M.S.W.; STEVEN MORROW,) U.S.C. § 1983 D.D.S., M.S.; STEVEN CHAN,) 28 1 FIRST AMENDED COMPLAINT CASE NO. 2:19-CV-08902 4851-9408-9894.26 3 Page ID #:2 1 D.D.S.; YVETTE CHAPPELL-) (4) Violations of Substantive 2 INGRAM, M.P.A.; ROSS LAI, D.D.S.;) Due Process (U.S. Const., LILIAN LARIN, D.D.S.; HUONG LE,) amend. XIV) pursuant to 28 3 D.D.S., M.A.; MEREDITH) U.S.C. § 1343 and 42 U.S.C. § 4 MCKENZIE, ESQ.; ABIGAIL) 1983 MEDINA; ROSALINDA OLAGUE,) 5 RDA, B.A.; JOANNE PACHECO,) (5) Violations of California's 6 RDH, M.A.O.B.; THOMAS) Unfair Competition Law (Cal. STEWART, D.D.S.; BRUCE L.) Bus. & Prof. Code § 17200, et 7 WHITCHER, D.D.S.; and JAMES) seq.) 8 YU, D.D.S., M.S., each individually) and in their official capacities as) 9 Officers and/or Members of the) DEMAND FOR JURY TRIAL 10 Dental Board of California; and) 11 DOES 1 – 10, inclusive,)) DIST. JUDGE: 12 Defendants.) MAG. JUDGE: 13)) 14) 15 16 17 18 BASIS FOR SUBJECT MATTER JURISDICTION 19 As explained further in the body of this Complaint, this Court has 20 federal question subject matter jurisdiction over several of the claims 21 asserted in this Complaint pursuant to 28 U.S.C. § 1331 because those 22 claims arise under the Constitution or laws of the United States. This 23 Court has supplemental jurisdiction over the remaining claims pursuant 24 to 28 U.S.C. § 1367 because those claims are so related to claims over 25 which this Court has federal question jurisdiction that they form part of 26 the same case or controversy under Article III of the United States 27 Constitution. 28 2 FIRST AMENDED COMPLAINT CASE NO. 2:19-CV-08902 4851-9408-9894.26 3 Page ID #:3 1 COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF 2 Plaintiffs Jeffrey Sulitzer, D.M.D.; Jeffrey Sulitzer, D.M.D., a 3 Professional Corporation; and SmileDirectClub, LLC bring this Complaint 4 against Defendants Joseph Tippins, individually and in his official capacity 5 as an Investigator in the Enforcement Unit of the Dental Board of 6 California ("Board"); Karen M. Fischer, M.P.A., individually and in her 7 official capacity as Executive Director for the Board; and Fran Burton, 8 M.S.W.; Steven Morrow, D.D.S., M.S.; Steven Chan, D.D.S.; Yvette 9 Chappell-Ingram, M.P.A.; Ross Lai, D.D.S.; Lilian Larin, D.D.S.; Huong Le, 10 D.D.S., M.A.; Meredith McKenzie, Esq.; Abigail Medina; Rosalinda Olague, 11 RDA, B.A.; Joanne Pacheco, RDH, M.A.O.B.; Thomas Stewart, D.D.S.; 12 Bruce L. Whitcher, D.D.S.; and James Yu, D.D.S., M.S., each individually 13 and in their official capacities as Officers and Members of the Board; as 14 well as DOES 1 – 10, inclusive, and allege: 15 INTRODUCTION AND NATURE OF THE ACTION 16 1. Plaintiff Jeffrey Sulitzer, D.M.D. is a licensed dentist practicing 17 dentistry in California. Dr. Sulitzer owns Jeffrey Sulitzer, D.M.D., 18 Professional Corporation ("Sulitzer P.C."). He is also the Chief Clinical 19 Officer of Plaintiff SmileDirectClub, LLC ("SmileDirect"). As part of his 20 dental practice, Dr. Sulitzer treats patients with misalignment or 21 "malocclusion" of their teeth. For patients with mild to moderate 22 malocclusion, Dr. Sulitzer has prescribed clear aligner therapy treatment, 23 and continues to work with doctors associated with Sulitzer P.C. on 24 treating patients with clear aligner therapy. An alternative to wire braces, 25 this treatment uses a series of custom-made, removable plastic aligners to 26 move the teeth in increments to their desired positioning. 27 28 3 FIRST AMENDED COMPLAINT CASE NO. 2:19-CV-08902 4851-9408-9894.26 3 Page ID #:4 1 2. Sulitzer P.C. contracts with SmileDirect to support Dr. Sulitzer's 2 practice, as well as the other state-licensed doctors and orthodontists 3 affiliated with Sulitzer P.C. SmileDirect is a dental support organization 4 ("DSO") that provides non-clinical, administrative services, including its 5 tele-dentistry platform ("DSO Services") to the independent dental 6 practices that contractually engage SmileDirect ("Affiliated Dental 7 Practices"). These Affiliated Dental Practices in turn contract with state- 8 licensed dentists and orthodontists ("Treating Doctors"), such as Dr. 9 Sulitzer, who treat patients. SmileDirect pioneered the direct-to-consumer 10 model for orthodontic clear aligners. 11 3. As one of its DSO Services, SmileDirect operates a national 12 chain of SMILESHOP stores. Consumers who visit a SMILESHOP store, 13 among other things, have their health and dental histories gathered 14 electronically, obtain information about financing and pricing of clear 15 aligner therapy, have free traditional and sophisticated photographs of 16 their teeth and gums taken, learn about clear aligner therapy, and are 17 shown visualizations of how clear aligner therapy can change their own 18 smiles. SmileDirect then connects those consumers with Treating Doctors 19 licensed in their respective states of residence for evaluation and, if 20 deemed appropriate by the Treating Doctor, for clear aligner treatment. 21 4. Sulitzer P.C. also owns and operates a bus—called a 22 SmileBus—that collects the same information and features the same 23 photographic equipment as the brick-and-mortar SMILESHOP locations. 24 This bus allows Dr. Sulitzer to reach consumers who cannot easily travel 25 to a SMILESHOP store. The SMILESHOP stores and SmileBus provide 26 consumers with a convenient, comfortable, and familiar environment in 27 28 4 FIRST AMENDED COMPLAINT CASE NO. 2:19-CV-08902 4851-9408-9894.26 3 Page ID #:5 1 which to start their journeys toward a better smile, as opposed to 2 traditional dental offices. 3 5. However, no one performs any clinical services at a SMILESHOP 4 store or on a SmileBus. Rather, the trained employees at those locations 5 take and then transmit the photographs and other consumer information 6 the employees collect from the consumer to Dr. Sulitzer as a Treating 7 Doctor (or to another Treating Doctor affiliated with Sulitzer P.C.). The 8 Treating Doctor then reviews all of this information, determines whether 9 they need additional information and ultimately determines whether the 10 consumer is a viable candidate for clear aligner therapy treatment. At all 11 times, the Treating Doctor has sole responsibility for determining, 12 diagnosing, managing, and overseeing care for each of his or her patients. 13 6. The direct-to-consumer model supported by SmileDirect allows 14 its Affiliated Dental Practices to reach large numbers of consumers who 15 otherwise lack reasonable, convenient, and affordable access to teeth- 16 straightening services. It also allows consumers to straighten their teeth 17 at 60 to 70 percent below the prices of traditional in-office orthodontic 18 treatments. The accessibility and affordability of clear aligners available 19 through this model, including the use of the SMILESHOP stores and 20 SmileBuses, has disrupted and threatens further to disrupt traditional, 21 higher-cost orthodontic delivery models. 22 7. The majority of the Board consists of practicing dentists in 23 California. By law, the Board must consist of eight practicing dentists, one 24 registered dental hygienist, one registered dental assistant, and five public 25 members. (Cal. Bus. & Prof. Code § 1601.1(a)) Currently, one of the five 26 public members is a registered dental hygienist, and one public spot is 27 28 5 FIRST AMENDED COMPLAINT CASE NO. 2:19-CV-08902 4851-9408-9894.26 3 Page ID #:6 1 open. In total, eleven of the fourteen Members practice in the dental 2 industry. 3 8. The Board regulates and enforces the standards of the practice 4 of dentistry and dental hygiene in California, but has no authority over 5 activities that do not constitute the practice of dentistry or dental hygiene, 6 or individuals (or organizations) that do not practice dentistry or dental 7 hygiene (such as SmileDirect). California law does not identify non-clinical 8 support services as the practice of dentistry. 9 9. In the past, California dentists have generated substantial fees 10 from providing their dental and orthodontic treatments using a traditional 11 in-office treatment model. The direct-to-consumer model supported by 12 SmileDirect represents a serious competitive threat to their ability to 13 continue to generate such fees through their traditional delivery model in 14 the future. The Members of the Board therefore have undertaken an 15 aggressive, anti-competitive campaign against SmileDirect, its Affiliated 16 Dental Practices, and their direct-to-consumer model. 17 10. This campaign has included, among other things, having one of 18 its investigators (Tippins) (a) conduct a series of coordinated raids on 19 SMILESHOP stores around California (by using teams of Enforcement Unit 20 personnel to invade the SMILESHOP stores); (b) intentionally harass 21 Sulitzer P.C. employees and consumers on a SmileBus (which occurred 22 days after Tippins officially closed an investigation involving an Affiliated 23 Dental Practice, as there was no evidence supporting any violations of 24 California law); and (c) serve a series of unwarranted information requests 25 on SmileDirect designed to intimidate, harass, and unduly burden 26 SmileDirect, Sulitzer P.C., and Dr. Sulitzer. 27 28 6 FIRST AMENDED COMPLAINT CASE NO. 2:19-CV-08902 4851-9408-9894.26 3 Page ID #:7 1 11. When SmileDirect and Dr. Sulitzer complained to the State and 2 the Board, the Members of the Board ignored their complaints and did 3 nothing to restrain its investigator's ongoing misconduct. Tippins' actions, 4 and the Board's and its Members' knowledge of those actions and 5 intentional failure to act in response to SmileDirect's and Dr. Sulitzer's 6 complaints, represents a de facto assertion of regulatory authority over the 7 activities undertaken at the SMILESHOP stores and on the SmileBuses, 8 even though no practice of dentistry occurs at those locations. 9 12. The Board, its Members, and Tippins have undertaken this 10 campaign in an effort to squelch the competitive threat posed by the 11 business model supported by SmileDirect, and not to protect any 12 legitimate concern about the public health, welfare, and safety of 13 consumers. This campaign instead benefits the interests of Members of 14 the Board who are participants in the orthodontia market (including clear 15 aligner therapy) because the campaign seeks to eliminate competitive 16 threats to private dental and orthodontic organizations to which those 17 Members belong. 18 13. The Board, its Members, and Tippins engaged in this campaign 19 of harassment, intimidation, and anti-comp