Assn of Amer Physn & Surgeons v. Texas Medical Board, et al

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PUBLISHED OPINION FILED. [09-50953 Vacated & Remanded] Judge: EHJ , Judge: TMR , Judge: CH Mandate pull date is 12/23/2010 [09-50953]

Assn of Amer PhysnCase: 09-50953 Document: 00511309459 & Surgeons v. Texas Medical Board, et al

Page: 1 Date Filed: 12/02/2010

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IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
December 2, 2010 N o . 09-50953 Lyle W. Cayce Clerk

A S S O C I A T I O N OF AMERICAN PHYSICIANS & SURGEONS INC, Plaintiff ­ Appellant v. T E X A S MEDICAL BOARD, (TMB); ROBERTA M. KALAFUT, Individually and in her Official Capacity; LAWRENCE L. ANDERSON, Individually and in his O ffic ia l Capacity; MICHAEL ARAMBULA, Individually and in his Official C a p a c it y ; JULIE K. ATTEBURY, Individually and in her Official Capacity; J O S E BENAVIDES, Individually and in his Official Capacity; PATRICIA S. B L A C K W E L L , Individually and in her Official Capacity; MELINDA S. F R E D R I C K S , Individually and in her Official Capacity; MANUAL G. G U A R J A R D O , Individually and in his Official Capacity; AMANULLAH KAHN, In d iv id u a lly and in his Official Capacity; MELINDA MCMICHAEL, Individually a n d in her Official Capacity; MARGARET MCNEESE, Individually and in her O ffic ia l Capacity; CHARLES E. OSWALT, Individually and in his Official C a p a c it y ; LARRY PRICE, Individually and in his Official Capacity; ANNETTE P . RAGGETT, Individually and in her Official Capacity; PAULETTE BARKER S O U T H A R D , Individually and in her Official Capacity; TIMOTHY J. TURNER, I n d iv id u a lly and in his Official Capacity; TIMOTHY WEBB, Individually and in h is Official Capacity; IRVIN E. ZEITLER, Individually and in his Official C a p a c it y ; DONALD PATRICK, Individually and in his Official Capacity; JOHN D O E S 1-10, Who are working for the TMB, Individually and in their Official C a p a c itie s , Defendants ­ Appellees

A p p e a l from the United States District Court fo r the Western District of Texas

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Case: 09-50953 Document: 00511309459 Page: 2 Date Filed: 12/02/2010

No. 09-50953 B e fo r e JONES, Chief Judge, and REAVLEY and HAYNES, Circuit Judges. E D I T H H. JONES, Chief Judge: T h e Association of American Physician and Surgeons ("AAPS") sued the T e x a s State Board of Medical Examiners ("the Board") under 42 U.S.C. § 1983 for declaratory and injunctive relief against alleged constitutional violations in c lu d in g the Board's use of anonymous complaints and retaliatory actions a g a in s t physicians. The district court dismissed the case based on AAPS's lack o f standing, noting an absence of "Fifth Circuit authority directly on point for the t y p e s of claims raised in this cause." Weighing in on this issue, we conclude that AAPS has standing to bring t h is suit on behalf of its members. The judgment is therefore vacated and the c a s e remanded for further proceedings. I . BACKGROUND A A P S is a not-for-profit membership organization incorporated under the la w s of Indiana and headquartered in Tucson, Arizona. Its membership includes t h o u s a n d s of physicians in nearly every state, including Texas. AAPS asserts t h a t part of its mission is to protect its members from arbitrary and unlawful g o v e r n m e n t a l action. The Board "is an agency of the executive branch of state government with t h e power to regulate the practice of medicine." TEX. OCC. CODE § 152.001. The B o a r d consists of nineteen members appointed by the governor ­ twelve p h y s ic ia n s and seven members of the public. Id. § 152.002. At the time this case w a s filed, Dr. Roberta Kalafut was the Board's president, and Lawrence A n d e r s o n was chair of the Disciplinary Process Review Committee. The other n a m e d and unnamed defendants were Board members and employees. The B o a r d has statutory authority to discipline physicians for misconduct. See, e.g., id . § 164.001.

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No. 09-50953 A A P S sued the Board on behalf of its members for what it describes as p e r v a s iv e and continuing violations of members' constitutional rights. AAPS a lle g e d first that the Board manipulated anonymous complaints. Illustratively, K a la fu t targeted physicians using anonymous complaints filed by her husband, a n d anonymous complaints allegedly were filed by a New York insurance c o m p a n y seeking to avoid paying a physician for claims. Second, AAPS alleged t h a t the Board knew that the former chairman of its Disciplinary Process R e v ie w Committee, Keith Miller, was operating with a significant conflict of in t e r e s t , but it took no corrective action and failed to disclose the conflict to the p u b lic or the physicians subject to discipline. Dr. Miller was allegedly an expert w it n e s s for plaintiffs in up to fifty malpractice cases during his tenure as chair o f the committee and generated business for himself as an expert by improperly d is c ip lin in g physicians. Third, AAPS alleged that the Board arbitrarily rejected a decision in favor o f a doctor by an administrative law judge from the State Office of A d m in is tr a t i v e Hearings, and then issued a sanction that damaged the p h y s ic ia n 's reputation. Fourth, AAPS asserted that the Board violated AAPS m e m b e r s ' privacy by releasing unproven facts and records concerning d is c ip lin a r y cases. Finally, AAPS alleged that the Board has retaliated against p h y s ic ia n s who have complained about the Board by subjecting them to d is c ip lin a r y proceedings and derogatory public comments. AAPS alleged

v io la t io n s of the confrontation clause and the due process, equal protection, and fr e e speech provisions of the Constitution, and violation of federal statutory p r iv a c y requirements.1 T h e Board's answer included a number of affirmative defenses and sought d is m is s a l under Fed. Rule Civ. Pro. 12(b)(1), arguing that AAPS lacked standing
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AAPS's complaint cites the Health Insurance Portability and Accountability Act (HIPPA), codified at 29 U.S.C. § 1181 et seq.

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No. 09-50953 t o sue on behalf of its members. In the midst of ongoing discovery disputes, the d is t r ic t court granted the motion to dismiss. AAPS appeals under 28 U.S.C. § 1291. I I . STANDARD OF REVIEW " W e review de novo motions to dismiss and motions for judgment on the p le a d in g s ." Jebaco, Inc. v. Harrah's Operating Co., Inc., 587 F.3d 314, 318 (5th C ir . 2009) (citations omitted). "[W]hen standing is challenged on the basis of the p le a d in g s ," we must "accept as true all material allegations of the complaint a n d . . . construe the complaint in favor of the complaining party." Pennell v. C ity of San Jose, 485 U.S. 1, 7, 108 S. Ct. 849, 855 (1988) (citations and internal q u o t a t io n omitted). I I I . DISCUSSION " T h e r e is no question that an association may have standing in its own r ig h t to seek judicial relief from injury to itself and to vindicate whatever rights a n d immunities the association itself may enjoy", but "[e]ven in the absence of in ju r y to itself, an association may have standing solely as the representative of it s members." Warth v. Seldin, 422 U.S. 490, 511, 95 S. Ct. 2197, 2211 (1975). AAPS's standing here depends on its ability to sue for redress of its members' g r ie v a n c e s . Thus, [A ]n association has standing to bring suit on behalf of its members w h e n : (a) its members would otherwise have standing to sue in their o w n right; (b) the interests it seeks to protect are germane to the o r g a n iz a tio n 's purpose; and (c) neither the claim asserted nor the r e lie f requested requires the participation of individual members in t h e lawsuit. S e e Hunt v. Wash. St. Apple Adver. Comm'n, 432 U.S. 333, 343, 97 S. Ct. 2434, 2 4 4 1 (1977). The first two components of Hunt address constitutional r e q u ir e m e n t s , while the third prong is solely prudential. See United Food &

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No. 09-50953 C o m m e r c ia l Workers Union Local 751 v. Brown Grp., Inc., 517 U.S. 544, 555, 1 1 6 S. Ct. 1529, 1535 (1996). B e y o n d question, AAPS satisfies the first and second Hunt prongs.2 As to t h e third prong, the Board argued that because AAPS's claims require the p a r tic ip a t io n of individual members, it cannot meet that test. The district court a g r e e d that AAPS's allegations about anonymous complaints, conflicts of in t e r e s t , arbitrary administrative rulings, breaches of privacy, and retaliation c a n n o t be sustained without the extensive participation of individual members a n d therefore render associational standing improper. We hold otherwise. B e c a u s e Hunt's third prong is prudential, "the general prohibition on a lit ig a n t 's raising another person's legal rights is a judicially self-imposed limi[t] o n the exercise of federal jurisdiction, not a constitutional mandate." Brown G r p ., 517 U.S. at 557, 116 S. Ct. at 1536 (citations and quotations omitted). The t h ir d prong focuses importantly on "matters of administrative convenience and e ffic ie n c y ." Id. Courts assess this prong by examining both the relief requested a n d the claims asserted. Cornerstone Christian Schs. v. Univ. Interscholastic L e a g u e , 563 F.3d 127, 134 n.5 (5th Cir. 2009). In general, "an association's a c t io n for damages running solely to its members would be barred for want of t h e association's standing to sue." Brown Grp., 517 U.S. at 546, 116 S. Ct. at 1 5 3 1 . But in this case, AAPS seeks declaratory and injunctive relief.

The first prong never has been in question, but the second prong was disputed at the dismissal stage, when the Board argued that the individual interests at issue are not germane to AAPS's purpose. The district court did not address that argument because it found the third Hunt prong dispositive. The Board, however, neither briefed nor argued the germaneness requirement before this court and therefore abandoned it. Regardless, the germaneness requirement is "undemanding" and requires "mere pertinence" between the litigation at issue and the organization's purpose. See Bldg. & Constr. Trades Council of Buffalo v. Downtown Dev., Inc., 448 F.3d 138, 148 (2nd Cir. 2006). Through its affidavits and acts, AAPS has demonstrated its obvious interest in representing its members against alleged governmental abuse. AAPS easily surpasses the low threshold of Hunt's germaneness prong.

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No. 09-50953 A s the district court noted, this court has not had occasion to consider H u n t's third prong with respect to claims similar to those AAPS alleges.3 Other c ir c u it s have diverged in analogous cases. AAPS relies on precedents from the T h ir d and Seventh Circuits, which allow standing if an association plaintiff can p r o v e its case with a sampling of evidence from its members. See Pa. Psychiatric S o c 'y v. Green Spring Health Servs., Inc., 280 F.3d 278 (3d Cir. 2002); Hosp. C o u n c il of W. Pa. v. City of Pittsburgh, 949 F.2d 83 (3d Cir. 1991); Retired Chi. P o lic e Ass'n v. City of Chi., 7 F.3d 584, 601­02, 608 (7th Cir. 1993). The Board, in contrast, emphasizes the Tenth Circuit's rejection of an association's standing in Kansas Health Care Association, Inc. v. Kansas Department of Social & R e h a b ilita tio n Services, 958 F.2d 1018 (10th Cir. 1992). T h e Third Circuit's approach is instructive. In Hospital Council, a

c o n s t it u t io n a l challenge was filed against certain cities' alleged practice of c o e r c in g tax-exempt hospitals into making payments in order to obtain zoning a p p r o v a l, protect their tax-exempt status, and secure other governmental b e n e fits . Id. at 85. Then-Judge Alito explained that although evidence would b e needed from certain individual hospitals and their employees in order to p r o v e whether the challenged policy had been enforced, the participation of all o f the individual members was unnecessary and thus associational standing w a s appropriate. Id. at 89­90; see also Pa. Psychiatric Soc'y, 280 F.3d at 287 (h o ld in g that plaintiff could attempt to establish associational standing with lim it e d individual member participation).

We rejected associational standing in Friends for American Free Enterprise Association v. Wal-Mart Stores, Inc., because the plaintiff's common law tortious interference claims at issue were wholly fact-specific as to the individual members. 284 F.3d 575 (5th Cir. 2002). Likewise, in Cornerstone Christian Schools v. University Scholastic League, associational standing was rejected for plaintiffs asserting a free exercise claim. 563 F.3d 127 (2009) (citing Harris v. McRae, 448 U.S. 297, 100 S. Ct. 2671 (1980)). Neither case is particularly instructive here.

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No. 09-50953 T h e Seventh Circuit expressly adopted the Third Circuit's reasoning in R e t i r e d Chicago Police Association, a suit seeking to prohibit the city from c h a n g in g the terms of annuitant health care costs under the city's pension plan. 7 F.3d at 590. To prove the case for a contract breach, some retirees would need t o submit evidence, but the active participation of each annuitant would not be r e q u ir e d . Id. at 601­03. The court noted: W e can discern no indication in Warth, Hunt, or Brock that the S u p r e m e Court intended to limit representational standing to cases in which it would not be necessary to take any evidence from in d iv id u a l members of an association. Such a stringent limitation on r e p r e s e n t a tio n a l standing cannot be squared with the Court's a s s e s s m e n t in Brock of the efficiencies for both the litigant and the ju d ic ia l system from the use of representational standing. Id. at 601-02. B o t h of these circuits interpret Hunt to mean, in light of the Court's p r e v io u s decision in Warth, that as long as resolution of the claims benefits the a s s o c ia t io n 's members and the claims can be proven by evidence from rep resen ta tiv e injured members, without a fact-intensive-individual inquiry, the p a rticip a tion of those individual members will not thwart associational standing. See also Pa. Psychiatric Soc'y, 280 F.3d at 286. T h e Tenth Circuit, however, refused to grant associational standing to a m e d ic a l services provider association that sought a preliminary injunction a g a in s t Kansas's planned Medicaid reimbursement rate freeze. See Kansas H e a lth Care Ass'n, 958 F.2d at 1018. Among other things, the association a r g u e d that the state's findings as to reimbursement rates did not comply with fe d e r a l law. Id. at 1020. The Tenth Circuit held that determining the adequacy o f the rates would "necessarily require individual participation of the a s s o c ia t io n s ' members." Id. at 1023. Further, to assess the state's compliance w it h federally prescribed procedures in arriving at its reimbursement rate, the

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No. 09-50953 d is t r ic t court would be required to make a detailed economic examination of in d iv id u a l providers. The court acknowledged that "minimal participation" from in d iv id u a l members might not defeat associational standing, Id. at 1022 (citing A M I S U B (PSL), Inc. v. Colo. Dep't of Soc. Servs., 879 F.2d 789 (10th Cir.1989)), b u t it held that the amount of individual participation necessary to prove the a s s o c ia t io n 's specific claims foreclosed associational standing. The differences between these decisions' approach to associational s t a n d in g are more of degree than kind. Hunt's prudential inquiry concerns both c la im s alleged and the relief sought because only a case-specific analysis will r e v e a l whether an association or its individual members are better positioned to p r e s e n t a case. See Int'l Union, UAW v. Brock, 477 U.S. 274, 289-90, 106 S. Ct. 2 5 2 3 , 2532-33 (1986) (comparing associational standing with class action c r it e r ia ). In Hospital Council and Retired Chicago Police Association, a discrete p a t t e r n of conduct or contract breach was alleged to have applied equally against a large number of association members. Proving the illegality of the pattern or b r e a c h of contract required some evidence from members, but once proved as to s o m e , the violations would be proved as to all. I n Kansas Health Care Association, however, the court carefully d is t in g u is h e d between claims of administrative illegality that would be

a p p a r e n t with minimal factual development and those that could only be proven b y intensive analysis of individual hospitals. Because of their fact-sensitivity, t h e ratemaking inquiries before the court did not lend themselves to proof that w o u ld readily apply to all of the members. T h e present case, on balance, more closely resembles Hospital Council t h a n Kansas Health Care Association. AAPS's complaint alleged, among other t h in g s , abuses perpetrated on physicians by means of anonymous complaints, h a r a s s m e n t of doctors who complained about the Board, and conflicts of interest b y decision-makers. If practiced systemically, such abuses may have violated or 8

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No. 09-50953 c h ille d AAPS members' constitutional rights. Proof of these misdeeds could e s t a b lis h a pattern with evidence from the Board's witnesses and files and from a small but significant sample of physicians. Because AAPS also seeks only e q u it a b le relief from these alleged violations, both the claims and relief appear t o support judicially efficient management if associational standing is granted. In so holding, we "accept as true all material allegations of the complaint a n d . . . construe the complaint in favor of the complaining party," Pennell, s u p r a , but we express no opinion on whether AAPS will ultimately be able to p r o v e its rather dramatic claims. Under these circumstances, dismissal under R u le 12(b)(1) was improper. III. CONCLUSION B e c a u s e AAPS was entitled to claim associational standing on behalf of its m e m b e r s , we vacate and remand for further proceedings not inconsistent with t h is opinion. VACATED AND REMANDED.

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