Association of American Physicians & Surgeons, Inc. v. Texas Medical Board

Case: 09-50953 Document: 00511309459 Page: 1 Date Filed: 12/02/2010

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

December 2, 2010

No. 09-50953 Lyle W. Cayce

Clerk

ASSOCIATION OF AMERICAN PHYSICIANS & SURGEONS INC,

Plaintiff – Appellant

v.

TEXAS MEDICAL BOARD, (TMB); ROBERTA M. KALAFUT, Individually and

in her Official Capacity; LAWRENCE L. ANDERSON, Individually and in his

Official Capacity; MICHAEL ARAMBULA, Individually and in his Official

Capacity; JULIE K. ATTEBURY, Individually and in her Official Capacity;

JOSE BENAVIDES, Individually and in his Official Capacity; PATRICIA S.

BLACKWELL, Individually and in her Official Capacity; MELINDA S.

FREDRICKS, Individually and in her Official Capacity; MANUAL G.

GUARJARDO, Individually and in his Official Capacity; AMANULLAH KAHN,

Individually and in his Official Capacity; MELINDA MCMICHAEL, Individually

and in her Official Capacity; MARGARET MCNEESE, Individually and in her

Official Capacity; CHARLES E. OSWALT, Individually and in his Official

Capacity; LARRY PRICE, Individually and in his Official Capacity; ANNETTE

P. RAGGETT, Individually and in her Official Capacity; PAULETTE BARKER

SOUTHARD, Individually and in her Official Capacity; TIMOTHY J. TURNER,

Individually and in his Official Capacity; TIMOTHY WEBB, Individually and in

his Official Capacity; IRVIN E. ZEITLER, Individually and in his Official

Capacity; DONALD PATRICK, Individually and in his Official Capacity; JOHN

DOES 1-10, Who are working for the TMB, Individually and in their Official

Capacities,

Defendants – Appellees

Appeal from the United States District Court

for the Western District of Texas

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

No. 09-50953

Before JONES, Chief Judge, and REAVLEY and HAYNES, Circuit Judges.

EDITH H. JONES, Chief Judge:

The Association of American Physician and Surgeons (“AAPS”) sued the

Texas State Board of Medical Examiners (“the Board”) under 42 U.S.C. § 1983

for declaratory and injunctive relief against alleged constitutional violations

including the Board’s use of anonymous complaints and retaliatory actions

against physicians. The district court dismissed the case based on AAPS’s lack

of standing, noting an absence of “Fifth Circuit authority directly on point for the

types of claims raised in this cause.”

Weighing in on this issue, we conclude that AAPS has standing to bring

this suit on behalf of its members. The judgment is therefore vacated and the

case remanded for further proceedings.

I. BACKGROUND

AAPS is a not-for-profit membership organization incorporated under the

laws of Indiana and headquartered in Tucson, Arizona. Its membership includes

thousands of physicians in nearly every state, including Texas. AAPS asserts

that part of its mission is to protect its members from arbitrary and unlawful

governmental action.

The Board “is an agency of the executive branch of state government with

the power to regulate the practice of medicine.” T EX. O CC. C ODE § 152.001. The

Board consists of nineteen members appointed by the governor – twelve

physicians and seven members of the public. Id. § 152.002. At the time this case

was filed, Dr. Roberta Kalafut was the Board’s president, and Lawrence

Anderson was chair of the Disciplinary Process Review Committee. The other

named and unnamed defendants were Board members and employees. The

Board has statutory authority to discipline physicians for misconduct. See, e.g.,

id. § 164.001.

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AAPS sued the Board on behalf of its members for what it describes as

pervasive and continuing violations of members’ constitutional rights. AAPS

alleged first that the Board manipulated anonymous complaints. Illustratively,

Kalafut targeted physicians using anonymous complaints filed by her husband,

and anonymous complaints allegedly were filed by a New York insurance

company seeking to avoid paying a physician for claims. Second, AAPS alleged

that the Board knew that the former chairman of its Disciplinary Process

Review Committee, Keith Miller, was operating with a significant conflict of

interest, but it took no corrective action and failed to disclose the conflict to the

public or the physicians subject to discipline. Dr. Miller was allegedly an expert

witness for plaintiffs in up to fifty malpractice cases during his tenure as chair

of the committee and generated business for himself as an expert by improperly

disciplining physicians.

Third, AAPS alleged that the Board arbitrarily rejected a decision in favor

of a doctor by an administrative law judge from the State Office of

Administrative Hearings, and then issued a sanction that damaged the

physician’s reputation. Fourth, AAPS asserted that the Board violated AAPS

members’ privacy by releasing unproven facts and records concerning

disciplinary cases. Finally, AAPS alleged that the Board has retaliated against

physicians who have complained about the Board by subjecting them to

disciplinary proceedings and derogatory public comments. AAPS alleged

violations of the confrontation clause and the due process, equal protection, and

free speech provisions of the Constitution, and violation of federal statutory

privacy requirements.1

The Board’s answer included a number of affirmative defenses and sought

dismissal under Fed. Rule Civ. Pro. 12(b)(1), arguing that AAPS lacked standing

1

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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to sue on behalf of its members. In the midst of ongoing discovery disputes, the

district court granted the motion to dismiss. AAPS appeals under 28 U.S.C.

§ 1291.

II. STANDARD OF REVIEW

“We review de novo motions to dismiss and motions for judgment on the

pleadings.” Jebaco, Inc. v. Harrah’s Operating Co., Inc., 587 F.3d 314, 318 (5th

Cir. 2009) (citations omitted). “[W]hen standing is challenged on the basis of the

pleadings,” we must “accept as true all material allegations of the complaint

and . . . construe the complaint in favor of the complaining party.” Pennell v.

City of San Jose, 485 U.S. 1, 7, 108 S. Ct. 849, 855 (1988) (citations and internal

quotation omitted).

III. DISCUSSION

“There is no question that an association may have standing in its own

right to seek judicial relief from injury to itself and to vindicate whatever rights

and immunities the association itself may enjoy”, but “[e]ven in the absence of

injury to itself, an association may have standing solely as the representative of

its 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’

grievances. Thus,

[A]n association has standing to bring suit on behalf of its members

when: (a) its members would otherwise have standing to sue in their

own right; (b) the interests it seeks to protect are germane to the

organization’s purpose; and (c) neither the claim asserted nor the

relief requested requires the participation of individual members in

the lawsuit.

See Hunt v. Wash. St. Apple Adver. Comm’n, 432 U.S. 333, 343, 97 S. Ct. 2434,

2441 (1977). The first two components of Hunt address constitutional

requirements, while the third prong is solely prudential. See United Food &

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Commercial Workers Union Local 751 v. Brown Grp., Inc., 517 U.S. 544, 555,

116 S. Ct. 1529, 1535 (1996).

Beyond question, AAPS satisfies the first and second Hunt prongs.2 As to

the third prong, the Board argued that because AAPS’s claims require the

participation of individual members, it cannot meet that test. The district court

agreed that AAPS’s allegations about anonymous complaints, conflicts of

interest, arbitrary administrative rulings, breaches of privacy, and retaliation

cannot be sustained without the extensive participation of individual members

and therefore render associational standing improper. We hold otherwise.

Because Hunt’s third prong is prudential, “the general prohibition on a

litigant’s raising another person’s legal rights is a judicially self-imposed limi[t]

on the exercise of federal jurisdiction, not a constitutional mandate.” Brown

Grp., 517 U.S. at 557, 116 S. Ct. at 1536 (citations and quotations omitted). The

third prong focuses importantly on “matters of administrative convenience and

efficiency.” Id. Courts assess this prong by examining both the relief requested

and the claims asserted. Cornerstone Christian Schs. v. Univ. Interscholastic

League, 563 F.3d 127, 134 n.5 (5th Cir. 2009). In general, “an association’s

action for damages running solely to its members would be barred for want of

the association’s standing to sue.” Brown Grp., 517 U.S. at 546, 116 S. Ct. at

1531. But in this case, AAPS seeks declaratory and injunctive relief.

2

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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As the district court noted, this court has not had occasion to consider

Hunt’s third prong with respect to claims similar to those AAPS alleges.3 Other

circuits have diverged in analogous cases. AAPS relies on precedents from the

Third and Seventh Circuits, which allow standing if an association plaintiff can

prove its case with a sampling of evidence from its members. See Pa. Psychiatric

Soc’y v. Green Spring Health Servs., Inc., 280 F.3d 278 (3d Cir. 2002); Hosp.

Council of W. Pa. v. City of Pittsburgh, 949 F.2d 83 (3d Cir. 1991); Retired Chi.

Police Ass’n v. City of Chi., 7 F.3d 584, 601–02, 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 &

Rehabilitation Services, 958 F.2d 1018 (10th Cir. 1992).

The Third Circuit’s approach is instructive. In Hospital Council, a

constitutional challenge was filed against certain cities’ alleged practice of

coercing tax-exempt hospitals into making payments in order to obtain zoning

approval, protect their tax-exempt status, and secure other governmental

benefits. Id. at 85. Then-Judge Alito explained that although evidence would

be needed from certain individual hospitals and their employees in order to

prove whether the challenged policy had been enforced, the participation of all

of the individual members was unnecessary and thus associational standing

was appropriate. Id. at 89–90; see also Pa. Psychiatric Soc’y, 280 F.3d at 287

(holding that plaintiff could attempt to establish associational standing with

limited individual member participation).

3

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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The Seventh Circuit expressly adopted the Third Circuit’s reasoning in

Retired Chicago Police Association, a suit seeking to prohibit the city from

changing 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

to submit evidence, but the active participation of each annuitant would not be

required. Id. at 601–03. The court noted:

We can discern no indication in Warth, Hunt, or Brock that the

Supreme Court intended to limit representational standing to cases

in which it would not be necessary to take any evidence from

individual members of an association. Such a stringent limitation on

representational standing cannot be squared with the Court’s

assessment in Brock of the efficiencies for both the litigant and the

judicial system from the use of representational standing.

Id. at 601-02.

Both of these circuits interpret Hunt to mean, in light of the Court’s

previous decision in Warth, that as long as resolution of the claims benefits the

association’s members and the claims can be proven by evidence from

representative injured members, without a fact-intensive-individual inquiry, the

participation of those individual members will not thwart associational standing.

See also Pa. Psychiatric Soc’y, 280 F.3d at 286.

The Tenth Circuit, however, refused to grant associational standing to a

medical services provider association that sought a preliminary injunction

against Kansas’s planned Medicaid reimbursement rate freeze. See Kansas

Health Care Ass’n, 958 F.2d at 1018. Among other things, the association

argued that the state’s findings as to reimbursement rates did not comply with

federal law. Id. at 1020. The Tenth Circuit held that determining the adequacy

of the rates would “necessarily require individual participation of the

associations’ members.” Id. at 1023. Further, to assess the state’s compliance

with federally prescribed procedures in arriving at its reimbursement rate, the

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district court would be required to make a detailed economic examination of

individual providers. The court acknowledged that “minimal participation” from

individual members might not defeat associational standing, Id. at 1022 (citing

AMISUB (PSL), Inc. v. Colo. Dep’t of Soc. Servs., 879 F.2d 789 (10th Cir.1989)),

but it held that the amount of individual participation necessary to prove the

association’s specific claims foreclosed associational standing.

The differences between these decisions’ approach to associational

standing are more of degree than kind. Hunt’s prudential inquiry concerns both

claims alleged and the relief sought because only a case-specific analysis will

reveal whether an association or its individual members are better positioned to

present a case. See Int’l Union, UAW v. Brock, 477 U.S. 274, 289-90, 106 S. Ct.

2523, 2532-33 (1986) (comparing associational standing with class action

criteria). In Hospital Council and Retired Chicago Police Association, a discrete

pattern 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

breach of contract required some evidence from members, but once proved as to

some, the violations would be proved as to all.

In Kansas Health Care Association, however, the court carefully

distinguished between claims of administrative illegality that would be

apparent with minimal factual development and those that could only be proven

by intensive analysis of individual hospitals. Because of their fact-sensitivity,

the ratemaking inquiries before the court did not lend themselves to proof that

would readily apply to all of the members.

The present case, on balance, more closely resembles Hospital Council

than Kansas Health Care Association. AAPS’s complaint alleged, among other

things, abuses perpetrated on physicians by means of anonymous complaints,

harassment of doctors who complained about the Board, and conflicts of interest

by decision-makers. If practiced systemically, such abuses may have violated or

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chilled AAPS members’ constitutional rights. Proof of these misdeeds could

establish 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

equitable relief from these alleged violations, both the claims and relief appear

to support judicially efficient management if associational standing is granted.

In so holding, we “accept as true all material allegations of the complaint

and . . . construe the complaint in favor of the complaining party,” Pennell,

supra, but we express no opinion on whether AAPS will ultimately be able to

prove its rather dramatic claims. Under these circumstances, dismissal under

Rule 12(b)(1) was improper.

III. CONCLUSION

Because AAPS was entitled to claim associational standing on behalf of its

members, we vacate and remand for further proceedings not inconsistent with

this opinion.

VACATED AND REMANDED.

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