Jeffrey Sulitzer v. Joseph Tippins

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SMILEDIRECTCLUB, LLC, a No. 20-55735

Tennessee limited liability company;

JEFFREY SULITZER, D.M.D., an D.C. No.

individual and a California 2:19-cv-08902-

Professional Corporation, GW-MAA

Plaintiffs-Appellants,

v. OPINION

JOSEPH TIPPINS, individually; KAREN

M. FISCHER, M.P.A., individually;

FRAN BURTON, M.S.W., individually;

STEVEN MORROW, DDS, MS

individually; STEVEN CHAN, DDS;

YVETTE CHAPPELL INGRAM, M.P.A.,

individually; ROSS LAI, DDS;

ABIGAIL MEDINA, individually, in her

official capacity as a Member of the

Dental Board of California;

ROSALINDA OLAGUE, RDA, B.A.,

individually, and in her official

capacity as a Member of the Dental

Board of California; JOANNE

PACHECO, RDH, M.A.O.B.,

individually and in her official

capacity as a Member of the Dental

Board of California; THOMAS

STEWART, DDS, individually and in

his official capacity as a Member of

2 SMILEDIRECTCLUB, LLC V. TIPPINS

the Dental Board of California;

BRUCE WHITCHER, DDS, individually

and in his official capacity as a

Member of the Dental Board of

California; JAMES YU, DDS, M.S.,

individually and in his official

capacity as a Member of the Dental

Board of California; DOES, 1–10;

MEREDITH MCKENZIE, individually

and in her official capacity as a

Member of the Dental Board of

California; JOSEPH TIPPINS, in his

official capacity as an Investigator in

the Enforcement Unit of the Dental

Board of California; KAREN M.

FISCHER, M.P.A., in her official

capacity as Executive Director for the

Dental Board of California; FRAN

BURTON, M.S.W., in her official

capacity as a Member of the Dental

Board of California; STEVEN

MORROW, DDS, MS, in their official

capacities as Officers and or Members

of the Dental Board of California;

STEVEN CHAN, DDS, in their official

capacities as Officers and/or Members

of the Dental Board of California;

YVETTE CHAPPELL-INGRAM, MPA, in

their official capacities as Officers

and/or Members of the Dental Board

of California; ROSS LAI; LILIAN

LARIN, DDS, individually and in their

official capacities as Officers and/or

Members of the Dental Board of

SMILEDIRECTCLUB, LLC V. TIPPINS 3

California; HUONG LE, DDS, M.A,

individually and M.A., and in his

official capacity as a Member of the

Dental Board of California,

Defendants-Appellees.

Appeal from the United States District Court

for the Central District of California

George H. Wu, District Judge, Presiding

Argued and Submitted July 26, 2021

San Francisco, California

Filed March 17, 2022

Before: M. Margaret McKeown and Jacqueline H.

Nguyen, Circuit Judges, and Royce C. Lamberth, *

District Judge.

Opinion by Judge McKeown

*

The Honorable Royce C. Lamberth, United States District Judge

for the District of Columbia, sitting by designation.

4 SMILEDIRECTCLUB, LLC V. TIPPINS

SUMMARY **

Antitrust

The panel affirmed in part and reversed in part the

district court’s dismissal of an action brought under antitrust

and constitutional law by a dentist, his professional

corporation, and the teledentistry company

SmileDirectClub, LLC, against members and employees of

the Dental Board of California.

The SmileDirect parties alleged that after they developed

on online service model for patients to access certain

orthodontic services, namely clear teeth aligners, defendants

conspired to harass them with unfounded investigations and

an intimidation campaign, with hopes of driving them out of

the market.

The panel held that the SmileDirect parties sufficiently

pled Article III standing because they alleged an injury in

fact that was fairly traceable to defendants’ challenged

conduct and was judicially redressable.

The panel concluded that the SmileDirect parties

sufficiently alleged anticompetitive concerted action, or an

agreement to restrain trade, to meet the pleading standards

of Federal Rule of Civil Procedure 12(b)(6). The panel

therefore partially reversed the district court’s dismissal of

the SmileDirect parties’ antitrust claim under § 1 of the

Sherman Act. The panel rejected the broad proposition that

regulatory board members and employees cannot form an

**

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

SMILEDIRECTCLUB, LLC V. TIPPINS 5

anticompetitive conspiracy when acting within their

regulatory authority. As to certain other defendants, the

panel affirmed dismissal because the SmileDirect parties

failed to plead facts sufficient to tie them to the alleged

conspiracy.

The panel affirmed the district court’s dismissal of the

SmileDirect parties’ claim under the Dormant Commerce

Clause, which prohibits states from discriminating against

interstate commerce.

The panel affirmed the district court’s dismissal of the

SmileDirect parties’ claim that defendants subjected them to

disparate treatment in violation of the Equal Protection

Clause. The panel held that to plead a class-of-one equal

protection claim, plaintiffs must allege facts showing that

they have been intentionally treated differently from others

similarly situated and that there is no rational basis for the

difference in treatment. Joining other circuits, the panel held

that a class-of-one plaintiff must be similarly situated to the

proposed comparator in all material respects. The

SmileDirect parties fell short of this showing because, rather

than claiming that they stood on the same footing as others,

they instead touted their uniqueness.

COUNSEL

James D. Dasso (argued), Foley & Lardner LLP, Chicago,

Illinois; Byron J. McLain, Foley & Lardner LLP, Los

Angeles, California; for Plaintiffs-Appellants.

Sharon L. O’Grady (argued), Deputy Attorney General;

Mark R. Beckington, Supervising Deputy Attorney General;

Thomas S. Patterson, Senior Assistant Attorney General;

6 SMILEDIRECTCLUB, LLC V. TIPPINS

Rob Bonta, Attorney General of California; Office of the

California Attorney General, San Francisco, California; for

Defendants-Appellees.

Andrew N. DeLaney (argued), Daniel E. Haar, and Nickolai

G. Levin, Attorneys; Makan Delrahim, Assistant Attorney

General; Michael F. Murray, Acting Principal Deputy

Assistant Attorney General; Daniel S. Guarnera, Counsel to

the Assistant Attorney General; United States Department of

Justice, Washington, D.C.; for Amicus Curiae United States

of America.

Joshua Polk and Anastasia Boden, Pacific Legal Foundation,

Sacramento, California, for Amicus Curiae Pacific Legal

Foundation.

OPINION

McKEOWN, Circuit Judge:

It is easy to recall examples of consumer-oriented

business models in the medical field that were once resisted

by incumbents but ultimately—through litigation,

regulation, and legislation—resulted in cheaper and more

accessible services. Take, for example, eyeglass

prescriptions. At one time, the consumer had to purchase

eyeglasses from the prescribing doctor. Now doctors must

provide a copy of the prescription, so consumers can get

their eyeglasses at Costco, Warby Parker, or a host of online

suppliers. Hearing aids represent another consumer

advance. Once approved by the Food and Drug

Administration, certain over-the-counter hearing aids can be

purchased without seeing a healthcare professional. In the

dental field, hygienists in some states can sometimes provide

services without the supervision of a dentist. In each case,

SMILEDIRECTCLUB, LLC V. TIPPINS 7

entrenched interests fought to preserve the status quo and to

stifle the innovators’ entry into the market.

In a similar vein, this appeal involves a company that

developed an online service model that, according to the

company, makes it cheaper, easier, and more convenient for

patients to access certain orthodontic services, namely clear

teeth aligners. The company alleges that incumbents in the

dental and orthodontia markets have illegally conspired to

shut down its disruptive business model. What distinguishes

this case from most run-of-the-mill antitrust lawsuits is that

it involves not only business competitors, but competitors

who sit on a regulatory board that oversees the practice of

dentistry.

A dentist, his professional corporation, and the

teledentistry company SmileDirectClub, LLC (together, the

“SmileDirect parties”) are the newcomers. Members and

employees of the Dental Board of California—largely made

up of traditional dentists and orthodontists who have a

financial motive to view the newcomers as competition—

allegedly conspired to harass the SmileDirect parties with

unfounded investigations and an intimidation campaign,

with hopes of driving them out of the market.

We conclude that the SmileDirect parties sufficiently

alleged anticompetitive concerted action to meet the

pleading standards of Federal Rule of Civil Procedure

12(b)(6). We thus partially reverse the district court’s

dismissal of the Sherman Act claim and reject the broad

proposition—offered up by the board members and the

district court—that regulatory board members and

employees cannot form an anticompetitive conspiracy when

acting within their regulatory authority. As to certain other

defendants, we affirm dismissal—not because of their

regulatory authority—but because the SmileDirect parties

8 SMILEDIRECTCLUB, LLC V. TIPPINS

failed to plead facts sufficient to tie them to the alleged

conspiracy. We also affirm dismissal of the Equal Protection

Clause and Dormant Commerce Clause claims.

BACKGROUND 1

Instead of traditional wire-and-bracket braces, some

orthodontic patients choose clear teeth aligners, which are

supposedly more cosmetically appealing. SmileDirectClub,

LLC (“SmileDirect”) sells these clear aligners through a

proprietary direct-to-consumer online platform. Their

telemedicine model allows SmileDirect-affiliated dentists to

treat out-of-state patients, subject to state licensure

requirements.

Dr. Jeffrey Sulitzer is one such dentist. He lives in

Washington State but is licensed in California and often

treats California-based patients. Through his professional

corporation, Sulitzer P.C., he owns the only SmileDirect-

affiliated dental practice in California. Sulitzer has several

brick-and-mortar “SMILESHOP stores” where technicians

gather images of patients’ teeth and gums. He also operates

a “SmileBus” with technicians onboard who do the same sort

of imaging. As a third option, patients can go online, order

an impression kit from SmileDirect’s website, receive the kit

from a lab in Tennessee, then make the impressions at home.

When the patient returns the impressions to the lab, a dentist

1

This background draws from the First Amended Complaint, which

we refer to as the Complaint for ease of reference. Because the district

court dismissed the Equal Protection Claim before the SmileDirect

parties amended the complaint, we also recount factual allegations from

the original complaint, as supplemented by the SmileDirect parties’

Offer of Proof.

SMILEDIRECTCLUB, LLC V. TIPPINS 9

reviews the treatment plan, the aligners are manufactured,

and then SmileDirect mails the aligners to the patient.

This appeal arises out of a dispute between the

SmileDirect parties and the Dental Board of California (the

“Board”). By statute, the Board regulates the practice of

dentistry in California. See Cal. Bus. & Prof. Code

§§ 1600–1621. It enforces dental regulations, administers

licensing exams, and issues dental licenses and permits. Id.

§ 1611. The Board is made up of fifteen members: “eight

practicing dentists, one registered dental hygienist, one

registered dental assistant, and five public members.” Id.

§ 1601.1(a). Since many of its members compete in the

market for teeth-straightening services, they allegedly view

SmileDirect as a “competitive threat.” The Complaint

alleges that certain members of the Board, motivated by their

private desires to stifle competition, mounted an aggressive,

anti-competitive campaign of harassment and intimidation

designed to drive the SmileDirect parties out of the market.

Complicating matters a bit, the SmileDirect parties have

not sued the Board itself; the Complaint instead names

sixteen individuals, plus ten unnamed “Doe” defendants,

who were at some point affiliated with the Board (together,

the “Board Actors”). Most are current or former board

members; one (Joseph Tippins) is an investigator employed

by the Board; and one (Karen M. Fischer) is the Board’s

Executive Director. Many of the board members maintain

“traditional dental and orthodontic practices” in California.

Several have shops within blocks of SMILESHOP stores.

And some belong to the American Dental Association and

the California Dental Association, trade associations that

have allegedly “opposed [SmileDirect’s] business model.”

The Complaint alleges that the Board Actors “have

agreed, combined and conspired to pursue an aggressive,

10 SMILEDIRECTCLUB, LLC V. TIPPINS

anti-competitive campaign of harassment and intimidation

against” the SmileDirect parties. It alleges that “[t]he

campaign includes, among other things, coordinated

statewide raids; false statements; misconduct in front of

consumers; and a retaliatory accusation filed in response to

[this] lawsuit.” The Complaint contends that these actions

violated the Sherman Antitrust Act; the Dormant Commerce

Clause; the Equal Protection Clause; the Due Process

Clause; 2 and California’s Unfair Competition Law.

The district court dismissed the federal claims and

declined to exercise supplemental jurisdiction over the state

law claim. With respect to the Sherman Act claim, the

district court first rejected the Board Actors’ argument that

they were entitled to state-action antitrust immunity under

Parker v. Brown, 317 U.S. 341 (1943). After a second round

of briefing, the district court nonetheless dismissed the

Sherman Act claim, holding that the Complaint only pled

“an agreement consistent with the Dental Board’s regulatory

purpose,” and that the alleged investigation “is to be

expected of a regulatory body given the authority to

investigate those regulated.”

We disagree. In rejecting the allegations as insufficient,

the district court went astray on two important principles.

First, it indirectly imported a summary judgment standard at

the motion to dismiss stage. And second, it absolved the

Board Actors because they acted “consistent with the Dental

Board’s regulatory purpose,” effectively granting them

antitrust immunity without holding them to the strictures of

the state-action immunity doctrine. See N.C. State Bd. of

Dental Exam’rs v. FTC, 574 U.S. 494, 504–05 (2015). We

2

The SmileDirect parties do not seek to resuscitate their Due

Process claim on appeal.

SMILEDIRECTCLUB, LLC V. TIPPINS 11

conclude that with respect to certain defendants, the

Complaint plausibly alleged anticompetitive concerted

action under the Sherman Act.

I. Standing

As a threshold matter, we reject the Board Actors’

argument that the SmileDirect parties lack standing to sue.

To adequately allege Article III standing, the SmileDirect

parties must plead that they “have (1) suffered an injury in

fact, (2) that is fairly traceable to the challenged conduct of

the defendant, and (3) that is likely to be redressed by a

favorable judicial decision.” Spokeo, Inc. v. Robins, 578

U.S. 330, 338 (2016). The SmileDirect parties allege that

the Board’s campaign of harassment and intimidation

injured their “business, revenue, goodwill, employee

relations, and reputation in the marketplace.” The intrusive

raids allegedly interrupted business operations and

intimidated customers visiting SmileDirect stores. These

injuries are fairly traceable to the Board Actors, who

allegedly authorized the campaign. And the Board Actors

do not dispute that this harm is judicially redressable through

an injunction or other appropriate remedy. The net result—

the Board Actors have sufficiently pled standing.

II. Sherman Act Claim

We review de novo the district court’s dismissal for

failure to state a claim, accepting as true all nonconclusory

allegations in the Complaint. In re Musical Instruments &

Equip. Antitrust Litig., 798 F.3d 1186, 1191 (9th Cir. 2015).

Section 1 of the Sherman Act prohibits “[e]very contract,

combination in the form of trust or otherwise, or conspiracy,

in restraint of trade or commerce.” 15 U.S.C. § 1. To state

a claim under § 1, plaintiffs must plead “(1) ‘a contract,

12 SMILEDIRECTCLUB, LLC V. TIPPINS

combination or conspiracy among two or more persons or

distinct business entities’; (2) which is intended to restrain

or harm trade; (3) ‘which actually injures competition’; and

(4) harm to the plaintiff from the anticompetitive conduct.”

Name.Space, Inc. v. Internet Corp. for Assigned Names &

Nos., 795 F.3d 1124, 1129 (9th Cir. 2015) (quoting Brantley

v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th Cir.

2012)). In the district court, the Board Actors moved to

dismiss the Sherman Act claim on just the first two elements.

Though they argue the other elements on appeal, we only

consider whether the Complaint plausibly pled (1) an

agreement (2) to restrain trade. See G & G Prods. LLC v.

Rusic, 902 F.3d 940, 950 (9th Cir. 2018) (issues not raised

before the district court are forfeited on appeal).

On the first element, we hold that the SmileDirect parties

plausibly pled concerted action, but we affirm dismissal as

to those defendants with insufficient allegations tying them

to the alleged conspiracy. On the second element, consistent

with the Supreme Court’s observation that the Sherman Act

prohibits “anticompetitive self-regulation by active market

participants,” N.C. State, 574 U.S. at 505, we hold that

agreements are not always lawful simply because they are

“consistent with” the purpose of a regulatory Board

dominated by market participants.

By requiring the SmileDirect parties to plead facts

inconsistent with the Board’s regulatory purpose, the district

court applied a standard more appropriate at the summary

judgment stage, where § 1 plaintiffs must offer “evidence

that tends to exclude the possibility” of lawful independent

conduct. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S.

752, 764 (1984). Rule 12(b)(6) does not require this

heightened showing. See Erie Cnty. v. Morton Salt, Inc., 702

F.3d 860, 869 (6th. Cir. 2012) (explaining that, at the motion

SMILEDIRECTCLUB, LLC V. TIPPINS 13

to dismiss stage, a § 1 “plaintiff need not allege a fact pattern

that ‘tends to exclude the possibility’ of lawful, independent

conduct”). We apply the standard that applies to all § 1

complaints: a plaintiff must plausibly allege an agreement

that is unreasonable “per se” or under the “rule of reason.”

Ohio v. Am. Express Co., 138 S. Ct. 2274, 2283–84 (2018).

Analyzing the allegations within that framework, we hold

that the Complaint plausibly pleads that the agreement was

anticompetitive. We note, however, that we make no

judgment on the merits of the claims and whether those

claims will withstand scrutiny in the next phase of the

litigation.

A. Contract, Combination, or Conspiracy

The SmileDirect parties allege they suffered a series of

anticompetitive acts committed by the Board members and

various agents. The Complaint does not, however, name the

Board as a defendant. Instead, the Complaint names various

Board members and employees. 3 None of these

defendants—apart from Tippins—are alleged to have

directly caused harm to the SmileDirect parties. Rather, the

Board Actors purportedly acted together to use the Board to

inflict anticompetitive injury on their behalf. That

circumstance distinguishes this case from those where

conspiracy may be inferred from the parallel conduct of

several ostensibly independent actors. See, e.g., In re Citric

Acid Litig., 191 F.3d 1090, 1102 (9th Cir. 1999) (firms

following similar pricing strategies). Here conspiracy must

3

The Board Actors do not argue, and we therefore do not consider,

whether they are a single entity incapable of conspiring within the

meaning of § 1. See, e.g., N.C. State Bd. of Dental Exam’rs v. FTC, 717

F.3d 359, 371–72 (4th Cir. 2013), aff’d on other grounds, 574 U.S. 494

(2015); Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 191–

92 (2010).

14 SMILEDIRECTCLUB, LLC V. TIPPINS

be inferred, if at all, as stemming from the actions of one

entity (the Board) and thereafter imputed to its members.

Our review of the Complaint reveals the SmileDirect

parties have adequately alleged the active participation of

many—but not all—of the Board Actors in the conspiracy.

The Complaint plausibly alleges that certain Board Actors

agreed to launch a “campaign . . . to protect the economic

interests of the traditional orthodontia market,” primarily

because of alleged private economic motives. As the

Supreme Court has remarked in denying blanket antitrust

immunity to state regulatory boards, allowing “active market

participants . . . to regulate their own markets free from

antitrust accountability” poses a significant risk that those

entities might engage in “self-dealing” to promote their

private interests. N.C. State, 574 U.S. at 505, 510. The

Board members who are dentists fall squarely within this

realm. Their governance role is sufficient, when coupled

with the congruence between the Board’s actions and their

own self-interest, to allow a plausible inference of active

participation. See Osborn v. Visa Inc., 797 F.3d 1057, 1067

(D.C. Cir. 2015) (holding plaintiffs did “more than allege

‘mere membership’” where complaint alleged defendants

used their governance role to force association to take

anticompetitive actions that served their economic interests);

cf. SmileDirectClub, LLC v. Ga. Bd. of Dentistry, 1:18-CV-

02328-WMR, 2019 WL 3557892, at *4 (N.D. Ga. May 8,

2019) (denying a motion to dismiss Sherman Act claims

against state dental board members, because the allegations

“are sufficient to plausibly allege concerted action”), aff’d

on other grounds sub nom. SmileDirectClub, LLC v. Battle,

969 F.3d 1134 (11th Cir. 2020), on reh’g en banc, 4 F.4th

1274 (11th Cir. 2021).

SMILEDIRECTCLUB, LLC V. TIPPINS 15

Our conclusions draw from the circuit’s caselaw

regarding anticompetitive conduct by membership

organizations, which provide a close analog in this

circumstance. We recognize that membership is not enough,

standing alone, to allow a plausible inference that an

organization’s members are engaged in an antitrust

conspiracy. Kline v. Coldwell, Banker & Co., 508 F.2d 226,

232 (9th Cir. 1974); see also Kendall v. Visa U.S.A., Inc.,

518 F.3d 1042, 1048 (9th Cir. 2008) (“[M]embership in an

association does not render an association’s members

automatically liable for antitrust violations committed by the

association.”). And “[e]ven participation on the

association’s board of directors is not enough by itself.”

Kendall, 518 F.3d at 1048.

Ultimately, we require some showing—direct or

circumstantial—that the defendants “actively participated in

an individual capacity in the scheme.” Kline, 508 F.2d at

232 (quoting N. Cal. Pharmaceutical Ass’n v. United States,

306 F.2d 379, 388–89 (9th Cir. 1962)). But the allegations

only go so far. In referring to the defendants collectively,

the Complaint alleges that the SmileDirect parties’ business

model poses a competitive threat to the dentist Board

members’ “dental practices;” that several Board members

belong to powerful trade groups; and that they collectively

have “an economic incentive” to drive SmileDirect out of the

market. These allegations logically apply only to the dentists

and orthodontists who allegedly view SmileDirect as

competition. We therefore affirm dismissal as to defendants

Chappell-Ingram, McKenzie, Medina, Pacheco, and Olague.

The Complaint pleads nothing (besides their presence on the

Board) to implicate these defendants in the alleged

conspiracy. See Kendall, 518 F.3d at 1048.

16 SMILEDIRECTCLUB, LLC V. TIPPINS

Although defendants Tippins, Fischer, and Burton are

not dentists or dental professionals, at this stage their alleged

involvement in the conspiracy withstands the motion to

dismiss. Tippins is the investigator who allegedly executed

the raids and sent document requests. Fischer is the

Executive Director who allegedly attended Enforcement

Committee meetings and dispatched Tippins to the

SmileBus. Burton is a member of the Enforcement

Committee, which, according to the Complaint, has some

authority over investigators and their enforcement activities.

Given these defendants’ close involvement in the alleged

anticompetitive acts, the Complaint plausibly alleges their

active participation, thus satisfying the concerted action

element.

B. Unreasonable Restraint of Trade

Concerted action is not enough to sustain a § 1 violation.

The agreement or conspiracy must be “intended to restrain

or harm trade.” Name.Space, 795 F.3d at 1129. Because the

Supreme Court has interpreted § 1 “to outlaw only

unreasonable restraints” on trade, courts must consider

whether a restraint falls into the “small group of restraints

[that] are unreasonable per se” or is otherwise unreasonable

under a “fact-specific assessment” known as the “rule of

reason.” Ohio, 138 S. Ct. at 2283–84 (internal citations and

quotations omitted). No per se violation is alleged here, so

we ask whether the alleged “restraint’s harm to competition

outweighs its procompetitive effects.” Tanaka v. Univ. of S.

Cal., 252 F.3d 1059, 1063 (9th Cir. 2001).

Noting that the Board Actors could not demonstrate

active state supervision, the district court rejected their

argument that they were home free under Parker v. Brown’s

state-action immunity doctrine. See 317 U.S. at 352 (holding

that restraints imposed by the state “as an act of government”

SMILEDIRECTCLUB, LLC V. TIPPINS 17

are immune from antitrust liability). However, in the same

breath, the district court appeared to hold that conduct within

the Board’s regulatory authority cannot be anticompetitive.

In their motion to dismiss, the Board Actors argued that the

actions of a state regulatory board could not be unreasonable

if the board was “functioning in” its “ordinary regulatory

capacity.” The district court took this rationale one step

further and held that an agreement “consistent with the

Dental Board’s regulatory purpose” cannot be unreasonable.

But rejecting Parker immunity—then turning around and

blessing the same conduct because it falls within the Board’s

authority—effectively grants the Board Actors a free pass

under the Sherman Act. That analysis is at odds with the

Supreme Court’s view, our precedent, and that of our sister

circuits. We hold that the Board Actors’ concerted action

can be unreasonable under the Sherman Act—even if they

seek to achieve their anticompetitive aims through the

exercise of valid regulatory authority.

Like professional trade associations, members of a

regulatory agency “act[] unlawfully” when their actions “are

unduly anticompetitive and without adequate redeeming

virtues.” Phillip E. Areeda & Herbert Hovenkamp, 4

Antitrust Law ¶ 1477 (4th & 5th eds. 2011). As the Supreme

Court has stressed, “[t]he similarities between agencies

controlled by active market participants and private trade

associations are not eliminated simply because the former

are given a formal designation by the State, vested with a

measure of government power, and required to follow some

procedural rules.” N.C. State, 574 U.S. at 511.

The district court viewed the allegations in the

Complaint as nothing more than an ordinary investigation

that “is to be expected of a regulatory body.” As alleged,

this was no standard or ordinary investigation; it was an

18 SMILEDIRECTCLUB, LLC V. TIPPINS

abusive, aggressive, retaliatory, and targeted campaign

designed to intimidate the SmileDirect parties and to drive

them out of the market. Cf. N.C. State Bd. of Dental Exam’rs

v. FTC, 717 F.3d 359, 373 (4th Cir. 2013), aff’d on other

grounds, 574 U.S. 494 (2015) (“[T]he lengthy consistent

campaign of sending letters and cease-and-desist orders is

suggestive of coordinated action.”).

According to the SmileDirect parties, a letter from a

trade association prompted the investigation, not a

dissatisfied consumer or patient who had been harmed.

Indeed, patient safety is not a focus of the proceedings here.

The Complaint alleges that the trade association has

advocated against SmileDirect’s business model, and that

Board representatives communicated with the association

about the supposedly confidential investigation behind the

scenes. Once the investigation was underway, the Board’s

investigators conducted aggressive and unreasonable “raids”

that were “designed to maximize . . . interference,

disruption, and public spectacle.” And they allege that, in

response to this lawsuit, the Board Actors began a

“retaliatory” administrative proceeding to possibly revoke

Sulitzer’s dental license.

Although each of those actions may independently fall

within the Board’s authority—which the Complaint does not

concede—they could still be illegal if their anticompetitive

effects outweighed their legitimate regulatory justifications.

See Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc.,

9 F.4th 1102, 1108 (9th Cir. 2021). It may well be, as the

Board Actors argue, that the investigation was conducted

“dutifully” and “by the book,” based on legitimate

complaints, or that the Board was screened off from ongoing

investigations, thus defeating any claim of a conspiracy. But

because we do not consider the Board Actors’ competing

SMILEDIRECTCLUB, LLC V. TIPPINS 19

facts at the pleadings stage, and because Rule 12 does not

require the Complaint to exclude the possibility of lawful

conduct, see SD3, LLC v. Black & Decker (U.S.) Inc., 801

F.3d 412, 425–26 (4th Cir. 2015), we hold that the

Complaint plausibly alleges a conspiracy to restrain trade.

The Fourth Circuit’s analysis in a similar case is

instructive. N.C. Dental, 717 F.3d 359. In that case, the

Federal Trade Commission found that the state dental board,

largely comprised of practicing dentists, worked to “shut

down” non-dentist teeth whitening services. Id. at 365. In

furtherance of that conspiracy, the Board issued several

cease-and-desist letters threatening that the non-dentists

were committing a misdemeanor by offering teeth-

whitening services. Id. That intimidation campaign

“successfully expelled non-dentist providers from the North

Carolina teeth-whitening market.” Id. After making clear

that the state dental board was capable of conspiring under

the Sherman Act, id. at 371–73, the Fourth Circuit proceeded

to ask whether the FTC properly found that the board’s

actions “amounted to an unreasonable restraint of trade,” id.

at 373. Applying the rule of reason and the related “quick

look doctrine,” the court affirmed the FTC’s factual finding

of unreasonableness. Id. at 373–75.

We do not share the district court’s concern that

permitting the case to go forward at this stage will expose

state regulatory board members to a lawsuit “every single

time such an investigation commences.” Nor do we suggest

that every investigation suggests the existence of a

conspiracy. But neither can we say that members of

regulatory bodies who conspire against competition are

automatically immune from antitrust allegations even when

the body does not meet the requirements for state-action

20 SMILEDIRECTCLUB, LLC V. TIPPINS

immunity. The SmileDirect parties have sufficiently alleged

anticompetitive concerted action for a § 1 claim.

III. Dormant Commerce Clause Claim

We affirm the district court’s dismissal of the

SmileDirect parties’ Dormant Commerce Clause claim. The

Commerce Clause empowers Congress to “regulate

Commerce. . . . among the several States.” U.S. Const. art.

I, § 8, cl. 3. “Courts have long read a negative implication

into the clause, termed the ‘dormant Commerce Clause,’ that

prohibits states from discriminating against interstate

commerce.” Yakima Valley Mem’l Hosp. v. Wash. State

Dep’t of Health, 731 F.3d 843, 846 (9th Cir. 2013). In other

words, the Dormant Commerce Clause “prohibits economic

protectionism—that is, regulatory measures designed to

benefit in-state economic interests by burdening out-of-state

competitors.” New Energy Co. of Ind. v. Limbach, 486 U.S.

269, 273 (1988).

The SmileDirect parties have not pled a per se violation

of the Dormant Commerce Clause, because the regulations

governing the Board do not “facially discriminate against

out-of-state interests.” Yakima Valley, 731 F.3d at 846; see

Cal. Bus. & Prof. Code §§ 1600–1621. Nor does the

investigation itself establish a per se violation: the

Complaint only alleges an investigation of one company’s

entirely in-state conduct.

The Complaint also falls short of pleading a Dormant

Commerce Clause violation through the investigation’s

“‘incidental’ impacts on interstate trade.” Yakima Valley,

731 F.3d at 846 (quoting Hughes v. Oklahoma, 441 U.S. 322,

336 (1979)). As the Supreme Court has stated: “Where the

statute regulates even-handedly to effectuate a legitimate

local public interest, and its effects on interstate commerce

SMILEDIRECTCLUB, LLC V. TIPPINS 21

are only incidental, it will be upheld unless the burden

imposed on such commerce is clearly excessive in relation

to the putative local benefits.” Id. at 846 (quoting Pike v.

Bruce Church, Inc., 397 U.S. 137, 142 (1970)). The Board

has a legitimate interest in regulating and investigating

California-licensed dentists, and the Board’s conduct

targeted only a handful of California stores and a SmileBus

parked in California. See Great Atl. & Pac. Tea Co. v.

Cottrell, 424 U.S. 366, 371 (1976).

IV. Equal Protection Claim

The SmileDirect parties allege that the Board Actors

subjected them to disparate treatment in violation of the

Equal Protection Clause of the Fourteenth Amendment.

They claim that Sulitzer is like every other California-

licensed dentist who can prescribe clear aligner therapy and

who is subject to the Board’s regulatory authority. But they

say that the Board Actors have not subjected any other

California dentists or dental corporations to similar

investigations, and have singled out Sulitzer and the other

SmileDirect parties on the basis of “economic protectionism

and animus.”

As the Supreme Court has recognized, “an equal

protection claim can in some circumstances be sustained

even if the plaintiff has not alleged class-based

discrimination, but instead claims that she has been

irrationally singled out as a so-called ‘class of one.’”

Engquist v. Or. Dep’t of Agric., 553 U.S. 591, 601 (2008).

To plead a class-of-one equal protection claim, the

SmileDirect parties must allege facts showing that they have

been “[1] intentionally [2] treated differently from others

similarly situated and that [3] there is no rational basis for

the difference in treatment.” Village of Willowbrook v.

Olech, 528 U.S. 562, 564 (2000) (per curiam).

22 SMILEDIRECTCLUB, LLC V. TIPPINS

We have not had occasion to determine what degree of

similarity makes a plaintiff “similarly situated” to others in

the class-of-one context, and the Supreme Court has offered

little guidance on that front. In Olech, a homeowner alleged

that the village demanded a 33-foot easement to connect her

property to the municipal water line, but only required a 15-

foot easement from other property owners in the same

position. Id. at 565. We have interpreted Olech to permit a

class-of-one claim by a property owner alleging that a

county arbitrarily denied her a permit for a road approach but

allowed other property owners to build road approaches

without incident. Gerhart v. Lake County, 637 F.3d 1013,

1022 (9th Cir. 2011). Neither case required extended

reflection on what made the plaintiffs “similarly situated”

with the comparator class: same neighborhood block; same

type of property; same city water line (Olech); same type of

road approach (Gerhart)—but different treatment by

government officials.

Our sister circuits, in defining what it means to be

“similarly situated,” have largely determined that a class-of-

one plaintiff should be similar to the proposed comparator in

all “relevant” or “material” respects. For example, in

assessing a claim by a land developer who alleged

differential treatment, the Second Circuit explained that

“class-of-one plaintiffs must show an extremely high degree

of similarity between themselves and the persons to whom

they compare themselves.” Clubside, Inc. v. Valentin, 468

F.3d 144, 159 (2d Cir. 2006). Likewise, the Seventh Circuit

has held that class-of-one plaintiffs must be “directly

comparable . . . in all material respects” to the comparator.

Reget v. City of La Crosse, 595 F.3d 691, 695 (7th Cir.

2010); accord. PBT Real Est., LLC v. Town of Palm Beach,

988 F.3d 1274, 1285 (11th Cir. 2021) (“The entities being

compared must be prima facie identical in all relevant

SMILEDIRECTCLUB, LLC V. TIPPINS 23

respects.” (internal quotation marks, alterations, and citation

omitted)); Superior Commc’ns v. City of Riverview, 881 F.3d

432, 446 (6th Cir. 2018) (adopting the “all material respects”

formulation); Gianfrancesco v. Town of Wrentham, 712 F.3d

634, 640 (1st Cir. 2013) (“[A] class-of-one plaintiff bears the

burden of showing that his comparators are similarly situated

in all respects relevant to the challenged government

action.”).

We join our sister circuits in holding that a class-of-one

plaintiff must be similarly situated to the proposed

comparator in all material respects. The SmileDirect parties

fall far short of this showing. Rather than claiming that they

stand on the same footing as others, they instead tout their

uniqueness, hailing their platform as “revolutionary,”

“unique,” “cutting-edge,” and “more convenient and

affordable” than traditional orthodontia models. Because

they operate a materially different business model, at a

significantly different price point, using new and different

technology, the SmileDirect parties cannot establish that

they are “similarly situated” to all other licensed dentists and

orthodontists in California. The district court properly

dismissed their equal protection claims without leave to

amend because it was “clear that the complaint could not be

saved by amendment.” Cooper v. Ramos, 704 F.3d 772, 783

(9th Cir. 2012).

AFFIRMED IN PART; REVERSED and

REMANDED IN PART.

The parties shall each pay their own costs on appeal.