Another Setback for State Regulatory Boards: Federal Court Denies Texas Medical Board's Motion to Dismiss Teladoc's Antitrust Lawsuit

Both Teladoc and the TMB agreed that active state supervision is a state action requirement, but disagreed as to whether it existed. The district court followed North Carolina State Board of Dental Examiners, noting that in order to constitute active supervision, “the supervisor must have the power to veto or modify particular decisions to ensure they accord with state policy.”

The TMB argued that it is indeed subject to active state supervision since its decisions are subject to judicial review by the courts of Texas, the Texas legislature, and the State Office of Administrative Hearings. The court found these purported review mechanisms to be focused on the mere validity/invalidity of rules—not allowing for an evaluation of the policies underlying the rules or bestowing the state with power to modify particular Texas Medical Board decisions to accord with state policy. The court also rejected the TMB’s argument that state supervision exists by way of the Texas legislature’s “sunset review” process (where the legislature votes on whether there is a public need for continuation of a state agency) because the legislature has no authority to veto or modify any TMB rules.