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No. 12-461Sjj

^tipreme Court of tlje flHtatteti State*

National Association of Optometrists& Opticians; LensCrafters, Inc.;

Eye Care Centers of America, Inc.,

Petitioners,

v.

Kamala D. Harris, in her official capacityas Attorney General of the State of California;

Denise Brown, in her official capacity asDirector of the Department of Consumer Affairs,

Respondents.

On Petition for Writ of Certiorarito the United States Court of Appeals

for the Ninth Circuit

Respondents' Breef in Opposition

«

Kamala D. Harris

Attorney Generalof California

Susan Duncan Lee

Acting StateSolicitor General

Kathleen A. KenealyChiefAssistant

Attorney GeneralAlfredo Terrazas

Senior AssistantAttorney General

Linda K. Schneider*

*Counsel ofRecordSupervising Deputy

Attorney GeneralSherry L. Ledakis

Deputy Attorney GeneralCraig Konnoth

Deputy Solicitor General

110 West A Street, Suite 1100San Diego, CA 92101Telephone: (619) 645-3037Fax: (619) 645-2061Linda.Schneider@doj .ca.gov

Counsel for Respondents

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QUESTION PRESENTED

In California and other states, only vision caredoctors such as ophthalmologists and optometristsmay provide medical eye care and dispense prescription eyewear as part of their medical service. Retailoptical stores, such as LensCrafters, whether headquartered in California orelsewhere, may not providemedical eye care, but may sell eyewear made to adoctor's prescription. Non-medical activities, such aseyewear retailing, are marginally regulated as commercial concerns, whereas doctors are highly regulated as medical professionals.

The question presented is:

Whether doctors are similarly situated to opticalretail stores for the purpose of evaluating discrimination claims under the dormant Commerce Clause?

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PARTIES TO THE PROCEEDINGS

Petitioners, who were the plaintiffs-appellees inthe first appeal and the plaintiffs-appellants in thesecond appeal to the Ninth Circuit Court of Appealsare National Association ofOptometrists &Opticians;LensCrafters, Inc.; and Eye Care Centers of America,Inc. Respondents, who were defendants-appellantsin the first appeal and defendants-appellees in thesecond appeal, are Kamala D. Harris, in her officialcapacity as Attorney General of the State of California, and Denise Brown, in her official capacity as theDirector ofthe Department ofConsumer Affairs. Defendants named previously are Bill Lockyer, in hisofficial capacity as the Attorney General of California;Edmund G. Brown Jr., in his official capacity as theAttorney General of California; Kathleen Hamilton,in her official capacity as the Director ofthe Department of Consumer Affairs; Charlene Zettel, in herofficial capacity as the Director of the Department ofConsumer Affairs; Carrie Lopez in her official capacity as the Director of the Department of ConsumerAffairs; and Brian J. Stiger, in his official capacity asthe Director of the Department ofConsumer Affairs.

Ill

TABLE OF CONTENTS

Page

Question Presented l

Parties to the Proceedings ii

Table of Authorities v

Opinions Below 1Constitutional and Statutory Provisions In

volved 1

Statement of the Case 2

I. Petitioners attack California's licensingscheme of medical providers 2

II. Denial of petitioners' first motion forsummary judgment alleging discrimination against out-of-state entities 5

III. The District Court and the Ninth Circuitfound interstate commerce remained unburdened and granted summary judgment to California •••• 8

Reasons for Denying the Petition 8

I. The Ninth Circuit Court of Appeals decisions below are consistent with thisCourt's dormant Commerce Clause jurisprudence 9A. The blueprint laid out by General Mo

tors Corp. v. Tracy to determinewhether entities are similarly situatedunder the dormant Commerce Clauseis clear and was correctly applied bythe Ninth Circuit 9

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IV

TABLE OF CONTENTS - Continued

Page

B. The Ninth Circuit properly appliedExxon Corp. u. Governor of Marylandto this case 15

C. Petitioners' remaining cases do notimplicate Tracy's clear direction northe Ninth Circuit's reasoning 16

II. The decisions of the Ninth Circuit do notconflict with the decisions of other circuitcourts in their application of Tracy andExxon 19

III. Because there is no effect, discriminatoryor otherwise, on interstate commerce, thecourt can offer petitioners no relief, whichrenders this case an unsuitable vehiclefor resolving similar situatedness 24

A. The challenged laws do not interferewith commerce in goods 25

B. Even if a burden on commerce ingoods need not be proved, petitionersare not "interstate" entities 26

C. Even if petitioners were out-of-stateentities, interstate commerce remainsunaffected 27

Conclusion 28

Respondents'Appendix ^A-l

TABLE OF AUTHORITIES

Page

Cases

Alaska v. Arctic Maid, 366 U.S. 199 (1961) 18, 27

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263(1984) 17, 18, 19, 22

Baude v. Heath, 538 F.3d 608 (7th Cir. 2008) 23

Ben Oehrleins and Sons and Daughter, Inc. v.Hennepin County, 115 F.3d 1372 (8th Cir.1997) 26

Brown & Williamson Tobacco Corp. v. Pataki,320 F.3d 200 (2d Cir. 2003) 20, 21

C & A Carbone, Inc. v. Town of Clarkstown,N.Y., 511 U.S. 383 (1994) 17

Cachia v. Islamorada, 542 F.3d 839 (11th Cir.2008) • 23

California State Bd. of Optometry v. FTC, 910F.2d 976 (D.C. Cir. 1990) 12

Edenfield v. Fane, 507 U.S. 761 (1993) 23

Exxon Corp. v. Governor of Maryland, 437 U.S.117(1978) passim

Family Winemakers of California v. Jenkins,592 F.3d 1 (1st Cir. 2010) 22

Ford Motor Co. v. Texas Dep't of Transp., 264F.3d 493 (5th Cir. 2001) 20

Fort Gratiot Sanitary Landfill v. MichiganDep't of Natural Resources, 504 U.S. 353(1992) 24

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VI

TABLE OF AUTHORITIES - ContinuedPage

General Motors Corp. v. Tracy, 519 U.S. 278(1997) paSSim

Government Suppliers Consolidating Services,Inc. v. Bayh, 975 F.2d 1267 (7th Cir. 1992) 23

Hunt v. Washington State Apple AdvertisingCom'n, 432 U.S. 333 (1977) li

LensCrafters, Inc. v. Robinson, 403 F.3d 798(6th Cir. 2005) 3' 5' ld' ZU

LensCrafters, Inc. v. Robinson, 546 U.S. 1172(2006) A2U

Lewis v. BT Inv. Managers, Inc., 447 U.S. 27(1980)

Minnesota v. Clover Leaf Creamery Co., 449U.S. 456 (1981) Z0

National Revenue Corp. v. Violet, 807 F.2d 285(1st Cir. 1986) A

Oregon Waste Systems, Inc. v. Department ofEnvironmental Quality of State of Or., 511U S 93 (1994)

Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) 7Walgreen Co. v. Rullan, 405 F.3d 50 (1st Cir. ^

2005)

Watson v. State of Maryland, 218 U.S. 173 ^(1910)

West Lynn Creamery, Inc. v. Healy, 512 U.S. ^186(1994)

vu

TABLE OF AUTHORITIES - Continued

Page

Williamson v. Lee Optical of Oklahoma, Inc.,348 U.S. 483 (1955) 3, 5, 13, 14

Wine and Spirits Retailers, Inc. v. Rhode Island, 481 F.3d 1 (1st Cir. 2007) 22

Constitutional Provision

U.S. Const, art. I, § 8, cl. 3 1

Statutes and Regulations

California Business and Professions Code§ 655 1§2050 3§2089 3§2550 4§2551 4§2553 4§2556 1§3003 3§3041 3§3041.2 3§3041.3 3§3046 3§3059 3§3077 4§3078 4§3097 4§3100 4§3103 1§3109 4

Vlll

TABLE OF AUTHORITIES - ContinuedPage

California Code of Regulations, title 16§1399.251 1§1514 1§1531 3§1536 3

Model Code of Prof'1 Conduct R. 5.4 (1983) 21

54 Fed. Reg. 10,285 12

OPINIONS BELOW

This case was heard twice in the district court

and twice in the court of appeals. The first opinion ofthe Ninth Circuit Court of Appeals on defendants'appeal is reported at 567 F.3d 521 and reproduced atRA.30. Following a denial of rehearing en banc andremand to the District Court, plaintiffs appealed andthe Ninth Circuit's second opinion is reported at 682F.3d 1144 and reproduced at RA.1.

The final judgment of the United States DistrictCourt for the Eastern District of California issuingjudgment for defendants is reported at 709 F. Supp. 2d968 and reproduced at RA.49. The District Court'sinitial decision is reported at 463 F. Supp. 2d 1116and reproduced at RA.71.

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

Under the Commerce Clause of the United States

Constitution (U.S. Const, art. I, § 8, cl. 3), petitionerschallenge California Business and Professions Code§§ 2556 (enacted in 1939), 655 (enacted in 1969), and3103 (enacted in 1939, renumbered in 2005); andCalifornia Code of Regulations, title 16, §§ 1399.251and 1514 (collectively "challenged laws") to the extentthat they prohibit registered dispensing opticians andoptical companies from locating optometrists on theirdispensing premises and advertising that eyewear

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and eye examinations are available in their eyewearstores. RA.73

STATEMENT OF THE CASE

This case is the latest challenge to state regulation of vision care. This Court has previously denied apetition challenging almost identical regulations,based on the same constitutional claims, and involving some of the same plaintiffs and counsel as thiscase. LensCrafters, Inc. v. Robinson, 546 U.S. 1172(2006). No developments in the intervening yearssince then merit granting this petition. The keyquestion raised by this case - when are two entitiessimilarly situated for the purpose of interstate discrimination - was decided clearly and decisively inGeneral Motors Corp. v. Tracy, 519 U.S. 278 (1997),and has needed no further elaboration. Although thequestion rarely arises, as in this case, circuit courtshave uniformly and faithfully followed the clear direction of Tracy, whose multi-factored test is bestapplied by lower courts. The petition should be denied.

I. Petitioners Attack California's LicensingScheme of Medical Providers

A. "[T]o free" the medical care of vision "to asgreat an extent as possible, from all taints of commercialism," California enacted laws that served toprevent doctors from working on premises owned by

registered dispensing opticians (RDOs). Williamson v.Lee Optical of Oklahoma, Inc., 348 U.S. 483, 491(1955); RA.39-40. In 1969, California strengthenedthese laws. RA.74. As one of the chief sponsors of the1969 act explained, the provision was introduced to"protect California from" a situation where "largebusiness interests have completely taken over theoptometric profession." RA.101. That same decade, forthe same reasons, other states passed similar statutes. See, e.g., LensCrafters, Inc. v. Robinson, 403F.3d 798, 800 (6th Cir. 2005).

These restrictions are part of a general panoplyof regulations with which vision care doctors, asmembers of the medical profession, must comply. As aphysician and surgeon who specializes in eye careand eye surgery, an ophthalmologist must earn amedical degree, pass state and national exams, andobtain a license from the California Medical Board.

Cal. Bus. & Prof. §§ 2050, 2089. Similarly, as a primary eye care doctor, an optometrist must completeundergraduate requirements, graduate from an accredited four-year optometry school, pass state andnational exams, and after licensure must fulfill continuing education requirements. Id. §§ 3003; 3041;3041.2; 3041.3; 3046; 3059; Cal. Code Regs. tit. 16,§§ 1531, 1536. Doctors also have special ethical andprofessional responsibilities. RA.40-41. The provisionof eyewear by doctors is "incidental to providingquality health care." RA.41 n. 3.

Apart from medical qualifications, to preventcommercial motivations from affecting their care, the

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business structures and practices of optometrists arestrictly regulated. Optometrists cannot have morethan one branch office, as their personal attention isneeded to care for their patients. Cal. Bus. & Prof.§ 3077; see also id. § 3078 (unlawful for optometrist touse an assumed name unless approved by the Board);id. § 3097 (optometrist may not use solicitors toobtain business); id. § 3100 (optometrist cannot advertise as a specialist); id. § 3109 (optometrist mayonly be employed by a licensed optometrist, or alicensed Knox-Keene plan).

The prohibition on co-location is part of thiscomprehensive regulatory scheme. Co-location canresult in conflicts of interest for an optometrist. Onone hand, they must fulfill their obligation to providesound medical care. On the other, they may be pressured by optical companies, such as an RDO, whois not bound by the same ethical and medical obligations, to act in a manner that promotes the opticalstore's commercial interests, such as sale of thestore's goods or limiting the time spent with a patientto maximize prescription volume. RA.106.

B. In contrast, RDOs lack similar training andintense regulation. RDOs simply complete an application and submit a fee to be licensed to engage in theretail business of selling prescription eyewear. Cal.Bus. & Prof. §§ 2550, 2551, 2553.

Because RDOs, such as LensCrafters, are laypersons, the state treats them differently. The strictregulation of optometrists' medical practice stands in

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stark contrast to the more limited regulation of thesale of eyewear. RDOs may maintain an unlimitednumber of stores, and can advertise nationally, takingadvantage of name recognition. All RDOs, whetherin- or out-of-state, enjoy these advantages. Indeed,when considered as a whole, California's regulatoryscheme benefits, rather than burdens RDOs whencompared to optometrists.

C. For over a half-century, motivated by preciselythe commercial considerations from which Californiaseeks to protect doctors, optical companies have selectively, and unsuccessfully, challenged co-locationlaws. See Williamson, 348 U.S. 483 (Oklahoma law);LensCrafters, 403 F.3d at 801 (Tennessee law). In2002, petitioners filed suit in California, characterizing the challenge as involving "one-stop shopping" asopposed to important medical care for California citizens. Petition for Writ of Certiorari (Pet.) at 6.

II. Denial of Petitioners' First Motion forSummary Judgment Alleging Discrimination Against Out-Of-State Entities

A. Upon cross motions for summary judgment,1the District Court sided with petitioners. The courtaccepted petitioners' self-characterization as "interstate" firms, and failed to acknowledge the myriad

1 Many of the documents petitioners filed with the DistrictCourt remain under seal pursuant to protective orders, one ofwhich itself remains under seal.

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restrictions upon optometrists, and the business jadvantages RDOs therefore possess. It therefore jincorrectly held that there was discrimination against Jinterstate commerce. j

The court found vision care doctors and RDOs I

similarly situated. It characterized the regulation Iof medical vision care as "marginal[]," RA.89, andplaced "educated professionals" with the training andobligations of the medical profession upon the samefooting as lay "business corporations." RA.98. Thecourt ignored Tracy's admonition that despite the"possibility of competition" in certain markets, entities may not be similarly situated. 519 U.S. at 302.Although optometrists provide eyewear in the contextof medical treatment and RDOs do so merely as layindividuals, the court placed upon optometrists the"hat of the retailer." RA.101. Further, the court notedthat the statute sought to protect optometrists "fromsome of the problems ... in eastern states, wherelarge business interests have completely taken overthe optometric profession." Id. Ignoring the plainlanguage of this statement, the court assigned a discriminatory purpose to the statute, and held it invalid.

B. The Ninth Circuit reversed. RA.46. The court

first recognized that the California statute was notdiscriminatory in purpose. Rather, it sought to protectoptometrists from "commercial interests generally."RA.38. As the court explained, "California has soughtto protect . . . health care professionals from . . .subtle pressures from commercial interests" that

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come about through "co-ownership and profit sharing"or "potentially even a landlord-tenant relationship."RA.39-40.

Next, the court determined that RDOs andoptometrists are not similarly situated. In addition tooptometrists' "significant educational requirements,"the court explained that "[ujnlike optometrists andophthalmologists, opticians are not health care providers, do not diagnose or treat diseases of the eye,and may be owned and operated as commercialconcerns." RA.41. To be sure, optometrists and RDOscompete for some of the same customers. However,just as the fact that the entities in Tracy potentiallycompeted in the same market was insufficient torender them similarly situated, so too was this factinsufficient to render optometrists and RDOs similarly situated.

Because it held that no discrimination was

possible, the Ninth Circuit did not assess whetherinterstate commerce was burdened. Rather, it re

manded the case to the District Court to determine ifthe alleged burden the laws place on interstate commerce outweighed their benefits, which would renderthem invalid under Pike v. Bruce Church, Inc., 397

U.S. 137, 142 (1970). RA.45. En banc review wasdenied. RA.48.

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III. The District Court and the Ninth CircuitFound Interstate Commerce Remained Unburdened and Granted Summary Judgment

to California

Upon remand, after an examination of the record,the District Court found that the laws had no impacton commerce whatsoever. RA.63, 69.2 The Ninth Circuit agreed, observing that burdens on interstatecommerce occur only when "the origin of goods andmaterials produced outside of the state or . .. entitiesproducing those goods" are burdened. RA.13, n. 6, 23.Petitioners do not seek review of this determination.

REASONS FOR DENYING THE PETITION

The question of when entities are similarly situated for evaluation of discrimination claims under

the dormant Commerce Clause needs no further elu

cidation by this Court. Tracy created a straightforward test for similar situatedness based upon casesthat preceded it, as has been applied in cases sincethen. Unsurprisingly, the circuit courts best suited toapply this fact-sensitive test have found it easy toapply, and have done so uniformly. Moreover, thequestion is a rare one —indeed, some of the circuitcases petitioners cite do not consider the similar

2 The Ninth Circuit had not instructed the District Court toso find, having held only that RDOs and doctors were notsimilarly situated.

9

situatedness of entities for the purpose of the Clauseat all.

Even if the petition presented a worthwhilequestion, this case presents unique considerationsthat makes it an inappropriate vehicle for review. TheNinth Circuit and District Court both found that the

laws here do not affect interstate commerce at all.

Petitioners never sought en banc review of that rulingor certiorari on that ground. Even if the Court were torule that opticians and optometrists were similarlysituated, petitioners would get no relief. To avoidissuing a ruling that would have no force, this Courtshould deny review.

I. The Ninth Circuit Court of Appeals Decisions Below are Consistent with This

Court's Dormant Commerce Clause Jurisprudence

A. The Blueprint Laid Out by GeneralMotors Corp. v. Tracy to DetermineWhether Entities Are Similarly Situated Under the Dormant Commerce

Clause Is Clear and Was Correctly Applied by the Ninth Circuit

The key question in this case - whether two entities are sufficiently comparable to trigger a discrimination analysis - is not doctrinally complicated, andwas properly addressed by the Ninth Circuit. Although this Court has frequently considered challenges under the dormant Commerce Clause, it has

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only once needed to explicitly address this question.In so doing, the Court developed a clear, but factsensitive test that is best applied by lower courts on acase-by-case basis.

1. In Tracy, this Court considered a challenge toan Ohio tax that gas marketers, except local gasdistribution companies (LDCs), were required to pay.The Court explained that to advance a claim of discrimination based on the Commerce Clause, as athreshold matter, a plaintiff must show that "substantially similar entities" are being compared. 519U.S. at 299. The Court ultimately determined thatLDCs and non-LDC marketers were not similarlysituated.

In reaching its conclusion, the Court set forth astraightforward test. It first examined whethercompetition existed between the entities. If there isan "absence of actual or prospective competition between the supposedly favored and disfavored entitiesin a single market" a court need proceed no further:"there can be no" discrimination, and the claim mustfail. Id. at 300. This lack of competition betweenentities had proven decisive in previous cases. Id. at302.

In Tracy however, contrary to petitioners' assertions, the competition criterion was not decisive.Pet.24-25. As the Court explained, it was true thatnon-LDCs did not seek to compete with LDCs in the"captive market" of residential customers. Id. at 299-300. However, non-LDCs were "increasingly direct[ing]"

11

sales to "small commercial sector" entities that were

also served by LDCs; hence, the Court concluded"eliminat[ing] the sales tax differential might wellintensify competition" in this commercial market.Tracy, 519 U.S. at 302 (citations omitted). Hence, theCourt noted, Tracy was "unlike" previous cases inwhich there had been no competition whatsoeverbetween the entities. Id. Rather, the Court had toengage in a further inquiry to determine whether to"accord controlling significance to the [small commercial] market in which [LDCs and non-LDCs] compete,or to the noncompetitive [residential] market. ..." Id.at 303.

The Court proceeded to consider "a number ofreasons" in addition to the competition criterion,which must be "weighed" together. Id. at 304, 307.First, it considered congressional treatment of thesubject. The Court conceded that Congress had displaced historic state discretion over the sale of gas toconsumers in 1978. Id. at 294. However, Congresshad also left standing previous court decisions thathad "construed" federal law to permit state-createdLDC monopolies. Id. at 304, 305, n. 13. From this, theCourt inferred that Congress had acquiesced in-state-created LDC monopolies. Second, the Court examinedits own previous treatment of LDCs. Id. at 305.Finally, it explained that in considering whether entities are similarly situated, courts must "accommodate" decisions states have made regarding "healthand safety regulation." Id. at 306. In consideringthese additional factors, the Court concluded that

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congressional acquiescence, its own precedent, andstate law supported treating LDCs as differentlysituated from non-LDCs.

2. The Ninth Circuit faithfully applied theTracy test here. Following Tracy, it noted that "competing in different markets or offering differentproducts" is sufficient to conclude that "entities arenot similarly situated." RA.42. However, as in Tracy,the entities here did "compete in one of the samemarkets." RA.39.

Nonetheless, under Tracy, competing in differentmarkets is sufficient, but not necessary to show thatentities are not comparable. When entities compete insimilar markets, other factors must be considered.Here, Congress, this Court, and the states haverecognized that optometrists and retail optical storesare not similarly situated.

First, Congress has acquiesced in judicial determinations that optometry may be subject to stateprohibitions on co-location. In California State Bd. ofOptometry v. FTC, the D.C. Circuit determined thatCongress believed that "state regulation of the practice of optometry is a quintessentially sovereign act."910 F.2d 976, 982 (D.C. Cir. 1990). Thus, it invalidated a Federal Trade Commission rule, 54 Fed.Reg. 10,285, that banned states' prohibitions onco-location on the basis that they are harmful to

13

consumers.3 Congress never attempted to undo thisruling. Similarly, Congress let the Sixth Circuit's decision stand in LensCrafters, which permitted nearlyidentical regulations at issue in this case to survive.As in Tracy, this Court may infer tacit acquiescencefrom Congress's failure to counter cases that permitted state regulation of this type. Indeed, unlike the1978 natural gas legislation, Congress has neversought to displace states' intrastate regulation ofmedical care and eyewear sales.

Next, this Court has historically recognized thatoptometrists and ophthalmologists are differentlysituated. In Williamson, this Court upheld an Oklahoma law that prohibited retailers from havingdoctors present on their premises to provide eyeexams against a due process challenge. It observedthat the purpose of the law "is an attempt to free theprofession . . . from all taints of commercialism.. ..Geographical location may be an important consideration in a legislative program which aims to raise thetreatment of the human eye to a strictly professional

3 Former chairpersons of the FTC filed an amicus curiaebrief on behalf of petitioners attacking the laws, however, theFTC's own study shows that consumers receive less thorougheye exams when obtained at chain retail stores. 3 SER-II 571-579. When debatable policy considerations are at issue, alegislative resolution is greatly superior to one devised by thecourts. Tracy, 519 U.S. at 304. LensCrafters has sponsoredAssembly Bill 778 in the last two terms in the CaliforniaLegislature seeking to change the "co-location ban" and hasindicated it will advance another bill.

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level." 348 U.S. at 491. This Court has therefore

historically recognized the ability of a state to put inplace these precise regulations because opticians andoptometrists are differently situated.

Finally, the state's interests here are, if anything,more acute than in Tracy, and its determination thatRDOs and optometrists are differently situateddeserves even greater deference. "There is perhaps noprofession more properly open to such regulationthan that which embraces the practitioners of medicine." Watson v. State of Maryland, 218 U.S. 173, 176(1910). Thus, the Ninth Circuit correctly concludedthat it had to "give some deference to states' decisionsregarding health and safety." RA.39.

Ultimately, LDCs were differently situated fromnon-LDCs because the product LDCs sold was "bundled with rights and benefits mandated by stateregulators" in order to protect residential consumers.Tracy, 519 U.S. at 305. Similarly, "bundled" with theeyewear optometrists provide are a host of state-imposed rights and responsibilities. Doctors' professional responsibility runs through every aspect oftheir patient care; dispensing eyewear is no exception. RA.40-41; 1 SER-II 147, 171; 4 SER-II 1101-02.RDOs are not similarly regulated and, like non-LDCs,are therefore not similarly situated; optometrists andRDOs do not "sell eyewear to the exact same customers in the exact same way," Pet.4, nor are theirdifferences based solely upon state labeling. Pet.27.Thus, the Ninth Circuit's decision faithfully trackedthe test this Court laid out in Tracy.

15

B. The Ninth Circuit Properly AppliedExxon Corp. v. Governor of Marylandto This Case

1. After considering Tracy, the Ninth Circuitreinforced its analysis by relying on Exxon Corp. v.Governor ofMaryland, 437 U.S. 117 (1978). In Exxon,a Maryland statute prohibited refiners or producers("refiners") of petroleum products from owning gasoline service stations in Maryland. 437 U.S. at 119-20.Retailers or dealers - both within and headquarteredoutside the state - were not affected. Refiners, all of

whom were located out-of-state, claimed that byaffecting only out-of-state entities, the statute violated the Commerce Clause. Id.

It was undisputed that out-of-state refiners andin-state dealers competed for the same customers -vehicle drivers at gas pumps. However, the Courtdeclined to use competition as its shibboleth, andcompare the burden upon refiners to the benefit todealers. Rather, it accepted the premise that the"structure or methods of operation" of a refiner weredifferent from that of a dealer. Id. at 127-28. It there

fore compared in-state dealers only to out-of-statedealers, holding that the statute treated these similarly situated entities equally. Id. at 125-26.

Petitioners attempt to muddy Exxon by suggesting, without citation, that the Court found the regulation there "neutral" in its effect because both dealers

and refiners were equally forbidden from "verticalintegration." Pet.28-29. To the contrary, the Court

16

acknowledged that the statute placed a "burden""solely on interstate" refiners, that "refiners will no

longer enjoy the same status in the Maryland market," and that dealers labored under no such burden.

437 U.S. at 125-26. Notwithstanding the greaterburden, the Court relied on the fact that in-state

dealers could only be compared to out-of-state dealers, rather than out-of-state refiners, and the factthat the total volume of interstate commerce would

remain unaffected under the regulation. Id. at 127.

2. As in Exxon, because of their different "structure or methods of operation" optometrists and RDOscannot be compared in spite of putative competitionbetween them. Indeed, this is an easier case thanExxon. The discriminatory effects in Exxon weredramatic and there, all of the firms who were bur

dened by the regulation were out-of-state. Id. at 120.Here, it is undisputed that numerous in-state RDOsare equally affected by co-location prohibitions.Further, the playing field is far more level in thiscase: unlike the refineries in Exxon, RDOs possessnumerous competitive advantages foreclosed to optometrists. Most critically, this case concerns the zenith ofstate powers: regulation of the medical profession.

C. Petitioners' Remaining Cases Do NotImplicate Tracy's Clear Direction Northe Ninth Circuit's Reasoning

1. As Tracy notes, this Court's previous cases"assume[d]" - and correctly so - "a comparison of

17

substantially similar entities." Tracy, 519 U.S. at 298.In each of petitioners' cited cases, an in-state businesswas compared to an identical out-of-state business.See, e.g., C &A Carbone, Inc. v. Town of Clarkstown,NY, 511 U.S. 383 (1994) (out-of-state companiesprocessing solid waste versus in-state companiesprocessing solid waste); Lewis v. BT Inv. Managers,Inc., 447 U.S. 27 (1980) (out-of-state versus in-statecompanies furnishing investment advisory services);Hunt v. Washington State Apple Advertising Com'n,432 U.S. 333 (1977) (Washington apple growersversus North Carolina apple growers); Oregon WasteSystems, Inc. v. Department ofEnvironmental QualityofState of Or., 511 U.S. 93 (1994) (disposal of in-statesolid waste versus out-of-state solid waste). Accordingly, as Tracy noted, these cases could neither inform, nor disrupt the 7>acy test.

2. To confuse Tracy's clear test, petitionersbriefly cite cases that predate Tracy. They incorrectlysuggest that these cases set "competition" as the"touchstone" for determining whether the entities aresimilarly situated. Pet.17, 19-20. Indeed, petitionersgo so far as to incorrectly state the outcome in oneparticular case in order to obtain review.

a. First, in Bacchus Imports, Ltd. v. Dias, inkeeping with the test it would develop in Tracy, theCourt first investigated whether Hawaiian liquorscompeted with out-of-state liquors. 468 U.S. 263, 268(1984). It explained that although Hawaiian liquorshad only a tiny share of the liquor market, competition between the products nonetheless existed. It also

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noted that nothing in the lower court opinion foreclosed the conclusion that competition existed. Id. at269, n. 10. Cf. Pet.20 (suggesting that this discussionof the lower court opinion constituted the holding ofthis Court).

However, the mere existence of competition didnot conclusively prove that the entities were similarlysituated. The Court proceeded to the second step ofthe would-be Tracy test, and examined other factors,ultimately noting that "the legislature's motivation. . . was to aid Hawaiian industry." Bacchus, 468 U.S.at 271. It was only because the Hawaiian legislaturesaw the products as similarly situated and subject tothe same economic pressures, that it proceeded tobenefit local producers over outsiders. Here, California has exhibited no discriminatory purpose and consistently treats doctors as differently situated fromRDOs.

b. Next, petitioners' misstate the outcome inAlaska v. Arctic Maid, 366 U.S. 199 (1961). In thatcase, the Court upheld Alaska's statute that imposedtaxes on certain freezer ships but not others, accepting the state's argument that "freezer ships do notcompete with those who freeze fish for the retailmarket." Id. at 204. Instead, interstate freezer shipstransported their fish south for canning, thus were incompetition with local canners, who paid an evenhigher tax rate. Id. Cf. Pet. 19 ("[T]his Court rejectedthe state's argument that interstate canned salmonshippers are not similarly situated to local businessesthat ship frozen salmon for later canning.") (emphasisadded). As the Court explained in Tracy, Arctic Maiddid not need to proceed further, as an absence of

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competition is sufficient to show a lack ofdiscrimination. 519 U.S. at 302.

3. Tracy, Exxon, and Bacchus, create a clearuniform test: if no competition exists between entities, they are not similarly situated. If competitionexists, a Court must engage in a sensitive analysis todetermine if they are similarly situated. Petitionersargue throughout the petition, that competition aloneforms the basis for finding state laws discriminatory.Pet.5-6, 9-10, 14, 16-19, 25-26. However, this cannotbe. As Exxon explained, "ifan adverse effect on competition were, in and of itself, enough to render astate statute invalid, the States' power to engage ineconomic regulation would be effectively destroved "437 U.S. at 133-34. '

II. The Decisions of the Ninth Circuit DoNot Conflict with the Decisions of OtherCircuit Courts in Their Application ofTracy and Exxon

Tracy's test requires "a sensitive, case-by-caseanalysis of purposes and effects" best carried out bylower courts. West Lynn Creamery, Inc. v. Healy, 512U.S. 186, 201 (1994). All circuits have easily followedthis test in determining whether entities are similarly situated across a variety of contexts. The conclusion reached in this case - that doctors are notcomparable to lay retailers - falls within the heartland of these cases. Petitioners, in fact, essentiallyconcede that the Ninth Circuit has followed every oneof the cases they cite which considered the questionofsimilar situatedness since Tracy was decided.

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A. Petitioners admit that the approaches of theSecond, Fifth, Sixth and Ninth Circuits are all consistent. Pet.31. The Sixth Circuit's approach is particularly instructive. There, in a case for all purposesidentical to this one, the court observed that "licensed

optometrists are healthcare providers and ... haveunique responsibilities and obligations to their patients that are not shared by optometric stores."LensCrafters, 403 F.3d at 798, cert, denied, 546 U.S.1172 (2006). Therefore, under Tracy, the entities werenot comparable.

In LensCrafters, plaintiffs sought to distinguishFord Motor Co. v. Texas Dep'tof Transp., 264 F.3d 493(5th Cir. 2001), which in turn, is indistinguishablefrom Exxon. In Ford, a Texas law prohibited carmanufacturers from becoming car dealers. The courtnoted that Exxon, in approving prohibitions on refiners operating retail gas stations, controlled the case.It upheld the statute, although both manufacturersand dealers sought to compete in the car "retail market." Id. at 500. Indeed, Ford appeared to concedethat Exxon controlled, and asked the court to ignore it"as an anomaly." Id. at 501. Petitioners admit thatthe Ninth Circuit followed this case, which in turn,faithfully clove to Supreme Court precedent.

Similarly, in Brown & Williamson Tobacco Corp.v. Pataki, the Second Circuit rejected a claim that a

law that prohibited direct shipping of cigarettes toNew York residents benefited in-state "brick andmortar" shops over internet sellers. 320 F.3d 200(2d Cir. 2003). "Brick and mortar" stores, where a

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purchaser's age is easily verifiable, and excise taxesappropriately collected, were not comparable to interstate shippers. Rather, out-of-state shippers couldonly be compared to in-state shippers, which wereequally burdened. Similarly here, only in- and out-of-state opticians are comparable. Id. at 216.

B. Cases from the remaining circuits either donot consider the question of similar situatedness, orbuttress, rather than conflict with, the Ninth Circuit'sruling. Of the circuit cases they discuss, petitionersfocus most on National Revenue Corp. v. Violet, 807F.2d 285 (1st Cir. 1986), which predated Tracy by overa decade. There, the First Circuit correctly struckdown an economic regulation that reserved exclusively for Rhode Island attorneys the entire businessof debt collection and prohibited any out-of-state entity from collecting debts in the state. Id. at 290.

For petitioners' analogy to Violet to carry weight,however, California would have to prohibit RDOsaltogether from the sale of eyewear, restricting thatbusiness only to optometrists. Rather, Californiapermits RDOs to sell eyewear, and only forbids themfrom offering the medical services of optometrists ontheir premises. Thus, this regulation is more analogous to rules of professional conduct which permitdebt collectors to collect debts, but forbid them fromowning law practices or partnering with lawyers topractice law. Such prohibitions are standard acrossstates and part of the Model Rules of ProfessionalConduct. See, Model Code of Prof'1 Conduct R. 5.4(1983).

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Indeed, the First Circuit has found entitiesdissimilarly situated, even though they may competefor the same customers. In Wine and Spirits Retailers,Inc. v. Rhode Island, plaintiffs argued that by prohibiting large franchises and chain stores from owningpackage stores with Class A liquor licenses, RhodeIsland discriminated against out-of-state businesses.481 F.3d 1 (1st Cir. 2007). Chains were excluded ifone or more stores were located out-of-state. Id. at 12.

Plaintiffs argued that Rhode Island violated theCommerce Clause in part because certain "in-stateestablishments, such as wineries and brewpubspurveying locally produced wine and beer" wereexempted from the franchise restrictions. The court

rejected this argument as "feeble" because "thereha[d] been no showing that these kinds of businessestablishments are similarly situated to packagestores." Id. at 14, n. 4. The court demanded no showing that the entities did not compete for the samecustomers.

Petitioners' remaining First Circuit cases areinapposite. In Family Winemakers of California v.Jenkins, 592 F.3d 1 (1st Cir. 2010), the First Circuitexplained that a Massachusetts law which favoredlocal small wineries over large out-of-state wineries,was discriminatory. As in Bacchus, the court disapproved quantitative arguments that small producersof a good are differently situated from a large producer of the same good and pointed to explicitly discriminatory statements by legislative sponsors. Id. at 713. The distinction here between doctors and lay

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retailers is qualitative, rather than quantitative.Similarly, Walgreen Co. v. Rullan, held that in-statepharmacies were similarly situated to identical out-of-state pharmacies. 405 F.3d 50 (1st Cir. 2005).

C. In order to hint at a circuit split that doesnot exist, petitioners inexplicably rely on cases inwhich the courts never even considered the questionof similar situatedness. Pet.33-34. In Government

Suppliers Consolidating Services, Inc. v. Bayh, 975F.2d 1267 (7th Cir. 1992), the Seventh Circuit invalidated a state garbage hauling law that would haveplaced a disproportionate burden upon interstatetrucking activity. There was no question that in-stateand out-of-state trucking companies were similarlysituated. See also Baude v. Heath, 538 F.3d 608

(7th Cir. 2008) (treating in-state and out-of-statewineries as similarly situated). Similarly, in Cachia v.Islamorada, 542 F.3d 839 (11th Cir. 2008), the Eleventh Circuit considered and invalidated a zoningordinance which benefited local restaurants by pro

hibiting chain restaurants.4

4 To be sure, in each of these cases, dicta suggests that astate may not proscribe methods of operation that burden interstate firms. However, none of these cases considered whetherdifferences in operation may situate entities differently underthe Commerce Clause. Moreover, at stake here are not differentmethods of operation of the same profession, but rather "distinctions, historical and functional, between professions," which "require consideration of quite different factors." Edenfield v. Fane,507 U.S. 761, 774 (1993).

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Thus, the Ninth Circuit in this case followedevery other circuit to have considered the question ofsimilar situatedness. No lower court has found theTracy test hard to administer, and this Court's intervention is unnecessary.

III. Because There Is No Effect, Discriminatory or Otherwise, on Interstate Com-merce, the Court Can Offer PetitionersNo Relief, Which Renders This Case anUnsuitable Vehicle for Resolving SimilarSituatedness

Laws that discriminate "on their face or in effect"against interstate commerce or interests violate theCommerce Clause. Fort Gratiot Sanitary Landfill v.Michigan Dep't of Natural Resources, 504 U.S. 353,361 (1992). The Ninth Circuit held that the laws didnot discriminate on their face or in purpose againstinterstate RDOs, a conclusion that petitioners do notquestion.5 It then held that RDOs and optometristswere not similarly situated, and remanded the casewithout considering whether commerce was actuallyburdened. RA.43-45.

However, upon remand, the District Court heldthat there was no burden, discriminatory or otherwise, on interstate commerce. RA.63, 69. The Ninth

In the proceedings below, petitioners claimed only that thelaws are discriminatory in effect, and not that they discriminated in purpose or facially. 1 EOR-I 919 (sealed).

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Circuit affirmed. RA.29. Petitioners have not chal

lenged that determination here. Even if this Courtgranted the petition, petitioners could obtain no reliefsince this essential aspect of their claim has beenconceded. Accordingly, even if the "similarly situated"issue merits this Court's review, this case presents anunsuitable vehicle for the Court to consider the

merits of their discrimination claim.

A. The Challenged Laws Do Not Interferewith Commerce in Goods

Following remand, both the District Court andthe Ninth Circuit held that the laws challenged heredo not affect interstate commerce. The Ninth Circuit

noted that under Exxon and Minnesota v. Clover LeafCreamery Co., 449 U.S. 456 (1981), interstate commerce was burdened only when the "flow of goods,"rather than the distribution of profits, is affected.RA.17, 21. As the Ninth Circuit noted, "the eyewearsold by opticians is no more likely to have been produced outside of California than the eyewear sold byoptometrists and ophthalmologists." RA.13, n. 6. Indeed, petitioners conceded that the flow of eyewear orany of its component parts is not impacted by thechallenged laws. 2 SER-II 73.

Given petitioners' failure to challenge the NinthCircuit's determination, and their concession that theflow of goods remains unaffected by California law,their claim must fail even if this Court were to rule intheir favor on similar situatedness.

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B. Even If a Burden on Commerce inGoods Need Not Be Proved, PetitionersAre Not "Interstate" Entities

Even if petitioners had a putative injury, andinterstate interests may be affected when the flow ofgoods is unaffected, petitioners have failed to showthat the vast majority of optical companies burdenedby the co-location ban are out-of-state. Pet.6. Theyoffer no evidence to establish the number of California-registered RDOs that are headquartered within oroutside of the state.

Petitioners appear to argue that a company'sinterstate status should be based on the location of itsheadquarters. However, this would open up statelaws to challenges whenever a company incorporatedout-of-state "suddenly purchased all a state's retailers," or indeed, reincorporates out-of-state. RA.23, n. 16.This outcome would be "unworkable and illogical"under this interpretation, "a regulation that previously was constitutional might immediately be renderedunconstitutional." Id.

Here, LensCrafters has close to 100 Californiastores that are registered as RDOs. 6 EOR-I 1200-01.Petitioners cannot "assume[] that an out-of-stateconcern that permanently locates an operation withinthe state is still an 'out-of-state' entity that can complain that a law that even-handedly restricts a localmarket is 'discriminatory.'" Ben Oehrleins and Sonsand Daughter, Inc. v. Hennepin County 115 F3d1372, 1386 (8th Cir. 1997).

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Entities, Interstate Commerce RemainsUnaffected

Finally even if petitioners show that RDOs aregenerally out-of-state entities, they cannot show thatinterstate commerce will be burdened by marketshare shifting in-state. To the extent that this case atall affects the interstate flow of goods, as in Exxon, ifLensCrafters closes some of its stores, there is "no

reason to assume that their share of the entire supplywill not be promptly replaced by other interstate"RDOs. Exxon, 437 U.S. at 127. Moreover, there is no

indication that optometrists benefit overall fromCalifornia's regulatory scheme more than RDOs. Tothe contrary, RDOs are subject to fewer regulationsthan optometrists. This Court's precedent requiresthe effects of the overall regulatory scheme to betaken into account when assessing whether interstatecommerce is burdened. For example, in Arctic Maid,interstate freezer ships challenged a license tax thatapplied only to freezer ships. However, the Courtnoted that local canners were subject to a higher taxunder another provision of Alaska law. 366 U.S. at204. Under this approach, RDOs are not, in fact,burdened. Here, there is no evidence that within theoverall regulatory scheme, where doctors are highlyregulated and RDOs are not, that RDOs can reasonably complain that they are excessively burdened.

Accordingly, because petitioners cannot showthat the challenged laws impact interstate commerce,

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this Court should avoid rendering a decision that canoffer petitioners no relief and dismiss the petition.

CONCLUSION

For the reasons discussed above, the Petition forWrit of Certiorari should be denied.

Respectfully submitted,

Kamala D. Harris

Attorney General of CaliforniaSusan Duncan LeeActing State Solicitor GeneralKathleen A. KenealyChiefAssistant Attorney GeneralAlfredo TerrazasSeniorAssistant Attorney GeneralLinda K. Schneider*^Counsel ofRecordSupervising Deputy Attorney GeneralSherry L. LedakisDeputy Attorney GeneralCraig Konnoth

Deputy Solicitor General110 West A Street, Suite 1100San Diego, CA 92101Telephone: (619) 645-3037Fax: (619) 645-2061

Linda.Schneider@doj.ca.govCounsel for Respondents

January 16, 2013