Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_02-cv-01464/USCOURTS-caed-2_02-cv-01464-4/pdf.json

Nature of Suit Code: 950
Nature of Suit: Contitutionality of State Statutes
Cause of Action: 28:1331 Federal Question: Other Civil Rights

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

NATIONAL ASSOCIATION OF

OPTOMETRISTS & OPTICIANS;

LENSCRAFTERS, INC; and EYE NO. CIV. S-02-1464 LKK/DAD

CARE CENTERS OF AMERICA, INC.,

Plaintiffs,

v. O R D E R

BILL LOCKYER, in his official 

capacity as Attorney General TO BE PUBLISHED

of the State of California; and

CHARLENE ZETTEL, in her official

capacity as Director of the

Department of Consumer Affairs,

Defendants,

 /

Plaintiffs challenge the constitutionality of California”s

statutory scheme regulating the manner in which interstate

optical companies sell eyewear in California. Plaintiffs are

the National Association of Optometrists and Opticians ("NAOO")

and two out-of-state optical companies, LensCrafters, Inc. and

Eye Care Centers of America, Inc. ("ECCA"). Both LensCrafters

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The Department of Consumer Affairs has supervisory powers 1

over the Board of Optometry, which has the power to discipline

optometrists, and the Medical Board of California, which has the

power to discipline opticians.

As explained in the Court's order staying the case, a 2

decision in Cole favorable to the plaintiffs here may have

eliminated or narrowed the necessity for a ruling on plaintiffs'

federal constitutional claims.

2

and ECCA own numerous optical stores throughout the United

States. Defendants are the Attorney General of California and

the Director of the California Department of Consumer Affairs,

both sued in their official capacities. Plaintiffs seek a 1

declaration that the challenged statutory and regulatory

provisions violate the Commerce Clause, Equal Protection Clause,

Due Process Clause and First Amendment of the United States

Constitution, and seek to enjoin enforcement of the provisions

on that basis.

Currently pending before the court are motions for summary

judgment filed by plaintiffs and defendants. These motions

address the question of whether the challenged statutory scheme

violates the dormant Commerce Clause. These motions were

originally filed in 2003; however, on March 10, 2004, the entire

case was stayed pending resolution of People v. Cole, 38 Cal.

4th 964 (2006). On June 12, 2006, the California Supreme 2

Court decided Cole and the stay in the pending case was lifted. 

Oral argument was heard on the pending motions prior to the stay

and again on September 25, 2006. The court decides the matter

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 Also pending before the court are motions to file amicus 3

curiae briefs by the California Optometric Association and Melvin

Gene Snow and Sabrina Hughes. Plaintiffs filed an opposition to

both motions. The court notes that the pending motions for summary

judgment were filed in 2003 and several hearings have occurred in

the case. The parties seeking to file amicus briefs fail to

explain why they waited until the fall of 2006 to file their

requests. The requests to file amicus briefs simply come too late.

See, e.g., Hawksbill Sea Turtle v. FEMA, 11 F. Supp. 2d 529, 541

(D.V.I. 1998) (denying leave to file amicus brief on grounds that

the "information provided in the brief is untimely since it comes

almost two years after this action was commenced and several months

after the parties completed briefing their Cross Motions for

Summary Judgment."); O Centro Espirita Beneficiente Uniao Do

Vegetal v. Ashcroft, 282 F. Supp. 2d 1271, 1274 (D.N.M. 2002)

(denying leave to file amicus brief where pending motions had been

briefed for over one year and hearing had previously been held).

For these reasons, the requests to file amicus briefs are denied.

Undisputed unless otherwise noted. Both parties filed 4

motions to strike certain evidence. None of the evidence at issue

in the motions to strike was relied upon by the court in reaching

its conclusion. Thus the motions are moot.

3

based on the papers and after oral argument. 

3

I.

UNDISPUTED FACTUAL AND PROCEDURAL BACKGROUND4

A. The Challenged Laws

Plaintiffs challenge three sections of California's

Business & Professions Code,§§ 655, 2556 and 3130, and two

companion regulations, 16 Cal. Code of Regs, Title 16 §§

1399.251 and 1514, to the extent these provisions taken together

prohibit out-of-state optical companies from offering

prescription eyewear at the same location in which eye

examinations are provided, and from advertising that eyewear and

eye examinations are available in the same location. 

Section 655 prohibits an out-of-state optical company from

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Section 655 makes it unlawful for an optician or any 5

company that manufactures or distributes eyewear to "have any

membership, proprietary interest, co-ownership, landlord-tenant

relationship, or any profit-sharing arrangement in any form,

directly or indirectly," with an optometrist. Cal. Bus. & Prof.

Code § 655.

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leasing space in its eyewear store to an optometrist. Section 5

2556 prohibits an out-of-state optical company from furnishing

the services of an optometrist on or near its optical dispensing

premises. Section 2556 also prohibits non-optometrists from

advertising the services of an optometrist. 

B. Plaintiffs' Allegations

Plaintiffs allege that optometrists and optical companies

compete vigorously to sell eyewear in a national market. They

claim that the ability to sell eyewear at the same location in

which eye examinations are performed provides a significant

competitive advantage. According to plaintiffs’, consumers

benefit from and prefer the provision of such "one-stop

shopping" and patronize entities that can offer it. 

Under California's statutory and regulatory scheme,

in-state optometrists and ophthalmologists are permitted to sell

eyewear in the same location in which eye examinations are

performed, and to advertise that eyewear is sold in that manner. 

Plaintiffs allege that out-of-state optical companies are

forbidden from competing for the same customers in the same way. 

Plaintiffs also allege that California's restrictive scheme

harms the welfare and health of consumers, unjustly burdens

plaintiffs, and provides no discernible countervailing benefits

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to the public. 

C. The Retail Eyewear Market

"Prescription eyewear" refers to corrective lenses and

frames for eyeglasses, manufactured according to a lens

prescription issued by either an optometrist or an

ophthalmologist. Decl. of Roger Noll in Supp. of Pls.’ Mot. for

Summ. J. re: Discriminatory Effect ("Noll Decl.") at ¶ 11. In

California, an eye examination must be performed by an

optometrist, licensed by the California Board of Optometry, see

Cal. Bus. & Prof. Code §§ 3010, 3041.2, 3055, or by an

ophthalmologist, a medical doctor specializing in treating eye

disease, licensed by the Medical Board of California, see Cal.

Bus. & Prof. Code §§ 2003, 2050. An optometrist or

ophthalmologist will write a lens prescription, which is then

used to manufacture lenses for frames (and/or contact lenses). 

Noll Decl. at ¶ 12.

A consumer may purchase eyewear from among the following

professionals: 

1. Dispensing Optometrists/Registered Dispensing

Optometrists

Many optometrists licenced in California sell eyewear as

part of their services. Noll Decl. at ¶ 14. They offer "onestop shopping" in that a patient can get his or her eyes

examined and purchase glasses in the same location. 

Defendants' expert, Lawrence Thal, O.D., former President

of the California Optometric Association and former President of

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the California Board of Optometry, estimates that over 90

percent of optometrists in private practice sell eyewear. Dep.

of Lawrence Thal Vol. I ("Thal Dep. I") at 116:25-118:9,

129:13-15, Ex. 6 of Decl. of Lori Schechter in Supp. of Mot.

Pls.’ for Summ. J. re: Discriminatory Effect ("Schechter Decl.

re: Discriminatory Effect"); Dep. of Lawrence Thal Vol. II

("Thal Dep. II") at 394:23-395:6, Ex. 7 of Schechter Decl. re:

Discriminatory Effect. Such optometrists are referred to as

"dispensing" optometrists, or registered dispensing optometrists

("RDOs"). 

In 2001, dispensing optometrists accounted for

approximately 31 percent of optical retail sales nationwide. 

Noll Decl. at ¶ 14. Plaintiff's expert, Gary Ford, however,

explains that in California, this percentage is likely much

larger, as a recent California survey showed that 60 percent of

consumers last purchased their eyewear from a dispensing

optometrist. Decl. of Gary T. Ford in Supp. of Pls.’ Mot. for

Summ. J. re: Discriminatory Effect ("Ford Decl.") at ¶ 9.

Plaintiffs maintain that dispensing optometrists derive a

significant portion of their income from the sale of eyewear. 

It is estimated that the percentage of gross income for

dispensing optometrists derived from the sale of eyewear exceeds

50 percent. The percentage of net income is estimated at

approximately 25 percent. Noll Decl. at ¶ 14; Dep. of Neil

Gailmard ("Gailmard Dep.") at 68:17-69:23, Ex. 8 of Schechter

Decl. re: Discriminatory Effect. 

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2. Interstate Optical Companies

Interstate optical chains, such as LensCrafters and ECCA,

are the main competitors of dispensing optometrists in the sale

of prescription eyewear. As plaintiffs point out, in 2001,

interstate optical chains accounted for approximately 40 percent

of optical retail sales nationwide. Noll Decl. at ¶ 16. A

recent survey showed that in California, 26 percent of consumers

made their last purchase of prescription eyewear from an

interstate retail chain. Id. at ¶ 16; Ford Decl. at ¶ 10. 

Prior to the California Supreme Court's decision in Cole,

explained in greater depth herein, interstate optical chains had

been selling eyewear while also associating with specialized

health care service plans licensed under the California

Knox-Keene Health Care Service Plan Act of 1975, Cal. Health &

Safety Code § 1340 et seq. See, e.g., Dep. of Wallace W.

Lovejoy ("Lovejoy Dep.") at 23:16-22, Ex. 1 of Schechter Decl.

re: Discriminatory Effect.

The Knox-Keene plans are a type of HMO. Under the

supervision of a state agency, the Department of Managed Health

Care ("DMHC"), Knox-Keene plans employ or contract with

optometrists and provide optometric services to plan members. 

The interstate chains then lease space in their stores to

Knox-Keene plans that employ the optometrists. Plaintiffs aver

that, in this way, interstate chains had been able to provide

one-stop shopping in competition with in-state dispensing

optometrists and ophthalmologists, albeit with added regulatory

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and financial burdens. 

These arrangements made pursuant to the Knox-Keene Act were

recently invalidated by the California Supreme Court in the Cole

case. At issue in the case was the Attorney General's

contention that the co-location of an optical company, Pearle

Vision, with an affiliated Knox-Keene plan that employs

optometrists, violated two of the challenged restrictions,

specifically Business & Professions Code sections 655 and 2556,

and Code of Regulation section 1399.251. Under the Attorney

General's interpretation, there was no circumstance under which

an interstate entity could offer one-stop shopping consistent

with the challenged restrictions. 

In its recent opinion, the California Supreme Court

concluded that the Act does not exempt approved plans from the

restrictions imposed by sections 655 and 2556. People v. Cole,

38 Cal. 4th 964, 969 (2006). The court concluded that approved

plans are authorized to deliver professional services, not to

lease space. Id. at 986. "As a landlord, Pearle RDO simply is

not acting as a ‘provider of professional services.'" Id. 

Without ruling on the question of whether or not the Pearle,

Inc. business arrangement does in fact violate sections 655 and

2556, the court held that the Knox-Keene Act did not exempt

optical companies from the restrictions set forth in sections

655 and 2556. The practical effect of the Cole decision is that

optical companies may no longer compete in the California market

through arrangements pursuant to the Knox-Keene Act. 

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3. Independent Opticians 

Consumers may also purchase eyewear from independent

licensed opticians. Cal. Bus. & Prof. Code §§ 2550, 2553; Noll

Decl. at ¶ 17. These independent optical shops sell eyewear,

but do not affiliate with optometrists to make eye examinations

available at the same location. Noll Decl. at ¶ 17. In 2001,

independent opticians accounted for approximately 13.8 percent

of retail sales nationwide. Id. A 2003 California survey

showed only about 3.8 percent of consumers had made their last

purchase of prescription eyewear from independent opticians. 

Ford Decl. at ¶ 12. These independent opticians are a declining

part of the market. Noll Decl. at ¶ 27.

4. Dispensing Ophthalmologists 

Finally, consumers may also purchase eyewear from

ophthalmologists. In 2001, dispensing ophthalmologists

accounted for approximately 12.3 percent of optical retail sales

nationwide. Noll Decl. at ¶ 15. 

D. Consumer Demand for One-Stop Shopping

Plaintiffs present uncontroverted evidence demonstrating

that the primary factor effecting competition in the retail

eyewear market is the overwhelming consumer preference for

one-stop shopping. One-stop shopping has "become the dominant

form of retailing eyewear." Noll Decl. at ¶ 27. As the market

figures relating to California independent opticians show,

"stores that sell eyewear but do not offer [one-stop shopping]

are increasingly marginal competitors in the market." Noll

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Decl. at ¶ 27; Ford Decl. at ¶ 12; Lovejoy Dep. at 246:24-247:2. 

Defendants concede that offering one-stop shopping provides

a competitive advantage because it is "easier to attract

business, make sales, and enjoy profits." Defs.' Suppl. Resp.

to ECCA First Set of Interrogs., No. 6, Ex. 11 of Schechter

Decl. re: Discriminatory Effect. 

Indeed, both defendants' and plaintiffs' experts state that

consumers prefer the convenience of one-stop shopping and make

their purchasing decisions accordingly. Ford Decl. at ¶¶ 15,

16; Dep. of Frank Baynham ("Baynham Dep.") at 116:21-117:5;

135:23-136:21, Ex. 12 of Schechter Decl. re: Discriminatory

Effect; Lovejoy Dep. at 272:24-273:13; Defs.' Suppl. Resp. to

ECCA First Set of Interrogs., No. 8, Ex. 11 of Schechter Decl.

re: Discriminatory Effect. Consumers also find it more

convenient to address any quality issues in one location,

without concern for determining whether it was the optician or

the optometrist that was responsible for the error. Noll Decl. 

¶ 27. Defendants' expert, Dr. Thal, agrees. Thal Dep. I at

87:20-89:24, Ex. 6 of Schechter Decl. re: Discriminatory Effect

(The ability to return to only one place to correct an error is

"another benefit to the patient in being able to purchase their

eyewear at the same place where they had their eyes examined.").

E. Effect of the Challenged Restrictions on Ability of

Interstate Optical Chains to Offer One-Stop Shopping

Section 655 prohibits an interstate optical company from

leasing space in its eyewear store to an optometrist. Section

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655 was introduced in the California Legislature in 1969 "on

behalf of the California Optometric Association in an effort to

protect California from some of the problems. . . being

experienced in eastern states, where large business interests

have completely taken over the optometric profession." Letter

from Senator Sherman, the legislation's chief sponsor, to

Governor Reagan, dated August 11, 1969 ("Letter from Sen.

Sherman to Gov. Reagan"), Ex. 13 of Schechter Decl. re:

Discriminatory Effect; Dep. of Carolina Rose ("Rose Dep.") at

207:14-209:20, Ex. 14 of Schechter Decl. re: Discriminatory

Effect; Defs.' Resp. to NAOO RFA No. 21, Ex. 18 of Schechter

Decl. re: Discriminatory Effect. In enacting Section 655, it

was not the Legislature's "intention to harm any existing

relationships between California optometrists" which were thus

excluded "by a careful amendment." See Letter from Sen. Sherman

to Gov. Reagan, Ex. 13 of Schechter Decl. re: Discriminatory

Effect.

Section 2556 prohibits an interstate optical company from

furnishing the services of an optometrist, or from maintaining

an optometrist "on or near the premises used for optical

dispensing . . ." and from advertising that an optometrist is

available where the eyewear is sold. Cal. Bus. & Prof. Code §

2556. Defendants' legislative analyst expert concedes that 

section 2556 was enacted as part of an effort to prevent

out-of-state optical companies from coming into California and

undercutting dispensing optometrists on price. Rose Dep. at

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The standards applicable to resolution of a motion for 6

summary judgment are well known, and have been discussed at length

by this court elsewhere. See, e.g., Guru Nanak Sikh Society v.

County of Sutter, 326 F. Supp. 2d 1140, 1147 (E.D.Cal. 2003). As

a concession to both the shortness of life and the length of this

opinion, the court will not repeat that discussion.

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173:15-174:18. Section 1514 likewise prohibits an optical chain

from occupying rented space with an optometrist. Sections 3130,

1514 and 1399.251 all prohibit optical chains from advertising

the availability of one-stop shopping at their locations. 

California law does not impose analogous restrictions on

in-state dispensing optometrists or ophthalmologists; instead,

it leaves them free to sell eyewear and to advertise one-stop

shopping. See, e.g., Cal. Bus. & Prof. Code § 2557. 

II.

ANALYSIS 6

A. The Dormant Commerce Clause 

The Supreme Court has long interpreted the Commerce Clause

to have a "negative aspect," referred to as the dormant Commerce

Clause, "that denies the States the power unjustifiably to

discriminate against or burden the interstate flow of articles

of commerce." Oregon Waste Sys., Inc. v. Dep't of Envtl.

Quality, 511 U.S. 93, 98 (1994). The Court's dormant Commerce

Clause jurisprudence is forged from the tension between the

Constitution's twin commitments to national unity and local

autonomy. See Conservation Force, Inc. v. Manning, 301 F.3d

985, 990 (9th Cir. 2002); see also H.P. Hood & Sons, Inc. v. Du

Mond, 336 U.S. 525, 533-34 (1949) (explaining that "[t]he desire

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of the Forefathers to federalize regulation of foreign and

interstate commerce stands in sharp contrast to their jealous

preservation of [states'] power over their internal affairs"). 

The Court has "struggled (to put it nicely) to develop a set of

rules by which we may preserve a national market without

needlessly intruding upon the States' police powers, each

exercise of which no doubt has some effect on the commerce of

the Nation." Camps Newfound/Owatonna, Inc. v. Town of Harrison,

520 U.S. 564, 596 (1997) (Scalia, J., dissenting). 

The instant motions demonstrate the difficulty of

adjudicating between these tensions, pitting the State's power

to regulate health professions relating to eye care against the

federal interest in preserving a national market for eyewear

that is free from protectionist barriers to competition. Given

this difficulty, the Supreme Court has cautioned that the

dormant Commerce Clause inquiry should be undertaken by

“eschew[ing] formalism for a sensitive, case-by-case analysis of

purposes and effects.” West Lynn Creamery, Inc. v. Healy, 512

U.S. 186, 201 (1994). 

Nonetheless, in order to determine whether the regulations

challenged in the case at bar implicate the dormant Commerce

Clause, the court must engage in a two-part analysis. First,

the court must determine if the challenged laws discriminate

against interstate commerce. Second, "[w]here discrimination

exists, the regulation is subject to strict scrutiny under which

it is the state's burden to show that the discrimination is

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narrowly tailored to further a legitimate interest." 

Conservation Force, 301 F.3d at 995 (internal citations and

quotation marks omitted). If there is no discrimination and "if

the State regulates evenhandedly, the regulation is valid unless

the plaintiff can show that it imposes a burden on interstate

commerce clearly excessive in relation to the putative local

benefits." Id.

The court first addresses the threshold question of whether

the challenged regulations discriminate against interstate

commerce. 

B. Discriminatory Effect on Interstate Commerce 

"Discrimination" for purposes of the Commerce Clause means

"differential treatment of in-state and out-of-state economic

interests that benefits the former and burdens the latter."

Oregon Waste Sys., 511 U.S. at 99. A state law may discriminate

against interstate commerce in three ways, any one of which is

sufficient to trigger strict scrutiny. A law may discriminate

(1) on its face, by explicitly treating local and out-of-state

interests differently; (2) in its purpose; (3) or in its effect,

by providing a competitive advantage to local interests. See

SDDS, Inc. v. South Dakota, 47 F.3d 263, 267 (8th Cir. 1995). 

Defendants contend that the dormant Commerce Clause is

simply inapplicable because the challenged restrictions do not

effect interstate commerce. This is so, they argue, because the

restrictions address purely local concerns and treat in-state

and out-of-state entities in the same manner. While the latter

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issue is really just another way of framing the discrimination

question, the former (whether the restrictions address purely

local concerns) must be addressed as a threshold matter. Put

simply, if the challenged restrictions have no impact on

interstate commerce, the inquiry ends there.

1. Impact on Interstate Commerce 

a. The Lack of Facially Discriminatory Language

Defendants' first argument in this regard may be easily

dispensed with. They contend that the language of the

challenged statutes and regulations makes no reference to

interstate commerce or out-of-state companies. This contention

while correct misses the point. "Certainly, a facially neutral

statute may be discriminatory because of its effect." Ford

Motor Co. v. Texas Dep't of Transp., 264 F.3d 493, 500 (5th Cir.

2001); see Minnesota v. Clover Leaf Creamery Company, 449 U.S.

456, 471 n. 15 (1981) ("A court may find a state law constitutes

‘economic protectionism' on proof of either discriminatory

effect, or of discriminatory purpose."). 

While the language of a statute is certainly relevant to

determining how that statute achieves effects in the real world,

the absence of explicitly discriminatory language does not

necessarily indicate an absence of discrimination. This is the

essence of the concept of "discriminatory effects," which has

been a feature of American constitutional law, not only in the

Commerce Clause context, but in many other contexts since the

landmark decision in Yick Wo v. Hopkins, 118 U.S. 356 (1886).

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b. Effect on Flow of Goods and Services

Defendants next argue that the challenged statutes and

regulations are unrelated to the flow of goods and services and

therefore have no effect on interstate commerce. Nothing about

the challenged enactments, they argue, effects or prevents the

passage of interstate goods or services either into or out of

California; their subject matter is purely local activity. 

The Supreme Court has addressed similar arguments and has

held that "[e]ven when business activities are purely local, if

‘it is interstate commerce that feels the pinch, it does not

matter how local the operation which applies the squeeze.'"

Camps Newfound/Owatonna, Inc., 520 U.S. at 573 (quoting Heart of

Atlanta Motel, Inc. v. United States, 379 U.S. 241, 258 (1964)). 

Here, however, the activity being regulated – the operation of

interstate chains within California – is clearly not purely

local. Momentarily setting aside the question of whether the

challenged restrictions are discriminatory or invalid, it is

nevertheless clear that this is a classic "market entry" case. 

It is well-established that regulations which "prevent

competition in local markets by out-of-state firms" effect

interstate commerce just as much as laws regulating the free

flow of goods. Lewis v. BT Inv. Managers, 447 U.S. 27, 39

(1980) (striking down statute which discriminated against

out-of-state entities' ownership of local investment or trust

businesses). 

For instance, in C & A Carbone, Inc. v. Clarkstown, 511

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U.S. 392, 391 (1994), the Supreme Court found that a local

ordinance requiring all solid waste to be processed at a

pre-designated local facility effected interstate commerce. 

Carbone, 511 U.S. at 389. The Court explained that "the article

of commerce is not so much the solid waste itself, but rather

the service of processing and disposing of it." Id. at 391. 

"The essential vice in laws of this sort is that they bar the

import of the processing service" and "leave[] no room for

investment from outside." Id. at 392. Consequently, the

dormant Commerce Clause was implicated because the ordinance

restricted the flow of services, and "deprive[d] out-of-state

businesses of access to a local market." Id. at 389; see also

Camps Newfound/Ottawana, 520 U.S. at 577 n.10 ("We have long

noted the applicability of our dormant Commerce Clause

jurisprudence to service industries."); Gulch Gaming, Inc. v.

South Dakota, 781 F. Supp. 621, 625 (D.S.D. 1991) (finding that

statute which "interferes with the flow of investments across

state lines . . . [and thus] restricts the opportunities of

nonresidents . . . to invest . . . in businesses owning South

Dakota gaming licenses" effects interstate commerce); John

Havlir & Assoc., Inc. v. TACOA, Inc., 810 F. Supp. 752, 756

(N.D. Tx. 1993) ("Statutes that impose burdens on out-of-state

businesses that are not applicable to in-state businesses effect

interstate commerce just as directly as those that regulate the

flow of goods across state lines.").

Similarly, and for the reasons discussed herein, the

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relevant regulated activity in this case is not so much the flow

of eyewear itself, as it is the service of selling prescription

eyewear.

c. Professional Regulations & Commerce Clause

Defendants appear to contend that state regulation of the

learned professions is necessarily purely local, or insulated in

some way from Commerce Clause challenge. I cannot agree.

In National Pharmacies, Inc. v. De Melecio, 51 F. Supp.2d

45 (D.P.R. 1999), a dormant Commerce Clause challenge to Puerto

Rico's restrictions on the practice of pharmacy, the court

rejected a nearly identical argument by the government that the

"practice of pharmacy is a profession, not a part of commerce,

and Puerto Rico's regulation of pharmacists is therefore not

subject to the strictures of the dormant commerce clause." Id.

at 54. The conclusion reached by the National Pharmacies court

– that there is no such exception for the profession – is just

as applicable here. 

It is true that the states have broad powers to regulate

and license the practice of the professions, Goldfarb v. Virgina

State Bar, 421 U.S. 773, 792 (1975); Goldfarb v. Supreme Court

of Virginia, 766 F.2d 859, 862 (4th Cir. 1985), and that the

states' police powers indisputably provide authority for

legislation which protects the health and safety of their

citizens. See Maine v. Taylor, 477 U.S. 131, 151-52 (1986);

Ferndale Laboratories v. Cavendish, 79 F.3d 488, 495 (6th Cir.

1996). It does not follow that the state is free from Commerce

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Clause concerns. On the contrary, when a state legislates in an

area of legitimate local concern, it nevertheless is limited by

the Commerce Clause. Minnesota v. Clover Leaf Creamery Co., 449

U.S. 456, 471 (1981). This limitation applies even for state

regulations regarding the health of its citizens. See Kassel v.

Consol. Freightways, 450 U.S. 662, 670 (1981) ("The incantation

of a purpose to promote the public health or safety does not

insulate a state law from Commerce Clause attack. Regulations

designed for that salutary purpose nevertheless may further the

purpose so marginally, and interfere with commerce so

substantially, as to be invalid under the Commerce Clause.");

Hunt v. Washington State Apple Adver. Comm'n, 432 U.S. 333, 350

(1977) ("[a] finding that state legislation furthers matters of

legitimate local concern, even in the health and consumer

protection areas, does not end the inquiry."). 

That proposition applies with equal force in the case of

state laws that regulate professions. Courts have considered

whether state laws that regulate professions unconstitutionally

limit interstate commerce on numerous occasions, making clear

that there is no "professional regulation" exception to the

Constitution's dormant Commerce Clause requirements. See, e.g.,

Head v. New Mexico Bd. of Exam'r in Optometry, 374 U.S. 424,

428-29 (1963) (law prohibiting optometrists from mentioning

specific prices in their advertising); Tolchin v. Sup. Ct. of

the State of New Jersey, 111 F.3d 1099, 1106-11 (3rd Cir. 1997)

(requirements for the practice of law in state); Kirkpatrick v.

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Shaw, 70 F.3d 100, 103 (11th Cir.1995) (rules for lawyers'

admission to state bar); Tetra Technologies, Inc. v. Harter, 823

F.Supp. 1116, 1121-24 (S.D.N.Y. 1993) (law on licensing

engineers); Ferndale, 79 F.3d at 492-96 (regulation of wholesale

distributors of pharmaceuticals); K-S Pharmacies v. American

Home Products, 962 F.2d 728, 730-32 (7th Cir. 1992) (statute

forbidding price discrimination in wholesale transactions of

prescription drugs).

Analogously, in the Sherman Act antitrust context, the

professions are considered a part of interstate commerce. See

Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 329- 33 (1991)

(allegation that hospitals conspired to exclude a single

physician from the market for ophthalmological services in Los

Angeles was sufficient to establish a nexus to interstate

commerce for purposes of antitrust jurisdiction); Goldfarb, 421

U.S. at 786-88 (in case involving a minimum legal fee schedule

established by bar association, Court rejected argument that the

learned professions were not a part of trade or interstate

commerce); Boddicker v. Arizona State Dental Ass'n, 549 F.2d

626, 629-32 (9th Cir. 1977) (dental associations' membership

requirements on individual dentists effected interstate commerce

and these practices were not entitled to a "learned profession"

exemption).

Because the challenged regulations implicate, and indeed

effect, interstate commerce, the next step of the analysis is

determining whether the regulations discriminate against

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interstate commerce.

2. Discriminatory Effect

a. Whether the Relevant In-State and Out-of-State

Entities Are Similarly Situated

In dormant Commerce Clause analysis, "‘discrimination'

simply means differential treatment of in-state and out-of-state

economic interests that benefit the former and burden the

latter." Oregon Waste Systems, 511 U.S. at 99. 

The evidence proffered by the plaintiffs, and much of the

defendants' evidence as well, demonstrates that in-state

optometrists and ophthalmologists who sell eyewear compete with

interstate optical chains to sell the same product —

prescription eyewear — to the same customers in the same retail

eyewear market. Defendants' own experts, for instance,

testified that a dispensing optometrists' "biggest single

competitor [is] a retail chain." Dep. of Joseph Bruneni

("Bruneni Dep.") at 75:16-24, Ex. 10 of Schechter Decl. re:

Discriminatory Effect. Moreover, consumers can and do switch

between dispensing optometrists and optical chains to purchase

their prescription eyewear in a market where the competition

between them is "plentiful." Thal Dep. II at 272:21-274:1, Ex. 7

of Schechter Decl. re: Discriminatory Effect.

Plaintiffs argue that the challenged restrictions treat

these competing entities differently, favoring the former

(in-state entities), and burdening the latter (out-of-state

entities). Thus, they contend, California has conferred upon

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in-state competitors a monopoly over selling prescription

eyewear at the same location where an eye exam is given —

"one-stop shopping" — a service that consumers demonstrably

prefer.

In response, defendants argue that plaintiffs cannot show

discrimination because the relevant entities – out-of-state

optical chains and in-state optometrists and ophthalmologists

who sell eyewear are not "similarly situated." Defendants argue

that plaintiffs, who are optical companies, are not similarly

situated to California optometrists or ophthamologists, because,

one, “optical companies are business entities, while

optometrists and opthamologists are highly educated, trained,

and licensed health care professionals, [and two], optical

companies and optometrists/opthamologists are also not similarly

situated as retail eyewear competitors, as each provides

distinct services to different consumer bases." Def's Opp’n. at

8-9. 

The first of these arguments can be referred to as

defendants' formal argument; it contends that the relevant

entities are not similarly situated because the entities are of

a different form or type from one another. The second argument

is a functional argument; it contends that the two entities are

not similarly situated because they function differently in the

marketplace, providing different services to different

customers.

 Both of these arguments rely heavily on two Supreme Court

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cases; it is therefore worth briefly revisiting these cases in

light of defendants' arguments before proceeding.

i. Exxon Corporation v. Governor of Maryland

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

the Supreme Court addressed a statute which flatly prohibited

producers and refiners of petroleum products from opening or

operating retail services within Maryland under a variety of

corporate or contractual arrangements. Id. at 120, n. 1. The

law was enacted in response to perceived inequities in the

allocation of petroleum products to retail outlets during the

fuel shortage of 1973. Various oil companies, all of whom

engaged in production and refining as well as in sale of

petroleum products, challenged the statute on a number of

grounds. They claimed, inter alia, that the statute violated

the Commerce Clause because it discriminated against producers

and refiners, all of whom were interstate concerns, in favor of

independent retailers, most of which were local businesses.

The Exxon Court rejected this contention. After holding

that the statute served the legitimate state purpose of

"controlling the gasoline retail market," Id. at 125, the Court

separately analyzed its effect on interstate commerce in the

producing-refining and retailing ends of the petroleum industry.

The Court concluded that the statute could not discriminate

against interstate petroleum producers and refiners in favor of

locally based competitors because, as a matter of fact, there

were no such local producers or refiners to be favored. Id. For

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the same reason, it concluded that the flow of petroleum

products in interstate commerce would not be reduced. Id. at

127. 

The Court also rejected a claim of discrimination at the

retail level because the statute placed "no barriers whatsoever"

on competition in local markets by "interstate independent

dealers" that did not own production or refining facilities. 

Id. at 126. Despite the fact that the number of stations

operated by independent dealers was small relative to the number

operated by producer-refiners, the Court concluded that neither

the placing of a disparate burden on some interstate competitors

nor the shifting of business from one part of the interstate

market to another was enough, under the circumstances, to

establish a Commerce Clause violation. Id. at 126-127.

Exxon is clearly distinguishable. Unlike Exxon, in the

instant case, California has enacted a statutory scheme which

has the practical effect of barring all out-of-state entities

from offering one-stop shopping, while reserving for the

principal in-state competitors the right to provide this

competitive advantage. 

In Exxon, the Court found that interstate dealers were able

to compete in the same manner as in-state service station owners

under the Maryland law. Only gasoline refiners could no longer

compete in the Maryland retail market. Unlike the case at bar,

in Exxon, other interstate firms could compete in the Maryland

market. Under these circumstances, the Court held, the dormant

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Commerce Clause was not violated. As the Court explained, "the

[dormant Commerce] Clause protects the interstate market, not

particular interstate firms, from prohibitive or burdensome

regulations." Id. at 127-28. 

This holding cannot be extended to the challenged

regulations in the case at bar. Here, the challenged

regulations prohibit all interstate firms from competing with in

state optometrists on the same terms. Unlike the facts in

Exxon, there are no inter-state companies that can compete with

the in-state entities. 

ii. General Motors v. Tracy

In General Motors Corporation v. Tracy, 519 U.S. 278

(1997), the Court considered an Ohio statute which imposed a

general sales and use tax on natural gas purchases from all

sellers, whether in-state or out-of-state, except regulated

public entities that met Ohio's statutory definition of a

"natural gas company." A "natural gas company" was defined as

any person "engaged in the business of supplying natural gas for

lighting, power, or heating purposes to consumers within this

state." Id. at 281. While the term applied to natural gas

utilities (termed "local distribution companies" or LDC's)

located within Ohio, Ohio's state supreme court had interpreted

the statutory term to exclude non-LDC gas sellers, such as

producers and independent marketers. The Supreme Court granted

certiorari to decide whether the difference in tax treatment

between sales of gas by other entities violated the Commerce

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See also Camps NewFound/Owatonna, Inc. v. Town of 7

Harrison, 520 U.S. 564, 582 n.16 (1997) (observing that the Tracy

"Court premised its holding . . . on the view that sellers of

‘bundled’ and ‘unbundled’ natural gas were principally competing

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Clause.

The Court found that there was no Commerce Clause violation

because the favored and disfavored entities were not similarly

situated. As the Court explained:

Conceptually, of course, any notion of discrimination 

assumes a comparison of substantially similar

entities. Although this central assumption has more

often than not itself remained dormant in this Court's

opinions on state discrimination subject to review

under the dormant Commerce Clause, when the allegedly

competing entities provide different products, as

here, there is a threshold question whether the

companies are indeed similarly situated for

constitutional purposes. This is so for the simple

reason that the difference in products may mean that

the different entities serve different markets, and

would continue to do so even if the supposedly

discriminatory burden were removed.

Id. at 298. 

Significantly for present purposes, this conclusion was not

based on a determination that the two natural gas sellers were

not of the same type and were not similarly situated. As the

Court explained, "in the absence of actual or prospective

competition between the supposedly favored and disfavored

entities in a single market there can be no local preference,

whether by express discrimination against interstate commerce or

undue burden upon it, to which the dormant Commerce Clause may

apply." Id. at 300. In short, the Court appeared to focus on

competition and the market served. 

7

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in different markets.").

 This decision was issued after the briefing in the pending 8

motions was complete. Although the parties did not address the

Sixth Circuit’s decision in their papers, the case was discussed

at length at oral argument. 

27

b. Defendants' "Formal" Argument

The court first addresses defendants' formal argument,

i.e., the contention that there is no discrimination because the

relevant entities are of different types and thus cannot be

compared.

The Sixth Circuit recently addressed the same issue in

LensCrafters, Inc. v. Robinson, 403 F.3d 798, 802 (6th Cir.

2005). There, the Sixth Circuit found that a Tennessee statute 8

which prohibited interstate eyewear retailers from leasing space

in their stores to optometrists was not discriminatory in

purpose or effect and therefore, did not violate the dormant

Commerce Clause.

In reviewing the discriminatory effect of the statute, the

Sixth Circuit held that: 

[L]icensed optometrists and optometric stores such as

LensCrafters are not similarly situated because they

provide different services to the market. Unlike

retail optical stores, licensed optometrists are

healthcare providers and, as such, have unique

responsibilities and obligations to their patients

that are not shared by optometric stores.

LensCrafters, 403 F.3d 798, 804 (6th Cir. 2005). 

With the greatest of respect, I cannot agree with the Sixth

Circuit’s reasoning. As this court reads the dormant Commerce

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Clause cases, the question is not whether the entities are

business corporations versus educated professionals, but whether

they "provide different products" because a "difference in

products may mean that the different entities serve different

markets, and would continue to do so even if the supposedly

discriminatory burden were removed." Tracy, 519 U.S. at 298. 

In conducting the "similarly situated" inquiry, courts have

consistently considered whether entities engage in competition

rather than whether the entities are of different types. 

Indeed, in instances where laws do not facially discriminate

against interstate commerce but a discriminatory effect is

claimed, it will not be uncommon that the relevant entities are,

at least to some extent, of different types. Thus the question

is not whether the entities are different, but whether they are

in competition. See, e.g., Continental Illinois Corp. v. Lewis,

827 F.2d 1517 (11th Cir. 1987) (examining not the status of the

entities, but analyzing whether the favored and disfavored

entities were both competing for the same market); Globe Glass &

Mirror Co. v. Brown, 917 F. Supp. 447 (E.D. La. 1996) (noting

that the fact that favored in-state entity and disfavored

out-of-state entity had different "statuses" is irrelevant);

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984) (“As long as

there is some competition between the locally produced exempt

products and non-exempt products from outside the State, there

is discriminatory effect.”).

Put directly, it appears to this court that it is the

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activity or conduct engaged in that is compared, without regard

to the status of the entity. In other words, to figure out who

the similarly situated entities are, the court looks at whether

or not the favored and disfavored entities compete in the same

market, with the same products, for the same customers. 

As previously noted, the evidence in this case is

overwhelming that interstate optical companies, such as

Lenscrafters, and in-state optometrists compete for the same

customers with the same products in the same market. As

defendants’ own expert explained, "the guts of dispensing

eyewear in a medical office or in an optometric office, or in a

retail chain, they're basically the same." Bruneni Dep. at

23:8-19, Ex. 10 of Schechter Decl. re: Discriminatory Effect. 

Indeed, it is undisputed that dispensing optometrists and

optical chains compete for the exact same consumers. As

defendants concede, consumers readily switch between

optometrists and retail optical chains for their prescription

eyewear purchases. See Defs.' Resp. to NAOO RFA No. 21, Ex. 18

of Schechter Decl. re: Discriminatory Effect; Defs.’s Suppl.

Resp. to ECCA First Set of Interrogs., No. 5, Ex. 11 of

Schechter Decl. Dr. Thal, defendants’ expert, characterized the

competition as "plentiful." Thal Dep. Vol. II at 272:21-274:1;

330:2-13, Ex. 6 of Schechter Decl. Mr. Bruneni, another

defense expert, testified that a dispensing optometrists'

"biggest single competitor [is] a retail chain." Bruneni Dep.

at 40:16-41:9; 61:14-62:3; 65:5-17; 75:16-24, Ex. 10 of

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Schechter Decl. 

c. Defendants' "Functional" Argument

Defendants' functional argument proceeds from the correct

premise, as outlined above, that the proper inquiry is how the

relevant entities compete in the market. Defendants argue that

the entities are not similarly situated because the optometrists

and opthamologists provide services – health services – that

optical chains like Lenscrafters do not, and that they have

special training that staff at Lenscrafters do not. Hence,

defendants argue, they are competing for different customers and

in a different market.

The first problem with defendants' argument is that they

have produced no evidence to demonstrate that the entities are

really competing for different customers with respect to eyewear

sales, and, as discussed above, the evidence in fact contradicts

that contention quite squarely.

The second problem, however, is a conceptual one. The

conduct at issue in this litigation is the retail selling of

prescription eyewear, and for that activity, the special

training of optometrists and ophthalmologists is irrelevant. If

the selling of eyewear had a component that was health related,

then all optometrists would be required to sell glasses and no

optical companies or opticians would be permitted to do so.

That, however, is simply not the case. 

Optometrists who sell eyewear wear two hats — one as a

provider of health care services and another as a retail seller

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of eyewear. When wearing the hat of the retailer, an

optometrist is in direct competition with optical companies such

as plaintiffs. For these reasons, the court concludes that

optometrists who sell eyewear are similarly situated to

out-of-state optician companies for constitutional purposes. 

Tracey, 519 U.S. at 298.

3. Relevance of Purpose Evidence

Finally, although plaintiffs do not advance a purpose-based

argument in their briefs, they have presented evidence

suggesting that some of the provisions challenged in this

litigation were enacted with a purely protectionist purpose. 

Specifically, the evidence shows that Section 655, arguably the

key provision being challenged, was introduced in the California

Legislature, as the Act's chief sponsor put it, "on behalf of

the California Optometric Association in an effort to protect

California from some of the problems . . . being experienced in

eastern states, where large business interests have completely

taken over the optometric profession." Letter from Sen. Sherman

to Gov. Reagan, Ex. 13 of Schechter Decl. re: Discriminatory

Effect. This evidence is quite strong. See S. Dakota Farm

Bureau v. Hazeltine, 340 F.3d 583, 593 (2003) ("the most

obvious" evidence of discriminatory purpose "would be direct

evidence that the drafters . . . intended to discriminate

against out-of-state businesses."). 

While this evidence does not shed further light on how the

challenged restrictions operate in practice, it does buttress

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the conclusion that the regulatory scheme is in fact an instance

of economic protectionism. "Discriminatory purpose is at the

heart of dormant Commerce Clause analysis and is often

incorporated into both first-tier analysis and second-tier Pike

balancing analysis." S. Dakota Farm Bureau, 340 F.3d at 596;

see also Fulton Corp. v. Faulkner, 516 U.S. 325, 330 (1996)

(describing dormant Commerce Clause as a prohibition on state

regulations designed with the purpose of benefitting in-state

interests by burdening out-of-state interests); West Lynn

Creamery, 512 U.S. at 196 (noting purpose of state's

unconstitutional pricing scheme although resting decision on

statute's discriminatory effect); Taylor, 477 U.S. at 148

(equating purposeful economic protectionism with per se

invalidity); Donald H. Regan, The Supreme Court and State

Protectionism: Making Sense of the Dormant Commerce Clause, 84

Mich. L Rev. 1091, 1206-1233 (1986) (presenting and defending

thesis that Supreme Court's dormant Commerce Clause analysis is

driven by desire to prevent purposeful protectionism).

C. Non-Discriminatory Alternatives

Given the court's conclusion that the challenged laws have

a discriminatory effect on interstate commerce, "the regulation

is subject to strict scrutiny under which it is the state's

burden to show that the discrimination is narrowly tailored to

further a legitimate interest." Conservation Force, Inc., 301

F.3d at 995. 

If a law discriminates against interstate commerce, it is

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"virtually per se invalid," Oregon Waste Systems, Inc., 511 U.S.

at 99, unless "the municipality can demonstrate, under rigorous

scrutiny, that it has no other means to advance a legitimate

local interest." Carbone, 511 U.S. at 391; see also Hughes v.

Oklahoma, 441 U.S. 322, 337-338 (1979)(explaining the state's

burden to show, under "the strictest scrutiny," that the

regulation is the "least discriminatory alternative" to advance

a legitimate purpose); Camps Newfound/Owatonna, 520 U.S. at 582

(observing that discrimination against interstate commerce

invokes the “strictest scrutiny” which “is an extremely

difficult burden”). 

To date, the Supreme Court has upheld discriminatory laws

only where the discrimination was justified by the threat of

death or disease. See e.g., Maine v. Taylor, 477 U.S. 131 (1986)

(upholding Maine's prohibition on importing live baitfish

because of the potential for destruction of Maine's fisheries);

Clason v. Indiana, 306 U.S. 439 (1939) (upholding Indiana's

restrictions on transporting dead animals without a license

because of the potential for disease).

To survive summary judgment, defendants must demonstrate

issues of fact regarding whether the laws are justified by a

valid factor unrelated to economic protectionism and, if so,

that no neutral alternatives are available. Envtl. Tech.

Council v. Sierra Club, 98 F.3d 774, 786 (4th Cir. 1996); see

also S. Dakota Farm Bureau, Inc., 340 F.3d at 597 (explaing

that defendant has high burden of demonstrating ineffectiveness

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of potential alternatives); Johnson, MacDonald & Associates v.

Webster Plastics, 856 F. Supp. 1249, 1253 (S.D. Ohio

1994)("Under the strict scrutiny test, it is the defender of the

statute which must come forward with proof there is no

non-discriminatory alternative."). 

1. Legitimate Local Purpose

The court first considers whether defendants have set forth

legitimate interests for the challenged regulations. Although

the Supreme Court has adopted a broad construction of the

applicability of the dormant Commerce Clause, it has cautioned

that "[t]he Commerce Clause . . . does not elevate free trade

above all other values." Maine, 477 U.S. at 151. That said,

states have broad powers to regulate in the interests of their

citizens.

Here, defendants assert that the challenged laws were

designed to protect against corporate influence interfering with

optometrists' professional judgment. Alvin Korobkin Dep., Ex.

TT in support of Defs.’ Mot for Summ. J. and in Opp’n to Pls.’s

Mots. for Summ. J. (“Defs.’ Ex.”). Defendants maintain that

"patient care and privacy are being compromised when lay optical

companies control optometrists." Defs.' Opp'n at 26. 

It is well established that a state has the right to impose

regulations in the interest of local health and safety. See

Maine, 477 U.S. at 131; H.P. Hood and Sons, 336 U.S. at 535

("This court consistently has rebuffed attempts of states to

advance their own commercial interests by curtailing the

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movement of articles of commerce, either into or out of the

state, while generally supporting their right to impose even

burdensome regulations in the interest of local health and

safety.").

As explained below, even assuming that defendants have a

legitimate interest in protecting public health through the

challenged regulations, defendants fail to establish that there

exist no non-discriminatory alternative measures to address this

exact interest. 

2. Non-Discriminatory Alternatives 

The court assumes for the purpose of this analysis that

corporate domination of eye professionals presents a real

danger. Defendants contend that "no less discriminatory

alternative measures exist which would effectively protect the

public from the evils that occur when lay corporations control

health care professionals." Defs.' Opp'n at 24. They maintain

that the challenged laws are the only means by which to insure

that the public receive non-biased eye care and that neither

neutral laws or a scheme akin to the Knox-Keene plan would be

effective at preventing the evils which plague optometrists who

work for corporate stores. Defendants maintain that the "only

way to combat the problem is to free all optometrists from that

lay control by separating them from lay optical companies, as

[the challenged statutes] do." Defs.' Opp'n at 22. 

In opposing plaintiffs' motion for summary judgment,

defendants implicitly argue that there remains an issue of

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material fact which defeats summary judgment, namely, whether

the public receives a lower level of care from optometrists

affiliated with chains as compared to dispensing optometrists. 

In support of this contention, defendants present literally

hundreds of pages of evidence which suggests that the quality of

service provided by corporately managed optometrists is poor. 

Nonetheless, for the reasons explained herein, defendants fail

to tender sufficient facts so as to defeat plaintiffs’ motion

for summary judgment. 

a. Defendants' Evidence Regarding the Quality of

Care Provided by Optometrists Associated with

Chains such as LensCrafers.

Defendants present evidence of the various problems which

arise when optometrists are employed by companies such as

Lenscrafters. This evidence generally suggests that

Lenscrafters exerts pressure on optometrists who work within

LensCrafter stores. For example, limitations are placed upon

the optometrists so that they prescribe LensCrafters'

proprietary optical goods, and optometrists are evaluated based

upon the percentage of their eye exam patients who purchase

Lenscrafters' eyewear. See Kim Lee Dep., Defs.’ Ex. NN. 

Similarly, Lenscrafters pressures its optometrists to perform a

certain numbers of dilation or retinal photographs regardless of

need. Id. Even if the court were to accept defendants’

recitation of all the evidence they present, there are two

general problems which defeat their opposition to plaintiffs’

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motions. 

First, plaintiffs present uncontroverted evidence that the

same practices which defendants complain of occur in the

dispensing optometrists setting as well. In other words, the

setting (optometrists affiliated with chains versus dispensing

optometrists) makes no difference as to practices – the same

practices occur in both settings. With one exception, (which is

discussed below), defendants fail to present any evidence which

compares the quality of care between dispensing optometrists and

optometrists who work for optical chains. 

Not knowing if the quality of service varies between

practice setting is an important issue in this case. As

mentioned earlier, defendants central argument is that "the only

way to combat the problem [of corporate control] is to free all

optometrists from that lay control by separating them from lay

optical companies as [the challenged restrictions do]." Defs.'

Opp'n at 22. However, as plaintiffs argue, in order to accept

this argument, the court would have to find that optometrists

provide worse care when affiliated with a chain than when acting

as a dispensing optometrist. The court cannot make that

finding. It is not enough to prove that optometrists in general

provide shoddy service. In this regard, defendants simply fail

to show that the quality of care is comparatively worse or

better depending on the practice setting. Plaintiffs,

meanwhile, set forth sufficient facts which reveal that the same

problem practices which defendants allege are prevalent in the

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corporate setting, are just as prevalent when optometrists

dispense eyewear. 

The court reviews some of the facts relied on by both

parties to illustrate this point. First, defendants contend

that optometrists who co-locate with a chain are required to

prescribe LensCrafters optical goods. Defs.'s Opp'n at 8, 9-10. 

Defendants suggest that "[f]or some patients, use of a

substitute LensCrafters' product could adversely affect a

patient's vision." Id. at 9:15-16. 

Plaintiffs maintain that the same practice occurs with

dispensing optometrists. This is regarded as an "important

benefit" to private optometrists. Bruneni Dep. at 72:21-73:4,

74:18-21), Ex. 4 of Suppl. Moynihan Decl. Indeed, there are

proprietary brands (such as the Varilux brand) which are sold

only by private optometrists. Id. at 80:16-22. Dr. Neil

Gailmard, plaintiffs' expert, explained that in private

practices, some dispensing optometrists write prescriptions in

such a way as to make it difficult for patients to have them

filled other than at that optometrist's dispensary. Gailmard

Dep. at 91:1-9, Ex. 8 of Suppl. Moynihan Decl.

Second, defendants contend that co-located practices can

include incentives and bonus systems which create a conflict of

interest for the optometrist as a health professional. Again,

plaintiffs point to evidence which suggests that the same

incentive schemes operate in offices of dispensing optometrists

as well. Plaintiffs rely on evidence which demonstrates that

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compensation for dispensing optometrists is based directly on

the number of eye exams provided, the sale of eyewear and the

sale of premium brands. Thal Dep. II at 339:15-340:14, Ex. 22

of Suppl. Moynihan Decl.; Bruneni Dep. at 125:24-126:2, Ex. 4 of

Suppl. Moynihan Decl. ("If the private optometrist quits selling

premium lenses, he would quit driving his Mercedes."). 

In fact, dispensing optometrists traditionally seek to

increase revenues in their dispensaries by paying their

employees, including associate optometrists, bonuses or

commissions based on the sales of certain products. Gailmard

Dep. at 101:9-103:23, Ex. 8 of Suppl. Moynihan Decl. (describing

methods used by dispensing optometrists to motivate employees,

including optometrists, to sell more, for example, commissions,

bonuses and other incentives); Dep. of Annette Juneau ("Juneau

Dep.") at 80:3-81:12, Ex. 11 of Suppl. Moynihan Decl.

(nationally recognized practice management consultant testified

that "spiffs" - paying bonuses based on sales of particular

frames or add-ons - are a typical and traditional manner of

compensating optical employees in a dispensing optometrist's

practice).

Associate optometrists employed by other dispensing

optometrists also are given financial incentives to prescribe

certain products, write more prescriptions and see more

patients. Dep. of Bradley Williams ("Williams Dep.") at

69:24-70:13, 85:5-87:9, Ex. 26 of Suppl. Moynihan Decl.

(Practice management consultant with California clients

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testified that it is quite typical for an associate optometrist,

employed by another optometrist, to receive a productivity bonus

or compensation component to motivate him to see more patients

and build the business); Juneau Dep. at 109:15-110:1 (explaining

that associate optometrists are often compensated by their

employer optometrists based upon a percentage of professional

fees and optical revenue produced, typically 20%).

Third, defendants tender evidence of Lenscrafter employees

"transitioning the patients" from the optometrists’ exam area to

the optical sales area. Defs.' Opp'n at 11:21; Lee Dep. at 131,

Defs.’ Ex. NN; Papadakis Dep. at 133-134, Defs.’ Ex. RR. Again,

defendants suggest that this practice may not be in the best

interest of the patient’s health. Plaintiffs, however, present

evidence that "transitioning" is a common part of private

optometry practice, known as part of the "circular flow"

practice management model. Gailmard Dep. at 94:3-95:21, Ex. 8

of Suppl. Moynihan Decl; Alan Limfat Dep. at 87:10-24, 89:12-

90:5, Ex. 12 of Suppl. Moynihan Decl. Practice management

consultants teach the practice as a method of retaining

optometric patients as dispensing customers. Gailmard Dep. at

126:6-127:9, 127:16-129:9, Ex. 8. of Suppl. Moynihan Decl. 

Thus, dispensing optometrists are taught to rely on their

relationship of trust and position of authority with their

patients to sell more eyewear. 

Fourth, defendants present evidence that optometrists

affiliated with chains perform "quick" eye exams. Defs.' Opp'n

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10; Thal declaration, para. 7-10; “Sweet Lemons” article, Defs.’

Ex. II. However, defendants fail to establish that this amount

of time is not comparable to the amount of time spent by

dispensing optometrists. Indeed, plaintiffs point to evidence

which shows that optometrists in private practice settings may

spend the same or less time on eye exams. Gailmard Dep. at

142:20-24, Ex. 8 of Suppl. Moynihan Decl. (optometrist can

perform a complete eye exam in 15 minutes); id. at 118:21-119:18

(scheduling 15 minute eye exam slots is not too fast to deliver

patient care of the absolute highest quality); Bradley Williams

Dep. at 188:25-191:12, Ex. 26 of Suppl. Moynihan Decl. (it is

"nonsense" to say that an eye exam cannot be accomplished in

less than 20 minutes of optometrist time); Elliott Shapiro Dep.

at 76:24-77:5, Ex. 20 of Suppl. Moynihan Decl. (time spent and

number of patients seen while in private practice was "virtually

identical" to his practice at EYEXAM). 

Plaintiffs also point to evidence presented by defendants

that similar complaints are raised against dispensing

optometrists and optometrists in chain stores. See, e.g.,

Report of Patient Abuse, Defs.’s Ex. FF-17 (LH 1217-3237 ("this

situation could have occurred with any other optometrist and

has"); id. at LH 1217-3240 (complaint regarding practice owned

and operated by optometrists); id. at LH 1217-3247 (complaining

about "multiple office practices, even when owned by an

optometrist"); id. at LH 1217-3252 ("doctors of optometry who

own multi-branch offices are more concerned with being

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businessmen rather than with being eye health practitioners");

id. at LH 1217-3255 (complaints regarding "doctor who owned the

practice"); id. at LH 1217-3257 (complaint regarding optometric

practice "owned and administered by licensed optometrists"); id.

at LH 1217-3258 (complaining about a practice "run by an

optometrist whose primary goal would appear to be solely

monetary."). 

There is, however, some evidence presented by the

defendants that deserves closer examination. Defendants rely on

the declaration of Phillip Parker, a professor of economics and

international strategy. Attached to his declaration are two

reports. The first report is entitled, "The Detection of

Selected Eye Conditions: A Study of Quality Differences Between

Commercial and Private Optometrists in the Boroughs of Brooklyn,

Manhattan and Queens." It is dated 1985. This study purports

to show that optometrists affiliated with chain stores provide

quick and less thorough eye examinations than their independent

counterparts. See Ophthalmic Practice Rulemaking Statement,

Robert R. Nathan Associates, Inc., Defs.' Ex. FF-21. The second

report focuses exclusively on optometry in California and seeks

to compare the two settings of optometry. Defs.' Ex. HH. Based

on these reports, Parker concludes that there is a difference in

quality between dispensing optometrists and optometrists who

work for chains. 

It appears to the court that the reports cannot be relied

upon for several reasons. First, the reports were written by

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A third reason is that the report entitled, "The Detection 9

of Selected Eye Conditions”, Defs.’ Ex. FF-21, only looked at New

York City. New York has a regulatory scheme that is different and

distinct from California. See N.Y. Laws §§ 7101 et seq.; N.Y.

Comp. Codes R. & Regs. tit. 8, §§ 66.1. Given that the laws are

different, comparing optometry practice in New York as compared to

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self-labeled "consulting economists," not optometrists. See

Defs.' Ex. FF-21 at LH 1217-4193. Accordingly, neither Parker

(an economist) nor the other authors of the reports can assess

the quality of care patients receive. Second, Parker's

conclusions, as well as the conclusions in the reports, are

based almost exclusively on the amount of time that an

optometrist spends with a patient. Parker concludes that less

time equates to a lower quality of care. See Defs.' Ex. HH. 

Yet, Parker presents no evidence that this is in fact the case. 

Most importantly, plaintiffs tender sufficient undisputed facts

which show that less time does not necessarily equate to a lower

quality of care. See, e.g., Julie Ann Wagstaff Dep. at 28:9-23,

85:25-87:7, 143:25-146:2, Ex. 25 of Suppl. Moynihan Decl.;

Galimard Dep. at 142:20-24, 118:21-119:18, Ex. 8 of of Suppl.

Moynihan Decl.; Williams Dep. at 188:25-191:12, Ex. 20 of

Suppl. Moynihan Decl. Moreover, as plaintiffs point out, in the

report on California, see Defs.’ Ex. HH, Parkers' underlying

data was from the Attorney General's investigation of Pearl

Vision in which investigators posed as patients without real

problems. Because the investigators had no real problems, they

required less time for an exam. Decl. of Richard Bennett at ¶

37. 

9

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California may well be like comparing apples and oranges. 

It is important to recall that it is insufficient to 10

simply tender an opposing view. Rather the opposing party must

tender facts which demonstrate that the dispute is genuine, i.e.

that a reasonable trier of fact could return a verdict for the

nonmoving party. Anderson v. Liberty Lobby Inc., 477 U.S. 242,

248-49 (1986), Cline v. Industrial Maintenance Engineering Co.,

200 F. 3d 1223, 1228 (9th Cir. 1999). 

44

In sum, these two reports fall short of establishing that

there remains a genuine issue of fact regarding the quality of

care by optometrists associated with chains as compared to

optometrists who dispense eyewear. Moreover, and perhaps most 10

importantly, even if the court were to accept Parker's

representations as true (that there is some variance between

settings), as discussed herein, defendants fail to establish

that there are no non-discriminatory alternatives which would

address these concerns. In short, no geuine dispute exists. 

There is a second problem with defendants’ evidence.

Defendants maintain that public health is the legitimate

interest that the challenged laws seek to protect. Yet, the

record is essentially silent as to how the practices identified

by defendants actually harm the public's health. In other

words, defendants state that public health is its main concern,

however, there is no evidence which links the complained of

practices to actual harm to the public’s health. For example,

defendants do not explain how short eye exams harm a patients'

health, or how prescribing only Lenscrafters eyewear endangers

health. Similarly, there is no evidence that "transitioning"

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customers from an exam to the store area threatens the public's

health. 

As mentioned earlier, one of the few instances in which the

Supreme Court has found that discriminatory regulations pass

strict scrutiny is when public health is at issue. See e.g.,

Maine, 477 U.S. at 313. Here, there is simply no evidence that

there are significant health risks that the challenged laws

protect against. On summary judgment, the court is to draw all

reasonable inferences in favor of the non-moving party. See

Matsushita, 475 U.S. at 587. Drawing an inference that the

practices cited to by defendants cause harm to the public

without evidence to support that fact is not a reasonable

inference. As I have repeatedly noted “inferences are not drawn

out of the air, and it is the opposing party’s obligation to

produce a factual predicate from which the inference may be

drawn.” See Richards v. Nielsen Freight Lines, 602 F. Supp.

1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898, 902 (9th

Cir. 1987).

For the reasons discussed, there is no evidence that the

quality of eye care varies by practice setting. Moreover, there

is no evidence that the practices that defendants complain of

actually harm the public's health. 

It therefore follows that the defendants’ justification for

the challenged law (that no other laws can protect the public's

health) fails. Stated somewhat differently, defendants cannot

establish that the challenged laws are not "a ‘last ditch’

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effort to solve the problem after nondiscriminatory alternatives

have proved unfeasible." Hughes, 441 U.S. at 323.

This conclusion is consistent with established dormant

Commerce Clause doctrine. For example, in striking down laws

restricting in-state treatment and disposal of hazardous waste

generated in other states, the Fourth Circuit found that

"[t]here is no basis to distinguish out-of-state waste from

domestic waste over concern for citizens health, safety, and

welfare . . . Hazardous waste is equally dangerous whether

generated within South Carolina or out-of-state.” Envtl. Tech.

Council v. Sierra Club, 98 F.3d at 786; see also Chemical Waste

Mngy., Inc. v. Hunt, 504 U.S. 334, 344-45 (1992)(holding that

hazardous waste's danger to the health and safety of Alabama's

citizens "does not vary with the point of origin of the waste"). 

Similarly, in the case at bar, defendants fail to establish that

the public’s health is in greater danger when receiving care

from an optometrist affiliated with a chain as compared to

receiving care from a dispensing optometrist. 

In Oregon Waste Systems, Inc., 511 U.S. at 101, the Supreme

Court addressed the constitutionality of an Oregon law imposing

a $2.50 per ton surcharge on in-state disposal of solid waste

generated in other states in comparison to a fee $0.85 per ton

on disposal of waste generated within Oregon. The Supreme Court

concluded that the "respondents have not offered any safety or

health reason unique to nonhazardous waste from other States for

discouraging the flow of such waste into Oregon." Id. at 101. 

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Being an eyeglass wearer myself, the conclusion that eye 11

care may well be shoddy whereever provided, is, to say the least,

cold comfort.

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The Supreme Court’s reasoning applies with equal force here. 

Defendants in the case at bar have not offered any health

benefits or disadvantages that are unique to optometrists who

associate with a chain. In fact, it appears that the potential

harm to patients exists irrespective of the setting. 

11

b. The Knox-Keene Act as an Example of a

Non-Discriminatory Alternative 

Prior to the California Supreme Court’s ruling in People v.

Cole, some out of state optical chains such as LensCrafters had

offered one-stop shopping in California by associating with

Knox-Keene plans. Lovejoy Dep. at 23:16-22, Ex. G of Moynihan

Decl. As explained previously, these specialized health care

service plans are a type of HMO licensed under the California

Knox-Keene Health Care Service Plan Act of 1975, Health & Safety

Code section 1340, et seq. Knox-Keene plans employ or contract

with optometrists to provide optometric services to plan

members. Some interstate optical chains leased space in their

California stores to Knox-Keene plans that provided optometric

services. 

The Act imposes numerous requirements on licensed plans to

ensure that commercial interests do not interfere with the

professional judgment of health care providers. For example,

Knox-Keene plans must employ a medical director and must

establish and adhere to a quality assurance program. Cal.

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Health & Safety Code § 1370. Similarly, Knox-Keene plans must

make extensive disclosures, including medical and fiscal audits,

to the DMHC. Id., §§ 1351, 1380, 1382, 1384; Cal. Code of

Regs., tit. 28, §§ 1300.84.06, 1300.84.2, 1300.84.3. 

Plaintiffs assert that these relationships have enabled out

of state optical companies to compete in California with

dispensing optometrists. Plaintiffs also submit that the

Knox-Keene scheme is a less restrictive, non-discriminatory

alternative to the challenged restrictions. See Pls.' Mot. for

Sum. J. at 11. 

Defendants' argue in their opposition that the Knox-Keene

plan is not an alternative because the California Fourth

District Court of Appeals held that the Knox-Keene Plan is not

exempt from the restrictions articulated in the challenged laws. 

As previously noted, since the parties submitted the pending

motions, the California Supreme Court decided People v. Cole, 38

Cal. 4th 964 (2006), holding that the Knox-Keene Act did not

exempt optical companies from the challenged laws at issue in

this case.

 The question before the California Supreme Court was

whether the legislature intended for there to be an exception to

the challenged laws for out-of-state optician companies

affiliated with Knox-Keene plans. The Supreme Court did not

address whether the underlying laws themselves (which are the

subject of this litigation) violated the dormant Commerce

Clause. Thus, to hold that the underlying laws violate the

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Commerce Clause would in no way contradict the holding of the

California Supreme Court. 

Moreover, this court’s purpose in discussing the Knox-Keene

Act is merely to demonstrate that there are non-discriminatory

schemes which the State could adopt and which would address the

health interests of the State. The court is not endorsing the

Knox-Keene Act arrangements per se, but merely discussing a

regulatory scheme which is an example of a non-discriminatory

alternative to the challenged regulations. 

For these reasons, the court finds that defendants have 

failed to demonstrate issues of fact regarding whether the laws

are justified by a valid factor, and if so, that there are no

neutral alternatives available. Envtl. Tech. Council v. Sierra

Club, 98 F.3d at 786.

V.

CONCLUSION

Accordingly, the court concludes that the challenged laws

substantially effect and discriminate against interstate

commerce and therefore are subject to strict scrutiny under the

dormant Commerce Clause. Although California has legitimate

interests in regulating the provision of health services,

defendants have failed to meet its burden of showing that it has

no other means to advance its legitimate interests. The court

therefore finds that the challenged laws violate the dormant

Commerce Clause. The court orders as follows: 

1. Plaintiffs’ motion for summary judgment as to

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discriminatory effect is GRANTED.

2. Plaintiffs’ motion for summary judgment as to nondiscriminatory alternatives is GRANTED. 

3. Defendants’ motion for summary judgment is DENIED.

4. Requests to file amicus briefs are DENIED.

5. The motions to strike filed by both defendants and

plaintiffs are DENIED. 

IT IS SO ORDERED. 

DATED: December 6, 2006. 

Case 2:02-cv-01464-LKK -DAD Document 414 Filed 12/06/06 Page 50 of 50