Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-5_05-cv-05142/USCOURTS-arwd-5_05-cv-05142-1/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights Act

---

1

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

DISPENSING SOLUTIONS, INC. a

Delaware Corporation; and

CORWIN PETTY, M.D. PLAINTIFFS

v. Case No. 05-5142

W. RAY JOUETT, M.D., Director of the

Arkansas State Medical Board, in his

official capacity DEFENDANT

ORDER

Now on this 14 day of July, 2006, comes on for th

consideration W. Ray Jouett’s Motion to Dismiss (doc. #21) and

plaintiffs’ Motion Requesting a Hearing on Defendant’s Motion to

Dismiss (Doc. 27). The Court, having reviewed the pleadings of

the parties, and all other matters of relevance before it, and

being well and sufficiently advised, finds and orders as follows

with respect thereto: 

1. Plaintiffs, Dispensing Solutions, Inc. and Corwin

Petty, M.D., originally filed this action on August 12, 2005, and

an Amended Complaint was filed on October 25, 2005. 

The Amended Complaint (which will hereinafter be referred to

as the “complaint”) names as defendant, W. Ray Jouett, M.D.,

Director of the Arkansas State Medical Board (hereinafter called

either “defendant” or “Jouett”), and asserts claims under 42

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 1 of 19 PageID #: <pageID>
The complaint also asserts a supplemental state cause of action. However, 1

the plaintiffs moved to dismiss that claim and an order to that effect was

entered on November 30, 2005. 

2

U.S.C. § 1983 challenging the constitutionality of Arkansas Code

Annotated § 17-95-102(d). 

In their complaint, plaintiffs assert that the Arkansas

statute in question violates the Commerce Clause of the United

States Constitution and the Equal Protection Clause of the Fifth

and Fourteenth Amendments to the United States Constitution.1

2. Defendant filed his motion to dismiss on November 3,

2005, asserting several grounds as to why it should be granted

and plaintiffs’ complaint dismissed. 

Plaintiffs have responded to the motion and deny that the

complaint should be dismissed. They also recently filed a Motion

Requesting a Hearing on Defendant’s Motion to Dismiss (Doc. 27).

From its review of the pleadings, the Court does not believe

that a hearing is necessary to a ruling on the motion to dismiss.

Accordingly, plaintiffs’ Motion Requesting a Hearing will be

denied and the Court will proceed to address and decide the said

motion to dismiss. 

3. The statute in question, Arkansas Code Annotated § 17-

95-102 (hereinafter called the “statute”), regulates the

dispensing of “legend drugs” with respect to physicians licensed

under the Arkansas Medical Practices Act, Ark. Code Ann. §§ 17-

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 2 of 19 PageID #: <pageID>
3

95-201 – 17-95-207, 17-95-301 – 17-95-305, and 17-95-401 – 17-95-

411. Section (d) of the statute provides that

[n]o physician licensed under the Arkansas Medical

Practices Act . . . shall dispense legend drugs without

prior approval by the Arkansas State Medical Board

after application to the board and on the showing of

need. . . .

4. Plaintiffs say that, prior to 1983, licensed

physicians, dentists, and veterinarians could dispense

prescription drugs under certain dispensing guidelines. Amended

Complaint, p. 1. However, they state that, in 1983, the Arkansas

legislature passed the statute at issue “which singled out

physicians by prohibiting physicians from dispensing prescription

drugs without the showing of need.” Amended Complaint, p. 1-2. 

Against that backdrop -- which is not disputed by defendant

-- plaintiffs assert the following:

(a) Dispensing Solutions, Inc. (“Dispensing”) argues that

the statute violates the Commerce Clause in the United States

Constitution. Dispensing, according to the complaint, is a

corporation “holding a wholesale distribution license” through

the Arkansas State Board of Pharmacy. Amended Complaint, p. 2.

It “sells prepackaged prescription drugs to physicians and

dentists throughout the country, including selling prescription

drugs to dentists in Arkansas.” Dispensing argues that the

statute, prohibiting as it does the dispensing of drugs by

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 3 of 19 PageID #: <pageID>
4

Arkansas physicians, “interferes with their right to engage in

interstate commerce in that the burden on interstate commerce

outweighs any legitimate state benefit produced by the statute.”

Amended Complaint, p. 2. 

(b) Corwin Petty, M.D. (“Petty”) says he is licensed by the

Arkansas Medical Board to practice medicine in the State of

Arkansas, and is the sole physician at the Champions Family

Clinic located in Rogers, Arkansas. He asserts that he would, if

allowed by Arkansas law, dispense prepackaged, prescription drugs

to his patients. Petty seeks to offer this service to his

patients because of his asserted belief that, by doing so, he can

offer his patients the same prescription drug at a lower cost;

can comply with all federal and state regulations regarding the

dispensing of prescription drugs; and can better protect the

privacy concerns of his patients. A.mended Complaint, p. 2.

Petty says he filed an application with the Arkansas State

Medical Board for approval to dispense prescription drugs which,

it would appear pursuant to applicable statutes, required him to

make a “showing of need” for such approval. Petty acknowledges

that he withdrew his application prior to any action by the

Board. He also acknowledges that he has the right to re-file

his application, but would still bear the burden of proving need.

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 4 of 19 PageID #: <pageID>
5

It is contended that if Petty were a dentist, veterinarian

pharmacist, or a medical physician whose practice is focused on

the oral cavities, he would be allowed under Arkansas law to

dispense prescription drugs without any showing of need. Amended

Complaint, p. 2-3. 

Petty argues that the statute “discriminates against

Arkansas physicians without a rational basis for said

discrimination in violation of the equal protection clause of the

Fifth and Fourteenth Amendment to the U.S. Constitution . . . .”

Amended Complaint, p. 3. 

5. In his motion and brief, defendant argues that

plaintiffs’ complaint should be dismissed for the reasons:

* that it is “barred by the principles of abstention”; 

* that Dispensing lacks standing to challenge the

statute;

* that plaintiffs have failed to state facts to support a

claim for violation of the Commerce Clause of the United States

Constitution; and

* that plaintiffs have failed to state facts to support a

claim for deprivation of equal protection under the United States

Constitution. 

Each of the defendant’s arguments will be addressed in the

order presented to the Court. 

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 5 of 19 PageID #: <pageID>
6

6. Abstention -- Defendant argues that this Court should

abstain from review of this matter under the principles of

abstention set forth by the United States Supreme Court in

Younger v. Harris, 401 U.S. 37 (1971), Colorado River Water

Conservation Dist. v. United States, 424 U.S. 800 (1976), or

Railroad Comm’n of Texas v. Pullman Co., 312 U.S. 496 (1941). 

Generally, federal courts have a “virtually unflagging

obligation” to exercise their jurisdiction in proper cases.

Colorado River, 424 U.S. at 817. “This exercise of jurisdiction

is constrained, however, by traditional principles of equity,

comity, and federalism.” Alleghany Corp. v. McCartney, 896 F.2d

1138 (8 Cir. 1990). The United States Supreme Court has th

established several limited abstention doctrines to preserve such

principles. Beavers v. Arkansas State Board of Dental Examiners,

151 F.3d 838, 840-41 (8 Cir. 1998). See also Younger, 401 U.S. th

37; Colorado River, 424 U.S. 800; and, Pullman, 312 U.S. 496. The

defendant argues that the abstention doctrines established in

Younger, Colorado River, and Pullman each apply. 

(a) First, the Court finds that neither the abstention

doctrines of Younger nor Colorado River apply. Both abstention

doctrines require an ongoing or parallel state proceeding.

Younger, 401 U.S. 37; Colorado River, 424 U.S. 800. The

defendant argues that the requirement is met because Petty could

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 6 of 19 PageID #: <pageID>
7

1) apply for a decision of the Arkansas State Medical Board and

then appeal an adverse decision under the Arkansas Administrative

Procedures Act, Ark. Code Ann. § 25-15-212, or 2) seek a

declaratory judgment. However, the possibility of a state

proceeding does not satisfy the requirement.

In his complaint, Petty asserts that, although he had filed

an application with the state, he withdrew it and it is not now

pending. The Court is obliged to regard this allegation as true

for purposes of ruling on a motion to dismiss. That being the

case, the Court finds no merit in defendant’s assertion that 

“. . .the state proceedings concerning Petty are ongoing, in that

the Board has not yet conducted a hearing or rendered a decision

on Petty’s application for a dispensing permit, a decision which

is reviewable by a circuit court and, ultimately, the Arkansas

Supreme Court.” Defendant’s brief at page 6. 

In Alleghany v. McCartney, 898 F.2 1138 (8th Cir. 1990) -- a

case relied upon by defendant -- the Eighth Circuit court panel

discussed the holdings in Younger and also Huffman v. Pursue,

Ltd., 420 U.S. 592 (1975) and did hold, as urged by defendant,

that a plaintiff could not circumvent Younger by failing to

exhaust his state appellate remedies. However, unlike

defendant, the Court sees nothing in Alleghany holding that when

nothing is pending in state court, a litigant may not seek relief

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 7 of 19 PageID #: <pageID>
8

in federal court without first initiating a state proceeding and

exhausting whatever remedy might be there available. In Huffman

the Supreme Court noted its discussion of Younger in the case of

Steffel v. Thompson, 415 U.S. 452 (1974) wherein it had stated

that the relevant principles of equity, comity and federalism

which undergirded the doctrine of abstention therein announced

“have little force in the absence of a pending state proceeding.”

Thus, the Court believes that the requirement of an ongoing state

proceeding is still viable in contexts of abstention inquiries

under both Younger and Colorado River.

(b) Under the Pullman abstention doctrine, a federal court

should “refrain from exercising jurisdiction when the case

involves a potentially controlling issue of state law that is

unclear, and the decision of this issue by the state courts could

avoid or materially alter the need for a decision on federal

constitutional grounds.” Moe v. Brookings County, S.D., 659 F.2d

880, 883 (8 Cir. 1981)(emphasis added). th

Defendant cites and relies on the case of Beavers v.

Arkansas State Bd. of Dental Exam’rs, 151 F.3d 838 (1998) as

being dispositive on the proposition that the Court should

abstain under the Pullman abstention doctrine. There, Beavers

brought a federal court action to contest the constitutionality

of dental board regulations which limited his opportunity to

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 8 of 19 PageID #: <pageID>
9

advertise. The regulations in question were made by a Board

created by the Arkansas State Legislature pursuant to Ark. Code

Ann. Section 17-82-208(a). The District Court there abstained

per the Pullman abstention doctrine finding, inter alia, that

Arkansas State courts could rule on the matter on purely state

statutory grounds and thereby avoid entirely the First Amendment

issue. Its reasoning was that a state court ruling could be to

the effect that the regulations in question were “onerous and

excessive” and not authorized by the creating statute --

essentially what Beavers was claiming -- and thus obviate any

federal constitutional question. The Eighth Circuit panel agreed

and affirmed. In so doing, it set forth the factors to be

properly considered under Pullman, viz:

* the effect abstention would have on the rights to be

protected by considering the nature of both the right and

necessary remedy;

* available state remedies;

* whether the challenged state law is unclear;

* whether the challenged state law is fairly susceptible to

an interpretation that would avoid any federal constitutional

question; and

* whether abstention will avoid unnecessary federal

interference in state operations.

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 9 of 19 PageID #: <pageID>
10

The appellate panel in Beavers noted that the “paradigm case

for abstention” arises when the challenged state statute is

susceptible of “a construction by the state courts that would

avoid or modify the [federal] constitutional question” and went

on to say:

Where resolution of the federal constitutional question is

dependent upon, or may be materially altered by, the

determination of an uncertain issue of state law, abstention

may be proper in order to avoid unnecessary friction in

federal-state relations, interference with important state

functions, tentative decisions on questions of state law,

and premature constitutional adjudication . . . The doctrine

. . . contemplates that deference to state court

adjudication only be made where the issue of state law is

uncertain. (Cites omitted.)

In light of the foregoing, the appellate court concluded the

district court had correctly decided that the case was “. . .

fairly subject to a determination by the Arkansas courts that the

Board exceeded its authority under Ark. Code Ann. Section 17-82-

106, thereby obviating federal constitutional inquiry.” Id. 841

(emphasis added).

In Beavers, therefore, the central issue was whether rules

and regulations made by a Board created by statute were in line

with and/or authorized by the statute which created it. Thus,

the Arkansas courts could have -- in a proper case -- ruled that

they were not and thus avoid any constitutional issue. Such is

not the case here.

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 10 of 19 PageID #: <pageID>
11

Petty does not challenge some rule or regulation made by a

Board created by the statute in question -- he challenges the

statute, itself. His quarrel is that the statute requires him to

seek prior approval of the Arkansas State Medical Board -- on a

proper showing of need -- before he be allowed to dispense legend

drugs. Unlike Beavers, it does not appear this case is “fairly

subject” to a determination by the Arkansas courts that the

Arkansas State Medical Board exceeded its authority under the

statute in question. Petty is complaining about the Board

apparently intending to do precisely what the statute requires of

it. Here also unlike Beavers, there would appear to be no

provisions of the Arkansas Administrative Procedure Act which

would be applicable since here there are no “rules and

regulations” being attacked. 

The Court is not persuaded that Beavers requires this Court

to abstain but, rather, in light of the criteria mentioned

therein, concludes that it should not abstain per the Pullman

abstention doctrine. 

7. Standing -- Next, defendant argues that Dispensing

lacks standing to challenge the statute. 

In order to establish standing to challenge the statute,

Dispensing must demonstrate the following:

* an injury in fact;

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 11 of 19 PageID #: <pageID>
12

* a causal relationship between the injury and the

challenged conduct; and,

* the likelihood that the injury will be redressed by a

favorable decision.

Northeastern Fla. Chapter of Associated Gen. Contractors of Am.

v. City of Jacksonville, Fla., 508 U.S. 656, 663 (1993). 

Defendant challenges Dispensing’s standing with respect to

the first requirement –- injury in fact. 

In order to prove “injury in fact”, the injury must be “(a)

concrete and particularized and (b) actual or imminent, not

‘conjectural’ or ‘hypothetical’”. Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560 (1992)(citations omitted). 

The defendant argues that Dispensing “is not regulated by

the statute and nothing in the statute prohibits it from selling

its product to anyone.” Defendant’s Brief, p. 12. However, “‘in

Commerce Clause jurisprudence, cognizable injury is not

restricted to those members of the affected class against whom

states or their political subdivisions ultimately discriminate.’”

South Dakota Farm Bureau, Inc. v. Hazeltine, 340 F.3d 583, 592

(8 Cir. 2003)[quoting Houlton Citizens’ Coalition v. Town of th

Houlton, 175 F.3d 178, 183 (1 Cir. 1999)]. st

In the complaint, Dispensing states that it sells

prepackaged prescription drugs to doctors and/or dentists

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 12 of 19 PageID #: <pageID>
13

throughout the country. It follows, therefore, that Dispensing

sells prepackaged prescription drugs to dentists in Arkansas and,

would, but for the Arkansas statute, sell the prepackaged

prescription drugs to physicians in Arkansas. Dispensing thus

argues that the challenged statute causes it economic damage

because it denies it a “significant market to sell its product

and services.” Plaintiffs’ Brief, p. 9. 

The Court believes that Dispensing has alleged sufficient

facts, for purposes of resisting a motion to dismiss, to meet its

burden to prove injury in fact. Northeastern Fla. Chapter of

Associated Gen. Contractors of Am. v. City of Jacksonville, Fla.,

508 U.S. 656, 663 (1993); South Dakota Farm Bureau, Inc. v.

Hazeltine, 340 F.3d 583, 592 (8 Cir. 2003). Accordingly, the th

Court rejects the “standing” challenge. 

8. Commerce Clause -- The defendant also argues that

Dispensing’s Commerce Clause claim should be dismissed for

failure to state a claim upon which relief can be granted. 

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows

a court to dismiss a complaint (or counts thereof) for failure to

state a claim upon which relief can be granted. When ruling on a

motion to dismiss under Rule 12(b)(6), a district court “must

accept the allegations contained in the complaint as true and all

reasonable inferences from the complaint must be drawn in favor

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 13 of 19 PageID #: <pageID>
14

of the nonmoving party.” Young v. City of St. Charles, 244 F.3d

623, 627 (8th Cir. 2001). Although dismissal for failure to

state a claim can only be granted when it appears beyond a

reasonable doubt that plaintiff can prove no set of facts in

support of a claim entitling him to relief, “dismissal under Rule

12(b)(6) serves to eliminate actions which are fatally flawed in

their legal premises and deigned to fail, thereby sparing

litigants the burden of unnecessary pretrial and trial activity.”

Young, 244 F.3d at 627. 

With the foregoing in mind, the Court now turns to a

discussion of the Commerce Clause issue. The United States

Congress has the power “to regulate Commerce with foreign

Nations, and among the several States.” U.S. Const., Art. I, §

8, cl. 3. “The Supreme Court has long held that this grant of

power to Congress contains negative implications that restrict

states’ power to regulate interstate commerce.” Oehrleins v.

Hennepin County, 115 F.3d 1372, 1383 (8 Cir. 1997)(citing CTS th

Corp. v. Dynamics Corp. of America, 481 U.S. 69, 87 (1987)). To

analyze a state or local law under the “dormant Commerce Clause,”

a two-step inquiry must be performed.

First, if a state law discriminates against interstate

commerce “in favor of local business or investment,” it is “per

se invalid, save a narrow class of cases in which the

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 14 of 19 PageID #: <pageID>
15

municipality can demonstrate, under rigorous scrutiny, that it

has no other means to advance a legitimate local interest.” C &

A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 392 (1994). 

Second, “if a state law does not overtly discriminate

against interstate commerce, it may nonetheless be contrary to

the Commerce Clause if it unduly burdens interstate commerce.”

Oehrleins v. Hennepin County, 115 F.3d at 1383. Such a nondiscriminatory state law is subject to a less rigorous balancing

test. According to Pike v. Bruce Church, Inc., such a law “will

be upheld unless the burden imposed on . . . commerce is clearly

excessive in relation to the putative local benefits.” 397 U.S.

137, 142 (1970). 

It is clear that the Arkansas statute does not directly or

overtly discriminate against interstate commerce. However, the

plaintiffs argue that the statute imposes a burden on interstate

commerce that is “clearly excessive in relation to the putative

local benefits.”

Defendant disputes this contention and points to the

legitimate interests the state has in regulating the dispensing

of prescription drugs by physicians. Defendant’s Brief, p. 16.

The defendant argues that:

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 15 of 19 PageID #: <pageID>
16

* the state has a legitimate interest in regulating

legend drugs and controlled substances dispensed by physicians;

* the statute’s central purpose is to protect citizens

from physicians who may over-prescribe legend drugs or controlled

substances or elect to dispense a more costly drug when a less

expensive and equally effective drug is available; and,

* the statute takes the personal profit of a physician

out of the equation.

 D e f endant’s Brief, p. 16-17. 

In response, plaintiffs argue that the stated purposes are

not legitimate and point to the following as evidence of the

excessive burden on interstate commerce:

* that Arkansas is one of only a few states that prohibit

medical physicians from dispensing prescription drugs;

* that limiting the number of outlets for prescription

drugs decreases competition and thereby increases already oftenunaffordable prescription drugs;

* that the higher costs of prescription drugs resulting in

part from lack of competition burdens the Medicaid and Medicare

programs and thus all taxpayers;

* that the higher costs affects the health insurance

costs of both employers and employees; and,

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 16 of 19 PageID #: <pageID>
17

* that prohibiting the dispensing of prescription drugs

by a medical physician results in the loss of patient privacy in

that a patient is forced to go to his local pharmacy to fill a

prescription rather than having it filled in his doctor’s office.

Defendants’ Brief, p. 11-13. 

Notwithstanding plaintiffs’ above stated points, the Court

sees nothing to indicate that plaintiffs can prove a set of facts

under which any indirect impact on interstate commerce would

exceed the obvious state interests. Accordingly, the Court

concludes that the portion of plaintiffs’ complaint asserting a

violation of the Commerce Clause should be dismissed and it will

so order. 

9. Equal Protection -- Finally, the defendant argues that

Petty’s Equal Protection claim should be dismissed for failure to

state a claim upon which relief can be granted. 

Petty’s Equal Protection claim stems from his argument that

the Arkansas statute imposes a different requirement upon

physicians than dentists or veterinarians -- thus denying

physicians the equal protection of the law provided under the

Fifth and Fourteenth Amendments to the United States

Constitution. 

“The Supreme Court has explained that ‘if a law neither

burdens a fundamental right nor targets a suspect class, we will

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 17 of 19 PageID #: <pageID>
18

uphold the legislative classification so long as it bears a

rational relation to some legitimate end.’” Weiler v. Purkett,

137 F.3d 1047 (8 Cir. 1998)(quoting Romer v. Evans, 517 U.S. th

620, 631 (1996)). Clearly, there is no allegation that Petty is

a member of a protected class or that the classification of which

he complains burdens a fundamental right. Therefore, the

appropriate standard for review of Petty’s equal protection

claims is rational basis review. 

“To state an equal protection claim, [Petty] must . . .

[establish] that he was treated differently from others similarly

situated to him.” Johnson v. City of Minneapolis, 152 F.3d 859,

862 (8 Cir. 1998). While Petty argues that he, as a physician, th

is similarly situated to others able to prescribe legend drugs –

i.e., dentists and veterinarians, the defendant argues that

physicians are not so similarly situated. The defendant further

argues possible reasons for the disparity in treatment for

physicians versus dentists and/or veterinarians.

Considering the parties’ arguments, the Court finds that

Petty has sufficiently set forth the necessary facts to state a

claim for equal protection under the Fifth and Fourteenth

Amendments to the United States Constitution. Therefore, the

defendant’s motion to dismiss will be denied with respect to

Petty’s equal protection claim. 

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 18 of 19 PageID #: <pageID>
19

10. Based on the foregoing, W. Ray Jouett’s Motion to

Dismiss (doc. #21) is granted in part and denied in part. 

IT IS, THEREFORE, ORDERED that W. Ray Jouett’s Motion to Dismiss

(doc. #21) is granted in part and denied in part, as follows: 

* the motion is granted with respect to Plaintiff Dispensing

Solutions, Inc.’s Commerce Clause Claim and Dispensing

Solutions, Inc. is dismissed as a plaintiff to this action.

* the motion is denied with respect to Plaintiff Corwin

Petty’s Equal Protection Claim.

IT IS, ALSO, ORDERED that plaintiffs’ Motion Requesting a Hearing

on Defendant’s Motion to Dismiss (Doc. 27) is denied. 

IT IS SO ORDERED.

 

/s/ Jimm Larry Hendren

UNITED STATES DISTRICT JUDGE

Case 5:05-cv-05142-JLH Document 28 Filed 07/14/06 Page 19 of 19 PageID #: <pageID>