Massengale v. Oklahoma Board of Examiners in Optometry

Citations: 30 F.3d 1325; 1994 U.S. App. LEXIS 19138; 1994 WL 387252Docket: Nos. 93-5039, 93-5108

Court: Court of Appeals for the Tenth Circuit; July 26, 1994; Federal Appellate Court

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Plaintiffs Larry Greenhaw, O.D., Philip Miller, O.D., Lenscrafters, Inc., and Pearle Vision, Inc. have appealed the district court's dismissal of their complaint against the Oklahoma Board of Examiners of Optometry and individual Board members for failure to exhaust state administrative remedies, resulting in claims deemed unripe. The district court also applied the abstention doctrine from Railroad Commission v. Pullman Co. to allow Oklahoma state courts to interpret relevant state statutes first. Following the dismissal, plaintiffs requested an injunction against any Board actions during their appeal, and subsequently filed motions to amend their complaint and seek relief from judgment, which the court granted for the injunction but denied for the other motions. The appeals have been consolidated, with the first appeal (No. 93-5039) addressing the ripeness and abstention issues, and the second appeal (No. 93-5108) focusing on the denial of Rule 60(b) relief and the motion to amend under Rule 15(d).

Plaintiff-optometrists Greenhaw and Miller have sublease agreements with Lenscrafters and Pearle for their office practices, which the Board alleges violate Oklahoma law (Okla.Stat. Ann. tit. 59, 596, 944). In November 1990, the Board informally met with three plaintiffs to discuss these agreements but took no action afterward. A subsequent meeting in May 1991 indicated that while no immediate discipline would occur for past violations, future violations could lead to penalties. Greenhaw, Massengale, and Skaggs did not attend this meeting. A third meeting in July 1991 involved questioning several optometrists about their relationships with Lenscrafters, again without disciplinary action taken.

The Board sought an opinion from the Oklahoma Attorney General, which clarified that licensed optometrists cannot lease or sublease from retail merchandisers. Following the issuance of this opinion, the Board notified all licensed optometrists to comply by May 14, 1992. When the plaintiffs did not comply, the Board voted to conduct disciplinary hearings. Before these hearings, the plaintiffs filed a federal lawsuit against the Board, alleging conspiracy to restrain trade, equal protection violations, procedural due process issues, and claims against the Oklahoma statute for vagueness and misapplication. They sought declaratory and injunctive relief. 

After the lawsuit was filed, the Board paused its formal disciplinary actions. When Miller entered into a lease with Pearle, the court permitted his intervention, but the case was dismissed shortly thereafter. The Board resumed disciplinary actions against the plaintiffs, who then sought to disqualify Board members due to alleged bias. An internal vote concluded no disqualifications were warranted. The plaintiffs later filed for Rule 60(b) relief and sought to amend their complaint, asserting they had exhausted all administrative remedies regarding disqualification procedures.

An independent hearing officer was appointed by the Board to address the case, as permitted by the Oklahoma Administrative Procedures Act (OAPA). The district court stayed the administrative hearing at the request of the plaintiff-optometrists but denied their motions under Rule 60(b) and 15(d). The central issue is whether the plaintiffs must exhaust state administrative remedies before pursuing federal court. The exhaustion requirement, while not jurisdictional, involves judicial discretion. The court reviews dismissals related to exhaustion for abuse of discretion. Generally, parties must exhaust administrative remedies prior to seeking judicial relief, although several exceptions to this requirement exist. The Supreme Court has outlined specific circumstances where exhaustion may be excused: 

1. When pursuing an administrative remedy could hinder future judicial review due to potential delays.
2. If the administrative remedy is inadequate, either due to lack of institutional competence or authority to provide the sought relief, or when the adequacy of the remedy aligns closely with the merits of the lawsuit.
3. If the administrative body is biased or has prejudged the issue.

The plaintiffs argue their situation fits within either the second or third exceptions.

Plaintiff-optometrists have not utilized the procedural safeguards in the relevant statute and the Oklahoma Administrative Procedures Act (OAPA) that they claim are insufficient. They have failed to demonstrate a factual basis for their assertion that engaging in the administrative process would necessitate waiving their right to a fair hearing. The Board is mandated to adhere to OAPA procedures for license revocation and suspension, which include reasonable notice, the right to a hearing, and provisions for disqualification of biased agency members. Members must recuse themselves if unable to maintain impartiality, and disqualification issues are to be addressed promptly. Mandamus may be used to disqualify Board members, and the Board can appoint independent hearing officers. Judicial review of decisions is also available, allowing for stays on enforcement of adverse rulings. These mechanisms provide adequate protection for the plaintiff-optometrists, who are required to exhaust their administrative remedies before claiming inadequacy. 

Regarding the bias exception to the exhaustion requirement, plaintiffs argue that historical bias against their business relationships with Lenscrafters and Pearle precludes an impartial hearing. They cite a statement from Board member Peck suggesting potential bias, although Peck voluntarily recused himself from disciplinary matters. The Board has also appointed an independent hearing officer for the disciplinary hearing. The plaintiffs have not provided concrete evidence of unfairness in the proceedings.

Plaintiffs contend their case aligns with Gibson v. Berryhill, where Alabama optometrists argued futility in exhausting administrative remedies due to bias in the state licensing board. However, the factual context differs significantly from Gibson. In Alabama, optometrists lacked viable options to challenge board bias, while Oklahoma's Administrative Procedures Act (OAPA) offers mechanisms to disqualify biased board members and appoint independent hearing officers. Unlike Alabama's restrictive membership requirements, the Oklahoma Board has been inclusive and has acted with caution, not opposing the plaintiffs' request for an injunction and showing readiness to stay enforcement pending state court appeals. 

The record indicates that the Board has not sought to exploit the disciplinary process for personal gain, instead aiming to minimize economic impacts on plaintiff-optometrists. The plaintiffs argue that Board members' economic interests could bias proceedings; however, the Board members operate traditional optometry practices without links to retail establishments, undermining the assumption of bias. The presence of an impartial hearing officer and state court review further mitigates concerns over bias. Plaintiffs have not demonstrated an exception to the exhaustion requirement, leading to the district court's dismissal of their complaint being upheld as promoting administrative authority and judicial efficiency.

Appeal No. 93-5108 addresses the district court's denial of Rule 60(b) relief concerning the exhaustion issue. The standard for reviewing such denials is for abuse of discretion, and Rule 60(b) relief is reserved for extraordinary circumstances. The plaintiffs misinterpreted the district court's order, believing their request to disqualify Board members fulfilled the exhaustion requirement; however, since the Board appointed a hearing officer for the disciplinary hearing, the plaintiffs received partial relief, negating the existence of extraordinary circumstances for Rule 60(b) relief. Consequently, the denial was not an abuse of discretion. Additionally, the denial of the plaintiffs' Rule 15(d) motion to amend their complaint was also reviewed for abuse of discretion. The plaintiffs' situation remained largely unchanged since the original dismissal for failure to exhaust administrative remedies, and the denial of their disqualification request did not represent a significant change warranting an amended complaint, especially given the Board's appointment of a neutral hearing officer. Thus, the denial of the Rule 15(d) motion was a proper exercise of discretion.

Plaintiffs Lenscrafters and Pearle are not considered proper parties to the Oklahoma disciplinary process and must seek declaratory relief in state court to challenge the administrative rules governing that process. Federal courts are deemed inappropriate for anticipatory judgments that could interfere with state agency actions, reinforcing that their participation does not alter the legal analysis. The plaintiffs failed to substantiate their antitrust claims on appeal, which are deemed unfounded as federal antitrust laws do not apply to state-authorized actions. The district court's dismissal for lack of exhausted administrative remedies is upheld, making the abstention issue unnecessary to address. Although the plaintiffs argue their constitutional claims are independent of Oklahoma law, they seek the Oklahoma Supreme Court's certification on key state law questions regarding the classification of optical retailers and the jurisdiction of the Board over optometrists. Such certification is discretionary and generally not granted post-adverse decision. Given that the disciplinary hearings for optometrists Massengale and Skaggs were scheduled and likely conducted, the state courts would offer a more suitable forum to interpret Oklahoma law. The plaintiffs' motion for certification is denied, and the decision is affirmed. Curt Massengale, O.D. and Derrick Skaggs, O.D., original plaintiffs, are not part of this appeal. A formal notice of disciplinary hearing was issued only after the federal complaint's dismissal.