Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

New Jersey Guild of Hearing Aid Dispensers v. Long

Decided: March 9, 1978.

NEW JERSEY GUILD OF HEARING AID DISPENSERS, A NON-PROFIT CORPORATION OF THE STATE OF NEW JERSEY; JOSEPH IACONO AND ROBERT P. AHRENS, APPELLANTS,
v.
VIRGINIA LONG, DIRECTOR OF THE DIVISION OF CONSUMER AFFAIRS; THE DIVISION OF CONSUMER AFFAIRS, AN AGENCY OF THE STATE OF NEW JERSEY; THE HEARING AID DISPENSERS EXAMINING COMMITTEE AND THE STATE BOARD OF MEDICAL EXAMINERS, AGENCIES OF THE STATE OF NEW JERSEY UNDER THE JURISDICTION OF THE DIVISION OF CONSUMER AFFAIRS, RESPONDENTS



For affirmance as modified -- Chief Justice Hughes and Justices Mountain, Sullivan, Pashman, Clifford, Schreiber and Handler. For reversal -- None. The opinion of the court was delivered by Pashman, J.

Pashman

Concern over allegations of consumer abuses in the sale of hearing aids prompted the Legislature to pass the Hearing Aid Dispensers Act, L. 1973, c. 19, N.J.S.A. 45:9A-1 et seq. ("the Act"), which became law on January 31, 1973. This enactment created a Hearing Aid Dispensers Examining Committee ("the Committee") under the State Board of Medical Examiners in the Division of Consumer Affairs of the Department of Law and Public Safety. N.J.S.A. 45:9A-1, 3. The Committee's statutory mandate was to

[ N.J.S.A. 45:9A-7]

On April 9, 1976, the Committee*fn1 filed its proposed rules

and regulations governing the practice of hearing aid dispensing in New Jersey, which were then unanimously approved by the State Board of Medical Examiners prior to their publication in the New Jersey Register.

The Committee conducted a public hearing on May 21, 1976 in Newark, at which time 19 witnesses, including the Director of the Division of Consumer Affairs ("the Director"), testified and numerous documentary exhibits were received. The Director testified that the "major problem areas perceived by the Committee" as requiring remedial regulatory action included

inappropriate fitting because of lack of proper supervision of the dispenser and the trainee; false advertising calculated to mislead the public into the belief that hearing aid dispensers have a medical degree or background; secrecy by the dispenser as to exactly what the consumer is paying for and exactly what he is getting, with the result that the consumer is unable to ascertain by independent means the viability of his aid; unscrupulous activity by the door-to-door salesman of hearing aids, especially with respect to the elderly; and unconscionable pricing of hearing aids. [Testimony of Virginia Long, Director, Division of Consumer Affairs, before the Hearing Aid Dispensers Examining Committee, May 21, 1976.]

The regulations as originally proposed were modified prior to their unanimous adoption by the Committee. The regulations as amended were unanimously approved by the State Board of Medical Examiners, as required by N.J.S.A. 45:9A-7, in July 1976 and thereafter filed with the Secretary of State. The final regulations appear in the New Jersey Administrative Code at N.J.A.C. 13:35-8.1 et seq.

In August 1976 enforcement of the Committee regulations was stayed by a single judge of the Appellate Division on the petition of the New Jersey Guild of Hearing Aid Dispensers

("the Guild"), and two of the Guild's officers in their individual capacities as hearing aid dispensers. The appeal sought review of the validity of the Committee regulations pursuant to R. 2:2-3. Consideration of the Guild's application for a stay pending appeal was consolidated with the appeal on the merits by the Appellate Division.

On December 15, 1976, Judge Botter, writing for the Appellate Division, upheld the validity of the Committee rules and regulations and denied the Guild's request that their enforcement be enjoined. 145 N.J. Super. 580 (App. Div. 1976). On December 22, 1976, the Guild filed a Petition for Rehearing and Stay of Judgment with the Appellate Division which was summarily denied on January 4, 1977. The basis for that petition was the imminent promulgation of regulations affecting the practice of hearing aid dispensing by the United States Food and Drug Administration ("FDA") and the consequent possibility of federal preemption of the Committee regulations.

On January 21, 1977 the Guild filed a petition for certification together with a notice of appeal alleging constitutional questions and a motion for a stay of the Appellate Division's judgment and enforcement of the Committee regulations pending disposition of the matter by this Court. On February 15, 1977, the Guild supplied us with advance copies of the proposed FDA regulations whose preemptive effect it had asserted below. Upon review of same, we granted the requested stay on February 15, 1977 and subsequently granted the Guild's petition for certification. 74 N.J. 247 (1977).

I

The Regulatory Background

The Act defines the activity it seeks to regulate, the "practice of dispensing and fitting hearing aids," as "the evaluation or measurement * * * of human hearing * * * and the consequent selection of [sic] adaptation or sale of hearing aids intended to compensate for hearing loss * * *." N.J.S.A.

45:9A-2(d). A hearing aid dispenser is defined as "a person engaged in the fitting and selling of hearing aids to a person with impaired hearing." N.J.S.A. 45:9A-2(e). The Committee created for this purpose is empowered to set educational and licensing requirements for practitioners, N.J.S.A. 45:9A-8 to 15, and to grant temporary licenses in certain circumstances. N.J.S.A. 45:9A-16. The Director of Consumer Affairs is authorized to discipline licensees for enumerated types of misconduct, the most expansive category of which is "unethical conduct," defined to include, inter alia, the "obtaining of any fee or the making of any sale by fraud or misrepresentation," N.J.S.A. 45:9A-17(c)(1), the use of misleading or false advertising or other representations, N.J.S.A. 45:9A-17(c)(3), the use of bait and switch sales tactics, N.J.S.A. 45:9A-17(c)(4), and the use of representations connoting medical expertise. N.J.S.A. 45:9A-17(c)(5), as well as for violations of the Act or the Committee rules and regulations. N.J.S.A. 45:9A-17(f). In addition, violations of the Act are subject to penalties and, where appropriate, restitution. N.J.S.A. 45:9A-19. They are also enjoinable at the suit of the Director of Consumer Affairs. N.J.S.A. 45:9A-20. Specifically exempted from the coverage of the Act are hearing aid dispensers whose practices are affiliated with academic institutions, public programs, or charitable organizations, unless such dispensers sell hearing aids; also exempted are licensed physicians. N.J.S.A. 45:9A-22.

Licensed dispensers are required to advise prospective purchasers at the outset of a hearing aid dispenser's lack of medical or audiological expertise and to provide all purchasers with a detailed written receipt which includes a statement that the purchaser has been so advised. N.J.S.A. 45:9A-23. Whenever a licensee learns that a prospective purchaser has certain ascertainable medical conditions, he must, prior to fitting and selling a hearing aid to that person, recommend in writing that the person consult a hearing specialist or other physician (providing the names and addresses of at least three such

physicians) and receive a receipt from the prospective purchaser acknowledging that the recommendation has been given. N.J.S.A. 45:9A-24.

The Guild's challenge to the Committee's regulatory action is directed at certain portions of the comprehensive substantive regulation, N.J.A.C. 13:35-8.24, entitled "General Rules and Regulations." It specifically objects to the provision of N.J.A.C. 13:25-8.24(c) which exempts from the coverage of the Act the activities of certified audiologists unless such persons engage in the dispensing of hearing aids. N.J.A.C. 13:35-8.24(c)(3). The Guild contends that this exemption for nondispensing audiologists is not authorized by the Act and in fact is internally inconsistent with another regulation in the same subsection, N.J.A.C. 13:35-8.24(c)(7), which includes certain activities preliminary to a sale within the definition of "fitting and selling hearing aids," activities in which the Guild claims certified audiologists engage.

Also contested by the Guild is the Committee's prohibition of the use of the term "certified hearing aid audiologists" by hearing aid dispensers in any advertising because of its potention misleading effect on prospective purchasers. N.J.A.C. 13:35-8.24(f)(3). The Guild disputes the legitimacy of that conclusion and contends that such a prohibition was not contemplated by the Act. As its source of authority for the promulgation of this rule, the Committee cites N.J.S.A. 45:9A-17(c)(3) and (5) and 23(b)(7).

The subjects of the Guild's most vehement protest are the regulatory provisions mandating advance disclosure and itemization in pricing, requiring the posting of a retail price list of all hearing aids offered for sale, and setting a price guideline for charges made for dispensing services and equipment. N.J.A.C. 13:35-8.24(g)(1) (prescribing a receipt form); (k)(1) and (2); (h)(4); and (k)(4), respectively. The Guild contends that these rules regulate the business and profits of hearing aid dispensers in a manner contrary to the legislative intent of the Act and not authorized thereunder.

Viewing the price guideline as setting a price ceiling, the Guild argues that any such regulatory restrictions would constitute an unauthorized exemption from the proscriptions of the New Jersey Antitrust Act. N.J.S.A. 56:9-1 et seq., for the practice of hearing aid dispensing. The Guild argues further that the price and price disclosure regulations are unconstitutional because they unreasonably restrict property rights, arbitrarily discriminate against the dispensing profession and unduly burden the practice of that profession without any justifying public need. Cited as statutory authority for these rules by the Committee are N.J.S.A. 45:9A-7, 17(c), 23(b) and 26.

Finally, the Guild challenges the ban on unsolicited sales visits to the homes or places of business of prospective purchasers without prior consent and the prohibition of the sale of a hearing aid to a person who has not been given a hearing test examination complying with certain specified technical standards. N.J.A.C. 13:35-8.24(j) and (e). The Guild contends that no legislative intent to regulate dispensing practices by proscribing home visits exists and, alternatively, that this rule is unnecessary because consumers are adequately protected by the Act's ban of unnecessary fittings and the obtaining of fees for services by fraud or misrepresentation. See N.J.S.A. 45:9A-17(c). The Guild argues that the testing standards imposed have an unduly burdensome effect on dispensers who cannot afford sophisticated testing equipment and that in the absence of any showing that such exacting standards are required to fit a hearing aid properly, the regulatory standards are unreasonable and constitute a denial of substantive due process.

Further complicating this picture of pervasive regulation of the hearing aid industry is the entry of the federal government into this field. Congress has enacted the "Medical Device Amendments of 1976," Pub. L. 94-295, 90 Stat. 539-583, effective May 28, 1976, to the Federal Food, Drug, and Cosmetic Act ("the FDCA"), 21 U.S.C. § 301 et seq., which provides the FDA with specific statutory authorization

to regulate "medical devices" so as to ensure their safety and effectiveness prior to their marketing to consumers. See generally 1976 U.S. Code Cong. and Admin. News 1070 et seq. The FDA is given this premarket clearance authority with respect to, inter alia, devices which are intended for human use and which do not operate chemically or require metabolization in order to achieve their intended effect. See 21 U.S.C. § 321(h). Pursuant to the grant of authority contained in the amended FDCA, the Commissioner of Food and Drugs, on behalf of the Secretary of Health, Education and Welfare (HEW), proposed regulations covering the labeling and conditions of sale of hearing aids on February 15, 1977. See 21 U.S.C. 360j(e)(1)(B); proposed 21 C.F.R. §§ 801.420, 421 (42 Fed. Reg. 9294-6 (February 15, 1977)). These regulations as originally promulgated became effective on August 25, 1977.*fn2

The FDA hearing aid regulations are divided into two sections, one concerned with labeling requirements for hearing aids (21 C.F.R. § 801.420) and the other (21 C.F.R. § 801.421) imposing certain conditions on and preconditions to their sale. The FDA distinguishes between three categories of professionals involved with hearing disabled persons: the "ear specialist," a licensed physician specializing in the diagnosis and treatment of ear diseases and hearing loss problems (21 C.F.R. § 801.420(a)(2)); the "audiologist," a trained specialist in the evaluation and rehabilitation of persons with hearing disorders (21 C.F.R. § 801.420(a)(4)); and the "dispenser," engaged in the "sale,

lease or rental of hearing aids" to the consuming public (21 C.F.R. § 801.420(a)(3)).

The FDA has established the medical evaluation of the prospective user as a mandatory precondition to the sale of a hearing aid to that person; said evaluation must have been made within the preceding six months. 21 C.F.R. § 801.421(a)(1). However, the medical evaluation may be waived by a prospective adult user under certain specified conditions. 21 C.F.R. § 801.421(a)(2).

The amended FDCA contains an explicit statutory provision concerning the preemptive effect of the FDCA and regulations promulgated pursuant thereto on any state or local requirements. A procedure is established whereby otherwise preempted state and local requirements may receive an exemption from preemption by the FDCA upon meeting certain enumerated criteria. FDCA § 521, 21 U.S.C. § 360k.*fn3

The FDA has promulgated proposed regulations detailing the administrative procedures to be followed in determining whether a particular state or local requirement is preempted by the FDCA and in applying, if necessary, for an exemption from federal preemption. Proposed 21 C.F.R. § 808.1 et seq. (42 Fed. Reg. 30383-9 (June 14, 1977)).*fn4

As a result of the timing of the promulgation of the FDA hearing aid and "preemption-exemption" regulations, the Appellate Division did not have the opportunity to review those regulations in considering the Guild's argument that the Committee's regulations were federally preempted under the FDCA. Another significant development in the case also came too late for consideration by the Appellate Division. In responding to the federal preemption claim advanced by the Guild, the Director of Consumer Affairs offers a letter dated June 2, 1977 from the Chief Counsel of the FDA to the Deputy Attorney General who is the Committee's counsel, which states that in the opinion of the FDA the only provision of the Committee regulations which would be preempted by the FDA hearing aid regulations was the presale hearing test requirement of N.J.A.C. 13:35-8.24(e). The stated basis for this conclusion is that the Committee regulation "establishes conditions of sale that are different from those provided in the FDA regulations." The FDA consequently concluded that the "provisions of [§ 8.24(e)] relating to conditions of sale are preempted" under FDCA § 521(a), 21 U.S.C. § 360k(a).

Pursuant to this administrative opinion letter, the Director concedes that N.J.A.C. 13:35-8.24(e) is federally preempted. Nevertheless the Director relies on this expression

of FDA opinion as dispositive authority on the issue of the Guild's contention that the remainder of the Committee regulations are similarly preempted by the FDA hearing aid regulations.*fn5 The Director advises that the State has applied to the FDA for an exemption from preemption for N.J.A.C. 13:35-8.24(e),*fn6 which will remain preempted until such time as an exemption is granted, and contends that it is unnecessary for the Court to decide the preemption issue with respect to that regulation.

In upholding the validity of the Committee's regulations, the Appellate Division rejected the Guild's arguments that the challenged regulations contravene the legislative intent underlying the Act by regulating the business aspects of hearing aid dispensing and thus exceed the scope of the authority delegated to the Committee by the Act. See 145 N.J. Super. at 584. The court found no federal preemption resulting from FDCA § 521 standing alone and felt that consideration of the preemptive effect of any FDA hearing aid regulations was premature prior to their becoming effective in final form. Id. at 588. We shall address these arguments and the Guild's other bases of attack on the Committee regulations seriatim.

II

A. The Scope of the Regulatory Power Delegated By the Act

The Director concurs in the Guild's observation that the Committee regulations go substantially beyond mere regulation

of the competency of the dispensers and the safety and effectiveness of the hearing aids they sell. The abuses which some of the challenged regulations were intended to correct were described by the Director at the public hearing:

They prohibit the use of terms calculated to connot non-existent medical competency. [ N.J.A.C. 13:35-8.24(f)(3)] They require an itemized receipt, in conformity with the trend in consumerism, to provide an individual with full knowledge of the product he is buying in advance of sale, which receipt will assist the Division in the enforcement of the Act by requiring full disclosure of the charges assessed for various phases of the dispensing procedure and the actual cost of the hearing aid. [ N.J.A.C. 13:35-8.24(g), (h)(4), and (k)(1) and (2)]

Further, the rules prohibit unsolicited home visits as a means of avoiding the fast talking, high pressure of the unethical practitioner. [ N.J.A.C. 13:35-8.24(j)]

And, in addition, they take a giant step forward by reallocating the burden in price gouging cases so that the onus is not on the consumer to show unfairness but on the dispenser to show that no overreaching occurred and that the price ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.