Obscure laws trigger suits that may send major eye care outfits packing.

Most anyone going for an eye exam knows the drill: Stop at a LensCrafters or Pearle Vision. Get the prescription. Walk from the exam room to the nearby sales desk to pay for the visit and the $99 glasses you saw on your way in.

What likely went unnoticed is that the exam and the glasses were purchased from separate companies owned by a single business that may be operating illegally in California.

Under laws on the books for nearly 35 years, retailers not licensed by the California Board of Optometry cannot perform optometric services. Laws also limit the relationship between an optometrist, trained in giving eye exams, and: an optician, who fills prescriptions and sells glasses and contact lenses.

Those laws have spurred a rash of litigation that has joined the state Attorney General, Bill Lockyer, and consumer attorneys in battle with the industry.

And though they were handed an appellate victory on Sept 3, lawyers for the eye care companies said losing the argument would drive them from the state.

Pressure on the eye care retailers ratcheted up last year when Cole National Corp., parent of Pearle Vision, was sued by Lockyer, who alleged it was illegally providing optometry services and falsely advertising to the public that it provides eye exams.

The Attorney General's case, pending in San Diego Superior Court, caught the attention of consumer lawyers who used the same section of the state code to sue LensCrafters Inc. and National Vision Inc., which operates vision centers in California Wal-Marts.

As more suits get fried, eye care retailers are taking notice.

"If the Attorney General is right, that could put Pearle Vision out of business in the state," said Richard Grabowski, a partner at Jones Day's Irvine office representing the company. "It's not just an inconvenience, if this is illegal, there's no other way to operate the business."

Proving costly

Major retailers comprise 40 percent of a national eye care market that generated $15.8 billion sales in 2001, according to court papers filed by LensCrafters in its case. The suits could be financially devastating, given that the Attorney General's case seeks $2,500 for violations like advertising optometry services, said Tom Dresslar, a spokesman for the Attorney General. The violation is also a criminal offense, the Attorney General's suit says.

To challenge the Attorney General, LensCrafters, along with Eye Care Centers of America Inc. and a trade group called the National Association of Optometrists & Opticians, sued the state in July 2002 in U.S. District Court, Eastern District of California, alleging that the state laws unfairly put eye care retailers at a competitive disadvantage to individual optometrists.

The statutes also violate U.S. commerce and due process laws, as well as the First Amendment's freedom of speech, the suit says. That case is set for trial next year.

The industry's recent victory came in a ruling by a three-judge panel in 2nd Appellate District, which found that National Vision does not violate state laws by operating vision centers in California Wal-Marts.

It is the first published opinion on the issue and, if finalized within 30 days, can be used by other eye care retailers in their cases. But the opinion still doesn't change the laws, which remain in dispute.

Business and Professions Code section 655 prohibits an optical retailer and optician from any "proprietary interest, co-ownership, landlord-tenant or profit-sharing arrangement."

Another statute, Business and Professions Code section 2556, prohibits an optician from having an optometrist "on or near the premises used for optical dispensing ... for the purpose of any examination or treatment of the eyes."

Those statutes, first enacted in 1969, are at the heart of the recent claims against the eye care retailers. The Attorney General's suit against Pearle Vision also claims violations of Business and Professions Codes 3040 and 3128, which prohibit non-licensed entities to advertise as optometrists.

"If you look at the legislative history of these laws, the reason they were enacted was to prevent businesses from influencing your doctor's decisions," said Matthew Davis, a San Francisco lawyer at Walkup Melodia Kelly Wecht & Schoenberger PC who filed the class action suit against LensCrafters in March 2002.

The latest suits aren't the first ones to accuse eye care retailers of operating illegally in California. In 1982, the San Diego Superior Court issued an injunction against Pearle Vision to stop advertising its optometry services in California in a case brought by the Attorney General. An appellate court affirmed the injunction in 1993.

"The bottom line is they ran afoul of the California law in '82, the court told them to stop, and we're alleging in this case that they're back at it again," Dresslar said.

Loophole or exemption?

Eye care retailers say they aren't breaking any laws. When the 1982 ruling was made, retailers provided optometry services through franchises, which was illegal. Now, retailers use managed health care plans created under the California Knox-Keene Health Care Service Plan Act of 1975.

That law, created to "help curtail the rising costs of health care," enabled businesses like LensCrafters to set up health maintenance organizations.

"If you walk into a Pearle Vision or a LensCrafters store, there's two companies in there," Jones Day's Grabowski said. "In the case of Pearle Vision, you've got one company selling eye glasses, Pearle Vision Inc., and another company, an HMO, called Pearle Vision Care Inc., that employs optometrists. Both those companies are owned by the same parent company."

Paying for an eye exam, in these cases, actually enrolls a consumer in a limited health care plan.

Retailers claim they have operated KnoxKeene plans in California for at least 15 years and that it has enabled them to compete with independent optometrists who frequently sell contact lenses.

Michael Carlson, a partner at Morrison & Foerster LLP representing LensCrafters in its suits, said the Department of Managed Health Care approves the plan's structure, operations, hiring, quality assurance plans and finances, and the plan allows retailers to provide one-stop shopping for consumers.

But other consumer attorneys said they would flight the ruling. "That's a very bad decision for us, and we're hoping to either get it reversed or get (it) de-published," Davis said.