United States Court of Appeals For the First Circuit

No. 21-1115

ROBERTO VÁZQUEZ-RAMOS; IRMA VÁZQUEZ-RAMOS; CONJUGAL PARTNERSHIP VÁZQUEZ-RAMOS; JAVIER E. COLÓN-IRIZARRY; ADVANCED UROLOGY GROUP, LLC; LUIS M. MUÑIZ-COLÓN; WEST UROLOGY GROUP PSC; JUAN M. COLÓN- RIVERA; CARIBBEAN UROCENTRE, CSP,

Plaintiffs, Appellants,

v.

TRIPLE-S SALUD, INC.; HÉCTOR M. RODRÍGUEZ-BLÁZQUEZ; UROLOGICS, LLC; MSO OF PUERTO RICO, LLC; UROLOGIST, LLC,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Silvia Carreńo-Coll, U.S. District Judge]

Before

Lynch and Kayatta, Circuit Judges, and Woodlock,* District Judge.

Jorge Martínez-Luciano, with whom Emil Rodríquez-Escudero and M.L. & R.E. Law Firm were on brief, for appellants. César T. Alcover, with whom Carla S. Loubriel Carríon and Casellas Alcover & Burgos, PSC were on brief, for appellees Urologics, LLC; Urologist, LLC; and Héctor Rodríguez-Blázquez. Luis R. Roman-Negron, for appellee Triple-S Salud, Inc. Iván J. Lladó, with whom Ramón E. Dapena and Morell Cartagena & Dapena were on brief, for appellee MSO of Puerto Rico, LLC.

* Of the District of Massachusetts, sitting by designation. December 8, 2022 KAYATTA, Circuit Judge. This appeal arises from the

dismissal under Federal Rule of Civil Procedure 12(b)(6) of an

attempted antitrust challenge to what look to be standard exclusive

dealing arrangements incident to the maintenance of closed health

care networks. Such challenges rarely succeed, largely because

such arrangements rarely pose significant harm to competition and

are often pro-competitive. See, e.g., Stop & Shop Supermarket Co.

v. Blue Cross & Blue Shield of R.I.,

(1st

Cir. 2004); U.S. Healthcare, Inc. v. Healthsource, Inc.,

(1st Cir. 1993); Cap. Imaging Assocs., P.C. v. Mohawk

Valley Med. Assocs., Inc.,

(2d Cir. 1993);

B&H Med., L.L.C. v. ABP Admin., Inc., No. 02-73615,

, at *14 (E.D. Mich. Oct. 29, 2004), aff'd,

(6th Cir. 2008). That being said, the issue now is not whether

the difficulty of prevailing on such claims is daunting. Rather,

the only issue is whether the amended complaint does enough to

"state a claim to relief that is plausible on its face." Bell

Atl. Corp. v. Twombly,

(2007). For the following

reasons, we find that, in part, it does.

- 3 - I.

We begin by summarizing the relevant aspects of the two

public health insurance programs at issue before turning to

plaintiffs' claims and the proceedings below. In so doing, we

"accept[] all well-pleaded allegations of plaintiffs as true and

afford[] all inferences in the plaintiffs' favor." Arroyo-Melecio

v. Puerto Rican Am. Ins. Co.,

(1st Cir. 2005).

A.

Prior to 1993, healthcare for medically indigent

populations in Puerto Rico was largely provided through publicly

owned facilities operated by local governments. In 1993, the

Commonwealth sought to improve the provision of public healthcare

on the island by passing Act 72, see

et seq. (1993), which privatized most healthcare facilities and

created a new government-run healthcare plan (branded as Mi Salud

at the time of the relevant events). See

§ 7025. Mi Salud

operated as a public health insurance system funded mostly through

Medicaid grants and funds collected from the Commonwealth and

municipal governments. Act 72 also created the Puerto Rico Health

Insurance Administration ("ASES," by its Spanish acronym), see id.

§ 7001, and delegated the administration of Mi Salud to that

agency, see id. §§ 7003–04.

To implement Mi Salud, ASES divided Puerto Rico into

eight geographical regions and assigned a single private

- 4 - healthcare insurer to each region. The agency then entered into

contracts with the insurers to deliver the required services in

the insurers' respective regions. The designated insurers in each

region were tasked with contracting with healthcare providers to

provide covered services to Mi Salud patients in the region. As

relevant to this appeal, ASES retained defendant Triple-S Salud,

Inc. ("Triple-S") as the Mi Salud insurer for the Western Region

of Puerto Rico, an area encompassing over 200,000 medically

indigent patients.1

In conjunction with the federal government, the

Commonwealth also operates a health insurance system called the

Medicare Advantage Program (also known as Medicare Part C).

Medicare Advantage provides coverage to qualified beneficiaries

under the Medicare Act,

et seq., which generally

covers elderly and disabled individuals. Private insurers enter

into contracts with the federal government to manage Medicare

Advantage plans for people in Puerto Rico. Medicare y Mucho Más

("MMM"), one such insurer, is one of the largest Medicare Advantage

Program coverage facilitators in Puerto Rico. Defendant MSO of

Puerto Rico, LLC ("MSO") is the administrator of the provider

network for the Medicare Advantage population insured by MMM and

1 In November 2018, Mi Salud was rebranded as Vital and abandoned the regional model. See Vázquez-Ramos v. Triple-S Salud, Inc., Civ. No.: 19-1527,

, at *1 n.1 (D.P.R. Dec. 15, 2020).

- 5 - contracts with physicians and healthcare providers to serve MMM's

Medicare Advantage patients.

B.

Plaintiffs are urologists and urology practices with

offices in the Western Region of Puerto Rico. Until the summer of

2015, plaintiffs were under contract with Triple-S to provide

urology services to urology patients in the area. A subset of the

plaintiffs -- Dr. Roberto Vázquez-Ramos, Dr. Javier Colón-Rivera,

and Caribbean Urocentre, CSP ("Medicare Advantage plaintiffs") --

were also under contract with MSO to provide urology services to

qualified MMM Medicare Advantage patients in Western Puerto Rico.

In early 2015, unbeknownst to plaintiffs, Triple-S began

conversations with Dr. Rodríguez-Blázquez, a competitor urologist,

about having Dr. Rodríguez and companies owned by him

(collectively, "Urologics") become the exclusive provider of

urology services for Mi Salud patients in Western Puerto Rico.

MSO had similar conversations with Urologics regarding MMM

patients. After these conversations, Triple-S and MSO both

declined to renew their contracts with various plaintiffs and

instead both entered into separate agreements with Urologics for

Urologics to become their exclusive urology provider in Western

Puerto Rico. The amended complaint alleges two markets relevant

to plaintiffs' claims: the market of Mi Salud patients in Western

Puerto Rico and the market of MMM Medicare Advantage patients in

- 6 - Western Puerto Rico. Plaintiffs claim that the exclusive dealing

agreements excluded them from one or both of those markets in a

manner that constitutes both an unlawful agreement under section 1

of the Sherman Act,

, and an unlawful acquisition and

use of monopoly power under section 2 of the Sherman Act,

§ 2.

Plaintiffs also allege parallel claims under the Commonwealth's

competition and tort laws. In neither instance do plaintiffs

allege any concerted action between Triple-S and MSO.

Plaintiffs assert that the exclusive dealing

arrangements have caused them to lose business and have made it

more difficult for patients to obtain adequate urology services in

Western Puerto Rico. Plaintiffs further contend that Mi Salud

patients have received lower quality care following the Triple-

S/Urologics agreement due to Urologics' purported inability to

sufficiently provide coverage to the region and to its alleged

practice of prioritizing profits over efficacy in its treatment

decisions.2

2 Urologics contends that ASES -- as the agency empowered to hear and resolve grievances over administration of the Mi Salud program -- has exclusive primary jurisdiction to resolve plaintiffs' claims as to the quality of urology services provided to Mi Salud patients. We have explained previously that "the primary jurisdiction doctrine has little to do" with federal antitrust cases "and it certainly does not go to the subject matter jurisdiction of the federal court." Arroyo-Melecio,

; see also P.R. Mar. Shipping Auth. v. Fed. Mar. Comm'n,

(1st Cir. 1996). In any event, issues of patient care play no dispositive role in our decision concerning the sufficiency of plaintiffs' pleading.

- 7 - The district court granted defendants' motion to dismiss

plaintiffs' amended complaint. First, the court held that

plaintiffs lacked antitrust standing -- a prudential requirement

designed to ensure that plaintiffs are the proper parties to bring

federal antitrust claims. See Vázquez-Ramos v. Triple-S Salud,

Inc., Civ. No.: 19-1527,

, at *3 (D.P.R. Dec. 15,

2020). Second, and in the alternative, the district court

concluded that the amended complaint failed to state a claim under

either section 1 or section 2 of the Sherman Act. See id. at *4-5.

Finally, having dismissed all the federal claims, the district

court declined to exercise supplemental jurisdiction over

plaintiffs' remaining Commonwealth law antitrust and tort claims

and dismissed those claims without prejudice. See id. at *5-6.

Dissatisfied with this outcome, plaintiffs timely appealed.

II.

We review a motion to dismiss de novo. Arroyo-Melecio,

. Before delving into the merits of plaintiffs'

claims, we first consider whether plaintiffs have standing to

proceed with their federal antitrust action.

Sections 4 and 16 of the Clayton Act,

,

26, create private causes of action for violations of federal

antitrust law.3 To bring such claims, plaintiffs must not only

3 Section 4 establishes that "any person who shall be injured in his business or property by reason of anything forbidden in the

- 8 - meet the typical requirements of Article III standing but also the

requirements of the so-called "antitrust standing" doctrine. See

Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of

Carpenters,

, 535 n.31 (1983). In this appeal, no

defendant contests plaintiffs' Article III standing. Nor have we

any doubts on that front. The only question is whether plaintiffs

also have antitrust standing.

The purpose of the antitrust standing doctrine is "to

avoid overdeterrence" and to "ensure that suits inapposite to the

goals of the antitrust laws are not litigated and that persons

operating in the market do not restrict procompetitive behavior

because of a fear of antitrust liability." Serpa Corp. v. McWane,

Inc.,

(1st Cir. 1999) (quoting Todorov v. DCH

Healthcare Auth.,

(11th Cir. 1991)). To

further this purpose, we seek to ensure that the prospective

antitrust plaintiff has suffered an injury of the kind antitrust

laws were intended to prevent, such that the plaintiff is a proper

party to bring a federal antitrust suit. To determine the

existence of antitrust standing consistent with this purpose, we

employ a six-factor test, assessing:

antitrust laws may sue therefor . . . and shall recover threefold the damages by him sustained."

(a). And section 16 provides that "[a]ny person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws."

§ 26.

- 9 - (1) the causal connection between the alleged antitrust violation and harm to the plaintiff; (2) an improper motive; (3) the nature of the plaintiff's alleged injury and whether the injury was of a type that Congress sought to redress with the antitrust laws ("antitrust injury"); (4) the directness with which the alleged market restraint caused the asserted injury; (5) the speculative nature of the damages; and (6) the risk of duplicative recovery or complex apportionment of damages.

RSA Media, Inc. v. AK Media Grp., Inc.,

(1st Cir.

2001) (quoting Serpa,

).

Five of the above factors plainly point towards

antitrust standing for plaintiffs in this case. The causal

connection here is patent: The exclusive dealing arrangements

plainly foreclose plaintiffs from selling their services to

Triple-S and MSO. The motive, as alleged, is to improperly

establish a monopoly for Urologics. The injury as alleged is

direct. And damages seem calculable by establishing the value of

lost sales. Conceivably, if consumers sued, there could be some

double recovery, but that seems speculative at this point.

The remaining factor -- whether the injury is an

"antitrust injury" -- is what gave the district court pause. The

Supreme Court has defined an "antitrust injury" as "injury of the

type the antitrust laws were intended to prevent and that flows

- 10 - from that which makes defendants' acts unlawful." Brunswick Corp.

v. Pueblo Bowl–O–Mat, Inc.,

(1977). In other

words, the alleged injury must be "the type of injury the antitrust

violation would cause to competition." Sterling Merch., Inc. v.

Nestlé, S.A.,

(1st Cir. 2011). Lack of an

antitrust injury is typically enough by itself to negate standing.

See RSA Media,

.

The district court concluded that plaintiffs failed to

allege any antitrust injury that was caused by defendants'

allegedly anticompetitive arrangements. See Vázquez-Ramos,

, at *3. With respect to the arrangement between Triple-

S and Urologics, the court acknowledged that, although "Triple-S

was the only option in the Western Region of Puerto Rico [Mi Salud

market]" and "[patients] in that market only had one choice of

insurer and therefore only one choice of urologist," the only

proper plaintiffs to bring an antitrust claim in that market "would

be the patients who are allegedly receiving inferior services,

i.e., the customers, not the individual doctors who lost out on

business when their services were no longer desirable."

And,

with respect to the arrangement between MSO and Urologics, the

court explained that there were "many other MMM providers in

addition to MSO available in Western Puerto Rico," so patients did

not have only one insurer and one urologist to choose from.

- 11 - This meant that "there was no antitrust injury as to MSO." Id.4

For the following reasons, we disagree as to both of the challenged

exclusive dealing arrangements -- between Triple-S and Urologics

and between MSO and Urologics.

A.

We consider first whether plaintiffs allege antitrust

injury as a result of the exclusive dealing arrangement between

Triple-S and Urologics. The amended complaint plainly alleges a

closed provider network in which all Triple-S insureds who want to

obtain urology services paid for by Triple-S must do business with

Urologics. That is to say, during the time period covered by the

exclusive dealing agreement, Urologics' competitors are excluded

from competing in the alleged market of Triple-S's 200,000 insureds

in Western Puerto Rico. Having been directly harmed by the alleged

elimination of competition in that alleged market, they have

plainly suffered an antitrust injury (assuming that the challenged

agreement is itself an antitrust violation). Nor is this by any

means surprising. The competitor of an entity granted exclusive

rights to a market is routinely the plaintiff that brings an

antitrust complaint as the party directly harmed by the elimination

4 Although plaintiffs bring independent claims under section 1 and section 2 of the Sherman Act, each of the alleged exclusive dealing arrangements provides the foundation of both corresponding claims. Accordingly, whether plaintiffs adequately alleged antitrust standing as to each claim depends on the same analysis. We therefore address them together.

- 12 - of competition in the foreclosed market. SAS of P.R., Inc. v.

P.R. Tel. Co.,

(1st Cir. 1995) (explaining that a

presumptively proper plaintiff in an antitrust suit includes "a

competitor who seeks to serve [a threatened] market"). Thus, even

though plaintiffs are not competitors of Triple-S themselves, they

are competitors of Urologics and are suing in that capacity.

None of this belies the district court's observation

that the amended complaint also alleges that the challenged

agreements harm patients as well. But we see no reason why the

occurrence of that harm deprives plaintiffs of standing to sue for

the economic effects of being foreclosed from selling services in

an alleged market. In most exclusive dealing cases there will be

someone like the patients here, i.e., someone who would have bought

goods or services from plaintiff but for the exclusive dealing

rights acquired by plaintiff's competitor. Indeed, the extent of

such harm is relevant to determining whether the exclusive dealing

arrangement is reasonable. See infra Section III(B)(1). If

existence of such harm means that the vendor precluded from

competing in the market cannot sue, then the exclusive arrangements

most likely to be deemed unlawful cannot be challenged by those

with the greatest incentive to sue. So, too, remedying any harm

to consumers would not likely remedy the economic loss claimed by

these plaintiffs. For these reasons, among others, the allegations

- 13 - that the exclusive dealing arrangement harmed patients do not

provide a basis for denying standing to plaintiffs.

Triple-S (not joined by Urologics) attempts one final

argument, contending that there is no causal relationship between

its decision to enter into an exclusivity agreement with Urologics

and its decision not to renew its contracts with plaintiffs. Even

assuming that Triple-S has no independent obligation to continue

renewing its contracts with plaintiffs, that would not mean that

Triple-S's decision to decline to renew those contracts is

unrelated to its decision to enter into an allegedly

anticompetitive agreement with Urologics. Indeed, as plaintiffs

allege, the very purpose of the exclusive dealing arrangement

between Triple-S and Urologics was to make Urologics Triple-S's

sole urology provider in Western Puerto Rico. Given that goal, it

should come as no surprise that Triple-S, in furtherance of its

exclusivity arrangement with Urologics, declined to renew its

contracts with plaintiffs. It is thus entirely plausible that

Triple-S's decision not to deal with plaintiffs was causally

related to its pact to deal exclusively with Urologics.

In sum, at the motion to dismiss stage, the allegations

in the amended complaint plausibly establish that those plaintiffs

who could have serviced Triple-S's Mi Salud patients but for the

exclusive arrangement between Triple-S and Urologics have

antitrust standing to challenge that arrangement.

- 14 - B.

As for the exclusive dealing arrangement between MSO and

Urologics, the standing allegations in the amended complaint

against MSO are nearly identical to those against Triple-S. The

three Medicare Advantage plaintiffs claim that they were excluded

from competing in a market for urology services for MMM's Medicare

Advantage patients in Western Puerto Rico due to MSO's exclusivity

arrangement with Urologics. As with Triple-S, the amended

complaint alleges that the Medicare Advantage plaintiffs suffered

monetary losses as a result. Those losses, no less than the ones

alleged by foreclosed Mi Salud providers, appear on their face to

be of the type that the antitrust laws were intended to address.

As far as the district court's conclusion that there

were alternative purchasers of MMM services in Western Puerto Rico,

MSO acknowledges that the district court was in error when it

stated that there are other MMM facilitators in addition to MSO.

MMM works exclusively with MSO. As MSO explains in its briefing

before this court, there are nevertheless other Medicare Advantage

insurers (i.e., competitors of MMM) that operate in Western Puerto

Rico. Plaintiffs do not contest this point. However, the

significance of other available buyers of plaintiffs' services

bears more on the degree of market foreclosure, and less (if at

all) on whether the alleged foreclosure gives rise to antitrust

injury.

- 15 - In their briefing on antitrust standing, the Urologics

and MSO defendants at various points also argue that the Medicare

Advantage plaintiffs improperly defined the relevant market for

their antitrust claims. Neither of these defendants, however,

explain why the precise contours of the relevant market are

relevant to assessing antitrust standing in this case as compared

to the merits of those claims. Accordingly, we interpret

defendants' market definition contentions as speaking to whether

the Medicare Advantage plaintiffs adequately stated Sherman Act

section 1 and section 2 claims, which we address next.

III.

Satisfied that all plaintiffs have standing to bring

their federal antitrust claims, we proceed to assess whether the

amended complaint actually alleges antitrust claims. Our review

remains de novo. Arroyo-Melecio,

.

Plaintiffs bring suit under two provisions of the

Sherman Act: section 1, which proscribes contracts and

conspiracies in restraint of trade; and section 2, which prohibits

the monopolization or attempted monopolization of an area of trade.

The district court held that plaintiffs failed to state a section 1

claim or a section 2 claim based on either the exclusive dealing

arrangement between Triple-S and Urologics or the arrangement

between MSO and Urologics. Vázquez-Ramos,

, at

*4-5. We find that the district court erred in dismissing the

- 16 - claims involving Triple-S's arrangement with Urologics, but we

agree with the district court that the claims involving MSO's

arrangement must be dismissed. Our reasoning follows.

A.

We start with an element common to both claims against

both parties: market power. Given that the amended complaint

alleges no per se violations of the Sherman Act, all of plaintiffs'

antitrust claims require "proof that [defendants] exercise[] or

could exercise a threshold degree of market power." Flovac, Inc.

v. Airvac, Inc.,

(1st Cir. 2016); see Ohio v.

Am. Express Co.,

(2018) (noting that "courts

usually cannot properly apply the rule of reason" in a section 1

claim "without an accurate definition of the relevant market");

Díaz Aviation Corp. v. Airport Aviation Servs., Inc.,

(1st Cir. 2013) (explaining that "monopoly power" in the

context of a section 2 claim "is typically proven by defining a

relevant market and showing that the defendant has a dominant share

of that market"). To that end, plaintiffs must in due course

"adduc[e] enough evidence to permit a reasonable factfinder to

define the relevant market." Flovac,

. The

relevant market is "the area of effective competition," Am.

Express,

(quoting Walker Process Equip., Inc.,

v. Food Mach. & Chem. Corp.,

(1965)), and

- 17 - includes both a "relevant geographic market" and a "relevant

product market," Flovac,

.

Plaintiffs allege that the relevant market for the

agreement between Triple-S and Urologics is the narrow market of

Mi Salud's 200,000 insureds in Western Puerto Rico. If that were

the relevant market, then we would arguably have a case in which

the exclusive arrangement closes off 100% of the market -- enough

to get an adjudicator's attention depending on duration,

justification, and other factors bearing on whether the defendants

effectively dominate the market. See ZF Meritor, LLC v. Eaton

Corp.,

(3d Cir. 2012); United States v.

Dentsply Int'l, Inc.,

(3d Cir. 2005).

Conversely, defendants claim that the relevant market consists

more broadly of all urology patients, whether insured by Triple-S

or not, and not necessarily limited to Western Puerto Rico. There

are other insurers, they allege, to whom plaintiffs may sell their

services, as well as uninsured patients.

In Stop & Shop Supermarket Co. v. Blue Cross & Blue

Shield of Rhode Island, we confronted a similar antitrust challenge

to a health insurer's closed provider network raised following

partial summary judgment on claims of per se antitrust violations

and a directed verdict on the rule of reason antitrust claim.

(1st Cir. 2004). We explained that "it was critical to

any attack on [an] exclusive dealing arrangement . . . that

- 18 - plaintiffs establish a relevant market and harm within it."

. We further explained that the relevant market is the market

for the "shut-out supplier," and is presumptively all customers,

"not just that smaller sub-group consisting of customers insured

by one or two insurers."

; see also Flovac, Inc. v.

Airvac, Inc.,

(D.P.R. 2015), aff'd,

(1st Cir. 2016) ("And where, as here, an antitrust

plaintiff neglects to 'define its proposed relevant market with

reference to the rule of reasonable interchangeability and cross-

elasticity of demand, or alleges a proposed relevant market that

clearly does not encompass all interchangeable substitute products

even when all factual inferences are granted in plaintiffs' favor,

the relevant market is legally insufficient.'" (quoting City of

New York v. Grp. Health Inc.,

(2d Cir. 2011))).

That being said, "well-defined submarkets may exist"

inside a broad product market and may themselves "constitute

product markets for antitrust purposes." Brown Shoe Co. v. United

States,

(1962). The boundaries of a defined

submarket are "determined by examining such practical indicia as

industry or public recognition of the submarket as a separate

economic entity, the product's peculiar characteristics and uses,

unique production facilities, distinct customers, distinct prices,

sensitivity to price changes, and specialized vendors."

- 19 - In affirming judgment for defendants in Stop & Shop, we

had the benefit of an evidentiary record including expert testimony

on the subject of market definition. Our reliance on an

evidentiary record in Stop & Shop was not aberrational. See U.S.

Healthcare, Inc.,

(noting that, "[i]n practice,"

the "question [of] how to define the product market is answered in

antitrust cases by asking expert economists to testify" to issues

including "[u]sage patterns, customer surveys, actual profit

levels, comparison of features, ease of entry, and many other

facts"); see also Morales-Villalobos v. García-Lloréns,

(1st Cir. 2003) ("[T]he matter [of market definition] cannot

be resolved on the face of the complaint.").

Here, by contrast, we stand at the pleading threshold,

with a record yet to be fleshed out with evidence and expert

opinions. We therefore ask only whether the amended complaint

alleges facts that plausibly delineate a relevant market. As to

the Triple-S and Urologics arrangement, plaintiffs allege a market

defined by the following characteristics: the geography delimited

by ASES and Mi Salud (Western Puerto Rico), the indigency of the

patients that qualifies them for Mi Salud and curtails their

ability to seek healthcare elsewhere, and the reluctance of

patients to travel long distances for medical care.

Whether there is such a market remains to be seen.

Perhaps there is no sufficient reason to segment out Mi Salud

- 20 - patients from those covered by other insurers, or those who are

self-insured. Or perhaps many patients do travel between regions

for services. The point for now is two-fold: Questions of fact

remain about "the universe of products that are considered

'reasonably interchangeable by consumers for the same purposes,'"

Flovac,

(quoting United States v. E.I. du Pont de

Nemours & Co.,

(1956)); and we typically "do not

require that the plaintiffs provide precise figures and

calculations at the pleading stage," for "[r]equiring such a high

burden would impose a nearly insurmountable bar for plaintiffs,"

In re Loestrin 24 Fe Antitrust Litig.,

(1st Cir.

2016); Morales-Villalobos,

(determining that, at

the motion to dismiss stage, it was not yet clear whether the

market foreclosure was "a trivial percentage" or "nearly

complete," and thus the matter of market definition could not "be

resolved on the face of the complaint" because defining the

relevant geographic market "depends on circumstances").

As to the claims against MSO, the amended complaint

alleges as the market the MMM Medicare Advantage population of

Western Puerto Rico. The foregoing analysis applies equally to

this alleged market -- "the matter . . . cannot be resolved on the

face of the complaint." Morales-Villalobos,

.

Whether that market definition provides any foundation for the

- 21 - claims against MSO on the merits is a matter we will separately

address.

Accordingly, we find that the amended complaint

adequately alleges a relevant market for purposes of parrying a

motion to dismiss as to both challenged exclusive dealing

arrangements. Whether the amended complaint in both instances

also alleges the other required elements of the asserted antitrust

claims is a matter to which we turn next, addressing separately

the two challenged arrangements.

B.

1.

The amended complaint meets the requirements for stating

a Sherman Act section 1 claim against Triple-S and Urologics. A

section 1 claim has two components: "First, there must be

concerted action"; and "[s]econd, the actors' agreement must

involve either restrictions that are per se illegal or restraints

of trade that fail scrutiny under the rule of reason." Euromodas,

Inc. v. Zanella, Ltd.,

(1st Cir. 2004). Section 1

also prohibits "only unreasonable restraints." Leegin Creative

Leather Prods., Inc. v. PSKS, Inc.,

(2007)

(quoting State Oil Co. v. Khan,

(1997)).

As to the first component, and contrary to what

defendants claim, the arrangements as alleged plainly involve

concerted action: Urologics agreed to concede "certain discounts

- 22 - in favor of Triple-S, on account of the exclusive provider status

that was being granted" and to "split" certain savings alleged to

result from providing inferior and even harmful services. Indeed,

the reciprocity established by the agreement resulted in lower

prices for the insured patients, and thus for the insurer, and

will likely be touted by defendants as evidence that the agreement

is pro-competitive. In any event, the point for present purposes

is that the pleading alleges facts that plausibly establish

concerted action.

Moving to the second component, plaintiffs do not allege

any per se illegality. Accordingly, all parties agree that a rule

of reason analysis is appropriate for assessing the exclusive

dealing arrangement at issue. Under the rule of reason, courts

engage in a "fact-specific assessment of 'market power and market

structure . . . to assess the [restraint]'s actual effect' on

competition." Am. Express,

(alteration in

original) (quoting Copperweld Corp. v. Indep. Tube Corp.,

(1984)). The purpose of this inquiry is to distinguish

between restraints of trade "that are harmful to the consumer and

restraints stimulating competition that are in the consumer's best

interest." Leegin,

.

Typically, courts apply a burden-shifting framework to

determine whether a restraint violates the rule of reason. See

Am. Express,

; see also Phillip E. Areeda &

- 23 - Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust

Principles and Their Application ¶ 1820a (5th ed. 2021). First,

the plaintiff must "prove that the challenged restraint has a

substantial anticompetitive effect that harms consumers in the

relevant market." Am. Express,

. Then, the

burden shifts to the defendant to demonstrate "a procompetitive

rationale for the restraint."

Finally, the burden shifts

back to the plaintiff to establish that "the procompetitive

efficiencies could be reasonably achieved through less

anticompetitive means."

Importantly, applying this framework

usually requires some fairly detailed facts, the ascertainment of

which is often beyond the scope of a Rule 12(b)(6) inquiry. See

PLS.Com, LLC v. Nat'l Ass'n of Realtors,

, 839–40 (9th

Cir. 2022) (explaining that "whether the alleged procompetitive

benefits of [the challenged restraint] outweigh its alleged

anticompetitive effects is a factual question that the district

court cannot resolve on the pleadings"); see also E. Food Servs.,

Inc. v. Pontifical Cath. Univ. Servs. Ass'n,

(1st

Cir. 2004) (describing the assessment as a "fact-intensive

process").

As recounted in greater detail above, plaintiffs allege

that the exclusive dealing arrangement between Triple-S and

Urologics has shut them out of a plausibly relevant market

entirely. The result of this exclusion has been an elimination of

- 24 - their ability to compete and an alleged reduction in the quality

of urology services for Mi Salud patients in Western Puerto Rico.

Taking the allegations in the amended complaint as true, plaintiffs

have, for pleading purposes, demonstrated "reduced output . . .

[and] decreased quality in the relevant market," which constitute

"[d]irect evidence" of anticompetitive effects. PLS.Com, LLC,

(quoting FTC v. Ind. Fed'n of Dentists,

(1986)). We reiterate that "[i]t is not for the court to

decide, at the pleading stage, which inferences are more plausible

than other competing inferences"; rather, we may "only accept as

true all factual allegations contained in a complaint, make all

reasonable inferences in favor of the plaintiff, and properly

refrain from any conjecture as to whether conspiracy allegations

may prove deficient at the summary judgment or later stages."

Evergreen Partnering Grp. v. Pactiv Corp.,

(1st

Cir. 2013). To do otherwise would "frustrate the purpose of

antitrust legislation and the policies informing it."

.

As an alternative argument, Urologics points to a Letter

of Intention and Confirmation of Preliminary Agreement between

Triple-S and Urologics and to a participating physician agreement

that contains a clause granting either party the right to terminate

the agreement without cause on thirty days' notice. Urologics

contends that the termination clause of the latter is incorporated

into the former. If that were so, any possible market constraint

- 25 - would likely be de minimis. U.S. Healthcare,

.

But the cross-referencing language to which Urologics points

refers to the incorporation of "obligations," and thus arguably

not rights.5 So whether either party retains the right to terminate

the exclusive dealing arrangement on short notice remains to be

seen.

To be sure, at subsequent stages in this litigation,

plaintiffs' claim that the challenged arrangement harms

competition in a relevant market may prove to be overblown, or

defendants might well show that the exclusive dealing arrangement

between Triple-S and Urologics actually has a procompetitive

effect. But at this stage, we are obliged to "accept[] all well-

pleaded allegations of the plaintiffs as true and afford[] all

inferences in the plaintiffs' favor." Arroyo-Melecio,

.

We therefore conclude that plaintiffs have stated a

Sherman Act section 1 claim based on the exclusive dealing

arrangement between Triple-S and Urologics.

2.

We next assess whether plaintiffs adequately plead a

Sherman Act section 2 claim against Triple-S and Urologics. The

5 The clause reads: "any obligation that arises from the contract of a participating provider . . . [will] also be applicable to this agreement" (emphasis supplied).

- 26 - key questions for establishing a section 2 violation are whether

the plaintiff has demonstrated that one of the defendants possessed

"monopoly power in the relevant market" and whether that defendant

acquired or maintained that power by "improper means." Town of

Concord v. Bos. Edison Co.,

(1st Cir. 1990); see

also Arroyo-Melecio,

(explaining that a section 2

claim "requires monopoly or near monopoly power in some market,

and a wrongful exclusionary act designed to enhance such power in

that market or to achieve an improper advantage in another market"

(quoting Town of Norwood v. New Eng. Power Co.,

, 420-

21 (1st. Cir. 2000))).

We assume for the purposes of the motion to dismiss, as

with the section 1 claim, that the relevant market for the

section 2 claim is Mi Salud patients needing urological care in

Western Puerto Rico. Plaintiffs allege that Urologics is the sole

provider of urology services to Mi Salud patients in Western Puerto

Rico, giving it monopoly power in the relevant market and leaving

patients with only one choice of provider. Plaintiffs also allege

that Urologics acquired this monopoly power not through any skill

or merit but through improper means, namely an anticompetitive

exclusive dealing arrangement with Triple-S that was designed to

monopolize the relevant market and keep plaintiffs from competing

in that market. We have noted that "exclusive dealing" is an

improper means of maintaining monopoly power for the purposes of

- 27 - section 2. See Fraser v. Major League Soccer, L.L.C.,

(1st Cir. 2002) ("In section 2 cases, the wrongful act is

usually one designed to exclude competitors from the market (e.g.,

predatory price, exclusive dealing)."). Together, these

allegations are sufficient, at the pleading stage, to establish a

plausible section 2 claim against Triple-S and Urologics.

Triple-S and Urologics argue in response that there can

be no section 2 violation because Triple-S's position as the

exclusive insurer for the Mi Salud program in Western Puerto Rico

was conferred to it by the government of Puerto Rico through a

contract with ASES. That is, they contend that Triple-S's monopoly

power was the product of state action rather than any allegedly

anticompetitive conduct involving the defendants. This argument,

however, misses a crucial detail. Plaintiffs' amended complaint

does not target only the monopoly power held by Triple-S as the

sole insurer in the relevant market. Rather, plaintiffs point to

the alleged monopoly held by Urologics as the sole provider of

urology services in that market. It is this monopoly power over

the provision of urology services that was allegedly created by

the exclusive dealing agreement between Triple-S and Urologics.

Accordingly, defendants' arguments that identify Triple-S as the

relevant holder of monopoly power miss the mark.

- 28 - C.

The Medicare Advantage plaintiffs' challenge to the

exclusive dealing agreement alleged to exist between MSO and

Urologics fares less well. As the reader may recall, the Medicare

Advantage plaintiffs define the market in which they compete as

limited to Medicare Advantage patients in one area of Puerto Rico

(Western Puerto Rico). Their amended complaint, though, does not

allege that MSO controls a substantial portion of that market.

Rather, plaintiffs point only to MSO's alleged control of physician

contracts with MMM, which plaintiffs in turn describe as "one of

the largest Medicare Advantage providers in Puerto Rico." This

misalignment between the relevant market as defined in the amended

complaint and the allegations of MMM's size in a much wider market

eschewed by the amended complaint leaves the amended complaint

well short of alleging at least some facts making it plausible

that plaintiffs will present a "showing of foreclosure of

substantial dimensions" that is "the essential basis . . . for an

attack on an exclusivity clause." U.S. Healthcare, Inc.,

; see Am. Express,

(plaintiffs must

demonstrate that defendant's decision to exclusively purchase from

one provider could possibly have "a substantial anticompetitive

effect that harms consumers in the relevant market"). Simply put,

the amended complaint does not allege facts plausibly pointing to

- 29 - any substantial degree of foreclosure of the alleged market.6 As

such, it fails to allege a violation of either sections 1 or 2 of

the Sherman Act. See, e.g., E. Food Servs,

.

IV.

We therefore reverse the district court's order

dismissing plaintiffs' federal antitrust claims concerning the

arrangement between Triple-S and Urologics, and affirm the

district court's order dismissing plaintiffs' federal antitrust

claims concerning the arrangement between MSO and Urologics.

Because we find that the federal claims of the plaintiffs who

challenge the Triple-S/Urologics arrangement were improperly

dismissed, we also vacate the district court's decision to decline

to exercise supplemental jurisdiction over the Commonwealth law

claims of those plaintiffs. The parties will bear their own costs.

6 Even as to this different, wider market, plaintiffs' allegation is the equivalent of saying that there are an uncertain number of potential purchasers in the market, with some unknown number being among the largest, and MMM is just one of those.

- 30 -