Med. Ctr. at Elizabeth Place, LLC v. Atrium Health Sys.
Med. Ctr. at Elizabeth Place, LLC v. Atrium Health Sys.
Opinion of the Court
This is a case about competition among hospitals in Dayton, Ohio. When Medical Center at Elizabeth Place, LLC ("MCEP") opened in 2006, it was an acute care, for-profit hospital owned by 60 physicians and one corporate shareholder. By 2009, MCEP's existence as a physician-owned enterprise came to an end when it sold an ownership interest to Kettering Health Network, a competitor in the Dayton healthcare market. MCEP alleges that it failed because of the anticompetitive actions of Premier Health Partners ("Premier"), a dominant healthcare network in the Dayton area. MCEP alleges that Premier contracted with area physicians and payers (insurers and managed-care plan providers) on the condition that they did not do business with MCEP. Because payers provide patients and physicians provide services, it is difficult to run a viable hospital when one, let alone both, is in short supply.
So, whether by licit or illicit means, Premier won that competition. In this litigation, the parties competed again. This time, MCEP pushed all its chips to the center of the table on one hand of cards: a claim that Premier had engaged in conduct so devoid of benefit to the market as to be per se illegal under the Sherman Act. Such claims apply only to a limited range of conduct. To be per se illegal, a defendant's conduct has to be so obviously anticompetitive that it has no plausibly procompetitive features-a high hurdle for plaintiffs claiming restraint of trade. Once they clear it, however, plaintiffs receive a corresponding reward: they need not undergo the often arduous process of showing that the challenged conduct was anticompetitive. As one of our sister circuits has described it, "[t]he per se rule is the trump card of antitrust law. When an antitrust plaintiff successfully plays it, he need only tally his score." United States v. Realty Multi-List, Inc. ,
*719The question before us is whether MCEP successfully played its hand. The district court from which MCEP appeals found that MCEP's per se claim failed because the record showed that Premier's contracts with payers and physicians had plausibly procompetitive features. That holding says nothing about whether Premier's conduct was on balance procompetitive or anticompetitive. This opinion likewise reaches no decision on the ultimate economic merits of Premier's actions because to do so would go beyond our charge. We must address only the question of per se illegality, and as to that, we agree with the district court that MCEP failed to meet the high standard required for per se claims. We AFFIRM .
I.
MCEP alleges a conspiracy between the Premier hospitals that implicates, without naming as defendants, payers and physicians in the Dayton area. During the course of this multi-year litigation, various legal issues raised in this case have been ruled on by U.S. District Judge Black, a Sixth Circuit appellate panel, and then, after the matter was remanded and Judge Black recused himself, District Judge Rice, who granted the motion for summary judgment presently before us.
Factual Background
MCEP is an acute-care hospital located in Dayton, Ohio, that opened in September 2006 with 60 physician owners and one corporate shareholder, Regent Surgical Health. Defendants in this case comprise four hospitals-Miami Valley Hospital (owned by MedAmerica Health), Good Samaritan Hospital (owned by Catholic Health Initiatives), Atrium Medical Center (owned by Atrium Health Systems), and Upper Valley Medical Center-as well as a joint operating company, Premier Health Partners ("Premier"), formed through a joint operating agreement among those four hospitals.
In spite of its dominant market position, the record leaves no doubt that Hospital Defendants felt threatened by the possibility of MCEP's presence in the Dayton medical market. Five months before MCEP opened for business, Hospital Defendants held a board meeting at which, "[b]y consensus, the Board supported management's efforts" to oppose MCEP. Executives from Premier told an MCEP shareholder that Hospital Defendants "would do whatever they needed to do in order to stop [MCEP] from opening."
Hospital Defendants' underlying concern appears to have been that MCEP's for-profit, physician-owned model of healthcare would "bankrupt" their hospitals. A letter written by primary care physicians (most of whom were affiliated with Hospital Defendants), addressed to physicians in the Dayton healthcare market, expressed the dynamic they found worrisome:
There is currently widespread opposition among not-for-profit community hospitals across the country toward physician owned inpatients [sic] hospitals such as this. The physician investors are doing so for reasons of profitability. MVH and GSH offer the range of services and the quality of care necessary *720to enable surgeons to care for their patients. A physician owned specialty hospital will take the better-insured and more profitable patients away from Premier (along with ancillary services), leaving our local hospitals with only the more complex and underinsured patients.
MCEP, for its part, wrote a "Dear Colleague" letter the next month, responding:
• While MCEP's business model will "create a competitive environment to deliver better and more efficient healthcare in Dayton," it will not drive hospitals out of business;
• MCEP "will not turn away patients on the basis of payor classification";
• "Premier generates about $ 1 billion in revenues and currently has a cash reserve of over $ 1 billion. As a non-profit, Premier pays no taxes.... [MCEP] will have revenues that are a fraction of Premier's, and our physician-owned hospital will pay corporate, personal and property taxes";
• "[C]omprehensive studies have confirmed that physician-run hospitals have fewer medical errors, shorter turnover times, fewer infections and greater cost efficiencies."
Citing Hospital Defendants' board-meeting consensus and their letter to physicians, MCEP alleges that Hospital Defendants blocked MCEP from gaining meaningful access to the Dayton market through a series of anticompetitive acts that amounted to a group boycott of MCEP. In its Amended Complaint, MCEP made only a per se claim; MCEP made no claim under the rule of reason. MCEP's Amended Complaint alleges that Hospital Defendants:
• financially coerced commercial health insurers or managed care plan providers (such as Anthem, UnitedHealthcare, Private Healthcare Systems, etc.) "to refuse to permit [MCEP] full access to their respective networks";
• financially coerced commercial health insurers or managed care plans to reimburse MCEP at suppressed rates far below what Hospital Defendants demanded for the same services;
• threatened retributive financial consequences to physicians who affiliated with MCEP, and followed through on threats, "including terminating leases that the physicians had with the Defendants for office space";
• offered payments to physicians "who agreed not to work with or at [MCEP]; and who agreed to divest ownership in the Medical Center";
• financially coerced physicians affiliated with Hospital Defendants from "admitting patients to [MCEP] or referring patients to physicians who treated patients at [MCEP]"; and
• deliberately poached physicians from MCEP who made up a "disproportionately high number of admissions and then prohibited them from admitting patients to [MCEP]."
Beyond these allegations, MCEP claims that, in the course of litigation, it discovered two additional agreements that comprised part of the actionable group boycott.
MCEP alleged only the "hub" agreement in its Amended Complaint. Hospital Defendants argue that the "rim conspiracy" claim is a new, and untimely , Sherman Act Section 1 claim. MCEP, for its part, maintains that the additional agreements are simply evidence of the overarching Section 1 conspiracy alleged in their Amended Complaint. Regardless of the exact scope of the alleged boycott, MCEP alleges that one existed, that it was orchestrated by Hospital Defendants, and that it prevented MCEP from succeeding as a going concern. MCEP claims that, but for Hospital Defendants' conduct, it would have been able to contract with payers and physicians, which would have, in turn, increased competition in the Dayton healthcare market for consumers of general inpatient surgical services.
Procedural History
This case was before Judge Black in Cincinnati from January 30, 2012, to April 19, 2017. During that time, Judge Black granted Hospital Defendants' motion for summary judgment on the ground that the MCEP's antitrust claim lacked the necessary plurality of actors.
On appeal to this court, a divided panel reversed Judge Black and rejected Hospital Defendants' motion for summary judgment. The panel held that a reasonable juror could find that Premier comprised multiple competing entities and, therefore, could engage in concerted action. MCEP I ,
On remand, Hospital Defendants moved again for summary judgment arguing, among other things, that MCEP's allegation of a per se antitrust violation failed as a matter of law. Hospital Defendants argued that their alleged restraints on trade were plausibly procompetitive which, they argued, is sufficient to defeat a per se antitrust claim. Because MCEP pleaded only a per se claim, if Hospital Defendants had succeeded in this argument, the case would have been dismissed. Judge Black denied Hospital Defendants' renewed motion for summary judgment, rejecting Hospital Defendants' argument on two alternative bases: first , the claimed procompetitive effects of the challenged conduct are subject to genuine dispute and are therefore an improper basis for summary judgment, and second , Hospital Defendants "failed to evidence that their joint contracting has any efficiency-enhancing purpose to which such an agreement is necessary." Med. Ctr. at Elizabeth Place v. Premier Health Partners ,
The case was set for trial. But on April 19, 2017, Judge Black recused himself and the case was re-assigned to Judge Rice.
II.
Summary judgment is warranted if, viewing the facts in the light most favorable to the nonmoving party, no material fact is subject to a genuine dispute. Matsushita Elec. Indus. Co. v.Zenith Radio Corp. ,
The parties dispute what de novo review should entail in this case. MCEP claims that Judge Rice's decision to not apply the "law of the case" doctrine was critical to his decision to grant Hospital Defendants' motion for summary judgment, and therefore we must review Judge Rice's "law of the case" decision de novo. According to MCEP, Judge Rice could reconsider Judge Black's denial of summary judgment only by finding that Judge Black clearly erred. So, MCEP says, if Judge Rice was wrong that Judge Black committed clear error, then we must reverse his "law of the case" judgment. For their part, Hospital Defendants argue that we should simply review de novo Judge Rice's substantive legal conclusions, separate and apart from Judge Rice's "law of the case" conclusion.
Ultimately, the Hospital Defendants have the better of this argument. First , we review for abuse of discretion Judge Rice's decision to reconsider Judge Black's pre-transfer order. See United States v. Todd ,
Second , we can find that Judge Rice abused his discretion in disturbing Judge Black's denial of summary judgment only if we have a "definite and firm conviction that [Judge Rice] committed a clear error in judgment" such as "rel[ying] upon clearly erroneous factual findings, appl[ying] the law improperly, or us[ing] an erroneous legal standard." See Garner v. Cuyahoga Cty. Juvenile Ct. ,
III.
MCEP's raises two substantive claims on appeal. First , MCEP argues that the district court erred by declining to apply the per se rule to Hospital Defendants' allegedly anticompetitive conduct. Second , MCEP argues that the district court erred in rejecting MCEP's "horizontal rim claims" due to untimeliness. Neither argument has merit.
A.
Per se claim
Section 1 of the Sherman Act states that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal."
*724Although a motion for summary judgment against a per se claim involves underlying facts, the propriety of per se treatment "is normally a question of legal characterization that can often be resolved by the judge on a motion ... for summary judgment." Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield ,
Per se claims against joint ventures
The question before us is further delineated by the fact that the challenged restraints exist within a joint venture, which the Supreme Court has noted "hold the promise of increasing a firm's efficiency and enabling it to compete more effectively." Copperweld Corp v. Indep. Tube Corp. ,
Because joint ventures often have procompetitive efficiencies, when a joint venture is itself challenged as anticompetitive, that claim is reviewed under the rule of reason. Copperweld Corp. ,
Core activity
Core activity is activity that is "integral to the running" of the venture. Id . at 7-8,
Hospital Defendants claim that the challenged panel limitation-but not the other challenged restraints-qualifies as core activity. They argue that because Dagher described price setting as a core activity for the joint venture in that case, and because panel limitations are a "pricing term" in Hospital Defendants' contracts with payers, the panel limitations are "core activity."
This argument is not persuasive. Dagher does not stand for the general proposition that restraints in contracts that are price related are always core activity for joint ventures. Dagher 's holding was tailored to the specific joint venture before it. Id . at 5-6,
Joint venture's ancillary restraints
Restraints that are "ancillary to the legitimate and competitive purposes of the business association" fall between "core" activity and "naked" restraints. Id . at 7,
Predictably, the parties spill considerable ink contesting what counts as "reasonable." MCEP urges the panel to accept Judge Black's version of the ancillary-restraints doctrine. We decline to do so because Judge Black framed the ancillary-restraints inquiry incorrectly in two ways: by applying too high a standard to determine what qualifies as "reasonable" and by placing an evidentiary burden on Hospital Defendants to meet that standard. Judge Black rejected Hospital Defendants' argument that their restraints bore a reasonable relationship to the joint venture's success, holding that they "failed to evidence that their joint contracting has any efficiency-enhancing purpose to which such an agreement is necessary." Under this standard, only restraints that are necessary to a joint venture's efficiency-enhancing purposes qualify as ancillary. Further, Judge Black held that Hospital Defendants must provide "undisputed proof" that the restraint is necessary to prevent a per se claim from proceeding to trial.
Judge Black's sole source of authority for this version of the ancillary-restraints doctrine is a guidance document put out by *726the Federal Trade Commission and the United States Department of Justice on collaboration among competitors. See Dep't of Justice & FTC, Antitrust Guidelines for Collaborations Among Competitors § 3.3, at 10-25 (Apr. 2000). But the citation is of dubious relevance to the ancillary-restraints doctrine because the cited section deals with joint ventures only under the rule of reason, not the per se rule.
To bolster Judge Black's approach, MCEP cites NaBanco v. Visa U.S.A., Inc. ,
Hospital Defendants, on the other hand, describe the standard as whether there exists a plausible procompetitive rationale for the restraint.
Perhaps most destructive to MCEP's argument is then-Judge Sotomayor's concurrence in MLB Properties ,
The question of what relationship a challenged restraint must have to a joint venture in order to qualify as ancillary splits the Circuits-the Eleventh Circuit *727on the one hand, and the Second, Seventh, Eighth, and Ninth Circuits on the other. We follow the majority of Circuits and hold that a joint venture's restraint is ancillary and therefore inappropriate for per se categorization when, viewed at the time it was adopted, the restraint "may contribute to the success of a cooperative venture." Polk Bros. ,
The Supreme Court generally has treated as per se illegal joint efforts by firms to disadvantage a competitor by persuading customers to deny that competitor relationships the competitor needs in the competitive struggle. But in these cases, the practices generally were not justified by plausible arguments that the practices enhanced overall efficiency and made markets more competitive.
328 F.3d at 1154-55. In a footnote that follows the court elaborated:
This is so because plausible arguments that a practice is procompetitive make us unable to conclude "the likelihood of anticompetitive effects is clear and the possibility of countervailing procompetitive effects is remote."
Id . at 1155 n.8 (quoting Stationers , 472 U.S. at 294,
Paladin faithfully applies the Supreme Court's holding in Stationers . Condemning as per se illegal restraints that, while not necessary to achieving a joint venture's efficiency-enhancing purpose nevertheless plausibly relate to that purpose, would run counter to the Supreme Court's instruction to avoid applying the per se rule to situations where efficiencies are being served. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc. ,
MCEP's second but related argument, which was adopted by Judge Black, is that Hospital Defendants bear the burden of proving that a challenged restraint is procompetitive, and therefore ancillary, because the question of the procompetitiveness of a restraint is "quintessentially one of fact." Judge Black's inclination to defer to the fact finder has an intuitive appeal in the summary judgment context. And it would be correct had MCEP brought a claim under the rule of reason. See Perceptron, Inc. v. Sensor Adaptive Mach., Inc. ,
If the record in this case reveals a plausible way in which the challenged restraints contribute to the procompetitive efficiencies of the joint venture, then "the possibility of countervailing procompetitive effects" is not remote and per se treatment is improper. Id . at 294,
(1) To provide a broad scope and a continuum of health care services with a focus upon community health benefit.
(2) To improve cost effectiveness and efficiencies in the delivery of health care services.
(3) To increase the quality of health care services in the greater Miami Valley Region.
(4) To integrate physicians and other health care providers with the JOC Network.
(5) To have the capacity to assume and manage financial risk.
(6) To improve the health status of the greater Miami Valley Region.
We analyze Hospital Defendants' challenged restraints in light of these goals.
MCEP challenges two kinds of conduct on the part of Hospital Defendants. First, MCEP argues that Hospital Defendants restrained trade through "panel limitations," wherein Hospital Defendants stipulated to payers that if they added MCEP to their networks, Hospital Defendants would be able to renegotiate prices. Second, MCEP alleges that Hospital Defendants took direct concerted action against MCEP by cutting off patient referrals to MCEP-affiliated physicians, evicting MCEP-affiliated physicians from office space owned by Hospital Defendants, and agreeing with third parties to refuse to deal with MCEP-affiliated physicians.
Panel limitations . Courts have found such restraints of trade supported by procompetitive justifications. Stop & Shop Supermarket Co v. Blue Cross & Blue Shield ,
*729But what is more common than exclusive dealing? It is illustrated by requirements contracts, which are common, and legal, and obligate a buyer to purchase all, or a substantial portion of, its requirements of specific goods or services from one supplier. [The Hospital Defendants'] deals with the health insurance companies are a form of requirements contract, for the deals require the companies to limit the network of providers from which they obtain the health care that their insurance contracts obligate them to obtain for their insureds. And an insurance company may get better rates from a hospital in exchange for agreeing to an exclusive contract, as exclusivity will drive a higher volume of business to the hospital.
MCEP claims that Hospital Defendants' argument that panel limitations help ensure volume is a pretext. In support of this claim, MCEP points to evidence showing that Premier's contract with insurer Aetna had a volume-based discount that automatically lowered Premier's rates when billing volume increased past certain benchmarks. Thus, even without panel limitations, Hospital Defendants had financially incentivized insurers to maintain a high volume of patients getting services from Hospital Defendants. To MCEP, this evidence reveals that the only possible purpose of the panel limitation in Hospital Defendants' contract with Aetna was "purely punitive."
We are not persuaded. A panel limitation and a price schedule are two distinct methods directed toward the common goal of keeping patients (customers) coming through the doors. A pricing schedule is a discount that incentivizes payers to keep volume up. A panel limitation, meanwhile, forces payers to confront the risk of renegotiating their contract with Hospital Defendants if they choose to send their insureds (customers) to a competing provider. Moreover, it is plausible that Hospital Defendants would deploy a "belt and suspenders" approach to a matter as crucial for a hospital system as maintaining patient (customer) volume. It is plausible that panel limitations, by lowering the cost of Hospital Defendants' services, contribute to the efficiency-enhancing purposes of the joint venture, specifically improving "cost effectiveness and efficiencies in the delivery of health care services."
Concerted action regarding physicians . MCEP's claims concerning Hospital Defendants' direct concerted action toward physicians can be divided into two categories: (1) threatened loss of patient referrals; and (2) non-compete agreements.
1. Threatened loss of patient referrals
This alleged restraint centers around evidence found in a letter sent by *730Hospital Defendants to Dayton-area doctors informing them of Hospital Defendants' opposition to MCEP. The letter, signed by 94 primary care physicians, discusses the consequences that MCEP's presence could have on the Dayton healthcare market. The primary concern expressed in the letter was that the profit-driven MCEP "will take the better insured and more profitable patients away from Premier" and leave "local hospitals with only the more complex and underinsured patients." At the conclusion of the letter, the physicians wrote:
We, the primary care network of physicians for Premier, strongly oppose [MCEP]. We believe it will have only negative impacts on our community, our hospitals and our network. We do not support the physicians who invest in these inpatient hospitals. We do look forward, however, to our continued efforts to work with the specialists of our hospital medical staffs and do our part within Premier to continue to improve the delivery of cost-effective, highest quality healthcare to the people of our community.
MCEP claims that doctors who signed the letter "understood [it] to mean that signatories would stop referring patients to anyone who invested in MCEP."
Hospital Defendants argue that the letter, in expressing the opinion of Premier and its affiliated physicians, does not constitute a restraint , and therefore cannot qualify as illegal conduct under antitrust laws. They are right. In Am. Council of Podiatrists v. Am. Bd. of Podiatric Surgery, Inc. , we held that, in the absence of a showing by the plaintiff that allegedly anticompetitive communication was (1) "false" and (2) "difficult or costly for the plaintiff to counter," we would apply a presumption that speech has "de minimis effect on competition."
2. Non-compete agreements
MCEP claims that Hospital Defendants terminated the leases of multiple MCEP-affiliated doctors who rented space in Hospital Defendants' hospitals. Judge Rice rejected this argument on the grounds that Hospital Defendants have a legitimate interest as a joint venture in preventing free riding by physicians who will reap the benefits of training and convenient office space at their hospitals and "then refer their patients elsewhere or invest in other hospitals." Hospital Defendants had a plausible concern that, without these contracts, physicians who invested in MCEP could rent office space at a Premier-associated hospital, free ride on the reputation and facilities of that hospital, and then refer patients out to MCEP. Preventing such a misalignment of incentives is plausibly related to Hospital Defendants' goal of "integrat[ing] physicians and other health care providers with the JOC Network."
MCEP also alleges that Hospital Defendants' non-compete agreements with physicians in the Dayton area qualify as concerted conduct subject to per se condemnation. Hospital Defendant Good Samaritan purchased the Dayton Heart Hospital in 2008. As characterized by MCEP, a condition of the purchase by Good Samaritan Hospital was that individual owners of Dayton Heart Hospital were paid in *731full only if they agreed "(i) not to invest in MCEP, and (ii) if they already owned shares, they would divest if MCEP began to offer cardiac services" over the next five years. MCEP cites no case law holding that vertical non-compete contracts entered into by joint ventures qualify as conduct that is anticompetitive per se.
MCEP's other arguments in support of its per se claim . First , MCEP argues that we are bound by precedent to find that Hospital Defendants' restraints qualify for per se treatment. To that end, MCEP cites to Klor's, Inc. v. Broadway-Hale Stores, Inc. ,
Second , MCEP argues that we are bound by "law of the case" to find in its favor because, in MCEP I , we implicitly rejected a number of the arguments that Hospital Defendants make here. We need not guess at the contours of MCEP I 's holding-we said expressly that it concerned "only ... whether defendants' conduct is the result of two or more entities acting in concert or whether defendants, based on their participation in the joint operating agreement, function as a single entity in the market place." MCEP I ,
B.
Rim Conspiracy claims
MCEP argues that Judge Rice erred in dismissing its Section 1 claims of *732concerted action based on "rim" conspiracies-that is, agreements (induced by Hospital Defendants) to boycott MCEP made among the payers as well as independent physicians. The rim conspiracies are distinct from the alleged conspiracy among the Hospital Defendants. MCEP argues that Hospital Defendants orchestrated two additional conspiracies-one among payers to collectively "hold the line" against MCEP by excluding it from their market, the other a "physician conspiracy" in which Hospital Defendants induced Dayton-area physicians to collectively refuse to refer patients to MCEP. As Judge Rice noted, this issue is significant. Hospital Defendants "conceded that, if MCEP could prove that the payers agreed among themselves not to offer MCEP a managed care contract and that Premier orchestrated that agreement, the per se rule would apply to that claim." If the district court erred by precluding these rim conspiracy claims, then even if Judge Rice was correct that MCEP has no triable per se claim of concerted action among Hospital Defendants (the "hub" claim), the case would need to be remanded and set for trial on MCEP's rim conspiracy claim.
MCEP argues that the rim conspiracy claims are not new. Instead, MCEP characterizes the rim agreements as additional evidence found through discovery that supports the overarching group boycott claim advanced in the Amended Complaint. MCEP undermines that position, however, by claiming simultaneously that "[t]he payer agreement and physician agreement ... represent additional horizontal concerted action that independently requires imposition of the per se rule whether the jury finds the Defendants to be a single entity or multiple actors."
But MCEP's Amended Complaint includes neither an allegation of an agreement among the payers nor an agreement among the physicians.
Faced with that omission, MCEP claims that Judge Rice erred by not permitting MCEP to submit a Second Amended Complaint to add the rim conspiracy claims. We review for abuse of discretion the district court's decision to deny such a motion. Super Sulky, Inc. v. U.S. Trotting Ass'n ,
The district court found that Hospital Defendants "would be severely prejudiced if MCEP were permitted to amend its Complaint at this late date" primarily for the reason that a proper adjudication of the rim conspiracy claims would require a new round of discovery that could last well over a year. The district court was unmoved by MCEP's arguments that amending its complaint would not cause prejudice because Hospital Defendants had been "on notice" of the rim conspiracy claims since MCEP filed its Omnibus Opposition to Defendants' Motions for Summary Judgment.
The district court did not abuse its discretion by concluding that its allowing MCEP to amend its complaint for a second time would require a new round of discovery that would cause undue delay and prejudice Hospital Defendants by significantly extending litigation that began in 2012. Tefft does not save MCEP on this point. In that case, it was "obvious that the facts as set forth in Tefft's original complaint would support [the new] cause of action ... as well as [the original cause of action]." Id . at 639. That is not the case here, where the facts as set forth in MCEP's Amended Complaint do not support MCEP's different rim conspiracy claims. This case is more like Super Sulky , where a plaintiff moved to amend his complaint to add an additional Section 1 theory that was absent from the original complaint, but had been raised in response to a motion for summary judgment-in short, the circumstance here. The district court denied that plaintiff's motion to amend and we affirmed. Super Sulky ,
Judge Rice did not abuse his discretion when he denied MCEP's motion to amend its complaint.
IV.
Because Judge Rice was correct to find that the challenged restraints do not fall within the circumscribed categories of per se condemnation, we AFFIRM the district court's grant of summary judgment.
BATCHELDER, J., delivered the opinion of the court in which SUTTON, J., joined, and WHITE J., joined in part. SUTTON, J. (pp. 733-35), delivered a separate concurring opinion. WHITE, J. (pp. 735-37), delivered a separate opinion dissenting in part.
CONCURRENCE
The other approach to determining whether a restraint of trade is "unreasonable" is the "rule of reason." In re Southeastern Milk Antitrust Litigation ,
In this opinion, we refer to the four hospitals and the joint operating company collectively as "Hospital Defendants" except where otherwise noted.
While there is some dispute about exactly when these claims were first brought to Hospital Defendants' attention, there does not appear to be any dispute that the claims were raised (though the Complaint was not amended to reflect the new claims) in MCEP's opposition to Hospital Defendants' initial motion for summary judgment before Judge Black.
Judge Black explained that, as a "Cincinnati duty-stationed Judge," he could not preside over a trial in Dayton.
If a presumption against summary judgment in antitrust cases is ever appropriate, it is not here. This circuit has applied a presumption against summary judgment in antitrust actions only when the case demanded a fact-intensive inquiry under the rule of reason into issues of intent and motive. In re Southeastern Milk Antitrust Litig. ,
MCEP cites Jimkoski v. State Farm Mut. Auto. Ins. Co. ,
Hospital Defendants, at one point, argue that the correct legal standard for determining whether a restraint is ancillary or naked is whether the challenged restraint is "completely unrelated to the purpose of a lawful joint venture." But this mischaracterizes the ancillary-restraints doctrine. "The per se rule would collapse if every claim of economies from restricting competition, however implausible, could be used to move a horizontal agreement not to compete from the per se rule to the Rule of Reason category." Gen. Leaseways, Inc. v. Nat'l Truck Leasing Ass'n ,
See MLB Properties ,
The challenged conduct evaluated in this section is limited to MCEP's claim of illegal concerted action among the Hospital Defendants, not the additional "rim conspiracy" claims. The reason for this is that we conclude in the next section that Judge Rice did not abuse his discretion by ruling that MCEP's effort to plead those claims was untimely.
MCEP also argues that Hospital Defendants waived the right to move for summary judgment on this theory of liability because they failed to argue before Judge Black that their direct concerted action should be viewed under the rule of reason. Likely, MCEP intends to say that Hospital Defendants' forfeited the argument. "Whereas forfeiture is the failure to make the timely assertion of a right, waiver is the intentional relinquishment or abandonment of a known right." United States v. Olano ,
Instead MCEP cites to E. States Retail Lumber Dealers' Assoc. v. United States ,
"It must have been obvious from the beginning that the flat ban against such restraints of trade covered more than the rationale of the rule required. The rule might prevent desirable transfers of property. The most valuable asset of a business might be the good will of the public toward its owner. Should he wish to sell the business the owner could not get a price reflecting the asset of good will or the true going concern value of his business unless he could promise the purchaser not to return to compete with the business sold." Robert Bork, Ancillary Restraints & the Sherman Act , 15 ABA Section of Antitrust Law Proceedings 211, 213 (1959) (footnote omitted).
MCEP's counsel acknowledged this fact in the course of a deposition, asserting: "I'll represent to you [to the deponent] that there was not an allegation of an outer rim in the complaint , but that MCEP contends that the evidence developed through discovery establishes the existence of an outer rim, meaning an understanding among two or more payers that each had agreed with the defendants not to expand their hospital panel."
MCEP raised two additional claims on appeal-that the district court erred in dismissing Catholic Heath Initiatives and that the case should be remanded to Judge Black rather than Judge Rice. Both arguments are mooted because we affirm the district court's summary judgment in favor of Hospital Defendants.
Concurring Opinion
I join Judge Batchelder's thoughtful opinion in full. I write separately to discuss the law-of-the-case doctrine and to explain why it does not apply to the prior panel's decision.
What we call law of the case has two parts. The first part, known as the "mandate rule," is vertical. A lower court "is bound by the decree [of a higher court] as the law of the case, and must carry it into execution according to the mandate." In re Sanford Fork & Tool Co. ,
The second part, the part implicated by this case, is horizontal. It "expresses the practice of courts generally to refuse to reopen what has been decided" by an earlier panel of the same court in the same case. Messenger v. Anderson ,
Today, we sit in essentially the same position as Judge Rice. A prior panel of our court decided that Premier was not a single entity under the Sherman Act. See Med. Ctr. at Elizabeth Place, LLC v. Atrium Health Sys. ,
As I see it, the dissent got it right. Section 1 of the Sherman Act "does not reach conduct that is wholly unilateral." Copperweld Corp. v. Indep. Tube Corp. ,
Premier qualified as a single entity.
Complete unity of interest? Check. The hospitals shared profits and losses according to a distribution schedule that did not change based on any one hospital's performance. That means that each hospital in the joint venture benefited when another hospital succeeded even if that other hospital drew patients and profits away.
Single decisionmaking center? Check again. Premier served as the "operator" for all the joint venture's health system activities and had the power to negotiate managed care contracts, fire hospital executives, dictate their budgets, and plot the strategic course each hospital took. Med. Ctr. ,
The law-of-the-case doctrine does not prohibit us from reviewing that ruling. And I would suggest we do so in this case save for one reality: It makes no difference to the outcome. Either way, Premier rightfully prevails.
No doubt, it's often said that courts at all levels should be "loathe" to overturn their earlier opinions unless they are "clearly erroneous" and cause a "manifest injustice." Christianson ,
DISSENT
HELENE N. WHITE, Circuit Judge, dissenting in part.
I agree with the majority's conclusion that the rule of reason applies to the alleged conspiracy involving concerted action by the Hospital Defendants. However, I disagree with the majority's determination regarding the rim conspiracy involving the payers.
The majority acknowledges that there is evidence of horizontal concerted action among the payers, orchestrated by Defendants, not to provide MCEP a managed-care contract (i.e., the "rim conspiracy"), and that the per se rule would apply to that conspiracy. The majority nevertheless concludes that MCEP cannot present that evidence to a jury because (1) it constitutes a separate, unpled claim from the conspiracy claim that MCEP pled; and (2) Judge Rice did not abuse his discretion in determining that allowing MCEP to amend its complaint to include this claim would prejudice Defendants. Because the allegations in MCEP's Amended Complaint encompass this rim conspiracy; the evidence was known by Defendants early in the proceedings; this court discussed the evidence of a rim conspiracy in the first appeal; Judge Black relied on the evidence of a rim conspiracy in denying Defendants' summary judgment motions after remand; and Defendants failed to seek the purported necessary additional discovery in a timely fashion, I would reverse the grant of summary judgment and remand for trial. Accordingly, I respectfully dissent.
The majority's recitation of the procedural history of this case omits important details that bear on whether the rim conspiracy should proceed to trial. After Defendants moved for summary judgment on the basis that they were a single entity and thus incapable of conspiring, MCEP affirmatively raised the rim conspiracy, arguing in opposition to Defendants' motion that evidence of concerted action by the payers-what MCEP called "an additional facet to th[e] conspiracy" it pled (R. 139, PID 10136)-meant that the plurality requirement was met and that the alleged conspiracy would still be subject to per se treatment even if Defendants were a single entity. In reply, Defendants did not argue that the rim conspiracy constituted a separate and untimely alleged conspiracy; and they did not argue that they needed additional discovery regarding this concerted action. Rather, they argued only that there was insufficient evidence of the rim conspiracy, forfeiting any timeliness argument.
It was not until the first appeal that Defendants challenged the rim-conspiracy claim as not encompassed within MCEP's Amended Complaint, and therefore untimely. Defendants also argued that they would be prejudiced by adding this new theory to the case, and stressed at oral argument in the first appeal that they would need additional discovery to defend *736against the allegation of horizontal concerted action by the payers. Despite Defendants' argument, the prior panel expressly considered evidence of the rim conspiracy in its majority opinion:
Plaintiff has submitted evidence that each insurer knew that the other insurers had included this [panel] limitation in their contracts, as demonstrated by the excerpt below from a Dayton industry publication:
Premier has threatened to revoke privileges for physicians participating in [plaintiff hospital] and contracts with health plans such as Anthem and UnitedHealth are known to be contingent on excluding [plaintiff hospital] from the network.
In addition to this published account, plaintiff also offered evidence from insurance company emails and defendant hospitals' Board of Directors meetings that, in addition to demonstrating knowledge among the insurers of the restriction on adding new hospitals to their networks in their managed-care contracts with defendant hospitals, the insurance companies regularly monitored each other to ensure that the other insurance companies were complying with the contract restriction on dealing with a new hospital.
Med. Ctr. at Elizabeth Place, LLC v. Atrium Health Sys. ,
After remand, Judge Black issued an order requesting briefing regarding the effects of the opinion in MCEP I on Defendants' previously filed summary judgment motions. In their reply brief, Defendants summarily argued, for the first time before the district court, that the horizontal concerted action by the payers was not pled and that adding that theory to the case would prejudice them. Defendants did not request additional discovery on that issue, however.
In denying Defendants' remaining summary judgment motions, to support his conclusion that the per se rule applies to MCEP's antitrust claim, Judge Black discussed and relied on evidence that at the behest of Defendants, the payers joined in an agreement not to deal with MCEP.
After Judge Black denied Defendants' remaining summary judgment motions, and despite this court's and Judge Black's opinions indicating that the rim conspiracy was part of the case and Defendants' representation to this court that they would need additional discovery to defend against that theory, Defendants still did not request additional discovery. Instead, more than seven months later, after Judge Black recused himself and only a couple of months before trial was scheduled to begin, Defendants made the same untimeliness *737argument to Judge Rice, arguing that they would be prejudiced if the rim conspiracy was included at trial and that they would need 12-18 months of additional discovery. As the majority explains, Judge Rice accepted those arguments, finding that the rim conspiracy was not alleged in the Amended Complaint and that MCEP could not file a Second Amended Complaint because Defendants would be prejudiced by the delay.
Given this chronology, I would reverse the district court's grant of summary judgment and allow the rim conspiracy, which all agree is subject to the per se rule, to proceed to trial. This conclusion is not dependent on whether the law of the case applies, but rather on whether the issue was fairly included in the case. First, MCEP's Amended Complaint expressly alleges a group boycott subject to per se condemnation involving Defendants and the payers. The horizontal concerted action by the payers, orchestrated and monitored by Defendants, can reasonably be construed as part of this single, overarching conspiracy. This conclusion is reinforced by Defendants' failure to argue in their summary judgment briefs before the first appeal that the rim conspiracy was not encompassed within the Amended Complaint; and this court's and Judge Black's express reliance on evidence of the rim conspiracy when discussing the merits of this case.
Second, Defendants' prejudice argument is unavailing in light of their failure to (1) argue prejudice in their initial summary judgment briefing, and (2) seek the discovery they told this court they would need in October 2015, despite the opportunity to do so for months. Rather than seek the discovery they claimed to need, Defendants moved forward with trial preparations before deciding to try their untimeliness argument a third time on a different judge after it failed to persuade either this court or Judge Black.
More fundamentally, the majority's affirmance of the dismissal of the rim conspiracy deprives MCEP of any remedy based on a pleading technicality even though all agree that there is sufficient evidence that Defendants and the payers conspired to exclude MCEP from the market in a way that is per se illegal-i.e., in a way that is "so inherently anticompetitive that [the agreement] is illegal per se without inquiry into the harm it has actually caused." Copperweld Corp. v. Indep. Tube Corp. ,
Because Judge Black construed MCEP's claim as encompassing the rim conspiracy, his conclusion that the per se rule applied to MCEP's claim is reasonable. Further, despite the majority's conclusion "that then-Judge Sotomayor's concurrence in MLB Properties " is "[p]erhaps most destructive to" Judge Black's framing of the ancillary-restraints doctrine (Maj. Op. at 726), then-Judge Sotomayor's concurrence in MLB Properties stated at several points that the restraint must be "reasonably necessary" to the efficiency-enhancing benefits of the joint venture. See, e.g. ,
Reference
- Full Case Name
- The MEDICAL CENTER AT ELIZABETH PLACE, LLC, Plaintiff-Appellant, v. ATRIUM HEALTH SYSTEM, Et Al., Defendants-Appellees.
- Cited By
- 17 cases
- Status
- Published