By Jeffrey May, J.D.
A group of ambulatory surgical centers (ASCs) failed to plausibly allege a conspiracy to suppress competition in the ambulatory surgery market in California’s Santa Clara and San Mateo Counties, the federal district court in San Jose, California, has decided. Defendant Aetna Life Insurance Company’s motion to dismiss was granted; however, the court provided the plaintiffs with "one last opportunity to amend their complaint as to Aetna." Defending surgery centers were dismissed on res judicata grounds (Bay Area Surgical Management, LLC v. Aetna Life Insurance Co., July 15, 2016, Freeman, B.).
Conspiracy allegations. For purposes of their conspiracy claim, the complaining ASCs did not allege facts tending to exclude independent conduct, according to the court. The plaintiffs asserted that, in response to complaints from defending surgery centers, Aetna and another insurer engaged in a boycott of the plaintiffs. They alleged that the insurers threatened surgeons with "termination" of their carrier agreements if they did not stop referring patients to the plaintiffs’ facilities. In addition, the insurers allegedly harassed the plaintiffs’ actual and prospective patients.
In an effort to meet the pleading requirements, the plaintiffs contended that the court could consider the defendants’ government petitioning activities, which were immune from antitrust liability under the Noerr-Pennington doctrine. Aetna had purportedly petitioned federal and state agencies for investigations into the plaintiffs’ financial and marketing practices. The Medical Board of California also was asked to look into plaintiffs’ conduct.
Although the plaintiffs did not predicate any of their liability claims on the filing of the Medical Board complaint or any of the letters written to any governmental agency or entity, they contended that immunized conduct could be considered as part of an overall scheme under the facts of the case. The Ninth Circuit had ruled that an unlawful scheme does not become protected under Noerr when it is enforced by immunized litigation. However, the plaintiffs in this case had not plausibly alleged an antitrust conspiracy. Thus, the court refused to consider any conduct protected under Noerr. "[A]fter removing the allegations concerningNoerr protected activity, Plaintiffs have not sufficiently alleged facts to plausibly establish a conspiracy," the court held.
Injury to competition, market power. The plaintiffs also did not adequately allege that the defendants had market power or that there was injury to the market as a whole for purposes of their rule of reason claim. Contentions that the insurers were "goliaths in the highly concentrated industry" were insufficient, in the court’s view. As for the defending surgery centers, an allegation that they constituted the largest ASC competition to the plaintiffs provided no information about whether these defendants had market power, according to the court. In addition, because the complaining firms focused on injury to themselves, they did not satisfy the injury to competition element of the claim. For instance, the plaintiffs never allege that any competitors have exited the market because of the defendants’ actions, the court noted.
The court also ruled that the plaintiffs did not allege a per se illegal conspiracy or an antitrust violation under a quick look approach. Neither the per se rule nor the quick look test applied to the alleged conduct. The complaining firms had to allege a horizontal agreement between companies to disadvantage direct competitors in order to invoke the per se approach, according to the court. Instead of alleging a horizontal agreement between the insurers, the plaintiffs alleged a hub-and-spoke conspiracy in which the defending surgery center manager formed the hub with the insurers as spokes in a vertical agreement with no "rim."
A truncated rule of reason or "quick look" approach also was rejected. This analysis was reserved for arrangements that have an apparent anticompetitive effect on customers and markets. The plaintiffs did not allege any effect at all on competition, the court explained.
Res judicata. The defending surgery centers who were parties to an earlier state court action brought by the plaintiffs successfully argued that the doctrine ofres judicata precluded the antitrust action. The plaintiffs’ prior state court action, which involved defamation law claims and ended in a settlement, involved the same harms at stake in the federal antitrust action, in the court’s view. In the state court action, the plaintiffs alleged that the defending ambulatory surgery center manager and owner/operators made defamatory statements, which harmed their reputations and caused the loss of business. Thus, the action was dismissed on res judicata grounds as to the defending surgery center manager and owner/operators, with the exception of a surgery center that was not party to the state court action. Further amendment as to the defendants in the prior state court action would be futile, the court noted.
The case is No. 5:15-cv-01416-BLF.
Attorneys: Donald Ross Pepperman (Blecher & Collins) for Bay Area Surgical Management LLC, Bay Area Surgical Group Inc. and Forest Surgery Center, LP. Samuel G. Liversidge (Gibson Dunn & Crutcher LLP) for Aetna Life Insurance Co. Gregory Raymond Jones (McDermott Will & Emery) for E3 Healthcare Management, LLC and Alpine Healthcare, LLC.
Companies: Bay Area Surgical Management LLC; Aetna Life Insurance Co.; E3 Healthcare Management, LLC; Alpine Healthcare, LLC
MainStory: TopStory Antitrust CaliforniaNews
Interested in submitting an article?
Submit your information to us today!Learn More
Antitrust Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on antitrust legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.