Antitrust Law Daily Merger of Tennessee healthcare groups stands
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Tuesday, July 28, 2020

Merger of Tennessee healthcare groups stands

By Jody Coultas, J.D.

In addition to affirming dismissal of the antitrust claims for lack of standing, the court admonished the plaintiffs’ use of disparaging statements and colorful insults.

Allegations that the Tennessee Department of Health created an unlawful interlocking directorate in violation of the Clayton Act were properly dismissed for lack of standing, according to the U.S. Court of Appeals in Cincinnati. A federal district court in Tennessee found that the plaintiffs challenging the creation of Ballard Health, a provider of health-related services, failed for lack of a concrete and particularized injury. The appellate court agreed that there was nothing in the complaint to show an injury stemming from the creating of Ballard Health. Also, the court rejected the plaintiffs’ argument that the standing requirement should be relaxed in this case because it involved health care (Bearden v. Ballad Health, July 23, 2020, per curiam).

On January 31, 2018, the Tennessee Department of Health permitted a merger of the Mountain State Health Alliance and Wellmont Health Systems over the FTC’s objection, creating Ballad Health, the dominant economic entity in the relevant geographic market for health-related services. The plaintiffs alleged that three board members of Ballad Health had conflicts of interest preventing them from serving on the Ballad Health Board of Directors because they had ties to another healthcare organization in the area called the Medical Education Assistance Corporation (MEAC).The complaint alleged that this created an unlawful interlocking directorate under 15 U.S.C. § 19.

The district court in Greeneville, Tennessee determined that the plaintiffs failed to demonstrate a concrete, particularized injury aside from a statutory violation. In deciding the plaintiff’s motion to amend complaint, the district court ruled that an amended complaint still failed to adequately plead Article III standing. While the plaintiffs provided additional facts, "the complaint lacks any factual allegations that the injury is particularized to the named plaintiffs." Therefore, the motion was denied.

The appellate court affirmed the district court’s dismissal of the antitrust claims for lack of standing. The plaintiffs argued that certain individual defendants had the authority to dissolve MEAC, and thus completely stifle its status as a market competitor with Ballad. However, the dissolution of MEAC was an "extreme" scenario and the plaintiffs failed to allege anything that would move this event beyond the realm of speculation—let alone show that it is "certainly impending." Further, there was no evidence to show that this speculative risk will affect the plaintiffs "in a personal and individual way." There was nothing in the complaint about what medical services they have sought in the past, what services they will seek in the future, or how the dissolution of MEAC would affect their access to these services.

Furthermore, the plaintiffs’ allegation that they and the general public have an interest in seeing that an improper, illegal, interlocking Board of Directors did not govern the regions’ dominant health care entity was rejected for failure to show a concrete and particularized injury.

A proposed amended complaint "added only insults, not injury" and a motion to amend was properly denied, the court ruled. While the proposed amended complaint was four times as long as the original, it included only unsupported legal conclusions as to standing. The plaintiffs stated that their theory of "injury in fact" might be "an aberration" of the requirement as articulated in prior decisions. The court rejected the plaintiffs’ argument that the relevant provision of the Clayton Antitrust Act has a unique prophylactic purpose and thus did not require a showing of an injury in fact as there is no exception to the standing rule. "When it comes to constitutional standing, there appears to be nothing special about antitrust law."

The court also rejected the plaintiffs’ argument that the court should relax the usual requirements for standing because this case implicated access to the important resource of healthcare. While the Supreme Court has treated death-penalty cases differently in some ways, it has emphatically refused to "create an exception to traditional standing doctrine" in such cases because the "core component of standing [is] an essential and unchanging part" of Article III. The court had no authority to take a different view when it came to healthcare.

Finally, the plaintiffs argued that they had standing because Ballad previously "stipulated" in an agreement with the State regarding its merger that a breach of the agreement would constitute "‘irreparable harm.’" The court found this argument flawed because parties can no more stipulate to elements of standing than they can to standing itself. Also, the stipulation only applied to a "breach or threatened breach" of the agreement (which the plaintiffs have not alleged) and extends only to relief under the agreement itself (to which the plaintiffs were not parties).

Following the holding, the court reminded the plaintiffs’ counsel that he was expected to treat other parties and their counsel with courtesy and professionalism. While attorneys are not required to write legal documents "in dry legalese," and are certainly allowed to passionately and forcefully advocacy for their clients, the uncivil statements in this case went too far. The court found that it could not dismiss the disparaging statements in this case as mere stylistic flourishes or vigorous advocacy.

This case is No. 20-5047.

Attorneys: Francis X. Santore, Jr. (Santore & Santore) for Christine Bearden. Jimmie C. Miller (Hunter, Smith & Davis, LLP) Michelle Lowery ((McDermott Will & Emery LLP) for Ballad Health. Lynda M. Hill (Frost Brown Todd LLC) for Medical Education Assistance Corp. d/b/a East Tennessee Physicians and Associates, d/b/a University Physicians Practice Group.

Companies: Medical Education Assistance Corp. d/b/a East Tennessee Physicians and Associates, d/b/a University Physicians Practice Group

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