Zoellner v. St. Luke's Regional Medical Center, Ltd.

Filing 25

MEMORANDUM DECISION AND ORDER granting 5 Motion to Dismiss Plaintiffs Federal and State Antitrust Claims. Plaintiff shall file any amended complaint within 30 days of this Order.. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (dks)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

PATRICK A. ZOELLNER, M.D.,

Case No. 1:11-cv–00382-EJL

Plaintiff,

MEMORANDUM DECISION AND
ORDER

v.
ST. LUKE’S REGIONAL MEDICAL
CENTER, LTD.,
Defendant.

INTRODUCTION
The Court has before it defendant’s Motion to Dismiss Plaintiff’s Federal and State
Antitrust Claims (Dkt. No. 5). Having reviewed the briefing submitted by the parties, the
Court has determined oral argument is unnecessary. For the reasons explained below, the
Court will grant the motion to dismiss.
BACKGROUND
Dr. Patrick Zoellner is an anesthesiologist who practiced at St. Luke’s Regional
Medical Center from 2003 to 2010. Dr. Zoellner was not a hospital employee, however.
He was employed by Anesthesia Associates of Boise. Anesthesia Associates is St.

MEMORANDUM DECISION AND ORDER - 1

Luke’s exclusive provider of anesthesiology services.
Dr. Zoellner was forced to resign from Anesthesia Associates in the fall of 2010
when four principals told him that the company “had to go in a different direction . . . .”
Id. ¶ 43. According to Dr. Zoellner, St. Luke’s coerced Anesthesia Associates into
terminating him by threatening not to renew the company’s exclusive contract unless Dr.
Zoellner was gone.
Dr. Zoellner says St. Luke’s wanted to get rid of him because he insisted on safe
scheduling practices for surgeries, whereas St. Luke’s surgeons insist on scheduling
surgeries at times that are not in the patients’ best interests. As an example, Dr. Zoellner
alleges that St. Luke’s “often allows a neurosurgeon to perform surgeries from 7:00 a.m.
to 11:00 p.m. on Monday and Tuesday, because he wants to take off Thursday through
Sunday to go to Sun Valley.” Compl., Dkt. 1, ¶ 32. More generally, Dr. Zoellner alleges
that St. Luke’s business culture “has been ‘to keep the surgeons happy – whatever the
surgeons want.’” Id. ¶ 31.
In any event, Dr. Zoellner felt he had no choice but to accept the forced resignation
because he was “[r]easonably concerned that he would be blackballed, receive no good
references to be able to find other positions, receive no referrals for surgical work, and
[be] faced with an immediate end of income.” Id. ¶ 44. Dr. Zoellner accepted a job in
Denver, but with “significantly reduced income.” Id. ¶ 47. His wife was “also forced to
abandon her medical practice in Boise.” Id.
In August 2011, Dr. Zoellner sued St. Luke’s, alleging federal and state antitrust
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violations, intentional interference with contract, and intentional interference with
prospective economic advantage.
THE STANDARD
A motion to dismiss based on Federal Rule of Civil Procedure 12(b)(6) “tests the
legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). A
complaint generally must satisfy “only the minimal notice pleading requirements” of
Federal Rule of Civil Procedure 8(a)(2) to avoid a 12(b)(6) dismissal. Porter v. Jones,
319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2), “requires only ‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests . . . .’”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355
U.S. 41, 47 (1957)).
In considering a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), “all well-pleaded allegations of material fact are taken as true and construed in a
light most favorable to the non-moving party.” Wyler Summit Partnership v. Turner
Broadcast Sys., Inc., 135 F.3d 658, 661 (9th Cir.1998) (citation omitted). The court does
not necessarily assume the truth of legal conclusions merely because they are cast in the
form of factual allegations in plaintiff's complaint. See Clegg v. Cult Awareness Network,
18 F.3d 752, 754-55 (9th Cir.1994). “However, conclusory allegations of law and
unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a
claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also
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Twombly, 550 U.S. 544. Finally, the Court may not consider any material beyond the
pleadings in ruling on a motion to dismiss under Rule 12(b)(6). See Branch v. Tunnell,
14 F.3d 449, 453 (9th Cir. 1994).
ANALYSIS
Dr. Zoellner alleges a variety of antitrust theories. He first asserts that St. Luke’s
conspired with Anesthesia Associates to “monopolize the provision of hospital surgical
services and the provision of anesthesiology services within a significant portion of the
Boise market . . . .” Compl., Dkt. 1, ¶ 51. In addition, he alleges that St. Luke’s conduct
constitutes: (1) a conspiracy to foreclose him from the market of anesthesiology providers
“through an unreasonable vertical restraint on trade restricting competition and
diminishing the quality of hospital surgical services”; (2) “an illegal boycott”; and (3) “an
illegal tying arrangement.” Compl., Dkt. 1, ¶¶ 56, 66, 67. St. Luke’s contends that none
of these theories is viable because Dr. Zoellner failed to adequately plead an antitrust
injury. The Court agrees.
Dr. Zoellner’s federal antitrust claims are based on § 1 of the Sherman Act. This
section declares agreements “in restraint of trade or commerce” illegal. 15 U.S.C. § 1
(“Every 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.”). Unlike the federal government, which can sue anyone who violates the
antitrust laws, private plaintiffs must “meet the requirements for ‘antitrust standing’ . . .
and to acquire ‘antitrust standing,’ a plaintiff must adequately allege and eventually prove
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antitrust injury.’” Glen Holly Entm’t, Inc. v. Tektronix Inc., 352 F.3d 367, 371 (9th Cir.
2003) (citation omitted). See generally 15 U.S.C. § 15 (Section 4 of the Clayton Act;
permitting antitrust actions by private plaintiffs).
An antitrust injury, in turn, is defined as one where the defendants’ “unlawful
conduct” injures the plaintiff in a way “the antitrust laws were designed to prevent.” Id.1
Additionally, “the party alleging the injury must be either a consumer of the alleged
violator’s goods and services or a competitor of the alleged violator in the restrained
market.’” Id. (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489
(1977)).
In Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990), the Supreme
Court explained that “[t]he antitrust injury requirement ... ensures that a plaintiff can
recover only if the loss stems from a competition- reducing aspect or effect of the
defendant’s behavior.” Id. at 344 (emphasis added). Similarly, in Les Shockley Racing,
Inc. v. National Hot Rod Association, 884 F.2d 504 (9th Cir. 1989), Ninth Circuit
explained that antitrust “claimants must plead and prove a reduction of competition in the
market in general and not a mere injury to their own positions as competitors in the
market.” Id. at 508 (emphasis added).

1

In Glen Holly, the Ninth Circuit articulates this part of the “antitrust injury” definition as
having four elements: “(1) unlawful conduct, (2) causing an injury to the plaintiff, (3) that flows
from that which makes the conduct unlawful, and (4) that is of the type the antitrust laws were
intended to prevent.” 325 F.3d at 372 (quoting Am. Ad Mgmt, Inc. v. Gen. Telephone Co., 190
F.3d 1051, 1055 (9th Cir. 1999)).
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Dr. Zoellner has failed to allege facts that plausibly show reduced competition in
the market for anesthesiology services based on his forced resignation from Anesthesia
Associates. An antitrust claim cannot survive a motion to dismiss if it fails to allege facts
supporting an economic theory of harm to competition that is “plausible in light of
economic principles.” William O. Gilley Enters., Inc. v. Atl. Richfield Co., 588 F.3d 659,
662 (9th Cir. 2009).
First, from the consumer’s standpoint (i.e., patients who need surgery performed
under anesthesia), Dr. Zoellner has not alleged facts showing that his forced resignation
reduced competition in the marketplace. Rather, as alleged in the complaint, patients who
need anesthesiology services have the same two choices they had before the resignation –
services performed by an exclusive provider at St. Alphonsus Regional Medical Center,
or services performed by Anesthesia Associates at St. Luke’s.
Second, from the anesthesiologists’ point of view, Dr. Zoellner fails to explain
how his elimination from the marketplace injured competition generally.2 In other words,
Dr. Zoellner does not plausibly allege that St. Luke’s gained an anti-competitive
advantage in the marketplace by forcing his resignation. As the Ninth Circuit has
explained, “an allegation that ‘competition has been injured rather than merely
competitors,’ is essential to any § 1 Sherman Act Antitrust Act Claim.’” Columbia River

2

Dr. Zoellner points out that after his departure, another anesthesiologist left St. Luke’s
because of its unsafe practices. But the mere fact that another doctor decided not to practice at
St. Luke’s because he disagrees with the hospital’s surgery-scheduling policies does not
establish that the hospital engaged in anticompetitive behavior.
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People’s Util. Dist. v. Portland Gen. Elec., 217 F.3d 1187, 1190 (9th Cir. 2000), quoting
Rutman Wine Co. v. E.&.J. Gallo Winery, 829 F.3d 729, 734-35 (9th Cir. 1987). After
all, the antitrust laws were enacted for “the protection of competition, not
competitors . . . .” Brown Shoe Co.. v. United States, 370 U.S. 294, 320 (1962).
Plaintiff contends that he fleshed out his antitrust injury allegations with sufficient
factual detail, but the facts relate to damages he personally suffered and do not allege any
broader harm to competition generally. Specifically, Dr. Zoellner alleges that he had to
accept a lower-paying job and his wife was forced to abandon her medical practice.
Dr. Zoellner also argues that he can make out an antitrust injury by alleging that
consumers are now forced to endure a lower-quality product – namely, surgeries
scheduled at the whim of surgeons, rather than according to safe practices. He quotes a
New York federal district court opinion – New York Medscan, LLC v. NYU School of
Medicine, 430 F. Supp. 2d 140 (S.D.N.Y. 2006) – in support of his argument. In New
York Medscan, the court observed that “a decline in quality is among the injuries that the
antitrust laws were designed to prevent . . . . Indeed, in the context of the provision of
health care services for cancer patients, the quality of care is likely to be at least as
important as the price.” Id. at 148 (citing, inter alia, Capital Imaging Assoc. P.C. v.
Mohawk Valley Med. Assocs., Inc., 996 F. 2d 537, 546-47 (2d Cir. 1993)).
New York Medscan, however, is distinguishable, namely because the plaintiffs
alleged facts supporting reduced competition; they did not rely solely on reduced quality.
See id. (court observed that “plaintiffs allege that defendants’ conduct has caused:
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reduced competition in the provision of PET/CT services; reduced competition in the
price of these services; . . . .”). Id. at 147. Further, the court observed that the alleged
reduction in quality was an effect of reduced competition. Id. (“Moreover, defendants
omit quality from their list of potential consequences of reduced competition.”).
This observation is, of course, in keeping with the Supreme Court and Ninth
Circuit precedents discussed above, which generally hold that plaintiffs must plead and
prove reduced competition to make out an antitrust injury. The Court therefore rejects
Dr. Zoellner’s argument that he can show antitrust injury by pointing to a decline in
quality, with nothing more. Moreover, Dr. Zoellner did not plausibly allege a marketwide decline in the quality of services after his forced resignation.
For all these reasons, the Court will dismiss Dr. Zoellner’s antitrust claims, though
it will allow Dr. Zoellner the opportunity to amend these claims. Any amended complaint
must allege facts supporting an economic theory of harm to competition that is
“‘plausible’ in light of basic economic principles.” William O. Gilley Enters., Inc. v. Atl.
Richfield Co., 588 F.3d 659, 662 (9th Cir. 2009) (citation omitted).

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ORDER
Plaintiff’s Motion to Dismiss (Dkt. 5) Plaintiff’s Federal and State Antitrust
Claims is GRANTED.

Plaintiff shall file any amended complaint within 30 days of this

Order.

DATED: June 19, 2012

Honorable Edward J. Lodge
U. S. District Judge

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