Porter v. Evanston Northwestern Healthcare Corporation
Filing
842
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Defendant NorthShores motion for summary judgment based on the statute of limitations 773 is denied in large part and granted to the limited extent explained in the Opinion. Emailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
IN RE: EVANSTON NORTHWESTERN
HEALTHCARE CORPORATION
ANTITRUST LITIGATION
)
)
)
)
)
No. 07 C 04446
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
On January 1, 2000, Evanston Northwestern Healthcare, now known as
NorthShore University HealthSystem, merged with Highland Park Hospital. R.
774, Def.’s Summ. J. Br. at 1.1 Seven years later, this class action was filed, R. 1,
Compl., alleging that the merger violated federal antitrust laws. The Complaint
(now on a Second Amended Complaint) alleges that the merger substantially
lessened competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, and
fueled NorthShore’s illegal monopolization of the market for healthcare services in
the Chicagoland area in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. In
April 2015, NorthShore moved for summary judgment, R. 675, asserting that the
Class claims are time barred under 15 U.S.C. § 15b, which generally sets a fouryear statute of limitations for private causes of action brought under the federal
antitrust laws. The Court denied NorthShore’s motion without prejudice after the
Class requested more time to complete outstanding discovery on the limitations
issue. See R. 680, Rule 56(d) Mot.; R. 708, 05/28/2015 Order. Once fact discovery
finally closed in December 2015, NorthShore once again moved for summary
1This
Court has subject matter jurisdiction over the case under 28 U.S.C. § 1331.
Citations to the record filings are “R.” followed by the docket number and, when necessary,
a page or paragraph number.
judgment based on the statute of limitations. R. 773, Mot. Summ. J. For the reasons
discussed below, NorthShore’s motion is granted in part and denied in part.
I. Background
In deciding Northshore’s motion for summary judgment, the Court views the
evidence in the light most favorable to the non-moving party. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). NorthShore University
HealthSystem provides healthcare in northern Illinois, and currently consists of
four hospitals: Evanston Hospital, Glenbrook Hospital, Highland Park Hospital,
and Skokie Hospital. R. 779, DSOF ¶¶ 1, 6, 9.2 Before January 2000, NorthShore
(then known as Evanston Northwestern Healthcare)3 comprised only two hospitals,
Evanston Hospital and Glenbrook Hospital. Id. ¶ 6. On January 1, 2000, however,
NorthShore merged with Highland Park Hospital.4 Id. ¶ 7.
2Citations
to the parties’ Local Rule 56.1 Statements of Fact are “DSOF” (for
NorthShore’s Statement of Facts) [R. 779 (unsealed)]; “PSOF” (for the Class’s Statement of
Additional Facts) [R. 800 (unsealed); R. 796 (sealed)]; “Pls.’ Resp. DSOF” (for the Class’s
Response to NorthShore’s Statement of Facts) [R. 799 (unsealed); R. 790 (sealed)]; and
Def.’s Resp. PSOF (for NorthShore’s Response to the Class’s Statement of Additional Facts)
[R. 815 (sealed)]. Where a fact is admitted, only the asserting party’s statement of facts is
cited; where an assertion is otherwise challenged, it is so noted. The Court cites to the
unsealed versions of the parties’ briefs and to the sealed versions of the parties’ statement
of facts and responses thereto. There are, however, a couple of exceptions: NorthShore only
filed an unsealed version of its Statement of Facts, so all cites are to that publicly-available
document. And Northshore only filed a sealed version of its Response to the Class’s
Statement of Additional Facts. In other words, no publicly-available, redacted version of
that document currently exists. By September 22, 2016, NorthShore must file a publicly
redacted version of its Response to the Class’s Statement of Additional Facts, and both
parties must explain why anything in this Opinion should remain sealed.
3For convenience’s sake, the Court will refer to Evanston Northwestern Healthcare
as “NorthShore” throughout the Opinion.
4Since 2000, NorthShore has added Skokie Hospital to its healthcare delivery
system, and has partnered with the University of Chicago Medical School. DSOF ¶ 9. The
Class claims do not concern either of these affiliations.
2
Chicago news outlets covered the anticipated merger. DSOF ¶ 28; R. 800,
PSOF ¶ 3; R. 790, Pls.’ Resp. DSOF ¶ 28. Months before the merger took place,
NorthShore and Highland Park Hospital publicly represented that the merger
would benefit consumers, Managed Care Organizations (which go by the acronym
MCOs), and the communities that the three hospitals served. PSOF ¶ 3.5
NorthShore did not, however, announce any intention to negotiate higher contract
rates with its MCO customers post-merger. Id. ¶ 4; DSOF ¶ 28; Pls.’ Resp. DSOF ¶
28 (“Neither the press releases nor the new[s] stories indicated that the [m]erger
would result in increased prices for hospital services.”). The named plaintiffs
acknowledge that they knew about the merger—after hearing about it from the
press or elsewhere—before it occurred. DSOF ¶¶ 29, 30, 31, 32; Pls.’ Resp. DSOF ¶¶
29, 30, 31, 32.
5See
also, e.g., R. 779-2, Exh. PP, Mark LeBien, Evanston Northwestern Healthcare
and Highland Park Hospital Merger Advances, The CHICAGO TRIBUNE (June 30, 1999),
available at http://articles.chicagotribune.com/1999-06-30/news/9907020383_1_evanstonnorthwestern-healthcare-highland-park-hospital-evanston-hospital (“Officials said the
merger would help the three hospitals better serve northern Cook County and Lake
County, enable the hospitals and their physicians to obtain more managed-care contracts,
provide more on-site learning opportunities for Northwestern University Medical School
students and allow for future expansion of healthcare service locations.”); id. (“Mark R.
Neaman, president and [CEO] of [NorthShore] said the merged organizations will create ‘a
single point of contact’ for managed-care insurers that have been negotiating with them
separately.”); R. 779-2, Exh. RR, Karen Berkowitz, Spaeth: Hospital merger focus is
‘growth’, HIGHLAND PARK NEWS (July 8, 1999) (“‘The benefit to the managed-care
companies is that it gives them a single point of contact and the broader service area and
reach that our collective organizations can put together,’ said Neaman.”); id. (“[The
president and CEO of Highland Park Hospital] said the merger will provide patients
greater convenience and expanded access to specialists.”).
3
NorthShore initially notified its MCO customers about the planned merger
back in June 1999. DSOF ¶ 21.6 It then contacted its MCO customers again in early
December 1999. Id. ¶ 22.7 This time, NorthShore sent the MCOs a letter (along with
a Consent and Assignment form) discussing post-merger logistics. Id. First, the
letter notified each MCO that, after the merger, Highland Park Hospital and
NorthShore would operate under the same legal entity and tax identification
number and that Highland Park Hospital would no longer exist as a separate
entity. Id. ¶ 23. Second, the letter also identified—subject to the MCO’s written
consent and return of the Consent to Assignment form—what contract would
govern the parties’ relationship once the merger took effect. Id.; Pls.’ Resp. DSOF ¶
23. For example, if before the merger the MCO had a contract with NorthShore and
a separate one with Highland Park Hospital, then the letter would identify (again,
subject to the MCO’s written consent) which contract—the MCO’s preexisting
contract with NorthShore or its preexisting contract with Highland Park Hospital—
would govern post-merger. DSOF ¶ 23 (“[NorthShore] notified the MCOs [that] …
[it] was either terminating [Highland Park Hospital’s] current contracts, or
terminating [NorthShore’s] contracts and assigning [Highland Park Hospital’s]
agreements to [NorthShore] … .”); Pls.’ Resp. DSOF ¶ 23 (“These letters portrayed
6The
Class denies that “‘[NorthShore and Highland Park Hospital] sent letters [in
June 1999] to all of their MCO customers announcing the impending [m]erger,’” and that
there is any evidence establishing that the letters NorthShore did send “were actually sent
to, or received by, the purported addressee, or when.” Pls.’ Resp. DSOF ¶ 21.
7Again, the Class denies that NorthShore and Highland Park Hospital sent letters
(along with a Consent and Assignment form) in December 1999 to “all of [their] MCO
customers,” and that there is any evidence establishing that the letters NorthShore did
send “were actually sent to, or received by, the addressees … .” Pls.’ Resp. DSOF ¶ 22.
4
including one entity or the other under the preexisting MCO contract a ministerial
matter necessitated by the merger … .”). Neither party disputes, however, that at
the time of the merger, NorthShore did not know whether its MCO contracts “were
better” than Highland Park Hospital’s.8 PSOF ¶ 8; Def.’s Resp. PSOF ¶ 8. And
finally, the letter acknowledged that NorthShore would provide services under the
existing rates, terms, and conditions set forth in its (or Highland Park Hospital’s)
preexisting contract with the MCO. DSOF ¶ 23 (“[NorthShore] notified the MCOs
[that] … [it] intended to provide services under the existing rates, terms and
conditions of either the current [Highland Park Hospital] or [NorthShore]
agreements.”); Pls.’ Resp. DSOF ¶ 23. There was no mention in the letter that
NorthShore would increase its prices for healthcare services after the merger. PSOF
¶ 7; Def.’s Resp. PSOF ¶ 7 (“NorthShore also admits that none of the assignment
letters stated that [it] had a right to higher reimbursement rates as a result of the
merger.”). The majority of MCOs9 did not sign and return the Consent to
Assignment form before the merger. DSOF ¶ 25; Pls.’ Resp. DSOF ¶ 25.
Soon after the merger, NorthShore began to renegotiate their contracts with
the MCOs. PSOF ¶ 9. The Class maintains—and NorthShore does not directly
8NorthShore
claims that one letter sent to a particular MCO put that MCO on notice
that NorthShore would choose whichever contract—the MCO’s preexisting contract with
Northshore or its preexisting contract with Highland Park Hospital—was “more favorable.”
See Def.’s Summ. J. Br. at 8. But that letter only suggests that NorthShore and the MCO
would continue using whichever preexisting contract was “better,” not that NorthShore was
going to choose whichever preexisting contract charged higher rates. See Pls.’ Resp. Br. at 5
n.3.
9Six MCOs signed and returned the Consent to Assignment form before the merger.
DSOF ¶ 24; Pls.’ Resp. DSOF ¶ 24.
5
dispute10—that by February 10, 2000, none of the MCOs had signed a finalized,
renegotiated contract with NorthShore.11 Id. In fact, the first renegotiated contract
was not signed until February 23, 2000. Id. ¶ 11.12
10In
response to the Class’s allegation that “[n]o non-assignment MCO contracts
were signed between the date of merger and February 10, 2000,” PSOF ¶ 9, NorthShore
states that it “denies this statement as vague and unsupported by the cited evidence,” Def.’s
Resp. PSOF ¶ 9. Local Rule 56.1(a) states that in response to a non-moving party’s
statement of additional facts, “the moving party may submit a concise reply in the form
prescribed in [section (b)] for a response.” N.D. Ill. R. 56.1(a) (emphasis added). This means
that a moving party’s response “shall contain … in the case of any disagreement, specific
references to the affidavits, parts of the record, and other supporting materials relied upon …
.” N.D. Ill. R. 56.1(b)(3)(b) (emphasis added); accord Koursa, Inc. v. Manroland, Inc., 971 F.
Supp. 2d 765, 770-71 (N.D. Ill. 2013); Aukstuolis v. Harrah’s Ill. Corp., 2002 WL 31006128,
at *2 (N.D. Ill. Sept. 5, 2002). Local Rule 56.1(a) further warns that “all material facts set
forth in [the non-moving party’s statement of additional facts] will be deemed admitted
unless controverted by the statement of the moving party.” N.D. Ill. R. 56.1(a) (emphasis
added). Here, Northshore offers no record evidence rebutting the Class’s allegation that
“[n]o non-assignment MCO contracts were signed between the date of merger and February
10, 2000,” PSOF ¶ 9, so the Court will treat that allegation as undisputed. See Curtis v.
Costco Wholesale Corp., 807 F.3d 215, 219 (7th Cir. 2015) (“It is the litigants’ duty to clearly
identify material facts in dispute and provide the admissible evidence that tends to prove or
disprove the proffered fact. A litigant who denies a material fact is required to provide the
admissible evidence that supports his denial in a clear, concise, and obvious fashion, for
quick reference of the court.”). Merely denying allegations on the grounds that they are
“vague and unsupported by the evidence cited” does not meet Local Rule 56.1’s
requirements. See Ammons v. Aramark Unif. Servs., Inc., 368 F.3d 809, 817 (7th Cir. 2004)
(district courts should mandate and enforce strict compliance with Local Rule 56.1).
11One of the MCOs amended its contract with NorthShore effective January 1, 2000;
but NorthShore signed the amendment in November 1999 before notifying the MCOs that
NorthShore would provide services under the existing rates, terms, and conditions set forth
in its (or Highland Park Hospital’s) preexisting contract with the MCO. See PSOF ¶ 9; Def.’s
Resp. PSOF ¶ 9.
12Again, NorthShore fails to properly respond to the Class’s Statement of Additional
Facts. In response to the Class’s allegation that “[n]one of the MCO contracts which were
renegotiated post-merger were signed prior to [one MCO] signing its contract on February
23, 2000,” PSOF ¶ 11, Northshore states that it “admits that a contract with [that MCO]
was signed by [the MCO] on or about February 23, 2000, however the contract’s effective
date was January 1, 2000. NorthShore denies the remainder of this statement.” Def.’s Resp.
PSOF ¶ 11 (internal citation omitted). Because NorthShore’s response here does not
contradict, but rather only tries to add more information—namely, that NorthShore and
[one MCO] agreed to retroactively apply their renegotiated contract, compare PSOF ¶ 11,
with Def.’s Resp. PSOF ¶ 11—the Court will treat the Class’s contention as undisputed. Cf.
Ammons, 368 F.3d at 817 (“In this case, several of Ammons’ responses to Aramark’s
6
Once
the
merger
took
effect,
NorthShore
sought
to
equalize
the
“chargemasters”—a list of prices for every procedure performed at the hospital and
the items used during those procedures—between Evanston Hospital, Glenbrook
Hospital, and Highland Park Hospital. PSOF ¶ 13. This process took until June
2000 to complete. Id.; Def.’s Resp. PSOF ¶ 13 (“Mr. Hillebrand testified that ‘by
June 30th of 2000, [equalizing charges at all three sites] had been completed.’”).
On February 10, 2004, the Federal Trade Commission filed an administrative
complaint against NorthShore. DSOF ¶ 10. The complaint alleged that the merger
violated federal antitrust laws because it substantially lessened competition and
enabled NorthShore to unlawfully increase its prices for healthcare services. Id.
Ultimately, the Commission held that the merger violated Section 7 of the Clayton
Act, 15 U.S.C. § 18. Id. ¶¶ 11-13.
As soon as the FTC proceeding wrapped-up in August 2007, the Class filed
suit challenging NorthShore’s merger. DSOF ¶ 14; Pls.’ Resp. DSOF ¶ 14. In
November 2008, the Class filed a Second Amended Complaint,13 alleging that
NorthShore violated Section 2 of the Sherman Act, 15 U.S.C. § 2, and Section 7 of
the Clayton Act, 15 U.S.C. § 18. R. 224, Second Am. Compl. ¶ 16. Specifically, the
Class alleged that Northshore “‘raise[d] its prices immediately and substantially
after completion of the [merger],’” and that “‘there were substantial mergercoincident price increases … .’” Id.; id. ¶ 33 (alleging that NorthShore “‘rapidly
allegations admit to the allegation but then add other additional facts. These facts should
have been included in a separate statement.”).
13A First Amended Complaint had been filed a year earlier in November 2007. R. 22,
Am. Compl.
7
increased the prices that it charged to most of its … customers’” after the merger
took place)14; cf. id. ¶ 33 (alleging that “[NorthShore] began to implement its price
increases sometime after the close of the merger through a number of ways.”).
In April 2015, NorthShore moved for summary judgment, R. 675, asserting
that the Class claims are time barred under 15 U.S.C. § 15b.15 Section 15b generally
imposes a four-year statute of limitations for private causes of action brought under
the federal antitrust laws. 15 U.S.C. § 15b. In response to NorthShore’s motion, the
Class filed a motion under Federal Rule of Civil Procedure 56(d), requesting that
the Court wait until fact discovery closed before deciding the limitations issue. Rule
56(d) Mot.; see also Fed. R. Civ. P. 56(d). The Court granted the Class’s Rule 56(d)
motion and correspondingly denied NorthShore’s summary judgment motion
without prejudice so that NorthShore could re-file its motion at the close of fact
discovery. 05/28/2015 Order. NorthShore re-filed its motion for summary judgment
in December 2015. Mot. Summ. J.; Def.’s Summ. J. Br.
II. Standard of Review
Summary judgment must be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if “the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating
14Paragraphs
16 and 33 of the Second Amended Complaint quote, but do not cite to,
the FTC opinion affirming that NorthShore violated the federal antitrust laws.
15Back in December 2007, NorthShore moved to dismiss the Class claims as time
barred, R. 32, but the previously assigned judge denied the motion, R. 77, because the face
of the complaint did not establish the accrual date for the claims.
8
summary judgment motions, courts must view the facts and draw reasonable
inferences in the light most favorable to the non-moving party. Scott v. Harris, 550
U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make
credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697,
704 (7th Cir. 2011), and must consider only evidence that can “be presented in a
form that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2). The party
seeking summary judgment has the initial burden of showing that there is no
genuine dispute and that they are entitled to judgment as a matter of law.
Carmichael v. Vill. of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th
Cir. 2008). If this burden is met, the adverse party must then “set forth specific
facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256.
III. Analysis
The Class brings two federal antitrust claims against NorthShore for
violations of Section 2 of the Sherman Act, 15 U.S.C. § 2, which prohibits unlawful
monopolization,16 and Section 7 of the Clayton Act, 15 U.S.C. § 18, which prohibits
acquisitions that substantially lessen competition or tend to create a monopoly. See
Second Am. Compl. NorthShore asserts that the federal antitrust claims are timebarred under 15 U.S.C. § 15b, which generally imposes a four-year statute of
limitations for any private cause of action brought under the federal antitrust laws.
16The
Class alleges that Northshore illegally monopolized the relevant market for
healthcare services (Count 1), Second Am. Compl. ¶¶ 42-50, or in the alternative, attempted
to monopolize the relevant market for healthcare services (Count 2), id. ¶¶ 51-56. For
convenience’s sake, the Court will refer to both counts together as the Class’s “Section 2”
claim.
9
Def.’s Mot. Summ. J. at 1, 5. It steadfastly maintains that both of the Class’s claims
accrued on January 1, 2000, the day that NorthShore merged with Highland Park
Hospital. Id. at 5-6, 9-14; R. 816, Def.’s Reply Br. at 1, 6-8. If that is the right start
date for the limitations clock, then the Class’s claims expired on January 1, 2004—
forty days before the FTC brought its antitrust action against NorthShore. (As
discussed below, see infra Section III.A.1. at 12-13, Section 5 of the Clayton Act, 15
U.S.C. § 16(i), tolled the Class’s federal antitrust claims as of February 10, 2004,
but only to the extent the statute of limitations on its claims had not already run.)
NorthShore further asserts that neither the discovery rule nor the continuing
violations doctrine render the Class’s claims timely. Def.’s Mot. Summ. J. at 1-3, 68, 14-19; Def.’s Reply Br. at 1-8.
In response, the Class contends that its claims did not accrue until class
members paid NorthShore’s allegedly anticompetitive prices.17 R. 808, Pl.’s Resp.
Br. at 10-18. That is, the Class argues that the claims did not accrue until after the
merger took place on January 1, 2000, and in fact, that the undisputed evidence
shows that the claims could not possibly have accrued before February 10, 2000
(that is, four years before the FTC brought its antitrust action against NorthShore).
Id. at 16 (“But even in the remote chance that a class member could have connected
all of the dots that it was paying higher prices after the merger, that those higher
17Alternatively,
the Class asserts that, under the discovery rule, their claims did not
accrue until the FTC filed its complaint against NorthShore on February 10, 2004. Pl.’s
Resp. Br. at 12-14. According to the Class, the “notorious opacity of hospital pricing”
prevented them from discovering their antitrust injuries until February 2004 when the
FTC announced—via its complaint—“that th[e] merger might be anticompetitive … .” Id. at
14.
10
prices were the result of increased market power …, and that the increased market
power was being abused to extract higher reimbursements, it could not have
reached all of these conclusions before February 10, 2000.”). The Class further
asserts that NorthShore’s monopolization of the healthcare services market
warrants applying the continuing violations doctrine, which restarts limitation
periods anew where the defendant inflicts continuous and accumulating injury. Id.
at 22-27. Finally, the Class maintains that two tolling doctrines, equitable tolling
and equitable estoppel, tolled the statute of limitations on its claims. Id. at 14-15
(equitable tolling), 18-21, 27-28 (equitable estoppel).
In analyzing whether the Class brought this case on time, the key date is
February 10, 2004, because that is the date that the FTC brought its case, and the
filing of that complaint tolled the statute of limitations as of that date. See infra
Section III.A.1 (discussing 15 U.S.C. § 16(i)). So whatever Class claims were timely
as of February 10, 2004 were preserved. Put another way, the Class claims—if
any—that accrued on or after February 10, 2000 are timely. Because that is the
dividing line, the Court’s analysis is divided into two sections: Section A analyzes
whether the Class claims based on NorthShore’s alleged post-February 10, 2000
supracompetitive price increases are time-barred. This analysis explains why 15
U.S.C. § 16(i) tolled the Class claims based on those price increases and when those
claims accrued. Section B then discusses whether Class claims based on
11
NorthShore’s pre-February 10, 2000 supracompetitive price increases are timebarred.18
A. Post-February 10, 2000 Price Increases
1. Tolling Under 15 U.S.C. § 16(i)
Section 5 of the Clayton Act, 15 U.S.C. § 16(i), tolls the limitations period for
private antitrust actions during the time that a related government case is pending:
Whenever any civil or criminal proceeding is instituted by the United States
to prevent, restrain, or punish violations of any of the antitrust laws, … the
running of the statute of limitations in respect to every private or State right
of action arising under said laws and based in whole or in part of any matter
complained of in said proceeding shall be suspended during the pendency
thereof and for one year thereafter: Provided, however, That whenever the
running of the statute of limitations in respect of a cause of action arising
under Section 15 or 15c of this title is suspended hereunder, any action to
enforce such cause of action shall be forever barred unless commenced either
within the period of suspension or within four years after the cause of action
accrued.
15 U.S.C. § 16(i). As compared to the accrual rule, which determines when the
statute of limitations begins, tolling rules like § 16(i) interrupt, or pause, the ticking
of the limitations clock after it has already begun to run. Heard v. Sheahan, 253
F.3d 316, 317-18 (7th Cir. 2001) (“Tolling interrupts the statute of limitations after
it has begun to run, but does not determine when it begins to run; that question is
the question of accrual[.]”); Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th
Cir. 1990) (“Tolling doctrines stop the statute of limitations from running even if the
18The
Class definition is broad enough to include any unlawful overcharges that the
Class paid “from at least as early as January 1, 2000 … .” R. 587, 12/10/2013 Class
Certification Order (emphasis added). In its response brief, the Class does not explicitly
point to any overcharges that class members paid before February 10, 2000, but it does
contend that “[NorthShore] may have raised a handful of prices in the 40 days after the
merger.” See Pls.’ Resp. Br. at 7. For this reason, the Court addresses whether claims based
on any pre-February 10, 2000 overcharges are time-barred. See infra Section III.B.
12
accrual date has passed.”). Courts routinely apply § 16(i) to proceedings “instituted”
by the FTC. See Minn. Mining & Mfg. Co. v. N.J. Wood Finishing Co., 381 U.S. 311,
321-22 (1965) (applying federal antitrust tolling provision to FTC proceedings);
Rader v. Balfour, 440 F.2d 469, 473 (7th Cir. 1971) (same).
Here, the FTC “instituted” a proceeding against NorthShore on February 10,
2004. That proceeding continued on well after counsel for the Class case filed the
proposed class action. Case Timeline, Federal Trade Commission, available at
https://www.ftc.gov/enforcement/cases-proceedings/0110234/evanston-northwesternhealthcare-corporation-enh-medical-group. So, as of February 10, 2004, § 16(i)
kicked-in and tolled the limitations period for any cause of action that the Class had
accrued, so long as the four-year limitations period for those claims had not already
run. See 15 U.S.C. § 16(i). This means that whatever rights the Class had as of
February 10, 2000—four years before the FTC instituted its action against
NorthShore—still existed when the Class filed its complaint on August 7, 2007. In
other words, § 16(i) only suspended the statute of limitations to the extent that the
Class had any unexpired claims as of February 10, 2004.19 The Court addresses that
issue next.
19NorthShore
makes a last-ditch argument in its summary judgment brief, asserting
that Section 16(i) does not apply to the Class claims because the FTC did not file its
complaint “during the four-year limitations period starting on January 1, 2000.” Def.’s
Summ. J. Br. at 20 (emphasis added). To support this argument, NorthShore points to the
last sentence in Section 16(i), which states “[t]hat whenever the running of the statute of
limitations … is suspended hereunder, any action to enforce such cause of action shall be
forever barred unless commenced either within the period of suspension or within four
years after the cause of action accrued.” 15 U.S.C. § 16(i) (emphasis added). The obvious
problem is that NorthShore’s argument assumes that the four-year limitations period
started on January 1, 2000. In other words, NorthShore attempts to bootstrap its § 16(i)
13
2. The Accrual Rule:
The parties dispute when the Class claims accrued. While NorthShore
maintains that both claims accrued on January 1, 2000, the date of the merger,
Def.’s Summ. J. Br. at 5-6, 9-14; Def.’s Reply Br. at 1, 6-8, the Class contends that
the claims accrued when class members paid NorthShore’s anticompetitive prices,
Pls.’ Resp. Br. at 10-18.
To get the basic terminology straight: “[a]ccrual is the date on which the
statute of limitations begins to run.” Cada, 920 F.2d at 450; Heard, 253 F.3d at 31718. In the antitrust context, this means that “a cause of action [generally] accrues
and the statute begins to run when a defendant commits an act that injures a
plaintiff’s business.” Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321,
338 (1971). Calculating the accrual date for antitrust actions, as in other areas of
the law, can be fairly straightforward—often the plaintiff knows that he has been
injured by the defendant’s alleged antitrust violation as soon as that violation
occurs. But not always. In instances where the plaintiff does not discover his
antitrust injuries until after the alleged wrong occurs, the “discovery rule”20 kicks-in
argument to its accrual-upon-merger argument. So, whether NorthShore can prevail on its
§ 16(i) argument, turns on when the Section 2 and Section 7 claims accrued—issues which
the Court addresses next. See infra Section III.A.2. So there is actually no independent
argument in NorthShore’s favor based on this filing date of the FTC’s complaint.
20The discovery rule “is read into statutes of limitations in federal-question cases …
in the absence of a contrary directive from Congress,” Cada, 920 F.2d at 450, which is
precisely the case here. In fact, the Seventh Circuit and the Northern District of Illinois
have applied the discovery rule to federal antitrust claims. See In re Copper Antitrust Litig.,
436 F.3d 782, 789-90 (7th Cir. 2006) (analyzing whether the discovery rule applied to the
plaintiffs’ Sherman Act and Clayton Act claims); see also, e.g., Shuffle Tech Int’l, LLC v.
Scientific Games Corp., 2015 WL 5934834, at *15 (N.D. Ill. Oct. 12, 2015) (acknowledging
that the discovery rule could apply to a Section 7 cause of action); Nat’l Black Expo v. Clear
14
to “postpone[] the beginning of the limitations period from the date when the
plaintiff is wronged to the date when he discovers he has been injured … .” Cada,
920 F.2d at 450; In re Copper Antitrust Litig., 436 F.3d 782, 789 (7th Cir. 2006). The
discovery rule then is not so much an exception to the accrual rule, but rather a rule
that tells us when the claim accrues. See Barry Aviation, Inc., v. Land O’Lakes Mun.
Airport Comm’n, 377 F.3d 682, 688 (7th Cir. 2004) (“[The discovery rule] is based on
the general rule that accrual occurs when the plaintiff discovers that ‘he has been
injured and who caused the injury.’” (quoting United States v. Duke, 229 F.3d 627,
630 (7th Cir. 2000))); In re Cooper Antitrust Litig., 436 F.3d at 789.
Another principle of accrual, called the “continuing violations” doctrine,
postpones the beginning of the limitations period where the defendant inflicts
continuing and accumulating harm. Heard, 253 F.3d at 319; see also Hanover Shoe,
Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 502 n.15 (1968) (continuing violation
applies where the defendant’s conduct “inflict[s] continuing and accumulating harm
on [the plaintiff].”). “[A] violation is called ‘continuing,’ signifying that a plaintiff can
reach back to its beginning even if that beginning lies outside the statutory
limitations period, when it would be unreasonable to require or even permit him to
sue separately over every incident of the defendant’s unlawful conduct.” Heard, 253
F.3d at 319.21
Channel Broad., Inc., 2007 WL 495307, at *5 (N.D. Ill. Feb. 8, 2007) (acknowledging that
the discovery rule could apply to a Section 2 cause of action).
21Heard acknowledges that courts differ on whether the continuing violations
doctrine operates to toll an already-running limitations clock or instead to set an accrual
date (that is, the start, or restart, of the limitations clock). 253 F.3d at 319 (“But the usual
and it seems to us the correct characterization of the doctrine of continuing violation is that
15
Taking the Section 2 and Section 7 claims in turn—again, based on
NorthShore’s alleged post-February 10, 2000 price increases—the Court first will
consider when it is that NorthShore committed an act that allegedly injured the
Class, see Zenith Radio, 401 U.S. at 338, before analyzing whether the discovery
rule, see Cada, 920 F.2d at 450, or the continuing violations doctrine, see Heard, 253
F.3d at 319, postponed the date on which those claims accrued.
a. Illegal Monopolization Under Section 2 of the Sherman Act
i. Berkey v. Photo, Inc. v. Eastman Kodak Co.
In Berkey v. Photo, Inc. v. Eastman Kodak Co., the Second Circuit was
presented with the question of when a purchaser’s Section 2 cause of action accrued.
603 F.2d at 295-96. The purchaser alleged that the defendant’s anticompetitive
conduct—which included illegal acquisitions, exclusionary tactics, and other
improper conduct—enabled the defendant to monopolize the photographic paper
market and overcharge its customers. Id. at 293. The anticompetitive conduct
occurred more than four years before the filing of the suit; four years is the
limitations period for an antitrust claim. Id. Relying on the Supreme Court’s
decision in Zenith Radio, Berkey observed that “the business of a monopolist’s rival
may be injured at the time the anticompetitive conduct occurs … .” Id. at 295
(emphasis added). But rivals are one thing, and purchasers are another. Berkey
explained that “a purchaser, by contrast, is not harmed until the monopolist
it is a doctrine governing accrual, not a tolling doctrine, because we don’t want the plaintiff
to sue before the violation is complete. Tolling rules create defenses; they are optional with
the plaintiff; he can sue as soon as his claim accrues. We therefore delay the accrual date
when, quite independent of the plaintiff’s wishes, we want to delay his right to bring suit.”
(internal citations omitted)).
16
actually exercises its illicit power to extract an excessive price.” Id. Rather than
hold that the defendant’s anticompetitive conduct by itself triggered the statute of
limitations, Berkey reasoned that a purchaser’s Section 2 claim cannot accrue until
“the purchaser[] … actually pays the [supracompetitive price].” Id.
Despite NorthShore’s argument to the contrary,22 Berkey is persuasive and
the Court applies it here. True, the Seventh Circuit has not decided one way or the
other to adopt Berkey. But there is no reason to think that the Seventh Circuit
would not do so, particularly given that Berkey relies almost exclusively on Supreme
Court precedent to reach its holding. See Berkey, 603 F.2d at 295-96 (citing, for
example, Zenith Radio, 401 U.S. 321; Cont’l Ore Co. v. Union Carbide & Carbon
Corp., 370 U.S. 690 (1962); and Schine Chain Theatres v. United States, 334 U.S.
110 (1948), overruled on other grounds by Copperweld Corp. v. Indep. Tube Corp.,
467 U.S. 752 (1984)). What’s more, the Seventh Circuit has cited Berkey’s accrual
rule with approval in a non-antitrust context, see Taylor v. Meirick, 712 F.2d 1112,
22NorthShore
asserts that Berkey is irrelevant: Berkey applies where “a monopolist
waits until sometime after it acquires a monopoly to charge an unlawful price,” and here,
NorthShore contends, “no time lapse existed between the anticompetitive conduct (the
[m]erger) and the alleged exercise of monopoly power (the alleged overcharges).” Def.’s
Summ. J. Br. at 11-12. To support this argument, NorthShore cites to the Second Amended
Complaint, see id., which alleges that NorthShore exercised its monopoly power by
increasing its prices “immediately” after, or “coincident” with, the merger, see Second Am.
Compl. ¶ 16. But phrases like “immediately” and “coincident” must be interpreted in
context—here, that “context” refers to a merger amongst three major northern Chicago
hospitals. Sure, perhaps the merger formally took place on January 1, 2000, but mergers
are not over and done with in a day. In fact, it took NorthShore six months just to equalize
the hospitals’ chargemasters. PSOF ¶ 13; Def.’s Resp. PSOF ¶ 13. So the Court declines to
read the Class’s allegation that NorthShore “immediately” increased its prices “coincident”
with the merger as alleging that NorthShore increased its prices “on January 1, 2000.” The
Court also notes that in any event, Berkey held that a purchaser’s claim does not accrue
until “the purchaser[] … actually pays the [supracompetitive price].” 603 F.2d at 295
(emphasis added). So the key issue is when the Class paid NorthShore’s supracompetitive
prices, not whether NorthShore “immediately” increased its prices on January 1, 2000.
17
1118 (7th Cir. 1983), and has repeatedly relied on Berkey to distinguish between
unlawful monopolization and lawful competition, see, e.g., Goldwasser v. Ameritech
Corp., 222 F.3d 390, 397 (7th Cir. 2000); Blue Cross & Blue Shield United of Wis. v.
Marshfield Clinic, 65 F.3d 1406, 1412-13 (7th Cir. 1995), as amended on denial of
reh’g (Oct. 13, 1995); Olympia Equip. Leasing Co. v. W. Union Tel. Co., 797 F.2d
370, 375-76 (7th Cir. 1986); MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d
1081, 1106 (7th Cir. 1983). Given all of this, there is no reason to think that the
Seventh Circuit would not also adopt Berkey’s accrual-on-purchase approach to
Section 2 claims.
So Berkey controls. Under Berkey, the Section 2 claim accrued when class
members purchased NorthShore’s healthcare services at allegedly supracompetitive
prices. And the fact that NorthShore’s alleged anticompetitive conduct—the
January 1, 2000 merger—occurred before the limitations period started does not
change this: “[T]here can be no unfairness in preventing a monopolist that has
established its dominant position by unlawful conduct from exercising that power in
later years to extract an excessive price.” Berkey, 603 F.2d at 296. Although
NorthShore notified the MCOs about the merger before it occurred, see DSOF ¶¶
21-22, NorthShore did not tell them that it would increase its prices for healthcare
services until after the merger. PSOF ¶ 7 (“None of [the letters] stated that the
assignment would increase prices, or that [NorthShore] had a right to higher
reimbursements as a result of the merger.”); Def.’s Resp. PSOF ¶ 7 (“NorthShore
also admits that none of the assignment letters stated that [NorthShore] had a right
18
to higher reimbursement rates as a result of the merger.”). Nor did NorthShore ever
publicly announce its intention to increase its prices post-merger. PSOF ¶ 4; DSOF
¶ 28; Pls.’ Resp. DSOF ¶ 28. Actually, before the merger, NorthShore had agreed to
provide its services under the same rates, terms, and conditions set forth in its (or
Highland Park Hospital’s) preexisting contract with the MCO.23 DSOF ¶ 23; Pls.’
Resp. DSOF ¶ 23. It was not until after the merger that NorthShore and the MCOs
began to renegotiate their contracts. PSOF ¶ 9. Indeed, none of the MCOs had
signed a finalized, renegotiated contract with NorthShore by February 10, 2000. Id.
The first MCO to sign a renegotiated contract with NorthShore did not do so until
February 23, 2000. Id. ¶ 11. This means that the MCOs began paying a
supracompetitive price for NorthShore’s healthcare services sometime after that
date once their renegotiated contracts took effect. NorthShore contends that
“distinct from Berkey, no time-lapse existed between the anticompetitive conduct
and the alleged price increases.” Def.’s Summ. J. Br. at 3. But there was a time
lapse here: between January 1, 2000, when the merger occurred, and post-February
23, 2000, when the renegotiated contracts took effect and class members actually
paid NorthShore’s supracompetitive prices. So, despite NorthShore’s argument to
the contrary, the rationale underlying Berkey—that purchasers are not injured until
they pay the too-high price—applies with equal force here.
23As
a reminder, to the extent that the Class argues that NorthShore increased its
prices as of January 1, 2000 when it chose (subject to the MCO’s consent) what contract
would govern post-merger and that class members were harmed as a result of those
supracompetitive price increases, the Court addresses those claims in Section III.B.
19
In sum, the Class’s Section 2 claim based on NorthShore’s post-February 10,
2000 supracompetitive price increases accrued when the Class paid those allegedly
illegal prices. Those payments did not occur, based on the record evidence, until
after February 10, 2000. This accrual timing, when combined with the tolling of
§ 16(i), renders the post-February 10, 2000 Section 2 claims timely. Put another
way, § 16(i) kicked in as of February 10, 2004 when the FTC brought its action and
tolled the limitations period all the way up until the Class filed this lawsuit. On
these grounds alone, NorthShore’s motion for summary judgment must be denied.
ii. The Discovery Rule
Even if the rule established by Berkey does not apply, the Section 2 claim for
post-February 10, 2000 supracompetitive price increases would still survive by
operation of the discovery rule. Remember that the discovery rule “postpones the
beginning of the limitations period from the date when the plaintiff is wronged to
the date when he discovers he has been injured … .” Cada, 920 F.2d at 450; In re
Copper Antitrust Litig., 436 F.3d at 789. NorthShore asserts that the discovery rule
does not apply because the Class “admitted to knowing about the [m]erger before it
occurred and alleged that NorthShore ‘immediately’ increased its prices after the
[m]erger.”24 Def.’s Summ. J. Br. at 14. But the fact that the Class knew about the
24To
support this argument, Northshore relies on commentary from a leading
antitrust treatise discussing the accrual rule for Section 2 claims:
Customers of the monopolist are not injured until after the monopolist causes them
injury through higher prices, which may occur later than the exclusionary practices
creating the monopoly. For example, competitors are injured immediately by
predatory pricing, but customers would not be injured until much later, when the
predation has done its work and the monopolist raises its price. Once customers
20
merger before it occurred is irrelevant; the discovery rule asks when the Class knew
(or had reason to know) that NorthShore had unlawfully increased its prices. See
Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 902 (7th Cir. 2004) (“The
period of limitations for antitrust litigation runs from the most recent injury caused
by the defendants’ activities rather than from the violation’s inception.”). As far as
the Class could tell as of January 1, 2000, NorthShore was touting that the merger
was only going to benefit consumers, MCOs, and the communities that the three
hospitals served. PSOF ¶ 3.
And here, class members could not have discovered that they suffered any
injury as a result of the merger until they knew that NorthShore had illegally
overcharged them for its healthcare services. As of January 1, 2000, NorthShore
had agreed to provide those services under the same rates that the MCO was
paying before the merger—either under its preexisting contract with NorthShore or
its preexisting contract with Highland Park Hospital. DSOF ¶ 23; Pls.’ Resp. DSOF
¶ 23. (To the extent that the Class argues that class members were harmed—that
have reason to know of the violation and their damages are sufficiently
ascertainable to justify an antitrust action, the statute begins to run against them.
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles
and Their Application, ¶ 320c4 (3d & 4th eds. and 2015 Cum. Supp.); see also Def.’s Summ.
J. Br. at 14.
The problem is that this excerpt actually supports applying the discovery rule to
postpone starting the limitations period until the Class knew (or had reason to know) that
NorthShore had charged supracompetitive prices. As the treatise points out, the class
members were not injured until after NorthShore “cause[d] them injury through higher
prices,” which occurred once the parties’ renegotiated contracts took effect. Areeda &
Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶
320c4. And even once the renegotiated contracts took effect, the Section 2 claims would not
have actually accrued until the class members “ha[d] reason to know” that they paid
supracompetitive prices for healthcare services. Id.
21
is, paid NorthShore’s supracompetitive prices—before February 10, 2000, the Court
addresses whether those claims are timely in Section III.B.) In other words, based
on the record evidence, there is nothing to suggest that the MCOs knew of
NorthShore’s plan to increase its prices as of February 10, 2000.25 In fact, the
MCOs’ discovery of their alleged injuries was probably much later. Cf. In re Copper
Antitrust Litig., 436 F.3d at 792; In re Ready-Mixed Concrete Price Fixing Litig.,
2006 WL 2849711, at *2 (S.D. Ind. Sept. 29, 2006). This is in part because “the
market for hospitals services [is] particularly complex,” which in turn makes it
difficult to readily uncover the basis of the pricing of those services:
Adding even more complexity [to the market for hospital services] is the fact
that insurers and health care providers negotiate contracts that cover not a
single service but complex bundles of many different services and products. ...
Even without such unbundling or re-bundling, the prices of the individual
component items are themselves subject to a wide variety of market
influences. ... Without any exercise of market power, therefore, the price for
[a] bundled service ... might go up, go down, or stay level, despite substantial
changes in the prices of the component[] [services and products]. As a result
of these complexities, changes in the nominal prices charged for particular
services might actually conceal rather than reveal a health care provider’s
exercise of unlawful market power.
Messner v. Northshore Univ. Health Sys., 669 F.3d 802, 816-17 (7th Cir. 2012)
(internal citation omitted). As the Class aptly points out, “even in the remote chance
that a class member could have connected all of the dots that it was paying higher
prices after the merger, that those higher prices were the result of increased market
25NorthShore
asserts that one letter it sent to one MCO put that particular MCO on
notice that NorthShore was going to choose the “more favorable” contract to govern the
parties’ post-merger relationship. Def.’s Summ. J. Br. at 8. But that letter only implies that
NorthShore and the MCO would utilize whichever preexisting contract was “better,” not
that NorthShore was going to choose whichever preexisting contract charged higher rates.
See Pls.’ Resp. Br. at 5 n.3.
22
power as opposed to a one-time catch up or normal price increase[], and that the
increased market power was being abused to extract higher reimbursements, it
could not have reached these conclusions before February 10, 2000.” Pls.’ Resp. Br.
at 16. Again, there is no factual dispute here: the Class did not discover its antitrust
injuries based on NorthShore’s post-February 10, 2000 price increases until after
February 10, 2000—four years before the FTC brought its antitrust action against
NorthShore. So, even if the holding of Berkey does not apply, the discovery rule
would require the denial of NorthShore’s motion for summary judgment as to the
Section 2 claim.
iii. Continuing Violations Doctrine
Because both Berkey and the discovery rule apply here, the Class need not
rely on the continuing violations doctrine to refute the limitations defense. For the
sake of completeness, the Court will discuss the application—or, as it turns out, the
non-application—of the doctrine. As noted earlier, the continuing violations doctrine
postpones the limitations period where the defendant inflicts continuing and
accumulating harm. Heard, 253 F.3d at 319. Thus, in order for the doctrine to
apply, the plaintiff must be challenging “not just one incident of [unlawful] conduct
… but an unlawful practice that continues into the limitations period … .” Havens
Realty Corp. v. Coleman, 455 U.S. 363, 380-81, (1982). In continuing violations
cases, “the complaint is timely when it is filed within [the limitations period,
23
measured from] the last asserted occurrence of that practice.”26 Id.; Brunswick
Corp. v. Riegel Textile Corp., 752 F.2d 261, 271 (7th Cir. 1984) (“[I]f a continuing
violation extends into the statutory period, the victim is entitled to complain about
the whole violation, no matter how long ago it began … .”).
The Class asserts that the continuing violations doctrine applies based on the
Supreme Court’s holding in Hanover Shoe v. United Shoe Machinery Corp., 392 U.S.
481; see also Pls.’ Resp. Br. at 22-23. In that case, United, a shoe machinery
manufacturer and distributor, instituted a lease-only policy in 1912, whereby it
agreed to lease, but would not sell, its machinery to Hanover. 392 U.S. at 483-84.
Hanover finally brought suit in 1955, asserting that the lease-only policy amounted
to unlawful monopolization. Id. The Court rejected United’s argument that “because
the earliest impact on Hanover of United’s lease only policy occurred in 1912,
Hanover’s [claim] arose during that year and is now barred by the … statute of
limitations”:
We are not dealing with a violation which, if it occurs at all, must occur
within some specific and limited time span. Rather, we are dealing with
conduct which constituted a continuing violation of the Sherman Act and
which inflicted continuing and accumulating harm on Hanover. Although
Hanover could have sued in 1912 for the injury then being inflicted, it was
equally entitled to sue in 1955.
Id. at 502 n.15 (emphases added) (internal citation omitted). Because the lease-only
policy continually harmed the plaintiff from 1912 through 1955, the Court
26See
also Heard, 253 F.3d at 320 (“In between the case in which a single event gives
rise to continuing injuries and the case in which a continuous series of events gives rise to a
cumulative injury is the case in which repeated events give rise to discrete injuries.”).
24
concluded that the plaintiff “[wa]s entitled to damages for [that] entire period.” Id.
at 502.
Hanover Shoe held that the continuing violations doctrine allowed the
plaintiff to reach back outside the limitations period to the earliest date that
United’s lease-only policy first inflicted harm. 392 U.S. at 502 n.15. But that
holding is of little relevance here. Applying Hanover Shoe here would only, at best,
allow the Class to reach back to when NorthShore’s post-February 10, 2000
supracompetitive prices first inflicted harm—in other words, when class members
actually paid NorthShore’s allegedly illegal overcharges. Based on the record
evidence, and according to the Class, this did not happen until after February 23,
2000, once Northshore had renegotiated its MCO contracts. PSOF ¶¶ 9, 11; see also
Pls.’ Resp. Br. at 17 (observing that “[NorthShore] signed new contracts with MCOs
which contained price increases, and MCOs [then] paid those higher prices … .”). So
the continuing violations doctrine is not of much use in this case because § 16(i)’s
tolling rule already renders timely the Class claims for post-February 10, 2000
overcharges. See supra Section III.A.1. In other words, the Class does not have to
reach back outside the limitations period to assert those claims.
In any event, it is not clear that Hanover Shoe would even apply to a Section
2 merger-based claim like the one at issue here. Although the Seventh Circuit has
not analyzed whether the continuing violations doctrine applies to merger-based
claims, other Circuits have concluded that it does not. See Z Techs. Corp. v. Lubrizol
Corp., 753 F.3d 594, 598-99 (6th Cir. 2014) (analyzing the continuing violations
25
doctrine and observing that “price increases in the merger-acquisition context do
not extend the statute of limitations”); Concord Boat Corp. v. Brunswick Corp., 207
F.3d 1039, 1052 (8th Cir. 2000) (concluding that “[c]ontinuing violations have not
been found outside the RICO or Sherman Act conspiracy context, however, because
acts that ‘simply reflect or implement a prior refusal to deal or acts that are merely
unabated inertial consequences (of a single act) do not restart the statute of
limitations’” (quoting DXS, Inc. v. Siemens Med. Sys., Inc., 100 F.3d 462, 467-68
(6th Cir. 1996))). What’s more, even if the doctrine applied to merger-based claims,
subsequent price increases or contract renegotiations would not constitute an
“independent predicate act” sufficient to start the limitations period anew. As
Professors Areeda and Hovenkamp point out:
[I]f there is one clear case where a subsequent act is a mere ‘reaffirmation’
rather than an ‘independent’ predicate act, it is the ongoing sales of the postmerger firm. Every merger contemplates that the post-merger firm will
continue to sell the product. To regard each sale as an independent predicate
act thus deprives the notion of ‘independence’ of all meaning.
Areeda & Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their
Application, ¶ 320c5. So, based on the above, the continuing violations doctrine does
not apply to the Section 2 claim.
In any event, both Berkey and the discovery rule provide independent bases
on which the Class’s Section 2 claims based on post-February 10, 2000 alleged
overcharges may go forward. (The continuing violations doctrine, by contrast, does
not.) It is worth noting that, not only must NorthShore’s motion be denied, but it
appears that there is no factual basis (given the legal principles that the Court has
26
adopted) for NorthShore to assert the limitations defense; in other words, the Class
might be entitled to summary judgment against the defense. But the Class did not
cross move, so it remains open, at this point, for NorthShore to try to prove that a
particular MCO knew, before February 10, 2000, that NorthShore planned to
charge supracompetitive prices.
b. Anticompetitive Merger Under Section 7 of the Clayton Act
i. Hold-and-Use Doctrine
Because Section 7, broadly speaking, prohibits anticompetitive acquisitions,
Section 7 claims typically accrue as soon as the acquisition takes place. See United
States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 598 (1957) (citing cases
brought under Section 7 “at or near the time of acquisition”). But it is possible for
accrual to take place afterwards. Indeed, a Section 7 claim can accrue “any time
when the acquisition threatens to ripen into a prohibited effect.” Id. at 597. In other
words, “old activity (in du Pont, a stock acquisition preceding the suit by 30 years) is
not immunized, if the potential for a reduction in output is created or realized more
recently as market conditions change.” U.S. Gypsum Co. v. Ind. Gas Co., 350 F.3d
623, 628 (7th Cir. 2003). And this makes sense: “The Clayton Act was intended to
supplement the Sherman Act. Its aim was primarily to arrest apprehended
consequences of inter corporate relationships before those relationships could work
their evil, which may be at or any time after the acquisition, depending upon the
circumstances of the particular case.” E.I. du Pont, 353 U.S. at 597 (emphasis
added).
27
So, where a merger only produces anticompetitive effects post-merger, the
statute of limitations begins to run not when the merger transpired, but when the
injury occurred.27 E. I. du Pont, 353 U.S. at 597-98; see also United States v. ITT
Cont’l Baking Co., 420 U.S. 223, 242 (1975) (“Thus, there can be a violation at some
time later even if there was clearly no violation—no realistic threat of restraint of
commerce or creation of a monopoly—at the time of the initial acts of acquisition.”).
Courts sometimes refer to this as the “hold-and-use” doctrine. See, e.g., Z Techs.
Corp., 753 F.3d at 595; see also ITT Cont’l Baking Co., 420 U.S. at 240 (Clayton Act
regulates “holding as well as obtaining assets”). Applying this principle, in Julius
Nasso Concrete Corp. v. Dic Concrete Corp., a district court determined that the
plaintiff’s Section 7 claim accrued when the defendants manipulated the market for
concrete materials, not when the mergers “which made [those] actions possible” took
place. 467 F. Supp. 1016, 1023 (S.D.N.Y. 1979). The court observed that
“[c]onstruing [Section] 7 to reach only conduct pertaining to initial mergers would
violate the Supreme Court’s ruling in [du Pont]. … Thus, in addition to prohibited
acquisitions giving rise to immediate [Section 7] claims, subsequent anticompetitive acts committed by the merger enterprise give rise to separate causes of
action.” Id. Because accrual occurs when the post-merger anticompetitive acts are
committed, the court held that “[the plaintiff’s] charges about Certified’s pricing
27The
Class interprets the holding in du Pont and the hold-and-use doctrine
generally as part and parcel of the continuing violations doctrine. See Pls.’ Resp. Br. at 2324. But the hold-and-use doctrine applies where the defendant lawfully acquires assets, but
then later uses those assets in a manner that inflicts anticompetitive injury. See E. I. du
Pont, 353 U.S. at 597-98. The continuing violations doctrine, by contrast, applies where the
defendant causes continuing and accumulating harm. Heard, 253 F.3d at 319.
28
policy and DIC-Underhill’s misuse of bonding power28 may be dated from the time
these events actually transpired and not only from the date of the mergers which
made these actions possible.” Id.
Similarly, here the Class alleges that the merger enabled NorthShore to
manipulate the market for healthcare services by charging supracompetitive prices.
Hold-and-use applies here: the Class seeks to recover for injuries arising from
NorthShore’s post-merger anti-competitive acts—increasing the price of healthcare
services so as to allegedly overcharge the Class for those services. The Class’s
Section 7 claim thus accrued, at the earliest, sometime after February 23, 2000,
once NorthShore had renegotiated its MCO contracts, PSOF ¶¶ 9, 11—not from the
date of the merger that made that act possible.
The Court hastens to add, however, that in order for the hold-and-use
doctrine to apply, the Class will have to show a causal connection between the
January 1, 2000 merger and NorthShore’s later supracompetitive price increases:
To base a [Section] 7 violation on subsequent conduct, however, several
things must be shown. First, it must be demonstrated that the conduct was
made possible by the acquisition. Plaintiffs must show either that the acts
were anticompetitive because of the acquisitions, or that their
anticompetitive nature was enhanced by the acquisitions. Acts that might be
characterized as merely competitive before a merger, might well be viewed as
anticompetitive when performed by a company that, because of the merger,
“dominates” the market. There must be a showing that the conduct was
related to an enhanced capacity to meet the short-term threat of a new
entrant into a dominated market, or simply that the conduct had a tendency
to substantially lessen competition or create a monopoly.
28The
plaintiff had alleged that the defendantDIC-Underhill “abused its pre-eminent
market position by posting performance bonds for building projects on which it ha[d]
applied for the concrete subcontract in exchange for which the prime contractor award[ed]
it the job without soliciting competitive bids.” Julius Nasso, 467 F. Supp. at 1019.
29
Robert's Waikiki U-Drive, Inc. v. Budget Rent-A-Car Sys., Inc., 491 F. Supp. 1199,
1224 (D. Haw. 1980) (emphasis added) (internal citations omitted), aff’d, 732 F.2d
1403 (9th Cir. 1984). In other words, the Class must show that the merger “made
[the price increase] possible.” Julius Nasso, 467 F. Supp. at 1023; cf. Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977) (“The injury should
reflect the anticompetitive effect either of the [Section 7] violation or of
anticompetitive acts made possible by the [Section 7] violation.”). Because
NorthShore instituted a supracompetitive pricing policy after February 10, 2000—
again, four years before the FTC brought its action—and because the merger made
that policy possible, the Class’s Section 7 claim based on that policy can go forward.
ii. The Discovery Rule
The discovery rule also applies to the Section 7 claim. In other words, even
absent the “hold-and-use” doctrine, the discovery rule dictates that the Class’s
Section 7 claim would not have accrued until class members discovered that the
merger caused anti-competitive injury. See Cada, 920 F.2d at 450; In re Copper
Antitrust Litig., 436 F.3d at 789. Like NorthShore’s argument against applying the
discovery rule to the Section 2 claim, here NorthShore argues that “[t]he rule is
irrelevant to determining when [the Section 7] claim accrued because it is
undisputed that each named plaintiff had actual knowledge of the [m]erger as of
January 1, 2000.” Def.’s Summ. J. Br. at 6; see also supra Section III.A.2.a.ii. at 2023. But again, the fact that the Class knew about the merger before it occurred is
30
irrelevant. What is relevant is when the Class knew (or had reason to know) that
NorthShore had unlawfully increased its prices. See Xechem, Inc., 372 F.3d at 902.
NorthShore further contends that a recent case, Shuffle Tech International,
LLC v. Scientific Games Corp., 2015 WL 5934834 (N.D. Ill. Oct. 12, 2015), explains
why the discovery rule does not apply to the Section 7 claim here. Northshore is
right on one point: Shuffle Tech held that the discovery rule did not apply to the
Section 7 claim because the plaintiffs were not participants in the relevant market
at the time the acquisitions occurred. Id. at *15; see also Def.’s Summ. J. Br. at 7.
But Shuffle Tech is a very different case from this one: there, the plaintiffs alleged
that the acquisitions themselves—not subsequent anticompetitive acts made possible
by those acquisitions—caused the anticompetitive harm:
But although it may be possible for a cause of action under section 7 to accrue
sometime after a merger causes a plaintiff’s undiscovered injury, that is not
the issue in this case. Plaintiffs claim that SHFL’s acquisition of CARD in
2004 and VendingDate in 2009 were monopolistic acquisitions that caused
anticompetitive harms when they transpired. At the time SHFL made these
acquisitions, plaintiffs were not participants in the casino shuffler market.
Accordingly, plaintiffs do not allege that they were in a position to suffer an
injury as a result of the merger. The discovery rule does not apply where, as
here, there was no injury to discover.
Shuffle Tech, 2015 WL 5934834, at *15 (emphasis added). Shuffle Tech, therefore,
has no bearing on deciding whether the discovery rule applies to the Section 7 claim
in this case. Here, the Class alleges that NorthShore’s post-merger anti-competitive
act—increasing the price of healthcare services so as to overcharge the Class for
those services—caused anticompetitive injury. If anything, Shuffle Tech only
supports the application of the discovery rule, because Shuffle Tech recognized that
31
the discovery rule can apply to Section 7 claims that are based on post-merger
anticompetitive acts. Id. Just as the discovery rule applies to the Section 2 claim, so
too does it apply to the Section 7 claim.
iii. Continuing Violations Doctrine
For the sake of completeness, the Court briefly discusses the applicability—or
inapplicability—of the continuing violations doctrine to the Section 7 claim. As with
the Section 2 claim, even if the continuing violations doctrine applied to mergerbased claims, the doctrine would only at best allow the Class to reach back to when
it first was injured by the anticompetitive effects of the merger—that is, when class
members paid NorthShore’s supracompetitive prices, which occurred after the
renegotiated contracts took effect. Because Section 16(i)’s tolling rule already
renders timely the Class’s claims based on those alleged overcharges, the continuing
violations doctrine is not of much use in this case. See supra Section III.A.1. In
other words, the Class does not have to reach back outside the limitations period to
assert its Section 7 claim. What’s more, the case law against applying the
continuing violations doctrine to merger-based claims brought under Section 7 in
particular is fairly well-settled. See Z Techs. Corp., 753 F.3d at 598-99; Midwestern
Mach. Co. v. Nw. Airlines, Inc., 392 F.3d 265, 271 (8th Cir. 2004); Concord Boat
Corp., 207 F.3d at 1052; see also supra Section III.A.2.a.iii. at 23-27.
In any event, the hold-and-use doctrine and the discovery rule do apply to the
Section 7 claim, and each is an independent basis to defeat the summary judgment
motion. The Court reiterates that to the extent NorthShore can prove that a
32
particular MCO knew that NorthShore planned to charge supracompetitive prices
before February 10, 2000, then NorthShore can still argue that the statute of
limitations bars that particular MCO’s Section 7 claim. For now, there is no record
evidence to that effect, so Northshore’s motion based on the Section 7 claim is
denied in its entirety.
B. Pre-February 10, 2000 Supracompetitive Price Increases
Until now, the analysis has focused on what rights, if any, the Class had from
February 10, 2000 onward. This is because § 16(i) postponed the limitations period
for any claims that accrued after that date. (Remember the FTC instituted its action
against NorthShore on February 10, 2004, so any claim that accrued on or after
February 10, 2000 is timely.) The only issue left for the Court to address is whether
the Class can assert any claim for injuries it suffered as a result of NorthShore’s
alleged pre-February 10, 2000 anticompetitive conduct. The short answer is no.
NorthShore sent letters to the MCOs in December 1999 identifying which
contract—the MCO’s preexisting contract with NorthShore or its preexisting
contract with Highland Park Hospital—would govern post-merger. DSOF ¶ 23; Pls.’
Resp. DSOF ¶ 23. If NorthShore’s strategy for choosing between those contracts was
to go with whichever one charged higher rates for healthcare services, then the
MCO would have faced a price increase as of January 1, 2000. (This is because
whatever rates the MCO had paid pre-merger for services rendered at NorthShore’s
hospitals or at Highland Park Hospital—depending on which preexisting contract
would govern post-merger—would have increased post-merger.) And in fact, this is
33
exactly what NorthShore asserts happened: “In other words, Northshore informed
the MCOs that it needed to renegotiate its contracts coincident with the [m]erger
and that it intended to provide services under the terms and conditions of either the
[NorthShore] or [Highland Park Hospital] contract, whichever was more favorable to
[NorthShore].” Def.’s Summ. J. Br. at 8 (emphasis added). But neither party
disputes that, at the time of the merger, NorthShore did not know whether its MCO
contracts “were better” than Highland Park Hospital’s MCO contracts. PSOF ¶ 8
(“[NorthShore] did not know whether the [NorthShore] or [Highland Park Hospital]
contracts were better.”); Def.’s Resp. PSOF ¶ 8 (“NorthShore admits that
[NorthShore] did not know whether its contracts were better than [Highland Park
Hospital’s] contracts before the merger.”). If this is true, then NorthShore had not
yet figured out, as of the time of the merger, whether its contracts or Highland Park
Hospital’s contracts charged higher rates for healthcare services (or for particular
health services). NorthShore also fails to cite any evidence showing that its strategy
was to go with whatever contract charged higher rates.29 If there was any evidence
to this effect, then NorthShore could plausibly argue that the MCOs had reason to
know that the merger was anticompetitive and that they had suffered harm (in the
form of higher prices) as of January 1, 2000. But the record evidence does not
support this argument.
29It
bears repeating that NorthShore claims that one letter it sent to one MCO put
that MCO on notice that it would choose whichever contract—the MCO’s preexisting
contract with Northshore or its preexisting contract with Highland Park Hospital—was
“more favorable” to NorthShore. See Def.’s Summ. J. Br. at 8. But again, that letter only
implies that NorthShore and that one MCO would utilize whichever preexisting contract
was “better,” not that NorthShore was going to choose whichever preexisting contract
charged higher rates. See Pls.’ Resp. Br. at 5 n.3.
34
The point here is two-fold: First, it is unclear from the record evidence that
NorthShore increased its prices as of January 1, 2000 when it chose which contract
would govern post-merger. NorthShore argues that it chose the “more favorable”
contract, but there is no record evidence supporting this contention as of the date of
the merger; even NorthShore did not know which contract was more favorable.
Likewise, the Class suggests that “[NorthShore] may have raised a handful of prices
in the 40 days after the merger,” but fails to cite to any evidence to support this
assertion. Pls.’ Resp. Br. at 7.
Second, and more importantly, to the extent the Class is trying to recover for
any alleged overcharges it paid between January 1, 2000 and February 10, 2000—
that is, alleged overcharges based on its preexisting contract with Northshore or
Highland Park Hospital, whichever NorthShore identified would govern postmerger—those claims are time-barred. This is because those overcharges (if there
were any) fall outside the limitations period. Section 16(i) only tolled the limitations
period for any claims that accrued after February 10, 2000. In order to have timely
raised any pre-February 10, 2000 claim, the Class must successfully invoke some
other tolling doctrine. This it cannot do.
None of the possible tolling or accrual doctrines—equitable tolling, equitable
estoppel, and the continuing violations doctrine—apply to toll the Class’s preFebruary 10, 2000 antitrust claims. Equitable tolling stops the statute of limitations
from running where a plaintiff “despite all due diligence … is unable to obtain vital
information bearing on the existence of his claim.” Cada, 920 F.2d at 451. The
35
doctrine does not kick-in, however, until the plaintiff is “certain his rights ha[ve]
been violated.” Id. In many ways, equitable tolling is the tolling counterpart to the
discovery rule: while the discovery rule determines when the limitations period
begins to run based on the plaintiff’s discovery of actual injury, equitable tolling
functions to stop the statute of limitations until the plaintiff can, with due diligence,
discover the facts supporting the claim. Put another way, the doctrine differs from
the discovery rule “in that the plaintiff is assumed to know that he has been
injured, so that the statute of limitations has begun to run; but he cannot obtain
information necessary to decide whether the injury is due to wrongdoing and, if so,
wrongdoing by the defendant.” Id. Based on the record evidence, equitable tolling
does not apply in this case. There is simply nothing to suggest that the Class did not
have the means available before the limitations period expired to determine that
the injury was due to NorthShore’s alleged anticompetitive conduct.
Equitable estoppel does not apply either. That doctrine “comes into play
[when] the defendant takes active steps to prevent the plaintiff from suing in time,
as by promising not to plead the statute of limitations. Cada, 920 F.2d at 450-51.
The Seventh Circuit has warned that “[e]quitable estoppel in the limitations setting
is sometimes called fraudulent concealment, but must not be confused with efforts
by a defendant in a fraud case to conceal the fraud.” Id. at 451. The Class contends
that “a jury could conclude that [NorthShore] concealed … the true purpose behind
the merger” given that “[NorthShore] touted the supposed benefits of the merger,
and emphasized increased efficiencies as a benefit for its customers.” Pls.’ Resp. Br.
36
at 27-28. The problem here, however, is that the Class has done exactly what the
Seventh Circuit warned against: confused the equitable estoppel doctrine with
NorthShore’s alleged efforts to conceal its antitrust violations. In other words, the
Class has “merge[d] the substantive wrong with the tolling doctrine.” Cada, 920
F.2d at 451. So, equitable estoppel does not apply.
And, finally, the continuing violations doctrine also does not render the
Class’s pre-February 10, 2000 claims timely. As already discussed, see supra Section
III.A.2.a.iii. at 23-27; Section III.A.2.b.iii. at 32-33, any price increase NorthShore
instituted would not constitute an “independent predicate act” sufficient to start the
limitations period anew: “Every merger contemplates that the post-merger firm will
continue to sell the product. To regard each sale as an independent predicate act
thus deprives the notion of ‘independence’ of all meaning.” Areeda & Hovenkamp,
Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 320c5.
So,
to
the
extent
the
Class
asserts
that
class
members
paid a
supracompetitive price for NorthShore’s healthcare services before February 10,
2000, those claims are untimely. NorthShore’s motion for summary judgment as to
the Section 2 and Section 7 claims based on any alleged pre-February 10, 2000
supracompetitive price increases is therefore granted.
37
IV. Conclusion
For the reasons discussed above, NorthShore’s motion for summary judgment
based on the statute of limitations, R. 773, is denied in large part and granted to the
limited extent explained in the Opinion.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: September 9, 2016
38
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