DEBORAH HEART AND LUNG CENTER v. PRESBYTERIAN MEDICAL CENTER OF THE UNIVERSITY OF PENNSYLVANIA HEALTH SYSTEM et al
Filing
57
ORDERED that Defts' 26 Motion to Dismiss, 27 Motion to Dismiss, 29 Motion to Dismiss & 45 Motion for Leave to File Sur-reply are GRANTED IN PART & DENIED IN PART as set forth in the Opinion. Signed by Judge Renee Marie Bumb on 12/30/2011. (drw, )
NOT FOR PUBLICATION
[Dkt. No. 26, 27, 29, 45]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
DEBORAH HEART AND LUNG CENTER,
Civil No. 11-1290 (RMB)(KMW)
Plaintiff,
OPINION
v.
PENN PRESBYPYTERIAN MEDICAL
CENTER, et al.,
Defendants.
Appearances:
Anthony Argiropoulos
Scott B. Murray
Thomas Kane
Sills Cummis & Gross, P.C.
650 College Road East
Princeton, New Jersey 08540
Attorneys for Plaintiff Deborah Heart and Lung Center
Robert A. White
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ 08540
Jay H. Calvert, Jr.
R. Brendan Fee
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attorneys for Defendants Presbyterian Medical Center
of the University of Pennsylvania Health System,
University of Pennsylvania Health System, Penn Cardiac
Care at Cherry Hill, and Clinical Health Care
Associates of New Jersey, P.C.
1
James J. Ferrelli
Philip H. Lebowitz
John E. Sindoni
Duane Morris LLP
1940 Route 70 East, Suite 200
Cherry Hill, New Jersey 08003
Attorneys for Defendant Virtua Health, Inc. and Virtua
Memorial Hospital Burlington County
Robert V. Dell’Osa
Cozen O’Connor P.C.
457 Haddonfield Road, Suite 300
Cherry Hill, New Jersey 08002
Ronald F. Wick
Cozen O’Connor P.C.
The Army and Navy Building
1627 Street, NW, Suite 1100
Washington, D.C. 20006
Attorneys for The Cardiology Group, P.A.
BUMB, United States District Judge:
Plaintiff Deborah Heart and Lung Center (“Plaintiff”), a
not-for-profit charity hospital, alleges two claims against the
Defendants - Virtua Health, Inc. and Virtua Memorial Hospital
Burlington County (the “Virtua Defendants”), Presbyterian
Medical Center of the University of Pennsylvania Health System,
University of Pennsylvania Health System, Penn Cardiac Care at
Cherry Hill, and Clinical Health Care Associates of New Jersey,
P.C. (the “Penn Defendants”), and The Cardiology Group, P.A.
(“Defendant CGPA”).
First, Plaintiff claims that the Defendants conspired with
one another, in violation of Section 1 of the Sherman Act, to
2
exclude Plaintiff from the market for certain critical, advanced
cardiac interventional procedures, thereby restricting
consumers’ choice of providers for these procedures, and forcing
consumers to pay higher prices.
Second, Plaintiff claims that these efforts were part of an
overlapping conspiracy by the Defendants, in violation of
Section 2 of the Sherman Act, for the Virtua Defendants to
monopolize the market for emergent/primary angioplasties - a
submarket of the larger market for advanced cardiac
interventional procedures that is the subject of the first
alleged conspiracy. Defendants have moved to dismiss on a number
of grounds.1
For the reasons that follow, Defendants’ motion to dismiss
is DENIED with respect to Plaintiff’s Section 1 claim and
GRANTED with respect to Plaintiff’s Section 2 Claim.
I.
Background
A.
The Plaintiff
Plaintiff is a 139-bed hospital located in Burlington
1
In briefing on the motions to dismiss, Plaintiff moved for leave to
file a sur-reply in further opposition to the motions, attaching the
sur-reply brief. Plaintiff's attachment of the brief was improper and
Plaintiff is cautioned that, going forward, it is to obtain this
Court's permission before filing any supplemental briefing. As such,
this Court has not considered the improperly filed sur-reply brief.
The Court previously exercised its discretion to deny the motion to
file the sur-reply brief. See Docket No. 48; Fenza's Auto, Inc. v.
Montagnaro's Inc., No. 10-3336, 2011 WL 1098993, at *4 (D.N.J. Mar. 21,
2011)(“[T]he court has broad discretion to consider supplemental
briefing as appropriate and fair.”).
3
County, New Jersey and is nationally renowned for the quality of
its cardiology and pulmonary services, as well as its high
scores for patient satisfaction.2
Uniquely, Plaintiff is one of
only three hospitals in the United States that are legally
exempt from collecting insurance co-pays and deductibles from
patients. Prior to 2010, Plaintiff lacked an emergency room and
Defendant Virtua Memorial Hospital was the primary and, at
times, only emergency room in what Plaintiff contends is the
relevant geographic market for emergency care.
B.
The Competitive Landscape
Plaintiff competes with the much larger Virtua Defendants,
who operate three hospitals in the area with nearly 900 beds.
Since 2005, the Virtua Defendants have made Defendant CGPA the
exclusive provider of cardiology services at Defendant Virtua
Memorial Hospital, one of the three hospitals the Virtua
Defendants operate.
Until 2007, the Virtua Defendants were unable, under New
Jersey law, which regulates what procedures hospitals may
perform based on area need by issuing Certificates of Need, to
provide any of the advanced cardiac interventional procedures
that are at issue in this litigation.
Those procedures fall in
to two broad categories: (1) elective - non-emergent
2
The allegations contained in Plaintiff’s Amended Complaint are accepted
as true for purposes of the motion to dismiss.
4
angioplasty, electrophysiology, and cardiac surgery (the
“Elective Procedures”); and (2) emergency - emergent/primary
angioplasty (the “Emergency Procedures”).
Plaintiff contends
that the relevant geographic market for the Elective Procedures
consists of Burlington County, New Jersey, as well as parts of
Atlantic, Camden, Mercer, and Ocean Counties, also in New
Jersey, and the Philadelphia area.
As for the relevant
geographic market for Emergency Procedures, Plaintiff claims
that the market is slightly smaller and consists of Burlington
County, as well as portions of Camden, Mercer, and Ocean
Counties, but not Atlantic County or the Philadelphia area.
Historically, because the Virtua Defendants were largely
unable to perform the procedures at issue3, Virtua transferred
patients requiring these procedures to other area hospitals.
These hospitals included New Jersey hospitals who had obtained a
Certificate of Need, like Plaintiff and two other hospitals who
also compete with Plaintiff - Cooper Hospital University Medical
Center (“Cooper”) and Our Lady of Lourdes Medical Center
(“Lourdes”).
They also included, for Elective Procedures,
Defendant Presbyterian Medical Center of the University of
Pennsylvania Health System (“Penn Presbyterian”), a
Philadelphia-based hospital, which was entitled to perform the
3
In 2007, the Virtua Defendants, who previously lacked a Certificate of
Need to perform any of the procedures at issue, were authorized to
perform a limited number of procedures on an emergency basis.
5
procedures under Pennsylvania law. According to Plaintiff,
patients requiring Emergency Procedures were generally not
transferred to Penn Presbyterian because the transit time would
have been considered unacceptable due to the need for these
patients to receive more immediate care.
Most patients, for
both Elective and Emergency Procedures, however, were simply
transferred to Plaintiff.
All this changed when, according to Plaintiff, the
Defendants conspired to exclude Plaintiff and, ultimately, drive
it out of business and allow Defendant Virtua Memorial Hospital
to monopolize the market for Emergency Procedures.
C.
The Alleged Conspiracies
According to Plaintiff, Defendants entered into an anticompetitive conspiracy in 2007 premised on two interlocking
written agreements: first, between the Virtua Defendants and
Defendant CGPA, making CPGA the exclusive provider of cardiology
services at Virtua; and second, between CGPA and the Penn
Defendants, making the Penn Defendants the exclusive recommended
referral of CGPA.
These agreements, Plaintiff contends, form
the building blocks of the larger conspiracies to exclude
Plaintiff from receiving transfers from the Virtua Defendants,
drive it out of the market, and allow the Virtua Defendants to
monopolize the Emergency Procedures market. Plaintiff claims
that, as a result of these conspiracies, the Virtua Defendants
6
transferred almost all patients requiring advanced cardiac care
to the Penn Defendants.
Plaintiff claims that, to enforce this
larger agreement, the Virtua Defendants monitored, and reported
to the other Defendants, instances of “leakage” - occasions when
Virtua Defendants' patients were transferred to other hospitals
besides those of the Penn Defendants.4
Plaintiff alleges that, in many instances, in contravention
of patients’ rights under the New Jersey Patients’ Bill of
Rights, patients of the Virtua Defendants had their requests to
transfer to Plaintiff denied, or were coerced not to transfer
through the use of false and malicious statements. According to
Plaintiff, the Virtua Defendants attempted to compensate for the
greater distance to Penn Presbyterian, which previously made
Penn an unattractive choice for patients requiring Emergency
Procedures, by utilizing helicopter transfers. However,
Plaintiff alleges that the helicopter transfers still regularly
exceeded medically recommended transfer time limits.
4
Plaintiff submitted an email discussing a “leakage report” in an
exhibit attached to its opposition to the motions to dismiss. Because
the exhibit, and Plaintiff's other attachments submitted in opposition
to the motion to dismiss, are consistent with the facts plead in the
Amended Complaint, this Court may exercise its discretion to consider
them without converting the motions to dismiss into motions for summary
judgment. Help at Home, Inc. v. Medical Capital, L.L.C., 260 F.3d 748,
752-53 (7th Cir. 2001)(“A plaintiff need not put all of the essential
facts in the complaint; he may add them by affidavit or brief in order
to defeat a motion to dismiss if the facts are consistent with the
allegations of the complaint.”(quotation and citation omitted);
Kulwicki v. Dawson, 969 F.2d 1454, 1462 (3d Cir. 1992)(“A trial judge
has the discretion to consider evidence outside the complaint in ruling
on motions to dismiss.”).
7
Plaintiff claims that these actions resulted in harm to
both Plaintiff and consumers: Plaintiff lost business to the
Penn Defendants and consumers faced higher costs, less choice,
and greater medical risk. In particular, according to Plaintiff,
patients transferred to the Penn Defendants faced higher fees in
the form of: “out of pocket expenses related to insurance copays and deductibles and balance billing” which do not occur at
Deborah.
Medicare, Medicaid, and third party insurers also
faced increased costs from lengthier ambulance transportation to
Penn Presbyterian and helicopter transport.
Patients and
insurers were both harmed because, according to Plaintiff, the
conspiracy enabled the Penn Defendants to charge
supracompetitive prices for the procedures at issue.
Finally,
Patients were deprived of their choice in hospital and, in the
case of Emergency Procedures, subjected to unnecessary medical
risk because of the lengthier transport time.
II.
Standard
To survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.”
Sheridan v. NGK Metals
Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010) (quoting Ashcroft
v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009) (internal
quotations omitted)).
“A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw
8
the reasonable inference that the defendant is liable for the
misconduct alleged.”
Id. (quoting Iqbal, 129 S.Ct. at 1949).
The Court conducts a three-part analysis when reviewing a
claim:
First, the court must take note of the elements a plaintiff
must plead to state a claim. Second, the court should
identify allegations that, because they are no more than
conclusions are not entitled to the assumption of truth.
Finally, where there are well-pleaded factual allegations,
a court should assume their veracity and then determine
whether they plausibly give rise to an
entitlement for
relief.
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir.
2010)(quotations and citations omitted); see also Fowler v. UPMC
Shadyside, 578 F.3d 203, 211 (3d Cir. 2009)(“ . . . [A]
complaint must do more than allege the plaintiff’s entitlement
to relief. A complaint has to ‘show’ such an entitlement with
its facts.”).
III. Analysis
Plaintiff makes two claims: (1) that Defendants have
violated Section 1 of the Sherman Act (conspiracy to restrain
trade); and (2) that Defendants have violated Section 2 of the
Sherman Act (conspiracy to monopolize the Emergency Procedures
market).5
5
Defendants have moved for dismissal of both claims
The Amended Complaint’s pleads a Section 2 claim with respect to both
the Elective and Emergency Procedures markets. However, in Plaintiff’s
motion to dismiss opposition briefing, Plaintiff solely addressed the
Emergency Procedures market and, at oral argument, Plaintiff confirmed
that its Section 2 claim was limited to the Emergency Procedures
market.
9
based on lack of antitrust standing and failure to meet the
elements of Section 1 and 2 claims.
The Court first turns to
the standing issue.
A.
Plaintiff Has Antitrust Standing To Maintain Its
Claims.
Defendants argue that Plaintiff lacks antitrust standing to
pursue its claims.
The Third Circuit applies a 5-factor test to
assess antitrust standing.
The factors are:
(1)
the causal connection between the antitrust violation
and the harm to the plaintiff and the intent by the
defendant to cause that harm, with neither factor
alone conferring standing;
(2)
whether the plaintiff's alleged injury is of the type
for which the antitrust laws were intended to provide
redress;
(3)
the directness of the injury, which addresses the
concerns that liberal application of standing
principles might produce speculative claims;
(4)
the existence of more direct victims of the alleged
antitrust violations; and
(5)
the potential for duplicative recovery or complex
apportionment of damages. Angelico v. Lehigh Valley
Hosp., Inc., 184 F.3d 268, 274 (3d Cir. 1999)(citation
omitted).
The first two factors relate to whether Plaintiff has
suffered an “antitrust injury.”
See Daniel v. Am. Bd. of
Emergency Med., 428 F.3d 408, 443 (2d Cir. 2005).
The final
three factors relate to whether Plaintiff would be an “efficient
enforcer” of the antitrust laws whose interest would be “aligned
with those of consumers generally.”
10
Id.; Reddy v. Puma, No.
1:06CV1283, 2006 WL 2711535, at *5 (E.D.N.Y. Sept. 21, 2006).
Importantly, in assessing these factors, this Court assumes the
alleged conduct would constitute an antitrust violation.
Steamfitters Local Unionn No. 420 Welfare Fund v. Philip Morris,
Inc., 171 F.3d 912, 926 n.7(3d Cir. 1999)( “assum[ing] for the
sake of assessing plaintiffs' antitrust standing that the
conduct in which defendants allegedly engaged would constitute
such a violation.”); Daniel, 428 F.3d at 437 (assuming that
alleged conduct was antitrust violation in assessing antitrust
violation to avoid blurring antitrust standing and merits);
Glaberson v. Comcast Corp., No. 03-6604, 2006 WL 2559479, at *45 (E.D.Pa. Aug. 31, 2006)(citing Antitrust Law by Phillip E.
Areeda and Herbet Hovenkamp for the proposition that “[t]o test
standing in a private suit . . . the court should assume the
existence of a violation and then ask whether the [standing
elements] are shown”). In light of this principle, the
“antitrust injury” analysis does not depend on whether Plaintiff
has plausibly alleged anticompetitive harm to the market.
St.
Clair v. Citizens Financial Group, No. 08-1257, 2008 WL 4911870,
at *5 (D.N.J. Nov. 12, 2008)(holding that harm to the market “is
not required for antitrust standing, but instead is relevant to
show restraint of trade when proving the merits of an antitrust
claim.”).
That factor goes to the merits and whether a
violation occurred, not a plaintiff’s standing.
11
Id.
Applying
these factors, Plaintiff has suffered an antitrust injury and
would be an efficient enforcer of the antitrust laws.
Plaintiff
therefore has antitrust standing.
First, Plaintiff has plausibly alleged that Defendants’
conspired to harm Plaintiff and that that conspiracy caused
Plaintiff harm in the form of lost patient revenues.
Second,
Plaintiff’s loss of revenues from its exclusion is among the
types of harm the antitrust laws were designed to prevent.
Angelico, 184 F.3d at 274 (“Turning to the second element,
whether Angelico's alleged injury is of the type the antitrust
laws were meant to redress, we conclude that the injury he
suffered, when shut out of competition for anticompetitive
reasons, is indeed among those the antitrust laws were designed
to prevent.”).
Third, Plaintiff’s injuries are “clearly [a]
direct (and substantial) . . . result of the alleged conspiracy”
as patients that likely would have transferred to Plaintiff were
instead sent to the Penn Defendants.
Id. at 275.
Fourth, there
are no more direct victims of the alleged conspiracy.
Other
excluded hospitals are in the same position as Plaintiff.
Insurers and individual consumers harmed by the alleged
antitrust violations are no more direct and the latter are less
likely to sue for this type of violation, absent a class action,
given the small amount of damages each would have sustained on
an individual basis.
Fifth, and finally, there is no potential
12
for duplicative recovery or complex apportionment of damages
since the other hospitals and consumers would have wholly
separate and independent damages.
Id.
More generally,
Plaintiff’s interest is aligned with consumers because both are
interested in protecting consumer choice and access to a lower
cost and, in the case of Emergency Procedures, medically
superior hospital.
Therefore, Plaintiff has antitrust standing to maintain its
claims and this Court must turn to whether Plaintiff has
plausibly alleged the elements of its antitrust claims.
B.
Plaintiff Has Plausibly Alleged A Section 1 Claim.
“To establish a violation of Section 1, a plaintiff must
prove: (1) concerted action by the defendants; (2) that produced
anticompetitive effects within the relevant product and
geographic markets; (3) that the concerted actions were illegal;
and (4) that it was injured as a proximate result of the
concerted action.”
Black Box Corp. v. Avaya, Inc., No. 07-6161,
2008 WL 4117844, at *7 (D.N.J. Aug. 29, 2008)(quotation and
citation omitted).
Defendants have vigorously challenged
Plaintiff’s allegations with respect to each of these elements.
However, because Plaintiff has satisfied each of these elements,
Defendants’ motions will be denied.
1.
Plaintiff Has Plausibly Alleged Concerted Action By
The Defendants.
13
“Concerted action is established where two or more distinct
entities have agreed to take action against the plaintiff.”
Gordon v. Lewistown Hosp., 423 F.3d 184, 204 (3d Cir. 2005).
Entities agree where they share “a unity of purpose, a common
design and understanding, a meeting of the minds, or a conscious
commitment to a common scheme.”
West Penn Allegheny Health
System, Inc. v. UPMC, 627 F.3d 85, 99 (3d Cir. 2010).
Agreement
may be plead through “direct or circumstantial evidence, or a
combination of the two.”
Id.
Plaintiff has adequately plead, through both direct and
circumstantial evidence, that Defendants are engaging in
concerted action to exclude Plaintiff from receiving patient
transfer from the Virtua Defendants.
Directly, Plaintiff has
demonstrated that there are two interlocking written agreements:
first, between the Virtua Defendants and Defendant CGPA, making
CPGA the exclusive provider of cardiology services at Virtua;
and second, between CGPA and the Penn Defendants, making the
Penn Defendants the exclusive recommended referral of CGPA.
According to Plaintiff, these interlocking agreements, in
practice, make the Penn Defendants the exclusive advanced
cardiac procedural referral of the Virtua Defendants.
This
direct evidence of agreement is supported by four strong pieces
of circumstantially pled evidence: (1) the powerful shift in the
Virtua Defendants' transfer pattern (Am. Compl. ¶¶ 75, 77); (2)
14
that the shift in patients needing Emergency Procedures was made
despite increased medical risks and costs (Am. Compl. ¶¶ 181185, 208); (3) coercive conduct by the Virtua Defendants and
CGPA to prevent patients from exercising their choice of
hospital, in the face of a statutory obligation to allow that
very choice (Am. Compl. ¶¶ 78-174)6; and (4) the Defendants’
dissemination and discussion of leakage reports. (See
Certification of Thomas Kane in Support of Plaintiff’s
Opposition to Motions to Dismiss, Ex. D).
The Virtua Defendants and CGPA argue that Plaintiff has
failed to establish concerted action because Plaintiff failed to
show that the events at issue are more plausibly the result of
concerted action than of parallel conduct because they lacked an
economic motive to engage in the alleged concerted action.
The
Court rejects that argument for three reasons.
First, Defendants overstate the Plaintiff's burden on a
motion to dismiss.
To survive a motion to dismiss, a
plaintiff's “allegations need not rule out all potential
alternative explanations” and instead must only adduce enough
factual material taken as true to plausibly suggest an agreement
6
The Penn Defendants contend that the alleged coercive conduct amounts
to no more than “garden-variety business torts” that do not rise to the
level of antitrust claims. That some of the conduct allegedly employed
by Defendants in furtherance of the alleged antitrust conspiracy was
also tortious is immaterial to the viability of Plaintiff’s antitrust
claims. Tortious and anticompetitive conduct are not mutually
exclusive.
15
was made.
See In re Magneisum Oxide Antitrust Litig., No. 10-
54983, 2011 WL 5008090, at *15 (D.N.J. Oct. 20, 2011).
As
described above, Plaintiff has plainly met this burden.
Second, Plaintiff has, in fact, plausibly and specifically
alleged economic incentive from these Defendants.
The Virtua
Defendants and CGPA both stood to gain from the potential
elimination of a rival.
In an e-mail, CGPA's President
contemplated the possibility of Plaintiff being driven out of
business and hypothesized that that process could be accelerated
by no longer transferring certain cardiac patients there.
Plaintiff's exit from the market would result in new patients
and an enhanced possibility of the Virtua Defendants being
awarded a Certificate of Need to perform additional cardiac
interventional procedures – a possibility the Virtua Defendants
are alleged to have considered and studied.
Third, these Defendants have failed to offer a plausible
explanation that the events at issue were the result of
independent conduct, rather than the result of an agreement.
Finally, the Penn Defendants argue that a Section 1 claim
requires, and they lacked, a unity of purpose with the other
Defendants, since the alleged goal of their co-defendants was to
shutdown Deborah, and their economic motivation was not
predicated on Deborah's shutdown, but on a the “influx of new
patients” as a result of the transfers – a legitimate business
16
interest.
But the complaint need not have alleged “that the
parties to an agreement had identical motives” or that a party's
motive was anti-competitive - only that they “had a plausible
reason to participate in the conspiracy.”
Trans World Techs.,
Inc. v. Raytheon Co., No. 06-5012, 2007 WL 3243941, at *4
(D.N.J. Nov. 1, 2007);
Paladin Assocs., Inc. v. Montana Power
Co., 328 F.3d 1145, 1153-54 (9th Cir. 2003)(holding that the
plaintiff “need not prove intent to control prices or destroy
competition to demonstrate the element of an agreement . . .
among two or more entities.”)(quotation and citation omitted).7
Therefore, even if the Penn Defendants had no desire to
eliminate Plaintiff and were merely motivated by economic selfinterest, Plaintiff has sufficiently alleged that the Penn
Defendants participated in the alleged conspiracy and their
reason for participation: the large influx of new patients.
Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 212-14
(3d Cir. 1992)(explaining that a conspirator in a scheme to
7
See also Petruzzi's IGA Supermarket, Inc. v. Darling-Delaware Co.,
Inc., 998 F.2d 1224, 1243 (3d Cir. 1993)(“However, we have made it
clear that the defendants need not share the same motive. Rather, all
that is required is they each have a motive to conspire.”); Acme
Markets, Inc. v. Wharton Hardware and Supply Corp., 890 F. Supp. 1230,
1239 (D.N.J. 1995)(holding that alleged co-conspirators may have
“independent motivations” so long as they “acted in concert to restrain
competition through their common objective of enforcing the restrictive
covenant.”); In re Processed Egg Prods. Antitrust Litig., No. 08-md02002, 2011 WL 4465355, at *7 (E.D.Pa. Sept. 26, 2011(holding that even
reluctant co-conspirators may be held liable and that “the issue is
whether the pleading delineates to some sufficiently specific degree
that a defendant purposefully joined and participated in the
conspiracy.”).
17
eliminate plaintiff did not need to share a commitment to the
elimination of the rival and could instead simply be motivated
by its own financial incentives).
Accordingly, Plaintiff has plausibly alleged the first
element of a Section 1 claim.
2.
Plaintiff Has Plausibly Alleged Anticompetitive
Effects Within The Relevant Product And Geographic
Markets.
A plaintiff may demonstrate that concerted action produced
adverse, anticompetitive effects within the relevant product and
geographic markets in two ways: (1) through direct evidence of
actual anticompetitive effects; or (2) through proof of the
defendant’s market power, which acts as a proxy for
anticompetitive effect.
Deutscher Tennis Bund v. ATP Tour,
Inc., 610 F.3d 820, 830 (3d Cir. 2010).8
8
Defendants argue that, in order to demonstrate competitive harm,
Plaintiff was required, and failed, to demonstrate that the alleged
exclusionary conduct resulted in a significant market foreclosure. But
market foreclosure analysis, like market power analysis, is merely a
surrogate for a demonstration of actual anticompetitive effect.
Jonathan M. Jacobson, Exclusive Dealing, “Foreclosure,” And Consumer
Harm, 70 ANTITRUST L.J. 311, 362 (2002). As Jonathan Jacobson, former
member of the Congressional Antitrust Modernization Commission,
persuasively writes:
But just as foreclosure is no more a magic wand for plaintiffs,
neither does the absence of “substantial foreclosure” provide a
defense for firms whose exclusive dealing practices in fact
threaten significant harm. The foreclosure concept was developed
as a useful proxy for analyzing harm to competition. If
“substantial foreclosure” was shown, the courts presumed that the
competitive process had been damaged and the restraint was
condemned accordingly. As the sophistication of antitrust
analysis has increased, however, the foreclosure proxy has been
found inadequate. A large amount of percentage foreclosure,
without more, proves nothing, but the absence of percentage
foreclosure is equally unilluminating. In all cases, the relevant
18
While, in both cases, a plaintiff must make some showing of
a relevant market, where a plaintiff demonstrates direct
evidence of actual anticompetitive effects, the plaintiff’s
burden is diminished and it must only demonstrate “the rough
contours of a relevant market.”
In re Compensation of
Managerial Professional and Technical Employees Antitrust
Litig., No. 02-CV-2924, 2008 WL 3887619, at *7 (D.N.J. Aug. 20,
2008)(quotation omitted).
Actual anticompetitive effects can be
shown through reduced output, increased prices, decreased
quality, and loss of consumer choice.9
Tunis Bros. Co., Inc. v.
Fort Motor Co., 952 F.2d 715, 728 (3d Cir. 1991)(“An antitrust
plaintiff must prove that challenged conduct affected the
prices, quantity or quality of goods or services.)(quotation and
citation omitted); Acme Markets, 890 F. Supp. at 1240 (same);
United States v. Brown Univ. in Providence in State of Rhode
Island, 5. F.3d 658, 675 (3d Cir. 1993)(noting that
“[e]nhancement of consumer choice is a traditional objective of
question is instead whether there has been an adverse effect on
price, output, quality, choice, or innovation in the market as a
whole. Id.
9
As described below, Plaintiff has adequately alleged actual
anticompetitive effect, obviating any need for a demonstration of
market foreclosure.
Defendants argue that Plaintiff cannot demonstrate anticompetitive
effects because Plaintiff cannot show reduced output. However, reduced
output is just one method of demonstrating anticompetitive harm. New
York Medscan LLC v. New York University School of Medicine, 430 F.
Supp. 2d 140, 146 (S.D.N.Y. 2006)(“A plaintiff asserts harm to
competition by alleging adverse effects on the price, quality, or
output of the relevant good or service.”)(emphasis added); Angelico,
184 F.3d at 276 (3d Cir. 1999)(same).
19
the antitrust laws and has also been acknowledged as a
procompetitive benefit.”); Rome Ambulatory Surgical Center LLC
v. Rome Memorial Hosp., Inc., 349 F. Supp. 2d 389, 410 (N.D.N.Y.
2004)(recognizing loss of consumer choice as a significant
injury to competition).
Because the Court concludes that Plaintiff has plausibly
alleged direct anticompetitive effects, there is no need to, and
the Court will not, separately assess whether Plaintiff
adequately alleged market power.
a.
Plaintiff Plausibly Alleged Competitive Harm
While Plaintiff’s allegations of supracompetitive pricing
for the procedures at issue are too conclusory to be credited10,
Plaintiff has sufficiently alleged competitive harm in the form
of: (1) higher prices through co-pays and related expenses and
increased transportation costs, particularly helicopter
transport costs; (2) reduced quality of care in Emergency
Procedures, where Plaintiff has plausibly alleged that the
increased transport time may cause adverse medical outcomes11;
10
See Burns v. Lavender Hill Herb Farm, Inc., No. Civ.A 01-7019, 2005 WL
1006321, at *3 (E.D.Pa. Apr. 28, 2005)(rejecting conclusory allegations
of higher prices); Process Controls Int’l, Inc. v. Emerson Process
Mgmt., No: 4:10CV645, 2011 WL 403121, at *4 (E.D.Mo. Feb. 1,
2011)(same).
11
At oral argument, the Virtua Defendants contended that there are two
time-based components to ensuring proper medical care for these
procedures: the transport time to the hospital and the time, once at
the hospital, before a patient receives the proper treatment. They
argued that the Amended Complaint alleges only that the transport time
is shorter for transfer to Deborah and, without allegations as to wait
20
and (3) loss of consumer choice as Plaintiff is removed as an
option for Virtua patients, even in cases where they request to
be transferred there but are denied.
Farina v. United Parcel
Service, MDL-1339, 2002 WL 1766554, at *10 (S.D.N.Y. July 31,
2002)(holding that denial of ability to purchase from lowerpriced competitor was anticompetitive harm); Bearing
Distributors, Inc. v. Rockwell Automation, Inc., No. 06-CV-831,
2006 WL 2709779, at *7 (N.D.Oh. Sept. 20, 2006)(holding that
removal of lower-priced, superior service product from market
was antitrust harm).
These are real competitive harms to a
significant population.
They do not reflect, as Defendants alternately contend: (1)
a de minimis, non-cognizable harm to competition; (2) a harmless
substitution of one provider of the procedures at issue –
Plaintiff – for another – the Penn Defendants; or (3) “increased
competition” from the Penn Defendants.
follow.
Those conclusions do not
Prior to the alleged conspiracy, the Penn Defendants
competed freely with Plaintiff and other hospitals in the area.
Once the conspiracy began, however, Plaintiff alleges that it
time at Deborah, does not plausibly establish that transfer to Penn
subject patients to unnecessary medical risks. This is an overly
technical reading of the Amended Complaint. Plaintiff has,
particularly in light of the historic practice of transferring patients
to it, plausibly alleged that there are no medical issues that prevent
transport to it from Virtua. It is a fair inference from these
allegations, and the allegations that Defendants’ practice subjects
patients to unnecessary medical risk, that there is no issue with
hospital waiting time at Deborah that would negate its transportation
time advantage.
21
was largely excluded from competition.
Thus, the diversion of
patients at issue was not the product of increased competition
from the Penn Defendants, who were already competitors, but the
exclusion of Plaintiff.
That exclusion was harmful, not
harmless, to consumers for the reasons detailed above and
affected a significant harm on the market.
Plaintiff has
therefore, contrary to Defendants’ arguments otherwise,
satisfied its burden to show anticompetitive harm that was more
than a de minimis restraint of trade.
Tunis, 952 F.2d at 728.
Defendants also argue that the higher prices patients
transferred to the Penn Defendants pay, through co-pays and
other payments that they do not need to pay at Plaintiff, cannot
constitute a competitive harm because: (1) they are the product
of a regulatory anomaly rather than Plaintiff’s competitive
merits; (2) the regulatory exemption is itself anti-competitive;
and (3) holding otherwise would mean that any transfer, other
than to Plaintiff, could constitute a competitive harm.
On the
first issue, Defendants have cited no authority, and this Court
can find none, suggesting that it would be improper to find
anticompetitive harm because of Plaintiff’s admitted regulatory
advantage.12
12
Defendants’ argument wrongly places the focus on
The Court ordered supplemental briefing on this issue. Defendants’
authority submitted in response is inapposite. In Schuylkill Energy
Resources v. Pa. Power & Light Co., 113 F.3d 405 (3d Cir. 1997), the
Court rejected an energy supplier’s contention that a utility company’s
failure to purchase energy from it resulted in a higher rates to
22
whether Plaintiff is competing on the merits, when antitrust law
is concerned, as evidenced by the required elements of a Section
1 claim, with Defendants’ conduct and its effect on competition.
Given these facts and antitrust law’s strong emphasis on
promoting lower prices for consumers13, this Court finds that the
higher prices patients pay can constitute an anticompetitive
harm.
On the second issue, similar logic applies: Defendants’
conduct and its effect on competition is at issue in this
litigation, not the merits of the exemption.
On the third
issue, competitive harm would not arise, based on the Court’s
interpretation, in every transfer.
It is only implicated where,
as here, it is the product of an exclusionary transfer policy.
In any event, even if these higher prices were not credited as
antitrust injuries, Plaintiff has plausibly alleged meaningful
consumers on two grounds. Id. at 414-15. First, the court found that
the utility’s rates were determined by regulators, not the marketplace,
and therefore any complaints were properly directed to regulatory
authorities. Id. Defendants have not identified any corresponding
authority here that would make antitrust review inappropriate Second,
the plaintiff there was found to be only a supplier to the utility, not
its competitor, so could not participate in the market for consumers.
Id. at 415. Plaintiff here, in contrast, is in direct competition with
Defendants. In In re Canadian Imp. Antitrust Litig., 470 F.3d 785 (8th
Cir. 2006), the court found that prescription drug purchasers failed to
allege anti-competitive conduct where they alleged that drug companies
acted to prevent the importation of cheaper brand name drugs from
Canada. Id. at 791 There, unlike here, the inability to access a
cheaper alternative was caused, at the start, by government
regulations, not the Defendants‘ exclusionary conduct. Id. at 791-92.
The plaintiffs there could not allege, as Plaintiff can here, “that
prior to the alleged anti-competitive conduct of the defendants”
consumers had access to the cheaper alternative. Id. at 792.
13
See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S.
209, 223 (1993)(holding, in the predatory pricing context, that “[l]ow
prices benefit consumer regardless of how those prices are
set”)(quotation and citation omitted).
23
competitive harms to consumer choice and, with respect to
Emergency Procedures, loss in quality.
Finally, Defendants argue that the alleged agreement is not
anticompetitive, and therefore there is no anticompetitive harm,
because there is no duty to cooperate.
But the anticompetitive
harm alleged is the exclusion of Plaintiff as a choice for
patients, not that Defendants have an affirmative obligation to
direct patients to Plaintiff, or give Plaintiff access to
Defendants’ patients.
b.
Plaintiff Has Met Its Burden To Allege Relevant
Markets.
Plaintiff has also sufficiently alleged, at a minimum, the
rough contours of the marketplace for both the Elective and
Emergency Procedures.
For the former, Plaintiff has adequately
alleged a marketplace in Southern New Jersey and Philadelphia.
For the latter, Plaintiff has adequately alleged a more
restricted geographic market, which excludes Philadelphia, in
light of the need for patients needing emergency treatment to
receive more rapid care and the alleged greater transport time
in transit to Philadelphia.
That the Virtua Defendants are, in
fact, transferring patients to the Penn Defendants in
Philadelphia for Emergency Procedures does not disturb this
analysis.
Plaintiff has plausibly alleged that Philadelphia
hospitals are not a suitable medical alternative and that
24
patients are only being transferred there as a result of the
conspiracy. It is therefore plausible that Philadelphia is not
part of the relevant market.
In any event, regardless of
whether Philadelphia is part of the market for Emergency
Procedures, Plaintiff’s allegations certainly allege the “rough”
market contours required in a direct evidence case.
3.
Plaintiff Has Plausibly Alleged That The Concerted
Action Was Illegal.
Concerted action that unreasonably restrains trade is
illegal.
American Needle, Inc. v. Nat’l Football League, 130
S.Ct. 2201, 2212 (2010).
“At the pleading stage, a plaintiff
may satisfy the unreasonable-restraint element by alleging that
the conspiracy produced anticompetitive effects in the
relevant markets.”
West Penn, 627 F.3d at 100.
As discussed
above, Plaintiff has plausibly alleged competitive harm.
Therefore, Plaintiff has plausibly alleged that Defendants’
concerted actions were illegal.
4.
Plaintiff Has Plausibly Alleged That It Was Injured
As A Proximate Result Of The Concerted Action.
Plaintiff has alleged that it has lost revenues because
patients who would have sought treatment at its hospital are
instead diverted to the Penn Defendants as the result of
Defendants’ conspiracy.
Therefore, Plaintiff has plausibly
alleged that it was injured, in the form of lost patients and
revenues, as a proximate result of Defendant’s concerted
25
actions.
C.
Plaintiff Has Failed To Plausibly Allege A Section 2
Claim.
The elements of a conspiracy to monopolize include at least
three elements: ”(1) a combination or conspiracy; (2) an overt
act in furtherance of the conspiracy; and (3) specific intent to
monopolize.”
Black Box, 2008 WL 4117844, at *8.
Courts are
divided on whether a fourth element – a dangerous probability of
successful monopolization – is required to establish the claim.
Id.
This Court agrees with those courts that have concluded
that a dangerous probability of success is not required.14
As
the Second Circuit has held:
Congress outlawed the conspiracy itself. Once a plaintiff
establishes a conspiracy with a specific intent to
monopolize, proof of success or impending success is
irrelevant.
Int’l Distribution Centers, Inc. v. Walsh Trucking Co., Inc.,
812 F.2d 786, 796 n. 8 (2d Cir. 1987)(citations omitted).
However, while a dangerous probability of success is not a
required element, the likelihood of success may be highly
significant to whether the defendants could plausibly have had
the specific intent to monopolize the market at issue.
14
Emigra
At oral argument, Plaintiff articulated its belief that it was, in
fact, obligated to demonstrate a dangerous probability of successful
monopolization. While the Court does not adopt this standard because
it believes that standard is incorrect, the differing standards are
immaterial here. The same facts, discussed below, that demonstrate the
implausibility of Defendants having the intent to successfully
monopolize, would also render implausible Plaintiff’s claim that
Defendants had a dangerous probability of success.
26
Group v. Fragomen, Del Rey, Bernsen & Loewy, 612 F. Supp. 2d
330, 363 (S.D.N.Y. 2009)(“And while rigorous proof of a relevant
market and the likelihood of monopolization is not required in
this Circuit on a conspiracy to monopolize claim, the relevant
market and the likelihood of its monopolization may have a
significant bearing on whether the requisite specific intent to
monopolize is present.”); Virginia Vermiculite Ltd. V. W.R.
Grace & Co., 144 F. Supp. 2d 558, 592 (W.D.Va. 2001)(“But where
actions are ambiguous the existence and extent of market power
may make the inference of specific intent from conduct more or
less plausible.”)(quotation and citation omitted).
That
specific intent to monopolize must be more than knowing and must
be shared by all the conspirators. ID Security Systems Canada,
Inc. v. Checkpoint Systems, Inc., 249 F. Supp. 2d 622, 660
(E.D.Pa. 2003)(holding that the alleged co-conspirators must
share the intent that would-be-monopolist obtain a monopoly);
Int’l Distribution, 812 F.2d at 796 (same); In re Microsoft
Corp. Antitrust Litig., 127 F. Supp. 2d 728, 731 (D.Md.
2001)(“[Specific intent] signifies something more
than willing, voluntary, and knowing participation
in the illegal course of conduct . . . .
It means participating
in that course of conduct for the specific, shared purpose
of [monopolization].”).
Plaintiff alleges that Defendants conspired with the intent
27
that the Virtua Defendants monopolize the market for Emergency
Procedures.
At the time Defendants allegedly entered into the
conspiracy (Plaintiff alleges it began sometime in 2007), the
Virtua Defendants had either no ability, or very limited
ability, to perform any of the Emergency Procedures at issue.
And any future ability to perform these procedures depended on
Virtua obtaining a Certificate of Need from the state. Virtua
also faced robust competition from at least Plaintiff, Cooper,
and Lourdes.
Against this backdrop, Defendants argue that successful
monopolization of the Emergency Procedures market is, and was,
implausible and, with respect to the Penn Defendants and CGPA,
there is no reason why they these entities would support a
monopoly by Virtua.
Therefore, Defendants argue, it is
implausible that they would have had the intent that the Virtua
Defendants monopolize the relevant Emergency Procedures market.
Plaintiff counters that there are plausible economic reasons why
Defendants could have shared such intent.
misapprehends its burden.
Plaintiff
It is not sufficient that there may
be some plausible reasons that Defendants could have shared the
requisite intent.
Plaintiff must instead advance factual
allegations to render it plausible that Defendants did share the
requisite intent.
Plaintiff has failed to meet this burden. On the
28
allegations before the Court in Plaintiff’s Amended Complaint,
successful monopolization of the Emergency Procedures market was
implausible given the competitive landscape and that the Virtua
Defendants were not even approved for such Procedures, let alone
participants in the market.
In the face of these allegations,
which are highly suggestive of a lack of specific intent,
Plaintiff has failed to offer more than conclusory allegations
of specific intent and argument why the Defendants rationally
could have possessed such intent.
Plaintiff has not offered
non-conclusory allegations suggesting that Defendants did have
such intent.
Plaintiff has thus failed to plausibly allege that
Defendants shared a specific intent for the Virtua Defendants to
monopolize the Emergency Procedures market.
Therefore,
Plaintiff has failed to plausibly allege a Section 2 claim.
IV.
Conclusion
For all these reasons, Defendants’ motions to dismiss
Plaintiff’s Section 1 claim is DENIED and Defendant’s motion to
dismiss Plaintiff’s Section 2 claim is GRANTED.
Plaintiff’s
Section 2 Claim is dismissed without prejudice.
Dated: December 30, 2011
s/Renée Marie Bumb
RENÉE MARIE BUMB
United States District Judge
29
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