ELLISON v. AMERICAN BOARD OF ORTHOPAEDIC SURGREY, INC.

Filing 55

OPINION. Signed by Judge Kevin McNulty on 3/12/2020. (sm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

BRUCE E. ELLISON, M.D.,

Civ. No. 16-844 1 (KM) (JBC)

Plaintiff,
OPINION
V.

AMERICAN BOARD OF
ORTHOPAEDIC SURGERY, INC.,
Defendant.

HEWN MCNULTY, U.S.D.J.:

Pending before the Court is the motion of defendant American Board of
Orthopaedic Surgery, Inc. (“ABOS”), to dismiss the Second Amended Complaint
filed by plaintiff Bruce E. Eflison, M.D. (“Dr. Ellison”) (DE 48). Two predecessor
complaints have already been dismissed on motion of ABOS.
Dr. Ellison’s Second Amended Complaintt asserts one count based on
alleged violations of federal antitrust law in relation to the certifications ABOS
provides to certain qualifying physicians (“Board Certification”). Dr. Ellison
asserts that ABOS improperly restrains trade by colluding with hospitals in
requiring orthopedic surgeons to obtain Board Certification as a condition of
practicing at those hospitals. ABOS allegedly prevents Dr. Ellison from
obtaining Board Certification unless he first has hospital medical staff
privileges, thereby reducing competition at hospitals by excluding surgeons
who, like Dr. Ellison, practice exclusively at ambulatory surgery centers or
other places that do not offer those medical staff privileges. Dr. Ellison

I

The following abbreviations are used herein:
Docket Entry in this case
=
“DE
—“

“2AC”

=

Second Amended Complaint (DE 48)
1

primarily seeks declaratory and injunctive relief, but also damages, costs, and
fees. ASOS has moved to dismiss the Second Amended Complaint, asserting
grounds similar to those in its prior motion to dismiss the First Amended
Complaint (see DE 29).
For the reasons stated in this opinion, I will dismiss the Second
Amended Complaint pursuant to Rule 12(b)(6) for failure to state a claim upon
which relief may be granted.
I.

Summary
a. Factual background

I recap the factual background from my prior opinion, supplementing as
necessary with facts newly asserted in the Second Amended Complaint.
Dr. Ellison holds a medical license in California, where he currently
treats patients as an orthopedic surgeon. (2AC ¶11 11, 32) For “personal and
professional reasons, Dr. Ellison would like to obtain medical staff privileges”
at a hospital in northern New Jersey. (Id. ¶ 11) The hospitals to which he says
he would apply for privileges—but has not actually applied—require that he
possess Board Certification provided by ABOS. (Id. ¶ 29)
Defendant ABOS—the only defendant in this action—oversees the Board
Certification program for physicians specializing in orthopedic surgery. (Id. ¶ 3)
Defendant ABOS is incorporated in Delaware. (Id.

¶

12) It has directors and

officers who reside in many different states, although the 2AC does not specify
where these members reside. (Id. ¶ 12) ABOS arranges for the administration of
the written portion of its Board Certification exam through a third-party
subcontractor at testing locations throughout the United States, including in
New Jersey, collects “up to a million dollars or more annually” from physicians
located in New Jersey, and communicates with hospitals and patients in New
Jersey about which physicians hold Board Certifications. (Id. ¶ 36—39)
Defendant ABOS does not maintain any offices, records, property, or staff in
New Jersey. (DE 49-3

¶

4)

2

ABOS is a member of the American Board of Medical Specialties
(“ABMS”). (Id. ¶ 2) ABMS is not a defendant here, nevertheless, the Second
Amended Complaint provides additional color with respect to this entity.
According to one article cited in the Second Amended Complaint, ABMS
continues to be the leading not-for-profit organization overseeing
physician certification in the United States. ABMS establishes the
standards its 24 Member Boards use to develop and implement
educational and professional evaluation, assessment, and
certification of physician specialists. More than 860,000 physicians
are certified in one or more of the approved 37 specialties and 86
subspecialties offered by the ABMS Member Boards.
(Id.

¶ 6, n.2 (citing https: / / wwxv.prnewswire. corn / news-releases / the

american-hospital-association-joins-abms-multi-speciaky-portfolio
program-300435665.h Lrnl))
The Second Amended Complaint includes additional details about
another entity, the American Hospital Association (“AHA”), which is also not a
defendant. Nearly 90% of all hospitals are members of AHA (Id. ¶ 4) AHA is a
non-profit that provides “education for health care leaders and is a source of
information on health care issues and trends.” (Id.
have interlocking memberships. (Id.

¶ 6, n.2) AHA and ABMS

¶ 5).

The 2AC asserts that AHA and ABMS (again, not defendants here)
entered into an agreement in April 2017 to “provide money-making programs in
connection with board certification by [defendant] ABOS and other specialty
groups.” (Id. ¶ 6) The Second Amended Complaint adds that AHA announced in
2017 that it had joined the ABMS Multi-Specialty Portfolio Program. This
program allows
Hospitals and health systems participating in the AHA’s Health
Research & Educational Trust (HRET) Hospital Improvement
Innovation Network (HIIN) [to] facilitate Maintenance of
Certification (MOC) Improvement in Medical Practice (Part IV)
credit for physicians who are Board Certified by one of the 21 of 24
ABMS Member Boards participating in the Portfolio Program.
The HRET HuN is the first HHN in the country to offer this
service to its more than 1,600 participating hospitals. Through
3

ABMS MDC Part IV credit, physicians can meet the requirements
for maintaining their certification while meaningfully participating
in quality improvement programs in their organizations. Partnering
on ABMS MOC Part IV also will reduce duplication of quality
improvement efforts; HRET HuN hospitals currently are engaged in
improvement efforts across 11 hospital-acquired condition topics.
Physicians’ roles in these projects may vary from team member to
physician champion. Projects will be data-driven, focused on
patient safety, and designed to implement evidence-based best
practices. AHA hopes this program will encourage the development
of long-lasting improvements, while strengthening physicians’
connection to the improvement efforts of their broader
organizations.
“We are very pleased to be the first HIIN to provide this
valuable service,” said Jay Bhatt, DO, HRET President and AHA
Chief Medical Officer. “Aligning physicians’ pursuit of their Board
Certification with hospitals’ quality improvement efforts will
accelerate our collective efforts to improve patient safety by
promoting team-based care delivery.”
(See Id. n.2 (citing https: I /www.prnewswire.com/news-releases/ the-american
hospital-associatjon-joins-abms-multi-specialty-portfolio-program
300435665.html))2 Dr. Ellison does not contend that this recent agreement to
provide continuing certification impacts him. Rather, Dr. Ellison alleges that
ABMS and AHA have previously entered into “similar agreements” to promote
ABOS and other specialty groups. As part of this “arrangement,” “ABCS
excludes Plaintiff from obtaining board certification by ABOS unless he first
has hospital medical staff privileges, and AHA member hospitals exclude
physicians unless they have board certification.” (2AC ¶1 6, 7) To achieve this
agreement, “ABMS and its members put pressure on hospitals through AHA, to

Dr. Ellison cites to a number of other articles in the 2AC. Many of these articles
are from the early 2000s, and they do not specifically refer to ABCS. (See 2AC fl 15
(citing a CMS Director Survey and Certification Group article from 2004 concerning
the requirements for hospitai medical staff privileging); ¶ 16 (citing two studies from
2007 and 2009 regarding hospital privileging as it relates to board certification); ¶ 28
(citing a 2005 article titled “Board Certification as Prerequisite for Hospital Staff
Privileges”))
2

4

require ABMS specialty board certification, which includes ABOS.” (Id.
see also id

¶

¶

18;

19, 20)

According to the Second Amended Complaint, the largest hospital
systems in northern New Jersey, like RWJBarnabas, have joined into a
conspiracy to make money since they are members of the AHA and require the
hospitals under their purview to provide medical staff privileges only to doctors
who have obtained Board Certification. (Id.

¶11

4, 23—26) St. Peter’s University

Hospital, located in New Brunswick, New Jersey, also requires Board
Certification as a condition of obtaining medical staff privileges. (Id. ¶ 27)
Similarly, Rutgers University Hospital requires Board Certification in order to
obtain medical staff privileges and will not process the applications for
employment of prospective doctors unless the applicant has acquired Board
Certification within seven years after completing residency training. (Id. ¶ 26)
The Board Certification process is controlled by ASMS and, for Dr. Ellison,
ABOS such that other equally rigorous board certification programs offered by
other organizations are not recognized. (Id.

¶11

28, 48) Thus, says Ellison,

ABMS and its members ABOS, AHA, and member hospitals all have an
arrangement to exclude Dr. Ellison from obtaining board certification. (Id.

¶

7)

Dr. Ellison alleges that the requirement for Board Certification precludes
him from obtaining medical staff privileges “at the major hospitals in the
regions of northern New Jersey.” (Id. ¶ 29; see also ¶ 9) Dr. Ellison successfully
passed the written portion of ABOS’s exam (“Part I”) in Chicago, Illinois. (Id ¶
53; DE 49-3 ¶ 6) This qualified him to take the oral portion of the exam (“Part
II”), which is only administered in Chicago. (2AC

¶I

53—55; DE 49-3

¶

7)

However, ABOS subsequently refused to allow him to take Part II of the exam
because he did not have medical staff privileges. (Id. ¶11 44, 56)
This, says Dr. Ellison, confronted him with the proverbial catch-22:
without medical staff privileges he cannot take Part II of the certification exam,
but without certification he cannot acquire medical staff privileges. This
practice, Dr. Ellison alleges, reduces competition to hospitals by shutting out
0

surgeons, like himself, who practice exclusively at ambulatory surgery centers
(which do not provide medical staff privileges), thereby reducing the number of
orthopedic surgeons available to patients. (Id.

¶

43) There is an exception to the

staff-privileges prerequisite for physicians who have completed their residency
within the last seven years, but that exception is unavailable to Dr. Ellison at
this later stage of his career. (Id.

¶

7)

Dr. Ellison has not applied for medical staff privileges at these New
Jersey hospitals because, he says, without board certification, rejection is
likely. He is therefore unwilling to apply, because a rejection of an application
for medical staff privileges allegedly “results in an automatic adverse entry in
the National Practitioner Data Bank, which severely damages the reputation of
a physician.” (Id.

¶

30)

Dr. Ellison asserts that ABOS has unlawfully acted in concert with
hospitals to require Board Certification as a precondition for employment, thus
interfering with the market for orthopedic surgery services at hospitals in
northern New Jersey. (Id. ¶ 41, 57) He also claims that ABOS has engaged in
an anticompetitive tying arrangement in violation of Section 1 of the Sherman
Act. (Id. ¶ 60) In this respect, ABOS and the hospitals are allegedly acting in
concert for ABOS’s pecuniary benefit. (Id.

¶

58) This pecuniary benefit for these

organizations is the only justification suggested by Dr. Ellison for the Board
Certification precondition for obtaining medical staff privileges. He suggests
that this must be the case because, from 2007—2017, the use of board
certification in hospital privileging significantly increased, but that increase
was not accompanied by improved physician competence or better outcomes
for patients. (Id. ¶j 15—22) Instead, the only reason for the increase in Board
Certification is ABOS’s and ABMS’s continued pressure on hospitals to require
Board Certification as a condition of medical staff privileges. (Id.)
This restraint, Dr. Ellison asserts, reduces “the availability of physicians
in the relevant market, which reduces patient choice and increases health care
costs.” (Id. 61) He seeks damages, a declaratory judgment that ABOS has

¶

6

violated the Sherman Act, injunctive relief allowing Dr. Ellison to take Part II of
the exam, and an order requiring ABOS to cease requiring surgical privileges as
a precondition for taking Part II of the exam. (Id.

¶

56—6 1)

b. Procedural history
This case, or some version of it, has been pending for over four years.
In December 2015, Ellison first brought suit against ABOS in the district
where it is located, i.e., the United States District Court for the Northern
District of Illinois (the “Illinois Complaint”), seeking the same relief he seeks in
this action. See Ellison v. American Board of Orthopaedic Surgery, Inc., No. 15cv-l 1848, Docket Entry 1, Illinois Complaint fl 3, 28—32. However, Dr. Ellison
voluntarily dismissed the Illinois Complaint in April 2016. Id.
That same month, Dr. Ellison filed a factually similar complaint in the
Superior Court of New Jersey, Law Division, Union County, alleging that ABOS
violated the New Jersey Consumer Fraud Act (“NJCFA”), N.J. Stat. Ann. § 56:81, etseq., and the New Jersey Antitrust Act, N.J. Stat. Ann. § 56:9-1, etseg.
(See DE 1) Dr. Ellison sought treble damages, attorneys’ fees, and declaratory
and injunctive relief requiring ABOS to allow him to take the Part II exam.
In November 2016, ABOS removed the case to federal court (“Removed
Complaint”) on the basis of diversity of citizenship. See 28 U.S.C. § 1332(a).
The notice of removal stated that Dr. Ellison is domiciled in California, and that
ABOS is a Delaware corporation with its principal place of business in North
Carolina. (DE 1

¶J

11—15)

In February 2017, ABOS moved to dismiss the Removed Complaint on a
variety of grounds. (DE 4)1 granted that motion and dismissed the Removed
Complaint pursuant to Rule l2(b)(6) for failure to meet the minimal pleading
standards of Rule 8. (DE 17) In that opinion I noted, inter alia, that “[t]he

The Removed Complaint alleged, less specifically, that Dr. Ellison is located in
California and that ABOS is headquartered in North Carolina. (DE no 1-1 ¶ 2, 3; DE
1-3, Civil Cover Sheet)

3

7

vagueness of the Complaint makes it difficult to discern what, if anything,
connects Dr. Ellison, ABOS, and any wrongful acts to the State of New Jersey.”
(Id. at p. 5.) Additionally, without any allegation of a concrete injury in fact, I
could not “accept that Dr. Ellison possesse[d] a cause of action in any
jurisdiction where he theoretically could have sought, and been refused,
admitting privileges.” (Id.) Finding that Dr. Ellison had failed to state a claim, I
did “not reach, or prejudge” the issues related to personal jurisdiction, venue,
or standing raised by ABOS and entered the dismissal of the Removed
Complaint without prejudice to the filing of a motion to amend. (Id.) However, I
flagged numerous challenges facing plaintiff, including the issues of personal
jurisdiction and venue, as follows: “the plaintiff may wish to consider whether
it make more sense to file this lawsuit in a district where the defendant is
incorporated and has its principal place of business, or in the alternative in a
district where the acts complained of actually took place.” (Id. at p.s.)
Dr. Ellison subsequently moved for leave to amend, which was granted,
and filed an Amended Complaint. (DE 21, 27, 28) See Eflison v. Ant Bd. of
Orthopaedic Surgery, Inc., No. 16-8441, 2018 WL 1919953, at *1 (D.N.J. Apr.
24, 2018). The Amended Complaint dropped the counts alleging violations of
New Jersey state law and instead alleged a single count of restraint of trade in
violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1. (See DE 28)

ABOS again moved to dismiss the Amended Complaint for lack of
personal jurisdiction, improper venue, lack of standing, and failure to state a
claim, pursuant to Fed. R. Civ. P. 12(b)(2), (3), and (6). (DE 29) In October
2018, I issued a second opinion, again dismissing the complaint for failure to
meet the pleading standards of Rule 8. (DE 34) Like the Removed Complaint,
the Amended Complaint still stated “only in a conclusory manner that northern
New Jersey hospitals conspired and knew about the alleged plan to bolster
ABCS’s market position.” (Id. p. 8.) I found that the “Amended Complaint does
not assert any plausible basis for a conspiracy between ABCS and the vast
network of New Jersey hospitals, nor does the Amended Complaint include any
8

plausible allegations that place the hospitals’ conduct in a context that raises a
suggestion of a preceding agreement.” (Id. p. 9.)
Dr. Ellison then filed for leave to file a Second Amended Complaint (DE
41), which was granted (DE 47). On June 13, 2019, Dr. Ellison filed the Second
Amended Complaint. (DE 48) Eight days later, on June 21, 2019, ABOS again
moved to dismiss on the basis that the Second Amended Complaint still
suffered from the same deficiencies as the Removed Complaint and the
Amended Complaint, namely that the
Second Amended Complaint does not cure the standing and
jurisdictional flaws identified by the Court when it granted ABOS’
first motion to dismiss. Nor does it adequately allege 1) an
anticompetitive conspiracy between ABOS and any specified New
Jersey hospitals or 2) an illegal tying arrangement, as the Court, in
granting ABOS’ most recent motion to dismiss, advised Plaintiff he
would be required to do.
(DE 49). Plaintiff opposed the motion (DE 51), and defendant filed a reply (DE
54).
II.

ANALYSIS

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a
complaint, in whole or in part, if it fails to state a claim upon which relief can
be granted. The defendant, as the moving party, bears the burden of showing
that no claim has been stated. Animal Science Products, Inc. u. China Minmetals
Corp., 654 F.3d 462, 469 n. 9 (3d Cir. 2011). For the purposes of a motion to
dismiss, the facts alleged in the complaint are accepted as true and all
reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters

& the Trustees Thereof v. Tishman Const. Corp. of New Jersey, 760 F.3d 297,
302 (3d Cir. 2014).
Federal Rule of Civil Procedure 8(a) does not require that a complaint
contain detailed factual allegations. Nevertheless, “a plaintiffs obligation to
provide the ‘grounds’ of his ‘entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell AU. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the
g

complaint’s factual allegations must be sufficient to raise a plaintiffs right to
relief above a speculative level, so that a claim is “plausible on its face.” Id. at
570; see also West Run Student Housing Assocs., LLC u. Huntington Nat. Bank,

712 F.3d 165, 169 (3d Cir. 2013). That facial-plausibility standard is met
“when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
While “{tlhe plausibility standard is not akin to a ‘probability requirement’.
it asks for more than a sheer possibility.” Iqbal, 556 U.S. at 678.
A.

Sherman Act claim

The Sherman Anti—Trust Act declares “every contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce
among the several States

...

to be illegal.” 15 U.S.C.

§ 1. “Although this

prohibition is literally all-encompassing, the courts have construed it as
precluding only those contracts or combinations which ‘unreasonably’ restrain
competition.” Animal Sci. Prod.) Inc., 34 F. Supp. 3d at 480 (quoting Northern
PacificRy. Co.

i’.

United States, 356 U.S. 1, 4—5 (1958)).

“In order to sustain a cause of action under

§ 1 of the Sherman Act, the

plaintiff must prove: (1) that the defendants contracted, combined, or conspired
among each other; (2) that the combination or conspiracy produced adverse,
anti-competitive effects within relevant product and geographic markets; (3)
that the objects of and the conduct pursuant to that contract or conspiracy
were illegal; and (4) that the plaintiff was injured as a proximate result of that
conspiracy.” Martin B. Glauser Dodge Co. u. Chrysler Corp., 570 F.2d 72, 8 1—82
(3d Cir. 1977). Accord Howard Hess Dental Laboratories Inc. v. Dentsply Int’l,
Inc., 602 F.3d 237, 253 (3d Cir. 2010); cf Franco v. Connecticut Gen. Life Ins.
Co., 818 F.Supp.2d 792, 829 (D.N.J. 2011) (“Pleading a colorable Sherman Act
section 1 claim requires a plaintiff to allege (1) an agreement (2) imposing an
unreasonable restraint of trade within a relevant product market and (3)
resulting in antitrust injury, that is ‘injury of the type the antitrust laws were
10

intended to prevent and

...

that flows from that which make defendants’ acts

unlawful.”’).
“The existence of an agreement is the hallmark of a Section 1 claim.
Liability is necessarily based on some form of concerted action.... The
agreement, of course, must pertain to some unlawful conduct within the
meaning of the antitrust laws. To establish liability under section 1, a plaintiff
must demonstrate that the challenged practice imposed an unreasonable
restraint on trade. The illegality of the restraint may be demonstrated in one of
two ways: under the per se standard or under a rule of reason analysis.”
Franco, 818 F.Supp.2d at 829—30 (D.N.J. 2011) (internal citations and
quotations omitted).
“The rule of reason requires courts to conduct a fact-specific assessment
to assess the [restraint]’ s actual
of ‘market power and market structure
effect’ on competition.” Ohio v. Am. Express Co., 138 5. Ct. 2274, 2284 (2018)
...

(citation omitted). “While the rule of reason typically mandates an elaborate
inquiry into the reasonableness of a challenged business practice, there are
certain agreements or practices which because of their pernicious effect on
competition and lack of any redeeming virtue are conclusively presumed to be
unreasonable. Such plainly anticompetitive agreements or practices are
deemed to be illegal per se.” United States v. Brown Univ. in Providence in State
of R.L, 5 F.3d 658, 669 (3d Cir. 1993) (internal quotations and citations
omitted). The types of “agreements or practices which because of their
pernicious effect on competition and lack of any redeeming virtue are
conclusively presumed to be unreasonable and therefore illegal without
elaborate inquiry as to the precise harm they have caused or the business
excuse for their use

...

are price fixing, division of markets, group boycotts, and

tying arrangements.” N. Pac. Ry. Co., 356 U.S. 1, 5 (1958). Accord Arizona v.
Maricopa County Med. Soc., 457 U.S. 332, 345 (1982); Deutscher Tennis Bund
a ATP Tour, Inc., 610 F.3d 820, 830 (3d Cir. 2010) (“Some categories of
restraints, such as horizontal price-fixing and market allocation agreements
11

among competitors, ‘because of their pernicious effect on competition and lack
of any redeeming virtue are conclusively presumed to be unreasonable,tm)
(quoting Brown Univ. in Providence in State of Ri., 5 F.3d at 669); In re Ins.
Brokerage, 618 F.3d at 316 (“Paradigmatic examples [of per se illegal restraintsj
are ‘horizontal agreements among competitors to fix prices or to divide
mkets.”’(quoting Leegin Creative Leather Products, Inc. v. PSKS, Ina, 551 U.S.
877, 886 (2007))).
1.

Agreement

“To allege such an agreement between two or more persons or entities, a
plaintiff must allege facts plausibly suggesting ‘a unity of purpose or a common
design and understanding, or a meeting of minds in an unlawful
arrangement.”’ Howard Hess Dental Labs. Inc., 602 F.3d at 254 (quoting
Coppenveld Corp. v. Indep. Tube Corp., 467 U.S. 752, 755 (1984)). With respect

to the alleged conspiracy between ABOS and northern New Jersey hospitals,
Dr. Ellison has failed to allege facts that plausibly suggest such an unlawful

arrangement.
Dr. Ellison has alleged no facts supporting a per se restraint of trade. The
Second Amended Complaint, like the complaints that preceded it, states only in
a conclusozy manner that northern New Jersey hospitals “conspired” with

ABOS to require certification. But “[rjesort to per se rules is confined to
that would always or almost always tend to restrict competition
restraints.
.

.

and decrease output.” Leegin, 551 U.S. at 886. There are no facts alleging any
type of agreement suggestive of plainly anticompetitive conduct that amounts
to a per se unlawful restraint.

The claim is tantamount to one that hospitals cannot require physician
qualifications unless they run their certification programs themselves, lest they
“conspire.” But there is nothing inherently harmful or unlawful about a
hospital requiring physicians to be certified. ft cannot be said that such a
practice has no legitimate purpose, and can only be aimed at restraining trade.
It has an obvious medical rationale. For this reason, a hospital’s requirement
12

that physicians meet certain qualifications will rarely if ever found to be per se
unreasonable. See, e.g., Weiss v. York Hosp., 745 F.2d 786, 820 (3d Cir. 1984)
(“The Medical Staff is, however, entitled to exclude individual doctors, including
osteopaths, on the basis of their lack of professional competence or
We recognize, therefore, that in many cases
unprofessional conduct
.

.

.

involving exclusion from staff privilege, courts will, more or less openly, have to
utilize a rule of reason balancing approach.”); Miller v. Indiana Hosp., 843 F.2d
139, 144 (3d Cir. 1988) (“We recognized that in a hospital staff privilege case in
which the hospital defends on lack of professional ability, the rule of reason
test would apply.”); see also BCB Anesthesia Care Ltd. v. Passavant Merit. Area
Hosp. Ass’n, 36 F.3d 664, 667 (7th Cir. 1994) (noting that courts “invariably
analyze” antitrust claims based on hospital credentialing decisions under the
rule of reason because “there is nothing obviously anticompetitive about a
hospital choosing one staffing pattern over another or in restricting the staffing
to some rather than many or all”).
The allegations in the 2AC also fail under the Rule of Reason analysis.
The Second Amended Complaint reiterates, for instance, that “Defendant ABCS
has undertaken its actions with a common design and understanding with
hospitals to exclude some competent orthopedic surgeons from the relevant
market, including Dr. Ellison.” (2AC
found throughout the 2AC. (E.g., Id.

¶ 62) This type of conclusory allegation is
¶ 6, 9, 14, 41, 44, 57, 58, 60, 61, 62, 63).

“But to survive dismissal it does not suffice to simply say that the defendants
had knowledge; there must be factual allegations to plausibly suggest as
much.” Howard Hess Dental Labs. Inc., 602 F.3d at 255 (citing Twombly, 550

U.S. at 564).
There are no such allegations here. Without more, the mere fact that
certain hospitals require Board Certification for admitting privileges combined
with a bare assertion that hospitals conspired with ABCS is not a sufficient
allegation of an unlawful agreement. See Twombly, 550 U.S. at 556-57 (“[A]n
allegation of parallel conduct and a bare assertion of conspiracy will not
13

suffice. Without more, parallel conduct does not suggest conspiracy, and a
conclusoiy allegation of agreement at some unidentified point does not supply
facts adequate to show illegality. Hence, when allegations of parallel conduct
are set out in order to make a [Sherman Act]

§ 1 claim, they must be placed in

a context that raises a suggestion of a preceding agreement, not merely parallel
conduct that could just as well be independent action.”).
Nothing in this complaint goes beyond an allegation that the hospitals
chose to require certification by an outside organization, ABOS. These entities
do not conspire any more than the hospitals “conspire” with medical schools by
virtue of requiring their doctors to possess a medical degree. The facts to
support a conspiratorial agreement or a coercive arrangement are lacking.
Dr. Ellison attempts to bridge that gap with public statements made by
ABMS (to which Defendant ABOS is alleged to belong). According to the
complaint, ABMS stated that it “encourages hospitals and insurers to consider
it when granting or delineating clinical privileges.” (2AC

¶ 64; see also ¶ 18). To

begin with, these statements are attributable to ABMS and AHA—not
defendant ABOS. In any event, they continue to miss the mark. There is
nothing inherently unlawful about ARMS “encouraging” certain hospitals to
accept its certification program. These vague allegations that ARMS influenced
or pressured hospitals into requiring board certification actually suggest just
the opposite. Lacking any actual agreement with hospitals, ARMS engaged in
public marketing efforts in an attempt to expand the reach of its programs. The
statements cited by Dr. Ellison confirm as much:
We all know that the hospital business is a competitive one, and
the more we can do to ensure patients, our insurers, and patient
advocacy groups that we deliver the highest quality care, the better
off we are. There has also been pressure from specialty boards
encouraging us to restrict staff privileges to those physicians who
have board certification. Our Board of Trustees has been struggling
with the issue for more than a year, and, after many rounds of
talks, they have decided that we will begin to require board
certification for all physicians who have staff privileges.
14

(2AC

¶

18). Implicit in this statement is the recognition by that hospital that it

must compete for patients by offering high quality services. While this
particular hospital struggled with the decision, its trustees ultimately agreed
that one way to compete and ensure quality care was to require board
certification for its physicians. There is no allegation, by the way, that this
article refers to any of the hospitals mentioned in the complaint. (See 2AC

¶

25)

In any event, the 2AC asserts nothing to suggest that this large collection
of New Jersey hospitals decided to require board certification as a prerequisite
to medical staff privileges based on an illicit agreement, rather than as the
result of their own independent calculation that this requirement would
improve the quality of care or make them more competitive in attracting
patients. The time, place, or manner of the alleged “agreement” is not specified.
The Second Amended Complaint does not assert any facts directly suggesting
such an between ABOS and the New Jersey hospitals; nor does it indirectly
state a factual context that implies a preexisting agreement with ABOS. Dr.
Ellison has not pled “enough fact[sJ to raise a reasonable expectation that
discovery will reveal evidence of illegal agreement.” Thvomhly, 550 U.S. at 556.
Nor has Dr. Ellison alleged facts sufficient to suggest that ABOS has
sufficient market power to affect a restraint of trade. Dr. Ellison in one sense
frames the allegations in the 2AC as restricting trade because ABOS prevents
him from getting certified by other equally rigorous board certification
programs offered by other organizations. (2AC

¶jJ

28, 48) Of course,

“exclusionary practices in themselves are not sufficient. There must be proof
that competition, not merely competitors, has been harmed” United States v.
Dentsply Int’l, Inc., 399 F.3d 181, 187 (3d Cir. 2005). To overcome this hurdle,
Dr. Ellison must allege that there are somehow fewer surgeons available to
treat patients because of ABOS’s restrictions. But all the 2AC can manage is a
conclusory assertion that “ABOS’s actions significantly reduce the availability
of orthopedic surgeons in the relevant market, which reduces patient choice
and increases health care costs.” (2AC

¶

61) There are no well-pled factual
15

allegations to support this sweeping conclusion. For example, Dr. Ellison does
not point to any reduction of the number of surgeons available to treat
patients, or resulting inflation of prices to consumers. Indeed, it is far from
evident that the purported agreement between ABOS and northern New Jersey
hospitals would operate in that manner. Failure to be certified, for example,
does not render a surgeon unable to practice. See Sanjuan v. Am. Rd. of
Psychiatry & Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994), as amended on
denial of reh’g (Jan. 11, 1995) (explaining that it is “hard to see how the
[defendant psychiatric board’s] activities could amount to an exercise of market
power, which entails cutting back output in the market and thus driving up
prices to consumers” where “plaintiffs already are sellers in the market for
psychiatric services [and] turning down their applications for certification does
not remove their output from the market and therefore does not raise prices to
consumers”) (internal citation omitted).
Even if the relevant market is considered to consist only of surgeons
admitted to practice at these New Jersey hospitals—an unsupported
contention—the necessary facts are lacking. The complaint alleges that Dr.
Ellison, a competitor, has been excluded from a market segment, but gives no
reason to think that competition has been harmed—for example, that the total
number of such surgeons admitted to practice at New Jersey hospitals has
been reduced. That prices for surgical services are indirectly affected cannot
simply be assumed, given the complex manner in which the (highly insurancedriven) market for surgical services functions.
“[I]t is commonplace, and often very useful, for organizations to
recommend quality’ standards
process.

.

.

.

.

.

or adopt them as part of a certification

Merely to say that the standards are disputable or have some

market effects has not generally been enough to condemn them as
‘unreasonable’ under the Sherman Act.” DMResearch, Inc. v. Coil. of Am.
Pathologists, 170 F.3d 53, 57 (1st Cir. 1999). Dr. Ellison fails to sufficiently
state a claim for an improper agreement under Section 1 of the Sherman Act.
16

The failure to allege an unlawful agreement alone warrants dismissal for failure
to state a claim.
2.

Tying Allegations

Dr. Ellison simultaneously asserts that defendant ABOS engaged in an
improper tying arrangement. He alleges both a per se and a “rule of reason”
tying violation. (2AC ¶P 64—65) “Tying is defined as selling one good (the tying
product) on the condition that the buyer also purchase another, separate good
(the tied product).” Town Sound and Custom Tops, Inc. v. Chrysler Motors Corp.,
959 F.2d 468, 475 (3d Cir. 1992). “[T}he essential characteristic of an invalid
tying arrangement lies in the seller’s exploitation of its control over the tying
product to force the buyer into the purchase of a tied product that the buyer
either did not want at all, or might have preferred to purchase elsewhere on
different terms. When such ‘forcing’ is present, competition on the merits for
the tied item is restrained and the Sherman Act is violated.” Id. at 476 (quoting
Jefferson Parish Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984)).
“[W]here (1) a defendant seller ties two distinct products; (2) the seller
possesses market power in the tying product market; and (3) a substantial
amount of interstate commerce is affected, then the defendant’s tying practices
are automatically illegal without further proof of anticompetitive effect.” Id. at
477. That is, under these circumstances, a defendant’s acts amount to a “per
se” violation.
While the “per se illegality rule applies when a business practice on its
face has no purpose except stifling competition,” conduct that does not trigger
a per se analysis is analyzed under a “rule of reason” test, which focuses on the
particular facts disclosed by the record to determine whether the probable
effect of the tying arrangement is to substantially lessen competition, rather
than merely disadvantage some particular competitor. Eisai, Inc. v. Sanofi
Aventis U.S., LLC, 821 F.3d 394, 402—03 (3d Cir. 2016) (citations and
quotations omitted).

17

Under the rule of reason test, a plaintiff must show a substantial
foreclosure of the market for the relevant product. Id. (citations and quotations
omitted). Although the test does not require total foreclosure, the challenged
practices must bar a substantial number of rivals or severely restrict the
market’s ambit. Id. The “concern is not about which products a consumer
chooses to purchase, but about which products are reasonably available to
that consumer. For example, if customers are free to switch to a different
product in the marketplace but choose not to do so, competition has not been
thwarted—even if a competitor remains unable to increase its market share.”
Id. (citations and quotations omitted). However, even in cases where consumers
have a choice between products, the market is foreclosed if the defendant’s
anticompetitive conduct renders that choice meaningless. Id. (citations and
quotations omitted).
Here, Dr. Ellison conclusorily asserts that ABOS’s board certification
requirements amount to an anticompetitive tying arrangement and defines the
“tying market” as “board certification for orthopedic surgeons holding an ‘M.D.’
degree as required by hospitals in northern New Jersey as a condition of
practicing medicine there.” (2AC

¶

45) The 2AC fails to describe the operation

of the alleged tying arrangement very clearly. Presumably the “tying product” is
ABCS’s board certification, and the the “tied product” would be hospital
medical staff privileges, or the other way around.
The relevant analysis fails at the first phase of either a per se analysis or
rule of reason analysis. This purported tying arrangement makes little sense. A
tying arrangement must be viewed in light of the power wielded by the
purported seller to force a consumer to buy other products it did not want, or
did not want on those terms. ABOS is not plausibly alleged to possess that
power. ft would be ABOS’s alleged “exploitation of its control over the tying
product to force the buyer into the purchase of a tied product that the buyer
either did not want at all, or might have preferred to purchase elsewhere on
different terms” that drives the inquiry. Town Sound and Custom Tops, Inc.,
18

959 F.2d at 476. “[T]he essence of illegality in tying agreements is the wielding
of monopolistic leverage; a seller exploits his dominant position in one market
to expand his empire into the next.” Times—Picayune Publishing Co. u. United
States, 345 U.S. 594, 611(1953). There are no allegations that ABOS has
influence over who is granted staffing privileges or that staffing privileges can
be provided or sold by ABOS. (I set aside the difficulties in treating hospital
staff status as a tied “product” sold in a market.) There are no well-pled
allegations that ABOS is provided any direct monetary or other benefits as a
result of a hospital issuing a surgeon staffing privileges. There are no facts
tending to demonstrate that ABOS—the defendant here—is conditioning staff
privileges on participation in its certification program, or profiting therefrom.
The theory, then, must be some highly attenuated one, for which the necessary
facts are not pled.
Because the 2AC fails to assert a tying arrangement or illicit agreement,
the Court need not opine on whether the other elements of a Section 1
Sherman Act violation are sufficiently pled; the failure to allege an unlawful
agreement alone warrants dismissal for failure to state a claim. See Howard
Hess Dental Labs. Inc., 602 F.3d at 254 (“Section 1 claims are limited to
combinations, contracts, and conspiracies, and thus always require the
existence of an agreement.”).5

To be clear, there is no allegation that Dr. Ellison is being forced to buy two
products, when he only wanted one. Instead, he alleges that he wants both products:
(1) to sit for phase II of the ABOS board certification test so that he can obtain board
certification (2AC ¶ 70), and thereby obtain (2) staffing privileges from a northern New
Jersey hospital. (See, e.g., id. ¶ 67)
5
I therefore express no further opinion on other issues raised by ABOS. These
include questions of venue, jurisdiction and standing raised by a speculative allegation
that a California physician theoretically would apply for, but is likely to be denied,
staff privileges at any one of a number of New Jersey hospitals.
4

lg

III.

CONCLUSION

ABOS’s motion to dismiss the Second Amended Complaint is granted on
Rule 12(b)(6) grounds, for failure to state a claim under Section 1 of the
Sherman Act. Because this complaint is in its third iteration (in this district), it
appears that further amendment would be futile. This dismissal of the Second
Amended Complaint as against ABOS is therefore entered with prejudice. An
appropriate Order follows.
Dated: March 12, 2020

H N. KEVIN MdNU

20

y, u.s.Dd.