Benitez v. The Charlotte-Mecklenburg Hospital Authority

Filing 56

ORDER that Defendant's 22 Motion for Judgment on the Pleadings is granted in part and stayed in part. Specifically, Plaintiff's claim for monetary damages under Section 4 of the Clayton Act, 15 U.S.C. is DISMISSED. Plaintiff's claim for injunctive relief is STAYED pending the resolutions of the Government's preexisting suit against Defendant. Signed by District Judge Robert J. Conrad, Jr on 3/4/2019. (brl)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:18-cv-00095-RJC-DCK
RAYMOND BENITEZ, individually
And on behalf of all others similarly
situated

)
)
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Plaintiff,
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v.
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)
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THE CHARLOTTE-MECKLENBURG )
HOSPITAL AUTHORITY, d/b/a
)
Carolinas Healthcare System, d/b/a
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Atrium Health
)
)
Defendant.
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____________________________________ )

ORDER

THIS MATTER comes before the Court on Charlotte-Mecklenburg Hospital
Authority’s (“Defendant”) Motion for Judgment on the Pleadings, (Doc. No. 22), and
the parties’ associated briefs and exhibits, (Doc. Nos. 16, 20–21, 23, 29–30, 47).
Having been fully briefed, the matter is now ripe for adjudication.
I.

BACKGROUND
A.

The Governments’ Suit

This is the second time this Court confronts this set of facts. 1 On June 19,
2016, the United States Department of Justice and the State of North Carolina

Additionally, there is a third lawsuit currently pending in the North Carolina
Business Court. DiCesare v. Charlotte-Mecklenburg Hospital Authority, No. 16CVS-164043 (N.C. Sept. 9, 2016). This state class action alleges violations of North
Carolina law filed on behalf of residents of North Carolina who paid premiums to
insurance companies that had Defendant in its network. Plaintiffs bring two claims
1

1

(“the Governments”) filed suit against the Charlotte-Mecklenburg Hospital
Authority d/b/a Carolinas HealthCare System and Atrium Health (“Defendant” or
“Atrium”) seeking injunctive relief. Doc. No. 1: “Governments’ Complaint,” United
States v. Charlotte-Mecklenburg Hosp. Auth., No. 3:16-cv-311 (W.D.N.C. June 19,
2016) [hereinafter the Governments’ suit]. Defendant is a North Carolina not-forprofit corporation providing healthcare services with its principal place of business
in Charlotte. (Id. ¶ 1). Its flagship facility is Carolinas Medical Center, a large
general acute-care hospital located in downtown Charlotte. (Id.). Defendant also
operates nine other general acute-care hospitals in the Charlotte area. (Id.). The
Governments brought a civil antitrust action to enjoin Defendant “from using
unlawful contract restrictions that prohibit commercial health insurers in the
Charlotte area from offering patients financial benefits to use less-expensive
healthcare services offered by [Atrium’s] competitors.” (Id. at 1). The Governments
contend that “[t]hese steering restrictions2 reduce competition resulting in harm to

against Defendant there: (1) contract, combination, or conspiracy in restraint of
trade in violation of N.C. Gen. Stat. §§ 75-1 and 75-2; and (2) monopolization in
violation of Article I, Section 34 of the North Carolina Constitution and N.C. Gen.
Stat. §§ 75-1.1, 75-2, and 75-2.1. Doc. No. 1: Complaint, DiCesare v. CharlotteMecklenburg Hospital Authority, No. 16-CVS-164043 (N.C. Sept. 9, 2016).
2 “Steering is a method by which insurers offer consumers of healthcare services
options to reduce some of their healthcare expenses. Steering typically occurs when
an insurer offers consumers a financial incentive to use a lower-cost provider or
lower-cost provider network, in order to lower their healthcare expenses.” (Doc. No.
1 ¶ 12). The Governments and Plaintiff allege the following:
To protect itself against steering that would induce price competition
and potentially require [Atrium] to lower its high prices, [Atrium] has
imposed steering restrictions in its contracts with insurers. These
restrictions impede insurers from providing financial incentives to
2

Charlotte area consumers, employers, and insurers.” (Id.). The Governments’ suit
remains pending in this Court.
B.

The Current Suit

Between July 4 and July 10, 2016, Raymond Benitez (“Plaintiff”), a Charlotte
resident, used Atrium general acute care inpatient hospital services3 for seven
overnight stays. (Doc. No. 1 ¶ 3, Benitez v. The Charlotte-Mecklenburg Hosp.
Auth., 3:18-cv-95 (W.D.N.C. Feb. 28, 2018) (i.e., the instant suit)). Plaintiff sought
treatment at Atrium’s flagship facility. At the time services were rendered,
Plaintiff was the dependent of Estelvina Coroas—a policy holder who was insured
under a health insurance policy issued under an agreement between Tyson Foods
(i.e., the insured’s employer) and Blue Advantage Administrators of Arkansas
(“Blue Advantage”), an operating division of Arkansas Blue Cross and Blue Shield.
(Doc. No. 20: Ex. 1). Plaintiff incurred charges for his healthcare services. (Id.).
While insurance covered most of these charges, Plaintiff paid Atrium $3,440.36 as a
co-insurance payment. (Doc. No. 1 ¶¶ 3, 39) (“A co-insurance payment is the
percentage of the bill for inpatient medical services paid directly by the insured
inpatient consumer, with the rest paid by the insurance company.”).

patients to encourage them to consider utilizing lower-cost but
comparable or higher quality alternative healthcare providers.
(Doc. No. 1 ¶ 14); Doc. No. 1 ¶ 7, United States v. Charlotte-Mecklenburg
Hosp. Auth., No. 3:16-cv-311 (W.D.N.C. June 19, 2016).
3 “Acute inpatient hospital services consist of a broad group of medical and surgical
diagnostic and treatment services that include a patient’s overnight stay in the
hospital.” (Doc. No. 1 ¶ 20).
3

At the time Plaintiff received services from Atrium, Defendant had a
separate contract—a Network Participation Agreement, (Doc. No. 21: Ex. 5)—with
Blue Cross Blue Shield North Carolina (“BCBSNC”). The Network Participation
Agreement required Atrium to treat any person presenting a “Blue Card” as a
member. A Blue Card establishes evidence of coverage through an affiliated Blue
Cross health plan. Under the terms of the Network Participation Agreement,
Atrium treated Plaintiff as a Member of BCBSNC, which gave Plaintiff access to
the discounted rates negotiated by BCBSNC with Defendant. (Doc. No. 21). The
primary policy on those records is BCBS OOS PPO4 (“Blue Cross Blue Shield Out of
State Preferred Provider Organization”). (Doc. No. 20). The Network Participation
Agreement authorizes Defendant to seek the collection of any deductibles or
copayments, which are determined by the “Benefit Plan”—"the particular set of
health benefits and services provided or administered by [BCBSNC] that is issued
to an individual or to a Group.” (Doc. No. 21 at 3). Defendant does not set
deductible or copayment prices; rather, the insurers establish these costs.
Plaintiff’s central allegation, derivative from the Governments’ suit, is that
Atrium’s anti-competitive steering restrictions drove up prices for inpatient services
and thus inflated the amount of co-insurance he paid. Plaintiff identifies the
relevant product market as “[t]he sale of general acute care inpatient hospital

A PPO designates that this is a broad network plan which has participating
providers who provide healthcare at prenegotiated rates and discounts.
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services to insurers (‘acute inpatient hospital services’)” and the relevant geographic
market as “no larger than the Charlotte area.” (Id. ¶ 18).
On February 28, 2018—almost two years after the Governments filed suit
seeking injunctive relief against Defendant—Plaintiff commenced the instant suit
against Defendant on behalf of himself and all others similarly situated. (Doc. No.
1). In this proposed class action for restraint of trade, Plaintiff seeks classwide
damages and injunctive relief under Section One of the Sherman Act, 15 U.S.C. § 1,
and Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26, against Defendant.
(Doc. No. 1). The only difference between the requested relief in Plaintiff’s suit as
compared to the Governments’ is that Plaintiff also seeks monetary damages for
Defendant’s alleged antitrust violations.
In his Complaint, Plaintiff references the Governments’ preexisting case and
acknowledges that he “relies, in part, on the [Governments’] thorough assessments
of the [Atrium] restraint of trade and their conclusions as to what constitutes the
public interest.” (Id. ¶ 17). Plaintiff characterizes the instant suit as a “related
action seek[ing] a remedy for consumers, who, as a result of [Atrium’s] unlawful
conduct, have been forced to pay [Atrium] above-competitive prices for inpatient
services through co-insurance payments and other direct payments.” (Id. ¶ 2).
Plaintiff seeks treble damages under 15 U.S.C. § 15 as recompense for the alleged
violations of the Sherman Act and injunctive relief to enjoin Defendant from
continuing to use and implement anti-steering provisions in its contracts with
insurers.

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II.

LEGAL STANDARD
Rule 12(c) motions are governed by the same standard as motions brought

under Rule 12(b)(6). Occupy Columbia v. Haley, 738 F.3d 107, 115 (4th Cir. 2013).
In its review of a Rule 12(b)(6) motion, “the court should accept as true all wellpleaded allegations and should view the complaint in a light most favorable to the
plaintiff.” Mylan Labs Inc. v. Matakari, 7 F.3d 1130, 1134 (4th Cir. 1993) (internal
citation omitted). But the court need not accept allegations that “contradict matters
properly subject to judicial notice or by exhibit.” Blankenship v. Manchin, 471 F.3d
523, 529 (4th Cir. 2006) (quoting Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)).
The court may consider the complaint, answer, and any materials attached to those
pleadings or motions for judgment on the pleadings “so long as they are integral to
the complaint and authentic.” Philips v. Pitt Cnty. Mem. Hosp., 572 F.3d 176, 180
(4th Cir. 2009); see also Fed R. Civ. P. 10(c) (stating that “an exhibit to a pleading is
part of the pleading for all purposes.”). In contrast to a Rule 12(b)(6) motion, the
court may consider the answer as well on a motion brought pursuant to Rule
12(c). Alexander v. City of Greensboro, 801 F. Supp. 2d 429, 433 (M.D.N.C. 2011).
The plaintiff's “[f]actual allegations must be enough to raise a right to relief
above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). “[O]nce a claim has been stated adequately, it may be supported by showing
any set of facts consistent with the allegations in the complaint.” Id. at 563. A
complaint attacked by a Rule 12(b)(6) motion to dismiss will survive if it contains
sufficient factual matter, accepted as true, to “state a claim to relief that is plausible

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on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S.
at 570). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. at 678. Thus, the applicable test on a motion for judgment
on the pleadings is whether, when viewed in the light most favorable to the party
against whom the motion is made, genuine issues of material fact remain or whether
the case can be decided as a matter of law. Alexander, 801 F. Supp. 2d at 433.
III.

DISCUSSION
Defendant moves for judgment on the pleadings on two grounds: (1) the Local

Government Antitrust Act of 1984 (“LGAA”), 15 U.S.C. § 34 et seq., and the
“indirect purchaser” rule of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), bar
Plaintiff’s claim for monetary damages5 and (2) the doctrine of duplicative litigation
and concepts of antitrust standing6 bar Plaintiff’s claim for injunctive relief. The
Court addresses each argument in turn.
A.

The LGAA Bars Plaintiff’s Claim for Monetary Damages.

Under the LGAA, local governments are statutorily immune from antitrust
claims seeking monetary damages brought under Section 4 of the Clayton Act, 15
U.S.C. § 15, when acting in an official capacity. 15 U.S.C. § 35(a) (“No damages,
interest on damages, costs, or attorney's fees may be recovered under section 4, 4A,

Because the Court finds that the LGAA bars Plaintiff’s claim for monetary
damages, it does not address Defendant’s Illinois Brick argument.
6 Also, because the Court finds that this suit is duplicative of the Governments’
preexisting suit and thus chooses to stay the instant action until the Governments’
suit is resolved, it need not reach Defendant’s standing argument either.
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or 4C of the Clayton Act (15 U.S.C. 15, 15a, or 15c) from any local government, or
official or employee thereof acting in an official capacity.”). “The Senate Report
concluded that it was necessary to enact a statute that would “allow local
governments to go about their daily functions without the paralyzing fear of
antitrust lawsuits.” Sandcrest Outpatient Servs., P.A. v. Cumberland Cty. Hosp.
Sys., Inc., 853 F.2d 1139, 1142 (4th Cir. 1988) (quoting S. Rep. No. 593, 98th Cong.,
2d Sess. 2 (1984)).
The LGAA specifies that the term “local government” includes “a school
district, sanitary district, or any other special function governmental unit
established by State law in one or more States.” Id. § 34. Courts have noted that
the LGAA’s language is “explicitly inclusive, not exclusive,” and is to be broadly
construed to apply to all aspects of local government entities’ decision making. E.g.,
Zapata Gulf Marine Corp. v. Puerto Rico Mar. Shipping Auth., 682 F. Supp. 1345,
1351 (E.D. La. 1988). “As such, the LGAA makes no distinction between a local
government’s ‘proprietary’ and ‘governmental’ activities. It applies even when the
local government acts as a market participant.” United Nat'l Maint., Inc. v. San
Diego Convention Ctr. Corp., Inc., No. 07-CV-2172-AJB, 2012 WL 12845620, at *4
(S.D. Cal. Sept. 5, 2012) (quoting Palm Springs Med. Clinic, Inc. v. Desert Hospital,
628 F. Supp. 454, 457 n.2, 458 n.3 (C.D. Cal. 1986)), aff'd sub nom. United Nat’l
Maint., Inc. v. San Diego Convention Ctr., Inc., 766 F.3d 1002 (9th Cir. 2014). The
determination of whether something qualifies as a “special function governmental
unit” turns on the state law at issue. 15 U.S.C. § 34(b) (establishing that the LGAA

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applies to special function governmental units “established by State law”); see
Tarabishi v. McAlester Regional Hosp., 951 F.2d 1558, 1566 (10th Cir. 1991)
(analyzing “the question of the character of a local entity under the LGAA” in part
as “a question of state law”).
Here, Defendant was created under Chapter 131E of the North Carolina
General Statutes (hereinafter, Chapter 131E) as a public hospital authority—“a
North Carolina not-for-profit corporation providing healthcare services with its
principal place of business in Charlotte.” (Doc. No. 1 ¶ 4; Doc. No. 16 ¶ 4). Under
the N.C. Hospital Authorities Act, § 131E, Art. 2, Pt. B, Defendant is “a public body
and a body corporate and politic organized under [North Carolina law].” N.C. Gen.
Stat. § 131E-16(14). North Carolina courts have explained that the designation of
“body politic” under other North Carolina statutes “connote[s] a body acting as
government; i.e. exercising powers which pertain exclusively to a government.”
Student Bar Ass’n Bd. of Governors, of Sch. Of Law, Univ. of N.C. Chapel Hill v.
Byrd, 239 S.E.2d 415, 420 (1977). Municipal hospitals are also authorized under
Chapter 131E as another form of a public hospital created by state law. N.C. Gen.
Stat. § 131E, Art. 2, Pt. 1. Under Chapter 131E, municipal hospitals and hospital
authorities have similar privileges, authorities, and powers—powers which are
typically characterized as governmental powers.7 Notably, Chapter 131E gives

Compare N.C. Gen. Stat. § 131E-7, -10, -12, with § 131E-17, -23, -24, -26. Some of
these powers include the power to (1) construct and maintain hospitals, (2) issue
bonds, (3) acquire real or personal property, (4) establish a fee schedule for services
received from hospital facilities and make the services available regardless of ability
to pay, (5) contract with other governmental or public agencies, (6) lease any
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hospital authorities the power to “act as an agent for the federal, State or local
government in connection with the acquisition, construction, operation or
management of a hospital facility, or any part thereof.” Id. § 131E-23(a)(21).
Hospitals formed under Chapter 131E are created to further public purposes. “A
hospital authority may be created whenever a city council or a county board of
commissioners finds and adopts a resolution finding that it is in the interest of the
public health and welfare to create a hospital authority.” N.C. Gen. Stat. § 131E17(a).
Previously, the Fourth Circuit has granted absolute immunity from antitrust
damages to a municipal hospital established under Chapter 131E, upholding the
determination that the hospital qualified as a “special function government unit”
under the LGAA. Sandcrest Outpatient Servs. v. Cumberland Cty. Hosp. Sys., Inc.,
853 F.2d 1139 (4th Cir. 1988). District courts within the Fourth Circuit—including
this Court—have echoed that conclusion: “the Fourth Circuit has recently given
clear expression to the absolute immunity provided by the LGAA” to both county
hospitals and their employees. Cohn v. Wilkes General Hosp., 767 F. Supp. 111,
112 (W.D.N.C. 1991); see also, Advance Nursing Corp. v. S.C. Hosp. Ass’n, 2016 WL
6157490, at *5 (D.S.C. 2016) (granting absolute immunity from antitrust damages
under the LGAA to the government hospitals). By extension, then, Defendant—as a
public hospital also formed under Chapter 131E for a public purpose to benefit the

hospital facility to a nonprofit corporation, and (7) to exercise the power of eminent
domain to acquire real property.
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health and welfare of the state—is also immune from antitrust claims seeking
monetary damages. This determination is consistent with decisions from other
jurisdictions considering LGAA application to other states’ enabling statues for
hospitals—statutes which are analogous to Chapter 131E.8 These decisions have
found it instructive that the enabling statutes specifically reference the public
purpose that the hospitals are to serve and have pointed to statutory language
characterizing the hospitals as a “public body corporate and politic.” See, e.g.,

The main source Plaintiff uses to assert that Defendant is not a governmental
entity undermines his argument. Plaintiff stakes almost his entire argument on a
Tenth Circuit case, Tarabashi v. McAlester Regional Hosp., 951 F.2d 1558 (10th
Cir. 1991), interpreting an Oklahoma state law that is distinguishable from
Chapter 131E. For example, the Oklahoma statute provided that a “public trust
hospital” would “exist as a legal entity separate and distinct from the settlor and
from the governmental entity that is its beneficiary,” but did not include any
provision establishing the hospital as a “public body” or “body politic.” See Okla.
Stat. An., tit. 60, § 176.1. The hospital in Tarabashi was created under Oklahoma
law as a “public trust hospital,” and the city of McAlester was its beneficiary.
Tarabashi, 951 F.2d at 1566. The Tenth Circuit expressly distinguished
Sandcrest—which applied LGAA immunity to a public hospital formed under
Chapter 131E—Sweeney, and cases from other jurisdictions with enabling statutes
similar to Chapter 131E, concluding that the public hospitals qualified as
governmental units: “[n]one of these cases directly answers the question of whether
a hospital operated as a public trust for furtherance of public functions with a city
as its beneficiary should be considered a special function governmental unit.” Id. at
1565–66. Therefore, by the Tenth Circuit’s own admission, Tarabashi is not
analogous to the case at hand. Rather, the Tenth Circuit found the plaintiff’s
argument persuasive that “Oklahoma law controls the question here, and thus the
interpretation of the status of a hospital under the laws of other states is
immaterial.” Id. at 1564. Accordingly, the interpretation of the status of a hospital
under Oklahoma law is irrelevant to the case at hand. The Tarabashi decision
reinforces the Fourth Circuit’s finding in Sandcrest and the Court’s decision today
that, under North Carolina law, the LGAA immunizes Defendant as a special
function governmental unit formed under Chapter 131E.
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Sweeney v. Athens Reg’l Med. Ctr., 705 F. Supp. 1556, 1561 (M.D. Ga. 1989)
(applying LGAA immunity to hospital authorities in Georgia). They have also
examined the powers given to hospitals under the statutes and have found LGAA
immunity appropriate when those powers include the right to “exercise public and
essential governmental functions.” Id. As discussed supra, Defendant has such
powers.
The determination of whether the LGAA applies is a question of law—an
“objective one[ ]” that is best made during the beginning stages of a case.
Sandcrest, 853 F.2d at 1148, 1148 n.9 (“[A] court should strive to resolve the
immunity issue as early as possible, with a minimum of expense and time to the
parties.”). The Fourth Circuit reasoned that waiting to determine the applicability
of LGAA immunity until after broad-ranging discovery and a trial on the merits
would vitiate the underlying purpose of the LGAA. Id. at 1148 (“This would be
incompatible with the underlying purpose of the LGAA, that is to protect such
defendants not only from damages but also from the expense and time required to
litigate such a case.”). Thus, the Court finds it proper to make the LGAA-immunity
determination now. According to the plain text of Chapter 131E, the statute under
which Defendant was formed, as well as the functions Defendant performs and
powers Defendant possesses, Defendant is a special governmental unit under the
LGAA. Therefore, the LGAA shields Defendant from antitrust claims for monetary
damages.

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B.

Injunctive Relief
“The LGAA does not extend its immunity to injunctive relief.” R.

Ernest Cohn, D.C., D.A.B.C.O. v. Bond, 953 F.2d 154, 158 (4th Cir. 1991). While
the LGAA immunizes Defendant from Plaintiff’s claim for monetary damages, it
does not bar Plaintiff’s claim for injunctive relief. In addition to his claim for
monetary damages, Plaintiff also seeks injunctive relief, requesting that the Court
“permanently enjoin Defendant from continuing the conspiracy and unlawful
actions . . . under Section 16 of the Clayton Act, 15 U.S.C. § 26.” (Doc. No. 1 at 15).
That is, Plaintiff requests that Defendant be enjoined from using and enforcing
anti-steering provisions in its contracts with insurers. As the parties concede,
Plaintiff’s injunctive request is identical to the Governments’ requested relief in the
preexisting action currently pending in this Court. Thus, the resolution of the
Governments’ preexisting suit would fully resolve the matters at issue in this case.
“When two suits are pending before federal district courts, the general
principle is to avoid duplicative litigation.” State Farm Life Ins. Co. v. Bolin, No.
5:11-CV-1, 2011 WL 1810591, at *2 (W.D.N.C. May 11, 2011). “Trial courts are
afforded broad discretion in determining whether to stay or dismiss litigation in
order to avoid duplicating a proceeding already pending in another federal
court.” I.A. Durbin, Inc. v. Jefferson Nat. Bank, 793 F.2d 1541, 1551–52 (11th Cir.
1986). Accordingly, in order to conserve judicial resources and avoid duplicative
litigation, the Court hereby stays this later-in time-proceeding pending a resolution
of the government complaint.

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IV.

CONCLUSION
IT IS THEREFORE ORDERED THAT Defendant’s Motion for Judgment on

the Pleadings, (Doc. No. 22), is GRANTED IN PART and STAYED IN PART.
Specifically, Plaintiff’s claim for monetary damages under Section 4 of the Clayton
Act, 15 U.S.C. § 15, is DISMISSED. Plaintiff’s claim for injunctive relief is
STAYED pending the resolution of the Governments’ preexisting suit against
Defendant.

Signed: March 4, 2019

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