Steward Health Care System LLC et al v. Blue Cross & Blue Shield of Rhode Island

Filing 34

OPINION AND ORDER denying 16 Motion to Dismiss for Failure to State a Claim. So Ordered by Chief Judge William E. Smith on 2/19/2014. (Urizandi, Nisshy)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
STEWARD HEALTH CARE SYSTEM, LLC,
)
BLACKSTONE MEDICAL CENTER, INC.,
)
f/k/a STEWARD MEDICAL HOLDING
)
SUBSIDIARY FOUR, INC., BLACKSTONE )
REHABILITATION HOSPITAL, INC.,
)
f/k/a STEWARD MEDICAL HOLDING
)
SUBSIDIARY FOUR REHAB, INC.,
)
)
C.A. No. 13-405 S
Plaintiffs,
)
)
v.
)
)
BLUE CROSS & BLUE SHIELD OF
)
RHODE ISLAND,
)
)
Defendant.
)
___________________________________)
OPINION AND ORDER
WILLIAM E. SMITH, Chief Judge.
The
general

Landmark
acute

Rhode Island.

care

Medical

Center

community

(“Landmark”)

hospital

located

is

a

214-bed,

in

Woonsocket,

Each year, it provides some 175,000 patients with

a wide array of medical services ranging from ambulatory surgery
and orthopedics to radiology and cancer treatment.

In May 2011,

Steward Health Care System, LLC submitted a proposal to acquire
Landmark
Rhode

and

Island.

its

subsidiary,

Approximately

the
a

Rehabilitation

year

and

a

half

Hospital
later,

of
the

proposed acquisition was deemed a failure and abandoned.

The

circumstances

the

surrounding

basis of this lawsuit.

the

ill-fated

acquisition

form

The Plaintiffs, Steward Health Care System, LLC, Blackstone
Medical

Center,

Inc.,

and

Blackstone

Rehabilitation

Hospital,

Inc. (collectively, “Steward”) allege that the Defendant, Blue
Cross & Blue Shield of Rhode Island (“Blue Cross”), violated
state and federal antitrust law, and tortuously interfered with
contractual

relations,

by

engaging

in

a

series

of

anticompetitive steps designed to block Steward’s acquisition of
Landmark and its entry into the Rhode Island markets for the
sale

of

commercial

health

commercial hospital services.
that

it

acted

legally

insurance

and

the

purchase

of

In response, Blue Cross contends

when

it

refused

to

accept

the

reimbursement rates at Landmark that Steward was offering, and
otherwise operated within its rights in order to promote its
business interests.
Now pending is a Motion to Dismiss (ECF No. 16) filed by
Blue Cross pursuant to Federal Rule of Civil Procedure 12(b)(6).
For the reasons set forth, the Motion to Dismiss is DENIED.
I.

The Complaint
The facts, as alleged in the Complaint, are as follows:

Steward employs a business model focused on the acquisition and
development of financially distressed community hospitals, which
Steward believes are better suited to provide quality medical
services

efficiently,

hospitals.

(Compl.

as
¶¶

compared
17-18.)
2

to

more

Steward

expensive
also

teaching

sells

health

insurance, and provides much of the care under those policies
within its network of community hospitals.

(Id. at ¶ 19.)

This

model has achieved a level of success in Massachusetts, where
Steward is based.
In

2008,

Landmark’s

(Id. at ¶¶ 5, 18.)

against

finances,

the
the

backdrop

of

Providence

the

deterioration

County

Superior

of

Court

appointed a special master to oversee Landmark’s operations (the
“Special

Master”). 1

(Id.

at

¶ 21.)

In February

2011,

the

Special Master sought a potential buyer to acquire Landmark as a
means of resolving Landmark’s ongoing fiscal woes.
24.)

(Id. at ¶

In May 2011, Steward submitted a bid and the Special

Master recommended that it be accepted.

(Id.)

Steward’s plan

for Landmark involved investing approximately 35 million dollars
in

capital

improvements

and

physician

recruitment,

and

using

Landmark as a base from which to offer limited network insurance
plans, as it had done in Massachusetts.
bolster

Landmark’s

precarious

financial

(Id. at ¶ 26.)
situation,

extended Landmark a five million dollar line of credit.
Steward

alleges

that

its

proposal

to

acquire

To

Steward
(Id.)
Landmark

triggered a series of anticompetitive steps by Blue Cross aimed
at blocking Steward’s entry into the Rhode Island market.
1

The

Steward alleges that, long before its failed acquisition
attempt, Blue Cross was in part responsible for the financial
struggles at Landmark.
In March 2011, the Special Master sued
Blue Cross, alleging that Blue Cross had made inadequate
payments to Landmark. (Compl. ¶ 22.)
3

first

of

these

steps,

Steward

alleges,

took

place

when

Blue

Cross filed an objection with the Special Master to Steward’s
proposal.
Steward

(Id.
and

at

the

¶

25.)

Special

Despite

Master

the

objection,

executed

an

asset

agreement in June 2011 (the “Purchase Agreement”). 2
Following

execution

of

the

Purchase

however,
purchase

(Id.)

Agreement,

began negotiating contracts with third parties.

Steward

In September

and October 2011, Steward and Blue Cross exchanged proposals for
reimbursement

rates

that

Blue

Cross

would

rendered to its subscribers at Landmark.

pay

for

services

(Id. at ¶ 28.)

As these negotiations were ongoing, a separate storyline
was unfolding in the Rhode Island legislature.
Steward
Hospital

filed

an

application

Conversion

Act

(the

pursuant

to

“Hospital

permission to acquire Landmark.

In October 2011,
the

Rhode

Conversion

(Id. at ¶ 29.)

Island

Act”)

for

In January

2012, as the Hospital Conversion Act filing was pending, a bill
was

introduced

would

have

in

had

a

both

houses

significant

operate in Rhode Island.
provision

of

state

law

of

the

bearing

state
on

legislature

Landmark’s

that

plans

to

That bill proposed to eliminate a
barring

any

owner

of

a

for-profit

hospital from converting more than one non-profit Rhode Island
hospital

to

for-profit

status

in

2

any

three-year

period

–

a

Steward’s obligations under the Purchase Agreement were
subject to certain conditions precedent.
4

change

that

would

have

enabled

Steward

to

acquire

other

facilities and implement its community hospital care model in
Rhode Island.

(Id. at ¶ 31.)

Blue Cross engaged in an intense

lobbying effort against passage of the bill, including offering
testimony before the House Corporations Committee.

(Id. at ¶

32.)
In May 2012, the Rhode Island Department of Health (the
“Department

of

Health”)

and

the

State

Attorney

General

approved Steward’s Hospital Conversion Act application.
¶ 35.)

each

(Id. at

Just prior to this approval, however, Blue Cross had

filed an application with the Department of Health to make a
“material

plan

modification”

provider network.
Meanwhile,

to

remove

Landmark

from

its

(Id. at ¶ 36.)

negotiations

between

Steward

and

Blue

regarding reimbursement rates at Landmark were ongoing.

Cross

Steward

alleges that it offered to accept rates that were 5% less than
the average rates Blue Cross was paying to other providers in
Rhode Island.
Blue

(Id. at ¶ 37.)

Cross’

hardline

Blue Cross declined the proposal.
stance

at

the

bargaining

table,

Steward alleges, was part and parcel with its ongoing attempt to
financially destabilize Landmark and undermine Steward’s entry
into the Rhode Island market.

In furtherance of these aims,

Steward alleges, in July 2012, while Blue Cross’ application to
remove

Landmark

from

its

provider
5

network

was

still

pending

before the Department of Health, Blue Cross sent out letters to
its subscribers and doctors informing them that Landmark was
likely to be removed from its network.
letters

led

to

a

decline

in

the

(Id. at ¶ 39.)

number

of

patients

These
seeking

treatment at Landmark and a resulting decline in revenues.
at ¶ 40.)

(Id.

At approximately the same time, Blue Cross stopped

making reimbursement payments to Landmark, further undermining
Landmark’s financial viability.

(Id. at ¶ 39.)

In September

2012, facing an increasingly desperate financial situation, the
Special Master sought permission from the state court to drop
Landmark’s lawsuit against Blue Cross, previously filed in March
2011, in exchange for Blue Cross recommencing payments.

(Id. at

¶ 42.)
Steward

alleges

that

Blue

Cross’

anticompetitive

conduct

went beyond direct interference with the Landmark acquisition.
More specifically, Steward alleges that Blue Cross discouraged
third parties, including Thundermist Health Center, from dealing
with Steward, and indicated to these third parties that dealing
with

Steward

Cross.

might

jeopardize

their

relationships

with

Blue

(Id. at ¶ 41.)

Likewise, in May 2012, Blue Cross notified Steward that it
would

not

renew

its

contracts

with

St.

Anne’s

Hospital,

a

Steward-owned facility in Fall River, Massachusetts on the Rhode
Island border (“St. Anne’s”).

(Id. at ¶ 45.)
6

Because St.

Anne’s was located in Massachusetts, once Blue Cross removed it
from its provider network, Rhode Island Blue Cross subscribers
could obtain services at St. Anne’s only by using the “BlueCard
Program.” 3

(Id. at ¶ 46.)

When its Rhode Island subscribers

would obtain services at St. Anne’s, Blue Cross would reimburse
St. Anne’s at rates negotiated by Blue Cross & Blue Shield of
Massachusetts, plus a BlueCard fee.

(Id. at ¶ 47.)

In an

effort to renew an agreement with Blue Cross for St. Anne’s,
Steward offered to continue reimbursement at the Blue Cross &
Blue Shield of Massachusetts rates, less the BlueCard fee that
Blue Cross was currently paying.
declined.

(Id. at ¶ 48.)

Blue Cross

(Id.)

At the same time, Steward alleges, Blue Cross began falsely
telling

doctors

that

St.

Anne’s

reimbursement

rates

were

unnecessarily high, leading doctors to believe that referring
patients to St. Anne’s would jeopardize their entitlement to
certain savings that Blue Cross pays to doctors utilizing costefficient providers.

(Id. at ¶ 49.)

The net effect of these

actions was to decrease patient and revenue flow at St. Anne’s.
(Id. at ¶ 51.)

3

The Complaint describes the BlueCard Program as a national
program whereby Blue Cross & Blue Shield plans in various states
allow subscribers of one plan to access benefits and rates of
another plan while traveling or living outside of their home
plan’s service area. (Compl. ¶ 46.)
7

After further efforts to negotiate a deal with Blue Cross
for reimbursement rates at Landmark failed, Steward announced on
September 27, 2012 that it was terminating its effort to acquire
Landmark.

(Id. at ¶ 43.)

Steward now brings claims for actual

and attempted monopolization and monopsonization 4 in violation of
§

2

of

the

Antitrust

Sherman

Act,

as

Act
well

and
as

§
for

6-36-5

of

tortious

the

Rhode

Island

interference

existing and prospective contractual relations.

with

Blue Cross has

moved to dismiss all of these claims.
II.

Standard of Review
“In

order

to

survive

a

motion

to

dismiss

under

Rule

12(b)(6), a plaintiff must ‘plead[] factual content that allows
the court to draw the reasonable inference that the defendant is
liable

for

the

misconduct

alleged.’”

Sanchez

v.

Pereira-

Castillo, 590 F.3d 31, 48 (1st Cir. 2009) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (alteration in original)).

The

complaint must “contain sufficient factual matter . . . to state
a claim to relief that is plausible on its face.”

Iqbal, 556

U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007) (internal quotation omitted)).

4

A monopsony is a market in which a single buyer has
disproportionate power – a “buyer’s monopoly.”
See Roger D.
Blair and Jeffrey L. Harrison, Antitrust Policy and Monopsony,
76 Cornell L. Rev. 297, 320 (1991).
In this context, Steward
alleges that Blue Cross exercised monopsony power as a buyer of
commercial hospital services.
8

The Court must “accept as true all the factual allegations
in the complaint and construe all reasonable inferences in favor
of the plaintiff.”
omitted).

Sanchez, 590 F.3d at 41 (internal citation

Nevertheless, “[t]hreadbare recitals of the elements

of a cause of action, supported by mere conclusory statements,
do not suffice.”

Iqbal, 556 U.S. at 678.

III. Antitrust Claims
To sustain a claim for monopolization under § 2 of the
Sherman

Act,

a

plaintiff

must

demonstrate:

(1)

that

the

defendant possessed monopoly power in the relevant market; and
(2) the defendant’s willful acquisition or maintenance of that
power,

as

distinguished

from

growth

or

development

as

a

consequence of a superior product, business acumen, or historic
accident.

Diaz Aviation Corp. v. Airport Aviation Servs., 716

F.3d 256, 265 (1st Cir. 2013) (citing United States v. Grinnell
Corp.,

384

elements

U.S.

apply

to

563,
a

570-71
claim

(1966)). 5

for

illegal

Logically,

the

monopsonization.

same
See

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S.
312,

320-22

(2007);

Susan

Foster,

Monopsony

and

Backward

Integration: Section 2 Violations in the Buyer’s Market, 11 U.
5

A § 2 claim for attempted monopolization requires that the
plaintiff establish:
“(1) that the defendant has engaged in
predatory or anticompetitive conduct with (2) a specific intent
to monopolize and (3) a dangerous probability of achieving
monopoly power.”
Diaz Aviation Corp. v. Airport Aviation
Servs., 716 F.3d 256, 265 (1st Cir. 2013) (quoting Spectrum
Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993)).
9

Puget Sound L. Rev. 687, 699 (1988).

The Court applies the same

substantive law to the state and federal antitrust claims as the
Rhode Island Antitrust Act mirrors the Sherman Act.

See Stop &

Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I., 239 F.
Supp.

2d

180,

186-87

(D.R.I.

2003);

ERI

Max

Entm’t

Inc.

v.

may

be

Streisand, 690 A.2d 1351, 1353 n.1 (R.I. 1997).
Blue

Cross’

arguments

in

favor

of

dismissal

summarized as follows: (1) Blue Cross, even as a monopolist, was
under no duty to deal with Steward; (2) Steward lacks standing
to

bring

antitrust

claims

because

its

alleged

injuries

are

speculative and not cognizable under antitrust law, and because
Steward is not presently a competitor or consumer in the alleged
markets;

(3)

Steward

failed

to

allege

plausible

product

and

geographic markets as required to sustain an antitrust claim;
and (4) Blue Cross’ various lobbying activities are immune from
antitrust scrutiny under the Noerr-Pennington Doctrine.

Each

argument is addressed in turn.
A.
In

Was Blue Cross Obligated to Deal with Steward?
the

absence

of

any

purpose

to

create

or

maintain

a

monopoly, the Sherman Act does not restrict the long-recognized
right of a trader or manufacturer engaged in an entirely private
business freely to exercise his own independent discretion as to
parties with whom he will deal.
250 U.S. 300, 307 (1919).

United States v. Colgate & Co.,

However, the high value placed on the
10

right to refuse to deal with other firms does not mean that the
right is unqualified.

Verizon Commc’ns Inc. v. Law Offices of

Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004).

Under certain

circumstances, a refusal to cooperate with rivals can constitute
anticompetitive conduct and violate § 2 of the Sherman Act.

Id.

Courts have identified examples of conduct giving rise to a § 2
claim

for

refusing

to

deal,

including

the

termination

of

a

voluntary (and thus presumably profitable) course of dealing,
electing

to

eliminating

forego

short-term

competition,

and

profits

the

for

refusal

to

the
deal

sake
with

of
the

plaintiff even if compensated at prevailing rates for products
that the defendant already sells to others.

See, e.g., Aspen

Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 610-11
(1985); Tucker v. Apple Computer, Inc., 493 F. Supp. 2d 1090,
1101

(N.D.

Cal.

2006).

However,

the

existence

of

a

valid

business justification for a monopolist to engage in this type
of behavior may preclude § 2 liability.

Aspen Skiing Co., 472

U.S. at 605-06; Creative Copier Servs. v. Xerox Corp., 344 F.
Supp. 2d 858, 867 (D. Conn. 2004).
generally

recognized

that

the

Nevertheless, courts have
existence

of

a

business

justification is not properly determined on a motion to dismiss.
See Creative Copier, 344 F. Supp. 2d at 867.
Steward relies principally on Aspen Skiing in contending
that Blue Cross illegally refused to deal.
11

There, the plaintiff

was the owner and operator of a ski mountain in Colorado.
U.S. at 578.
mountains.
had

The defendant owned and operated three nearby

Id. at 589-90.

offered

a

joint,

For years, plaintiff and defendant

all-mountain

access to all four mountains.
demanding

472

an

increased

pass

Id. at 591.

share

of

the

ultimately discontinued the joint pass.
Predicting

that

that

elimination

of

allowed

skiers

After repeatedly

proceeds,

defendant

Id. at 592-93.

the

pass

would

adversely

affect its business, plaintiff attempted a variety of methods to
recreate the simplicity of the all-mountain pass.

For example,

plaintiff offered to purchase lift tickets from defendant at
retail

value,

but

defendant

refused

to

sell.

Id.

at

593.

Plaintiff later offered an “Adventure Pack” which included a
three-day pass to its own mountain, and vouchers for the full
cash value of lift tickets at defendant’s mountains.
593-94.

Id. at

Defendant refused to accept the vouchers.

In upholding a § 2 verdict for the plaintiff, the Supreme
Court focused on the defendant’s abandonment of a successful
prior course of dealing (as evidenced by robust sales of the
all-mountain pass and high levels of customer satisfaction), id.
at 603, defendant’s willingness to accept short-term losses to
preserve its monopoly (as evidenced by its refusal to sell lift
tickets to plaintiff or to accept Adventure Pack vouchers from
skiers),

id.

at

608,

and

defendant’s
12

failure

to

proffer

a

legitimate business justification for its actions, id. at 60809.

This

unilateral

abandonment

of

a

voluntary

course

of

dealing, forsaking of short-term profits, refusal to transact
business with the plaintiff even if compensated at rates set by
the defendant, and concomitant inability to provide a legitimate
business

rationale

requirements

of

a

have
§

2

evolved

refusal

to

to

deal

form

the

claim.

baseline
See,

e.g.,

Creative Copier, 344 F. Supp. 2d. 865-66.
Nevertheless, the Supreme Court has subsequently clarified
that “Aspen Skiing is at or near the outer boundary of § 2
liability.”
Verizon,

Trinko, 540 U.S. at 409.

was

required

under

In Trinko, the defendant,

telecommunications

regulations

offer certain “unbundled” services to its competitors.
403.

to

Id. at

The plaintiff brought a class action under § 2 on behalf

of a competing telecommunication provider’s customers alleging
that

Verizon

filled

competitors’

orders

slowly

and

on

a

discriminatory basis in order to dissuade customers from staying
with

the

competitors.

Id.

at

404-05.

The

Supreme

Court

reviewed the factors set forth in Aspen Skiing and found that
Verizon’s

actions

liability.
because
unbundled

were

insufficient

Id. at 409-10.

Verizon

was

services,

subject

it

to

§

2

Specifically, the Court found that

required
it

to

could

by
not

regulation
be

said

to

that

previously voluntarily dealt with its competitors.
13

share

the

Verizon

had

Id. at 410.

What is more, because the price at which the unbundled services
were to be provided was statutorily prescribed, the Court could
not conclude whether Verizon was foregoing short-term profits to
solidify its monopoly. 6
Several
credit
failure
dealing

courts

refusal
to

to

interests 7

in

or

the

deal

establish

contrary

Id.

to

wake

claims

of

based

termination
the

defendant’s

Trinko

of

on
a

defendant’s
refusal

to

have
either

declined

plaintiffs’

voluntary

course

short-term
sell

to

products

of

business
to

the

plaintiff that it made available at retail to other consumers. 8

6

The Court declines to credit Blue Cross’ reliance on
Trinko for the proposition that the heavily regulated nature of
health care markets makes it improper for courts to intervene on
antitrust grounds. See Trinko, 540 U.S. at 412 (“One factor of
particular importance is the existence of a regulatory structure
designed to deter and remedy anticompetitive harm. Where such a
structure exists, the additional benefit to competition provided
by antitrust enforcement will tend to be small.”). Whereas the
telecommunications industry at issue in Trinko was the subject
of extensive antitrust regulation, it cannot be said that the
same level of antitrust-focused regulation exists in health care
markets.
See D. Andrew Austin and Thomas L. Hungerford, Cong.
Research Serv., R40834, The Market Structure of the Health
Insurance Industry 46-47 (2009).
7

See, e.g., In re Elevator Antitrust Litigation, 502 F.3d
47, 52 (2d Cir. 2007) (“[B]ecause plaintiffs do not allege that
defendants terminated any prior course of dealing – the sole
exception to the broad right of a firm to refuse to deal with
its competitors – the allegations are insufficient to state a []
claim.”); see also Christy Sports, LLC v. Deer Valley Resort
Co., 555 F.3d 1188, 1197 (10th Cir. 2009).
8

See, e.g., MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d
1124, 1133 (9th Cir. 2004); Stein v. Pac. Bell, 172 F. App’x
192, 194 (9th Cir. 2006).
14

At the outer boundaries of § 2 liability though it may be, Aspen
Skiing prescribes a set of factors that are present in abundance
in this case.

For example, Steward has pled facts sufficient to

suggest that Blue Cross, in an effort to undermine the Landmark
acquisition and Steward’s entry into the Rhode Island market,
unilaterally sought to terminate two prior courses of dealing in
Landmark and St. Anne’s. 9
Likewise,

the

Complaint

allegations

suggesting

courses

dealing

of

financial interests.

that

were

contains

these

contrary

sufficient

terminations
to

Blue

of

Cross’

factual
existing

short-term

With respect to the negotiations between

the parties for reimbursement rates at Landmark, Steward alleges
that it offered – and Blue Cross rejected – reimbursement rates
that were 5% below the average rates that Blue Cross accepted
statewide from other hospitals.

(See Compl. ¶ 37.)

respect

to

has

refused

to

St.

Anne’s,

accept

Steward

terms

that

alleged

would

have

that

And with
Blue

Cross

preserved

prior

reimbursement rates, but saved Blue Cross from having to pay
certain fees associated with the BlueCard program.

(See id. at

¶ 48.)

9

While it cannot be said that Steward and Blue Cross had a
prior course of dealing with each other with respect to
Landmark, the Court is not aware of case law that would preclude
consideration of Blue Cross’ own direct prior course of dealing
with Landmark.
15

Blue

Cross

correctly

notes

that

the

Complaint

refers

repeatedly to reimbursement rate increases at Landmark.
Compl. ¶¶ 37-38.)

(See

It contends that Steward is precluded from

stating a refusal to deal claim because this concession provides
evidence

that

Landmark

would

business

interests.

persuasive,
litigation
previous

termination
not

there
upon

be

of

no

which

reimbursement

prior

contrary

While

is

the

to

to

this

rates

Blue

argument

record
rest

course

at
a

this

Steward sought to increase them.

dealing

Cross’
may

early

conclusion

were

of

short-term

prove
stage

as

negotiated,

to
and

at

to

be

of

the

when

the

how

much

The Complaint does allege,

however, that the rates that had previously been in place at
Landmark were grossly inadequate to cover Landmark’s cost of
doing business.
found

an

(Id. at ¶¶ 22, 23, 28.)

unlawful

refusal

to

deal

Courts have previously

where

the

defendant

would

agree only to unreasonable terms and conditions amounting to a
practical refusal to deal.

See Aspen Skiing, 472 U.S. at 592;

Safeway Inc. v. Abbott Labs., 761 F. Supp. 2d 874, 894-95 (N.D.
Cal. 2011).

For purposes of the instant Motion to Dismiss, it

is sufficient for Steward to have pled facts suggesting that
Blue Cross rejected proposed reimbursement rates significantly
lower than the statewide average that Blue Cross accepted at
other hospitals.

See Creative Copier, 344 F. Supp. 2d at 867

(“[T]he

of

presence

a

business
16

justification

.

.

.

is

not

appropriately raised at [the motion to dismiss] stage.

. . .

[The plaintiff] is not required to allege the negative of every
possible

justification

[the

defendant]

may

must

is

offer

for

its

conduct.”).
The

next

hurdle

Steward

clear

establishment

of

facts suggesting that Blue Cross offered a product or service
for sale to the public at a retail price that it then refused to
provide

to

Steward

on

the

same

terms.

While

the

facts

underlying this case require more parsing than the forlorn skier
turned

away

Complaint
that

from

the

contains

Blue

Cross

ticket

window

sufficient

refused

to

factual
purchase

in

Aspen

Skiing,

allegations
hospital

to

the

suggest

services

from

Steward at or around the same price points that it was willing
to pay other providers for similar services.

(See Compl. ¶ 37.)

Blue Cross aptly notes the complexity underlying hospital
contracting and suggests that, unlike the ski mountain operator
in Aspen Skiing, it does not provide a retail product or service
to consumers at a fixed price.
merit,

given

the

odd

This argument is not without

complexities

and

idiosyncrasies

of

our

modern health care market.
To

briefly

sketch

the

landscape,

the

health

insurance

industry as we know it traces its roots to Baylor University
Hospital in Dallas.

In the late 1920s, it was discovered that

unpaid medical bills from local teachers were placing a strain
17

on the hospital’s finances.

See D. Andrew Austin and Thomas L.

Hungerford, Cong. Research Serv., R40834, The Market Structure
of the Health Insurance Industry 3 (2009).

In an effort to

alleviate the financial burden, the hospital created a pre-paid
hospitalization

benefit

plan

for

teachers.

Unlike

previous

insurance products that paid a fixed cash indemnity, enrollees
in the Baylor plan were entitled to hospital care and services
as needed.

Id.

Within
country
began

several

were
to

years,

offering

collaborate

hospitals

similar
with

plans.

one

in

cities

Soon

another

by

across

after,

the

hospitals

offering

shared

community-based plans, providing subscribers access to multiple
facilities.

When a group of hospitals in St. Paul, Minnesota

joined together to offer one such community-based plan, they
chose a blue cross to serve as their emblem.

Other community-

based plans began incorporating the same emblem, and through the
1930s,

the

number

increased rapidly.

of

“Blue

Cross”

plans

and

subscribers

Rosemary Stevens, In Sickness and in Wealth:

American Hospitals in the 20th Century 186 (Basic Books 1989).
With the advent of private health insurance in the 1950s, and
the creation of Medicare and Medicaid in the 1960s, in less than
a generation, the health care industry had been transformed from
a traditional marketplace with individual buyers and sellers, to

18

one in which the vast majority of Americans obtained medical
care through an insurance intermediary.
The modern role played by these intermediaries is enormous.
Insurers such as Blue Cross serve a vital function by making
coverage eligibility determinations, bridging the informational
asymmetry between patients and providers, spreading the risk of
catastrophic loss among subscribers, and assuring that providers
will

be

compensated

patient’s

ability

influence

in

services.

to

setting
For

for

their

services

pay.

As

prices

and

example,

an

such,

regardless

they

affording

insurer

may

exert
access

choose

of

the

substantial
to
to

medical
pay

one

provider more or less for the same procedure than it chooses to
pay another provider based on the provider’s quality of service,
bargaining

power,

or

a

host

of

other

factors.

See,

e.g.,

Kartell v. Blue Shield of Mass., Inc., 749 F.2d 922, 923 (1st
Cir. 1984) (upholding health insurer’s right to set the prices
at which it would reimburse physicians for services rendered to
subscribers).
result

of

But the bargaining power vested in insurers as a

their

unique

market

function

cannot

preclude

§

2

liability where an insurer engages in anticompetitive conduct to
exclude a potential competitor, merely on the grounds that the
insurer’s market power enables it to set variable prices among

19

providers such that there is no discernable retail or market
price for the services that it transacts. 10
Next, Blue Cross accurately notes that Steward is asking
this

Court

opposed

to

to

recognize

the

implicating

a

previously

more

found

Blue

traditional

monopolist’s

anticompetitive

Cross’

that

conduct,

refusal

obligation

where
a

obligation

to

there

to

to

buy,

deal

sell.

as

claim

Courts

have

is

manufacturer

no

evidence

of

has

no

obligation

to

purchase goods from a particular supplier.

See Raitport v. Gen.

Motors Corp., 366 F. Supp. 328, 331 (E.D. Pa. 1973).

Similarly,

courts have found that there can be no duty to buy where the
plaintiff seeks to sell goods or services that are inferior or
overpriced.

See,

e.g.,

Kamine/Besicorp

Allegany

L.P.

v.

Rochester Gas & Elec. Corp., 908 F. Supp. 1194, 1207 (W.D.N.Y.
1995)

(“It

simply

does

not

appear

that

the

effect

of

[defendant]’s refusal to pay more than its actual avoided cost
would

have

Commc’ns

an

Corp.,

anticompetitive
408

F.

Supp.

effect.”);
1075,

10

1101

AT&T
(S.D.

Co.

v.

Delta

Miss.

1976)

Likewise, that Blue Cross serves as an intermediary
between the producer (the hospital) and the ultimate consumer
(the patient) does not preclude § 2 liability for an illegal
refusal to deal.
See, e.g., Otter Tail Power Co. v. United
States, 410 U.S. 366, 382 (1973) (finding a power provider in
violation of the antitrust laws for its refusal to sell power to
certain municipalities in order to prevent those municipalities
from
establishing
their
own
power
infrastructure
and
distributing power directly to households).
20

(“[T]he

undisputed

material

facts

show

that

the

service

[plaintiff] was attempting to sell was not worth buying.”).
However,

this

Court

is

unaware

of

any

case

law

holding

that, as a matter of law, an alleged refusal to buy cannot ever
form the basis of a § 2 refusal to deal claim.

In this case,

Steward has pled facts sufficient to suggest that Blue Cross
refused

to

purchase

similar

services

from

Steward

that

it

purchased from other providers, at prices significantly below
what Blue Cross was willing to pay to those other providers. 11
Blue

Cross

would

have

the

Court

believe

that

Steward’s

refusal to deal claim fails as a matter of law because Blue
Cross has the right to deal, or refuse to deal, with whomever it
likes.

(See Mot. to Dismiss 10.)

This is true to a great

extent, but the right is not unlimited.
recognized

in

Aspen

Skiing,

the

right

As the Supreme Court
of

those

engaged

in

private business to choose with whom they will deal is subject
to the qualification that the right exists only in the absence

11

Without belaboring the point, it is worth noting again
that the unique role played by health insurance intermediaries
has a bearing on the allegations in this case. As compared with
a traditional manufacturing firm that purchases its raw
materials from Party A and sells its finished product to Party
B, a health insurer such as Blue Cross employs a wholly
different business model in which it sells an insurance product
to Party A, contracts to purchase medical services from Party B,
then turns around and grants access to those services to Party
A.
Given this unique function, it should come as no surprise
that a refusal to deal allegation against a health insurance
provider would implicate the provider’s refusal to buy.
21

of any purpose to create or maintain a monopoly.
472 U.S. 602 (citing Colgate, 250 U.S. 307).
the

factual

allegations

in

the

Complaint

Aspen Skiing,

Accepting as true
and

construing

all

reasonable inferences in favor of Steward, as the Court must,
the

Complaint

alleges

sufficient

facts

to

suggest

that

Blue

Cross’ conduct falls within the scope previously found by courts
to be violative of the antitrust laws.

That being the case,

dismissal of Steward’s refusal to deal claim is unwarranted.
B.

Does Steward Have Standing to Bring Antitrust Claims?

Courts utilize a six-factor test to determine whether a
private plaintiff has standing to bring an antitrust action.
The factors are: (1) the causal connection between the alleged
antitrust violation and harm to the plaintiff; (2) an improper
motive; (3) the nature of the plaintiff’s alleged injury and
whether the injury was of a type that Congress sought to redress
with

the

antitrust

laws;

(4)

the

directness

with

which

the

alleged market restraint caused the asserted injury; (5) the
speculative

nature

of

the

damages;

and

(6)

the

risk

of

duplicative recovery or complex apportionment of damages.

Serpa

Corp. v. McWane, Inc., 199 F.3d 6, 10 (1st Cir. 1999).

Blue

Cross makes three distinct arguments in contending that Steward
lacks

standing

alleged

injury

to

bring

its

–

loss

of

antitrust
negotiating

claims:

(1)

leverage

Steward’s
–

is

not

cognizable under antitrust law; (2) Steward’s alleged damages
22

are too remote and too speculative to state a valid claim in
that

they

presume

the

successful

acquisition

of

Landmark,

followed by the successful statewide implementation of Steward’s
community

hospital

“presumptively
present,

it

care

disfavored”

is

neither

alleged markets.

a

model;

and

antitrust

(3)

Steward

competitor

plaintiff
nor

a

is

because,

consumer

in

a
at
the

The Court rejects these arguments, and finds

that Steward has standing.
i.

Is Steward’s Alleged
Antitrust Law?

Injury

Cognizable

Under

Every antitrust plaintiff must show that it has sustained
antitrust injury.

Sterling Merch., Inc. v. Nestle, S.A., 656

F.3d 112, 121 (1st Cir. 2011).

Antitrust injury is “injury of

the type the antitrust laws were intended to prevent and that
flows from that which makes defendants’ acts unlawful.”

Id.

(quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.
477, 489 (1977)).
Blue Cross characterizes Steward’s alleged injury as the
loss of negotiating leverage that Steward would have attained
had

it

successfully

acquired

Landmark

community hospital model in Rhode Island.
Steward

vigorously

Complaint.

disputes

this

and

implemented

its

As discussed below,

characterization

of

the

But, accepting Blue Cross’ depiction of the alleged

injury for the time being, Blue Cross relies principally on the

23

Brunswick

case

in

contending

that

the

loss

of

negotiating

leverage does not constitute a cognizable antitrust injury.
In Brunswick, the defendant acquired three bowling alleys,
all of which were facing financial difficulty.
80.
same

429 U.S. at 479-

The plaintiff, the operator of other bowling alleys in the
area,

brought

antitrust

claims

alleging

that

the

defendant’s decision to acquire the alleys, rather than letting
them go out of business, had deprived the plaintiff of increased
market share.

The Supreme Court denied recovery, reasoning that

the antitrust laws are for the protection of competition, not
competitors.

Id. at 488.

The Supreme Court found that the loss

of potential market share was not the type of injury that the
antitrust laws were intended to prevent.
Blue
Brunswick

Cross’
holding

reliance

on

arguably

Id. at 489.

Brunswick
counsels

is

misplaced,

against

considered in the context of the instant facts.

as

dismissal

the
when

Ultimately, the

holding in Brunswick for the defendant was based on the fact
that the plaintiff’s acquisition of the bowling alleys served to
increase, rather than decrease competition.

The Supreme Court

reasoned that the antitrust laws were not designed to give rise
to a cause of action where the alleged illegal act actually
served to increase competition by preventing the bowling alleys
from going out of business.
end

of

the

spectrum,

Blue

Here, on the completely opposite
Cross’
24

alleged

conduct

served

to

decrease

competition

by

denying

Steward

access

to

the

Rhode

Island market.
What is more, the Court finds merit in Steward’s argument
that Blue Cross has mischaracterized the Complaint by contending
that

Steward’s

negotiating
Steward

alleged

leverage

disputes

this

injury
to

consists

seek

higher

characterization

only

of

the

reimbursement
of

the

loss

of

rates.

Complaint,

and

accurately points out that the Complaint’s reference to loss of
negotiating leverage refers not to Steward’s alleged injury, but
to Blue Cross’ alleged rationale for wanting to sabotage the
Landmark acquisition: Blue Cross believed that entry by Steward
into the Rhode Island market would have decreased Blue Cross’
negotiating leverage.

Steward argues that its injury is not the

loss of negotiating leverage at all, but rather the millions of
dollars

invested

in

the

Landmark

acquisition

prior

to

its

abandonment, and the lost profits that would have resulted from
entry into the Rhode Island market.

This is sufficient to state

a cognizable antitrust injury.
ii.

Are Steward’s Damages Too Remote or Speculative?

An antitrust plaintiff must show that its alleged damages
were caused by the alleged antitrust violation.
v.

AK

Media

Grp.,

Inc.,

260

F.3d

10,

14

RSA Media, Inc.

(1st

Cir.

2001).

“[A]ntitrust laws have been interpreted to incorporate common
law principles of causation.”

Rhode Island Laborers’ Health &
25

Welfare Fund ex rel. Trs. v. Philip Morris, Inc., 99 F. Supp. 2d
174, 187 (D.R.I. 2000).

As such, “[c]ontingencies, conjecture,

and speculation will not support a finding of proximate cause,”
and

will,

therefore,

liability.

not

support

a

finding

of

antitrust

Id.

Nevertheless, in assessing the standing of would-be market
entrants, courts assess the “intent and preparedness” of the
prospective entrant.
City

of

Pontiac,

See, e.g., Huron Valley Hosp., Inc. v.
666

F.2d

1029,

1033

(6th

Cir.

1981)

(plaintiff’s acquisition of land for hospital, performance of
feasibility
and

studies,

consummation

of

attempts

to

contracts

obtain
were

government

sufficient

approvals,

to

establish

standing); see also Shionogi Pharma, Inc. v. Mylan, Inc., No.
10-1077, 2011 U.S. Dist. LEXIS 98547, at *10-16 (D. Del. August
31, 2011).

A potential competitor’s “[i]ndicia of preparedness

include adequate background and experience in the new field,
sufficient financial capability to enter it, and the taking of
actual and substantive affirmative steps toward entry, such as
the

consummation

necessary
Biovail

of

facilities
Corp.

relevant
and

Int’l,

contracts

equipment.”

256

F.3d

799,

and

Andrx
807

procurement
Pharm.,

(D.C.

Inc.

Cir.

of
v.

2001)

(internal citation and quotation marks omitted).
Blue

Cross

argues

that

Steward

does

not

have

standing

because its alleged damages are too speculative and premised
26

upon multiple assumptions, including satisfaction of conditions
precedent in the Purchase Agreement and the ability to create a
successful hospital network in Rhode Island thereafter.

Relying

principally

Pharma,

Steward

on

Huron

responds

Valley

that

it

Hospital

has

and

Shionogi

demonstrated

its

preparedness to enter the Rhode Island market.
undertook

a

acquisition

long
and

series
to

gain

of
a

steps

to

foothold

and

Indeed, Steward

complete
in

intent

Rhode

the

Landmark

Island.

For

example, Steward invested heavily in Landmark by extending a
five million dollar line of credit during the pendency of the
Purchase Agreement, and completed regulatory filings necessary
to effectuate the acquisition.

What is more, Steward’s market

preparedness is demonstrated by its operation of St. Anne’s,
whose geographic proximity to Rhode Island resulted in a number
of Rhode Island patients seeking treatment there.
Shionogi

Pharma

plaintiffs

brought

defendants

based

is

instructive.

antitrust

on

the

claims

There,
against

counter-defendants

the

counter-

the

counter-

allegedly

having

filed a frivolous patent suit to keep the counter-plaintiffs
from

entering

product.
the

the

market

for

the

sale

of

a

pharmacological

2011 U.S. Dist. LEXIS 98547, at *3-5.

antitrust

claim,

the

counter-defendant

argued

In defending
that

other

factors barred the counter-plaintiff’s entry into the relevant
market,

most

notably

the

absence
27

of

FDA

approval

for

the

counter-plaintiff to market its product.

Id. at *11-12.

The

district

reasoning

the

court

rejected

the

argument,

that

counter-plaintiff had taken steps to enter the market and had
demonstrated its intent and preparedness to sell the product.
Id. at *16.
Likewise, here, while Blue Cross avers that Steward had not
satisfied certain conditions precedent to the Purchase Agreement
at

the

time

of

Blue

Cross’

alleged

anticompetitive

conduct,

Steward has pled facts sufficient to suggest that those actions
were

the

proximate

acquisition.

cause

of

the

collapse

of

the

Landmark

In order to convince a fact finder of Blue Cross’

culpability and to establish damages, Steward may ultimately be
called upon to demonstrate that its successful acquisition of
Landmark would have permitted Steward to develop its community
hospital model in Rhode Island.
the initial pleading stage.

But, Steward need not do so at

See Koch v. I-Flow Corp., 715 F.

Supp. 2d 297, 302 (D.R.I. 2010).

As such, it would be improper

to dismiss the action on grounds that the alleged damages are
too remote or speculative.
iii. Is Steward an Improper Plaintiff by Virtue of Not
Being a Market Competitor or Consumer?
Because Steward was neither a competitor nor a consumer in
the

Rhode

Island

market

at

the

time

that

the

alleged

anticompetitive conduct occurred, Blue Cross argues that Steward

28

is “presumptively disfavored” and thus lacks standing.

What is

more, Blue Cross suggests, other parties are better suited to
bring antitrust claims, further undermining Steward’s standing.
Current competitors and consumers in the alleged relevant
market are presumptive antitrust plaintiffs; all other parties
are “presumptively disfavored.”

Serpa Corp., 199 F.3d at 11-12;

see also SAS of Puerto Rico, Inc. v. Puerto Rico Tele. Co., 48
F.3d 39, 45 (1st Cir. 1995) (“If competitors and consumers are
favored

plaintiffs

in

antitrust

cases,

the

presumptively disfavored is far longer.”).

list

of

those

Nevertheless, there

are circumstances where presumptively disfavored plaintiffs may
sustain antitrust claims.

See Serpa Corp., 199 F.3d at 12; SAS

of Puerto Rico, 48 F.3d at 45.

“The most obvious reason for

conferring standing on a second-best plaintiff is that, in some
general category of cases, there may be no first best with the
incentive or ability to sue.”

SAS of Puerto Rico, 48 F.3d at

45.

In market exclusion cases, where evidence indicates that

the

plaintiff

has

been

directly

harmed

by

the

alleged

exclusionary conduct, standing may also be established.

See

Yangtze Optical Fibre v. Ganda LLC, No. CA 04-474ML, 2006 WL
1666180,

at

*3

(D.R.I.

June

9,

2006)

(the

standing

inquiry

“center[s] on whether or not the complaining party suffered a
sufficiently direct injury as a result of the alleged antitrust
violation.”).
29

As

an

initial

matter,

the

Court

notes

that

Steward

was

arguably already a participant in the Rhode Island market prior
to its attempted acquisition of Landmark.

As set forth in the

Complaint, Steward had been providing medical services to Rhode
Island

Blue

Cross

subscribers

through

its

operation

of

St.

Anne’s, in effect selling commercial hospital services to Blue
Cross.

(See Compl. ¶ 45.)

Regardless, even if the Court were to conclude that Steward
is a presumptively disfavored plaintiff, this case is one in
which there exists no other party with the incentive or ability
to sue.

Put simply, there is no party better-suited (or indeed

able) to bring claims alleging Steward’s unlawful exclusion from
the Rhode Island market other than Steward.

See SAS of Puerto

Rico, 48 F.3d at 45.
What is more, Steward has pled facts sufficient to indicate
that it suffered a direct injury as a result of Blue Cross’
alleged exclusionary conduct.
WL 1666180, at *3.

See Yangtze Optical Fibre, 2006

The Complaint plausibly suggests that Blue

Cross perceived Steward’s entry into the Rhode Island market as
a

threat,

and

took

steps

to

undermine

Landmark’s

financial

viability and otherwise frustrate Steward’s market entry.

See

Reazin v. Blue Cross & Blue Shield of Kansas, Inc., 899 F.2d
951, 962-63 (10th Cir. 1990) (“While it is true that [plaintiff]
was not itself a direct participant in the provision of health
30

care

financing,

it

was,

by

virtue

of

its

affiliation

with

[certain third parties], a perceived competitor of [defendant].
Indeed . . . that is the precise reason [defendant] undertook
the

conduct

at

issue

in

this

case.”)

(internal

citation

and

quotation marks omitted).
To permit the defendant in an unlawful exclusion case to
hide

behind

participants

the

presumptive

would

insurmountable

subject

Catch-22.

disfavoring

plaintiffs
Were

of

non-market

in

courts

such

cases

to

observe

a

to

an

blanket

prohibition on claims brought by those excluded from the market
by alleged anticompetitive conduct, those firms responsible for
the

exclusion

might

never

be

held

accountable.

In

these

circumstances, even if one were to conclude that Steward is a
presumptively

disfavored

plaintiff,

Steward

has

pled

facts

sufficient to establish antitrust standing.
C.

Did Steward Adequately Allege Relevant Markets?

Blue
failed

to

markets.

Cross

seeks

sufficiently

dismissal
plead

on

grounds

relevant

that

product

Steward

and

has

geographic

To state a valid antitrust claim, a plaintiff must

allege that the defendant possessed, at a minimum, a “dangerous
probability of achieving monopoly power” in a properly-defined
relevant market.

Spectrum Sports, Inc. v. McQuillan, 506 U.S.

447, 456 (1993); see also Ocean State Physicians Health Plan,
Inc. v. Blue Cross & Blue Shield of Rhode Island, 883 F.2d 1101,
31

1110 (1st Cir. 1989).

A relevant market includes both (1) the

product market and (2) the geographic area involved.

Lee v.

Life Ins. Co. of N. Am., 829 F. Supp. 529, 539 (D.R.I. 1993),
aff’d, 23 F.3d 14 (1st Cir. 1994).

Failure to plausibly allege

each of these components is grounds for dismissal.

Id. at 541.

However, because market definition is a “deeply fact-intensive
inquiry, courts hesitate to grant motions to dismiss for failure
to plead a relevant product market.”

Todd v. Exxon Corp., 275

F.3d 191, 199-200 (2d Cir. 2001); see also Morales-Villalobos v.
Garcia-Llorens, 316 F.3d 51, 55 (1st Cir. 2003) (“[W]hile there
are

arguments

for

a

larger

[geographic]

market,

the

matter

cannot be resolved on the face of the complaint.”).
i.

Does Steward Allege a Valid Product Market?

A relevant product market “is composed of products that
have reasonable interchangeability for the purposes for which
they

are

produced

–

price,

use

and

qualities

considered.”

George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 508
F.2d 547, 552 (1st Cir. 1974) (internal citation omitted).

If a

plaintiff “alleges a proposed relevant market that clearly does
not encompass all interchangeable substitute products . . . the
relevant market is legally insufficient and a motion to dismiss
may be granted.”

Queen City Pizza, Inc. v. Domino’s Pizza,

Inc., 124 F.3d 430, 436 (3d Cir. 1997).

32

Blue Cross argues that the Complaint’s depiction of the
market for the purchase of commercial hospital services ignores
the presence of Medicare and Medicaid, both major governmental
buyers of hospital services.

As such, Blue Cross contends, the

alleged product market does not encompass all interchangeable
substitute products.

The scant case law on this topic, however,

suggests that Steward’s exclusion of Medicare and Medicaid from
the relevant product market was not in error.
In United States v. Blue Cross Blue Shield of Mich., 809 F.
Supp. 2d 665 (E.D. Mich. 2011), the government brought antitrust
claims against the Blue Cross of Michigan entity related to Blue
Cross’ use of “most favored nation” clauses in its agreements
with

hospitals.

interchangeable

The

complaint

product

alleged

because

not

government health care programs.
went

unchallenged,

and

the

that

there

everyone

qualifies

Id. at 672.

district

court

Clinic

PA

Cross
v.

relies

Baptist

principally

found

Health,

591

on

Little

F.3d

591

no
for

That assertion
that

complaint had plausibly alleged a relevant product market.
Blue

was

Rock
(8th

the
Id.

Cardiology
Cir.

2009).

There, an association of cardiologists brought suit against the
defendant medical facility and a Blue Cross Blue Shield entity
alleging
eliminate

that
them

the

facility

from

and

competing

Blue
in

the

Cross

had

market

conspired

for

to

cardiology

services in Arkansas by revoking staff privileges from doctors
33

who had interests in a competing hospital.

Id. at 594.

The

plaintiffs argued that the relevant product market to which they
were deprived access should be limited to patients using private
insurance because private insurance and government programs such
as Medicare and Medicaid are not interchangeable.

Id. at 597.

They are not interchangeable, plaintiffs suggested, because not
everyone qualifies for Medicare and Medicaid based on their age
and income level.

Id.

The Court of Appeals for the Eighth Circuit affirmed the
district court’s dismissal based on the plaintiffs’ failure to
plead

a

relevant

product

market.

Id.

The

Eight

Circuit

reasoned that the plaintiffs were approaching the issue from the
wrong perspective.
for

Medicare

and

While it is true that not everyone qualifies
Medicaid,

from

the

standpoint

of

a

medical

doctor providing services, it does not matter how the patient
pays – private insurance, out-of-pocket, or through a government
program.
available

Id.
to

(“But

this

patients,

it

lawsuit
is

is

about

not

the

about

options

the

options

available

to

shut-out cardiologists. . . . Patients able to pay their medical
bill,

regardless

of

the

method

of

payment,

are

reasonably

interchangeable from the cardiologist’s perspective—the correct
perspective from which to analyze the issue in this case.”).
Despite

Blue

Cross’

arguments

to

the

contrary,

Baptist

Health stands for the proposition that the correct lens through
34

which

to

conduct

relevant

market

perspective of the aggrieved party.

analysis

is

from

the

Steward alleges that it was

excluded from the product market for the commercial purchase of
hospital services.

It is this market in which Steward does not

include Medicare and Medicaid as interchangeable substitutes.
Here, the opposite rationale of Baptist Health comes into
play.
not

The Baptist Health court focused on the fact that while

everyone

conceivably

qualifies
has

access

for
to

Medicare
every

patient

regardless of their method of payment.
the

purchase

of

hospital

and

services,

Medicaid,
in

the

a

doctor

marketplace

In the marketplace for
however,

Medicare

and

Medicaid purchase hospital services, but they can only do so for
the

limited

programs.
insurers

number
The

of

remainder

purchasing

individuals
of

hospital

the

that

market

services

for

qualify
consists
their

for
of

those
private

subscribers.

Viewing the product market from the perspective of an aggrieved
private purchaser of hospital services, then, it is appropriate
to exclude Medicare and Medicaid purchases because the private
purchaser was never competing to purchase those services in the
first place.

For this reason, the Court distinguishes Baptist

Health as inapposite and finds that Steward has sufficiently
pled a relevant product market.
ii.

Does Steward Allege a Valid Geographic Area?

35

A

relevant

geographic

market

consists

of

the

“the

geographic area in which the defendant faces competition and to
which consumers can practically turn for alternative sources of
the product.”
Petroleum
citation
market

Coastal Fuels of Puerto Rico, Inc. v. Caribbean

Corp.,

79

omitted).
in

an

competition.”

F.3d
In

182,
other

antitrust

(1st

words,

case

is

Cir.

the

1996)

relevant

the

“area

(internal
geographic

of

effective

Tampa Elec. Co. v. Nashville Coal Co., 365 U.S.

320, 327 (1961).

Failure to plead a relevant geographic market

is grounds for dismissal.
Pontifical

196

Catholic

Univ.

See, e.g., E. Food Servs., Inc. v.
of

P.R.

Serv.

Ass’n,

Inc.,

222

F.

Supp. 2d 131, 135-36 (D.P.R. 2002), aff’d, 357 F.3d 1 (1st Cir.
2004).
Blue
plausible

Cross

argues

geographic

that

market

Steward
because

has

failed

while

Steward

to

plead

a

identifies

Rhode Island as the relevant market, the Complaint admits that
people
Anne’s.

cross

state

lines

to

obtain

medical

services

at

St.

This argument, however, oversimplifies the two areas of

effective competition at issue in this case.

In the first area

of effective competition – the market for the sale of commercial
health

insurance

(the

market

that

Blue

Cross

is

alleged

to

monopolize), the relevant inquiry is not where patients turn for
hospital services, but where they turn for insurance.

Steward

accurately notes that Rhode Island residents cannot practicably
36

turn to out-of-state insurance providers that do not offer innetwork access to hospitals and doctors in Rhode Island.
Likewise,

in

assessing

the

market

for

the

commercial

purchase of hospital services (the market that Blue Cross is
alleged to monopsize), the relevant inquiry must assess which
hospitals Rhode Island residents can practicably turn to for
treatment.

While it is true that the Complaint indicates that

some Rhode Island residents cross state lines to obtain medical
services

at

St.

Anne’s,

practice is widespread.
consumers

of

medical

neither

party

suggests

that

this

Indeed, common sense suggests that most
services

would

choose

to

receive

those

services at locations proximate to their home or work in order
to minimize the time and cost of transportation. 12
Steward

has

alleged

a

valid

geographic

dismissal on these grounds is unwarranted.

area

such

that

See Blue Cross Blue

Shield of Mich., 809 F. Supp. 2d at 673 (“Geographic markets
need not be alleged or proven with ‘scientific precision,’ nor
be defined ‘by metes and bounds as a surveyor would lay off a
plot of ground.’

The complaint need only present sufficient

12

Contrary to the position taken by Blue Cross, the
Complaint’s acknowledgement that some patients cross state lines
to obtain treatment is by no means fatal to the claim.
In
discussing the Elzinga-Hogarty test for consumer origin, courts
have previously found a relevant geographic market where up to
10% of consumers were found to have gone outside the relevant
area to obtain a product.
See Nilavar v. Mercy Health Sys.-W.
Ohio, 244 F. App’x. 690, 697 (6th Cir. 2007); Gordon v.
Lewistown Hosp., 272 F. Supp. 2d 393, 426 (M.D. Pa. 2003).
37

information to plausibly suggest the contours of the relevant
geographic market.”) (internal citations omitted).
D.

Is Blue Cross Entitled to Immunity for its Lobbying
Activities Under the Noerr-Pennington Doctrine?

In addition to the principal claim that Blue Cross engaged
in

an

unlawful

refusal

to

deal,

Steward

makes

a

variety

of

ancillary claims related to Blue Cross’ petitioning activities
in opposition to the Landmark acquisition.
include

Blue

Cross’

filing

of

an

objection

These activities
with

the

Special

Master, lobbying against passage of an amendment to the Hospital
Conversion Act, and filing of an application with the Department
of Health to remove Landmark from its provider network.
Compl. ¶¶ 25, 32-33, 36.)

(See

While both parties conclude that

these activities do not independently give rise to the antitrust
claims, Blue Cross asks that they be stricken from the Complaint
by virtue of the immunity afforded petitioning activity under
the Noerr-Pennington Doctrine.
Under
government
unless

the

Noerr-Pennington,
for

redress

petitioning

is
is

a

party

immune
a

from

sham. 13

that

petitions

antitrust
Prof’l

the

liability,

Real

Estate

Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49,

13

The Noerr-Pennington Doctrine is rooted in First
Amendment concerns about the chilling of political speech. See
E. R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S.
127 (1961).
38

56-60 (1993) (discussing E. R.R. Presidents Conf. v. Noerr Motor
Freight, Inc., 365 U.S. 127 (1961)).

Nevertheless, a plaintiff

may properly include evidence of immune lobbying activity in its
antitrust

allegations

illustrate

insofar

the

context

anticompetitive

and

conduct.

as

that

motive

See

evidence

underlying

United

Mine

serves
the

Workers

to

alleged

of

Am.

v.

Pennington, 381 U.S. 657, 670 n.3 (1965) (An activity “barred
from

forming

introduced

the

if

it

basis
tends

for

a

suit,

reasonably

to

may
show

nevertheless
the

purpose

be
and

character of the particular transactions under scrutiny.”).
As

noted,

both

parties

conclude

that

the

various

petitioning activities undertaken by Blue Cross do not form the
basis

of

purposes

Steward’s
of

claim,

illuminative

but

rather

are

introduced

Blue

Cross’

for

anticompetitive

the

intent.

(See Def.’s Mot. to Dismiss 18, ECF No. 16; Pl.’s Objection to
Def.’s

Mot.

circumstances,

to

Dismiss
the

25,

ECF

inclusion

of

No.
Blue

23-1.)

Under

Cross’

these

petitioning

activities in the Complaint is proper, and the Court declines
Blue Cross’ request to strike this material. 14

See Pennington,

381 U.S. at 670 n.3.
IV.

Tortious Interference Claims

14

Although briefed by both parties, the Court need not
reach the issue of whether the petitioning might be subject to
the sham exception to the Noerr-Pennington Doctrine.
39

To state a claim for tortious interference with existing or
prospective contractual relations, the plaintiff must establish:
“(1) the existence of a business relationship or expectancy, (2)
knowledge by the interferor of the relationship or expectancy,
(3)

an

intentional

act

of

interference,

(4)

proof

that

the

interference caused the harm sustained, and (5) damages to the
plaintiff.”
(R.I.

Roy v. Woonsocket Inst. for Sav., 525 A.2d 915, 919

1987).

Blue

interference

counts

Cross
on

moves

to

grounds

dismiss

that

the

Steward

tortious

failed

to

element,

a

sufficiently plead an intentional act of interference.
To

satisfy

plaintiff

must

the

allege

without justification.”

intentional
“legal

interference

malice”

or

“intent

to

do

harm

Belliveau Bldg. Corp. v. O’Coin, 763

A.2d 622, 627 (R.I. 2000).

Whether an act of interference is

unjustified

weighing

ultimately

on

situation.”
98

(R.I.

depends
the

on

the

“judgment

and

of

choice

several
of

factors 15

values

in

and
each

Avila v. Newport Grand Jai Alai, LLC, 935 A.2d 91,

2007)

(internal

citation

15

and

punctuation

omitted).

Those factors include:
“(1) the nature of the actor’s
conduct; (2) the actor’s motive; (3) the contractual interests
with which the conduct interferes; (4) the interests sought to
be advanced by the actor; (5) the balance of social interests in
protecting freedom of action of the actor and the contractual
freedom of the putative plaintiff; (6) the proximity of the
actor’s conduct to the interference complained of; and (7) the
parties’ relationship.”
Belliveau Bldg. Corp. v. O’Coin, 763
A.2d 622, 628 n.3 (R.I. 2000) (citing Restatement (Second) of
Torts § 767, at 26-7 (1979)).
40

While a defendant may avoid liability for tortious interference
where its actions were undertaken with the benefit of a legally
recognized privilege or other justification, Alfieri v. Koelle,
No. 06-510, 2007 U.S. Dist. LEXIS 24003, at *7 (D.R.I. March 29,
2007), to defeat a tortious interference claim on a motion to
dismiss, the privilege or other justification must be one of
well-documented and unquestioned authority, whether by contract
or statute.

See Ira Green, Inc. v. Military Sales & Serv. Co.,

No. 10-207-M, 2012 U.S. Dist. LEXIS 82290, at *6-7 (D.R.I. June
13, 2012) (citing cases).
Blue

Cross’

argument

may

be

distilled

as

follows:

any

action that it allegedly took to hinder the Landmark acquisition
and Steward’s entry into the Rhode Island market was justified
in

order

to

protect

Blue

Cross’

business

interests

because

Steward intended to acquire Landmark in order to increase its
own

negotiating

previously,
discussion

leverage.

Blue
of

Cross’

As

argument

negotiating

an

initial

matter,

misconstrues

leverage.

(See

the

supra

as

noted

Complaint’s
at

Section

B(i).)

What is more, Blue Cross does not argue, nor could it

prove,

that

its

alleged

interference

with

the

Landmark

acquisition and with Steward’s arrangements with third parties
including Thundermist Health Center was privileged by contract
or statute.

See Ira Green, 2012 U.S. Dist. LEXIS 82290, at *6-

7; Barkan v. Dunkin’ Donuts, Inc., 520 F. Supp. 2d 333, 341-42
41

(D.R.I. 2007); Avila, 935 A.2d at 99.
Cross’

actions

inquiry.

were

justified

will

Determining whether Blue
require

See Belliveau, 763 A.2d at 628 n.3.

a

fact-intensive

Thus, Blue Cross’

Motion to Dismiss cannot be granted with respect to the tortious
interference claims. 16
V.

Conclusion
Because Steward has alleged sufficient facts to state a

plausible

claim

that

Blue

Cross

engaged

in

anticompetitive

conduct in violation of state and federal antitrust law, and
tortuously interfered with existing and prospective contractual
relations, Blue Cross’ Motion to Dismiss is DENIED.

IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: February 19, 2014

16

The Court declines to credit Blue Cross’ argument that
Steward has not satisfied the causation element of its tortious
interference claims based on the conditions precedent to the
Purchase Agreement that remained at the time of the alleged
interference.
Resolution of this issue on a motion to dismiss
is premature. See Ed Peters Jewelry Co. v. C & J Jewelry Co.,
51 F. Supp. 2d 81, 102 (D.R.I. 1999), aff’d, 215 F.3d 182 (1st
Cir. 2000) (“[C]ausation [in tortious interference claims] is
generally a matter left to the consideration of the jury.”).
42