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The Medical Center At Elizabeth Place, LLC v. Atrium Health System

United States Court of Appeals, Sixth Circuit

April 25, 2019

The Medical Center at Elizabeth Place, LLC, Plaintiff-Appellant,
v.
Atrium Health System, et al., Defendants-Appellees.

          Argued: April 25, 2018

          Appeal from the United States District Court for the Southern District of Ohio at Dayton. No. 3:12-cv-00026-Walter H. Rice, District Judge.

          Richard A. Ripley, RUYAK CHERIAN LLP, Washington, D.C., for Appellant. Shay Dvoretzky, JONES DAY, Washington, D.C., for Appellees. ON BRIEF: Richard A. Ripley, Brittany V. Ruyak, RUYAK CHERIAN LLP, Washington, D.C., James A. Dyer, Patrick O'Shaughnessy, SEBALY, SHILLITO DYER, Dayton, Ohio, for Appellant.

          Shay Dvoretzky, Robert Stander, JONES DAY, Washington, D.C., Melinda K. Burton, FARUKI IRELAND COX RHINEHART & DUSING P.L.L., Dayton, Ohio, Thomas Demitrack, JONES DAY, Cleveland, Ohio, for Appellees.

          Before: BATCHELDER, SUTTON, and WHITE, Circuit Judges.

          OPINION

          ALICE M. BATCHELDER, CIRCUIT JUDGE.

         This is a case about competition among hospitals in Dayton, Ohio. When Medical Center at Elizabeth Place, LLC ("MCEP") opened in 2006, it was an acute care, for-profit hospital owned by 60 physicians and one corporate shareholder. By 2009, MCEP's existence as a physician-owned enterprise came to an end when it sold an ownership interest to Kettering Health Network, a competitor in the Dayton healthcare market. MCEP alleges that it failed because of the anticompetitive actions of Premier Health Partners ("Premier"), a dominant healthcare network in the Dayton area. MCEP alleges that Premier contracted with area physicians and payers (insurers and managed-care plan providers) on the condition that they did not do business with MCEP. Because payers provide patients and physicians provide services, it is difficult to run a viable hospital when one, let alone both, is in short supply.

         So, whether by licit or illicit means, Premier won that competition. In this litigation, the parties competed again. This time, MCEP pushed all its chips to the center of the table on one hand of cards: a claim that Premier had engaged in conduct so devoid of benefit to the market as to be per se illegal under the Sherman Act. Such claims apply only to a limited range of conduct. To be per se illegal, a defendant's conduct has to be so obviously anticompetitive that it has no plausibly procompetitive features-a high hurdle for plaintiffs claiming restraint of trade. Once they clear it, however, plaintiffs receive a corresponding reward: they need not undergo the often arduous process of showing that the challenged conduct was anticompetitive. As one of our sister circuits has described it, "[t]he per se rule is the trump card of antitrust law. When an antitrust plaintiff successfully plays it, he need only tally his score." United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1362-63 (5th Cir. 1980).[1]

         The question before us is whether MCEP successfully played its hand. The district court from which MCEP appeals found that MCEP's per se claim failed because the record showed that Premier's contracts with payers and physicians had plausibly procompetitive features. That holding says nothing about whether Premier's conduct was on balance procompetitive or anticompetitive. This opinion likewise reaches no decision on the ultimate economic merits of Premier's actions because to do so would go beyond our charge. We must address only the question of per se illegality, and as to that, we agree with the district court that MCEP failed to meet the high standard required for per se claims. We AFFIRM.

         I.

         MCEP alleges a conspiracy between the Premier hospitals that implicates, without naming as defendants, payers and physicians in the Dayton area. During the course of this multi-year litigation, various legal issues raised in this case have been ruled on by U.S. District Judge Black, a Sixth Circuit appellate panel, and then, after the matter was remanded and Judge Black recused himself, District Judge Rice, who granted the motion for summary judgment presently before us.

         Factual Background

         MCEP is an acute-care hospital located in Dayton, Ohio, that opened in September 2006 with 60 physician owners and one corporate shareholder, Regent Surgical Health. Defendants in this case comprise four hospitals-Miami Valley Hospital (owned by MedAmerica Health), Good Samaritan Hospital (owned by Catholic Health Initiatives), Atrium Medical Center (owned by Atrium Health Systems), and Upper Valley Medical Center-as well as a joint operating company, Premier Health Partners ("Premier"), formed through a joint operating agreement among those four hospitals.[2] This joint operating agreement merged some of the hospitals' healthcare functions but allowed them to retain control of others. Med. Ctr. at Elizabeth Place v. Atrium Health Sys. ("MCEP I"), 817 F.3d 934, 936-37 (6th Cir. 2016). Hospital Defendants comprise a dominant healthcare network in the Dayton area, with more than a 55% share of Dayton's inpatient surgical services.

         In spite of its dominant market position, the record leaves no doubt that Hospital Defendants felt threatened by the possibility of MCEP's presence in the Dayton medical market. Five months before MCEP opened for business, Hospital Defendants held a board meeting at which, "[b]y consensus, the Board supported management's efforts" to oppose MCEP. Executives from Premier told an MCEP shareholder that Hospital Defendants "would do whatever they needed to do in order to stop [MCEP] from opening."

         Hospital Defendants' underlying concern appears to have been that MCEP's for-profit, physician-owned model of healthcare would "bankrupt" their hospitals. A letter written by primary care physicians (most of whom were affiliated with Hospital Defendants), addressed to physicians in the Dayton healthcare market, expressed the dynamic they found worrisome:

There is currently widespread opposition among not-for-profit community hospitals across the country toward physician owned inpatients [sic] hospitals such as this. The physician investors are doing so for reasons of profitability. MVH and GSH offer the range of services and the quality of care necessary to enable surgeons to care for their patients. A physician owned specialty hospital will take the better-insured and more profitable patients away from Premier (along with ancillary services), leaving our local hospitals with only the more complex and underinsured patients.

         MCEP, for its part, wrote a "Dear Colleague" letter the next month, responding:

• While MCEP's business model will "create a competitive environment to deliver better and more efficient healthcare in Dayton," it will not drive hospitals out of business;
• MCEP "will not turn away patients on the basis of payor classification";
• "Premier generates about $1 billion in revenues and currently has a cash reserve of over $1 billion. As a non-profit, Premier pays no taxes. . . . [MCEP] will have revenues that are a fraction of Premier's, and our physician-owned hospital will pay corporate, personal and property taxes";
• "[C]omprehensive studies have confirmed that physician-run hospitals have fewer medical errors, shorter turnover times, fewer infections and greater cost efficiencies."

         Citing Hospital Defendants' board-meeting consensus and their letter to physicians, MCEP alleges that Hospital Defendants blocked MCEP from gaining meaningful access to the Dayton market through a series of anticompetitive acts that amounted to a group boycott of MCEP. In its Amended Complaint, MCEP made only a per se claim; MCEP made no claim under the rule of reason. MCEP's Amended Complaint alleges that Hospital Defendants:

• financially coerced commercial health insurers or managed care plan providers (such as Anthem, UnitedHealthcare, Private Healthcare Systems, etc.) "to refuse to permit [MCEP] full access to their respective networks";
• financially coerced commercial health insurers or managed care plans to reimburse MCEP at suppressed rates far below what Hospital Defendants demanded for the same services;
• threatened retributive financial consequences to physicians who affiliated with MCEP, and followed through on threats, "including terminating leases that the physicians had with the Defendants for office space";
• offered payments to physicians "who agreed not to work with or at [MCEP]; and who agreed to divest ownership in the Medical Center";
• financially coerced physicians affiliated with Hospital Defendants from "admitting patients to [MCEP] or referring patients to physicians who treated patients at [MCEP]"; and
• deliberately poached physicians from MCEP who made up a "disproportionately high number of admissions and then prohibited them from admitting patients to [MCEP]."

         Beyond these allegations, MCEP claims that, in the course of litigation, it discovered two additional agreements that comprised part of the actionable group boycott.[3] First, MCEP alleges an agreement among the payers, induced by Hospital Defendants, not to offer MCEP a managed care contract. Second, MCEP alleges an agreement among primary care physicians not to do business with physicians who invested in MCEP (Hospital Defendants refer to this as the "physician conspiracy"). Hospital Defendants describe the relationship of these agreements to the original allegation using the metaphor of a hub, spoke, and rim. For these claims, the Hospital Defendants form the hub; the vertical agreements the Hospital Defendants made with payers and physicians to exclude MCEP are the spokes; and the discrete agreements to boycott MCEP, among the payers and among the physicians, are at the rim.

         MCEP alleged only the "hub" agreement in its Amended Complaint. Hospital Defendants argue that the "rim conspiracy" claim is a new, and untimely, Sherman Act Section 1 claim. MCEP, for its part, maintains that the additional agreements are simply evidence of the overarching Section 1 conspiracy alleged in their Amended Complaint. Regardless of the exact scope of the alleged boycott, MCEP alleges that one existed, that it was orchestrated by Hospital Defendants, and that it prevented MCEP from succeeding as a going concern. MCEP claims that, but for Hospital Defendants' conduct, it would have been able to contract with payers and physicians, which would have, in turn, increased competition in the Dayton healthcare market for consumers of general inpatient surgical services.

         Procedural History

         This case was before Judge Black in Cincinnati from January 30, 2012, to April 19, 2017. During that time, Judge Black granted Hospital Defendants' motion for summary judgment on the ground that the MCEP's antitrust claim lacked the necessary plurality of actors.

         On appeal to this court, a divided panel reversed Judge Black and rejected Hospital Defendants' motion for summary judgment. The panel held that a reasonable juror could find that Premier comprised multiple competing entities and, therefore, could engage in concerted action. MCEP I, 817 F.3d at 945. The panel did not address other issues raised before it, such as whether MCEP's additional rim conspiracy claims were untimely. Id. at 939.

         On remand, Hospital Defendants moved again for summary judgment arguing, among other things, that MCEP's allegation of a per se antitrust violation failed as a matter of law. Hospital Defendants argued that their alleged restraints on trade were plausibly procompetitive which, they argued, is sufficient to defeat a per se antitrust claim. Because MCEP pleaded only a per se claim, if Hospital Defendants had succeeded in this argument, the case would have been dismissed. Judge Black denied Hospital Defendants' renewed motion for summary judgment, rejecting Hospital Defendants' argument on two alternative bases: first, the claimed procompetitive effects of the challenged conduct are subject to genuine dispute and are therefore an improper basis for summary judgment, and second, Hospital Defendants "failed to evidence that their joint contracting has any efficiency-enhancing purpose to which such an agreement is necessary." Med. Ctr. at Elizabeth Place v. Premier Health Partners, 2016 WL 9460026, at *5 (S.D. Ohio Oct. 6, 2016).

         The case was set for trial. But on April 19, 2017, Judge Black recused himself and the case was re-assigned to Judge Rice.[4] Before Judge Rice, Hospital Defendants moved to "Clarify Issues for Trial," which all parties now agree amounted to a motion for reconsideration of Judge Black's October 6, 2016, order denying Hospital Defendants' motion for summary judgment. Less than a week before trial was set to begin, Judge Rice granted Hospital Defendants' motion for summary judgment and dismissed the Amended Complaint with prejudice. Judge Rice declined to apply the "law of the case" doctrine, holding that Judge Black had clearly erred. He found that while Judge Black correctly articulated the standard for a per se claim-that the challenged conduct must have no plausible procompetitive effect-Judge Black failed to acknowledge that the record showed that the Hospital Defendants' challenged restraints had such plausible procompetitive effects. Judge Rice also rejected MCEP's argument that the Amended Complaint implicitly included claims of rim conspiracies among the payers and among the physicians-claims that all agree, if proven, would constitute a per se violation-explaining that those claims were not contained in the Amended Complaint, that MCEP's attempt to "wedge this new claim into the existing allegations" was improper, and that the Hospital "Defendants would be severely prejudiced if MCEP were permitted to amend its Complaint [again] at this late date." MCEP asks us to reverse Judge Rice's decision granting Hospital Defendants' motion for summary judgment and to remand the case for trial.

         II.

         Summary judgment is warranted if, viewing the facts in the light most favorable to the nonmoving party, no material fact is subject to a genuine dispute. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986).[5] We review de novo grants of summary judgment. Expert Masonry, Inc. v. Boone Cty., 440 F.3d 336, 341 (6th Cir. 2006).

         The parties dispute what de novo review should entail in this case. MCEP claims that Judge Rice's decision to not apply the "law of the case" doctrine was critical to his decision to grant Hospital Defendants' motion for summary judgment, and therefore we must review Judge Rice's "law of the case" decision de novo. According to MCEP, Judge Rice could reconsider Judge Black's denial of summary judgment only by finding that Judge Black clearly erred. So, MCEP says, if Judge Rice was wrong that Judge Black committed clear error, then we must reverse his "law of the case" judgment. For their part, Hospital Defendants argue that we should simply review de novo Judge Rice's substantive legal conclusions, separate and apart from Judge Rice's "law of the case" conclusion.

         Ultimately, the Hospital Defendants have the better of this argument. First, we review for abuse of discretion Judge Rice's decision to reconsider Judge Black's pre-transfer order. See United States v. Todd, 920 F.2d 399, 403 (6th Cir. 1990). MCEP argues that abuse of discretion is not the proper standard of review in a case transferred from one district court to another, in which a pre-transfer ruling of one judge is altered by a post-transfer decision of a different judge. We have foreclosed this argument by holding-in precisely the scenario identified by MCEP- that abuse of discretion remains the proper standard of review. See Gillig v. Advanced Cardiovascular Sys. Inc., 67 F.3d 586, 590 (6th Cir. 1995).[6]

         Second, we can find that Judge Rice abused his discretion in disturbing Judge Black's denial of summary judgment only if we have a "definite and firm conviction that [Judge Rice] committed a clear error in judgment" such as "rel[ying] upon clearly erroneous factual findings, appl[ying] the law improperly, or us[ing] an erroneous legal standard." See Garner v. Cuyahoga Cty. Juvenile Ct., 554 F.3d 624, 634 (6th Cir. 2009) (citation and quotation marks omitted). Of these potential bases for abuse of discretion, MCEP argues only that Judge Rice improperly applied the law, a question that we review de novo.

         III.

         MCEP's raises two substantive claims on appeal. First, MCEP argues that the district court erred by declining to apply the per se rule to Hospital Defendants' allegedly anticompetitive conduct. Second, MCEP argues that the district court erred in rejecting MCEP's "horizontal rim claims" due to untimeliness. Neither argument has merit.

         A.

         Per se claim

         Section 1 of the Sherman Act states that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1. Because virtually every agreement between parties has the potential to be considered a restraint of trade, antitrust jurisprudence limits the range of restraints within the reach of antitrust law to agreements that unreasonably restrain trade. In re Southeastern Milk Antitrust Litig., 739 F.3d 262, 270 (6th Cir. 2014). A restraint on trade may be found to be unreasonable per se or under the "rule of reason." Id. As MCEP makes only a per se claim, the question before us is whether Judge Rice erred in granting Hospital Defendants' motion for summary judgment on the grounds that Hospital Defendants' conduct falls outside per se illegality. Judges Black and Rice did not agree in their answer to the underlying ...


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