W. Penn Allegheny Health Sys., Inc. v. UPMC (Full Text)
Case: 09-4468 Document: 003110361329 Page: 1 Date Filed: 11/29/2010
PRECEDENT IAL
UN ITED STATES COURT OF A PPEALS
FOR THE TH IRD C IRCU IT
N o . 09 -4468
W EST PENN ALLEGHENY HEALTH SY STEM , INC .,
A ppe llan t
v .
UPMC ; H IGHM ARK , INC .
O n A ppea l from the U n i ted S ta tes D is tr ic t C ou r t
fo r the W este rn D istric t o f Penn sylvan ia
D is tric t C ou rt N o . 2 -09 -cv -00480
D is tric t Judge : The H ono rab le A rthu r J . Schw ab
A rgued Sep tembe r 15 , 2010
B e fo re : SLOV ITER , BARRY , and SM ITH , C ircu it Judge s
(F iled : N ovembe r 29 , 2010 )
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Case: 09-4468 Document: 003110361329 Page: 2 Date Filed: 11/29/2010
B a rak A . B a ssm an
Jam es T . G iles
B a rba ra W . M a the r (a rgued )
B a rba ra T . S ica lide s
Peppe r H am i lton
18 th & A rch S tree ts
3000 Tw o Logan Square
Ph ilade lph ia , PA 19103
A nd rew K . F le tche r
Peppe r H am i lton
500 G ran t S tree t
50 th F loo r
P ittsbu rgh , PA 15219
C oun se l fo r Appe llan t
Jona than M . Jacob son (a rgued )
W ilson , Son sin i, G ood rich & R o sa ti
1301 A venue o f the Am e rica s
40 th F loo r
N ew Y o rk , NY 10019
N ilam A . Sanghv i
N ancy W inke lm an
Schnade r H a rrison Sega l & L ew is
1600 M a rke t S tree t
Su ite 3600
Ph ilade lph ia , PA 19103
Pau l H . T itu s
Schnade r H a rrison Sega l & L ew is
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120 F if th A venue
2700 F if th A venue P lace
P ittsbu rgh , PA 15222
C oun se l fo r Appe llee UPM C
D an ie l I . B ooke r (a rgued )
Je f frey J . B re sch
D onna M . D ob lick
Pau l G . Eastga te
R eed Sm ith
Su ite 1200
225 F if th A venue
P ittsbu rgh , PA 15222
C oun se l fo r Appe llee H ighm a rk , Inc .
________________
O P IN ION
________________
SM ITH , C ircu it Judge .
The p la in tif f in th is an titru s t ca se is P ittsbu rgh ’s second –
la rge st ho sp ita l sys tem . It sued P ittsbu rgh ’s dom inan t ho sp ita l
sys tem and hea lth in su re r unde r the She rm an A c t and s ta te law .
The p la in tif f asse rts tha t the de fendan ts v io la ted sec tion s 1 and
2 o f the She rm an A c t by fo rm ing a con sp iracy to p ro tec t on e
ano the r f rom compe tition . The p la in tif f says tha t pu rsuan t to the
con sp iracy, the dom inan t ho sp ita l sys tem u sed its pow e r in the
p rov ide r m a rke t to in su la te the hea lth in su re r f rom compe tition ,
and in exchange the in su re r u sed its pow e r in the in su rance
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m a rke t to s t ren g then the ho sp ita l sys tem and to w eaken the
p la in tif f . The p la in tif f a lso a sse rts tha t the dom inan t ho sp ita l
system v io lated sec tion 2 o f the She rm an A c t by a ttem p ting to
m onopo lize the P ittsbu rgh -a rea ma rke t fo r spec ia lized ho sp ita l
se rv ice s. F ina lly, the p lain tiff asse rts sta te- law c laim s fo r un fa ir
compe tition and to rtiou s in te rfe rence aga in s t the dom inan t
ho sp ita l sys tem . The D is tric t C ou rt d ism issed the She rm an A c t
c la im s and , h av ing done so , dec lined to exe rc ise supp lemen ta l
ju risd ic tion ove r the sta te -law c la im s . B ecau se w e conc lude tha t
the D is tr ic t C ou r t e r red in d ism iss ing the She rm an A c t c la im s ,
w e w i ll reve rse in pa rt, vaca te in pa rt, and remand fo r fu rthe r
p ro ceed ing s .
I . Facts
The fo l low ing fac ts are a l leg ed in the p la in t iff ’s
com p lain t. T he D istric t C ou rt dec ided th is case on a m o tion to
d ism iss . W e accep t a s true the fac tua l a llega tion s in the
com p la in t and d raw a l l rea sonab le in fe rence s in the p la in t iff’s
favo r. R eve ll v . Po r t Au th ., 598 F .3d 128 , 134 (3d C ir . 2010 ).
A . C as t o f C harac ters
Th is law su it invo lves th ree pa r ties . The p la in t if f W es t
Penn A llegh eny H ea lth System , Inc . (“W est P enn” ) is
P ittsbu rgh ’s second – la rges t ho sp ita l sys tem ; it has a sha re o f less
th an 23% o f the m a rke t fo r ho sp ita l se rv ices in A l legheny
C oun ty, w h ich inc lude s the C ity o f P ittsbu rgh . The de fendan t
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U n iv e rsity o f P ittsbu rgh M ed ica l C en ter (“U PM C ” )
is
P ittsbu rgh ’s dom inan t ho sp ita l sys tem . It en joys a 55% sha re o f
the A l legheny C oun ty m arke t fo r ho sp i ta l serv ices , and i ts share
o f the ma rke t fo r te rtia ry an d qua te rna ry ca re se rv ice s exceed s
50% . W est P enn and U PM C a re the tw o m a jo r com pe tito rs in
1
the A llegheny C oun ty m a rke t fo r ho sp ita l se rv ice s, and a re the
on ly com p e t itors in the m arke t fo r ter t iary and qua ternary ca re
se rv ice s. The de fendan t H ighm a rk , Inc . is the dom inan t in su re r
in the A llegheny C oun ty m a rke t fo r hea lth in su rance .2
H ighm a rk ’s m a rke t sha re ha s rema ined be tw een 60% and 80%
s ince 2000 .
B . P re -C on sp iracy C onduc t
In 2000 , The W e ste rn Penn sylvan ia H ea lthca re Sys tem
m e rged w ith seve ra l f inan c ia lly d is tressed m ed ica l p rov ide rs,
“Tertiary care” refers to highly sophisticated, specialized
1
care. See Highmark Br. at 3 n.1. “Quaternary care” refers to
“advanced levels of medicine which are highly specialized and not
widely used.” Id. at 4 n.2.
Specifically, the relevant market with respect to Highmark
2
is alleged to be the Allegheny County market for “health care
financing and administration for private employers and individuals,
including indemnity insurance, managed care products such as HMO,
PPO, or POS plans, and third-party administration of employer self-
funded health plans.” JA 129. But in their briefs the parties have
referred to this market as the Allegheny County market for health
insurance, and we do the same.
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inc lud ing A llegheny G ene ra l H o sp ita l, to fo rm W e st Penn .
H ighm a rk funded the me rge r w ith a $125 m i ll ion loan .
H ighm a rk ’s la rge sse d id no t sp ring f rom a sen se o f a ltru ism bu t
w a s in tended to p re se rve com pe tition in the m a rke t fo r ho sp ita l
se rv ice s. H ad the f inanc ia l ly d is tre ssed p rov ide rs comp r is ing
W e st Penn fa iled , U PM C w ou ld have a tta ined nearly unchecked
dom inance in the ma rke t. Th is w ou ld no t h av e been good fo r
H ighm ark : the m o re dom inan t UPM C bec om e s , the m o re
leve rage it ga in s to dem and g rea te r re imbursem en ts f rom
H ighm a rk . (R e imbu rsem en ts a re the paym en ts insu re rs g ive to
p rov ide rs
to cove r se rv ices
rende red
to
th e
insu re rs ’
sub scr ibe rs .)
A f ter the m e rge r, H ighm a rk and W est P enn con tinued to
en joy a good re la tion sh ip , a s H ighm a rk reco gn ized tha t
p rese rv ing W es t Penn w as in i ts in tere s ts . Thu s , H ighm ark
en c ou raged inves to rs to pu rchase bond s f rom W es t P enn ,
tou ting its f inanc ia l ou tlook an d the qua lity o f its m ed ica l
se rv ice s. A nd in ea r ly 2002 , H ighm a rk gave W e st Penn a $42
m illion g ran t to inves t in its fac ilities .
In con t ras t to H ighm a rk , U PM C has been ho s tile to W es t
Penn s ince its incep tion . U PM C oppo sed the me rg e r c rea ting
W e st Penn : it in te rvened in the me rge r p roceed ing s , f iled an
un su cc e ssfu l law su it to p reven t H ighm a rk f rom fund ing the
m erger , and a t tem p ted (w i th some su ccess) to d issuade inv es to rs
f rom pu rcha sing W e st Penn bond s . U PM C ’s ho s tility tow a rd s
W es t Penn con t inued af ter th e m erger . S ince W es t Penn ’s
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fo rm a tion , U PM C execu tive s have repea ted ly sa id tha t they
w an t to de stroy W e st Penn , and they have taken ac tion to fu rthe r
tha t goa l on m o re than a few occas ion s . B u t mo re on tha t la ter .
See Sec tion I.E , in fra .
H isto rica lly, UPM C has a lso h ad a b itte r re lation sh ip
w ith H ighm a rk . Fo r examp le , w hen UPM C demanded
pu rpo rted ly exce ss ive re im bu rsemen t ra te s f rom H ighm a rk ,
H ighm a rk responded by fo rm ing C omm un ity B lu e , a low -cos t
in su rance p lan . To pa rtic ipa te in C omm un ity B lue , a ho sp ita l
had to ag ree to accep t reduced re imbu rsem en ts , bu t w ou ld
rece ive a h ighe r vo lum e o f pa tien ts. W est P enn pa rticipa ted in
C omm un ity B lue , bu t UPM C d id no t, cla im ing tha t its
re imbu rsem en t ra te s w e re too low . UPM C responded to
Commun ity B lu e by form ing its own h ea lth in su re r , U PM C
H ea lth P lan . UPM C H ea lth P lan has b een H ighm a rk ’s m a in
compe tito r in the A llegheny C oun ty m a rke t fo r hea lth in su rance
s ince its fo rm a tion .
M o reove r , H ighm a rk and U PM C hav e faced o f f in
litiga tion in the pa st. In a 2001 fede ra l law su it, H ighm a rk sued
U PM C unde r the L anham A c t, a sse rting tha t U PM C had made
fa lse sta tem en ts abou t Comm un ity B lue in an adve rtisem en t.
The D istric t Cou rt ag reed w ith H ighm a rk and p re lim ina rily
en jo ined d issem ina tion o f the adve r ti sem en t; w e a ff irm ed on
app ea l. H ighm a rk , Inc . v . UPM C H ea lth P lan , Inc ., 276 F .3d
160 , 171–73 (3d C ir. 2001 ) . In ano ther 2001 law su i t, H ighm ark
sough t to en jo in U PM C ’s propo sed acqu is it ion o f a ch i ld ren ’s
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ho sp ital; H ighm a rk c laim ed tha t the acqu isition w ou ld v io late
the an titru s t law s . The case u ltim a te ly se ttled , how eve r, and
U PM C acqu ired the ho sp ital.
C . The Con sp iracy B eg in s ; the D ynam ic s C hange
In 1998 , U PM C o f fered a “ truce” to H ighm a rk . U nde r
the term s o f the truce , each en tity w ou ld u se its m a rke t pow e r to
p ro tec t the o the r f rom compe tition . H ighm a rk in itia lly re jec ted
UPMC ’s o f fe r , c ritic iz ing it as an illega l “a t tem p t to fo rm a
‘sup er’ m onopo ly fo r the p rov is ion o f h ea l th ca re in W es tern
Penn sylvan ia in w h ich [UPM C ] , the lead ing p rov ide r o f ho sp ita l
se rv ice s, and H ighm a rk , the lead ing hea lth insu re r, w ou ld
com b ine fo rces .” JA 95 .
T h e comp la in t a lleges , how eve r , tha t in the summ e r o f
2002 , ov e r
th e cou rse o f severa l mee t ing s , H ighm ark
recon side red and dec ided to accep t U PM C ’s o f fer o f a truce .
The comp la in t a llege s tha t U PM C ag reed to u se its pow e r in the
p rov ide r m a rke t to p reven t H ighm a rk compe tito rs f rom ga in ing
a foo tho ld in the A llegheny C oun ty m a rke t fo r hea lth in su rance ,
and in exchange H ighm a rk ag reed to take step s to s treng then
U PM C and to w eaken W e st Penn . The comp la in t o f fers the
fo llow ing fac tua l a llega tion s in suppo rt o f the con sp iracy c la im .
U PM C engaged in conduc t tha t e f fec tive ly in su la ted
H ighm a rk f rom com pe ti tion . F irst, it re fu sed to en ter in to
com pe titive p rov ide r ag reem en ts w ith H ighm a rk ’s r iva ls. Th is
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p reven ted the riva ls f rom en ter ing the A llegheny C oun ty hea lth
in surance market because , g iven UPM C ’s dom inance , an in su re r
canno t succeed in the m arke t w i thou t be ing ab le to o ffer a
com pe t it ive ly-pr iced p lan tha t inc lud es U PM C as an in-ne tw o rk
p rov ider . 3
Second , U PM C sh runk U PM C H ea l th P lan (H ighm ark ’s
m a in com p e ti to r in the insu rance m a rke t). It cu t the H ea lth
P lan ’s adve rtis ing budge t and inc rea sed its p rem ium s , w h ich led
to a sh a rp d rop in en ro llm en t. It a lso re fu sed to se ll the H ea lth
P lan to in su re rs in te re s ted in buying it, w h ich m igh t have
rev ived it a s a H ighm a rk compe tito r . U PM C acknow ledged tha t
it dec ided to sh rink the H ea lth P lan a s a re su lt o f nego tia tion s
w ith H ighm a rk , in wh ich H ighm a rk had ag reed to tak e
C omm un ity B lue o f f the m a rk e t.
tha t enhanced
took ac t ion
M eanwh ile , H ighm a rk
U PM C ’s dom in an ce . M o st s ign if ican tly, it p a id U PM C
sup racom pe t it ive re imbu rsem en t ra tes . To af fo rd U PM C ’s
re im bu rsemen ts , H ighm a rk had to inc rea se its in su rance
p rem ium s (w h ich , acco rd ing to W e st P en n , i t w a s ab le to do
w i thou t lo s ing bu s ine ss becau se UPM C had in su la ted it f rom
compe tition ) . H ighm a rk , m o reove r, p rov ided U PM C w ith $230
In fact, United Healthcare tried to enter the Allegheny
3
County insurance market in 2005 and 2006, but it was effectively
prevented from doing so because UPMC would not offer it a
competitive contract.
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m illion to bu i ld a new fac ility fo r its ch ild ren ’s ho sp ita l, $70
m illion o f w h ich w as a g ran t and the rem a ind e r o f w h ich w as a
low – in teres t loan . In add i tion , H ighm ark vow ed no t to o f f er a
hea l th p lan tha t d id no t inc lud e U PM C as an in-ne tw o rk
p rov ide r . Thu s , in 2004 , H ighm a rk e lim ina ted its low -cos t
in su rance p lan , C omm un ity B lue , in w h ich UPM C had dec lined
to p a r tic ipa te . W ith the e lim ina t ion o f a lea d ing low -cos t
insu rance p lan , hea lth insu rance p rem ium s in A llegheny C oun ty
ro se . Fu r the rm o re , in 2006 , H ighm a rk pub lic ly suppo rted
U PM C ’s acqu is ition o f M e rcy H osp i ta l, w h ich , o the r than W es t
Penn , w a s U PM C ’s on ly o the r compe tito r in th e m a rk e t fo r
te r tia ry and qua te rna ry ca re se rv ice s. F ina lly, in 2006 ,
H ighm a rk leaked con f iden tia l f inanc ia l in fo rm a tion rega rd ing
W e st Penn to U PM C , “w h ich in tu rn leaked a d is to rted ve rs ion
o f the in fo rma tion to c red it- ra ting agen c ies and to the bus iness
m ed ia in an a ttem p t to d es tro y inves to r con f iden ce in W es t
Penn .” JA 113 .
In add ition , H ighm a rk e ssen tia lly cu t W e st Penn o f f from
its f inanc ial suppo rt, thu s ham pe ring its ab ility to com pe te w ith
U PM C . H ighm a rk , fo r ins tance , repea ted ly re jec ted W es t
Penn ’s reque sts to re f inance the $125 m illion loan tha t w a s u sed
to fund the 2000 me rge r. A l though H ighm a rk be lieved
4
re f inan c ing the loan m ade bus in e ss sense , it dec l ined to do so
Even so, the loan agreement allowed West Penn to obtain
4
financing elsewhere and to repay the loan early, which West Penn did
in 2007. See JA 710–11.
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ou t o f fea r tha t U PM C w ou ld re ta lia te aga in s t it fo r v io la ting
the ir ag reem en t— an ag reem en t
tha t H ighm a rk cand id ly
adm i tted w a s “p robab ly illega l.” H ighm a rk sa id tha t it w a s
unde r a “ con s tan t ba rrage” f rom U PM C and tha t U PM C w a s
“ob sessed ” w i th d r iv ing W es t Penn ou t of bu s ine ss . H ighm ark
exp lain ed tha t if it he lped W est P enn f inanc ially, UPM C w ou ld
a llow one o f H ighm a rk ’s compe tito rs to en te r the A llegheny
C oun ty in su rance m a rke t o r w ou ld se ll U PM C H ea lth P lan to a
H ighm a rk com p e t ito r . Indeed , UPM C had sen t H ighm a rk a
le tte r con ta in ing such a w a rn ing . JA 107–09 .
M o reover , H ighm ark m a in ta ined W es t Penn ’s
re im bu rsemen t ra te s a t a rtif ic ia lly dep re ssed
leve ls and
repea ted ly re fu sed to increa se them . In 2005 and 2006 , fo r
exam p le, W est P enn ask ed H ighm a rk fo r a gene ra l in c rease in
its ra tes , w h ich w e re o rig ina lly se t in 2002 . H ighm a rk in itia lly
acknow ledged tha t W e st Penn ’s ra te s w e re too low and
suggested tha t it w ou ld ra ise them , bu t it u ltim a tely re fu sed to
fo llow th rough , ex p la in ing tha t it cou ld no t he lp W e st Penn
becau se , if it d id , U PM C w ou ld re ta lia te .
F ina lly, H ighm a rk “d isc rim ina ted aga in s t W e st P enn [ ]
in the aw a rd o f g ran ts to im p rove the qua lity o f m ed ica l ca re in”
A llegheny C oun ty. In N ovem be r 2005 , fo r exam p le ,
H ighm a rk launched a p rog ram to p rov ide g ran t
do l la r s
im p lemen ta tion o f
the
im p rove
to
in fo rm a tion techno logy in hea lth ca re . The
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p rog ram p rov ided fo r g ran ts o f $7 ,000 pe r
phys ic ian , w ith an agg rega te lim it o f $500 ,000 pe r
hea lth system . O n ly tw o hea lth sys tem s in
W e s t e r n P e n n s y l v a n i a em p l o ye d e n o u g h
phys ic ian s to be lim ited by th e $500 ,000 cap :
U PM C and W e st Penn [ ]. H ighm a rk w a ived the
ca p in U PM C ’s ca se , aw a rd ing a g ran t o f $8
m illion . [B u t] H ighm a rk con sis ten tly re fu sed to
ra ise the cap fo r W es t P enn . . . .
JA 113 .
D . The E f fec ts o f the Con sp iracy
Th e consp i racy end ed in 2007 , w hen the A n t itrus t
D iv is ion o f the D epa rtm en t o f Ju s tice began inve stiga ting
H ighm ark ’s and U PM C ’s re la tion sh ip . Du r ing the yea rs
covered by the con sp iracy, U PM C and H ighm ark reaped reco rd
p ro f its. UPM C ’s n e t incom e ro se f rom $23 m illion in 2002 to
ov e r $618 m i llion in 2007 , and H ighm a rk ’s n e t in com e ro se
from $50 m i ll ion in 2001 to $398 m i l lion in 2006 . U PM C ’s
inc reased revenue cam e
the “sw ee thea r t”
la rge ly f rom
re imbu rsem en ts it rece ived from H ighm ark , and H ighm ark
inc rea sed its ea rn ing s by ra is ing p rem ium s . O n the o the r hand ,
5
For example, from 2002–2006, “health insurance premiums
5
for single individuals in the Pittsburgh area rose approximately 55%
and health insurance premiums for Pittsburgh families rose
approximately 51%.” JA 105. The increases in nearby regions were
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W es t Penn s trugg led du ring the yea rs cove red by the con sp iracy.
It w as fo rced to sca le back its se rv ice s, and to abandon p ro jec ts
to expand and im p rove its se rv ice s and fac ilitie s . In e ssence ,
W e st Penn w a s unab le to compe te w ith U PM C a s v igo rou s ly a s
it o the rw ise w ou ld have .
E . U PM C ’s U n ila te ra l C onduc t
B e side s the con sp iracy w ith H ighm a rk , U PM C ha s taken
a num b e r o f a c tion s on i ts ow n to w eaken W es t Penn . M os t
s ign if ican tly, UPM C ha s sys tema tica lly “ ra ided” key phys ic ian s
f rom W es t P enn . Ev en be fore W es t P enn ’s form a tion , U PM C
h ired phys ic ian s , inc lud ing neu ro su rgeon s , onco log i s ts , hand
surgeons, card io log ists , gas troen tero log ists, pu lmono log ists, and
p rim a ry ca re phys ic ian s f rom tw o o f W e st Penn ’s p redece sso r
ho sp ita ls , inc lud ing A llegh eny G ene ra l. U PM C lu red these
phys ic ian s aw ay by paying them sa la rie s tha t w e re w e ll above
market ra tes . A lthough U PM C incu rred f inanc ial lo sses because
o f the h iring s (tha t is , it pa id the phys ic ian s m o re money than
they gene ra ted ), it adm i tted tha t it w a s w illing to do so in o rde r
to in ju re the ho sp ita ls .
U PM C ’s phys ic ian “ ra id ing” ha s “con t inued unaba ted”
s in ce W es t P enn ’s form a tion . JA 117 . In 2002 , U PM C
a ttemp ted to h ire the en tire ane sthe sio logy s ta f f o f a W e st Penn
ho sp ita l. U PM C d id so even though its in te rna l ana lys is show ed
much lower.
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th a t th e ra id w ou ld b e unp ro f itab le . A s b efore , though , U PM C
adm it te d th a t it w as no t trying to earn p ro f its. It w as trying to
d rive
the
the end ,
In
the ho sp ita l ou t o f bu s in e s s .
an es thes io log is ts w ere lu re d aw ay by U PM C ’s b loa ted sa lary
o f fe rs. B u t they qu it no t long a f te r jo in ing U PM C , beca u se
UPMC lacked su f f ic ien t ope ra ting space to ab so rb them .
The comp la in t iden tifies many add itiona l examp le s o f so –
ca l led phys ic ian ra id ing . In 2 003 , U PM C h ired two p r im ary
ca re p rac titione rs f rom a W e st Penn ho sp ita l; U PM C adm i tted
tha t i t took the p rac t it ioners on in o rde r to in jure the hosp i ta l . In
2005 , UPM C h ired a su rg ica l g roup f rom a W est P enn ho sp ital.
In 2006 , U PM C h ired a rad io log is t, an o rthoped ic su rg eon , a
c ard iovascu la r su rgeon , and an en tire vascu la r lab depa rtm en t
f rom W e s t P enn .
the
to ab so rb
U PM C w a s unab le
ca rd iovascu la r su rg eon and v ascu la r lab s ta f f . In 2008 , U PM C
took ca rd iovascu lar su rgeon s , ca rd io log is ts , and n ine p r im ary
ca re phys ic ian s f rom W e s t Penn . U PM C ag reed to pay one o f
the p rim a ry ca re physic ian s rough ly $500 ,000— a f igu re w e ll
above the revenue gene ra ted by the phys ic ian ’s p rac tice and
m o re th an fou r times the sa lary he rece ived a t W es t Penn . In
2009 , U PM C o f fered A llegheny G ene ra l’s key ba ria tric su rgeon
a b loa ted sa la ry in an a ttemp t to h ire h im aw ay. In an in te rna l
ema il to U PM C ’ s CEO , a UPM C execu tive sa id tha t if the
su rg eo n jo ined UPM C , “ [A llegheny G ene ra l] w ill no t have a
su sta inab le b a ria trics p rog ram un les s th ey just m e rge it w ith
[W es t P enn ] .” T he execu tive a lso sa id tha t even if A l legh eny
G ene ra l ra ised the su rgeon ’s sa la ry and pe rsuaded h im to s tay,
14
Case: 09-4468 Document: 003110361329 Page: 15 Date Filed: 11/29/2010
a t lea st U PM C “w ill have fo rced [A llegheny G ene ra l] to incu r
h ighe r co sts .” JA 120–21 . T h e su rgeon ended up leav ing
A llegheny G ene ra l to jo in U PM C .
In o ther ins tan ce s , U PM C tr ied un successfu l ly to lure
phys ic ian s aw ay f rom W e s t Penn . B e tw een 2002 and 2009 ,
U PM C a ttemp ted to h ire a ca rd io logy g roup , a u ro logy g roup , an
anes th es io logy sta f f , a rad io logy s ta ff , a “p rem ie r pod ia tr is t,”
and an endoc rino logy g roup f rom W e st Penn . U PM C d id no t
need the add i tiona l phys ic ian s , and a l though the doc tors
rem a ined w ith W e st Penn , they d id so on ly a f te r W e st Penn
ag reed to inc rease the ir sa la ries .
In add ition to h iring physic ian s aw ay f rom W e st Penn ,
U PM C ha s p re ssu red comm un ity ho sp ita ls in to en te ring jo in t
v en tu res w ith it for th e p rov is ion o f onco logy se rv ices . U PM C
to ld the ho sp itals th a t un les s they en tered the jo in t ven tu res, it
w ou ld bu ild U PM C sa te llite fac ilitie s nex t to them , d ra in ing
the ir bu s ine ss . N ea rly eve ry comm un ity ho sp ita l in the
P it tsbu rgh m e tropo l itan a rea (excep t tho se ow ned by W est Penn)
acqu ie sced and en te red a jo in t ven tu re w ith U PM C . The se jo in t
ven tu re s func tion as exc lu s ive -d ea ling a rrangem en ts , i.e ., the
comm un ity ho sp itals re fe r a ll o f the ir onco logy pa tien ts to
U PM C fac ilitie s . M o reove r, unde r p re ssu re f rom U PM C , m any
o f the comm un ity ho sp itals h ave begun send ing a ll o f the ir
te rt ia ry and qua te rn a ry ca re re fe rra ls to U PM C fac ilities .
F ina l ly, U PM C has repea ted ly m ade fa lse s ta tem en ts
abou t W e st Penn ’s f inanc ia l hea lth in o rde r to d iscou rage
inve sto rs f rom pu rcha sing W e st Penn bond s . O n one occa sion ,
fo r examp le , UPM C d issem ina ted “a book o f fa lse and
de fam a to ry in fo rm a tion abou t W e st Penn [ ’s] f inances tha t w a s
15
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p rin ted in a fo rm a t de signed to appear a s if it w e re au tho red by
W est P enn .” JA 122 . The book , w h ich w as d istribu ted to
inv es tm en t bank e rs and c red it- ra ting agen c ies , gav e inv es to rs a
d is to rted im p re ss ion o f W e st Penn ’s f inanc ia l s tab ility. O n the
w ho le , U PM C ’s e f fo rts to fo re s ta ll inve stm en t in W e st Penn
w e re som ew ha t success fu l. A lthough W est P enn has b een ab le
to issue deb t w hen nece ssa ry, U PM C ’s d ispa ragem en t ha s
cau sed it to pay a rtific ially in f lated f inanc ing co sts on the deb t.
II . P rocedura l H istory
O n A p ril 21 , 2009 , W e st Penn in itia ted th is law su it in the
U n i ted S ta te s D is tric t C ou rt fo r the W e ste rn D is tric t o f
Penn sylvan ia . U PM C and H ighm a rk f iled mo t ion s to d ism iss ,
bu t W e st Penn sough t and w a s g ran ted leave to subm it an
amended com p la in t, w h ich it f iled on A ugu s t 28 , 2009 . The
amended com p la in t (he rea f te r, “ the comp la in t” ) inc lude s f ive
coun ts . C oun ts 1 and 2 a sse rt tha t U PM C and H ighm a rk
v io la ted sec tion s 1 and 2 o f the She rm an A c t, re spec tive ly, by
con sp iring to p ro tec t one ano the r f rom com pe tition . Coun t 3
a llege s tha t U PM C v io la ted sec tion 2 o f the She rm an A c t by
a ttemp t ing to m onopo lize the A lleghe ny C oun ty m a rke t fo r
“acu te care inp a t ien t se rv ice s,” o r, in the a lte rna tive , the
A l legheny C oun ty m arke t fo r “h igh -end ter tiary and qua ternary
acu te care inpa tien t se rv ice s.” JA 126 . (Fo r s im p lic ity’s sake ,
w e w ill re fer to the tw o co l lec tive ly a s the ma rke t fo r
“ spec ia lized ho sp ita l se rv ice s.” ) C oun ts 4 and 5 a sse rt s ta te -law
c la im s aga in s t U PM C fo r un fa ir compe tition and to rtiou s
in ter fe rence w ith bu siness re lation s. The com p lain t requests
damage s , inc lud ing treb le and pun itive damage s , and in junc tive
re lie f , inc lud ing an o rde r requ iring H ighm a rk to “end any
d isc rim ina tion in re imbu rsem en t (bo th d irec t and in d irec t)
16
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be tw een U PM C and W es t P enn .” JA 142 .
O n Sep tembe r 18 , 2009 , U PM C and H ighm a rk f iled
renew ed m o t ion s to d ism iss . The d e fendan ts mov ed to d ism iss
the con sp iracy c la im s on th ree ba se s . They a rgued (1 ) tha t the
comp la in t fa ils adequa te ly to a llege an un law fu l con sp iracy, (2 )
tha t even if it do e s a llege a con sp iracy, it fa ils to a llege tha t
W e st P en n su s ta ined an “an titru s t in ju ry” a s a re su lt o f the
con sp iracy, and (3 ) tha t the con sp iracy c la im s a re tim e -ba rred .
U PM C u rged the Cou rt to d ism iss the a ttemp ted
m onopo liza tion c laim on the g round tha t the com p lain t fa ils to
a llege “an ticom pe titive conduc t,” an e lem en t o f such a c la im .
F ina lly, U PM C a rgued tha t if the Cou rt d ism issed the She rm an
A c t c la im s , it shou ld dec line to exe rc ise supp lemen ta l
ju risd ic tion ove r the s ta te -law c la im s .
O n O c tobe r 29 , 2009 , the D is tric t C ou rt issued a leng thy
op in ion d ism iss ing the com p la in t in its en t ire ty. F irs t , the C ou r t
d iscussed the p lead ing s tand a rd tha t app lies in com p lex cases ,
inc lud ing in an titru s t ca se s . N o ting tha t d iscove ry in com p lex
ca se s is expen sive and tim e -con sum ing , the C ou rt s ta ted tha t
judge s p re sid ing ove r such ca se s have a du ty to ac t a s
“ga tek eepe rs.” A lthough the Cou rt d id no t elabo ra te on w ha t it
m ean t by th is , it sugge sted th a t , in o rde r to p reven t comp lex
cases lack ing m e r it f rom p roceed ing to d iscove ry, cou r ts mus t
sub jec t p lead ing s in such case s to he igh tened sc ru tiny. A f te r
d iscu ss ing the p lead ing s tanda rd— and tak ing on the ro le o f
ga tekeepe r— the C ou r t p roceed ed to add ress the m e r its .
The Cou rt d ism issed the con sp iracy c la im s on the g round
tha t the comp la in t fa ils to a llege a con sp iracy. A cco rd ing to the
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C ou rt, the com p lain t “is long on innuendo and frequen tly repea ts
the buzz w o rd tha t the de fendan ts ‘con sp ired ,’” bu t u ltim a tely
fa ils to a lleg e “ any fac ts w h ich ev idence a conce rted ac tion .”
JA 55 . The C ou r t a lso conc lud ed tha t the consp iracy c la im s are
de f ic ien t becau se the comp la in t fa ils to a llege tha t W e st Penn
su s ta ined an an titru s t in ju ry as a con sequence o f the con sp iracy.
W i th respec t to the a t tem p ted m onopo l iza t ion c la im , the C ou r t
ag reed w ith U PM C
to a llege
the comp la in t fa ils
tha t
an t icom p e titive conduc t. F ina lly, a f te r d ism iss ing the fede ra l
c la im s , the Cou rt dec lined to exe rc ise supp lemen ta l ju risd ic tion
ov e r the s ta te – law c la im s . 6
W es t P enn f iled th is tim e ly appea l.
III . Jur isd ic tion and S tandard o f R ev iew
The D is tric t C ou rt had ju risd ic tion ove r the She rm an A c t
c la im s unde r 28 U .S .C . §§ 1331 and 1337 (a ), and supp lemen ta l
jur isd ic tion over the s ta te- law c la im s under 28 U .S .C . § 1367 (a) .
Th is C ou rt ha s ju risd ic tion unde r 28 U .S .C . § 1291 . O u r rev iew
o f a d is tric t cou rt’s ru ling on a m o tion to d ism is s is p lena ry.
In reaching its decision, the District Court relied heavily on
6
evidence extrinsic to the complaint. The general rule, of course, is
that “a district court ruling on a motion to dismiss may not consider
matters extraneous to the pleadings.” In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). A limited exception
exists for documents that are “integral to or explicitly relied upon in
the complaint.” Id. (emphasis in original and internal quotation
marks omitted). No purpose would be served by examining each
document that the District Court relied on and determining whether
it was properly considered. But based on an initial review, we believe
that the Court may have considered several documents which should
not have been within its purview.
18
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Jone s v . ABN Am ro M o r tg . G rp ., Inc ., 606 F .3d 119 , 123 (3d
C ir. 2010 ) .
IV . The P lead ing S tandard
U nd e r Fede ra l R u le o f C iv il P rocedu re 8 , a comp la in t
m u s t con ta in a “ sho rt and p la in sta temen t o f the c la im show ing
tha t the p leader is en titled to re lie f .” In B e ll A tlan tic Co rp . v .
Tw om b ly , 550 U .S . 544 (2007 ), the Sup rem e C ou rt he ld tha t to
sa tisfy R u le 8 , a com p lain t mu st con tain fac tua l a lleg a tion s tha t,
taken as a w ho le , ren d e r the p la in tif f ’s en titlemen t to re lie f
p lau s ib le . Id . a t 556 , 569 n .14 ; H ow a rd H e ss D en ta l Lab s ., Inc .
v . D en tsp ly In t’l, Inc ., 602 F .3d 237 , 246 (3d C ir. 2010 ); Ph illip s
v . C oun ty o f A llegheny , 515 F .3d 224 , 234 (3d C ir. 2008 ). Th is
“ ‘doe s no t im po se a p robab ility req u iremen t a t the p lead ing
s tage ,’ bu t in s tead ‘s im p ly ca lls fo r enough fac ts to ra ise a
rea sonab le expec ta tion tha t d iscove ry w ill revea l ev idence o f ’
the nece ssa ry e lemen t .” Ph illip s , 515 F .3d a t 234 (quo ting
Tw om b ly , 550 U .S . a t 556 ) . In de te rm in ing w he the r a comp la in t
is su f f ic ien t, cou rts shou ld d isrega rd the comp la in t’s lega l
conc lu s ion s and de te rm ine w he the r th e rema in ing fac tua l
a llega tion s sugge st tha t the p la in tif f has a p lau sib le— a s oppo sed
to m e re ly conce ivab le— c la im fo r re lie f . A shc ro ft v . Iqba l, 129
S . C t. 1937 , 1949–50 (2009 ); Fow le r v . UPM C Shady side , 578
F .3d 203 , 210–11 (3d C ir . 2009 ).
The D is tric t C ou rt op ined tha t judge s p re s id ing ove r
an titru s t and o the r comp lex ca se s m u s t ac t a s “ga tekeepe rs ,” and
m u s t sub jec t p le ad ing s in such cases to he igh tened sc ru tiny.
T h e D is tric t C ourt’s g lo ss on Ru le 8 , how eve r , is squa re ly a t
odd s w ith Sup reme C ou rt p receden t . A lthough Tw om b ly
acknow ledged tha t d iscove ry in an titru s t ca se s “ ca n be
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expen sive ,” 550 U .S . at 558 , it exp ress ly re jec ted the no tion tha t
a “ ‘h e igh tened ’ p lead ing s tandard ” app lie s in an titru s t cases , id .
a t 5 69 n .14 , and Iqba l m ade c lea r tha t R u le 8 ’s p lead ing
standa rd app lies w ith the sam e lev e l o f rigo r in “ ‘a ll civ il
ac tion s ,’” 129 S . C t. a t 1953 . See a lso Sw ierk iew icz v . So rem a
N .A ., 534 U .S . 506 , 512–13 (2002 ) ; Lea the rm an v . Ta r ran t
C oun ty N arco tics In telligence & C oo rd ina tion U n it, 507 U .S .
163 , 167–68 (1993 ) (re jec ting F if th C ircu it’s adop tion o f a
he igh tened p lead ing s tanda rd fo r c iv il righ ts ca se s a lleg ing
m un ic ipa l liab i l ity) ; 5 C har les A lan W r igh t & A r thu r R . M i ller ,
F edera l P rac tice & P rocedu re § 1221 (3d ed . 2004 ) (no ting tha t
R u le 8 ’s p lead ing s tanda rd app lie s w ith the same deg ree o f rigo r
“ in every ca se , regard less o f i ts s ize , com p lex i ty, o r the num bers
o f p ar t ies tha t m ay be invo lved ”) .
It is , o f cou rse , true tha t judg ing the su f f ic iency o f a
p lead ing is a con tex t-dependen t ex e rc ise . See Iqba l, 129 S . C t.
a t 1950 ; Tw om b ly , 550 U .S . at 567–68 ; Ph ill ip s , 515 F .3d a t
232 . Som e c la im s requ ire m o re fac tua l exp l ica t ion than o thers
to s ta te a p lau s ib le c la im fo r re lie f . See In re In s . B roke rage
An titru s t L itig ., 618 F .3d 300 , 320 n .18 (3d C ir . 2010 ). Fo r
examp le , it gene ra lly take s few e r fac tua l a llega tion s to s ta te a
c la im fo r s im p le ba t te ry than to s ta te a c la im fo r an t itrus t
con sp iracy. See A . B en jam in Spence r, U nde rs tand ing P lead ing
D oc tr ine , 108 M ich . L . R ev . 1 , 13–18 (2009 ). Bu t, con tra ry to
the ab le D is tric t C ou rt’s sugge stion , th is doe s n o t m ean tha t
Tw om b ly’s p lau sib ility s tanda rd func tion s m o re
like a
p robab ility requ irem en t in com p lex cases .
W e conc lude tha t it is inapp rop ria te to app ly Tw om b ly’s
p lau sib ility s tanda rd w ith ex tra b ite in an titru s t and o th e r
com p lex ca ses . W e now turn to add ress w he the r W es t P enn ’s
20
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com p la in t sa tis f ies the p lau s ib ility s tanda rd .
V . T he C on sp iracy C la im s
W es t Penn asse r ts con sp iracy c la im s under sec t ion s 1 and
2 o f the She rm an A c t, 15 U .S .C . §§ 1 and 2 . Sec tion 1 p rov ide s
tha t “ [e]ve ry con trac t, comb in a t ion in the fo rm o f tru s t o r
o the rw ise , o r con sp iracy, in re stra in t o f trade o r comm e rce
am ong the seve ra l S tate s . . . is dec lared to be illega l.” D esp ite
its seem ing ly ab so lu te language , sec tion 1 has been con stru ed to
p roh ib it on ly un rea sonab le re s tra in ts o f trade . S tanda rd O il C o .
v . U n ited S ta te s , 221 U .S . 1 , 58 (1911 ); U n ited S ta tes v . B row n
U n iv ., 5 F .3d 658 , 668 (3d C ir . 1993 ) . Som e ag reem en ts a re so
p la in ly an ticompe titive tha t they a re condem ned per se ; tha t is ,
they a re conc lu s ive ly p re sum ed to un rea sonab ly re stra in trade .
E .g ., U n ited S ta te s v . T ren ton Po tte rie s C o ., 273 U .S . 392 ,
397–400 (1927 ) (ho rizon tal ag reem en ts to f ix p rices); Pa lm e r v .
BRG o f G a ., Inc ., 498 U .S . 46 , 49 –50 (1990 ) (pe r cu riam )
(ho rizon tal ag reem en ts to d iv ide m a rke ts). O the r ag reem en ts
a re condem ned on ly if eva lua tion unde r the f a c t- in ten sive ru le
o f reason ind ica tes tha t they un re a sonab ly res tra in trade . E .g .,
Leeg in C rea tive Lea the r P rod s ., Inc . v . PSK S , Inc ., 551 U .S . 877
(2007 ) (ve rt ica l ag reem en ts to m a in ta in re sa le p rices).
Sec tion 2 impo se s liab ility on “ [e ]ve ry pe rson w ho sh a ll
m onopo l ize , o r a t tem p t to m onopo l ize , o r com b ine o r con sp ire
w ith any o the r pe rson o r pe rson s , to m onopo lize any pa rt o f the
trade o r comm e rce am ong the seve ra l S ta te s .” 15 U .S .C . § 2 ;
see a lso H ow ard H ess , 602 F .3d a t 253 (lis ting the e lemen ts o f
21
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a sec t ion 2 con sp iracy c la im ) . 7
U PM C and H ighm ark defend the D is tr ic t C ou r t’s
d ism issa l o f the con sp iracy c la im s on seve ra l bases . W e add ress
each in tu rn .
A . A g reemen t
F irs t, w e add re ss the de fendan ts’ a rgum en t tha t the
con sp iracy c la im s w e re p rope rly d ism issed becau se the
comp la in t fa ils to a llege an ag reemen t. To p reva il on a sec tion
1 c la im o r a sec tion 2 consp i racy c la im , a p la in t if f m us t es tab l ish
th e ex is ten ce o f an ag reem en t, som e tim e s a lso re f erred to a s a
“con sp iracy” o r “conce rted ac tion .” Tw om b ly , 550 U .S . a t 553 ;
G o rdon v . Lew is tow n H o sp ., 423 F .3d 184 , 207 & n .16 (3d C ir.
2005 ) . A n ag reem en t ex is ts w hen the re is a un ity o f pu rpo se , a
comm on de sign and unde rs tand ing , a m ee ting o f the m ind s , o r
a con sc iou s comm itm en t to a comm on schem e . C opperw e ld
C o rp . v . Indep . Tube C o rp ., 467 U .S . 752 , 771 (1984 ); H ow ard
H ess , 602 F .3d a t 254 ; G o rdon , 423 F .3d a t 208 .
A p la in tif f may p lead an ag reemen t by a lleg ing d irec t o r
Commentators have noted that, to the extent it bans
7
conspiracies to monopolize, section 2 is largely superfluous, as
conspiracies to monopolize will usually—if not always—run afoul of
section 1’s prohibition of conspiracies that unreasonably restrain
trade. See, e.g., Mark T.L. Sargent, Economics Upside-Down: Low-
Price Guarantees as Mechanisms for Facilitating Tacit Collusion,
141 U. Pa. L. Rev. 2055, 2109 (1993). Even so, the fact that
Congress created a redundant cause of action is not a basis for
dismissal. See JTC Petroleum Co. v. Piasa Motor Fuels, Inc., 190
F.3d 775, 779–80 (7th Cir. 1999).
22
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c ircum s tan tia l ev iden ce , o r a comb ina tion o f the tw o . If a
comp la in t
inc lude s non -conc lu so ry a llega tion s o f d irec t
ev idence o f an ag reemen t, a cou rt need go no fu rthe r on the
ques tion w he the r an ag reem en t has been adequa te ly p led . Ins .
B roke rage , 618 F .3d a t 323 (“A llega tion s o f d irec t ev idence o f
an ag reem en t, if su f f icien tly d e ta iled , a re . . . ad equa te.” ); see
a lso To ledo M ack Sa le s & Se rv ., Inc . v . M ack T ruck s, Inc ., 530
F .3d 204 , 219–20 & n .10 (3d C i r . 2008 ) (c iting Ro ss i v .
S tanda rd Roo fing , Inc ., 156 F .3d 452 , 466 (3d C ir . 1998 )) .
W e st Penn ’s theo ry on the con sp iracy c la im s is tha t in the
summ e r of 2002 , U PM C and H ighm a rk fo rm ed an ag reem en t to
p ro tec t one ano the r f rom compe tition . W e st Penn a s se rts tha t
U PM C ag reed to u se i ts pow e r in the p rov ide r m a rke t to exc lude
H ighm a rk ’s riva ls f rom the A llegheny C oun ty hea lth in su rance
m a rke t, and tha t in exchange H ighm a rk ag reed to tak e step s to
s treng then UPM C and to w eaken its p rim a ry riva l, W e st Penn .
W e conc lud e tha t the com p la in t con ta in s non -conc luso ry
a llega tion s o f d irec t ev idence o f such an ag reem en t.
The comp la in t a llege s tha t in 2005 , W e st Penn a sked
H ighm a rk to re f inance the loan tha t w a s u sed to fund the 2000
m e rge r, tha t H ighm a rk ag reed tha t re f inanc ing w a s a good idea ,
bu t tha t H ighm a rk w ou ld no t s ign o f f on the re f inanc ing .
H ighm a rk exp la ined tha t if it he lped W es t Penn ou t f inanc ia lly,
U PM C , w h ich w a s “ob se ssed” w ith d riv ing W e s t Penn ou t o f
bu siness , w ou ld re talia te aga inst
it fo r v io lating
the ir
ag reemen t— an ag reemen t
tha t H ighm a rk adm i tted w a s
“p robab ly illega l.” Indeed , U PM C had sen t H ighm a rk a le tte r
w a rn ing tha t if it ex tende d f inanc ia l a ss is tance to W e st Penn ,
U PM C w ou ld en ter a p rov ider ag reem en t w i th a H ighm ark
compe tito r , thu s reduc ing H ighm a rk ’s dom inance in the
23
Case: 09-4468 Document: 003110361329 Page: 24 Date Filed: 11/29/2010
in su rance m a rke t. The comp la in t a lso a llege s tha t in 2005 and
2006 , W e st Penn a sked H ighm a rk to inc rea se its re im bu rsemen t
ra te s , tha t H ighm a rk acknow ledged tha t the ra te s w e re too low
and sugges ted tha t i t w ou ld ra ise them , bu t tha t H ighm ark
re fused to fo l low th rough , exp la in ing tha t if it inc reased W es t
Penn ’s ra tes , UPM C w ou ld re talia te aga inst it fo r v io lating the ir
ag reem en t . F ina l ly, the com p la in t a lleges tha t a t an em p loyees ’
m ee ting , U PM C ’s CEO adm i t ted tha t he dec ided to sh rink
U PM C H ea lth P lan a s a re su lt o f “nego tia tion s” w ith H ighm a rk ,
du ring w h ich H ighm a rk had ag reed to take C ommun ity B lue o f f
the m arke t . In a l l, these a l leg a t ion s o f d irec t ev iden ce are
su f f ic ien t to su rv ive a mo t ion to d ism iss on the ag reemen t
e lem en t. See In s . B roke rage , 618 F .3d a t 323 . 8
B . U n rea sonab le Re stra in t
The de fendan ts m ake a ha lf -hea rted a rgum en t tha t even
if the com p lain t alleges tha t they fo rm ed a con sp iracy to sh ield
one ano the r f rom com pe tit io n , th e sec tion 1 c laim is s till
de f ic ien t becau se the comp la in t doe s no t a llege tha t the
con sp iracy un rea sonab ly re stra ined trade . W e d isag ree . A t the
p lead ing s tage , a p la in tif f may sa tisfy the un rea sonab le -re stra in t
e l em e n t b y a l le g in g
th e c o n sp i r a c y p ro d u c e d
th a t
an ticom pe titiv e e f fec ts in the re lev an t m a rk e ts . See H ow ard
H ess , 602 F .3d a t 253 ; B row n U n iv ., 5 F .3d a t 668 .
A n ticompe titive e ffec ts inc lude inc rea sed p rice s, reduced
ou tpu t, and reduced qua lity. To ledo M ack , 530 F .3d a t 226 ;
B row n U n iv ., 5 F .3d a t 668–69 .
Because we conclude that the allegations of direct evidence
8
are by themselves sufficient, we do not address the sufficiency of the
circumstantial allegations. See Ins. Brokerage, 618 F .3d a t 323 .
24
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H e re , the com p la in t a llege s tha t the re levan t m a rke ts a re ,
on one hand , the A llegheny C oun ty m a rke t fo r spec ia lized
ho sp ital se rv ice s and , on the o the r hand , the A llegheny C oun ty
m a rke t fo r hea lth insu rance . The com p lain t p lau sib ly suggests
9
tha t by denying W es t Penn cap i ta l, the consp i racy caused W es t
Penn to cu t back on its se rv ice s (inc lud ing spec ia lized ho sp ita l
se rv ice s) and to abandon p ro jec ts to expand and imp rove its
se rv ice s and fac ilities . The com p lain t also p lau sib ly suggests
tha t by sh ie ld ing H ighm a rk f rom compe tition , the con sp iracy
re su lted in inc rea sed p rem ium s and reduced ou tpu t in the ma rke t
fo r hea l th insu rance . These a llega t ion s a re su f f ic ien t to sugges t
tha t the con sp iracy p roduce d an t icompe titive e ffec ts in the
re levan t m a rke ts .1 0
C . A n t itru s t In jury
W e now tu rn to the de fen d an ts’ a rgum en t tha t the
con sp iracy c la im s w e re p rope rly d ism issed on the g round tha t
the com p la in t fa i ls to a llege an t itru s t in jury. In B run sw ick Co rp .
v . Pueb lo Bow l-O -M a t, Inc ., 429 U .S . 477 (1977 ) , the Sup rem e
C ou rt he ld tha t an an t itru s t p la in tif f mu s t do m o re than show
tha t it w ou ld have been be tte r o f f ab sen t the v io la tion ; the
p la in tif f m us t es tab lish tha t it su f fe red an an t itru s t in ju ry. A n
The defendants do not challenge West Penn’s definition of
9
the relevant markets.
In so concluding, we do not reach West Penn’s argument
10
that—given the horizontal aspect of the conspiracy, i.e., UPMC’s
agreement to shrink UPMC Health Plan—the conspiracy is subject to
per se condemnation. Even if the more demanding rule of reason
applies, the complaint adequately alleges that the conspiracy stifled
competition in the relevant markets.
25
Case: 09-4468 Document: 003110361329 Page: 26 Date Filed: 11/29/2010
an t itru s t in jury is an “ in ju ry o f the type the an t itru s t law s w ere
in tended to p reven t and tha t f low s f rom tha t w h ich make s [ the ]
de fendan ts’ ac ts un law fu l .” Id . a t 489 . “T he in ju ry shou ld
re f lec t the an ticomp e t i t ive e ffec t e ithe r o f the v io la tion o r o f
an ticomp e t i t ive ac ts m ade po ss ib le by the v io la tion .” Id .; see
a lso A tl. R ich f ie ld C o . v . U SA P e tro leum C o ., 495 U .S . 328 ,
334 , 344 (1990 ) (“ [A n ] in ju ry, a lthough cau sa lly re la ted to an
an t itrus t v io la tion , nev e r the less w ill no t qu a lify as an ‘an titrus t
in ju ry’ un le ss it is a ttribu tab le to . . . a compe tition -reduc ing
aspec t o r e f fec t o f the de fendan t’s behav io r.” ).
The an titru s t-in ju ry requ iremen t he lp s en su re “ tha t the
ha rm c la im ed by the p la in tif f co rre spond s to the ra tion a le fo r
f ind ing a v io lation o f the an titru st law s in the f irst p lace , and it
p reven ts lo sses tha t stem f rom competition f rom suppo rting su its
by p riva te p la in tif f s fo r . . . damage s .” A tl. R ich field , 495 U .S .
a t 342 ; see a lso C a rg ill, Inc . v . M on fo r t o f C o lo ., Inc ., 479 U .S .
104 , 109–10 (1986 ) (dec la r ing tha t “ it is in im ica l to the an titrus t
law s to aw a rd dam age s fo r lo sse s s temm ing f rom con tinued
com pe tition” ) (in terna l punc tua tion om itted ); S e r fecz v . Jewe l
Food S to re s , 67 F .3d 591 , 597 (7 th C ir . 1995 ) (“W hen the
p lain tiff ’s in ju ry is linked to the in ju ry in f licted upon the m a rke t,
such a s w hen con sum e rs pay h ighe r p rice s becau se o f a m a rke t
m onopo ly o r w hen a compe tito r is fo rced ou t o f the ma rke t, the
compen sa tion o f the in ju red pa r ty p rom o te s the de signa ted
pu rpo se o f the an t itru s t law— the p rese rva tion of com pe t it ion .”) ;
IIA Ph illip E . A reeda , H e rb e rt H ovenkam p e t a l., An titru s t Law
¶ 337a , a t 82 -83 (3d ed . 2007 ).
So , fo r examp le , in B run sw ick , a g roup o f bow ling a lleys
sued a manu fac tu re r o f bow ling equ ipm en t, c la im ing tha t the
la tte r’s acqu is ition o f seve ra l f inan c ia lly d is tressed a lleys
26
Case: 09-4468 Document: 003110361329 Page: 27 Date Filed: 11/29/2010
v io la ted the an tit ru s t law s . 429 U .S . a t 479 -80 . The p la in tif f s
sa id tha t if the s trugg l ing a lleys had b een a l low ed to fa il, th e i r
p ro f its w ou ld have inc rea sed , a s d isp laced bow le rs w ou ld have
pa tron ized the ir a lleys . Id . a t 481 . The Sup reme C ou rt he ld ,
how eve r , tha t the p la in tif fs had no t su s ta ined an an titru s t in ju ry.
T h e a cqu isition s in ques tion w e re un law fu l , if a t a ll, becau se
they tended to g ive the de fendan t m onopo ly pow e r in the
bow ling a lley m a rke t. A nd the p la in tif f s w e re comp la in ing
abou t p ro f its lo s t a s a re su l t o f con tinued compe tition (the
de fendan t’s re scu ing the d is tre ssed a lleys) , no t abou t in ju rie s
linked to redu c ed com pe tition . The p lain tiff s thu s fa iled to
es tab lish an titru s t in ju ry. Id . a t 487 -89 .
A s a genera l m a tte r, the c la ss o f p la in tif f s c ap ab le o f
sa tisfying
the an titru st-in ju ry requ irem en t
is
lim ited
to
con sum e rs and com pe tito rs in the re s tra ined m a rk e t, C a rpe t
G roup In t’l v . O r ien ta l R ug Im p s . A ss’n , Inc ., 227 F .3d 62 ,
76–77 (3d C ir. 2000 ); G u lfs tream III A ssoc s ., Inc . v . G u lfs tream
A e ro space Co rp ., 995 F .2d 425 , 429 (3d C ir. 1993 ); G regory
M k tg . C o rp . v . W ake fe rn Food C o rp ., 787 F .2d 92 , 95 (3d C ir.
1986 ) , and to tho se w ho se in ju rie s a re the mean s by w h ich the
de fendan ts seek to ach ieve the ir an ticom pe titiv e end s , B lue
Sh ie ld o f Va . v . M cC ready , 457 U .S . 465 , 479 (1982 ); B roadcom
C o rp . v . Q ua lcomm Inc ., 501 F .3d 297 , 320–21 (3d C ir. 2007 ) ;
A reeda & H ovenkam p , supra , ¶ 339 , a t 123 .
W e st Penn a sse rts tha t th ree aspec ts o f the con sp iracy
cau sed it an titru s t in ju ry. F irs t, W e st Penn says it w a s in ju red a s
a re su lt o f H ighm a rk ’s dec is ion to take C omm un ity B lue o f f the
m a rke t. It exp la in s tha t C omm un ity B lue sub sc ribe rs o f ten
rece ived trea tm en t a t W es t P enn ho sp ita ls and tha t it los t
bu s ine ss w hen C omm un i ty B lue w as e l im ina ted . W es t Penn ’s
27
Case: 09-4468 Document: 003110361329 Page: 28 Date Filed: 11/29/2010
in ju ry in th is rega rd , how eve r, is no t an titru st in ju ry. A s W es t
Penn seem s to ac know ledge , H ighm a rk ’s e lim ina tion o f
C omm un ity B lue v io lated the an titru st law s, if a t a ll, becau se it
tended to reduce compe tition in the A llegheny C oun ty m a rke t
fo r hea lth in su rance and thu s tended to cau se , among o the r
th ing s , an inc rea se in p rem ium s . W e st Penn pa rtic ipa te s in the
insu rance m a rke t no t as a con sum e r o r a com pe t ito r bu t as a
supp lie r— it se lls ho sp ita l se rv ice s to in su re rs . A supp lie r doe s
no t su f fer an an titru s t in ju ry w hen compe tition is reduced in the
dow ns tream m a rke t in w h ich it se lls good s o r se rv ices .
Schuy lk ill Ene rgy R e s ., Inc . v . Pa . Pow e r & L igh t C o ., 113 F .3d
405 , 410 , 415 (3d C ir. 1997 ); SAS o f P .R ., Inc . v . P .R . Te le . C o .,
48 F .3d 39 , 44–45 (1 st C ir. 1995 ); Se rfec z, 67 F .3d a t 597–98 ;
In t’l Raw M a te ria ls , L td . v . S tau ffe r C hem . C o ., 978 F .2d 1318 ,
1327–28 (3d C ir. 1992 ) ; A lber ta G as C hem s . L td . v . E .I . D u
Pon t D e N em ou r s & Co . , 826 F .2d 1235 , 1241–42 (3d C ir.
1987 ) . A lthough a supp lie r m ay lo se bu s ine ss w hen compe tition
is re stra ined in the dow n s tream m a rke t in w h ich it se lls good s
and se rv ice s, such lo sse s a re me re ly byp roduc ts o f the
an ticom p e t i tive e f fec ts o f the re s tra in t. See A reeda &
H ovenkam p , supra , ¶ 350c , a t 237 -38 . W e conc lude , then , tha t
W e st Penn d id no t su s ta in an an titru s t in ju ry ba sed on the
e lim ina tion o f C omm un ity B lue .
Second , W es t P enn a l leges tha t it sus ta ined an an titrus t
in ju ry ba sed on H ighm a rk ’s re fu sa ls to re f inance the $125
m illion loan . It exp lain s tha t H ighm a rk ’s re fu sa ls c au sed it to
incu r in f la ted f inanc ing co sts , w h ich in tu rn dep rived i t o f
cap ital tha t it w ou ld h av e u sed to imp rove and expand its
m ed ica l fac ilities . B u t even if H ighm a rk wou ld no t re f inanc e
the loan , the lo an ag reem en t allow ed W est P enn to ob tain
f inanc ing e lsew he re and to repay the loan ea rly w ithou t
28
Case: 09-4468 Document: 003110361329 Page: 29 Date Filed: 11/29/2010
pen a lty.
In fac t, W es t Penn d id so in 2007 . B ecause
1 1
H ighm a rk w a s ju s t one o f many po ss ib le sou rce s o f f inanc ing ,
w e conc lude tha t— even if it ac ted w ith an ticompe titive
m o tive s— H ighm a rk ’s re f inanc ing re fu sa ls cou ld no t have been
“compe tition -reduc ing aspec t[ s] . . . o f the” con sp iracy, A tl.
R ich field , 495 U .S . a t 344 , an d thu s d id no t g ive rise to an
an titru s t in ju ry. See P aycom B illing Servs ., Inc . v . M as tercard
In t’l, Inc ., 467 F .3d 283 , 294 (2d C ir. 2006 ); John so n v . U n iv .
H ea lth S e rv s ., Inc ., 161 F .3d 1334 , 1338 (11 th C ir . 1998 )
(de fendan t’s re fu sa l to p rov ide the p lain tiff f in anc ing w ith
w h ich to open he r ow n bus iness d id no t g ive r ise to an titrus t
in ju ry becau se p la in tif f cou ld have ob ta ined f inanc ing f rom
m any o the r sou rces); C hr is to f ferson D a iry , Inc . v . MMM Sa les ,
Inc ., 849 F .2d 1168 , 1173–74 (9 th C ir. 1988 ) (de fendan t’s
re fusa l to se ll p la in t if f su rp lus m ilk d id no t g ive r ise to an titrus t
in ju ry w he re “ the re w e re ‘p len ty’ o f o the r so u rce s fo r su rp lu s
m ilk” ).
F ina l ly, W e s t Penn a rgues tha t it sus ta ined an an titrus t
in ju ry in the fo rm o f a r tif ic ia lly dep ressed re im bu rsem en t ra tes .
The comp la in t a llege s tha t du ring the con sp iracy, W e st Penn
a sked H ighm a rk to renego tia te and ra ise its ra te s . The
comp la in t sugge sts tha t H ighm a rk acknow ledged tha t the ra te s
w e re too low and in itia lly ag reed to ra ise them , bu t tha t
H ighm a rk re fu sed to fo llow th rough , citing its ag reem en t w ith
U PM C , unde r w h ich it w as no t to do anyth ing to b en e f i t W es t
Penn f inanc ia lly. W e st Penn a sse rts tha t the amoun t o f the
u n d e r p a ym e n t s— i . e . ,
t h e d i f f e r e n c e b e t w e e n
t h e
Although this case is considered on a motion to dismiss, the
11
loan agreement may be reviewed because it is integral to the
complaint. Burlington Coat, 114 F.3d at 1426.
29
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re im bu rsemen ts it w ou ld have rece ived in a compe titive ma rke t
and tho se it ac tua lly rece iv ed— con s titu tes an an titru s t in ju ry.
Fo r the ir pa r t, the d efendan ts do no t take issue w i th W es t Penn ’s
sugge stion tha t its re im bu rsemen t ra te s w ou ld have been g rea te r
absen t the consp i racy. T hey a rgue , ins tead , tha t paying W es t
Penn dep re ssed re im bu rsemen t ra te s w a s no t an e lemen t o f the
con sp iracy tha t po sed an titru s t p rob lem s . They rea son tha t low
re im bu rsemen t rates translate in to low p rem ium s fo r sub sc ribe rs ,
and tha t it w ou ld the re fo re be con tra ry to a key pu rpo se o f the
an t itrus t law s— p rom o t ing con sum e r w e lfa re— to a l low W es t
Penn to recover the amoun t o f the unde rpaym en ts . W e st Penn
has it r igh t.
A dm itted ly, had H ighm a rk been ac ting a lone , W e st Penn
w ou ld h ave little bas is fo r cha lleng ing the re im bu rsem en t ra tes .
A f irm tha t ha s sub s tan tia l pow e r on the buy s ide o f the ma rke t
(i.e ., m onop sony pow e r) is gene ra lly free to ba rga in aggressively
w hen ne go tia ting the p r ices it w ill pay fo r good s and se rv ices .
K a r te ll v . B lue Sh ie ld o f M a ss ., Inc ., 749 F .2d 922 , 926–30 (1s t
C ir. 1984 ) (B reye r, J.); T rave lers In s . C o . v . B lue C ro ss o f W .
Pa ., 481 F .2d 80 , 84 (3d C ir . 1973 ) . Th is re f lec ts the gene ra l
he sitance o f cou rts to condemn un ila te ra l behav io r , le st v igo rou s
com pe tition be ch illed . Am . N eed le , Inc . v . NFL , 130 S . C t.
2201 , 2209 (2010 ); G o ldw a sse r v . Am e r itech Co rp ., 222 F .3d
390 , 397 (7 th C ir. 2000 ) .
B u t w hen a f irm exe rc ise s m onop sony pow e r pu rsu an t to
a con sp iracy, its conduc t is sub jec t to m o re rigo rou s sc ru tiny,
see Am . N eed le , 130 S . C t. at 2209 , and w ill be condem ned if it
im po ses an un reasonab le re s tra in t o f trade , see S tanda rd O il,
221 U .S . a t 58 . “Th is is so becau se un like independen t ac tion ,
‘concerted ac tiv ity inhe ren tly is f raugh t w ith an ticompe titive
30
Case: 09-4468 Document: 003110361329 Page: 31 Date Filed: 11/29/2010
risk ’ in so fa r a s it ‘dep rive s the ma rke tp lac e o f independen t
cen te rs o f dec is ionm ak ing tha t compe tition a s sum e s and
demand s .’” Am . N eed le , 130 S . C t. a t 2 209 (quo ting
Copperw eld , 467 U .S . at 768–69 ) ( in te rn a l punc tua tion om itted).
tha t H ighm a rk ha s
the comp la in t sugge sts
H e re ,
subs tan t ia l m onop sony pow e r . I t a lleges tha t H ighm a rk has a
60% –80% sh a re o f the A lleg h eny C oun ty m a rke t fo r hea lth
insu rance , tha t there are s ign if ican t en try barr iers fo r in su rers
w ish ing
to b reak
in to
the m arke t ( inc lud ing U PM C ’s
unw i ll ingness
to dea l com pe t it ive ly w i th non -H ighm ark
in su re rs) , and tha t m ed ica l p rov ide rs have very few a lte rna tive
pu rcha se rs fo r the ir se rv ice s.
The com p la in t a lso a llege s tha t
1 2
H ighm a rk pa id W e s t Penn dep re ssed re im bu rsemen t ra te s , no t
a s a re su lt o f independen t dec is ionm ak ing , bu t pu rsuan t to a
con sp iracy w ith U PM C , unde r w h ich UPM C
in su la ted
H ighm a rk f rom compe tition in re tu rn fo r H ighm a rk ’ s tak ing
step s to hobb le W est P enn . In these c ircum stances, it is
ce rta in ly p lau sib le
tha t paying W e st Penn dep ressed
re imbu rsem en t ra tes un reasonab ly restra ined trade . Such sho rt-
chang ing po se s compe titive th rea ts s im ila r to tho se po sed by
con sp irac ies am ong buye rs to f ix p rices , see M andev ille Is land
Fa rm s v . Am . C ry sta l Suga r C o ., 334 U .S . 219 (1948 ) , and o the r
restra in ts tha t resu lt in a rtific ia lly dep ressed paym en ts to
supp lie rs— nam e ly,
subop tim a l ou tpu t,
reduced qua lity,
a lloca tive ine f f icienc ies , and (g iven the reduc tion s in ou tpu t)
h ighe r p rices fo r con sum e rs in the long run . See B row n v . P ro
Foo tba ll, Inc ., 50 F .3d 1041 , 1061 (D .C . C ir. 1995 ) (W a ld , J . ,
Indeed , the complaint alleges that the only other insurer
12
with a significant market share is UPMC Health Plan, and that UPMC
Health Plan has basically been unwilling to deal with West Penn.
31
Case: 09-4468 Document: 003110361329 Page: 32 Date Filed: 11/29/2010
d issen ting )
(d i scu s s ing
the an ticompe titive e ffec ts o f
m onop sony) (c iting R oge r D . B la ir & Je f frey L . H a rrison ,
M onop sony 36–43 , 72 (1993 )) ; A reeda & H ov enkam p , supra ,
¶ 350b , a t 234–235 & n .8 ; John J . M ile s , H ea lth C a re &
A n titru s t Law § 15B :4 (2010 ) (co llec ting sou rce s and d iscu ss ing
the p rob lem s l in ked to insu rer m onop sony) ; R oger D . B la ir &
John E . Lop a tk a , P reda to ry B uy ing and the A n titru st Law s ,
2008 U tah L . R ev . 415 , 415 (ob se rv ing tha t the “exe rc ise o f
m on op so ny pow e r . . . m isa lloca te s re sou rce s and the reby
reduce s soc ia l w e lfa re” ) ; see a lso S t. B e rna rd G en . H o sp ., Inc .
v . H o sp . Serv . A ss’n , 712 F .2d 978 , 985–87 (5 th C ir . 1983 )
(p rim a fac ie an titru s t v io la tion show n w he re in su re r tha t w a s
con tro lled by pa rticipa ting ho sp itals lim ited re im bu rsem en ts
pa id to non -p a rt ic ipa ting ho sp ita ls).
The de f endan ts a rgue , though , tha t H ighm a rk ’s paying
W es t Penn dep ressed re im bu rsem en ts d id no t po se a n t i trus t
p rob lem s becau se it enab led H ighm a rk to se t low in su rance
p rem ium s and thu s b ene f itted con sum e rs. W e d isag ree . F irst,
even if it w e re true tha t paying W e st Penn dep re s sed ra te s
enab led H ighm a rk to o f fer low e r p rem ium s , it is fa r f rom c lea r
tha t th is w ou ld have benef itted con sum e rs , becau se the p rem ium
reduc tion s w ou ld have been ach ieved on ly by tak ing ac tion tha t
tend s to d im in ish the qua lity an d ava ilab ility o f ho sp ita l
se rv ices . See B row n , 50 F .3d a t 1061 (W a ld , J ., d issen t ing ) ;
W a rren S . G rim es , The Sherm an A c t’s U n in tend ed B ias Aga ins t
L illipu tian s , 69 A n t itru s t L .J . 195 , 210 (2001 ) (“The v ery na ture
o f m onop sony o r o ligopsony pow e r is tha t it tend s to supp ress
ou tpu t and reduce qua lity o r cho ice .” ). Second , the comp la in t
a llege s tha t H ighm a rk d id no t pass the sav ing s on to con sum e rs.
It a lleg es, instead , tha t H ighm a rk pocke ted th e sav ing s, w h ile
repea ted ly ra tche ting up in su rance p rem ium s . See a lso R oge r D .
32
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B la ir & Je f f rey L . H a rr ison , An titru s t Po licy and M onop sony , 76
C o rne ll L . R ev . 297 , 339 (1991 ) (exp la in ing tha t “ low e r inpu t
p rice s re su lting f rom the exerc ise o f monop sony pow e r do no t
u l tima te ly tran s la te in to low er p r ice s to the m onop son is t’s
cu s tom e rs” ).
B u t mo st im po rtan tly, the de fendan ts’ a rgum en t re f lec ts
a basic m isunde rstand ing o f the an titru st law s . The N in th
C ircu it’s d iscu ss ion in K neve lbaa rd Da iries v . K ra ft Food s , Inc .,
232 F .3d 979 (9 th C ir . 2000 ) , illu s tra te s the po in t w e ll. The re ,
the p la in tif f m i lk p roduce rs e stab lished tha t the de fendan t
cheese m ake rs had con sp ired to dep re ss the p rice they pa id fo r
m ilk . The chee se make rs a rgued tha t the p la in tif f s’ in ju rie s
w e re no t an t i t ru s t in ju ries— i.e ., w e re no t the k ind o f in ju rie s
“ the an titru s t law s w e re in tended to p reven t,” B run sw ick , 429
U .S . a t 489— becau se the consp i racy enab led them to pu rchase
m ilk a t low e r co sts and thu s to se ll cheese to con sum e rs a t low e r
p rices . Kn e ve lba a rd D a ir ie s , 232 F .3d a t 988 . The N in th
C ircu it p rope rly re jec ted th is a rgum en t:
The fa llacy o f
th [e defendan ts’] a rgum en t
become s c lea r w hen w e reca ll th a t the cen tra l
pu rpo se o f the an titru s t law s . . . is to p re se rve
compe tition . It is compe tition— no t the co llu s ive
f ix ing o f p r ice s a t leve ls e ithe r low o r h igh— tha t
these sta tu tes recogn ize as v ital to the pub lic
in te re st. The Sup reme C ou rt’s re ferences to the
go a ls o f ach iev ing “ the low es t p r ices , the h igh es t
qua lity and the g rea te st m a te ria l p rog re ss ,” [N .
Pac . R y . C o . v . U n ited S ta te s , 356 U .S . 1 , 4
(1958 )], and o f “assu r[ ing ] cu stom e rs th e bene f its
[A s so c ia ted G en .
o f p r ic e com p e t i t io n ,”
C on trac to rs o f C a l., Inc . v . C a l. S ta te Counc il o f
C arpen ters , 459 U .S . 519 , 538 (1983 )] , do no t
33
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m e an th a t consp irac ies among buye rs to dep r e s s
acqu is ition p rice s a re to le ra ted . Eve ry p receden t
in the f ie ld m ake s c lea r tha t the in te rac tion o f
com pe titive fo rces, no t p rice -rigg ing , is w ha t w ill
ben e f it con sum e rs.
Id .; see a lso M andev ille , 334 U .S . a t 235 . S im i la r rea son ing
app lie s he re . H ighm a rk ’s im p rop e rly m o tiva ted exerc ise o f
m onop sony pow e r, like the co llu s ive exerc ise o f o ligop sony
in K neve lbaa rd , w a s
pow e r by
the cheese make rs
an ticompe titive and canno t be de fended on the so le g round tha t
it enab led H ighm a rk to se t low e r p rem ium s on its in su rance
p lan s .
H av ing conc luded tha t paying W est P enn a rtific ially
dep re ssed re im bu rsemen t ra te s w a s an an ticompe titive a spec t o f
the a lleg ed con sp iracy, it fo llow s tha t the unde rpaym en ts
con s titu te an an titru s t in ju ry. See A tl. R ich field , 495 U .S . a t 334
(ho ld ing tha t an an titru st in ju ry is an in ju ry tha t is “a ttribu tab le
to an an t i-com pe t it ive a sp ec t of the p rac t ice under sc ru t iny”) ;
B run sw ick , 429 U .S . a t 489 ; A reeda & H ovenkam p , su p ra , ¶
350 , a t 235 (no ting tha t “se lle rs rece iv ing illega l ly low p r ices .
. . su f fe r an titru s t in ju ry”).
D . S ta tu te o f L im ita tion s 1 3
Although Federal Rule of Civil Procedure 8(c) suggests that
13
“a statute of limitations defense cannot be used in the context of a
Rule 12(b)(6) motion to dismiss,” Oshiver v. Levin, Fishbein, Sedran
& Berman, 38 F.3d 1380, 1384 n.1 (3d Cir. 1994), our cases
recognize that a defendant may raise a limitations defense in a motion
to dismiss, Robinson v. Johnson, 313 F.3d 128, 135 & n.3 (3d Cir.
2002) (citing cases). For the defendant to prevail, though, the
plaintiff’s tardiness in bringing the action must be apparent from the
34
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H ighm a rk a rgue s tha t the con sp i racy c la im s a re tim e –
barred . U nder 15 U .S .C . § 15b , a su i t to recover dam ag es fo r a
v io la tion o f the She rm an A c t m u s t be “comm enced w ith in fou r
yea rs a f te r the cau se o f ac tion accrued .” In Zen ith Rad io C o rp .
v . H a ze ltine Re sea rch , Inc ., 401 U .S . 321 (1971 ) , the Sup rem e
C ou rt dec lared tha t an an titrust cau se o f ac tion gene ra lly
“acc rue s and the s ta tu te [o f lim ita tion s] beg in s to run w hen a
de fendan t comm its an ac t tha t in ju re s a p la in tif f ’s bu s ine ss .” Id .
a t 338 . H ow eve r, “ [ i]n the con tex t o f a con tinu ing co n sp i racy
to v io la te the an titru s t law s , . . . each tim e a p la in tif f is in ju red
by an ac t o f the de fendan ts a cau se o f ac tion a cc rues to [ it] to
recove r the d am ages cau sed b y th a t ac t and . . . as to those
damage s , the sta tu te o f lim ita tion s run s f rom the comm iss ion o f
the ac t.” Id .; H anove r Shoe , Inc . v . U n ited Shoe M ach . C o rp .,
392 U .S . 481 , 502 n .15 (1968 ); In re Low er Lake E r ie Iron O re
An titru s t L itig ., 998 F .2d 1144 , 1172 (3d C ir . 1993 ) (“ [A ]n
in ju riou s ac t w ith in the lim itation s p e riod m ay se rve a s a basis
fo r an an titru st su it.” ); see a lso K leh r v . A .O . Sm ith C o rp ., 521
U .S . 179 , 189–90 (1997 ).
W es t Penn in i tia ted th is law su it on A p r il 21 , 2009 , and so
the lim ita tion s p e r iod ex tend s back to A p ri l 21 , 2005 . See 15
U .S .C . § 15b . The comp la in t adequa te ly a llege s tha t the
de fendan ts pe rfo rm ed in ju riou s ac ts in fu rthe rance o f the
con sp iracy w ith in the lim ita tion s pe r iod . The com p la in t a lleges ,
fo r exam p le, tha t as pa rt o f the con sp iracy, H ighm a rk refu sed to
inc re a se W e st Penn ’s re im bu rsemen t ra te s in 2006 . O n a
s tra igh tfo rw a rd read ing o f Zen ith , it the re fo re app ea rs tha t W es t
Penn m ay, con sis ten t w ith the sta tu te o f lim i ta t ion s , recover
face of the complaint. Id.
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damage s fo r the ac ts tha t occu rred w ith in the lim ita tion s pe riod .
See 401 U .S . a t 338 .
H ighm a rk acknow ledge s a ll o f th is , bu t u rge s u s to adop t
a lim ita tion on Zen ith . C i ting persuas ive au tho r i ty, H ighm ark
a sk s u s to ho ld tha t no cau se o f ac tion accrue s ba sed on
in ju riou s ac ts tha t occu r w ith in the l im ita tion s pe r iod , if tho se
ac ts a re me re ly “ rea ff irm a tion s” o f ac ts done o r dec is ion s m ade
ou ts ide the l im i ta tion s pe riod . See H ighm a rk B r . a t 38–46
(c iting , e .g ., G rand Rap id s P la stic s , Inc . v . Lak ian , 188 F .3d
401 , 406 (6 th C ir. 1999 )). H ighm a rk says tha t unde r th is
s tanda rd W e st Penn ’s con sp iracy c la im s a re tim e -ba rred ,
becau se the ac ts tha t a lleged ly occu rred w ith in the lim ita tion s
pe riod w e re m e re ly m an ifesta tions o f dec ision s m ade o r ac ts
done ou ts ide the l im i ta t ion s per iod . W e re jec t H ighm ark ’s
p ropo sed standa rd , a s it is incon sis ten t w ith con tro lling
p receden t.
W e sta rt w ith H anove r Shoe . The re , a shoe manu fac tu re r
sued a shoemak ing m ach ine ry company fo r m onopo liza tion
unde r sec tion 2 o f the She rm an A c t. The m anu fac tu re r a sse rted
tha t in 1912 , the m ach ine ry company had e stab lished a lea se –
on ly po licy fo r its m o st im po rtan t equ ipm en t, unde r w h ich it
w ou ld
lea se— bu t w ou ld no t
se ll— the equ ipm en t
to
m anu fac tu re rs . 392 U .S . a t 483 . The manu fac tu re r c la im ed tha t
the lea se -on ly po licy h ad enab led the m ach ine ry com pany to
m a in tain a m onopo ly in the m a rke t fo r shoem ak ing equ ipm en t,
and tha t as a resu lt, it had incu rred a rtific ially in f lated co sts in
ca rrying ou t its bu s iness . Id . a t 484 . A lthough the manu fac tu re r
a sse rted tha t the lea se -on ly po licy had been es tab lished in 1912 ,
it d id no t f ile su it aga in s t the mach ine ry company un til 1955 .
C iting the tim e gap , the mach ine ry company a sse rted tha t the
36
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su it w as tim e -ba rred . The Sup rem e C ou rt d isag reed :
[The m ach ine ry company] ha s . . . advanced the
a rgum en t tha t becau se the earlie st im pac t on [ the
m anu factu rer] o f [ the mach inery com pany’s] lease
on ly po licy occu r red in 1912 , [ the manu f ac tu re r’s]
cau se o f ac tion a ro se du ring tha t yea r and is now
ba r red by the app l icab le . . . s ta tu te o f lim ita tion s .
. . . [Bu t w ]e a re no t dea ling w ith a v io la tion
w h ich , if it occu rs a t a ll, m us t occu r w ith in som e
spec if ic and l im i ted t im e sp an . . . . R a the r , w e a re
dea ling w ith conduc t w h ich con stitu ted a
con tinu ing v io la tion o f the She rm an A c t and
w h ich inf lic ted con tinu ing and accum u la ting harm
o n
[ th e
A l th o u g h
[ th e m a n u f a c tu r e r ] .
m anu fac tu re r] cou ld have sued in 1912 fo r the
in ju ry then be ing in f lic ted , it w a s equa lly en titled
to sue in 1955 .
Id . a t 502 n .15 . The Cou rt so he ld even though the in ju riou s
ac ts tha t took p lace w ith in the lim ita tion s pe riod— i.e ., in s tances
in w h ich the m ach ine ry company pe rs is ted in its re fu sa l to o f fer
its equ ipm en t fo r sa le— w e re sim p ly m an ife sta tion s o f the lea se –
on ly po licy, w h ich had been e stab lished in 1912 , w e ll be fo re the
s ta rt o f the lim ita tion s pe riod . See id .; see a lso K leh r , 521 U .S .
a t 189–90 (no ting tha t in the con tex t o f a p rice -f ix ing
con sp iracy, any g iven sa le g ives ris e to a cau se o f ac tion to
recov e r the dam ages cau sed by tha t sa le) ; H a ro ld F r iedm an , Inc .
v . Thoro fa re M k ts . , 587 F .2d 127 , 138–39 (3d C ir . 1978 )
( se c t ion 1 su it ch a lleng ing shopp ing cen te r’s re fusa l to leas e
space to g roce ry s to re deemed tim e ly, even though re fu sa l w a s
“g rounded upon an exc lu s iv ity c lau se in a lea se tha t w a s en te red
in to [b e tw ee n the shopp ing cen te r and a riva l g roce ry s to re ]
m o re than fou r yea rs be fo re the comm encem en t o f the su it” ).
37
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O u r dec is ion in Low er Lake E rie is a long the sam e lines .
The re the p la in tif f s, w h ich inc luded dock ing and tran spo rta tion
com pan ies , sued a ra ilroad unde r sec tion 1 o f the She rm an A c t.
The compan ie s p roved tha t the de fendan t had pa rtic ipa ted in a
con sp iracy among ra ilroad s to exc lude the compan ie s f rom the
m a rke t fo r the hand ling and tran spo rta tion o f iron o re . 998 F .2d
a t 1153–54 . The ra ilroad s had exc luded the com pan ies by,
am ong o the r th ing s, re fu sing to lea se them dock p rope rty
su itab le fo r the sh ipm en t o f iron o re , and by ove rch a rg ing the
com pan ies to u se the ra ilroad s to sh ip o re . Id . The de fendan t
a rgued tha t becau se the con sp iracy had go tten unde r w ay ou ts ide
the lim ita tion s pe riod , the compan ie s’ c la im s w e re tim e -ba rred .
W e d isag reed , rea son ing tha t the com pan ies ’ c laim s w e re tim e ly
becau se the ra ilroad s’ exc lu s iona ry conduc t, inc lud ing re fu sing
to lease do ck p rope r ty and ov e rcha rg ing fo r use o f the ra ilroads ,
had con tinued in to the lim ita tion s pe riod . See id . a t 11 72 ;
acco rd B e ll v . D ow C hem . C o ., 847 F .2d 1179 , 1186–87 (5 th
C ir. 1988 ); Im p er ia l Po in t Co lonnades Condo ., Inc . v .
M angu r ian , 549 F .2d 1029 , 1035 , 1041–43 (5 th C ir. 1977 ) ,
fo llow ed in H a ro ld F r iedm an , 587 F .2d a t 139 & nn . 43–45 ;
Po s te r E xch ., In c . v . N a t’l Sc reen Serv . C o rp ., 517 F .2d 117 ,
127–28 (5 th C ir . 1975 ) . Bu t see , e .g . , D av id O rge ll, Inc . v .
G ea ry ’s S to re s , Inc ., 640 F .2d 936 , 937–38 (9 th C ir. 1981 ) .
T aken toge the r, H anove r Shoe and Low e r Lake E r ie leave no
room fo r H ighm ark ’s propo sed ru le . In each ca se , the p la in t iff ’s
su it w a s tim e ly even though the ac ts tha t occu rred w ith in the
lim itation s p e riod w e re rea f f irm a tion s o f dec ision s o rig ina lly
m ade ou ts ide the lim ita tion s pe riod .
F ina lly, w e no te tha t the po lic ie s unde rlying lim i ta t ion s
s ta tu tes— nam e ly, p rov id ing po ten t ia l de fe nd an ts w ith repose
and a vo id ing p re jud ice cau sed by lo s t ev idence , faded
38
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m em o ries , and unava ilab le w itnesses , see W ilson v . G a rc ia , 471
U .S . 261 , 271–72 (1985 )— do no t coun se l in fa vo r o f
recogn izing H ighm a rk ’s p ropo sed ru le. A s fo r repo se , the F if th
C ircu it sa id it w e ll in Po s te r E xchange, w he re it re jec ted a ru le
strik ing ly sim ilar to the one H ighm a rk p ropo se s h e re :
[A dop ting the de fendan t’s ru le ] w ou ld . . .
im p rope rly tran sfo rm the lim ita tion s s ta tu te f rom
one o f repo se to one o f con tinued imm un ity. Fo r
acco rd ing to [ the de fendan t’ s ] a rgum en t, a
p la in tif f w ho su f fers [damage f rom a con tinu ing
an titru s t v io la tion ] is ba rred no t on ly f rom
p rov ing v io la tion s and damage s m o re than fou r
yea rs o ld , bu t is ba rred fo reve r f rom comp la in ing
o f [ the con tinua tion ] o f the un law fu l conduc t. The
func tion o f the lim itation s s tatu te is sim p ly to pu ll
th e b lanke t o f peace over ac ts and even ts w h ich
hav e them se lves a lready s lep t fo r the s ta tu to ry
pe riod ,
thu s ba rring
the p roo f o f w rong s
embedded in tim e -pa ssed even ts . Em p loying the
lim ita tion s s ta tu te add i tiona l ly to imm un ize recen t
repe tition o r con tinua tion o f v io la tion s and
damage s occas ioned the reby no t on ly ex tend s the
sta tu te b eyond its pu rpo se , bu t also con f licts w ith
the po licies o f v igo rou s en fo rcem en t o f p r iva te
r igh ts th rough p r iva te ac tion s .
517 F .2d a t 127–28 (in terna l cita tion s om itted ). W ith rega rd to
the po licy o f avo id ing p re jud ic e , the de fendan ts “ha rd ly a re in
a po sition to a rgue fo r the p ro tec tion o f the s ta tu te o f lim ita tion s
on the trad itiona l g round tha t ev idence ha s been lo s t, m emo r ie s
have faded , an d w i tn e s se s have d isappeared . . . w hen it is the
de fendan ts’ ow n recen t conduc t tha t re su lts in a f ind ing o f a
n ew ly accru ing cau se o f ac tion .” Im pe ria l Po in t, 549 F .2d a t
39
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1041 (in te rn a l c ita tion s and punc tua tion om itted ).
W e thu s end up w he re w e sta r ted : Zen ith shou ld be
app l ied on i ts term s . U nder Zen ith , W e st Penn ’s con sp iracy
c laim s a re no t tim e -ba rred becau se the com p lain t adequa tely
a lleg es tha t the de f end an ts pe rfo rm ed in ju riou s ac ts in
fu rthe rance o f the con sp iracy w ith in the lim ita tion s pe riod .
V I. The A ttem p ted M onopo liza tion C la im
In add i t ion to the con sp iracy c la im s , W e st Penn a llege s
tha t U PM C v io la ted sec tion 2 o f the She rm an A c t by a ttemp t ing
to monopo lize the A l legheny Coun ty m a rke t fo r spec ia l iz ed
ho sp ita l se rv ice s. The e lemen ts o f a ttemp ted monopo l iza tion
a re (1 ) tha t the de fendan t h a s a spec if ic in ten t to m onopo lize ,
and (2 ) tha t the de fe nd an t ha s engaged in an ticompe titive
conduc t tha t, taken as a w ho le , c rea te s (3 ) a dangerou s
p robab ility of ach ieving m onopo ly pow e r. Spec trum Spo r ts , Inc .
v . M cQ u illan , 506 U .S . 447 , 456 (1993 ) ; Sw ift & Co . v . U n ited
S ta te s , 196 U .S . 375 , 396 (1905 ); Lepage ’s Inc . v . 3M , 324 F .3d
141 , 162 (3d C ir . 2003 ) (en banc) (ho ld ing tha t a cou r t shou ld
con side r a de fendan t’s an ticompe titiv e conduc t “a s a w ho le
ra the r than con side ring each a spec t in iso la tion” ) (c iting C on t’l
O re Co . v . U n ion C a rb ide & C a rbon C o rp ., 370 U .S . 690 , 699
(1962 )) .
The D is tric t C ou rt d ism issed
the a ttemp ted
m onopo liza tion c laim on the g round tha t the com p lain t fa ils to
a llege an ticompe titive conduc t, and the pa rtie s have add re ssed
on ly tha t issue he re . W e lim it ou r rev iew acco rd ing ly.
B road ly speak ing , a f irm engages in an ticompe titive
conduc t w hen it a ttemp ts “ to exc lude riva ls on som e ba sis o the r
than e f f ic iency,” A sp en Sk iing C o . v . A spen H igh land s Sk iing
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C o rp ., 472 U .S . 585 , 605 (1985 ) (in te rna l quo ta tion m a rk s
om itted ), o r w hen it compe te s “on som e b a s i s o the r than the
m e rits ,” Lepage’s , 324 F .3d a t 147 . “Conduc t tha t im pa irs the
oppo rtun itie s of riva ls and e ithe r doe s no t fu rthe r compe tition on
the m e rits o r doe s so in an unnece ssa rily re stric tive w ay m ay be
deemed an ticompe titive .” B roadcom , 501 F .3d a t 308 . The line
be tw een an ticom pe titive conduc t a nd v igo rou s com pe tition is
som e tim es b lu rry, bu t d istingu ish ing be tw een the tw o is c ritica l,
becau se the She rm an A c t “d irec ts itse lf no t aga in s t conduc t
w h ich is compe titive , even seve re ly so , bu t aga in s t conduc t
w h ich un fa irly tend s to de stroy compe tition itse lf .” M cQ u illan ,
506 U .S . a t 458 ; U n ited S ta tes v . A lum inum C o . o f Am ., 148
F .2d 416 , 429–30 (2d C ir . 1945 ).
“ ‘A n t icompe titiv e condu c t’ c an com e in too m any
d iffe ren t fo rm s , and is too dep enden t upon con tex t , fo r any cou r t
o r comm en ta to r eve r to have enum e ra ted a ll th e va rie tie s .”
Lepage’s , 324 F .3d a t 152 (quo ting C a r ibbean B road Sy s., L td .
v . Cab le & W ire less PLC , 148 F .3d 1080 , 1087 (D .C . C ir.
1998 )) . Fo r p re sen t pu rpo se s , it is su f f ic ien t to no te tha t
an ticompe titive c ondu c t can inc lude a con sp iracy to exc lude a
riva l, A reeda & H ovenkam p , supra , ¶ 806 f3 , at 4 28 ; see
Lepage’s , 324 F .3d a t 157 , h i ring a r iva l ’s em p loyees no t to u se
them bu t to deny them to the riva l, U n ive rsa l Ana ly tic s , Inc . v .
M acN ea l-Schw end le r C o rp ., 914 F .2d 1256 , 1258 (9 th C ir .
1990 ) (pe r cu riam ); A reeda & H ovenkam p , supra , ¶ 702 , a t 205 ,
a ho sp ital’s coe rc ing p rov ide rs no t to re fe r pa tien ts to a riva l,
Po t ters M ed . C tr . v . C i ty H o sp . A ss’n , 800 F .2d 568 , 576–77 ,
580 (6 th C ir. 1986 ); see M&M M ed . Supp lie s & Se rv ., Inc . v .
P lea san t Va lley Ho sp ., 981 F .2d 160 , 166–67 (4 th C ir . 1992 ) (en
banc ), and mak ing fa l se sta temen ts abou t a riva l to po ten tia l
inves to rs and cu s tom e rs , see Lepage’s , 324 F .3d a t 153 (c iting
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Case: 09-4468 Document: 003110361329 Page: 42 Date Filed: 11/29/2010
In t’l T rave l A rrange rs , Inc . v . W e ste rn A ir line s , Inc ., 623 F .2d
1255 (8 th C ir . 1980 )); C a r ibbean , 148 F .3d a t 1087 ; see
gene ra lly M au rice E . S tucke , Sym po s ium , W hen a M onopo l is t
D ece ive s, 76 A n t itru s t L .J . 823 (2010 ) .
1 4
The c om p la in t a llege s the fo llow ing an ticompe titive
conduc t. F irs t, the d e f endan ts engaged in a con sp iracy, a
pu rpose o f w h ich w as to d r ive W es t Penn ou t o f bus iness .
Second , U PM C h ired emp loyee s aw ay f rom W e st Penn by
paying them b loa ted sa la rie s . U PM C adm i tted to h iring som e o f
the em p loyee s no t becau se i t needed them bu t in o rde r to in jure
W e st Penn ; U PM C cou ld no t ab so rb som e o f the emp loyee s and
had to le t them go ; and U PM C incu r red f inanc ia l lo ss e s as a
resu l t o f the h i ring . Th e se a llega t ion s a re su f f ic ien t to sugges t
tha t a t leas t som e o f the h ir ing s w e re an ticom pe titiv e . See
U n ive rsa l Ana ly tic s , 914 F .2d a t 1258 (A n ticompe titive o r
p reda to ry h iring “can be p roved by show ing the h iring w a s m ade
w ith [an ticompe titive ] in ten t, i.e . to ha rm the compe tition
w ithou t he lp ing the [d e fendan t] , o r by show ing a c lea r nonuse
We previously recognized—though perhaps in overly broad
14
terms—that making false statements about a rival, without more,
rarely interferes with competition enough to violate the antitrust laws.
See Santana Prods., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d
123, 132 (3d Cir. 2005) (stating, in the context of a section 1 case,
that “‘deception, reprehensible as it is, can be of no consequence so
far as the Sherman Act is concerned’”). But in some cases, such
defamation, which plainly is not competition on the merits, can give
rise to antitrust liability, especially when it is combined with other
anticompetitive acts. See Lepage’s, 324 F.3d at 153, 162; Int’l
Travel, 623 F.2d at 1268, 1270; Caribbean, 148 F.3d at 1087.
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Case: 09-4468 Document: 003110361329 Page: 43 Date Filed: 11/29/2010
in fac t.” ).
R e la ted ly, U PM C tried un successfu lly to lu re a
1 5
num be r o f emp loyee s aw ay f rom W e st Penn ; U PM C cou ld no t
h av e ab so rbed the add itiona l emp loyee s, and a lthough the
emp loyee s rema ined w ith W e st Penn , they d id so on ly a f te r
W es t Penn ra ised the i r sa la r ies to sup racom pe t i t ive leve ls.
Th ird , U PM C app roached comm un ity ho sp ita ls and th rea tened
to bu ild U PM C sa te llite fac ilitie s nex t to them un le ss they
s topped re ferring onco logy pa tien ts to W e st P enn and began
re ferring a ll such pa tien ts to U PM C . N ea rly a ll o f the
comm un ity ho sp ita ls caved in , w h ich dep rived W e st Penn o f a
key sou rce o f pa tien ts . M o reove r , unde r p ressu re f rom UPM C ,
seve ra l o f the comm un ity ho sp ita ls have stopped send ing any o f
the ir te rtia ry and qua te rna ry ca re re ferra ls to W e st Penn and
have begun send ing them a l l to U PM C . F ina lly, on seve ra l
occas ion s , U PM C m ad e f a lse s ta tem en ts abou t W es t Penn ’s
f inanc ia l hea lth to po ten tia l inve sto rs , w h ich cau sed W e st Penn
to pay a rtific ially in f lated f inanc ing co sts on its deb t.
V iew ed as a w ho le , these a llega t ion s p laus ib ly sugg es t
tha t U PM C ha s engaged in an ticom pe titiv e conduc t, i.e ., tha t
U PM C ha s compe ted w ith W e st Penn “on som e ba sis o the r than
the m e rits .” Lepage’s , 324 F .3d a t 147 . The D is tric t C ou r t
e rred in conc lud ing o the rw ise .
1 6
UPMC argues that we may not consider hirings made
15
outside the limitations period in determining whether the new hirings
were anticompetitive. Not so. Toledo Mack, 530 F.3d at 217
(holding that it is proper to consider pre-limitations period conduct in
determining whether conduct within the limitations period violated
the antitrust laws).
West Penn also claims that UPMC’s acquisition of Mercy
16
Hospital was anticompetitive. It says that, besides West Penn, Mercy
was UPMC’s only other competitor in the market for specialized
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Case: 09-4468 Document: 003110361329 Page: 44 Date Filed: 11/29/2010
V II . T he S ta te -L aw C la im s
A f ter d ism iss ing the f ed era l c la im s , the D is tr ic t C ou r t
dec lined to exe rc ise supp lemen ta l ju risd ic tion ove r the sta te -law
c la im s . H av ing de term ined tha t the f ed era l c la im s w ere
im p rope rly d ism issed , w e w ill vaca te the d ism issa l o f the sta te –
law c la im s fo r recon s ide ra tion by the D is tr ic t C ou rt .
V III . C onc lu s ion
Fo r the rea son s se t fo rth abo ve , the judgm en t o f the
D is tric t C ou rt w ill be reve rsed in pa rt and vaca ted in pa rt, and
the case w ill b e rem anded fo r fu rthe r p ro ceed ing s .
hospital services, and that the acquisition brought UPMC one step
closer to monopoly. As UPMC points out, however, West Penn has
failed to allege that it sustained an antitrust injury as a result of the
acquisition, and thus may not challenge it. See Alberta Gas, 826 F.2d
at 1241–42 (gas producer sustained no antitrust injury as a result of
an acquisition of a potential competitor by another competitor);
Areeda & Hovenkamp, supra, ¶ 348b , a t 204 .
44