Antitrust Law Daily Wrap Up, ANTITRUST—D. Or.: Ambulatory surgical center monopolization claims stayed pending arbitration, (Nov 30, 2015)

By Greg Hammond, J.D.

Claims that a leading operator of ambulatory surgery centers in the United States engaged in anticompetitive practices by requiring its partner physicians to execute overly broad and unreasonable non-compete covenants that limit the opening and operation of new surgery centers in central Oregon have been stayed pending the results of arbitration, the federal district court in Eugene, Oregon has decided (Wallace v. AmSurg Holdings, Inc., November 24, 2015, McShane, M.).

AmSurg Holdings, Inc. allegedly owns and operates more than 240 ambulatory surgery centers (ASCs) across the United States. Two physicians who formed plaintiff Northwest Medical Specialists, LLC also purchased a partnership interest in Bend Surgery Center. The partners subsequently approved an agreement under which AmSurg would acquire a majority interest in Bend Surgery Center and executed an operating agreement that included a restrictive non-compete covenant providing no owner or affiliated physician could have a direct or indirect ownership interest in a competing business within a 25 mile radius of Bend Surgery Center for five years from the date of the agreement.

The partners, Northwest, and an employee of Northwest filed suit against AmSurg, alleging—in part—that AmSurg unlawfully maintains its monopoly power through its restrictive and one-sided non-compete covenants and by its arbitration demand to enforce the covenants. The plaintiffs moved to stay an arbitration proceeding, and AmSurg moved to dismiss or, in the alternative, to stay the antitrust proceeding pending the results of the arbitration.

The court first noted that there was no dispute that the two physicians who formed Northwest Medical Specialists are bound by the arbitration agreement, and there is currently ongoing arbitration proceedings involving the two physicians, with a final hearing set for early February 2016. The plaintiffs’ motion to stay arbitration was therefore denied.

However, the two remaining plaintiffs—Northwest and an employee—did not benefit directly from the operating agreement at issue; have not performed any services under the agreement; received no payments under the agreement; and allege that the agreement does not provide benefits, but actually harms them by violating antitrust laws. The court therefore concluded that Northwest and the employee are not bound by the operating agreement and that AmSurg did not demonstrate Northwest and its employee should be estopped from avoiding arbitration. The court consequently exercised its discretion to stay the remaining claims pending arbitration of the two physicians’ claims.

The case is No. 6:15-cv-01548-MC.

Attorneys: Gregory P. Lynch (Miller Nash Graham & Dunn LLP) for Philip Wallace and Northwest Medical Specialists, LLC. Meredith M. Thompson (Bass Berry & Sims PLC) for AmSurg Holdings, Inc.

Companies: Northwest Medical Specialists, LLC; AmSurg Holdings, Inc.

Cases: Antitrust OregonNews