Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Class action alleging tying, monopolization by health care provider dismissed, (Jun 23, 2014)

By Edward L. Puzzo, J.D.

A putative class of health care plan purchasers failed to allege plausible relevant geographic markets required to state tying and monopolization claims against a regional health care services provider, the federal court in San Francisco has ruled. Thus, the claims were dismissed with prejudice (Sidibe v. Sutter Health, June 20, 2014, Beeler, L.).

Three individuals, on behalf of a putative class of health care plan purchasers, brought antitrust claims against Sutter Health, Northern California’s largest hospital chain and health care services provider. After earlier versions of the complaint were dismissed without prejudice on June 3, 2013 and November 7, 2013, plaintiffs submitted their third amended complaint, alleging (1) unlawful tying (per se or rule of reason); (2) a “Section 1 Course of Conduct” that caused an unreasonable restraint of trade; (3) unreasonable restraint of trade in violation of California's Cartwright Act; (4) monopolization; (5) attempted monopolization; and (6) unfair competition in violation of California’s Unfair Competition Law (UCL). Sutter Health again moved to dismiss.

Relevant market. In order to state claims for tying, unreasonable restraint of trade, monopolization, or attempted monopolization, plaintiffs must establish that Sutter Health has market power in a “relevant market,” meaning a relevant product market and a relevant geographic market. The relevant product market identifies the products or services that compete with each other, and the relevant geographic market identifies the area where the competition in the relevant product market takes place.

Here, the parties did not dispute that the relevant product market for antitrust purposes was inpatient hospital services sold to commercial health plans. Sutter Health, however, challenged the plausibility of the corresponding geographic markets.

Plaintiffs alleged that the geographic markets were "hospital service areas" (HSAs), a unit used by some policy makers to assess the economics of hospital markets. But just because HSAs are useful tools for assessing the economics of hospital markets in some capacity does not mean that they define relevant markets for antitrust purposes, according to the court. Plaintiffs did not cite a single instance where HSAs were accepted in an antitrust case, the court noted.

Plausible geographic markets. The court viewed as unsupported plaintiffs assertion that there were no economic substitutes to commercial health plans for Inpatient Hospital Services provided in that particular HSA. The plaintiffs, the court continued, failed to plausibly define the geographic markets for the sale of Inpatient Hospital Services to commercial health plans, because they did not define the geographic markets in terms of the areas where a health plan or its members could seek substitutes for Sutter’s Inpatient Hospital Services. The fact that most of the people in the HSAs seek treatment within those boundaries did not necessarily mean that they could not seek substitutes elsewhere or that a health plan could not contract with a substitute hospital from outside the HSA. In addition, the plaintiffs did not explain why or how HSAs were roughly congruent to the boundaries of the geographic markets.

Plaintiffs failed to identify the relevant markets and support their allegations with some factual allegations to render them plausible, the court stated. The problem was not that plaintiffs’ geographic market definition was based on faulty logic; the problem was that it was unsupported by non-conclusory factual allegations, the court stated. To reach this conclusion is not to require heightened pleading, the court noted. But if plaintiffs want to assert these claims, they must identify the relevant markets and support their allegations with some facts to show that they are plausible.

Therefore, the court again granted Sutter Health's motion to dismiss. Since all of plaintiffs' antitrust and state law claims were predicated on their relevant market definitions, their failure to allege plausible geographic markets meant that plaintiff's complaint must be dismissed in its entirety, the court ruled. In addition, since plaintiffs had four opportunities to plausibly allege relevant antitrust markets without being able to do so, the dismissal must be with prejudice, the court ruled.

The case is Civil Action No. 3:12-cv-04854-LB.

Attorneys: Azra Z. Mehdi (The Mehdi Firm PC), Allan Steyer (Steyer Lowenthal Boodrookas Alvarez & Smith LLP), Axel Bernabe (Constantine Cannon LLP), and Charles Ralph Jaeger (Farmer Brownstein Jaeger LLP) for Djeneba Sidibe, Diane Dewey and Jerry Jankowski. Lin W. Kahn (Jones Day) for Sutter Health.

Companies: Sutter Health

Cases: Antitrust CaliforniaNews