Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Iowa: Pathologists test negative on their pleading of ‘central Iowa’ antitrust claims, (Jan 16, 2025)

By Justin Marcus Smith, J.D.

The court reasoned that the pathologists’ alleged injuries were too remote, patients would have been paying supracompetitive prices, and it also appeared that such pricing could be avoided by simply sending specimens for analysis outside Iowa.

A group of pathologists failed to plead antitrust claims against their former employer and another close defendant, held the federal district court in Des Moines, Iowa. The pathologists did not have Article III standing because they were not the proper party to bring the suit. The court reasoned here that the pathologists’ injuries were too remote, and their patients would have been the ones paying supracompetitive pricing, if any. The pathologists separately failed to plead a conspiracy to monopolize because the two defendants were incapable of conspiring. The court found the two defendants had a unity of interest in a joint venture without independent centers of control. Last, the pathologists failed to plead attempted monopolization because they failed to specify what they meant by a “central Iowa” geographic market. There was no reason to think it impractical to send pathology specimens for testing out-of-state. The court granted the defendants’ motion to dismiss all claims, apparently without prejudice; however, it footnoted that it denied the plaintiff’s “oral request to amend”, which did not specify how it would amend (Goldfinch Laboratory, P.C. v. Iowa Pathology Associates, P.C., No. 4:24-cv-00168-RGE-HCA (S.D. Iowa Dec. 13, 2024)).

Background. In May 2024, Goldfinch Laboratory, P.C. (Goldfinch) filed a complaint alleging that defendants Iowa Pathology Associates, P.C. (IPA) and Regional Laboratory Consultants, P.C. (RLC) conspired to monopolize, and attempted to monopolize, “central Iowa” pathology and dermatopathology services in violation of the Sherman Act and the Iowa Competition Law.

Goldfinch consisted of four pathologists who previously worked for defendants IPA and RLC. Goldfinch alleged that IPA had nearly all of the pathologists in central Iowa who were not associated with a single practice group confined to serving physicians in that one group. The Goldfinch complaint did not define “central Iowa.” Among various other details, Goldfinch alleged that the defendants unsuccessfully pressured Goldfinch pathologists to sign a noncompetition agreement; locked Goldfinch pathologists out of their offices; refused to share biopsy slides; and otherwise disparaged Goldfinch and its pathologists in various ways.

This federal district court case was not the only litigation. In December 2022, the defendants sued the Goldfinch pathologists individually in Iowa state court. Goldfinch, itself, was not a party, but the Goldfinch pathologists filed counterclaims against the defendants on many of the same facts alleged here.

The defendants moved for dismissal arguing that Goldfinch 1) lacked standing because it did not allege a cognizable antitrust injury with general harm to competition and it was not the proper party to bring the suit; and, 2) failed to adequately plead state and federal antitrust claims. The court, construing Iowa antitrust law in a manner consistent with federal antitrust law, granted the defendants’ motion to dismiss all claims.

Standing. The court granted the defendant’s motion to dismiss for lack of statutory standing. Goldfinch opposed dismissal arguing that 1) the defendants’ actions harmed competition generally; and, 2) it was an efficient enforcer because it suffered direct injury as a competitor in the affected market without jeopardy of duplicate recovery or complex apportionment of injury to Goldfinch.

The court found that most of Goldfinch’s alleged harms were not antitrust injuries. The alleged injuries did not stem from conduct affecting competition in the pathology and dermatopathology markets generally. The alleged damages described a targeting of Goldfinch and showed injury only to Goldfinch as a competitor in the form of lost patients and referral sources.

The court acknowledged one possible exception here, the allegation that the defendants falsely told potential referral sources that the defendants had exclusive contracts with Goldfinch. The court said that might cause general harm to competition in the pathology and dermatopathology markets because it would dissuade the referral sources from using other pathologists, not just Goldfinch. That was the sort of harm Congress wanted to prevent.

However, even so, the court found Goldfinch was not the proper party to bring this suit. Goldfinch alleged that the defendants caused supracompetitive pricing that harmed patients and other payors for those services and its own loss of around $3.3 million. The court explained how these alleged injuries were too “remote.” Any competition could cause some profit loss, but that alone would not confer standing to sue for antitrust injuries. In addition, patients would be paying the higher prices, not Goldfinch. Goldfinch was not the proper plaintiff due to the remoteness of the harms alleged.

Conspiracy. The court separately found that, even if Goldfinch had standing, Goldfinch could not allege a conspiracy. This was so because IPA and RLC were not independent centers of decisionmaking capable of conspiring.

The defendants argued that Goldfinch failed to allege that IPA and RLC were separate entities capable of a Sherman Act §1 conspiracy. Goldfinch responded that IPA and RLC were “capable of conspiring” because they were “functionally distinct.” Goldfinch added that dismissal without further factual development would be premature. Goldfinch expected discovery to show that IPA employed only technicians and staff, while RLC employed only pathologists, such that they operated together like a “nut and bolt,” with distinct functions, but were nonetheless a collaboration that allowed them to suppress competition and charge supracompetitive prices.

The court saw a pleading deficiency in that Goldfinch did not assert that IPA and RLC were separate economic actors pursuing separate economic interests congruent with the holding of American Needle. See Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 195 (2010). Goldfinch did not assert American Needle separate control of a joint venture. Goldfinch said RLC was essentially a profit-sharing pathologist affiliate within IPA.

The court resolved that IPA and RLC could not have conspired because they had a unity of interest. The court considered it irrelevant that IPA and RLC had different kinds of employees. Differing employees did not indicate independent decision making which, in combination, would squelch competition. The court said Goldfinch also undercut itself with an employment agreement complaint exhibit that characterized IPA and RLC as a singular “employer” with a singular “executive committee.”

Attempted monopolization. The court found that Goldfinch failed to allege a requisite relevant market for pathology and dermatopathology services in support of its attempted monopolization claims. Although the court found a relevant product market for independent pathology and dermatopathology services, Goldfinch failed to specify what it meant by a “central Iowa” geographic market, nor why it would limit the relevant geographic market in that way.

The defendants argued first that “pathology services” were not a valid product market because they were interchangeable with other hospital services. The court did not agree with this because the defendants did not explain how anyone could avoid nontransitory prices increases for pathology and dermatopathology services by switching to other kinds of hospital services.

The defendants also argued that Goldfinch did not address the “variety of locations and private laboratories” providing pathology services to patients. Pertinent here, Goldfinch said it sufficiently defined “central Iowa” because it alleged an absence of alternative suppliers, but the court faulted Goldfinch for not addressing why potential referral sources could not simply send specimens to areas outside “central Iowa,” whatever that was. Goldfinch even mentioned that specimens could travel long distances “in interstate commerce.” Where potential referral sources preferred to send samples was beside the point. The court said the proper inquiry was where they might have practical alternatives. The court also did not agree with Goldfinch that the twenty-five-mile radius of the noncompetition agreement implied anything about where the defendants faced competition. The restriction did not indicate anything about where potential referral sources could “realistically” send specimens for analysis, and the specified radius may have only been intended to comport with Iowa law.

Without a relevant geographic market, the court declined to consider whether Goldfinch properly alleged the other requisites for attempted monopolization. The court accordingly granted dismissal of all claims, apparently without prejudice; however, the court footnoted that Goldfinch did not appropriately move for leave to amend, nor did not explain how it would amend. The court specified that it “denie[d] Goldfinch’s oral request to amend.”

The Case is No. 4:24-cv-00168-RGE-HCA.

Judge: Ebinger, R.

Attorneys: Sarah K. Franklin (Dentons Davis Brown PC) for Goldfinch Laboratory, PC. Michael A. Dee (BrownWinick Law Firm) for Iowa Pathology Associates, PC.

Companies: Goldfinch Laboratory, PC; Iowa Pathology Associates, PC

Cases: Antitrust IowaNews GCNNews