Antitrust Law Daily Wrap Up, ANTITRUST—SDCal: Health Care Company Fails to State Claims Against Labor Unions, Competitors, (Apr 8, 2013)

By Tobias J. Gillett, J.D., LL.M.

A health care services company has failed to state antitrust claims against labor unions and competing healthcare companies over an alleged conspiracy to drive the company out of the market, because the company did not provide sufficient "direct evidence" of the conspiracy, and because the company’s allegations that the defendants lobbied the government to further their conspiracy were subject to the Noerr-Pennington doctrine, the federal district court in San Diego tentatively ruled (Prime Healthcare Services, Inc. v. Service Employees International Union, April 4, 2013, Curiel, G.).

Prime Healthcare Services, Inc. brought suit against Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, and Southern California Permanente Medical Group, Inc. (collectively, Kaiser), as well as the Service Employees International Union—United Healthcare Workers West and the Service Employees International Union (SEIU), alleging that Kaiser and the SEIU had conspired to drive Prime out of the healthcare services market in violation of the Sherman Act. In the present tentative ruling, the court addressed motions to dismiss filed by the various defendants.

The court first determined that Prime had not stated a claim under Section 1 of the Sherman Act. The court explained that a plaintiff must plead "not just ultimate facts (such as conspiracy), but evidentiary facts which, if true, will prove: (1) a contract, combination or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intended to harm or restrain trade or commerce among the several States, or with foreign nations; (3) which actually injures competition."

Here, Prime alleged that the defendants had engaged in a series of meetings, "‘work[ed] together as step one in the formation of the conspiracy,’ sought ‘to advance the goals of the conspiracy,’ and further collaborated to ‘harm and ultimately destroy Kaiser’s competitors, including Prime.’" However, these assertions did not constitute the "direct evidence" of a conspiracy required to establish a Section 1 violation, in the court’s view.

Moreover, Prime’s allegations that the defendants "worked together to expand Kaiser’s enrollment membership; wrongfully besmirched Kaiser hospital competitors, produced inaccurate reports and studies; persuaded government agencies, legislative representatives, and the media to investigate and publicize Prime’s conduct; proposed legislation designed to destroy Prime’s business model"; and engaged in other conspiratorial activities merely constituted independent action or parallel conduct, "insufficient to suggest an agreed upon activity." Therefore, the court dismissed the complaint for failure to state a Section 1 claim.

Noerr-Pennington doctrine. Prime’s allegations that the defendants engaged in "direct lobbying" in furtherance of their conspiracy were barred by the Noerr-Pennington doctrine. The court explained that the Noerr-Pennington doctrine exempts petitioning activity unless it represents a sham covering "what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor."

Here, Prime claimed that the defendants’ petitioning activity constituted a "sham," depriving them of the protection of the Noerr-Pennington doctrine, because they employed "false and misleading" studies to convince federal and state agencies to investigate Prime, and because they lobbied for certain "senate bills for the purpose of inhibiting Prime’s growth and success." The court concluded that these allegations "appear to exemplify that Defendants attempted to influence the policies of either the agencies or the legislature—activity intended to be protected under the Noerr-Pennington doctrine."

The court will issue a written order "in due course" following a hearing on April 5, 2013, on the issues addressed in its tentative ruling, as well as on whether its dismissal of Prime’s claims should be with or without prejudice.

The case is No. 11cv2652-GPC-RBB.

Attorneys: Amanda Catherine Fitzsimmons (DLA Piper LLP) for Prime Healthcare Services, Inc. Constance Hsiao (Rothner, Segall & Greenstone) for Service Employees International Union. Arthur N. Lerner (Ryley Carlock & Applewhite) for Kaiser Foundation Health Plan, Inc.

Companies: Prime Healthcare Services, Inc.; Service Employees International Union; Service Employees International Union —United Healthcare Workers West; Kaiser Foundation Health Plan, Inc.; Kaiser Foundation Hospitals; Southern California Permanente Medical Group, Inc.

Cases: Antitrust CaliforniaNews