Antitrust Law Daily Wrap Up, TOP STORY—D.N.J.: Antitrust suit over physician recertification requirements moved to Chicago, (Apr 3, 2014)

By Jeffrey May, J.D.

An antitrust action brought by Association of American Physicians & Surgeons, Inc. (AAPS) against American Board of Medical Specialties (ABMS) over an alleged conspiracy to enforce specialty physician recertification requirements has been transferred by the federal district court in Trenton, New Jersey, to the federal district court in Chicago, where ABMS is headquartered. The court refused to dismiss for improper venue, and, in light of the transfer, declined to address the merits of ABMS’s motion to dismiss for failure to state a claim (Assn. of American Physicians & Surgeons, Inc. v. American Board of Medical Specialties, April 2, 2014, Sheridan, P.).

AAPS is a membership organization of thousands of practicing physicians, including physicians practicing in the State of New Jersey. It is organized under the laws of the State of Indiana and its principal place of business is in Arizona.

ABMS serves as an umbrella organization for 24 medical specialty boards. It assists its member boards in the development and use of standards in the evaluation and certification of physicians in a particular specialty. ABMS is organized under the laws of the State of Illinois, and its principal place of business in Chicago.

AAPS alleges that ABMS reached agreement with the 24 separate medical specialty boards, and acted in concert with The Joint Commission—a standard-setting organization for more than 20,000 health care organizations and hospitals—to impose formal recertification requirements on physicians that unreasonably restrain trade in violation of the Sherman Act. Under these rules, specialty physicians who seek to maintain certification must meet “continuous professional development” requirements.

According to AAPS, many hospitals throughout the country have decided to deny staff privileges to physicians who have chosen not to meet the recertification program’s requirements. In particular, AAPS identified a New Jersey physician, who although previously certified by the American Board of Family Medicine, was excluded from the medical staff at Somerset Medical Center in Somerville, New Jersey, after 29 because he chose not to participate in the recertification program. The physician, an AAPS member, had objected to time and expense required to satisfy the recertification program’s requirements.

AAPS filed its suit in the federal district court in New Jersey. It asserted that venue was proper in that court under Section 12 of the Clayton Act, which “permits venue in any federal district in which a corporation is an ‘inhabitant,’ may be ‘found,’ or ‘transacts business.’”

AAPS did not allege that ABMS was an “inhabitant” of New Jersey or might be “found” in the state. Instead, it contended that ABMS “transacts business” in New Jersey by “polic[ing] the qualifications” of physicians in the state.

ABMS did not engage in direct and continual supervision of its member boards within the State of New Jersey to have sufficiently transacted business within the state for purposes of Section 12 of the Clayton Act, the court ruled. ABMS had submitted an affidavit stating that it: (1) was not licensed to do business in New Jersey and did not maintain a registered agent in the state; (2) did not own any property in New Jersey; (3) did not operate any offices or employ any employees, agents, or other representatives in New Jersey; (4) did not engage in any public relations, publicity, solicitations of business, or business activities in New Jersey; (5) was not subject to taxes, regulation, or licensing by New Jersey; and (6) derived no revenue from goods used or consumed in New Jersey.

In addition, ABMS’s operation of a website through which patients could find out whether a particular physician in New Jersey was certified in a specialty did not constitute the transaction of business in New Jersey, the court ruled. “By listing the qualifications of New Jersey physicians on its website, ABMS simply provides information to consumers of medical services so that they may make an independent and informed decision as to whether they want to engage the services of a certified or non-certified physician,” the court explained. It did not amount to direct and continual supervision necessary to support venue.

The court also rejected AAPS’s assertion that venue was proper in New Jersey under 28 U.S.C. § 1391, because “’a substantial part of the events or omissions giving rise to the claim occurred’ here.” AAPS relied exclusively on the exclusion of the New Jersey physician from the medical staff of Somerset Medical Center, which was located in the judicial district. However, this exclusion was only tangentially related to the claims against ABMS. Nearly all of the activities that AAPS described as anticompetitive, namely ABMS’s development, production, and management of the recertification program, occurred at its headquarters in Chicago, in the court’s view.

Therefore, ABMS satisfied its burden of showing improper venue by offering evidence that the wrongful acts alleged in the complaint did not occur in New Jersey, and AAPS failed to rebut that evidence. In its discretion, the court decided to transfer the case.

The case is Civil Action No. 13-2609 (PGS) (LHG).

Attorneys: Andrew Layton Schlafly for Assn. of American Physicians & Surgeons, Inc. Arnold B. Calmann (Saiber LLC) for American Board of Medical Specialties.

Companies: Assn. of American Physicians & Surgeons, Inc.; American Board of Medical Specialties

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