Professional Documents
Culture Documents
United States Court of Appeals, Eleventh Circuit
United States Court of Appeals, Eleventh Circuit
2d 1385
1990-1 Trade Cases 69,070
C. Knox McLaney, III, Montgomery, Ala., Jerry R. Knight, Decatur, Ala., for
plaintiffs-appellants.
Appeal from the United States District Court for the Middle District of
Alabama.
Before RONEY and HILL, Senior Circuit Judges* , and MARCUS**, District
Judge.
Dennis W. Austin and Ernest D. Woodall, Jr. appeal from the June 7, 1988
district court order dismissing their Amended Complaint on the finding that
Appellants lacked antitrust standing to bring this action. We find no error in the
district court's determination and accordingly we affirm.
I.
7
Appellant Austin charges specifically that his wife and newborn child incurred
substantial medical expenses at Decatur General Hospital and Huntsville
Hospital during the months of December 1986 and March 1987. While Dennis
Austin and his dependents were covered by a health, medical and hospital
insurance policy issued by Time Insurance Company--not a party to the law
suit--Austin was responsible for certain uncovered hospital expenses as well as
a twenty percent co-payment for costs which were covered under the policy.
Austin claims that due to "cost shifting" engaged in by the hospitals as a result
of agreements reached with Blue Cross, he was forced to pay inflated charges
for the health care received by his wife and child.
Appellant Ernest D. Woodall, Jr. claims to have been treated at the Emergency
Room of Decatur General Hospital at various times during 1985 and 1986. He
charges that he was not covered by health, medical or hospital insurance during
the period in which he received treatment and that he, too, incurred inflated
charges for hospital services due to the "cost shifting" practices engaged in by
the hospital. The Amended Complaint sought declaratory and injunctive relief
as well as treble damages for the purported violations of the Sherman Act.
10
II.
11
The question of standing to sue under the Sherman and Clayton Acts is one of
law. Midwest Communications v. Minnesota Twins, 779 F.2d 444, 449 (8th
Cir.1985), cert. denied, 476 U.S. 1163, 106 S.Ct. 2289, 90 L.Ed.2d 730 (1986).
In order to determine whether a plaintiff has standing to bring an antitrust
action, a court must review the allegations contained in the complaint. PanIslamic Trade Co. v. Exxon Corp., 632 F.2d 539, 547 (5th Cir.1980), cert.
denied, 454 U.S. 927, 102 S.Ct. 427, 70 L.Ed.2d 236 (1981); In Re Beef
Industry Antitrust Litigation, 600 F.2d 1148, 1168 (5th Cir.1979). More than
constitutional standing must exist; "the court must find a close relationship
between the plaintiff's injury and the alleged antitrust violation." Amey, Inc. v.
Gulf Abstract & Title, Inc., 758 F.2d 1486, 1493 (11th Cir.1985), cert. denied,
476 U.S. 1153, 106 S.Ct. 2267, 90 L.Ed.2d 712 (1986).
12
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, defines very broadly the class
of persons who may bring a private damage action under the antitrust laws.
That section provides:
The Supreme Court has observed that "[a] literal reading of the statute is broad
enough to encompass every harm that can be attributed directly or indirectly to
the consequences of an antitrust violation." Associated General Contractors v.
Carpenters, 459 U.S. 519, 529, 103 S.Ct. 897, 903, 74 L.Ed.2d 723 (1983).
However, in Associated General Contractors, the Court rejected so expansive a
reading of Sec. 4 noting that the question of whether a plaintiff can recover for
alleged antitrust injuries "cannot be answered simply by reference to the broad
language of Sec. 4. Instead ... the question requires us to evaluate the plaintiff's
harm, the alleged wrongdoing by the defendants, and the relationship between
them." Id. at 535, 103 S.Ct. at 907. It is clear that "the judicial remedy [of Sec.
4] cannot encompass every conceivable harm that can be traced to alleged
wrongdoing" Id. at 537, 103 S.Ct. at 908. See also Hawaii v. Standard Oil Co.,
405 U.S. 251, 263, n. 14, 92 S.Ct. 885, 891, n. 14, 31 L.Ed.2d 184 (1972) ("The
lower [federal] courts have been virtually unanimous in concluding that
Congress did not intend the antitrust laws to provide a remedy in damages for
all injuries that might conceivably be traced to an antitrust violation");
Southhaven Land Co. v. Malone & Hyde, Inc., 715 F.2d 1079, 1081 (6th
Cir.1983) ("[A]pplication of Section 4 has of necessity been judicially confined
to limit the remedy available thereunder to particular classes of persons and for
redress of particular forms of injury.")
15
The federal courts have long struggled to develop a precise test to determine
whether a party alleged to have been injured by an antitrust violation may
recover treble damages. This struggle has been compared with "the struggle of
common-law judges to articulate a precise definition of the concept of
'proximate cause' ". Associated General Contractors, 459 U.S. at 535-36, 103
S.Ct. at 907. In Associated General Contractors, the Supreme Court recognized
the impracticality inherent in the application of a "black-letter rule" to
determine whether a plaintiff has standing to recover for an antitrust violation.
Id. at 536, 103 S.Ct. at 907. In doing so, the Court suggested that the use of
formulations such as the "direct injury" test and the "target area" test may tend
to "lead to contradictory and inconsistent results." Rather, the Court observed, "
[i]n our view, courts should analyze each situation in light of the factors set
forth in the text...." Id. at 536, n. 33, 103 S.Ct. at 907, n. 33.
16
S.Ct. at 907-12. See also Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d
1486, 1494-95 (construing factors employed in Associated General Contractors
). The Court noted that the foregoing factors are reflective of "previously
decided cases [which] identify factors that circumscribe and guide the exercise
of judgment in deciding whether the law affords a remedy in specific
circumstances." Associated General Contractors at 536-37, 103 S.Ct. at 908.
17
18
Standing
to prosecute a private antitrust action under section 4 of the Clayton Act
requires the plaintiff to prove that "he is within that sector of the economy which is
endangered by a breakdown of competitive conditions in a particular industry."
Jeffrey v. Southwestern Bell, 518 F.2d 1129, 1131 (5th Cir.1975). See Construction
Aggregate Transport Inc. v. Florida Rock Industries, Inc., 710 F.2d 752, 762 (11th
Cir.1983). The plaintiff must be the target against which anticompetitive activity is
directed. Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d 705, 710 (11th
Cir.1984); Pan-Islamic Trade Corp. v. Exxon Corp., 632 F.2d 539, 546-47 (5th
Cir.1980), cert. denied, 454 U.S. 927, 102 S.Ct. 427, 70 L.Ed.2d 236 (1981). The
injury must be "of the type the antitrust laws were intended to prevent and that flows
from that which makes defendants' act unlawful." Brunswick Corp. v. Pueblo BowlO-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977).
"Incidental or consequential injury or injury remotely caused by an antitrust
violation does not give a plaintiff standing to complain that he has been injured by
reason of anything forbidden in the anti-trust laws." Midwestern Waffles, 734 F.2d
at 710-11. See Jeffrey, 518 F.2d at 1131 (citing cases)
19
III.
In Amey, this Court observed that the target area test does not produce results
materially different from the results obtained by applying the factorial analysis
embodied in Associated General Contractors. Indeed, the target zone test
incorporates the factors delineated in Associated General Contractors. See
Amey, 758 F.2d at 1496-97. Measured by any of these standards Appellants
have not established antitrust standing.
20
21
The Complaint does not allege, however, that the contracts between Blue Cross
and the hospitals say anything at all as to the rates the hospitals charge to other
purchasers. There is no claim that Blue Cross plays any role in the decisions of
the hospitals to set various rates for others. Indeed, there is no claim that Blue
Cross in any way coerced the hospitals to charge non-Blue Cross customers
higher rates than those charged to Blue Cross customers. Nor, finally, is there
any claim that Blue Cross conspired with the hospitals to engage in any
predatory pricing. It is important to observe that the only allegations of "cost
shifting" contained in the Complaint are limited to actions purportedly taken by
the hospitals. In short, the Appellants have made no real showing of a causal
connection between their injury and Blue Cross' alleged antitrust violation. The
connection is indirect and collateral.
22
23
24 antitrust injury concept ... requires the private antitrust plaintiff to show that his
The
own injury coincides with the public detriment tending to result from the alleged
violation. This requirement increases the likelihood that public and private
enforcement of the antitrust laws will further the same goal of increased
competition.
25
26
27
28
The Travelers Court analyzed whether the complaint alleged sufficient facts to
constitute a claim for damages resulting from a violation of Secs. 1 and 2 of the
Sherman Act. After assuming, arguendo, that Blue Cross possessed sufficient
market strength to have "monopoly power," the Court observed:
29 its negotiating with hospitals, Blue Cross has done no more than conduct its
In
business as every rational enterprise does, i.e., get the best deal possible. This
pressure encourages hospitals to keep their costs down; and, for its own competitive
advantage, Blue Cross passes along the saving thus realized to consumers. To be
sure, Blue Cross' initiative makes life harder for commercial competitors such as
Travelers. The antitrust laws, however, protect competition, not competitors; and
stiff competition is encouraged, not condemned.
30
Id. The Court concluded that Blue Cross' use of market power to obtain
discounts for its customers from hospital providers did not constitute a restraint
of trade or the willful acquisition or maintenance of monopoly power. Efforts to
obtain lower prices for subscribers are not anti-competitive. A similar
conclusion was reached by the First Circuit in Kartell v. Blue Shield of Mass.,
Inc., 749 F.2d 922 (1st Cir.1984), cert. denied, 471 U.S. 1029, 105 S.Ct. 2040,
85 L.Ed.2d 322 (1985). The Kartell Court found no right of action under the
Sherman Act under circumstances similar to the instant case, holding that
pricing agreements between an insurance company and participating physicians
do not represent a restraint of trade or monopolization.
31
32
entered
into contracts, combinations or conspiracies with all, or substantially all, of
the entities operating hospitals in the State of Alabama for the purpose of creating or
maintaining a monopoly or monopoly power or for the purpose of eliminating,
lessening, discouraging or impeding competition from others engaged in the health,
medical and hospital insurance business.
33
34
Pursuant
to the aforesaid contracts, combinations or conspiracies, the various
hospitals accept from the Defendant, in behalf of its insured, in full settlement and
discharge of the accounts for services rendered to the Defendant's insured amounts
lower than the standard charges assessed for services rendered to persons insured by
insurers in competition with the Defendant and to private patients or uninsured
persons[.]
35
36
Blue Cross conspired with the hospitals to engage in predatory pricing. There is
no suggestion that the hospitals priced their services below average variable
cost, see International Air Industries, Inc. v. American Excelsior Co., 517 F.2d
714, 722 (5th Cir.1975), cert. denied, 424 U.S. 943, 96 S.Ct. 1411, 47 L.Ed.2d
349 (1976), or below total cost, see McGahee v. Northern Propane Gas
Company, 858 F.2d 1487 (11th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct.
2110, 104 L.Ed.2d 670 (1988), or that any "cost-shifting" by the hospitals was
either required by or approved of by the Blue Cross contracts, or, finally, that
Blue Cross acted as if it were a "third force" intervening in the market place in
such a way as to prevent willing buyers and sellers from "independently"
coming together to strike bargains as to price and service. See Kartell, supra,
749 F.2d at 924.
37
38
39 the possession of monopoly power in the relevant market and (2) the willful
(1)
acquisition or maintenance of that power as distinguished from growth or
development as a consequence of a superior product, business acumen, or historic
accident.
40
In the instant case, even assuming that Blue Cross possessed monopoly power
within the relevant market, we can find no violation of Sec. 2 of the Sherman
Act and no indication of antitrust injury. In light of our finding that the
agreements between Blue Cross and the hospitals do not represent a restraint of
trade, we have little trouble concluding likewise that Appellants have not
established any antitrust injury arising from allegations of monopolization.
Again, the complained of conduct arises from Blue Cross' ability to provide a
superior product, namely health coverage at lower rates than its competitors.
See Travelers, 481 F.2d at 85 (finding no violation of Sec. 2 of the Sherman
Act in the face of essentially the same allegations as the allegations contained in
the Amended Complaint). In short, Appellants have not shown antitrust injury.
41
In the third place, we observe that neither of the Appellants dealt directly with
Blue Shield, suggesting the remoteness of Appellants injury from any purported
antitrust violation. The Amended Complaint only alleges that most of Austin's
medical expenses were covered through a policy issued by Time Insurance
Company, notably not a party to this action. It is also claimed that Austin was
required to pay some medical bills directly to the hospital. The Amended
Complaint also states that Woodall was not covered by health insurance and all
charges incurred for his medical treatment were owed directly to the hospital.
42
In Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707
(1977), the Supreme Court addressed the issue of whether plaintiffs asserting
"pass-on" damages have standing to bring an action under Sec. 4 of the Clayton
Act. Illinois Brick arose out of a lawsuit brought by a large group of
government entities located within the State of Illinois. Antitrust injury was
premised on the contention that the Defendant brick manufacturers had
conspired to engage in price-fixing, thus raising the price of cement bricks and
eventually leading to inflation of the prices paid for finished buildings by the
government entities. As the Court noted, the Plaintiffs were "indirect
purchasers of concrete block, which passes through two separate levels in the
chain of distribution before reaching [the Plaintiffs]. The block [was]
purchased directly from petitioners by masonry contractors and used by them to
build masonry structures; those structures [were] then incorporated into entire
buildings by general contractors and sold to [the Plaintiffs]." Id. at 726, 97 S.Ct.
at 2064. In finding that the government entities lacked standing to bring an
antitrust action under Sec. 4, the Court held that where potential plaintiffs
include both direct purchasers and indirect purchasers only the direct purchasers
have standing to bring an action under Sec. 4. The Court concluded:
44
Here, Appellants base their claims for damages upon the contention that the
"cost shifting" practices of the hospitals resulted in the hospital charging them
inflated prices for medical services. These claims essentially constitute pass-on
claims proscribed by Illinois Brick. Neither Woodall nor Austin was in privity
with Blue Cross. Their claims are wholly derivative in that Appellants assert
their costs were inflated only as a result of the hospitals' alleged "cost shifting."
The Appellants are at least one step removed from the antitrust violation.
45
Appellants argue, however, that Illinois Brick does not apply because they dealt
directly with the hospitals which are alleged to be co-conspirators with Blue
Cross. However in In Re Beef Industry Litigation, 600 F.2d 1148, 1163 (5th
Cir.1979), the former Fifth Circuit found that the effect of the Illinois Brick
prohibition of pass-on damage claims cannot be avoided by a plaintiff's
assertion that it had direct dealings with an alleged co-conspirator who is not
joined as a defendant in the action.
46
47
In the present case, the claimed antitrust injuries are extremely remote from the
actions complained of. The allegations rely on a theory that the hospitals have
somehow charged higher rates to the Appellants and insurers other than Blue
Cross based on price concessions to Blue Cross. Such allegations require an
evaluation not only of the actions taken by Blue Cross but also an evaluation of
the reaction of the hospitals, who were not joined as co-Defendants, to the
price-fixing allegedly engaged in by the Appellee. The indirect nature of the
Appellants' injury claims squarely "implicates the strong interest ... in keeping
the scope of complex antitrust trials within judicially manageable limits."
Associated General Contractors, 459 U.S. at 543, 103 S.Ct. at 911. If the
Appellants have standing in this case, and the Appellee was found to be liable
on these claims, determination of antitrust damages would require the
construction of complex and highly speculative economic models. The
economic questions requiring determination would surely include, among
others, the precise extent to which the hospitals charges directly billed to Austin
and Woodall were increased to compensate for concessions made to Blue Cross
and the degree to which the "cost shifting" derivatively effected the premiums
charged by Austin's insurer. Effective employment of the antitrust remedy
provided by Sec. 4 of the Clayton Act requires that these law suits not be
weighed down with "massive evidence and complicated theories." See Illinois
Brick, 431 U.S. at 741, 97 S.Ct. at 2072 (citing Hanover Shoe v. United Shoe
Machine Co., 392 U.S. 481, 493, 88 S.Ct. 2224, 2231, 20 L.Ed.2d 1231
(1968)). The speculativeness of Appellants' claims militates still further in favor
of the conclusion that Appellants lack antitrust standing.
IV.
48
In short, we find that Appellants lack antitrust standing to sue under Sec. 4 of
the Clayton Act because of the remote and tenuous connection between
Appellants' injuries and Blue Cross' conduct, the failure to allege antitrust
injury, the application of the Illinois Brick doctrine, and the abstract and
speculative nature of Appellants' claimed injuries. Accordingly the district
court's order of dismissal is AFFIRMED.
See Rule 34-2(b), Rules of the U.S. Court of Appeals for the Eleventh Circuit
**
Honorable Stanley Marcus, U.S. District Judge for the Southern District of
Florida, sitting by designation