Opinion
Civil Action WMN-02-2902.
August 10, 2004
MEMORANDUM
Before the Court are Motions for Summary Judgment filed by Defendants Western Maryland Health Systems, Inc., Paper No. 96, and Tri-State Radiology, Paper No. 97. Plaintiffs have filed a consolidated opposition and both Defendants have replied. Upon a review of the pleadings and applicable case law, this Court determines that no hearing is necessary (Local Rule 105.6) and that Defendants' motions will be granted.
I. BACKGROUND
This antitrust action commenced with a complaint alleging "a long-term, multifaceted conspiracy and unified scheme to unlawfully foreclose and limit competition for the purpose of achieving and maintaining monopoly power in the markets for radiology services in the greater Cumberland area." Compl. ¶ 29. The document goes on to include a laundry list of anticompetitive and tortious conduct on the part of the Defendants supposedly causing damage to both the radiologist Plaintiff and the relevant pool of patients; the consumers of radiology services in western Maryland Unfortunately for the authors of the complaint, the discovery process yielded little to no evidence to support the alleged odious plot.
Plaintiffs in this antitrust action are comprised of the radiology practice of F. Daniel Jackson, M.D., and the companies that Dr. Jackson controls: The Imaging Center, Inc. and Imaging Associates of Cumberland, Inc. Dr. Jackson has practiced radiology in Cumberland, Maryland for more than twenty five years. Up until 1990, Dr. Jackson was affiliated with Centre Radiology, P.A. (Centre), which, at that time, had an exclusive contract with Memorial Hospital (Memorial). In 1990, Dr. Jackson resigned from Centre to establish his own outpatient radiology facility, The Imaging Center (TIC). As a result of his resignation from Centre, Dr. Jackson lost his privileges at Memorial.
In the early 1990's, two hospitals, Memorial and Sacred Heart, competed for business in Cumberland Sacred Heart also had an exclusive contract for radiology services with Kim Rogers and subsequently Summit Radiology, P.A. (Summitt). Plaintiff alleges that the competitive landscape in Western Maryland began to change dramatically in the mid-1990s due to massive consolidation. Memorial and Sacred Heart began to purchase independent medical facilities in the area and in April of 1996, Western Maryland Health Systems, Inc. (WMHS) was formed through the affiliation of Memorial and Sacred Heart. WMHS continued to buy area clinics and physician practices, and maintained the exclusive radiology contracts with Centre and Summit. Later in 1998, Tri-State Radiology (Tri-State) was formed by certain members of Centre and Summitt. Since 1998, Tri-State has had an exclusive contract to provide radiology services at WMHS.
Dr. Jackson alleges that the services provided by TIC were superior to those offered by Memorial, Sacred Heart, or subsequently by WMHS through Tri-State, and until 1998 his business experienced modest growth. TIC's annual number of procedures performed, however, dropped in both 1999 and 2000 and has yet to recover to its 1998 levels. Plaintiffs believe that this drop in business is directly attributable to WMHS's aggressive monitoring of where its physicians are referring their patients for radiology services, WMHS's exclusive contract with Tri-State, and WMHS's interference in Dr. Jackson's attempts to expand TIC. In response, Plaintiffs filed the instant complaint alleging violations of federal and state antitrust laws by Defendants WMHS and Tri-State. It specifically alleges their orchestration of a group boycott of Plaintiffs by some 70 area doctors, and for exclusive dealings, monopolization, and attempted monopolization concerning the relevant market for radiology services. Plaintiffs also assert common law tort claims for misappropriation of trade secrets, unfair competition, and tortious interference with business relations.
II. LEGAL STANDARD
Summary judgment is proper if the evidence before the court, consisting of the pleadings, depositions, answers to interrogatories, and admissions of record, establishes that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
Rule 56 mandates the entry of summary judgment against a party who, after reasonable time for discovery and upon motion, "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322.
If the moving party demonstrates that there is no genuine issue of material fact and that the moving party is entitled to summary judgment as a matter of law, the non-moving party must, in order to withstand the motion for summary judgment, produce sufficient evidence in the form of depositions, affidavits or other documentation which demonstrates that a triable issue of fact exists for trial. Celotex, 477 U.S. at 324. When considering the pleadings, the court assumes that all of the non-moving party's evidence is worthy of belief and justifiable inferences are drawn in favor of the non-moving party. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In antitrust cases, however, "when there is evidence of conduct that is consistent with both legitimate competition and an illegal conspiracy, courts may not infer that an illegal conspiracy has occurred without other evidence."Thompson, Everett, Inc. v. National Cable Advertising, L.P., 57 F.3d 1317, 1323 (4th Cir. 1995) (citing Matsushita, 475 U.S. at 588).
III. DISCUSSION
As a preliminary matter, both Defendants assert that Plaintiffs' claims under §§ 1 and 2 of the Sherman Act are barred by the four year statute of limitations over antitrust actions established by 15 U.S.C. § 15b. This argument is supported by evidence that any alleged boycott efforts by Defendants and area physicians began in the early 1990's, well outside of the limitations period for Plaintiffs' September 2002 complaint. Additionally, Defendants argue that WMHS, and its predecessor hospitals, has utilized exclusive radiology contracts since the early 1990's for which Plaintiffs have not competed. Any contracting that took place within the limitations period, according to Defendants' reasoning, was simply a reshuffling of existing exclusive contractual relationships that did not cause Plaintiffs' new injury.
Plaintiff responds that his antitrust causes of action did not accrue until his damages from Defendants' conduct became ascertainable, and, alternatively, that Defendants' more recent injurious acts were part of a continuing violation. See Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321, 338-39 (1971). Because Plaintiffs' claims fail for a variety of other reasons, the Court will assume arguendo that Plaintiffs' damages were not cognizable until their business downturn in 1999-2000, and thus should not be barred based on a statute of limitations theory. The correctness of this assumption is bolstered by Plaintiffs' argument that overt acts connected to their antitrust claims (such as WMHS's monitoring of physician referrals, Defendants' 2002 radiology contract negotiations, and WMHS's 2002 refusal to grant Dr. Jackson staff privileges) were indeed committed during the limitations period so as to create new, timely causes of action.
A. Section One Claims
Section One of the Sherman Act prohibits "every contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States. . . ." 15 U.S.C. § 1. Plaintiffs assert two separate causes of action under § 1, the first for a group boycott, and the second for exclusive dealing. Unilateral conduct is not prohibited under Section One; there must be two or more entities acting in concert in order for a violation to occur. See Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984). The Fourth Circuit has thus clarified that a Plaintiff asserting Section One violations has the burden at summary judgement of establishing that Defendants had a "conscious commitment to a common scheme designed to achieve an unlawful objective" and "evidence that excludes the possibility that the alleged coconspirators acted independently or based upon a legitimate business purpose." Laurel Sand Gravel Inc. v. CSX Transp., Inc., 924 F.2d 539, 543 (4th Cir.),cert. denied, 502 U.S. 814 (1991).
If concerted action is shown, whether contractual or otherwise, then courts must analyze whether the restraint on trade is either "per se unreasonable," or whether it violates the "rule of reason" by tending to suppress or destroy competition rather than promoting it. FTC v. Indiana Federation of Dentists, 476 U.S. 447, 458 (1986). The Supreme Court has explained that although group boycotts are the classic example of a per se unreasonable restraint, "the category of restraints classed as group boycotts is not to be expanded indiscriminately," and that they hesitate "to extend per se analysis to restraints imposed in the context of business relationships where the economic impact of certain practices is not immediately obvious." Id. at 458-59.
1. Group Boycott
In Plaintiffs' complaint, they assert their belief that WMHS had threatened physicians with loss of staff privileges, capital and financial assistance, or exclusive contracts unless they agreed to cease or limit their referrals to TIC. Plaintiffs argue that the resulting group boycott by physicians in the Cumberland area of Plaintiffs' services should be judged as a per se violation of Section One of the Sherman Act. Even if the Court were to agree with this dubious classification, potentially obviating Plaintiffs' need to show an adverse impact on competition in the relevant market, see Okansen v. Page Memorial Hosp., 945 F.2d 696, 709 (4th Cir. 1991) (en banc), the evidence does not support the existence of the alleged medical conspiracy.
Defendants argue that Plaintiffs' conspiracy, as alleged, is impossible under Copperweld Corp v. Independence Tube Co., 467 U.S. 752, 769 (1984), and Okansen, because a hospital is incapable of conspiring with its staff physicians for antitrust purposes. While the Court is unconvinced that Fourth Circuit precedent definitively forecloses the legal existence of the type of conspiracy alleged here, it need not reach the question on these facts.
Three of the physicians identified by plaintiffs as recipients of pressure not to refer to TIC, and deposed during this litigation, denied ever being threatened by officials from Defendants concerning their radiology referrals. See Depositions of Drs. Barrera, Williams, and Crossland At the close of discovery, Plaintiffs cannot identify testimony from a single physician who purports to have been coerced into boycotting Plaintiffs or who suffered any adverse action taken by Defendants due to referrals made to Plaintiffs. At most, Plaintiffs' evidence demonstrates a policy of aggressive monitoring of radiology referrals, in which individual physicians were at times directly questioned as to why they were making referrals to TIC rather than WMHS affiliated facilities. Such evidence is insufficient to raise a genuine issue of material fact as to whether a boycott was taking place, and so the Court cannot apply a per se analysis to Defendants' conduct.
Significantly, Dr. Pellegrino, the one physician who reports feeling directly pressured by WMHS, asserts that he refused to change his referral patterns and did not suffer any consequences from that refusal. See Deposition of Dr. Pellegrino.
Under a rule of reason analysis, the evidence of referral monitoring unearthed in discovery is likewise insufficient to survive summary judgment. Plaintiffs failed to demonstrate any adverse effects on the Cumberland area market for radiology services that would lead the Court to conclude that Defendants had unreasonably restrained trade. The availability of radiology services in Cumberland has increased. TIC continues to operate, WMHS has a new outpatient radiology clinic, and a non-party physician recently opened a third outpatient radiology center. No evidence has been submitted showing that prices for radiology services have increased, nor that the quality of those services has declined. In short, no harm to competition has been proven through Plaintiffs' evidence, even when viewed in its most favorable light. Furthermore, Plaintiffs cannot seriously question the legitimacy of a hospital's monitoring the referrals of its staff physicians in the hopes of improving its own competing services. Accordingly, summary judgment will be granted to Defendants on Plaintiffs' group boycott claims.
Of course, this evidentiary void simultaneously supports the Court's conclusion that the economic impact of Defendants' monitoring practices is not immediately obvious, and thus does not merit classification as a per se unreasonable restraint.
2. Exclusive Dealing
Unlike their group boycott claim, Plaintiffs' do not dispute that their exclusive dealing claim should be analyzed under the rule of reason. Pursuant to that analysis, the claim fails. First, as discussed above, Plaintiffs have shown no antitrust injury to the market as a whole. See Drs. Steur Latham, P.A. v. National Medical Enter., Inc., 672 F. Supp. 1489, 1501 (D.S.C. 1987), aff'd without published opinion, 846 F.2d 70 (4th Cir. 1988) ("[T]he mere fact that a disappointed competitor must practice elsewhere does not constitute `antitrust injury.'"). The Court understands Plaintiffs' argument, stripped of the market injury issue, to be that Defendants' dominant market power, acquired through their exclusive contracts, puts them in a de facto position to potentially have an adverse effect on competition. Even if they are correct, however, this would simply shift the burden to Defendants to put forward legitimate, pro-competitive reasons for desiring an exclusive contract for the provision of radiology services. Defendants having done so, see WMHS's Motion for Summary Judgment, Paper No. 96, at 30-32 (detailing the evidence supporting the hospitals' desire to ensure uniformity, consistency, and quality, and to facilitate scheduling), Plaintiffs are unable to make an effective rebuttal. Accordingly, summary judgment will be granted to Defendants on Plaintiffs' exclusive dealing claims.
The Court notes that the market definitions at issue in this case are sharply disputed, with Defendants focusing on a nationwide job market for radiologists, while Plaintiffs urge consideration of a local market for radiology services. The Court will assume, for purposes of the exclusive dealing claim, that Plaintiffs' expert has correctly identified the relevant geographic market for radiology services as limited to the greater Cumberland area. See Pl.'s Exh. 80. Furthermore, the Court agrees with Plaintiffs that the Supreme Court has sought to protect consumers, not just distributors, under our nation's antitrust laws. See Jefferson Parish Hops. Dist No. 2 v. Hyde, 466 U.S. 2, 29-31 (1984). Nonetheless, it is somewhat difficult to take seriously Dr. Jackson's current efforts in the role of consumer champion, as he combats exclusive contracts quite similar to those whose benefits he formerly reaped as a Centre radiologist. If the Court were to instead focus on the relevant market for radiologists, it would be hard pressed to grant Jackson standing to challenge the disputed contracts since he made no efforts to compete for them, nor has he demonstrated an ability to do so. Finally, as noted below, Plaintiffs' evidence does not rule out Defendants' legitimate reasons for desiring an exclusive contract.
B. Tort Claims
Plaintiffs' complaint raises several Maryland tort law causes of action based primarily on the same alleged conduct at issue in its antitrust claims. None of these claims are sufficiently supported by the record to warrant a trial on the merits. From their failure to argue to the contrary the Court concludes that Plaintiffs admit as much in reference to their claim for Misappropriation of Trade Secrets. As to their claim of Unfair Competition, the Court is not persuaded by Plaintiffs' solitary footnote in its defense. As the Court discusses both above and below, the record does not contain evidence of "fraud, deceit, trickery or unfair methods[,]" on Defendants' part, and thus summary judgment is appropriate on this claim. See Cavalier Mobile Homes, Inc. v. Liberty Homes, 53 Md. App. 379, 389 (1983). Plaintiffs do, however, raise a vigorous opposition to the alleged inadequacy of their claim for Tortious Interference with Business Relations. In order to prevail on this tort claim, a Plaintiff must prove: "(1) intentional and wilful acts; (2) calculated to cause damage to the [claimants] in their lawful business; (3) done with the unlawful purpose to cause such damage and loss, without right or justifiable cause on the part of the defendants (which constitutes malice); and (4) actual damage and loss resulting." Natural Design, Inc. v. Rouse, 302 Md. 47, 71 (1984). Maryland's highest court has further clarified that proof of a defendant's intent to harm the plaintiff must be coupled with interference by improper or wrongful conduct in order to establish the tort. Macklin v. Robert Logan Assocs., 334 Md. 287, 301 (1994).
Plaintiffs' argument for this tort claim's survival is largely premised upon WMHS's alleged interference in a 1999 sale of land by Allegany College to Dr. Jackson for an expanded radiological facility. According to Plaintiffs, a contract for the 20 acre parcel had been nearly finalized, and was slated for approval at the August 18th meeting of Allegany College's seven member Board of Trustees. The meeting was cancelled on August 17th, however, by Chairman Kim Leonard's memorandum which explained:
I was recently informed by the Western Maryland Health System that it might not be in the best interests of the System to have Dr. Jackson purchase the land and then to build a health clinic that would compete against the System. This information would ordinarily not be a significant event in the sale of this land; however, four of us are [also] members of the boards of WMHS[.]
Pl.'s Exh. 42. The memorandum went on to explain that the Maryland Ethics Commission had already confirmed a conflict of interest on behalf of the four board members.
Following a closed executive session, the Board held a public meeting on September 8th at which, with the four conflicted members abstaining, the remaining members voted 2 to 1 in favor of selling the parcel to Dr. Jackson. Board members also expressed some concern during the session regarding whether it was proper for the Board to act with only a minority of members voting. As a result, the Board agreed to seek a legal opinion from the State Ethics Commission, and if any problems with the process were confirmed, the vote would be voided and the issue revisited at a future meeting.
Upon advice from the Ethics Commission confirming, inter alia, that a quorum was needed for the Board to transact business, the Board reconvened on September 14th and held a second vote for which Chairman Leonard determined that Jack McMullen should participate as the least conflicted of the four originally abstaining members. That vote resulted in a 2 to 2 tie, after which Chairman Leonard cast the deciding vote against the sale. Two days later, the Ethics Commission was again contacted, this time to provide a written opinion as to the procedure followed by the Board at the September 14th meeting. The Ethics Commission responded by letter, suggesting that if the Board wanted "advice regarding the specific situation, the full facts should be disclosed and the matter presented to the Ethics Commission for review." Pl.'s Exh. 48. No further information was submitted to the Ethics Commission by the Board, and the parcel was not sold to Dr. Jackson nor anyone else.
Plaintiffs assert that the scenario above, when combined with WMHS's admitted desires to "pre-empt" Plaintiffs' "major competitive initiative," provides a sufficient factual basis for their claim of tortious interference with business relations. The Court disagrees. There has simply been no evidence presented of improper means used by WMHS to interfere in the Allegany College Board of Trustee's decision. While perhaps unfortunate for Plaintiffs that their chosen community of practice is small enough to have the same core of individuals serving on multiple area boards, nothing in the record supports an inference of WMHS orchestrating an ethical violation by the conflicted board members. To the contrary, the record indicates a group of people who happened to find themselves in a difficult position and went to some length to conform to the appropriate ethical guidelines. That they did not provide sufficient information to generate a specific opinion approving of their conduct after the fact cannot be appropriate grounds for Plaintiffs' present assertion that their conduct was improper. Furthermore, it is less than clear that Plaintiffs' business was harmed as a result, since no evidence was presented on the uniquely desirable aspects of the Allegany College parcel and Plaintiffs independently chose not to pursue other options to expand their business. Accordingly, summary judgment will be granted to Defendants on Plaintiffs' tort claims.
If the land sale scenario were construed as forming part of the basis for Plaintiffs' antitrust claims, summary judgment would likewise be warranted pursuant to a rule of reason analysis. Plaintiff cannot present evidence to rebut the Board members' legitimate concerns concerning the original vote's effectiveness, nor the ultimately prevailing opinion that the land should not be sold until the college could purchase replacement property. See WMHS's Reply at 10-11, n. 9 (explaining that the cash from the potential sale could cause the college to lose funding if not quickly reinvested).
C. Section 2 Claims — Monopolization
Section 2 of the Sherman Act provides that no person shall "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states." 15 U.S.C. § 2. Plaintiffs' complaint includes claims for both monopolization and attempted monopolization. The elements of a claim for monopolization are: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966). The elements of attempted monopolization are: "(1) a specific intent to monopolize a relevant market, (2) predatory or anticompetitive acts, and (3) a dangerous probability of successful monopolization." MM Medical Supplies and Service, Inc. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 166 (4th Cir. 1992). To succeed under either claim Plaintiffs must present evidence of conduct on Defendants' part that is unreasonably exclusionary or predatory. See Laurel Sand Gravel, 924 F.2d at 544. This, in turn, involves showing the lack of a legitimate business justification other than excluding actual or potential competitors from the market. Id.
Both WMHS and Tri-State attack Plaintiffs' ability to show exclusionary or predatory conduct on the part of either Defendant. Although Plaintiffs assert that "[t]he record in this case is rife with anticompetitive acts taken in furtherance of Defendants' attempt to monopolize the market for radiology services[,]" Pl.'s Opp'n at 53, they cite to no additional evidence beyond that already considered by the Court in the context of Plaintiffs' other claims. Accordingly, the Court can only conclude that summary judgment is also warranted for Plaintiffs' monopolization claims.
IV. CONCLUSION
For all of the foregoing reasons, Defendants' Motions for Summary Judgment will be granted as to each of the claims asserted in Plaintiffs' complaint. A separate order consistent with this memorandum will issue.
Maryland's antitrust statutes track their federal counterparts, and thus summary judgment is warranted as to Plaintiffs' state law antitrust claims for the same reasons as their federal claims. See, e.g., Montgomery County Ass'n of Realtors, Inc. v. Realty Photo Master Corp., 878 F. Supp. 804, 818 (D. Md. 1995), aff'd, 91 F.3d 132 (4th Cir. 1996) (holding that where summary judgment is appropriate for federal antitrust claims, it is likewise appropriate for analogous claims brought under Maryland antitrust statutes).