Opinion
No. 01-1177
July 11, 2001
REPORT AND RECOMMENDATION
This cause is before the Court on Defendants' Motion to Dismiss
I. FACTS ALLEGED IN THE COMPLAINT
In late 1996, Drs. Nicholas Nayak and Anjuli Nayak ("the Nayaks") sold their office condominium — which consisted of the space currently known as Suite 180 in the Bromenn Physician's Office Building — to the Bromenn Foundation. As part of the transaction, the parties contemplated that the Nayaks would sign leases for Suites 100, 160, and 180 in which they were conducting their medical practices as well as their clinical research activities. On or around August 1, 1996, the Nayaks signed a three year lease for Suite 100. On or around October 1, 1996, the Nayaks signed a lease which expired on September 30, 1999, for Suite 160. Finally, on or around January 1, 1997, the Nayaks signed a one year lease for Suites 160 and 180.
During the next several years, Dr. Nicholas Nayak operated his general and family medical practice from these suites, and Dr. Anjuli Nayak conducted her allergy practice from these suites. The Nayaks also conducted their clinical research studies jointly in these suites.
In 1999, the Nayaks sold their clinical research business to ICSL. However, the Nayaks agreed to remain as managers of the business and to conduct research on behalf of ICSL. The Nayaks intended to continue their respective medical practices at the suites, and in fact, it was necessary that they remain at the same location as ICSL because their duties as managers of ICSL required them to be on site.
On or around January 1, 1999, ICSL signed a lease with the Bromenn Foundation for Suite 180. This lease restricted the use of the premises (i.e., the Suite which Dr. Nicholas Nayak had used for his family medical practice) to research activities only. On March 8, 2000, the Bromenn Foundation, through its counsel, sent a letter to Dr. Nicholas Nayak demanding that he cease and desist the practice of medicine in Suite 180 pursuant to the terms of the lease. As a result, Dr. Nicholas Nayak was forced to close his family medical practice.
In addition, Dr. Nicholas Nayak alleges that Bromenn Physicians Management Corporation ("Brornenn Management") systematically denied him certain hospital privileges which were granted to other family practitioners who were employed by Bromenn Management in violation of § 1 of the Sherman Act. 15 U.S.C. § 1.
Meanwhile, the Nayaks' lease for Suite 100 expired. Dr. Anjuli Nayak used Suite 100 primarily for her allergy practice. Although the Nayaks requested an interim lease while the lease of Suite 180 was being resolved, the Bromenn Foundation insisted that the Nayaks sign a longterm lease or vacate the premises. Because the Nayaks did not sign a long-term lease, the Bromenn Foundation began eviction proceedings against Dr. Anjuli Nayak for Suite 100.
The Nayaks alleged that the renewal of the leases were important because the United States Food and Drug Administration ("FDA") had designated Dr. Anjuli Nayak as the physician primarily responsible for the clinical research studies conducted for the FDA and because failure to provide proper supervision and accurate information to the FDA could subject her to criminal penalties. It would be impossible for Dr. Anjuli Nayak to fulfill her obligations to the FDA and maintain her allergy practice if her allergy practice and her research activities could not be conducted at the same location, Therefore, in order to remain in the building, it was necessary for the Nayaks to resolve the problems with the lease of Suite 180; otherwise, it would be impossible for Dr. Anjuli Nayak to meet her research obligations to the FDA and continue her medical practice as well.
On August 10, 2001, the Nayaks filed a five Count Complaint against Defendants alleging violations of the Sherman and Clayton Acts and state tort law claims. Specifically, Count I alleges that Defendants entered into contracts in restraint of trade in violation of § 1 of the Sherman Act ( 15 U.S.C. § 1); Count II alleges that Defendants have monopolized the relevant market in violation of § 2 of the Sherman Act ( 15 U.S.C. § 2); Count III (brought by Dr. Nicholas Nayak) alleges a per se violation of § 1 of the Sherman Act in that Defendants combined and conspired with one another to illegally boycott him from attaining certain hospital staff privileges; Count IV alleges that Defendants intentionally interfered with the Nayaks' prospective business advantage; and Count V alleges that Defendants negligently interfered with the Nayaks' prospective business advantage. Defendants, in turn, have filed a motion to dismiss the Nayaks' Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a cause of action upon which relief can be granted.
II. LEGAL STANDARD FOR MOTIONS TO DISMISS
In ruling on a motion to dismiss, the Court "must accept well pleaded allegations of the complaint as true. In addition, the Court must view these allegations in the light most favorable to the plaintiff." Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). Although a complaint is not required to contain a detailed outline of the claim's basis, it nevertheless "must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984). Mere conclusions, without supporting factual allegations, are insufficient to support a claim for relief. Cohen v. Illinois Inst. of Tech., 581 F.2d 658, 663 (7th Cir. 1978). Dismissal should not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45 (1957).
III. ARGUMENTS
Defendants argue that each of the Nayaks' claims against them should be dismissed pursuant to Rule 12(b)(6). Defendants assert that Counts I and III should be dismissed because they are incapable of conspiring among themselves and because the Nayaks have failed to allege an unreasonable restraint of trade in a relevant market. Defendants contend that Count II should be dismissed because the Nayaks have failed to identify any predatory or exclusionary conduct taken by them to gain and/or maintain a monopoly. In addition, Defendants assert that all three antitrust Counts should be dismissed because the Nayaks have failed to allege an antitrust injury.
As for their state law claims, Defendants argue that the Nayaks' negligent interference with a prospective business advantage claim (i.e., Count V) must be dismissed because Illinois does not recognize such a tort or cause of action and argue that their intentional interference with a. prospective business advantage must be dismissed because the Nayaks have failed to allege an essential element of such a cause of action; specifically, they have failed to allege conduct by Defendants directed at third parties with whom the Nayaks entertain a business expectancy. Accordingly, Defendants ask the Court to dismiss the Nayaks' Complaint in toto.
The Nayaks argue that, under the facts of this case, Defendants are precluded from relying upon the "unity of interest" rule that they cannot conspire with one another for purposes of § 1 of the Sherman Act. Moreover, the Nayaks contend that they have sufficiently pleaded a cause of action under § 1 and § 2 of the Sherman Act for purposes of surviving Defendants' Rule 12(b)(6) motion to dismiss, including alleging an antitrust injury. Finally, the Nayaks assert that they have alleged all of the elements necessary to state a cause of action against Defendants for intentional interference with a prospective business advantage. Accordingly, the Nayaks ask the Court to deny Defendants' motion.
Notably, the Nayaks have not responded to Defendants' motion to dismiss Count V of their Complaint.
IV. ANALYSIS
A. ANTITRUST CLAIMS
The Court believes that the Nayaks' attempt to maintain their antitrust claims against Defendants is wholly inadequate. Although Defendants note several valid reasons as to why the Nayaks' antitrust claims fail to state a cause of action, the Court believes that it is sufficient to focus on the Nayaks' failure to allege an antitrust injury as grounds to allow Defendants' motion to dismiss. Accordingly, the Court recommends that Counts I, II, and III of the Nayaks' Complaint be dismissed.
Congress enacted the Sherman Act "to assure customers the benefits of price competition, and protect the economic freedom of participants in the relevant market." Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 538 (1983). In order to state a claim under § 1 of the Sherman Act, a would-be plaintiff must allege "(1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in the relevant market; and (3) an accompanying injury." Denny's Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217, 1220 (7th Cir. 1993); 15 U.S.C. § 1; MCM Partners, Inc. v. Andrews-Bartlett Assoc., Inc., 161 F.3d 443, 448 (7th Cir. 1998). In order to state a claim under § 2 of the Sherman Act, a would-be plaintiff must allege: "(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." Goldwasser v. Ameritech Corp., 222 F.3d 390, 396-97 (7th Cir. 2000), citing Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 481 (1992), quotingUnited States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966); 15 U.S.C. § 2.
Thus, "[I]n order to maintain an antitrust action, plaintiffs must establish that they (1) have suffered an antitrust injury and (2) are the proper plaintiffs to maintain an antitrust action with respect to each of these markets." Serfecz v. Jewel Food Stores, 67 F.3d 591, 596-97 (7th Cir. 1995). The United States Supreme Court has held that:
Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be "the type of loss that the claimed violations would be likely to cause "Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). As the United States Court of Appeals for the Seventh Circuit has explained:
This test focuses on the connection between the purpose of the antitrust laws (protecting market competition) and the alleged injury. When the plaintiffs injury is linked to the injury inflicted upon the market, such as when consumers pay higher prices because of a market monopoly or when a competitor is forced out of the market, the compensation of the injured party promotes the designated purpose of the antitrust law — the preservation of competition.Serfecz, 67 F.3d at 597.
In the instant case, the Nayaks have failed to allege that they suffered an antitrust injury. "Antitrust law is designed to protect consumers from the higher prices — and society from the reduction in allocative efficiency — that occurs when firms with market power curtail output" L.A.P.D., Inc. v. General Elec. Corp., 132 F.3d 402, 404 (7th Cir. 1997). "Over and over, [the Seventh Circuit has] stress[ed] that antitrust is designed to protect consumers from producers, not to protect producers from each other or to ensure that one firm gets more of the business." Ehredt Underqround, Inc. v. Commonwealth Edison Co., 90 F.3d 238, 240 (7th Cir. 1996); see Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 110 (1986), quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962) (holding that "the antitrust laws . . . were enacted for the protection of competition, not competitors.") (emphasis in original).
The Nayaks have not alleged that the consumers (i.e., the patients) have been harmed by any action(s) taken by Defendants. Rather, the Nayaks allege that Defendants have forced them out of the medical market by not allowing them to lease space at an office suite of their choosing. Defendants' conduct is not the kind of action which the antitrust laws were designed to cure. O.K. Sand Gravel, Inc. v. Martin Marietta Tech., Inc., 36 F.3d 565, 572-73 (7th Cir. 1994). Defendants' actions may have prevented the Nayaks from practicing medicine in Suite 180 in the Bromenn Physician's Office Building, but the Nayaks have made no allegation that Defendants have prohibited them from practicing medicine in the Bloomington/Normal, Illinois, area. See Ehredt Underground, 90 F.3d at 239 (noting that "[a]lthough [the plaintiff] alleges unlawful exclusion from a market, what `market' could that be, given that it remained free to sell to other buyers of trenching services, the clientele it had before Commonwealth Edison started subcontracting in 1988? It would not make sense to speak of `the market in trenches dug for Commonwealth Edison."); See also Serfecz, 67 F.3d at 598 (holding that "the plaintiffs' injury is not the direct effect of the defendants' anticompetitive conduct. Assuming Jewel's goal was to gain control of the retail grocery market in Elk Grove, Illinois, we do not believe that the damages claimed by plaintiffs (devaluation of Grove Mall) present the type of anticompetitive injury that the antitrust laws were intended to remedy."); see also Elliott v. United Center, 126 F.3d 1003, 1004 (7th Cir. 1997) (holding that "[w]ithout a relevant market to back it up, virtually all of the remaining antitrust theories collapsed.").
Furthermore, the Court is not convinced that the Nayaks are a proper plaintiff to bring an antitrust action against Defendants. As the Seventh Circuit has explained:
The doctrine of antitrust standing therefore limits the class of plaintiffs under § 4 to those who can show "a direct link between the antitrust violation and the antitrust injury." Greater Rockford Energy Technology Corp. v. Shell Oil Co., 998 F.2d 391, 395 (7th Cir. 1993). The Supreme Court has identified several factors to be considered in determining whether a plaintiff is the proper party to bring a private action under the antitrust laws: (1) the causal connection between the antitrust violation and the plaintiffs injury; (2) the nature of the plaintiff's injury and the relationship between the plaintiffs injury and the type of activity sought to be redressed under the antitrust laws; and (3) the speculative nature of the plaintiff's claim for damages and the potential for duplicative recovery or complex apportionment of damages.AlliedSignal Inc. v. B.F. Goodrich Co., 183 F.3d 568, (7th Cir. 1999). The Nayaks have alleged no direct link between the alleged antitrust violation and the antitrust injury. An allegation that fewer doctors means less competition does not ipso facto establish an antitrust violation. Moreover, the Court finds nothing in the Nayaks' Complaint which tilt the above-listed factors in their favor.
Finally, as for Dr. Nicholas Nayak's antitrust claim regarding his exclusion from certain hospital privileges (i.e., Count III), the Seventh Circuit has rejected a similar claim. See Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994) (holding that "[i]t is hard to see how the Board's activities could amount to an exercise of market power, which entails cutting back output in the market and thus driving up prices to consumers. After all, plaintiffs already are sellers in the market for psychiatric services; turning down their applications for certification does not remove their output from the market and therefore does not raise prices to consumers."); see also BCB Anesthesia Care, Ltd. v. Passavant Memorial Area Hosp. Ass'n, 36 F.3d 664, 669 (7th Cir. 1994) (opining that "[h]ow one hospital staffs its needs is so unlikely to be within the ambit of section 1 of the Sherman Act that it does not justify a detailed examination of purpose and effect unless plaintiffs give us far better reasons for that examination than they have here."); see also Wagner v. Magellan Health Serv., Inc., 121 F. Supp.2d 673, (N.D. Ill. 2000), quoting Electronics Communications Corp. v. Toshiba Am. Consumer Prods., Inc., 129 F.3d 240, 245 (2d Cir. 1997) (holding that "[w]ithout any allegation as to how market-wide competition will be affected, the complaint fails to allege a claim on which relief may be granted.").
From the Court's reading of the Complaint, the only injury suffered by the Nayaks is that they will have to find a different location from which to practice medicine and perform their medical research. Such an injury does not constitute an antitrust injury. Accordingly, the Court recommends that Defendants' motion to dismiss Counts I, II, and III be allowed and that those counts be dismissed.
As the Court noted supra, Defendants have raised several grounds upon which the Nayaks' antitrust claims could be dismissed. Without specifically making a recommendation as to each, the Court Will make a few observations. As for Defendants' argument that they cannot conspire together because they are sister companies, the Court does not believe that it can make such a conclusion on a Rule 12(b)(6) because there are no allegations as to Defendants' relationship contained within the Complaint. That being said, such an argument may prevail on a motion for summary judgment because the Court is not at all persuaded by the Nayaks' argument that this Court should merely reject the decisions from the Fourth and Sixth Circuits which support Defendants' position in the absence of authority from the Seventh Circuit, nor does the Court agree with the Nayaks' curious estoppel argument. Furthermore, in addition to failing to allege an antitrust injury, the Nayaks have failed to allege an antitrust violation. Again, as previously stated by the Court, restricting the Nayaks' medical and research practice, via a lease, from a certain building does not create an antitrust violation. Finally, the Nayaks have alleged no predatory or exclusionary conduct by Defendants other than their enforcement of a lease with a third party.
B. STATE LAW CLAIMS
Because the Court has recommended dismissing the Nayaks' federal causes of action, the Court recommends that the district court decline to exercise supplemental jurisdiction over their two state law tort claims (i.e., Counts IV and V). 28 U.S.C. § 1367 (c)(3). The Seventh Circuit has stated that "[a] decision to relinquish pendent jurisdiction before the federal claims have been tried is, as we have said, the norm, not the exception, and such a decision will be reversed only in extraordinary circumstances." Contreras v. Suncast Corp., 237 F.3d 756, 766 (7th Cir. 2001), quoting Disher v. Information Resources, Inc., 873 F.2d 136, 140 (7th Cir. 1989). Thus, the Court recommends that Defendants' motion to dismiss Counts IV and V be allowed and that those Counts be dismissed.See Olive Can Co., Inc. v. Martin, 906 F.2d 1147, 1153 (7th Cir. 1990), quoting Baltimore Orioles, Inc. v. Major League Baseball Players Ass'n, 805 F.2d 663, 682 (7th Cir. 1986) (holding that "[w]hen the federal claims are disposed of before trial, the state claims should be dismissed without prejudice almost as a matter of course.").
One final note. Although the Court believes that the Nayaks' attempt to state antitrust violations by Defendants was paltry, the Court cannot say that they should, at this point, be deprived of an opportunity to re-plead their allegations. Accordingly, the Court is recommending that the district court dismiss the Nayaks' Complaint without prejudice. If the district court agrees with this Report and Recommendation, and if the Nayaks decide to replead their antitrust claims, the Court urges their counsel to recall two principles before doing so: (1) his obligation under Federal Rule of Civil Procedure 11; (2) his obligation under Illinois Rule of Professional Conduct 1.1.
Wherefore, the Court RECOMMENDS that Defendants' Motion to Dismiss be ALLOWED and that Plaintiffs' Complaint be DISMISSED WITHOUT PREJUDICE. The parties are advised that any objection to this Report and Recommendation must be filed in writing with the Clerk of the Court within ten working days after being served with a copy of this Report and Recommendation. See 28 U.S.C. § 636 (b)(1). Failure to file a timely objection will constitute a waiver of objections on appeal. Video Views, Inc. v. Studio 21, Ltd., 797 F.2d 538, 539 (7th Cir. 1986). See Local Rule 72.2.