Americare Medservices Inc v. City of Costa Mesa et al

NOTICE OF MOTION AND MOTION to Dismiss Plaintiff's Amended Complaint

C.D. Cal.January 6, 2017

JAMES R. TOUCHSTONE, Bar No. 184584 jrtgjones-mayer.corn MELISSA M. BALLARD, Bar No. 185739 mmbgiones-mayer.corn BRUCE A. LINDSAY, Bar No. 102794 balgiones-mayer.com JONES & MAYER 3777 N. Harbor Boulevard Costa Mesa, CA 92835 Telephone: (714) 446-1400 Facsimile: (714) 446-1448 KENDALL H. MacVEY, Bar No. 057676 kendall.macvey@bbklaw.com WENDY Y. WA1\1G, Bar No. 228923 wendy.wang@bbklaw.com BEST BEST Bz. KRIEGER LLP 3390 University Avenue, 5th Floor Riverside, CA 92502 Telephone: (951) 686-1450 Facsimile: (951) 686-3083 Attorneys for CITY OF COSTA MESA UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Case No. 8:16-CV-01804-JLS-AFM NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF AMERICARE MEDSERVICES INC.'S AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF (F.R.C.P. 12(b)) Date: March 10, 2017 Time: 2:30 p.m. Courtroom: 10A Judge: Hon. Josephine L. Staton 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AMERICARE MEDSERVICES INC. Plaintiff, v. CITY OF COSTA MESA and CARE AMBULANCE SERVICE, INC. Defendants. NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF'S AMENDED COMPLAINT 8:16-cv-01804-JLS-AFM 55441.00003\29367607 2 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 1 of 34 Page ID #:161 TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on March 10, 2017 at 2:30 p.m., or as soon thereafter as the matter may be heard in Courtroom 10-A of the above-entitled court, Defendant City of Costa Mesa ("City") will and hereby moves the Court for an order dismissing Plaintiff AmeriCare MedServices, Inc.'s Amended Complaint under Rule 12(b)(6). The grounds for this motion are set forth in the attached Memorandum of Points and Authorities and include Plaintiff's failure to state a claim for relief for any of its causes of action as the Amended Complaint is entirely premised on violations of California state law, and that under these circumstances the state- action immunity and Burford abstention doctrines apply. Further, Plaintiff as a private plaintiff fails to meet the standing requirements of the federal antitrust laws by not pleading a plausible theory of antitrust injury. For the reasons set forth in the attached Memorandum, the City respectfully requests this Court to grant its motion to dismiss the Amended Complaint in its entirety. This Motion is made following the conference of counsel pursuant to and in compliance with Local Rule 7-3, which took place telephonically on November 29, 2016. The parties could not reach a resolution during the call that would have obviated the need for the instant Motion. \\\ \\\ \\\ \\\ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003\29367607.2 NOTICE OF MOTION TO DISMISS PLAINTIFF'S AMENDED COMPLAINT 8:16-cv-0 I 804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 2 of 34 Page ID #:162 This Motion will be based on this Notice of Motion and Motion, the attached Memorandum of Points and Authorities, the complete file and pleadings in this matter, and on matters the Court may consider at the time of hearing. Dated: January 6, 2017 JONES & MAYER By: /s/ James R. Touchstone JAMES R. TOUCHSTONE MELISSA M. BALLARD BRUCE A. LINDSAY Attorneys for Defendant CITY OF COSTA MESA Dated: January 6, 2017 BEST BEST & KRIEGER LLP By: /s/ Kendall H. MacVey KENDALL H. MacVEY WENDY Y. WANG Attorneys for Defendant CITY OF COSTA MESA NOTICE OF MOTION TO DISMISS 55441 00003\29367607.2 2 PLAINTIFF'S AMENDED COMPLAINT 8: 16-cv-01804-JLS-AFM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 3 of 34 Page ID #:163 1 TABLE OF CONTENTS 2 Page I. INTRODUCTION 1 II. LEGAL STANDARD: THE TWOMBLY AND IQBAL PLEADING STANDARD 2 III. BACKGROUND 3 A. Factual Allegations in the Amended Complaint 3 B. Municipal Oversight of Emergency Medical and Ambulance Services Is a Long Standing Tradition in California 4 IV. THE FEDERAL ANTITRUST COUNTS ARE ENTIRELY BASED ON CONTENTIONS OF STATE LAW THAT SHOULD AND CAN ONLY BE ADDRESSED IN STATE COURT 9 A. THE FEDERAL ANTITRUST COUNTS ARE BARRED BY THE STATE-ACTION DOCTRINE 9 1. The U.S. Supreme Court Has Expressly Rejected Transforming Allegations of State Law Violations into Federal Antitrust Claims Against Local Government 9 2. The EMS Act Expressly Invokes State-Action Immunity and Bars Federal Antitrust Liability Against Municipalities 14 B. THE ABSTENTION DOCTRINE BARS CONSIDERATION OF PLAINTIFF'S CLAIMS 18 V. THE ANTITRUST CLAIMS ARE BARRED BECAUSE THERE IS NO ANTITRUST INJURY AS REQUIRED FOR PRIVATE PLAINTIFFS 19 A. OVERVIEW OF THE INJURY REQUIREMENTS 19 B. THERE IS NO INJURY TO PLAINTIFF'S "BUSINESS OR PROPERTY" OR "INJURY IN FACT" 21 1. Plaintiff Speculates That It Would Have Qualified as a Provider in Costa Mesa Under the EMS Act If the Act Were Followed as Interpreted by Plaintiff 21 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 4 of 34 Page ID #:164 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS (continued) Page 2. Plaintiffs Claim of Injury-In-Fact Is Logically Implausible Because It Is Based on a Contradiction 23 C. PLAINTIFF'S ALLEGED INJURY IS NOT THE TYPE OF INJURY THAT THE ANTITRUST LAWS ARE DESIGNED TO FORESTALL 24 VI. THE LOCAL GOVERNMENT ANTITRUST ACT APPLIES 24 VII. CONCLUSION 25 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 5 of 34 Page ID #:165 TABLE OF AUTHORITIES Page Federal Cases Ashcroft v. Iqbal 556 U.S. 662 (2009) 2 Balistreri v. Pacifica Police Dep't 901 F.2d 696 (9th Cir. 1990) 2 Bell Atlantic Corp. v. Twombly 550 U.S. 544 (2007) 2, 21, 23, 25 Berman v. McManus 483 Fed. Appx. 363 (9th Cir. 2012) 2 Brown Shoe Co. v. United States 370 U.S. 294 (1962) 9 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. 429 U.S. 477 (1977) 20, 22 Burford v. Sun Oil Co. 319 U.S. 315 (1943) 19 Chicago, B & Q, Ry. v. Illinois 200 U.S. 561 (1906) 4 City of Columbia v. Omni Outdoor Advertising 499 U.S. 365 (1991) 10, 11, 13, 14, 15, 24, 25 Davric Maine Corp. v. Rancourt 216 F.3d 143 (1st Cir. 2000) 20 FTC v. Phoebe Putney Health Sys. 133 S. Ct. 1003 (2013) 16 Gold Cross Ambulance & Transfer v. Kansas City 705 F.2d 1005 (8th Cir. 1983) 3 Hoover v. Ronwin 466 U.S. 558 (1984) 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - iii - TABLE OF AUTHORITIES Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 6 of 34 Page ID #:166 TABLE OF AUTHORITIES (continued) Page Leveto v. Lapina 258 F.3d 156 (3d Cir. 2001) 2 Mercy-Peninsula Ambulance, Inc. v. County of San Mateo 791 F.2d 755 (9th Cir. 1986) 17, 18 New Orleans Pub. Service Inc. v. Council of City of New Orleans 491 U.S. 350 (1989) 19 Paragould Cable v. City of Paragould 930 Fd.2d 1310, 1312-13 (8th Cir. 1991) 13 Parker v. Brown 317 U.S. 341 (1943) 6, 10, 11, 13, 16, 18 Redwood Empire Life Support v. County of Sonoma 190 F.3d 949 (9th Cir. 1999) 3 Southern Motor Carries Rate Conference v. United States 471 U.S. 48 (1985) 10 Springs Ambulance Service, Inc. v. Rancho Mirage 745 F.2d 1270 (9th Cir. 1984) 3, 7, 16, 17, 18 Town of Hallie v. City of Eau Claire 471 U.S. 34 (1985) 10, 11 United National Maintenance, Inc. v. San Diego Convention Center, Inc. 766 F.3d 1002 (9th Cir. 2014) 14 United States v. Morros 268 F.3d 695 (9th Cir. 2001) 19 Vaughn v. Bay Envtl. Mgmt. 567 F.3d 1021 (9th Cir. 2009) 2 State Cases Bell v. City of Mountain View (1977) 66 Cal. App.3d 332 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - iV - TABLE OF AUTHORITIES Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 7 of 34 Page ID #:167 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page County of San Bernardino v. City of San Bernardino (1997) 15 Cal. 4th 909 5, 19 Customer Co. v. City of Sacramento (1995) 10 Ca1.4th 368 4 Lossman v. City of Stockton (1935) 6 Cal.App.2d 324 4 Subriar v. City of Bakersfield (1976) 59 Cal.App.3d 175 4 Valley Medical Transport, Inc. v. Apple Valley Fire Protection Dist. (1998) 17 Cal.4th 747 19 Federal Statutes 15 U.S.C. 15(a) 20 15 U.S.C. §§ 1 & 2 ("Sherman Act") 1, 3, 9, 10, 11, 13, 18 15. U.S.C. §§ 34-36 24 State Statutes California Code of Civil Procedure § 1060 19 California Government Code § 38794 4, 7, 14, 16, 17 California Government Code § 54980(c) 4 California Health & Safety Code §§ 1797-1799.207 ("California's Emergency Medical Services System and Prehospital Emergency Medical Care Personnel Act") 1, 3, 4, 5, 6, 7, 15, 16, 17, 19, 21, 24 California Health & Safety Code § 1797.6 6, 16 California Health & Safety Code § 1797.6(b) 17 California Health & Safety Code § 1797.200 16 - V - TABLE OF AUTHORITIES Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 8 of 34 Page ID #:168 TABLE OF AUTHORITIES (continued) Page California Health & Safety Code § 1797.201 5, 6, 16, 18, 19, 23 California Health & Safety Code § 1797.224 5, 6, 18, 20, 21, 22, 23 California I lealth & Safety Code § 13801 4, 7 Fire Protection District Law of 1987 7 Rules Federal Rules of Civil Procedure Rule 8 2 Federal Rules of Civil Procedure Rule 12(b)(6) 2 Rule 12(b)(6) 2 Constitutional Provisions California Constitution Article XI § 7 4 Other Authorities Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application (2016, Ch. 2, § 2B-3, ¶221d7. 15, 20, 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - vi - TABLE OF AUTHORITIES Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 9 of 34 Page ID #:169 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION In this action, Plaintiff AmeriCare MedServices Inc. claims that defendants City of Costa Mesa and CARE Ambulance Service, Inc. ("CARE") violated Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 & 2) by precluding Plaintiff from rendering ambulance and emergency pre-hospital services within the City's jurisdiction. As acknowledged in Plaintiff's Amended Complaint, these federal antitrust claims rest entirely on the premise that the City has failed to conform with state law regarding emergency medical services under California's Emergency Medical Services System and Prehospital Emergency Medical Care Personnel Act ("EMS Act") and that the City has abused its "police and regulatory powers" by "misinterpreting" state law. Amended Complaint ("AC") at 1:5-11. Plaintiff further acknowledges that there would be no basis for federal antitrust liability if the City complied with the EMS Act. AC at 1:25-27. Plaintiff asks this Court to transform Plaintiff's interpretation of state law into a treble damages federal antitrust case prohibiting the City from engaging in a long-established function of municipal government, namely, local oversight over emergency medical services. The U.S. Supreme Court has pointedly rejected turning allegations of non- conformance with state law into federal antitrust lawsuits against local public entities as violating fundamental principles of federalism. On this basis alone, this action is fatally flawed and should be dismissed without leave to amend. Other separate flaws, such as failure to meet the pleading requirements of antitrust plausibility and antitrust injury, provide additional independent grounds for dismissal without leave. The invocation of vague and general adjectives and nouns, such as "willful" and "conspiracy," sprinkled throughout the Amended Complaint, does nothing to MEMO OF POINTS AND AUTHORITIES IN 55441 00003 \29367607 2 1 SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 10 of 34 Page ID #:170 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 salvage this misguided lawsuit. This action should be dismissed immediately to avoid extraordinary and unnecessary consumption of this Court's and the parties' time and resources, including in the discovery process. II. LEGAL STANDARD: THE TWOMBLY AND IOBAL PLEADING STANDARD A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is a challenge to the sufficiency of the pleadings set forth in the complaint. A dismissal is proper under Rule 12(b)(6) where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A motion to dismiss under Rule 12(b)(6) is proper where defendants assert immunity, abstention, or lack of statutory standing as affirmative defenses. See, e.g., Leveto v. Lapina, 258 F.3d 156, 161 (3d Cir. 2001) (immunity); Berman v. McManus, 483 Fed. Appx. 363, 363 (9th Cir. 2012) (abstention); Vaughn v. Bay Envtl. Mgmt., 567 F.3d 1021, 1022 (9th Cir. 2009) (standing). To survive a 12(b)(6) motion, plaintiffs must comply with Rule 8 notice standards and allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (emphasis added) [hereinafter Twombly]. In Twombly — an antitrust case — the Supreme Court held that "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" are insufficient to satisfy the "plausible" standard. Id. at 555. "Factual allegations must be enough to raise a right to relief above the speculative level." Id. This pleading standard is required considering the recognized high costs associated with antitrust discovery. Id. at 558-59. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The pleading of the elements of a claim must be factual, not a conclusory recitation of the elements, MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607.2 - 2 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8 :16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 11 of 34 Page ID #:171 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to survive a motion to dismiss. Id. Allegations must be supported by "sufficient factual matter." Id. Each of Plaintiff's causes of action fails to meet this heightened standard, and therefore should be dismissed. III. BACKGROUND A. Factual Allegations in the Amended Complaint Plaintiff alleges the City violated the Sherman Act by misinterpreting the EMS Act in refusing to put Plaintiff immediately into a rotation with defendant CARE to provide emergency ambulance services within the jurisdiction of the City. AC at 1:6-11, 3:26-4:2 & 14:11-17. Since at least June 1, 1980 until October 2000, emergency ambulance services in the City were provided by Schaefer Ambulance Service, Inc. ("Schaefer") and Seal's Ambulance. Id. at 11:19-12:3. From October 2000 to September 2008, such services were provided by Schaefer. Id. at 11:27- 12:3. In 2008, the City awarded an exclusive contract to CARE. Id. at 12:4-5. Plaintiff contends that, because the City failed to comply with the EMS Act, state-action immunity does not apply here and the City should be held to the same standard of liability as other market participants. Id. at 1:27-2:7. Plaintiff seeks monetary damages, attorney fees, and declaratory and injunctive relief Id. at 25:10-26:10. However, Plaintiff fails to cite to any legal authority that imposes federal antitrust liability for municipal ambulance services. In fact, the City cannot locate a single case where federal antitrust liability was found against a local public entity for having a singular ambulance provider whereas there are several cases that find no liability.' Ninth Circuit and state cases interpreting the EMS Act do not support antitrust litigation against the City. Moreover, the reliefs sought by Plaintiff are also barred by state-action immunity. Lastly, the Court should not consider the 'See, e.g., Redwood Empire Life Support v. County of Sonoma, 190 F.3d 949 (9th Cir. 1999 ; Springs Ambulance Service, Inc. v. Rancho Mirage, 745 F.2d 1270 (9th Cir. 1984 ; Gold Cross Ambulance & Transfer v. Kansas City, 705 F.2d 1005 (8th Cir. 1983 MEMO OF POINTS AND AUTHORITIES IN 3 SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM 55441 00003\29367607.2 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 12 of 34 Page ID #:172 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 merit of Plaintiff's allegations as Plaintiff lacks standing under antitrust laws and courts should abstain from determining complex state law issues. B. Municipal Oversight of Emergency Medical and Ambulance Services Is a Long Standing Tradition in California Under the California Constitution, cities have police and regulatory power to provide for the health, safety, and welfare of their inhabitants. Cal. Const. art. XI §7; see also Chicago, B & Q, Ry. v. Illinois, 200 U.S. 561, 592 (1906). In fact, the word "police" is derived from the Greek word `polis" meaning "city." McQuillin, Municipal Corporations §24.02 (3d rev ed. 1988). One long recognized essential municipal function is for cities to respond to emergencies. See, e.g., Customer Co. v. City of Sacramento, 10 Ca1.4th 368, 384- 85 (1995). Providing emergency services such as police and fire can be a "municipal affair" and "a matter of public concern." Lossman v. City of Stockton, 6 Cal.App.2d 324, 332 (1935). The California Constitution further provides that cities may provide for public transportation to its constituents. Cal. Const. art. XI §7. Accordingly, California has established decades ago that cities were legally recognized as having the power to exclude specific private ambulance providers within their jurisdiction. See Subriar v. City of Bakersfield, 59 Cal.App.3d 175, 202-06 (1976); Bell v. City of Mountain View, 66 Cal. App.3d 332, 339-340 (1977). It has also been long established that a city may contract for ambulance service to serve its residents "as convenience requires." Cal. Gov't Code §38794. "Municipal services or functions" include ambulance services. Cal. Gov't Code §54980(c). The California Legislature declared in 1987 that "[]local control over the types, levels, and availability of ambulance and emergency medical services is "a long — standing tradition in California which the Legislature intends to retain." Cal. Health & Safety Code §13801. Plaintiff, in its Amended Complaint, ignores this legal backdrop and focuses only on "the EMS Act," which was enacted in 1981 and has been subsequently MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607 2 - 4 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-0 I 804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 13 of 34 Page ID #:173 1 amended. See Cal. Health & Safety Code §§1797-1799.207. The EMS Act sets up 2 a three-tiered regulatory system for emergency medical services in California. The 3 first tier is the state-level Emergency Medical Services Authority. Id. at §1797.1. 4 The second tier is a county-level EMS agency. Id. at §1797.200. The third tier is 5 municipal or fire district-level. Id. at §1797.201. 6 Under this last tier, a city that has been providing ambulance prehospital 7 emergency medical care services since June 1, 1980 may enter into an agreement 8 with the local emergency medical services agency. However, until such an 9 agreement is entered the city has the statutory duty to provide such services at "not 10 less than the existing level." Id. at §1797.201; County of San Bernardino v. City of 11 San Bernardino, 15 Cal. 4th 909, 922-23 (1997). Section 1797.201 provides in 12 pertinent part that "[u]ntil such time that an agreement is reached [with a local EMS 13 agency], prehospital emergency medical services shall be continued at not less than 14 the existing level, and the administration of prehospital EMS by cities . . . presently 15 providing such services shall be retained by those cities . . ." Cal. Health & Safety 16 Code §1797.201 (emphasis added). 17 While the City is not governed by Section 1797.224 of the EMS Act, that 18 section provides further verification of California's policy to permit cities and fire 19 districts to occupy the field of emergency medical and prehospital services to the 20 exclusion of competition, which articulation, makes explicit what was previously 21 recognized by existing law and case authority. Under this section, a local EMS 22 agency may also continue the use of existing providers "in the manner and scope in 23 which the services have been provided without interruption since January 1, 1981." 24 Most importantly, Section 1797.224 concludes by stating, "[n]othing in this section 25 supersedes Section 1797.201." In other words, Section 1797.224 does not trump a 26 city's rights under Section 1797.201, and the provision and administration of EMS 27 and prehospital ambulance services remain a vital and significant obligation solely 28 55441.00003\29367607.2 MEMO OF POINTS AND AUTHORITIES IN 5 SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 14 of 34 Page ID #:174 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of Section 1797.201 cities and fire districts until such time, if ever, that they seek to join the local EMS agency. The heart of the Amended Complaint is its disputed interpretation of the rights the City may have under Section 1797.201 as to what extent these rights may provide for exclusivity and how they interplay with Section 1797.224. Plaintiff contends that Section 1797.224 provides the only means for excluding providers. Others, such as the City, have over the years contended that they are acting pursuant Section 1797.201, and that Section 1797.201 is not superseded by Section 1797.224 in any manner because that is exactly what the statute says. To the extent a city is acting pursuant to its rights under Section 1797.201, it may do so to the exclusion of other providers. This issue of disputed interpretation of state law is set out in detail in Exhibit C to the Amended Complaint, a letter from legal counsel for the City. This dispute is the centerpiece of the Amended Complaint and it pivots totally around a question of state law and its interpretation. What is not under dispute is that the state-action doctrine under Parker v. Brown, 317 U.S. 341 (1943), and its progeny, can provide state and local government federal antitrust immunity. In keeping with its historical grant of state authority to local government to occupy the field of emergency and ambulance services, Health & Safety Code Section 1797.6 continues this provision of authority by expressly invoking this doctrine. As discussed previously, Plaintiff concedes that city compliance with the EMS Act provides such immunity. AC at 1:25-27. Yet nothing in Section 1797.6 suggests the State Legislature intended strict compliance with the Act to be foundational or exclusive in order that its clearly articulated policy designed to displace competition will apply to a Section 1797.201 city or fire district. (As will be discussed in more detail later, such a policy is an element of the state-action doctrine.) Instead Section 1797.6 manifests a clear intent by the State of California to trigger full federal antitrust immunity for local government's oversight of MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607 2 - 6 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8: 16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 15 of 34 Page ID #:175 emergency medical services. Any interpretation of the EMS Act requiring strict compliance with the Act to allow for such immunity contradicts the express purpose of the EMS Act to displace competition with the intent to provide immunity to local government. At the same time, there are other bases beyond the EMS Act for finding State policy to displace competition by local control over emergency medical services. Notably, Section 38794 of the California Government Code, gives cities the power to contract for ambulance services for its residents. This provision is independent of the EMS Act and has been found by the Ninth Circuit to trigger the state-action doctrine and authorize a city's "exclusion of private ambulance companies." Springs Ambulance Serv., Inc. v. City of Rancho Mirage, 745 F.2d 1270, 1273 (9th Cir. 1984). The State Legislature has further confirmed its policy to displace competition with its enactment of the Fire Protection District Law of 1987. The opening declaration in this Act at Section 13801 of the California Health and Safety Code states in pertinent part: The Legislature finds and declares that the local provision of fire protection services, rescue services, emergency medical services, hazardous material emergency response services, ambulance services, and other services relating to the protection of lives and property is critical to the public peace, health, and safety of the state. . . . Local control over the types, levels, and availability of these services is a long-standing tradition in California which the Legislature intends to retain. Recognizing that the state's communities have diverse needs and resources, it is the intent of the Legislature in enacting this part to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003\29367607.2 MEMO OF POINTS AND AUTHORITIES IN 7 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 16 of 34 Page ID #:176 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 provide a broad statutory authority for local officials. This declaration can only be fairly read to reflect a State policy to displace and replace competition with local control over emergency medical and ambulance services. This over-arching State of California policy of displacing competition by local control, as reflected in various statutory frameworks, case law, and long- standing tradition, is also supported by compelling practical factors. These services are not and cannot be provided by unregulated private markets—instead they are best provided under the auspices of local government. This is necessitated by consideration of geography and the nature of emergency response services. First, the geographic scope of municipal services is never defined by private markets—it is defined by the legally set geographic boundaries of the cities themselves, within which the city has the legal duty to protect the health, safety and welfare of its residents. Practically, emergency medical response also has to be local. Ambulances in Sacramento cannot effectively serve Los Angeles. Second, the demand for emergency medical services, such as illustrated by 911 calls, could never be prudently or effectively managed by unregulated private markets even if they are local. In unregulated private markets, it is typically assumed that prospective "customers" are capable of shopping around for the "best deal." It is self-evident that this assumption cannot apply in responding to medical emergencies. Those, for instance, injured in a serious accident or suffering from a heart attack, are in no position to "shop around" and negotiate for ambulance or emergency services. Local regulatory oversight is therefore essential to serve the health, safety, and welfare of the community. The typical relevant market definition analysis in antitrust cases that focuses on the delineation of the product and geographic market is therefore misguided when applied to municipal services. (For a classic example of defining the relevant MEMO OF POINTS AND AUTHORITIES IN 55441.00003\29367607 2 - 8 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 17 of 34 Page ID #:177 market for antitrust purposes see Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962).) That this is misguided is illustrated in part by Plaintiff's attempts to define the relevant product market by using governmental, not private market, delineations of emergency service areas. See AC at 1:13-14, 15:22-23 & 16:26- 17:3 (relying on governmental geographic and product delineations for its market definition). In other words, Plaintiff attempts to define the relevant market by regulatory delineation and then pretends such delineation is no different from delineating markets in the traditional antitrust setting of private markets. Plaintiff's misconceived approach that equivocates "markets" defined by governmental roles to private markets defined by private business conduct would upend essential municipal functions beyond just those regarding emergency medical response. To give just a few examples, it would be unprecedented to find cities having violated the Sherman Act by "monopolizing" a geographic and product market for police, fire, or jail services in their borders on the premise the cities did not fully comport with state law in providing these governmental services as "participants" in "markets" that are defined by those very services. As will be discussed next, such an unprecedented extension of the federal antitrust laws has already been rejected by the U.S. Supreme Court. This rejection requires dismissal of the Amended Complaint in its entirety. IV. THE FEDERAL ANTITRUST COUNTS ARE ENTIRELY BASED ON CONTENTIONS OF STATE LAW THAT SHOULD AND CAN ONLY BE ADDRESSED IN STATE COURT A. THE FEDERAL ANTITRUST COUNTS ARE BARRED BY THE STATE-ACTION DOCTRINE 1. The U.S. Supreme Court Has Expressly Rejected Transforming Allegations of State Law Violations into Federal Antitrust Claims Against Local Government 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003\29367607.2 MEMO OF POINTS AND AUTHORITIES IN 9 SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-ILS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 18 of 34 Page ID #:178 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The state-action doctrine provides antitrust immunity to state and local government for anti-competitive policies that are the intentional or foreseeable result of state action. This doctrine was first enunciated in Parker v. Brown, 317 U.S. 341 (1943). In that decision, the Supreme Court upheld a California program regulating raisins that was challenged under the Sherman Act. The decision emphasized the tradition of our system of federalism and that states are "sovereign." Id. at 354. The Supreme Court did not read the Sherman Act as intruding into such sovereignty even in situations in which competition is clearly constrained. Id. at 352. The Parker immunity or state-action doctrine has traversed a long, sometimes winding path over the decades, especially when addressing how to apply the doctrine to local government. Certain bedrock principles, however, are now well established. The doctrine requires that the challenged conduct be "pursuant to a 'clearly articulated and affirmatively expressed state policy' to replace competition with regulation." Hoover v. Ronwin, 466 U.S. 558, 569 (1984). This doctrine has been extended to local governments acting pursuant to such state policy. See, e.g., City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365, 370 (1991). The "clear articulation" criterion is satisfied if the state policy expressly articulates an intent to displace or permit displacement of competition. See e.g., Southern Motor Carries Rate Conference v. United States, 471 U.S. 48, 61 (1985). But the "clear articulation" requirement can also be met without the state's explicit expression of its intent to displace competition when the state-action doctrine is applied to local government. In Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985), the Supreme Court addressed "how clearly a state policy must be articulated for a municipality to be able to establish that its anticompetitive activity constitutes state action." Id. at 40. In this instance, the municipality was charged with violating the Sherman Act for allegedly obtaining a monopoly over MEMO OF POINTS AND AUTHORITIES IN 55441 00003 \29367607 2 - 10 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 19 of 34 Page ID #:179 the provision of sewage collection and transportation services. The Supreme Court reviewed the state statutory framework and found although there was no express statutory assertion to displace competition, such displacement was still "a foreseeable result" of such a framework and that "it is clear that anticompetitive effects logically would result from this broad authority to regulate." Id. at 42. Accordingly, the immunity applied. The Supreme Court thereafter addressed the question whether the state-action doctrine protected local government when local government does not fully comply with the state law that displaces competition. In City of Columbia v. Omni Outdoor, supra, a municipality was accused of violating the Sherman Act by "conspiring" with a billboard company so the company could monopolize billboards within the city. The Supreme Court found that the state statutory framework for zoning foreseeably displaced competition and thus satisfied Parker immunity. The plaintiff, however, made certain contentions that such immunity should not apply under these circumstances because: (1) the conduct was not "authorized" by the local government by failing to comply with state law; (2) the immunity does not apply when there is a "conspiracy" with a private actor and the local government; and (3) the immunity does not apply when there are "bribes." These three contentions have a "deja vu" ring to them here because the Plaintiff makes essentially the same allegations in its Amended Complaint. See AC at 1:27-2:8, 13:14-16 & 17:19-18:3. The Supreme Court rejected each of these as possible exceptions to the state- action doctrine. It addressed the first issue of local government non-compliance with state law: It could be argued, however, that a municipality acts beyond its delegated authority, for Parker purposes, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003\29367607.2 MEMO OF POINTS AND AUTHORITIES IN - 11 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-0 I 804-.ILS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 20 of 34 Page ID #:180 1 2 3 4 5 6 7 wherever the nature of its regulation is substantively or even procedurally defective. On such an analysis it could be contended, for example, that the city's regulation in the present case was not "authorized" . . . As scholarly commentary has noted, such an expansive interpretation of the Parker-defense authorization requirement would have unacceptable consequences. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 "To be sure, state law 'authorizes' only agency decisions that are substantively and procedurally correct. . Erroneous acts or decisions are subject to reversal by superior tribunals because unauthorized. If the antitrust court demands unqualified 'authority' in this sense, it inevitably becomes the standard reviewer not only of federal agency activity but also of state and local activity whenever it is alleged that the governmental body, though possessing the power to engage in the challenged conduct, has actually exercised its power in a manner not authorized by state law. We should not lightly assume that Lafayette 's authorization requirement dictates transformation of state administrative review into a federal antitrust job. Yet that would be the consequence of making antitrust liability depend on an undiscriminating and mechanical demand for 'authority' in the full administrative law sense." P. Areeda & H. Hovenkamp, Antirust Law [citation omitted]. We agree with that assessment . . . in order to prevent 55441.00003\29367607 2 MEMO OF POINTS AND AUTHORITIES IN - 12 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 21 of 34 Page ID #:181 Parker from undermining the very interests of federalism it is designed to protect . . . . Omni Outdoor, 499 U.S. at 371-72. Plaintiffs conclusory allegations that the state-action doctrine does not apply because the City is not in compliance with state law and therefore its acts are "ultra vires" must accordingly be rejected. Plaintiff's entire antitrust theory rests on the claim that the City is not complying with state law. These claims of non- compliance with state law should not, and cannot, be used to transform issues of state law into a "federal antitrust job." The Supreme Court has already disposed of Plaintiff's "ultra vires" theory. To allow Plaintiff to pursue this theory is contrary to Omni Outdoor and would "undermine the very interests of federalism." The second proposed exception of "conspiracy" between public and private actors fares no better. The Supreme Court held "[t]here is no such conspiracy exception" to the state-action doctrine. Id. at 374. Therefore, Plaintiff's conclusory allegations of "conspiracy" with a private party, co-defendant CARE, must be rejected. The third exception of "bribes" was rejected by the Supreme Court on various grounds, including the ground that the Sherman Act was not designed to assure that public officials are to abide by "principles of good government." Id. at 378. Plaintiff's allegations of "payoffs" through campaign contributions must therefore be discarded. AC at 13:14-16. Plaintiff then attempts to skirt around these problems by making conclusory allegations that the state-action doctrine is inapplicable because the City is a "market participant." Id. at 17:23-24, 19:7-9, 20:23-24 & 22:11-13. In passing dicta, the Supreme Court did refer to a "possible market participant" exception. Omni Outdoor, 499 U.S. at 379. But federal courts have been reluctant to acknowledge this as an exception. See, e.g., Paragould Cable v. City of Paragould, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003 \29367607.2 MEMO OF POINTS AND AUTHORITIES IN - 13 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-0 I 804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 22 of 34 Page ID #:182 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 930 Fd.2d 1310, 1312-13 (8th Cir. 1991) ("Omni's market participant exception is merely a suggestion and not a rule of law"). See also United National Maintenance, Inc. v. San Diego Convention Center, Inc., 766 F.3d 1002 (9th Cir. 2014) (state-action doctrine applies to a local governmental entity operating a revenue generating convention center). In the case at hand, however, the Court need not address the viability or the meaning of the "possible market exception" because this exception, if it exists, is inapplicable here for two reasons. First, Omni establishes that the state-action doctrine applies when the local governmental entity is acting in a regulatory capacity, such as when it engages in zoning and municipal planning. The Amended Complaint alleges that the City is "[a]busing its police and regulatory powers" and is engaging in a "misinterpretation of California regulatory law." AC at 1:7-9. The City, by Plaintiff's admission, is acting in a regulatory capacity and therefore it cannot be considered a "market participant." The City is clearly acting pursuant to various statutory and State constitutional authorizations to regulate and oversee medical emergency services specifically and generally pursuant its State constitutional police power to protect the health, safety, and welfare of the community. See e.g., Cal. Gov't Code § 38794. The second reason is that it would be unprecedented to apply such an exception to long-standing, traditional municipal functions. This is true even if the municipality receives some kind of payment in the process. As observed by Areeda and Hovenkamp in their authoritative treatise that is frequently cited by the Supreme Court and federal courts: The fact that at least some state or local governments find it useful to engage in self-provision and even to "monopolize" some services—for example, the provision of garbage collection, public transportation, airport MEMO OF POINTS AND AUTHORITIES IN 55441 00003129367607.2 - 14 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-0 I 804-1LS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 23 of 34 Page ID #:183 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 facilities, or water—may suggest the state's conclusion that a competitive market will not adequately meet the public needs for such services. Thus, where a state contracts exclusively with private parties for garbage disposal or bus service, it is reasonable to presume that such monopoly is consistent with public needs. (Footnotes omitted.) Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application (2016, Ch. 2, § 2B-3, ¶221d7.). To hold otherwise, as discussed previously, would upend traditional municipal functions by making municipalities subject to charges of monopolizing the "market" for police, fire, jail, or even parking meter services in their locale on the allegations that they have failed to comply with state law and that they should be deemed "market participants." Nothing in the case law suggests such a preposterous undermining of federalism. In fact, Omni Outdoor compels its rejection. In short, even if Plaintiff's allegation that City is non-compliant with the EMS Act is assumed to be true, Plaintiff's lawsuit must be dismissed. If remedy is to be found, Plaintiff must look elsewhere, not in federal court and not through the Sherman and Clayton Acts. But as will be discussed next, Plaintiff's allegation of non-compliance with state law must be rejected, and even under Plaintiff's understanding of the state-action doctrine, immunity must apply. 2. The EMS Act Expressly Invokes State-Action Immunity and Bars Federal Antitrust Liability Against Municipalities Plaintiff contends that, because the City failed to comply with the EMS Act by reaching an agreement with the county EMS agency regarding EMS and ambulance service, the Parker v. Brown state-action immunity doctrine does not apply here. AC at 1:-27-2:7. However, case law is clear that once there is a MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607 2 - 15 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8: I 6-cv-0 I 804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 24 of 34 Page ID #:184 "clearly articulated and affirmatively expressed state policy to displace competition" and the alleged anticompetitive effect was contemplated by the legislature, the immunity applies. FTC v. Phoebe Putney Health Sys., 133 S. Ct. 1003, 1005-06 (2013) [hereinafter "Phoebe"]; Springs Ambulance Service, Inc., 745 F.2d at 1272-73 (holding that a city was immune from federal antitrust liabilities when it displaced private ambulance operations). As it would be "unrealistic" for the legislature to set forth every anticompetitive effect, "a state policy to displace federal antitrust law [is] sufficiently expressed where the displacement of competition [is] the inherent, logical, or ordinary result of the exercise of authority delegated by the state legislature." Phoebe, 133 S. Ct. at 1012-13. Here, the EMS Act explicitly sets forth California's policy to displace competition in emergency medical services and, state-action immunity applies to any claims against the City for federal antitrust violations. Cal. Health & Safety Code §1797.6; Cal. Gov't. Code § 38794. As discussed above in Section III.B., California has long granted to municipalities the exclusive right to provide ambulance service to their residents. Cal. Gov't Code §§38794 & 54980(c); Springs Ambulance Serv., Inc., 745 F.2d at 1273 ("Here, the exclusion of private ambulance companies is a necessary or reasonable consequence of providing subsidized municipal ambulance services, and was surely within the contemplation of the legislature when it enacted Gov't. Code § 38794."). The EMS Act, first enacted in 1980, acknowledges this historical context of local agencies providing emergency medical services. Cal. Health & Safety Code §§1797.200 (county) & 1797.201 (city and fire department). In 1984, acting in direct response to a Supreme Court decision concerning local government's liability under federal antitrust laws, the California Legislature amended the EMS Act by enacting California Health & Safety Code Sections 1797.6, 1797.85, and 1797.224, which again reflects the long-standing policy of immunizing municipalities from antitrust claims. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003\29367607 2 MEMO OF POINTS AND AUTHORITIES IN - 16 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 25 of 34 Page ID #:185 Two years after the 1984 amendment to the EMS Act, the Ninth Circuit Court of Appeal addressed the state-action immunity with respect to emergency ambulance service in Mercy-Peninsula Ambulance, Inc. v. County of San Mateo, 791 F.2d 755 (9th Cir. 1986), and held that the EMS Act authorized anti- competitive conduct and the county, which granted exclusive contracts for emergency medical services to private providers and hospital districts, was therefore protected by the state-action immunity to federal antitrust law because the anti-competitive conduct was a foreseeable result of the authority granted to appellee county. Id. at 756. "There can thus be no question that the [EMS Act's] authorization for the counties to contract for paramedic services and to regulate those who can provide them, has a foreseeably anti-competitive effect which excludes some potential service providers." Id. at 758. The Ninth Circuit reaffirmed its earlier holding in Springs Ambulance, 745 F.2d at 1273, that a "foreseeable result of authorizing [a] city to contract for ambulance services is exclusion of ambulance providers not awarded the contract." Mercy-Peninsula, 791 F.2d at 758. The Springs Ambulance court had determined that "the exclusion of private ambulance companies is a necessary or reasonable consequence of providing subsidized municipal ambulance service, and was surely within the contemplation of the legislature when it enacted Gov't Code § 38794." Springs Ambulance, 745 F.2d at 1273. The Ninth Circuit thus concluded that California had now stated expressly what it had implied by Government Code Section 38794 — that cities were empowered to occupy the field of prehospital ambulance services to the exclusion of competition. Mercy-Peninsula, 791 F.2d at 758 ("Section 1797.6(b) of the EMS now expressly states the legislature's intent to exercise a sufficient degree of state direction to provide 'state action immunity under federal antitrust laws' to local government") (emphasis added). Like the local agencies in Springs and Mercy-Peninsula, the City is protected by the state-action immunity as the California Legislature has expressed its MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607 2 - 17 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-0 I 804-JLS-AFM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 26 of 34 Page ID #:186 1 unequivocal intent to displace competition in emergency medical services and to 2 shield local agencies from federal antitrust liabilities. Assuming Plaintiff's 3 allegations in the Amended Complaints are all true, they do not establish a 4 sufficient basis for a claim under the Sherman Act. 5 Plaintiff's conclusory claims that Section 1797.201 does not apply to the City 6 "because it did not have an existing EMS service that has been provided 7 uninterrupted since January 1, 1981," does not give rise to federal jurisdiction. AC 8 at 24:11-14. As an initial matter, this generalization contradicts allegations Plaintiff 9 made in Paragraph 26 of the Amended Complaint. AC at 11:18-22 (the City has 10 had agreements with private ambulance providers since at least June 1, 1980 to 11 provide such services). Nothing in the EMS Act prohibits the City from switching 12 its exclusive ambulance provider when the level of service remains the same. 13 Even assuming arguendo that the City was wrong in its interpretation of 14 Section 1797.201, whether the City complied with that section or whether the 15 Orange County Emergency Medical Services Agency has designated the City to be 16 in a non-exclusive jurisdiction are irrelevant to the application of the Parker 17 immunity. As discussed above, once a legislative intent to authorize anti- 18 competitive activities is established, the Parker immunity attaches. There is no 19 question here that the California Legislature intended to protect local agencies from 20 federal antitrust liabilities when they engage in anti-competitive activities in 21 procuring emergency ambulance services within their jurisdiction. Moreover, the 22 legislature never intended Section 1797.224 to supersede Section 1797.201, which 23 permits a city that has been providing ambulance prehospital emergency medical 24 care services since June 1, 1980 to either: (1) enter into an agreement with the local 25 emergency medical services agency; or (2) continue to provide the existing level of 26 emergency medical services. Cal. Health & Safety Code §§ 1797.201 & 1797.224. 27 28 55441.00003 \29367607.2 MEMO OF POINTS AND AUTHORITIES IN - 18 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8: 16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 27 of 34 Page ID #:187 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. THE ABSTENTION DOCTRINE BARS CONSIDERATION OF PLAINTIFF'S CLAIMS Alternatively, the Court should abstain from adjudicating these claims as it would inevitably interfere with the state's ability to adjudicate its own statutes and to set its own policy. Abstention is proper where a case involves complex questions of state law administered by state administrative agencies, and subject to timely and adequate state court review. In such cases, a federal court could potentially undermine the state's administrative process and disrupt the state's efforts to establish a coherent, uniform policy with respect to the matter at issue. See Burford v. Sun Oil Co., 319 U.S. 315, 334 (1943); see also, New Orleans Pub. Service Inc. v. Council of City of New Orleans, 491 U.S. 350, 362 (1989). Burford allows federal courts to "decline to rule on an essentially local issue arising out of a complicated state regulatory scheme." United States v. Morros, 268 F.3d 695, 705 (9th Cir. 2001) [hereinafter "Morros"]. This case undoubtedly involves local issues and state law. In fact, the entirety of Plaintiff's federal antitrust claims rest on its interpretation of a state statute. By its own admission, Plaintiff seeks a judicial determination of the City's rights and authorities under California's EMS Act, especially Sections 1797.201 and 1797.224, which have already been the subject of considerable litigation in state court. AC at 23:18-21 & 24:22-25; see e.g., County of San Bernardino v. City of San Bernardino, 15 Cal.4th 909 (1997); Valley Medical Transport, Inc. v. Apple Valley Fire Protection Dist., 17 Ca1.4th 747 (1998). Before this Court can ever determine the federal issues, it must make a determination as to complex state law issues, by reviewing and interpreting the various precedents set by the long history of case law in California state courts. Finally, it should be noted that Count V of the Amended Complaint is a declaratory relief action under California Code of Civil Procedure §1060. It seeks to declare that the City has no oversight or exclusive rights under §§1797.201 or MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607.2 - 19 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8 : 16-cv-0 I 804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 28 of 34 Page ID #:188 1797.224. This declaration, plus the other causes of action, would extinguish the City's oversight over emergency medical services within its boundaries and provide no replacement. This threatens to create chaos regarding how, when, and who will provide such oversight and what happens in the interim. This amply illustrates why this matter belongs in state court, not federal court under the guise of federal antitrust claims. V. THE ANTITRUST CLAIMS ARE BARRED BECAUSE THERE IS NO ANTITRUST INJURY AS REQUIRED FOR PRIVATE PLAINTIFFS A. OVERVIEW OF THE INJURY REQUIREMENTS Proof of an antitrust violation is not by itself sufficient for a private plaintiff to obtain damages or other relief under the Sherman and Clayton Acts. As Areeda and Hovenkamp note in their treatise: "[T]he antitrust injury requirement often enables antitrust courts to dispose of more claims at an early stage of litigation by simply examining the logic of the plaintiff's theory of injury. . . . In order to survive a motion to dismiss, the plaintiff must allege not only that the antitrust laws have been violated; it must also allege facts concerning how its own injuries resulted. That claim, as stated in the complaint, can often be the basis for determining whether the plaintiff has alleged the type of injury for which the antitrust laws provide relief." Areeda & Hovenkamp, supra, at Ch. 3, ¶337a. Accordingly, "the antitrust injury doctrine depends less on the plaintiff's proof than on the logic of its complaint and its theory of injury." Id. at Ch. 3, ¶337d. The plaintiff must therefore meet what are sometimes referred to by the antitrust courts as "standing" requirements. It must show injury to "business or property." 15 U.S.C. 15(a). A plaintiff must establish the existence of "injury-in- fact." See, e.g., Davric Maine Corp. v. Rancourt 216 F.3d 143, 149 (1st Cir. 2000). And it also must establish that the injury is the type that the antitrust laws are designed to address. See generally, Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55441.00003\29367607.2 MEMO OF POINTS AND AUTHORITIES IN - 20 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8: 16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 29 of 34 Page ID #:189 What is more, antitrust claims at the pleading stage must be "plausible" in which the claim of plausibility can be "viewed in light of common economic experience" and must "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 & 565. As discussed below, Plaintiff's antitrust injury allegations fail to meet these essential requirements for establishing such injury—they are instead conclusory, speculative, implausible, and illogical. Even if it is assumed to be true that the City has violated the antitrust laws, the Amended Complaint should be dismissed for failing to allege any plausible theory of antitrust injury. B. THERE IS NO INJURY TO PLAINTIFF'S "BUSINESS OR PROPERTY" OR "INJURY IN FACT" 1. Plaintiff Speculates That It Would Have Qualified as a Provider in Costa Mesa Under the EMS Act If the Act Were Followed as Interpreted by Plaintiff Plaintiff alleges that the City operates without authorization an exclusive area for ambulance services, and did not grant Plaintiff's "written request" to be placed on rotation to provide ambulance services within the City. Plaintiff further alleges that as a result Plaintiff was excluded and thereby injured by the City in violation of the antitrust laws. AC at 13:17-15:5. This claim of antitrust injury is spurious on its face. A key difficulty with this allegation of antitrust injury is that Plaintiff acknowledges that the City under Section 1797.224 of the EMS Act in fact could have lawfully operated an exclusive service area. AC at. 4:6-14. Such an exclusive area by definition could have been to the exclusion of Plaintiff It is not alleged, and it would be pure speculation to have alleged, that if the City followed 1797.224 of the EMS Act to establish an exclusive service area with the County EMS agency, that Plaintiff would have been selected to be the provider of emergency medical services for that area. Plaintiff's 55441.00003\29367607.2 MEMO OF POINTS AND AUTHORITIES IN - 21 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 30 of 34 Page ID #:190 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 claim that it was "injured" must be considered illogical and speculative for that 2 reason. 3 This conclusion is in accord with Brunswick, supra, 429 U.S. 477. The 4 Supreme Court found as a matter of law there was no injury-in-fact to an antitrust 5 plaintiff claiming that an acquisition of a failing company by a competitor violated 6 the antitrust laws and that the resulting acquisition injured plaintiff. In rejecting 7 plaintiff's claim of antitrust injury, the Supreme Court noted that the acquisition could have just as easily been done by an entity with no antitrust relationships with the plaintiff and thereby would not have violated the antitrust laws. Under this alternative scenario, the acquisition by a different party would have been lawful under the antitrust laws, yet resulted in exactly the same injury to plaintiff. Because the identical injury could have been inflicted without ever offending the antitrust laws, there could be no antitrust injury. Id. at 429 U.S. at 488. Likewise, Plaintiff here could have been excluded (and still could be excluded) by the City and the County under Section 1797.224 and suffer exactly the same injury described in the Amended Complaint. Even according to Plaintiff, this exclusion would not have offended the antitrust laws, yet the injury would be identical to the one alleged in the Amended Complaint. Under these circumstances, the holding in Brunswick compels finding no antitrust injury has or can be alleged. The claim of injury as alleged in the Amended Complaint is implausible for yet another reason. It is implausible that Plaintiff's "written request" as alleged could ever have entitled Plaintiff to be accepted as a provider of services in the City because the "written request" is defective on its face. The "written request" is attached to the Amended Complaint as Exhibit B. AC at 14:11-17. It is devoid of the obvious fundamentals required for it to be considered a legitimate request. The "written request," for example, makes no mention of pricing of ambulance services; the nature of personnel to be employed; the number, location, model, type, age or response times of ambulances that would be provided MEMO OF POINTS AND AUTHORITIES IN 55441 00003 \29367607 2 - 22 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 31 of 34 Page ID #:191 on a rotational basis in the City; the financial background of the Plaintiff; the scope of insurance, if any, that Plaintiff will have to cover any liabilities; whether Plaintiff would indemnify or hold the City harmless for any incidents; or Plaintiff's history of accidents and performance. Because of these and other material omissions, it would have been derelict for the City, or any other public agency with oversight authority, to have accepted this "written request" because it would have no meaningful idea of what it actually approved in practice. Plaintiff has failed to show with any plausibility that its "written request" could have ever been accepted under any circumstance.2 Plaintiff's allegations of injury-in-fact, in short, never "rise above the speculative level" and must be rejected under the pleading requirements of Twombly. 2. Plaintiff's Claim of Injury-In-Fact Is Logically Implausible Because It Is Based on a Contradiction Plaintiff alleges that it was injured because its request to be a provider of ambulance services on a rotational basis was not granted by the City. AC at 14:11- 23. At the same time the Amended Complaint alleges that the City has no rights under Section 1797.201 regarding emergency medical services, and no rights under Section 1797.224. AC at 4:6-14. This is tantamount to alleging that the City does not have any legal oversight authority for the administration of ambulance and prehospital emergency medical services. But if the City has no such authority, the City would have no right to grant Plaintiff's written request to be a provider of such 2This implausibility is amplified by the fact that Plaintiff has before this Court other emergency medical services antitrust lawsuits against 12 cities in Orange County. In these lawsuits, Plaintiff alleges it made essentially the same "written request" as alleged here. The question arises if Plaintiff is really proposing to simultaneously offer such services in all 12 cities, and, if so, how it would go about doing so and under what terms. The Court may take judicial notice of these virtually identical "written requests" in Plaintiff's lawsuits pending before it. MEMO OF POINTS AND AUTHORITIES IN 55441 00003 \29367607 2 - 23 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 32 of 34 Page ID #:192 services. In other words, Plaintiff is claiming injury for not getting something from the City that the Plaintiff has effectively alleged the City has no legal right to grant. C. PLAINTIFF'S ALLEGED INJURY IS NOT THE TYPE OF INJURY THAT THE ANTITRUST LAWS ARE DESIGNED TO FORESTALL Only the type of injuries that the antitrust laws are intended to forestall are cognizable. For example, as the Supreme Court noted in Omni Outdoor, supra, allegations that public officials were bribed resulting in anti-competitive impacts are not cognizable because the federal antitrust laws are not designed to protect the integrity of government. 499 U.S. at 378. Count V is a pendent state claim per California statute seeking a declaration that the City is not compliant with the EMS Act. This cause of action confirms two points. First, the entire foundation of Plaintiff's federal antitrust claims is a claim that California statute has been violated. Second, Plaintiff has a remedy available to it under California law to address these alleged violations. It should be held that the federal antitrust laws are not designed to forestall violations of state law that can already be remedied by state law. Otherwise, the federal courts will be transformed into arbiters of state law and violations of state law will be transformed into federal claims with legal remedies and claims tacked on that the state legislatures never sought or intended in enacting these laws. VI. THE LOCAL GOVERNMENT ANTITRUST ACT APPLIES Plaintiff alleges in each of its antitrust causes of action that the Local Government Antitrust Act (15 U.S.C. §§ 34-36) does not apply. AC at 17:25-18:3, 19:9-15, 20:25-21:3 & 22:14-19. It alleges the Act does not apply because the City is a "market participant" and its acts are ultra vices. No such exceptions exist under the Act. Passed in 1984, the purpose of the Act was to protect local governments from damages liability under the federal antitrust laws that potentially could result from the Supreme Court's evolving holdings on the state-action doctrine. The MEMO OF POINTS AND AUTHORITIES IN 55441 00003\29367607 2 - 24 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8: 16-cv-01804-JLS-AFM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 33 of 34 Page ID #:193 Dated: January 6, 2017 Dated: January 6, 2017 55441 00003\29367607 2 JONES & MAYER By: /s/ James R. Touchstone By: /s/ Kendall H. MacVey KENDALL H. MacVEY WENDY Y. WANG Attorneys for Defendant CITY OF COSTA MESA JAMES R. TOUCHSTONE MELISSA M. BALLARD BRUCE A. LINDSAY Attorneys for Defendant CITY OF COSTA MESA BEST BEST & KRIEGER LLP MEMO OF POINTS AND AUTHORITIES IN - 25 - SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT; 8:16-cv-01804-JLS-AFM facial language of the Act provides no such exceptions and the exceptions proposed by Plaintiff would undermine the purpose of the Act to protect local government from massive damages exposure under the federal antitrust laws. See generally Phillip E. Areeda & Herbert Hovenkamp, supra, at Ch. 2, §2B, ¶223d ("As a result, the Act applies even when the local government acts as a market participant.") In addition to the plain language and purpose of the Act, as previously discussed, Omni Outdoor already rejects Plaintiff's "ultra vires" theory. Such a theory would undermine principles of federalism that the courts have found must be protected when interpreting the federal antitrust laws. VII. CONCLUSION After amending its complaint, Plaintiff still fails to set forth a remotely plausible, even logical, federal antitrust case. As the Supreme Court observes in Twombly, because of their inevitable expense and high consumption of resources, implausible antitrust cases should be nipped at the pleading stage and not be allowed to proceed to the expensive discovery stage. The City respectfully urges the Court to dismiss the Amended Complaint without leave to amend. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 8:16-cv-01804-JLS-AFM Document 25 Filed 01/06/17 Page 34 of 34 Page ID #:194