Americare Medservices Inc v. City of Fountain Valley et al

NOTICE OF MOTION AND MOTION to Dismiss Case

C.D. Cal.January 11, 2017

- 1 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law Colin R. Burns SBN 228311 crburns@harperburns.com Alex M. Halfman SBN 300828 amhalfman@harperburns.com HARPER & BURNS LLP 453 South Glassell Street Orange, California 92866 Telephone (714) 771-7728 Facsimile (714) 744-3350 Attorneys for Defendant City of Fountain Valley UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORIA SOUTHERN DIVISION AmeriCare MedServices, Inc., Plaintiff, v. City of Fountain Valley and CARE Ambulance Services, Inc., Defendants. Case No.: 8:16-cv-01795 JLS (AFMx) BEFORE THE HONORABLE JOSEPHINE L. STATON DEFENDANT CITY OF FOUNTAIN VALLEY’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES Filed concurrently with: [Proposed] ORDER Federal Rule of Civil Procedure 12(b)(6) Date: Time: Courtroom: March 10, 2017 2:30 p.m. 10A Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 1 of 9 Page ID #:138 - 2 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law TO THE HONORABLE COURT AND TO PLAINTIFF AND COUNSEL OF RECORD: PLEASE TAKE NOTICE that Defendant City of Fountain Valley will move and hereby moves pursuant to Federal Rule of Civil Procedure 12(b)(6) for an order dismissing this action in its entirety. A hearing on this motion is set for Friday, March 10, 2017, at 2:30 p.m. before the Honorable Josephine L. Staton, United States District Judge, in Courtroom 10A of the above-entitled Court, located at 411 West Fourth Street, Santa Ana, California 92701. This motion is made on the ground that Plaintiff’s Amended Complaint fails to state a claim upon which relief can be granted. This motion is made following a conference of counsel pursuant to Local Rule 7-3, which took place by telephone between counsel on December 9, 2016 and again on January 9, 2017. This motion is based on this Notice of Motion, the attached Memorandum of Points and Authorities, the pleadings on file in this action, and any further evidence or argument that may be presented at or before the hearing on this motion. Date: January 11, 2017 HARPER & BURNS LLP /s/ Colin Burns ________________________________ Colin R. Burns Attorneys for Defendant City of Fountain Valley Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 2 of 9 Page ID #:139 - 3 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law MEMORANDUM OF POINTS AND AUTHORITIES I. Introduction Cities protect the health, safety, and welfare of residents. Cal. Const. art. XI § 7. They have long provided emergency response services. Lossman v. City of Stockton, 6 Cal. App. 2d 324, 332 (1935). The provision of emergency ambulance services is “…at the core of vital civic functions.” Ma v. City and County of San Francisco, 95 Cal. App. 4th 488, 508 (2002) disapproved on other grounds in Eastburn v. Regional Fire Protection Authority, 31 Cal. 4th 1175, 1184 (2003). Plaintiff filed an antitrust action against Fountain Valley and CARE Ambulance, and numerous other Orange County cities, alleging that ambulance services in Fountain Valley should be subject to open market competition. Victims of an incident requiring emergency medical attention are in no position to shop the best quality or price in ambulance services. Local oversight is essential to ensure ambulance providers have appropriate personnel; sufficient number of ambulances; adequate financial background; and are qualified, responsive, and capable of providing emergency medical response at the scene of a serious injury. Local oversight is also essential to cost control. Ambulances have fixed costs for being on call 24-hours a day. With more competitors, patients are charged a higher fee to compensate for overhead spread among fewer patients. With less providers, patients enjoy reduced prices from economies of scale. Plaintiff’s complaint, which attempts to convert a core municipal function into one done on the open market, fails on its face as the antitrust allegations are barred by the doctrine of state action immunity. Fountain Valley asks this Court to dismiss the complaint for failure to state a claim on which relief can be granted without an opportunity to amend. /// /// /// Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 3 of 9 Page ID #:140 - 4 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law II. Dismissal Is Proper Where Plaintiff’s Factual Allegations Fail to Demonstrate a Plausible Cause of Action Federal Rule of Civil Procedure 12(b)(6) authorizes a Court to dismiss a complaint that “fail[s] to state a claim upon which relief can be granted.” Plaintiff must plead facts, rather than conclusory allegations, legal assertions, or restatements of the elements of a claim. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, fn. 3 (2007). The factual allegations must show “that the pleader is entitled to relief.” F.R.C.P. 8(a)(2). A Rule 12(b) motion is properly granted where the plaintiff fails to plead a valid legal theory for relief. Balistreri v. Pacifica Police Department, 901 F. 2d 696, 699 (9th Cir. 1990). Here, the amended complaint should be dismissed under Rule 12(b)(6) because the state action doctrine is a complete defense to Plaintiff’s antitrust claims. III. Cities Have Express Statutory Authority to Administer Ambulance Service Within Their Jurisdiction Passed in 1971, California Government Code section 38794 provides: “The legislative body of a city may contract for ambulance service to serve the residents of the city as convenience requires.” See also Gov’t Code § 54980 (“Municipal services or functions” expressly includes “firefighting, police, ambulance” service). In 1980, the California Legislature enacted the Emergency Medical Services (EMS) Act which “contained 100 different provisions in 9 separate chapters and created a comprehensive system governing virtually every aspect of prehospital emergency medical services.” County of San Bernardino v. City of San Bernardino, 15 Cal. 4th 909, 915 (1997). The EMS Act establishes a three-tier system of regulation. The state occupies the first tier, where the state Emergency Medical Services Authority “performs a number of different functions relating to the coordination of EMS throughout the state,” including assessing service areas (Cal. Health & Saf. Code § 1797.102); developing various guidelines (Cal. Health & Saf. Code § 1797.103); providing Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 4 of 9 Page ID #:141 - 5 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law technical assistance (Cal. Health & Saf. Code § 1797.104); and reviewing plans submitted by local EMS agencies (Cal. Health & Saf. Code § 1797.105). The local EMS agencies (or LEMSAs) make up the second tier of the system. Counties are authorized to develop an emergency medical services program and each county that develops such a program shall designate a LEMSA. Cal. Health & Saf. Code § 1797.200. Among other things, the LEMSA handles planning, medical direction, and management of emergency medical systems on a countywide basis. See Cal. Health & Saf. Code §§ 1797.204, 1797.250, 1797.254. The third tier is occupied by cities and fire districts that have continued to provide ambulance services since 1980. Section 1797.201 provides: Upon the request of a city or fire district that contracted for or provided, as of June 1, 1980, prehospital emergency medical services, a county shall enter into a written agreement with the city or fire district regarding the provision of prehospital emergency medical services for that city or fire district. Until such time that an agreement is reached, prehospital emergency medical services shall be continued at not less than the existing level, and the administration of prehospital EMS by cities and fire districts presently providing such services shall be retained by those cities and fire districts, …. Thus, cities that have contracted for or provided ambulance services since June 1, 1980 may continue to do so unless and until they voluntarily give up their right to continue. County of San Bernardino, 15 Cal. 4th at 922-923. IV. Fountain Valley Has “Contracted for or Provided” Ambulance Services Since June 1, 1980 Pursuant to its authority under the EMS Act, Fountain Valley has administered ambulance services since before 1980 and has not voluntarily relinquished its rights to the County. Plaintiff admits that “[a]ny local public agency Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 5 of 9 Page ID #:142 - 6 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law that fulfills its duties under the EMS Act is immune from the reach of federal antitrust law under the doctrine of state action immunity.” (First Amended Complaint “FAC” 1:25-27.) The EMS Act expressly provides that cities that have contracted for or provided ambulance services since June 1, 1980 may continue to do so. Cal. Health & Saf. Code § 1797.201. Plaintiff admits that Fountain Valley contracted with a provider until 1998 when it awarded an exclusive contract to CARE. (FAC 3:14-19.) Plaintiff’s own allegations thus demonstrate Fountain Valley is a grandfathered “.201” city. By statute, City has a grant of legislative authority to continue to administer it’s ambulance response program, including by continuing with an exclusive private service provider. Cal. Health & Saf. Code § 1797.201; Cal. Gov’t Code § 38794. V. Cities Acting Pursuant to a Grant of Legislative Authority Intended to Displace Competition with Regulation are Immune from Anti-Trust Liability Under the State Action Doctrine The Sherman Act is not intended to apply to the acts of states as sovereign. Parker v. Brown, 317 U.S. 341, 352 (1943). In keeping with the principles of federalism, the Supreme Court recognizes state action immunity to antitrust liability. When a State government acts through its legislature, its actions are exempt from antitrust liability. Hoover v. Ronwin, 466 U.S. 558, 568 (1984). State action immunity also applies to municipal governments when their actions “reflect state policy.” City of Lafayette v. Louisiana Power & Light, Co., 435 U.S. 389, 413 (1978). For the immunity to apply, municipal action must be taken under a “clearly articulated” state policy to displace competition. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 39-46 (1985). A clearly established policy does not need to be an explicit authorization to engage in anti-competitive behavior. Town of Hallie, 471 U.S. at 42. Rather, it is sufficient that the challenged action is the “foreseeable result” of a grant of authority by the state. Town of Hallie, 471 U.S. at 42. Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 6 of 9 Page ID #:143 - 7 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law For example, the Supreme Court held that a municipal zoning ordinance was exempt from antitrust liability because the state’s policy of delegating zoning authority to local governments foreseeably results in anticompetitive restraints: “The very purpose of zoning regulation is to displace unfettered business freedom in a manner that regularly has the effect of preventing normal acts of competition, particularly on the part of new entrants.” City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 373 (1991). Accordingly, a municipal billboard ordinance was immune from antitrust liability even though it “necessarily protects existing billboards against some competition from newcomers.” Ibid. Here, California Government Code section 38794 expressly authorizes “[t]he legislative body of a city [to] contract for ambulance service to serve the residents of the city as convenience requires.” Reviewing the statute, the Ninth Circuit held that the grant of authority under section 38794 “affirmatively authorizes cities to provide ambulance services to their residents[.]” Springs Ambulance Service, Inc. v. Rancho Mirage, 745 F.2d 1270, 1273 (9th Cir. 1984). This statute alone was held sufficient to confer anti-trust immunity under the state action doctrine to cities contracting for ambulance services. (Id. at 1273.) Further, the EMS Act authorizes cities, like Fountain Valley, that have provided or contracted for ambulance services since 1980, to continue to do so. Cal. Health & Saf. Code § 1797.201. The Ninth Circuit, in Mercy-Peninsula Ambulance, Inc. v. County of San Mateo, 791 F .2d 755 (9th Cir. 1986), held that the EMS Act’s grant of authority to the County to provide for ambulance services and to provide for exclusive contracts with private service providers conferred state action anti-trust immunity because the anti-competitive conduct was the foreseeable result of the EMS statutory scheme. Id. at 756. In doing so, it reaffirmed its holding in Springs Ambulance that a “foreseeable result of authorizing [a] city to contract for ambulance services is exclusion of ambulance providers not awarded the contract.” Id. at 758. Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 7 of 9 Page ID #:144 - 8 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law As such, Fountain Valley is statutorily authorized to contract for ambulance services under both Government Code 38794 and the section 1797.201 of the EMS Act; anticompetitive conduct is the “foreseeable result” of contracting with ambulance service providers; and, therefore, the City is immune from antitrust liability under the state action doctrine. Plaintiff argues that the immunity should not apply because Fountain Valley (1) failed to comply with California law, (2) conspired with a private actor, and (3) because elected officials accepted campaign donations. Similar allegations were rejected by the Supreme Court in City of Columbia. There, the Court noted that the broad principles of state action immunity are not affected by whether the state action was illegal, the result of bribery, or conspiracy with a private party. City of Columbia, 499 U.S. at 371-372, 374, 378. VI. The Local Government Antitrust Act Bars Plaintiff’s Claims for Damages, Costs, and Attorney Fees Congress enacted the Local Government Antitrust Act in 1984 which broadly exempts municipal governments and officials from damages for violations of antitrust laws. See Cohn v. Bond, 953 F. 2d 154, 157 (4th Cir. 1991); Wicker v. Union Co. Gen’l Hosp., 673 F. Supp. 177, 186 (N.D. Miss. 1987) (dismissing antitrust damages claims against county officials). The LGAA provides, inter alia, that: No damages, interest on damages, costs, or attorney’s fees may be recovered under section 4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 15a, or 15c) from any local government, or official or employee thereof acting in an official capacity. (15 U.S.C. Section 35(a).) The Act applies to bar Plaintiff’s request for damages, costs, and attorney fees. This Court should strike the same from Plaintiff’s complaint. /// Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 8 of 9 Page ID #:145 - 9 - CITY OF FOUNTAIN VALLEY’S MOTION TO DISMISS AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law VII. Conclusion Cities protect the health, safety, and welfare of residents. Like police and fire, emergency medical response is a core municipal safety function that cities are well- equipped to address. Emergency ambulance response is unlike regular open market commodities or services in that the customer-victim has no ability to shop the market for the best deal or quality. Principles of federalism treat states as sovereign. That sovereignty extends to municipalities under the state action doctrine. That doctrine gives broad immunity to cities when their actions reflect state policy. As early as 1971, California state policy was to allow cities to contract for private ambulance services. Cal. Gov’t Code § 38794. Then again in 1980, the State gave cities the power to continue to provide or contract for ambulance services. Since before 1980, Fountain Valley has administered a successful emergency ambulance response program on behalf of its residents. This core municipal function should not be taken from the City and removed to the private market. Date: January 11, 2017 HARPER & BURNS LLP /s/ Colin Burns _____________________________________ Colin R. Burns Attorneys for Defendant City of Fountain Valley Case 8:16-cv-01795-JLS-AFM Document 23 Filed 01/11/17 Page 9 of 9 Page ID #:146 - 1 - [Proposed] ORDER DISMISSING AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law Colin R. Burns SBN 228311 crburns@harperburns.com Alex M. Halfman SBN 300828 amhalfman@harperburns.com HARPER & BURNS LLP 453 South Glassell Street Orange, California 92866 Telephone (714) 771-7728 Facsimile (714) 744-3350 Attorneys for Defendant City of Fountain Valley UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORIA SOUTHERN DIVISION The motion of Defendant City of Fountain Valley for an Order Dismissing Plaintiff’s Amended Complaint without leave to amend came on for a hearing in Department 10A of this Court, the Honorable Josephine L. Staton, presiding, on AmeriCare MedServices, Inc., Plaintiff, v. City of Fountain Valley and CARE Ambulance Services, Inc., Defendants. Case No.: 8:16-cv-01795 JLS (AFMx) BEFORE THE HONORABLE JOSEPHINE L. STATON [Proposed] ORDER DISMISSING AMENDED COMPLAINT Federal Rule of Civil Procedure 12(b)(6) Date: Time: Courtroom: March 10, 2017 2:30 p.m. 10A Case 8:16-cv-01795-JLS-AFM Document 23-1 Filed 01/11/17 Page 1 of 2 Page ID #:147 - 2 - [Proposed] ORDER DISMISSING AMENDED COMPLAINT 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 Harper & Burns LLP attorneys at law March 10, 2017. Colin Burns, Esq. of Harper & Burns LLP appeared for Defendant City of Fountain Valley. Jarod Bona, Esq. of Bona Law PC appeared for Plaintiff. Having read the motion, memoranda, other papers submitted on the motion, and having heard argument of counsel, and good cause appearing therefore, IT IS ORDERED that Defendant’s motion is granted. The amended complaint is hereby dismissed with prejudice. Date: ___________________ _____________________________________ Honorable Josephine L. Staton United States District Judge Case 8:16-cv-01795-JLS-AFM Document 23-1 Filed 01/11/17 Page 2 of 2 Page ID #:148