Americare Medservices Inc v. City of Fountain Valley et al

NOTICE OF MOTION AND MOTION to Dismiss Case

C.D. Cal.January 13, 2017

NOTICE OF MOTION AND MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) 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 Faisal M Zubairi (SBN 244233) zubairi.faisal@dorsey.com Bryan M. McGarry (SBN 258156) mcgarry.bryan@dorsey.com DORSEY & WHITNEY LLP 600 Anton Boulevard, Suite 2000 Costa Mesa, CA 92626-7655 Telephone: (714) 800-1400 Facsimile: (714) 800-1499 Attorneys for Defendant CARE AMBULANCE SERVICE, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA AmeriCare MedServices, Inc., Plaintiff, vs. City of Fountain Valley and CARE Ambulance Service, Inc., Defendants. CASE NO: 8:16-cv-01795-JLS-AFM District Judge Magistrate Judge Josephine L. Staton Alexander F. MacKinnon Ctrm 10A/10th Fl Ctrm H/9th FL DEFENDANT CARE AMBULANCE SERVICE, INC.’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF AMERICARE MEDSERVICES, INC.’S FIRST AMENDED COMPLAINT [Filed Concurrently Herewith Memorandum of Points and Authorities in Support; and [Proposed] Order] HEARING Date: Friday, April 7, 2017 Time: 2:30 P.M. Ctrm: 10A/10th Fl. Complaint Filed: September 27, 2016 Am. Complaint Filed: December 1, 2016 Trial Date: None Set Case 8:16-cv-01795-JLS-AFM Document 26 Filed 01/13/17 Page 1 of 4 Page ID #:151 1 NOTICE OF MOTION AND MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) CASE NO. 8:16-CV-01795-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 TO THE COURT, ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD: Please take notice that on Friday, April 7, 2017, at 2:30 pm in Courtroom 10A, Tenth Floor of the above-captioned court, located at Ronald Reagan Federal Building and United States Courthouse, 411 West Fourth Street, Santa Ana, California 92701, or as soon thereafter as this matter may be heard, Defendant Care Ambulance Service, Inc. (“Care”) will, and hereby does, move this Court, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), for an Order dismissing all of the claims and causes of action contained in the First Amended Complaint filed in this action by Plaintiff AmeriCare MedServices, Inc. (“Plaintiff” or “AmeriCare”) with prejudice and without leave to amend, or; alternatively, pursuant to Federal Rule of Civil Procedure 12(f), for an Order striking Plaintiff’s claim for damages, interest on damages, costs or attorney fees and to abstain from adjudicating any remaining claims, based on the following grounds: 1. Pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted, because Care is entitled to immunity under the State Action Immunity Doctrine (Parker Immunity Doctrine), where, as here, Care’s alleged conduct was undertaken pursuant to an agreement with a municipality in light of a “clearly articulated and affirmatively expressed” State policy to displace competition, and none of the alleged exceptions to the doctrine exist or apply. 2. Pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted, because Care is entitled to immunity under the Noerr-Pennington Doctrine for allegedly entering into an exclusive service contract with a municipality, which is activity protected by the First Amendment, and none of the alleged exceptions to this doctrine exist or apply. Case 8:16-cv-01795-JLS-AFM Document 26 Filed 01/13/17 Page 2 of 4 Page ID #:152 2 NOTICE OF MOTION AND MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) CASE NO. 8:16-CV-01795-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 3. Pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction, because Plaintiff alleges purely local conduct and fails to allege the purely local conduct has a substantial effect on interstate commerce in order to sustain a claim under Sections 1 or 2 of the Sherman Act. 4. Pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted, or, alternatively, pursuant to Rule 12(f) to strike Plaintiff’s claims for damages, interest on damages, costs or attorney fees, because Plaintiff’s claims are barred by the Local Government Antitrust Act (“LGAA”) (15 U.S.C. §§ 34-36), which precludes an award of “damages, interest on damages, costs, or attorney’s fees” in actions under the antitrust laws “against a [private] person based on any official action directed by a local government, or official or employee thereof acting in an official capacity.” 5. Pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief may be granted with respect to Plaintiff’s First, Second, Third and Fourth causes of action under Sections 1 and 2 of the Sherman Act, because Plaintiff fails to plead facts sufficient to sustain such claims, including by failing to plead: (1) the existence of a relevant market, (2) that Care exercises “market power,” and/or (3) that AmeriCare suffered a cognizable injury as contemplated by the Sherman Act. 6. Alternatively, and to the extent that any claims survive the foregoing legal challenges, Care respectfully requests the Court to abstain from adjudicating the remaining claims pursuant to the Burford Abstention Doctrine, because their adjudication would require the interpretation of a complex state statutory scheme that impacts public policy. This Motion is made following the conference of counsel, pursuant to Central District of California Local Rule 7-3, which took place on December 12, 2016. /// Case 8:16-cv-01795-JLS-AFM Document 26 Filed 01/13/17 Page 3 of 4 Page ID #:153 3 NOTICE OF MOTION AND MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) CASE NO. 8:16-CV-01795-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 This Motion is based on this Notice of Motion and Motion, the contemporaneously filed Memorandum of Points and Authorities, all other papers and pleadings on file in this action, and on such additional papers and arguments as may be presented at or before the hearing of this Motion. DATED: January 13, 2017 DORSEY & WHITNEY LLP By /s/ Faisal M. Zubairi Faisal M. Zubairi Bryan M. McGarry Attorneys for Defendant Care Ambulance Service, Inc. Case 8:16-cv-01795-JLS-AFM Document 26 Filed 01/13/17 Page 4 of 4 Page ID #:154 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS 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 Faisal M. Zubairi (SBN 244233) zubairi.faisal@dorsey.com Bryan M. McGarry (SBN 258156) mcgarry.bryan@dorsey.com DORSEY & WHITNEY LLP 600 Anton Boulevard, Suite 2000 Costa Mesa, CA 92626-7655 Telephone: (714) 800-1400 Facsimile: (714) 800-1499 Attorneys for Defendant CARE AMUBLANCE SERVICE, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA AmeriCare MedServices, Inc., Plaintiff, vs. City of Fountain Valley and CARE Ambulance Service, Inc., Defendants. CASE NO: 8:16-cv-01795-JLS-AFM District Judge Magistrate Judge Josephine L. Staton Alexander F. MacKinnon Ctrm 10A/10th Fl Ctrm H/9th FL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT CARE AMBULANCE SERVICE, INC.’S MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT [Filed Concurrently Herewith Notice of Motion and Motion; and [Proposed] Order] HEARING Date: Friday, April 7, 2017 Time: 2:30 P.M. Ctrm: 10A / 10th Floor Action Filed: September 27, 2016 Am. Comp. Filed: December 1, 2016 Trial Date: None Set Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 1 of 45 Page ID #:155 i MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 TABLE OF CONTENTS I. INTRODUCTION ........................................................................................... 1 II. RELEVANT FACTUAL ALLEGATIONS AND REGULATORY FRAMEWORK ............................................................................................... 3 A. Relevant Factual Allegations ................................................................ 3 B. AmeriCare’s Allegations Misconstrue the EMS Act ............................ 6 C. AmeriCare’s Unsustainable Claims .................................................... 10 III. ARGUMENT ................................................................................................. 10 A. The State Action Doctrine Bars AmeriCare’s Claims ........................ 11 B. The Noerr-Pennington Doctrine Bars AmeriCare’s Claims Against Care ..................................................................................................... 15 C. No Exception to the Immunity Doctrines Applies Here ..................... 18 1. AmeriCare’s Arguments that the Cities Violated California EMS Law Lack Merit and, in Any Event, These Arguments Do Not Apply ............................................................................ 18 a. The City was Not Required to Directly Provide EMS Services in Order to Preserve its Section .201 Rights .... 18 b. Cal. Health & Safety Code § 1797.224 Does Not Supersede or Displace the Cities’ Section .201 Rights .. 19 c. The Cities and Care Are Entitled to Immunity Even If the Cities Misinterpreted or Misapplied the EMS Act ... 20 2. There Is No “Conspiracy” Exception to the Immunity Doctrines ................................................................................... 22 3. There Is No “Market Participant” Exception to the Immunity Doctrines .................................................................. 23 4. If a City Is a Market Participant, It Has No Duty to Hire AmeriCare ................................................................................. 26 D. This Court Lacks Jurisdiction Because there is no Interstate Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 2 of 45 Page ID #:156 ii MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Commerce ........................................................................................... 27 E. The Local Government Antitrust Act (LGAA) Bars AmeriCare’s Claims for Damages, Interest, Costs and Attorney Fees .................... 28 F. AmeriCare Fails to State a Claim Upon which Relief may Be Granted ................................................................................................ 29 1. AmeriCare Fails to Adequately Plead a “Relevant Geographic Market” ................................................................. 30 2. AmeriCare Fails to Alleges Facts Establishing Care has “Market Power” ........................................................................ 32 3. AmeriCare Fails to Plead Antitrust Injury ................................ 33 G. This Court Should Alternatively Abstain from Deciding this Case ... 35 IV. CONCLUSION ............................................................................................. 37 Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 3 of 45 Page ID #:157 iii MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 TABLE OF AUTHORITIES Page(s) Cases In re Airport Car Rental Antitrust Litigation, 521 F. Supp. 568 (N.D. Cal. 1981) ........................................................................ 24, 36 Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988) ............................................................................................... 15, 22 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 2, 24, 30 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) ......................................................................................... 26, 27, 34 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................................... 2, 23, 30 Big Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096 (9th Cir. 1999) ............................................................................... 31, 32 Boone v. Redevelopment Agency of San Jose, 841 F.2d 886 (9th Cir. 1988) ........................................................................................ 22 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) ............................................................................................... 33, 34 California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508 (1972) ...................................................................................................... 15 California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) ........................................................................................................ 12 Campbell v. Chicago, 823 F.2d 1182 (7th Cir.1987) ....................................................................................... 17 Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, 810 F.2d 869 (9th Cir. 1987) ........................................................................................ 12 Chicago, B & Q. Ry. V. Illinois, 200 U.S. 561 (1906) ........................................................................................................ 6 Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 4 of 45 Page ID #:158 iv MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Cine 42nd Street Theater Corp. v. Nederlander Organization, 790 F.2d 1032 (2d Cir. 1986) ....................................................................................... 13 City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365 (1991) ................................................................................... 11, 21, 22, 23 Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) ...................................................................................................... 36 County of San Bernardino v. City of San Bernardino, 15 Cal. 4th 909 (1997) ..................................................................................... 14, 19, 20 Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 127 (1961) ............................................................................................... 15, 23 Eastman v. Quest Diagnostics Inc., 108 F. Supp. 3d 827 (N.D. Cal. 2015) ................................................................... 33, 35 Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133 (9th Cir. Cal. 2003) ............................................................................... 27 FTC v. Phoebe Putney Health, 568 U.S. ---, 133 S.Ct. 1003 (2013) ...................................................................... 23, 24 GF Gaming Corp. v. City of Black Hawk, 405 F.3d 876 (10th Cir. 2005) ............................................................................... 28, 29 Gold Cross Ambulance and Transfer v. City of Kansas City, 705 F.2d 1005 (8th Cir. 1983) ............................................................................... 14, 15 Greenwood Utils. Com v. Miss. Power Co., 751 F.2d 1484(5th Cir. 1985) ....................................................................................... 17 Intellectual Ventures I LLC v. Capital One Fin. Corp., Case No. 1:13-cv-00740 (AJT/TRJ), 2013 U.S. Dist. LEXIS 177836 (E.D. Va. Dec. 18, 2013) ....................................................................................... 33, 35 McGlinchy v. Shell Chemical Co., 845 F.2d 802 (9th Cir. Cal. 1988) ................................................................................. 33 McGuire v. Ameritech Servs., Inc., 253 F.Supp.2d 988 (S.D. Ohio 2003) ........................................................................... 25 McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232 (1980) ............................................................................................... 27, 28 Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 5 of 45 Page ID #:159 v MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Mercy-Peninsula Ambulance, Inc. v. San Mateo Cnty., 791 F.2d 755 (9th Cir. 1986) ........................................................................................ 32 Metro Cable Co. v. CATV of Rockford, Inc., 516 F.2d 220 (7th Cir. 1975) ........................................................................................ 22 New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350 (1989) ...................................................................................................... 36 NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998) ............................................................................................... 34, 35 Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370 (7th Cir. 1986) ........................................................................................ 34 Omega Homes, Inc. v. City of Buffalo, 4 F. Supp. 2d 187 (W.D.N.Y. 1998) ...................................................................... 17, 18 Parker v. Brown, 317 U.S. 341 (1943) ................................................................................. 1, 3, 11, 12, 21 Prime Healthcare Servs. v. Harris, Case No. 3:16-cv-00778-GPC-RBB, 2016 U.S. Dist. LEXIS 150719 (S.D. Cal. Oct. 31, 2016) .............................................................................................. 23 Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ........................................................................................ 33 Saint Alphonsus Medical Center-Nampa Inc. v. St. Luke's Health System, Ltd., 778 F.3d 775 (9th Cir. 2015) ................................................................................. 30, 31 Sandcrest Outpatient Svcs., P.A. v. Cumberland County Hosp. Sys., Inc., 853 F.2d 1139 (4th Cir. 1988) ...................................................................................... 29 Sanders v. Brown, 504 F.3d 903 (9th Cir.2007) .................................................................................. 16, 24 Sessions Tank Liners, Inc. v. Joor Mfg., Inc., 17 F.3d 295 (9th Cir. 1994) .......................................................................................... 16 Spanish Broad. Sys. Of Fla., Inc. v. Clear Channel Commc’ns, Inc., 376 F.3d 1065 (11th Cir. 2004) .................................................................................... 32 Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 6 of 45 Page ID #:160 vi MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969) ........................................................................................ 16 Tanaka v. University of Southern California, 252 F.3d 1059 (9th Cir. 2001) ............................................................................... 30, 31 Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) ........................................................................................................ 11 Toyo Tire & Rubber Co., Ltd. v. CIA Wheel Group, et al., Case No. 15-cv-246-JLS (DFMx), 2015 U.S. Dist. LEXIS 98939 (C.D. Cal. July 8, 2015) .......................................................................................................... 15 United Mine Workers v. Pennington, 381 U.S. 657 (1965) ...................................................................................................... 15 United States v. Morros, 268 F.3d 695 (9th Cir. 2001) ........................................................................................ 36 United States v. ORS, Inc., 997 F.2d 628 (9th Cir.1993) ......................................................................................... 27 Valley Medical Transport, Inc. v. Apple Valley Fire Protection Dist., 17 Cal. 4th 747 (1998) .................................................................................................. 14 Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ............................................................................................... 27, 34 VIBO Corp. v. Conway, 669 F.3d 675 (6th Cir. 2012) ................................................................................. 24, 25 Video International Production, Inc. v. Warner-Amex Cable Communications, Inc., 858 F.2d 1075 (5th Cir. Tex. 1988) ....................................................................... 16, 17 Western Waste Service Systems v. Universal Waste Control, 616 F.2d 1094 (9th Cir. 1980) ...................................................................................... 16 Wooster Indus. Park, LLC v. City of Wooster, 55 F.Supp.3d 990 (N.D. Ohio 2014) ..................................................................... 24, 25 Zimomra v. Alamo Rent-A-Car, Inc., 111 F.3d 1495 (10th Cir. 1997) ............................................................................. 12, 13 Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 7 of 45 Page ID #:161 vii MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Statutes 15 U.S.C. § 1 ............................................................................................................... 10, 27 15 U.S.C. § 2 ......................................................................................................... 10, 27, 33 15 U.S.C. § 12 .................................................................................................................... 28 15 U.S.C. § 26 .................................................................................................................... 10 15 U.S.C. § 34 .................................................................................................................... 28 15 U.S.C. § 34(1)(A) ......................................................................................................... 28 15 U.S.C. § 36 ............................................................................................................. 28, 29 28 U.S.C. § 2201 ................................................................................................................ 10 Cal. Civ. Proc. Code § 1060 .............................................................................................. 10 Cal. Health & Saf. Code §§ 1797 through 1799.207 ........................................................... 6 Cal. Health & Saf. Code § 1797.6 .............................................................................. 21, 25 Cal. Health & Saf. Code § 1797.85 ................................................................................... 22 Cal. Health & Saf. Code § 1797.94 ..................................................................................... 9 Cal. Health & Saf. Code § 1797.200 ...............................................................................6, 9 Cal. Health & Saf. Code § 1797.201 ............ 2, 6, 7, 8, 9, 13, 14, 15, 18, 19, 20, 26, 30, 37 Cal. Health & Saf. Code § 1797.224 ........................................................ 2, 8, 9, 20, 22, 26 California Government Code § 38794 .................................................. 6, 10, 13, 14, 15, 30 P. AREEDA & H. HOVENKAMP, 1A ANTITRUST LAW ¶ 223d (4th ed. 2013) ...................... 28 Other Authorities Cal. Const. Art. XI, § 7 ........................................................................................................ 6 Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 8 of 45 Page ID #:162 1 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 I. INTRODUCTION Plaintiff AmeriCare MedServices, Inc. (“AmeriCare”) filed lawsuits against twelve Orange County cities for whom it does not provide emergency medical services (“EMS”), and included Care Ambulance Service, Inc. (“Care”) as a defendant in eight such lawsuits because the cities in those cases (collectively the “Cities”) selected Care as their designated 911 EMS provider. Ignoring volumes of controlling case law, AmeriCare claims that each contract between a City and Care violates the Sherman Act. In doing so, AmeriCare selectively recites and misapplies the applicable statutory scheme in an effort to undermine longstanding legislation that is designed to balance competition with the need for safe, reliable and efficient delivery of EMS. AmeriCare would have this Court unwind the carefully planned policies that were designed to avoid the dangers and inefficiencies that arise from having two ambulances rush to the same scene in response to a 911 call, or the possibility of having no ambulance show up at all. AmeriCare’s allegations fail for several reasons, including because the Cities and Care are immune from such claims under the State Action Doctrine, and the claims against Care are also barred by the Noerr-Pennington Doctrine. First, the Cities and Care are immune from federal antitrust liability under the State Action Doctrine, which is also known as the Parker Immunity Doctrine, because California has enacted laws that permit cities to contract for EMS “as convenience requires,” and exclusive EMS contracts are a foreseeable result of these laws. Second, Care is also immune from federal antitrust liability under the Noerr- Pennington Doctrine, because the State of California contemplated that EMS vendors (like Care) would solicit and enter into contracts with cities, and that conduct is protected under the First Amendment right to petition government agencies. Numerous federal cases have applied these doctrines to reject the type of claims asserted by AmeriCare here. AmeriCare acknowledges that “[a]ny local public agency that fulfills its duties under [California EMS law] is immune from the reach of federal antitrust law under the Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 9 of 45 Page ID #:163 2 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 doctrine of state-action immunity.” Amended Complaints (“AC”) at p. 1 (Nature of the Action). AmeriCare nevertheless tries to plead artfully around the dispositive immunity doctrines in various ways. First, AmeriCare alleges that Defendants have not acted in accordance with California EMS law, including Cal. Health & Safety Code §§ 1797.201 and 1797.224, and therefore cannot claim immunity. This argument lacks merit because immunity attaches once the state legislature expresses an intent to immunize the conduct of the Cities regardless of whether the Cities strictly comply with the regulatory scheme. More importantly, AmeriCare pleads facts establishing that the Cities have in fact complied with the relevant regulatory framework, which AmeriCare mischaracterizes and only selectively presents in an effort to manufacture a claim. Even assuming that any of the Cities did not strictly comply with these statutes, the failure to do so does not give rise to a Federal antitrust claim, and Care is in any event entitled to immunity under the Noerr- Pennington Doctrine because Care was entitled to petition for the subject agreements under the First Amendment. Second, AmeriCare alleges, in a conclusory way, that Care offered “kickbacks” to the Cities. This allegation apparently seeks to invoke a purported “conspiracy” exception to the immunity doctrines, but it fails because: (a) there is no such “conspiracy” exception; and (b) even if such a “conspiracy exception” existed, the Court must disregard AmeriCare’s conclusory “kickback” allegation in its Rule 12 analysis under Twombly and Iqbal. Third, AmeriCare alleges that the Cities are “market participants” because they offer “ancillary” emergency medical response services and Care offers both response and transport services. AC at p. 2 (Nature of Action). These allegations apparently seek to invoke a purported “market participant” exception to the immunity doctrines. This argument also fails because: (a) there is no “market participant” exception to the applicable immunity doctrines; and (b) even if there were such an exception, neither the Cities nor Care acted as “market participants” in respect to the exclusive contract. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 10 of 45 Page ID #:164 3 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 In sum, this lawsuit is driven by AmeriCare’s disappointment that these various Cities selected other providers, in some instances Care, as their EMS vendor instead of itself. But the Cities are empowered by California law to select their own EMS vendors, and Care is authorized by the First Amendment to petition government agencies for and to enter into such contracts. The Cities and Care are thus immune from antitrust liability. AmeriCare’s claims also fail for several other reasons. First, the Court does not have jurisdiction because the alleged activity is purely local, and does not have a substantial impact on interstate commerce. Second, the Local Government Antitrust Act (“LGAA”) precludes any claim against the Cities and Care for damages, interest on damages, costs or attorney fees. Third, even assuming arguendo the claims were not barred based on the foregoing threshold legal doctrines, including by the Parker Immunity and Noerr-Pennington doctrines, for lack of subject matter jurisdiction, or under the LGAA, and they are, the claims nevertheless fail because AmeriCare fails to allege facts sufficient to sustain the elements of its Sherman Act claims, including the existence of relevant market, that Care possesses market power, or any cognizable antitrust injury. Lastly in the event that the Court does not dispose of AmeriCare’s claims based on the foregoing, it would be appropriate to abstain from deciding any remaining equitable claims because their adjudication would require the interpretation of a complex state statutory scheme that impacts public policy. AmeriCare’s claims against Care should accordingly be dismissed with prejudice because AmeriCare cannot possibly amend its complaint to state viable claims. II. RELEVANT FACTUAL ALLEGATIONS AND REGULATORY FRAMEWORK A. Relevant Factual Allegations AmeriCare’s eight amended complaints against the Cities and Care allege the following pertinent facts. As of June 1, 1980, six Cities (Anaheim, Costa Mesa, Fountain Valley, Fullerton, Garden Grove and La Habra) had de facto, unwritten Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 11 of 45 Page ID #:165 4 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 “agreements” with various ambulance services providers to provide emergency ambulance service within their respective city limits: AAC ¶ 25; CMAC ¶ 26; FVAC ¶ 26; FAC ¶ 26; GGAC ¶ 26; LHAC ¶ 25.1 As of June 1, 1980, two Cities (Buena Park and San Clemente) did not have written agreements in place with their designated private emergency ambulance service providers. BPAC ¶ 26; SCAC ¶ 26.2 AmeriCare alleges that each of the eight Cities continued to provide emergency ambulance services, either through their “de facto, unwritten agreements” with providers or through their “designated emergency service providers” until each of the Cities entered into contracts with Care. AmeriCare contends each of the Cities granted Care an exclusive contract at various times between 1998 and 2015, and that each City has continued to extend or renew the exclusive contract to the present. AAC ¶ 28; BPAC ¶ 27; CMAC ¶ 29; FVAC ¶ 27; FAC ¶ 27; GGAC ¶ 28; LHAC ¶ 27; SCAC ¶ 28. AmeriCare contends that these exclusive contracts conferred a monopoly on Care for EMS within each City’s borders. AC p. 3 (Nature of Action). AmeriCare’s Amended Complaints, therefore, allege that each City provided for emergency ambulance services from 1980 to until it entered into an exclusive agreement with Care, and that the exclusive agreements have continued to the present. Id. AmeriCare also contends that in addition to contracting with Care, each of the Cities itself participates in the market for prehospital EMS. AC p. 2 (Nature of Action). AmeriCare alleges one of the following three different factual scenarios in each Amended Complaint to support its claim that each of the Cities is a “market participant”: 1 Anaheim Amended Complaint (“AAC”); Buena Park Amended Complaint (“BPAC”); Costa Mesa Amended Complaint (“CMAC”); Fountain Valley Amended Complaint (“FVAC”); Fullerton Amended Complaint (“FAC”); Garden Grove Amended Complaint (“GGAC”); La Habra Amended Complaint (“LHAC”); and San Clemente Amended Complaint (“SCAC”). 2 Anaheim, Costa Mesa, Fountain Valley, Fullerton, Garden Grove, La Habra, Buena Park and San Clemente may hereinafter collectively be referred to as the Cities or individually as a City. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 12 of 45 Page ID #:166 5 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Scenario 1: As to two Cities (Anaheim and Fullerton), AmeriCare alleges that the City provides emergency response, Care provides transport and response, and that patients are billed for both. AAC ¶ 31-33; FAC ¶ 30-32. The City is allegedly a “market participant” because the provision of overlapping “response” services results in double-billing and “monopoly rents” of $300,000 (Anaheim) or $140,000 (Fullerton) per year for the City. Id. Scenario 2: As to four Cities (Buena Park, Fountain Valley, Garden Grove and San Clemente), AmeriCare alleges that the City provides emergency response, Care provides transport and response, Care serves as billing and collections agent for the City, takes a fee for this service and remits the balance of collections to City, which results in significant revenue for the City, thus making the city a “market participant.” BPAC ¶ 27; FVAC ¶ 27; GGAC ¶ 28; SCAC ¶ 28. For Buena Park and San Clemente, Care separately bills for its response and transport services. BPAC ¶ 27; SCAC ¶ 28. Scenario 3: As to the two remaining Cities (Costa Mesa and La Habra), AmeriCare alleges that Care alone provides emergency response and transport, Care serves as billing and collections agent for the City, Care takes a fee for this service; beyond that, the City pays Care for its labor, and keeps the rest. AmeriCare contends that because this consistently generates significant net revenue for the City, the City is a “market participant.” CMAC ¶ 29; LHAC ¶ 27. Care is also alleged to provide “kickbacks” to members of each City’s government in the form of campaign contributions with the understanding that the contributions help secure Care’s continued role. AAC ¶ 35; BPAC ¶ 34; CMAC ¶ 34; FVAC ¶ 33; FAC ¶ 34; GGAC ¶ 34; LHAC ¶ 33; SCAC ¶ 35. AmeriCare alleges that when any of the eight Cities receives a 911 service call, it dispatches either its own paramedics or those of Care, and dispatches the Care ambulance for transportation, rather than referring that business to someone else, such as itself. AAC ¶¶ 31, 36, 49; BPAC ¶¶ 31-35, 48; CMAC ¶¶ 31, 35, 48; FVAC ¶¶ 31, 34, 47; FAC ¶¶ 30, 35, 48; GGAC ¶¶ 32, 35, 48; LHAC ¶¶ 31, 34, 47; SCAC ¶¶ 32, 36, 49. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 13 of 45 Page ID #:167 6 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 AmeriCare allegedly asked each of the Cities to include AmeriCare as part of the EMS “rotation” on March 19, 2015, but that the Cities either did not respond or denied the request. ACs Exs. B-C; AAC ¶¶ 39-40; BPAC ¶¶ 38-39; CMAC ¶¶ 38-39; FVAC ¶¶ 37- 38; FAC ¶¶ 38-39; GGAC ¶¶ 38-39; LHAC ¶ 37-38; SCAC ¶ 39-40. AmeriCare alleges that, to the extent a City provided a reason for its denial, the City claimed it retained the right under Cal. Health & Saf. Code § 1797.201 to determine its EMS providers and is “not required to open up [their] jurisdiction[s], on a rotation or any other basis, to additional providers.” Id. B. AmeriCare’s Allegations Misconstrue the EMS Act The California Constitution grants cities police power, which includes provision for the health, safety and welfare of their inhabitants. See Cal. Const. Art. XI, § 7; Chicago, B & Q. Ry. V. Illinois, 200 U.S. 561, 592 (1906). In addition to this general historic grant of authority, California expressly granted municipalities the right to provide ambulance services to their residents. Effective in 1971, California Government Code section 38794 permits “[t]he legislative body of a city [to] contract for ambulance service to serve the residents of the city as convenience requires.” In addition, as of 1981, California enacted the Emergency Medical Services Act (the “EMS Act”), at California Health & Safety Code sections 1797 through 1799.207, which provides state-wide coordination of EMS through a three-tiered state, county and city structure. At the first tier (state level), the Emergency Medical Services Authority (“Authority”) performs a number of different functions relating to the coordination of EMS throughout the state, including establishing state-wide minimum standards. At the second tier (county level), each county has the option to develop an “emergency medical services program” for that county, and designate a “local EMS agency,” to be established and operated by the county, to administer the local emergency medical services. Cal. Health & Saf. Code § 1797.200, et seq. And consistent with California’s long history of municipally organized EMS, the third tier of the EMS Act allows certain cities to continue to provide EMS services to their residents, rather than cede control of such Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 14 of 45 Page ID #:168 7 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 services to the “local EMS agency” designated by the county. California Health and Safety code sections 1797.201 and 1797.224 are the primary provisions that carve out a role for cities. AmeriCare alleges that § 1797.201 says that a city “that had contracted or provided for its own prehospital EMS as of June 1, 1980 could choose whether to continue administering its own prehospital EMS or to enter into an agreement with the local EMS agency.” ACs ¶ 19. AmeriCare alleges that the City “never had those rights because it was not contracting for or providing its own prehospital EMS services as of June 1, 1980.” ACs p. 4 (Nature of the Action) (emphasis added). But, as noted above, AmeriCare admits that as of June 1, 1980, each City either had a de facto, unwritten agreement with an ambulance service provider, or otherwise had “designated private ambulance services provider[s],” despite not having an agreement. AAC ¶ 25; BPAC ¶ 26; CMAC ¶ 26; FVAC ¶ 26; FAC ¶ 26; GGAC ¶ 26; LHAC ¶ 25; SCAC ¶ 26. AmeriCare appears to believe that the Cities’ agreements with or designation of these ambulance providers does not satisfy the requirements of § 1797.201 because the services provided by the contracted for or designated providers were not the City’s “own” services. However, § 1797.201 does require that the EMS provided by a city as of June 1, 1980 be the city’s “own” services. Section 1797.201 actually provides that: 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, except the level of prehospital EMS may be reduced where the city council, or the governing body of a fire district, pursuant to a public hearing, determines that the reduction is necessary. Notwithstanding any provision of this section the provisions of Chapter 5 (commencing with Section 1798) shall apply. Cal. Health & Saf. Code § 1797.201 (emphasis added). Section 1797.201 therefore Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 15 of 45 Page ID #:169 8 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 actually applies to any city that “contracted for or provided . . . prehospital emergency medical services” as of June 1, 1980, and until such time as an alternative agreement is reached with the relevant county, “the administration of prehospital EMS by cities . . . shall be retained by those cities . . . .” Id. Significantly, AmeriCare does not allege that any of the Cities ever entered into a “written agreement” with Orange County that extinguished the Cities’ respective rights to maintain EMS at levels existing as of June 1, 1980.3 AmeriCare also alleges that “regardless of whether the City retained .201 rights, it may only operate as an exclusive operating area” under Cal. Health & Safety Code § 1797.224 if either “(a) ‘a competitive process is utilized to select the provider or providers’ or (b) OCEMS [i.e., the Orange County Emergency Medical Services Agency] ‘develops or implements a local plan that continues the use of existing providers operating within the area in the manner and scope in which the services have been provided without interruption since January 1, 1981.’” AC at p. 4 (Nature of the Action). AmeriCare further alleges that each Cities’ decision to switch its exclusive EMS business to Care violated § 1797.224 because the Cities did not “utilize[] a competitive process and [did] not carr[y] on with an existing service provider without interruption since before January 1, 1981.”4 Id. Section 1797.224 does not apply to any City which, like each of the Cities here, retained its § .201 rights. Section 1797.224 actually provides as follows: A local EMS agency may create one or more exclusive operating 3 AmeriCare acknowledges that it asked the local EMS agency for Orange County – the Orange County Emergency Medical Services Agency (“OCEMS”) – whether the Cities retained their § .201 rights. AAC ¶¶ 37-38; BPAC ¶¶ 36-37; CMAC ¶¶ 36-37; FVAC ¶¶ 35-36; FAC ¶¶ 36-37; GGAC ¶¶ 36-37; LHAC ¶¶ 35-36; SCAC ¶¶ 37-38. OCEMS advised that it “does not currently believe the determination of which cities can legitimately claim § .201 rights is one to be made by [it].” Id.; AC Exs. A. Thus, there is no reason to doubt that the Cities’ retained their § .201 rights. 4 AmeriCare’s allegations that the Cities did not employ a competitive bidding process are incorrect. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 16 of 45 Page ID #:170 9 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 areas in the development of a local plan, if a competitive process is utilized to select the provider or providers of the services pursuant to the plan. No competitive process is required if the local EMS agency develops or implements a local plan that continues the use of existing providers operating within a local EMS area in the manner and scope in which the services have been provided without interruption since January 1, 1981. A local EMS agency which elects to create one or more exclusive operating areas in the development of a local plan shall develop and submit for approval to the authority, as part of the local EMS plan, its competitive process for selecting providers and determining the scope of their operations. This plan shall include provisions for a competitive process held at periodic intervals. Nothing in this section supersedes Section 1797.201. Cal. Health & Saf. Code § 1797.224 (emphasis added). Section 1797.224 therefore does not apply to the Cities at all. Rather, it only applies to a “local EMS agency,” which is defined as “the agency, department, or office having primary responsibility for administration of emergency medical services in a county.” Cal. Health & Saf. Code § 1797.94 (emphasis added).5 Even then, Section .224 merely governs the local EMS agency’s creation of an “exclusive operating area,” which is not what the Cities have done. Rather, they have merely exercised their statutorily prescribed authority to enter into contracts with ambulance service providers. More egregiously, AmeriCare ignores the last sentence of § 1797.224, which expressly preserves the effect of § 1797.201. Section 1797.224 therefore does not apply to any of the Cities because AmeriCare does not allege facts from which it can be inferred that any of the Cities gave up its § .201 rights (i.e., that a City entered into a written agreement with Orange County extinguishing its § .201 rights). AmeriCare also ignores the existence of a California law that specifically provides that “[t]he legislative body of a city may contract for ambulance service to serve the residents of the city as 5 A local EMS agency “shall be the county health department, an agency established and operated by the county, an entity with which the county contracts for the purposes of local emergency medical services administration, or a joint powers agency created for the administration of emergency medical services by agreement between counties or cities and counties pursuant to the provisions of Chapter 5 (commencing with Section 6500) of Division 7 of Title 1 of the Government Code.” Cal. Health & Saf. Code § 1797.200. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 17 of 45 Page ID #:171 10 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 convenience requires.” Cal. Gov’t Code § 38794. C. AmeriCare’s Unsustainable Claims Ignoring these relevant statutes, AmeriCare alleges six equally non-viable claims, as follows: (1) monopolization in violation of 15 U.S.C. § 2 (Sherman Act § 2); (2) restraint of trade in violation of 15 U.S.C. § 1 (Sherman Act § 1); (3) conspiracy to monopolize in violation of 15 U.S.C. § 2; (4) conspiracy to restrain trade in violation of 15 U.S.C. § 1; (5) declaration of rights under Cal. Civ. Proc. Code § 1060; and (6) declaratory judgment under 28 U.S.C. § 2201 and 15 U.S.C. § 26. III. ARGUMENT AmeriCare attempts to invoke federal antitrust laws to attack the substance and implementation of California’s carefully crafted EMS regulatory structure. This attack, which seeks to turn AmeriCare’s misinterpretation and selective presentation of the relevant California statutory scheme in to a treble damages claim, fails for several reasons: (1) the Cities and Care are entitled to immunity under the State Action Doctrine because their conduct was authorized by the relevant California statutes; (2) Care is entitled to immunity under the Noerr-Pennington Doctrine because its right to solicit and contract with the Cities as contemplated by the relevant statutory scheme is protected by the First Amendment; (3) the Court lacks subject matter jurisdiction because AmeriCare fails to plead any impact on interstate commerce; (4) the claims are barred by the Local Government Antitrust Act (“LGAA”) because Care’s alleged conduct was undertaken at the direction of local governments; and (5) AmeriCare otherwise fails to adequately plead the elements required to sustain its individual claims, including because it fails to allege the existence of a relevant market, any antitrust injury, or Care’s exercise of the requisite market power. If the Court does not dispose of AmeriCare’s claims based on the foregoing, it would be appropriate to abstain from deciding any remaining claims (particularly the requests for declaratory and other equitable relief) because their adjudication would require the interpretation of a complex state statutory scheme that implements an important public policy. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 18 of 45 Page ID #:172 11 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 A. The State Action Doctrine Bars AmeriCare’s Claims The Sherman Act was adopted to regulate commerce, and not the states’ rights to govern their affairs. In our “dual system of government . . . the states are sovereign” and there are constitutional limits to Congressional authority to subtract from that sovereignty. Parker v. Brown, 317 U.S. 341, 350-51 (1943). As the Supreme Court stated in Parker, there is “nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.” Id. (holding that a marketing program enacted by the California legislature to create price supports for raisins was exempt from challenge under the Sherman Act because the program “derived its authority and its efficacy from the legislative command of the state”). This principle has developed into the State Action Doctrine (also known as the Parker Immunity Doctrine), which provides that actions of the state taken pursuant to a state directive are outside the scope of the Sherman Act and exempt from federal antitrust liability. Id. Immunity under the State Action Doctrine extends to municipalities, where, as here, the challenged conduct was taken pursuant to a “clearly articulated and affirmatively expressed” State policy to displace competition. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 39, 44 (1985) (holding that the defendant municipality was entitled to immunity under the State Action Doctrine because the City of Eau Claire’s anticompetitive conduct in relation to sewage treatment services were a foreseeable outcome of the authority granted by the state). The “clear articulation test” does not require that a state legislature “expressly state in a statute or its legislative history that the legislature intends for the delegated action to have anticompetitive effects.” Hallie, 471 U.S. at 43. Rather, state-action immunity applies if the supposedly anticompetitive effect was the “foreseeable result” of what the State authorized. Id. at 42; see also City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365, 373 (1991) (the “clear- articulation” test was satisfied because the suppression of competition in the billboard market was the foreseeable result of a state statute authorizing municipalities to adopt Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 19 of 45 Page ID #:173 12 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 zoning ordinances regulating construction). Immunity under the State Action Doctrine also extends to private parties, such as Care, where, as here, they are acting pursuant to an agreement with a municipality that is entitled to immunity under the State Action doctrine and the challenged conduct was taken pursuant to a “clearly articulated and affirmatively expressed” State policy to displace competition.6 In Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, 810 F.2d 869, 878 (9th Cir. 1987), the Ninth Circuit concluded that since the relevant state agency in that case, the Department of Transportation, “had Parker immunity to grant SIDA [the private party co-defendant] an exclusive franchise to provide outbound taxi service from the Airport . . . SIDA cannot be held liable for possessing that monopoly.” Id. at 878-79 (“Because the monopoly granted to SIDA was shielded by the Parker doctrine, SIDA cannot be held liable for possessing that monopoly.”). “To hold otherwise, would allow the Parker doctrine to be circumvented by artful pleading: ‘A plaintiff could frustrate any [Parker protected state plan] merely by filing suit against the regulated private parties, rather than the state officials who implement the plan.’” Id. More recently, in Zimomra v. Alamo Rent-A-Car, Inc., 111 F.3d 1495 (10th Cir. 1997), the Tenth Circuit applied a similar analysis. There a plaintiff sued 14 car rental companies for alleged Sherman Act violations based on their imposition of a daily usage fee under a municipal ordinance enacted by the City and County of Denver. Id. at 1498. The court held that the state action immunity doctrine applies to the rental car companies because the relevant government entities (City and County of Denver) were acting pursuant to clearly articulated and affirmatively expressed state policy to displace competition, and to hold that they “could be immune from antitrust damages, while the 6 Although the Supreme Court in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980), articulated a second prong (requiring both a “clearly articulated and affirmatively expressed” State policy and State supervision) that applies to private parties claiming State Action Immunity, as explained by the case law cited hereinabove, only the first prong applies where, as here, the private party is acting pursuant to an agreement with a municipality. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 20 of 45 Page ID #:174 13 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 car rental companies, all of whom were compelled to comply with the ordinance in order to lease space at the DIA [Denver International Airport] . . . . would be illogical and inconsistent with Supreme Court precedent.” Id.; see also Cine 42nd Street Theater Corp. v. Nederlander Organization, 790 F.2d 1032, 1048 (2d Cir. 1986) (holding that private party theater operators acting in concert with the Urban Development Corporation, which acquired and leased theaters for urban redevelopment, enjoyed the same state action immunity from antitrust liability as both the Urban Development Corporation and City of New York). Thus, the applicable standard for determining whether the State Action Doctrine applies to the Cities and Care is whether they acted pursuant to a “clearly articulated and affirmatively expressed” State policy to displace competition. Here, AmeriCare alleges that each of the eight Cities entered into exclusive EMS contracts with Care. These exclusive EMS contracts were a foreseeable result of the relevant California law, which expressly authorizes municipalities to control the provision of EMS within their borders, including by outsourcing it. “The legislative body of a city may contract for ambulance service to serve the residents of the city as convenience requires.” Cal. Gov’t Code § 38794 (emphasis added). In addition, the exclusive EMS contracts are foreseeable results of § 1797.201, which permits a California city to retain its right to continue providing prehospital EMS at the level existing as of January 1, 1980, unless and until it entered into a contrary agreement with a local EMS agency (the County).7 Cal. Health & Saf. Code § 1797.201. AmeriCare acknowledges that each of the Cities believes it retained its § .201 rights. AAC ¶ 28; Ex. C; BPAC ¶ 28; CMAC ¶ 30, Ex. C; FVAC ¶ 28; FAC ¶ 27, Ex. C; GGAC ¶ 30, Ex. C; LHAC ¶ 28, Ex. C; SCAC ¶ 29. AmeriCare does not allege that any 7 Section 1797.201, which was enacted in 1980, did not preempt Cal. Gov’t Code § 38794, which was enacted in 1971, either expressly or by virtue of any conflict between the sections. The municipal rights afforded by Gov’t Code § 38794, which allows cities to contract for ambulance service “as convenience requires,” are perfectly compatible with the retained rights of cities afforded by § 1797.201. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 21 of 45 Page ID #:175 14 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 of the Cities, in fact, extinguished their respective § .201 rights by entering into a written agreement with Orange County.8 AmeriCare also acknowledges that each of the Cities maintained an exclusive provider of EMS continuously from June 1, 1980 through the present (either through contract, designation or both). AAC ¶ 25; BPAC ¶ 26; CMAC ¶ 26; FVAC ¶ 26; FAC ¶ 26; GGAC ¶ 26; LHAC ¶ 25; SCAC ¶ 26.9 Thus, the alleged conduct of both the Cities and Care satisfies the “clear articulation test” of the State Action Doctrine because their exclusive contracts were foreseeable results of both Gov’t Code § 38794 and Cal. Health & Saf. Code § 1797.201. These statutes allow California cities, like the Cities here, to retain their sovereign right to control the provision of EMS within their borders, including by outsourcing the services on an exclusive basis. The California laws applicable here are indistinguishable from laws in other states where courts have found that the State Action Doctrine applies to similar claims. For example, in Gold Cross Ambulance and Transfer v. City of Kansas City, 705 F.2d 1005, 1013 (8th Cir. 1983) the Eighth Circuit concluded that the State Action Doctrine precluded Sherman antitrust claims brought against Kansas City and its exclusive ambulance service provider because a Missouri statute authorizing a city “to contract with one or more” ambulance providers was sufficient evidence, standing alone, to support the district court’s finding that the state intended to displace competition because 8 There is no time limit placed on how long a city may retain its § .201 rights. County of San Bernardino v. City of San Bernardino, 15 Cal. 4th 909, 925 (1997) (“there is no statutory deadline imposed for requesting or reaching such agreement”). 9 Section 1797.201 does not prevent a city from reducing the level of services offered as of June 1, 1980, and California courts have made clear that it does not prevent a city from increasing the level of services offered as of June 1, 1980; instead, it bars cities from offering new services that were not offered as of that date. Valley Medical Transport, Inc. v. Apple Valley Fire Protection Dist., 17 Cal. 4th 747, 757 (1998); San Bernardino, 15 Cal. 4th at 929. In any event, AmeriCare does not allege that the Cities’ contracts with Care offer new types of services that were not offered as of January 1, 1980. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 22 of 45 Page ID #:176 15 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 this authorization “plainly contemplate[d]” the possibility of monopoly ambulance service. Id. at 1013. Here, too, exclusive EMS contracts were a foreseeable result of California’s decision to authorize cities to contract for EMS services “as convenience requires,” see Gov’t Code § 38794, provided such services remain at the level existing as of January 1, 1980, if the City has not otherwise reached an agreement with its local EMS agency, see Cal. Health & Saf. Code § 1797.201. B. The Noerr-Pennington Doctrine Bars AmeriCare’s Claims Against Care The First Amendment guarantees the right of private entities to petition the government. The Noerr-Pennington doctrine protects this right by shielding such petitioning activities from federal antitrust liability. See Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 127 (1961) (immunizing from antitrust liability lobbying efforts by 24 railroads and an association of railroad presidents to obtain legislative and executive action unfavorable to competing trucking firms); United Mine Workers v. Pennington, 381 U.S. 657 (1965) (extending Noerr immunity to efforts to influence agency decision making, stating that “joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition”). The Supreme Court has extended Noerr-Pennington immunity to cover a wide range of activities beyond lobbying, including publicity campaigns and court litigation. See, e.g., Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 510 (1988) (Noerr-Pennington immunity applies to lobbying, publicity campaigns, and other traditional avenues of political expression); California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510-11 (1972) (Noerr-Pennington immunity applies to litigation); see also Toyo Tire & Rubber Co., Ltd. v. CIA Wheel Group, et al., Case No. 15-cv-246-JLS (DFMx), 2015 U.S. Dist. LEXIS 98939 * 9-10 (C.D. Cal. July 8, 2015) (granting motion to dismiss antitrust claims because petitioning court for relief by filing complaint was protected activity under the Noerr-Pennington Doctrine). AmeriCare tries to circumvent the Noerr-Pennington Doctrine by disclaiming any right to relief based on Care’s acts of lobbying or petitioning to obtain exclusive EMS Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 23 of 45 Page ID #:177 16 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 contracts. See AAC ¶ 61; BPAC ¶ 59; CMAC ¶ 59; FVAC ¶ 58; FAC ¶ 59; GGAC ¶ 59; LHAC ¶ 58; SCAC ¶ 60 (AmeriCare “does not complain of any lobbying effort or petition to the city that [Care] might have made or against any other protected ‘political activity’ that it might have undertaken” but only “against [Care]’s unlawful possession of monopoly power in the Market.”). But AmeriCare draws a false distinction between petitioning activity and its results. In fact, both are protected by the Noerr-Pennington Doctrine. The Ninth Circuit has concluded that Noerr-Pennington immunity protects private parties from liability not only for petitioning activity but also for any government action that results “directly” from the petitioning activity. Sanders v. Brown, 504 F.3d 903, 914 (9th Cir.2007) (citing Sessions Tank Liners, Inc. v. Joor Mfg., Inc., 17 F.3d 295, 299 (9th Cir. 1994)). The Ninth Circuit, and numerous other circuits, have accordingly applied Noerr- Pennington immunity to contracts between government entities and private parties. In Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341, 341-342 (9th Cir. 1969), questioned on other grounds in Western Waste Service Systems v. Universal Waste Control, 616 F.2d 1094, 1098 (9th Cir. 1980), plaintiff competed with defendant in the market for sanitation pick-up and disposal services. Defendant obtained an exclusive franchise for these services in an unincorporated territory, and plaintiff sued for violations of Sections 1 and 2 of the Sherman Act. Relying on Noerr-Pennington, the Ninth Circuit affirmed the district court’s grant of summary judgment in favor of defendants stating “[a] plaintiff cannot, by charging a conspiracy, turn what is basically a claim of violation of state law into a federal antitrust case.” Id. at 343; accord Sanders v. Brown, 504 F.3d 903, 914 (9th Cir. 2007) (tobacco companies protected from federal antitrust liability for entering into master settlement agreement with government agencies that resulted in higher tobacco prices for consumers under the Noerr-Pennington doctrine); Video International Production, Inc. v. Warner-Amex Cable Communications, Inc., 858 F.2d 1075, 1083-1084 (5th Cir. Tex. 1988) (franchisee protected from federal antitrust liability under Noerr-Pennington when it contracted with the city for a cable Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 24 of 45 Page ID #:178 17 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 franchise); Campbell v. Chicago, 823 F.2d 1182, 1186 (7th Cir.1987) (defendant taxi companies immune from federal antitrust liability under Noerr-Pennington for market power acquired by virtue of municipal ordinance because any injury to plaintiff stemmed from successful lobbying of the city council); Greenwood Utils. Com v. Miss. Power Co., 751 F.2d 1484, 1498-1499(5th Cir. 1985) (defendant’s exclusive contract with federal energy agency was protected from federal antitrust liability under Noerr-Pennington). AmeriCare’s allegations and claims here are not materially different from the allegations and claims dismissed under Noerr-Pennington in Omega Homes, Inc. v. City of Buffalo, 4 F. Supp. 2d 187 (W.D.N.Y. 1998). In Omega Homes, a developer sued its competitor, a city, and city officials for federal antitrust violations after the defendants entered into an exclusive contract to develop, build, and sell low-income housing units in a neighborhood redevelopment project. Id. at 189. The project was financed by the U.S. Department of Housing and Urban Development (“HUD”), which implemented a program that “expected that the applicant [city] will establish extensive partnerships with the private and nonprofit sector.” Id. The court dismissed the claims against the private developer with prejudice under the Noerr-Pennington Doctrine. Id. at 195. The court held that “[a]ttempts to influence governmental action are immune from antitrust liability under the doctrine even when undertaken for anticompetitive purposes.” Id. at 193 (emphasis added). In Omega Homes, as here, “Plaintiff’s complaint only alleges that the private sector defendants entered into an agreement with the City defendants that, at most, could be considered successful lobbying activity.” Id. at 193-94. “While plaintiff [like AmeriCare in this case] uses the words ‘conspiracy,’ ‘restraint of trade,’ and ‘monopoly’ in its complaints, no facts are presented other than the entering into of an agreement. No bad acts are alleged, and no fraud is alleged.”10 Id. at 194 (“‘[A]ssuming arguendo that the agreement between the City and the Developers restricts competition, 10 The insufficiency of AmeriCare’s conclusory allegations that Care provided unspecified “kickbacks” to City employees (AAC ¶ 35; BPAC ¶ 34; CMAC ¶ 34; FVAC ¶ 33; FAC ¶ 34; GGAC ¶ 34; LHAC ¶ 33; SCAC ¶ 35) is discussed below. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 25 of 45 Page ID #:179 18 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 they are immune from liability under the antitrust laws.’”) (citations omitted). This Court, like in Omega Homes, should therefore dismiss AmeriCare’s claims with prejudice under the immunity doctrines. C. No Exception to the Immunity Doctrines Applies Here AmeriCare attempts to allege various exceptions to the State Action Immunity and Noerr-Pennington Immunity Doctrines. For the reasons set forth below, AmeriCare’s allegations and proposed exceptions fails as a matter of law. 1. AmeriCare’s Arguments that the Cities Violated California EMS Law Lack Merit and, in Any Event, These Arguments Do Not Apply AmeriCare alleges the Cities violated California EMS law in two ways and that neither Care nor the Cities are entitled to immunity under the State Action Doctrine. These arguments lack merit because: (1) AmeriCare misinterprets California EMS law; (2) Care’s conduct was not governed by the laws in question; and (3) immunity attaches even if the municipality failed to strictly comply with the EMS Act. a. The City was Not Required to Directly Provide EMS Services in Order to Preserve its Section .201 Rights AmeriCare alleges that each of the Cities violated § 1797.201 because that provision required a city to offer “its own prehospital EMS as of June 1, 1980” in order to qualify for a retention of those rights. AC ¶ 19 (emphasis added). AmeriCare then alleges, as to each City, that it “never had those rights because it was not contracting for or providing its own prehospital EMS services as of June 1, 1981. AC p. 4 (Nature of the Action) (emphasis added). But AmeriCare admits that each City arranged – either by contract or designation – to provide emergency ambulance services within its respective city limits as of June 1, 1980, and continuously thereafter until the commencement of each City’s relationship with Care. AAC ¶ 25; BPAC ¶ 26; CMAC ¶ 26; FVAC ¶ 26; FAC ¶ 26; GGAC ¶ 26; LHAC ¶ 25; SCAC ¶ 26. AmeriCare’s argument is therefore predicated on the assumption that the Cities’ agreements with (or designations of) various ambulance service companies could not satisfy the requirements Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 26 of 45 Page ID #:180 19 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 of § 1797.201 because such services were somehow not the City’s “own” services. But § 1797.201 does not mandate that the EMS provided by a city as of June 1, 1980 be the city’s “own” services, nor does it preclude a city from changing providers. Instead, it refers only to “prehospital emergency medical services” that a city “contracted for or provided” as of June 1, 1980. Cal. Health & Saf. Code § 1797.201. The Cities’ respective agreements with (or designation of) various ambulance companies obviously meets this standard. In each case, the City “contracted or provided for” the “prehospital emergency medical services” as of June 1, 1980, and section 1797.201 therefore plainly applies to each of the Cities. The only operative question is whether any City extinguished its § .201 rights to maintain such services by entering into a contrary “written agreement” with the county. As noted above, AmeriCare does not allege that any City did, in fact, enter into any such “written agreement,” and thus does not allege that any City’s § .201 rights were extinguished. AmeriCare acknowledges that the California Supreme Court in San Bernardino affirmed that cities may retain their §.201 rights, but AmeriCare quotes language in San Bernardino that “nothing in this reference to section 1797.201 suggests that cities . . . are to be allowed to expand their services, or to create their own exclusive operating areas.” AC ¶ 21 (quoting San Bernardino, 15 Cal. 4th at 932). None of the Cities here, however, are expanding services or creating new exclusive territories. Rather, they are simply maintaining their rights under section § .201 to offer EMS on the same exclusive basis that they were offered as of June 1, 1980. As unequivocally affirmed by the California Supreme Court in San Bernardino, “eligible cities and fire districts may retain administrative control of their emergency medical services until they agree otherwise with the counties in which they are located.” San Bernardino, 15 Cal. 4th at 914. b. Cal. Health & Safety Code § 1797.224 Does Not Supersede or Displace the Cities’ Section .201 Rights Second, AmeriCare alleges that, “regardless of whether [a] City retained .201 rights,” Cal. Health & Safety Code § 1797.224 applies to the Cities. According to Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 27 of 45 Page ID #:181 20 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 AmeriCare, § 1797.224 provides that a City may “only operate as an exclusive operating area” if either “(a) ‘a competitive process is utilized to select the provider or providers’ or (b) OCEMS [i.e., the Orange County Emergency Medical Services Agency] ‘develops or implements a local plan that continues the use of existing providers operating within the area in the manner and scope in which the services have been provided without interruption since January 1, 1981.’” AC at p. 4 (Nature of the Action). AmeriCare further alleges that each City violated § 1797.224 by switching its exclusive EMS business to Care because (according to AmeriCare) none of the Cities engaged in competitive bidding or maintained the same provider as of January 1, 1981. Id. AmeriCare misinterprets § 1797.224 to apply to the Cities, who retained their § .201 rights. However, § 1797.224 expressly states that “[n]othing in this section supersedes Section 1797.201.” Cal. Health & Saf. Code § 1797.224 (emphasis added). AmeriCare does not acknowledge the existence of this sentence or its effect: that § 1797.224 does not apply to the Cities because AmeriCare does not and cannot allege that any of the Cities entered into a written agreement with Orange County extinguishing their respective § .201 rights. To put it another way, the exclusive EMS contracts that a city may offer pursuant to its § .201 rights are not the same thing as “exclusive operating areas” that local EMS agencies administer pursuant to Section 1797.224. AmeriCare therefore fails to allege any facts suggesting the Cities violated the EMS Act. c. The Cities and Care Are Entitled to Immunity Even If the Cities Misinterpreted or Misapplied the EMS Act AmeriCare alleges that the Cities’ exercises of authority under Section .201 were procedurally and substantively defective because the Cities did not maintain their respective Section .201 rights, and, even if they did, Section .224 precludes the Cities from designating exclusive operating areas absent grandfathering or competitive bidding. Based on this tortured interpretation of the EMS Act, AmeriCare contends the Cities and Care are not entitled to state action immunity because their exercise of authority under Section .201 is procedurally and substantively defective. The Supreme Court, however, Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 28 of 45 Page ID #:182 21 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 previously rejected this line of argument in City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365, 370-371 (1990). In Omni, the Court extended Parker immunity to a municipality’s exercise of authority, even if such exercise was procedurally or substantively defective, so long as it was undertaken pursuant to state statutory authority. Id. The Court, quoting P. Areeda & H. Hovenkamp [citation omitted], reasoned that it would be inappropriate, in the antitrust context, to hold that immunity applies only when the municipality’s exercise of authority has been procedurally and substantively correct. This would mean the federal courts would become “the standard reviewer . . . 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.” Id. Interpreting the “authorization” requirement in this strict a fashion would “mak[e] antitrust liability depend on an undiscriminating and mechanical demand for ‘authority’ in the full administrative law sense” and would “transform . . . state administrative review into a federal antitrust job.” Id. The Supreme Court’s Omni decision therefore dooms AmeriCare’s claim that state action immunity does not extend to the Cities’ conduct in acting (incorrectly, according to AmeriCare) under Section .201 or Section .224. The California legislature expressly authorized Cities to continue to administer or contract for pre-hospital EMS, and it legislated its intent to immunize cities from antitrust challenges in doing so. Cal. Health & Saf. Code § 1797.6 (“It is the intent of the Legislature in enacting this section and Sections 1797.85 and 1797.224 to prescribe and exercise the degree of state direction and supervision over emergency medical services as will provide for state action immunity under federal antitrust laws for activities undertaken by local governmental entities. (emphasis added).) Omni therefore guarantees that state action immunity extends to the Cities even assuming arguendo they failed to comply procedurally or substantively with the EMS Act, which they did not. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 29 of 45 Page ID #:183 22 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 2. There Is No “Conspiracy” Exception to the Immunity Doctrines AmeriCare also alleges that “CARE provides kickbacks to members of city government in the form of campaign contributions with the mutual understanding that the contributions secure CARE’s continued role.” AAC ¶ 35; BPAC ¶ 34; CMAC ¶ 34; FAC ¶ 34; FVAC ¶ 33; GGAC ¶ 34; LHAC ¶ 33; SCAC ¶ 35. AmeriCare apparently believes, mistakenly, that there is an exception to the State Action Doctrine when politicians or political entities are alleged to be conspirators with private actors in the awarding of municipal contracts. But, as explained by the Supreme Court, “[t]here is no such conspiracy exception.” Omni Outdoor Advertising, 499 U.S. at 374. The United States Supreme Court has concluded that a “conspiracy” exception does not exist because it would “swallow up” the State Action Doctrine for three reasons: (1) “it is both inevitable and desirable that public officials often agree to do what one or another group of private citizens urges upon them,” id. at 375; (2) “virtually all regulation benefits some segments of society and harms others” but “it is not universally considered contrary to the public good if the net economic loss to the losers exceeds the net economic gain to the winners,” id. at 377; and (3) the determination of the “public interest” requires “value judgment,” and the State Action Doctrine “was not meant to shift that judgment from elected officials to judges and juries.”11 Id. The same rationales apply to the Noerr-Pennington Doctrine, which protects any defendant who “genuinely seeks to achieve his governmental result but does so through improper means.” Allied Tube, 486 U.S. at 508 n.10. Accordingly, the Supreme Court 11 AmeriCare admits the so-called “kickbacks” were actually campaign contributions, and campaign contributions are, in any event, also protected by the Noerr-Pennington Doctrine. Boone v. Redevelopment Agency of San Jose, 841 F.2d 886, 895 (9th Cir. 1988) (“[p]ayments to public officials, in the form of … campaign contributions, is a legal and well-accepted part of our political process”); Metro Cable Co. v. CATV of Rockford, Inc., 516 F.2d 220, 231 (7th Cir. 1975) (“giving or acceptance of campaign contributions as inducements to support the donor’s interests in the legislative process” is “conduct [that] was not intended to be covered by the Sherman Act”). Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 30 of 45 Page ID #:184 23 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 has also held that there is no “conspiracy” exception to Noerr-Pennington immunity.12 Omni Outdoor Advertising, 499 U.S. at 383. AmeriCare’s “conspiracy exception” argument fails for the additional reason that, even if such an exception were to exist (and it does not), AmeriCare has not alleged sufficient facts to establish that it applies here. AmeriCare fails to identify a single improper payment by Care to any City representative. Conclusory allegations like this must be disregarded under federal pleading standards. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-57 (2007); Prime Healthcare Servs. v. Harris, Case No. 3:16-cv- 00778-GPC-RBB, 2016 U.S. Dist. LEXIS 150719 * 28, 33-34 (S.D. Cal. Oct. 31, 2016) (allegations on information and belief of quid pro quo scheme to make $25 million campaign contribution to public official in exchange for preventing plaintiff from acquiring hospital were conclusory and failed under Iqbal). 3. There Is No “Market Participant” Exception to the Immunity Doctrines AmeriCare alleges the Cities are “market participants” because the Cities offer “ancillary” emergency medical response services, and because the Cities generate substantial revenue either through their own services, through charging for Care’s services or both. See ACs at 2 (Nature of the Action); AAC ¶ 31-33; BPAC ¶ 27; CMAC ¶ 29; FVAC ¶ 27; FAC ¶ 30-32.; GGAC ¶ 28; LHAC ¶ 27; SCAC ¶ 28. This argument lacks merit for two reasons. First, the Supreme Court has not adopted a “market participant” exception to the State Action Doctrine. See FTC v. 12 While there is a “sham exception” to the Noerr-Pennington Doctrine for petitioning activities that are “ostensibly directed toward influencing governmental action . . . to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor,” Noerr, 365 U.S. at 144, this exception does not apply. AmeriCare alleges that Care wanted to obtain the EMS contracts, not simply block competitors from getting them. AAC ¶ 35; BPAC ¶ 34; CMAC ¶ 34; FVAC ¶ 33; FAC ¶ 34; GGAC ¶ 34; LHAC ¶ 33; SCAC ¶ 35. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 31 of 45 Page ID #:185 24 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 Phoebe Putney Health, 568 U.S. ---, 133 S.Ct. 1003, 1010 n.4 (2013) (declining an amicus curiae request to recognize a “market participant” exception to the State Action Doctrine). Second, the vast majority of lower courts, including the Fifth and Eighth Circuits, have concluded that no such exception exists. See Wooster Indus. Park, LLC v. City of Wooster, 55 F.Supp.3d 990, 1000-01 (N.D. Ohio 2014) (discussing cases); see also In re Airport Car Rental Antitrust Litigation, 521 F. Supp. 568, 579 (N.D. Cal. 1981) (rejecting the existence of a “generally applicable commercial activity exception to the Noerr-Pennington doctrine.”). To establish the applicability of the Noerr-Pennington Doctrine, a defendant must demonstrate that it engaged in petitioning activity protected by the First Amendment or conduct “directly” arising from such petitioning activity. Sanders v. Brown, 504 F.3d at 914. “Market participation” arising directly from petitioning activity, like the services allegedly offered by Care here, is thus protected by the doctrine. One of the very few courts that has acknowledged a “market participant” exception – the Sixth Circuit – articulated a standard for market participation that the City does not (and cannot) meet based upon AmeriCare’s allegations. See VIBO Corp. v. Conway, 669 F.3d 675 (6th Cir. 2012). In VIBO, the Sixth Circuit concluded that a government entity is a market participant when it acts in a proprietary capacity as a purchaser or seller with regard to the challenged action or its actions constituted direct state participation in the market. Id. at 687. Here, the Cities’ decision to continue outsourcing the provision of EMS through Care did not entail the Cities’ direct participation in the EMS market. Nor did the Cities act “in a proprietary capacity as a purchaser or seller” of EMS services by virtue of hiring Care to act as a “seller” of such services. Although AmeriCare argues some of the Cities offered some overlapping or related ancillary services, AmeriCare does not challenge the Cities’ right to do so. Rather, AmeriCare challenges the alleged “monopoly” created by the Cities’ exclusive contract with Care. AC at pp. 1-5 (Nature Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 32 of 45 Page ID #:186 25 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 of the Action); see also Counts I-III. Consequently the Cities were not “market participants” for the challenged conduct. This conclusion is supported by the decision in Wooster Indus. Park, which applied the VIBO standard and reached the same conclusion based on similar facts. The Wooster Indus. Park court concluded that a city did not act as a market participant under the VIBO standard when it entered into a contract with a private vendor to build and maintain a cell tower for use by city safety services, even though the city earned revenues from the contract, because the contract was otherwise authorized by state law and served the public purpose of promoting collocation of wireless telecommunications facilities. Wooster Indus. Park, 55 F.Supp.3d at 1000. The court held that the city’s decision to outsource public services, even on a “monopolistic” basis, did not amount to market participation. Id. (citing McGuire v. Ameritech Servs., Inc., 253 F.Supp.2d 988, 1006, 1010 (S.D. Ohio 2003)). Here, too, each City’s decision to outsource EMS to Care serves the public purpose of providing EMS within that City’s borders, and the contract was offered pursuant to California law. Even if a City outsourced the public service to a single operator, that did not amount to market participation. Adoption here of a “market participant” exception to the State Action Doctrine would make no sense in another respect. The California law governing provision of EMS expresses an intent to confer State Action immunity on municipalities: (a) It is the policy of the State of California to ensure the provision of effective and efficient emergency medical care . . . . (b) It is the intent of the Legislature in enacting this section and Sections 1797.85 and 1797.224 to prescribe and exercise the degree of state direction and supervision over emergency medical services as will provide for state action immunity under federal antitrust laws for activities undertaken by local governmental entities in carrying out their prescribed functions under this division. Cal. Health & Saf. Code § 1797.6 (emphasis added). The use of the phrase “local government entities,” instead of “local EMS agencies,” reflects an intent to protect all local government entities, including cities, from antitrust liability. In addition, § 1797.6 expressly applies to § 1797.224, which, in turn, expressly saves the effect of Cal. Health Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 33 of 45 Page ID #:187 26 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 & Saf. Code § 1797.201. See Cal. Health & Saf. Code § 1797.224 (“Nothing in this section supersedes Section 1797.201.”). Section 1797.201 preserves cities’ rights, which existed prior to January 1, 1980, to continue to provide EMS at existing levels until the cities reach contrary agreements with their local EMS agencies. Thus, § 1797.6 reflects the State of California’s intent that cities, like the Cities here, be afforded full protection of the State Action Doctrine for EMS-related activities. For the reasons noted, if the Cities are immune from liability for the contract, so too is Care. 4. If a City Is a Market Participant, It Has No Duty to Hire AmeriCare If the Cities are engaging in market activities, they have no antitrust-based duty to do business with AmeriCare. AmeriCare’s theory is that state law requires the Cities to do business with all licensed ambulance service providers by putting them in the “rotation,” regardless of the providers’ relative efficiency, safety and reliability, or whether they have sufficient resources within the particular City. AmeriCare’s claim is that, as a matter of antitrust law, it has a right to force the Cities to deal with AmeriCare (and with any other qualified rival). The U.S. Supreme Court disagrees. A monopolist’s refusal to deal with a rival may be illegal, but only in rare circumstances (for example, when it ends a prior profitable relationship without any procompetitive justification). See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601-02 (1985). More recently the Supreme Court has reaffirmed the principle that even a monopolist has the right to refuse to deal with a rival and distinguished Aspen Skiing as “at or near the outer boundary of §2 liability.” Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004). Here, AmeriCare does not allege that any of the Cities terminated a prior profitable relationship with AmeriCare. Rather, AmeriCare alleges that it has never had any relationships with the Cities; instead, the Cities have had longstanding relationships with other providers (including Care). AmeriCare’s real complaint is that it is not the chosen provider. This is not an antitrust violation. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 34 of 45 Page ID #:188 27 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 D. This Court Lacks Jurisdiction Because there is no Interstate Commerce In addition to being barred based on the immunity doctrines set forth above, AmeriCare’s claims also fail because a Sherman Act violation can only exist when the defendant’s business activities are “‘in restraint of trade or commerce among the several States.’” United States v. ORS, Inc., 997 F.2d 628, 629 (9th Cir.1993) (quoting 15 U.S.C. § 1).13 “This requisite relationship to interstate trade or commerce is not only an element of the alleged antitrust offense, but also a necessary jurisdictional requirement.” Id. (citing McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232, 242 (1980). A federal court will not have jurisdiction under the Act “unless the relevant aspect of interstate commerce is identified; it is not sufficient merely to rely on identification of a relevant local activity and to presume an interrelationship with some unspecified aspect of interstate commerce.” McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 242 (1980). Although the jurisdictional reach of the Sherman Act is broad (see McLain, 444 U.S. at 241), “[m]onopolizing the local lemonade stand doesn’t get you into federal court.” Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133, 1144 (9th Cir. Cal. 2003). A plaintiff may establish jurisdiction under the Act upon a showing that “defendants’ activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce.” Id. at 242; Freeman 322 F.3d at 1143-44. AmeriCare fails to allege any facts suggesting that the Defendants’ provision of EMS within the City’s borders is itself an act of interstate commerce. Rather, it is completely intra-state activity and local in nature. AmeriCare is therefore required to plead “a substantial effect on interstate commerce generated by respondents’ [‘infected’] activity.” Id. (quoting McLain, 444 U.S. at 242–43). But AmeriCare fails to plead any such facts here. AmeriCare fails to identify any respect in which Defendants’ conduct even affects interstate commerce, much less substantially 13 Section 2 of the Sherman Act, addressing monopolization, includes parallel language. 15 U.S.C. § 2. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 35 of 45 Page ID #:189 28 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 affects it. E. The Local Government Antitrust Act (LGAA) Bars AmeriCare’s Claims for Damages, Interest, Costs and Attorney Fees AmeriCare’s claims for monetary relief are also barred by the Local Government Antitrust Act (“LGAA”). In 1984, Congress passed the LGAA, which amends the Clayton Act to preclude the award of “damages, interest on damages, costs, or attorney’s fees” in actions under the antitrust laws against “any local government, official or employee thereof acting in an official capacity,” or “against a [private] person based on any official action directed by a local government, or official or employee thereof acting in an official capacity.”14 15 U.S.C. § 36. The LGAA thus protects the Cities (each of which is a “local government”) and Care (which is a “private person” acting in an official capacity pursuant to its contracts with the Cities). GF Gaming Corp. v. City of Black Hawk, 405 F.3d 876, 886-887 (10th Cir. 2005) (holding LGAA immunized private defendants acting pursuant to local government direction). Thus, AmeriCare may not recover damages, costs or attorney’s fees. AmeriCare nevertheless alleges the LGAA does not apply here because the Cities engaged in what AmeriCare call “ultra vires” acts and Defendants were market participants. AAC ¶ 60; BPAC ¶ 58; CMAC ¶ 58; FVAC ¶ 57; FAC ¶ 58; GGAC ¶ 58; LHAC ¶ 57; SCAC ¶ 59. Neither exception is applicable. There is no “market participant” exception to the LGAA because the LGAA does not distinguish between a local government’s commercial and governmental activities. As the leading treatise explains, the LGAA “applies even when the local government acts as a market participant.” P. AREEDA & H. HOVENKAMP, 1A ANTITRUST LAW ¶ 223d (4th ed. 2013). Even if there were such an exception, the Cities did not act as market participants for the 14 The word “person” includes corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, or the laws of any foreign country. 15 U.S.C. §§ 12, 34. The word “local government” includes cities. 15 U.S.C. § 34(1)(A). Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 36 of 45 Page ID #:190 29 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 reasons set forth in Section III(C)(4) above. There is also no “ultra vires” exception to the LGAA because the LGAA eliminates antitrust liability based on any “official action” that has been directed by a local government official “acting in an official capacity.” 15 U.S.C. § 36. The LGAA does not carve out an exception for conduct that is beyond the powers of the local government. In GF Gaming Corp.,405 F.3d at 885, the court rejected the same argument AmeriCare makes here. The GF Gaming plaintiff named both private defendants and local government officials as defendants and sought to hold both liable for federal antitrust damages. The GF Gaming plaintiff claimed the LGAA did not protect local government officials who plaintiff claimed were not acting “in an official capacity” because they acted “beyond the scope of their authority and pursuant to their personal interests.” Id. at 885 (emphasis added). The court held that the LGAA’s use of “in an official capacity” was intended “to be given broad meaning encompassing all ‘lawful actions, undertaken in the course of a defendant’s performance of his duties, that reasonably can be construed to be within the scope of his duties and consistent with the general responsibilities and objectives of his position.’” Id. at 885 (quoting Sandcrest Outpatient Svcs., P.A. v. Cumberland County Hosp. Sys., Inc., 853 F.2d 1139, 1145 (4th Cir. 1988)). Here, the Cities acts of offering Care exclusive EMS contracts can reasonably be construed to fall within the scope of the Cities’ authority under Cal. Gov’t Code § 38794 and Cal. Health & Saf. Code § 1797.201. A contrary interpretation would have absurd results. Local officials could be liable under federal antitrust law for treble damages based on mistaken understandings of authority. The Court should not read a treble damages provision into the EMS regime. F. AmeriCare Fails to State a Claim Upon which Relief may Be Granted Even if AmeriCare’s claims could survive the immunity, subject matter jurisdiction, and LGAA challenges set forth above, AmeriCare’s Amended Complaints fail to plead a plausible federal antitrust claim against Care. A complaint may be dismissed if it does not allege “enough facts to state a claim to relief that is plausible on Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 37 of 45 Page ID #:191 30 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, “a complaint [does not] suffice if it tenders naked assertions devoid of further factual enhancement.” Id. (quotation marks and brackets omitted). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. AmeriCare fails to plead facts establishing (1) a relevant geographic market, (2) that Care possessed “monopoly power,” or (3) that any conduct of Care has caused any injury to AmeriCare. 1. AmeriCare Fails to Adequately Plead a “Relevant Geographic Market” The Ninth Circuit has long held that the “[f]ailure to identify a relevant market is a proper ground for dismissing a Sherman Act claim.” Tanaka v. University of Southern California, 252 F.3d 1059, 1063 (9th Cir. 2001). AmeriCare alleges the “relevant market” is the provision of EMS services (the “service market”) in each relevant city (the “geographic market”). AAC ¶¶ 47, 52; BPAC ¶¶ 46, 50; CMAC ¶¶ 46, 50; FVAC ¶¶ 45, 50; FAC ¶¶ 46, 50; GGAC ¶¶ 46, 50; LHAC ¶¶ 45, 49; SCAC ¶¶ 47, 51. AmeriCare has failed to allege any facts to suggest that its proposed geographic markets are plausible.15 A geographic market is an “area of effective competition where buyers can turn for alternate sources of supply. . . Put differently, a market is the group of sellers or producers who have the actual or potential ability to deprive each other of significant levels of business.” Saint Alphonsus Medical Center-Nampa Inc. v. St. Luke's Health System, Ltd., 778 F.3d 775, 784 (9th Cir. 2015) (internal citations and quotation marks 15 For purposes of this motion, Care does not challenge AmeriCare’s proposed definition of the relevant service market as the provision of EMS services. It should, however, be noted that AmeriCare is not precluded from providing ambulance services for private parties within the Cities. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 38 of 45 Page ID #:192 31 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 omitted). Each City is simply one opportunity to win a contract, but that does not make it a relevant market. This point is further illustrated by AmeriCare’s allegation of 12 separate geographic markets within Orange County. If AmeriCare does not win the business with one municipal account, it can still try to win business at other cities in Orange County—or indeed, in San Diego County, Los Angeles County, or any place else in the State of California. Cities and counties, rather than individuals, arrange for such services in advance, and as AmeriCare acknowledges, each City (not the individual who receives the service) is effectively the buyer of EMS services. AAC ¶ 49; BPAC ¶ 48; CMAC ¶ 48; FVAC ¶ 47; FAC ¶ 48; GGAC ¶ 48; LHAC ¶ 47; SCAC ¶ 49. Indeed, AmeriCare’s allegations fairly demonstrate the implausibility of its geographic market definition (as well as other fundamental flaws in its antitrust theory). AmeriCare alleges that “[p]ractically speaking, most calls for emergency service and EMS are made to the city’s emergency lines, such as 911” and that when those calls come in, “it is the city that dispatches these emergency calls. . . .” AAC ¶ 49; BPAC ¶ 48; CMAC ¶ 48; FVAC ¶ 47; FAC ¶ 48; GGAC ¶ 48; LHAC ¶ 47; SCAC ¶ 49. From an antitrust perspective, it is a matter of indifference whether a City provides the ambulance service itself or outsources that function to a private firm. The real point is that the City is effectively the customer. The lack of a plausible definition of the relevant geographic market warrants dismissal. For example, in Tanaka v. University of Southern California, the Ninth Circuit approved dismissal of a complaint that alleged a relevant geographic market of Los Angeles and a relevant product market of the UCLA women’s soccer program. 252 F.3d at 1063. The complaint “fail[ed] to allege that Los Angeles is an ‘area of effective competition’ for student-athletes competing for positions in women’s intercollegiate soccer programs.” Similarly, in Big Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999), the Ninth Circuit held that a complaint alleging Big Bear Valley as the relevant market failed as a matter of law where plaintiffs did not allege that Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 39 of 45 Page ID #:193 32 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 “Big Bear Valley is the area of effective competition in which buyers of these products can find alternative sources of supply.” 2. AmeriCare Fails to Alleges Facts Establishing Care has “Market Power” AmeriCare does not allege facts establishing Care has “market power,” but instead conflates Care and the Cities and conclusively alleges that together Defendants “hold 100% market power.” AAC ¶ 46; BPAC ¶ 45; CMAC ¶ 45; FVAC ¶ 44; FAC ¶ 45; GGAC ¶ 45; LHAC ¶ 44; SCAC ¶ 46. The actual factual allegations acknowledge that Care does not wield any “market power”:“[t]he city has the power to exclude competition and has exercised that power in favor of itself and CARE” and also that “[p]ractically speaking, ….[it] is the city that dispatches [911] emergency calls and otherwise uses its police and regulatory powers to ensure that only the provider(s) of whom it has approved can render EMS in its area.” AAC ¶ 49; BPAC ¶ 48; CMAC ¶ 48; FVAC ¶ 47; FAC ¶ 48; GGAC ¶ 48; LHAC ¶ 47; SCAC ¶ 49. While AmeriCare’s factual allegations suggest that the Cities may wield market power,16 AmeriCare fails to allege any facts suggesting Care wields “market power.” AmeriCare also alleges Defendants charged supracompetitive pricing, and provided “lower quality, slower service.” AAC ¶¶ 55, 64, 75, 85; BPAC ¶¶ 53, 62, 73, 83; CMAC ¶¶ 53, 62, 73, 83; FVAC ¶¶ 52, 61, 72, 82; FAC ¶¶ 53, 62, 73. 83; GGAC ¶¶ 53, 62, 73, 83; LHAC ¶¶ 52, 61, 72, 82; SCAC ¶¶ 54, 63, 74, 84. Such conclusory 16 Even if AmeriCare could plead that the Cities wield “market power,” AmeriCare’s antitrust claims against the Cities would still fail because AmeriCare fails to allege the Cities are competitors. “The gravamen of a section 2 claim is the deliberate use of market power by a competitor to control price or exclude competition.” Mercy- Peninsula Ambulance, Inc. v. San Mateo Cnty., 791 F.2d 755, 759 (9th Cir. 1986); see also, Spanish Broad. Sys. Of Fla., Inc. v. Clear Channel Commc’ns, Inc., 376 F.3d 1065, 1075 (11th Cir. 2004) (“There is no question that [defendant] does not participate in the Spanish language radio market. Thus, [defendant] cannot attempt to monopolize that market.”). While the Cities may have “market power” because they control access to EMS in their respective Cities, the Cities are not competitors and therefore cannot be liable under a Section 2 claim, and are, in any event, immune. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 40 of 45 Page ID #:194 33 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 allegations are insufficient as a matter of law. See, e.g., Eastman v. Quest Diagnostics Inc., 108 F. Supp. 3d 827, 835 (N.D. Cal. 2015) (dismissing complaint containing “conclusory and speculative” allegations of “monopoly prices” and “above-competitive prices,” in absence of allegations of actual prices charged or how actual prices charged compare to competitive prices); Intellectual Ventures I LLC v. Capital One Fin. Corp., Case No. 1:13-cv-00740 (AJT/TRJ), 2013 U.S. Dist. LEXIS 177836, *18-20 (E.D. Va. Dec. 18, 2013) (dismissing monopolization counterclaim where counter-plaintiff “provide[d] nothing other than conclusory allegations that IV has demanded and received ‘supracompetitive prices’”). 3. AmeriCare Fails to Plead Antitrust Injury To plead antitrust injury, plaintiff must allege that: (1) Care’s anticompetitive conduct (2) causes injury to competition in a definable market. McGlinchy v. Shell Chemical Co., 845 F.2d 802, 812-13 (9th Cir. Cal. 1988) (“failure to allege injury to competition is a proper ground for dismissal by judgment on the pleadings.”); Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995) (“To show antitrust injury, a plaintiff must prove that his loss flows from an anticompetitive aspect or effect of the defendant’s behavior, since it is inimical to the antitrust laws to award damages for losses stemming from acts that do not hurt competition.”). Here, AmeriCare alleges two theories of anticompetitive conduct: (1) exclusive contracts between Care and the Cities, and (2) that Care demanded “supracompetitive” prices, and provided “lower quality, slower service.” AAC ¶¶ 55, 64, 75, 85; BPAC ¶¶ 53, 62, 73, 83; CMAC ¶¶ 53, 62, 73, 83; FVAC ¶¶ 52, 61, 72, 82; FAC ¶¶ 53, 62, 73. 83; GGAC ¶¶ 53, 62, 73, 83; LHAC ¶¶ 52, 61, 72, 82; SCAC ¶¶ 54, 63, 74, 84. AmeriCare’s first theory of “injury” fails as a matter of law. Essentially, AmeriCare claims that if Care did not receive the “exclusive contracts,” AmeriCare would have increased its own market share. In Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977), the Supreme Court held that to recover damages in an antitrust action, a plaintiff must “prove antitrust injury, which is to say injury of the type Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 41 of 45 Page ID #:195 34 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful,” which is something more “than injury causally linked to an illegal presence in the market.” What AmeriCare is really saying is that it has a right, as a matter of antitrust law, to compel each City to choose AmeriCare’s preferred business model (a rotation system) and then to dispatch some number of calls to AmeriCare. If the State of California wanted to impose that duty on its cities, that would be its policy choice, but federal antitrust law does not compel that outcome. Except in the exceedingly rare circumstances identified in Aspen Skiing, no firm (even a monopolist) has an antitrust-based duty to deal with another firm. Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408-409 (2003). The decision not to do business with someone does not mean that the rejected suitor has suffered antitrust injury. For example, in NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998), the Supreme Court rejected the use of a “group boycott” theory (and its rule of per se illegality) where a “buyer [chose] to purchase goods or services from one supplier rather than another,” even if there were “no legitimate business reason for that purchasing decision.” Indeed, in that case the Court noted that the real source of the plaintiff’s claimed injury flowed “from the exercise of market power that is lawfully in the hands of a monopolist, namely, New York Telephone” – which is what AmeriCare alleges here, namely, that the Cities received the 911 calls and had the ability to determine what service to dispatch. As the Court put it, the plaintiff’s “simple allegation of harm to Discon does not automatically show injury to competition.” Id. at 138. Similarly in Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370 (7th Cir. 1986), the Seventh Circuit found that even a monopolist (which is what AmeriCare says each City is) has no duty to assist a rival. As that court colorfully put it, “[s]o if a firm went to a monopolist and said, ‘Please — for the sake of competition — give me a loan so I can compete with you and make this a competitive market,’ and it was turned down, it could not invoke the Sherman Act.” That, in essence, is what AmeriCare is trying to do here. It claims that each City has an antitrust-based Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 42 of 45 Page ID #:196 35 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 duty to send business AmeriCare’s way. That is simply wrong. Whatever each City’s state-law rights or obligations may be, AmeriCare is complaining about the unwillingness of the Cities to do business with AmeriCare (and, in eight cases, their decision to do business with Care). That is not antitrust injury. AmeriCare’s second theory of injury – that Care charges supracompetitive prices, and provides “lower quality, slower service” – similarly fails as a matter of law. First, the allegations fail as conclusory for the reasons stated above. See, e.g., Eastman 108 F. Supp. 3d at 835; Intellectual Ventures I LLC, 2013 U.S. Dist. LEXIS 177836, at *18-20. Second, even assuming arguendo that AmeriCare could plead facts sufficient to support the otherwise conclusory allegations of supracompetitive pricing, this alleged antitrust conduct does not harm AmeriCare. If anything, these effects of each City’s decision (if the allegations were true) would actually help AmeriCare by creating political dissatisfaction with service and taxation levels, putting at least some amount of pressure on the Cities to make other decisions. AmeriCare fails to plead a plausible theory of antitrust injury. As a result, the Court should dismiss AmeriCare’s antitrust claims. G. This Court Should Alternatively Abstain from Deciding this Case In the event that the Court does not dispose of AmeriCare’s claims based on the foregoing challenges, it should abstain from deciding any remaining claims (particularly the requests for declaratory and other equitable relief) because their adjudication would require the interpretation of a complex state statutory scheme that implements an important public policy. AmeriCare’s claims fundamentally turn on the issue whether the Cities were empowered to determine that they retained § .201 rights. AmeriCare acknowledges that OCEMS (the relevant local EMS agency) disclaimed the power to make this determination and that the Cities each believe they have such power (even though AmeriCare disagrees). AAC ¶¶ 37-40; BPAC ¶¶ 28, 36-38; CMAC ¶¶ 30, 36- 39; FVAC ¶¶ 28, 35-37; FAC ¶¶ 27, 36-39; GGAC ¶¶ 29, 36-39; LHAC ¶¶ 28, 35-38; SCAC ¶¶ 29, 37-39. AmeriCare further acknowledges the existence of a third state Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 43 of 45 Page ID #:197 36 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 agency – the California Emergency Medical Services Authority (“EMSA”) – that has oversight of local EMS agencies like OCEMS. Id. at pp. 2-3 (Nature of the Action). This is a political question that should be resolved in the first instance among the government entities themselves or by the California Supreme Court, not by a federal court. Under the Burford Abstention Doctrine: Where timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are ‘difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar; or (2) where the ‘exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.’ New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 361 (1989) (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976)); United States v. Morros, 268 F.3d at 705. Burford applies where a federal court sits in equity. Assuming arguendo the Court has jurisdiction and the action is not barred by immunity, the Court sits in equity because the LGAA bars AmeriCare’s claims for damages, attorney fees and costs, so that it is relegated to injunctive or declaratory relief. Burford allows a federal court 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). This case meets each element of the Burford standard. First, this suit involves local issues delegated by California EMS law to the California EMSA, local EMS agencies, and Cities. Second, there are no federal issues that can be separated easily from the need to determine which California entity has authority to declare the existence of § .201 rights. To the contrary, AmeriCare’s federal Sherman Act claims turn on this determination. Third, a decision in this case might disrupt State efforts to resolve this issue and establish a coherent policy for provision of EMS within § 1797.201 cities, which is a matter of substantial public concern. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 44 of 45 Page ID #:198 37 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS CASE NO. 8:16-CV-01795-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 IV. CONCLUSION Based on the foregoing, AmeriCare respectfully requests the Court to grant its Motion to Dismiss AmeriCare’s Amended Complaints with prejudice. DATED: January 13, 2017 DORSEY & WHITNEY LLP By /s/ Faisal M. Zubairi Faisal M. Zubairi Bryan M. McGarry Attorneys for Defendant Care Ambulance Service, Inc. Case 8:16-cv-01795-JLS-AFM Document 26-1 Filed 01/13/17 Page 45 of 45 Page ID #:199 [PROPOSED] ORDER GRANTING MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) 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 Faisal M Zubairi (SBN 244233) zubairi.faisal@dorsey.com Bryan M. McGarry (SBN 258156) mcgarry.bryan@dorsey.com DORSEY & WHITNEY LLP 600 Anton Boulevard, Suite 2000 Costa Mesa, CA 92626-7655 Telephone: (714) 800-1400 Facsimile: (714) 800-1499 Attorneys for Defendant CARE AMBULANCE SERVICE, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA AmeriCare MedServices, Inc., Plaintiff, vs. City of Fountain Valley and CARE Ambulance Service, Inc., Defendants. CASE NO: 8:16-cv-01795-JLS-AFM District Judge Magistrate Judge Josephine L. Staton Alexander F. MacKinnon Ctrm 10A/10th Fl Ctrm H/9th FL [PROPOSED] ORDER GRANTING DEFENDANT CARE AMBULANCE SERVICE, INC.’S MOTION TO DISMISS PLAINTIFF AMERICARE MEDSERVICES, INC.’S FIRST AMENDED COMPLAINT [Filed Concurrently Herewith Notice of Motion and Motion; and Memorandum of Points and Authorities in Support] HEARING Date: Friday, April 7, 2017 Time: 2:30 P.M. Ctrm: 10A/10th Fl. Complaint Filed: September 27, 2016 Am. Complaint Filed: December 1, 2016 Trial Date: None Set Case 8:16-cv-01795-JLS-AFM Document 26-2 Filed 01/13/17 Page 1 of 3 Page ID #:200 1 [PROPOSED] ORDER GRANTING MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) CASE NO. 8:16-CV-01795-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 Defendant Care Ambulance Service, Inc.’s (“Care’s”) Motion to Dismiss the Amended Complaint filed by Plaintiff AmeriCare MedServices, Inc. (“AmeriCare” and/or “Plaintiff”), pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure; its alternative Motion to Strike AmeriCare’s claim for damages, interest on damages, costs or attorney fees; and its Motion to abstain from adjudicating any remaining claims; came on for hearing before the above-entitled Court, on April 7, 2017 at 2:30 p.m. After consideration of the papers, the record in this case, and the arguments of counsel, IT IS HEREBY ORDERED THAT the motion is GRANTED, and the Amended Complaint as to Care, including Counts I-VI of the Amended Complaint, are hereby DISMISSED WITH PREJUDICE, for the following reasons: 1. Pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), on the grounds that Care is entitled to immunity under the State Action Immunity Doctrine (Parker Immunity Doctrine), where, as here, Care’s alleged conduct was undertaken pursuant to an agreement with a municipality in light of a “clearly articulated and affirmatively expressed” State policy to displace competition, and none of the alleged exceptions to the doctrine exist or apply. 2. Pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), because Care is entitled to immunity under the Noerr-Pennington Doctrine for allegedly entering into an exclusive service contract with a municipality, which is activity protected by the First Amendment, and none of the alleged exceptions to the doctrine exist or apply. 3. Pursuant to Federal Rule of Civil Procedure 12(b)(1), on the grounds that this Court lacks subject matter jurisdiction because Plaintiff alleges purely local conduct and fails to allege the purely local conduct has a substantial effect on interstate commerce in order to sustain a claim under Sections 1 or 2 of the Sherman Act. 4. Pursuant to Federal Rules of Civil Procedure 12(b)(6), on the grounds that Plaintiff fails to state a claim upon which relief can be granted because Plaintiff’s claims Case 8:16-cv-01795-JLS-AFM Document 26-2 Filed 01/13/17 Page 2 of 3 Page ID #:201 2 [PROPOSED] ORDER GRANTING MOTION TO DISMISS (FOUNTAIN VALLEY ACTION) CASE NO. 8:16-CV-01795-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 for damages, interest on damages, costs or attorney fees are barred by the Local Government Antitrust Act (“LGAA”) (15 U.S.C. §§ 34-36), which precludes an award of “damages, interest on damages, costs, or attorney’s fees” in actions under the antitrust laws “against a [private] person based on any official action directed by a local government, or official or employee thereof acting in an official capacity.” Alternatively, Plaintiff’s claims for damages, interest on damages, costs or attorney fees are hereby stricken, pursuant to Federal Rule of Civil Procedure 12(f), on the grounds that they are barred by the Local Government Antitrust Act (“LGAA”) (15 U.S.C. §§ 34- 36). 5. Pursuant to Federal Rule of Civil Procedure 12(b)(6), on the grounds that Plaintiff fails to state a claim upon which relief may be granted with respect to Plaintiff’s First, Second, Third and Fourth causes of action under Sections 1 and 2 of the Sherman Act, because Plaintiff fails to plead facts sufficient to sustain such claims, including by failing to plead: (1) the existence of a relevant market, (2) that Care exercises “market power,” and/or (3) that AmeriCare suffered a cognizable injury as contemplated by the Sherman Act. With respect to any claims that are included in the Amended Complaint that are not entirely disposed of by the foregoing, IT IS HEREBY ORDERED THAT: The Court hereby exercises its discretion to abstain from adjudicating such remaining claims pursuant to the Burford Abstention Doctrine to the extent they are not otherwise stricken, because their adjudication would require the interpretation of a complex state statutory scheme that impacts public policy. IT IS SO ORDERED. DATED: , 2016 By: The Honorable Josephine L. Staton U.S. District Court Judge Case 8:16-cv-01795-JLS-AFM Document 26-2 Filed 01/13/17 Page 3 of 3 Page ID #:202