Balaklaw v. Lovell

• Decision Date: 26 January 1994
• Docket Number: No. 395,D,395
• Citation: 14 F.3d 793
• Parties: , 1994-1 Trade Cases P 70,497 Lee A. BALAKLAW, Plaintiff-Appellant, v. Robert M. LOVELL; Wessley D. Stisser; Donald Ames; Joseph Compagni, Jr.; Ronald Denniston; Deborah Geibel; James Gibbs; William Greer; David Hempson; David Hunsinger; Bonnie Innerst; David Lundeen; Dean Mitchell; Gene Nacci; Joan Poskanzer; Charles Spaulding; Connie Swarr; Cortland Memorial Hospital; The C.M.H. Group, Defendants-Appellees. ocket 93-7484.
• Court: U.S. Court of Appeals — Second Circuit

Page 793

14 F.3d 793

62 USLW 2469, 1994-1 Trade Cases P 70,497

Lee A. BALAKLAW, Plaintiff-Appellant, v. Robert M. LOVELL; Wessley D. Stisser; Donald Ames; Joseph Compagni, Jr.; Ronald Denniston; Deborah Geibel; James Gibbs; William Greer; David Hempson; David Hunsinger Bonnie Innerst; David Lundeen; Dean Mitchell; Gene Nacci Joan Poskanzer; Charles Spaulding; Connie Swarr Cortland Memorial Hospital; The C.M.H. Group, Defendants-Appellees.

No. 395, Docket 93-7484.

United States Court of Appeals Second Circuit.

Argued Sept. 29, 1993.

Decided Jan. 26, 1994.

Whitney North Seymour, Jr., New York City, for plaintiff-appellant.

Frances A. Ciardullo, Syracuse (Costello, Cooney & Fearon), for defendants-appellees.

Before: CARDAMONE, McLAUGHLIN, and LAY, ^* Circuit Judges.

LAY, Senior Circuit Judge:

Borrowing themes from the Supreme Court's opinions in Jefferson Parish ¹ and Summit Health ², Dr. Lee A. Balaklaw, an anesthesiologist practicing in Cortland, New York, brought suit under section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1988), ³ and sections 4 and 16 of the Clayton Act, 15 U.S.C. Secs. 15, 26 (1988), ⁴ for an alleged "group boycott" and unreasonable restraint of trade preventing him from rendering anesthesiology services at Cortland Memorial Hospital ("CMH" or "the Hospital"). Balaklaw, rather than asserting a claim of an illegal tie-in, as Dr. Hyde did in Jefferson Parish, or alleging an illegal disciplinary-review process as Dr. Pinhas had in Summit Health, urges that CMH violated the Sherman Act by entering into an exclusive contract with a group of anesthesiologists of which Dr. Balaklaw was not a member. Dr. Balaklaw alleges a conspiracy among the hospital, the successful bidding group of anesthesiologists (the "King group"), and others. ⁵ The district court ⁶ rejected these claims, and we affirm.

I. BACKGROUND

Prior to the commencement of this lawsuit, Dr. Balaklaw served as president of Anesthesia Associates of Cortland, P.C., ("AAC") a private physicians' group, and Chief of Cortland Memorial Hospital's Department of Anesthesiology. Although there was no written contract governing the relationship between AAC and the Hospital, the entire Department of Anesthesiology consisted of AAC members, and AAC was solely responsible for meeting the Hospital's anesthesia requirements. AAC had what the district court described as a "de facto exclusive contract with the Hospital." Plaintiff rejects this characterization, testifying that throughout this period, any qualified competitor "could have come in from the outside and competed with us at any point in time."

Dr. Balaklaw's arrangement with CMH came to an end when CMH decided to solicit proposals from outside for a written exclusive contract for anesthesiology services. ⁷ CMH sent a formal Request for Proposals to practicing anesthesiologists in New York, Vermont, Massachusetts, Connecticut, New Jersey, Pennsylvania, and Ohio. Nine proposals were received in return, including one from AAC. An ad hoc selection committee consisting of members of the Board of Trustees, Hospital administration, and medical and nursing staffs then interviewed four of the applicant groups, including the group headed by Dr. Balaklaw. The committee unanimously recommended that the Board award the exclusive contract to a group headed by Dr. Delf King, and the Board of Trustees subsequently announced its intent to enter into such a contract.

Pursuant to the Hospital's Medical Staff By-Laws, Dr. Balaklaw sought a hearing to review this decision. The hearing committee unanimously supported the Board's intent to award the contract to Dr. King, and on appeal the full Board upheld the hearing committee's decision. The Hospital then executed a formal written agreement with Dr. King.

Under the terms of the contract, Dr. King and his group became the exclusive providers of anesthesia services to all patients at CMH. The initial term of the contract was three years, but either party could terminate the contract without cause upon six-months' notice. Dr. Balaklaw's clinical privileges were not terminated. He asserts, however, that the nature of the contract effectively ousted him from his practice at CMH and that because other hospitals request information about any prior diminutions in privileges, he has been rendered unable to secure another full-time position.

The complaint alleges that the Hospital's and Dr. King's actions in entering into the exclusive anesthesiology contract constituted a conspiracy to engage in an illegal group boycott of, and a concerted refusal to deal with, Dr. Balaklaw. Dr. Balaklaw claims that he has been driven from the practice of his profession, not only at CMH, but nationwide. He alleges that the proceedings that led to the contract between CMH and Dr. King were anti-competitive and a per se violation of the Sherman Act. As compensation, Dr. Balaklaw seeks treble damages under section 4 of the Clayton Act, 15 U.S.C. Sec. 15, and declaratory and injunctive relief under section 16 of the Clayton Act, 15 U.S.C. Sec. 26.

The district court held that the plaintiff lacked standing to assert his antitrust claims. The court reasoned that the injury plaintiff alleged did not appear "to be the type of injury the antitrust laws were intended to prevent." In addition, the court held that even if the plaintiff did possess the requisite standing, summary judgment for the defendants would still be warranted because the plaintiff had not established the substantive elements of his claims. The court concluded that CMH's effort to change the anesthesia services at CMH did not hinder competition, but rather, it fostered it by awarding the contract to the organization that offered to provide the services needed by the Hospital at the lowest price. The court thus entered its order granting defendants' motion for summary judgment, from which the plaintiff appeals. ⁸

We affirm the district court's dismissal of the complaint for lack of standing.

II. DISCUSSION

It is now well settled that in order to have standing to prosecute private antitrust claims, plaintiffs must show more than that the defendants' conduct caused them an injury. Associated Gen. Contractors of Cal., Inc. v. California State Council of Carpenters, 459 U.S. 519, 535 n. 31, 103 S.Ct. 897, 907 n. 31, 74 L.Ed.2d 723 (1983); Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 250 (2d Cir.1985), cert. denied, 484 U.S. 918, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987); Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1448 (11th Cir.1991). "Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977); see R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 107 (2d Cir.), cert. denied, 493 U.S. 815, 110 S.Ct. 64, 107 L.Ed.2d 31 (1989). This antitrust injury requirement underscores the fundamental tenet that "[t]he antitrust laws ... were enacted for 'the protection of competition, not competitors.' " Brunswick, 429 U.S. at 488, 97 S.Ct. at 697 (quoting Brown Shoe v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962)).

It follows from the purposes of the antitrust laws that injuries resulting from competition alone are not sufficient to constitute antitrust injuries. See Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law p 334.2 (Supp.1993). Thus, in Brunswick, the Supreme Court found no antitrust injury where the defendant had preserved, rather than dampened, competition by acquiring a number of the plaintiff's bowling alley competitors that would otherwise have gone out of business. 429 U.S. at 488, 97 S.Ct. at 697. The Court responded to the plaintiff's claim that the defendant's actions deprived it of profits it would have received had its competition been allowed to fail by stating, "It is inimical to the purposes of [the antitrust] laws to award damages for the type of injury claimed here." Id.; see also Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 116-117, 107 S.Ct. 484, 493, 93 L.Ed.2d 427 (1986) (extending antitrust injury requirement to equitable actions under section 16 of the Clayton Act and stating that "the threat of loss of profits due to possible price competition following a merger does not constitute a threat of antitrust injury").

In the case before us, even if we assume that the plaintiff suffered a direct and readily identifiable injury caused by the defendants' actions, there is no evidence that this injury was "of the type the antitrust laws were intended to prevent." ⁹ We agree with the district court that Dr. Balaklaw's claimed injury came as a result of his losing out in the competition for an exclusive anesthesiology contract at CMH, and nothing more.

A. Exclusive Dealing

Dr. Balaklaw claims that the exclusive contract between CMH and the King group led to an antitrust injury because it "unreasonably foreclose[d] a significant amount of competition in the relevant market without pro-competitive justification." We disagree. The Supreme Court in Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984), disposed of a similar argument on the merits. The Court observed with respect to an exclusive contract between the defendant hospital and an anesthesiology group headed by Dr. Kermit Roux:

There is ... insufficient evidence in this record to provide a basis for finding that the Roux contract, as it actually operates in the market, has unreasonably restrained competition. The record sheds little light on how this arrangement affected consumer demand for separate arrangements with a specific anesthesiologist. The evidence indicates that some...