425 U.S. 738 (1976), 74-1452, Hospital Building Co. v. Trustees of Rex Hospital

Docket Nº:No. 74-1452
Citation:425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338
Party Name:Hospital Building Co. v. Trustees of Rex Hospital
Case Date:May 24, 1976
Court:United States Supreme Court

Page 738

425 U.S. 738 (1976)

96 S.Ct. 1848, 48 L.Ed.2d 338

Hospital Building Co.


Trustees of Rex Hospital

No. 74-1452

United States Supreme Court

May 24, 1976

Argued February 25, 1976




Petitioner corporation, which operates a 49-bed proprietary hospital (Mary Elizabeth) in Raleigh, N.C. brought this antitrust action alleging that respondents, a private, tax-exempt hospital (Rex) in Raleigh, two of its officers, and a health planning officer, had violated the Sherman Act by conspiring along with others to block the relocation and expansion within Raleigh of Mary Elizabeth, for the purpose of enabling Rex to monopolize the business of providing hospital services in Raleigh. Petitioner alleged that a substantial portion of its medicines and supplies comes from out-of-state sellers; that a large portion of its revenue comes from out-of-state insurance companies or the Federal Government; that it pays a management service fee to its parent company, a Georgia-based Delaware corporation; and that the planned expansion would be largely financed through out-of-state lenders. Concluding that petitioner's business was strictly local, and that respondents' alleged conduct only incidentally and insubstantially affected interstate commerce, the District Court granted respondents' motion to dismiss the complaint. The Court of Appeals affirmed.

Held: Petitioner's complaint states a cause of action upon which relief can be granted under the Sherman Act, the combination of factors involving petitioner in interstate commerce being sufficient to establish a "substantial effect" on interstate commerce, within the meaning of the Sherman Act, as a result of respondents' alleged conduct. Pp. 743-747.

[96 S.Ct. 1850] (a) That respondents may not have had the intentional goal of affecting interstate commerce does not exempt their conduct from Sherman Act coverage. Burke v. Ford, 389 U.S. 320. Pp. 744-745.

(b) The "substantial effect" test can be satisfied even if the impact on interstate commerce of the conduct alleged falls short of causing petitioner's out-of-state suppliers to go out of business or the market price to be affected by the conspiracy. Pp. 745-746.

511 F.2d 678, reversed and remanded.

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MARSHALL, J., delivered the opinion for a unanimous Court.

MARSHALL, J., lead opinion

MR. JUSTICE MARSHALL delivered the opinion of the Court.

This is a suit brought under § § 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1-2. Petitioner has alleged that respondents are engaged in an unlawful conspiracy to restrain trade and commerce in the furnishing of medical and surgical hospital services, and that they are attempting to monopolize the hospital business in the Raleigh, N.C. metropolitan area. The District Court dismissed petitioner's amended complaint on the pleadings, finding that petitioner had not alleged a sufficient nexus between the alleged violations of the Sherman Act and interstate commerce. The Court of Appeals for the Fourth Circuit, sitting en banc, affirmed the judgment of the District Court, holding that the provision of hospital services is only a "local" activity, 511 F.2d 678, 682 (1975), and that the amended complaint did not adequately allege a "substantial effect" id. at 684, on interstate commerce. We granted certiorari, 423 U.S. 820 (1975), and now reverse. We hold that the amended complaint, fairly

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read, adequately alleges a restraint of trade substantially affecting interstate commerce, and that dismissal on the pleadings of petitioner's amended co,plaint was therefore inappropriate.



Since we are reviewing a dismissal on the pleadings, we must, of course, take as true the material facts alleged in petitioner's amended complaint. See, e.g., Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 222 (1948). Petitioner is a corporation organized for profit under the laws of North Carolina. It operates the Mary Elizabeth Hospital, a 49-bed proprietary hospital in Raleigh, N.C., which offers a general range of medical and surgical services to the public. Respondent Trustees of Rex Hospital (Rex) is a North Carolina corporation which operates Rex Hospital, a private, tax-exempt hospital also located in Raleigh. The other three respondents are the administrator of Rex, one of its individual trustees, and the executive secretary of the local agency responsible for making...

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