Smith v. Northern Michigan Hospitals, Inc., 81-1513

• Citation: 703 F.2d 942
• Decision Date: 21 October 1982
• Docket Number: No. 81-1513,81-1513
• Parties: 1983-1 Trade Cases 65,289 James R. SMITH, M.D., et al., Plaintiffs-Appellants, v. NORTHERN MICHIGAN HOSPITALS, INC., et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 942

703 F.2d 942

1983-1 Trade Cases 65,289

James R. SMITH, M.D., et al., Plaintiffs-Appellants, v. NORTHERN MICHIGAN HOSPITALS, INC., et al., Defendants-Appellees.

No. 81-1513.

United States Court of Appeals, Sixth Circuit.

Oct. 21, 1982.

Decided March 25, 1983.

Grady Avant, Jr., Long, Preston, Kinnaird & Avant, Detroit, Mich., Cheryl Bailey Estes, John C. Buchanan (argued), Hecht, Buchanan & Cheney, Grand Rapids, Mich., for plaintiffs-appellants.

Gregory L. Curtner (argued), Miller, Canfield, Paddock & Stone, Derek I. Meier (argued), Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, Mich., for defendants-appellees.

Before LIVELY and KENNEDY, Circuit Judges, and SPIEGEL, ^* District Judge.

CORNELIA G. KENNEDY, Circuit Judge.

Plaintiff physicians appeal the District Court's grant of summary judgment dismissing their claim that the defendants, Northern Michigan Hospitals, Inc., and the Burns Clinic Medical Center, P.C., had violated sections 1 and 2 of the Sherman Antitrust Act. ¹ We affirm the summary judgment on appellants' ² section 1 and 2 claims involving conspiracy but reverse and remand appellants' section 2 monopolization and attempted monopolization claims against the Burns Clinic for further consideration by the District Court. ³

On June 1, 1977 the Little Traverse and Lockwood-MacDonald hospitals of Petoskey, Michigan merged to form Northern Michigan Hospitals, Inc. (NMH), one of two defendants in this lawsuit. ⁴ The second defendant, Burns Clinic Medical Center, P.C. (Burns Clinic), is a multi-specialty professional corporation of which 90% of the doctors and nearly all of the specialists in Petoskey are members. The plaintiffs are independent physicians formerly on the Lockwood-MacDonald staff who became members of the NMH staff with the merger. All of the plaintiffs, except one, practice or had practiced family medicine in Petoskey. ⁵

After the merger in 1977, the emergency rooms of Little Traverse and Lockwood-MacDonald were consolidated into one facility at the Little Traverse division of NMH. It is not claimed that the consolidation was undertaken for other than legitimate medical and financial reasons. However, appellants assert that the method of staffing the consolidated emergency facility and hospital practices with respect to referrals of emergency room patients, violated and continues to violate the antitrust laws. Three practices at NMH form the basis of the appellants' complaints. ⁶

The appellants first challenge the award of an exclusive contract to the Burns Clinic for the provision of emergency room services. Shortly after the merger, NMH determined, through a staff committee comprised of both Burns Clinic and independent physicians, that its new consolidated emergency room would be staffed by a small group of full-time physicians specializing in emergency room medicine. ⁷ To this end, NMH solicited bids from the Burns Clinic, independent physicians in Petoskey, and the "Williams Group," a private company that specializes in providing emergency room staffing. Although only two weeks were allowed for preparation of bids, both the Burns Clinic and the Williams Group submitted proposals. The appellants did not. The exclusive contract was, not unexpectedly, awarded to the Burns Clinic. ⁸ The appellants contend that this grant of an exclusive contract for the provision of the emergency room services constitutes an unreasonable restraint of trade in violation of section 1. The appellants also urge that this arrangement results from a conspiracy designed to monopolize acute care medicine in the Petoskey market in violation of section 2.

The second practice complained of involves NMH's system of referring uncommitted emergency room patients for follow-up care. Under this system, emergency room patients who do not have or do not prefer a particular doctor in the community are referred, in accordance with the medical judgment of the emergency room physician, to an "on-call" NMH physician in the appropriate area of medical expertise. All physicians on the NMH staff, including the appellants, share rotation on the "on-call" list and theoretically would receive a "fair-share" of those uncommitted patients requiring follow-up care in the area of medicine they practice. The appellants, however, assert that the referral system, while fair on its face, was applied in a discriminatory fashion from 1977 to 1978 before NMH instituted formal auditing. This discriminatory application of the referral system is alleged to have been designed to drive the appellants out of the practice of medicine in Petoskey, in violation of both sections 1 and 2 of the Sherman Act.

Finally, the appellants assert that NMH's so-called "pediatrician rule" violates sections 1 and 2. This rule requires that medical emergencies involving children 14 and younger, who have no physician, be treated by a pediatrician. All of the pediatricians in Petoskey are with Burns Clinic. ⁹ A similar rule had been in effect at the Little Traverse emergency room since 1955. The rule was, in a manner not clearly disclosed by the record, continued at NMH after merger and consolidation of emergency room services. ¹⁰ Appellants allege that the rule was continued at NMH at the behest of Burns Clinic pediatricians with whom the appellants compete directly for the general or "primary" treatment of children. Although there are no pediatricians among the non-Burns Clinic physicians, all of the appellants enjoy or enjoyed pediatric privileges at NMH and assert that they are and were fully qualified to treat many of the children in the emergency room who are automatically treated by Burns Clinic pediatricians.

Defendants moved for summary judgment shortly before the scheduled trial date. This was two years after the case had been filed and after extensive discovery including depositions from most, if not all, potential witnesses. The District Court found that the appellants had failed to make "even a preliminary showing" that the defendants had "unfairly restrained" trade or conspired to do so and granted summary judgment. In light of the appellants' weak factual proofs and the countervailing medical purposes justifying the practices complained of, the court concluded that no legal basis existed upon which to try the case.

On appeal the appellants assert three grounds for reversal. First, the District Court erroneously failed to apply the more stringent standard for summary judgment appropriate in antitrust actions. Second, the court ignored substantial evidence from which a reasonable jury could infer a conspiracy to eliminate the appellants from acute care practice and to monopolize such services in the Petoskey market. Finally, the District Court erroneously failed to premise its decision on economic analysis and instead accepted the defendants' incantation of medical justifications.

While there is some merit to the appellants' first and third assertions of legal error, we nevertheless find that summary judgment was appropriate on appellants' section 1 and 2 conspiracy claims. Because the District Court's inquiry on appellants' section 2 monopolization and attempted monopolization claims is incomplete, we remand for further development of those claims.

Summary Judgment in Antitrust Litigation

Both the Supreme Court and this Circuit have expressed a clear reluctance to dispose of antitrust litigation on motions for summary judgment. E.g., Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 284-90, 88 S.Ct. 1575, 1590-93, 20 L.Ed.2d 569 (1968); Davis-Watkins Co. v. Service Merchandise, 686 F.2d 1190, 1197 (6th Cir.1982); Taylor Drug Stores, Inc. v. Associated Dry Goods Corp., 560 F.2d 211, 213 (6th Cir.1977); Bohn Aluminum & Brass Corp. v. Storm King Corp., 303 F.2d 425, 427 (6th Cir.1962). This reluctance to utilize summary judgment dispositions stems from the crucial role that intent and motive have in antitrust claims and the difficulty of proving conspiracy by means other than factual inference. Thus, the Supreme Court in Poller stated that:

Summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot.

368 U.S. at 473, 82 S.Ct. at 491.

The District Court interpreted language in First National Bank, 391 U.S. at 284-90, 88 S.Ct. at 1590-93, as eliminating the distinction between summary judgment in antitrust cases and other civil litigation. We do not believe it can be read so broadly. Rather, the Court merely re-emphasized that even in an antitrust action the party opposing summary judgment may not rest on its pleadings. See Fed.R.Civ.P. 56(e). The adverse party must present sufficient evidence supporting its claims to "require a judge or jury to resolve the parties' differing versions of the truth at trial." First National Bank, 391 U.S. at 286-90, 88 S.Ct. at 1591-93. See Norfolk Monument Co., Inc. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 701, 703-04, 89 S.Ct. 1391, 1392, 1393-94, 22 L.Ed. 658 (1968) (per curiam). In First National Bank, summary judgment was found appropriate because the plaintiff's "total failure to produce evidence tending to show [the defendant's] part in a conspiracy" and the adversity of interests among co-conspirators "conclusively showed" that the allegations were "not susceptible" of the interpretation the plaintiff sought. 391 U.S. at 286-90, 88 S.Ct. at 1591-1593.

To the extent that petitioner's burden-of-proof argument can be interpreted to suggest that Rule 56(e) should, in effect, be read out of antitrust cases and permit plaintiffs to get to a jury on the basis of the allegations in their complaints, coupled with the hope that something can be developed at trial in the way of evidence to support those...