721 F.2d 68 (3rd Cir. 1983), 82-1817, Cardio-Medical Associates, Ltd. v. Crozer-Chester Medical Center

Docket Nº82-1817.
Citation721 F.2d 68
Party NameCARDIO-MEDICAL ASSOCIATES, LTD. and Thomas J. McBride, M.D., and Paul T. Cass, M.D., and C. Richard Schott, M.D., and Michael B. Goodkin, M.D., Appellants, v. CROZER-CHESTER MEDICAL CENTER and James H. Loucks, M.D., and Michael C. Boyd, William J. Breece, John F. Crampt, Esq., Daniel R. Curran, Mary E. Dale, Conrad A. Etzel, M.D., Jeremiah A. Hartl
Case DateNovember 18, 1983
CourtUnited States Courts of Appeals, Court of Appeals for the Third Circuit

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721 F.2d 68 (3rd Cir. 1983)


and Paul T. Cass, M.D., and C. Richard Schott,

M.D., and Michael B. Goodkin, M.D., Appellants,



Michael C. Boyd, William J. Breece, John F. Crampt, Esq.,

Daniel R. Curran, Mary E. Dale, Conrad A. Etzel, M.D.,

Jeremiah A. Hartley, Joseph R. Layton, Rev. David A.

MacQueen, Peter L. Miller, William B. Mitchell, Jr.,

Clarence R. Moll, Ph.D., J. Harold Perrine, Malcolm B.

Petrikin, Esq., and Bertram M. Speare individually and as

members of the Crozer-Chester Medical Center Board of

Directors and James Clark, M.D., Chief of Department of

Medicine of Crozer-Chester Medical Center and Daniel J.

Marino, M.D., David R. Mishalove, M.D., Joel A. Krackow,

M.D., Adrian S. Weyn, M.D., Peter Lavine, M.D., Michael Yow,

M.D., and Ancil Jones, M.D., t/a Cardiology Associates of

Delaware County, Appellees.

No. 82-1817.

United States Court of Appeals, Third Circuit

November 18, 1983

Argued July 12, 1983.

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[Copyrighted Material Omitted]

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David Berger (argued), Merrill G. Davidoff, Allan M. Sandals, Berger & Montague, P.C., Philadelphia, Pa., and Howard Richard, Lyn B. Schoenfeld, Richard, Disanti, Hamilton, Gallagher & Paul, Media, Pa., for appellants.

H. Robert Halper (argued), Hope S. Foster, John J. Miles, Mary Susan Philp, O'Connor & Hannan, Washington, D.C., John W. Wellman, Steven G. Brown, Petrikin, Wellman, Damico, Carney & Brown, P.C., Media, Pa., for appellees Crozer-Chester Medical Center, et al.

H. Robert Fiebach, Roberta D. Liebenberg, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for appellees Cardiology Associates of Delaware County.

Before SEITZ, Chief Judge and SLOVITER and VAN DUSEN, Circuit Judges.


SEITZ, Chief Judge:

This is an appeal from two orders of the district court striking appellants' demand for a jury trial and dismissing appellants' amended complaint for lack of subject matter jurisdiction.

The issues on appeal are two: whether appellants, plaintiffs in an action charging violations of sections 1 and 2 of the Sherman Act, have alleged sufficient effects on interstate commerce to withstand a motion to dismiss for lack of subject matter jurisdiction, and whether appellants are entitled to a jury trial.

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I. Background

Appellants in this case are four physicians and their employer, Cardio-Medical Associates, Ltd. (hereafter referred to as "plaintiffs"). All four physicians practice in Pennsylvania and specialize in cardiology and internal medicine. Cardio-Medical Associates is a Pennsylvania corporation created for the purpose of facilitating the physicians' practice of cardiology and internal medicine.

Appellees are the Crozer-Chester Medical Center and various of its employees (hereafter referred to as "defendants"). The Medical Center is a health care facility located in Upland, Pennsylvania. It provides various medical services, including cardiological services. Plaintiffs maintain their offices in one of the buildings in defendants' complex.

Plaintiffs filed a complaint against defendants in the district court in 1981, charging violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2, and the equal protection and due process clauses of the fourteenth amendment. Plaintiffs alleged that defendants had entered into contracts and other agreements to prevent the plaintiff doctors from using certain of defendants' specialized cardiological equipment, located in defendants' complex. These agreements, according to plaintiffs, were part of a conspiracy to restrain trade and monopolize the local market for cardiological services. As a result, plaintiffs were allegedly foreclosed from this market and were injured both in their ability to offer full cardiological services to existing patients and in their ability to attract new patients.

Defendants answered the complaint and then filed a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c), alleging a failure to state a claim and lack of subject matter jurisdiction. The district court granted this motion. The constitutional claim was dismissed with prejudice, and plaintiffs have not renewed that claim in subsequent proceedings. The Sherman Act claims were dismissed for lack of subject matter jurisdiction. This dismissal was without prejudice, and plaintiffs were given sixty days in which to file an amended complaint. 536 F.Supp. 1065.

Plaintiffs filed a timely amended complaint in which they renewed their claims under sections 1 and 2 of the Sherman Act and demanded, for the first time, a jury trial. Without answering this complaint, defendants moved to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1). Defendants also moved to strike plaintiffs' demand for a jury trial and to stay all discovery pending disposition of the Rule 12(b)(1) motion.

In separate opinions, the district court granted both the motion to strike the demand for a jury trial, 95 F.R.D. 194, and the motion to dismiss, 552 F.Supp. 1170. Plaintiffs appeal from orders implementing those two decisions.

II. Jurisdiction Under the Sherman Act

Sections 1 and 2 of the Sherman Act both require that the acts prohibited by those sections relate to trade or commerce "among the several States". This requirement of interstate commerce has been construed as an element of both the jurisdictional standard and the substantive offense under the Sherman Act. See Mortensen v. First Federal Savings & Loan Association, 549 F.2d 884, 890-91 (3d Cir.1977). In the present appeal we are concerned only with jurisdiction.

There are two ways to satisfy the jurisdictional requirement. The proscribed conduct may itself be "in interstate commerce", or the conduct may be a purely intrastate activity that has a "substantial and adverse effect" (or, what is apparently the same thing, a "not insubstantial effect") on interstate commerce. See, e.g., McLain v. Real Estate Board of New Orleans, 444 U.S. 232, 246, 100 S.Ct. 502, 511, 62 L.Ed.2d 441 (1980) ("not insubstantial effect"); Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 743, 96 S.Ct. 1848, 1852, 48 L.Ed.2d 338 (1976) ("substantially and adversely affects interstate commerce"). In this appeal, plaintiffs argue that they have

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adequately alleged that defendants' actions had the requisite "effect" on commerce.

The first issue that we must consider is the question of the type of effect that must be shown. The district court held that plaintiffs' complaint must satisfy a "tripartite test" by demonstrating the following:

(i) the presence of interstate commerce; (ii) the existence of a substantial and adverse effect on interstate commerce; and (iii) the requisite nexus between the challenged activities of defendants and the effect on the relevant channel of interstate commerce.

552 F.Supp. at 1177 (emphasis in original). The district court based this test on language in various decisions of the Supreme Court. In our opinion, however, the first and third findings in this analysis are subsumed within the second finding. Cf. McLain, 444 U.S. at 242, 100 S.Ct. at 509; Hospital Building Co., 425 U.S. at 743-44, 96 S.Ct. at 1852. We therefore require only that plaintiffs show a substantial and adverse effect on commerce.

This court has elsewhere explained this requirement in the following terms: "[s]ubstantiality of effect ... is to be viewed on a case-by-case, practical economic basis, from the perspective of whether the local activity has a significant impact on competition in commerce and whether the commerce so affected is substantial in volume." Harold Friedman, Inc. v. Thorofare Markets Inc., 587 F.2d 127, 132 (3d Cir.1978).

The district court also held that the plaintiffs may not meet their burden merely by demonstrating that the defendants' conduct "shifted" the flow of interstate commerce away from the plaintiffs and toward some other firm. According to the district court, the plaintiffs must demonstrate a net change in the flow of interstate commerce into or out of the state. 552 F.Supp. at 1178. In making such a showing, "the identified aspect of interstate commerce must relate to the activities of the plaintiffs, not the defendants." Id. at 1177. We consider these two holdings in turn.

There is no doubt, at least in the Third Circuit, that the requisite effect need not be a reduction in commerce. In Harold Friedman Inc., supra, we held that the effect need not be of any particular magnitude so long as it is substantial, and in fact the requirement may be satisfied "even if interstate commerce is increased by the anticompetitive conduct." 587 F.2d at 132.

This does not answer the question, however, whether there must be either an increase or decrease in net trade. This issue has not been addressed directly either by the Supreme Court or by this court. We approached the issue in Harold Friedman, Inc., where we held that the plaintiff had met its burden by showing a decrease in its own trade and an increase in the defendant's trade. We did not consider the result where the decreases and increases were equal and therefore produced only a "shift".

The Sixth Circuit has directly addressed this issue and concluded that a mere shift is sufficient to satisfy the requirement of an effect on interstate commerce. In James R. Snyder Co., Inc. v. Associated General Contractors of America, 677 F.2d 1111 (6th Cir.), cert. denied, --- U.S. ----, 103 S.Ct. 374, 74 L.Ed.2d 508 (1982), the court looked to the Supreme Court's decisions in McLain and Hospital Building Co. and concluded that the effect of...

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