Oltz v. St. Peter's Community Hosp.

• Decision Date: 28 November 1988
• Docket Number: Nos. 87-3944,87-3945,s. 87-3944
• Citation: 861 F.2d 1440
• Parties: 1988-2 Trade Cases 68,345 Tafford E. OLTZ, Plaintiff-Appellee, v. ST. PETER'S COMMUNITY HOSPITAL, Defendant-Appellant. Tafford E. OLTZ, Plaintiff-Appellant, v. ST. PETER'S COMMUNITY HOSPITAL, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1440

861 F.2d 1440

1988-2 Trade Cases 68,345

Tafford E. OLTZ, Plaintiff-Appellee, v. ST. PETER'S COMMUNITY HOSPITAL, Defendant-Appellant.

Tafford E. OLTZ, Plaintiff-Appellant, v. ST. PETER'S COMMUNITY HOSPITAL, Defendant-Appellee.

Nos. 87-3944, 87-3945.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Sept. 15, 1988.

Decided Nov. 28, 1988.

Michael J. Mulroney, Luxan & Murfitt, Helena, Mont., and Dan S. Bushnell, Kirton, McConkie & Bushnell, Salt Lake City, Utah, for defendant-appellant.

Urban L. Roth, Poore, Roth & Robinson, P.C., Butte, Mont. and Daniel S. Koch, McNally & Kurz, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the District of Montana.

Before WRIGHT, WALLACE and HUG, Circuit Judges.

HUG, Circuit Judge:

This case concerns a Sherman Act Sec. 1 claim for damages from an unlawful conspiracy among anesthesia service providers and the local hospital to enter an exclusive dealing contract and eliminate competition. By special verdict in a bifurcated trial, the jury found the defendant hospital liable and awarded damages of $421,831. The district court denied the hospital's motion for judgment notwithstanding the verdict or for a new trial on the issue of liability. Sua sponte, however, the district court ordered a new trial on damages after finding that the damages awarded were excessive. Defendant hospital challenges jury instructions, the jury's special verdict on liability, and the denial of the post-trial motion. Plaintiff challenges the order granting a new trial on damages. We affirm both orders of the district court.

FACTUAL BACKGROUND

Defendant St. Peter's Community Hospital ("St. Peter's") is one of two hospitals in Helena, one of Montana's smaller cities. St. Peter's, however, is the only hospital in the area open to the general public and equipped to perform general surgery. At trial, the parties stipulated that St. Peter's enjoys a market share of 84% of general surgical services in Helena.

Plaintiff Tafford E. Oltz and his wife are registered nurse anesthetists. A nurse anesthetist does not have the broad and extensive medical education that is required for an M.D. anesthesiologist; however, nurse anesthetists are clinically qualified to provide certain anesthesia services under the supervision of the M.D. performing the surgery. See Bhan v. NME Hospitals, Inc., 772 F.2d 1467, 1471 (9th Cir.1985). Thus, nurse anesthetists may provide anesthesia services in direct competition with M.D. anesthesiologists.

In late 1974, Mr. and Mrs. Oltz were living in Bozeman, Montana. At the invitation of St. Peter's, Mr. Oltz began administering anesthesia at St. Peter's in Helena pursuant to a written billing agreement. Under the agreement, Mr. Oltz submitted his bills to St. Peter's, rather than to the patient, and received 90 percent of his billings as full payment directly from St. Peter's. The agreement expressly provided that Mr. Oltz was an independent contractor and not an employee of the hospital. The agreement was automatically renewable each month until one of the parties gave written notice of termination.

When Mr. Oltz began at St. Peter's, three M.D. anesthesiologists were also administering anesthesia there. Mr. Oltz, however, performed as a free lance anesthetist, administering anesthesia under the clinical supervision of the operating surgeon or obstetrician. Mr. and Mrs. Oltz moved from Bozeman to Helena in early 1977. During this time, Mrs. Oltz was practicing as a nurse anesthetist in communities outside of Helena.

By early 1978, the number of M.D. anesthesiologists with hospital privileges at St. Peter's had risen to four. Evidence at trial revealed that Mr. Oltz and the anesthesiologists were in direct competition for many of the cases at St. Peter's. Mr. Oltz' popularity among the surgical staff had grown so that some doctors, particularly obstetricians, preferred his services. For example, Mr. Oltz administered lumbar epidural anesthesia, a type of spinal anesthesia commonly used to assist women in childbirth, which some of the anesthesiologists were reluctant to perform. Moreover, Mr. Oltz charged $9.30 per anesthesia unit, while the anesthesiologists charged $14 per unit.

The dispute over Mr. Oltz' independent billing status became divisive among the general medical staff, and some of the anesthesiologists began threatening to leave the hospital. On March 30, 1978, St. Peter's organized the Department of Anesthesia. The anesthesiologists comprised the department's membership. During department meetings in the presence of Howard Purcell, Jr., the administrator at St. Peter's, the department discussed termination of Mr. Oltz' billing contract. They also drafted policies encouraging supervision by anesthesiologists of all anesthesia administered at St. Peter's, removed Mr. Oltz from the anesthesia call schedule, and declined administrative as opposed to clinical supervision of Mr. Oltz' practice at St. Peter's.

On September 14, 1978, the anesthesiologists wrote to Purcell and demanded that the hospital terminate the billing contract with Mr. Oltz. The anesthesiologists forwarded copies of their demand to the chief of staff and to the St. Peter's Board of Trustees. The board discussed the demand and referred the matter to a joint conference committee of the medical staff. The anesthesiologists presented a report to the joint committee, outlining the impact of nurse anesthetists on anesthesiologist incomes.

Near December 28, 1978, Purcell telephoned Mr. Oltz and informed him the billing contract was terminated. After receiving correspondence from Mr. Oltz' attorney and the antitrust section of the Montana Attorney General's office, however, the board of trustees rescinded the termination. The board submitted the matter to an ad hoc committee of medical staff, directing them to recommend a resolution in compliance with the standards of the Joint Commission on Accreditation of Hospitals ("JCAH") regarding supervision of nurse anesthetists.

The ad hoc committee recommended that St. Peter's institute supervision of all nurse anesthetists by anesthesiologists but Even though they had approved the recommendation, at least three of the four anesthesiologists continued to openly discuss plans of leaving St. Peter's. On April 9 and 11, 1979, the Board of Trustees met to discuss the committee's recommendation. The Board minutes indicate that the board rejected the recommendation, in part, because the anesthesiologists were threatening to leave. Instead, the board decided to offer an exclusive contract for anesthesia services.

"grandfather" Oltz' free lance position as an exception to the policy. The committee further recommended placing Oltz within the administrative supervision of the department of anesthesia while leaving his clinical supervision to the operating surgeons. Upon inquiry, the committee received confirmation from JCAH personnel that such supervision would satisfy JCAH standards. The medical staff, including the anesthesiologists, voiced approval of the recommendation, and the committee submitted the recommendation to the board of trustees.

St. Peter's advertised nationally for proposals from anesthesiologists to enter an exclusive contract. St. Peter's received proposals from various groups of doctors but ultimately awarded the contract to an association formed by three of the four anesthesiologists already in Helena. On April 29, 1980, Purcell wrote Mr. Oltz that the exclusive contract would commence and Oltz' billing contract would terminate on July 14, 1980.

Following the termination, the anesthesiologists at St. Peter's offered Mr. Oltz a salaried position as an employee in their association but under their clinical supervision. The salary offered to Mr. Oltz was $40,000. Mr. Oltz rejected the offer and advertised nationally for employment. Ultimately, Mr. Oltz and his wife accepted positions on the University of Iowa faculty, and Mr. Oltz eventually became chief nurse anesthetist at a regional medical center of the university. After Mr. Oltz' departure from St. Peter's, each of the anesthesiologists in Helena experienced increased annual earnings by 40 to 50%.

PROCEDURAL HISTORY

Mr. Oltz sued St. Peter's and the four anesthesiologists under section one of the Sherman Act. The four doctors settled, paying $462,500, and the case was dismissed as to them. The case against St. Peter's proceeded to a bifurcated jury trial on a theory of conspiracy to boycott and exclude competition. The jury found liability by special verdict.

Before the trial on damages, the district court ruled in limine to exclude evidence of Mrs. Oltz' earnings after 1980. The jury then awarded Mr. Oltz $212,182 damages for loss of income to the date of trial and $209,649 damages for loss of future income.

St. Peter's moved for judgment notwithstanding the verdict or for a new trial on the issue of liability. The district court denied the motions but sua sponte ordered a new trial on damages. Oltz v. St. Peter's Community Hosp., 656 F.Supp. 760, 765 (D.Mont.1987). The district court found that the damages awarded were excessive and that the court had caused the excess by erroneously excluding evidence of Mrs. Oltz' income after 1980. Id. at 764-65.

Both parties sought our permission to appeal the district court's post-verdict ruling under 28 U.S.C. Sec. 1292(b). We granted permission, and the parties perfected appeals pursuant to Fed.R.App.P. 5(d).

ISSUES PRESENTED

St. Peter's appeal from the jury verdict on liability and Oltz' appeal from the order granting a new trial on damages raise four issues that we must decide:

(1) whether the district court improperly removed from the jury the factual determination of the relevant market;

(2) whether the duration and purpose of the exclusive contract between St. Peter's and several M.D. anesthesiologists preclude a finding of intent to injure competition;

(3)...