Acuity Optical Labs., LLC v. Davis Vision, Inc.
| Decision Date | 23 August 2016 |
| Docket Number | 14-cv-03231 |
| Parties | ACUITY OPTICAL LABORATORIES, LLC, Petitioner, v. DAVIS VISION, INC., Respondent. |
| Court | U.S. District Court — Central District of Illinois |
Before the Court is Respondent Davis Vision, Inc.'s Motion for Summary Judgment (d/e 27) and Petitioner Acuity Optical Laboratories, LLC's Motion for Partial Summary Judgment (d/e 35). Respondent's Motion is GRANTED IN PART and DENIED IN PART WITH LEAVE TO REFILE AT THE CLOSE OF DISCOVERY and Petitioner's Motion is DENIED. The Court finds that Davis Vision is entitled to summary judgment on Counts V, VI, and IX, and Acuity is not entitled to summary judgment on Count I because the Mandatory Lab Policy is neither a per se unlawful restraint on trade between Davis Vision and its competitors nor a per se unlawful forced group boycott. The Court further finds that Davis Vision is entitled to summary judgment on Counts III, IV, X, XI, and XIV because Acuity fails to state a claim upon which relief can be granted in those counts. The Court further finds that Davis Vision is not entitled to summary judgment on Counts I, II, VII, VIII, XII, and XIII, and Acuity is not entitled to summary judgment on Count II because with further development of the record through discovery, reasonable issues of material fact may exist as to the merits of the claims. However, Davis Vision may refile its motion for summary judgment on these counts once discovery has concluded.
Acuity Optical Laboratories, LLC of Illinois brings this suit against Davis Vision, Inc. of New York for damages and permanent injunctive relief. Acuity claims that Davis Vision's Mandatory Lab Policy, a requirement that essentially all of Davis Vision's in-network providers agree to provide only Davis Vision manufactured lenses to Davis Vision members constitutes: (1) a per se unlawful horizontal conspiracy with providers under Section 1 of the Sherman Antitrust Act and Section 1 of the Illinois Antitrust Act(Counts I and VI); (2) a per se unlawful collection of vertical agreements that, in reality, act as a horizontal forced group boycott among providers, orchestrated by Davis Vision, under Section 1 of the Sherman Antitrust Act, Section 3 of the Clayton Act, and Sections 1 and 4 of the Illinois Antitrust Act (Counts I, V, VI, and IV); (3) an otherwise unlawful conspiracy under Section 1 of the Sherman Antitrust Act and Section 2 of the Illinois Antitrust Act (Counts I and VII); (4) an illegal plan to monopolize under Section 2 of the Sherman Antitrust Act and Section 3 of the Illinois Antitrust Act (Counts II and VIII); (5) a per se unlawful tying arrangement under Sections 1 and 2 of the Sherman Antitrust Act (Count III); (6) an illegally compulsory provision within Davis Vision's provider agreement under the Illinois Insurance Code (Count X); (7) an unreasonable restriction on members' access to healthcare under the Illinois Insurance Code (Count XI); (8) tortious interference with Acuity's ability to enter into valid business relationships with providers (Count XII); and (9) an illegal restriction on members' right to choose where to purchase lenses under the Eyeglass Rule, 16 C.F.R. § 456 (Count XIV). Acuity further claims that Davis Vision: (1) has engaged in illegal predatory pricing under section 2of the Clayton Act (Count IV); and (2) has committed illegal misrepresentation under the Lanham Act (Count XII).
On August 25, 2015, about four months prior to the close of fact discovery, Davis Vision filed its motion for summary judgment (d/e 27). Acuity filed a combined response to Davis Vision's motion and Acuity's own motion for partial summary judgment (d/e 35). Responses and replies were subsequently filed. The Court heard oral arguments on the motions on April 11, 2016.
The following is a summary of the facts that the parties agree are undisputed:
a. The Parties in this Action Are Acuity, a Lens Manufacturer and Davis Vision, a Vision Benefits Provider.
Acuity Optical Laboratories, LLC is a manufacturer of eyeglass lenses and other ophthalmic goods ("lens manufacturer"), headquartered in Normal, Illinois. Day-to-day business operations of both Acuity and All About Eyes are run by Adam Rosengren. Initially, Acuity primarily sold eyeglass lenses ("lenses") only to its affiliated chain of retail stores, All About Eyes. However, in July 2011, after Acuity's lab was destroyed by an adjacent building's collapse, Acuity invested in new equipment and began selling lensesto third-party opticians, optometrists, and retail outlets (together "providers"). Acuity conducts its third-party lens sales via an independent department within the company that operates under the name Identity Optical. Identity Optical is managed by Peter Kimerling.
Acuity uses only state-of-the-art digital lens manufacturing technology, also known as "freeform," to manufacture lenses for the national market. This technology allows Acuity to manufacture lenses that are superior to the lenses produced with conventional lens manufacturing technology. Further, Acuity offers next-day-air shipping and regularly reduces prices on its lenses to acquire new business.
As of February 2015, Acuity had approximately 350 open customer accounts across the entire continental United States, mostly with optometrists. Also, Acuity's affiliated retail store, All About Eyes, has agreements to produce lenses for several vision benefits companies. The predominant vision benefits plan with which Acuity does business is EyeMed, as a result of EyeMed's coverage of State of Illinois employees and Acuity's presence in Illinois.
Davis Vision is a managed vision care company headquartered in San Antonio, Texas. Davis Vision is wholly owned by HVHC, Inc. Davis Vision shares its headquarters with another wholly owned subsidiary of HVHC called Visionworks. No physical separation exists between the Davis Vision's and Visionworks' headquarters. Visionworks operates a chain of retail vision care stores. Davis Vision and Visionworks each own two laboratories that produce lenses. John Kay, an HVHC employee, supervises all four labs. Along with sharing office space, Visionworks and Davis Vision also share information, such as budgeting forecasts and other financial information.
Davis Vision sells different forms of vision care plans to private employers, government employers, and other plan sponsors. Individual members receive Davis Vision's vision care benefits through an employer or sponsor. Davis Vision has two types of members: discount plan members, who receive discounts on eye exams, glasses, contacts, and other goods; and funded plan members, who receive insurance coverage for their vision care. However, Davis Vision derives revenue primarily from the memberswith funded plans, with little to no revenue coming from discount plan members.
Davis Vision contracts with providers for in-network status in Davis Vision's vision plans. Davis Vision members receive benefits from their vision plans only when they go to these in-network providers for exams, lenses, and other services. As a result, Davis Vision funded plan members rarely go to out-of-network providers for lenses. However, if a funded plan member is prescribed a specific lens that Davis Vision does not produce, the member can and must obtain that product from an out-of-network provider, and the member does not receive any contribution from his or her Davis Vision plan.
As a part of Davis Vision's contract with most in-network providers, the provider must agree to Davis Vision's Mandatory Lab Policy. The Mandatory Lab Policy requires that the provider uses lenses manufactured by one of Davis Vision's labs to fill any orders for lenses by a Davis Vision member. Davis Vision's contracts with its employers and plan sponsors do not contain any such language regarding the Mandatory Lab Policy between Davis Vision and providers. By extension, Davis Vision members are also unaware ofthe policy. The Mandatory Lab Policy has been a part of Davis Vision's business model since the company was established in 1974. For almost all providers, if the provider is not willing to accept the Mandatory Lab Policy, Davis Vision will not contract with that provider. However, Visionworks, a lens retailer, along with five other large lens retailers, including Costco and Walmart, are exempted from the policy.
Davis Vision's funded members pay a co-pay for the lenses obtained with their vision care benefits, rather than paying for the lenses outright. As a result, Davis Vision considers lenses to be a cost of delivering benefits. To limit this cost, Davis Vision manufactures the lenses for use by its members. Davis Vision manufactures lenses only for this purpose and does not sell the lenses it manufacturers to any third parties. In fact, Davis Vision does not even sell the lenses manufactured for its members to the providers. Rather, a Davis Vision member pays a co-pay to Davis Vision for a pair of lenses and Davis Vision provides the lenses to the provider, at no charge, for the provider to use in the member's eyeglasses. Then, Davis Vision pays the provider a dispersing fee. According to Davis Vision, the Mandatory Lab Policy is a criticalelement of its effort to control the cost of lenses for the benefit of its members. Davis Vision produces only about 10% of its lenses using the same state-of-the-art "freeform/digital lens" technology as that employed by Acuity.
b. The Parties Operate in Different Product Markets.
Davis Vision members constitute about 18 million of approximately 150.7 million vision plan participants in the United States. Therefore, the Mandatory Lab Policy impacts fewer than 12% of all vision plan participants nationally. Davis Vision produced approximately 2.3 million pairs of lenses in 2014. More than 98 million pairs of lenses were produced nationally in 2014. Therefore, Davis Vision's labs produced less than 2.4% of...
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