Advanced Health-Care v. Giles Memorial Hosp.

• Decision Date: 15 March 1994
• Docket Number: Civ. A. No. 88-0346-R.
• Citation: 846 F. Supp. 488
• Court: U.S. District Court — Western District of Virginia
• Parties: ADVANCED HEALTH-CARE SERVICES, INC., Plaintiff, v. GILES MEMORIAL HOSPITAL & Medserv Corporation, Defendants.

846 F. Supp. 488

ADVANCED HEALTH-CARE SERVICES, INC., Plaintiff, v. GILES MEMORIAL HOSPITAL & Medserv Corporation, Defendants.

Civ. A. No. 88-0346-R.

United States District Court, W.D. Virginia, Roanoke Division.

March 15, 1994.

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John Thomas Arnold, Moss & Rocovich, P.C., Roanoke, VA, James A. Burt, Strong & Associates, P.C., Springfield, MO, for Advanced Health-Care Services, Inc.

Michael F. Urbanski, Heman Alexander Marshall, III, Woods, Rogers & Hazlegrove, P.L.C., Roanoke, VA, for Giles Memorial Hosp. and Health East.

Charles Nealson Dorsey, William Hitchcock Lindsey, Bounds & Dorsey, P.C., Roanoke, VA, George R. Clark, Robert J. Aamoth, Alexander P. Starr, Reed, Smith, Shaw & McClay, Washington, DC, for Medserv Corp.

MEMORANDUM OPINION

TURK, District Judge.

I.

This multi-count antitrust case was filed by Advanced Health-Care Services, Inc. ("AHCS"), a corporation engaged in the business of renting and selling durable medical equipment ("DME") in southwest Virginia.¹ Defendant Giles Memorial Hospital ("Giles Memorial") is a Virginia not-for-profit hospital corporation in Pearisburg, Virginia. Defendant Medserv is a corporation engaged in the business of renting and selling DME.² On August 1, 1985, Giles Memorial and Medserv entered into a contract to provide DME to residents in Giles Memorial's service area.³ This joint venture contract established a home DME business located in Giles Memorial called Home Connections. Under the contract, Giles Memorial essentially provided office space and Medserv provided personnel and DME. Giles Memorial received thirty-five percent of Home Connections' collections. In 1991 the Giles Memorial-Medserv contract was terminated. Home Connections terminated at the same time.

AHCS and another DME business, McLean's Drug, shared the DME business from Giles Memorial prior to the entry of Home Connections into the market.⁴ AHCS' market share predictably declined after Home Connections started up. This decline in business led AHCS to close its Pearisburg office on March 31, 1986. AHCS filed this lawsuit on August 1, 1988. By order of this court dated December 29, 1988, this case was dismissed pursuant to Fed.R.Civ.P. 12(b)(6). The Fourth Circuit Court of Appeals reversed, Advanced Health-Care Services, Inc. v. Radford Community Hosp., 910 F.2d 139 (4th Cir.1990) ("Radford") and set forth the law of this case. Extensive discovery is now complete and defendants have filed a joint motion for summary judgment. As the court finds that plaintiff has not met its burdens to go forward with trial, defendants' motion is granted. AHCS' second amended complaint alleges seven counts of federal and state antitrust violations; these will be examined in turn.

II.

The complex nature of antitrust litigation encourages summary disposition of such cases where permissible. The Fourth Circuit Court of Appeals has approved of the use of summary judgment in antitrust cases. Oksanen v. Page Memorial Hosp., 945 F.2d 696, 708 (4th Cir.1991) (en banc), cert. denied, ___ U.S. ___, 112 S.Ct. 973, 117 L.Ed.2d 137 (1992). In a case with as much complicated and detailed evidence as this, once the moving party has met its burden under Fed.R.Civ.P. 56(c), the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986), but must come forward with sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. See Abcor Corp. v. AM Intern., Inc., 916 F.2d 924, 930 (4th Cir. 1990). After four years of discovery, plaintiff has not been able to come forward with significantly probative evidence sufficient to create a triable issue of fact.

III. Unreasonable Restraint of Trade

Count 1 of plaintiff's second amended complaint alleges that defendants' implementation of the August 1, 1985 contract constituted an unreasonable restraint of trade in violation of section 1 of the Sherman Act, 15 U.S.C. § 1.⁵ To prove that the contract constituted an unreasonable restraint of trade, the Fourth Circuit instructed that AHCS must show:

(1) that the conspiracy produced adverse, anticompetitive effects within the relevant product and geographic market; (2) that the objects and conduct pursuant to the conspiracy were illegal; and (3) that the plaintiff was injured as a proximate result of the conspiracy.

Radford, 910 F.2d at 144 (quoting Terry's Floor Fashions, Inc. v. Burlington Industries, Inc., 763 F.2d 604, 610 n. 10 (4th Cir. 1985)).

Plaintiff has not produced significantly probative evidence that the contract produced adverse, anticompetitive effects within the relevant product and geographic market. The parties have agreed, at least for the purpose of this motion, that the relevant product market is DME and the geographic market is the "greater Pearisburg, Virginia region," or Giles County. Prior to the entry of Home Connections, AHCS and McLean's Drug roughly split the market.⁶ After Home Connections entered the market, Super-Aid also began to do business in the DME market. The market became less concentrated after the entry of Home Connections, as consumers had a greater choice of suppliers. Plaintiff has submitted no evidence indicating that prices increased upon Home Connections' entry. For example, as might be expected from the appearance of new competitors, prices for oxygen concentrator rentals declined during the period in question. Nor has plaintiff demonstrated a substantial or continuing decline in the quality of DME available to consumers in the market as a result of any actions of Home Connections.⁷ Thus, since plaintiff has neither demonstrated a rise in the price or reduction in quality of DME, nor a decrease in the number of firms supplying DME to consumers in Giles County, "the aphorism that `the antitrust laws were enacted for the protection of competition not competitors' rings true in this case." Oksanen, 945 F.2d at 709 (citations omitted). See also Sewell Plastics, Inc. v. Coca-Cola Co., 720 F.Supp. 1196 (W.D.N.C. 1989) (plaintiff's § 1 claim dismissed — general market condition for plastic bottles was more competitive after joint venture contract since price and market concentration decreased, production increased and overall quality and service was substantially unchanged), aff'd per curiam, 912 F.2d 463 (4th Cir.1990), cert. denied, 498 U.S. 1110, 111 S.Ct. 1019, 112 L.Ed.2d 1101 (1991).

AHCS may have been hurt by Home Connections' entry into the market, but there is no evidence that competition as a whole in the relevant market has been harmed. Based on the foregoing, plaintiff is unable to establish that the contract produced adverse, anticompetitive effects within the relevant product and geographic market; therefore, summary judgment is appropriate for Count 1.⁸

IV. Monopolization

Plaintiff alleges in Count 2 that defendants monopolized the DME market in Giles County in violation of section 2 of the Sherman Act. 15 U.S.C. § 2. To prevail on a monopolization claim, a plaintiff must show possession of monopoly power in a relevant market, willful acquisition or maintenance of that power in an exclusionary or predatory manner, and causal antitrust injury. Radford, 910 F.2d at 147. Plaintiff alleges that Home Connections possessed at least a seventy-five percent market share of the DME market in Giles County and that this constitutes monopoly power. Defendants claim that Home Connections never achieved a dominant share of the DME market in Giles County. Numerous cases and commentators have suggested that absent extraordinary circumstances, a market share over fifty percent is required to show market power.⁹ Plaintiff's evidence of market share was compiled by its expert, Dr. Roger Blair. Dr. Blair reports that Home Connections' market share reached a peak of 57.8 percent in 1989. Dr. Blair made two mistakes in his calculations. First, Dr. Blair calculated Home Connections' market share based on billed revenue, while calculating all other suppliers' market shares on collected revenue. Second, Dr. Blair calculated Home Connections' market share based on revenue from Giles County residents and from non-Giles County residents, but calculated others suppliers' market shares based on revenue from Giles County only.¹⁰ When these mistakes are corrected, Home Connections' true market share of DME in Giles County peaks at 44.1 percent in 1989 and averages 32.9 percent over the 1986-1989 period of its existence. Thus, defendants' market share was significantly below the established floor for showing monopoly power.

Another means of viewing monopoly power is through market share trends. If the defendants' market share is declining and/or other competitors' market shares are rising, then the defendants can hardly possess monopoly power. See, e.g., Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 826 (6th Cir.1982) ("The fact that defendant's share of the market was declining also belies whatever inference of capacity to monopolize that may be drawn from the size of its market share."); United States v. Syufy Enterprises, 903 F.2d 659, 666 (9th Cir.1990) ("In evaluating monopoly power, it is not market share that counts, but the ability to maintain market share.") (emphasis in original). Toward the end of the relevant time period, Home Connections steadily lost ground to other DME firms. For example, from 1989 to 1990, Home Connections' market share dropped 22.7 percent, while McLean's market share rose 13.7 percent, Hometown's market share rose 62.5 percent, and Super-Aid's market share rose 140 percent.¹¹ AHCS's market share fell 2.7 percent, but given its competitors' gains, it would be speculative to attribute plaint...