American Medical Ass'n v. United States, No. 7929

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Writing for the Court: MILLER, RUTLEDGE and MARTIN, Associate Justices
• Citation: 130 F.2d 233
• Decision Date: 15 June 1942
• Docket Number: No. 7929,7930.
• Parties: AMERICAN MEDICAL ASS'N v. UNITED STATES. MEDICAL SOC. OF DISTRICT OF COLUMBIA v. SAME.

130 F.2d 233 (1942)

AMERICAN MEDICAL ASS'N
v.
UNITED STATES.
MEDICAL SOC. OF DISTRICT OF COLUMBIA
v.
SAME.

Nos. 7929, 7930.

United States Court of Appeals for the District of Columbia.

Decided June 15, 1942.

As Amended September 21, 1942.

Writ of Certiorari Granted in Part October 12, 1942.

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Messrs. Seth W. Richardson and William E. Leahy, both of Washington, D. C., with whom Messrs. Edward M. Burke, of Chicago, Ill., and Charles S. Baker, and Warren E. Magee, both of Washington, D. C., were on the brief, for appellant in each case

Messrs. John Henry Lewin and Grant W. Kelleher, Special Assistants to the Attorney General, with whom Thurman W. Arnold, Assistant Attorney General, and Messrs. E. Compton Timberlake and Walton S. Allen, both of Washington, D. C., were on the brief, for appellee in each case.

Mr. Edward M. Curran, United States Attorney, of Washington, D.C., also entered an appearance for appellee in each case.

Before MILLER, RUTLEDGE and MARTIN, Associate Justices.

Writ of Certiorari Granted in Part October 12, 1942. See ___ U.S. ___, 63 S.Ct. 44, 87 L.Ed. ___.

MILLER, Associate Justice.

In United States v. American Medical Association,¹ we held that the term "in restraint of trade" as used in Section 3 of the Sherman Act, 15 U.S.C.A. § 3, had its genesis in the common law; that the practice of medicine was recognized by the English cases as constituting trade; that a restraint imposed upon the practice of medicine may constitute a restraint of trade; that restraints imposed upon the operation of hospitals and upon Group Health Association, designed to prevent it from making available to and financing medical services on behalf of its members may constitute restraint of trade; that the indictment under which appellants were charged stated a case under Section 3 of the Sherman Act. Accordingly, we held that the indictment was sufficient as against a demurrer; we reversed a judgment of the District Court, which had sustained a demurrer, and remanded the case for trial. Upon the trial which followed and at the close of the Government's case the court directed verdicts of acquittal for two unincorporated associations and two individual defendants. Thereafter the jury convicted the appellants and acquitted all other defendants. Appeals from the judgment of the District Court, based upon these convictions, were consolidated for hearing in this court.

On this appeal it is suggested that the Supreme Court, in Apex Hosiery Co. v. Leader,² repudiated the doctrine stated in our earlier decision; hence that we should reconsider and abandon the position which we there took. But we see no reason to adopt the suggestion which, apparently, grew out of appellants' failure to distinguish between trade and restraint of trade. Appellants' confusion is evidenced by the following statement from their brief: "The Apex case held in substance and effect that no activity could be in `trade' unless it was a commercial activity and exercised and used in such a way as to affect the market either by fixing prices or suppressing competition in the market to the injury of the public." Of course the Court did not so hold, nor has any court ever so held. Most activities which are in trade serve, rather than injure, the public.

In the Apex case,³ no question was involved as to whether the petitioner was engaged in trade or commerce. The opening sentence of the opinion states, as an undisputed fact: "Petitioner, a Pennsylvania corporation, is engaged in the manufacture, at its factory in Philadelphia, of hosiery, a substantial part of which is shipped in interstate commerce." Neither was the Court in doubt as to whether trade or commerce was affected by the actions complained of.⁴ The question which was presented for its

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decision was whether the conduct of the labor union and its members constituted restraint of trade, within the meaning of Section 1 of the Sherman Act, 15 U.S.C.A. § 1.⁵

In answering this question the Court, first, restated the familiar common law doctrines relating to contracts and combinations in restraint of trade and the equally familiar history of the taking over, by the Sherman Act, of the common law concept of illegal restraints.⁶ It then concluded that (1) the Sherman Act does not condemn all combinations and conspiracies which interrupt interstate transportation;⁷ (2) labor unions are to some extent and in some circumstances subject to the Act;⁸ but (3) it does not apply to all labor union activities affecting interstate commerce;⁹ (4) the evil at which the Sherman Act was aimed was the control of the market "by suppression of competition in the marketing of goods and services * * *";¹⁰ (5) the end sought was the prevention of "restraints to free competition in business and commercial transactions which tended to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services * * *";¹¹ and, finally (6) "Restraints on competition or on the course of trade in the merchandising of articles moving in interstate commerce is not enough, unless the restraint is shown to have or is intended to have an effect upon prices in the market or otherwise to deprive purchasers or consumers of the advantages which they derive from free competition."¹²

The trade or commerce which was involved in the present case was of three kinds: (1) The making available and financing of medical and hospital services; (2) medical service itself, i.e., service rendered by medical doctors; (3) hospital service, i.e., service rendered by hospital staffs and the use of hospital facilities. As we indicated in our earlier opinion the common law recognized the practice of medicine as being trade¹³ and there is nothing in the Apex case to suggest the contrary. It may be regrettable that Congress chose to take over in the Sherman Act the common law concept of trade, at least to the extent of including therein the practice of medicine. Developments which have taken place during recent decades in the building up of standards of professional education and licensure, together with self-imposed standards of discipline and professional ethics, have, in the belief of many persons, resulted in substantial differences between professional practices and the generally accepted methods of trade and business. As we pointed out in our earlier decision,¹⁴ the American Medical Association and other local medical associations have undoubtedly made a profound

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contribution to this development. However, our task is not to legislate or declare policy in such matters but, rather, to interpret and apply standards and policies which have been declared by the legislature. That Congress did use the common law test there is no doubt. That Congress was not otherwise advised was perhaps because of the failure of the professional groups to insist upon the distinction and to secure its legislative recognition. In any event, there is no doubt that Group Health Association was engaged in trade or commerce, within the meaning of the applicable section of the statute.¹⁵ It is not necessary, in order to constitute trade or business, that it shall be carried on for profit.¹⁶ Appellants protest that the District Court has said in Group Health Association v. Moor:¹⁷ "The actions of the plaintiff G.H.A. in no way tend to commercialize the practice of medicine." They argue from this that the activities of Group Health Association were not commercial activities and hence not in trade within the meaning of the Sherman Act. But this argument misses the point. The activities of Group Health Association are commercial, but because the lay executives of Group Health Association do not in any way interfere with the professional work of the medical doctors, their commercial activities do not tend to commercialize the practice of medicine. Medical doctors have long conceded the propriety of medical services furnished by large industrial organizations, to their employees, by doctors also in their employ.¹⁸ There is no greater

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incongruity in the making available of medical services by a cooperative association or a nonprofit mutual benefit association, in similar manner; nor any more reason for suggesting that such industrial organizations are not engaged in commercial activities. In each case the service is rendered in accordance with the standards of the profession and to that extent uncontrolled by the corporate employer.¹⁹ But, at the same time, the salaries of such professional employees may undoubtedly be paid by the corporation and charged as an ordinary and necessary expense of business.²⁰ Although there is authority for the proposition that for some purposes charitable hospitals are not engaged in trade, business or industry,²¹ we have no doubt that the hospitals described in the indictment were engaged in trade and commerce within the meaning of the common law and of the Sherman Act.²²

So far as Group Health and the hospitals are concerned, therefore, their activities are properly described as business and commercial in character. There is also no question that commercial and business competition was not only the possible but the probable result of Group Health's activities. Consequently — entirely apart from any direct restraint upon the practice of medicine itself — if a conspiracy was shown, the purpose of which was to restrain competition, raise prices, or otherwise control the market to the detriment of purchasers or consumers of medical or hospital services, by destroying or injuring Group Health Association, it was sufficient to sustain the conviction.

The fact of commercial and business competition is the predominant note in the controversy which preceded the initiation of criminal prosecutions in these cases.²³ One of the major purposes of Group Health

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