Austin v. Blue Cross and Blue Shield of Alabama

• Decision Date: 22 June 1990
• Docket Number: No. 88-7406,88-7406
• Parties: 1990-1 Trade Cases 69,070 Dennis W. AUSTIN, Individually and as representatives of the Plaintiff's Class; and Ernest D. Woodall, Jr., Individually and as representative of the Plaintiff's Class, Plaintiffs-Appellants, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1385

903 F.2d 1385

1990-1 Trade Cases 69,070

Dennis W. AUSTIN, Individually and as representatives of the Plaintiff's Class; and Ernest D. Woodall, Jr. Individually and as representative of the Plaintiff's Class Plaintiffs-Appellants, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, a corporation Defendant-Appellee.

No. 88-7406.

United States Court of Appeals Eleventh Circuit.

June 22, 1990.

C. Knox McLaney, III, Montgomery, Ala., Jerry R. Knight, Decatur, Ala., for plaintiffs-appellants.

Robert D. Eckinger, Lange, Simpson, Robinson & Somerville, Birmingham, Ala., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Alabama.

Before RONEY and HILL, Senior Circuit Judges ^*, and MARCUS ^**, District Judge.

MARCUS, District Judge.

Dennis W. Austin and Ernest D. Woodall, Jr. appeal from the June 7, 1988 district court order dismissing their Amended Complaint on the finding that Appellants lacked antitrust standing to bring this action. We find no error in the district court's determination and accordingly we affirm.

I.

This action arose out of allegations contained in Appellants' Amended Complaint filed in the United States District Court for the Middle District of Alabama. In their Amended Complaint, Austin and Woodall, residents of Decatur, Alabama, allege that Blue Cross and Blue Shield of Alabama ("Blue Cross") entered into contracts, combinations or conspiracies with all, or substantially all, of the hospitals in the state of Alabama for the purpose of creating or maintaining a monopoly or for the purpose of eliminating, lessening, discouraging, or impeding competition from others engaged in the health, medical and hospital insurance business. The Amended Complaint further charges that the Defendant and the hospitals, including the Decatur General Hospital and the Huntsville Hospital, engaged in certain illegal acts and practices. The Amended Complaint claims that agreements reached between Blue Cross and the hospitals wrongfully provided for the hospitals to accept payments for services rendered from Blue Cross, on behalf of its insured, in amounts lower than charges which the hospitals assessed to patients insured by competitors of Blue Cross and patients who do not subscribe to health insurance for like services. Appellants say that the agreements between Blue Cross and the hospitals caused the hospitals to engage in a practice known as "cost shifting," a process whereby patients insured with other insurance companies as well as uninsured patients are assessed charges higher than they would be assessed but for the alleged preferential treatment given to Blue Cross and its insured pursuant to the alleged agreements. It is further charged that the agreements put Blue Cross in a superior competitive position by giving Blue Cross a decided actuarial advantage over its competitors. The Appellants claim that Blue Cross' actions in allegedly entering into agreements regarding price concessions with the hospitals violate both Sections 1 and 2 of the Sherman Act, Title 15 U.S.C. Secs. 1, 2.

Appellant Austin charges specifically that his wife and newborn child incurred substantial medical expenses at Decatur General Hospital and Huntsville Hospital during the months of December 1986 and March 1987. While Dennis Austin and his dependents were covered by a health, medical and hospital insurance policy issued by Time Insurance Company--not a party to the law suit--Austin was responsible for certain uncovered hospital expenses as well as a twenty percent co-payment for costs which were covered under the policy. Austin claims that due to "cost shifting" engaged in by the hospitals as a result of agreements reached with Blue Cross, he was forced to pay inflated charges for the health care received by his wife and child.

Appellant Ernest D. Woodall, Jr. claims to have been treated at the Emergency Room of Decatur General Hospital at various times during 1985 and 1986. He charges that he was not covered by health, medical or hospital insurance during the period in which he received treatment and that he, too, incurred inflated charges for hospital services due to the "cost shifting" practices engaged in by the hospital. The Amended Complaint sought declaratory and injunctive relief as well as treble damages for the purported violations of the Sherman Act.

On March 4, 1988, Appellee moved to dismiss based on the lack of antitrust standing. Appellants responded on March 30, 1988, and on June 7, 1988 the district court granted the motion to dismiss finding that Austin and Woodall lacked "antitrust standing." This appeal ensued.

II.

The question of standing to sue under the Sherman and Clayton Acts is one of law. Midwest Communications v. Minnesota Twins, 779 F.2d 444, 449 (8th Cir.1985), cert. denied, 476 U.S. 1163, 106 S.Ct. 2289, 90 L.Ed.2d 730 (1986). In order to determine whether a plaintiff has standing to bring an antitrust action, a court must review the allegations contained in the complaint. Pan-Islamic Trade Co. v. Exxon Corp., 632 F.2d 539, 547 (5th Cir.1980), cert. denied, 454 U.S. 927, 102 S.Ct. 427, 70 L.Ed.2d 236 (1981); In Re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1168 (5th Cir.1979). More than constitutional standing must exist; "the court must find a close relationship between the plaintiff's injury and the alleged antitrust violation." Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1493 (11th Cir.1985), cert. denied, 476 U.S. 1153, 106 S.Ct. 2267, 90 L.Ed.2d 712 (1986).

Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, defines very broadly the class of persons who may bring a private damage action under the antitrust laws. That section provides:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

The Supreme Court has observed that "[a] literal reading of the statute is broad enough to encompass every harm that can be attributed directly or indirectly to the consequences of an antitrust violation." Associated General Contractors v. Carpenters, 459 U.S. 519, 529, 103 S.Ct. 897, 903, 74 L.Ed.2d 723 (1983). However, in Associated General Contractors, the Court rejected so expansive a reading of Sec. 4 noting that the question of whether a plaintiff can recover for alleged antitrust injuries "cannot be answered simply by reference to the broad language of Sec. 4. Instead ... the question requires us to evaluate the plaintiff's harm, the alleged wrongdoing by the defendants, and the relationship between them." Id. at 535, 103 S.Ct. at 907. It is clear that "the judicial remedy [of Sec. 4] cannot encompass every conceivable harm that can be traced to alleged wrongdoing" Id. at 537, 103 S.Ct. at 908. See also Hawaii v. Standard Oil Co., 405 U.S. 251, 263, n. 14, 92 S.Ct. 885, 891, n. 14, 31 L.Ed.2d 184 (1972) ("The lower [federal] courts have been virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation"); Southhaven Land Co. v. Malone & Hyde, Inc., 715 F.2d 1079, 1081 (6th Cir.1983) ("[A]pplication of Section 4 has of necessity been judicially confined to limit the remedy available thereunder to particular classes of persons and for redress of particular forms of injury.")

The federal courts have long struggled to develop a precise test to determine whether a party alleged to have been injured by an antitrust violation may recover treble damages. This struggle has been compared with "the struggle of common-law judges to articulate a precise definition of the concept of 'proximate cause' ". Associated General Contractors, 459 U.S. at 535-36, 103 S.Ct. at 907. In Associated General Contractors, the Supreme Court recognized the impracticality inherent in the application of a "black-letter rule" to determine whether a plaintiff has standing to recover for an antitrust violation. Id. at 536, 103 S.Ct. at 907. In doing so, the Court suggested that the use of formulations such as the "direct injury" test and the "target area" test may tend to "lead to contradictory and inconsistent results." Rather, the Court observed, "[i]n our view, courts should analyze each situation in light of the factors set forth in the text...." Id. at 536, n. 33, 103 S.Ct. at 907, n. 33.

Associated General Contractors involved a union's claim that an association of contractors coerced third parties and other members of the contractor's association into avoiding business relationships with union contractors and subcontractors. In determining that the union lacked standing to bring an action under the Clayton Act, the Supreme Court declined to apply a rigid test to resolve the standing issue. Instead, the Court applied the following battery of factors to reach its conclusion: 1) the existence of a causal connection between the antitrust violation and the alleged injury; 2) the nature of plaintiff's alleged injury; 3) the directness or indirectness of the asserted injury and the related inquiry of whether the damages are speculative; 4) the potential for duplicative recovery or complex apportionment of damages; and, finally, 5) the existence of a more direct victim of the alleged anti-competitive conduct. Id. at 536-45, 103 S.Ct. at 907-12. See also Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1494-95 (construing factors employed in Associated General Contractors ). The Court noted that the foregoing factors are reflective of "previously decided cases [which] identify factors that circumscribe and guide the exercise of judgment in deciding whether the law...