Ballard v. Blue Shield of Southern West Virginia, Inc., MEDICAL-SURGICAL
| Citation | 543 F.2d 1075 |
| Decision Date | 19 October 1976 |
| Docket Number | Nos. 75-1982,MEDICAL-SURGICAL,s. 75-1982 |
| Parties | 1976-2 Trade Cases 61,123 Herman L. BALLARD et al., Appellants, v. BLUE SHIELD OF SOUTHERN WEST VIRGINIA, INC., a West Virginia Corporation, et al., Appellees. Herman L. BALLARD et al., Appellees, v. MONONGAHELASERVICE, INC., a West Virginia Corporation, et al., Appellants, and Blue Shield of Southern West Virginia, Inc., a West Virginia Corporation, et al., Defendants. Herman L. BALLARD et al., Appellees, v. WEST VIRGINIA MEDICAL SERVICE, INC., a West Virginia Corporation, et al., Appellants, and Blue Shield of Southern West Virginia, Inc., a West Virginia Corporation, et al., Defendants. to 75-1984. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
William D. Levine, Huntington, W.Va. (Marshall & St. Clair, David B. Daugherty, Huntington, W.Va., on brief), for appellants in 75-1982 and for appellees in 75-1983 and 75-1984.
William T. O'Farrell, Charleston, W.Va., Frederick P. Stamp, Jr., Wheeling, W.Va. (Schrader, Miller, Stamp & Recht, Wheeling, W.Va., Jackson, Kelly, Holt & O'Farrell, Charleston, W.Va., William T. Hancock Charles W. Davis, Richardson, Kemper & Hancock, Bluefield, W.Va., Fred Adkins, Thomas H. Gilpin, Huddleston, Bolen, Beatty, Porter & Copen, Huntington, W.Va., W. E. Mohler, Charleston, W.Va., Herbert G. Underwood, James M. Wilson, Steptoe & Johnson, Clarksburg, W.Va., on brief), for appellants in 75-1983 and 75-1984 and appellees in 75-1982.
Before BOREMAN and BRYAN, Senior Circuit Judges, and BUTZNER, Circuit Judge.
Six West Virginia chiropractors appeal from a judgment of the district court dismissing their antitrust suit against six corporations that sell Blue Cross-Blue Shield health insurance, the doctors who are directors of the corporations, and the West Virginia State Medical Association. Several of the defendants appeal from the denial of their motion to dismiss for lack of venue. Relying largely on three recent Supreme Court opinions, 1 which were not available to the district judge, we reverse the judgment of dismissal, affirm the order sustaining venue, and remand the case for further proceedings.
The chiropractors allege that the physicians, the medical association, and the corporations combined and conspired to refuse health insurance coverage for chiropractic services. This denial of coverage, the chiropractors claim, violates sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2) because it restrains and monopolizes the distribution of both health services and health insurance by making chiropractic services financially unattractive to consumers. They charge that the purpose and effect of the denial of coverage is to eliminate the competition of chiropractors throughout the state. The plaintiffs also asked for certification of the case as a class action on behalf of all West Virginia chiropractors.
The defendants moved to dismiss the case for lack of jurisdiction and venue and for failure to state a claim for which relief can be granted.
The district court dismissed the case on the pleadings, holding that the alleged conduct did not affect interstate commerce and that the McCarran-Ferguson Act and the learned profession doctrine exempted the defendants' activities from the antitrust laws. The court denied the defendants' motion to dismiss for improper venue and the chiropractors' request for certification of a class action.
The complaint alleges that the defendants' violations of the Sherman Act adversely affect interstate commerce by reducing the sale of therapeutic devices and equipment that are manufactured outside of West Virginia and purchased by chiropractors and their patients in the state. The complaint also charges that the violations increase the cost of health care to a substantial number of patients who travel in interstate commerce for chiropractic treatment, and that the defendants' monopoly injures interstate insurance companies that pay chiropractic claims.
It is well settled "(t)hat wholly local business restraints can produce the effects condemned by the Sherman Act." United States v. Employing Plasterers Association, 347 U.S. 186, 189, 74 S.Ct. 452, 454, 98 L.Ed. 618 (1954). Although merely incidental effects are insufficient, the restraints need not have a direct effect on interstate commerce to support jurisdiction. Doctors, Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48, 51-53 (3rd Cir. 1973). The applicable test is whether "the allegations in the complaint, if proven, could show that the conspiracy resulted in 'unreasonable burdens on the free and uninterrupted flow' " of goods and services in interstate commerce. Hospital Building Co. v. Rex Hospital 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976).
In Hospital Building Co., the hospital alleged that it purchased a substantial proportion of its supplies from out-of-state sources, that much of its revenue came from out of state, that it paid a management fee to an out-of-state company, and that its financing for a proposed expansion was from out-of-state lenders. The Court held this combination of factors to be sufficient to establish a substantial effect on interstate commerce within the meaning of the act. It also reiterated that "in antitrust cases, . . . dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." 425 U.S. at 746, 96 S.Ct. at 1853.
Following the "rigorous standard" prescribed in Hospital Building Co., 425 U.S. at 738, 96 S.Ct. 1848, we hold that the district court erred in dismissing this case on the pleadings. It is possible that the alleged reduction or elimination of the chiropractors' business throughout the entire State of West Virginia may adversely affect interstate commerce. At this stage in the proceedings, we cannot say with certainty that the effect on commerce is so insubstantial as to deny federal jurisdiction.
The district court also held that the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1013, exempts the corporate defendants from the operation of the antitrust laws because they conduct the business of insurance under regulation by West Virginia. The court's ruling, however, skirts a pivotal issue of this controversy.
The McCarran-Ferguson Act's exemption of state regulated insurance business from federal antitrust laws is not absolute. Congress expressly provided that the Sherman Act should remain applicable to boycotts and agreement to boycott. 15 U.S.C. § 1013(b). 2 See generally 7 Von Kalinowski, Antitrust Laws and Trade Regulation § 47.03 (1976). The Sherman Act proscribes even a peaceful, primary boycott designed to dissuade persons from dealing with others. Duplex Printing Press Co. v. Deering, 254 U.S. 443, 466-68, 41 S.Ct. 172, 65 L.Ed. 349 (1921). Consequently, the McCarran-Ferguson Act condemns this type of boycott. Cooperativa de Seguros Multiples v. San Juan, 294 F.Supp. 627 (D.P.R.1968).
The complaint alleges that the defendants have combined and conspired to refuse insurance coverage for the services offered by chiropractors, to refuse payment of claims for services rendered by chiropractors even though claims for identical services rendered by physicians are honored, and to refuse permission for chiropractors to participate as officers in the companies offering Blue Shield Plans. Although the complaint does not employ the term " boycott", we believe these allegations sufficiently charge a group boycott in violation of the Sherman Act. Cf. Radovich v. National Football League, 352 U.S. 445, 453, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957). The complaint, therefore, alleges conduct that falls within § 1013(b) of the McCarran-Ferguson Act subjecting the insurance companies, and those who have conspired with them, to the antitrust laws. Cf. Monarch Life Insurance Co. v. Loyal Protective Life Insurance Co., 326 F.2d 841 (2d Cir. 1963); Hill v. National Auto Glass Co., 293 F.Supp. 295 (N.D.Calif.1968).
The defendants contend that under the doctrine of Parker v. Brown,317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), they enjoy an exemption from the Sherman Act "wider in scope" than that afforded by the McCarran-Ferguson Act. The district judge properly declined to base his decision on this defense. The doctrine of Parker v. Brown deals with ascertaining the extent to which Congress intended a state's displacement of competition to be exempt from the Sherman Act. Section 1013(b) of the McCarran-Ferguson Act expresses congressional intention to subject boycotts by insurance companies to the Sherman Act. Consequently, there can be no justification for utilizing the principles of Parker v. Brown to impute a contrary intent to Congress. 3
Furthermore, no action on the part of West Virginia compels the defendants to exclude the chiropractors from their insurance plans. West Virginia law specifically authorizes the defendant companies to insure the costs of chiropractic treatment, 4 but the defendants have elected not to provide this coverage. Therefore, they can claim no immunity under Parker v. Brown. Cantor v. Detroit Edison Co., --- U.S. ----, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976); Goldfarb v. Virginia State Bar, 421 U.S. 773, 788-92, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975).
The district court ruled that the physicians "are members of a 'learned profession' and their activities, as described in the complaint, are neither trade nor commerce, and, therefore, not subject to the provisions of the Sherman Act." We believe, however, that this ruling is not in accord with Supreme Court decisions where the learned profession defense was rejected.
Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), and American Medical Association v. United States, 317 U.S. 519, 63 S.Ct. 326, 87 L.Ed. 434 (1943), teach that the payment exchanged for professional services constitutes trade or commerce. The Sherman Act contains neither...
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