Boulware v. State of Nev., Dept. of Human Resources

• Decision Date: 27 March 1992
• Docket Number: No. 90-16737,90-16737
• Citation: 960 F.2d 793
• Parties: , 1992-1 Trade Cases P 69,771 Frederick T. BOULWARE, Jr., M.D., Boulware Neurology Consultants, Ltd., Plaintiffs-Appellants. v. STATE OF NEVADA, DEPARTMENT OF HUMAN RESOURCES, National Care Services Corporation of Nevada, a Nevada Corporation, d/b/a Sunrise Diagnostic Center, Humana Hospitals, Inc., a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 793

960 F.2d 793

60 USLW 2666, 1992-1 Trade Cases P 69,771

Frederick T. BOULWARE, Jr., M.D., Boulware Neurology Consultants, Ltd., Plaintiffs-Appellants. v. STATE OF NEVADA, DEPARTMENT OF HUMAN RESOURCES, National Care Services Corporation of Nevada, a Nevada Corporation d/b/a Sunrise Diagnostic Center, Humana Hospitals, Inc., a corporation, Defendants-Appellees.

No. 90-16737.

United States Court of Appeals, Ninth Circuit Argued and Submitted Jan. 17, 1992.

Decided March 27, 1992.

Lawrence R. Lieberman, Levinson & Lieberman, Beverly Hills, Cal., for plaintiffs-appellants.

David N. Frederick, Lionel, Sawyer & Collins, Las Vegas, Nev., for defendants-appellees.

Appeal from the United States District Court for the District of Nevada.

Before: GOODWIN, FLETCHER and BRUNETTI, Circuit Judges.

GOODWIN, Circuit Judge:

Dr. Frederick Boulware appeals a summary judgment in favor of defendants Humana Hospitals, Inc. ("Humana") and National Care Service Corp. ("NCSC") on Boulware's antitrust and civil rights actions and pendent state law claims. The claims arise out of a Nevada state court action brought by defendants against Boulware for an alleged failure to comply with Nevada Certificate of Need ("CON") regulations governing the acquisition of medical equipment.

I. BACKGROUND

The predicate acts for Boulware's antitrust suit stem from NCSC's intervention in a Nevada state court suit brought by the Nevada Department of Human Resources (the Department). The Department sought an injunction against Boulware for allegedly failing to comply with Nevada statutory and regulatory provisions pertaining to the acquisition of a Magnetic Resonance Imaging (MRI) unit.

On August 22, 1985, the state district court issued a temporary injunction followed by a permanent injunction on January 27, 1986, prohibiting construction of Boulware's MRI facility until a Certificate of Need was obtained. On appeal, the Nevada Supreme Court ruled unanimously in favor of Boulware and held that his purchase of an MRI unit was not subject to CON approval. The court stated that the "legislature never intended that private physician offices would come under the definition of health facility" under Nev.Rev.Stat. § 439A.015 (1983). Boulware v. Department of Human Resources, 103 Nev. 218, 737 P.2d 502, 503 (1987). Boulware had requested attorneys' fees. While this issue was not specifically addressed in the opinion, the court stated that "[w]e have considered the other issues raised in this appeal and find them to be without merit." Id.

Driven into bankruptcy by the injunction that stalled his MRI venture, Boulware sought antitrust and other relief in federal court. He sued the Department, NCSC, and Humana. Boulware alleged that the defendants had violated sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and the Nevada Unfair Trade Practices Act, Nev.Rev.Stat. § 598A.060. Boulware also claimed that the defendants had engaged in malicious prosecution and that they had violated 42 U.S.C. § 1983 by depriving him of his property without due process of law.

Boulware's claims against the Department were dismissed with prejudice on Eleventh Amendment sovereign immunity grounds. ¹ After further proceedings, the district court granted Humana and NCSC's motion for summary judgment. The court held that Boulware's Sherman Act claims, state unfair trade practice claim and section 1983 claim were barred by the Noerr- Pennington doctrine and that Boulware could not establish the elements of his malicious prosecution claim.

II. STANDARD OF REVIEW

We review de novo a district court's grant of summary judgment. The judgment will be affirmed if, viewing the record in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Norfolk Energy, Inc. v. Hodel, 898 F.2d 1435, 1439 (9th Cir.1990). Although summary judgment is not favored in antitrust cases, it is proper where the defendant's allegedly anticompetitive conduct is protected by the Noerr- Pennington doctrine and the defendant's efforts to influence the courts do not fall within the "sham" exception to Noerr- Pennington as a matter of law. See Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1257 (9th Cir.1982).

III. THE FEDERAL ANTITRUST CLAIMS

Boulware claims that Humana and NCSC violated section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to use the state court suit to delay or prevent Boulware from operating an MRI system in competition with NCSC. Boulware also claims that the defendants violated section 2 of the Sherman Act, 15 U.S.C. § 2, by attempting to monopolize the market for MRI system diagnostic services in southern Nevada.

A. Implied Repeal

As a preliminary matter, the defendants urge this court to find that in enacting the National Health Planning and Resource Development Act ("NHPRDA") of 1974, Pub.L. 93-641, 88 Stat. 2226, codified at 42 U.S.C. §§ 300k et seq. (1982) ², Congress implied the repeal of the antitrust laws with respect to activities involving the active participation of health care providers in the development of health policy. Even if the unsolicited intervention of a private party in a state enforcement action could be characterized as involvement in policy formation, the defendants' argument is unpersuasive.

We are somewhat surprised that members of the health care profession continue to press tired arguments seeking to avoid the clear competitive mandate of the Sherman Act. The application of antitrust laws to medical markets dates at least as far back as American Medical Association v. United States, 317 U.S. 519, 63 S.Ct. 326, 87 L.Ed. 434 (1943), where the Supreme Court maintained that the "occupation of the individual physicians charged as defendants is immaterial." Id. at 528, 63 S.Ct. at 328. If the Supreme Court's message in Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 349-51, 102 S.Ct. 2466, 2475-77, 73 L.Ed.2d 48 (1982); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 25 n. 42, 104 S.Ct. 1551, 1565, n. 42, 80 L.Ed.2d 2 (1984); and FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 463, 106 S.Ct. 2009, 2020, 90 L.Ed.2d 445 (1986), was not clear enough, then its specific announcement in National Gerimedical Hosp. & Gerontology Ctr. v. Blue Cross, 452 U.S. 378, 101 S.Ct. 2415, 69 L.Ed.2d 89 (1981), should have been. "We hold, therefore, that the NHPRDA is not so incompatible with antitrust concerns as to create a 'pervasive' repeal of the antitrust laws as applied to every action taken in response to the health-care planning process." Id. at 393, 101 S.Ct. at 2424. See also North Carolina ex rel. Edmisten v. P.I.A. Asheville, Inc., 740 F.2d 274, 284-85 (4th Cir.1984), cert. denied, 471 U.S. 1003, 105 S.Ct. 1865, 85 L.Ed.2d 159 (1985). The antitrust laws apply to hospitals in the same manner that they apply to all other sectors of the economy. Health care providers are exposed to the same liability and entitled to the same defenses as businesses in other industries.

B. The Section One Claim

Boulware's Sherman Act section 1 claim must be rejected at the outset. Because NCSC is a wholly owned subsidiary of Humana, these two entities cannot form a "combination or conspiracy" for purposes of section 1. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 777, 104 S.Ct. 2731, 2745, 81 L.Ed.2d 628 (1984). In view of the Supreme Court's recent rejection of a "conspiracy" exception to the state action and Noerr-Pennington doctrines, any claim that Humana or NCSC conspired with the Department also must fail. See City of Columbia v. Omni Outdoor Advertising, Inc., --- U.S. ----, ----, 111 S.Ct. 1344, 1351, 1355, 113 L.Ed.2d 382 (1991). The only remaining federal antitrust claims are monopolization and attempted monopolization in violation of section 2.

C. Noerr-Pennington Immunity

Private efforts to influence governmental bodies or courts, even for anticompetitive purposes, enjoy an exemption from the antitrust laws grounded in the First Amendment right to petition. See California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510-11, 92 S.Ct. 609, 611-612, 30 L.Ed.2d 642 (1972); United Mine Workers v. Pennington, 381 U.S. 657, 669-71, 85 S.Ct. 1585, 1592-94, 14 L.Ed.2d 626 (1965); Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 137-38, 81 S.Ct. 523, 529-30, 5 L.Ed.2d 464 (1961). The Noerr-Pennington doctrine shields lobbying and litigation activity from the reach of the antitrust laws so long as the activity is not a "sham." Trucking Unlimited, 404 U.S. at 510-11, 92 S.Ct. at 611-12.

The Supreme Court has recently instructed that the sham exception "encompasses situations in which persons use the governmental process--as opposed to the outcome of that process--as an anticompetitive weapon." Omni Outdoor Advertising, 111 S.Ct. at 1354; see also Franchise Realty Interstate Corp. v. San Francisco Local Joint Exec. Bd. of Culinary Workers, 542 F.2d 1076, 1084 (9th Cir.1976) (drawing the same distinction), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d 787 (1977). We have defined as a sham litigation "undertaken solely to interfere with free competition and without the legitimate expectation that such efforts will in fact induce lawful government action." Omni Resource Dev. Corp. v. Conoco, Inc., 739 F.2d 1412, 1413 (9th Cir.1984). As this formulation indicates, courts frequently have approached sham claims by attempting to assess the objective legal merit of the predicate suit. A finding that the predicate action was baseless would thus be sufficient to establish that the primary motivation behind the litigation was to inflict anticompetitive injury through the judicial process because the expected value of the legal outcome of a meritless suit is zero.

Although the usual example given for sham litigation is a pattern of baseless and repetitive claims, see, e.g., Otter Tail Power Co....