Collins v. Associated Pathologists, Ltd.

• Decision Date: 11 February 1987
• Docket Number: No. 84-1332.,84-1332.
• Citation: 676 F. Supp. 1388
• Court: U.S. District Court — Central District of Illinois
• Parties: James G.P. COLLINS, Plaintiff, v. ASSOCIATED PATHOLOGISTS, LTD., William M. Nickey, Jr., Donald D. Van Fossan, Victor H. Lary, Alfonso J. Strano, St. John's Hospital Sisters of the Third Order of St. Francis, Defendants.

676 F. Supp. 1388

James G.P. COLLINS, Plaintiff, v. ASSOCIATED PATHOLOGISTS, LTD., William M. Nickey, Jr., Donald D. Van Fossan, Victor H. Lary, Alfonso J. Strano, St. John's Hospital Sisters of the Third Order of St. Francis, Defendants.

No. 84-1332.

United States District Court, C.D. Illinois, Peoria Division.

February 11, 1987.

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Carol Fines, Giffin, Winnin, Linder, Newkirk, Cohen & Bodewes, Springfield, Ill., Mark Crane, Hopkins & Sutter, Chicago, Ill., for plaintiff.

Robert Gillespie, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Springfield, Ill., for Pathologists.

Hugh Graham III, Graham & Graham, Springfield, Ill., for St. John's Hosp.

ORDER

MIHM, District Judge.

The Plaintiff filed this antitrust lawsuit, claiming that he was prevented from practicing pathology at the hospital where he had worked for eight years, because his membership in the group providing such services to the hospital had been terminated. The Plaintiff, Dr. James G.P. Collins, contends that the contractual arrangement between the Defendant Hospital, St. John's Hospital, and the Defendant pathological group, Associated Pathologists, Ltd., is an exclusive dealing arrangement and an illegal tying agreement in violation of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, and the Illinois Antitrust Act Ill.Rev. Stat., ch. 38, § 60-1 to § 60-11 (1983). The Plaintiff also argues that his dismissal from Associated Pathologists and the Hospital's subsequent refusal to hire him resulted in claims for breach of contract, unlawful withdrawal of staff privileges, and misrepresentation. After substantial discovery and voluminous filings by the parties, this case is before the Court upon the Defendants' Motions for Summary Judgment.

STATEMENT OF FACTS

Associated Pathologists, Ltd., (APL) is an Illinois medical corporation whose principal employees are the individual Defendants, Doctors Donald Van Fossan, William M. Nickey, Jr., Victor H. Lary, and Alfonso J. Strano. Dr. J. Herschel Fulcher, Jr. was a member of the APL until his death in March of 1983, and Dr. Collins has named Jessie Fulcher, as executor of Dr. Fulcher's estate, a Defendant in this suit. St. John's Hospital of the Hospital Sisters of the Third Order of St. Francis (St. John's) is an Illinois not-for-profit corporation which owns and operates St. John's Hospital, located in Springfield, Illinois. St. John's Hospital is a tertiary care, private, not-for-profit teaching hospital affiliated with Southern Illinois University School of Medicine. It provides approximately 800 beds. There are two other hospitals located in Springfield, Illinois: Memorial Medical Center, a somewhat smaller, comparable tertiary care hospital and Humana Hospital of Springfield (formerly Springfield Community Hospital), a much smaller, for-profit institution that does not provide tertiary care.

Dr. Nickey came to Springfield in 1969 and entered into a contract with St. John's Hospital, the terms of which provided that Dr. Nickey would be responsible for the pathology department at the Hospital. Dr. Nickey replaced a group of pathologists who had been terminated by St. John's.

Within one month of coming to St. John's, Dr. Nickey recruited Dr. Van Fossan. APL was formed by the two doctors on February 1, 1969. Dr. Herschel Fulcher (deceased March 1983) joined APL in 1969, and the pathology group added Dr. Victor Lary in 1970. APL entered into a new contract with St. John's Hospital on July 1, 1970.

In 1974, APL hired Dr. Alfonso J. Strano and Dr. James G.P. Collins. Both Dr. Collins and Dr. Strano became shareholders in APL less than one year after they were hired by the corporation. Each of the individual doctors were employed by APL under identical written employment contracts.

The employment contracts between the individual doctors and APL were of one year duration subject to annual renewal. These contracts provided for compensation in the form of a salary, contributions to pension and profit sharing plans, and a possible bonus. The By-laws of APL provided that this bonus was to be awarded at the discretion of the directors. The doctors' contracts did not specify that a bonus would be paid, nor did the contract specify the amount of bonus or method of calculation.

From 1971 to the present, APL has awarded bonuses each year. APL's corporate records reflect the actions of the Board of Directors with respect to bonuses. Each pathologist did receive a bonus until the years 1980 and 1981.

APL did not award Dr. Collins a bonus in either 1980 or 1981. The directors of APL asked for and received Dr. Collins' resignation from APL, effective January 31, 1982. After leaving APL, Dr. Collins requested St. John's Hospital to hire him as a pathologist on an individual basis, but St. John's refused to do so. Dr. Collins has maintained staff privileges at St. John's Hospital on a leave of absence of basis since 1982. He is currently employed as a pathologist at Humana Hospital in California.

APL's relationship with St. John's Hospital has been governed by successive contracts: the February 1, 1969 contract, the July 1, 1970 contract, the December 31, 1975 contract, and the October 1, 1983 contract. The first three of these contracts stated that APL would "provide complete and adequate professional pathology services" to St. John's Hospital, while the October 1, 1983 contract provides an expanded form of this language at paragraph 4 of the section, "Agreements of the Corporation." Each of the St. John's/APL contracts contain a provision allowing termination of the contract at any time upon 90 days notice, effective either immediately or after the first year of the contract.

The contracts of 1969, 1970 and 1975 do not contain any provision dealing with St. John's Hospital's right to hire additional pathologists or groups of pathologists. The October 1, 1983 written agreement authorizes in paragraph 5 of "Mutual Agreements" that "The Hospital may employ additional pathologists or groups of pathologists to perform services in pathology for the Hospital based on the needs of the Hospital, its medical staff, and patients. The Hospital may permit such persons to have the use of the Hospital facilities based on reasonable schedules and conditions."

St. John's and the other hospitals in Springfield draw their patients from the Springfield standard metropolitan statistical area (the "Springfield SMSA") which includes Springfield and the surrounding areas of Sangamon and Menard Counties. In 1980, the United States Census showed the population of Springfield to be 187,789 people, most of whom reside in Springfield and the surrounding area of Sangamon County. The residents of the Springfield SMSA rely almost exclusively on the hospitals in Springfield. A statewide patient origin study prepared by the Illinois Hospital Association shows that in 1981 approximately 97.3% of all persons in Sangamon County who were hospitalized, and approximately 92.2% of all persons in Menard County who were hospitalized, received hospital care from one of the three hospitals in Springfield.

The Springfield hospitals, primarily St. John's and Memorial, also attract patients from other nearby counties. The patient origin study shows that 23% to 39% of the persons in Cass, Christian, Logan, Macoupin, Montgomery, Morgan and Scott Counties sought hospital care at one of the three hospitals in Springfield, Illinois. Generally, the patients from the City of Springfield and Sangamon, Menard, or Cass Counties receive the entire range of hospital care, whereas those patients at St. John's from surrounding counties are there for more specialized treatment. These specialized or tertiary care services include services provided by medical practitioners specializing in neorosurgery, nephrology, neonatalogy, and the like. Such services are not available at the small hospitals in the area.

EXCLUSIVE DEALING CONTRACT

The Plaintiff's main antitrust claims are based upon § 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. That section makes it unlawful for anyone to contract, combine in the form of a trust or otherwise, or conspire, in restraint of trade or commerce among the several states. Based upon this section, the Plaintiff alleges that the contract between APL and St. John's Hospital is a combination in restraint of trade, an unlawful boycott, and an unlawful tying agreement. (Counts I and III).

The Plaintiff argues that the agreements entered into between St. John's Hospital and APL are unreasonable restraints of trade because they are exclusive contracts which require that any pathology work to be performed at St. John's Hospital must be performed by APL. The Plaintiff contends that because these agreements are exclusive, they have substantially foreclosed competition in the market of providing pathological services. Moreover, these agreements have foreclosed competition in an illegal manner because the exclusive contracts are neither reasonable nor necessary.

There does seem to be a factual issue with regard to whether the agreements between APL and St. John's are, in fact, exclusive. The Defendants argue that the word exclusive never appears in any of the St. John's/APL agreements, but the Plaintiff responds that over the years, the parties to the agreements have operated as if they were exclusive. The Court finds that even though such a factual dispute exists, it does not prevent the Court from entering summary judgment on this issue, because the factual dispute is not material to the Court's decision on this issue. Rather, the Court concludes that summary judgment in favor of the Defendants is appropriate because the agreements are not an unreasonable restraint of trade even if they operate as exclusive contracts.

Cases interpreting the Sherman Act make it clear that all exclusive contracts are not violations of the Sherman Act because they are not necessarily an unreasonable...