DeGregorio v. Segal

• Citation: 443 F. Supp. 1257
• Decision Date: 10 January 1978
• Docket Number: Civ. A. No. 76-264.
• Parties: Daniel B. DeGREGORIO, Pearl Gouedy, by Von Gouedy, guardian ad litem, on behalf of themselves and all others similarly situated, and Philadelphia Welfare Rights Organization, Plaintiffs, v. Stanley SEGAL, Individually and as administrator of the Ashton Hall Nursing Home, the Ashton Hall Nursing Home, Thomas Mignone, Individually and as administrator of the Chapel Manor Nursing and Convalescent Center, the Chapel Manor Nursing and Convalescent Center, Terry Thesieres, Individually and as administrator of the Haverford Nursing Home, the Haverford Nursing Home, Beverly Shenefelt, Individually and as administrator of the Mayo Nursing Home, the Mayo Nursing Home, on behalf of themselves and all others similarly situated, the Health Care Facilities Association of Pennsylvania (HCFAP), Walter Harrison, in his capacity as President of HCFAP, Gerald Specter, in his capacity as Executive Vice-President of HCFAP, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

443 F. Supp. 1257

Daniel B. DeGREGORIO, Pearl Gouedy, by Von Gouedy, guardian ad litem, on behalf of themselves and all others similarly situated, and Philadelphia Welfare Rights Organization, Plaintiffs, v. Stanley SEGAL, Individually and as administrator of the Ashton Hall Nursing Home, the Ashton Hall Nursing Home, Thomas Mignone, Individually and as administrator of the Chapel Manor Nursing and Convalescent Center, the Chapel Manor Nursing and Convalescent Center, Terry Thesieres, Individually and as administrator of the Haverford Nursing Home, the Haverford Nursing Home, Beverly Shenefelt, Individually and as administrator of the Mayo Nursing Home, the Mayo Nursing Home, on behalf of themselves and all others similarly situated, the Health Care Facilities Association of Pennsylvania (HCFAP), Walter Harrison, in his capacity as President of HCFAP, Gerald Specter, in his capacity as Executive Vice-President of HCFAP, Defendants.

Civ. A. No. 76-264.

United States District Court, E. D. Pennsylvania.

January 10, 1978.

COPYRIGHT MATERIAL OMITTED

Gilbert B. Abramson, Philadelphia, Pa., for Segal and Ashton Hall.

Benj. S. Ohrenstein, Bala Cynwyd, Pa., for Chapel Manor and Thomas Mignone.

Donald Brown, Nathan L. Posner, Philadelphia, Pa., for Mayo and Beverly Shenefelt.

Roger L. Mutzel, Media, Pa., for Thesieres and Haverford.

John Killian and Charles O. Barto, Jr., Harrisburg, Pa., for HCFAP, Harrison and Specter.

R. Michael Kemler, Ellen Josephson, Community Legal Services, Philadelphia, Pa., for plaintiffs.

OPINION

DITTER, District Judge.

This anti-trust action for treble damages alleges that the owners of nursing home facilities have conspired to fix prices charged for the care of indigents.¹ Presently before the court are the defendants' motions to dismiss for lack of subject matter jurisdiction and failure to state a claim under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).² For the reasons which follow, these motions must be denied.

1. Factual Background

In this action, the two named plaintiffs and the Philadelphia Welfare Rights Organization (hereafter PWRO) purport to represent a class of all persons eligible for medical assistance in Pennsylvania who are in need of skilled nursing facilities but who have been denied access to them. Defendants are four nursing homes; their administrators; the Health Care Facilities Association of Pennsylvania (hereafter HCFAP), which is a trade organization representing 215 non-profit, proprietary and governmental nursing homes; and two HCFAP officers. Plaintiffs allege that these defendants have conspired to fix the rates which the Commonwealth of Pennsylvania pays under the medical assistance program to skilled nursing facilities for providing care to indigent patients. Plaintiffs assert that defendants have conspired to deny such care as part of an effort to increase their prices, contending this activity constitutes per se violations of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2, as well as common law tortious conduct.

Taking as true the allegations of the complaint and all reasonable inferences deducible therefrom, Curtis v. Everette, 489 F.2d 516, 518 (3d Cir. 1973), cert. denied 416 U.S. 995, 94 S.Ct. 2409, 40 L.Ed.2d 774 (1974), the operative facts may be briefly stated. Under ordinary circumstances, a skilled nursing facility participating in the Pennsylvania Medical Assistance Program (hereafter Medicaid), 42 U.S.C. §§ 1396 et seq.; 62 P.S. §§ 441.1 et seq., enters into a contract with the Pennsylvania Department of Public Welfare, executing a "Skilled Nursing Home Care Agreement." This agreement obligates the facility to provide skilled nursing care to eligible medical assistance patients in return for which the facility receives reimbursement presently set at $20. per patient per day from the welfare department. At some unknown date prior to June 26, 1975, defendants began a series of discussions which culminated in a conspiracy to 1) have the rate of reimbursement raised to $27.25 per day; 2) boycott and refuse to accept any new Medicaid patients until this rate was increased, this boycott to begin on August 1, 1975; and 3) further coerce the Commonwealth to increase the rate by threatening to terminate their provider agreements with the state. The culmination of this conspiracy occurred on June 26, 1975, when a HCFAP press release was issued, detailing the above-described action the defendants would undertake and its objectives (Complaint, paragraphs 32, 35; Exhibit II). In furtherance of this conspiracy, defendants refused to admit plaintiff DeGregorio, although he had been approved by the Medicaid program as eligible for skilled care and each of the homes had beds available for male patients. Mr. DeGregorio's sole source of income was and still is a monthly Social Security check of approximately $130. Plaintiff Gouedy was subjected to a similar concerted refusal of admission, although she also had been declared eligible for skilled care. Mrs. Gouedy's sole source of income also was a monthly Social Security check for $168.50.

Defendants' objections to the complaint are many, but basically they can be broken down into two main categories: standing and the sufficiency of the allegations of effect on interstate commerce. I shall consider them separately.

2. Standing

The threshold requirement of standing is statutory in antitrust cases.³ An antitrust plaintiff has standing if he alleges a violation of the antitrust laws, demonstrates that he has suffered injury to his business or property, and shows that his injury was incurred "by reason of" the other party's illegal activities. These requirements are imposed because Congress did not intend, by enacting Section 4 of the Clayton Act, to "provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation." Hawaii v. Standard Oil Co., 405 U.S. 251, 263 n. 14, 92 S.Ct. 885, 891, 31 L.Ed.2d 184 (1972). Rather, treble damage relief has been confined, at least in the Third Circuit, "to those individuals whose protection is the fundamental purpose of the antitrust laws." Cromar Co. v. Nuclear Materials and Equipment Corp., 543 F.2d 501, 505 (3d Cir. 1976), quoting In Re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122, 125 (9th Cir.), cert. denied sub. nom. Morgan v. Automobile Mfgrs. Assn., 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973).

At the outset, it is apparent that plaintiffs have sufficiently alleged a violation of the antitrust laws. Group boycotts, concerted refusals by competitors to deal with others, long have been held unreasonable or illegal per se under the federal antitrust laws, and beyond justification. Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959); Northern Pacific R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed. 545 (1958).⁴ Trade associations must necessarily regulate the conduct of their members, but regulations or rules which require the members to refuse to deal should be upheld only if they are reasonable and not directed at specific individuals. Radiant Burners, Inc. v. People's Gas, Light & Coke Co., 364 U.S. 656, 81 S.Ct. 365, 5 L.Ed. 358 (1961). Here, defendants' policies were directed, by their very nature, against plaintiffs.⁵ Therefore, plaintiffs have alleged an antitrust violation, and if they can demonstrate individual injury sustained by reason of the violation, they may maintain this suit.

a. Daniel DeGregorio's Allegations of Injury Under Section 1

Mr. DeGregorio first alleges that he suffered a cognizable injury to his business in that defendants' act denied him the opportunity to be restored to employability. From early on, it has been recognized that the language "business interest" should be given a broad interpretation to accomplish the Act's objectives, Quinonez v. Nat. Assn. of Securities Dealers, Inc., 540 F.2d 824 829 (5th Cir. 1976), that it "denotes the employment or occupation in which a person is engaged to procure a living." Roseland v. Phister Mfg. Co., 125 F.2d 417, 419 (7th Cir. 1942). One who has lost the opportunity to perform work as the result of an antitrust violation has stated an injury to his business or property and is entitled to recovery, Nichols v. Spencer International Press, Inc., 371 F.2d 332, 334 (7th Cir. 1967), and salaries or commissions lost as a result of antitrust practices are recoverable as well. Vandervelde v. Put and Call Brokers and Dealers Assn., 344 F.Supp. 118 (S.D.N.Y. 1972). However, this does not mean that everyone can bring an action because he was denied the opportunity to enter a business. Numerous courts have rejected the idea that there need be an actual on going business to obtain standing, see, e. g. Triangle Conduit & Cable Co. v. Nat. Electric Products Corp., 152 F.2d 398, 400 (3d Cir. 1945); N.W. Controls, Inc. v. Outboard Marine Corp., 333 F.Supp. 493, 507 (D.Del. 1971); Delaware Valley Marine Supply Co. v. American Tobacco Co., 184 F.Supp. 440, 443-4 (E.D.Pa.1960), aff'd 297 F.2d 199 (3d Cir. 1961), cert. denied 369 U.S. 839, 82 S.Ct. 867, 7 L.Ed.2d 843 (1962), but they have required at the very least that plaintiff demonstrate the intention and preparedness to enter the business. A simple hope or expectation to enter a business is insufficient.

Plaintiff DeGregorio has failed to allege that he is prepared to enter a business.⁶ He argues that it would be superfluous and unjust to require him to show preparedness to be employed, because it is precisely plaintiff's preparedness to be employed that has been deprived by defendants' activities. I find this argument to be unacceptable. It is nothing more than a bootstrap attempt to alleviate the necessity of demonstrating that he has suffered some economic injury. Were I to follow this line of reasoning, then anyone denied skilled nursing care, no matter if that person was incapable of ever working again, could contend that ...