Ellison v. Am. Bd. of Orthopaedic Surgery

• Decision Date: 30 August 2021
• Docket Number: No. 20-1776,20-1776
• Citation: 11 F.4th 200
• Parties: Bruce E. ELLISON, Appellant v. AMERICAN BOARD OF ORTHOPAEDIC SURGERY
• Court: U.S. Court of Appeals — Third Circuit

11 F.4th 200

Bruce E. ELLISON, Appellant

v.AMERICAN BOARD OF ORTHOPAEDIC SURGERY

No. 20-1776

United States Court of Appeals, Third Circuit.

Argued: April 12, 2021

Filed: August 30, 2021

Andrew L. Schlafly [ARGUED], 939 Old Chester Road, Far Hills, NJ 07931, Counsel for Appellant

Lawrence J. Joseph, 1250 Connecticut Avenue, N.W., Suite 700-1A, Washington, DC 20036, Counsel for Amici National Medical Association, Alan D. Ullberg, and American Board of Physician Specialties

Daniel C. Green [ARGUED], Vedder Price, 1633 Broadway, 47th Floor, New York, NY 10019, Gregory G. Wrobel, Vedder Price, 222 North LaSalle Street, Suite 2600, Chicago, IL 60601, Counsel for Appellee

Jack R. Bierig, Schiff Hardin, 233 South Wacker Drive, Suite 7100, Chicago, IL 60606, Counsel for Amicus American Board of Medical Specialties

Jason S. Rathod, Migliaccio & Rathod, 412 H Street, N.E., Suite 302, Washington, DC 20002, Counsel for Amicus Open Markets Institute

Before: CHAGARES, JORDAN, and SCIRICA, Circuit Judges

OPINION OF THE COURT

CHAGARES, Circuit Judge.

Bruce Ellison appeals an order of the District Court dismissing his second amended complaint against the American Board of Orthopaedic Surgery ("ABOS") with prejudice for failure to state a claim. Ellison alleges that ABOS violated antitrust law by refusing to let him complete its certification examination, and that he cannot obtain medical staff privileges and employment at certain hospitals in northern New Jersey without ABOS certification. However, Ellison, who practices medicine in California, has not attempted to apply for medical staff privileges or taken any concrete steps to practice in New Jersey. His assertions that ABOS has injured him are thus speculative, and he lacks standing to maintain his claim in federal court. The District Court did not address standing and instead dismissed Ellison's complaint on the merits. But federal courts lack jurisdiction to reach the merits in the absence of standing, so we will vacate the District Court's order and remand with instructions to dismiss the case without prejudice.

I.

Bruce Ellison is an orthopedic surgeon who practices in California. He wants to move to northern New Jersey and practice at Rutgers University Hospital, St. Peter's University Hospital, or one of the hospitals in the RWJBarnabas Health system. These hospitals are members of the American Hospital Association ("AHA"), and they generally grant medical staff privileges to physicians with M.D. degrees only if those physicians have been certified by a member of the American Board of Medical Specialties ("ABMS"). Ellison consequently sought certification by ABOS — the ABMS member board that certifies orthopedic surgeons — around 2012. ABOS only certifies surgeons who successfully complete its multistep certification examination. Ellison passed the first step of ABOS's exam, but ABOS prohibited him from taking the second step until he first obtained medical staff privileges at a hospital.

Ellison has yet to apply for staff privileges. He believes the New Jersey hospitals where he desires to practice will reject his application, as their bylaws provide that they generally grant privileges only to physicians who are already board certified.¹ According to Ellison, submitting an application is inadvisable because the rejection of staff privileges can seriously harm a physician's reputation and results in an automatic adverse entry in the National Practitioner Data Bank. Ellison believes he is thus stuck in a Catch-22 where he cannot obtain hospital medical staff privileges because he lacks ABOS certification, and he cannot obtain ABOS certification because he lacks hospital medical staff privileges. So, Ellison has neither completed ABOS's certification exam nor obtained employment at a hospital in New Jersey.

Ellison attributes this situation to anticompetitive conduct by ABOS. Ellison filed a lawsuit against ABOS in 2016 under state law in New Jersey state court, but ABOS removed the matter to federal court. Ellison later amended his complaint to allege that ABOS violated the Sherman Act, 15 U.S.C. § 1. The District Court dismissed Ellison's initial complaint without prejudice upon a motion by ABOS, and it subsequently dismissed the amended complaint without prejudice after a renewed motion by ABOS. Although ABOS moved to dismiss each complaint on multiple grounds, including lack of subject matter or personal jurisdiction, the District Court avoided the jurisdictional grounds and instead held in each of its orders of dismissal that Ellison failed to state a claim for relief.

Ellison subsequently filed his second amended complaint (the "SAC"), which again pleaded that ABOS violated section one of the Sherman Act. Ellison based his antitrust claim on two theories. First, ABOS or ABMS allegedly reached an illegal agreement with AHA or its New Jersey members, whereby ABOS only grants certification to physicians with hospital privileges and AHA hospitals only grant privileges to physicians with ABMS certifications. Second, Ellison suggests that ABOS's hospital privileges requirement constitutes an illegal tying arrangement. Ellison contends that ABOS has a monopoly over the certification of orthopedic surgeons with M.D. degrees in northern New Jersey, and it exercises its power in that market to require aspiring orthopedic surgeons to obtain hospital medical staff privileges. Because hospitals require orthopedic surgeons to have ABOS certification, the agreement or tie allegedly secures a steady stream of revenue for ABOS. ABOS's conduct allegedly reduces competition in the northern New Jersey market for certification and the supply of orthopedic surgeons who can serve patients. Ellison further contends that ABOS's requirement is unreasonable because many doctors do not practice at hospitals, such as those who operate exclusively at ambulatory surgery centers. He claims that ABOS's actions have prevented him from obtaining employment at New Jersey hospitals and caused him to lose compensation. Ellison accordingly seeks recovery for his losses and an injunction ordering ABOS to let him complete its certification exam.

ABOS moved to dismiss the SAC for lack of standing, lack of personal jurisdiction, improper venue, and failure to state a claim. The District Court granted ABOS's motion and dismissed the SAC with prejudice for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The court considered the allegations of an illegal agreement between ABOS and northern New Jersey hospitals conclusory and lacking in factual support, opining that they failed to address the possibility that hospitals independently require board certification because it is an indicator of a physician's competence. The District Court similarly held that a tying arrangement was implausible because ABOS does not derive any direct economic benefit from surgeons’ acquisition of hospital staff privileges. The court also noted that Ellison was not forced to purchase an unwanted tied product because he actively desired both certification and staff privileges. The District Court again declined to consider whether the complaint should be dismissed for lack of standing or personal jurisdiction, reasoning that it was unnecessary in light of its decision on the merits. The court dismissed the case with prejudice, holding that further amendment would be futile. Ellison timely appealed.

II.

We have jurisdiction over the District Court's final order of dismissal under 28 U.S.C. § 1291.² The parties dispute whether the District Court had jurisdiction to enter that order, though. The District Court did not resolve this dispute and instead chose to dismiss the SAC on the merits. This was error because "a federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the category of claim in suit (subject-matter jurisdiction) and the parties (personal jurisdiction)." Sinochem Int'l Co. v. Malay. Int'l Shipping Corp., 549 U.S. 422, 430–31, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007). We may resolve the jurisdictional issues in the first instance on appeal, as we have an obligation to assure ourselves that jurisdiction exists. See Finkelman v. Nat'l Football League, 810 F.3d 187, 193 (3d Cir. 2016) ; Storino v. Borough of Point Pleasant Beach, 322 F.3d 293, 296 (3d Cir. 2003) (noting that courts must ensure that they and the courts from which the record came have jurisdiction). We conclude that the District Court lacked subject matter jurisdiction because Ellison lacked standing under Article III of the Constitution.

Article III limits the federal courts to adjudication of "Cases" and "Controversies." U.S. Const. art. III, § 2, cl. 1. "Courts enforce the case-or-controversy requirement through the several justiciability doctrines," which "include standing, ripeness, mootness, the political-question doctrine, and the prohibition on advisory opinions." Toll Bros., Inc. v. Twp. of Readington, 555 F.3d 131, 137 (3d Cir. 2009). Standing is "perhaps the most important of these doctrines." Allen v. Wright, 468 U.S. 737, 750, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). Standing has three elements: "[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 578 U.S. 330, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). "The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing these elements." Id.

Injury in fact is often determinative of standing, and it is our focus here. See Toll Bros., 555 F.3d at 138 ; see also Spokeo, 136 S. Ct. at 1547 (describing injury in fact as the "[f]irst and foremost" element of standing). The purpose of the injury-in-fact requirement is "to distinguish a person with a direct stake in the outcome of a litigation — even though small — from a person...