F.T.C. v. Hospital Bd. of Directors of Lee County
| Decision Date | 30 November 1994 |
| Docket Number | No. 94-2642,94-2642 |
| Citation | 38 F.3d 1184 |
| Parties | , 1994-2 Trade Cases P 70,803 FEDERAL TRADE COMMISSION, Plaintiff-Appellant, v. HOSPITAL BOARD OF DIRECTORS OF LEE COUNTY, d/b/a Lee Memorial Hospital; West Coast Health System, Inc.; Cape Coral Medical Center, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
David C. Shonka, Federal Trade Commission, Washington, DC, for appellant.
Joe Sims and Thomas F. Cullen, Jr., Jones, Day, Reavis & Pogue, Washington, DC, for appellees.
Appeal from the United States District Court for the Middle District of Florida.
Before HATCHETT and BLACK, Circuit Judges, and YOUNG *, Senior District Judge.
The Federal Trade Commission (Commission) brings this antitrust action to prevent the Hospital Board of Directors of Lee County (Board), d/b/a Lee Memorial Hospital (Lee Memorial), from acquiring the assets of Cape Coral Medical Center, Inc., which owns and operates Cape Coral Hospital (CCH). The Commission alleges that the acquisition would violate federal antitrust laws by substantially lessening competition in the acute healthcare market. The Board alleges that the state action doctrine immunizes the acquisition from federal antitrust laws because the Florida Legislature foresaw possible anticompetitive effects when it gave the Board the implicit power to make acquisitions. The district court found that anticompetitive conduct was foreseeable and granted state action immunity to the Board. We affirm.
In 1963 a special act of the Florida Legislature created the Board as a non-profit public organization "to establish and to provide for the operation and maintenance of a public hospital" in Lee County. 1963 Fla.Spec.Laws ch. 63-1552 Sec. 1. The special act directed the Board to operate its facilities for "public and county purpose" and for "the use and benefit of the residents of Lee County." Id. at Secs. 7, 14. The Board's first act was building a new facility adjacent to the only hospital then in existence in Lee County. Once the new facility was completed, the Board acquired the assets and assumed the operations of the original hospital, now known as Lee Memorial, giving it 100% of the market share at that time. Today, Lee Memorial is a public, general, acute care hospital that holds 49% of the market share of the acute care inpatient hospital services in Lee County. It serves 80% of Lee County's Medicaid patients, 75% of the county's indigent patients, and 90% of the county's "penetrating trauma" patients.
In 1987, the Florida Legislature amended the Board's enabling legislation and extended the Board's power, allowing operation of additional hospitals in Lee County. The amendment authorized the Board to "establish and provide for the operation and maintenance of additional hospitals; satellite hospitals; clinics; or other facilities devoted to the provision of healthcare services...." Id. at Sec. 1, ch. 87-438, Sec. 1. The Board was also given the authority to
be a voting member of, choose directors to service on the boards of, be a partner in, or participate in or control, any venture, corporation, partnership, or other organization, public or private, which the hospital board finds operates for the purposes consistent with, and in furtherance of, the purposes and best interests of the hospital and other facilities created and authorized under this act.
Id. at Sec. 23, ch. 87-438, Sec. 7.
On March 31, 1994, the Board approved Lee Memorial's acquisition of CCH, a private, nonprofit hospital in Lee County. According to the Board, the acquisition would increase operating efficiencies and reduce expenditures of the two hospitals, alleviate CCH's current financial difficulties, and enable Lee Memorial and CCH, as one, to become an effective bidder for managed care contracts in Lee County.
On April 28, 1994, the Commission filed a complaint pursuant to Section 13(b) of the Federal Trade Commission Act (FTCA), 15 U.S.C. Sec. 53(b) (1988), 1 to prevent the Board from consummating the asset acquisition, which the Commission challenged as violative of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18 (1988). 2 According to the Commission the acquisition would be anticompetitive by reducing the number of hospitals in Lee County from four to three and by increasing Lee Memorial's market share in the county from 49% to 67%. The Commission thus maintains that Lee County consumers of acute care inpatient hospital services would be denied the benefits of free and open competition based on price, quality, and service.
On April 28, 1994, the district court entered a temporary restraining order blocking the acquisition. On May 10, the Board filed a motion to dismiss the case on the ground that the challenged acquisition was immunized under the state action doctrine. On May 16, treating the motion as one for summary judgment, the district court granted the motion without considering the actual anticompetitive impact of the acquisition. The district court found the Board immune under the state action doctrine, dissolved the temporary restraining order, and granted summary judgment.
The Commission filed a timely notice of appeal and a request for an injunction pending appeal. The request for an injunction was denied by the district court on May 17. On May 18, this Circuit granted the Commission's emergency motion for an injunction pending appeal and for an expedited appeal, construing the Commission's request as a motion for stay pending appeal of the district court's order of May 16, 1994.
The application of the state action doctrine is a question of law. The district court's grant of summary judgment is therefore subject to de novo review by the Circuit. See Bolt v. Halifax Hosp. Medical Ctr., 980 F.2d 1381, 1384 (11th Cir.1993) (citing Griesel v. Hamlin, 963 F.2d 338, 341 (11th Cir.1992); Morrison v. Washington County, Ala., 700 F.2d 678, 682 (11th Cir.), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983)).
In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court considered whether the Sherman Act prohibits anticompetitive conduct by a state. The petitioner sought to enjoin the California Director of Agriculture from enforcing a program adopted pursuant to the California Agricultural Prorate Act, which restricted the marketing of privately produced raisins. The statute was intended to restrict competition among agricultural producers in the state in order to stabilize prices and prevent economic waste. Id. at 353-55, 63 S.Ct. at 315.
Relying on principles of federalism and state sovereignty, the Court refused to apply the Sherman Act to the anticompetitive conduct of a state acting through its legislature. It reasoned that the purpose of the Sherman Act was to prohibit private restraints on trade, not to prohibit state action of a local nature intended to benefit the state's citizens. See id. at 349-53, 63 S.Ct. at 313-314. Thus, the Court concluded that the Sherman Act did not prohibit anticompetitive actions prescribed by the states "as an act of government." Id. at 351-53, 63 S.Ct. at 314.
The Parker doctrine protects the anticompetitive actions of the states from federal antitrust laws. It does not apply directly to a state's political subdivisions because these subdivisions "are not themselves sovereign; they do not receive all the federal deference of the States that create them." City of Lafayette, La. v. Louisiana Power & Light Co., 435 U.S. 389, 412, 98 S.Ct. 1123, 1136, 55 L.Ed.2d 364 (1978). However, the Supreme Court applied the Parker doctrine, with some modifications, to the anticompetitive actions of political subdivisions in Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985). To obtain state action immunity, an entity, such as the Board, must show the following: (1) that it is a political subdivision of the state; (2) that, through statutes, the state generally authorizes the political subdivision to perform the challenged action; and (3) that, through statutes, the state has clearly articulated a state policy authorizing anticompetitive conduct. See id.
The district court found, and the Commission does not contest, that the Board is a political subdivision of the State of Florida. In Hallie, the Supreme Court left open the question of whether a state agency, such as a healthcare authority, can be immune from federal antitrust laws under the state action doctrine absent some state supervision. Nevertheless, in Askew v. DCH Regional Health Care Authority, 995 F.2d 1033 (11th Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 603, 126 L.Ed.2d 568 (1993), this Circuit held that a healthcare authority created by the Alabama Legislature was a political subdivision of the state. Here, the Board is a healthcare authority created by the Florida Legislature as a special purpose unit of local government. 1963 Fla.Spec.Laws ch. 63-1552 Sec. 1. The Board, therefore, satisfies the first criteria of state action immunity required for political subdivisions.
The Commission concedes, and we agree, that the Board is empowered and authorized by the State of Florida to engage in the proposed acquisition. The Florida Legislature granted the Board extensive authority to operate, control, and maintain a public hospital and other hospital facilities in Lee County. Thus, the Board's power under state law to engage in the proposed transaction is not at issue.
The parties have stipulated, and we agree, that the Board is a political subdivision of the state and that the acquisition was authorized by the state. The only issue on appeal, therefore, is...
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