Fed. Trade Comm'n v. Phoebe Putney Health Sys., Inc.

• Decision Date: 09 December 2011
• Docket Number: No. 11–12906.,11–12906.
• Citation: 23 Fla. L. Weekly Fed. C 628,663 F.3d 1369,2011 Trade Cases P 77722
• Parties: FEDERAL TRADE COMMISSION, Plaintiff–Appellant,State of Georgia, Plaintiff, v. PHOEBE PUTNEY HEALTH SYSTEM, INC., Phoebe Putney Memorial Hospital, Inc., Phoebe North, Inc., HCA, Inc., Palmyra Park Hospital, Inc., Hospital Authority of Albany–Dougherty County, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

2011-2 Trade Cases P 77,722

23 Fla. L. Weekly Fed. C 628

663 F.3d 1369

FEDERAL TRADE COMMISSION, Plaintiff–Appellant,State of Georgia, Plaintiff,

v.PHOEBE PUTNEY HEALTH SYSTEM, INC., Phoebe Putney Memorial Hospital, Inc., Phoebe North, Inc., HCA, Inc., Palmyra Park Hospital, Inc., Hospital Authority of Albany–Dougherty County, Defendants–Appellees.

No. 11–12906.

United States Court of Appeals, Eleventh Circuit.

Dec. 9, 2011.

Imad Dean Abyad, John F. Daly, Edward D. Hassi, Leslie Rice Melman, Priya B. Viswanath, Federal Trade Commission, Washington, DC, Michael J. Moore, U.S. Atty., Macon, GA, for Plaintiff–Appellant.

Robert M. Brennan, John H. Parker, Jr., Thomas D. Watry, Parker, Hudson, Rainer & Dobbs, LLP, Ronan P. Doherty, Michael A. Caplan, Frank M. Lowrey, IV, Bondurant, Mixon, & Elmore, LLP, Amy J. McCullough, Baudino Law Group, Atlanta, GA, James C. Egan, Jr., Jonathan L. Sickler, Weil, Gotshal & Manges, LLP, Lee Kavel Van Voorhis, Baker & McKenzie, LLP, Washington, DC, Kevin J. Arquit, Nicholas F. Cohen, Paul C. Gluckow, Aimee H. Goldstein, Jennifer Rie, Meryl G. Rosen, Simpson, Thacher & Bartlett, LLP, New York City, Charles E. Peeler, Flynn & Peeler, LLC, Karin Allen Middleton, Baudino Law Group, Edgar B. Wilkin, Jr., Albany, GA, Robert J. Baudino, Jr., David J. Darrell, Baudino Law Group, Des Moines, IA, for Defendants–Appellees.

Appeal from the United States District Court for the Middle District of Georgia.Before TJOFLAT and CARNES, Circuit Judges, and MICKLE,^* District Judge.TJOFLAT, Circuit Judge:

I.

A.

In 1941, the Georgia legislature enacted the Hospital Authorities Law, 1941 Ga. Laws 241 (codified as amended at O.C.G.A. § 31–7–70 et seq.). That statute creates a hospital authority, “a public body corporate and politic,” for each city and county, O.C.G.A. § 31–7–72(a), or for multiple cities or counties combined, id. § 31–7–72(d). The hospital authority does not become operative, however, unless the governing body of the city or county determines that the authority is needed for the delivery of hospital services. Id. § 31–7–72(a). Once such need is determined, the governing body appoints between five and nine individuals to manage the authority. Id.

Each authority is given broad powers to meet the public health needs of its community. Among those specified by the statute are the powers to “operate projects,” id. § 31–7–75(4), which include hospitals, clinics, nursing homes, and other public health facilities, id. § 31–7–71(5);¹ to “acquire by purchase, lease, or otherwise ... projects,” id. § 31–7–75(4); to “construct, reconstruct, improve, alter, and repair projects,” id. § 31–7–75(5); to “lease ... for operation by others any project,” id. § 31–7–75(7); to “establish rates and charges for the services and use of the facilities of the authority,” id. § 31–7–75(10); to “exchange, transfer, assign, pledge, mortgage, or dispose of any real or personal property or interest therein,” id. § 31–7–75(14); and to “form and operate, either directly or indirectly, one or more networks of hospitals, physicians, and other health care providers and to arrange for the provision of health care services through such networks,” id. § 31–7–75(27).

The statute also grants the authorities more general powers to “make plans for unmet needs of their respective communities,” id. § 31–7–75(22), to “make and execute contracts and other instruments necessary to exercise the[ir] powers,” id. § 31–7–75(3), and to “exercise any or all powers now or hereafter possessed by private corporations performing similar functions,” id. § 31–7–75(21). And, the statute makes clear, these enumerated powers—broad as they are—are not exhaustive: each authority has “all the powers necessary or convenient to carry out and effectuate the purposes and provisions of this article.” Id. § 31–7–75.²

B.³

In 1941, the City of Albany and Dougherty County (in which the City is located) determined the need for a hospital authority in Dougherty County and established the Hospital Authority of Albany–Dougherty County (the “Authority”). After it was formed, the Authority acquired Phoebe Putney Memorial Hospital in Albany (“Memorial”). Until 1990, the Authority operated Memorial. That year, however, the Authority exercised its § 31–7–75(7) power to lease the facility for operation by others; to such end, it formed two nonprofit corporations, Phoebe Putney Health System, Inc. (“PPHS”) and, as a PPHS subsidiary, Phoebe Putney Memorial Hospital, Inc. (“PPMH”), and leased Memorial to PPMH.⁴ Since 1990, PPMH has been operating the hospital.

PPMH's lease gives it the right to set the prices for the services Memorial provides. In exercising such right, however, PPMH is subject to the Hospital Authorities Law's proscription against charging prices greater than necessary to cover the cost of the services and provide reasonable reserves. See id. § 31–7–77.

Memorial consists of 443 beds and offers, among other things, a full range of inpatient general acute-care services. Memorial's (and thus PPHS's and PPMH's) only real competitor is Palmyra Park Hospital, Inc. (“Palmyra”), a subsidiary of HCA, Inc. established in Albany in 1971.⁵ Palmyra consists of 248 beds and provides essentially the same services as Memorial. Memorial controls 75 percent and Palmyra 11 percent of their geographic market.⁶

In December 2010, PPHS presented the Authority with a plan to acquire Palmyra's assets, i.e., the Palmyra hospital facility, with funds provided by PPHS⁷ and to lease such assets to PPHS or a nonprofit PPHS subsidiary. The terms of the lease would be essentially the same as the Authority's PPMH lease.⁸ The Authority approved the plan to the extent that it called for the purchase of the Palmyra hospital and its temporary management by a subsidiary to be established by PPHS. In April 2011, the Authority approved the terms of the proposed lease to PPHS or its subsidiary.

II.

On April 19, 2011, the Federal Trade Commission (the “Commission”) initiated an administrative proceeding to determine whether the Authority's purchase of Palmyra and subsequent lease to PPHS, or a PPHS subsidiary, would substantially lessen competition or tend to create a monopoly in the inpatient general acute-care hospital services market in Dougherty County and surrounding areas (the “relevant market”) in violation of section 7 of the Clayton Act, 15 U.S.C. § 18. See 15 U.S.C. § 21(a) (granting the Commission authority to enforce section 7 of the Clayton Act). Section 7 provides that “no person subject to the jurisdiction of the [Commission] shall acquire ... the assets of another ... where ... the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18. According to the Commission, the proceeding was to be held in September 2011. If a section 7 violation were to be found, the Commission would issue a cease and desist order to prevent the Authority going forward with the plan to acquire the Palmyra hospital facility. The order would be subject to review in this court. 15 U.S.C. § 45(c) (“Any person, partnership, or corporation required by an order of the Commission to cease and desist ... may obtain a review of such order in the [appropriate circuit] court of appeals of the United States.”).

To prevent the consummation of the plan prior to the completion of the administrative proceeding, FTC v. Univ. Health, Inc., 938 F.2d 1206, 1217 n. 23 (11th Cir.1991) (“[O]nce an anticompetitive acquisition is consummated, it is difficult to ‘unscramble the egg.’ ”), the Commission brought this action, on April 20, 2011, to obtain a preliminary injunction against the Authority, PPHS, PPMH, HCA, Inc., and Palmyra (collectively “Appellees”). See 15 U.S.C. § 53(b) (“Whenever the Commission has reason to believe (1) that any person, partnership, or corporation is violating, or is about to violate [section 7] ... the Commission ... may bring suit in a district court of the United States to enjoin any such act.”). In order to demonstrate its likelihood of prevailing on the merits,⁹ the Commission alleged that the Authority's purchase of Palmyra would create a monopoly in the relevant market.

The Appellees, in response, moved the district court to dismiss the Commission's complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. They did not contest the Commission's claim that the acquisition of Palmyra and effective merger of Palmyra and Memorial would tend to create, if not actually create, a monopoly in the relevant market. Instead, they asserted that the “state-action doctrine” immunized the Authority and its operation of the two hospitals under the planned arrangement with PPHS from antitrust liability. The district court agreed that the Authority, PPHS, and PPMH were entitled to such immunity and dismissed the Commission's complaint with prejudice. The Commission now appeals.

III.

We review de novo a district court's order dismissing a complaint under Rule 12(b)(6). Speaker v. U.S. Dep't of Health & Human Servs. Ctrs. for Disease Control & Prevention, 623 F.3d 1371, 1379 (11th Cir.2010). We “accept[ ] the factual allegations in the complaint as true and construe [ ] them in the light most favorable to the plaintiff,” id.; we are not, however, “bound to accept as true a legal conclusion couched as a factual allegation,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 2944, 92 L.Ed.2d 209 (1986)).

We agree with the Commission that, on the facts alleged, the joint operation of Memorial and Palmyra would substantially lessen competition or tend to create, if not create, a monopoly. The question, then, is whether this anticompetitive conduct is immunized by the state-action doctrine.

A.

The doctrine of state-action immunity protects the states from liability under the federal antitrust laws. In Parker...