Fed. Trade Comm'n v. Penn State Hershey Med. Ctr.
| Decision Date | 27 September 2016 |
| Docket Number | No. 16–2365,16–2365 |
| Citation | 838 F.3d 327 |
| Parties | Federal Trade Commission;Commonwealth of Pennsylvania, Appellants v. Penn State Hershey Medical Center; Pinnacle Health System |
| Court | U.S. Court of Appeals — Third Circuit |
David C. Shonka, Sr., Acting General Counsel, Joel R. Marcus, Director of Litigation, Deborah L. Feinstein, Michele Arington, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, DC 20580, William H. Efron [ARGUED],
Ryan F. Harsch, Jared P. Nagley, Jonathan W. Platt, Geralyn J. Trujillo, Federal Trade Commission, One Bowling Green, Suite 318, New York, NY 10004, Counsel for Federal Trade Commission
Bruce L. Castor, Jr., Solicitor General of Pennsylvania, Bruce Beemer, First Deputy Attorney General, James A. Donahue, III, Executive Deputy Attorney General, Tracy W. Wertz, Chief Deputy Attorney General, Jennifer Thomson, Aaron L. Schwartz, Office of Attorney General of Pennsylvania, Strawberry Square, Harrisburg, PA 17120, Counsel for Commonwealth of Pennsylvania
Charles I. Artz, Artz McCarrie Health Law, 200 North 3rd Street, Suite 12–B, Harrisburg, PA 17101, Counsel for Amicus Curiae Association of Independent Doctors
Richard P. Rouco, Quinn Conner Weaver Davies & Rouco, LLP, 2—20th Street North, Suite 930, Birmingham, AL 35203, Counsel for Amici Curiae Economics Professors
Lawrence G. Wasden, Attorney General of Idaho, Brett DeLange, Deputy Attorney General, Office of Attorney General of Idaho, Consumer Protection Division, 954 West Jefferson Street, 2nd Floor, Boise, ID 83720, Robert W. Ferguson, Attorney General of Washington, Darwin P. Roberts, Deputy Attorney General, Jonathan A. Mark, Senior Assistant Attorney General, Office of Attorney General of Washington, Antitrust Division, 800 5th Street, Suite 200, Seattle, WA 98104, Kamala D. Harris, Attorney General of California, George Jepsen, Attorney General of Connecticut, Lisa Madigan, Attorney General of Illinois, Thomas J. Miller, Attorney General of Iowa, Janet T. Mills, Attorney General of Maine, Maura Healey, Attorney General of Massachusetts, Lori Swanson, Attorney General of Minnesota, Jim Hood, Attorney General of Mississippi, Tim Fox, Attorney General of Montana, Ellen F. Rosenblum, Attorney General of Oregon, Counsel for Amici Curiae States of Idaho, Washington, California, Connecticut, Iowa, Illinois, Massachusetts, Maine, Minnesota, Mississippi, Montana, and Oregon
William D. Coglianese, Louis K. Fisher [ARGUED], Julie E. McEvoy, Christopher N. Thatch, Adrian Wager–Zito, Alisha M. Crovetto, Jon G. Heintz, Jones Day, 51 Louisiana Avenue, N.W., Washington, DC 20001, James P. DeAngelo, Kimberly A. Selemba, McNees Wallace & Nurick LLC, 100 Pine Street, P.O. Box 1166, Harrisburg, PA 17108, Counsel for Penn State Hershey Medical Center and PinnacleHealth System
Before: FISHER, GREENAWAY, JR., and KRAUSE, Circuit Judges.
At issue in this case is the proposed merger of the two largest hospitals in the Harrisburg, Pennsylvania area: Penn State Hershey Medical Center and PinnacleHealth System. The Federal Trade Commission (“FTC”) opposes their merger and filed an administrative complaint alleging that it violates Section 7 of the Clayton Act because it is likely to substantially lessen competition. In order to maintain the status quo and prevent the parties from merging before the administrative adjudication could occur, the FTC, joined by the Commonwealth of Pennsylvania, filed suit in the Middle District of Pennsylvania under Section 13(b) of the Federal Trade Commission Act (“FTC Act”) and Section 16 of the Clayton Act, which authorize the FTC and the Commonwealth, respectively, to seek a preliminary injunction pending the outcome of the FTC's adjudication on the merits. The District Court denied the FTC and the Commonwealth's motion for a preliminary injunction, holding that they did not properly define the relevant geographic market—a necessary prerequisite to determining whether a proposed combination is sufficiently likely to be anticompetitive as to warrant injunctive relief. For the reasons that follow, we will reverse. We will also remand the case and direct the District Court to enter the preliminary injunction requested by the FTC and the Commonwealth.
Penn State Hershey Medical Center (“Hershey”) is a leading academic medical center and the primary teaching hospital of the Penn State College of Medicine. It is located in Hershey, and it offers 551 beds and employs more than 800 physicians, many of whom are highly specialized. Hershey offers all levels of care, but it specializes in more complex, specialized services that are unavailable at most other hospitals. Because of its advanced services, Hershey draws patients from a broad area both inside and outside Dauphin County.
PinnacleHealth System (“Pinnacle”) is a health system with three hospital campuses—two located in Harrisburg in Dauphin County, and the third located in Mechanicsburg in Cumberland County. It focuses on cost-effective primary and secondary services and offers only a limited range of more complex services. It employs fewer than 300 physicians and provides 646 beds.
In June 2014, Hershey and Pinnacle (collectively, the “Hospitals”) signed a letter of intent for the proposed merger. Their respective boards subsequently approved the merger in March 2015. The following month, the Hospitals notified the FTC of their proposed merger and, in May 2015, executed a “Strategic Affiliation Agreement.”
After receiving notification of the proposed merger, the FTC began investigating the combination. Following the investigation, on December 7, 2015, the FTC filed an administrative complaint alleging that the merger violates Section 7 of the Clayton Act. 15 U.S.C. § 18. On December 9, 2015, the FTC and the Commonwealth of Pennsylvania (collectively, the “Government”) filed suit in the Middle District of Pennsylvania. Invoking Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), and Section 16 of the Clayton Act, 15 U.S.C. § 26, the Government sought a preliminary injunction pending resolution of the FTC's administrative adjudication. In its complaint, the Government alleged that the Hospitals' merger would substantially lessen competition in the market for general acute care services sold to commercial insurers in the Harrisburg, Pennsylvania market. Am. Compl. ¶ 4, at 3–4 (Dist. Ct. ECF 101). According to the Government, the combined Hospitals would control 76% of the market in Harrisburg. See Gov't Br. 3–4.
The District Court conducted expedited discovery and held five days of evidentiary hearings. During the hearings, the District Court heard testimony from sixteen witnesses and admitted thousands of pages of exhibits into evidence.
Following the hearings, the District Court denied the Government's request for a preliminary injunction on the basis that the Government had failed to meet its burden to properly define the relevant geographic market. Without a properly defined relevant geographic market, the District Court held there was no way to determine whether the proposed merger was likely to be anticompetitive. Thus, the Government could not show a likelihood of success on the merits, and its failure to properly define the relevant geographic market was fatal to its motion. The District Court also analyzed what it called “equities,” which it held supported denying the injunction request. The Government timely appealed.
The District Court had jurisdiction under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), which authorizes the FTC to request a preliminary injunction in cases involving violations of the Clayton Act, and under Section 16 of the Clayton Act, 15 U.S.C. § 26, which likewise authorizes the Commonwealth of Pennsylvania to seek a preliminary injunction. We have appellate jurisdiction under 28 U.S.C. §§ 1291 and 1292(a)(1).
We begin with the familiar standard of review. We review the District Court's “findings of fact for clear error, its conclusions of law de novo , and the ultimate decision to grant the preliminary injunction for abuse of discretion.” Miller v. Mitchell , 598 F.3d 139, 145 (3d Cir. 2010). This standard, though easy enough to articulate, often proves difficult to apply, particularly where, as here, we are asked to review determinations made by the District Court that cannot be neatly categorized as either findings of fact or conclusions of law.
The Government argues that the District Court made “three independent legal errors” in rejecting its proffered geographic market. Gov't Br. 26. Because the errors are legal, the Government would have us apply no deference to the District Court's determination and exercise plenary review of its conclusions. Id. at 30–31. The Hospitals disagree. They argue that market definition is a factual dispute to which we should apply the most deferential standard: clear error. Hosps. Br. 15.
On several occasions, this Court, and others, have reviewed district courts' determinations of the relevant geographic market for clear error. E.g. , Gordon v. Lewistown Hosp. , 423 F.3d 184, 211–13 (3d Cir. 2005) ; St. Alphonsus Med. Ctr.–Nampa Inc. v. St. Luke's Health Sys., Ltd. , 778 F.3d 775, 783–84 (9th Cir. 2015). In determining that clear-error review applied, the Ninth Circuit in St. Alphonsus reasoned that “[d]efinition of the relevant market is a factual question ‘dependent upon the special characteristics of the industry involved.’ ” 778 F.3d at 783 (quoting Twin City Sportservice, Inc. v. Charles O. Finley & Co. , 676 F.2d 1291, 1299 (9th Cir. 1982) ). This characterization of the relevant market arose from the Supreme Court's recognition that “Congress prescribed a pragmatic, factual approach to the definition of the relevant market and not a formal, legalistic one.” Brown Shoe Co. v. United States , 370 U.S. 294, 336, 82 S.Ct. 1502, 8 L.Ed.2d 510 (196...
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...Med. Ctr., 185 F. Supp. 3d 552 (M.D. Pa. 2016) ............................................... 207 FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327 (3d Cir. 2016) ............................................. 207, 208, 209 FTC v. Phoebe Putney Health Sys., 133 S. Ct. 1003 (2013) ................