Furlong v. Long Island College Hosp.

• Decision Date: 14 June 1983
• Docket Number: D,No. 614,614
• Citation: 710 F.2d 922
• Parties: 1983-1 Trade Cases 65,452 Monica FURLONG, M.D., Plaintiff-Appellant, v. The LONG ISLAND COLLEGE HOSPITAL, et al., Defendants-Appellees. ocket 82-7565.
• Court: U.S. Court of Appeals — Second Circuit

Page 922

710 F.2d 922

1983-1 Trade Cases 65,452

Monica FURLONG, M.D., Plaintiff-Appellant, v. The LONG ISLAND COLLEGE HOSPITAL, et al., Defendants-Appellees.

No. 614, Docket 82-7565.

United States Court of Appeals, Second Circuit.

Argued Dec. 15, 1982.

Decided June 14, 1983.

Harold M. Weiner, New York City (Sandra M. Goodman, New York City, on the brief), for plaintiff-appellant.

Robert Lang, New York City (Edward N. Meyer, David W. Shapiro, Cole & Deitz, New York City, on the brief), for defendant-appellee Long Island College Hosp.

Diana L. Nicholson, Brooklyn (Corner, Finn, Nicholson & Charles, Brooklyn, on the brief), for defendants-appellees Owre and Long Island Anesthesiology Associates, P.C.

Before FEINBERG, Chief Judge, and TIMBERS and NEWMAN, Circuit Judges.

NEWMAN, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the Eastern District of New York (Charles P. Sifton, Judge) entered upon an order dismissing, with leave to amend, a Sherman Act complaint for failure to allege adequately the required connection to interstate commerce. Though we do not agree with all of the District Court's analysis of the relevant standards for assessing the sufficiency of an allegation of interstate commerce effects, we agree that the complaint, in its present form, was properly dismissed.

I.

The following facts were alleged in the complaint and subsequently filed affidavits. Plaintiff-appellant Monica Furlong is a licensed physician and surgeon and a National Board certified anesthesiologist. Dr. Furlong began work at the Long Island College Hospital (LICH) in 1968. In 1974, Dr. Stewart Owre, chief of the Department of Anesthesiology at LICH, appointed Dr. Furlong to the position of Assistant Director of Anesthesiology. By 1977, appellant had become a fully privileged staff member of LICH with senior privileges in anesthesiology.

In May 1978, Dr. Owre established a professional corporation, Long Island Anesthesiology Associates (LIAA). Although the other anesthesiologists associated with LICH joined LIAA, Dr. Furlong was not asked to become a member. On May 10, 1978, LIAA executed a contract with LICH, which granted LIAA the exclusive right to provide anesthesiological services to LICH, and which obliged LIAA to provide such services on a 24-hour, seven-days-per-week basis.

Notwithstanding the exclusivity provision of its contract with LIAA, LICH did not dismiss Dr. Furlong from her staff position. Dr. Owre, however, deprived Dr. Furlong of certain economic benefits that she had consistently received prior to the formation of LIAA. In addition, Dr. Owre removed Dr. Furlong from her position as Assistant Director of Anesthesiology and sought to prevent her assignment to surgical cases.

On April 15, 1979, Dr. Furlong requested and received a leave of absence from LICH. Some time during her leave, Dr. Furlong found alternative employment as an anesthesiologist. On August 14, 1981, Dr. Furlong instituted this action, alleging, among other things, that LICH, LIAA, and Dr. Owre acted together to restrain trade and fix prices in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1976).

To establish that her claim was cognizable under federal antitrust law, Dr. Furlong alleged several connections between the parties' business activities and interstate commerce. The connections specified were Dr. Furlong's receipt of third-party payments from out-of-state, LIAA's receipt of such payments, LIAA's practice of purchasing goods and services in interstate commerce, and LICH's receipt of federal subsidies. It was not alleged that any of these connections to interstate commerce were or would be affected by the claimed antitrust violation.

Defendants filed motions to dismiss the complaint, pursuant to 12(b)(6), Fed.R.Civ.P., for failure to allege adequately the effect on interstate commerce required to permit application of the Sherman Act. In the supporting affidavits, defendants asserted that neither the amount of out-of-state payments received nor the amount of goods and services purchased had been or would be altered by their alleged conduct.

On June 16, 1982, the District Court filed a memorandum opinion and order dismissing the claim. ¹ In its opinion, the Court held that " '[a]s a matter of logic,' the extent of defendants' activities in interstate commerce, in and of itself, 'is irrelevant in a denial of hospital staff privileges ... [since] their denial of staff privileges to [plaintiff] has no possible effect on their own activities in interstate commerce; the only potential effect relates to plaintiff['s] practice of medicine,' " quoting Cardio-Medical Associates, Ltd. v. Crozer-Chester Medical Center, 536 F.Supp. 1065 (E.D.Pa.1982). Focusing solely on plaintiff's professional activities, Judge Sifton concluded that plaintiff's receipt of third-party payments from out of state did not provide a cognizable relation to interstate commerce within the scope of the Sherman Act. ² He therefore dismissed the complaint "without prejudice to the filing of an amended complaint that would state a claim within the Court's jurisdiction." Declining the District Court's invitation to amend, plaintiff appealed from the judgment entered upon the order of dismissal.

II.

The interstate commerce component of an antitrust cause of action may be established in two ways. First, plaintiff may allege and prove that defendant's conduct is "within" the stream of interstate commerce. Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975). Alternatively, plaintiff may allege and prove that defendant's conduct, although entirely local or confined to one state, nonetheless "affects" interstate commerce. United States v. Employing Plasterers Association, 347 U.S. 186, 189, 74 S.Ct. 452, 454, 98 L.Ed. 618 (1954). Both sides in this case agree that the complaint seeks to plead antitrust jurisdiction under the "affecting commerce" approach. What divides the parties on the substantive aspect of the commerce issue is a dispute concerning the scope of business activities relevant in determining the requisite relationship to interstate commerce. This dispute concerns two issues: (1) whether, in any antitrust case, a court may examine all of the business activities of a defendant or only the defendant's activities affected by the conduct alleged to be unlawful; (2) whether, in a case like Dr. Furlong's, involving a doctor's alleged loss of hospital staff privileges, a court may examine the relevant activities of either party or only those of the plaintiff.

The first dispute requires consideration of the Supreme Court's decision in McLain v. Real Estate Board, 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980), which sustained the jurisdictional allegations of a complaint by real estate buyers and sellers accusing New Orleans real estate brokers of conspiring to fix commission rates. The Court ruled that the plaintiffs need demonstrate a substantial effect on interstate commerce resulting only from defendants' "brokerage activity," not from the "alleged conspiracy to fix commission rates." Id. at 242, 100 S.Ct. at 509. The Ninth Circuit has extracted from McLain a general rule that the requisite impact on interstate commerce may be established by any of a defendant's business activities "independent of the violations." Western Waste Service Systems v. Universal Waste Control, 616 F.2d 1094, 1097 (9th Cir.), cert. denied, 449 U.S. 869, 101 S.Ct. 205, 66 L.Ed.2d 88 (1980). ³ However, the First and Tenth Circuits have read McLain more narrowly to mean that an antitrust plaintiff must show an effect upon interstate commerce resulting from defendant's unlawful conduct, either an effect that has already occurred or is likely to occur. Cordova & Simonpietri Insurance Agency v. Chase Manhattan Bank, 649 F.2d 36, 45 (1st Cir.1981); Crane v. Intermountain Health Care, Inc., 637 F.2d 715, 719, 722 (10th Cir.1981) (en banc). At first glance, this narrower approach seems inconsistent with the language in McLain that explicitly rejected a requirement that the plaintiffs must show an effect on commerce caused by the alleged price-fixing or other activity alleged to be unlawful. 444 U.S. at 242-43, 100 S.Ct. at 509. However, as Judge Breyer's opinion for the First Circuit in Cordova indicates, the narrower view does not require an explicit showing of a causal link between the unlawful conduct and interstate commerce; instead, it requires only sufficient facts to support an inference that the unlawful conduct has affected or is likely to affect commerce, and in drawing this inference a court will focus upon the link between the defendant's activities " 'infected' " by illegality, 649 F.2d at 45 (quoting McLain, supra, 444 U.S. at 246, 100 S.Ct. at 511), and interstate commerce.

We agree with the First and Tenth Circuits that it would not be prudent to extract from McLain a generalized rule that antitrust jurisdiction can be established simply by showing that some aspects of a defendant's business have a relationship to interstate commerce. Rather the inquiry must be whether the defendant's activity that has allegedly been "infected" by unlawful conduct can be shown " 'as a matter of practical economics' to have a not insubstantial effect on the interstate commerce involved." McLain, supra, 444 U.S. at 246, 100 S.Ct. at 511, quoting Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738, 745, 96 S.Ct. 1848, 1852, 48 L.Ed.2d 338 (1976). The requisite showing will vary with the type of unlawful conduct alleged. With a price-fixing allegation, as in McLain, the link between the "infected" activities and an ultimate effect on commerce was easily posited, since price-fixing is generally recognized as tending to restrict output, and the complaint adequately alleged interstate activities--real estate financing and title insurance--that would be adversely affected if the local...