Health Care Equalization v. Iowa Medical Soc.

Decision Date05 November 1980
Docket NumberCiv. No. 79-381-A.
Citation501 F. Supp. 970
CourtU.S. District Court — Southern District of Iowa





Lex Hawkins, George F. Davison, Jr., Glenn L. Norris, Donald J. Polden, Hawkins & Norris, Des Moines, Iowa, for plaintiff.

H. Richard Smith, Des Moines, Iowa, Dennis C. Waldon, Roan & Grossman, and Jay H. Hedgepeth, Chicago, Ill., for defendant American Hosp. Assn.

A. Roger Witke, John C. Eddy, Whitfield, Musgrave, Selvy, Kelly & Eddy, Des Moines, Iowa, for Blue Cross of Iowa.

Kenneth W. Biermacher, Des Moines, Iowa, James L. Simon, Chicago, Ill., for defendants.

Robert B. Throckmorton, Arthur F. Owens, Des Moines, Iowa, for defendants Iowa Medical Society, Donald C. Young, M. D., and Nelson H. Chesney, M. D.

L. Call Dickinson, Jr., Craig F. Graziano, Des Moines, Iowa, for defendant Blue Cross & Blue Shield of Iowa.

Thomas J. Miller, Atty. Gen., Jeanine Freeman, Gary H. Swanson, Asst. Attys. Gen., Des Moines, Iowa, for defendant Norman L. Pawlewski.

Dennis D. Jerde, Robert F. Holz, Jr., Des Moines, Iowa, and Newton N. Minow, Jack R. Bierig, Sidley & Austin, and Bernard D. Hirsh, B. J. Anderson, Chicago, Ill., for American Medical Association, Clarence R. Denser, Jr., H. Doyl Taylor, Am. Hospital Assn., Joint Commission on Accreditation of Hospitals, and American College of Radiology.

B. A. Webster, Brent B. Green, Arthur E. Gamble, Richard W. Berglund, Des Moines, Iowa, for defendant Iowa Hospital Association.

John D. McClintock, Hansen, McClintock & Riley, Des Moines, Iowa and James A. Cherney, John R. McCambridge, Paul M. VanArsdell, Jr., Hedlund, Hunter & Lynch, Chicago, Ill., for American College of Radiology.


STUART, Chief Judge.

The Health Care Equalization Committee ("HCEC"), standing as a committee of the Iowa Chiropractic Society, Inc. and purporting to be assignee of the claims of over 150 Iowa chiropractors, initiated this action against fourteen defendants, including six professional and trade associations, Blue Cross and Blue Shield, the Iowa Commissioner of Health, and other individually named physicians. HCEC alleges that these defendants have interfered with the practice of Iowa chiropractors in violation of §§ 1 and 2 of the Sherman Act, the state common law of tort, and federal civil rights statute, 42 U.S.C. § 1983. Defendants have filed motions seeking dismissal of this action based on lack of capacity and standing to sue, lack of personal jurisdiction and venue, and failure to state a claim upon which relief can be granted.


All defendants have either filed or joined in the filing of a Motion to Dismiss for Lack of Capacity and Standing to Sue.

A. Capacity

"Generally, capacity is conceived of as a procedural issue dealing with the personal qualifications of a party to litigate and typically is determined without regard to the particular claim or defense asserted." Wright & Miller, 6 Federal Practice and Procedure § 1559 at 727-28 (1971).

Rule 17(b) of the Federal Rules of Civil Procedure governs capacity to sue and provides in part:

Capacity to sue or be sued shall be determined by the law of the state in which the district court is held, except (1) that a partnership or other unincorporated association, which has no such capacity by the law of such state, may sue or be sued in its common name for the purpose of enforcing for or against it a substantive right existing under the Constitution or laws of the United States....

This rule requires the court to look first to the state law to determine if an entity has the capacity to sue. It will do so assuming for this purpose that plaintiff's allegations concerning HCEC are true and that it is a committee of the Iowa Chiropractic Society authorized by the society to investigate and prosecute this action. It is governed by ten doctors of chiropractic licensed in Iowa. More than 150 Iowa chiropractors have, in writing, assigned their individual causes of action against these defendants to HCEC, giving it power of attorney in fact and creating an express trust over the funds contributed by them. It authorizes the committee to prosecute the instant action and collect the benefits on behalf of HCEC and its assigning members.

1. Capacity under Chapter 504A, Code of Iowa

Plaintiff asserts that HCEC has been delegated the management power to pursue this suit by the Iowa Chiropractic Society, Inc., an Iowa non-profit corporation under Chapter 504A. The Iowa law does not allow a subordinate committee to sue in its own name. Under Iowa Code § 504A.21, a non-profit corporation can delegate to an executive committee the authority of the board of directors except that authority specifically exempted from such a delegation in the statute. Obviously, however, the board cannot delegate authority it does not have in the first place. A board of directors does not have the authority to sue in its own name as a board on behalf of the corporation; instead, legal action must be taken in the name of the corporation itself. Iowa Code § 504A.4(2) (Supp.1979). Therefore, even if HCEC was properly formed under § 504A.21, Chapter 504A would not vest in it the authority to assert the present claims.

2. Capacity under Iowa Common Law

The Court believes that HCEC is an unincorporated association with the capacity to sue under Iowa law. In Wilson & Co. v. United Packinghouse Workers of America, 181 F.Supp. 809, 815 (N.D.Iowa 1960), Judge Graven in ascertaining the status of the local union defendant under Iowa law cited the United States Supreme Court's definition of "association" in Hecht v. Malley, 265 U.S. 144, 157, 44 S.Ct. 462, 467, 68 L.Ed. 949 (1924):

It has been defined as a term `used throughout the United States to signify a body of persons united without a charter, but upon the methods and forms used by incorporated bodies for the prosecution of some common enterprise.'

Judge Graven concluded that the local union was in fact an unincorporated association. Wilson, 181 F.Supp. at 815.

Although the committee concept advanced here is not the type of organization ordinarily considered an association, this Court is persuaded that HCEC comes within this broad definition. It was formed for the purpose of furthering a common goal-prosecution of this action. Even though there is no corporate charter, the committee is given the power to make by-laws, to compensate members, and to conduct activities in furtherance of the association's purpose. HCEC adopted the society's by-laws and constitution.

Under the law of Iowa, unincorporated associations are given the capacity to sue and be sued as a legal entity. See Wright & Miller, 6 Federal Practice and Procedure, § 1564 at 742 (1971). HCEC, as an unincorporated association with capacity to sue under Iowa law, has capacity to sue pursuant to Federal Rule of Civil Procedure 17(b).

3. Capacity under Federal Substantive Law

Even if the Iowa common law did not give an association the capacity to sue, HCEC would have the right to bring this action as a separate entity under the federal substantive right exception found in Rule 17(b)(1), which provides that an unincorporated association not accorded legal status under state law may still have capacity to sue if it is suing for "the purpose of enforcing ... a substantive right existing under the Constitution or laws of the United States, ...".

The Federal and Iowa definitions of unincorporated association are the same: a group of persons formed voluntarily without a charter for the purpose of promoting a common enterprise or objective. Hecht v. Malley, 265 U.S. 144, 157, 44 S.Ct. 462, 467, 68 L.Ed. 949 (1924); Associated Students of University of California at Riverside v. Kleindienst, 60 F.R.D. 65, 67 (C.D.Cal.1973); Local 4076, United Steelworkers v. United Steelworkers, 327 F.Supp. 1400, 1402-03 (W.D.Pa.1971); Yonce v. Miners Memorial Hospital Association, 161 F.Supp. 178, 186 (W.D.Va.1958). The Court earlier concluded that HCEC is an unincorporated association under this definition.1

Further, the plaintiff's complaint clearly alleges a claim seeking to enforce a substantive right pursuant to federal antitrust law under claims assigned to it. Pursuant to the Court's responsibility to determine the applicability of the substantive federal right exemption found in Rule 17(b)(1),2 the Court concludes that HCEC has capacity to sue as an unincorporated association in its own name under Federal Rule of Civil Procedure 17(b)(1).

Therefore, all defendants' requests for dismissal for lack of capacity to sue are denied.

B. Standing
1. Treble Damage Claim

The Eighth Circuit Court of Appeals recently affirmed the dismissal of a complaint on the ground that plaintiff, a non-profit association, lacked standing to assert the federal antitrust claims in either its own right or in its representational capacity. Associated General Contractors v. Otter Tail Power, 611 F.2d 684, 687-691 (8th Cir. 1979). In arguing that HCEC lacks standing to assert the damage claims, the defendants rely heavily on the Eighth Circuit's observation that associational standing is traditionally denied for treble damage claims asserted pursuant to § 4 of the Clayton Act, 15 U.S.C. § 15. Id. at 689.

The Court agrees that under Associated General Contractors, HCEC could not assert the treble damage claims of its members if it based its power to do so on the doctrine of associational standing alone. HCEC, however, is assignee of the claims of 150 chiropractors in the State of Iowa. The Eighth Circuit has recognized that an association can have standing to assert antitrust damage claims validly assigned to it by members. Louisiana Farmers' Protective Union v. Great A & P Tea Co., 131 F.2d 419, 423 (8th Cir. 1942). See also...

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