Highmark Inc. v. UPMC Health Plan Inc.

• Decision Date: 17 October 2001
• Docket Number: No. 01-1377,01-1377
• Citation: 276 F.3d 160
• Parties: (3rd Cir. 2001) HIGHMARK, INCORPORATED, v. UPMC HEALTH PLAN, INCORPORATED, APPELLANT Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 160

276 F.3d 160 (3rd Cir. 2001)

HIGHMARK, INCORPORATED, v. UPMC HEALTH PLAN, INCORPORATED, APPELLANT

No. 01-1377

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: October 17, 2001

December 21, 2001

Appeal from the United States District Court For the Western District of Pennsylvania D.C. No.: 01-CV-00254 District Judge: Honorable William L. Standish

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Christine L. Donohue (Argued) Bryan S. Neft David W. Snyder Klett, Rooney, Lieber & Schorling A Professional Corporation One Oxford Centre, 40th Floor Pittsburgh, PA 15219 Counsel for Appellant.

Michael E. Lowenstein (Argued) Daniel I. Booker Gary L. Kaplan Gregory M. Luyt Reed Smith Llp 435 Sixth Avenue Pittsburgh, PA 15219 Counsel for Appellee.

Before: Alito, Barry, and Rosenn, Circuit Judges

OPINION OF THE COURT

Rosenn, Circuit Judge

This appeal has its genesis in the intense commercial rivalry between two insurers licensed in Pennsylvania to underwrite health insurance plans. This rivalry erupted in advertisements that appeared in the Pittsburgh Post-Gazette in February 2001. We had occasion almost a decade ago to observe the "dynamic role" commercial advertising plays in the financial and industrial activities of our society. Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 940-41 (3d Cir. 1993). Whether the McCarran-Ferguson Act (the McCarran Act), 15 U.S.C. SS 1011-1015, bars a false advertising claim by an insurer against another insurer under Section 43(a) of the Lanham Act, 15 U.S.C. S 1125(a)(1)(B), is an issue of first impression in this court.

Alleging that UPMC Health Plan, Inc. (UPMC), one of the foregoing insurers, published full-page advertisements (the UPMC ad or the Ad) in the Pittsburgh Post-Gazette in February 2001 containing deceptive misstatements in comparing insurance plans offered by UPMC and Highmark, Inc. (Highmark), the other insurer, Highmark, promptly sought injunctive relief and damages in the United States District Court for the Western District of Pennsylvania. The bases for its action are that the UPMC ad contained false statements and deceptive advertising in violation of Section 43(a) of the Lanham Act, state common law claims of commercial disparagement, and intentional interference with contractual relations.

UPMC moved to dismiss the action for lack of subject matter jurisdiction, contending that neither its Ad, nor the services mentioned therein, substantially affect interstate commerce as required under Section 43(a) of the Lanham Act. UPMC later asserted that plaintiff 's Lanham Act claims also were proscribed by the McCarran Act and the Pennsylvania Unfair Insurance Practices Act (UIPA), 40 PA. CONS. STAT. ANN. SS 1171.1-.15 (1999). After a two-day hearing, the District Court denied the motion to dismiss and granted Highmark's motion for a preliminary injunction. In granting the injunction, the District Court found that UPMC's ad contained nine separate literally false statements. The Court also found that UPMC's advertising had a tendency to deceive the intended readers. The Court's order required UPMC to cease and desist further dissemination of its Ad and any other false and deceptive advertisements or marketing materials containing a claim specifically found by the District Court to be false and misleading. UPMC timely appealed to this Court. We affirm.

I.

As a licensed insurer, UPMC offers two health insurance plans marketed solely to employers and subscribers in Western Pennsylvania, the Enhanced Access Point of Service plan and the Enhanced Access HMO plan. Highmark, also a licensed insurer, offers three health insurance plans under its CommunityBlue umbrella, including its CommunityBlue Direct plan. The CommunityBlue Direct plan is also marketed solely to employers and subscribers in Western Pennsylvania. Both UPMC plans and Highmark's CommunityBlue Direct plan are network-based plans. As such, they utilize the services of hospitals and physicians under contract with the plan to provide health care to subscribers. UPMC's plans and Highmark's plan make their services available outside of their respective networks, but at a greater cost to the subscriber, through deductibles and co-payments.

The County of Allegheny chose the UPMC health plans and the Highmark CommunityBlue Direct plan as the exclusive health insurance plans offered to the County's non-union employees during the open enrollment period beginning on February 1, 2001. On February 1 and February 4, 2001, UPMC published full-page advertisements in the Pittsburgh Post-Gazette comparing various features of UPMC's and Highmark's plans. The top of the Ad states "A message to the employers of Allegheny County," and asks "If you were diagnosed with a serious illness tomorrow, which health plan would you rather have?" The District Court found nine statements in the Ad (including seven statements comparing UPMC and Highmark health care plans) were false and misleading.

The District Court reviewed the prerequisites for a preliminary injunction. Based on its findings of fact, it concluded that Highmark had established that it was likely to succeed on the merits and that it would suffer irreparable injury if injunctive relief were denied. The Court also balanced the hardship to the parties and considered the public interest. On balance, it reasoned that the injunction would prevent UPMC "from gaining an unfair advantage in its competition with Highmark" and that the public interest would best be served by a cessation of the Ad and the publication of a corrective advertisement. It thereupon granted the application for the injunction.

II.

On appeal, UPMC raises two significant legal issues. First, it claims the Ad does not substantially affect interstate commerce, and thus there is no Lanham Act jurisdiction. It also claims that the McCarran Act bars the application of the Lanham Act, because to do so would invalidate, impair, or supersede Pennsylvania's Unfair Insurance Practices Act.

First, we address the jurisdictional issues with respect to Highmark's Lanham Act claim. This is essentially a legal issue and our standard of review is plenary. United States Sec. & Exch. Comm'n v. Infinity Group Co., 212 F.3d 180, 186 n.6 (3d Cir. 2000).

UPMC argues that the Lanham Act's interstate commerce requirement is not met because it directed its Ad to employees of Allegheny County, Pennsylvania, and the advertised health plans are sold only in Pennsylvania. Thus, it maintains that there is no substantial effect on interstate commerce. The District Court rejected this argument, holding that the Ad does indeed substantially affect interstate commerce.

A.

The Lanham Act provides civil liability for any person who "uses in commerce" any false or misleading description or representation of fact which in commercial advertising misrepresents the nature, characteristics, or qualities of any person's services or commercial activities. 15 U.S.C. S 1125(a)(1)(B). The term "commerce," as used in the Act, refers to "all commerce which may lawfully be regulated by Congress." 15 U.S.C. S 1127. It has long been acknowledged that the Act "confers broad jurisdictional powers upon the courts of the United States." Steele v. Bulova Watch Co., 344 U.S. 280, 283 (1952); accord U.S. Healthcare, Inc. v. Blue Cross, 898 F.2d 914, 922 (3d Cir. 1990) ("The commerce requirement has been broadly interpreted."). Congress's authority under the interstate commerce clause extends even to purely intrastate activity if that activity substantially affects interstate commerce. United States v. Lopez, 514 U.S. 549, 558-59 (1995).

The District Court held that five nexi substantially affect interstate commerce. First, the Pittsburgh Post-Gazette is distributed interstate and, therefore, the Ad appeared outside Pennsylvania. Second, the health plans referred to in the advertisements offer emergency care to patients outside of Pennsylvania. Third, the Highmark plan applies to subscribers residing outside of Pennsylvania, and services may be provided to a subscriber's dependents who reside outside of Pennsylvania. Fourth, subscribers may be referred to a hospital or medical facility outside of Pennsylvania. Finally, the Ad might have an impact on the parties outside of Pennsylvania. UPMC does not challenge the Court's factual findings, appealing only the Court's holding that these facts are sufficient to give the Court Lanham Act jurisdiction.

The District Court's findings relating to the health plan services offered outside of Pennsylvania support its conclusion with respect to interstate commerce. Cynthia Dellecker, Highmark's vice president of product management and development, testified that CommunityBlue Direct covers subscribers' dependents residing outside of Pennsylvania, and that CommunityBlue Direct offers emergency care outside of the state and country. She also testified that CommunityBlue Direct subscribers have access to out-of-state hospitals such as Sloan-Kettering, the Cleveland Clinic, Massachusetts General Hospitals, and the Mayo Clinic. Dr. Kenneth Melani, the executive vice president of Highmark for strategic business development and health services, testified that Highmark has approved care for subscribers at Sloan-Kettering. Melani further noted that Joslin Clinic, a CommunityBlue Direct network hospital situated in Boston, Massachusetts, is an internationally recognized diabetes treatment center.

John DeGruttola, the chief marketing officer for UPMC, acknowledged that Highmark has arrangements with the Cleveland Clinic and Johns Hopkins University, situated in Baltimore, Maryland. Moreover, UPMC covers medical emergency care outside Pennsylvania, and, according to DeGruttola, he's "never had a complaint come across . . . that said th[e UPMC] card wasn't recognized across the United States or in the world." The record testimony amply supports the District Court's conclusion with respect to the...