Hospital Building Company v. Trustees of Rex Hospital, No. 74-1452

CourtUnited States Supreme Court
Writing for the CourtMARSHALL
Citation425 U.S. 738,96 S.Ct. 1848,48 L.Ed.2d 338
Decision Date24 May 1976
Docket NumberNo. 74-1452
PartiesHOSPITAL BUILDING COMPANY, Petitioner, v. TRUSTEES OF the REX HOSPITAL et al

425 U.S. 738
96 S.Ct. 1848
48 L.Ed.2d 338
HOSPITAL BUILDING COMPANY, Petitioner,

v.

TRUSTEES OF the REX HOSPITAL et al.

No. 74-1452
Argued Feb. 25, 1976.
Decided May 24, 1976.
Syllabus

Petitioner corporation, which operates a 49-bed proprietary hospital (Mary Elizabeth) in Raleigh, N.C., brought this antitrust action alleging that respondents, a private, tax-exempt hospital (Rex) in Raleigh, two of its officers, and a health planning officer, had violated the Sherman Act by conspiring along with others to block the relocation and expansion within Raleigh of Mary Elizabeth, for the purpose of enabling Rex to monopolize the business of providing hospital services in Raleigh. Petitioner alleged that a substantial portion of its medicines and supplies comes from out-of-state sellers; that a large portion of its revenue comes from out-of-state insurance companies or the Federal Government; that it pays a management service fee to its parent company, a Georgia-based Delaware corporation; and that the planned expansion would be largely financed through out-of-state lenders. Concluding that petitioner's business was strictly local, and that respondents' alleged conduct only incidentally and insubstantially affected interstate commerce, the District Court granted respondents' motion to dismiss the complaint. The Court of Appeals affirmed. Held: Petitioner's complaint states a cause of action upon which relief can be granted under the Sherman Act, the combination of factors involving petitioner in interstate commerce being sufficient to establish a "substantial effect" on interstate commerce, within the meaning of the Sherman Act, as a result of respondents' alleged conduct. Pp. 743-747.

(a) That respondents may not have had the intentional goal of affecting interstate commerce does not exempt their conduct from Sherman Act coverage. Burke v. Ford, 389 U.S. 320, 88 S.Ct. 443, 19 L.Ed.2d 554. Pp. 744-745.

(b) The "substantial effect" test can be satisfied even if the impact on interstate commerce of the conduct alleged falls short of causing petitioner's out-of-state suppliers to go out of business or the market price to be affected by the conspiracy. Pp. 745-746. 4 Cir., 511 F.2d 678, reversed and remanded.

Page 739

John. Train III, Atlanta, Ga., for petitioner.

Ray S. Bolze, Washington, D.C., for respondents.

Carl Weissburg and Lyle R. Mink, Los Angeles, Cal., for Federation of American Hospitals, amicus curiae.

Mr. Justice MARSHALL delivered the opinion of the Court.

This is a suit brought under §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1-2. Petitioner has alleged that respondents are engaged in an unlawful conspiracy to restrain trade and commerce in the furnishing of medical and surgical hospital services, and that they are attempting to monopolize the hospital business in the Raleigh, N.C. metropolitan area. The District Court dismissed petitioner's amended complaint on the pleadings, finding that petitioner had not alleged a sufficient nexus between the alleged violations of the Sherman Act and interstate commerce. The Court of Appeals for the Fourth Circuit, sitting en banc, affirmed the judgment of the District Court, holding that the provision of hospital services is only a "local" activity, 511 F.2d 678, 682 (4 Cir. 1975), and that the amended complaint did not adequately allege a "substantial effect" Id., at 684, on interstate commerce. We granted certiorari, 423 U.S. 820, 96 S.Ct. 33, 46 L.Ed.2d 37 (1975), and now reverse. We hold that the amended complaint, fairly

Page 740

read, adequately alleges a restraint of trade substantially affecting interstate commerce and that dismissal on the pleadings of petitioner's amended complaint was thefore inappropriate.

I
A.

Since we are reviewing a dismissal on the pleadings, we must, of course, take as true the material facts alleged in petitioner's amended complaint. See, e.g., Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 222, 68 S.Ct. 996, 999, 92 L.Ed. 1328, 1332 (1948). Petitioner is a corporation organized for profit under the laws of North Carolina. It operates the Mary Elizabeth Hospital, a 49-bed proprietary hospital in Raleigh, N.C., which offers a general range of medical and surgical services to the public. Respondent Trustees of Rex Hospital (Rex) is a North Carolina corporation which operates Rex Hospital, a private, tax-exempt hospital also located in Raleigh. The other three respondents are the administrator of Rex, one of its individual trustees, and the executive secretary of the local agency responsible for making recommendations to state officials concerning the Raleigh community's need for additional hospital beds. The amended complaint alleges that respondents, along with several co-conspirators not named as defendants in this action, have acted in concert to block the planned relocation of Mary Elizabeth Hospital within the city of Raleigh and its expansion from 49 beds to 140 beds. According to the amended complaint, respondents and their co-conspirators orchestrated a plan to delay and, if possible, prevent the issuance of the state authorization that was a necessary prerequisite to the expansion of Mary Elizabeth. After a delay of some months, the authorization was finally granted, but since then, it is alleged, respondents and

Page 741

their co-conspirators have employed a series of bad-faith tactics, including the bringing of frivolous litigation, to block the implementation of the expansion. The amended complaint also alleges that respondents have maliciously instigated the publication of adverse information about petitioner's expansion plan in order to block the expansion. All these actions, it is contended, have been taken as part of an attempt by Rex to monopolize the business of providing compensated medical and surgical services in the Raleigh area.

Petitioner identifies several areas of interstate commerce in which it is involved. According to the amended complaint, petitioner purchases a substantial proportion up to 80% Of its medicines and supplies from out-of-state sellers. In 1972, it spent $112,000 on these items. A substantial number of the patients at Mary Elizabeth Hospital, it is alleged, come from out of State. Moreover, petitioner claims that a large proportion of its revenue comes from insurance companies outside of North Carolina or from the Federal Government through the Medicaid and Medicare programs. Petitioner also pays a management service fee based on its gross receipts to its parent company, a Delaware corporation based in Georgia. Finally, petitioner has developed plans to finance a large part of the planned $4 million expansion through out-of-state lenders. All these involvements with interstate commerce, the amended complaint claims, have been and are continuing to be adversely affected by respondents' anticompetitive conduct.

B

Respondents' motion to dismiss asserted both that the District Court had no jurisdiction over the subject matter of the amended complaint, Fed.Rule Civ.Proc. 12(b)(1), and that the amended complaint failed to

Page 742

state a claim upon which relief could be granted. Rule 12(b)(6). Critical to respondents' motion was their contention that the...

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4082 practice notes
  • Gifford v. Kampa, No. 2:17-CV-2421-TLN-DMC
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
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    ...light most favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); see also Hosp. Bldg. Co. v. Rex Hosp. Trustees, 425 U.S. 738, 740 (1976); Barnett v. Centoni, 31 F.3d 813, 816 (9th Cir. 1994) (per curiam). All ambiguities or doubts must also be resolved in the plainti......
  • Pell v. Weinstein, No. 3:CV-88-1905.
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    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
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    ...the well pleaded allegations of the complaint, but denies their legal sufficiency. Hospital Building Co. v. Trustees of the Rex Hospital, 425 U.S. 738, 740, 96 S.Ct. 1848, 1850, 48 L.Ed.2d 338, 341 (1976). "It is the settled rule that `a complaint should not be dismissed for failure to stat......
  • Huron Valley Hospital v. City of Pontiac, Civ. No. 78-72970.
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    ...not permitting a proposed dealership." ___ U.S. at ___, 99 S.Ct. at 412. By contrast, Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976), relied on by plaintiff to bring its claim under the Sherman Act, is inapplicable on its facts and leav......
  • Pontius v. Children's Hosp., Civ. A. No. 78-987.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 30, 1982
    ...Copp Paving Co., 419 U.S. 186, 195, 95 S.Ct. 392, 398, 42 L.Ed.2d 378 (1974). Prior to Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976), it was generally thought that medical services provided by and in a hospital did not meet this jurisd......
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4130 cases
  • Pell v. Weinstein, No. 3:CV-88-1905.
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • March 20, 1991
    ...the well pleaded allegations of the complaint, but denies their legal sufficiency. Hospital Building Co. v. Trustees of the Rex Hospital, 425 U.S. 738, 740, 96 S.Ct. 1848, 1850, 48 L.Ed.2d 338, 341 (1976). "It is the settled rule that `a complaint should not be dismissed for failure to stat......
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    • United States District Courts. 6th Circuit. United States District Court (Western District Michigan)
    • March 2, 1979
    ...not permitting a proposed dealership." ___ U.S. at ___, 99 S.Ct. at 412. By contrast, Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976), relied on by plaintiff to bring its claim under the Sherman Act, is inapplicable on its facts and leav......
  • Pontius v. Children's Hosp., Civ. A. No. 78-987.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 30, 1982
    ...Copp Paving Co., 419 U.S. 186, 195, 95 S.Ct. 392, 398, 42 L.Ed.2d 378 (1974). Prior to Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976), it was generally thought that medical services provided by and in a hospital did not meet this jurisd......
  • US v. Greater Syracuse Bd. of Realtors, Inc., No. 77-CR-57.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
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    ...has expanded over the years, so has the scope of the Sherman Act. 449 F. Supp. 891 Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 743 n. 2, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976); Gulf Oil Corp. v. Copp Paving Co., Inc., 419 U.S. 186, 201-02, 95 S.Ct. 392, 42 L.Ed.2d 378 The......
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    • American Criminal Law Review Nbr. 58-3, July 2021
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    ...commerce power and the Sherman Act’s coverage have similarly expanded as the economy has grown); Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 746 (1976) (holding “unreasonable burdens” on the f‌low of interstate commerce satisf‌ied the nexus). 96. See, e.g., McLain, 444 U.S. at 242 (......
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    ...Pen Register and Trap and Trace Device to Trace Cellphones and Internet Use, 15 A.L.R. Fed. 2d 537 [section] 2 (2006). (56) Smith, 425 U.S. at 738. (57) Id. at (58) Id. at 742-43. (59) Id. at 741, 743. (60) Id. at 743-44. (61) Id. at 743. (62) Id. at 745-46. (63) See, e.g., United States v.......
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