Jackson Tennessee v. West Tennessee

• Decision Date: 11 July 2005
• Docket Number: No. 04-5387.,04-5387.
• Citation: 414 F.3d 608
• Parties: JACKSON, TENNESSEE HOSPITAL COMPANY, LLC, Plaintiff-Appellant, v. WEST TENNESSEE HEALTHCARE, INC., Jackson-Madison County General Hospital District, and BlueCross BlueShield of Tennessee, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

414 F.3d 608

JACKSON, TENNESSEE HOSPITAL COMPANY, LLC, Plaintiff-Appellant, v. WEST TENNESSEE HEALTHCARE, INC., Jackson-Madison County General Hospital District, and BlueCross BlueShield of Tennessee, Inc., Defendants-Appellees.

No. 04-5387.

United States Court of Appeals, Sixth Circuit.

Argued: March 10, 2005.

Decided and Filed: July 11, 2005.

Harry M. Reasoner, Vinson & Elkins, Houston, Texas, for Appellant.

David Marx, Jr., McDermott, Will & Emery, Chicago, Illinois, Kevin D. McDonald, Jones Day, Washington, D.C., for Appellees.

Harry M. Reasoner, Bruce A. Blefeld, Vinson & Elkins, Houston, Texas, Cannon F. Allen, Armstrong Allen, Memphis, Tennessee, Robert V. Redding, Armstrong Allen, Jackson, Tennessee, for Appellant.

David Marx, Jr., Joseph Fisher, Kevin M. Jones, McDermott, Will & Emery, Chicago, Illinois, Kevin D. McDonald, Julia C. Ambrose, Jones Day, Washington, D.C., Jerry D. Kizer, Jr., Rainey, Kizer, Reviere & Bell, Jackson, Tennessee, Max Shelton, Harris, Shelton, Dunlap, Cobb & Ryder, Memphis, Tennessee, for Appellees.

Cathrine G. O'Sullivan, David Seidman, United States Department of Justice, Washington, D.C., Victor J. Domen, Jr., Office of the Attorney General, Nashville, Tennessee, Carlos C. Smith, Miller & Martin, Chattanooga, Tennessee, J. Robin Rogers, Strang, Fletcher, Carriger, Walker, Hodge & Smith, Chattanooga, Tennessee, for Amici Curiae.

Before: BOGGS, Chief Judge; and COOK and BRIGHT, Circuit Judges.^*

OPINION

BOGGS, Chief Judge.

Although this is an antitrust case, it turns on the proper interpretation of a Tennessee statute. The plaintiff alleges that the Jackson-Madison County General Hospital District (the "Hospital District"), which is a political subdivision of the state of Tennessee, and the other defendants have committed antitrust violations. The district court dismissed the suit, finding that the state action doctrine protects the defendants from antitrust liability. The state action doctrine protects subdivisions of a state government from antitrust liability when there is a clearly expressed state policy authorizing anticompetitive acts. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 40, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985). The issue, then, is whether Tennessee law authorizes the Hospital District to engage in anticompetitive actions. We conclude that it does, and therefore affirm.

I

The Hospital District is a "private act hospital authority"¹ ("hospital authority") created by the Tennessee Legislature.² The Hospital District was created in 1949 to own, manage, and operate hospital facilities. The original rationale for the Hospital District was to serve indigent and low-income patients, although it has since expanded into a full-service healthcare operation. The Hospital District is a political subdivisions of the state of Tennessee.

The Tennessee Legislature recently reformed the statutory framework governing hospital authorities. In Acts passed in 1995 and 1996 ("the Acts"), the legislature gave hospital authorities far greater freedom of operation.³ The Acts granted hospital authorities broad powers, including the ability to:

• Borrow, issue bonds, or take on other forms of debt

• Own and operate subsidiaries such as outpatient departments, clinics, etc.

• Participate as a shareholder or partner in any lawful form of business

• Set fees to be charged to patients

• Hire and fire all employees, as well as set the terms of compensation

• Set rules governing physicians and other providers operating within the authority

• Set criteria for admission of patients

• Sue and be sued

• Invest any excess funds

• Acquire or improve any real property

Tenn.Code Ann. § 7-57-502(a)-(b). And, just in case anything was missed, the list ends with a catch-all provision: the hospital authority shall "[h]ave and exercise all powers necessary or convenient to effect any or all the purposes for which a private act metropolitan hospital authority is organized." Tenn.Code Ann. § 7-57-502(b)(10) (emphasis added). In short, after the Acts, a hospital authority has broad powers to do almost anything plausibly related to its mission of providing healthcare services.

At the heart of this dispute is the final provision in the "Powers Granted" section:

In the exercise of its powers, including, without limitation, the powers in this section, any other provision of this part and of any other law a private act metropolitan hospital authority may acquire manage, lease, purchase, sell, contract for or otherwise participate solely or with others in the ownership or operation of hospital, medical or health program properties and facilities and properties, facilities, and programs supporting or relating thereto of any kind and nature whatsoever and in any form of ownership whenever the board of trustees in its discretion shall determine it is consistent with the purposes and policies of this part or any private act applicable to it, and may exercise such powers regardless of the competitive consequences thereof.

Tenn.Code Ann. § 7-57-502(c) (emphasis added). The meaning of the last two lines is in dispute.

On July 6, 2003, Jackson, Tennessee Hospital Company ("THC"), which operates a private hospital in Jackson-Madison County, filed suit in federal district court against the Hospital District, West Tennessee Healthcare, and BlueCross BlueShield ("BlueCross") alleging violations of state and federal antitrust laws. THC alleges that the defendants engaged in various anticompetitive acts to monopolize the local healthcare market. Among the acts alleged were exclusive contracting with doctors and insurance companies, acquiring real estate around the private hospital to block expansion, charging prices that were too low or too high, acquiring other healthcare providers, and bundling its services. On February 27, 2004, the district court granted the defendants' Fed.R.Civ.P. 12(b)(6) motion to dismiss on the grounds that the state action doctrine barred antitrust liability.

II

We review the district court's grant of a Fed.R.Civ.P. 12(b)(6) motion to dismiss de novo. AirTrans, Inc. v. Mead, 389 F.3d 594, 597 (6th Cir.2004). All factual allegations are taken to be true, and we draw all reasonable inferences in favor of the plaintiff. Ibid. "A Rule 12(b)(6) motion should only be granted if it appears beyond doubt that the plaintiffs can prove no set of facts in support of [their] claim which would entitle [them] to relief." Ibid. (quotation marks omitted).

The defendants argue that the state action doctrine bars liability on any of the antitrust claims raised by the plaintiff. BlueCross also argues, in the alternative, that it is protected from antitrust liability by the Noerr-Pennington doctrine. Because we conclude that the state action doctrine bars antitrust liability for all the defendants, including BlueCross, we do not reach this alternative argument.

A

Under the so-called "state action doctrine," it is well established that antitrust law does not apply to states acting as sovereigns.⁴ Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The Supreme Court has determined that principles of federalism and state sovereignty provide blanket protection for states, but political subdivisions of the states are not automatically immune from antitrust liability. City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 370, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991). Political subdivisions of states are beyond the reach of the antitrust laws only when they act pursuant to a "clearly expressed state policy."⁵ Town of Hallie v. City of Eau Claire, 471 U.S. 34, 40, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985). The state legislature need not explicitly authorize anticompetitive conduct, as long as anticompetitive effect would logically result from the authority granted by the state. Columbia, 499 U.S. at 372-73, 111 S.Ct. 1344 ("[i]t is enough, we have held, if suppression of competition is the `foreseeable result' of what the statute authorizes"); Hallie, 471 U.S. at 41-42, 105 S.Ct. 1713. Applying these principles, we recently held that Michigan law implicitly authorized anticompetitive conduct when it empowered prisons to grant public contracts for the provision of telephone services. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527 (6th Cir.2002). The issues of implied authority and "foreseeable" anticompetitive effects are recurring ones in the case law, but, obviously, are relevant only when there is no express authorization for anticompetitive conduct.

B

Defendants hold the trump in this case: plain statutory language. The crux is the following sentence, which appears after the long list of specific and general powers granted by the Acts: "[hospital authorities] may exercise such powers regardless of the competitive consequences thereof." Tenn.Code Ann. § 7-57-502(c) (emphasis added). The phrase "competitive consequences" is commonly used in antitrust and competition law. See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 251, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993) ("[an element] of the violation is the competitive consequences of predatory conduct."); Texaco Inc. v. Hasbrouck, 496 U.S. 543, 557, 110 S.Ct. 2535, 110 L.Ed.2d 492 (1990) ("[the Robinson-Patman Act] plainly reveals a concern with competitive consequences...."). We are not aware of any other context in which this phrase is commonly used, and the plaintiff has not provided any authority suggesting an alternative meaning. The antitrust laws protect competition and are concerned with competitive consequences; thus, permission to act "regardless of competitive consequences" is most sensibly read as an authorization to act without regard for the antitrust laws.

Although no Tennessee court has addressed this issue,⁶ the Tennessee Attorney General reached the same conclusion in a 1995 Opinion. Around the time the 1995 Act was passed, the Tennessee Attorney General...