Kartell v. Blue Shield of Massachusetts, Inc.

• Decision Date: 20 August 1981
• Citation: 384 Mass. 409,425 N.E.2d 313
• Parties: James P. KARTELL et al. 1 v. BLUE SHIELD OF MASSACHUSETTS, INC. et al. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 313

425 N.E.2d 313

384 Mass. 409

James P. KARTELL et al. ¹ v. BLUE SHIELD OF MASSACHUSETTS, INC. et al. ²

Supreme Judicial Court of Massachusetts, Suffolk.

Argued May 7, 1981.

Decided Aug. 20, 1981.

James van R. Springer, Washington, D. C. (Stanley V. Ragalevsky, Boston, with him), for plaintiffs.

Daniel O. Mahoney, Boston (Reginald H. Howe, Boston, with him), for Blue Shield of Massachusetts and another.

Paul W. Johnson, Asst. Atty. Gen., for Commissioner of Ins., intervener.

Before HENNESSEY, C. J., and LIACOS, ABRAMS and NOLAN, JJ.

NOLAN, Justice.

On January 16, 1981, a judge of the United States District Court for the District of Massachusetts certified to this court two questions relating to a private antitrust action now pending in the Federal court. The questions are as follows:

"1. Is Blue Shield of Massachusetts, Inc. compelled by M.G.L. c. 176B, § 7 or any other Massachusetts statute or required by any clearly articulated and affirmatively expressed State policy (a) to limit fees of participating physicians as described in the annexed Stipulation and (b) to refuse to make payment for non-emergency services provided in Massachusetts by physicians who decline to accept the terms imposed by Blue Shield in their participation agreement, including such limitation of fees?

"2. Is Blue Cross of Massachusetts, Inc. permitted generally under the Massachusetts statutes to make payments to subscribers or physicians for medical services provided by physicians to Blue Cross-Blue Shield subscribers, as it does under its contract insuring employees of the Commonwealth?" For the reasons which follow, we answer question 1(a) and 2 in the negative. We answer question 1(b) in the affirmative.

I. Background.

The plaintiffs, four Massachusetts physicians, seek injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26 (1976), against certain practices of the defendants, Blue Shield of Massachusetts, Inc. (Blue Shield), and Blue Cross of Massachusetts, Inc. (Blue Cross), which are alleged to operate in restraint of trade in violation of §§ 1 and 2 of [384 Mass. 411] the Sherman Act, 15 U.S.C. §§ 1 and 2 (1976). Specifically, the plaintiffs allege that a) by refusing to reimburse physicians who have not signed Participating Physician's Agreements with Blue Shield for services to subscribers, except in emergencies or for services rendered outside Massachusetts, and b) by requiring that participating physicians accept Blue Shield's reimbursement as payment in full in most cases, Blue Shield is engaged in unlawful price setting. The plaintiffs further allege that Blue Cross has conspired with Blue Shield in refusing to provide benefits for physicians' services other than those rendered by the salaried staff of institutional providers such as hospitals and those rendered under Blue Cross's contract covering State employees, thereby perpetuating Blue Shield's alleged dominance in the market for physicians' services.

The defendants raised the defense that the challenged practices are immune from Federal antitrust attack under the "state action" exemption recognized in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and most recently articulated in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). This contention was supported by the Commissioner of Insurance (Commissioner) and initially accepted by the trial judge, who in August, 1978, ordered the complaint dismissed. On appeal, however, the United States Court of Appeals for the First Circuit reversed, holding that the questions of statutory construction raised by the State action defense should initially be determined by the State courts. Kartell v. Blue Shield of Mass., Inc., 592 F.2d 1191 (1st Cir. 1979). The Court of Appeals accordingly directed the District Court to abstain pending our decision in Nelson v. Blue Shield of Mass., Inc., 377 Mass. 746, 387 N.E.2d 589 (1979), and, if sufficient guidance was not provided by that decision, to consider certifying questions to this court. Kartell v. Blue Shield of Mass., Inc., supra at 1195. After determining that the Nelson decision did not speak to the central statutory issues raised by the instant case, the trial judge proceeded with this certification. The materials before us include the briefs of the parties, including the Commissioner, a stipulation of facts accompanied by a documentary appendix, and certain materials developed during the discovery phase of the Federal litigation.

II. Primary jurisdiction.

As a threshold matter, the defendants invoke the doctrine of primary jurisdiction, and urge that we refer both certified questions to the Commissioner of Insurance for his formal consideration. We decline to do so.

The doctrine of primary jurisdiction permits a court to refrain from exercising its jurisdiction until an administrative agency has determined some question or some aspect of a question arising in the proceeding before that court. 3 K.C. Davis, Administrative Law § 19.01, at 3 (1958). See Murphy v. Administrator of the Div. of Personnel Administration, 377 Mass. 217, 220-222, 386 N.E.2d 211 (1979). A court will apply the doctrine to promote uniformity of regulation and to take advantage of an agency's special expertise. Mashpee Tribe v. New Seabury Corp., 592 F.2d 575, 580 (1st Cir. 1979). See Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 303-304, 96 S.Ct. 1978, 1986-1987, 48 L.Ed.2d 643 (1976). In antitrust cases, the doctrine of primary jurisdiction may provide a means of accommodating Federal antitrust policy to an agency's regulatory policy. 3 K.C. Davis, Administrative Law § 19.05, at 26 (1958). See Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d 525 (1973); Jaffe, Primary Jurisdiction, 77 Harv.L.Rev. 1037, 1069-1070 (1964). Its use in a given case, however, rests in the sound discretion of the trial judge. Lehman Bros. v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 1744, 40 L.Ed.2d 215 (1974).

In the instant case, the judge who certified questions of law to this court has already considered the applicability of the doctrine of primary jurisdiction. He rejected the defendants' comparison of the allegations in this case with those in Nelson v. Blue Shield of Mass., Inc., supra, where we applied the doctrine to dismiss a complaint alleging that certain of Blue Shield's practices, regulated by the Commissioner, violated State law provisions which are enforced in the first instance by the Commissioner. The judge concluded that in the instant case "(t)he threshold question ... is purely one of state statutory construction; no fact-finding, administrative proceedings are necessary or even relevant." Because we agree with the statement, we need not reach the question whether, under our Uniform Certification of Questions of Law Rule, S.J.C. Rule 1:03, --- Mass. --- (1980), we possess the power to refer certified questions to an agency for its consideration, especially when the Federal trial court has already refused to do so. See SDK Medical Computer Servs. Corp. v. Professional Operating Management Group, Inc., 371 Mass. 117, 126-127, 354 N.E.2d 852 (1976), which held that, although it is possible that certain charges as to unfair competitive practices by Blue Shield should be initially referred to the Commissioner of Insurance for correction under his administrative authority, the matter is one for consideration by the trial court. But see Kartell v. Blue Shield of Mass., Inc., 592 F.2d 1191, 1196 (1st Cir. 1979) (Coffin, C. J., dubitante) ("(I)f, in the process of considering the questions certified the Massachusetts court finds the record to be inadequate, I would see no reason why it could not require the record to be supplemented as might be necessary").

We find the first rationale supporting primary jurisdiction the promotion of uniformity and consistency in the regulation of business entrusted to a particular agency to be unimportant here. The danger of inconsistency present where, for example, various Federal courts construe the provisions of Federal regulatory statutes, is absent in our construction of State law as it applies to a State agency. ³ See Comment, Confusion of Exhaustion of Administrative Remedies and Primary Jurisdiction Doctrines, 7 Suffolk U.L.Rev. 124, 138-139 (1972).

As to the second rationale supporting the use of primary jurisdiction reliance on an agency's special expertise, especially with respect to issues involving technical questions of fact we perceive no lack in the voluminous record before us which could be remedied by any kind of administrative proceeding. The certified questions before us involve questions of law and the application of principles of statutory construction. We agree with the District Court that, in this regard, Nelson v. Blue Shield of Mass., Inc., supra, is distinguishable. That case involved, among other questions, consideration of the frequency with which Blue Shield's board had been convened, the adequacy of its staff, its technical competence, and the efficiency of its procedures. Id., 377 Mass. at 753, 387 N.E.2d 589. Such factual questions underlay what amounted to "an attack on the entire system by which Blue Shield compensates participating physicians." Id. The certified questions before us, while potentially having a broad impact on the Blue Cross-Blue Shield insurance system, present no such unresolved issues of fact, nor do they involve any claimed violation of the statutes administered by the Commissioner. Accordingly, we see no need to refer to the Commissioner any aspect of the questions certified.

III. Restriction on "balance billing."

The parties have stipulated that at present, approximately 96 per cent of all Blue Shield subscribers are covered by "service benefit" contracts, under which a participating physician is required to accept the fee paid by Blue Shield as payment in full for...