Mercatus Group LLC v. Lake Forest Hosp.

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: Blanche M. Manning
• Citation: Mercatus Group LLC v. Lake Forest Hosp., 528 F.Supp.2d 797 (N.D. Ill. 2007)
• Decision Date: 15 November 2007
• Docket Number: No. 07 C 2042.,07 C 2042.
• Parties: MERCATUS GROUP LLC, Plaintiff, v. LAKE FOREST HOSPITAL, Village of Lake Bluff, Michael Peters, David Barkhausen, and Rick Lesser, Defendants.

528 F.Supp.2d 797

MERCATUS GROUP LLC, Plaintiff, v. LAKE FOREST HOSPITAL, Village of Lake Bluff, Michael Peters, David Barkhausen, and Rick Lesser, Defendants.

No. 07 C 2042.

United States District Court, N.D. Illinois, Eastern Division.

November 15, 2007.

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W. Gordon Dobie, Brian D. Werner, Attorney at Law, Winnetka, IL, William Edward Walsh, Winston & Strawn LLP, Chicago, IL, for Plaintiff.

David Marx, Erin C. Arnold, Stephen Yusheng Wu, McDermott, Will & Emery LLP, Adam M. Kingsley, Peter Michael Friedman, Holland & Knight LLC, Chicago, IL, Howard P. Levine, James L. Deano, Laura Lee Scarry, Deano & Scarry, LLC, Wheaton, IL, for Defendants.

MEMORANDUM AND ORDER

BLANCHE M. MANNING, District Judge.

Plaintiff Mercatus Group, LLC ("Mercatus") brings suit against defendants Lake Forest Hospital ("LFH"), Village of Lake Bluff (the "Village"), and individual defendants Michael Peters, David Barkhausen, and Rick Lesser, all of whom are trustees of the Village (the "Trustees"). The Village and the Trustees are referred to collectively as the "Village Defendants." In its complaint, Mercatus alleges that LFH sought to monopolize the diagnostic medical imaging market in eastern Lake County, Illinois and exclude Mercatus from that market.

To that end, Mercatus has filed a complaint alleging the following nine counts: Count I (attempted monopolization under § 2 of the Sherman Act against LFH); Count II (conspiracy in restraint of trade under § 1 of the Sherman Act against LFH); Count III (substantive due process violation under 42 U.S.C. § 1983 against the Village and Trustees); Count IV (procedural due process violation under 42 U.S.C. § 1983 against the Village and Trustees); Count V (state law ultra vires action against the Village and Trustees); Count VI (equal protection violation under 42 U.S.C. § 1983 against the Village and Trustees); Count VII (tortious interference with prospective economic advantage against LFH); Count VIII (tortious interference with prospective economic advantage against LFH); and Count IX (claim for violation of vested rights against the Village).

Both LFH and the Village Defendants separately move to dismiss Mercatus's complaint under Fed.R.Civ.P. 12(b)(6). For the reasons stated below, LFH's motion to dismiss is granted in part and denied in part and the Village Defendants' motion to dismiss is granted.

I. Facts

For purposes of this motion to dismiss, the court accepts as true the following well-pled allegations. Mercatus develops and runs "physician centers" that compete with hospitals like LFH in the delivery of diagnostic imaging services including nuclear imaging, CT scans, and MRI. In 2004, Mercatus began plans to build a physician center in Lake Bluff, Illinois (the "Mercatus Center"), approximately three miles away from LFH. According to Mercatus, the new center would drive down prices for diagnostic imaging and increase access to health care.

Mercatus alleges that the property it sought to build on (which it refers to as the "Shepard Land" because the property already featured an automotive sales dealership on part of the property called Shepard Chevrolet) was zoned L-2 under Lake Bluff zoning ordinances, which allowed it automatically to be used for the medical office center it wanted to develop. Thus, Mercatus alleges that it merely was seeking site plan approval from the Village Board, which it agrees it needed under Lake Bluff ordinances,¹ and that initially, the Village never raised the issue of Mercatus needing a "special use" permit.

According to Mercatus, however, Trustee Lesser, a physician at LFH, told Mercatus that he would not support the Mercatus Center because of the potential harm to LFH. After Lesser and LFH voiced their opposition to the Center, "the Village informed Mercatus for the first time that it would need a `special use' permit," and that site plan approval was contingent on special use permission. Cmplt. at ¶ 36. The Shepard Land was already governed by a 1972 Special Use Permit ("Shepard SUP"), which was amended in 1972 and 1979 (the "Amendments"). Each of the Amendments, of which the court takes judicial notice as they are matters of public record, Anderson v. Simon, 217 F.3d 472, 474-75 (7th Cir.2000) (citation omitted), contained language indicating that approval of the Village Board was necessary for any future developments of the relevant portions of the Shepard Land. See Exh. 2 to Village Defendants' Motion to Dismiss, 1976 Amendment (stating that "[n]o further developments of Lot 4 and 5 [the lots at issue] may be made without approval of the President and Board of Trustees of the Village of Lake Bluff') and Exh. 3, 1979 Amendment (stating that "[n]o additional or further usage shall be made of said Lots 4 and 5 except as provided by the Board of Trustees of the Village of Lake Bluff.").

In late 2006, Mercatus was initially granted permission by the Board to build the Center and its site plan for the construction of a medical office building was approved by the Village's Architectural Board of Review ("ABR"). However, prior to final site plan approval by the Board, Mercatus alleges that the defendants intervened in the process to thwart competition in a variety of ways. Specifically, LFH allegedly misrepresented information to both public and private entities regarding Mercatus, the proposed center and the economic impact on LFH. Mercatus also alleges that LFH interfered with Mercatus's existing business relationships by, among other things, intimidating physicians who had agreed to work at the proposed center and causing them to back out of their commitments to Mercatus. As a result, Mercatus alleges that the Board denied upon reconsideration the "special use" permission it had granted. The Board then denied site plan approval based on the denial of the "special use" permission.²

With respect to the Village Defendants, Mercatus alleges that they participated in a scheme to deprive Mercatus of fair access to governmental process by their active participation in a sham proceeding. Specifically, Mercatus alleges that the Village Defendants manipulated approval for the Mercatus Center and subjected Mercatus to an unnecessary and illegal hearing on whether Mercatus required a "special" or "developmental"³ use permit to build in Lake Bluff for the purpose for which the land was already zoned, i.e., a medical office building.

In addition, Mercatus alleges that the Village Defendants denied Mercatus due process by meeting hi secret in violation of the Illinois Open Meetings Act and through other procedural irregularities. In these secret meetings, the participants purportedly defined the criteria to which Mercatus would be subject and then having defined those criteria, denied Mercatus due process and did not allow Mercatus to be heard at the Village board meetings.

After the Board's denial of the "special use" permit, the Village attorney stated during a January 2007 meeting regarding site plan approval that because the "use" permit was denied, site plan approval was effectively impossible to grant. Thus, the Board voted to draft a resolution that denied the Mercatus site plan because of the "special use" vote and, according to Mercatus, without consideration of the requisite criteria in the Lake Bluff ordinance.

II. Analysis

The standard applied by a court in deciding a motion to dismiss was addressed in a recent. United States Supreme Court case, Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007). The Seventh Circuit's recent interpretation of Bell Atlantic is as follows:

Rule 12(b)(6) permits a motion to dismiss a complaint for failure to state a claim upon which relief can be granted. To state such a claim, the complaint need only contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R.Civ.P. 8(a)(2). The Supreme Court has interpreted that language to impose two casy-to-clear hurdles. First, the complaint must describe the claim in sufficient detail to give the defendant "fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)) (alteration in Bell Atlantic). Second, its allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a "speculative level"; if they do not, the plaintiff pleads itself out of court. Bell Atlantic, 127 S.Ct. at 1965, 1973 n. 14.

E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir.2007).

A. Lake Forest Hospital's Motion to Dismiss

LFH argues that Mercatus's complaint should be dismissed because its alleged anticompetitive conduct is immunized by the Noerr-Pennington doctrine and the state action doctrine. LFH further contends that Mercatus lacks antitrust standing as to LFH's alleged non-petitioning conduct. Finally, LFH argues that upon dismissal of the antitrust claims, the court should dismiss the remaining state law claims against it. The court addresses these arguments in turn.

1. Sherman Act (Counts I and II)

Section 1 of the Sherman Act forbids contracts, combinations, and conspiracies that unreasonably restrain trade. See 15 U.S.C. § 1. Section 2 of the Sherman Act prohibits monopolization by sanctioning: "[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce...." 15 U.S.C. § 2.

a. LFH's petitioning conduct—Noerr-Pennington doctrine

Under the First Amendment, "parties may petition the government for official action favorable to their interests without fear of suit, even if the result of the petition, if granted, might harm the interests of others." Tarpley v. Keistler, 188 F.3d...