Michigan Ass'n of Psychotherapy Clinics v. Blue Cross and Blue Shield of Michigan

• Decision Date: 18 November 1980
• Docket Number: Docket No. 45750-1
• Citation: 301 N.W.2d 33,101 Mich.App. 559
• Parties: , 1980-81 Trade Cases P 63,791 MICHIGAN ASSOCIATION OF PSYCHOTHERAPY CLINICS, a Michigan Corporation to be formed, Institute For Mental Health, P. C., a Professional Corporation, John Back, M. D., Russell Rude, M. S. W., Dr. Sidney Berkowitz, Helen Pilzner, R. N., John Doe and Mary Roe, Plaintiffs-Appellees, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, a Michigan Non-Profit Corporation, Defendant-Appellant. MIDWEST MENTAL HEALTH CLINIC, P. C., a Professional Corporation, John Doe and Mary Roe, Plaintiffs-Appellees, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, a Michigan Non-Profit Corporation, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 33

301 N.W.2d 33

101 Mich.App. 559, 1980-81 Trade Cases P 63,791

MICHIGAN ASSOCIATION OF PSYCHOTHERAPY CLINICS, a Michigan

Corporation to be formed, Institute For Mental Health, P.

C., a Professional Corporation, John Back, M. D., Russell

Rude, M. S. W., Dr. Sidney Berkowitz, Helen Pilzner, R. N., John Doe and Mary Roe, Plaintiffs-Appellees, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, a Michigan

Non-Profit Corporation, Defendant-Appellant.

MIDWEST MENTAL HEALTH CLINIC, P. C., a Professional

Corporation, John Doe and Mary Roe, Plaintiffs-Appellees, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, a Michigan

Non-Profit Corporation, Defendant-Appellant.

Docket No. 45750-1.

Court of Appeals of Michigan.

Nov. 18, 1980.

Released for Publication Jan. 29, 1981.

Rehearing Denied Feb. 6, 1981.

Michael T. Zajac, Detroit, for defendant-appellant.

Delmer C. Gowing, III, Bloomfield Hills, for Psychotherapy Assoc.

Noel A. Gage, Southfield, for Midwest Mental Health; Mark E. Reizen, Lynn H. Shecter, Southfield, of counsel.

Before HOLBROOK, P. J., and V. J. BRENNAN and EVERETT, ^* JJ.

V. J. BRENNAN, Judge.

Defendant Blue Cross and Blue Shield of Michigan appeals from a nonjury trial on stipulated facts and exhibits. Following trial, defendant was permanently enjoined from enforcing a substitute participation agreement as to outpatient psychotherapy clinics involved in the action.

The facts which give rise to this dispute can be summarized as follows. Since 1966, defendant has offered its subscribers outpatient psychiatric benefits. This has let to increased demand for treatment and a concomitant increase in the number of outpatient psychotherapy clinics. In order for outpatient psychotherapy clinics to be eligible for reimbursement for services rendered to patients insured by defendant Blue Cross and Blue Shield, these clinics must be approved by Blue Cross and Blue Shield. Plaintiffs Midwest Mental Health Clinic and the member clinics of Michigan Association of Psychotherapy Clinics were such approved clinics.

Originally, defendant reimbursed psychiatrists, psychologists, social workers and other professionals at an average rate of $40 per treatment session. On February 23, 1979, Blue Cross and Blue Shield notified its participating clinics of modifications to its reimbursement policy to take effect May 1, 1979. This modification was to be effected by invoking a 60-day termination at will provision in defendant's participation agreements with the 98 clinics, and by offering the clinics new participation agreements. ¹ Under the new agreements, the single rate structure would be replaced by a differential rate structure. ² Reimbursement would continue until December 31, 1979, for treatment begun before February 26, 1979.

On appeal defendant raises six issues. The first issue is one of jurisdiction.

At the end of trial, the court permanently enjoined Blue Cross and Blue Shield from enforcing the May 1, 1979, modifications to the OPC Program Agreement and ordered the participation agreement in effect through April, 1979, continued until further order of the court. The trial judge reasoned as follows:

"The contracts before and after May 1st are not insurance contracts, but are merely arrangements for the purchase of services to perfect cost savings and are subject to the strictures of the Sherman Act. The May 1st contract will effectively 'fix prices and restrain trade' in violation of the Sherman Act and is within the jurisdiction of this Court for the purposes of enjoining such unlawful action upon the part of the Defendant."

Defendant-appellant Blue Cross and Blue Shield argues that the trial court's ruling constitutes fundamental error with respect to the circuit court's subject matter jurisdiction as well as an erroneous application of an antitrust "price fixing" proscription. Appellant contends that state courts lack subject matter jurisdiction over a cause of action based on Federal antitrust laws and that exclusive jurisdiction is in the Federal courts. They further contend that lack of subject matter jurisdiction cannot be waived or avoided by stipulation of the parties.

Plaintiffs Midwest and Michigan Association of Psychotherapy Clinics do not dispute that an antitrust action must be brought in the Federal Courts. They argue, however, that they have neither based their action upon nor sought relief under Federal antitrust laws. Rather, they argue that the complaint sounded on the unconscionability of a contract term in violation of state statutes and that under these circumstances, the courts of Michigan do have jurisdiction over original actions based on state law where a violation of Federal antitrust law is raised collaterally.

Actions to restrain violations of Federal antitrust law must be brought in Federal court. General Investment Co. v. Lakeshore & M. S. R. Co., 260 U.S. 261, 43 S.Ct. 106, 67 L.Ed. 244 (1922), Barnes v. Dairymen's League Co-op Ass'n, Inc., 220 App.Div. 624, 222 N.Y.S. 294 (1927). Moreover, subject matter jurisdiction may not be conferred by stipulation of the parties. Shane v. Hackney, 341 Mich. 91, 98, 67 N.W.2d 256 (1954), Eggermont v. City of Clawson, 88 Mich.App. 246, 248, 276 N.W.2d 574 (1979).

In some cases, however, defendants have been allowed to raise Federal antitrust defenses to contract actions in state courts. See General Analine & Film Corp. v. Bayer Co., 305 N.Y. 479, 113 N.E.2d 844 (1953), Vendo Co. v. Stoner, 105 Ill.App.2d 261, 245 N.E.2d 263 (1969), Lyons v. Westinghouse Electric Corp., 222 F.2d 184 (CA 2, 1955).

In Lyons, supra, Westinghouse brought a breach of contract action in state court in which Lyons had raised a violation of Federal antitrust law as an affirmative defense. Lyons then brought an action in Federal court based on alleged Federal antitrust violations. One of the issues thus confronting the Federal Court was whether the state court had jurisdiction to entertain the Federal antitrust claims. The Court held that while the state court's findings were not res judicata in the Federal Courts, the state court could in fact adjudicate Federal antitrust claims raised collaterally to settle the other issues raised:

"Nor is there anything inconsistent with this in allowing violations of the Acts to be raised as valid defenses to actions brought in state courts * * * if it involves a partial enforcement of an undertaking itself forbidden." 222 F.2d 184, 190.

Two state courts have directly upheld the state court's application of Federal antitrust laws in fairly adjudicating a contract action before it. In Vendo, supra, the action was for breach of contract, and Federal antitrust violation was alleged as a defense. The Court held that the mere fact that a defense is predicated on Federal statute does not, by itself, deprive the state court of jurisdiction to hear and pass upon the defense. A similar result was forthcoming in General Analine & Film Corp., supra, wherein defendant raised violations of Federal antitrust laws as a defense in an action for breach of contract.

In Overseas Motors, Inc. v. Import Motors Ltd., Inc., 375 F.Supp. 499 (E.D.Mich., 1974), aff'd, 519 F.2d 119 (CA 6, 1975), the Court dealt with an appeal from a German Court of Arbitration. In addressing whether the findings of the Court of Arbitration constituted res judicata, Judge Feikens of the District Court addressed the antitrust and contract issues as follows:

"Claims arising under the antitrust laws are within the exclusive jurisdiction of the federal courts. They are not subject to arbitration and no res judicata qua claim preclusion could be based on any such proceeding. As this court has previously determined, the questions submitted to the Zurich court of arbitration were not in the nature of antitrust claims. That cause of action was bottomed on contract, and in the absence of allegations that the contract itself was intrinsically violative of the antitrust laws, such actions are not preempted by this court's exclusive authority over them. Conversely, an adverse judgment in that case is no bar to maintenance of antitrust claims arising out of the same transactions. (Citations deleted.) 375 F.Supp. 499, 518.

As in Lyons, Vendo and General Analine, the instant case was not premised on a charge of violation of Federal antitrust laws. The complaint was grounded on breach of contract, unconscionability of contract, interference with the practice of medicine, equitable estoppel, tortious interference with advantageous business relationships and restraint of trade and/or price fixing under Michigan antitrust laws. Since the cause of action was bottomed on contract and there were no allegations that the contract itself was intrinsically violative of antitrust laws, we find the judge's ruling was not preempted by the Federal Court's exclusive jurisdiction over antitrust actions. Overseas Motors, Inc. v. Import Motors Ltd., Inc., supra. The mere fact that the antitrust violation raised by the judge is predicated on the Federal statute did not deprive the state court of jurisdiction to hear and pass upon it.

Defendant's next argument is inextricably related to its first: that is, that the trial court erred by holding that the participation agreements to take effect May 1, 1979, would fix prices and restrain trade in violation of Federal antitrust law.

GCR 1963, 517.1 requires the trial court to find the facts specially and state separately its conclusions thereon. ³ Since clear and complete findings are essential to this Court for the exercise of its appellate function, failure to comply with the rule can result in reversal regardless of whether the issue is raised by the parties. Nicpon v. Nicpon, 9 Mich.App. 373, 157 N.W.2d 464 (1968). The mere statement of the court's ultimate findings and conclusory language are not sufficient to comply with the rule. As our Supreme Court succinctly stated in Ray v. Mason County Drain Comm'r, 393 Mich. 294, 302, 224 N.W.2d 883 ...