Mitchell v. Frank R. Howard Memorial Hosp.

• Decision Date: 09 August 1988
• Docket Number: 87-2069,Nos. 87-1913,s. 87-1913
• Parties: 47 Fair Empl.Prac.Cas. 954, 47 Empl. Prac. Dec. P 38,237, 1988-2 Trade Cases 68,186 Winston A. MITCHELL, M.D.; Winston A. Mitchell, M.D., Inc., Plaintiffs-Appellants, v. FRANK R. HOWARD MEMORIAL HOSPITAL; Robert Harrah; Steven Wentworth, M.D., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 762

853 F.2d 762

47 Fair Empl.Prac.Cas. 954,

47 Empl. Prac. Dec. P 38,237,

1988-2 Trade Cases 68,186

Winston A. MITCHELL, M.D.; Winston A. Mitchell, M.D., Inc. Plaintiffs-Appellants, v. FRANK R. HOWARD MEMORIAL HOSPITAL; Robert Harrah; Steven Wentworth, M.D., Defendants-Appellees.

Nos. 87-1913, 87-2069.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 15, 1988.

Decided Aug. 9, 1988.

Arthur R. Chenen, Hirschtick, Chenen, Lemon & Curtis, Los Angeles, Cal., for plaintiffs-appellants.

Robert L. Rusky, Hanson, Bridgett, Marcus, Vlahos & Rudy, San Francisco, Cal., Theodore A. Kolb, Sullivan, Roche & Johnson, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN, Chief Judge, CHOY, and NORRIS, Circuit Judges.

NORRIS, Circuit Judge:

From July 1980 until August 31, 1985, appellant Winston A. Mitchell served under oral contract as the radiologist for appellee Howard Memorial Hospital ("the Hospital"), a 38-bed facility that is the only hospital in the rural town of Willits, Mendocino County, California (pop. 4200). After the Hospital terminated its agreement with Dr. Mitchell and entered into an exclusive contract for hospital-based radiology services with Dr. Steven Wentworth, Dr. Mitchell sued in federal district court claiming that the exclusive arrangement between Howard Memorial Hospital and Dr. Wentworth violated the Sherman Act. He also claims that the Hospital violated Title VII by discriminating against him because he is Mormon. Dr. Mitchell also pleaded a number of pendent state claims. The district court entered summary judgment for the Hospital on the antitrust claims on the ground that its activities did not, as a matter of law, have sufficient impact on interstate commerce to create jurisdiction under the Sherman Act. The district court also granted defendants' motion to dismiss the Title VII counts on the ground that Dr. Mitchell was not engaged in any employment relationships which are protected by Title VII. Finally, the court dismissed the pendent claims and entered judgment for the defendants. Our jurisdiction rests on 28 U.S.C. Sec. 1291.

I

Dr. Mitchell argues that because the Hospital receives a substantial portion of its $5,000,000 annual revenues from out-of-state public and private insurance programs, because the Hospital purchases an unknown amount of medical supplies from out-of-state sources, and because the radiology department alone generates over $600,000 a year in revenue, the Hospital's activities, although local in nature, substantially affect interstate commerce. We review a summary judgment de novo. Hall v. State of Hawaii, 791 F.2d 759, 761 (9th Cir.1986).

In McLain v. Real Estate Bd., 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980), the Supreme Court held that to establish jurisdiction under the Sherman Act a plaintiff must show either "that the defendants' activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce." Id., 444 U.S. at 242, 100 S.Ct. at 509. As the Ninth Circuit has interpreted McLain, to establish jurisdiction under the Sherman Act, Dr. Mitchell is required to identify a relevant aspect of interstate commerce and then show "as a matter of practical economics" that the Hospital's activities have a "not insubstantial effect on the interstate commerce involved." Palmer v. Roosevelt Lake Log Owners Ass'n, Inc., 651 F.2d 1289, 1291 (9th Cir.1981). ¹

We agree with the district court that Dr. Mitchell has failed to show a not insubstantial effect on any appreciable activity in interstate commerce. ² Although the Supreme Court has recognized that the receipt of insurance payments and the purchase of hospital supplies from out-of-state sources are relevant to the determination of whether a hospital's activities substantially affect interstate commerce, see Hospital Building Co. v. Rex Hosp. Trustees, 425 U.S. 738, 744, 96 S.Ct. 1848, 1852, 48 L.Ed.2d 338 (1976), as the district court observed, "determinations of [Sherman Act] jurisdiction [in hospital cases] are based not merely upon revenue figures, but on a broad aggregate of factors including proximity of the facility to regional centers of commerce or to other states, treatment of significant numbers of out-of-state patients, purchase of equipment and supplies from interstate sources and interstate transfer of payment for patient care." Order Granting Plaintiff's Motion for Reconsideration and Granting Defendants' Motion for Summary Judgment. [Excerpt of Record, Tab No. 43, at 3.]

We agree with the district court that these factors weigh against finding Sherman Act jurisdiction here. The small defendant hospital is located in a remote area of northern California over 150 miles from either the Oregon or Nevada borders and over 100 miles from the nearest significant urban center, San Francisco. According to the uncontroverted evidence in the record, the Hospital has not provided medical services for even one out-of-state patient at least since 1983. ³ The mere fact that this small hospital receives some out-of-state insurance payments and may have purchased some supplies from out-of-state sources does not amount to a showing that as a matter of practical economics the hospital's activities have a not insubstantial effect on any interstate commerce. ⁴

As the decisions of other courts make clear, whether a hospital's activities sufficiently affect interstate commerce to create Sherman Act jurisdiction is a highly fact-based question calling for common sense judgment. Dr. Mitchell cites several hospital cases in which courts have found a sufficient impact on interstate commerce to support Sherman Act jurisdiction. In Mishler v. St. Anthony's Hosp. Systems, 694 F.2d 1225 (10th Cir.1981), for example, the Tenth Circuit reversed the district court's dismissal of the complaint because the plaintiff doctor alleged that the hospital received substantial revenues from out-of-state insurance, that the hospital received medical supplies from out-of-state, and that the hospital provided services to out-of-state patients. Id. at 1227. Similarly, in Tarleton v. Meharry Medical College, 717 F.2d 1523 (6th Cir.1983), the Sixth Circuit found jurisdiction where the defendant medical college provided services for a substantial number of out-of-state patients, actively recruited its students and faculty from other states, obtained significant amounts of medical supplies from out-of-state, and received both private and public funding from out-of-state. See also Crane v. Intermountain Health Care, Inc., 637 F.2d 715 (10th Cir.1980) (en banc) (same facts as Mishler ). ⁵

Other courts, however, have held that Sherman Act jurisdiction does not extend to claims against hospital defendants in somewhat similar circumstances. In Doe v. St. Joseph's Hosp., 788 F.2d 411 (7th Cir.1986), for example, the Seventh Circuit held that allegations that the defendant hospital had purchased medical supplies out of state, received reimbursements from out-of-state insurance programs, treated out-of-state patients, and shared medical information and training across state lines were legally insufficient to establish Sherman Act jurisdiction. Id. at 417. And in a case relatively close to the one at hand, the Eighth Circuit upheld the dismissal of a Sherman Act claim in which the plaintiff doctor alleged that the defendant hospital purchased supplies from out-of-state sources and that 88% of the defendant hospital's bills were paid by third-party payors, 33% of which were Medicare payments. Hayden v. Bracy, 744 F.2d 1338, 1342-43 (8th Cir.1984).

Our canvassing of the hospital cases supports our judgment that Dr. Mitchell has failed to make a showing sufficient to establish Sherman Act jurisdiction. ⁶ The cases in which courts have found Sherman Act jurisdiction involve hospitals whose activities appear to have had a much greater effect on interstate commerce than the activities of the hospital in this case. In sum, we hold that "as a matter of practical economics" Dr. Mitchell has failed to make a sufficient showing of effect on interstate commerce to establish Sherman Act jurisdiction.

II

Dr. Mitchell also appeals the district court's dismissal of his Title VII counts for failure to state a claim. The district court dismissed the Title VII counts with prejudice on the ground that Dr. Mitchell, as an independent contractor with the Hospital, did not have an employment relationship with either the Hospital or with his patients which is protected by Title VII. We review de novo dismissals under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Guillory v. County of Orange, 731 F.2d 1379, 1381 (9th Cir.1984).

A

Dr. Mitchell argues first that the district court erred in rejecting his factual allegations that for some purposes he was an employee of the Hospital, not an independent contractor. ⁷ He contends that the facts alleged in his Title VII counts are sufficient to withstand a motion to dismiss for failure to state a claim. We agree.

It is axiomatic that in considering a motion to dismiss under Rule 12(b)(6) the district court must accept as true all facts as alleged by the plaintiff. Hospital Building Co., 425 U.S. at 740, 96 S.Ct. at 1850. Moreover, a plaintiff's claims should not be dismissed on the pleadings "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). We feel that Dr. Mitchell's complaint satisfies this standard and that the district court erred in rejecting as legally insufficient Dr. Mitchell's allegations that, for the purposes of Title VII, he was an employee of defendant Hospital.

As we noted in Lutcher v. Musicians Union Local 47, 633...