Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 89-15022

• Decision Date: 01 February 1991
• Docket Number: No. 89-15022,89-15022
• Citation: 924 F.2d 1484
• Parties: , 1991-1 Trade Cases 69,315 MORGAN, STRAND, WHEELER & BIGGS d/b/a Tucson Radiology, an Arizona partnership; West Coast Radiology, Inc.; Karl H. Morgan, M.D., an individual; Richard D. Strand, M.D., an individual; and Lee E. Taylor, M.D., an individual, Plaintiffs-Appellants, v. RADIOLOGY, LTD., an Arizona partnership; HCA Health Services of Arizona, Inc., an Arizona corporation; Hospital Corporation of America, a Tennessee corporation; Hospital Corporation of Arizona, an Arizona corporation d/b/a El Dorado Hospital, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1484

924 F.2d 1484

59 USLW 2510, 1991-1 Trade Cases 69,315

MORGAN, STRAND, WHEELER & BIGGS d/b/a Tucson Radiology, an Arizona partnership; West Coast Radiology, Inc.; Karl H Morgan, M.D., an individual; Richard D. Strand, M.D., an individual; and Lee E. Taylor, M.D., an individual Plaintiffs-Appellants, v. RADIOLOGY, LTD., an Arizona partnership; HCA Health Services of Arizona, Inc., an Arizona corporation; Hospital Corporation of America, a Tennessee corporation; Hospital Corporation of Arizona, an Arizona corporation d/b/a El Dorado Hospital, Defendants-Appellees.

No. 89-15022.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 16, 1990.

Decided Feb. 1, 1991.

Andrew Laidlaw, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for plaintiffs-appellants.

H. Michael Clyde, Brown & Bain; Randall S. Yavitz, Sacks, Tierney, Kasen & Kerrick (James A. Craft, Evans, Kitchel & Jenckes, on the brief), Phoenix, Ariz., for defendants-appellees.

Appeal from the United States District Court for the District of Arizona.

Before TANG and BEEZER, Circuit Judges, and STEPHENS, ^* District Judge.

TANG, Circuit Judge:

Plaintiffs-appellants (hereafter all referred to as "MSW & B") are radiologists and radiology groups. Plaintiff-appellant Morgan, Strand, Wheeler & Biggs, d/b/a Tucson Radiology, is an Arizona partnership that began providing radiology services in Tucson, Arizona starting in 1980. Its partners include plaintiffs-appellants Doctors Strand and Morgan. Plaintiff-appellant West Coast Radiology, Inc., a California professional corporation, provided radiology services to plaintiff Tucson Radiology. West Coast Radiology employs Doctors Strand and Morgan, as well as plaintiff-appellant Doctor Taylor, all of whom hold shares in it. All plaintiff-appellant physicians except Dr. Taylor started practicing radiology in Tucson in 1980. Dr. Taylor was a RL radiologist before he joined West Coast Radiology.

Defendants-appellees are a radiology group, Radiology, Ltd. (hereafter "RL"), a hospital, Northwest Hospital, and the hospital's owner, Hospital Corporation of America (hereafter "HCA"). RL is a professional corporation that provides radiology services in Tucson, Arizona.

MSW & B appeals the district court's summary judgment in all but one of their claims. They alleged violations of section 1 of the Sherman Act, 15 U.S.C. Sec. 1, through exclusive service contracts, group boycott, and collective refusal to deal, and of section 2, 15 U.S.C. Sec. 2, by monopolization, attempted monopolization, and conspiracy to monopolize. They claim that RL and HCA unfairly and illegally contracted exclusively to MSW & B's detriment, and even though MSW & B assiduously sought that contract.

BACKGROUND

Radiologists are physicians who specialize in interpreting medical images. Medical images include the traditional x-ray films and contrast material studies, flouroscopy, cineradiography, ultrasound, and radionucleide (nuclear medicine), computerized axial tomography (CAT), nuclear magnetic resonance (NMR), and positron emission tomography (PET) scans. Both radiologists and nonradiologist physicians interpret the images. Physicians who care directly for patients are the ones who order imaging. These same physicians may interpret the images, especially the more common x-ray studies. For example, cardiologists may, without consulting a radiologist, obtain and interpret coronary arteriograms, cineangiograms, and echocardiograms. A general practitioner may obtain conventional x-rays for examining the chest or an injured extremity. Technicians usually operate the equipment that obtains the images. The equipment owners generally employ the technicians who obtain the images. Hospitals usually contract with radiologists to supervise the technicians.

The record does not show what proportion of images radiologists or nonradiologists interpret in this case. Hospitals may have a variety of arrangements and rules that determine who may order and who is responsible for interpreting medical images of hospital patients. Often, the ordering physicians will interpret the images, but hospital rules usually require a radiologist's interpretation as well. Hospitals generally have contracts with radiologists to insure prompt and reliable image interpretations when physicians order medical images. The contract might provide only that a radiologist be available, but might also provide a specific radiologist or group of radiologists an exclusive obligation and right to interpret all medical images obtained in the hospital.

MSW & B attempted to contract with at least two Tucson hospitals to provide radiology services. In 1978, they unsuccessfully solicited a contract with El Dorado Hospital. In 1983, they bid for a contract at Northwest Hospital, which rejected the bid. HCA owned both hospitals, but managed them through different subsidiaries. Both hospitals ultimately awarded contracts to RL. RL's contracts at Northwest and El Dorado were exclusive, precluding other radiologists from interpreting medical images obtained in those hospitals. Although Northwest rejected their bid, MSW & B maintained an office across the street from Northwest and their business there continued to grow after Northwest opened.

RL had nonexclusive contracts with three other Tucson hospitals, Tucson Medical Center, St. Joseph's Hospital, and St. Mary's Hospital. The radiologists at the University of Arizona exclusively staffed three Tucson hospitals, the University Hospital, Kino Hospital, and the Veterans Administration Hospital. Osteopathic radiologists staffed Tucson General Hospital. At the three hospitals where it had nonexclusive contracts, RL had primary staffing responsibilities, but other radiologists also had staff privileges. RL appears to have had the obligation and first opportunity to provide night and weekend radiological services, to schedule radiology facilities' use, and to interpret images when the ordering physician did not specify a particular radiologist.

MSW & B asserts a relevant market comprised of referrals by Tucson private (i.e., not associated with the University of Arizona) medical doctors (i.e., those who hold M.D. rather than D.O. degrees) to private medical radiologists. They contend that RL has somewhere between 60% and 70% of that market. They also assert a Northwest Tucson submarket, of which they say Northwest Hospital attracts twenty-seven percent of the patients. MSW & B maintain that RL's and HCA's exclusive service contracts, group boycott, and collective refusal to deal restrained trade and thereby violated section 1 of the Sherman Act. They also contend RL and HCA violated section 2 by monopolizing, attempting to monopolize, and conspiring to monopolize the relevant market.

The district court granted summary judgment to defendants in all of MSW & B's claims except their attempted monopolization claim. The district court held that MSW & B had not shown that RL and HCA had market power. It also held that, in regard to their conspiracy to monopolize, group boycott, and concerted refusal to deal claims, MSW & B had not shown "a conscious commitment to a common scheme designed to achieve an unlawful end." MSW & B appeals the district court's grant of summary judgment on their Sherman Act Sec. 1 claims and their monopolization and conspiracy to monopolize claims.

DISCUSSION

I. Standard of Review

We review the district court's grant of summary judgment de novo. See Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty, Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). "[T]his standard mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a), which is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict." Id. We review discovery rulings for abuse of discretion. See Ah Moo v. A.G. Becker Paribas, Inc., 857 F.2d 615, 619 (9th Cir.1988); Mackey v. Pioneer Nat'l Bank, 867 F.2d 520, 523 (9th Cir.1989) (refusal to permit further discovery).

II. The Section 1 Claims

Under the rule of reason, ¹ "a section 1 claimant must establish three elements: '(1) an agreement or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intend to harm or restrain competition; and (3) which actually restrains competition." Thurman Indus., Inc. v. Pay 'N Pak Stores, Inc., 875 F.2d 1369, 1373 (9th Cir.1989) (quoting Oltz v. St. Peter's Community Hosp., 861 F.2d 1440, 1445 (9th Cir.1988)). MSW & B contends that RL conspired with Northwest Hospital, specifically intending to restrain trade and to give RL a monopoly of the Tucson private medical radiology market, by contracting that RL would alone provide radiological services at Northwest Hospital.

MSW & B summarizes evidence that they contend creates a genuine factual issue as follows. RL tried to coerce another group of radiologists (Southern Arizona Radiologists ("SAR") which is not a party here) not to compete at another hospital (St. Mary's, which is also not a party) by threatening to compete for a contract with Northwest Hospital. RL offered not to bid on the contract at Northwest if SAR did not compete for the contract at St. Mary's. Despite this, SAR sought the contract at St. Mary's. RL, however, obtained it. Subsequently, RL bid for the contract with Northwest. Its representative met with Northwest officials and owners. A "steering committee," which RL partisans dominated, advised Northwest to contract with RL. Northwest subsequently did so.

To withstand summary judgment,...