Saint Francis Med. Ctr. v. C.R. Bard Inc.

• Decision Date: 19 October 2010
• Docket Number: No. 09-3325.,09-3325.
• Citation: 616 F.3d 888
• Parties: SOUTHEAST MISSOURI HOSPITAL, Plaintiff, Saint Francis Medical Center, Plaintiff-Appellant, v. C.R. BARD, INC., Defendant-Appellee, Tyco International, US, Inc.; Tyco Health Care Group; John Does 1-10, Defendants. Attorney General of the State of Missouri, Amicus on Behalf of Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

616 F.3d 888

SOUTHEAST MISSOURI HOSPITAL, Plaintiff,Saint Francis Medical Center, Plaintiff-Appellant,

v. C.R. BARD, INC., Defendant-Appellee,Tyco International, US, Inc.; Tyco Health Care Group; John Does 1-10, Defendants.Attorney General of the State of Missouri, Amicus on Behalf of Appellant.

No. 09-3325.

United States Court of Appeals,Eighth Circuit.

Submitted: June 15, 2010.

Filed: Aug. 17, 2010.

Rehearing Granted and Opinion Vacated Oct. 19, 2010.

David Charles Frederick, argued, Washington, DC (Aaron M. Panner, Washington, DC, David Boies, III, Mark Schirmer, Fairfax VA, Michael Ponder, Cape Girardeau, MO, Daniel Hume, Roger W. Kirby, David E. Kovel, Kenneth G. Walsh, Christopher S. Studebaker, Karina Kosharskyy, Kirby McInerney, on the brief, New York, NY), for appellant.

Bruce Roger Braun, argued, Chicago, IL (Dan K. Webb, Michael P. Roche, David J. Doyle, Andrew M. Johnstone, Chicago, IL, Alan C. Kohn, Kevin A. Sullivan, on the brief, St. Louis, MO), for appellee.

Anne E. Schneider, Andrew M. Hartnett, AAG, Jefferson City, MO, for amicus brief for the State of MO.

Before MURPHY, BEAM, and BENTON, Circuit Judges.

BENTON, Circuit Judge.

Saint Francis Medical Center brought this class action suit against C.R. Bard, Inc., a supplier of medical equipment, including Foley and intermittent catheters. According to Saint Francis, Bard's contracts with Group Purchasing Organizations violate sections 1 and 2 of the Sherman Act, section 3 of the Clayton Act, and Missouri antitrust law. See 15 U.S.C. §§ 1, 2; 15 U.S.C. § 14; Mo.Rev.Stat. § 416.031 (2000). Saint Francis seeks relief under sections 4 and 16 of the Clayton Act, and Missouri law. See 15 U.S.C. §§ 15, 26; Mo.Rev.Stat. § 416.121.1 (2000). The district court ¹ granted summary judgment to Bard. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

Saint Francis Medical Center, a hospital in Cape Girardeau, is a member of Novation, a Group Purchasing Organization. GPOs negotiate standard contracts with suppliers on behalf of member hospitals. GPO membership is voluntary. Hospitals can (and do) switch from one GPO to another, and may belong to multiple GPOs. GPOs do not purchase supplies; member hospitals do, under the terms of GPO-negotiated contracts. GPO contracts with suppliers typically last three to eight years, and may be terminated by either side, with notice. Once a GPO contracts with a supplier, its member hospitals may sign letters of commitment, accepting the terms of the GPO contracts. A member hospital's commitment may be terminated at any time, with notice to the supplier. ² According to the parties, 96 to 98 percent of all hospitals in the United States belong to one or more GPOs.

GPO-member hospitals are not required to purchase through their GPO contracts. GPO-member hospitals can purchase supplies, like catheters, “off-contract,” negotiating their own prices with suppliers. Hospitals purchasing off-contract may pay increased prices, as they forgo the discounts in their GPO contracts. On average, hospitals pay 16 percent less by buying under GPO contracts.

Bard sells medical supplies, including catheters. Bard is the leading supplier of Foley catheters in the United States. From 2003 through 2008, Bard made 86.7 percent of Foley sales to hospitals. Bard also has a significant share of the market for intermittent catheters. ³

Saint Francis purchases Bard's catheters, pursuant to their GPO's contracts with Bard. According to Saint Francis, Bard abuses its dominant position in the catheter market in contracting with GPOs, inflating prices for hospitals. Specifically, Saint Francis objects to sole-source provisions, tiered pricing, and bundled discounts in Bard's GPO contracts.

Bard prefers sole-source contracts with GPOs. In sole-source contracts, Bard is the only supplier of catheters listed on the GPO price list provided to member hospitals, and thus the only seller under the terms in the GPO contract. In addition, according to Saint Francis, Bard's sole-source contracts with one GPO (Novation) from 2001 to 2005 urged participating member hospitals not to solicit proposals from Bard's competitors or conduct product evaluations of competitors' products. As the district court found, “there is ‘fierce competition’ for sole-source contracts.” Hospitals that buy Bard catheters under sole or dual-source contracts generally pay less than hospitals that do not. Even under sole-source agreements, however, member hospitals may purchase off-contract.

Several of Bard's GPO contracts include tiered pricing: hospitals get bigger discounts for purchasing higher percentages of supplies from Bard. The largest discounts go to hospitals that buy at least 85 percent of certain listed products from Bard. None of the GPO contracts give hospitals a discount for buying Bard catheters exclusively.

The GPO contracts also offer discounts to hospitals buying other Bard medical supplies along with catheters. These “bundled discounts” allow hospitals to pay a lower price for several medical products purchased together than when purchased separately. Bundles in the GPO contracts include catheters and related products, like drainage bags and urine meters.

After both Saint Francis and Bard moved for summary judgment, the district court ruled for Bard.

II.

This court reviews the district court's grant of summary judgment de novo. See, e.g., Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1489-90 (8th Cir.1992). A grant of summary judgment is appropriate only where the record, read most favorably to the non-moving party, indicates that “no genuine issues of material fact exist ... and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). There is no different or heightened summary judgment standard in complex antitrust cases. See Amerinet, 972 F.2d at 1490.

According to Saint Francis, Bard's sole-source GPO contracts, tiered pricing, and bundled discounts unreasonably restrain trade in violation of the Sherman Act, the Clayton Act, and Missouri antitrust law. ⁴ See 15 U.S.C. §§ 1, 2; 15 U.S.C. §§ 14, 15, 26; Mo.Rev.Stat. § 416.031 (2000). Saint Francis's theory is that, while hospitals (even those participating in sole-source GPO contracts) may purchase catheters from other suppliers, Bard's GPO contracts are de facto exclusionary because the discount prices are so attractive that hospitals cannot afford to forgo them. See Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1058 (8th Cir.2000) (claims under Section 1 of the Sherman Act “that allege only de facto exclusive dealing may be viable.”).

Saint Francis must establish “an antitrust violation, the fact of damage or injury, a causal relationship between the violation and the injury, and the amount of damages.” Amerinet, 972 F.2d at 1490. See also Iverson v. Pfizer, Inc. (In re Canadian Imp. Antitrust Litig.), 470 F.3d 785, 791 (8th Cir.2006) (“Unlike a governmental entity, ... a private plaintiff must demonstrate that [it] has suffered an ‘antitrust injury’ as a result of the alleged conduct of the defendants, and that [it] has standing to pursue a claim under the federal antitrust laws.”); id. (“Injunctive relief under § 16 of the Clayton Act is likewise available only to plaintiffs who have suffered an injury cognizable under § 4.”); Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 122, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986) (“We hold that a plaintiff seeking injunctive relief under § 16 of the Clayton Act must show a threat of antitrust injury, and that a showing of loss or damage due merely to increased competition does not constitute such injury.”). “The antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a competition-reducing aspect or effect of the defendant's behavior.” Atlantic Richfield Co. v. United States Petroleum Co., 495 U.S. 328, 344, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990). “Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation.” Hawaii v. Standard Oil Co., 405 U.S. 251, 262-63 n. 14, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972).

The “Supreme Court has urged great caution and a skeptical eye when dealing with unfair pricing claims.”

Concord Boat, 207 F.3d at 1060 (internal quotations omitted). This is because “[l]ow prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition.” Atlantic Richfield, 495 U.S. at 340, 110 S.Ct. 1884. “Hence, they cannot give rise to antitrust injury.” Id. The Supreme Court has “adhered to this principle regardless of the type of antitrust claim involved.” Id.

When prices are not predatory, any losses flowing from them cannot be said to stem from an anticompetitive aspect of the defendant's conduct. It is in the interest of competition to permit dominant firms to engage in vigorous competition, including price competition.

Id. at 340-41, 110 S.Ct. 1884 (internal quotations omitted). See also Brooke Group v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 223, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993) (noting that the Court has “rejected elsewhere the notion that above-cost prices that are below general market levels or the costs of a firm's competitors inflict injury to competition cognizable under the antitrust laws,” and reasoning that it “is beyond the practical ability of a judicial tribunal to control [above-cost discounting] without courting intolerable risks of chilling legitimate price cutting.”); Pacific Bell Tel. Co. v. linkLine Commc'ns, Inc., --- U.S. ----, 129 S.Ct. 1109, 1120, 172 L.Ed.2d 836 (2009) (“Recognizing a price-squeeze claim where the defendant's retail price remains above cost would invite the precise harm we sought to avoid in Brooke Group: Firms might raise their...