Shahawy v. Harrison

• Decision Date: 16 December 1985
• Docket Number: No. 83-3650,83-3650
• Parties: , 1985-2 Trade Cases 66,888 Mahfouz El SHAHAWY, M.D., etc., et al., Plaintiffs-Appellants, v. William T. HARRISON, Jr., etc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 636

778 F.2d 636

54 USLW 2378, 1985-2 Trade Cases 66,888

Mahfouz El SHAHAWY, M.D., etc., et al., Plaintiffs-Appellants, v. William T. HARRISON, Jr., etc., et al., Defendants-Appellees.

No. 83-3650.

United States Court of Appeals Eleventh Circuit.

Dec. 16, 1985.

As Amended March 11, 1986.

Guy B. Bailey, Jr., Jesse C. Jones, Miami, Fla., for Shahawy.

Mary A. Lau, Tampa, Fla., James H. Burgess, Jr., Sarasota, Fla., for Floyd, Rand, French, Tollerton & The Sarasota County Public Hosp. Bd., Harrison, Mathews, Bowman.

Frank E. Strelec, Claire L. Hamner, Sarasota, Fla., Robert R. Feagin, Tallahassee, Fla., for Rushton, Carlson, Page, Sarkis, Silverstein, Stutz, Natarjan, Bowman, Mathews, Meyers, Delmastro, Chidsey & Fieegler.

Appeal from the United States District Court for the Middle District of Florida.

Before HATCHETT and CLARK, Circuit Judges, and STAFFORD ^*, Chief District Judge.

ON PETITION FOR REHEARING

HATCHETT, Circuit Judge:

This appeal is from the district court's dismissal of a lawsuit brought by a physician who was denied the privilege of performing a certain medical procedure at a hospital. The district court found the physician's complaint insufficient to sustain a lawsuit based on violation of the anti-trust, civil rights, and federal and state contract laws. We reverse in part and affirm in part. ¹

FACTS

Appellant, Mahfouz El Shahawy and his medical association, Mahfouz El Shahawy,

                M.D., P.A., (Shahawy), are on the staff of the Sarasota Memorial Hospital, a public hospital in Florida.  A hospital committee denied Shahawy the privilege of conducting cardiac catheterizations in the hospital's laboratory.  Shahawy filed a complaint in the district court, Middle District of Florida, alleging unlawful conduct against several of the appellees. 2   Shahawy alleged that appellees committed antitrust violations, deprivation of his civil rights, deprivation of due process of law, and engaged in illegal racketeering.  The district court dismissed Shahawy's original and amended complaints for failure to state a federal claim for relief. 3
                

ISSUES

On appeal, Shahawy raises three issues: (1) the district court's dismissal of his Sherman Act claims for failure to satisfy the Act's jurisdiction; (2) the district court's finding that Shahawy's complaint did not allege either the existence of a protected federal interest or state action for relief under 42 U.S.C.A. Secs. 1983 and 1985; and (3) the district court's abuse of its discretion in dismissing his pendent claims.

I.

A. Sherman Act Jurisdiction

Shahawy contends that the district court erred in holding that his amended complaint did not satisfy the jurisdictional requirements of the Sherman Act. ⁴

In McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980), the Supreme

                Court established the jurisdictional requirements of the Sherman Act.  In McLain, a class of individuals who employed real estate brokers in the purchase and sale of residential property in the Greater New Orleans area, sued real estate trade associations, real estate firms, and a class of realtors for engaging in restraint of trade in violation of section 1 of the Sherman Act, 15 U.S.C.A. Sec. 1 (Supp.1984).  Plaintiffs claimed to have satisfied the jurisdictional requirements of the Act by the allegations in their complaint and by trial testimony that the financing of residential property in the Greater New Orleans area included out-of-state investors, multi-state lending institutions, interstate secondary mortgage market activity, and title insurance furnished by interstate corporations.  In holding that such commercial activity satisfied the Sherman Act's jurisdictional requirements, the Supreme Court ruled that the Act requires the demonstration of a "substantial effect on interstate commerce generated by respondents' brokerage activity."   McLain, 444 U.S. at 242, 100 S.Ct. at 509.  Further, the court ruled that the Sherman Act does not require that the "unlawful conduct itself [have] an effect on interstate commerce," or that a plaintiff must quantify the adverse impact of a defendant's anti-competitive activities for jurisdictional purposes.   McLain, 444 U.S. at 243, 100 S.Ct. at 509.  To invoke the jurisdiction of the Sherman Act, therefore, McLain mandates that a plaintiff show (1) that the local activity has a (2) substantial effect on (3) interstate commerce.   Lease Lights v. Public Service Company of Oklahoma, 701 F.2d 794, 798-99 (10th Cir.1983);  Turf Paradise, Inc. v. Arizona Downs, 670 F.2d 813, 818-19 (9th Cir.1982)
                

The district court dismissed Shahawy's amended complaint based on its interpretation of Construction Aggregate Transport v. Florida Rock Industries, Inc., 710 F.2d 752 (11th Cir.1983) (CAT ), which held that the test of Sherman Act jurisdictional sufficiency is whether the defendant's general business activity or the plaintiff's general business activity has a substantial effect on interstate commerce. 710 F.2d at 767-69. In considering Shahawy's amended complaint, the district court found in the CAT decision authority for its view that Sherman Act jurisdiction requires a nexus between a defendant's anti-competitive activity and a plaintiff's interstate commerce activity. The district court quoted a portion of CAT 's footnote 31:

Thus, when determining whether interstate commerce is affected by an alleged violation courts will often examine both the defendant's relationship with interstate markets and the plaintiff's. Such an approach makes good sense because injury to the plaintiff may result directly in injury to the market. In our view, therefore, the proper inquiry is one which focuses on the interstate markets involved in both the defendant's and the plaintiff's operations, and seeks to determine whether the defendant's business conduct will likely make its presence known in those markets. 710 F.2d at 767 n. 31 (citations omitted). [Emphasis added by court.]

Based on this language, the district court concluded:

The above-quoted language suggests that there must be some relationship between the allegedly restrictive conduct of the defendant and the injury to the relevant interstate market. This threshold jurisdictional test can be met by examining either the defendant's activities that have 'an immediate impact on the particular goods or services involved' or the 'injury to the plaintiff [that] may result directly in injury to the market.'

The district court held that Shahawy "must allege facts sufficient to show that if indeed the defendants conspired to deny him the use of the cardiac catheterization laboratory, that conduct had some not insubstantial effect upon the plaintiff's activities as they affect interstate commerce."

B. McLain Jurisdictional Standard

Much dispute exists in the federal circuits over the content of the elements of the Sherman Act jurisdictional inquiry. The central dispute is whether defendant's The controversy over the necessary allegations of defendant's conduct derives from the following passage in McLain:

general business activity or its specific anti-competitive conduct is to be measured for substantial effect on interstate commerce.

To establish the jurisdictional element of a Sherman Act violation it would be sufficient for petitioners to demonstrate a substantial effect on interstate commerce generated by respondents' brokerage activity. Petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix commission rates, or by those other aspects of respondents' activity that are alleged to be unlawful.

McLain, 444 U.S. at 242-43, 100 S.Ct. at 509 (emphasis added). In Crane v. Intermountain Health Care, Inc., 637 F.2d 715 (10th Cir.1980), the Tenth Circuit interpreted this passage:

In context ... the court was referring to the challenged activities, not the brokers' overall business, by its reference to 'respondents' brokerage activities' .... By stating that plaintiff 'need not make the more particularized showing of an effect on interstate commerce caused by the conspiracy ... or other aspects of respondents' activity that are alleged to be unlawful,' the court was only confirming the principle set forth in Hospital Building [Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976) ], Burke [v. Ford, 389 U.S. 320, 88 S.Ct. 443, 19 L.Ed.2d 554 (1967) ], and Goldfarb [v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975) ] that for jurisdictional purposes a plaintiff need not 'make the ... particularized showing.' 444 U.S. at 242, 100 S.Ct. at 509. In other words, an elaborate analysis of interstate impact is not necessary at the jurisdictional stage, only an allegation showing a logical connection as a matter of practical economics between the unlawful conduct and interstate commerce. The emphasis was intended to be that a 'particularized' showing is not necessary, not that a showing of a nexus between unlawful conduct and effect is unnecessary.

Crane, 637 F.2d at 723; Malini, M.D. v. Singleton & Associates, 516 F.Supp. 440, 442 (S.D.Tex.1981). We agree.

A determination of whose interstate activity is relevant for jurisdictional purposes under the Sherman Act cannot be made without understanding the basic objectives of the act. It is to be remembered that the "vital thing is the effect on commerce, not the precise point at which the restraint occurs." Mandeville Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 238, 68 S.Ct. 996, 1007, 92 L.Ed. 1328 (1948), cited in P. Areeda, Antitrust Analysis, 131 (3rd ed. 1981). "What is relevant is the presence in interstate commerce of transactions that, as a result of the anti-competitive conduct, are substantially 'different' from the transactions that would otherwise have occurred." Cardio-Medical Association v. Crozer-Chester Medical Center, 721 F.2d 68, 74 (3d Cir.1983) (reversing ...