Surgical Care Center of Hammond, L.C. v. Hospital Service Dist. No. 1 of Tangipahoa Parish

• Decision Date: 24 March 1999
• Docket Number: No. 97-30887,97-30887
• Citation: 171 F.3d 231
• Parties: 1999-1 Trade Cases P 72,482 SURGICAL CARE CENTER OF HAMMOND, L.C., doing business as St. Luke's Surgicenter; Plaintiff-Appellant, v. HOSPITAL SERVICE DISTRICT NO. 1 OF TANGIPAHOA PARISH, doing business as North Oaks Medical Center; Quorum Health Resources, Incorporated, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 231

171 F.3d 231

1999-1 Trade Cases P 72,482

SURGICAL CARE CENTER OF HAMMOND, L.C., doing business as St Luke's Surgicenter; Plaintiff-Appellant, v. HOSPITAL SERVICE DISTRICT NO. 1 OF TANGIPAHOA PARISH, doing business as North Oaks Medical Center; Quorum Health Resources, Incorporated Defendants-Appellees.

No. 97-30887.

United States Court of Appeals Fifth Circuit.

March 24, 1999.

Craig Lewis Caesar, Donna Guinn Klein, McGlinchey & Stafford, New Orleans, LA, for Plaintiff-Appellant.

David Seidman, U.S. Dept. of Justice, Antitrust Div., App. Section, Washington, DC, for Federal Trade Commission and U.S., Amicus Curiae.

Robert S. Rooth, L. Kenneth Krogstad, Wilbur Anthony Toups, III, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, LA, Daniel M. Mulholland, III, Susan M. Lapenta, Horty, Springer & Mattern, Pittsburgh, PA, for Defendants-Appellees.

Gregory George Garre, John Glover Roberts, Jr., Hogan & Hartson, Janet L. McDavid, Washington, DC, James Charles McMichael, Jr., McMichael, Medlin & Weir, Shreveport, LA, for Willis-Knighton Medical Center, Amicus Curiae.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before KING, Chief Judge, and POLITZ, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH, DUHE, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES, STEWART, PARKER and DENNIS, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

In this antitrust case against a hospital district in Hammond, Louisiana, filed by a privately owned competitor, the district court concluded that the state legislature had granted the hospital district immunity from federal antitrust laws, dismissed those claims, and declined to exercise supplemental jurisdiction over related state claims charging violations of state antitrust and consumer protection laws. A panel of this court affirmed, believing it was bound to do so by prior decisions of the court. We took the case en banc and now reverse the judgment of dismissal and remand to the district court for further proceedings. The Louisiana legislature did not make sufficiently clear an intent to exercise its authority to insulate its creature of state government from the constraints of the Sherman Antitrust Act, an authority recognized in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and progeny, including Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985).

I

Through its North Oaks facility, Hospital Service District No. 1 of Tangipahoa Parish offers acute care and surgical services. North Oaks is managed for the district by Quorum, a privately owned management firm engaged in the business of managing hospitals for profit. The state-owned hospital competes with St. Luke's, a privately owned hospital located only a quarter mile away and the only outpatient surgery center in the immediate area.

St. Luke's filed this suit in 1997 alleging that North Oaks enjoyed a monopoly in the local market for acute care services and was attempting to extend its monopoly to outpatient surgical care. The complaint also outlined the implementing path of the effort, marked by various anticompetitive acts. These acts included pressuring five of the seven largest managed care plans in the market into contracts calculated to exclude St. Luke's from the market for outpatient surgical care. Specifically, North Oaks allegedly used its monopoly power to ensure that its contracts with the plans included provisions for exclusivity and tying, in violation of the Sherman Act and the Louisiana Monopolies Law, La.Rev.Stat. § 51:123, and the Louisiana Unfair Trade Practice and Consumer Protection Law, id. §§ 51:1405 to 51:1409.

North Oaks and Quorum moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), pointing to the Louisiana Service District Law, La.Rev.Stat. §§ 46:1051 et seq., which establishes the hospital service districts as political subdivisions of the State of Louisiana. See id. § 46:1064(A). North Oaks urged that as a political subdivision it enjoyed "immunity" from the Sherman Antitrust Act as announced in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and as applied by this court in Martin v. Memorial Hospital, 86 F.3d 1391 (5th. Cir.1996). Quorum denied it was an independent player, asserting that it was only the agent for the district, an entity enjoying immunity from federal antitrust laws. The district court granted the motion, dismissing both defendants.

The district court conceived its question as "whether the alleged noncompetitive activities of North Oaks may be fairly considered the foreseeable result of the state policy articulated in the Louisiana Hospital Service District Law." It concluded that the exclusive contracts were the "foreseeable result" of statutory authority to contract "with any entity to promote the delivery of health services." Other alleged anticompetitive practices were found to be either "foreseeable results of the statutory license for hospitals to develop confidential marketing strategies," or "clearly in the realm of the routine business decisions concerning day-to-day operations to which the state action immunity should apply." The court concluded that Quorum, although not a political subdivision of the state, acted only as an agent of the district and "therefore requires no separate grant of immunity." St. Luke's appealed.

A panel of this court agreed with the district court that the hospital district enjoyed immunity. Applying our decision in Martin, it held that North Oaks was immune because the alleged anticompetitive acts were the foreseeable results of the statutory grant of authority to the hospital district. Chief Judge King specially concurred, "troubled by [this court's] opinion in Martin ". As we will explain, the district court's analysis reflected its reading of Martin, a reading we are persuaded is not faithful to the foreseeability test of the Supreme Court. However justified by uncertainties in our case law, any reading of Martin that finds immunity in a state legislature's general grant to its agency of authority to conduct its affairs is incorrect. As we will explain, a state may express its will as it prefers, but insulation of its instruments from the Sherman Act must be fairly signaled.

II

Under Title 46 a board of five commissioners is charged to "represent the public interest in providing hospital and medical care in the district." La.Rev.Stat. § 46:1054(A)(1). It must "make, alter, amend, and promulgate rules and regulations governing the conduct of the hospital." Id. § 46:1055(A)(3). The commission is specifically authorized to "contract with or engage in a joint venture with a person, corporation, partnership, or group of persons to offer, provide, promote, establish, or sell any hospital health service." Id. § 46:1077. The Louisiana Legislature found that the hospital service districts had been competitively disadvantaged by the ability of private competitors to offer integrated health services. The disadvantages included the inability to discuss its business strategy in private and to enter into various business forms prevalent in the market, such as joint ventures. The Legislature sought to end both of these handicaps. See id. § 1071. The legislation directs that it is to be construed liberally to cure competitive disadvantages. See id. § 46:1071.

III

The Sherman Act prohibits contract combinations and conspiracies in restraint of trade. Nothing on its face qualifies its reach to states or shirks from such a regulatory bite. Nor does the statute expressly regulate states. In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court found that Congress had not made clear its intent to intrude on the sovereign powers of the states by subjecting their decisions to the constraints of the federal antitrust laws.

The doctrine of clear statement is vital to the concreteness of federalism--to the translation of principle to result--in judicial decisionmaking, an observation made palpable by its wider use in the half century since Parker. Strictly speaking, then, Parker immunity is an inapt description, for its parentage differs from the qualified and absolute immunities of public officials. It does however function in certain important respects much like an immunity. Like other immunities, Parker issues can often be resolved at an early stage of the litigation. As Professors Areeda and Hovenkamp note, "State authorization is generally interpreted by an objective test that looks at the language of the statute; if other evidence is needed, it can be gleaned from legislative histories or state judicial decisions." I Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law p 222b (1997). It ordinarily produces a legal conclusion reviewed de novo. See, e.g., Bolt v. Halifax Hosp. Med. Ctr., 980 F.2d 1381, 1384 (11th Cir.1993).

While thus a convenient shorthand, "Parker immunity" is more accurately a strict standard for locating the reach of the Sherman Act than the judicial creation of a defense to liability for its violation. The price of the shorthand of using similar labels for distinct concepts is the risk of erroneous migrations of principles. Eleventh Amendment immunity, for example, is arguably a second source of protection for states from the federal antitrust laws. Yet this does not mean that Parker immunity for state creatures follows the Eleventh Amendment, which in fact is far stingier in protecting instruments of local government. That said, while its limits are yet uncertain, the Parker doctrine is well developed and is quickly stated.

The Sherman Act does not reach states. Creatures of states, organized to provide local government, such as hospital districts and municipalities, are not sovereign states and are not necessarily beyond the reach of federal antitrust laws. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (19...