TOTAL BEN. SERVICES v. Group Ins. Admin., Inc., Civ. A. No. 92-2386.

• Decision Date: 08 February 1995
• Docket Number: Civ. A. No. 92-2386.
• Parties: TOTAL BENEFIT SERVICES, INC., v. GROUP INSURANCE ADMINISTRATION, INC., Group Insurance Administration of Louisiana, Inc. and Robert H. Carter, III.
• Court: U.S. District Court — Eastern District of Louisiana

875 F. Supp. 1228

TOTAL BENEFIT SERVICES, INC., v. GROUP INSURANCE ADMINISTRATION, INC., Group Insurance Administration of Louisiana, Inc. and Robert H. Carter, III.

Civ. A. No. 92-2386.

United States District Court, E.D. Louisiana.

February 8, 1995.

COPYRIGHT MATERIAL OMITTED

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Paula Anne Perrone, Law Offices of Paula Perrone, Raphael A. Benitez, III, George B. Recile, New Orleans, LA, for Total Ben. Services, Inc.

Leon Gary, Jr., Davis B. Allgood, Gary, Hicks, Field & Bradford, Baton Rouge, LA, Steven M. Stastny, Feingerts & Kelly, New Orleans, LA, Dennis E. Kelly, Dennis E. Kelly, APLC, James LaRue Harmon, James L. Harmon, New Orleans, LA, for Group Ins. Admin., Inc., Group Ins. Admin. of Louisiana, Inc. and Robert H. Carter, III.

Kim Maria Boyle, Rodney, Bordenave & Boykin, New Orleans, LA, for Regional Transit Authority.

Paula Anne Perrone, Law Offices of Paula Perrone, New Orleans, LA, for A. Michael Lawrence.

MEMORANDUM AND ORDER

VANCE, District Judge.

This is an action asserting claims under the federal antitrust laws and various state law theories by Total Benefit Services, Inc. ("TBS"), a provider of health care financing services. Defendants are Robert H. Carter, III ("Carter") and two entities affiliated with Carter, Group Insurance Administration of Louisiana, Inc. ("GIA-LA"), and Group Insurance Administration, Inc. ("GIA"). These entities likewise provide health care financing services. This matter is now before the Court on defendants' motions for partial summary judgment on the antitrust claims, voluntary dismissal of their counterclaim, and dismissal for lack of subject matter jurisdiction of the state law claims. The Court heard oral argument on the motions. Following the arguments, the Court granted the motions, with written reasons to follow. The following reasons underlie the Court's decision.

I. Factual Background

TBS is a Louisiana corporation that engages in various aspects of the health care financing business. Its principals, A. Michael Lawrence and Sandra DeBlanc, purchased the business in 1989 for $60,000. TBS provides claims administration and reinsurance brokerage services primarily to entities that provide self-insured health benefit plans to their employees. Through subcontractors, TBS also offers preferred provider organization ("PPO") networks to its customers.

Defendant GIA-LA is likewise a Louisiana corporation that provides various forms of health care financing services, including its own PPO. GIA-LA markets claims administration services alone and in conjunction with its PPO services. GIA-LA also offers a health maintenance organization ("HMO") through a subcontractor and indemnity-style health insurance through a joint venture.

Defendant GIA is an Illinois corporation that provides health care financing services in several parts of the United States. Carter is the president of both GIA and GIA-LA. At the time this lawsuit was filed, Carter owned 100% of GIA-LA and 95% of GIA. In a January 1993 reorganization, Carter formed a holding company, GIA-USA, which owns 100% of GIA-LA and 95% of GIA. Carter owns 95% of the voting stock of the holding company.

This lawsuit arises out of the parties' involvement in the City of New Orleans' employee health benefit plan. TBS was the successful low bidder on a contract to serve as the third party administrator of the city's self-funded health care plan. As a third party administrator ("TPA"), TBS receives claims, determines whether and to what extent charges are reimbursable by the city, and writes checks on a city bank account in payment of claims. In January 1992, the city also hired GIA-LA to provide discounted health care services to city employees through its PPO network. Under the system adopted, TBS and GIA-LA were required to work together to administer claims under the city's health care plan. Claims went first to GIA-LA for repricing based on the city's discount, then to TBS for eligibility determination. TBS then paid GIA-LA for claims due its PPO providers, from which GIA-LA deducted fees due it as administrator of the PPO. The dual system of administration proved cumbersome, and it was plagued by mistakes and delays. Both parties blamed these administrative problems on each other.

Indeed, the gravamen of plaintiff's claims in this case is that defendants and co-conspirators, including former Mayor Sidney Bartholemy and Cheryl Cramer, a member of the Orleans Parish School Board, conspired to create delays and other difficulties in the administration of the city's plan to make plaintiff look bad. Plaintiff further alleges that the conspirators spread false information about plaintiff's services and generated adverse publicity about its business in order to eliminate plaintiff as a competitor for third party administration services to be provided to governmental and quasi-governmental health plans in the New Orleans area. Plaintiff claims that this alleged conspiracy violated Section 1 of the Sherman Act. See 15 U.S.C. § 1. Additionally, plaintiff relies on the same conduct as the basis of its claims that defendants attempted to monopolize and conspired to monopolize the market under Section 2 of the Sherman Act. See id. § 2. Finally, plaintiff asserts that this conduct amounts to defamation, tortious interference with contractual relations, and unfair trade practices under state law.

Defendants challenge plaintiff's antitrust claims on a number of grounds. First, defendants contend that plaintiff's Section 1 and Section 2 claims must fail because plaintiff cannot prove a valid relevant market and defendants' power in that market. Second, defendants attack plaintiff's conspiracy claims as legally and factually deficient. Third, defendants claim that plaintiff cannot prove "antitrust injury," an element of antitrust standing under Section 4 of the Clayton Act. Because the Court has determined that defendants' first two arguments are legally sufficient to warrant the entry of summary judgment on the antitrust claims, the Court need not reach the third argument.

II. Legal Analysis

The standard for the entry of summary judgment is a familiar one. The moving party must demonstrate that there is no genuine issue of material fact and that it is entitled to summary judgment as a matter of law. Fed.R.Civ.Pro. 56(c). Summary judgment is warranted when a party fails to prove an essential element of its case as to which that party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). In antitrust conspiracy cases, plaintiff must prove more than conduct that is as consistent with permissible competition as with illegal conspiracy in order to create a triable issue of conspiracy under the antitrust laws. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 597 n. 21, 106 S.Ct. 1348, 1361 n. 21, 89 L.Ed.2d 538 (1986); Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 763-64, 104 S.Ct. 1464, 1470-71, 79 L.Ed.2d 775 (1984). Rather, plaintiff must proffer evidence that tends to negate the possibility that defendants were acting lawfully.

A. The Relevance of the Market.

The Court agrees with defendants that plaintiff's antitrust claims under both Section 1 and Section 2 of the Sherman Act for the most part rise or fall with the issue of the relevant market and defendants' power in that market. Plaintiff's Section 1 claim in essence alleges that defendants conspired to eliminate TBS as a competitor by using unfair competitive practices. Such conduct does not amount to a per se violation of the Sherman Act. See Union City Barge Line, Inc. v. Union Carbide Corp., 823 F.2d 129, 138 (5th Cir.1987) (holding that unfair competition is not per se illegal under Sherman Act); Northwest Power Prods., Inc. v. Omark Indus., 576 F.2d 83, 88 (5th Cir.1978), cert. denied, 439 U.S. 1116, 99 S.Ct. 1021, 59 L.Ed.2d 75 (1979) (same). Accordingly, plaintiff's claims under Section 1 of the Sherman Act must be assessed under the rule of reason. Union City Barge Line, Inc., 823 F.2d at 138 (applying rule of reason analysis to unfair competition claim). See generally National Soc'y of Professional Eng'rs v. United States, 435 U.S. 679, 691, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978) (discussing rule of reason).

Under the rule of reason, the inquiry is limited to the market impact of the challenged conduct on competition. National Soc'y of Professional Eng'rs, 435 U.S. at 691 & n. 17, 98 S.Ct. at 1365 & n. 17. This analysis requires definition of the relevant market in both its product and geographic dimensions. Hood v. Tenneco Texas Life Ins. Co., 739 F.2d 1012, 1018 (5th Cir.1984) (holding that rule of reason plaintiff must prove adverse effect on competition in properly defined product and geographic markets). Then the effect of the challenged conduct on competitive conditions in the market so defined must be assessed. See United States v. Arnold, Schwinn & Co., 388 U.S. 365, 375, 87 S.Ct. 1856, 1863-64, 18 L.Ed.2d 1249 (1967). The restraint must have a substantial anticompetitive impact to be unreasonable. Id. (requiring "substantially adverse" impact); United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1372 n. 39 (5th Cir.1980) (requiring substantial impact on competition). The number of firms in the relevant market and their market shares are relevant to this inquiry. See Kestenbaum v. Falstaff Brewing Corp., 575 F.2d 564, 571 (5th Cir.1978), cert. denied, 440 U.S. 909, 99 S.Ct. 1218, 59 L.Ed.2d 457 (1979). In addition, if the defendants lack market power, that is, the power to raise prices above competitive levels, their conduct is not likely to have the required impact on competition. See NCAA v. Board of Regents, 468 U.S. 85, 109 n. 38, 104 S.Ct. 2948, 2964 n. 38, 82 L.Ed.2d 70 (1984) (defining market power); Goss v. Memorial Hosp. Sys., 789 F.2d 353, 355 (5th Cir.1986); Ball Memorial Hosp., Inc. v. Mutual Hosp. Ins.,...