U.S. v. A. Lanoy Alston, D.M.D., P.C.

• Decision Date: 11 September 1992
• Docket Number: No. 91-10040,91-10040
• Citation: 974 F.2d 1206
• Parties: , 1992-2 Trade Cases P 69,962 UNITED STATES of America, Plaintiff-Appellant, v. A. LANOY ALSTON, D.M.D., P.C.; Ronald D. Walker; Desert Valley Dental, Ltd.; Richard B. Meyer; Aaron L. ("Lanoy") Alston, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1206

974 F.2d 1206

61 USLW 2175, 1992-2 Trade Cases P 69,962

UNITED STATES of America, Plaintiff-Appellant, v. A. LANOY ALSTON, D.M.D., P.C.; Ronald D. Walker; Desert Valley Dental, Ltd.; Richard B. Meyer; Aaron L ("Lanoy") Alston, Defendants-Appellees.

No. 91-10040.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 8, 1991.

Decided Sept. 11, 1992.

James F. Rill, Asst. Atty. Gen., Charles A. James, Deputy Asst. Atty. Gen., John J. Powers, III, Andrea Limmer, U.S. Dept. of Justice, Washington, D.C., (Robert E. Bloch, Ann Lea Harding, James F. Shalleck, Jessica Cohen, Dept. of Justice, Washington, D.C., of counsel), for plaintiff-appellant U.S.

Stephen M. Weiss, Karp, Stolkin & Weiss, Tucson, Ariz., for defendants-appellees Aaron Lanoy Alston and A. Lanoy Alston, D.M.D., P.C.

Frederic J. Dardis, Dardis & Hippert, Tucson, Ariz., for defendant-appellee Richard B. Meyer.

Peter B. Keller, Keller, Postero & Hall, Tucson, Ariz., for defendants-appellees Ronald D. Walker and Desert Valley, Ltd.

Mary K. Logan, Thomas H. Boerschinger, American Dental Ass'n, Chicago, Ill., Kirk B. Johnson, Edward B. Hirshfeld, Michael L. Ile, American Medical Ass'n, Chicago, Ill., Jack R. Biereg, Richard D. Raskin, Sidley & Austin, Chicago, Ill., Mark E. Haddad, Paul E. Kalb, Sidley & Austin, Washington, D.C., for amici curiae American Dental Ass'n and American Medical Ass'n.

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

Before: FLETCHER, WIGGINS and KOZINSKI, Circuit Judges.

KOZINSKI, Circuit Judge.

We examine three dentists' criminal antitrust convictions.

Background

Aaron Lanoy Alston, Richard B. Meyer and Ronald D. Walker provide dental services for members of prepaid dental plans in Tucson, Arizona. ¹ They and other providers receive two kinds of payments: capitation fees, which are paid by the plans to the dentists based on the number of plan-member patients they see, and co-payment fees, which are paid by the patients to the dentists based on the services performed. The plans, not the dentists, determine both fee amounts.

Co-payment fees in Tucson had not risen for ten years, although they had in other cities, including nearby Phoenix. Some Tucson dentists were failing to break even on the most commonly performed services, such as porcelain crowning. Several Tucson dentists had individually approached the plans about increasing the fee schedule; their efforts proved unsuccessful. Drs. Alston, Meyer and Walker were among the dentists who felt the fees were too low. They met with about fifty local dentists at Dr. Alston's office to discuss the fees, after which many of those present at the meeting mailed letters to the plans requesting higher fees. ² The plans did in fact revise their fee schedules, resulting in higher costs to plan members for some services.

This practice drew immediate fire from the Justice Department, which obtained an indictment against Alston, Meyer and Walker for conspiring to fix prices in violation of section 1 of the Sherman Act. ³ The jury convicted all three defendants, but the district court granted judgments of acquittal notwithstanding the verdict to Meyer and Walker and a new trial to Alston. United States v. Alston, 1991-1 Trade Cas. p 69,366 (D.Ariz.1990). The government appeals. ⁴

Discussion

I

We begin with the Supreme Court's most recent per se case, FTC v. Superior Court Trial Lawyers Association, 493 U.S. 411, 110 S.Ct. 768, 107 L.Ed.2d 851 (1990) (SCTLA ). About 100 private lawyers in Washington, D.C., regularly served as court-appointed attorneys for indigent defendants. More than 90 percent of them agreed to stop providing legal representation until the District of Columbia government increased their compensation. Because of the boycott's detrimental effect on the quality of criminal justice, the District government acceded to the lawyers' demands. The Federal Trade Commission brought a civil action against SCTLA, alleging that the boycott constituted an unfair method of competition in violation of section 5 of the FTC Act. ⁵ After hearings before an ALJ, the Commission and the D.C. Circuit, the case came before the Supreme Court. The Court held that the lawyers' boycott was "a plain violation of the antitrust laws," 493 U.S. at 428, 110 S.Ct. at 778, and that it was prohibited per se.

In so holding, the Court made clear that the per se condemnation of price fixing is a substantive rule of antitrust law, not merely a device of administrative convenience: "The per se rules are, of course, the product of judicial interpretations of the Sherman Act, but the rules nevertheless have the same force and effect as any other statutory commands." Id. at 432-33, 110 S.Ct. at 779-80. Price fixing is illegal regardless of pro-competitive justifications offered therefor: "[I]t is not our task to pass upon the social utility or political wisdom of price-fixing agreements," id. at 421-22, 110 S.Ct. at 774; "[e]very such horizontal arrangement among competitors poses some threat to the free market," id. at 434, 110 S.Ct. at 781; "[price-fixing agreements] are all banned because of their actual or potential threat to the central nervous system of the economy," id. at 435, 110 S.Ct. at 781 (quoting United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 226 n. 59, 60 S.Ct. 811, 845 n. 59, 84 L.Ed. 1129 (1940)).

The government analogizes the dentists here to the lawyers in SCTLA, and argues that the per se rule is thus applicable. Amici supporting the dentists argue that the case should be analyzed instead under the rule of reason. It's true that in a very narrow class of cases, market arrangements involving horizontal restraints are nevertheless analyzed under the rule of reason rather than the per se approach. See NCAA v. Board of Regents, 468 U.S. 85, 98-104, 104 S.Ct. 2948, 2958-62, 82 L.Ed.2d 70 (1984) (limiting television coverage of members' college football contests); Broadcast Music, Inc. v. CBS, 441 U.S. 1, 16-24, 99 S.Ct. 1551, 1560-65, 60 L.Ed.2d 1 (1979) (blanket licensing of copyrighted music at set fees). Such cases, however, involve industries "in which horizontal restraints on competition are essential if the product is to be available at all." NCAA, 468 U.S. at 101, 104 S.Ct. at 2960; see also Robert H. Bork, The Antitrust Paradox 278 (1978).

The health-care market is not such an industry. As we recently had occasion to note:

The application of antitrust laws to medical markets dates at least as far back as American Medical Association v. United States, 317 U.S. 519, [63 S.Ct. 326, 87 L.Ed. 434] (1943), where the Supreme Court maintained that the "occupation of the individual physicians charged as defendants is immaterial." Id. at 528, . If the Supreme Court's message in Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 349-51 [102 S.Ct. 2466, 2475-77, 73 L.Ed.2d 48] (1982); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 25 n. 42 [104 S.Ct. 1551, 1565 n. 42, 80 L.Ed.2d 2] (1984); and FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 463 [106 S.Ct. 2009, 2020, 90 L.Ed.2d 445] (1986), was not clear enough, then its specific announcement in National Gerimedical Hosp. & Gerontology Ctr. v. Blue Cross, 452 U.S. 378[, 393, 101 S.Ct. 2415, 2424, 69 L.Ed.2d 89] (1981), should have been.... The antitrust laws apply to hospitals in the same manner that they apply to all other sectors of the economy. Health care providers are exposed to the same liability and entitled to the same defenses as businesses in other industries.

Boulware v. State of Nevada, 960 F.2d 793, 796-97 (9th Cir.1992) (emphasis added). The district court properly allowed the government to proceed on a per se theory.

II

A. The jury returned guilty verdicts against all three defendants, who then moved for judgments of acquittal notwithstanding the verdict, and in the alternative for a new trial. The district court granted judgments of acquittal to Meyer and Walker, and granted Alston's new trial motion. The reasons for the court's decision appear to be two: That there was insufficient evidence to support the convictions, and that the instructions given were deficient. ⁶

We reject the argument that the jury instructions were erroneous. The district court itself recognized:

I have looked at my instructions. I think the instructions are technically and legally correct, but I think they were too sterile. I didn't relate or connect the instructions to the case itself. And I have been uncomfortable with that ever since, that while it wasn't a legal error, that I could have done a better job of telling the jury that they didn't have to find the defendants guilty.

1991-1 Trade Cas. at 65,471 (emphasis added). We have reviewed the instructions and agree that they were "technically and legally correct."

The court began by correctly characterizing a conspiracy as "an agreement of two or more persons to accomplish some unlawful purpose or to accomplish a lawful purpose by unlawful means." Instruction # 8. The court went on to state:

In order to convict any defendant, the government must prove beyond a reasonable doubt as to that defendant each of the following: First, that the conspiracy charged existed at or about the time stated in the indictment; second, that the defendant knowingly--that is, voluntarily and intentionally--became a member of the conspiracy charged in the indictment, knowing of its goal and intending to help accomplish it; third, that interstate commerce was involved.

Id. This instruction correctly states the government's burden. ⁷

The court also specified the conduct charged in this case: "What the government has charged here, and what it must prove, is that there was a single, continuing conspiracy, which the defendant joined, to fix and raise co-payment fees paid by members of the dental plans named in the indictment." Id. This instruction accurately characterizes the indictment and, if proven, would constitute an antitrust...