Ukiah Valley Medical Center v. F.T.C.

• Decision Date: 13 August 1990
• Docket Number: No. 90-15184,90-15184
• Citation: 911 F.2d 261
• Parties: 1990-2 Trade Cases 69,146 UKIAH VALLEY MEDICAL CENTER, a California not-for-profit corporation, formerly known as Ukiah Adventist Hospital; Adventist Health System/West, a California not-for-profit corporation, Plaintiffs-Appellants, v. FEDERAL TRADE COMMISSION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 261

911 F.2d 261

1990-2 Trade Cases 69,146

UKIAH VALLEY MEDICAL CENTER, a California not-for-profit corporation, formerly known as Ukiah Adventist Hospital Adventist Health System/West, a California not-for-profit corporation, Plaintiffs-Appellants, v. FEDERAL TRADE COMMISSION, Defendant-Appellee.

No. 90-15184.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 7, 1990.

Decided Aug. 13, 1990.

Thomas Campbell, Gardner, Carton & Douglas, Chicago, Ill., for plaintiffs-appellants.

Frederick E. Dooley, F.T.C., Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before CANBY, NOONAN and RYMER, Circuit Judges.

RYMER, Circuit Judge:

Adventist Health System/West and its affiliated corporation, Ukiah Valley Medical Center, appeal from the district court's order dismissing their action for declaratory and injunctive relief to restrain the Federal Trade Commission from proceeding with its complaint charging them with violations of Sec. 7 of the Clayton Act, 15 U.S.C. Sec. 18. They contend that the district court erred in determining that the FTC's issuance of an administrative complaint did not constitute "final agency action" and therefore was not subject to judicial review prior to the conclusion of administrative proceedings. We affirm.

I

Prior to July 1988, Ukiah Valley owned and operated a 43 bed hospital in Ukiah, California, and the Ukiah Hospital Corporation owned and operated Ukiah General Hospital, a 51 bed hospital, also located in Ukiah. Ukiah is a town of approximately 13,600 people. In July 1988, Ukiah Valley acquired substantially all the assets of Ukiah Hospital Corporation for approximately $5.6 million. AHS/West is a major interstate hospital chain; the board of directors for AHS/West is also the board of directors for its affiliated corporation, Ukiah Valley. Both Ukiah Valley and AHS/West are not-for-profit California corporations.

In November 1989, the FTC issued an administrative complaint, which charged that it had reason to believe that Ukiah Valley and AHS/West acquired over a ninety percent market share in the provision of acute hospital services in a significant geographic area in Mendocino and Lake Counties in northern California, in violation of Sec. 7 of the Clayton Act, 15 U.S.C. Sec. 18. On December 26, 1989, Ukiah Valley and AHS/West moved to dismiss the FTC complaint. On February 8, 1990, the ALJ granted the motion in part and denied it in part: he ruled that FTC complaint counsel had not met the burden of showing that pure asset acquisitions by not-for-profit corporations may violate Sec. 7 of the Clayton Act, but also held that whether the effects of the transaction were "tantamount to a merger" under Sec. 7, as alleged, could only be ascertained after discovery and a trial. The ALJ also determined that the issue of whether Ukiah Adventist's activities were "in or affecting interstate commerce" was a fact-based question that could not be resolved prior to discovery.

Meanwhile, Ukiah Valley and AHS/West brought this action in the district court on December 19, 1989. They sought an emergency restraining order and expedited hearing of a motion for a preliminary injunction. On December 20, 1989, United States District Judge Thelton E. Henderson denied their motion for a temporary restraining order. On January 16, 1990, Judge Alfonso Zirpoli denied their motion for a preliminary injunction, and ruled that the issuance of the FTC complaint did not constitute "final agency action" under FTC v. Standard Oil Co., 449 U.S. 232, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980), such that it is subject to judicial review in the district court.

II

We have jurisdiction of this appeal under 28 U.S.C. Secs. 1291, 1292(a)(1) and 1294. The denial of the motion for a preliminary injunction will be reversed only if the district court abused its discretion or based its decision upon an erroneous legal standard or clearly erroneous finding of fact. Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 612 (9th Cir.1989). A dismissal for lack of jurisdiction is reviewed de novo. Assiniboine & Sioux Tribes v. Board of Oil & Gas Conservation, 792 F.2d 782, 787 (9th Cir.1986).

III

Ukiah Valley and AHS/West invoke Section 10(c) of the Administrative Procedure Act ("APA"), 5 U.S.C. Sec. 704, which provides, in pertinent part:

Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review. A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action.

There is no provision making the FTC's issuance of an administrative complaint "reviewable by statute." Thus, the critical inquiry in this case is whether the issuance of the complaint constitutes "final agency action for which there is no other adequate remedy in a court." Id.; see FTC v. Standard Oil Co., 449 U.S. 232, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980).

The district court correctly determined that the FTC's issuance of an administrative complaint did not constitute "final agency action" and that judicial review was therefore premature under Standard Oil. In Standard Oil, the Supreme Court held that "[b]ecause the Commission's issuance of a complaint averring reason to believe that [the plaintiff] has violated the [FTC] Act is not 'final agency action' under Sec. 10(c) of the APA, it is not judicially reviewable before administrative adjudication concludes." 449 U.S. at 246, 101 S.Ct. at 496; see also USAA Fed. Sav. Bank v. McLaughlin, 849 F.2d 1505, 1508 (D.C.Cir.1988) ("the mere issuance of an administrative complaint does not constitute final agency action."). ¹

The general rule is that administrative orders are not final and reviewable "unless and until they impose an obligation, deny a right, or fix some legal relationship as a consummation of the administrative process." Chicago & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 113, 68 S.Ct. 431, 437, 92 L.Ed. 568 (1948), quoted in Air Cal. v. United States Dep't of Transp., 654 F.2d 616, 621 (9th Cir.1981). When an action is not a "definitive" statement of the FTC's position and does not have a "direct and immediate ... effect on the day-to-day business" of the subject party, it is not "final." Standard Oil, 449 U.S. at 239, 101 S.Ct. at 492; see also Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 193, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985) ("the finality requirement is concerned with whether the initial decision-maker has arrived at a definitive position on the issue that inflicts an actual, concrete injury...."). Other relevant factors include whether the order has the status of law or comparable legal force, and whether immediate compliance with its terms is expected. See Standard Oil, 449 U.S. at 239-40, 101 S.Ct. at 493. The FTC complaint in this case does not satisfy these indicia of finality.

The fact that the FTC voted to issue the complaint does not in itself constitute a definitive determination by the agency that it has jurisdiction. The jurisdictional issue is still pending before the ALJ and may be resolved in favor of Ukiah Valley and AHS/West. Indeed, the ALJ ruled on February 8, 1990 that the asset acquisition clause of Sec. 7 of the Clayton Act is not a basis for FTC jurisdiction over this transaction. ²

The issuance of the complaint requires only that Ukiah Valley and AHS/West appear and defend themselves in the administrative adjudicatory proceedings. Such a burden has consistently been held not to constitute a "direct and immediate ... effect on the day-to-day business" of charged parties. See Standard Oil, 449 U.S. at 239, 242-44, 101 S.Ct. at 494-95; USAA Fed. Sav. Bank v. McLaughlin, 849 F.2d 1505, 1510 (D.C.Cir.1988); see also California ex rel. Christensen v. FTC, 549 F.2d 1321, 1323 (9th Cir.), cert. denied, 434 U.S. 876, 98 S.Ct. 227, 54 L.Ed.2d 156 (1977) ("litigation expenses, however substantial and nonrecoverable, which are normal incidents of participation in the agency process do not constitute irreparable injury" and therefore are insufficient to "permit judicial intervention in the agency process."). Nor does mere "possible financial loss" have such an effect. See California Dep't of Educ. v. Bennett, 833 F.2d 827, 834 (9th Cir.1987). ³

Ukiah Valley and AHS/West are not yet subject to any order requiring them to act. Should the FTC, at the conclusion of the administrative proceedings, issue a final order, they can at that time obtain judicial review and challenge the issuance of the complaint as well as the agency's jurisdiction. Such a final order is not binding until after judicial review is complete or the time allowed for judicial review has expired. See 15 U.S.C. Sec. 21; Standard Oil, 449 U.S. at 241-43, 101 S.Ct. at 493-95. ⁴

Ukiah Valley and AHS/West contend that the FTC has in fact reached a definitive position on its jurisdiction, because it has refused three times to accept their arguments that jurisdiction is lacking. In addition to issuing the complaint, they point to FTC Commissioner Calvani's letter ruling, subsequently adopted by the full Commission, which refused to quash the subpoena duces tecum served upon AHS/West despite jurisdictional objections, and to a recent address by FTC Chairman Janet Steiger mentioning the Ukiah transaction and stating "the Commission's general view that mergers by non-profit hospitals also have the potential for impairing competition and consumer welfare, and may properly be subject to antitrust scrutiny under the Commission's statutory authority."

We agree with the FTC that neither action is dispositive. The Calvani letter ruling cannot be considered definitive because it explicitly refused to consider the merits of the jurisdictional issues raised in the petition to quash, noting that such...