United States v. American Medical Ass'n, 63221.

• Decision Date: 26 July 1939
• Docket Number: No. 63221.,63221.
• Citation: 28 F. Supp. 752
• Parties: UNITED STATES v. AMERICAN MEDICAL ASS'N et al.
• Court: U.S. District Court — District of Columbia

28 F. Supp. 752

UNITED STATES v. AMERICAN MEDICAL ASS'N et al.

No. 63221.

District Court of the United States for the District of Columbia.

July 26, 1939.

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Thurman Arnold, Asst. Atty. Gen., and John Henry Lewin and Allan Hart, Sp. Assts. to Atty. Gen., and Smith Brittingham, of Norfolk, Va., Sp. Atty., for the United States.

William E. Leahy, of Washington, D. C., Edward M. Burke, of Chicago, Ill., and Charles S. Baker, Adrien F. Busick, Seth W. Richardson and John E. Laskey, all of Washington, D.C., for defendants.

PROCTOR, Justice.

The indictment charges a conspiracy to restrain trade in the District of Columbia in violation of Section 3 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 3. The defendants are American Medical Association, a national organization of physicians; two of its subordinate bodies, the Medical Society of the District of Columbia and Harris County Medical Society of Houston, Texas; also the Washington Academy of Surgery, not fully identified; and twenty-one individual doctors, all members of the national body, some officers thereof, others members and officers of the Medical Society of the District of Columbia. All defendants have demurred to the indictment. It is very long, and only abbreviated references will be made to such parts as are deemed necessary to this decision.

Group Health Association, Inc (hereinafter called Association), is alleged to be an association of Government employees, engaged "in the business of arranging for the provision of medical care and hospitalization to its members and their dependents on a risk sharing pre-payment basis". Medical care is provided by a staff of salaried practitioners engaged in group practice under a medical director. A clinic is maintained, and limited hospital expenses are defrayed for the members and their dependents.

The defendants are alleged to have conspired (1) to restrain the Association in its business of arranging for the provision of medical care and hospitalization to its members and their dependents, (2) to restrain such members in obtaining, by cooperative efforts, adequate medical care for themselves and their dependents from doctors engaged in group medical practice, (3) to restrain doctors serving on the medical staff of the Association in pursuit of their callings, (4) to restrain other doctors in the District of Columbia, including some of the individual defendants, in pursuit of their callings, and (5) to restrain Washington hospitals in the operation of their businesses.

The demurrers raise basic objections to the indictment. Of first importance is the contention that none of the alleged restraints has reference to a trade; that Section 3 comprehends only those occupations in commercial life carried on in the marts of trade activity; therefore, that the medical profession and the businesses of the Association and hospitals do not constitute "trade" within the purview of the statute. Against this contention the Government's position is that all who are occupied in any activity whereby they supply money's worth for full money payment are engaged in trade; that Section 3 does cover all such activities; therefore, that the practice of medicine and the businesses of the Association and hospitals do fall within the scope of the statute.

Is medical practice a trade within the meaning of Section 3 of the Sherman Act? In my opinion, it is not. I think the matter is settled by the Supreme Court in the case of Atlantic Cleaners & Dyers v. United States, 286 U.S. 427, 52 S.Ct. 607, 610, 76 L.Ed. 1204. That case squarely presented the question whether "trade" is used in a narrow sense, as importing "only traffic in the buying, selling, or exchanging of commodities", or in a broader sense. It fairly called for a definition of the word. This the Court undertook to give. In so doing, it declared that the word "trade" was used in Section 3 of the Sherman Act in the general sense attributed to it by Justice Story in the case of The Schooner Nymph, 1 Sumn. 516, 18 Fed.Cas. 506, 507, No. 10,388. The Court, intending to give a full and broad meaning, adopted for its own definition of "trade" the language of Justice Story in that early case, quoting therefrom as follows:

"The argument for the claimant insists, that `trade' is here used in its most restrictive sense, and as equivalent to traffic in goods, or buying and selling in commerce or exchange. But I am clearly of opinion, that such is not the true sense of the word, as used in the 32d section 46 U.S.C.A. § 325. In the first place, the word `trade' is often, and indeed, generally used in a broader sense, as equivalent to occupation, employment, or business, whether manual or mercantile. Wherever any occupation, employment, or business is carried on for the purpose of profit, or gain, or a livelihood, not in the liberal arts or in the learned professions, it is constantly called a trade. Thus, we constantly speak of the art, mystery, or trade of a housewright, a shipwright, a tailor, a blacksmith, and a shoemaker, though some of these may be, and sometimes are, carried on without buying or selling goods."

Thus, we have this recent controlling decision defining the word trade, and expressly excepting the learned professions of which admittedly the practice of medicine is one. The decision is in harmony with others rendered before and after the Cleaners & Dyers case. See Federal Trade Comm. v. Raladam Co., 283 U.S. 643, 51 S. Ct. 587, 75 L.Ed. 1324, 79 A.L.R. 1191; Graves v. Minnesota, 272 U.S. 425, 47 S.Ct. 122, 71 L.Ed. 331; and Semler v. Board of Dental Examiners, 294 U.S. 608, 55 S.Ct. 570, 79 L.Ed. 1086. The restraints alleged against the doctors in specifications 3 and 4 of the charge are clearly not within the purview of the statute. I cannot accept the refinements of thought whereby it is argued for the Government that the Court in quoting Justice Story was not defining "trade" but merely illustrating the narrow and broad concepts of the word. Nor does the decision lend any support to the idea that by enacting Section 3 Congress intended to exercise all its plenary power over the District of Columbia to prohibit restraints against all business activities of the citizen. The Court has simply said that Congress meant to deal effectively with the evils resulting from contracts, combinations and conspiracies in restraint of trade — not all restraints upon every business pursuit, but only those affecting trade. Doubtless, in the fullness of its power over the District, Congress could have prohibited restraints upon all occupations of the citizen. But there is nothing in the history of the legislation to suggest the need for such a broad reach of power, and clearly it was not intended.

The Government has cited many English and American cases dealing with restrictive covenants ancillary to agreements by doctors concerning the sale or conduct of their practice, in which the courts have applied the common law doctrine as to "contracts in restraint of trade". It is argued that these cases have, in a legal sense, drawn medical practice within the orbit of trade, giving to the word a common law meaning to include the professions. From this, it is further argued that at common law restraints upon the practice of medicine were "restraints of trade" and that Congress in the Sherman Act used the term in such a sense. But those cases are beside the point. They do not involve any question as to whether medicine is a trade. They accept the universal understanding of it as a profession. Nor do they define "trade". They merely apply a rule of law. At most such cases serve only to illustrate the development of a legal doctrine, having its origin in contracts concerning tradesmen, which became known as the doctrine "against restraint of trade", and which in course of time was extended and applied to agreements by doctors respecting their professional practice.

The case of Pratt v. Medical Association, 1 K.B. 244, upon which the prosecution places much reliance, is interesting in the similarity of facts there proven and here alleged; yet the legal aspects differ greatly. The suit was a civil action in tort by the plaintiff doctors to recover damages for malicious injury to their means of livelihood. The claim was grounded upon common law principles which hold every man liable in damages for wrongful injury to another's means of livelihood. Combination was not the gist of the action; that circumstance only increased the damage. So here, if the livelihood of group practitioners has been injured by the wrongful acts of the defendants, they too have redress in a civil court. But the charge in the present case is criminal, and to stand must find its sanction, solely in the statute.

Coming now to other specifications of the charge, 1, 2 and 5. Is the Association, or are its members or the hospitals, engaged in trade within the meaning of Section 3 of the statute? The Association is alleged to be a non-profit co-operative association of government employees engaged in the...