United States v. American Medical Ass'n

• Citation: 110 F.2d 703
• Decision Date: 04 March 1940
• Docket Number: No. 7488.,7488.
• Parties: UNITED STATES v. AMERICAN MEDICAL ASS'N et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

110 F.2d 703 (1940)

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

No. 7488.

United States Court of Appeals for the District of Columbia.

Argued January 12, 1940.

Decided March 4, 1940.

Writ of Certiorari Denied June 3, 1940.

COPYRIGHT MATERIAL OMITTED

Thurman Arnold, Asst. Atty. Gen., and John Henry Lewin and Grant W. Kelleher, Sp. Assts. to Atty. Gen., for appellants.

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

Before GRONER, Chief Justice, and MILLER and VINSON, Associate Justices.

Writ of Certiorari Denied June 3, 1940. See 60 S.Ct. 1096, 84 L.Ed. ___.

GRONER, C. J.

This appeal is taken from a judgment of the United States District Court sustaining a demurrer to an indictment for conspiracy in restraint of trade in the District of Columbia, in violation of Sec. 3 of the Sherman Anti-trust Act.¹

The main purpose of the conspiracy as shown in the indictment was to impair or destroy the business and activities of Group Health Association, Inc., which had been organized in 1937, as a non-profit cooperative association for the provision of medical care and hospitalization to its members and their dependents. The indictment is very long but, summarized, charges as follows:

Group Health is an association of employees of certain executive departments of the Government employed in the District of Columbia, eighty per cent earning annual incomes not over $2,000. The association provides medical care and hospitalization to its members and their dependents on a risk sharing prepayment basis. Its funds are collected monthly in the form of dues. Medical care is provided by its medical staff, consisting of salaried physicians under the sole direction of a medical director. It provides a modern clinic and defrays, within certain limits, the expenses of hospitalization of its members and their dependents. The personal relationship ordinarily existing between doctor and patient exists between Group Health doctors and Group Health patients.

Defendant American Medical Association is a corporation with a membership of 110,000 out of the total of 145,000 physicians in the United States. It is the only important national society representative of the medical profession in the country. It maintains a "Bureau of Medical Economics", which has taken a leading part in carrying out the association's policy of discouraging and suppressing group medical practice on a risk sharing prepayment basis.

Defendant The Medical Society of the District of Columbia is a constituent society of American. Defendant Harris County Medical Society is a component society of American. Members of constituent and component societies are ipso facto members of American. Washington Academy of Surgery is an unincorporated association with its office in the District of Columbia. Of the individual defendants, five were officers of American, and the others members of District Society, most of the latter being officers or else members of the executive and hospital committees of the Society or members of the regular staffs of Washington City hospitals. American Association and District Society possess power to exclude a doctor, disapproved by them, from attending and treating his patients in the Washington hospitals, which include all the hospitals in the District of Columbia in which private patients may be treated by doctors. By enforcing their rules of ethics and expelling members, they may deprive them of the essential privilege of consultation with other members. By granting or refusing approval of hospitals, they can control the ability of hospitals to obtain internes, and by threatening hospitals with the exercise of this power, they may control the members of medical staffs in each. To carry out these powers, on November 3, 1937, District Society adopted the following resolution:

"Whereas The Medical Society of the District of Columbia has an apparent means of hindering the successful operation of Group Health Association, Inc., if it can prevent patients of physicians in its employ being received in the local private hospitals; and

"Whereas, The Medical Society of the District of Columbia has no direct control over the policies of such hospitals as determined by their lay boards of directors, except through its control of its own members serving on their medical staffs; and

"Whereas, conflicts between the Medical Society of the District of Columbia and any local hospitals arising from an attempt to enforce the provisions of Chapter IX, Article IV, Section 5, of its Constitution should be assiduously avoided, if possible, because of the unfavorable publicity that would accrue to its own members; therefore, be it

"Resolved, That the Hospital Committee be, and is hereby, directed to give careful study and consideration to all phases of this subject and report back to the Society, at the earliest practicable date, its recommendations as to the best way of bringing this question to the attention of the medical boards and boards of directors of the various local hospitals in such a manner as to insure the maximum amount of practical accomplishment with the minimum amount of friction and conflict."

Subsequently, the conspiracy was discussed at meetings held by members and committees of District Society, with the purpose of "hindering" Group Health from procuring and retaining on its medical staff qualified doctors by threatening with disciplinary action any members of District Society who should either join Group Health's staff or consult with physicians on its staff, and with the purpose of hindering and obstructing members of Group Health from obtaining access to hospital facilities and obstructing the doctors on its staff from treating and operating upon patients in Washington hospitals, and for the purpose of inducing Washington hospitals to boycott Group Health and its doctors. A "white list" of approved organizations, groups, and individuals was circulated, with the name of Group Health omitted, — all for the purpose of threatening with disciplinary action any member of the District Society who worked for Group Health or consulted with any doctor on its staff and any hospital which admitted any Group Health doctor to its courtesy staff; — the general purpose of the conspiracy being to restrain doctors in the District of Columbia in the pursuit of their calling and to restrain the hospitals in the operation of their business and to destroy Group Health in the performance of its functions. Disciplinary action was taken against two District Society members on Group Health's staff. One was induced to resign from the staff, the other was expelled from the society. Harris County Society opened disciplinary action against one of its members on the staff. District Society opened disciplinary action against a specialist who consulted with a Group Health doctor. Demand was made on the hospitals that they receive only members of the American Medical Association on their staffs. Upon recommendation of Washington Academy of Surgery, a surgeon was excluded from hospital staffs principally because he was working for Group Health. By threatening to deprive another doctor of courtesy staff privileges, defendants induced a Group Health doctor to resign his position.

The conspiracy is charged to have had as its background the long continued policy of opposition on the part of American Medical Association to risk sharing plans for medical service, growing out of the fear of its members of business competition from doctors connected with such organizations. Each defendant is charged to have knowingly participated in the formation and furtherance of the plan pursuant to the common purpose.

The several defendants demurred on a number of grounds, attacking not only the substance but the form of the indictment.

The District Court sustained the demurrer (1) because the practice of medicine is not a trade within the meaning of Sec. 3 of the Sherman Act; (2) because the indictment is vague and uncertain and fails to charge clearly commission of any crime.

The United States have appealed under the provisions of the Act of March 3, 1901, ch. 854, 31 Stat. 1341, D.C.Code 1929, Tit. 6, sec. 355.

The case divides itself into three main problems:

1. Does the indictment charge a combination or conspiracy in restraint of "trade" as that term is used in Sec. 3 of the Sherman Act?

2. If it does, is the restraint charged an unreasonable one which would be illegal under the Act?

3. Is the indictment defective in form?

Sec. 3 of the statute reads as follows: "Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in * * * the District of Columbia * * * is hereby declared illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars $5,000, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court."

The trial court was of opinion that the practice of medicine and the business of Group Health and the hospitals do not constitute "trade" within the intent of the statute. The question is new, at least to the extent that there is no case in which, in the circumstances existing here, it has been decided, but a careful consideration of the language of the Act, its legislative background and the various statements of the Supreme Court concerning the source from which the congressional purpose may be gathered, leads us to conclude the trial court was in error.

The phrase "restraint of trade" had its genesis in the common law, and its legal import and significance is declared again and again in the decisions of English courts, both before and after the date of our independence, as well as in American...