SANDS, District Judge.
Before the Court are Plaintiffs Federal Trade Commission's (FTC) and State of Georgia's Motion for Preliminary Injunction (hereinafter "PI Motion") (Doc. 5); Hospital Authority of Albany-Dougherty County's ("the Authority")
PROCEDURAL and RELEVANT FACTUAL BACKGROUND
Pursuant to section 13(b) of the Federal Trade Commission Act (hereinafter "FTCA"), see 15 U.S.C. § 53(b),
In July 2010, Joel Wernick, PPHS's President and CEO, authorized Robert Baudino, a consultant and attorney engaged by PPHS, to begin discussions with HCA regarding the possible acquisition of Palmyra by Phoebe Putney. (Doc. 2 ¶ 32). According to the Complaint, Baudino began negotiations on behalf of PPHS to acquire Palmyra in August 2010. (Id.). HCA's significant cash offer demand, however, made it difficult for PPHS to find an independent investment bank to issue a fairness opinion opining that the price required by HCA for Palmyra was fair. Consequently, Baudino proposed that the transaction be structured so that the Authority would acquire Palmyra, a solution that would also avoid the risk of antitrust enforcement, as demanded by HCA. (Id. ¶ 37). As proposed, the Authority would simply buy Palmyra, with PPHS guaranteeing the purchase price and the Authority's performance under the purchase agreement. (Id. ¶ 38). Once the Authority obtained title, it would lease Palmyra to PPHS for $1.00 per year for forty years on terms similar to the 1990 Lease between PPMH, Inc. and the Authority. (Id.).
On October 21, 2010, Wernick and Tommy Chambless, PPHS's general counsel, held a thirty-minute informational session with two of the Authority's members, Ralph Rosenberg and Charles Lingle. The entire Authority, however, was not presented with the proposed transaction until December 21, 2010, after PPHS made a formal offer to HCA for Palmyra on November 16, 2010; the PPHS Board approved the final terms of the deal between PPHS and HCA on December 2, 2010, including PPHS's guarantee of $195 million payment and agreement to pay a $35 million break-up fee and/or rescission fee; and PPHS and HCA entered into a Termination Agreement that required PPHS to pay $17.5 million if the Authority did not approve, in the exact form as negotiated, the Asset Purchase Agreement. (Id. ¶¶ 47-49).
At the December 21, 2010 special Authority meeting on the proposed transaction, Baudino, who appeared as special counsel to the Authority, presented the terms of the transaction using a presentation from PPHS's December 2, 2010 Board meeting. (Doc. 2 ¶¶ 37, 49). The members then voted to approve the Asset Purchase Agreement and the Termination Agreement, exactly as negotiated, Ex. PX008-04, as well as a Management Agreement between the Authority and Phoebe Putney. (Id. ¶ 50). Effective March 1, 2011, and set to "automatically terminate upon the effective date of [the putative] executed lease," the Management Agreement granted the entity formed by PPHS control over Palmyra's operations immediately upon the closing of the transaction. Ex. PX009 § 7.03(c). Several months later, on April 4, 2011, the Authority approved a lease term sheet prepared by Baudino that clarifies the December 21, 2011 Resolutions approved by the Authority as well as the Authority's plan to lease Palmyra's and PPMH's assets to Phoebe Putney under a single lease. (Doc. 2 ¶ 52).
On these facts, Plaintiffs assert in their Complaint and Memorandum in Support of their PI and TRO Motions that Phoebe Putney and the Authority have structured the subject transaction to avoid antitrust enforcement by the FTC through the sale of Palmyra to the Authority, the grant of management and operational control over Palmyra's assets to PPHS pursuant to the
Accordingly, Plaintiffs center their Complaint on the need for the Court to aid in the maintenance of the status quo during the FTC's ongoing administrative proceedings, which includes a September 19, 2011 trial on the merits of the legality of Phoebe Putney's alleged acquisition of Palmyra. (See id. ¶¶ 91-95; see also Doc. 7). They further maintain that Defendants are not entitled to state action immunity because the Authority was not sufficiently involved in the transaction, and PPHS, as a private party, entirely negotiated, structured, and executed the subject transaction without the independent analysis and oversight of the Authority. (See Doc. 2 ¶¶ 85-89). Injunctive relief, according to Plaintiffs, is therefore necessary and appropriate in this case to prevent competitive harm during the pendency of the FTC administrative proceedings. (Doc. 7 at 6-7).
In consideration of the foregoing factual allegations and assertions, the Court granted Plaintiffs' Motion for TRO (Doc. 4) on April 22, 2011 (Doc. 9).
After a day-long hearing on June 13, 2011, on Plaintiffs' PI Motion and Defendants' Motions to Dismiss, said Motions are left pending for the Court to decide. The Parties have fully briefed the issues surrounding Plaintiffs' request for preliminary injunctive relief and Defendants' request for dismissal—namely, state action antitrust immunity. Before assessing the substance of the Parties' arguments in the context of the relevant law, the Court first must resolve a preliminary dispute between the Parties concerning the scope of issues for the Court's review under section 7 of the Clayton Act. It then turns to Defendants' Motions to Dismiss (Docs. 45, 46, 53)—specifically, the potential application of state action to the Authority, Phoebe Putney, and HCA/Palmyra—and if the Court finds that state action is inapplicable, to Plaintiffs' PI Motion (Doc. 5).
Defendants' Motions to Dismiss
a. Standard of Review
In light of Defendants' asserted antitrust immunity, Defendants' Motions to Dismiss are brought pursuant to Fed. R.Civ.P. 12(b)(6)
In other words, "[a] motion to dismiss is granted only when the movant demonstrates `beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Spain v. Brown & Williamson Tobacco Corp., 363 F.3d 1183, 1187 (11th Cir.2004) (citation omitted). In evaluating the sufficiency of a plaintiff's pleadings, while the court must "accept[ ] the allegations in the complaint as true[,] constru[e] them in the light most favorable to the plaintiff," Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003), and "make reasonable inferences in
b. The Meaning and Scope of the Alleged Transaction
The Parties differ as to the events constituting the "transaction" that Plaintiffs contend violate antitrust laws under section 7 of the Clayton Act. As a result, the parameters of the conduct to which the state action immunity exception may apply are blurred. Plaintiffs allege that the acquisition includes three stages: (1) the Authority's purchase of Palmyra's assets from HCA using PPHS's money, (2) the Authority's immediate provision of control of Palmyra to Phoebe Putney, specifically PNI, under a Management Agreement, and (3) Phoebe Putney's entry into a lease with the Authority to grant Phoebe Putney managerial control of Palmyra assets for forty years. (Doc. 2 at 2).
In contrast, Defendants contend that the first stage of the alleged transaction is the only event relevant to the Court's analysis of the state action immunity issue. Thus, they contest the inclusion of the third stage as part of an "acquisition" subject to antitrust review. This third stage, particularly with respect to the alleged lack of adequate supervision by the Authority of Phoebe Putney's control of Palmyra operations, is "speculative," Defendants maintain, because the lease and its terms do not yet exist and have not even been negotiated. (See Docs. 45-47, 53 (arguing that Article III of the U.S. Constitution prohibits Court from enjoining Authority's acquisition of Palmyra based on non-existent lease)). Moreover, Defendants argue that neither the putative lease nor the Management Agreement is alleged to have competitive impact beyond the acquisition of Palmyra itself by the Authority. (Doc. 75 at 6). Accordingly, they also seemingly contest the inclusion of the second stage regarding the Management Agreement as part of the "acquisition" subject to antitrust review because it is unexecuted. (See, e.g., Doc. 47-2 at 14).
Section 7 of the Clayton Act provides, in pertinent part, "no person subject to the jurisdiction of the [FTC] shall acquire the whole or any part of the assets of another person . . ., where . . . the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."
Language on the breadth of section 7 from a popularly quoted case from a court in the Southern District of Illinois is particularly instructive:
Archer-Daniels-Midland Co., 584 F.Supp. at 1137 (emphases added) (quoting Columbia Pictures Corp., 189 F.Supp. at 181-82). Thus, as one court in the Northern District of Georgia held, "[t]he words `acquire' and `assets' are not terms of art or technical legal language[, but] . . . are generic, imprecise terms encompassing a broad spectrum of transactions whereby the acquiring person may accomplish the acquisition by means of purchase, assignment, lease, license, or otherwise." See S. Concrete Co. v. U.S. Steel Corp., 394 F.Supp. 362, 374 (N.D.Ga.1975) (emphases added) (quoting Columbia Pictures Corp., 189 F.Supp. at 181-82). Therefore, "[t]he test [for whether an acquisition falls under section 7] is pragmatic,. . . ." Archer-Daniels-Midland, 584 F.Supp. at 1137 (quoting Columbia Pictures Corp., 189 F.Supp. at 181-82).
Courts have consequently found the consummation of an acquisition unnecessary for a Clayton Act violation; a planned acquisition created by the parties' entry into an agreement is sufficient. Nelson v. Pacific Southwest Airlines, 399 F.Supp. 1025, 1027 (S.D.Cal.1975). Accordingly, courts have applied the term "acquisition" to a wide variety of transactions, including putative and ongoing leases. See, e.g., Cine 42nd Street, 790 F.2d at 1047-48 (indicating that lease of property by private parties, as approved by city and urban development corporation, constituted "acquisition" under Clayton Act); Archer-Daniels-Midland Co., 584 F.Supp. at 1137-38 (construing operating lease as acquisition within reach of section 7, as lessee of operating lease acquires property rights of possession and use in leased assets); Nelson, 399 F.Supp. at 1028-1030 (holding that despite abandonment of agreement for acquisition between parties, acquirer's ability to have gained substantial control over decision-making process of airline during pendency of acquisition agreement created genuine issue of threat of acquirer's purchase of corporation's controlling of stock in airline to airline transportation competition). Such broad applications of section 7 are sensible in light of the Clayton Act's purpose to prevent acquisitions that "may" or "tend to" cause specified harm. Gottesman v. General Motors Corp., 414 F.2d 956, 961 (2d Cir. 1969) (explaining that acquisitions that directly bring about harm or that even make possible acts that do, can violate Clayton Act).
Based on the above rationale, this Court finds that the inchoate or unexecuted
Following the consummation of the sale to the Authority and execution of the Management Agreement between the Authority and PPHS, any additional steps that any Defendant takes such as the execution of the lease agreement—no matter the number of months and steps required before such a lease may be created and executed—are in furtherance of the alleged merger to monopoly and thus, the transaction. In fact, if it were not for the Court's grant of Plaintiffs' Motion for TRO to block the acquisition, Defendants would have proceeded with their plans to consummate the acquisition; execute the Management Agreement for Phoebe Putney's maintenance and operation of Palmyra's assets; and begin steps to negotiate, draft, and execute the purported lease of Palmyra to Phoebe Putney.
In effect, therefore, along with the acquisition of Palmyra by the Authority, the lease, which will follow the execution of the Management Agreement under which Phoebe Putney will immediately control Palmyra assets, makes possible the alleged harm of the acquisition on hospital competition in the relevant market of Albany, Dougherty County, Georgia. The inclusion of the lease stage in the Court's review of the "acquisition" is consistent with the court's finding in Nelson that a terminated acquisition agreement, which was never executed, fell within the purview of section 7. It also comports with Cine 42nd Street's decision to implicitly construe a lease granted to private parties as an acquisition under the Clayton Act. It is the mere alleged plausibility that Phoebe Putney could achieve control of the decision making processes of Palmyra, its only competitor—even through an unexecuted Management Agreement and unnegotiated lease arrangement with the Authority—that triggers the Clayton Act.
Several documents referenced in the Complaint, including a Memorandum on the Required Terms for a Revised Lease between the Authority and PPMH, Inc., as well as the Resolutions adopted by the Authority at the December 21, 2010 special meeting, indicate that Phoebe Putney and the Authority intended to draft a lease for PPHS's control of Palmyra. See, e.g., Ex. PX0082. One of the Resolutions adopted by the Authority states that Phoebe Putney and the Authority would enter into a lease for the operation of Palmyra by Phoebe Putney on terms substantially similar to those of the 1990 Lease between PPMH, Inc. and the Authority for PPMH's operation.
For all of the above reasons, the Court similarly finds no reason to exclude the Management Agreement from the purview of the alleged "transaction," as the Authority's approval of the Management Agreement represents the "transfer of a sufficient part of the bundle of legal rights and privileges [in Palmyra] from [the Authority, the owner, as lessor,] to [Phoebe Putney, as lessee,] to give the transfer economic significance and the prescribed adverse `effect'" under the Clayton Act. See Archer-Daniels-Midland Co., 584 F.Supp. at 1137 (quoting Columbia Pictures Corp., 189 F.Supp. at 181-82). These facts, coupled with the approximately $200 million Phoebe Putney has guaranteed for the transaction, remove the lease of Palmyra to PPHS by the Authority from the speculative realm into the realistic. Accepting the truth of these allegations, as the Court is required to do at this pleading stage, the Court rejects Defendants' narrow view of the breadth of section 7 that excludes the purported second and third stages of the transaction.
c. State Action Immunity
Having determined the scope of the transaction that is subject to the Court's review, the Court is left to resolve the issue of Defendants' asserted entitlement to state action immunity. In their Motions to Dismiss, all six Defendants argue that the Authority's acquisition of Palmyra, as well as any subsequent lease of Palmyra to Phoebe by the Authority, triggers state action; thereby immunizes the subject transaction from antitrust laws; and requires the dismissal of Plaintiffs' Complaint, the denial of Plaintiffs' PI Motion, and an order vacating the TRO. (Doc. 45-1 at 4, 7, 13, 17). Defendants base this proposition on the proposed transaction's satisfaction of all three elements of the state action immunity doctrine. (See id. (analogizing and relying on FTC v. Hosp. Bd. of Directors of Lee County, 38 F.3d 1184 (11th Cir.1994); Crosby v. Hosp. Auth. of Valdosta & Lowndes County, 93 F.3d 1515 (11th Cir.1996))).
As to the Authority's immunity, they contend that (1) the Authority is a political subdivision of the state; (2) Georgia state statutes authorize the Authority to acquire other hospitals as part of its authority to operate, control, and maintain a public hospital and other hospital facilities; and (3) the anticompetitive effect of the Authority's acquisition is reasonably foreseeable by the Georgia state legislature, given the express acquisition powers broadly conferred by the Georgia legislature to hospital authorities. (Id. at 4-5, 17-18, 21-23). According to Defendants, because a hospital authority can operate only within its sponsoring city or county, the Georgia legislature certainly knew that any acquisition was likely to be of a competing local hospital and that intra-county acquisitions would often result in the combination of two or more hospitals in a single county. (Id. at 21 (citing O.C.G.A. § 31-7-71(1))). Because such a conclusion flowed from similar express acquisition, operational, and management powers conferred on Florida hospital authorities by the Florida legislature in Lee County, the same conclusion logically flows from the powers legislatively granted to Georgia hospital authorities to acquire and operate hospitals. (Id.).
Defendants further argue that the actions of HCA, Palmyra, and Phoebe Putney are also immune from antitrust laws. As private parties that contract with a political subdivision of the state such as the Authority, they contend that HCA and Palmyra are immune under state action
Once the state action doctrine is established, Defendants argue, the individual motives underlying the transaction—specifically, Phoebe Putney's financial interests in acquiring Palmyra—become irrelevant. (Doc. 45-1 at 25 to 27; see also Doc. 72 at 3 ("[There is simply no point at which] the influence of a private actor becomes so great that that . . . the state doctrine [does not] appl[y].")). Rather, the fact that the Authority is the only entity acquiring Palmyra, as determined from a plain reading of the Asset Purchase Agreement, confirms that the transaction is immune from antitrust laws under the state action doctrine. (Doc. 75 at 4).
Phoebe Putney goes further to state that because no Phoebe entity is the buyer of the assets underlying Plaintiffs' allegations, only the Authority will own Palmyra and will have ultimate responsibility for its operation.
And even if active supervision does apply, Phoebe Putney argues that "the existing longstanding lease terms between PPMH and the Authority, plus the Authority's recent resolution to lease Palmyra only if it contains certain terms that clearly constitute active supervision under the relevant law, is sufficient." (Id. at 20). Lastly, Phoebe Putney as well as HCA, Palmyra, and the Authority argue that under the Noerr-Pennington doctrine, the only "conduct" alleged against Phoebe Putney is legally and constitutionally protected petitioning of a government entity under the First Amendment of the U.S. Constitution. (Doc. 53 at 2; Doc. 53-1 at 12 to 13; see also Doc. 45-1 at 6, 26 to 27, 35).
In response, Plaintiffs argue that the state action defense to antitrust enforcement
As to the Authority, Plaintiffs contend that although the Authority is a political subdivision of state, Georgia Hospital Authorities Law does not authorize the usurpation of the decision and supervision powers of an authority by private actors for the private actor's benefit and without meaningful oversight by an authority. (Doc. 62 at 8-9, 12, 18-19; see also Doc. 7 at 21, 22-23). Thus, Plaintiffs maintain that the Authority cannot be considered to have acted pursuant to state policy authorized by the state legislature, and the displacement of private competition by Palmyra's sale to the Authority and subsequent lease by Phoebe Putney cannot be considered to be reasonably foreseeable by the Georgia legislature. (See Doc. 7 at 21-23 (distinguishing Lee County, 38 F.3d 1184, and Askew v. DCH Reg'l Health Care Auth., 995 F.2d 1033, 1040-41 (11th Cir.1993), because law at issue in Lee County was "special act" of Florida Legislature that applied to that specific county's health system, and health care authorities act in Askew expressly exempted authorities whose exercise of their authorized powers resulted in anticompetitive activities)).
As to Phoebe Putney, Plaintiffs contest the ability of the Phoebe entities, as private parties, to show that (1) the challenged transaction was clearly articulated and affirmatively expressed as state policy, and (2) that such policy was actively supervised by the state, so as to receive state action immunity. (Doc. 7 at 21-24; see also Doc. 61 at 20). They base this contention on the role of Phoebe Putney, and not the Authority, as the effective decision maker in planning, funding, and executing the transaction. (Doc. 7 at 7). In support thereof, Plaintiffs highlight the Authority's lack of meaningful review of the acquisition, failure to acknowledge the transaction until shortly before the day of its approval, and failure to ask questions during the presentation of the transaction. (Id. at 8-12). Plaintiffs further note that the Resolutions for the transaction for the Authority's approval were prepared by Phoebe Putney for the Authority members' signatures. Such conduct by Phoebe Putney, according to Plaintiffs, was beyond the type of state action that may qualify for antitrust immunity. (Doc. 62 at 9). As to HCA and Palmyra, they contend that a mere contract with the state does not immunize private conduct.
The foregoing dispute between the Parties as to the application of state action
U.S. Supreme Court and Eleventh Circuit Case Law on State Action Immunity
The origins of the state action doctrine derive from the reasoning of the U.S. Supreme Court's decision in Parker v. Brown. See 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). In Parker, relying on principles of federalism and state sovereignty,
Although the establishment of the challenged marketing program, approved by the Prorate Advisory Commission, was initially petitioned by private producers and was approved by referendum of producers, the Court found that "the state . . . ha[d] created the machinery for establishing the prorate program." Id. at 346-47, 352, 63 S.Ct. 307. "The prerequisite approval of the program upon referendum by a prescribed number of producers [wa]s not the imposition by them of their will upon the minority by force of agreement or combination . . . ."; rather, the required vote on the referendum was one condition of the application of the regulations enacted and prescribed by the state under the enabling language of the Agricultural Prorate Act. Id. at 352, 63 S.Ct. 307 (citation omitted). According to Parker, therefore, the Sherman Act—and by extension, the Clayton Act—is not meant to restrain acts of the state that are directed by the legislature. Id. at 350-51, 63 S.Ct. 307; see also Lee County, 38 F.3d at 1186 (holding that state action doctrine is available under Clayton Act).
Several years later, in Cal. Retail Liquor Dealers Assoc. v. Midcal Aluminum, Inc., the U.S. Supreme Court extended the parameters of Parker to apply to alleged restraints of trade brought about by private actors. 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). There, the Court held that to qualify private action for state action
Applying these elements to the wine pricing scheme established by private wine producers under the California Business and Professionals Code, the Court found that although the relevant provisions of the state Code represented a policy to permit the price resale maintenance by California wine sellers, the price setting program did not meet second requirement of Parker immunity because the state merely authorized price setting, enforced prices established by private parties, and never reviewed the reasonableness of price schedules or regulated the terms of the fair trade contracts. Simply put, the wine producers held the power to prevent price competition by dictating the prices charged by wholesalers, while the state played a passing, indirect role in pricing and management that was insufficient to establish antitrust immunity. Id. at 103-04, 100 S.Ct. 937 (explaining that without extensive official oversight by state, Parker, 317 U.S. at 351, 63 S.Ct. 307, may have found violation of Sherman Act).
Since Parker and Midcal, the Supreme Court and Eleventh Circuit have determined that state action immunity is applicable to political subdivisions such as municipalities, City of Columbia, 499 U.S. 365, 111 S.Ct. 1344, and hospital authorities, Lee County, 38 F.3d at 1188 (applying Parker immunity to Florida hospital authority); Askew, 995 F.2d at 1039 (same as to Alabama hospital authority). Yet, the determination that a political subdivision's anticompetitive activities constitute state action "is not a purely formalistic inquiry" that a party can establish by simply declaring the political subdivision's actions to be lawful. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 39, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985).
Nonetheless, anticompetitive effects can result from broad authority to regulate. Id. In fact, "the [political subdivision] need not `be able to point to a specific, detailed legislative authorization' in order to assert a successful Parker defense to an antitrust suit," as a requirement for such explicit authorization would unnecessarily impose on municipalities' local authority and autonomy. Id. at 39, 42, 44, 105 S.Ct. 1713 (finding that state statute broadly empowering cities to provide sewage services and to refuse to provide sewage services to unannexed areas clearly contemplated that city could engage in anticompetitive conduct that would result in monopoly over provision of sewage services).
Rather, to obtain protection under state action immunity doctrine, a political subdivision of the state must "demonstrate that their anticompetitive activities were authorized by the state `pursuant to state policy to displace competition with regulation or monopoly public service.'" Bolt v. Halifax Hosp. Med. Ctr., 980 F.2d 1381, 1385 (quoting Town of Hallie, 471 U.S. at 38-39, 105 S.Ct. 1713). This requires proof of the challenged action (1) by a political subdivision of the state, (2) undertaken pursuant to state statutes authorizing the challenged action, (3) the anticompetitive effects of which are reasonably foreseeable to the legislature based on the statutory power granted to the political subdivision. Id. at 1386.
1. Immunity of Hospital Authorities
Here, Plaintiffs do not contest the Authority's satisfaction of the first and second elements of state action immunity, nor does the Court reject Defendants' contention
For this reason, the Court's analysis as to the Authority's immunity hinges on the third element: whether the suppression of competition in the manner alleged in the Complaint is a reasonably foreseeable result of the conduct authorized and the powers granted to the Authority under Georgia Hospital Authorities law. To answer this question in the affirmative, the Court must be satisfied that the Georgia legislature reasonably foresaw a private entity taking managerial and operational control of its only former competitor through a management agreement and lease granted to it by a hospital authority following the authority's acquisition of that competitor.
In Lee County, the primary authority on which Defendants rely in their Motions to Dismiss, the Eleventh Circuit easily found this element met, even without an "explicit [statement by the legislature] that it expect[ed] anticompetitive conduct to result from [the subject] legislation." 38 F.3d at 1188 (citing and quoting Town of Hallie, 471 U.S. at 41-43, 105 S.Ct. 1713; Askew, 995 F.2d at 1040-41); see also Askew, 995 F.2d at 1040, 1041 (explaining that although enabling legislation, unlike that in Lee County, explicitly recognized potential anticompetitive results of state code's provision of broad acquisition and operational powers to healthcare authority, court was not required to find such explicit language to render such results foreseeable). The court held that the Florida legislature foresaw possible anticompetitive effects of the Hospital Board of Directors of Lee County's ("The Board") proposed in-county purchase of a private non-profit hospital, Cape Coral Medical Center, Inc., when the state legislatively authorized the Board to make acquisitions of medical facilities and to own general acute care hospitals in Lee County. Lee County, 38 F.3d at 1186.
According to the Court, only one hospital, Lee Memorial Hospital, existed in Lee County when the Board was created in 1963; once authorized by the 1963 legislation, the Board's purchase of the hospital thereby created a monopoly. Id. Thus, when the Board's power was legislatively extended in 1987 to permit it to "establish and provide for the operation and maintenance of additional hospitals . . . and other facilities devoted to the provision of healthcare
Similarly, in Askew, the Eleventh Circuit granted state action to DCH, a public healthcare facility created by Alabama legislature, when it sought to expand through the acquisition of a private healthcare facility. The court found that the state's legislative authorization to hospital authorities to "acquire, . . . enlarge, expand, alter,. . . and operate health care facilities" and "create, establish, acquire, operate or support subsidiaries and affiliates, . . . for profit or non-profit" made the displacement of competition foreseeable at the time the legislature gave DCH the power to acquire other hospitals. Askew, 995 F.2d at 1035 n. 2 (quoting Ala.Code § 22-21-318; § 22-21-358). According to Lee County and Askew, therefore, anticompetitive conduct need only be reasonably anticipated rather than inevitable, ordinary, or routine. See Lee County, 38 F.3d at 1191.
Anticompetitive conduct by a political subdivision under Eleventh Circuit law is even reasonably foreseeable when it is heavily influenced by the interests of, or involves, a private party. In City of Columbia, for example, the Court found that because the South Carolina statutes under which the city acted authorized municipalities to regulate the use of land and the construction of buildings and other structures within their boundaries, the suppression of billboard advertising competition from newcomers and the protection of existing billboards, including those owned by the company which had enjoyed a majority of the market share, were reasonably anticipated to result from the city ordinances at issue that regulated the size, location, and spacing of billboards. 499 U.S. at 373, 111 S.Ct. 1344. The Court reached this finding notwithstanding the city's and private billboard company's alleged involvement in a secret anticompetitive agreement to protect the company's monopoly position in billboard advertising, the close relationship between city officials and the company, and the alleged efforts of the company to lobby the city to enact the challenged ordinances. Id.; cf. Cine 42nd Street, 790 F.2d at 1046-48 (permitting private parties, as well as urban development corporation (UDC), to enjoy state's immunity from antitrust liability for anticompetitive consequences resulting from acquisition and lease of five movie houses to private party theatre operators, to which UDC had designated operational powers).
The absence of public health, safety, morals, or the general welfare of the community from the city ordinances, as well as the company's alleged motivation of the enactment of the ordinances, was immaterial, for public officials, the Court reasoned, often agree to do what groups of private citizens urge upon them. City of Columbia, 499 U.S. at 374, 368, 375, 378, 111 S.Ct. 1344; cf. Cine 42nd Street, 790 F.2d at 1035 (acknowledging necessity of government involvement in effectuating policies and goals to cure ailing economy and reverse urban blight when private parties in the free market enterprise cannot alone do so). It was enough that the suppression of competition was, at the very least, a foreseeable result of the state's enabling legislation. City of Columbia, 499 U.S. at 368, 111 S.Ct. 1344; see also Town of Hallie, 471 U.S. at 39, 105 S.Ct. 1713 (explaining that although compulsion is often best evidence of state policy, "clear articulation" requirement of state action test does not require that defendant show state "compelled" it to act, but at minimum, to only show reasonable anticipation).
For this reason, the Supreme Court and Eleventh Circuit have rejected inquiries into the motives and reasons for a government's anticompetitive actions. Not only are "very few government actions . . . immune from charges that they are not in the public interest," but "judicial [probing] and assessment of the public interest after the fact . . . compromise[s] the ability of the states to regulate their own commerce," thereby rendering state action immunity meaningless. Id. at 1388-89 (quoting City of Columbia, 499 U.S. at 377, 111 S.Ct. 1344) (prohibiting inquiry into whether authority's allegedly anticompetitive denial of staff privileges to plaintiff were pretextual or furthered public good).
2. Immunity of State Actors' Agents and of Private Parties
Because of this prohibition into possible private motives of state anticompetitive action, federal antitrust laws cannot regulate the conduct of private individuals in seeking anticompetitive action or in influencing government officials to engage in conduct of such behavior. See City of Columbia, 499 U.S. at 378-80, 111 S.Ct. 1344. This action is protected by the Noerr-Pennington doctrine, a corollary to the state action doctrine, which shields from antitrust review concerted efforts to influence public officials regardless of intent or purpose, and even where anticompetitive results are brought about by deception or bribery.
Furthermore, actions of a private party also can be considered actions taken by the same as an agent of a political subdivision, such that it should share the political subdivision's immunity. See Crosby, 93 F.3d at 1529. The appropriate inquiry for this rule focuses on whether "there is little or no danger that the actor is involved in . . . private" conduct "as opposed to state action vindicating a truly governmental interest." Id. at 1530 (emphases added) (quoting Town of Hallie, 471 U.S. at 47, 105 S.Ct. 1713). If the action is truly that of the state and not of an individual or private actor, then the private parties will receive the state action immunity of the political subdivision, and the need for evaluation of the Midcal "active state supervision" element for private parties is eliminated. Id. at 1530-31; see, e.g., Cine 42nd Street, 790 F.2d at 1047-48 (declining to apply active supervision requirement because private party theatre operators operating in concert with urban development corporation enjoyed state's antitrust immunity, given clearly articulated state policy that private parties and government necessarily work together to effectuate city's mission to cure urban blight).
To illustrate, in Crosby, a suit challenging an allegedly anticompetitive peer review
The court's ruling was based on the fact that the (1) the control exercised by the hospital authority over the peer review decisions, specifically its retention of power over decisions to grant or deny hospital privileges, and (2) the overall statutory context of peer review in Georgia, that is, the statutory requirement that hospitals provide for the review of professional practices in a hospital. Id. at 1530-31. Had the court held otherwise—that is, had the authority but not the private defendants been deemed immune for an action performed with or on behalf of the authority—it would have defeated the purpose of antitrust immunity by permitting the plaintiff to sue the private defendants for the conduct of the authority that had already been declared immune. See id.; see also Cine 42nd Street, 790 F.2d at 1048.
In sum, therefore, a greater level of state involvement in anticompetitive conduct must be demonstrated if the defendant is a private party rather than a political subdivision. If not a state actor or a private party, a defendant travels under the three-part test from Bolt and Town of Hallie to show "clear articulation"; if, however, the defendant is a private party, it travels under the two-prong Midcal test—i.e., defendant must show clear articulation and active supervision, unless it can establish that it acted pursuant to Noerr-Pennington or as an agent of the political subdivision which has received antitrust immunity. Thus, the Court now turns to its analysis of whether the Authority, Phoebe Putney, and HCA/Palmyra should be evaluated as private actors, political subdivisions, or agents thereof.
1. Immunity of the Authority of Albany-Dougherty County, Georgia
The Court first analyzes the Authority's entitlement to state action immunity. As previously established, the enabling legislation need not explicitly authorize the exact actions undertaken to establish foreseeability. Rather, "it is only necessary
Formation, Purpose, and Powers of the Albany-Dougherty County Hospital Authority
Pursuant to the Hospital Authorities Law, O.C.G.A. § 31-7-70 et seq., the Georgia legislature "created in and for each county and municipal corporation of the state a public body corporate and politic to be known as the `Hospital Authority' of such county or city. . . ." O.C.G.A. § 31-7-72(a) (emphasis added). A hospital authority is "deemed to exercise public and essential governmental functions and [has] all the powers necessary and convenient to carry out and effectuate the purposes and provisions of [the Hospital Authorities Law]." O.C.G.A. § 31-7-75. An authority may not operate for profit, however, and must set its rates and charges only in amounts sufficient to operate, service debt and bond obligations, and maintain "reserves for improvement, replacement, or expansion of its facilities or services." O.C.G.A. § 31-7-77. In 1941, the Hospital Authority of Albany-Dougherty County, Georgia, was jointly activated pursuant to a resolution by the City of Albany and Dougherty County, Georgia, to execute the goals represented by the Georgia Hospital Authorities Law. See Ex. PX008.
As noted above, see supra note 16, a hospital authority's powers include, in addition to those necessary to operate a hospital, "[t]o acquire by purchase, lease, or otherwise and to operate projects," O.C.G.A. § 31-7-75(4), which are defined as "the acquisition . . . and equipping of hospitals . . . to promote the public health needs of the community," O.C.G.A. § 31-7-71(5). Section 31-7-75(7) also authorizes a hospital authority to lease for any number of years not to exceed forty for the operation of any project by another, provided that authority determines that lease will promote public health needs of community by making additional facilities available or reducing healthcare costs, and that authority retain sufficient control over any project so leased so as to ensure that lessee will not in any way receive more than reasonable rate of return on its investment in the project. Id. § 31-7-75(7). Hospital authorities may also execute their acquisition and leasing powers by partnering directly or indirectly with other hospitals, facilities, and health care providers to arrange for the provision of health care services. § 31-7-75(27). Thus, an authority's powers, including those of the Authority in this case, appear to be as broad and diverse as the problems they are designed to address.
The 1990 Lease of PPMH by the Authority
Pursuant to the Hospital Authorities Law, in December 1990, the Authority entered into a Lease and Transfer Agreement, with respect to the assets and operation of PPMH. Under the Lease, which has been extended on several occasions to a 2042 expiration date (Doc. 2 ¶ 27), the Authority operates PPMH as a lessee for purposes of carrying out the mission of the Authority. Ex. PX002; see also Ex.
Pursuant to the Lease terms, the Authority has delegated to PPMH, Inc., among other responsibilities, its powers to provide indigent care in fulfillment of the Authority's agreement with Dougherty County, Ex. PX002 §§ 4.02, 4.18, and to set rates and charges for PPMH, Ex. PX002 § 4.03(b). Moreover, Phoebe Putney, which owns PPMH, Inc., pays all expenses of the Authority, which has no budget, no staff and no employees, and the Authority is composed of appointed, unpaid members. (Doc. 2 ¶ 27). Despite the delegation of rights to Phoebe Putney with respect to PPMH, the Authority may terminate the Lease if PPMH, Inc. materially fails to operate PPMH in compliance with the Lease terms and delegated responsibilities. Ex. PX0002-46 §§ 9.01-9.03, 9.07.
Plaintiffs reason that this relationship between Phoebe Putney and the Authority under the 1990 Lease indicates that the Authority will have no authority over or interest in overseeing the administration of Palmyra once the transaction now at issue is consummated. (Doc. 61 at 26). On the totality of the foregoing allegations, along with those provided in the Procedural and Relevant Factual Background Section, see supra, Plaintiffs claim that the Authority "rubberstamped the transaction" and used the Authority as a "strawman," thereby disqualifying Defendants for antitrust immunity (See id. at 17, 23; see also Doc. 2 ¶ 85).
Defendants, however, submit that this relationship represented by the 1990 Lease evidences that PPMH, Inc. exists to operate and support PPMH and does so only for so long as it complies with the 1990 Lease. To Defendants, therefore, a similar relationship will exist between Phoebe Putney, specifically PNI, and the Authority for the former's operation of Palmyra pursuant to the terms of the subject transaction and in a manner immune from antitrust scrutiny. (Doc. 45-1 at 9-10). The Court agrees for reasons discussed below.
While the Court must accept Plaintiffs' well-pleaded version of the facts as true and view them in a light most favorable to Plaintiffs, it is not required to accept Plaintiffs' legal conclusions as to the unavailability of state action immunity to Defendants. Pursuant to its own review of the Supreme Court and circuit precedent and relevant Georgia statutes, the Court concludes that the provisions of Georgia Hospital Authorities Law, O.C.G.A. § 31-7-70 et seq., that concern the powers of hospital authorities in the State of Georgia have created a scheme for establishing and enforcing anticompetitive conduct, particularly through leasing authority-owned hospital facilities or property to another hospital or its affiliated entity as manager and lessee.
As previously established, see supra pp. 1375-76, Georgia has broadly authorized the Authority to "acquire by purchase" hospital projects and to lease these hospitals to others for a period of up to forty years, O.C.G.A. § 31-7-75(4), (6), limited the Authority's execution of such powers to the city or county that activated the Authority, i.e., its "area of operation," id. § 31-7-71(1), and required that the Authority operate on a non-profit basis, id.
The totality of these grants of authority, the geographic limitation, and the non-profit requirement demonstrates that the Georgia legislature intended to guarantee that hospital authorities could accomplish their mission of promoting public health notwithstanding the anticompetitive results.
Only one hospital, PPMH, existed in Albany, Dougherty County, when the Authority was created. Thus, once authorized to acquire additional hospitals and in view of the reality of its lack of funds and resources, the Authority was foreseeably likely to acquire and lease hospitals in the manner proposed in this case. And the fact that the Authority, with no staff or budget of its own, is statutorily empowered to add new facilities and to lease facilities to other hospitals—which, once again, must be within its area of operation—increases the likelihood that it may enter into a lease for the operation of one of its acquired hospitals by another hospital or hospital network with which the acquired hospital once competed. Such a finding is underscored by the fact that significant barriers to entry into the healthcare market already exist, for example, under Georgia Certificate of Need (CON) laws, which require the issuance of a CON prior to a hospital's provision of specific types of healthcare services at newly built facilities. See O.C.G.A. §§ 31-6-41, 31-6-42.
The Court reaches this finding notwithstanding the accomplishment of a hospital authority's acquisition and lease of a hospital with the assistance of private parties.
Furthermore, the absence of the Authority's own budget, as well as the statutory prohibition on authorities' operation for profit, makes it reasonably foreseeable that hospital authorities would work with private hospitals or hospital networks to operate hospitals. Without the assistance of third parties for funding, resources, and personnel, hospital authorities likely find it difficult to operate and discharge their mission for the provision of healthcare services. The Court finds that this represents a reality that the legislature reasonably foresaw, similar to the court's acknowledgment in Cine 42nd of the reasonable foreseeability of the necessary collaboration between private entities and the local government to revitalize blighted urban areas in New York City.
Therefore, so long as the Authority determines that the proposed transaction will continually fulfill the Authority's mission to promote public health needs of the community and allow it to retain public control of Palmyra as is contemplated by the Hospital Authorities Law—which it has done here, see Ex. PX008—the Authority may collaborate with private parties such as Phoebe Putney to execute the proposed transaction, without being subject to antitrust liability. In this light, the subject transaction, including the lease stage, merely represents the application of approved principles of the Hospital Authorities Law to new conditions. See Richmond County, 336 S.E.2d at 564.
The Court reaches the above findings, even accepting Plaintiffs' allegations that the subject transaction was effectively motivated and controlled by PPHS through its own independent private and pecuniary interests and that the transaction was structured to circumvent antitrust law. Not only does City of Columbia expressly forbid the Court's inquiry into such reasons for and motivations behind acquisitions and their structure, but it, along with Cine 42nd Street, also illustrates that the private Defendants, specifically Phoebe Putney, can motivate, influence, and work on behalf of and with a political subdivision to knowingly bring about anticompetitive results, free of the risk of antitrust enforcement.
Contrary to Plaintiffs' claims, therefore, whether the Authority authorized the purchase of Palmyra without considering, among other factors, the anticompetitive adverse effect of the acquisition on healthcare in the community and alternatives to leasing Palmyra to Phoebe Putney becomes irrelevant. Like the Court's treatment of the producers' required referendum
2. The Immunity of Phoebe Putney and HCA/Palmyra
The Court also holds that state action immunity applies to the private Defendants as well, as the challenged action at issue here is really directed by the Authority and not Phoebe Putney.
Noerr-Pennington, along with the state action doctrine, therefore forbids Plaintiffs' attempt to hold Phoebe Putney, a private party, liable for a hospital acquisition by the Authority, a local government actor that has received antitrust immunity. The fact that Phoebe Putney may have an interest in controlling Palmyra and that it has acted on this interest in petitioning the Authority and negotiating and structuring the transaction means nothing; what governs is the enabling legislation, as assessed above and whether it expresses a policy that makes the anticompetitive conduct now at issue reasonably foreseeable. See supra Part I.c. Because the Court has found that it does, Phoebe Putney's interest in controlling Palmyra and its associated actions to actualize their interests are protected and thereby have no relevance to this Court's analysis of Phoebe Putney's entitlement to state action immunity as a private party.
Moreover, even if Phoebe Putney is not considered a private party whose actions are protected under Noerr-Pennington, it may be considered an effective agent of the Authority based on its negotiation of, planning for, and funding and facilitation
To illustrate, the Asset Purchase Agreement between PPHS and Palmyra states that it is being entered into by "the Authority, as buyer, Palmyra, as seller, [Phoebe Putney], as guarantor of the obligations of the Authority and PNI." Ex. PX226-01 (emphases added); see also Ex. PX009 § 2.02 (explaining that Authority remains owner of Palmyra's sold assets and therefore, "shall at all times have during the Operating Period have ultimate control over the assets and operations of [Palmyra]"). As such, pursuant to the terms of the Management Agreement, PNI was created by PPHS to serve, under PPHS's control, as the day-to-day Manager of assets used exclusively in the operation of Palmyra. Yet Phoebe Putney is still required to operate Palmyra, through PNI, according to the Authority's instructions and not its own desires: it "shall be responsible for the performance of all acts reasonably necessary or required in connection with the operation of [Palmyra] in accordance with the Authority's directions" and "in managing [Palmyra] shall follow the charity and indigent care policies of Authority and shall assist Authority in meeting all of Authority's required obligations under Hospital Authorities Law. See, e.g., Ex. PX009 § 3.03(c), (e) (Management Agreement) (emphases added).
Much like the private party theatre operators in Cine 42nd Street who operated in concert with the urban development corporation and to whom the urban development corporation had delegated its rights for the operation of the theatres, any actions of Phoebe Putney in its operation of Palmyra are therefore intended to effectuate the Authority's purpose. Although the Authority has "delegated control and authority for overseeing Medical Staff affairs, treatment and related functions [at Palmyra] to [Phoebe Putney]," Phoebe Putney is merely an "agent" of the Authority in operating Palmyra, see, e.g., Ex. PX009 § 3.03(b) (stating that Phoebe Putney "acts in Authority's name and as agent for" Authority in making deposits and disbursements), and as stated in the Management Agreement, owes the Authority a fiduciary duty with regard to the performance of its responsibilities on the Authority's behalf, Ex. PX009 § 2.01; see also Ex. PX009 §§ 3.09, 3.10 (explaining Phoebe Putney's obligation to ensure Authority's continuous compliance with applicable laws required for ongoing operation of Palmyra and protection of confidentiality of records of Authority).
Thus, while Phoebe Putney or a PPHS entity such as PNI will operate Palmyra as lessee once it is acquired and leased by the Authority to Phoebe Putney, the Management Agreement and to a degree, the Asset Purchase Agreement thereby ensure that Phoebe Putney understands that it does not operate Palmyra independent of the Authority and that the Authority is the ultimate decisionmaker of all project decisions.
Because Phoebe Putney will not be able to exercise control over Palmyra's operations independent of the Authority, the Court therefore holds that Phoebe Putney's actions in the transaction are considered those of the Authority, which the Court has already ruled is entitled to immunity. Were the Court to hold otherwise, the state action immunity afforded to the Authority would be meaningless. See Crosby, 93 F.3d at 1532. Phoebe Putney's and HCA/Palmyra's Motions to Dismiss (Docs. 46, 53) are thereby
Plaintiffs' PI Motion
In view of the Court's grant of Defendants' Motions to Dismiss, the Court need not further address Plaintiffs' PI Motion. See Lee County, 38 F.3d at 1192 ("[If] the allegedly anticompetitive results were foreseeable under the state action doctrine, it is unnecessary to determine whether the acquisition [potentially] violates the Clayton Act [for purposes of granting preliminary injunctive relief."). Plaintiffs PI Motion (Doc. 5) is thus
For all of the foregoing reasons, the Court rules that Defendants are immune from antitrust liability under the Clayton Act and the Federal Trade Commission Act. Thus, the Hospital Authority of Albany-Dougherty County's Motion to Dismiss or Alternatively, for Summary Judgment and to Vacate the Temporary Restraining Order (Doc. 45); HCA, Inc.'s and Palmyra Park Hospital, Inc.'s Cross-Motion to Dismiss or Alternatively, for Summary Judgment and to Dissolve the TRO (Doc. 46); and Defendants Phoebe Putney Health System Inc.'s, Phoebe Putney Memorial Hospital, Inc.'s, and Phoebe North, Inc.'s Motion to Dismiss and Vacate the TRO (Doc. 53) are
Whenever the Commission has reason to believe—
FTCA § 13(b), 15 U.S.C. § 53(b).
Clayton Act § 16, 15 U.S.C. § 26.
For this reason, the Court also