OPINION OF THE COURT
BECKER, Circuit Judge.
I. Introduction and General Background 791
II. The Facts - 793
III. Procedural History and Problems - 799
IV. The Sherman Act Claims - 812
V. Conclusion - 828
I. INTRODUCTION AND GENERAL BACKGROUND
This antitrust case arises from the refusal to grant hospital staff privileges to a physician. The plaintiff, Malcolm Weiss, is an osteopath
The gravamen of Weiss' lawsuit is that, although allopaths (hereinafter referred to as medical doctors or M.D.s) and osteopaths (D.O.s) are equally trained and qualified to practice medicine,
In addition, Weiss alleged that the treatment that he received at the hands of the M.D.s who control York sent a message to other D.O.s in the York MSA not to apply for staff privileges at York. In Weiss' submission, this scheme to exclude D.O.s from York Hospital was motivated by a desire to restrict the ability of D.O.s to compete with M.D.s, thereby increasing the profits of the M.D.s. Weiss contends that this conduct violates sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2, and state law (tortious interference with contractual relations).
The district court bifurcated the trial. The liability phase commenced on August 11, 1982, and on September 1, 1982, the jury returned unanimous answers to 42 special verdict questions. The district court molded the jury's responses into findings of liability in favor of the class (but not Weiss) and against the medical staff on the section 1 claim; in favor of Weiss and the class and against the hospital on the section 2 claim; and in favor of Weiss and against the hospital and four of the individually named defendants on the state law claims. All other defendants were exonerated on all other claims. Adopting the jury's findings of fact (by which it considered itself bound), the district court thereupon entered a final injunction against the hospital and the medical staff pursuant to section 16 of the Clayton Act,
The case raises a number of complicated legal questions. Our opinion is divided into five parts. Part I is this introduction and general background. In part II we detail the facts. Part III discusses a number of preliminary issues, including the extent of our appellate jurisdiction over the questions presented by the appeals, the propriety of the class certification, and the proper vicinage for the jury trial in this case. We hold that we have no appellate jurisdiction to review the defendants' challenges to the district court's findings of liability under section 1 and 2 of the Sherman Act to the extent that those findings relate solely to plaintiffs' claims for treble damages under section 4 because there is no final judgment as to these claims, and no exception to the final judgment rule applies. We reach the same conclusion with respect to the state law claims. We thus limit this opinion to a review of questions raised by the district court's issuance of an injunction under section 16 and its exoneration of some of the defendants on some of plaintiff's claims. We also hold that the class certification was proper and that the trial was held in an appropriate location.
In part IV we turn to the heart of this appeal: a review of the findings of liability under sections one and two of the Sherman Act against the hospital and the medical staff, and the consequent issuance of an injunction under section 16 of the Clayton Act. We affirm the court's issuance of an injunction against the medical staff for violating section 1, an injunction that also benefits Weiss. However, we reverse the district court's grant of an injunction against the hospital for violating section 2 because we believe that that plaintiff has failed to adduce sufficient evidence to enable him to carry his burden of demonstrating that the hospital engaged in any willful behavior designed to acquire or maintain its monopoly power. Because of a problem with the jury charge we grant a partial new trial on the question of Weiss' professional competence and character, a factor relevant to the defendants' defenses to Weiss' section 1 damage claims. In addition, we affirm, as supported by the evidence, the district court's exoneration of various defendants on various claims. We then review the scope of the injunction issued by the district court and conclude that, given our substantive decisions on the questions of liability under sections 1 and 2, the district court should be given the opportunity to re-consider the appropriate scope of injunctive relief in the first instance. Part V contains a summary of our conclusions.
II. THE FACTS
A. Hospital Services in the York MSA
There are two providers of in-patient hospital services in the York MSA: York, which is run by M.D.s, and Memorial Hospital ("Memorial"), which is run by D.O.s. York is by far the larger of the two, with approximately 450 beds and 2,500 employees. Memorial has 160 beds.
In addition to York's overall market dominance, testimony at trial established that certain complex, highly technical "tertiary care"
B. Discrimination Against D.O.s at York
Prior to 1974, both York hospital's corporate charter and the bylaws of the York medical staff barred D.O.s from obtaining staff privileges at York. "Without staff privileges, a physician cannot admit, effectively follow, or treat patients at York Hospital." Weiss, 548 F.Supp. at 1053 (finding of fact No. 32). Consequently, whenever a patient of a D.O. wanted to go to York for treatment, either because the patient preferred the reputation and size of York over Memorial, or because the patient required tertiary care services that were available only at York, the treating D.O. had no choice but to refer the patient to an M.D. with staff privileges at York. Weiss, 548 F.Supp. at 1053 (finding of fact No. 33).
The evidence adduced at trial indicated several ways in which D.O.s were economically disadvantaged as a result of this discrimination. First, D.O.s lost fees directly when one of their patients was admitted for treatment at York. Obviously, if the patient required treatment that the D.O. was qualified to provide but could perform only at York, the D.O. lost the fees that would ordinarily be charged for those services. Moreover, even if the patient required services that the D.O. was not qualified to provide, the D.O. lost the fees for those non-specialized services provided to patients both before and after the specialized care that he was qualified to perform but which had to be performed in York Hospital by an M.D. It is primarily the loss of these latter fees, derived from monitoring a patient who is receiving tertiary care from a specialist, that economically disadvantaged general practice D.O.s, who were forced to refer patients needing tertiary care to a general practice M.D. with staff privileges at York.
D.O.s were also indirectly disadvantaged as the result of York's discriminatory policy. When patients of D.O.s were referred to M.D.s in order that they could be treated at York, they sometimes did not return to the referring D.O. after the treatment at York was completed, but instead remained in the care of the referred M.D. See Weiss, 548 F.Supp. at 1053 (finding of fact No. 35). Thus the referring D.O. lost the patient not just for purposes of the immediate treatment at York, but for purposes of
In 1974 York amended its corporate charter to allow osteopathic physicians to practice at York. Osteopaths were still barred from admission to York, however, because of the prohibition in the medical staff by-laws. Nevertheless, in early 1976, Weiss and another osteopath named Dr. Michael Zittle, both of whom were engaged in family practice in the York MSA, applied for staff privileges at York. Dr. Weiss informed representatives of the York medical staff that if York excluded him because of his osteopathic training he would institute legal action.
The York medical staff considered the applications and Weiss' threat of legal action, and in November of 1976 amended its bylaws to permit admission of osteopaths at York. Dr. Weiss' contends that the amendment of the bylaws was purely cosmetic, and that since 1976 the York medical staff has engaged in a deliberate covert policy of discrimination against osteopaths. In support of this contention Weiss offered evidence that York had a historical presumption in favor of admitting any M.D. who applied for staff privileges, regardless of the applicant's medical ability or social graces,
C. Staff Privileges Application Procedure
When a physician applies for staff privileges at York, the following procedure is customarily followed. After the applicant's background and reference information has been gathered, the chairman of the hospital department in which the applicant seeks privileges evaluates the application. In the Family Practice Department, to which Weiss applied, the department chairman selects a department credentials committee to assist the chairman in formulating the evaluation. Once the department makes a recommendation, the Medical Staff's Credentials Committee reviews the application and related file, including the (Family Practice) department's recommendation, and formulates its own recommendation to the Medical Staff Executive Committee. The Medical Staff Executive Committee independently reviews the application and related file and formulates a recommendation on the application to the hospital's Board of Directors.
The hospital Board of Directors then refers the application to its standing Medical Affairs Committee, which recommends a disposition of the application. Finally, based on the applicant's file and the various recommendations of the committees, the Board of Directors decides whether to accept or reject the application. If either the Medical Staff Executive Committee or the hospital's Board of Directors makes an adverse decision, the applicant is informed in writing. The applicant may, at that point, request and obtain (1) a written statement of the reasons for the recommendation or decision, and (2) the impanelling of a "judicial review" committee composed of physicians who have had no part in the consideration of the application to that point. The judicial review committee is authorized to hear testimony and receive other evidence to determine whether the adverse recommendation on the application was "in error, unreasonable, arbitrary, or capricious." The applicant is entitled to attend the hearing, to call witnesses and introduce evidence, to cross-examine and impeach witnesses, and otherwise to rebut adverse evidence.
D. Doctor Weiss' Application for Staff Privileges
In 1976 Doctors Weiss and Zittle applied for staff privileges in York's Family Practice Department. In accordance with the procedures outlined above, the Family Practice Department Credentials Committee and the chairman of the Family Practice Department considered the applications. On January 17, 1977, the department recommended that they be accepted. The Medical Staff Credentials Committee then reviewed the applications and also recommended acceptance. The Medical Staff Executive Committee, however, did not approve either application. Instead, it took the unusual step of deciding to conduct a further investigation.
On June 30, 1977, the hospital Board of Directors considered the recommendations of the various committees which had considered Weiss' and Zittle's applications. The Board voted to approve Zittle's application and deny Weiss' application. Notice of the Board's action was sent to Weiss the same day.
On February 28, 1978, the Medical Staff Credentials Committee voted to recommend again that Weiss' renewed application be accepted. However, on March 6, 1978, the Medical Staff Executive Committee again voted to recommend that the application be denied.
Weiss' application was next referred to the Medical Affairs Committee of the hospital's Board of Directors. This committee directed that the members of the Family Practice Department Credentials Committee, the Medical Staff Credentials Committee, and the Medical Staff Executive Committee meet informally to attempt to reach a consensus on Weiss' application. The members of these committees then met on March 20, 1978, and voted to recommend that Weiss' application be denied.
On April 21, 1978, York sent Weiss written notice of the April 19, 1978, unfavorable recommendation of the Medical Staff Executive Committee. Upon being advised of the decision of that Committee, Weiss requested and received a statement of reasons. Weiss' status as a D.O. rather than a M.D. was not one of the reasons cited by the Committee in its official statement of reasons. Weiss also requested an appeal to a "judicial review" committee as provided for in the hospital bylaws.
A "Judicial Review" Committee was impanelled
The hospital Board of Directors then held a special meeting at which presentations were made by counsel for Weiss and special counsel for the Hospital. On March 13, 1979, the Board voted to deny Weiss staff privileges.
III. PROCEDURAL HISTORY AND PROBLEMS
A. Before the District Court
On February 6, 1980, Weiss filed this suit in the United States District Court for the Middle District of Pennsylvania. The complaint named as defendants York Hospital, the York Hospital Medical and Dental Staff, and ten individual members of the York medical staff: the five physicians who in their capacity as members of the Medical Staff's Executive Committee voted on Dr. Weiss' application for privileges, and the five physicians who constituted the Judicial Review Committee that was specially impanelled to review the Executive Committee's recommendation that Weiss not be given staff privileges at York.
Weiss, 548 F.Supp. at 1060-62.
Weiss, 548 F.Supp. at 1061.
In addition to entering the injunction, the district court also entered the following "judgment on special verdict":
Weiss, 548 F.Supp. at 1062. On October 12, 1982, the defendants moved the district court to certify this "judgment on special verdict" as final pursuant to Fed.R.Civ.P. 54(b). Plaintiff opposed this motion for certification by memorandum filed October 27, 1982. On November 18, the district court granted the defendants' motion and entered the following order:
B. Appellate Jurisdiction
Three appeals have been filed in this case. The first is an appeal filed on October 28, 1982, by the hospital and staff from the district court's injunction which was entered on September 30, 1982. The second appeal is by the hospital, the staff, and the four individual defendants who were found liable to the plaintiffs under the Sherman Act and state law; this appeal was filed on December 9, 1982, from the "order and final judgment entered 11/18/82 and order entered 11/22/82 denying these defendants' motion for judgment notwithstanding verdict or for a new trial and all other orders, rulings and judgments of the court." The third appeal was filed on December 13, 1982, by the plaintiff. This appeal is denominated a "cross-appeal" and is from the "orders directing judgment in favor of certain defendants which became final on November 18, 1982."
The defendants' appeal from the grant of the injunction is authorized by 28 U.S.C. § 1292(a)(1) and therefore it is clearly before us.
1. The Defendants' December 9th Appeal
The December 9th appeal by the defendants purports to be from the "judgments" (other than the injunction) that resulted from the district court's September 30th "special verdict." However, because the trial was bifurcated and additional proceedings, including the determination of certain defenses and of damages, are yet to take place, most of these "judgments" (i.e., those not resulting in verdicts for the defendants) are not final within the meaning of 28 U.S.C. § 1291, see Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945) (a "final decision" for purposes of 28 U.S.C. § 1291 "is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment"); Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1321 (5th Cir.1976) ("a finding of `liability' in Phase I of a bifurcated trial is interlocutory"); see also Sun Shipbuilding & Dry Dock Co. v. Benefits Review Board, 535 F.2d 758, 760 (3d Cir.1976). Moreover, as to those judgments in defendants' favor, having prevailed, they cannot appeal. Therefore, it would appear that we have no jurisdiction to hear this appeal.
The defendants argue, however, that we have jurisdiction because of the November 18, 1982, order of the district court certifying the September 30, 1982, "judgment on special verdict" as final pursuant to Fed.R. Civ.P. 54(b).
The defendants' December 9th appeal must therefore be dismissed for two reasons. First, all of the final decisions that resulted from the September 30th "judgment on special verdict" were in favor of the defendants and the defendants cannot appeal decisions that they have won. Second, because additional portions of the bifurcated trial have not yet been held, all the "judgments" against the defendants arising out of the September 30th special verdict are non-final and therefore not appealable under 28 U.S.C. § 1291. Furthermore, these non-final "judgments" do not fall within any of the limited exceptions for interlocutory appeals.
Id. at 449 (emphasis in original; footnotes omitted). See also Allegheny County Sanitary Authority v. U.S.E.P.A., 732 F.2d 1167, 1173 (3d Cir.1984).
In applying the Kershner doctrine to this situation, we understand that, to the extent that there are factual or legal issues that must be resolved in ruling on the appealable orders, our holdings on those issues will be the law of the case and control in possible future appeals. However where, as here, there are significant issues involved in the non-appealable orders which are (or may be) different from issues involved in the appealable orders, we do not have pendent appellate jurisdiction to review those non-appealable orders. For example, while we conclude, infra text accompanying notes 30-32, that there is no requirement that each member of the plaintiff class must make a demand for staff privileges in order for the class to qualify for injunctive relief pursuant to section 16, we specifically reserve the question whether a demand is required in order to recover treble damages pursuant to section 4. This latter issue is not "inextricably bound" with the appeal from the injunction and therefore we may not exercise pendent appellate jurisdiction to decide it. Similarly none of the issues involved in the non-final state law claims are inextricably bound up with the appeal from the injunction or the appeal for the dismissed state law claims and therefore these issues are also not appealable. In sum, the Kershner doctrine does not save the defendants' December 9th appeal.
2. The Plaintiffs' December 13th "Cross-Appeal"
The plaintiff appealed from a number of final judgments against the plaintiff and the plaintiff class, in the December 13th cross-appeal. As to plaintiff Weiss there are final judgments:
As to the plaintiff class there are final judgments:
Since the district court's order certifying the "special verdict" pursuant to Rule 54(b) does not distinguish what decisions have been certified, we assume that the court intended to certify every final judgment that resulted from the special verdict, including those against the plaintiff and the plaintiff class. It would therefore seem that, because the plaintiff filed his notice of
There is, however, one potential problem of jurisdiction over the plaintiffs' cross-appeal. Rule 54(b) certification was sought by the defendants, and actively opposed by the plaintiff. The district court granted the certification, but its order did not indicate which "judgments" it intended to certify. Thus it may be that the certification brings up only those claims on which a final decision was entered against the defendants. But all of the potentially appealable decisions in this case are against the plaintiff. Apparently the defendants (and the district court) thought that the Rule 54(b) certification would make the claims on which the plaintiff won on the liability issue, but for which the question of damages had not yet been tried, appealable, a belief we have shown to be erroneous. Had the defendants realized that their Rule 54(b) certification motion would accomplish nothing for them, but might result in bringing up for review judgments in their favor which plaintiffs had not initially sought to have have reviewed at that stage, they might not have sought a Rule 54(b) certification. The question, then, is whether the combination of the "blanket" Rule 54(b) certification issued at the defendant's request and over the plaintiffs' opposition, and the plaintiffs' cross-appeal, are sufficient to bring before us the final decisions against the plaintiffs.
We have been unable to find any cases or treatises that discuss the efficacy of a Rule 54(b) certification issued at the behest of a party against whom there are no final judgments, or by the district court sua sponte. We nevertheless conclude that the policy of Rule 54(b) to permit immediate appeals from final decisions in complex litigation renders the district court's Rule 54(b) certification efficacious under the circumstances of this case, i.e., where: (1) the plaintiffs' appeal is from several final decisions; (2) the parties have briefed and argued the legal questions already; and (3) we have to review the propriety of the injunction which is based on the same factual circumstances as the various final judgments against the plaintiffs and involves most of the same legal issues. The plaintiffs' cross-appeal is thus properly before us.
C. Class Certification
The district court granted the plaintiff's motion for class certification, determining that the action could be maintained pursuant to Fed.R.Civ.P. 23(b)(2) on behalf of a class of all osteopathic physicians practicing medicine in the York MSA. The defendants attack the class certification on several grounds.
1. The Necessity of Proof of Demand
The defendants contend that the law of this Circuit is "clear" that where a claim is based upon an unlawful refusal by defendant to deal with the plaintiff, that plaintiff — and hence each class member — must allege and prove a demand which the defendant rejected. In support of this proposition the defendants cite Mazus v. Dept. of Transportation, Commonwealth of Pa., 629 F.2d 870 (3d Cir.1980), cert. denied, 449 U.S. 1126, 101 S.Ct. 945, 67 L.Ed.2d 113 (1981), and Lawlor v. Nat'l Screen Service Corp., 270 F.2d 146, 154 (3d Cir.1959), cert. denied, 362 U.S. 922, 80 S.Ct. 676, 4 L.Ed.2d 742 (1960). But we are not here faced, as in those cases, with the question whether each member of the class must have made a demand and have been rejected in order to obtain damages from the defendants (that question is posed by the dismissed appeals). We thus find these cases to be inapposite to the limited issue before us on these appeals — i.e., whether the law requires as a prerequisite to injunctive relief that each member of the (b)(2) class have had an application for staff privileges rejected by the hospital.
A private antitrust claim has two parts. A plaintiff must demonstrate "a violation of the antitrust laws" — in this case sections 1 and 2 of the Sherman Act — and he must also prove the right to either the treble damage remedy given by section 4 of the Clayton Act or the equitable remedy afforded by section 16 of that Act. See Mid-West Paper Products Co. v. Continental Group, Inc., 596 F.2d 573 (3d Cir.1979). Cf. Double H Plastics, Inc. v. Sonoco Products Co., 732 F.2d 351 (3d Cir.1984) (Gibbons, J., dissenting). In a case challenging market exclusion under section 1 of the Sherman Act, the formation of a conspiracy with the requisite exclusionary purpose forms the essence of the violation. See generally Silver v. New York Stock Exchange, 373 U.S. 341, 347, 83 S.Ct. 1246, 1251, 10 L.Ed.2d 389 (1963); Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945); American Medical Association v. United States, 317 U.S. 519, 63 S.Ct. 326, 87 L.Ed. 434 (1943). Similarly, under section 2 of the Act, it is the willful acquisition or maintenance of monopoly power that is the essence of the offense. See generally Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973). United States v. Terminal Railroad Ass'n of St. Louis, 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed.2d 810 (1912). In both instances, the violation is based on the defendant's conduct, rather than on the effect on the plaintiff. On the question of appropriate relief under section 4 or 16, however, effect on the plaintiff becomes critical. This is demonstrated by a comparison of the language of the two sections and the caselaw thereunder.
Section 4 of the Clayton Act, 15 U.S.C. § 15, provides:
As in the case of common-law torts, the right to antitrust damages is limited to those plaintiffs who can demonstrate a causal relationship between the defendants' unlawful conduct and their economic injury. See Perkins v. Standard Oil Co. of California, 395 U.S. 642, 648-49, 89 S.Ct. 1871, 1874-1875, 23 L.Ed.2d 599 (1969).
In contrast to section 4, section 16 contains no requirement that a plaintiff prove actual injury to his business or property caused by the antitrust violation. Instead, section 16 authorizes injunctive relief for any person who demonstrates "threatened loss or damage by a violation of the antitrust laws." Thus it is generally said that section 16 imposes a lower threshold "standing" requirement on a plaintiff than does section 4. See, e.g., Bogus v. American Speech & Hearing Ass'n, 582 F.2d 277, 288 (3d Cir.1978); L. Sullivan, Handbook of the Law of Antitrust § 247, at 772 (1977). The courts have applied section 16 "more expansively, both because its language is less restrictive than that of section 4, ... and because the injunctive remedy is a more flexible and adaptable tool for enforcing the antitrust laws than the damage remedy." Bogus, 582 F.2d at 288-89; see Hawaii v. Standard Oil Co. of Calif., 405 U.S. 251, 261-62, 92 S.Ct. 885, 890-891, 31 L.Ed.2d 184 (1972); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 131, 89 S.Ct. 1562, 1580, 23 L.Ed.2d 129 (1969).
In Zenith Radio Corp., 395 U.S. at 130, 89 S.Ct. at 1580, the Supreme Court reversed a court of appeals decision setting aside the district court's grant of injunctive relief stating:
Zenith, 395 U.S. at 130-131, 89 S.Ct. at 1580 (footnote omitted). See also Mid-West Paper Products Co. v. Continental Group, Inc., 596 F.2d 573, 589-94 (3d Cir.1979) (court held that the Illinois Brick direct purchaser rule did not preclude an indirect purchaser from obtaining injunctive relief against price fixing under section 16 of the Clayton Act.)
In view of the differences between sections 4 and 16, especially as explicated in Zenith, we conclude that the question whether a defendant has violated sections 1 and/or 2 of the Sherman Act is independent of the question whether each class member must have made a "demand" for
We therefore hold that where the plaintiff class is a (b)(2) class — i.e., one that seeks primarily injunctive relief — a demand by each member of the class is not a prerequisite to injunctive relief, at least where the plaintiffs have established that the denial of a physician's application for staff privileges is injurious to the physician's professional reputation.
2. The Requirements of Fed.R.Civ.P. 23
As we noted above, the district court, pursuant to Fed.R.Civ.P. 23, certified Weiss as the representative of the class of all osteopathic physicians in the York MSA. The defendants challenge that certification on two grounds: first that the plaintiff and plaintiff class do not satisfy the four threshold requirements for class action certification contained in Rule 23(a), and second that the district court improperly certified the plaintiff class as (b)(2) class. We address these contentions in turn.
a. Rule 23(a)
Fed.R.Civ.P. 23(a) contains the threshold requirements for the maintenance of any type of class action. The Rule provides:
For the reasons that follow, we conclude that the plaintiff class in this case satisfied the four requirements of Rule 23(a).
The first requirement is that the class must be so numerous that joinder of all
In most cases where a plaintiff seeks injunctive relief against discriminatory practices by a defendant, the defendant will not be prejudiced if the plaintiff proceeds on a class action basis, as opposed to an individual basis, because the requested relief generally will benefit not only the claimant but all other persons subject to the practice under attack. 7 C. Wright & A. Miller, Federal Practice & Procedure § 1771, at 663-64 (1972). A judicial determination that a particular practice infringes upon protected rights and is therefore invalid will prevent its application by the defendant against many persons not before the court. Thus rigorous application of the numerosity requirement would not, as the district court noted, appear to be warranted. Also supporting this view is the fact that, as this case demonstrates, and as the district court observed, generally speaking, individual interest in pursuing litigation where the relief sought is primarily injunctive will be minimal. Id. Weiss demonstrated an obvious commitment vigorously to pursue the antitrust claim against the defendants. This commitment apparently did not escape the other D.O.s in the York MSA because no D.O. sought to intervene in the lawsuit or otherwise challenge Weiss' leadership.
Given our conclusion that the interests of the plaintiff class and the interests of the defendants will not be affected significantly by permitting Weiss to maintain this class action, we agree with the district court that a strict application of the numerosity requirement is not required here. Consequently, the district court did not abuse its discretion in concluding that the class of 92 D.O.s who work in the York MSA was sufficiently numerous to satisfy the requirements of Rule 23(a)(1). Of course, 92 class members might be enough in any event.
Rule 23(a)(2) requires that there be questions of law or fact common to the class, although not all questions of law or
Defendants also argue that Weiss' claims are not typical of the class. Rule 23(a)(3) requires that the claims or defenses of the representative parties be typical of the claims or defenses of the class. The meaning of this requirement has historically been somewhat elusive.
Defendants argue that General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) requires the conclusion that plaintiffs' claims are atypical of the class' claims:
Defendants' Brief at 26. This argument fails for two reasons. First, the Supreme Court in Falcon did not hold that the plaintiff could not represent the class; the Court merely held that the requirements of Rule 23(a) are not waivable in a Title VII case, and therefore that the plaintiff had to make the required presentation demonstrating that he satisfied the requirements of that rule.
(iv) Adequacy of Representation
The fourth and final part of the Rule 23(a) test requires that the plaintiff must adequately represent the interests of the class.
Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239, 247 (3d Cir.), cert. denied, 421 U.S. 1011, 95 S.Ct. 2415, 44 L.Ed.2d 679 (1975). The quality and experience of plaintiff's counsel is conceded by the defendants. In addition, Weiss testified before the district court that he was willing and able (both financially and otherwise) to pursue this litigation, and that he could perceive no conflict of interest between himself and any class member. The district court concluded that Weiss would fairly and adequately represent the class. We agree and therefore conclude that the requirements of subsection (a)(4) have also been satisfied.
b. Rule 23(b)(2)
The defendants also challenge the propriety of the district court's certification of a (b)(2) plaintiff class;
D. The Vicinage Requirement Of 28 U.S.C. § 1393(a)
The final preliminary issue is the defendants' contention that the district court erred in holding the trial in this case at the Lewisburg/Williamsport courthouse rather than the Harrisburg courthouse.
Unlike numerous districts, the Middle District of Pennsylvania has not been subdivided by Congress into divisions. The Middle District has, however, been divided into a number of subdivisions by local court rule. All the defendants in this case reside in the Harrisburg subdivision, and they contend that section 1393(a) gives them the right to be tried there,
Section 1393(a) does provide that a defendant must be tried in the division of the district court wherein he resides; however, the statute only applies where the "divisions" have been created by legislative action. See Jenner v. Murray, 32 F.2d 625 (5th Cir.1929) (construing predecessor statute to present section 1393); Patrick Jobbing Co. v. Globe & Rutgers Fire Ins. Co., 21 F.2d 106 (W.D.Va.1927) (same). The Harrisburg division involved in this case was created by court rule not by legislative action. A federal rule of civil procedure promulgated by the Supreme Court cannot and does not affect venue. 1 J. Moore, Moore's Federal Practice ¶ 0.143, at 1464 (2d ed. 1984). A fortiori a local district court rule is similarly limited. See id. Because the Middle District of Pennsylvania has no legislatively created divisions, see 28 U.S.C. § 118, section 1393's venue provisions are irrelevant to trials conducted there, and the defendants' vicinage claim must be rejected.
IV. THE SHERMAN ACT CLAIMS
We now turn to the substantive-law questions presented by this appeal. In part A of this section, we deal with the appeal from the district court's conclusion that the medical staff is liable to the class under section 1 of the Sherman Act; in part B, we discuss the hospital's appeal from the finding of liability against it under section 2 of the Sherman Act; and in part C, we review the propriety of the injunction issued against both the medical staff and the hospital.
A. Section 1 of the Sherman Act
In order to establish a violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1982), a plaintiff must establish three elements: (1) a contract, combination, or conspiracy; (2) restraint of trade; and (3) an effect on interstate commerce. Each of these three elements has been the subject of extensive analysis by the courts, and we now turn to a discussion of that caselaw and its application to the facts of this case, taking the elements up in turn.
1. Proof of an Agreement: Is There a Sufficient Number of Conspirators?
In order to establish a violation of section 1, a plaintiff must prove that two or more distinct entities agreed to take action against the plaintiff. Before the district court, Weiss contended that the hospital and its medical staff were legally distinct entities and therefore capable of conspiring in violation of section 1. He also asserted that the doctors who joined together to form the medical staff were separate economic entities who competed against each other so that, as a matter of law, the medical staff was a "combination" of doctors within the meaning of section 1. Finally, Weiss argued that even if the individual doctors who made up York's medical staff were deemed by the court to be the equivalent of "officers or employees" of the hospital and therefore ordinarily not capable of conspiring with the hospital, nevertheless the doctors were acting for their own benefit in discriminating against osteopaths, and therefore fell within an exception to the ordinary rule that "officers or employees of the same firm do not provide the plurality of actors imperative for a § 1 conspiracy." Copperweld Corp. v. Independence Tube Corp., ___ U.S. ___, 104 S.Ct. 2731, 2741, 81 L.Ed.2d 628 (1984).
The defendants countered that York and its medical staff were legally one entity and therefore incapable of conspiring. In addition the defendants asserted that the individual doctors who made up the medical staff were the equivalent of "employees or officers" of the hospital and hence legally incapable of conspiring with the hospital. Finally the defendants asserted that they had not discriminated against osteopaths and therefore that the putative exception to the general rule did not apply in this case.
The district court concluded, and instructed the jury, that the medical staff was an "unincorporated division" of the hospital, and as such the two were legally a "single entity" incapable of conspiring. In addition, the court instructed the jury that the hospital, as a corporation, could act only through its "officers and agents," and that in proving that York had so acted, the plaintiffs had not shown the existence of a "contract, combination ... or conspiracy."
In response to these instructions, the jury answered the following special verdict question in the affirmative:
App. at 6247a. However, when requested by special verdict question number 13 to check the names of the defendants who so conspired, the jury checked only the single name: "York Hospital Medical and Dental Staff."
Weiss, 548 F.Supp. at 1051 (finding of fact No. 8).
The defendants appeal the district court's finding that there was a "conspiracy." They note that all the individual defendants and the hospital itself were exonerated from liability under section 1, and that because "there is no evidence in the record identifying any possible `co-conspirator'" other than the individual defendants and the hospital, the finding that the medical staff engaged in a "conspiracy" is erroneous.
We agree with the plaintiffs that, as a matter of law, the medical staff is a combination of individual doctors and therefore that any action taken by the medical staff satisfies the "contract, combination, or conspiracy" requirement of section 1. Any error created by the district court's jury charge on the requirements for a "conspiracy," however, was harmless because the jury found that a conspiracy did exist. In addition, because the medical staff itself is a combination as a matter of law, we conclude that the absence of evidence of any other co-conspirator(s) is irrelevant. We do, however, agree with the
Antitrust policy requires the courts to seek the economic substance of an arrangement, not merely its form. Copperweld Corp. v. Independence Tube Corp., ___ U.S. ___, 104 S.Ct. 2731, 2738, 2739-40, 2744, 81 L.Ed.2d 628 (1984); United States v. Sealy, Inc., 388 U.S. 350, 353, 87 S.Ct. 1847, 1850, 18 L.Ed.2d 1238 (1967); United States v. Yellow Cab Co., 332 U.S. 218, 227-228, 67 S.Ct. 1560, 1565-1566, 91 L.Ed. 2010 (1947); Appalachian Coals, Inc. v. United States, 288 U.S. 344, 360-61, 376-77, 53 S.Ct. 471, 474-475, 480, 77 L.Ed. 825 (1933).
In the past, the Supreme Court has had occasion to address the problems created by cooperative ventures among otherwise competing entities in a single market. See Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963); Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945). Both the AP and NYSE are organizations which serve an economically useful purpose: the AP allows smaller newspapers to combine their resources for the purpose of collecting, assembling, and distributing news; NYSE provides an organized market for the purchase and sale of securities. Yet in both cases, the fact that the defendant organization was a combination of otherwise competing entities was deemed sufficient to satisfy the "contract, combination, ... or conspiracy" requirement of section 1.
On the basis of these cases, we believe that the actions of the York medical staff are the actions of a combination of the individual doctors who make it up. In substance, the medical staff is a group of individual doctors in competition with each other and with other physicians in the York MSA, who have organized to regulate the provision of medical care at York hospital. Where such associations exist, their actions are subject to scrutiny under section 1 of the Sherman Act in order to insure that their members do not abuse otherwise legitimate organizations to secure an unfair advantage over their competitors.
The foregoing summary does not, however, end our discussion on this point, for we must consider whether errors in the district court's charge harmed any of the parties. The district court instructed the jury that "York Hospital and the Medical and Dental Staff of York Hospital must be regarded by you as a matter of law as a single entity which cannot conspire with itself." App. at 5685a. To the extent that this instruction indicates that the medical staff must be considered a single entity for antitrust purposes, it is at variance with our holding that the medical staff is a combination of the individual doctors who make it up. The plaintiffs, however, were not harmed by this error. In answer to the special verdict questions propounded by the trial judge the jury found that a conspiracy did exist, but that the medical staff was the only defendant that participated. See supra note 45 and accompanying text. Since the legal result of this finding is identical to that of our conclusion that the medical staff is a "combination," the district court's error was harmless.
Finally, we deal with the plaintiff's assertion that the district court erred in charging the jury that the hospital could not conspire with its medical staff. The district court found that the medical staff was an unincorporated division of the hospital, and as such the court determined that the two could not conspire. Although we do
2. Proof of Restraint of Trade
Read literally, Section 1 prohibits every agreement "in restraint of trade." In United States v. Joint Traffic Ass'n, 171 U.S. 505, 19 S.Ct. 25, 43 L.Ed. 259 (1898), the Supreme Court recognized that Congress could not have intended a literal interpretation of the word "every," and since Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911), courts have analyzed most restraints under the so-called "rule of reason." As its name suggests, the rule of reason requires the factfinder to decide whether, under all the circumstances of the case, the restrictive practice imposes an unreasonable restraint on competition.
The courts have also, however, applied a rule of per se illegality to certain types of business practices. The development of
b. Is Defendants' Exclusionary Conduct the Equivalent of a Concerted Refusal to Deal ("Boycott")?
The jury found that the defendants had engaged in a policy of discrimination against Dr. Weiss and the other D.O.s in the York MSA by applying unfair, unequal, and unreasonable procedures in reviewing their applications. Weiss, 548 F.Supp. at 1051 (findings of fact Nos. 5-8). In addition, the district court concluded that this unfair, unreasonable, and unequal treatment "could reasonably be anticipated [by the defendants] to cause osteopathic physicians to refrain from applying for staff privileges at the York Hospital." Weiss, 548 F.Supp. at 1053 (finding of fact No. 31).
In this case York is a provider of hospital services; for the purpose of our analysis, the equivalent of the manufacturer in the example of a classical boycott. Similarly, the M.D.s are the equivalent of the retailers in the example, in the sense that physicians require access to a hospital in order to effectively treat patients. The difficulty with this analogy, at first blush, is that there is no evidence that the M.D.s have used coercion for the purpose of inducing York to exclude their competitors, the D.O.s. Upon closer analysis, however, the absence of coercion is irrelevant. A boycott is not illegal under the antitrust laws because of opposition to the use of coercion, but because it involves the use by businesses of an existing relationship with a supplier to exclude competition. In the paradigm case, coercion is necessary to induce the supplier not to deal with the competitors. In this case, because of the M.D.s' control over York's admission decisions, no coercion is necessary. The underlying antitrust violation is the same: a group of firms at one level of distribution, i.e., the doctors' level, have used their existing relationship with a supplier to exclude their competitors from dealing with the supplier.
We recognize that the facts of this case do not precisely fit into the mold of the
The Medical Staff is, however, entitled to exclude individual doctors, including osteopaths, on the basis of their lack of professional competence or unprofessional conduct. See infra note 60. If York's policy toward D.O.'s could be viewed as a form of industry self-regulation of this type, the rule of reason, rather than a per se rule, would be applicable. See generally L. Sullivan, Handbook of the Law of Antitrust §§ 86-88 (1977).
Congruent with the foregoing discussion, the Supreme Court has adopted an exception to application of the per se rule of illegality where the case involves a learned profession and where the restriction is justified on "public service or ethical norm" grounds. Thus unlike most cases where characterization of some activity as a classical boycott ends the inquiry, here, because the medical profession is involved, the rule of reason analysis may still control, as a "built-in" exception. We now turn to a discussion of this potential "escape hatch" to see if it can extricate the defendants from the "cut" of the per se rule.
c. The "Learned Profession" Exception
In Goldfarb v. Virginia State Bar, 421 U.S. 773, 788 n. 17, 95 S.Ct. 2004, 2013 n. 17, 44 L.Ed.2d 572 (1975), in which the Supreme Court made clear that the medical profession is not exempt from the antitrust laws, the Court stated that the "public service aspect, and other features of the professions, may require that a particular practice, which could properly be viewed as a violation of the Sherman Act in another context, be treated differently." See also National Society of Professional Engineers v. United States, 435 U.S. 679, 696, 98 S.Ct. 1355, 1367, 55 L.Ed.2d 637 (1978). In Arizona v. Maricopa County Medical Society, 457 U.S. 332, 348-49, 102 S.Ct. 2466, 2475-2476, 73 L.Ed.2d 48 (1982), the Court partially explained this exception by stating that conduct which is normally subject to per se condemnation under section 1 will instead be subject to rule of reason analysis where the challenged conduct is "premised on public service or ethical norms." Id.
In this case the defendants have offered no "public service or ethical norm" rationale for their discriminatory treatment of D.O.s. Indeed, their defense at trial was that they did not discriminate against D.O.s. Since the jury believed otherwise, we conclude that the per se rule governs this case,
d. The District Court's Charge and the Sherman Act Section 1 Verdict as to Weiss
As we have explained, the case was submitted to the jury on special interrogatories, and, based thereon, the district court made certain findings and granted injunctive relief. Because of our rulings on appealability, see supra Part III B, we ultimately review here, in terms of the plaintiffs' section 1 claims, only the injunctive order. We conclude that a per se analysis, coupled with the district court's findings, provide the substantive basis for the issuance of an injunction under section 1 of the Sherman Act in favor of the class and that, as a matter of law, there is no grounds for distinguishing Weiss and the class under section 1 for purposes of injunctive relief. The district court entered an injunction in favor of both Weiss and the class, but held that Weiss was entitled to relief under section two. Although we reverse that holding, see infra part IV.B., we conclude that Weiss was entitled to injunctive relief under section 1.
The question of whether Weiss or any class member is entitled to damages, however, is in no way settled by our conclusion. In the trial on the question of damages, the defendants may raise the defenses relating to individual osteopaths, including the demand requirement defense as to members of the class, see supra notes 30, 32, and the defense of lack of professional competence or character as to both Weiss and the class. This is so even though, as we have explained, no such defense has been interposed as to osteopaths generally, thus facilitating our disposition of the injunctive relief claim under section 16. See supra at Part III C 1.
We must also address the question whether the professional competence and character issue has already been resolved by the jury's verdict with regard to Weiss.
App. at 5690a-5695a. Apparently applying this instruction, the jury concluded that the defendants' conduct constituted an "unreasonable restraint" as to the class, but was not an "unreasonable restraint" as to Weiss. Weiss, 548 F.Supp. at 1051-52 (findings of fact Nos. 7 & 9). Based on these answers, the district court concluded that the medical staff was liable for violating Sherman Act section 1 as to the class but not as to Weiss.
This conclusion is flawed, however, because the instruction was either incorrect or misleading. The instruction was incorrect to the extent that the defendants' conduct in discriminating against D.O.s as a class is subject to the per se rule of illegality, hence it was irrelevant whether the defendants' conduct was an unreasonable restraint as to Weiss (or the class). In that respect the question should not have been submitted to the jury. See Jefferson Parish Hosp. Dist. No. 2 v. Hyde, ___ U.S. ___, 104 S.Ct. 1551, 1556, 80 L.Ed.2d 2 (1984); Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49-50, 97 S.Ct. 2549, 2557-2558, 53 L.Ed.2d 568 (1977). To the extent that the charge posed to the jury the question whether it was not unreasonable to deny Weiss admission because he lacked professional competence or character, it was confusing, because the court did not properly define the relationship between the per se rule for concerted refusals to deal and the learned profession exception. The question of Weiss' professional competence or character, however, was neither properly nor squarely presented to the jury. The district court did not reach any conclusion arguably based on that question.
3. Substantiality of Effect on Interstate Commerce
In order to violate section 1 of the Sherman Act, a defendant's actions must relate to trade or commerce "among the several States."
The district court focused its evidentiary inquiry on the effect on interstate commerce of the defendants' conduct and found the requisite "substantial and adverse" effect.
The defendants' argument is premised primarily on a district court opinion, Cardio-Medical Associates v. Crozer-Chester Medical Center, 552 F.Supp. 1170 (E.D.Pa. 1982). Since the time of oral argument in this case, however, this court reversed that district court's opinion and held that:
Cardio-Medical Assocs. Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir.1983). Consequently, the district court was correct in focusing on the effect on interstate commerce of the defendants' activities.
B. Section 2 of the Sherman Act
Section 2 reads in pertinent part:
15 U.S.C. § 2. The test for determining whether a defendant has monopolized in violation of section 2 has been articulated by the Supreme Court as: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-571, 86 S.Ct. 1698, 1703-1704, 16 L.Ed.2d 778 (1966). See also Borough of Lansdale v. Philadelphia Electric Co., 692 F.2d 307, 311 (3d Cir.1982).
York contends that the jury incorrectly concluded that the appropriate market was inpatient health care services provided by hospitals and their staffs; that it incorrectly concluded that York had monopoly power in that market; and that it incorrectly concluded that York acquired or maintained that power by means of "willful" conduct. We conclude that, although there was sufficient evidence to support the jury's conclusion as to relevant market and monopoly power, there was no evidence of willful conduct designed to acquire or maintain monopoly power, and therefore the judgment against York under section 2 must be reversed.
(1) Relevant Market
In order to define the relevant market for purposes of a section 2 claim, it is necessary to examine two aspects of that market: the product market and geographic market. York does not challenge the jury's finding that the relevant geographic market is the York MSA. York does, however, challenge the jury's finding on the product market. In answer to special verdict question number 14, the jury found that the relevant product market was "inpatient hospital health care services supplied by hospitals and their medical staffs." Weiss, 548 F.Supp. at 1052 (finding of fact No. 10). Market definition is a question of fact, Borough of Lansdale, 692 F.2d at 311-12, and we therefore must affirm the jury's conclusion unless the record is devoid of evidence upon which the jury might reasonably base its conclusion. See Dawson v. Chrysler Corp., 630 F.2d 950, 959 (3d Cir.1980), cert. denied, 450 U.S. 959, 101 S.Ct. 1418, 67 L.Ed.2d 383 (1981); Columbia Metal Culvert Co., Inc. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 28 (3d Cir.), cert. denied, 439 U.S. 876, 99 S.Ct. 214, 58 L.Ed.2d 190 (1978); Denneny v. Siegel, 407 F.2d 433, 439 (3d Cir.1969).
In defining a market in an antitrust case, the fact finder must take into account the realities of competition. See United States v. Grinnell Corp., 384 U.S. 563, 572-73, 86 S.Ct. 1698, 1704-1705, 16 L.Ed.2d 778 (1966); United States v. Philadelphia National Bank, 374 U.S. 321, 356-57, 83 S.Ct. 1715, 1737-1738, 10 L.Ed.2d 915 (1963); see also Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Since the purpose of market definition is to determine whether market power exists, see L. Sullivan, Handbook of the Law of Antitrust § 12 (1977), market definitions must account for all factors affecting the ability of the alleged monopolist to raise prices or restrict competition, but need not account for other factors which might affect an economist's definition of a product market.
Defendants argue that "inpatient health care services" is not a single market, but an amalgam of numerous markets for individual types of services. Where, however, several goods or services are generally offered by the same providers, it is not unreasonable for a jury to conclude that the market for antitrust purposes includes all of those goods or services. See Grinnell Corp., 384 U.S. at 572, 86 S.Ct. at 1704;
(2) Monopoly Power.
Monopoly power is defined as the ability to control price in or to exclude or restrict competition from a relevant geographic market. United States v. Grinnell Corp., 384 U.S. 563, 571, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966); United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391, 76 S.Ct. 994, 1005, 100 L.Ed. 1264 (1956); Columbia Metal Culvert Co., Inc. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 26 (3d Cir.1978), cert. denied, 439 U.S. 876, 99 S.Ct. 214, 58 L.Ed.2d 190 (1978).
A primary criterion used to assess the existence of monopoly power is the defendant's market share. See L. Sullivan, Handbook of the Law of Antitrust § 22 (1977).
3. Willful Acquisition or Maintenance of Monopoly Power
In addition to proving monopoly power in the relevant market, an antitrust plaintiff must also show that the defendant willfully acquired or maintained that power. United States v. Grinnell Corp., 384 U.S. 563,
On this point, the uncontradicted evidence of both the plaintiffs' and the defendants' experts was that York, like any hospital, would maximize its revenues by giving staff privileges to every qualified doctor who applied. Hospitals are in the business of providing facilities (rooms and equipment) and support staff (nurses, administrators, etc.). These resources are fixed in the short run, and the hospital maximizes its revenues by encouraging competition for its hospital beds and operating rooms. Since only physicians with staff privileges can admit and treat patients, York can maximize competition for its facilities by granting staff privileges to every qualified doctor who applies. Excluding D.O.s. on the other hand, is likely to weaken York's monopoly position in the long run, since a potential rival, such as Memorial Hospital, would have an incentive to provide competing services for the D.O.s excluded from York.
Recognizing this problem with their section 2 claim, plaintiffs assert that, although the hospital itself has no economic reason to discriminate against D.O.s, the hospital's medical staff, which as a matter of law is a single entity with the hospital, see supra text preceding note 51, is a combination of M.D.s, each of whom have a strong economic motive to exclude D.O.s. Thus, the plaintiffs argue, we should ascribe the anti-competitive motives of the individual M.D.s to the hospital.
There are two problems with this argument. First, the fact that the individual M.D.s who make up the medical staff have parallel anticompetitive motives was the reason we concluded that, as a matter of law, the medical staff is a combination of doctors within the meaning of section 1. We believe, however, that it would be improper to attribute the economic motive of the M.D.s' to York because the M.D.'s motive is to restrict competition in a market in which York is not involved, and because in fact York's economic interest is directly contradictory to that of the individual doctors. Second, even if the anticompetitive motive of the individual doctors could be attributed to the hospital, the actions taken in furtherance of that motive have nothing to do with the maintenance of York's monopoly position; restricting the access of D.O.s to York will not aid York in maintaining that monopoly power.
In sum, we conclude that there is no evidence that York "willfully" maintained its monopoly position as the dominant provider of inpatient health care services in the York MSA. For this reason we reverse the district court's finding that York violated section 2 of the Sherman Act.
C. The Propriety and Scope of the Injunction under Section 16 of the Clayton Act
The final issue we must confront is the propriety and scope of the injunction granted by the district court. The defendants
Section 16 of the Clayton Act,
The jury found that both Weiss and the class had been injured by discriminatory admission practices at York,
The defendants suggest two reasons for their contention that the jury's findings that Weiss and the class were injured by the defendants' conduct are unsupported by any evidence in the record of this case. First, they claim that there is no evidence on which the jury could have based its conclusion that the medical staff discriminated against D.O.s, and therefore, if the staff did not discriminate against D.O.s, then the D.O.s could not have been injured by the staff. We have already concluded, however, that there was substantial evidence supporting the jury's conclusion of discrimination, and therefore we reject the defendants' contrary contention. Second, defendants suggest that primary care physicians, such as Weiss and the majority of the D.O. class members, do not need hospital admitting and attending privileges because they can provide their services solely by "visiting" their patients at York, and that therefore the plaintiffs were not injured by the alleged discriminatory conduct in denying them staff privileges.
Plaintiffs' Brief at 57 n. 25.
Because the district court's conclusion that Weiss and the class were threatened with significant injury due to the discriminatory treatment of D.O.s at York is supported by the evidence, we conclude that the court did not abuse its discretion in granting injunctive relief pursuant to section 16.
The injunction issued by the district court in this case was tailored to prevent possible future harm to Weiss and the class resulting from further discriminatory practices at York:
Weiss, 548 F.Supp. at 1061. Our scope of review over questions of the scope of an injunction issued pursuant to section 16 is abuse of discretion, William Goldman Theatres, Inc. v. Loew's, Inc., 164 F.2d 1021 (3d Cir.), cert. denied, 334 U.S. 811, 68 S.Ct. 1016, 92 L.Ed. 1742 (1948), and it appears that the injunction entered in this case falls within allowable discretion. However, given the fact that we have modified the district court's conclusions concerning the liability of the defendants under sections 1 and 2, we believe that the prudent course is to remand to the district court to reconsider the proper scope of injunctive relief given our decision on the sections 1 and 2 claims. Accordingly, we remand the question to the district court so that it may consider whether or not the injunction should be modified. We do, however, note our concern that certain phraseology within the order might be subject to overbroad interpretation ("full ... access ... to the facilities"), though we
In summary, we reach the following conclusions. First, we find that the district court's decision that the medical staff violated Sherman Act section 1 as to the plaintiff class is supported by sufficient evidence, and we therefore will affirm the district court on this point. Since we also conclude that, as a matter of law, there was no distinction between Weiss and the class for purposes of injunctive relief under section 1, we hold that Weiss was entitled to the same relief as the class on that claim. Second, since there was no evidence adduced at trial that York engaged in any willful conduct designed to acquire or maintain its monopoly power, we will reverse the district court's finding of liability in favor of Weiss and the class and against York on section 2 grounds. Third, we also agree that the issuance of an injunction by the district court in this case was proper. Although the scope of the injunction also appears to fall within the district court's discretion, given our modification of the district court's determinations on the liability of the defendants under Sherman Act sections 1 and 2, we will remand the case to the district court for reconsideration of the scope of the injunction in light of our opinion here.
On remand, the court will also have to try the damage claims, affording the defendants the opportunity to raise the defenses that members of the class did not make demand for staff privileges, and that any such application, including that of Weiss, was properly refused because of the doctor's lack of professional competence or character. See supra note 18. To the extent that the district court may have addressed the latter question with respect to Weiss in its findings and judgment, we grant a partial new trial. Finally, although we did not address the question in the text, we have concluded, see supra note 29, that the district court's decisions absolving various of the defendants on various of the claims, which decisions are based on the jury's answers to the special verdict questions, are supported by the evidence, and we therefore will affirm them.
Osteopathic physicians signify their degree as D.O.
Although it was not known to the committees at York considering Weiss' application for staff privileges, and only revealed in discovery proceedings in this case, the defendants adduced certain evidence tending to show that Dr. Weiss was discourteous to nurses in areas of the hospital where patients might have overheard and been distracted. This evidence was contained in hospital files that the defendants characterized as business records, but the evidence was never admitted, apparently either because the defendants did not authenticate the records or because the district court exercised its discretion to exclude them under Fed.R.Evid. 403 (they were offered solely for impeachment purposes). App. at 5160a-5171a. It is possible that this evidence may be offered again, and we express no view concerning its admissibility at that time since no objection was taken by the defendants to its exclusion at the first phase of this trial.
Subsequently the defendants sought two writs of mandamus and prohibition from this Court. In one matter, No. 81-2191, the petition was directed to the district court's certification of the plaintiff class. This Court denied the petition holding that mandamus and prohibition were not available. In the other matter, No. 81-2171, the court denied a petition directed to the district court's order authorizing discovery of confidential income data of approximately 100 M.D.s in the York area until completion of the liability portion of the bifurcated trial, and retained — and still retains — jurisdiction in the matter. The opinion in both matters is reported as DeMasi v. Weiss, 669 F.2d 114 (3d Cir.1982).
Thereafter, defendants filed a motion before the district court to decertify the class. The motion was denied on August 18, 1982.
____________________________________________________________________________ Defendants § 1 Sherman Act § 2 Sherman Act State Law (Weiss & Class) (Weiss & Class) (Weiss Only) Monop./Attempt/Consp. ____________________________________________________________________________ York Hospital -- W&C W&C W&C W York Hospital Medical Staff C -- -- -- -- Ardison -- -- -- -- -- Bauer -- -- -- -- W Butler -- -- -- -- W Diesher -- -- -- -- W Kline -- -- -- -- -- Kushner -- -- -- -- W Laucks -- -- -- -- -- MacDougall -- -- -- -- -- MacKenzie -- -- -- -- -- Whiteley -- -- -- -- -- ____________________________________________________________________________ W = Liable to named plaintiff C = Liable to class -- = Exonerated ____________________________________________________________________________
The final judgments entered against the plaintiff class are:
We affirm all the dismissals as to the individual defendants because we believe the evidence supports the jury's conclusions on these claims. We also affirm the dismissal of Weiss' and the class' section 2 claims, against the medical staff, on the same ground. We reverse the dismissal of Weiss' section 1 claim against the medical staff for the reasons stated infra text accompanying notes 52-63. Finally, we affirm the dismissal of Weiss' and the class' claims against York because we believe that these decisions are also supported by evidence in the record. We note however that exoneration of York Hospital on the section 1 claims does not necessarily result in the dismissal of the action as to York. The medical staff (which the jury found liable on section 1 grounds, and which decision we affirm, see infra text accompanying notes 43-66) does not exist independent of the hospital, and therefore the hospital may be liable to pay any award of money damages in favor of the plaintiffs and against the staff under section 4 which may result in the future, on a respondeat superior theory of liability. We leave this question to another day.
3B J. Moore, Moore's Federal Practice ¶ 23.05, at 23-150 (2d ed. 1982) (footnotes omitted).
This approach focuses on the legal and/or factual stance assumed by the class representative as compared with that of the class members. Under this approach, while factual variations will not defeat certification where the various claims arise from the same legal theory, where the named plaintiff's individual circumstances are markedly different or where the legal theory upon which the claims are based differs from that upon which the claims of other class members will perforce be based, there exists the danger that the unique circumstances or legal theory will receive inordinate emphasis and that the other claims will not be pressed with equal vigor or will go unrepresented. Wofford v. Safeway Stores, Inc., 78 F.R.D. 460, 489 (N.D.Cal.1978); Karan v. Nabisco, Inc., 78 F.R.D. 388, 405 (W.D.Pa.1978); Cohen v. Uniroyal, Inc., 77 F.R.D. 685, 691-92 (E.D.Pa.1977). ("[M]ere anticipation that all class members will benefit from the suit ... is not enough. But interests sufficiently parallel to ensure a vigorous and full presentation of all potential claims for relief should satisfy Rule 23(a)(3)"). See Scott v. University of Delaware, 601 F.2d 76, 84 (3d Cir.), cert. denied, 444 U.S. 931, 100 S.Ct. 275, 62 L.Ed.2d 189 (1979). Illustrative of this approach is Donaldson v. Pillsbury Co., 554 F.2d 825 (8th Cir.), cert. denied, 434 U.S. 856, 98 S.Ct. 177, 54 L.Ed.2d 128 (1977), in which the court described the typicality prerequisite variously as a requirement that there be other members of the class who have the same or similar grievances, id. at 830; that the charge be based on patterns or practices not special or unique to plaintiff, id. at 831; that a significant number of other members of the class have been similarly victimized by the same patterns or practices. Id. The approach of Donaldson and of other courts adopting the Wright and Miller formulation thus appears to be an attempt to attribute semantic integrity to the term "typicality," by using what is essentially its common sense definition and positing that where the plaintiff's factual or legal stance is not characteristic of that of other class members, the typicality prerequisite has not been met. In something of a variation of the above analysis, other courts have held that in order to satisfy the typicality requirement, plaintiff must show that the issues of law or fact he or she shares in common with the class occupy "the same degree of centrality" to his or her claims as to those of unnamed class members. Parker v. Bell Helicopter Co., 78 F.R.D. 507 (N.D.Tex.1978); Cottrell v. Virginia Electric & Power Co., 62 F.R.D. 516 (E.D.Va. 1974); see Wofford, 78 F.R.D. at 489. A similar formulation is the "nexus text." See Hannigan v. Aydin Corp., 76 F.R.D. 502, 508 (E.D.Pa.1977), a Title VII case where Chief Judge Joseph S. Lord, III wrote that typicality exists where plaintiff has demonstrated some "nexus" with the claims of other class members, which can be shown by demonstrating the similarity between the conditions of employment of plaintiff and those of other class members, the similarity between the alleged discrimination practices on the named plaintiff and that affecting the class, and by the compatability of the relief requested and that appropriate for the class.
We view the "centrality" and "nexus" tests as functionally indistinguishable from the Wright-Miller/ Donaldson "marked difference" formulation; each test attributes to the typicality requirement what we have termed a semantic integrity by focusing on its dictionary or common sense meaning. We see no point in attempting an additional formulation, for we could not improve on the foregoing.
Our conclusion that the district court did not err as a matter of law in trying the case in Williamsport should not, of course, be taken as a suggestion that the ensuing phase of the trial also be tried in Williamsport as opposed to Harrisburg.
App. at 5685a.
York Hospital _______ York Hospital Medical and Dental Staff
XGary Ardison, M.D. _______ Thomas L. Bauer, M.D. _______ Ivan L. Butler, M.D. _______ S.W. Deisher, M.D. _______ Jack A. Kline, M.D. _______ Lois Kushner, M.D. _______ S. Philip Laucks, M.D. _______ Harold H. MacDougall, M.D. _______ Iain L. MacKenzie, M.D. _______ John P. Whiteley, M.D. _______
App. at 6250a. It would appear that since the court instructed the jury that the hospital was one in the same with the medical staff and that therefore it was legally impossible for the two to conspire, it was internally inconsistent to provide one space to be checked for York Hospital and a separate space for the York Hospital Medical and Dental Staff.
The jury also believed that the defendants had conspired against plaintiff Weiss:
App. at 6243a. However, because the jury concluded that the conspiracy against Weiss did not unreasonably restrain interstate commerce, Special Verdict No. 8, the jury was not required to answer Special Verdict No. 10, which asked them to identify the conspirators.
Copperweld, 104 S.Ct. at 2742.
326 U.S. at 15, 65 S.Ct. at 1422 (emphasis in original). In Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), the Court, on the issue of joint action, stated only:
373 U.S. at 347, 83 S.Ct. at 1252.
We acknowledge that there are factual distinctions between Silver and Associated Press on the one hand, and this case on the other. York Hospital is more than simply an association of doctors; it is a separate economic entity which provides services separate from those provided by the doctors on the medical staff. This case, however, involves only the question of the medical staff's decision about which doctors would be allowed to practice at York. For these purposes, we believe that the principles of Silver and Associated Press are applicable.
Id. (footnotes omitted). Some commentators have suggested the creation of a rebuttable presumption of agreement between the hospital and the medical staff. See Antitrust and Hospital Privileges, supra note 4, at 642; Note, A Suggested Role for Rebuttable Presumptions in the Antitrust Restraint of Trade Litigation, 1972 Duke L.J. 595, 605-624. These authors focus on the relationship between the hospital and the members of its medical staff. We focus instead on the relationship between the entities (individual doctors) who make up the medical staff, and conclude that it is they who provide the requisite joint action element for a section 1 violation.
This case can be viewed as presenting the question whether the relationship between York Hospital and the M.D.s is like a parent-subsidiary relationship, or more closely akin to a traditional boycott. But the rationale for treating the parent-subsidiary relationship differently — that the subsidiaries cannot pressure the parent to act against its own interests — does not apply where independent economic entities such as the M.D.s on the medical staff control the staff-privileges decision-making of an entity — York — at another level of production. Therefore we conclude that this case does not involve a parent-subsidiary relationship. We note, in this regard, our cognizance of the fact that the staff-privileges decision of the medical staff is subject to ultimate review by the Hospital Board. However, given the dominant role of the medical staff and the limited nature of the review process in that area, see supra at pp. 796-799, we believe that the jury's findings as to the culpability of the medical staff are supported.
435 U.S. at 696, 908 S.Ct. at 1367-1368 (footnote omitted). In the light of the Supreme Court's subsequent decision in Maricopa County, see text, we read Professional Engineers to hold that where an "ethical norm" of a learned profession is under attack on section 1 grounds, a rule of reason analysis governs even if the per se rule might otherwise apply, but that in order to prevail on the rule of reason inquiry the defendant must demonstrate that the challenged conduct has a pro-competitive effect. Cf. Antitrust and Hospital Privileges, supra note 4, at 644-45 n. 239 (commentators differ on whether Professional Engineers applied the rule of reason or the per se approach).
We add that the defendants adduced certain evidence that tended to show that Dr. Weiss was boisterous and discourteous to nurses in areas of the hospital where patients might have overheard and have been disturbed. See supra note 18. Although this evidence was not the central focus of the trial — the major issue was whether the defendants applied two levels of scrutiny to applicants; a very deferential review to M.D. applicants and a substantially more rigorous review of osteopathic applicants — we do not doubt that a hospital could exclude an applicant from staff privileges either because he is not medically qualified or because of unprofessional conduct, so long as the hospital applies the same standards to all applicants. This result does not skew our antitrust analysis. First, as to medical ability, restricting staff privileges to doctors who have achieved a specified level of medical ability falls within the scope of a hospital's "public service" function, and therefore the rule of reason analysis, not the per se rule of illegality, would control. Applying the rule of reason analysis, it seems obvious that by restricting staff privileges to doctors who have achieved a predetermined level of medical competence, a hospital will enhance its reputation and the quality of the medical care that it delivers. Thus such action is pro-competitive and, therefore, permissible under the rule of reason. See infra note 61. The analysis for professional conduct is basically identical. The "public service" function of a hospital is to provide for effective and efficient medical treatment for its patients. One factor in the effective and efficient running of a hospital is a medical staff that can work together and be courteous to patients and staff. Doctors who have a history of trouble in interpersonal relations can legitimately be excluded because, if admitted, they will reduce the effectiveness of the medical staff, thereby reducing the ability of the hospital to provide top-flight service. In sum, doctors who have trouble getting along with other people will reduce efficiency, thereby reducing the hospital's competitive position, and, therefore, exclusion of such doctors is pro-competitive and permissible under the rule of reason.
See generally Dolan & Ralston, supra note 4, at 719, 735.
Finally, in Kreuzer v. American Academy of Periodontology, 735 F.2d 1479 (D.C.Cir.1984), the D.C. Circuit Court held that the rule of reason analysis governed a section 1 challenge to a rule promulgated by the American Academy of Periodontology (AAP) that limited membership in the AAP to licensed dentists who practice periodontics exclusively, and who do not practice other forms of dentistry. The court labeled the effect of the AAP's rule a "group boycott" but concluded that "[w]hen a conspiracy of this sort is alleged in the context of one of the learned professions, the nature and extent of its anticompetitive effect are often too uncertain to be amendable to per se treatment." Id. at 1492. We believe the "boycott" involved in the Kreuzer case is not a classical boycott, in that a group of competitors at one level of production — i.e., the periodontists — were not trying to use their position to coerce some entity on some other level of production to discriminate against competitors of the periodontists, and therefore Kreuzer is inapposite to the facts of the instant case. Even if we were to conclude that a rule of reasons analysis governs in this case simply because a learned profession is involved, we would conclude that the defendants' conduct here was an unreasonable restraint because: (1) Weiss met his burden of production and persuasion that the purpose and effect of the defendants' discriminatory conduct was to "foreclose so much of the market from penetration by [the M.D.s'] competitors [i.e., the D.O.s] as to unreasonably restrain competition in the affected market, the market for [inpatient medical care]," see Jefferson Parish Hosp. Dist. No. 2 v. Hyde, ___ U.S. ___, 104 S.Ct. 1551, 1568 n. 51, 80 L.Ed.2d 2 (1984), and (2) the defendants — who relied solely on the defense they had not discriminated against D.O.s — made no attempt to counter this evidence.
Id. The court did not include in its order any specific declaration that Weiss did not prevail as to section 1.
384 U.S. at 571-72, 83 S.Ct. at 1704. The Supreme Court squarely rejected that argument, upholding a single service market for central alarm protection:
Id. at 572, 83 S.Ct. at 1704.
App. at 5702a.
App. at 5702a.
384 U.S. at 571, 86 S.Ct. at 1704. See also International Boxing Club of N.Y., Inc. v. United States, 358 U.S. 242, 249, 79 S.Ct. 245, 249, 3 L.Ed.2d 270 (1959) (81% market control is sufficient to establish monopoly power); United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 389-90, 76 S.Ct. 994, 1003-1004, 100 L.Ed. 1264 (1956); Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 33, 31 S.Ct. 502, 505, 55 L.Ed. 619 (1911) (90% is enough); United States v. Aluminum Co. of America, 148 F.2d 416, 424 (2d Cir.1945) (90% is enough, 60% not likely enough, and 33% not enough). The courts consider more than just the percentage of the market share in determining monopoly power. Other relevant factors that the courts have identified include: the size and strength of competing firms, freedom of entry into the field, pricing trends and practices in the industry, ability of consumers to substitute comparable goods on services from outside the market, and consumer demand factors. A defendant's power either by itself or aided by these other factors must be enough to restrict entry, supply, or price. See L. Sullivan, Handbook of the Law of Antitrust §§ 22-32 (1977); see also Dolan & Ralston, supra note 4, at 767.