Rehearing and Rehearing En Banc Denied September 9, 1986.
ALLGOOD, Senior District Judge:
This appeal arose out of an action brought by St. Joseph's Hospital, Inc., against Hospital Corporation of America, HCA Management Company, and Chatham County Hospital Authority d/b/a Memorial Medical Center, for alleged violations of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2.
After a careful review of the entire record and the applicable law, this court has concluded that in accordance with Fed.R.Civ.Proc. 8(a)(2) the plaintiff's complaint is sufficient to put the defendants on notice of an antitrust cause of action.
St. Joseph's Hospital, Inc., is a Georgia non-profit general acute care hospital in Savannah, Georgia. Chatham County Hospital Authority, d/b/a Memorial Medical Center (MMC), is also a licensed, non-profit general acute care hospital in Savannah, Georgia. Hospital Corporation of America (HCA) is a for-profit corporation which operates
Under Georgia's Health Planning and Development Act of 1983, all health care facilities are required to obtain a certificate of need (CON) from the State Health Planning Agency (SHPA) prior to the implementation or expansion of any health service.
In February 1984, prior to issuing a decision on St. Joseph's application, SHPA adopted the "New Cardiac Surgery Rule," SHPA Rule 272-2-09(13), which states:
On April 6, 1984, St. Joseph's request for a CON was denied. SHPA determined that the additional open heart services at St. Joseph's would unnecessarily duplicate the services being provided by MMC. Because SHPA determined the need for additional open heart surgery had not been shown, it concluded that the requirements of agency rule 272-2-09(13) had not been met and the application was denied.
St. Joseph's appealed SHPA's denial to the Review Board on April 27, 1984. MMC was not a party to those proceedings but actively tried to have the appeal dismissed without a hearing by encouraging SHPA to move for a dismissal. The Hearing Panel Chairman, John Woodall, refused to grant SHPA's motion to dismiss and ruled that St. Joseph's was entitled by statute to a full evidentiary hearing. MMC then requested the right to intervene. In spite of some reservations Woodall granted the motion. In arguing the motion to intervene MMC stated that it would do nothing to obstruct or delay the proceedings. However, as soon as MMC was allowed to intervene, it began a course of conduct designed to delay the proceedings. Pursuant to a motion filed by MMC, John Sibley, Chairman of the Review Board, disqualified Woodall as the hearing officer because Woodall had previously represented St. Joseph's insurance carrier in workmen's compensation
On the same date that the stay was issued, St. Joseph's filed a petition and complaint for mandamus and injunctive relief in Fulton Superior Court requesting the stay be lifted and the hearing granted. On August 17, 1984 the stay was lifted. St. Joseph's Hospital, Inc. v. Sibley, Civil Action No. C-12402 (Fulton Superior Ct., August 17, 1984). A hearing was conducted on September 5, 1984 and on December 6, 1984 the Review Board found that need had been shown for the additional cardiac services proposed by St. Joseph's. However, the Review Board determined that under the New Cardiac Surgery Rule only SHPA could issue the CON and that even SHPA could not issue the CON until the validity of the rule had been resolved by the Georgia Court of Appeals. The Georgia Court of Appeals already had before it two cases in which the New Cardiac Surgery Rule was being challenged. Those appeals were ultimately dismissed on jurisdictional grounds. State Health Planning Review Board v. Piedmont Hospital, 173 Ga.App. 450, 326 S.E.2d 814 (1985). Following the decision in which the stay was lifted St. Joseph's filed a complaint and petition for review in the Superior Court of Chatham County. The court agreed with the Review Board's findings on the merits of the application, but rejected the Review Board's determination that only SHPA could make the ultimate determination of whether "need was otherwise displayed" and issue the CON. The court modified the Review Board's decision to direct SHPA to issue the CON. MMC appealed to the Georgia Court of Appeals.
On April 4, 1986, a final order was issued by the court of appeals. Chatham County Hospital Authority v. St. Joseph's Hospital, Inc., 344 S.E.2d 463 (Ga.App.1986). The court determined that the New Rule does not require a moratorium on considering applications for a certificate and affirmed the superior court's and the board's finding that need for the additional services had been shown.
In August, 1984, before the superior court's decision, St. Joseph's filed a complaint in federal court, alleging that the defendants had conspired to prevent St. Joseph's establishment of a cardiac surgery program in violation of the Sherman Antitrust Act. St. Joseph's also charged the defendants with monopolizing or attempting to monopolize trade in violation of § 2 of the Sherman Antitrust Act. The central focus of St. Joseph's allegations was that the defendants had submitted false information to SHPA and SHPA relied on that information in denying St. Joseph's application. St. Joseph's also charged the defendants with acting in bad faith to obstruct, delay and prevent St. Joseph's obtaining a hearing and later a review of the adverse decision.
HCA and MMC each filed a 12(b)(6) motion to dismiss. St. Joseph's filed an amended complaint; and the defendants again filed motions to dismiss. The district court granted the motions without granting the plaintiff leave to amend. This appeal followed.
Motion to Dismiss
Although authorized by the Federal Rules of Civil Procedure, the liberal rules as to the sufficiency of a complaint
The short statement must be plain and must show the pleader is entitled to relief. The pleading "must contain either direct allegations on every material point necessary to sustain a recovery on any legal theory, even though it may not be the theory suggested or intended by the pleader, or contain allegations from which an inference fairly may be drawn that evidence on these material points will be introduced at trial." Wright & Miller, Federal Practice and Procedure: Civil § 1216 at 121-23.
In ruling on the motion to dismiss the district court must accept the well pleaded facts as true and resolve them in the light most favorable to the plaintiff.
The district court based its dismissal of the complaint on the erroneous conclusion that the defendants' actions were protected by the "Noerr-Pennington Doctrine" and did not come within the "sham exception" to that doctrine. The court also held that the plaintiff failed to allege that HCAM was anything more than a mere employee of Memorial and could not be a co-conspirator without evidence of a personal stake in the outcome.
On appeal St. Joseph's argues that the district court erred in granting the motion to dismiss. St. Joseph's contends that the complaint sufficiently alleged statements and actions by the defendants which violated the Sherman Act and put the defendants on notice as required by Fed.R.Civ.Proc. 8(a)(2). St. Joseph's also contends that the defendants represent separate interests sufficient to support the allegations of a conspiracy under § 1 of the Sherman Act.
The Noerr-Pennington Doctrine
The Noerr-Pennington doctrine was established in a trio of Supreme Court decisions. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965); California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972).
In Noerr, supra, a group of railroads conducted a publicity campaign designed to damage the image of truck drivers and persuade the Pennsylvania legislature to enact laws which would be detrimental to the trucking industry. The Supreme Court found no violation of the Sherman Act in those actions and held that Sherman Act liability could not be predicated on "mere attempts to influence the passage or enforcement of laws." 365 U.S. at 135, 81 S.Ct. at 528. The Court reasoned that
Id. at 137-138, 81 S.Ct. at 529-530.
The Court also recognized the rights of the people to petition their government even if they only had an anti-competitive motive. The Court did recognize that there
The Noerr ruling was reaffirmed in United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). In Pennington a group of large coal companies and the UMW persuaded the Secretary of Labor to adopt high minimum wage rates for companies supplying coal to the Tennessee Valley Authority. The Court found no Sherman Act violations in their actions and said, "[j]oint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. Such conduct is not illegal, either standing alone or as part of a broader scheme itself violative of the Sherman Act." Id. at 670, 85 S.Ct. at 1593.
The Noerr immunity was extended to administrative and judicial proceedings in Trucking Unlimited, supra, and for the first time the Court utilized the exception to the general immunity, saying:
Id. 404 U.S. at 513, 92 S.Ct. at 613.
The Trucking Unlimited court also said, "There are many other forms of illegal and reprehensible practice which may corrupt the administrative or judicial processes and which may result in antitrust violations. Misrepresentations, condoned in the political arena, are not immunized when used in the adjudicatory process." Id. at 513, 92 S.Ct. at 613.
The district court in a rather lengthy opinion focused almost entirely on the "sham exception" and whether the plaintiffs had alleged a cause of action which would come within that exception. In order to find that a situation falls within an exception to a general rule, it must first be clear that the general rule itself is applicable. The plaintiff here has alleged misrepresentations before a governmental agency. When a governmental agency such as SHPA is passing on specific certificate applications it is acting judicially. Misrepresentations under these circumstances do not enjoy Noerr immunity.
As to the delaying tactics, motions to dismiss and appeals, St. Joseph's failed to allege that the defendants did anything more than use the adjudicatory process to obtain a favorable outcome. In spite of the damaging effect, the defendants were within their rights to use every available legal means to delay or forestall the CON being issued and the anti-competitive purpose did not make them illegal. "Noerr shields from the Sherman Act a concerted effort to influence public officials regardless of intent or purpose." 381 U.S. at 670, 85 S.Ct. at 1593. Likewise, "[j]oint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. Such conduct is not illegal, either standing alone or as part of a broader scheme itself violative of the Sherman Act." Id. at 670, 85 S.Ct. at 1593.
Thus, while the delaying tactics of the defendants are clearly immune from antitrust liability, the furnishing of misinformation to SHPA is not entitled to the same protection.
As an alternative ground for dismissing the complaint the district court found that
As to HCA Management and MMC, the district court found there could be no conspiracy between a corporation and its employee, relying on Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879 (3rd Cir.1981), cert. denied 454 U.S. 893, 102 S.Ct. 390, 70 L.Ed.2d 208 (1981); Nelson Radio & Supply Co., Inc. v. Motorola, Inc., 200 F.2d 911 (5th Cir.1952), cert. denied, 345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953).
According to the plaintiff the relationship of the parties is not as simple as the district court views it. The plaintiff contends that while HCAM is a wholly owned subsidiary of HCA, its status as an employee of MMC is more complicated than the usual employer-employee situation. In this case the employee is a separate corporate entity with an entirely separate board of directors, and the employee is in the business of managing hospitals for a profit. As such, St. Joseph's argues that HCA/HCAM had the independent corporate existence plus the independent interest and motive necessary to support a conspiracy claim under § 1 of the Sherman Act.
As the Seventh Circuit pointed out in Tamaron Distributing Corporation v. Weiner, 418 F.2d 137 (7th Cir.1969), Nelson Radio
Id. at 139.
The courts have repeatedly noted that, while a corporation's officers and its employees are legally incapable of conspiring among themselves, if the "officers or employees act for their own interests, and outside the interests of the corporation, they are legally capable of conspiring with their employers for purposes of Section 1." Tunis Brothers Co., Inc. v. Ford Motor Co., 763 F.2d 1482 (3rd Cir.1985), appeal pending; H & B Equipment Co., Inc. v. International Harvester, 577 F.2d 239 (5th Cir.1978). Greenville Publishing Co. v. Daily Reflector, Inc., 496 F.2d 391 (4th Cir.1974).
St. Joseph's alleged that HCA and MMC were separate entities with separate economic interests but failed to support the allegations with sufficient facts to show that anyone other than MMC had an "independent personal stake" in the outcome of the conspiracy. St. Joseph's should be given an opportunity to amend the complaint, if it can, to show the missing elements.
Section 2 of the Sherman Act
St. Joseph's has also alleged a violation of § 2 of the Act. The district court did not distinguish the claims under §§ 1 and 2 since it determined that the actions of the defendants were protected activity. Our determination that such action is not immune from antitrust action applies to both Sections 1 and 2.
Section 2 differs from § 1 in that it is not restricted to a conspiracy, but is aimed at, inter alia, the acquisition or retention of effective market control. Monopolies, attempted monopolies and conspiracies to monopolize any part of interstate commerce are a violation of § 2 of the Sherman Act.
For the above stated reasons, the court concludes that the dismissal of this action was premature and the order of the district court must be VACATED, the claims of the plaintiff under both §§ 1 and 2 of the Sherman Act be reinstated and the case REMANDED for further proceedings.
15 U.S.C. § 2 reads in pertinent part:
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