United States District Court, D. Alaska
ORDER
H.
Russel Holland, United States District Judge
Motion
To Dismiss
Defendants
move to dismiss plaintiffs' amended
complaint.[1] This motion is opposed.[2]Oral argument was
not requested and is not deemed necessary.
Background
Plaintiffs
are William Curtis, M.D., and Pedro Valdes, M.D. Defendants
are Providence Health & Services (PH&S), Providence
Health & Services - Washington (PH&S-Washington), and
Bruce Lamoureux.
Plaintiffs
are cardiothoracic surgeons who had medical staff privileges
at Providence Alaska Medical Center (PAMC).[3] Plaintiffs allege
that “Dr. Valdes was granted medical staff privileges
at PAMC in 1995” and that “Dr. Curtis was granted
medical staff privileges at PAMC in
2008.”[4]
Plaintiffs
allege that PAMC is owned and operated by PH&S-Washington
and that PH&S is PH&S-Washington's
“principal or sole
‘member.'”[5] Plaintiffs allege that PAMC “is
the largest acute care hospital in Anchorage and that Alaska
Regional Hospital (ARH) “is PAMC's only hospital
competitor within the Municipality of
Anchorage.”[6]
Plaintiffs
allege that in August 2016, PAMC completed a review of its
cardiothoracic program, which revealed some coverage issues
due to the small number of cardiothoracic surgeons with
privileges at PAMC.[7] Plaintiffs allege that PAMC's chief
executive, Dr. Mandsager, issued a memo after the review was
complete, in which he stated that “for 30 days in 2016,
PAMC had no CT EMTALA coverage due to ‘an insufficient
number of surgeons in Anchorage'” and he expressed
that PAMC had “a desire to enter into an exclusive
contract with a single CT group to improve PAMC's CT
surgery service efficiency, as well as ‘CT surgeon
availability, patient outcomes, and patient, staff, and
referring physician satisfaction.'”[8] Plaintiffs allege
that in response, they proposed hiring a third cardiothoracic
surgeon “if PAMC would guarantee a salary for the third
surgeon, making up any shortfall in revenue between
collections and $1.5 million, if such a shortfall
occurred.”[9]Plaintiffs allege that “PAMC did not
respond to [their] proposal.”[10]
Instead,
plaintiffs allege that PAMC was pursuing an exclusive
contract with Starr-Wood Cardiac Group of Portland,
P.C.[11] Plaintiffs allege that “Starr-Wood
sought to affiliate with [them], but the arrangement proposed
by Starr-Wood would have made them subordinate to Starr-Wood
and given Starr-Wood the power to exclude them from PAMC at
any time.”[12] Plaintiffs allege that they
“rejected Starr-Wood's
proposal.”[13]
Plaintiffs
allege that on May 22, 2017,
Lamoureux wrote that he was disappointed to learn that [they]
had not been able to reach mutually acceptable terms under
which they would join with Starr-Wood. The letter stated:
“[s]hould PAMC's negotiations with Starr-Wood or a
Starr- Wood-affiliated entity end successfully, only surgeons
affiliated with the contracting entity will have related
privileges at PAMC.”[14]
Plaintiffs
allege that
[o]n June 1, 2018, PAMC wrote to [them] that PAMC had entered
into an exclusive agreement for CT services and notified them
that their clinical privileges to perform cardiac and
thoracic surgery services at [PAMC] would automatically
terminate on the ‘CT Start Date' unless they became
employees of NorthStar Cardiothoracic Surgery, LLC,
Starr-Wood's contracting subsidiary.[15]
Plaintiffs
allege that PAMC later informed them that their privileges
would terminate on September 4, 2018.[16]
Plaintiffs
commenced this action on September 4, 2018. In their original
complaint, plaintiffs only asserted claims against PH&S.
On October 4, 2018, PH&S-Washington removed the matter to
this court.[17] Plaintiffs moved to remand, and on
November 8, 2018, this court granted plaintiffs' motion
to remand because the case had been improperly removed by a
nonparty.[18] Upon remand, plaintiffs filed an amended
complaint. In their amended complaint, plaintiffs assert
antitrust claims against PH&S, a breach of contract claim
against PH&S-Washington, a breach of the implied covenant
of good faith and fair dealing claim against
PH&S-Washington, a breach of the Alaska Unfair Trade
Practices Act (UTPA) claim against PH&S-Washington, an
intentional interference with prospective economic advantage
claim against PH&S-Washington and Lamoureux, and a
piercing the corporate veil claim.
Pursuant
to Rule 12(b)(6), Federal Rules of Civil Procedure,
defendants now move to dismiss all of plaintiffs' claims.
Discussion
‘To
survive a [Rule 12(b)(6)] motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face.'”
Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir.
2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). “A claim is facially plausible ‘when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.'” Id. (quoting
Iqbal, 556 U.S. at 678). “The plausibility
standard requires more than the sheer possibility or
conceivability that a defendant has acted unlawfully.”
Id. “‘Where a complaint pleads facts
that are merely consistent with a defendant's liability,
it stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Iqbal, 556 U.S. at 678).
“[T]he complaint must provide ‘more than labels
and conclusions, and a formulaic recitation of the elements
of a cause of action will not do.'” In re Rigel
Pharmaceuticals, Inc. Securities Litig., 697 F.3d 869,
875 (9th Cir. 2012) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). “In evaluating
a Rule 12(b)(6) motion, the court accepts the complaint's
well-pleaded factual allegations as true and draws all
reasonable inferences in the light most favorable to the
plaintiff.” Adams v. U.S. Forest Srvc., 671
F.3d 1138, 1142-43 (9th Cir. 2012). “However, the trial
court does not have to accept as true conclusory allegations
in a complaint or legal claims asserted in the form of
factual allegations.” In re Tracht Gut, LLC,
836 F.3d 1146, 1150 (9th Cir. 2016).
Defendants
first move to dismiss plaintiffs' antitrust claims.
Plaintiffs assert antitrust claims under AS 45.50.562 and AS
45.50.564.[19] “To establish a prima facie case
of unreasonable restraint of trade under AS 45.50.562,
[plaintiffs] must set forth facts which if proven would
establish that ‘the defendants combined or conspired
with an intent to unreasonably restrain trade.'”
Odom v. Fairbanks Memorial Hosp., 999 P.2d 123, 129
(Alaska 2000) (quoting Smith v. N. Mich. Hosps.,
Inc., 703 F.2d 942, 949 (6th Cir. 1983)). “Whether
actions are tantamount to unreasonably restraining trade is
determined by either the rule of reason test or the per se
analysis.” Id. Plaintiffs allege that
PAMC's “exclusive contract with Starr-Wood does not
pass the rule of reason test. . . .”[20] “To
establish unreasonable restraint of trade under the rule of
reason test, [plaintiffs] must prove three elements:
‘(1) an agreement or conspiracy among two or more
persons or distinct business entities; (2) by which the
persons or entities intend to harm or restrain competition;
and (3) which actually injures competition.'”
Id. (quoting Oltz v. St. Peter's Community
Hosp., 861 F.2d 1440, 1445 (9th Cir. 1988)).
“Claims brought under AS 45.50.562 are also referred to
as Sherman Act § 1 claims[.]” Id. at 128.
AS
45.50.564 provides that “[i]t is unlawful for a person
to monopolize, or attempt to monopolize, or combine or
conspire with another person to monopolize any part of trade
or commerce.” Plaintiffs allege that PAMC attempted to
monopolize the Anchorage hospital market.[21] “[T]o
state a claim for attempted monopolization, the plaintiff
must allege facts that, if true, will prove: ‘(1) that
the defendant has engaged in predatory or anticompetitive
conduct with (2) a specific intent to monopolize and (3) a
dangerous probability of achieving monopoly
power.'”[22] Coalition for ICANN Transparency,
Inc. v. VeriSign, Inc., 611 F.3d 495, 506 (9th Cir.
2010) (quoting Cascade Health Solutions v.
PeaceHealth, 515 F.3d 883, 893 (9th Cir. 2008)).
“[C]laims under AS 45.50.564 have been termed Sherman
Act § 2 claims.” Odom, 999 P.2d at 128.
Defendants
first argue that plaintiffs have failed to state plausible
antitrust claims because plaintiffs have failed to identify
and define the relevant market. See Tanaka v. Univ. of S.
Calif., 252 F.3d 1059, 1063 (9th Cir. 2001) (citation
omitted) (“[t]he plaintiff bears the initial burden of
showing that the restraint produces significant
anticompetitive effects within a relevant market”);
Big Bear Lodging Ass'n v. Snow Summit, Inc., 182
F.3d 1096, 1104 (9th Cir. 1999) (“[m]onopolization
claims can only be evaluated with reference to properly
defined geographic and product markets”). The term
“relevant market”
“encompasses notions of geography as well as product
use, quality, and description. The geographic market extends
to the area of effective competition . . . where buyers can
turn for alternative sources of supply. The product market
includes the pool of goods or services that enjoy reasonable
interchange-ability of use and cross-elasticity of
demand.”
Tanaka, 252 F.3d at 1063 (quoting Oltz, 861
F.2d at 1446). “Plaintiffs must identify the relevant
geographic and product markets in which [p]laintiffs and
[d]efendants compete and allege facts demonstrating that
[d]efendants' conduct has an anticompetitive effect on
those markets.” Big Bear Lodging Ass'n,
182 F.3d at 1104-05. “Failure to identify a relevant
market is a proper ground for dismissing a Sherman Act
claim.” Tanaka, 252 F.3d at 1063.
Plaintiffs
allege that the relevant market is the hospital market in
Anchorage.[23] Defendants argue that this allegation is
insufficient for two reasons. First, defendants argue that
the “hospital market” is not relevant to
plaintiffs' antitrust claims because plaintiffs do not
participate in that market. Defendants argue that antitrust
plaintiffs must participate in the same market as the
defendant, that they must be either a consumer or competitor
of the defendant. Because plaintiffs are not hospitals or
patients, defendants argue that plaintiffs could not
plausibly participate in the relevant market they have
defined. Defendants cite to Associated General
Contractors of California, Inc. v. California State Council
of Carpenters, 459 U.S. 519 (1983), in support. But, as
the Ninth Circuit has explained,
[t]he Supreme Court has never imposed a “consumer or
competitor” test but has instead held the antitrust
laws are not so limited. The Supreme Court's only
suggestion of such a restriction is a passing comment in
Associated General that the plaintiff union was
“neither a consumer nor a competitor” in the
relevant market. The Court did not find that fact in any way
dispositive, however, and concluded the antitrust injury of
unions required case-by-case consideration.
Amer. Ad Mgmt., Inc. v. General Telephone Co. of
Calif., 190 F.3d 1051, 1057 (9th Cir. 1999) (quoting
Associated General, 459 U.S. at 539). Plaintiffs do
not have to be consumers or competitors of PAMC in order for
their antitrust claims to be plausible.
Defendants
also argue that plaintiffs' relevant market allegation is
insufficient because plaintiffs have failed to allege any
facts to explain why the Municipality of Anchorage is the
appropriate geographic scope of the market. Defendants
contend that plaintiffs have not explained why hospitals
outside of the Anchorage-area do not enjoy cross-elasticity
of demand with PAMC and ARH for certain services, such as CT
surgery.
But,
“‘the failure to pinpoint precisely the relevant
market through detailed market analysis is not uniformly
fatal to'” antitrust claims. Sisters of
Providence in Wash. v. A.A. Pain Clinic, Inc., 81 P.3d
989, 1001 (Alaska 2003) (quoting Oltz, 861 F.2d at
1448). Plaintiffs' allegations as to the geographic scope
of the relevant market are sufficient to survive a Rule
12(b)(6) motion.
Defendants
next argue that plaintiffs have failed to state plausible
antitrust claims because it is implausible that PAMC's
exclusive contract with Starr-Wood caused any anticompetitive
effects within the relevant market. Defendants argue that it
is not plausible that an exclusive contract for the provision
of physicians for a small subset of surgical services would
have any anticompetitive effect. Defendants argue that
plaintiffs have not even alleged any connection between
PAMC's contract with Starr-Wood and the relevant market.
“Anticompetitive
effects include increased prices, reduced output, and reduced
quality.” West Penn Allegheny Health System, Inc.
v. UPMC, 627 F.3d 85, 100 (3rd Cir. 2010). Plaintiffs
have adequately alleged anticompetitive effects by claiming
that the quality of CT surgery that will be available to
consumers at PAMC has been reduced as a result of the
exclusive contract with Starr-Wood.[24]
But
even if plaintiffs' anticompetitive effects allegations
are adequate, defendants argue that plaintiffs' antitrust
claims should still be dismissed because plaintiffs lack
standing to bring these claims. “Antitrust standing is
distinct from Article III standing: ‘A plaintiff who
satisfies the constitutional requirement of injury in fact is
not necessarily a proper party to bring a private antitrust
action.'” Dang v. San Francisco Forty
Niners, 964 F.Supp.2d 1097, 1110 (N.D. Cal. 2013)
(quoting Am. Ad Mgmt., 190 F.3d at 1054 n.3).
“To have standing as an antitrust plaintiff, a party
must demonstrate antitrust injury, meaning it must show
‘injury of the type the antitrust laws were intended to
prevent and that flows from that which makes defendants'
acts unlawful.'” Int'l Longshore and
Warehouse Union v. ICTSI Oregon, Inc., 863 F.3d 1178,
1186 (9th Cir. 2017) (quoting Atl. Richfield Co. v. USA
Petroleum Co., 495 U.S. 328, 334 (1990)).
“Antitrust laws are designed to protect competition,
not competitors.” Adaptive Power Solutions, LLC v.
Hughes Missile Systems Co., 141 F.3d 947, 951 (9th Cir.
1998). “‘[T]he alleged injury must be caused by a
reduction, rather than an increase, in competition resulting
from the restraint.'” Id. (quoting
Theee Movies of Tarzana v. Pacific Theatres, Inc.,
828 F.2d 1395, 1400 (9th Cir. 1987)). “[A] plaintiff
must show proof of actual harm to competition reaching beyond
mere harm to itself as a competitor.” Sisters of
Providence, 81 P.3d at 1003.
Plaintiffs
have alleged harm “beyond mere harm” to
themselves. Id. Plaintiffs have alleged
“decreased consumer welfare[.]” Id.
Specifically, plaintiffs have alleged that because
Starr-Wood's surgeons do not live in Alaska, the
Starr-Wood surgeons will not be able to follow up with their
patients, that there may be a lack of surgeons available, and
that some of the Starr-Wood surgeons are relatively
inexperienced.[25] In Sisters of Providence, the
court found evidence of such issues to be relevant ...