DiCesare v. Charlotte-Mecklenburg Hosp. Auth.

• Court: Supreme Court of North Carolina
• Decided: December 18, 2020
• Docket: 156A17-2
• Status: Published

Opinion

IN THE SUPREME COURT OF NORTH CAROLINA

No. 156A17-2

Filed 18 December 2020 CHRISTOPHER DICESARE, JAMES LITTLE, and DIANA STONE, individually and on behalf of all others similarly situated v. THE CHARLOTTE-MECKLENBURG HOSPITAL AUTUHORITY, d/b/a CAROLINAS HEALTHCARE SYSTEM

Appeal pursuant to N.C.G.S. § 7A-27(a)(3) and by writ of certiorari pursuant

to N.C.G.S. § 7A-32(b) from an interlocutory order entered on 27 February 2019 by

Special Superior Court Judge for Complex Business Cases Michael L. Robinson in

Superior Court, Mecklenburg County, after the case was designated a mandatory

complex business case by the Chief Justice pursuant to N.C.G.S. § 45.4(b). Heard in

the Supreme Court on 16 June 2020.

Elliott Morgan Parsonage, PLLC, by R. Michael Elliott; Lieff Cabraser Heimann & Bernstein, LLP, by Daniel Seitz, Adam Gitlin, and Brendan P. Glackin; Pearson Simon & Warshaw, LLP, by Alexander L. Simon and Benjamin E. Shiftan, for plaintiff-appellant Christopher DiCesare, et al.

Womble Bond Dickinson (US) LLP, by Russ Ferguson, James Cooney, III, Sarah Motley Stone, Debbie W. Harden, Matthew Tilley, Mark J. Horoschak, Bryan Hayles, and Michael P. Fischer; Boies Schiller & Flexner, LLP, by Hampton Y. Dellinger, Richard A. Feinstein, and Nicholas Widnell, for defendant-appellee The Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas Healthcare System.

Attorney General Joshua H. Stein, by Deputy Solicitor General James W. Doggett, Special Deputy Attorneys General K.D. Sturgis Daniel P. Mosteller, and Assistant Attorney General Daniel T. Wilkes, for amicus State of North Carolina. DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Opinion of the Court

N.C. Department of State Treasurer, by Sam M. Hayes and Kendall M. Bourdon, for amicus N.C. State Health Plan.

ERVIN, Justice.

This case involves a dispute between plaintiffs, a group of current and former

North Carolina residents who are covered under commercial health insurance

obtained through an employer with fifty-one or more employees, and the Charlotte-

Mecklenburg Hospital Authority, a non-profit corporation providing healthcare

services with a principal place of business in Charlotte, in which plaintiffs seek

reimbursement for healthcare costs based upon claims for restraint of trade and

monopolization pursuant to Chapter 75 of the North Carolina General Statutes and

Article I, Section 34 of the North Carolina Constitution. As will be discussed in

greater detail below, this case requires us to determine whether the trial court

correctly decided issues arising from the Hospital Authority’s motion for judgment on

the pleadings relating to the claims asserted in plaintiffs’ third amended complaint.

After careful consideration of the parties’ challenges to the trial court’s order in light

of the allegations contained in the third amended complaint, we conclude that the

challenged trial court order should be affirmed, in part, and reversed, in part.

-2- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

I. Factual Background

A. Substantive Facts

The Hospital Authority was established in 1943 pursuant to the North

Carolina Hospital Authorities Act,1 N.C.G.S. §§ 131E-15 et seq., and is jointly

chartered by Mecklenburg County and the City of Charlotte. The Act states that

“[t]he General Assembly finds and declares that in order to protect the public health,

safety, and welfare, including that of low income persons, it is necessary that counties

and cities be authorized to provide adequate hospital, medical, and health care and

that the provision of such care is a public purpose.” N.C.G.S. § 131E-1(b) (2019). The

Act is intended “to provide an alternate method for counties and cities to provide

hospital, medical, and health care,” id, and defines a hospital authority as “a public

body and a body corporate and politic organized under the provisions of [the Act].”

N.C.G.S. § 131E-16(14). The Hospital Authority is governed by a Board of

Commissioners, whose members are appointed by the mayor or chairman of the

county commission. N.C.G.S. § 131E-17(b).

The Hospital Authority provides, among other things, a suite of general acute

care inpatient hospital services, including a broad range of medical and surgical

diagnostic and treatment services, to individuals insured under group, fully-insured,

and self-funded healthcare plans. The Hospital Authority has a large general acute-

1 The Hospital Authorities Act was initially known as the Hospital Authorities Law

and was formerly codified at N.C.G.S. § 131-90 to -116 (1943).

-3- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

care hospital located in downtown Charlotte and nine other general acute-care

hospitals in the Charlotte area. There are at least two other inpatient hospitals or

multi-hospital systems operating within the Charlotte area: Novant, which operates

five inpatient hospitals in the Charlotte area, and CaroMont Regional Medical

Center.

In 2013, the Hospital Authority began including restrictions in its contracts

with the four insurers which provide coverage to more than eighty-five percent of the

commercially-insured residents of the Charlotte area, with the effect of these

restrictions being to prohibit the insurers from “steering” their insureds to lower cost

providers of medical care services and to forbid the insurers from allowing the

Hospital Authority’s competitors to place similar restrictions in their contracts with

the insurers.

B. Procedural History

On 9 September 2016, plaintiff Christopher DiCesare filed a complaint

“individually and on behalf of a class of similarly situated individuals”2 in Superior

Court, Mecklenburg County, which he amended on three occasions for the primary

purpose of adding additional parties plaintiff.3 In their third amended complaint,

2 Although plaintiffs seek to represent a state-wide class in this lawsuit pursuant to

Rule 23 of the North Carolina Rules of Civil Procedure, the trial court had not ruled on this request at the time it entered the orders which serve as the basis of this appeal. 3 On 14 October 2016, Mr. DiCesare filed a first amended complaint to add James

Little and Johanna MacArthur as named plaintiffs. On 20 November 2017, plaintiffs filed a second amended complaint reflecting the fact that Mr. DiCesare had moved and was no longer a resident of North Carolina. On 21 May 2018, Ms. MacArthur voluntarily dismissed

-4- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

plaintiffs asserted claims against the Hospital Authority for: (1) restraint of trade

pursuant to N.C.G.S. § 75-1 (2019) (providing that “[e]very contract, combination in

the form of trust or otherwise, or conspiracy in restraint of trade or commerce in the

State of North Carolina is hereby declared to be illegal”) and N.C.G.S. § 75-2

(providing that “[a]ny act, contract, combination in the form of trust, or conspiracy in

restraint of trade or commerce which violates the principles of the common law is

hereby declared to be in violation of [N.C.G.S. §] 75-1”) and (2) monopolization in

violation of N.C. Const. art. I, § 34 (providing that “monopolies are contrary to the

genius of a free state and shall not be allowed”), N.C.G.S. § 75-1.1 (providing that

“[u]nfair methods of competition in or affecting commerce, and unfair or deceptive

acts or practices in or affecting commerce, are declared unlawful”), N.C.G.S. § 75-2,

and N.C.G.S. § 75-2.1 (providing that “[i]t is unlawful for any person to monopolize,

or attempt to monopolize, or combine or conspire with any other person or persons to

monopolize, any part of trade or commerce in the State of North Carolina”). In

support of these claims, plaintiffs alleged that the Hospital Authority is “the

dominant hospital system in the Charlotte area, with approximately a fifty percent

share of the relevant market”; that the Hospital Authority had “leveraged its market

power to . . . increase [its] billing rates”; and that its two largest competitors in the

area—Novant and CaroMont Regional Medical Center—had “less than half” and “less

her claims against the Hospital Authority. On 8 August 2018, plaintiffs filed a third amended complaint adding Diana Stone and Kenneth Fries as named plaintiffs.

-5- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

than one tenth” of the Hospital Authority’s annual revenue, respectively. According

to plaintiffs, the Hospital Authority’s market power allowed it “to profitably charge

prices to insurers that are higher than competitive levels across a range of services,

and to impose on insurers restrictions that reduce competition”; “to negotiate high

prices (in the form of high ‘reimbursement rates’) for treating insured patients”; and

to “demand[ ] reimbursement rates that are up to 150 percent more than other

hospitals in the Charlotte area for providing the same services.” Plaintiffs further

alleged that “[the Hospital Authority] encourages insurers to steer patients toward

itself by offering health insurers modest concessions on its market-power driven,

premium prices” while “forbid[ding] insurers from allowing [the Hospital Authority’s]

competitors to do the same.” In plaintiffs’ view, the Hospital Authority’s alleged

conduct “prevent[s] [the Hospital Authority’s] competitors from attracting more

patients through lower prices,” providing its competitors with a “less[ened] incentive

to remain lower priced and to continue to become more efficient” and “reduc[ing]” the

amount of competition faced by the Hospital Authority.

In light of these allegations, plaintiffs claimed that the steering restrictions

contained in the Hospital Authority’s contracts with insurers resulted in an unlawful

restraint of trade and monopolization on the grounds that “these steering restrictions

have had, and will likely continue to have, . . . substantial anticompetitive effects in

the relevant product and geographic market,” including: (1) “protecting [the Hospital

Authority’s] market power and enabling [the Hospital Authority] to charge

-6- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

supracompetitive prices that increase payments for deductibles, copayments and

insurance premiums”; (2) “substantially lessening competition among providers of

acute inpatient hospital services”; (3) “restricting the introduction of innovative

insurance products that are designed to achieve lower prices and improved quality

for acute inpatient hospital services”; (4) “reducing consumers’ incentives to seek

acute inpatient hospital services from more cost-effective providers”; and

(5) “depriving insurers and their enrollees of the benefits of a competitive market for

their purchase of acute inpatient hospital services.” In addition, plaintiffs claimed

that “[e]ntry or expansion by other hospitals in the Charlotte area has not

counteracted the actual and likely competitive harms resulting from” the steering

restrictions; that any future “entry or expansion is unlikely to be rapid enough and

sufficient in scope and scale to counteract these harms to competition”; and that “[the

Hospital Authority] did not devise its strategy of using steering restrictions for any

procompetitive purpose,” “[n]or do the steering restrictions have any procompetitive

effects,” so that “[a]ny arguable benefits of [the Hospital Authority’s] steering

restrictions are outweighed by their actual and likely anticompetitive effects.”

On 14 August 2018, the Hospital Authority filed an answer to plaintiffs’ third

amended complaint in which it denied the material allegations set forth in plaintiffs’

third amended complaint and asserted various affirmative defenses. On the same

date, the Hospital Authority filed a motion seeking judgment on the pleadings in its

favor pursuant to N.C.G.S. § 1A-1, Rule 12(c), on the grounds that (1) “quasi-

-7- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

municipal corporations such as the Hospital Authority are not subject to claims under

Chapter 75” in accordance with the Court of Appeals’ decision in Badin Shores Resort

Owners Ass’n, Inc. v. Handy, 257 N.C. App. 542, 560, 811 S.E.2d 198, 210 (2018)

(holding that, “as a quasi-municipal corporation,” a sanitary district “cannot be sued

for unfair and deceptive trade practices” pursuant to Chapter 75), and “[Chapter 75]

therefore does not apply to the Hospital Authority”; and that (2) “[p]laintiffs [had]

failed to allege facts sufficient to state a claim for violation of . . . [N.C. Const. art. I,

§ 34], and, indeed, [had] alleged facts that affirmatively defeat such a claim.”

On 27 February 2019, the trial court entered an order in which it granted the

Hospital Authority’s motion for judgment on the pleadings with respect to plaintiffs’

restraint of trade and monopolization claims to the extent that those claims were

predicated upon alleged violations of Chapter 75, given that: (1) “our legislature

intended that hospital authorities organized under the [Hospital Authorities] Act

were to be treated as quasi-governmental entities,” so that, “consistent with Badin

Shores, . . . [the Hospital Authority] is . . . exempt from liability pursuant to the

provisions of Chapter 75” and that (2) our decision in Madison Cablevision, Inc. v.

City of Morganton, 325 N.C. 634, 386 S.E.2d 200 (1989) (holding that, where the

General Assembly had “specifically authorized [cities] . . . to own and operate cable

systems and to prohibit others from doing so without a franchise” and where the

General Assembly had not “required [the municipalities] to issue franchises,” “the

legislature cannot be presumed to have intended that conduct so clearly authorized

-8- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

could give rise to state antitrust liability”), “[did] not control the [trial court’s]

analysis” in this case, given the trial court’s “belie[f] that Madison Cablevision,

properly interpreted, stands for the limited proposition that, where the legislature

has contemplated or authorized conduct that could be considered anticompetitive, the

legislature did not intend those acting pursuant to their authorization to

simultaneously be subject to potential liability under Chapter 75,” despite the

absence of any “indicat[ion] that [the Hospital Authority] was explicitly authorized

. . . to include these restrictions in its contracts with insurers.” On the other hand,

the trial court denied the Hospital Authority’s motion seeking judgment on the

pleadings with respect to plaintiffs’ monopolization claim given that N.C. Const. art.

I, § 34, “covers [the Hospital Authority] as a quasi-municipal corporation” and given

that plaintiffs had alleged that there are other small competitors in the Charlotte

area, that the Hospital Authority’s “sheer size gives it excessive market power to

negotiate contracts with health insurers that restrain competition,” and that services

outside of the Charlotte area are not a reasonable substitute for equivalent services

within the Charlotte area, with such allegations serving to demonstrate that

competition had been “stifled” or that freedom of commerce had been “restricted” to

such an extent as to state a monopolization claim pursuant to N.C. Const. art. I, § 34,

and with the facts of this case being distinguishable from those at issue in American

Motors Sales, 311 N.C. 311, 317 S.E.2d 351 (1984) (holding that a statute which

enabled the Commissioner of Motor Vehicles to prohibit a manufacturer from

-9- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

granting more than one Jeep dealership within a specific county did not violate N.C.

Const. art. I, § 34, given that the Commissioner’s actions had lessened, but not

“stifle[d],” competition), a case which the trial court did “not read . . . as requiring a

plaintiff to plead that all competition has been eliminated.” On 28 March 2019,

plaintiffs noted an appeal to this Court from the trial court’s order, which the trial

court had certified for immediate review pursuant to N.C.G.S. § 1A-1, Rule 54(b). On

1 July 2019, the Hospital Authority filed a petition seeking the issuance of a writ of

certiorari requesting that we review the trial court’s order denying the Hospital

Authority’s motion for judgment on the pleadings with respect to plaintiffs’

monopolization claim. On 30 October 2019, this Court allowed the Hospital

Authority’s certiorari petition.

II. Substantive Legal Analysis

A. Standard of Review

The purpose of N.C.G.S. § 1A-1, Rule 12(c) “is to dispose of baseless claims or

defenses when the formal pleadings reveal their lack of merit” and is appropriately

employed where “all the material allegations of fact are admitted in the pleadings

and only questions of law remain.” Ragsdale v. Kennedy, 286 N.C. 130, 137, 209

S.E.2d 494, 499 (1974). In deciding a motion for judgment on the pleadings, “[t]he

trial court is required to view the facts and permissible inferences in the light most

favorable to the nonmoving party,” with “[a]ll well pleaded factual allegations in the

nonmoving party’s pleadings [being] taken as true and all contravening assertions in

-10- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

the movant’s pleadings [being] taken as false.” Id. A party seeking judgment on the

pleadings must show that “the complaint . . . fails to allege facts sufficient to state a

cause of action or admits facts which constitute a complete legal bar thereto.” Van

Every v. Van Every, 265 N.C. 506, 510, 144 S.E.2d 603, 606 (1965). According to well-

established North Carolina law, we review the trial court’s rulings granting or

denying motions for judgment on the pleadings de novo. Old Republic Nat’l Title Ins.

Co. v. Hartford Fire Ins. Co., 369 N.C. 500, 507, 797 S.E.2d 264, 269 (2017) (citing

CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51, 790 S.E.2d 657,

659 (2016)).

B. Chapter 75 Claims

In seeking relief from the challenged trial court order, plaintiffs contend that

the trial court erred by granting the Hospital Authority’s motion for judgment on the

pleadings with respect to its claims pursuant to Chapter 75 for essentially three

reasons. First, plaintiffs assert that our decision in Madison Cablevision requires

that the trial court’s decision with respect to the applicability of Chapter 75 be

reversed. In plaintiffs’ view, Madison Cablevision “did not grant [the city] blanket

immunity from antitrust liability under Chapter 75 because it was a municipality”;

“[r]ather, the Court analyzed the entire statutory scheme governing cable television

and found that antitrust liability did not lie because the legislature had authorized

the challenged conduct and clearly contemplated that such conduct could displace

competition.” In addition, plaintiffs assert that Madison Cablevision recognized the

-11- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

validity of “the analogy between exempting a city’s conduct from [C]hapter 75 . . . and

exempting certain municipal conduct under the ‘state action’ exemption of the

Sherman Act,”4 quoting id. at 656, 386 S.E.2d at 213, and ultimately concluded that,

while “municipalities do not automatically enjoy immunity under the state action

exemption,” quoting Madison Cablevision, 325 N.C. at 656–57, 386 S.E.2d at 213,

“[w]here the legislature has authorized a city to act, it is free to carry out that act

without fear that it will later be held liable under state antitrust laws for doing the

very act contemplated and authorized by the legislature,” quoting id. at 657, 386

S.E.2d at 213 (emphasis added).

According to plaintiffs, “[r]ather than apply[ing] [the] straightforward

analysis” set forth in Madison Cablevision, the trial court erroneously found that that

decision was not controlling given that “the Hospital Authorities Act does not indicate

that [the Hospital Authority] was explicitly authorized by the legislature to include

these [anti-steering] restrictions in its contracts with insurers.” Plaintiffs contend

that “[i]t is precisely because the Hospital Authorities Act does not authorize the

anticompetitive conduct alleged here that the Madison Cablevision standard” has not

been met in this case, so that “[the Hospital Authority] cannot claim immunity from

4 The Sherman Antitrust Act was enacted by Congress in 1890 and prohibits “contract[s] . . . in restraint of trade or commerce among the several States,” 15 U.S.C. § 1, and “monopoliz[ing], or attempt[s] to monopolize, . . . any part of the trade or commerce among the several States,” 15 U.S.C. § 2. In 1914, the Sherman Act was modified by the Clayton Antitrust Act, which, in pertinent part, provides for the awarding of treble damages to “[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws.” 15 U.S.C. § 17.

-12- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

antitrust suit under Chapter 75.” Plaintiffs claim that “the [trial] court’s reading of

Madison Cablevision turns this Court’s decision on its head and effectively renders it

a nullity,” arguing that, “if cities, towns, and quasi-municipal corporations have

blanket immunity from all claims under Chapter 75, this Court’s statutory and policy-

based analysis in Madison Cablevision was superfluous” given that “there is no

mention in Madison Cablevision, even in dicta, that an entity other than the State

could receive the blanket immunity from antitrust claims under Chapter 75 that [the

Hospital Authority] seeks here.”

Secondly, plaintiffs suggest that the state action immunity doctrine—which

they describe as providing “immun[ity] from antitrust liability only if a court finds

that the legislature intended to displace or restrain competition as a matter of state

policy, and actively supervised that policy,” citing Parker v. Brown, 317 U.S. 341, 63

S. Ct. 307, 87 L. Ed. 315 (1943)—should apply here and that the Hospital Authority

is not entitled to claim immunity under the state action doctrine. Plaintiffs suggest

that “there is considerable confusion among the lower courts regarding the proper

lens through which to consider municipal and quasi-municipal corporations’ liability

for state antitrust violations” and that “[this] Court can settle the law on this issue

by formally adopting the federal state action immunity doctrine, as it has twice

indicated it might do.” Plaintiffs assert that “this Court explained in Rose v. Vulcan

Materials Co., [282 N.C. 643, 194 S.E.2d 521 (1973)] [that] Chapter 75 is based on the

federal Sherman Act” and that “the body of law applying the Sherman Act, although

-13- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

not binding upon this Court, . . . is nonetheless instructive in determining the full

reach of the statute,” quoting id. at 655, 194 S.E.2d at 530, and citing Johnson v.

Phoenix Mutual Life Insurance Co., 300 N.C. 247, 262, 266 S.E.2d 610, 620 (1980)

(stating that “it is appropriate for us to look to the federal decisions interpreting the

[Federal Trade Commission] Act for guidance in construing the meaning of [N.C.G.S.

§] 75-1.1”). More specifically, plaintiffs point out that “[N.C.G.S. §§] 75-1 and 75-2

mirror section 1 and section 2 of the Sherman Act, outlawing unreasonable restraints

of trade and monopolization, respectively”; that “[N.C.G.S. §] 75-16 . . . offer[s] a

treble damages remedy” just like its federal counterpart, the Clayton Act; and that

[N.C.G.S. §] 75-1.1 “prohibit[s] . . . unfair and deceptive trade practices” and is, for

that reason, comparable to the Federal Trade Commission Act of 1914. In addition,

plaintiffs suggest that the Court of Appeals has previously utilized federal case law

in construing Chapter 75, see Hyde v. Abbott Laboratories, Inc., 123 N.C. App. 572,

578, 473 S.E.2d 680, 684 (1996) (stating that “[f]ederal case law interpretations of the

federal antitrust laws are persuasive authority in construing our own antitrust

statutes”), and state that “[t]his Court [and the Court of Appeals have] previously

adopted federal antitrust doctrines . . . that benefit defendants like [the Hospital

Authority] by immunizing certain forms of conduct from liability,” citing N.C. Steel,

Inc. v. National Council on Compensation Insurance, 347 N.C. 627, 632, 496 S.E.2d

369, 372 (adopting the federal filed rate doctrine), and Good Hope Hospital, Inc. v.

N.C. Department of Health & Human Services, 174 N.C. App. 266, 275–78, 620 S.E.2d

-14- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

873, 881–82 (2005) (adopting the federal Noerr-Pennington doctrine) Moreover,

plaintiffs assert that we stated in Madison Cablevision, 325 N.C. at 657, 386 S.E.2d

at 213, that our decision in that case was “fortified” by the reasoning of the United

States Supreme Court in Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S. Ct.

1713, 85 L. Ed. 2d 24 (1985), and that we “employed an analysis fully consistent with

federal jurisprudence.”

Plaintiffs emphasize that “[t]he federal state-action immunity doctrine is the

product of seven decades of jurisprudence,” beginning with Parker; that “[i]t is the

best rubric available for understanding the circumstances under which government-

related actors may and may not be liable under the antitrust laws”; and that “the

doctrine grants immunity from suit under the Sherman Act to substate governmental

entities like municipalities and hospital authorities only if the legislature intended

to replace competition with regulation,” with the ultimate goal of “seek[ing] to strike

the appropriate balance between a State’s sovereign ability to govern in ways that

may run afoul of the antitrust laws without ipso facto immunizing actions that may

not truly be those of the [S]tate,” citing Federal Trade Commission v. Ticor, 504 U.S.

621, 112 S. Ct. 2169, 119 L. Ed. 2d 410 (1992). Plaintiffs also point to Federal Trade

Commission v. Phoebe Putney Health System, Inc., 568 U.S. 216, 133 S. Ct. 1003, 185

L. Ed. 2d 43 (2013), in which the Supreme Court determined that, while a Georgia

statute authorized hospital authorities to acquire additional facilities, that statute

“[did] not clearly articulate and affirmatively express a state policy empowering [the

-15- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

defendant] to make acquisitions of existing hospitals that [would] substantially

lessen competition” and, for that reason, reversed a judgment upholding the

defendant’s claim of state action immunity. Id. at 228, 133 S. Ct. at 1012, 185 L. Ed.

2d at 56. In light of the Supreme Court’s conclusion that, “when a State’s position ‘is

one of mere neutrality respecting the municipal actions challenged as

anticompetitive,’ the State cannot be said to have ‘contemplated’ those

anticompetitive actions,” id. at 228, 133 S. Ct. at 1012, 185 L. Ed. 2d at 55, quoting

Community Communications Co., Inc. v. City of Boulder, 455 U.S. 40, 55, 102 S. Ct.

835, 843, 70 L. Ed. 2d 810, 821 (1982), it is not sufficient, for purposes of a claim of

state-action immunity, to show that the hospital authority was merely authorized to

act; instead, the hospital authority must have been authorized to act in an

anticompetitive manner in order to enjoy state-action immunity.

Plaintiffs argue that there is “no evidence” that the General Assembly has

authorized the Hospital Authority “to employ anti-steering provisions that

substantially lessen competition for hospital services or in any way even

contemplated that such conduct would be a likely result of [the Hospital Authority’s]

delegation of authority by the Hospital Authorities Act.” Instead, plaintiffs suggest

that “this case demonstrates the dangers of extending immunity to a nominally public

but largely unsupervised entity like [the Hospital Authority]” given its “clear

institutional interest in deterring competitors or mechanisms that might effectively

serve to lower prices for its services.” According to plaintiffs, “[w]ithout adoption of

-16- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

the state action doctrine, entities like [the Hospital Authority] will claim the right to

flout the . . . State’s antitrust law with impunity, and lower courts will struggle to

reconcile the case law in assessing the anticompetitive conduct of any actor that is

not strictly ‘private.’ ” In plaintiffs’ view, the fact that the Hospital Authority is a

nonprofit corporation is of no moment given that nonprofit hospitals “seek to

maximize their revenues and reimbursement rates just like their for-profit

counterparts,” citing Federal Trade Commission v. University Health, Inc., 938 F.2d

1206, 1213–14 (11th Cir. 1991) (stating that the “assumption that University

Hospital, as a nonprofit entity, would not act anticompetitively was improper”), and

Federal Trade Commission v. OSF Healthcare System, 852 F. Supp. 2d 1069, 1081

(N.D. Ill. 2012) (stating that “the evidence in this case reflects that nonprofit hospitals

do seek to maximize the reimbursement rates they receive”), and that “[t]he adoption

of the nonprofit form does not change human nature,” quoting Hospital Corp. of

America v. Federal Trade Commission, 807 F.2d 1381, 1390 (7th Cir. 1986) (citations

omitted). Finally, plaintiffs note that “by preserving the functional approach

articulated in Madison Cablevision, modeled on the state action doctrine, this Court

would not merely align North Carolina with the federal jurisprudence; it would also

join the majority of its sister states that have considered the issue,” noting that eight

states have judicially adopted the federal state action doctrine “outright”; fourteen

states have laws that “expressly adopt federal antitrust exemptions or that immunize

conduct either required by state law or taken under the express authorization of state

-17- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

law, to the extent of that authorization”; “[two] states [have] reject[ed] special

immunity for state actors altogether”; and “[o]nly six states have more broadly limited

the application of antitrust laws in the case of the state and municipalities,” with

“none of th[o]se decisions or statutes support[ing] extending blanket immunity by

judicial fiat to a multi-billion dollar enterprise like [the Hospital Authority], accused

of violating the North Carolina antitrust laws in ways not intended or foreseen by the

legislature.” According to plaintiffs, “[i]f this Court abandoned Madison Cablevision

and granted [the Hospital Authority] the sweeping immunity it seeks, North Carolina

would truly stand alone.”

Thirdly, plaintiffs contend that Badin Shores was wrongly decided, that

“Badin Shores must give way to Madison Cablevision in the antitrust context” given

that “Badin Shores is at the very least inapplicable to antitrust claims,” and that we

should “leav[e] for another day the question of whether Badin Shores survives in the

unfair and deceptive trade practices context in which it originated.” In plaintiffs’

view, “Badin Shores represents the ultimate conclusion of a muddled body of Court

of Appeals case law.”

As support for this assertion, plaintiffs point to Sperry Corp. v. Patterson, 73

N.C. App. 123, 325 S.E.2d 642 (1985), in which the Court of Appeals held that,

regardless of whether sovereign immunity existed, the Secretary of the North

Carolina Department of Administration was exempt from suit in light of the fact that

Chapter 75 only applies to actions by and against a “person, firm, or corporation,”

-18- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

with the State not falling within any of those categories. Id. at 125, 325 S.E.2d at

644–45. Plaintiffs further assert that, in F. Ray Moore Oil Co. v. State, 80 N.C. App.

139, 142–43, 341 S.E.2d 371, 374 (1986), the Court of Appeals held that the State

could bring an unfair trade practices claim pursuant to Chapter 75 as a consumer

against its fuel oil supplier on the grounds that the State was “engaged in business,”

and was acting in the same capacity as it had been acting in Sperry. Plaintiffs next

direct our attention to the Court of Appeals’ decisions in Rea Construction Co. v. City

of Charlotte, 121 N.C. App. 369, 370, 465 S.E.2d 342, 343 (1996), and Stephenson v.

Town of Garner, 136 N.C. App. 444, 448, 524 S.E.2d 608, 612 (2000), stating that “the

Court of Appeals summarily extended the Sperry exemption to incorporated cities

and towns in unfair trade practices cases” without “examin[ing] the language of

Chapter 75” or “even mention[ing] Madison Cablevision, . . . from which [these]

holdings deviated,” and failed to “incorporate[ ] the F. Ray Moore Oil exemption for

activities by state actor[s] engaged in business” (citation omitted). In addition, in

Badin Shores, plaintiffs contend that the Court of Appeals erroneously determined

that, since “[sanitary] districts have been defined as quasi-municipal corporations”

and since Chapter 75 did not create a cause of action against the State, a sanitary

district “cannot be sued for unfair and deceptive trade practices” “regardless of

whether a sanitary district is entitled to sovereign immunity.” 257 N.C. App. at 560,

811 S.E.2d at 210. According to plaintiffs, “the Court of Appeals failed to incorporate

the limitation to the exemption imposed by F. Ray Moore Oil Co., that a governmental

-19- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

entity can sue . . . under Chapter 75 if it is engaged in business” (quotation omitted),

citing F. Ray Moore Oil Co., 80 N.C. App. at 142, 341 S.E.2d at 374. Finally, plaintiffs

contend that there are “significant differences between the statutes establishing

hospital authorities and sanitary districts,” including that sanitary districts—but not

hospital authorities—possess or exercise powers: (1) “which pertain exclusively to a

government”; (2) “to levy property taxes”; (3) to “make rules for the public—

enforceable as Class 1 misdemeanors and via injunction”; (4) to “require its residents

to use its services” given that it has “no competitors”; and (5) to “establish a fire

department—another core function of government.”

In plaintiffs’ view, “[t]he dramatic extension of Sperry ultimately worked in

Badin Shores cannot stand as a matter of statutory interpretation.” Plaintiffs argue

that, since N.C.G.S. § 75-16 expressly states that a “person, firm, or corporation” can

sue and be sued pursuant to Chapter 75, the fact that the Hospital Authority “claims

to be a quasi-municipal ‘corporation’ ” demonstrates that it falls within the ambit of

Chapter 75. Moreover, plaintiffs note that N.C.G.S. § 12-3(6) “broadly define[s]

‘person’ ” as encompassing “bodies politic and corporate, as well as . . . individuals,

unless the context clearly shows to the contrary,” quoting N.C.G.S. § 12-3(6). In light

of their belief that “[t]he heart of [the Hospital Authority’s] argument—and central

to the [trial court’s] decision—is that as a ‘body corporate and politic’ it qualifies as a

public entity and ‘quasi-municipal corporation,’ ” plaintiffs assert that the fact that

N.C.G.S. § 12-3(6) defines “person” to include “bodies politic and corporate” ensures

-20- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

that the Hospital Authority “is therefore plainly a ‘person’ ” for purposes of Chapter

75. Plaintiffs contend that this interpretation is “mandated” by our decision in

Jackson v. Housing Authority of City of High Point, 316 N.C. 259, 341 S.E.2d 523

(1986), in which, according to plaintiffs, we “dutifully read [N.C.G.S. §] 12-3(6)’s

definition of ‘person,’ and its inclusion of ‘bodies politic,’ into the wrongful death

statute.” For that reason, plaintiffs reason that “surely a quasi-municipal

corporation, even further removed from the auspices of state action, may be sued

under [N.C.G.S. §] 75-16, when the legislature has provided no limitation on its

applicability to hospital authorities, or for that matter any bodies politic.” In the

event that the General Assembly had intended to limit the scope of the term “person”

so as to exclude entities like the Hospital Authority, plaintiffs assert that it could

have provided such a limitation in the statute, but chose not to.

Furthermore, plaintiffs note that “the General Assembly intended Chapter 75

‘to establish an effective private cause of action for aggrieved consumers in this

State,’ ” quoting Marshall v. Miller, 302 N.C. 539, 543, 276 S.E. 2d 397, 400 (1981),

and that the Court of Appeals upheld this principle in Hyde, 123 N.C. App. at 578,

473 S.E.2d at 684 (stating that “the General Assembly intended to provide a recovery

for all consumers” in Chapter 75). Plaintiffs claim that “[a] blanket exemption from

antitrust suit under Chapter 75 for all quasi-municipal corporations regardless of

their legislative grant of authority or role in the marketplace does not effectuate the

Legislature’s intent for Chapter 75 to provide a broad-based recovery by all aggrieved

-21- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

consumers,” particularly given that “it cannot be seriously disputed that, regardless

of its government affiliation, [the Hospital Authority] is a market participant

‘engaged in [the] business’ of selling hospital services.” Plaintiffs further argue that,

“[i]f this Court chooses not to overrule Badin Shores, at a minimum it should correct

the Court of Appeals’ omission of the ‘engaged in business’ exception articulated in F.

Ray Moore Oil” given that “[t]here is no reason that the State should be liable when

‘engaged in business’ whereas multi-billion dollar entities like [the Hospital

Authority] should not be.” As a result, for all of these reasons, plaintiffs request that

we overturn the trial court’s decision to dismiss its claims pursuant to Chapter 75;

that we “curb the uncertainty that has arisen among the lower courts in this area of

the law by officially adopting the state-action immunity doctrine”; and that we

“correct the legal error” contained within the Court of Appeals’ holding in Badin

Shores.

The Hospital Authority responds, as an initial matter, by contending that

Badin Shores applies to plaintiffs’ Chapter 75 claims and that it was correctly

decided.5 The Hospital Authority begins by arguing that it “shares the same material

legal characteristics as the sanitary district in Badin Shores” given that both sanitary

districts and the Hospital Authority (1) “are created pursuant to state statutes by

5 In addition, the Hospital Authority points out that it is a quasi-municipal corporation

and a “body corporate and politic,” citing the Hospital Authorities Act, N.C.G.S. § 131E-16, et seq. In light of the fact that plaintiffs do not appear to contest that the Hospital Authority is a quasi-municipal corporation or a “body corporate and politic,” we refrain from discussing the Hospital Authority’s arguments with respect to this issue in greater detail.

-22- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

acts of local government”; (2) “are governed by boards appointed by elected,

government officials”; (3) “are authorized to issue municipal bonds and notes under

the Local Government Finance Act”; (4) “are subject to North Carolina’s Public

Records Law”; (5) “are subject to North Carolina’s Open Meetings Law”; (6) “are

subject to regulation by the Local Government Commission”; and (7) “have the

power . . . of eminent domain.” In light of these similarities, the Hospital Authority

contends that the trial court properly applied Badin Shores to this case.

Moreover, the Hospital Authority argues that “[t]he Court of Appeals’ decision

in Badin Shores merely represents the logical application of Sperry, F. Ray Moore Oil,

Rea, and Stephenson.” The Hospital Authority notes that the Court of Appeals held

in Sperry that “[t]he consumer protection and antitrust laws of Chapter 75 of the

General Statutes do not create a cause of action against the State, regardless of

whether sovereign immunity may exist,” Sperry, 73 N.C. App. at 125, 325 S.E.2d at

644 (emphasis added), and that neither the State nor an individual “act[ing] as a

representative of the State when dealing with [a] plaintiff” may be sued pursuant to

Chapter 75, id. at 125, 325 S.E.2d at 645. In the Hospital Authority’s opinion, the

Court of Appeals decision in F. Ray Moore Oil Co. merely “confirmed” that the Court’s

“interpretation of [N.C.G.S. §] 75-16 did not rest solely on [the] phrase ‘person, firm,

or corporation,’ but instead on a broader understanding of Chapter 75’s purpose and

intent,” which is the understanding that N.C.G.S. § 75-16 was “aimed at unfair and

deceptive practice by those engaged in business for profit,” quoting F. Ray Moore Oil

-23- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Co., 80 N.C. App. at 142–43, 341 S.E.2d at 374. In view of the fact that “the State did

not engage in ‘business for profit,’ ” the Hospital Authority argues that the Court of

Appeals’ ultimate conclusion that “Chapter 75 was not intended to apply to

governmental entities” “was consistent with [the] broader purpose” of Chapter 75.

The Hospital Authority asserts that the Court of Appeals relied upon such an

understanding, in addition to the “language, history, and context” of N.C.G.S. § 75-

16, in concluding in its subsequent decisions that, “[a]s creatures of the State,” cities

and towns are also “exempt from the reach of Chapter 75.” See Rea Construction, 121

N.C. App. at 370, 465 S.E.2d 343 (cities); Stephenson, 136 N.C. App. at 448, 524

S.E.2d at 612 (towns). The Hospital Authority contends that the General Assembly

“has continued to leave the definitional scope of Chapter 75 untouched,” despite the

“many times since 1985” that it has amended Chapter 75, thereby “demonstrating its

acquiescence to and acceptance of Sperry and its progeny,” citing Wells v.

Consolidated Judicial Retirement System of North Carolina, 354 N.C. 313, 319, 553

S.E.2d 877, 881 (2001) (stating that, “[w]hen the legislature chooses not to amend a

statutory provision that has been interpreted in a specific way, we assume it is

satisfied with the administrative interpretation”). Moreover, the Hospital Authority

notes that this Court has “declined review in at least five cases that rely [on] or

expound on Sperry’s original holding,” so that “principles of stare decisis and a need

to ensure uniform application of the law” “counsel Sperry’s continued application,”

-24- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

citing Bacon v. Lee, 353 N.C. 696, 712, 549 S.E.2d 840, 851–52 (2001), and McGill v.

Town of Lumberton, 218 N.C. 586, 591, 11 S.E.2d 873, 876 (1940).

As to plaintiffs’ argument that the general statutory definition of “person” set

forth in N.C.G.S. § 12-3(6) should govern in this case, the Hospital Authority asserts

that, not only did plaintiffs fail to cite this statute before the trial court, they have

“persistently omit[ted] the critical final words” of that statute, which state that the

general definition shall apply “unless context clearly shows to the contrary.” In the

Hospital Authority’s view, “the language and structure of Chapter 75 show that it

was not intended to apply to the State and local government entities, and thus

‘context clearly shows otherwise’ from Section 12-3(6).” The Hospital Authority

contends that the definition of “person” set forth in N.C.G.S. § 12-3(6) “was only ever

intended to serve as a general, default rule that should not be applied where [the]

context shows the Legislature intended a different meaning.” Furthermore, the

Hospital Authority argues that “applying Section 12-3(6)’s definition of ‘person’ to

Chapter 75 would necessarily mean the statute applies to all ‘bodies politic and

corporate’—which includes the State itself,” given that “Section 12-3(6) does not

provide any basis to distinguish between the State and local governmental bodies

when applying the phrase ‘bodies politic and corporate.’ ” As a result, “adopting

[p]laintiffs’ argument would necessarily mean that Chapter 75 also applies to the

State itself, not just quasi-municipal entities like the Hospital Authority,” “a

conclusion [which would] directly contravene[ ] the rule that ‘[n]ormally, general

-25- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

statutes do not apply to the State unless the State is specifically mentioned therein,’ ”

quoting Davidson County v. City of High Point, 85 N.C. App. 26, 37, 354 S.E.2d 280,

286, modified and aff’d, 321 N.C. 252, 362 S.E.2d 553 (1987).

In addition, the Hospital Authority notes that, “when the General Assembly

has wanted to apply certain provisions of Chapter 75 to municipalities, it has

expressly included them,” as it did in N.C.G.S. § 75-39 (prohibiting municipalities

from conditioning the provision of water and sewer services on the purchase of

electricity or other municipal utilities) and N.C.G.S. § 75-61(9) (adopting a separate

definition of the term “person,” specific to the Identity Theft Protection Act, that

specifically includes a “government” and “governmental subdivision”), and that

“[t]here would be no need to expressly include municipalities and governmental

subdivisions in these provisions if they were already ‘persons’ governed under

Chapter 75 through the application of Section 12-3(6),” citing AH N.C. Owner LLC v.

N.C. Department of Health & Human Services, 240 N.C. App. 92, 111, 771 S.E.2d 537,

548–49 (2015). Finally, the Hospital Authority argues that “the unfair trade practice

and antitrust provisions of Chapter 75 make clear that they are intended to apply to

‘practice[s] by those engaged in business for profit,’ ” quoting F. Ray Moore Oil, 80

N.C. App. at 142, 341 S.E.2d at 374, and that “[t]his emphasis on businesses engaged

in traditional commercial activities for profit plainly excludes governmental entities.”

In spite of plaintiffs’ assertion that Badin Shores and the cases upon which it

relies are only applicable to the unfair and deceptive trade practices portions of

-26- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Chapter 75, and not to the antitrust provisions that also appear in Chapter 75, the

Hospital Authority contends that “[p]laintiffs cannot offer any valid reason” for

interpreting the relevant statutes in this manner. On the contrary, the Hospital

Authority argues that “Sperry, Badin Shores, and the other cases interpreting

[N.C.G.S. §] 75-16 have consistently made clear that they apply with equal force to

claims under the State’s antitrust statutes,”—“a point the [trial court] confirmed” in

its order in this case—and that “either the statute as a whole applies to these entities

or it does not.”

For a variety of reasons, the Hospital Authority disputes the validity of

plaintiffs’ contention that their claims would survive in the event that the Court

elected to utilize concepts drawn from federal antitrust jurisprudence in determining

the scope of Chapter 75. As an initial matter, the Hospital Authority asserts that,

“far from being inconsistent, somehow, with federal law,” “Congress . . . made the

same determination that Badin Shores and its predecessors found in Chapter 75” by

enacting the Local Government Antitrust Act of 1984, 15 U.S.C. § 34, et seq., which

provides that “local governmental entities . . . are exempt from monetary damages

under federal antitrust law,” with “local governments” being defined so as to include

school districts, sanitary districts, “or any other special function governmental unit,”

quoting 15 U.S.C. § 34. The Hospital Authority notes that a federal court recently

held explicitly that the Hospital Authority “was just such a local government, exempt

from money damages under the federal antitrust laws,” see Benitez v. Charlotte-

-27- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Mecklenburg Hospital Authority, 2019 WL 1028018, *5 (W.D.N.C. 2019) (stating that

“[the Hospital Authority] is a special governmental unit under the [Local Government

Antitrust Act]” and that “the [Local Government Antitrust Act] shields [the Hospital

Authority] from antitrust claims for monetary damages”).

In addition, the Hospital Authority argues that plaintiffs are “indirect

purchasers,” being “two or more steps down the distribution chain,” and that federal

law prohibits “indirect purchasers” from “bring[ing] antitrust claims for any purpose

and against any entity,” citing Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct.

2061, 52 L. Ed. 2d 707 (1977). The Hospital Authority points out that, in response to

the Hospital Authority’s certiorari petition requesting this Court to review the right

of indirect purchasers to sue pursuant to Chapter 75, “[p]laintiffs urged this Court

not to ‘graft’ federal doctrines regarding antitrust standing onto Chapter 75” given

that doing so “would have resulted in dismissal of their claims.” In the Hospital

Authority’s view, plaintiffs “effectively take the position that federal law should be

adopted where it only benefits [plaintiffs], and otherwise must be ignored,” an

approach that the Hospital Authority characterizes as “both unprincipled and

disingenuous.”

In view of the fact that N.C.G.S. § 75-16 was enacted a year before Congress

enacted its counterpart, which appears as Section 4 of the Clayton Act, the Hospital

Authority asserts that plaintiffs’ contention that the General Assembly intended to

incorporate the provisions of federal antitrust law into Chapter 75 as of the date of

-28- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

its enactment is “nonsensical” given that the equivalent federal legislation “did not

yet even exist.” Moreover, the Hospital Authority argues that, “even assuming that

the General Assembly intended to incorporate federal law that did not yet exist when

it adopted [N.C.G.S. §] 75-16, the understanding at that time was that local

governments were not subject to the antitrust laws,” with it being “another sixty

years . . . before the [Supreme Court] held that political subdivisions were subject to

federal antitrust laws in certain circumstances,” citing City of Lafayette v. Louisiana

Power & Light Co., 435 U.S. 389, 98 S. Ct. 1123, 55 L. Ed. 2d 364 (1978), and City of

Boulder, 455 U.S. 40, 102 S. Ct. 835, 70 L. Ed. 2d 810. The Hospital Authority notes

that these decisions resulted in the passage of “the [Local Government Antitrust Act]

just two years later,” with the Fourth Circuit having recognized in Sandcrest

Outpatient Services, P.A. v. Cumberland County Hospital System, Inc., 853 F.2d 1139,

1142 (4th Cir. 1988), that the enactment of the Local Government Antitrust Act was

“a response to the filing of ‘an increasing number of antitrust suits, and threatened

suits,’ ” quoting H.R. Rep. No. 965, 98th Cong., 2d Sess. 2, reprinted in 1984 U.S. Code

Cong. & Admin. News 4602, 4603, as a result of the holdings in City of Lafayette and

City of Boulder, which the Fourth Circuit determined “could undermine a local

government’s ability to govern in the public interest,” quoting id.

Next, the Hospital Authority argues that, contrary to plaintiffs’ assertions,

“[n]othing [about our decision in Madison Cablevision] . . . amounts to a

determination that [N.C.G.S. §] 75-16 was meant to apply to local governments,” so

-29- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

that “Madison Cablevision does not govern” plaintiffs’ Chapter 75 claims. Instead,

the Hospital Authority asserts that the Court made clear in Madison Cablevision that

it “did not have to reach [the] question” of whether N.C.G.S. § 75-16 applied to cities

“in order to dispose of the case” given that “the Court was able to decide it based on a

much narrower (and simpler) proposition that it would make little sense for the

General Assembly to authorize an action in one statute only to make it illegal under

another.” Moreover, despite plaintiffs’ reliance upon our decision in N.C. Steel, the

Hospital Authority contends that that decision actually “cuts against [plaintiffs]”

given the fact that “none of the defendants in N.C. Steel [were] even . . . governmental

entit[ies]” and the fact that we “expressly rejected arguments that Madison

Cablevision adopted an analysis akin to the state action immunity doctrine under

federal antitrust law” in that case. According to the Hospital Authority, “Madison

Cablevision and N.C. Steel merely confirm that this Court has refused to adopt”

“[p]laintiffs’ bid to graft the federal state action doctrine onto Chapter 75,” with “no

reported cases in this State ha[ving] ever held that [N.C.G.S. §] 75-16 applies to

governmental entities.”

Finally, the Hospital Authority asserts that the federal state action immunity

doctrine is not applicable to plaintiffs’ Chapter 75 claims. Instead, the Hospital

Authority argues that “[t]he state action immunity doctrine as developed under

federal antitrust law is rooted in principles of federalism and is ‘premised on the

assumption that Congress, in enacting the Sherman Act, did not intend to

-30- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

compromise the States’ ability to regulate their domestic commerce,’ ” quoting

Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 56, 105

S. Ct. 1721, 1726, 85 L. Ed. 2d 36, 44 (1985), and “ha[d] no bearing on whether the

General Assembly intended to subject local governments to claims for treble damages

when it enacted [N.C.G.S. §] 75-16.” The Hospital Authority also asserts that

plaintiffs’ contention that a “majority” of our sister states have adopted the state

action immunity test is “incorrect.” In addition to the five states listed by plaintiffs

as having rejected the opportunity to adopt the state action immunity test into state

law, the Hospital Authority lists four other states which have reached the same result

and states that “there are at least four additional states in which courts construed

their states’ antitrust laws to be inapplicable to municipal corporations irrespective

of the state action immunity doctrine.” Moreover, even though plaintiffs have argued

that numerous states had adopted the state action immunity doctrine, the Hospital

Authority notes that, “[o]nce properly analyzed, there are sixteen states that follow

the federal state action immunity construction for their antitrust laws”; “however,

thirteen of those sixteen states do so as the result of specific statutory enactments

unlike Chapter 75, not as the result of judicial adoption of this doctrine,” and that

there are, “in fact, only three states in which courts have taken the path urged on

this Court by [plaintiffs].”

The Hospital Authority urges that this Court refrain from adopting the state

action doctrine on the grounds that “it would be subjecting political subdivisions . . .

-31- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

to a raft of liability under all sections of Chapter 75,” pointing out that, “[a]ccording

to Senate Judiciary Committee Reports, in the year and half between the time City

of Boulder was decided and the [Local Government Antitrust Act] was passed, there

were ‘more than one hundred Federal antitrust suits seeking treble damages [filed]

against’ ” local government entities, quoting S. Rep. No. 98th Cong., 2d Sess. 2 (1984),

leading to the enactment of the Local Government Antitrust Act, which was intended

to “allow local governments to go about their daily functions without paralyzing fear

of antitrust lawsuits,” quoting Sandcrest, 853 F.2d at 1142. The Hospital Authority

adds that, “[i]n North Carolina, this [impact] would only be exacerbated by the fact

that [N.C.G.S. §] 75-16 applies as well to unfair trade practice claims under [N.C.G.S.

§] 75-1.1,” violations of which are “claim[ed] in most every complaint based on

commercial or consumer transaction[s] in North Carolina,” quoting Matthew W.

Sawchak and Kip D. Nelson, Defining Unfairness in “Unfair Trade Practices,” 90

N.C. L. Rev. 2033, 2034 (2012) (quotation and citation omitted). As a result, for all of

these reasons, the Hospital Authority asks that we affirm the trial court’s decision to

grant its motion for judgment on the pleadings with respect to plaintiffs’ Chapter 75

claims and to dismiss those claims with prejudice.

We agree with the trial court that, as a quasi-municipal corporation, the

Hospital Authority is not a “person, firm, or corporation” for purposes of N.C.G.S.

§ 75-16. To begin with, plaintiffs’ suggestion that the definition of “person” set forth

in N.C.G.S. § 12-3(6) includes bodies politic and corporate, and for that reason, covers

-32- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

the Hospital Authority in light of the fact that the Hospital Authorities Act

specifically defines a hospital authority as “a public body and a body corporate and

politic,” N.C.G.S. § 131E-16(14), and that fact that the Hospital Authority’s

Certificate of Incorporation refers to it as a public body and a body corporate and

politic, ignores the fact that N.C.G.S. § 12-3(6) also expressly states that this

definition applies “unless the context clearly shows to the contrary.” We are

persuaded that the context here “clearly shows to the contrary” given that the

Hospital Authority is acting in its delegated legislative function and not in a private

fashion of any sort, particularly in light of our decision in O’Neal v. Jennette, 190 N.C.

96, 100–01, 129 S.E. 184, 186 (1925), holding that counties—which we know not to be

“persons”—are also “bod[ies] politic and corporate.” We find further support for this

conclusion in Student Bar Ass’n Board of Governors v. Byrd, 293 N.C. 594, 60, 239

S.E.2d 415, 420 (1977) (holding that “the term ‘body politic’ connotes a body acting as

a government; i.e., exercising powers which pertain exclusively to a government, as

distinguished from those possessed also by a private individual or a private

association”); Smith v. School Trustees, 141 N.C. 143, 150, 53 S.E. 524, 527 (1906)

(holding that “the words ‘political’, ‘municipal’, and ‘public’ are used interchangeably”

to describe “municipal corporations”); and Sides v. Cabarrus Memorial Hospital, Inc.,

287 N.C. 14, 18, 213 S.E. 2d 297, 300 (1975) (holding that, where a county possessed

the authority to levy a special tax to operate and maintain a hospital which was

created by legislative act as a “body corporate” and to substantially control that

-33- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

hospital through the actions of the county commission, the hospital was an agency of

the county). Furthermore, we note that the term “person” as used throughout

Chapter 131E is defined as “an individual, trust, estate, partnership, or corporation

including associations, joint-stock companies, and insurance companies,” N.C.G.S. §

131E-1(2), none of which clearly encompass the Hospital Authority.

Plaintiffs’ attempts to equate the Hospital Authority to a corporation subject

to liability under Chapter 75 do not strike us as persuasive given that plaintiffs have

made no genuine effort to distinguish a quasi-municipal corporation from any other

sort of corporation, including an ordinary business corporation. In our view, the two

entities have significant differences. N.C.G.S. § 131E-16(9) defines “corporation” as

“a corporation for profit or having a capital stock which is created and organized

under Chapter 55 of the General Statutes or any other general or special act of this

State, or a foreign corporation which has procured a certificate of authority to

transact business in this State pursuant to Article 10 of Chapter 55 of the General

Statutes” (emphasis added). The record reflects, on the other hand, that the Hospital

Authority is a registered non-profit organization. Simply put, the Hospital Authority

does not appear to us to be a “corporation” as defined in N.C.G.S. § 131E-16(9).

As we have previously held, quasi-municipal corporations are created “to serve

a particular government purpose,” with the General Assembly having “giv[en] to

these specially created agencies [certain] powers and call[ed] upon them to perform

such functions as the Legislature may deem best.” Greensboro-High Point Airport

-34- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Authority v. Johnson, 226 N.C. 1, 9–10, 36 S.E.2d 803, 809 (1946). Quasi-municipal

corporations are “commonly used in [North Carolina] and other states to perform

ancillary functions in government more easily and perfectly by devoting to them,

because of their character, special personnel, skill and care.” Id. at 9, 36 S.E.2d at

809. In such instances, “for purposes of government and for the benefit and service

of the public, the [S]tate delegates portions of its sovereignty, to be exercised within

particular portions of its territory, or for certain well-defined public purposes.”

Gentry v. Town of Hot Springs, 227 N.C. 665, 667, 44 S.E.2d 85, 86 (1947).

As the record clearly reflects, the Hospital Authority was created in accordance

with N.C.G.S. § 131E-17(a) when the Charlotte city council adopted a resolution in

which it “[found] that the public health and welfare, including the health and welfare

of persons of low income in the City and said surrounding area, require the

construction, maintenance, or operation of public hospital facilities for the

inhabitants thereof.” At that point, the mayor of Charlotte appointed eighteen

individuals to serve as commissioners of the Hospital Authority pursuant to N.C.G.S.

§§ 131E-17(b), -18, with the mayor having maintained the authority to remove

commissioners “for inefficiency, neglect of duty, or misconduct in office” in accordance

with N.C.G.S. § 131E-22. The Hospital Authority possesses the authority to acquire

real property by eminent domain pursuant to N.C.G.S. § 131E-24 and to issue

revenue bonds under the Local Government Revenue Bond Act pursuant to N.C.G.S.

§ 131E-26. The Hospital Authority is subject to annual audits by the mayor or the

-35- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

chairman of the county commission pursuant to N.C.G.S. § 131E-29; to the Public

Records Law, see Jackson, 238 N.C. App. at 352, 768 S.E.2d at 24; and to regulation

by the Local Government Commission, see N.C.G.S. §§ 131E-21(f), -26, -32(c). In sum,

the Hospital Authority was clearly created by the City of Charlotte, pursuant to

statute, to provide public healthcare facilities for the benefit of the municipality’s

inhabitants. We are satisfied that the Hospital Authority is a quasi-municipal

corporation, rather than a for-profit corporation coming within the purview of

N.C.G.S. § 75-16.

As a result, we have no hesitation in concluding that the trial court correctly

determined that the Hospital Authority, as a quasi-municipal corporation, is not

subject to liability under Chapter 75. First, we do not find our holding in Madison

Cablevision to be germane in resolving this issue given that, as the trial court noted,

the General Assembly specifically authorized the conduct at issue in that case, which

makes it different than the circumstances that are before us in this case. The General

Assembly’s silence with respect to this issue does not end our analysis; instead, it

simply means that our analysis cannot be as straightforward as it was in Madison

Cablevision.

For that reason, we turn to the Court of Appeals’ decision in Badin Shores, in

which that Court concluded that “regardless of whether a sanitary district is entitled

to sovereign immunity, as a quasi-municipal corporation it cannot be sued for unfair

and deceptive trade practices.” Badin Shores, 257 N.C. App. at 560, 811 S.E.2d at

-36- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

210. The trial court interpreted Badin Shores as standing for the proposition that all

quasi-municipal corporations are exempt from liability under Chapter 75, noting that

“[n]othing in the Badin Shores opinion appears to limit its holding to the factual

scenario presented in that case” and that, “while Badin Shores involved an unfair

and deceptive trade practices claim”, its “holding encompasses all provisions of

Chapter 75.” As we previously discussed, quasi-municipal corporations are agencies

which have been specially created by the General Assembly, Greensboro-High Point

Airport Authority, 226 N.C. at 9–10, 36 S.E.2d at 809, by means of a legislative

delegation of authority, to carry out the governmental purpose of providing a service

to the benefit of the public, Gentry, 227 N.C. at 667, 44 S.E.2d at 86, which the

legislature is not as well positioned to carry out itself. In this sense, quasi-municipal

corporations are an extension of the government that have been created to more

efficiently and effectively manage the provision of necessary services to the public.

Although quasi-municipal corporations are not subject to all of the requirements

applicable to other governmental entities, it is clear that their essential function is,

at its core, the governmental provision of services. For that reason, just as Rea

Construction and Stephenson held that cities and towns are governmental entities

that are exempt from suit under Chapter 75, we conclude that the same is true of a

hospital authority which is jointly operated by a city and a county and, indeed, that

-37- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

all quasi-municipal corporations are exempt from suit under Chapter 75.6 As a result,

we affirm the trial court’s decision to dismiss plaintiffs’ Chapter 75 claims.

C. Article I, Section 34 Claim

In challenging the trial court’s decision to deny its request for entry of

judgment on the pleadings with respect to plaintiffs’ monopolization claim, the

Hospital Authority begins by contending that “the history and interpretation of the

Anti-Monopoly Clause reveals that it applies only when competition is eliminated,”

rather than when “government actions reduce competition, or have an adverse effect

on competition.”7 The Hospital Authority points out that N.C. Const. art. I, § 34, “was

initially adopted as part of the State’s first Constitution in 1776, and thus predates

the federal Sherman Act and the state antitrust laws embodied in Chapter 75 by more

than a century,” citing N.C. Const. of 1776 Declaration of Rights, Art. XXIII; John V.

Orth and Paul M. Newby, The North Carolina State Constitution 90–91 (2d ed. 2013)

(Orth and Newby); and Stephen Calabresi, Monopolies and the Constitution: A

History of Crony Capitalism, 36 Harv. J.L. & Pub. Pol’y 984, 1073 (2012). For that

reason, the Hospital Authority argues that “[t]he Anti-Monopoly Clause . . . is not

6 In light of this determination, we need not determine whether the Hospital Authority

is entitled to the protections of the state action doctrine as it is known in federal antitrust law. 7 The Hospital Authority also asserts that, “by bringing an Anti-Monopoly Clause

claim, [p]laintiffs concede the Hospital Authority is a governmental entity,” despite plaintiffs contentions for the purposes of Chapter 75 that the Hospital Authority was a private actor or “nominally public.” According to the Hospital Authority, plaintiffs were not entitled to assert their monopolization claim if the Hospital Authority was not, in fact, “a unit of government.”

-38- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

meant to be the constitutional embodiment of federal and State antitrust statutes.”

“Instead,” the Hospital Authority contends, “the clause was intended to prevent

historical practices under which ‘English monarchs had used grants of monopolies to

reward their political favorites,’ ” citing Orth and Newby at 90–91, and McRee v.

Wilmington & Raleigh Rail Road Co., 47 N.C. 186 (1855). The Hospital Authority

asserts that, “[w]hile today the word ‘monopoly’ is generally used to refer to the

private accumulation of economic power,” “[t]he original meaning of the word

‘monopoly’ was an exclusive grant of power from the government—in the form of a

‘license’ or ‘patent’—to work in a particular trade or to sell a specific good,” quoting

Calabresi, Monopolies and the Constitution: A History of Crony Capitalism, 36 Harv.

J.L. & Pub. Pol’y at 984 (emphasis added), “which had theretofore been a matter of

common right,” quoting State v. Harris, 216 N.C. 746, 761, 6 S.E.2d 854, 864 (1940).

In the Hospital Authority’s view, the “North Carolina courts have consistently

adhered to this established, historical definition of ‘monopoly’ when applying the

Anti-Monopoly Clause,” citing Rockford-Cohen Group, LLC v. N.C. Department of

Insurance, 230 N.C. App. 317, 749 S.E.2d 469 (2013) (holding that N.C. Const. art. I,

§ 34, prohibits the General Assembly from granting a single, named entity the

exclusive right to train bail bondsmen); Thrift v. Board of Commissioners, 122 N.C.

31, 30 S.E. 349 (1898) (holding that N.C. Const. art. I, § 34, prohibits a municipality

from granting an individual company the exclusive right to construct and maintain

water and sewer systems within its corporate limits); and McRee, 47 N.C. 191

-39- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

(holding that N.C. Const. art. I, § 34, prohibits the Governor from granting

individuals the exclusive right to construct and operate bridges over a stream), while

simultaneously having “upheld government actions that stop short of granting an

exclusive franchise or control over a particular market,” citing Madison Cablevision,

325 N.C. at 654, 386 S.E.2d at 211 (holding that, since “Morganton ha[d] not declared

or established itself as the ‘exclusive’ supplier of cable television to its citizens,” it had

not violated N.C. Const. art. I, § 34, given that it “ha[d] not foreclosed . . . the

possibility that franchises might be granted to other applicants”), or laws and

regulations that “do not grant license holders an exclusive monopoly or otherwise

eliminate competition,” citing State v. Sasseen, 206 N.C. 644, 175 S.E. 142, 144 (1934);

Capital Associated Industries, Inc. v. Stein, 922 F.3d 198, 212 (4th Cir. 2019); and In

re DeLancy, 67 N.C. App. 647, 654, 313 S.E.2d 880, 884 (1984). The Hospital

Authority contends that “the fundamental goal when interpreting the State

Constitution is ‘to give effect to the intent of the framers of the organic law and of the

people adopting it,’ ” quoting Stephenson, 355 N.C. at 370, 562 S.E.2d at 389, with

due consideration being given to the “history of the questioned provision and its

antecedents, the conditions that existed prior to its enactment, and the purposes

sought to be accomplished by its promulgation,” quoting id. at 370–71, 562 S.E.2d at

389.

The Hospital Authority asserts that the American Motors case is “the most

pertinent case to the issues at bar,” particularly given that “[t]he facts here are

-40- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

strikingly similar to those in American Motors,” with American Motors having

demonstrated that “the mere fact that competition had been ‘restrained’ was not

enough to establish a constitutional violation, so long as competition had not been

‘eliminated.’ ” The Hospital Authority notes that, in American Motors, while this

Court recognized that North Carolina’s Anti-Monopoly Clause was similar to a

Georgia constitutional provision that had been used to invalidate auto-dealer statutes

in that state, the Georgia provision prohibited the legislature from approving “any

contract or agreement which may have the effect of defeating or lessening

competition, or encouraging a monopoly,” leading this Court to conclude that “the

scope [of the Georgia provision] seem[ed] considerably more far-reaching into the area

of commerce than our anti-monopoly provision.” American Motors, 311 N.C. at 321,

317 S.E.2d at 359 (emphasis added).

The Hospital Authority asserts that the trial court “relied on an erroneous

reading of American Motors to conclude that a ‘monopoly’ may exist under the Anti-

Monopoly Clause, even though the alleged monopolist controls less than the entire

market and ‘some continued yet reduced competition’ remains,” resulting in the

“commi[ssion of] a number of fundamental errors.” In light of our conclusion in

American Motors that competition which is not “as full and free” as it would be in the

absence of governmental restraint upon the granting of additional dealerships within

a given market area “is by no means eliminated” and that “[m]ore than a mere

adverse effect on competition must arise before a restraint of trade becomes

-41- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

monopolistic,” 311 N.C. at 317, 317 S.E.2d at 356, the Hospital Authority asserts that

the trial court’s decision in this case to allow plaintiffs’ monopolization claim to

proceed, despite the fact that plaintiffs had merely alleged “a restriction on

commerce” by the Hospital Authority, “stands directly at odds with the Court’s

reasoning in American Motors,” particularly given that “the facts showing continued

competition are even greater in this case than in American Motors” since plaintiffs

“have affirmatively alleged [here] that there are six competitors in the same market.”

In addition, the Hospital Authority contends that the trial court “focused on

only a part of the Court’s definition of ‘monopoly’ in American Motors without

considering all of its elements.” Although this Court enumerated four elements in

defining the term “monopoly” in American Motors—”(1) control of so large a portion

of the market of a certain commodity that (2) competition is stifled, (3) freedom of

commerce is restricted, and (4) the monopolist controls prices,” 311 N.C. at 316, 317

S.E.2d at 356—the Hospital Authority argues that the trial court “[f]ocus[ed] on only

the first three elements” in deciding this case, each of “which deal with restriction of

commerce, but not the control of prices indicative of a monopoly,” and thereby

erroneously concluding that “[p]laintiffs had stated a claim even though they have

not alleged any facts to support the crucial fourth element in the American Motors

definition” and even though the trial court “did not conduct any analysis to determine

whether [p]laintiffs had alleged” facts to support the fourth element.

-42- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

In the Hospital Authority’s view, “[t]he ability to control prices lies at the heart

of the ‘public harm’ that the Anti-Monopoly Clause is intended to prevent”; is “the

critical element that distinguishes a monopoly from a firm with just some measure of

‘market power,’ ” citing Eastman Kodak Co. v. Image Technical Services, Inc., 504

U.S. 451, 480, 112 S. Ct. 2072, 2090, 119 L. Ed. 2d 265, 293 (1992) (holding that

monopoly power requires “something greater than market power”); and is “key to

determining whether a plaintiff has stated a claim at all, no matter what definition

of ‘monopoly’ the Court adopts.” Even so, the Hospital Authority argues that

“[p]laintiffs conspicuously stop short of alleging any facts that would show the

Hospital Authority controls prices for hospital services in Charlotte or that it has the

power to exclude competitors,” having simply argued, instead, that the Hospital

Authority’s market power enabled it to “negotiate high prices” and “negotiate

contracts with health insurers that restrain competition.”8 Furthermore, the Hospital

8 In its reply brief, the Hospital Authority states that it “has not argued that a state

actor must eliminate each and every competitor or control 100% of the market before an Anti- Monopoly Clause violation occurs,” and that, instead, “it is clear after American Motors that government actions which merely reduce, but do not eliminate, competition do not cause a violation,” citing 311 N.C. at 317, 317 S.E.2d at 356, and that “governmental actions . . . must create or lead to the creation of a monopoly.” According to the Hospital Authority, while an alleged monopolist need not hold one-hundred percent of the relevant market, the fifty percent share alleged in the complaint in this case is clearly insufficient. See United States v. Aluminum Co. of America, 148 F.2d 416, 424 (2d Cir. 1945) (stating that a ninety percent control over the aluminum market “is enough to constitute a monopoly” but that “it is doubtful whether sixty or sixty-four percent would be enough; and certainly thirty-three per cent is not”); U.S. Dep’t of Justice, Competition and Monopoly: Single-Firm Conduct under Section 2 of the Sherman Act, Chapt. 2, n.23 (2008) (stating that “lower courts generally require a minimum market share of between 70% and 80%” to establish monopoly power for the purpose of antitrust statutes); Exxon Corp. v. Berwick Bay Real Estate Partners, 748 F.2d 937, 940 (5th Cir. 1984) (per curiam) (stating that “monopolization is rarely found when the

-43- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Authority argues that “alleging ‘high prices,’ or even ‘supracompetitve prices,’ is not

enough to establish monopoly power,” citing a number of decisions from certain

federal circuit courts of appeal and from the Middle District of North Carolina.

In addition, the Hospital Authority argues that, in concluding that plaintiffs’

allegations that “outside-market competitors ‘would not prevent a hypothetical

monopolist provider of acute inpatient hospital services located in Charlotte from

profitably imposing small but significant price increases over a sustained period of

time,’ ” the trial court “mistakenly relied on allegations in the complaints regarding

the ‘hypothetical monopolist test’ as if they were factual allegations about the

Hospital Authority itself.” In the Hospital Authority’s view, the “hypothetical

monopolist test” is merely “a thought experiment used to define the boundaries of an

economic market—not an analysis of actual market conditions or facts concerning the

Hospital Authority,” so that plaintiffs’ allegations concerning this subject “ha[ve]

nothing to do with the Hospital Authority.”

defendant’s share of the relevant market is below 70%”); Bailey v. Allgas, Inc., 284 F.3d 1237, 1250 (11th Cir. 2002) (holding that a “market share at or less than 50% is inadequate as a matter of law to constitute monopoly power”); Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1411 (7th Cir. 1995) (stating that “[f]ifty percent is below any accepted benchmark for inferring monopoly power from market share”). In other words, the Hospital Authority asserts that, “[w]hile monopoly power certainly carries with it market power, market power does not create a monopoly”; thus, “a plaintiff must allege facts evidencing not just market power, but monopoly power in order to state a monopoly claim under State [law],” citing a number of federal district court decisions—a showing that the Hospital Authority asserts that plaintiffs simply did not make.

-44- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Finally, the Hospital Authority argues that the trial court “ignor[ed] [this]

Court’s admonition in American Motors that the Anti-Monopoly Clause was intended

to apply only to ‘horizonal’ restraints of competition,” citing 311 N.C. at 318, 317

S.E.2d at 357, which the Hospital Authority describes as “agreements among

competitors which eliminate competition,” “rather than the ‘vertical’ restraints

challenged in this case,” with vertical restraints being defined as “restraints imposed

by agreement between firms at different levels of distribution,” quoting Ohio v.

American Express Co., 138 S. Ct. 2274, 2284, 201 L. Ed. 2d 678, 690 (2018) (quotations

and citation omitted). In the Hospital Authority’s view, “[t]here is good reason to

distinguish vertical and horizontal restraints and limit the reach of the Anti-

Monopoly Clause to horizontal restraints” given that “vertical restraints, such as

those at issue in this case, ‘can often have procompetitive effects,’ ” quoting

Valuepest.com of Charlotte, Inc. v. Bayer Corp., 561 F.3d 282, 287 (2009); are

“presumptively lawful,” citing American Express Co., 138 S. Ct. at 2284, 201 L. Ed. 2d

at 678; and “do not automatically result in the elimination of competition, the

establishment of a monopoly, or the control of pricing.” Instead, the Hospital

Authority contends that vertical restraints can “facilitate the arrangements that lead

hospitals to offer insurance companies discounts in the first place” and “protect

patient choice” by ensuring that “all in-network hospitals have an equal chance to

compete for insurers’ patients” and that “insurance companies are not able to put

their thumb on the scale by requiring [ ] patients to see the insurance company’s

-45- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

preferred provider in order to get the full benefit of the insurance they purchased.”

The Hospital Authority notes that horizontal restraints “are treated much more

critically, as they are more likely to involve the type of ‘naked restraints’ the law

views as inherently anticompetitive, such as price-fixing or market allocation

arrangements among competitors to divide markets,” citing Leegin Creative Leather

Products, Inc. v. PSKS, Inc., 551 U.S. 877, 127 S. Ct. 2705, 168 L. Ed. 2d 623 (2007).

By “ignoring” this distinction, the Hospital Authority contends that the trial court

“replaced a bright-line rule . . . with a much more amorphous inquiry that will require

[c]ourts to second-guess the reasonableness of every government action that arguably

reduces, but does not eliminate, competition,” contrary to our decision in American

Motors.

The Hospital Authority cautions that, if the trial court’s decision is allowed to

stand, it would have “sweeping effects,” with plaintiffs being able to “invoke the Anti-

Monopoly Clause to challenge not just exclusive, government-sponsored franchises

and monopolies, but any governmental action that restrains trade in any way.” The

Hospital Authority states that “[i]t is hard to overstate the change such a ruling

would work in the law, or the extent to which it would hamper governmental

conduct,” “call[ing] into the question the legitimacy of the government’s participation

in markets for transportation, airports, hospitals, ports, water and sewer systems,

construction, cablevision, and education” and leaving “open[ ] to challenge virtually

all regulations governing private commercial activity.” Ultimately, in the Hospital

-46- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Authority’s opinion, the trial court’s interpretation of the Anti-Monopoly Clause

“would have a paralyzing effect on [government’s] ability to effectuate important state

policies,” quoting Madison Cablevision, 325 N.C. at 657, 386 S.E.2d at 213, given that,

“if an adverse effect on competition were, in and of itself, enough to render a state

statute invalid, the States’ power to engage in economic regulation would be

effectively destroyed,” quoting Exxon Corp. v. Governor of Maryland, 437 U.S. 117,

133, 98 S. Ct. 2207, 2218, 57 L. Ed. 2d 91, 105 (1978). In light of the fact that “the

government’s economic actions and commercial regulations are reviewed under the

forgiving ‘rational-basis test,’ ” citing Tinsley v. City of Charlotte, 228 N.C. App. 744,

751, 747 S.E.2d 145, 150 (2013), the Hospital Authority asks that we reverse the

portion of the trial court’s order dealing with plaintiffs’ Anti-Monopoly Clause claim

and direct the Court to enter judgment on the pleadings in favor of the Hospital

Authority with respect to this issue.

In seeking to persuade us to uphold the trial court’s decision with respect to

the monopolization claim, plaintiffs begin by contending that the trial court correctly

concluded that competition need not be “eliminated” to sustain a such a claim.

According to plaintiffs, the Hospital Authority used “isolated language” from our

opinion in American Motors to support its point, ultimately “ignoring the holding [of

that case] itself.” Plaintiffs direct our attention to an excerpt from American Motors

in which we stated that “[a] monopoly results from ownership or control of so large a

portion of the market for a certain commodity that competition is stifled, freedom of

-47- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

commerce is restricted, and control of prices ensues,” “denot[ing] an organization or

entity so magnified that it suppresses competition and acquires a dominance in the

market,” with the result being a “public harm through the control of prices of a given

commodity.” 311 N.C. at 315–16, 317 S.E.2d at 355. According to plaintiffs, we

“reduced this definition” to the four elements to which the Hospital Authority referred

in its argument and, based upon an analysis of the relevant facts, proceeded to

conclude that the Commissioner of Motor Vehicles did not violate N.C. Const. art. I,

§ 34, by revoking a Jeep dealership’s franchise on the basis that: (1) there was already

another Jeep dealership in that county, so that the market would not support two

Jeep dealerships; and (2) there were other Jeep dealerships within a reasonable range

of the affected geographic area.

In addition, plaintiffs assert that the trial court correctly noted that American

Motors was decided on “a full factual record and not on a motion for judgment on the

pleadings,” with the trial court having cited to a decision from the Eastern District of

North Carolina, Jetstream Aero Services, Inc. v. New Hanover County, 672 F. Supp.

879, 885 (E.D.N.C. 1987) (denying the defendant’s motion for judgment on the

pleadings on the grounds that, “assuming [the] plaintiff can prove its allegations at

trial, . . . a jury could find that [the] defendants’ activities constitute a restraint of

trade resulting in a monopoly”), in support of this aspect of its reasoning. Plaintiffs

also argue that the trial court “correctly distinguished this case from American

Motors on the facts” in light of its recognition that, in American Motors, the affected

-48- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

consumers could “easily” reach other, neighboring Jeep dealerships and other four-

wheel drive vehicles, while, in this case, “[a]cute inpatient hospital services outside

of the Charlotte area are not a reasonable substitute for such services within the

Charlotte area,” with “the lack of reasonable substitutes” being “important to

monopolization claims.”

Furthermore, plaintiffs contend that the trial court’s decision was “consistent

with Madison Cablevision” since the municipality at issue in that case had “expressly

left open the possibility that other capable companies could” compete, rendering that

decision consistent with the “longheld principle that merely by entering the market

the state does not, without more, give rise to a [N.C. Const. art. I, § 34,] claim by a

private competitor,” citing 325 N.C. at 654, 386 S.E.2d at 211–12, and asserting that,

otherwise, Madison Cablevision “is simply inapposite to [p]laintiffs’ [N.C. Const. art.

I, § 34,] claim” given that plaintiffs “are not challenging, facially, the ability of a local

government to establish a hospital authority” and given that this case does not

involve a situation in which a “competitor has failed to meet legal requirements to

compete in the market.”

Moreover, plaintiffs claim that the Hospital Authority “ignores or

mischaracterizes a host of decisions that reveal a broader prohibition” than that

provided for in response to the actions of the English monarchs and “effectively wants

the Court to overrule a century of jurisprudence and return the State of North

Carolina civil rights to some imagined scope in 1776” despite the absence of any

-49- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

support for this position. In plaintiffs’ view, the approach advocated by the Hospital

Authority conflicts with this Court’s recognition of the importance of our fundamental

legal principles, citing Thrift, 122 N.C. at 37, 30 S.E. at 351 (stating that “common

law maxims and definitions . . . must be construed by us in the light of changed

conditions”). In addition, plaintiffs assert that “the history of [N.C. Const. art. I, § 34,]

jurisprudence shows it has been regularly applied to ‘abuses’ unknown to King

George,” citing In re Certificate of Need for Aston Park Hospital, Inc., 282 N.C. 542,

551, 193 S.E.2d 729, 735–36 (1973) (holding that the Medical Care Commission’s

decision to “den[y] Aston Park the right to construct and operate its proposed hospital

except upon the issuance to it of a certificate of need” amounts to the creation of “a

monopoly in the existing hospitals contrary to the provisions of [N.C. Const. art. I,

§ 34,]” and makes “a grant to them of exclusive privileges forbidden by [N.C. Const.

art. I, § 32]”);9 Roller v. Allen, 245 N.C. 516, 525, 96 S.E.2d 851, 859 (1957) (striking

down a State scheme for the licensing of tile contracts on the grounds that “no

substantial public interest is shown to be involved or adversely affected,” so that

“regulation is not justified”); and Harris, 216 N.C. 746, 762, 6 S.E.2d 854, 864 (1940)

(striking down a State licensing scheme for dry cleaners which was of “little . . .

9 The Hospital Authority correctly notes that, after our decision in Aston Park, the

Court of Appeals held in Hope – a Women’s Cancer Center, P.A. v. State, 203 N.C. App. 593, 607, 693 S.E.2d 673, 683 (2010), that certificate of need laws are constitutional. In light of that fact, the Hospital Authority asserts that Aston Park “has no continuing validity” and that, even if it did, it is otherwise distinguishable from the facts of this case. In light of our agreement that the facts at issue in this case are materially different from those at issue in Aston Park, we will refrain from commenting on its “continuing validity” in this opinion.

-50- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

importance” other than to give “interested members of the group . . . control [over]

admission to the trade”). Although the Hospital Authority cited to several local-

ordinance cases to support its position, plaintiffs contend that those cases “stand for

the proposition that the state may not privilege one competitor or some competitors

over others, regardless of the fact that competition has not been ‘eliminated,’ ” and

that none of those cases involved a situation in which a single member of a given

profession was allowed to monopolize the relevant trade, citing Sasseen, 206 N.C. at

644, 175 S.E. at 142; Capital Associated Industries, 922 F.3d 198; and In re DeLancy,

67 N.C. App. at 654, 313 S.E.2d at 885.

Plaintiffs also argue assert that their monopolization claim is consistent with

the “original purposes” of the Anti-Monopoly Clause. Plaintiffs assert that “the right

to compete, and the attendant right of North Carolinians to prices set by free

competition,” is precisely the “fundamental principle” protected by N.C. Const. art. I,

§ 34. According to plaintiffs, “there has never been a historical consensus . . . that

unlawful monopolization requires the complete elimination of competition” and that

“even the earliest reported common-law case on monopoly, in 1599, confirms” that

proposition, citing Davenant v. Hurdis (1599) 72 Eng. Rep. 769; Moore 576 (K.B.).

Moreover, plaintiffs suggest that “North Carolina has elected a path of robust

antitrust enforcement,” “being one of two states with a constitutional prohibition on

monopolies at the founding” and having “enacted a treble-damages remedy . . . even

more comprehensive” than the one found in the federal Sherman Act “when one

-51- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

considers that North Carolina has extended the remedy to all consumers, including

indirect purchasers.”

According to plaintiffs, the allegations set out in their third amended complaint

“repeatedly and in detail” alleged that the Hospital Authority possessed “market

power [which] allowed it to control prices,” effectively satisfying the fourth element

of the test for the presence of a monopoly enunciated in American Motors, and that

the trial court “acknowledged those allegations,” having “block quoted two

paragraphs” from plaintiffs’ third amended complaint which “discussed the ways that

[the Hospital Authority’s] power affects prices” in denying the Hospital Authority’s

motion for judgment on the pleadings with respect to this issue. Plaintiffs suggest

that, while the Hospital Authority “hangs its argument” on the fact that plaintiffs

alleged that the Hospital Authority’s market power “enabled it to negotiate high

prices,” “[t]he Hospital Authority may not cherry-pick one word out of a complaint

and then ask the Court to draw inferences about that word in its favor” given that

“[p]laintiffs clearly alleged that [the Hospital Authority] has amassed market power

that is large enough to allow it to control prices.”

According to plaintiffs, the “price-control prong of American Motors follows

from the test for monopoly power under the federal Sherman Act” given that

American Motors relied upon State v. Atlantic Ice & Coal Co., 210 N.C. 742, 188 S.E.

412 (1936), in which plaintiffs assert that we decided “not . . . to be moored strictly to

arcane definitions of monopolies” and, instead, “looked to Black’s Law Dictionary and

-52- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

a Massachusetts case,” Commonwealth v. Dyer, 243 Mass. 472, 486, 138 N.E. 296,

303 (1923) (stating that, “[i]n the modern and wider sense monopoly denotes a

combination, organization or entity so extensive and unified that its tendency is to

suppress competition, to acquire a dominance in the market and to secure the power

to control prices to the public harm with respect to any commodity which people are

under a practical compulsion to buy”), in defining what a monopoly is. With this

“more flexible foundation in place,” plaintiffs assert that “Atlantic Ice proceeded to

apply federal antitrust precedent,” such as Standard Oil Co. v. United States, 221

U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1911), and that decisions by the United States

Supreme Court have consistently held that “the power to control prices or exclude

competition may be inferred from, among other evidence, evidence of the ability to

profitably raise prices substantially above the competitive level for a significant

period of time,” citing Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 27

n.46, 104 S. Ct. 1551, 1566 n.46, 80 L. Ed. 2d 2, 22 n.46 (1984) (holding that “market

power exists whenever prices can be raised above the levels that would be charged in

a competitive market”); United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir.

2001); and Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995).

In plaintiffs’ view, the question of whether the Hospital Authority “in fact has market

power sufficient to meet American Motors’ requirements of control of a portion of the

-53- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

market large enough to stifle competition, restrict commerce, and control prices [is a]

question[ ] properly left to the jury.”10

Finally, plaintiffs suggest that the Anti-Monopoly Clause applies to vertical

restraints as well as horizontal restraints and assert that the Hospital Authority’s

position to the contrary represents “a fundamental misreading of American Motors.”

According to plaintiffs, the Hospital Authority “ignores” the fact that the language

that it relied upon from American Motors “address[ed] the petitioner’s facial

challenge to the dealer protection statute” in that case, making it “not even relevant

conceptually,” while, in this case, plaintiffs “challenge the specific restraints imposed

on competition by [the Hospital Authority],” a fact that renders the language upon

which the Hospital Authority relies beside the point. In addition, plaintiffs suggest

that the Hospital Authority’s “argument that a monopoly claim must involve

horizontal restraints” “cannot be reconciled” with its argument that the Anti-

Monopoly Clause “was understood only to prevent the State from granting or creating

10 In addition, plaintiffs argue that the Hospital Authority waived the right to argue

that plaintiffs failed to plead the “control of prices” element given that the Hospital Authority never set out the elements of the test contained within American Motors before the trial court and cannot, for that reason, assert for the first time on appeal that plaintiffs failed to satisfy the fourth element. The Hospital Authority responds that it “clearly argued below that [p]laintiffs had failed to allege sufficient facts to establish a monopoly,” that it did not advocate the application of the American Motors test, and that it could not, for that reason, “have known, prospectively, that the [trial court] would fail to fully apply it.” In light of the fact that the Hospital Authority contended in the memorandum of law that it submitted in support of its motion for judgment on the pleadings that “[p]laintiffs have not alleged sufficient facts to support such a claim, and, indeed, have alleged facts in their [t]hird [a]mended [c]omplaint that establish just the opposite,” we are satisfied that the Hospital Authority properly preserved this argument for purposes of appellate review.

-54- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

exclusive franchises of monopolies” given that “horizontal restraints, by definition,

contemplate other market actors.” Plaintiffs also note that “this case does not involve

the type of intra-brand restraint that this Court approved in American Motors” since

the “intent and effect” underlying the Hospital Authority’s anti-steering restrictions

“[is] to protect [the Hospital Authority] from price competition from its horizontal,

inter-brand competitors: other hospitals.” As a result, for all of these reasons,

plaintiffs request that we affirm the trial court’s decision to allow plaintiffs to proceed

with respect to their monopolization claim.

In resolving the issue that is before us as a result of the trial court’s decision

to allow plaintiffs’ monopolization claim to survive the Hospital Authority’s motion

for judgment on the pleadings, we are guided by our prior decision in American

Motors, in which we held that the Commissioner of Motor Vehicles did not violate

N.C. Const. art. I, § 34, by allowing only one Jeep franchise to operate within a

particular county in light of the fact that there were Jeep franchises in multiple

adjoining counties. 311 N.C. at 317, 317 S.E.2d at 356. In reaching this conclusion,

we stated that “[a] monopoly results from ownership or control of so large a portion

of the market for a certain commodity that competition is stifled, freedom of

commerce is restricted, and control of prices ensues”; that “[i]t denotes an

organization or entity so magnified that it suppresses competition and acquires a

dominance in the market”; and that “[t]he result is public harm through the control

of prices of a given commodity.” Id. at 315–16, 317 S.E.2d at 355. As a result, we

-55- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

held that “[t]he distinctive characteristics of a monopoly are . . . (1) control of so large

a portion of the market of a certain commodity that (2) competition is stifled,

(3) freedom of commerce is restricted and (4) the monopolist controls prices.” Id. at

316, 317 S.E.2d at 356. In other words, in “order to monopolize, one must control a

consumer’s access to new goods by being the only reasonably available source of those

goods,” with “a consumer [having to] be without reasonable recourse to elude the

monopolizer’s reach.” Id. In addition, we concluded that, “[w]hile competition may

not be as full and free as with multiple . . . Jeep franchises existing in the [same

county], it [was] by no means eliminated,” and that “[m]ore than a mere adverse effect

on competition must arise before a restraint of trade becomes monopolistic.” Id. at

317, 317 S.E.2d at 356. In reliance upon these fundamental principles, we turn to

the application of the test enunciated in American Motors to the factual record that

is before us in this case. At the conclusion of our analysis, we are unable to agree

with the trial court’s determination that plaintiffs adequately pleaded that the

Hospital Authority controlled “so large a portion of the market” that it not only stifled

competition and restricted freedom of commerce, but also controlled prices.

In spite of plaintiffs’ insistence that the Hospital Authority possesses a

“dominan[ce]” over the market and “excessive market power,” plaintiffs explicitly

alleged that the Hospital Authority possessed “an approximately fifty percent share

of the relevant market.” Although reviewing courts have not identified a fixed

percentage market share that an entity must allegedly possess in a given market in

-56- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

order to adequately allege a monopolization claim and although the absence of such

a bright line test compels the conclusion that the relevant determination must be

made on a case-by-case basis, we are satisfied that, when considered in its entirety,

plaintiffs’ third amended complaint does not sufficiently allege that the Hospital

Authority had a monopoly in the relevant market.

In reaching this conclusion, we do not wish to be understood as holding that a

monopolization claim cannot proceed unless all competition has been eliminated and

do not understand our prior decision in American Motors to support the imposition of

any such requirement. On the other hand, however, we agree with the Fourth Circuit

and other jurisdictions that have been skeptical of monopoly claims that, like

plaintiffs, assert that a monopoly exists when an entity, like the Hospital Authority,

has a market share of fifty percent or less. See, e.g., White Bag Co. v. International

Paper Co., 579 F.2d 1384, 1387 (4th Cir. 1974) (citing Hiland Dairy, Inc. v. Kroger

Co., 402 F.2d 968, 974 n.6 (8th Cir. 1986) (stating that “when monopolization has

been found the defendant controlled seventy to one hundred percent of the relevant

market”). For that reason, in light of the market share disclosed by the third

amended complaint, plaintiffs’ monopolization claim cannot survive unless the other

allegations in the third amended complaint show that the Hospital Authority has the

ability to control prices in the Charlotte market in spite of the fact that it only has a

fifty percent market share.

-57- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

Instead of containing additional allegations that show the ability to control

prices, however, the allegations contained in the third amended complaint cut the

other way. For example, the third amended complaint alleges that other hospitals of

significant size provide acute inpatient hospital services in the Charlotte area. In

other words, unlike the situation at issue in American Motors, in which the only

intrabrand competitors were located in different service areas, the allegations

contained in the third amended complaint show that the Hospital Authority faces a

material level of competition within the Charlotte area itself. Moreover, while the

Hospital Authority allegedly used its market power “to insulate itself from

competition” so as to charge “higher prices,” such allegations are not tantamount to

a showing that the Hospital Authority is able to effectively control prices in the

relevant market. As a result, given that plaintiffs have alleged that the Hospital

Authority has no more than a fifty percent share of the market for acute inpatient

hospital services in the Charlotte area and that it faces sizeable competitors within

that market and given that plaintiffs have failed to allege that the Hospital Authority

has the ability to actually control prices in that market, we are not persuaded that

the allegations contained in the third amended complaint suffice to show that the

Hospital Authority possesses “so large a portion” of that market that it risks causing

the sort of harm to the public that N.C. Const. art. I, § 34, is designed to prevent. As

a result, we hold that the trial court erred by denying the Hospital Authority’s motion

for judgment on the pleadings with respect to plaintiffs’ monopolization claim.

-58- DICESARE V. CHARLOTTE-MECKLENBURG HOSP. AUTH.

III. Conclusion

Thus, for the reasons set forth above, we conclude that the trial court did not

err by granting judgment on the pleadings in favor of the Hospital Authority with

respect to plaintiffs’ Chapter 75 restraint of trade and monopolization claims. On the

other hand, however, we further conclude that the trial court did err by denying the

Hospital Authority’s motion for judgment on the pleadings with respect to plaintiffs’

claim pursuant to N.C. Const. art. I, § 34. As a result, the challenged order is

affirmed, in part, and reversed, in part.

AFFIRMED, IN PART; REVERSED, IN PART.

-59-