Stone v. William Beaumont Hospital

782 F.2d 609

• Court: Court of Appeals for the Sixth Circuit
• Decided: January 30, 1986
• Docket: Nos. 84-1086, 84-1149
• Status: Published

Opinions

KRUPANSKY, Circuit Judge.

Plaintiff John M. Stone, M.D. (Stone) appealed the summary judgment entered in favor of defendants William Beaumont Hospital (Beaumont), Seymour Gordon, M.D. (Gordon), Gerald Timmis, M.D. (Timmis), and Gordon-Timmis & Associates, P.C. (GTA). Plaintiff’s complaint, as amended, alleged that Beaumont’s denial of Stone’s application for staff privileges resulted from concerted activity by the defendants in contravention of federal and state antitrust laws. Specifically, Count 1 alleged violations of the Sherman Act, 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2, and sought injunctive relief and treble damages pursuant to the Clayton Act, 15 U.S.C. §§ 15 and 15/26" style="color:var(--green);border-bottom:1px solid var(--green-border)">26. Count 2 presented pendent state claims under the Michigan antitrust statutes, M.S.A. §§ 28.31 and 28.62 [M.C.L.A. §§ 445.701, 445.762].

Stone’s relationship with Beaumont commenced in the late 1960’s when he accepted a position on the hospital’s medical staff. Shortly thereafter, Stone, a cardiologist, was offered the job of developing the “noninvasive” ¹ cardiac laboratory procedures at Beaumont. Stone declined this offer and in 1972, left Michigan and relocated in Illinois for “personal reasons.”

When Stone returned to the Detroit area in the fall of 1973, he became director of the catheterization facilities at Harper Hospital (Harper) in the Detroit Medical Center, a position which he continues to occupy. In addition to his administrative responsibilities at Harper, which Stone characterized as consuming 75 percent of his time, Stone maintains an extensive private cardiology practice. In conjunction with his practice, he has obtained staff positions at six other hospitals, namely, Crittenton, Detroit Receiving, Heritage, the Troy branch of Beaumont, the Grace branch of Northwest, and Lynn Hospital.

Prior to Beaumont’s unsuccessful solicitation of Stone to develop the hospital’s non-invasive cardiology procedures, Beaumont had recruited Gordon and Timmis to develop and oversee the invasive techniques in Beaumont’s cardiology department. Commencing in the mid-1960’s, Gordon and Timmis formed GTA, through which they proceeded to expand Beaumont’s cardiology division from virtually a nonexistent department to a full service state-of-the-art enterprise. In 1978, Beaumont’s administration decided to further enlarge the hospital’s cardiology division, a move which was not supported by Gordon and Timmis. According to Dr. Weintraub (Weintraub), Beaumont’s Director of Medical Services, the purpose of the expansion was to maximize the use of Beaumont’s cardiovascular surgical facilities. At the same time, however, the hospital was not desirous of overburdening its catheterization facilities. Toward this end, a physician’s profile was derived to define characteristics which would complement Beaumont’s expansion plan.

As explained by the district court, the profile developed by Weintraub identified two potential sets of characteristics which would conform to Beaumont’s expansion plan. The first group was personnel, such as GTA physicians, who could be “full-time geographic”² at Beaumont. The second set was comprised of physicians who had access to catheterization facilities at other nearby hospitals, but who would perform cardiac surgery procedures at Beaumont. Members of this latter group would also be required to be associated with physicians who could provide back-up care for their patients at Beaumont.

Upon learning of the planned expansion, Stone applied for staff privileges at Beaumont. When interviewed by Weintraub, Stone stated that he would retain his position at Harper and that he would at most use Beaumont’s catheterization facilities two or three times per month. During a deposition, Weintraub averred that upon conclusion of the interview, he immediately and unilaterally determined that Stone did not meet the hospital’s expansion profile, and thus resolved that Stone’s application should be denied.

After notification of his rejection, Stone received a full administrative hearing before Beaumont’s Appeals Committee, during which he was assisted by legal counsel. Despite Stone’s allegations of a GTA monopoly and/or conspiracy regarding Beaumont’s cardiology division, the Appeals Committee affirmed Weintraub’s decision to deny Stone’s application for staff privileges. Two committee members whom Stone later deposed, Dr. Westfall (Westfall) and Dr. Catto (Catto), both testified that neither Gordon or Timmis nor anyone associated with GTA influenced their respective decisions to deny Stone staff privileges at Beaumont. To the contrary, Westfall and Catto cited reliance on Weintraub’s evaluation of Stone as an inappropriate candidate due to his heavy commitments to other hospitals, his lack of back up capacity at Beaumont, and the fact that Stone’s association with Beaumont would not further the institution’s objectives of maintaining a staff of full-time geographic cardiologists.

Although Stone’s application was denied, six cardiologists who were not affiliated with Gordon or Timmis or GTA were admitted to the Beaumont staff and granted catheter lab privileges. When the district court granted summary judgment for defendants, there were 17 cardiologists on Beaumont’s staff who routinely performed catheterization, ten of whom were not affiliated with the Gordon-Timmis group. Of the ten non-GTA physicians, nine had catheterization privileges. The GTA personnel were all full time at Beaumont and remained the primary users of the catheterization facilities. Beaumont also maintained its long-standing practice of allowing all EKG readings to be performed by GTA associates.

Following the Appeals Committee's decision, Stone initiated the instant action. As observed by the district court, the thrust of plaintiff’s federal antitrust claim is incorporated in paragraph 18 of his original complaint, which alleges:

The refusal to permit Dr. Stone to practice at defendant Hospital has prevented Dr. Stone from competing with those Hospital staff and cardiologists and the Gordon Timmis P.C. for general cardiology practice at defendant Hospital and constitutes a combination and conspiracy among defendants Hospital, Gordon, Timmis, and Gordon Timmis, P.C. to boycott Dr. Stone and. thereby to restrain trade and commerce as hereinabove alleged, all in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and to monopolize the trade and commerce hereinabove alleged in that defendant Hospital has afforded to defendants Gordon, Timmis and Gordon Timmis P.C. monopolistic control and access to the defendant Hospital cardiology practice to the detriment of competing cardiologists and have acted in concert with each other to prevent entry by Dr. Stone as a competitor in that trade and commerce, all in violation of § 2 of the Sherman Act, 15 U.S.C. § 2.

Based on the foregoing, the district court first determined that the plaintiff had sufficiently established the necessary “interstate commerce” nexus to invoke the Sherman Act. However, after reviewing the voluminous materials submitted in support of and in opposition to defendants’ motion for summary judgment, the court further determined that (1) plaintiff had provided no evidence whatsoever which supported the charges that a conspiracy existed between the hospital and GTA to monopolize or restrain trade; (2) the “physician’s profile” utilized in 1978 to select new doctors for Beaumont’s cardiology department was devised for legitimate medical and business needs rather than, as plaintiff urged, a pretext to coverup anticompetitive practices; (3) plaintiff’s attempted monopolization and monopolization claims were similarly without merit; and (4) the federal court was without jurisdiction to entertain the pendent state claims. In response to a motion filed by defendants, the district court subsequently clarified its opinion by deleting reference to “attempted monopolization,” having decided that plaintiff had not raised that issue in his pleadings. From this disposition of his case, plaintiff appealed.

In every federal antitrust case, the critical threshold inquiry is whether a sufficient nexus existed between the parties’ activities and interstate commerce, thus bringing the claim within the Sherman Act’s parameters. In the instant case, the district court concluded such a nexus derived from the out-of-state funds received by GTA and Beaumont for cardiological procedures, supplies which were purchased and received from out-of-state suppliers, and Stone’s out-of-state patient income. This court is not convinced that these elements are sufficient to invoke the Sherman Act’s protections.³

In McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980), the Supreme Court reiterated that the prerequisite for recovery under a Sherman Act, § 1 claim could be satisfied by showing “either that defendants’ activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce.” 444 U.S. at 242, 100 S.Ct. at 509. Since the operation of Beaumont is local in nature, the “effect on interstate commerce” test is applicable. In applying the “effects upon interstate commerce” test, the circuits áre divided, with the Ninth Circuit invoking Sherman Act when any business activity of the defendant effects interstate commerce, Western Waste. Service v. Universal Waste Control, 616 F.2d 1094 (9th Cir.), cert. denied, 449 U.S. 869, 101 S.Ct. 205, 66 L.Ed.2d 88 (1980), and the First, Second, Seventh, Eighth and Tenth Circuits invoking it when the particular business activity challenged by the plaintiff effects interstate commerce. Seglin v. Esau, 769 F.2d 1274 (7th Cir.1985); Hayden v. Bracy, et al., 744 F.2d 1338,1342-1343 (8th Cir.1984); Furlong v. Long Island College Hospital, 710 F.2d 922 (2d Cir.1983); Cordova & Simonpietri Insurance Agency v. Chase Manhattan Bank, 649 F.2d 36, 45 (1st Cir.1981); Crane v. Intermountain Health Care, Inc., 637 F.2d 715, 719-722 (10th Cir.1981) (en banc). The Sixth Circuit, although .aware of the conflict of authority, has not addressed the conflicting interpretations of McLain. See Tarleton v. Meharry Medical College, et al., 717 F.2d 1523, 1528 n. 2, 1532 (6th Cir.1983); James R. Snyder Co., Inc. v. Associated General Contractors, 677 F.2d 1111, 1111 n. 3 (6th Cir.1982). The Supreme Court has recently cited with approval the McLain “effect on interstate commerce” standard for establishing a claim under the Sherman Act, but has provided no additional guidance which would resolve the disparity between the circuits. See, Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 104 S. Ct. 1551, 1571 n. 5, 80 L.Ed.2d 2 (1984) (Brennan, J., concurring). However, a recent Second Circuit opinion sheds some light on this subject.

In Furlong v. Long Island College Hospital, 710 F.2d 922 (2d Cir.1983), the court addressed, as here, a claim that a hospital and various staff members acted in concert to deprive a physician of staff privileges in restraint of trade. Similar to the matter at bar, the ultimate Sherman Act interstate commerce nexus was alleged to arise from the purchase of hospital supplies and services, interstate third patient payments, and federal construction subsidies. Id. at 924. The Furlong district court dismissed the claim as beyond the scope of the Sherman Act. On appeal, the Second Circuit interpreted McLain in examining the parameters of the defendant’s business activity. The critical conclusion articulated in Furlong was that the allegedly unlawful conduct itself must be shown to “infect” those general business activities of the defendant which do, or are likely to, effect interstate commerce. Indeed, this appears to be the plain import of the Supreme Court’s own formulation of the jurisdictional standard, which states that if the contested practice “is local in nature,” that is, not itself in interstate commerce, then the challenged conduct must be shown to have “an effect on some other appreciable activity demonstrably in interstate commerce.” 444 U.S. at 242, 100 S.Ct. at 509 (emphasis added). The Second Circuit opined:

We agree with the First and Tenth Circuits that it would not be prudent to extract from, McLain a generalized rule that antitrust jurisdiction can be established simply by showing that some aspects of a defendant’s business have a relationship to interstate commerce. Rather the inquiry must be whether the defendant’s activity that has allegedly been “infected” by unlawful conduct can be shown “ ‘as a matter of practical economics’ to have a not insubstantial effect on the interstate commerce involved.” McLain, supra, 444 U.S. at 246, 100 S.Ct. at 511, quoting Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738, 745, 96 S.Ct. 1848, 1852, 48 L.Ed.2d 338 (1976). The requisite showing will vary with the type of unlawful conduct alleged. With a price-fixing allegation, as in McLain, the link between the “infected” activities and an ultimate effect on commerce was easily posited, since price-fixing is generally recognized as tending to restrict output, and the complaint adequately alleged interstate activities — real estate financing and title insurance — that would be adversely affected if the local brokerage activities of the defendants were diminished. In prior cases, the Court has spelled out in more detail the causal chain by which the alleged illegality could be expected to affect the relevant lines of commerce. Burke v. Ford, 389 U.S. 320, 88 S.Ct. 443, 19 L.Ed.2d 554 (1967); Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 235-44, 68 S.Ct. 996, 1005-1010, 92 L.Ed. 1328 (1948). We therefore conclude that a plaintiff must allege sufficient facts concerning the alleged violations and its likely effect on interstate commerce to support an inference that the defendants’ activities infected by illegality either have had or can reasonably be expected to have a not insubstantial effect on commerce.

710 F.2d at 926.⁴

Since the instant case is factually identical to the Second Circuit’s well-reasoned Furlong opinion, this court adopts the reasoning and disposition articulated therein and concludes that the trial court in the instant case erred in determining that plaintiff had alleged sufficient facts to support an “interstate commerce” nexus to bring the case within the parameters of the Sherman Act. To the contrary, the gravamen of Stone’s complaint was that defendants illegally excluded him from using a local facility two or three times a month. This court cannot ascertain how such a deprivation has any more than a de minimis impact on interstate commerce. Consequently, the Sherman Act prerequisites simply have not been satisfied.⁵

In view of the foregoing, the lower court’s determination that a sufficient interstate nexus was established is reversed, however, the ultimate disposition of the case, that is, the grant of summary judgment for defendants, is AFFIRMED.

1 . Cardiology involves the diagnosis and treatment of persons with heart disease. In this area, physicians employ procedures that are termed "invasive” or "non-invasive,” depending on whether an actual invasion of the patient’s body is required. For example, an electrocardiogram (EKG) is a non-invasive diagnostic procedure, while a heart catheterization, involving insertion of a catheter into the body to examine the heart, is classified as an invasive technique.

2 . As .explained by defendants, "full-time geographic” is a term used to describe a physician’s ability to devote the majority of his time to one hospital in order to provide an around-the-clock team of qualified back-up physicians.

3 . Defendants filed an untimely notice of appeal wherein they challenged the lower court’s ruling as to jurisdiction. Plaintiffs responded with a motion to dismiss defendants’ appeal as untimely. The motion has been referred to this panel. Although plaintiffs motion is technically correct, dismissal of defendants’ appeal as untimely becomes an exercise in futility because the issue of subject matter jurisdiction is threshold to the court’s authority to invoke its jurisdiction to proceed with an action. Subject matter jurisdiction may be contested at any and all stages of the proceedings, even after judgment and may be addressed by the court sua sponte.

4 . The Furlong court’s interpretation of McLain as requiring plaintiff to allege sufficient facts that the defendants’ purported illegal activity itself have a "not insubstantial effect on interstate commerce” (as opposed to focusing, as did the court below, upon the defendants’ business in general to find the interstate nexus) was cited approvingly by this circuit in McElhinney v. The Medical Protective Co., et al, 738 F.2d 439 (6th Cir.1984). However, that decision, which reversed the trial court’s conclusion that defendants’ general interstate transactions satisfied the criteria, was not published, and therefore is not precedent within this circuit. See Sixth Circuit Rule 24(B); U.S. v. Eckman, 581 F.2d 587, 588 (6th Cir.1978) (per curiam) (unreported decision only binding if res judicata to present appeal).

5 . Judge Martin's concurrence would affirm the trial court's motion for summary judgment on the theory that no antitrust injury was proved. Initially, I seriously question this court’s inherent authority to affirm the district court's award of summary judgment on issues that were not addressed by the district court nor assigned as error, briefed or argued before this court. To support its conclusion, the concurrence cites to County of Oakland v. City of Berkley, 742 F.2d 289, 298 (6th Cir. 1984) and Herm v. Stafford, 663 F.2d 669, 684 (6th Cir.1981). The controlling language of Herm is as follows:

[a]n appellate court can find an alternative basis for concluding that a party is entitled to summary judgment ... provided it proceeds carefully so the opposing party is not denied an opportunity to respond to the new theory.

In the instant case the concurrence contends that the plaintiff was not denied an opportunity to respond to the injury theory because that issue had been raised in the trial court. However, a review of the record in this appellate proceeding fails to disclose that the defendants joined the issue of no injury as an assignment of error or that the plaintiff responded or had an opportunity to respond to the argument before this court. An examination of the record before the trial court concerning the motion for summary judgment reflects that the issue of antitrust injury and damage was properly joined by the pleadings and by the defendants’ affirmative assertions which were specifically denied by the plaintiffs. Moreover, the plaintiff supported his allegations with documentary evidence including the deposition testimony of his expert witness Dr. Paul Feldstein. J.App. 331. Although only one page of Dr. Feldstein’s testimony is incorporated into the record, the following synopsis of that testimony outlined in the plaintiffs brief in opposition to the motion for summary judgment states:

(b) Patient Market

After two hearings before this Court, plaintiff obtained patient origin zip code data showing the residence of patients who were treated for cardiological problems at 18 Detroit area hospitals having catheterization facilities. Plaintiffs expert, Dr. Paul Feldstein, Ph.D., was questioned about this data during ahis recent deposition. Dr. Feldstein testified that there is an area consisting of approximately 15 zip codes from which most of the patients utilize Beaumont Hospital for cardiologic difficulties. In Dr. Feldstein’s opinion, Dr. Stone cannot hope to treat patients residing in this market area unless he obtains staff privileges at Beaumont Hospital (Feldstein Tr. 1:24). Plaintiff intends to utilize this data at trial to establish, through expert testimony, that there is a distinct market of cardiology patients served by Beaumont Hospital and Drs. Gordon and Timmis. In addition, plaintiff will produce data showing that although Beaumont and Harper Hospitals are relatively equal in size, in 1980 the volume of cardiac diagnoses at Beaumont was nearly twice that at Harper.

Because defendants have not seen plaintiffs statistical data, they certainly cannot assert to this Court that the data is incorrect or that the conclusions drawn by plaintiffs expert are erroneous. In any event, definition of market based on the submissions of the respective parties must await trial, inasmuch as it presents a factual issue to be resolved. {See, e.g., FTC v. Rhinechem Corp., 459 F.Supp. 785, 788 (N.D.I11., 1978) ("The definition of a relevant product market is a factual question”).*

Instead, defendants hope to skirt the issue by stating merely that Crittenton Hospital serves the same type of patients as are treated at Beaumont Hospital. However, this is not the same thing as saying that Crittenton Hospital services the same patient population. In point of fact, plaintiff’s patient origin zip code data establishes conclusively that Beaumont Hospital and Crittenton Hospital service separate and distinct markets of cardiac patients.

* See abo Borden, Inc. v. FTC, 674 F.2d 498 (6th Cir. 1982), wherein the Sixth Circuit Court of Appeals stated that "Only a careful factual analysis of the market in question will reveal whether monopoly power, in fact, exists.” Id. 510.

JApp. 123-124.

The conflicts of fact as to the material issue of antitrust injury and damage are demonstrated by the foregoing summary of the plaintiffs challenge to the defendants’ assertions on the issue. Essentially, plaintiff claimed damages for being denied access to a separate and distinct market of cardiac patients served by Beaumont. It is apparent that where, as here, the record reveals the existence of material issues of fact bearing on the presence or absence of an antitrust injury, summary judgment is inappropriate. The concurrence would not only invade a province of the jury, but endorse the highly disfavored practice of weighing the limited evidence in the record, assessing its probative value, passing upon credibility, speculating as to ultimate findings and electing between the factual inferences which could be drawn from the evidence adduced pursuant to a summary judgment motion. See Aronsen v. Crown Zellerbach, 662 F.2d 584 (9th Cir.1981), cert. denied, 459 U.S. 1200, 103 S.Ct. 1183, 75 L.Ed.2d 431 (1983) and KennettMurray Corp. v. Bone, 622 F.2d 887 (5th Cir. 1980).