Date Filed: 07/19/2024
Agency decision
Ask Donna
What actually matters in this document.
Text
Case: 24-20270
Document: 23
Page: 1
Date Filed: 07/19/2024
No. 24-20270
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
–––––––––––––––––––––––––––––––––––––––––––––
FEDERAL TRADE COMMISSION,
Plaintiff – Appellee,
v.
U.S. ANESTHESIA PARTNERS, INCORPORATED,
Defendant – Appellant.
–––––––––––––––––––––––––––––––––––––––––––––
On Appeal from the United States District Court
for the Southern District of Texas
No. 4:23-CV-03560
Hon. Kenneth M. Hoyt
–––––––––––––––––––––––––––––––––––––––––––––
MOTION OF THE FEDERAL TRADE COMMISSION
TO DISMISS INTERLOCUTORY APPEAL
FOR LACK OF APPELLATE JURISDICTION
–––––––––––––––––––––––––––––––––––––––––––––
HENRY LIU
Director, Bureau of Competition
ANISHA S. DASGUPTA
General Counsel
BRADLEY S. ALBERT
Acting Assistant Director
MATTHEW M. HOFFMAN
IMAD D. ABYAD
Attorneys
DANIEL W. BUTRYMOWICZ
TIMOTHY KAMAL-GRAYSON
DYLAN HERTS
PATRICK KENNEDY
Attorneys
FEDERAL TRADE COMMISSION
Washington, DC 20580
FEDERAL TRADE COMMISSION
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
(202) 326-3579
iabyad@ftc.gov
Case: 24-20270
Document: 23
Page: 2
Date Filed: 07/19/2024
CERTIFICATE OF INTERESTED PERSONS
A Certificate of Interested Persons is not required, as appellee is a
government agency. 5th Cir. R. 28.2.1.
i
Case: 24-20270
Document: 23
Page: 3
Date Filed: 07/19/2024
TABLE OF CONTENTS
Certificate of Interested Persons ................................................................i
Table of Authorities ................................................................................... iv
Introduction ................................................................................................ 1
Background ................................................................................................. 3
A. The FTC’s Enforcement Authority ...................................................... 3
B. The FTC’s Allegations .......................................................................... 5
C. USAP’s Motion to Dismiss and the District Court’s
Rulings.................................................................................................. 7
Legal Standards.......................................................................................... 9
Argument .................................................................................................. 11
I.
The District Court Ruling That the FTC Can Bring This
Action Without First Initiating Administrative
Proceedings Is Not Collaterally Reviewable..................................... 12
A. The Ruling Is Effectively Reviewable on Appeal from
Final Judgment........................................................................... 12
B. Whether Section 13(b) Authorizes a Standalone
Court Action for a Permanent Injunction Is Not a
“Serious and Unsettled” Question of Law. ................................ 16
II. The District Court Ruling on USAP’s Constitutional
Argument Is Not Collaterally Reviewable. ....................................... 18
A. The Constitutional Ruling Is Effectively Reviewable
on Appeal from Final Judgment. ............................................... 18
B. The Constitutional Ruling Does Not Raise Serious
and Unsettled Questions of Law................................................ 23
Conclusion................................................................................................. 26
ii
Case: 24-20270
Document: 23
Page: 4
Certificate of Service
Certificate of Compliance
Certificate of Conference
Exhibit A
iii
Date Filed: 07/19/2024
Case: 24-20270
Document: 23
Page: 5
Date Filed: 07/19/2024
TABLE OF AUTHORITIES
CASES
PAGE
AMG Cap. Mgmt., LLC v. FTC,
593 U.S. 67 (2021) ............................................................................ 5, 17
Axon Enter., Inc. v. FTC,
598 U.S. 175 (2023) ........................................................................ 21, 22
Cohen v. Beneficial Indus. Loan Corp.,
337 U.S. 541 (1949) .......................................................................... 9, 10
Collins v. Yellen,
594 U.S. 220 (2021) ........................................................................ 20, 23
Cmty. Fin. Servs. Ass’n of Am., Ltd. v. Consumer
Fin. Prot. Bureau, 51 F.4th 616 (5th Cir. 2022) ........................... 20, 21
Consumers’ Research v. Consumer Prod. Safety Comm’n,
91 F.4th 342 (5th Cir. 2024) ................................................ 8, 23, 24, 25
Digital Equip. Corp. v. Desktop Direct, Inc.,
511 U.S. 863 (1994) ............................................................ 11, 12, 13, 14
Flanagan v. United States,
465 U.S. 259 (1984) .............................................................................. 19
FTC v. Am. Nat’l Cellular, Inc.,
810 F.2d 1511 (9th Cir. 1987) .............................................................. 26
FTC v. Cement Inst.,
333 U.S. 683 (1948) ................................................................................ 4
FTC v. H. N. Singer, Inc.,
668 F.2d 1107 (9th Cir. 1982) .............................................................. 18
iv
Case: 24-20270
Document: 23
Page: 6
CASES (CONT’D)
Date Filed: 07/19/2024
PAGE
FTC v. Kochava Inc.,
671 F.Supp.3d 1161 (D. Idaho 2023) ................................................... 26
FTC v. Syngenta Crop Protection AG,
No. 22-828, 2024 WL 149552 (M.D.N.C. Jan. 12, 2024) .................... 26
FTC v. U.S. Oil & Gas Corp.,
748 F.2d 1431 (11th Cir. 1984) ............................................................ 18
FTC v. Walmart Inc.,
664 F.Supp.3d 808 (N.D. Ill. 2023) ...................................................... 26
Gulfstream Aerospace Corp. v. Mayacamas Corp.,
485 U.S. 271 (1988) .............................................................................. 11
Henry v. Lake Charles Am. Press LLC,
566 F.3d 164 (5th Cir. 2009) ................................................................ 14
Humphrey’s Executor v. United States,
295 U.S. 602 (1935) .......................................................................... 3, 23
Illumina, Inc. v. FTC,
88 F.4th 1036 (5th Cir. 2023) ................................................ 3, 8, 23, 24
In re Deepwater Horizon,
793 F.3d 479 (5th Cir. 2015) .......................................................... 10, 16
Lauro Lines S.R.L. v. Chasser,
490 U.S. 495 (1989) ............................................................ 10, 13, 14, 15
Leonard v. Martin,
38 F.4th 481 (5th Cir. 2022) ................................................ 9, 10, 12, 16
v
Case: 24-20270
Document: 23
Page: 7
CASES (CONT’D)
Date Filed: 07/19/2024
PAGE
Matter of Greene Cnty. Hosp.,
835 F.2d 589 (5th Cir. 1988) ................................................................ 15
McClanahan v. Wilson,
852 Fed. App’x 145 (5th Cir. 2021)...................................................... 15
Midland Asphalt Corp. v. United States,
489 U.S. 794 (1989) ........................................................................ 14, 19
Mohawk Indus., Inc. v. Carpenter,
558 U.S. 100 (2009) .............................................................................. 11
Nixon v. Fitzgerald,
457 U.S. 731 (1982) ........................................................................ 10, 16
Poirrier v. Nicklos Drilling Co.,
648 F.2d 1063 (5th Cir. 1981) .............................................................. 16
Richardson-Merrell Inc. v. Koller,
472 U.S. 424 (1985) .............................................................................. 13
Seila Law LLC v. CFPB,
591 U.S. 197 (2020) .............................................................................. 23
United States v. JS & A Grp., Inc.,
716 F.2d 451 (7th Cir. 1983) ...................................................... 8, 17, 18
United States v. Valencia,
940 F.3d 181 (5th Cir. 2019) .................................................... 19, 20, 21
United States v. Wampler,
624 F.3d 1330 (10th Cir. 2010) ............................................................ 26
Van Cauwenberghe v. Biard,
486 U.S. 517 (1988) .............................................................................. 16
vi
Case: 24-20270
Document: 23
CASES (CONT’D)
Page: 8
Date Filed: 07/19/2024
PAGE
Will v. Hallock,
546 U.S. 345 (2006) .................................................................. 10, 11, 13
STATUTES, RULES, & REGULATIONS
PAGE
15 U.S.C. § 1 ................................................................................................ 4
§ 2................................................................................................ 4
§ 18.............................................................................................. 4
§ 21(a) ......................................................................................... 4
§ 21(b) ......................................................................................... 4
§ 21(c).......................................................................................... 4
§ 41.............................................................................................. 3
§ 45(a) ....................................................................................... 26
§ 45(a)(2) ..................................................................................... 3
§ 45(b) ......................................................................................... 4
§ 45(c).......................................................................................... 4
§ 53(b) ................................................................... 1, 5, 14, 17, 26
28 U.S.C. § 1291 ...................................................................................... 1, 9
§ 1292(b) ................................................................................... 16
vii
Case: 24-20270
Document: 23
Page: 9
Date Filed: 07/19/2024
INTRODUCTION
The Federal Trade Commission moves to dismiss this appeal for
want of appellate jurisdiction. Appellant, U.S. Anesthesia Partners, Inc.
(USAP), seeks to appeal an interlocutory decision of the district court
denying its motion to dismiss the FTC’s complaint against it. Because
neither of the rulings that USAP challenges falls within the narrow
scope of the collateral order doctrine, this Court lacks jurisdiction under
28 U.S.C. § 1291, and the appeal must be dismissed.
The FTC has sued USAP for injunctive relief under Section 13(b)
of the Federal Trade Commission Act, 15 U.S.C. § 53(b), alleging that
USAP violated the antitrust laws by acquiring at least fifteen
competitors since 2012 and executing anticompetitive agreements with
others. USAP moved to dismiss, arguing that Section 13(b) does not
permit the FTC to seek a permanent injunction in court unless it first
initiates an administrative proceeding to adjudicate the same claims. In
a footnote, USAP also joined a co-defendant’s argument that Section
13(b) is unconstitutional because the FTC Commissioners (who
authorized the filing of suit) are not removable at will by the President.
The district court rejected both arguments and denied USAP’s motion to
1
Case: 24-20270
Document: 23
Page: 10
Date Filed: 07/19/2024
dismiss. USAP now seeks to raise the same arguments before this Court
via an interlocutory appeal.
Neither of the challenged rulings meets the strict standards for
application of the collateral order doctrine. That doctrine applies to a
small class of rulings that (1) conclusively determine a disputed
question, (2) resolve an important issue completely separate from the
merits, and (3) are effectively unreviewable on appeal from final
judgment. To meet these requirements, the ruling under review must
present a serious and unsettled question of law, and involve an
important right that would be irreparably lost if review had to await
final judgment.
The issues that USAP raises are not effectively unreviewable on
appeal from a final judgment. USAP cannot show that it will suffer any
cognizable harm if its arguments are not reviewed immediately.
Furthermore, neither of USAP’s claims on appeal presents a serious
and unsettled question of law. To the contrary, USAP’s arguments have
been soundly rejected by every court that has confronted them,
including the Supreme Court and this Court. Because the collateral
order doctrine does not apply, USAP’s appeal must be dismissed.
2
Case: 24-20270
Document: 23
Page: 11
Date Filed: 07/19/2024
BACKGROUND
A.
The FTC’s Enforcement Authority
The FTC is a bipartisan agency charged with enforcing the
antitrust laws, among other responsibilities. It consists of five
Commissioners appointed by the President and confirmed by the
Senate, who serve staggered terms of seven years. 15 U.S.C. § 41. No
more than three Commissioners may be members of the same party. Id.
Commissioners may be removed by the President only for “inefficiency,
neglect of duty, or malfeasance in office.” The Supreme Court held that
this for-cause removal restriction is constitutional in Humphrey’s
Executor v. United States, 295 U.S. 602 (1935), and this Court recently
recognized that Humphrey’s Executor remains binding on the lower
courts, notwithstanding the fact that Congress has granted the FTC
additional powers since 1935. Illumina, Inc. v. FTC, 88 F.4th 1036,
1046-47 (5th Cir. 2023).
As relevant here, Congress “empowered and directed” the FTC to
“prevent” the use of “unfair methods of competition.” 15 U.S.C.
§ 45(a)(2). Unfair methods of competition include, but are not limited to,
any conduct that violates the Sherman Act, including agreements in
restraints of trade and attempts or conspiracies to monopolize a market.
3
Case: 24-20270
Document: 23
Page: 12
Date Filed: 07/19/2024
FTC v. Cement Inst., 333 U.S. 683, 694 (1948); see 15 U.S.C. §§ 1, 2.
Congress also directed the FTC to enforce the Clayton Act, which
prohibits acquisitions the effect of which “may be substantially to lessen
competition, or to tend to create a monopoly.” 15 U.S.C. § 18; see also id.
§ 21(a).
When Congress initially established the FTC in 1914, it directed
the Commission to carry out its enforcement responsibilities through
administrative adjudication. Specifically, Section 5 of the FTC Act
authorizes the FTC to initiate an administrative proceeding whenever it
has reason to believe that a person or company has been or is using an
unfair method of competition. 15 U.S.C. § 45(b); see also id. § 21(b)
(analogous Clayton Act procedure). Following a hearing, if the claims
are proven, the Commission will issue an appropriate cease and desist
order, which is then reviewable in the federal courts of appeals. Id.
§§ 45(b), (c); 21(b), (c).
In 1973, Congress concluded that the FTC required additional
enforcement powers and enacted Section 13(b) of the FTC Act, which
authorizes the Commission to sue in federal district court for injunctive
relief whenever it has reason to believe a defendant “is violating, or is
4
Case: 24-20270
Document: 23
Page: 13
Date Filed: 07/19/2024
about to violate, any provision of law enforced by the [FTC].” 15 U.S.C.
§ 53(b). Section 13(b) authorizes two kinds of injunctive relief actions.
The bulk of the statute concerns actions for a preliminary injunction
pending an administrative determination (e.g., to block a corporate
merger while the Commission considers its legality). But a separate
proviso states that the Commission also “may seek, and after proper
proof, the court may issue, a permanent injunction.” Id. As the Supreme
Court and every other court to consider the issue has recognized, this
proviso authorizes the Commission to “dispense with administrative
proceedings” and seek a standalone injunction in appropriate cases.
AMG Cap. Mgmt., LLC v. FTC, 593 U.S. 67, 76-77 (2021); see also id. at
78 (“[T]he Commission may use § 13(b) to obtain injunctive relief while
administrative proceedings are foreseen or in progress, or when it seeks
only injunctive relief.”) (emphasis added).
B.
The FTC’s Allegations
The FTC brought this action under Section 13(b) against USAP
and its private equity sponsors (collectively referred to as “Welsh
Carson”), alleging an anticompetitive scheme to consolidate the Texas
hospital anesthesia market and drive up the price of anesthesia services
5
Case: 24-20270
Document: 23
Page: 14
Date Filed: 07/19/2024
for patients in Texas. Cmplt. ¶1. Welsh Carson founded USAP in 2012.
USAP then began a “roll-up” strategy by acquiring nearly every large
anesthesia practice in Texas, beginning in Houston and then expanding
to Dallas, San Antonio, Austin, Amarillo, and Tyler. To date, USAP has
acquired at least 15 anesthesia practice groups with over 1,000 doctors
and 750 nurses. Id. ¶¶3-4.
The FTC alleges that USAP enhanced the anticompetitive impact
of its roll-up strategy by entering or maintaining price-setting
arrangements with other, independent anesthesia groups with whom
USAP shared key hospitals in Houston and Dallas. Cmplt. ¶6. Under
these arrangements, USAP charged its own, higher prices for services
that in fact were provided by those independent groups, and shared the
resulting extra revenue with each independent group. Id. In addition,
the FTC alleges that USAP entered into a market-allocation agreement
with another large anesthesia services provider, thereby sidelining a
significant USAP rival. Id. ¶7.
According to the Complaint, as a result of USAP’s multi-pronged
anticompetitive conduct, USAP is now the dominant provider of
hospital anesthesia services in Texas as a whole, and in many of the
6
Case: 24-20270
Document: 23
Page: 15
Date Filed: 07/19/2024
state’s major metropolitan areas (controlling nearly 70% of the market
in Houston and Dallas, for example, and over 52% in Austin). Id. ¶¶8,
162, 261. As of 2021, USAP has outsized its second-largest rival group
by four times in Houston; six times in Dallas; and nearly seven times in
Texas as a whole. Id. ¶8. Moreover, USAP’s insurance reimbursement
rates are double the median rate of other anesthesia providers in Texas.
Id. In other words, USAP has been able to extract monopoly profits
while simultaneously growing its monopoly power. Id. ¶9.
C.
USAP’s Motion to Dismiss and the District Court’s
Rulings
USAP and Welsh Carson both moved to dismiss the complaint
pursuant to Rule 12(b)(6). ECF 97, 100. As relevant to this interlocutory
appeal, USAP argued that Section 13(b) of the FTC Act does not
authorize the agency to sue for a permanent injunction without first
initiating an administrative proceeding. ECF 97 at 12-18. In a footnote,
USAP “join[ed] and incorporate[d] by reference” Welsh Carson’s
argument that by enacting Section 13(b), Congress “unconstitutionally
vested executive law-enforcement power in an agency whose members
are not removable at will by the President.” Id. at 16 n.7.
7
Case: 24-20270
Document: 23
Page: 16
Date Filed: 07/19/2024
The district court rejected both arguments.1 The court noted that
USAP’s claim of a required parallel administrative proceeding is
precluded by “[t]he statutory language of [S]ection 13(b),” which “limits
the availability of preliminary injunctive relief to situations ‘pending
issuance of a complaint by the Commission’,” but contains “[n]o similar
language … relating to permanent injunctive relief.” Op. 16 (quoting
United States v. JS & A Grp., Inc., 716 F.2d 451, 456 (7th Cir. 1983)).
The court further noted that its reading of Section 13(b) was consistent
with the Supreme Court’s analysis in AMG. Op. 17.
The district court also rejected the constitutional argument that
USAP had borrowed “with no elaboration” from Welsh Carson’s motion.
Op. 21 n.5. The court held that the argument is foreclosed by
Humphrey’s Executor and decisions of this Court, including Illumina, 88
F.4th at 1047, and Consumers’ Research v. Consumer Prod. Safety
Comm’n, 91 F.4th 342 (5th Cir. 2024). Op. 21.
USAP has appealed these interlocutory rulings, asserting that
this Court has appellate jurisdiction under the collateral order doctrine.
1 The district court granted Welsh Carson’s motion to dismiss on other
grounds not relevant to this appeal. Op. 9-16.
8
Case: 24-20270
Document: 23
Page: 17
Date Filed: 07/19/2024
The notice of appeal frames the issues as (1) “whether the [FTC] has
statutory authority to file this federal court action for permanent
injunctive relief without first initiating administrative proceedings,”
and (2) “if so, whether the exercise of that quintessentially executive
power is constitutional given that the FTC is an independent agency
whose Commissioners cannot be removed at will by the President.” ECF
153 at 1 (internal quotation marks and citations omitted).
LEGAL STANDARDS
Under 28 U.S.C. § 1291—the only basis for appellate jurisdiction
USAP asserts here—this Court has jurisdiction over appeals from “final
decisions” of the district courts. See, e.g., Leonard v. Martin, 38 F.4th
481, 485 (5th Cir. 2022). In general, a “final decision” is one that “ends
the litigation on the merits and leaves nothing more for the court to do
but execute the judgment.” Id. (cleaned up). Nonetheless, there is a
“small class” of rulings that “finally determine claims of right separable
from, and collateral to, rights asserted in the action” that are deemed
final decisions. Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546
(1949). Although not disposing of the litigation, these collateral orders
are immediately appealable because they are “too important to be
9
Case: 24-20270
Document: 23
Page: 18
Date Filed: 07/19/2024
denied review and too independent of the cause itself to require that
appellate consideration be deferred until the whole case is adjudicated.”
Id.; see also Will v. Hallock, 546 U.S. 345, 349-51 (2006).
To qualify for appeal under the collateral order doctrine, the
district court’s ruling “must” (1) “conclusively determine the disputed
question”; (2) “resolve an important issue completely separate from the
merits”; and (3) “be effectively unreviewable on appeal from a final
judgment.” Will, 546 U.S. at 349; accord Leonard, 38 F.4th at 486.
Additionally, “a collateral appeal of an interlocutory order must present
a ‘serious and unsettled question’.” Nixon v. Fitzgerald, 457 U.S. 731,
742 (1982) (quoting Cohen, 337 U.S. at 547); accord In re Deepwater
Horizon, 793 F.3d 479, 490 (5th Cir. 2015). This requirement, which
goes to the importance of the issue, “has sometimes been characterized
as a discrete fourth requirement and other times been wrapped up in an
analysis of both the second and third requirements.” Deepwater
Horizon, 793 F.3d at 484; see also Lauro Lines S.R.L. v. Chasser, 490
U.S. 495, 502 (1989) (Scalia, J., concurring) (“The importance of the
right asserted has always been a significant part of [the] collateral
order doctrine.”).
10
Case: 24-20270
Document: 23
Page: 19
Date Filed: 07/19/2024
These conditions for collateral review are “stringent.” Digital
Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868 (1994). An order
that “fails to satisfy any one of these requirements … is not appealable
under the collateral-order exception to § 1291.” Gulfstream Aerospace
Corp. v. Mayacamas Corp., 485 U.S. 271, 276 (1988). Otherwise, the
collateral order exception will “swallow the general rule that a party is
entitled to a single appeal, to be deferred until final judgment has been
entered.” Digital Equip., 511 U.S. at 868. Accordingly, “the class of
collaterally appealable orders must remain ‘narrow and selective in its
membership’.” Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100, 113
(2009) (quoting Will, 546 U.S. at 350).
ARGUMENT
USAP’s interlocutory appeal should be dismissed because the
district court’s order denying USAP’s motion to dismiss does not end the
case, and neither of the two district court rulings that USAP challenges
is a “final decision” under the collateral order doctrine.
11
Case: 24-20270
I.
Document: 23
Page: 20
Date Filed: 07/19/2024
THE DISTRICT COURT RULING THAT THE FTC CAN BRING
THIS ACTION WITHOUT FIRST INITIATING ADMINISTRATIVE
PROCEEDINGS IS NOT COLLATERALLY REVIEWABLE.
The first district court ruling that USAP challenges—the holding
that the FTC can seek a permanent injunction under Section 13(b)
without first initiating administrative proceedings—is not a final
decision under the collateral order doctrine because it can be effectively
reviewed on appeal from a final judgment and does not involve a serious
and unsettled question of law.
A.
The Ruling Is Effectively Reviewable on Appeal
from Final Judgment.
USAP’s argument that the FTC cannot sue under Section 13(b)
without first initiating an administrative action is not effectively
unreviewable on appeal from a final judgment, and USAP will not lose
any important rights if the appeal does not proceed now. Even if USAP
could show it is burdened by being required to litigate only in a federal
forum rather than in a federal forum and an administrative forum,
“[a]n order is not ‘effectively unreviewable’ just because it ‘may burden
litigants in ways that are only imperfectly reparable by appellate
reversal of a final district court judgment’.” Leonard, 38 F.4th at 486
(quoting Digital Equip., 511 U.S. at 872). Rather, the “decisive
12
Case: 24-20270
Document: 23
Page: 21
Date Filed: 07/19/2024
consideration is whether delaying review until the entry of final
judgment ‘would imperil a substantial public interest’ or ‘some
particular value of a high order’.” Id. (quoting Will, 546 U.S. at 352-53).
This is the case only “where the order at issue involves an asserted
right the legal and practical value of which would be destroyed if it were
not vindicated before trial.” Id. (internal quotation marks and citations
omitted). Courts “must make this determination on a categorical basis,
looking only at whether the class of claims, taken as a whole, can be
vindicated by other means than immediate appeal.” Id. (internal
quotation marks and citations omitted).
The fact that the appellant may incur additional legal costs—even
substantial ones—if review proceeds in the ordinary course after final
judgment is not enough to justify interlocutory review. The Supreme
Court has “declined to find the costs associated with unnecessary
litigation to be enough to warrant allowing the immediate appeal of a
pretrial order.” Lauro Lines, 490 U.S. at 499; see also RichardsonMerrell Inc. v. Koller, 472 U.S. 424, 436 (1985) (“[T]he possibility that a
ruling may be erroneous and may impose additional litigation expense
13
Case: 24-20270
Document: 23
Page: 22
Date Filed: 07/19/2024
is not sufficient to set aside the finality requirement imposed by
Congress” in § 1291).
The quintessential example of an issue that is effectively
unreviewable and hence appealable under the collateral order doctrine
is where the appellant claims immunity from suit—i.e., the right not to
be tried at all. See, e.g., Lauro, 490 U.S. at 499.2 But USAP is not
claiming an immunity from suit. It does not argue that it should not
have to answer the FTC charges at all. Rather, USAP’s argument is
that the FTC lacks authority to sue for a permanent injunction in
district court under Section 13(b) unless the FTC also files a parallel
administrative proceeding—raising the same claims and seeking the
same relief.3
USAP’s argument boils down to a claim that the FTC failed to
comply with a purported procedural requirement to issue an
2 The Supreme Court has cautioned that “claims of a ‘right not to be
tried’” should be viewed “with skepticism, if not a jaundiced eye.”
Digital Equip., 511 U.S. at 873. “A right not to be tried in the sense
relevant to the Cohen exception rests upon an explicit statutory or
constitutional guarantee that trial will not occur.” Henry v. Lake
Charles Am. Press, LLC, 566 F.3d 164, 178 (5th Cir. 2009) (quoting
Midland Asphalt Corp. v. United States, 489 U.S. 794, 801 (1989)).
3 Under Section 13(b), initiation of an administrative case neither
precludes nor suspends ongoing judicial proceedings. 15 U.S.C. § 53(b).
14
Case: 24-20270
Document: 23
Page: 23
Date Filed: 07/19/2024
administrative complaint before going to court. USAP does not contest
that the court proceedings could then still go on all the way to final
judgment. That is not an issue that imperils a substantial public
interest or some other order of a high value. It is a garden-variety claim
of procedural error that is properly addressed on appeal from a final
judgment. Indeed, even if the issuance of an administrative complaint
were viewed as a jurisdictional requirement (which it is not), that would
not make the order immediately appealable. Questions of subject
matter jurisdiction are “far from unreviewable on appeal from a final
judgment.” Matter of Greene Cnty. Hosp., 835 F.2d 589, 596 (5th Cir.
1988); accord McClanahan v. Wilson, 852 Fed. App’x 145 (5th Cir.
2021).
Insofar as USAP contends that adjudication of the FTC charges
should take place administratively instead of in district court—an
argument that cannot be squared with Section 13(b)’s text—the order is
still not effectively unreviewable. A claimed entitlement not to be sued
in a particular court is “different in kind” than “a right not to be sued at
all.” Lauro Lines, 490 U.S. at 501. Thus, courts do not permit immediate
appeal from orders denying motions to enforce a contractual forum
15
Case: 24-20270
Document: 23
Page: 24
Date Filed: 07/19/2024
selection clause, id. at 500, or denying motions to dismiss on forum non
conveniens grounds, Van Cauwenberghe v. Biard, 486 U.S. 517, 527
(1988); see also Leonard, 38 F.4th at 487; Deepwater Horizon, 793 F.3d
at 485. Likewise, an “order denying remand of a case removed to federal
court is not a final order within the meaning of 28 U.S.C. § 1291” and is
not collaterally reviewable. Poirrier v. Nicklos Drilling Co., 648 F.2d
1063, 1064-65 (5th Cir. 1981) (denial of motion to remand to state court
“cannot be appealed unless certified” under 28 U.S.C. § 1292(b)).
Similarly here, insofar as USAP is arguing that the FTC’s claims must
be adjudicated in an administrative forum rather than a court, that is
not an issue that is effectively unreviewable on appeal from a final
judgment.
B.
Whether Section 13(b) Authorizes a Standalone
Court Action for a Permanent Injunction Is Not a
“Serious and Unsettled” Question of Law.
The district court’s ruling that the FTC can sue for a permanent
injunction under Section 13(b) without first initiating an administrative
action is also collaterally unreviewable because it presents no “serious
and unsettled question.” Nixon, 457 U.S. at 742; Deepwater Horizon,
793 F.3d at 490. To begin with, the Supreme Court recognized in AMG
16
Case: 24-20270
Document: 23
Page: 25
Date Filed: 07/19/2024
that the language of Section 13(b) reasonably can be read as allowing
the Commission to “dispense with administrative proceedings.” 593 U.S.
at 76-77. The Court observed that “the Commission may use § 13(b) to
obtain injunctive relief while administrative proceedings are foreseen or
in progress, or when [the Commission] seeks only injunctive relief.” Id.
at 78 (emphasis added). That is, the Court recognized that the FTC may
seek permanent injunctive relief in court even where administrative
proceedings are not “foreseen or in progress.”
Every court of appeals to have considered the issue has likewise
concluded that the plain text of Section 13(b)’s “permanent injunction”
proviso allows the FTC to sue in court without also filing a duplicative
administrative case. As the Seventh Circuit has explained, “[t]he
statutory language of section 13(b) limits the availability of preliminary
injunctive relief to situations ‘pending issuance of a complaint by the
Commission’,” but “[n]o similar language is found in the second proviso
relating to permanent injunctive relief.” JS & A Grp., 716 F.2d at 456
(quoting 15 U.S.C. § 53(b)). “Had Congress intended the initiation or not
of an administrative cease and desist proceeding to affect the ability of
the Commission to seek permanent injunctive relief, it undoubtedly
17
Case: 24-20270
Document: 23
Page: 26
Date Filed: 07/19/2024
would have included language similar to that found in the provision
governing preliminary injunctive relief.” Id. Other courts of appeals
have reached the same conclusion. See, e.g., FTC v. U.S. Oil & Gas
Corp., 748 F.2d 1431, 1434-35 (11th Cir. 1984); FTC v. H. N. Singer,
Inc., 668 F.2d 1107, 1110-11 (9th Cir. 1982). And no court has reached
the opposite conclusion.
II.
THE DISTRICT COURT RULING ON USAP’S CONSTITUTIONAL
ARGUMENT IS NOT COLLATERALLY REVIEWABLE.
USAP’s other claim on interlocutory appeal—that the FTC’s
exercise of executive power violates Article II of the Constitution
because the FTC “is an independent agency whose Commissioners
cannot be removed at will by the President,” ECF 153 at 1—is
collaterally unreviewable for the same reasons. The issue is not
effectively unreviewable on appeal from a final judgment and does not
present a serious and unsettled question.
A.
The Constitutional Ruling Is Effectively
Reviewable on Appeal from Final Judgment.
USAP’s argument that Section 13(b) is unconstitutional because
the FTC is prohibited from exercising executive power (i.e., filing suit
under Section 13(b)) is not effectively unreviewable on appeal from a
final judgment. Constitutional challenges like this are commonplace,
18
Case: 24-20270
Document: 23
Page: 27
Date Filed: 07/19/2024
but unless they fit into the narrow class of collaterally reviewable
claims (e.g., claims of immunity from trial), they must adhere to the
rule of finality in appeals. As the Supreme Court has emphasized, not
“every violation of [constitutional] protections” amounts to “a defect so
fundamental” that it warrants collateral review. Midland Asphalt, 489
U.S. at 802. “There is a crucial distinction between a right not to be
tried and a right whose remedy requires the dismissal of charges.” Id. at
801 (internal quotation marks and citations omitted); see also Flanagan
v. United States, 465 U.S. 259, 259-60 (1984) (despite Sixth Amendment
rights at risk, order disqualifying counsel in criminal case not
collaterally reviewable). Here, even if the FTC’s action were deemed
unconstitutional, USAP will suffer no cognizable and irreparable harm
from denial of an immediate appeal, for the reasons discussed above.
Insofar as USAP is arguing that the FTC Commissioners lack any
enforcement authority because they are not removable at will, that
claim likewise is effectively reviewable on appeal from a final judgment.
This Court addressed a similar issue in United States v. Valencia, 940
F.3d 181 (5th Cir. 2019), where a criminal defendant sought to appeal
the denial of his motion to dismiss his indictment on the grounds that
19
Case: 24-20270
Document: 23
Page: 28
Date Filed: 07/19/2024
the Acting Attorney General was unconstitutionally appointed. The
Court held that the order was not effectively unreviewable and the
defendant would “have the opportunity to raise these same issues when
appealing any adverse final judgment per § 1291.” Id. at 183.
USAP’s argument for collateral review is even weaker than the
claim in Valencia because, here, USAP does not and cannot argue that
any of the FTC Commissioners were improperly appointed. Unlike an
improper appointment, an improper removal restriction voids agency
action only when the challenging party shows that the removal
restriction actually caused harm. Collins v. Yellen, 594 U.S. 220, 257260 (2021); see also Cmty. Fin. Servs. Ass’n of Am., Ltd. v. Consumer
Fin. Prot. Bureau, 51 F.4th 616, 631 (5th Cir. 2022) (“[T]he challenging
party must demonstrate not only that the removal restriction violates
the Constitution but also that ‘the unconstitutional removal provision
inflicted harm’.”) (quoting Collins, 594 U.S. at 260), rev’d on other
grounds, 144 S. Ct. 1474 (2024).4
4 To secure relief from allegedly improper removal restrictions, the
challenging party must demonstrate “three requisites for proving harm:
(1) a substantiated desire by the President to remove the
unconstitutionally insulated actor, (2) a perceived inability to remove
20
Case: 24-20270
Document: 23
Page: 29
Date Filed: 07/19/2024
If claims of unconstitutional appointments of federal enforcement
officials are collaterally unreviewable, see Valencia, 940 F.3d at 183,
then challenges like USAP’s to the removal protections for such officials
are certainly collaterally unreviewable. Whereas challenges to the
appointment of officials typically raise a purely legal question that
courts could easily address on an interlocutory appeal, challenges to
officials’ removal restrictions are inextricably connected to the
underlying facts. Specifically, proving harm from an allegedly improper
removal protection implicates, at a minimum, the factual circumstances
of an attempted presidential removal, see supra note 4, which renders
the issue altogether inappropriate for collateral review.
The Supreme Court’s decision in Axon Enterprise, Inc. v. FTC, 598
U.S. 175 (2023), does not alter the collateral review analysis here. See
ECF 153 (Notice of Appeal), at 1 (USAP invoking Axon). In Axon, the
respondent in an FTC administrative proceeding brought a freestanding
declaratory judgment action in federal district court against the FTC,
the actor due to the infirm provision, and (3) a nexus between the desire
to remove and the challenged actions taken by the insulated actor.”
Cmty. Fin. Servs., 51 F.4th at 632. USAP never even alleged below any
of these requisites for proving harm.
21
Case: 24-20270
Document: 23
Page: 30
Date Filed: 07/19/2024
asserting facial constitutional challenges to the FTC’s administrative
process. Axon, 598 U.S. at 183. The Court noted the “extraordinary”
nature of Axon’s claims, id. at 180, describing them as “far-reaching,”
id. at 185, attacking a “fundamental aspect of the Commission’s
structure,” id. at 182, and going “to the core of the FTC’s existence,” id.
at 189. The Court held that claims of that nature—“fundamental, even
existential” challenges to the very structure of administrative
agencies—were not precluded by the judicial review scheme in the FTC
Act, which would have channeled those claims through the agency to
the courts of appeals, on review of a cease and desist order. Id. at 180.
But the collateral order doctrine was not at issue in Axon and
indeed the Court specifically cautioned: “Nothing we say today portends
newfound enthusiasm for interlocutory review.” Id. at 192. Axon thus
did not purport to alter the longstanding rules limiting the application
of the collateral order doctrine in appeals from interlocutory orders of
district courts. Moreover, unlike Axon, USAP is not asserting a right
not to be tried in an administrative proceeding; to the contrary, USAP’s
argument (discussed above) is that the Commission should be required
to issue an administrative complaint. USAP also does not challenge the
22
Case: 24-20270
Document: 23
Page: 31
Date Filed: 07/19/2024
district court’s jurisdiction to try the case. Nor is USAP challenging the
Commission’s existence—merely its authority to proceed under a
particular statute. Axon, therefore, does not aid USAP’s cause.
B.
The Constitutional Ruling Does Not Raise
Serious and Unsettled Questions of Law.
USAP’s argument that Section 13(b) is unconstitutional because
the FTC Commissioners are not removable at will also does not present
a serious and unsettled question of law. First, as the district court has
noted, Op. 21, both the Supreme Court and this Court have upheld the
constitutionality of the FTC Commissioners’ removal restrictions. The
Supreme Court first upheld those restrictions in Humphrey’s Executor,
295 U.S. at 625, and has since expressly declined to overrule that
decision on many occasions, most recently in Collins, 594 U.S. at 255-56
& n.21, and Seila Law LLC v. CFPB, 591 U.S. 197, 203-04 (2020). And
this Court, twice in the past year, has held that Humphrey’s Executor
remains binding on the lower courts. Consumers’ Research, 91 F.4th at
352 & n.51, reh’g en banc denied, 98 F.4th 646 (5th Cir. 2024); Illumina,
88 F.4th at 1047.
USAP’s argument that the FTC’s exercise of executive powers is
unconstitutional is just a repackaging of the arguments this Court
23
Case: 24-20270
Document: 23
Page: 32
Date Filed: 07/19/2024
rejected in Illumina and Consumers’ Research. Specifically, the
Illumina petitioners argued that “the FTC unconstitutionally exercised
executive powers while insulated from presidential removal in violation
of Article II.” Illumina, 88 F.4th at 1046-47. They acknowledged
Humphrey’s Executor, but argued that subsequent decisions by
Congress granting the FTC additional executive authority meant that
the statutory scheme now violated Article II. This Court rejected the
argument, explaining that “although the FTC’s powers may have
changed since Humphrey’s Executor was decided, the question of
whether the FTC’s authority has changed so fundamentally as to render
Humphrey’s Executor no longer binding is for the Supreme Court, not
us, to answer.” Id. at 1047. Thus the Court found no Article II violation
based on existing and controlling Supreme Court precedent.
The Court reached the same conclusion in Consumers’ Research.
That case involved the Consumer Product Safety Commission (CPSC),
which has a statutory structure that is the “mirror image” of the FTC’s,
including the provision that the President may remove Commissioners
only for cause. 91 F.4th at 346. The plaintiffs argued that this scheme
violates Article II because the CPSC exercises executive powers—
24
Case: 24-20270
Document: 23
Page: 33
Date Filed: 07/19/2024
including the power to “commence civil actions in federal court”—even
though the Commissioners are not removable at will. Id. at 346-47. This
Court agreed that the CPSC “exercises substantial executive power (in
the modern sense),” id. at 353-54, but nonetheless held that Humphrey’s
Executor still controlled. Id. 354-56. The Court thus again found no
Article II violation under existing and controlling Supreme Court
precedent.
Here, USAP is making the same argument that the Court has
twice rejected. It contends that by enacting Section 13(b) in 1973,
Congress conferred new executive power on the FTC, and that the
exercise of this authority violates Article II because the Commissioners
are not removable at will. But Illumina makes clear that Humphrey’s
Executor remains binding on the lower courts notwithstanding the fact
that the Commission’s powers have changed since 1935. And
Consumers’ Research holds that even where an independent agency like
the CPSC or the FTC exercises “substantial executive power,” the fact
that Commissioners are not removable at will does not violate Article II.
USAP’s argument in this case cannot be squared with these recent
precedents. Likewise, all other courts presented with USAP’s argument
25
Case: 24-20270
Document: 23
Page: 34
Date Filed: 07/19/2024
that Section 13(b) is unconstitutional because of the Commissioners’
removal protections have rejected the argument.5 Against this
background, there is no plausible argument for interlocutory review.
*****
“In case after case in year after year, the Supreme Court has
issued increasingly emphatic instructions that the class of cases capable
of satisfying [the collateral order doctrine’s] stringent test should be
understood as small, modest, and narrow.” United States v. Wampler,
624 F.3d 1330, 1334 (10th Cir. 2010) (internal quotation marks and
citations omitted). Neither of USAP’s claims satisfies that test, and thus
neither qualifies for interlocutory review.
CONCLUSION
For the foregoing reasons, USAP’s appeal must be dismissed.
5 The Ninth Circuit, for example, has held “the enforcement statutes
of the [FTC] Act, 15 U.S.C. §§ 45(a) and 53(b)” to be “constitutional,
under Humphrey’s Executor.” FTC v. Am. Nat’l Cellular, Inc., 810 F.2d
1511, 1513-14 (9th Cir. 1987); accord FTC v. Syngenta Crop Prot. AG,
No. 22-828, 2024 WL 149552, *27-*28 (M.D.N.C. Jan. 12, 2024); FTC v.
Kochava Inc., 671 F.Supp.3d 1161, 1178-79 (D. Idaho 2023); FTC v.
Walmart Inc., 664 F.Supp.3d 808, 843-45 (N.D. Ill. 2023).
26
Case: 24-20270
Document: 23
Page: 35
Date Filed: 07/19/2024
Respectfully submitted,
HENRY LIU
Director, Bureau of Competition
ANISHA S. DASGUPTA
General Counsel
BRADLEY S. ALBERT
Acting Assistant Director
MATTHEW M. HOFFMAN
Attorney
DANIEL W. BUTRYMOWICZ
TIMOTHY KAMAL-GRAYSON
DYLAN HERTS
PATRICK KENNEDY
Attorneys
/s/ Imad Abyad
IMAD D. ABYAD
Attorney
FEDERAL TRADE COMMISSION
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
(202) 326-3579
iabyad@ftc.gov
FEDERAL TRADE COMMISSION
Washington, DC 20580
27
Case: 24-20270
Document: 23
Page: 36
Date Filed: 07/19/2024
CERTIFICATE OF SERVICE
I certify that on July 19, 2024, I served the foregoing motion on
counsel of record using the Court’s electronic case filing system. All
counsel of record are registered ECF filers.
July 19, 2024
/s/ Imad Abyad
IMAD D. ABYAD
Attorney
FEDERAL TRADE COMMISSION
600 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20580
Case: 24-20270
Document: 23
Page: 37
Date Filed: 07/19/2024
CERTIFICATE OF COMPLIANCE
I certify that the foregoing motion complies with the volume
limitations of Fed. R. App. P. 27(d)(2)(A) because it contains 5,139
words, excluding the parts exempted by Fed. R. App. P. 32(f). I certify
further that it complies with the typeface and type style requirements
of Fed. R. App. P. 27(d)(1)(E) because it was prepared using Microsoft
Word 2010 in 14-point Century Schoolbook.
July 19, 2024
/s/ Imad Abyad
IMAD D. ABYAD
Attorney
FEDERAL TRADE COMMISSION
600 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20580
Case: 24-20270
Document: 23
Page: 38
Date Filed: 07/19/2024
CERTIFICATE OF CONFERENCE
Pursuant to 5th Cir. Rule 27.4, I certify that I have attempted to
contact the counsel of record for appellant U.S. Anesthesia Partners,
Inc. (USAP). I have not heard back from USAP’s counsel as of the time
of this filing. In light of the dispositive nature of this mation, it is
reasonable to assume that USAP plans to file an opposition.
July 19, 2024
/s/ Imad Abyad
IMAD D. ABYAD
Attorney
FEDERAL TRADE COMMISSION
600 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20580
Case: 24-20270
Document: 23
Page: 39
Date Filed: 07/19/2024
EXHIBIT A
[DISTRICT COURT’S MEMORANDUM OPINION AND ORDER]
Case:
24-20270 Document
Document:
23 Filed
Page:
40 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 1 of 23
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
§
§
Plaintiff,
§
§
VS.
§
§
U.S. ANESTHESIA PARTNERS, INC., §
et al.,
§
§
Defendants.
§
May 13, 2024
Nathan Ochsner, Clerk
FEDERAL TRADE COMMISSION,
CIVIL ACTION NO. 4:23-CV-03560
MEMORANDUM OPINION AND ORDER
I.
INTRODUCTION
Before the Court are the defendants’, U.S. Anesthesia Partners, Inc. (“USAP”)
and Welsh Carson,1 motions to dismiss (DEs 99 & 100). The plaintiff, the Federal Trade
Commission (“FTC”), has responded to the motions (DEs 119 & 120), and the
defendants have replied (DEs 124 & 126). After reviewing the filings and the applicable
law, the Court determines that Welsh Carson’s motion should be GRANTED, and
USAP’s motion should be DENIED.
II.
FACTUAL BACKGROUND
This antitrust case concerns the monopolization of Texas’ hospital anesthesia
market. We begin with a brief explanation of the hospital anesthesia market, as provided
by the FTC. Hospitals need anesthesiologists on-hand 24/7 for surgical procedures.
1 Seven defendants are Welsh Carson entities. Because their distinction is not crucial to this analysis, the
Court frequently refers to them all as “Welsh Carson” for ease of reference.
Case:
24-20270 Document
Document:
23 Filed
Page:
41 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 2 of 23
Some hospitals directly employ anesthesiologists, but many contract with outside
groups to be their exclusive providers. Anesthesiologists are primarily compensated
through reimbursement by insurers or insurers’ clients (employers). Insurers’ main
leverage while negotiating reimbursement rates is the threat of network exclusion.
Insurers select favored anesthesia groups to join their networks. Anesthesia groups
strive to participate in these networks because network exclusion can endanger hospital
relationships and make it more difficult to obtain payment. Thus, if groups raise their
rates too high, the insurance company will remove them from the network. But this
threat is credible only if the insurer has feasible alternatives with which to replace them.
If a group grows so large that it becomes indispensable, the threat of network removal
loses its bite, leaving patients with the burden of paying higher rates. That is what the
FTC alleges has happened regarding USAP.
USAP
In 2012, USAP was created by a private equity firm called Welsh Carson and
several physician partners. USAP’s goal was to drive profits by consolidating Texas’
hospital anesthesia market. Accordingly, USAP quickly began an aggressive
acquisition strategy. Its first target, Greater Houston Anesthesiology, was the largest
practice in Houston, billing itself as “20 times the size of the second largest local
competitor.” Welsh Carson put $100 million toward the purchase, with third-party
lenders providing the rest. After this first acquisition, USAP started planning more,
2
Case:
24-20270 Document
Document:
23 Filed
Page:
42 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 3 of 23
targeting groups that already had exclusive contracts with hospitals. Through “tuck-in
clauses,” USAP would apply its higher rates to the same services already offered by its
acquisitions.
Thus, USAP soon bought three other practices in Houston. Each had strong
relationships with important hospitals, and each had previously competed with USAP.
After each acquisition, USAP raised the acquired group’s rates to match its own higher
rates. In 2014, USAP took this strategy to Dallas, buying the area’s largest practice,
followed by six more. USAP soon expanded to Tyler, Austin, Amarillo, and San
Antonio. In each of these markets, the FTC alleges that USAP used its dominance to
raise prices at patients’ expense. To date, USAP has acquired at least fifteen anesthesia
groups in Texas.
Apart from USAP’s acquisitions and price increases, the FTC also alleges that
USAP maintains price-setting agreements with several competitors. Under these
agreements, USAP bills for work that its competitors perform, but it bills under USAP’s
higher rates, as if the competitors’ anesthesiologists were USAP’s. This practice has the
effect of increasing USAP’s bargaining power and eliminating potential savings for
patients. USAP inherited two such ongoing agreements and executed a third agreement
that has since expired.
Finally, the FTC alleges that USAP paid Envision Healthcare to stay out of the
Dallas market. Envision is a national healthcare company that also provides anesthesia
3
Case:
24-20270 Document
Document:
23 Filed
Page:
43 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 4 of 23
services to hospitals. While USAP initially sought to persuade Envision not to compete
anywhere in Texas, Envision limited its agreement to not competing in Dallas for five
years in return for $9 million.
Today, USAP is the largest anesthesia practice in Texas, including in many of its
metro areas.2 It controls nearly 70% of the commercially insured, hospital-only
anesthesia market in Houston, a similar share in Dallas, and over 52% in Austin. USAP
handles nearly half of all hospital-only anesthesia cases in Texas, and earns almost 60%
of all hospital anesthesia revenue paid by Texas insurers, employers, and patients.
USAP’s negotiating leverage has grown along with its market share, and USAP has
used this leverage to raise prices across Texas. The FTC alleges that this has resulted in
patients and their employers paying tens of millions of dollars more each year for
anesthesia than they otherwise would pay.
Welsh Carson
The mastermind behind USAP is allegedly Welsh Carson, a private equity firm
that invests in healthcare and technology. Welsh Carson operates through various
corporate entities that share personnel and resources. Hence, one set of entities houses
the firm’s employees and manages its investments, while another set, known as “funds,”
makes and holds Welsh Carson’s investments, while a separate set controls these funds.
2
USAP currently operates in eight states, with Texas remaining its largest market.
4
Case:
24-20270 Document
Document:
23 Filed
Page:
44 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 5 of 23
The FTC alleges that all of these corporations operate together, as a single company, to
hatch and carry out USAP’s monopolization scheme.
In early 2012, Welsh Carson decided to enter Texas’ hospital-based anesthesia
market. Brian Regan, a partner at Welsh Carson, spearheaded this strategy. He
explained that the plan was to “consolidate practices with high market share in a few
key markets,” which would offer “negotiating leverage with commercial payors.” Over
the next few months, Welsh Carson employees set up the company that would effect
this scheme—USAP. Welsh Carson initially owned 50.2% of USAP, and saw itself as
USAP’s “control investors.” Welsh Carson chose USAP’s leadership, including its
CEO, CFO, COO, and head of human resources. Each of these officers had previously
been employed at other Welsh Carson entities. USAP’s CEO, Kristen Bratberg, had led
a previous Welsh Carson consolidation strategy in the neonatology sector. Brian Regan,
himself, served as a USAP director from its creation until 2022.
After creating USAP, Welsh Carson actively participated in its acquisitions.
USAP’s internal rules required that proposed acquisitions be approved by Welsh
Carson. Welsh Carson employees researched anesthesia practices for USAP to acquire.
Welsh Carson also worked with a consultant to develop a modeling tool for identifying
promising acquisition targets. Welsh Carson funded USAP’s first acquisition. Welsh
Carson negotiated USAP’s first acquisition in Dallas, and Brian Regan led the
negotiations for USAP’s agreement with Envision, initially proposing that USAP pay
5
Case:
24-20270 Document
Document:
23 Filed
Page:
45 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 6 of 23
Envision $9 million annually to not provide anesthesia services in Texas. This
ultimately became the price tag for Envision’s exclusion from Dallas.
In 2017, Welsh Carson sold about half its stake in USAP. A Welsh Carson entity
This left Fund XII, a Welsh Carson entity with 23% ownership of USAP. Fund XII
appoints two of the fourteen board seats in USAP. In 2021, the FTC began a two-year
investigation of Welsh Carson and USAP. It brought this suit on September 21, 2023
to permanently enjoin the defendants’ anticompetitive conduct under Section 13(b) of
the FTC Act. The Court held a hearing on the present motions to dismiss on April 8,
2024.
III.
CONTENTIONS OF THE PARTIES
Welsh Carson argues that the FTC cannot bring this suit under Section 13(b) of
the FTC Act because Welsh Carson is not violating antitrust laws, nor is it about to.
USAP makes the same argument, adding that Section 13(b) requires a concomitant
administrative proceeding, which the FTC has not begun. USAP further asserts that the
FTC is unconstitutional because its commissioners are not removable at will by the
President. Finally, USAP argues that the FTC’s claims are based on a myopic market
definition, and that USAP has not raised prices above competitive levels.
The FTC responds that both Welsh Carson and USAP are currently violating
antitrust laws, and that both are about to violate antitrust laws. The FTC insists that
13(b) does not require an administrative proceeding before a suit can be filed.
6
Case:
24-20270 Document
Document:
23 Filed
Page:
46 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 7 of 23
Regarding the argument that it is unconstitutional, the FTC points to Fifth Circuit
precedent holding otherwise. The FTC defends its market definition of commercially
insured hospital-only anesthesia, asserting that non-hospital anesthesia is not an
available substitute. Finally, the FTC maintains that it has alleged super-competitive
pricing due to the defendants’ uncompetitive behavior.
IV.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) authorizes a motion to dismiss for
“failure to state a claim upon which relief can be granted.” Under the difficult standard
of a Rule 12(b)(6) motion, “[t]he plaintiff’s complaint is to be construed in a light most
favorable to the plaintiff, and the allegations contained therein are to be taken as true.”
Oppenheimer v. Prudential Sec., Inc., 94 F.3d 189, 194 (5th Cir. 1996). Dismissal is
appropriate only if the “[f]actual allegations [are not] enough to raise a right to relief
above the speculative level, on the assumption that all the allegations in the complaint
are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). A court’s review is limited to the allegations in the complaint and any
documents attached to a defendant’s motion to dismiss, if they are both referred to in
the complaint and central to the claims. Causey v. Sewell Cadillac-Chevrolet, Inc., 394
F.3d 285, 288 (5th Cir. 2004).
7
Case:
24-20270 Document
Document:
23 Filed
Page:
47 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 8 of 23
V.
ANALYSIS & DISCUSSION
Section 13(b)
The FTC’s statutory authority for seeking this injunction lies in 15 U.S.C. § 53(b)
(commonly referred to as “Section 13(b)”). Section 13(b) allows the FTC to “bring suit
in a district court of the United States to enjoin” allegedly unlawful conduct only where
it has “reason to believe . . . that any person, partnership, or corporation is violating, or
is about to violate, any provision of law enforced by the [FTC].” (Emphasis added).
Section 13(b) is not a catch-all statute. Rather, Section 13(b) “addresses a specific
problem, namely, that of stopping seemingly unfair practices from taking place while
the [FTC] determines their lawfulness [through its own administrative proceedings].”
AMG Cap. Mgmt., 593 U.S. at 76. See S. Rep. No. 93-151, at 30 (1973). The FTC is
authorized to conduct its agency actions through Section 5(b) of the FTC Act, which is
a much broader grant of antitrust authority, and looks backward, while Section 13(b)
looks forward. Section 13(b) therefore “does not permit the FTC to bring a claim based
on long-past conduct without some evidence that the defendant ‘is’ committing or ‘is
about to’ commit another violation.” Federal Trade Commission v. Shire ViroPharma,
Inc., 917 F.3d 147, 156 (3d Cir. 2019). If “the FTC wants to recover for a past violation
— where an entity ‘has been’ violating the law — it must use Section 5(b).” Id. at 159
(quoting 15 U.S.C. § 45(b)).3 What the FTC cannot do is “use the most advantageous
3 Of course, the FTC is not alone in enforcing antitrust law. The Department of Justice has broad
authority to enforce antitrust law, including for past acts. See 15 U.S.C. §§ 4, 25.
8
Case:
24-20270 Document
Document:
23 Filed
Page:
48 DateinFiled:
Case
4:23-cv-03560
146
on 05/13/24
TXSD07/19/2024
Page 9 of 23
aspects of each statutory provision—to punish [a defendant] for a past violation using
the less onerous enforcement mechanism [of Section 13(b)].” Id.
A) Welsh Carson
A) 1) The FTC Has Not Adequately Alleged that Welsh Carson “is violating”
Antitrust Law
The FTC argues that Welsh Carson is currently violating antitrust laws. The FTC
insists that “USAP continues to hold the illegally acquired practices, uses the resulting
leverage to raise prices, and shares its profits with Welsh Carson.” But the FTC does
not cite any authority for the proposition that receiving profits from an entity that may
be violating antitrust laws is itself a violation of antitrust laws. Indeed, “profits, sales,
and other benefits accrued as the result of an initial wrongful act are not treated as
‘independent acts.’” Z Techs. Corp. v. Lubrizol Corp., 753 F.3d 594, 600 (6th Cir.
2014). Thus, the act of receiving profits from USAP is not an ongoing antitrust
violation.
The FTC also argues that Welsh Carson commits ongoing antitrust violations by
continuing to hold stock in USAP. The FTC insists that “an injunction under Section
13(b) is a theoretically available remedy in a Section 2 challenge to long-ago mergers
so long as the defendant still holds the purchased assets or stock.” Fed. Trade Comm’n
v. Facebook, Inc., 560 F. Supp. 3d 1, 32 (D.D.C. 2021). Thus, the FTC’s argument that
9
24-20270 Document
Document:
Page:
49 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 10 of 23
Welsh Carson is committing ongoing antitrust violations boils down to this: 1) Welsh
Carson holds stock in USAP; 2) holding assets that result in reduced competition is an
ongoing violation of antitrust laws; and 3) Section 13(b) permits the FTC to address
ongoing violations.
The first and third steps are not in serious dispute. The substance therefore is in
the second step of the argument. The FTC is correct that holding assets can constitute
an ongoing violation of antitrust laws: “[A]ny acquisition by one corporation of all or
any part of the stock of another corporation, competitor or not, is within the reach of
[Section 2] whenever the reasonable likelihood appears that the acquisition will result
in a restraint of commerce or in the creation of a monopoly of any line of commerce.”
United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, 592 (1957). Section 7
of the Clayton Act prohibits mergers or acquisitions, “directly or indirectly,” if the
effect “may be substantially to lessen competition, or to tend to create a monopoly.” 15
U.S.C. § 18 (2000). In du Pont, the Court determined that a supplier to General Motors
leveraged stock that it had bought to entrench itself as General Motors’ primary
supplier. 353 U.S. at 592. The differences between du Pont and the present case, though,
are that du Pont involved a direct acquisition, Section 13(b) was not in play, and du
Pont did not involve a defendant with a minority, noncontrolling stake in the purchasing
entity.
10
24-20270 Document
Document:
Page:
50 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 11 of 23
Since 2017, only one of the Welsh Carson entities—Fund XII—has owned stock
in USAP. Fund XII’s 23% ownership entitles it to appoint two of the fourteen directors
to the USAP board: one-seventh of the board, disproportionately small compared to its
almost one-quarter ownership. The FTC does not explain how Fund XII’s minority
stake—as distinct from USAP’s acquisitions of anesthesiology practices—is a violation
of Section 2 of the Sherman Act or Section 7 of the Clayton Act. Indeed, at oral
argument, the FTC conceded “we still have to prove that Welsh Carson’s conduct
substantially lessens competition . . . we are not seeking to hold Welsh Carson liable
merely because they have an ownership stake.” But that ownership stake is the FTC’s
only hook for an “ongoing violation” under Section 13(b). Section 13(b) requires more
than the FTC’s concession; Welsh Carson’s ongoing conduct must reduce competition.
It is not clear how owning a minority share in a company that reduces competition
satisfies the statute.
What du Pont and Facebook indicate is that if an acquisition was itself a violation
of antitrust laws, the FTC may use Section 13(b) to address it. Indeed, the “Clayton Act
is concerned with whether an acquisition or merger itself may cause antitrust injury.”
Geneva Pharms. Tech. Corp. v. Barr Lab’ys Inc., 386 F.3d 485, 511 (2d Cir. 2004)
(citing Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 115–17 (1986)). The
FTC’s authorities discuss only one merger to roll back, where rolling back the merger
resolves the ongoing violation. Not so here; The FTC’s theory would require rolling
11
24-20270 Document
Document:
Page:
51 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 12 of 23
back Welsh Carson’s acquisition of USAP stock and USAP’s own acquisitions. The
analogous merger to du Pont is not USAP’s acquisitions, but Fund XII’s 2017 purchase
of 23% of USAP. And there is no allegation that that acquisition itself violated antitrust
laws. Thus, the FTC’s conflation of Fund XII’s stake in USAP with USAP’s
acquisitions of anesthesia groups is unavailing.
The closest case to the present one appears to be Cmty. Publishers, Inc. v. Donrey
Corp., 882 F. Supp. 138 (W.D. Ark. 1995). There, the court determined that Section 7
applied to a parent company that acquired stock through its subsidiarity. The key
difference, though, is that the parent and subsidiary had “substantially overlapping
ownership.” Id. at 139. Indeed, 99% of the parent stock was owned by an entity called
“SGI,” which was owned entirely by a family trust. The subsidiary, meanwhile, was
owned 95.5% by the very same family trusts. Furthermore, the parent, the subsidiary,
and SGI were all chaired by the same man, who was a member of the family who owned
the trusts.
There is a stark contrast between Donrey and the present case, in which Fund XII
owns 23% of USAP and has only two out of fourteen board seats. The fact that other
Welsh Carson entities that do not own stock in USAP helped create both USAP and its
acquisition strategy does not change the analysis. The FTC has not cited a case in which
a minority, noncontrolling investor—however hands-on—is liable under Section 13(b)
because the company it partially owned made anticompetitive acquisitions. Such a
12
24-20270 Document
Document:
Page:
52 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 13 of 23
construal of Sections 7 and 13(b) would expand the FTC’s reach further than any court
has yet seen fit; it would also expand liability to minority investors whose subsidiaries
reduce competition. This Court will not adopt this novel interpretation.
A) 2) The FTC Has Not Adequately Alleged that Welsh Carson Is “About To
Violate” Antitrust Law
The second stage of the Section 13(b) analysis is whether the FTC has adequately
pled that Welsh Carson is “about to” violate antitrust law. The FTC alleges that nothing
“prevent[s] Welsh Carson from re-upping its investment in USAP, retaking formal
control of the company, and directing yet more anticompetitive positions.” The FTC
also points to Welsh Carson’s investments in the emergency medicine and radiology
markets as evidence of intent to further consolidate the anesthesia market.
The parties disagree as to the proper interpretation of Section 13(b)’s “about to
violate.” The FTC insists that the Fifth Circuit held that Section 13(b)’s “about to
violate” requirement can be satisfied by alleging facts that give a “fair inference of a
reasonable expectation of continued violations.” F.T.C. v. Sw. Sunsites, Inc., 665 F.2d
711, 723 (5th Cir. 1982) (citing Securities and Exchange Commission v. Manor Nursing
Center, Inc., 458 F.2d 1082, 1100-01 (2d Cir. 1972)). It is not clear that this was the
holding of Sunsites. The court mentioned this standard without analysis, discussion of
the statute, or any other support. The entire relevant paragraph reads:
The district court acted well within its discretion in ordering appellees to
cease and desist from further violations of the Act. This is particularly true
13
Document:
24-20270 Document
Page:
53 Date
on 05/13/24
in Filed:
TXSD 07/19/2024
CaseCase:
4:23-cv-03560
14623 Filed
Page 14 of 23
when the evidence developed to date suggests a large-scale systematic
scheme tainted by fraudulent and deceptive practices, giving rise to a “fair
inference of a reasonable expectation of continued violations” absent
restraint.
Id. Regardless, it is unclear how much light is shined by interpreting “about to
violate” as “giving rise to a fair inference of a reasonable expectation of continued
violations.” Indeed, the consensus is that “[a]side from analyzing the facts at issue, the
Sunsites court did not provide extensive guidance to district courts on applying § 13(b)’s
threshold requirement.” Fed. Trade Comm’n v. Educare Ctr. Servs., Inc., 433 F. Supp.
3d 1008, 1014 (W.D. Tex. 2020). The facts at issue in Sunsites were quite distinct from
those before this Court. There, the FTC sought to enjoin a party from persisting in a
“continuing” fraudulent scheme executed by that party. Here, there is no allegation of
fraud, and Welsh Carson’s activity is not continuing. Indeed, the FTC does not allege
any conduct by Welsh Carson in the past six years that is a plausible antitrust violation.
Instead, the FTC argues that Welsh Carson designed and implemented a large,
systematic scheme that still exists. This argument is to mean, if anything, that the
violation is ongoing, rather than likely to recur. The only sense in which the scheme
still exists is that USAP still exists, and that USAP still consolidates the market and
reduces competition. But that goes to USAP’s violations, not Welsh Carson’s; Sunsites
said nothing about derivate liability for another company’s actions.
Besides, this long-past conduct does not raise a fair inference that Welsh Carson
will soon do so again, even if such conduct were an antitrust violation. Indeed, it is
14
24-20270 Document
Document:
Page:
54 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 15 of 23
unclear what an act of recurrence would mean: creating another vehicle for anesthesia
consolidation to compete with USAP? The FTC insists that Welsh Carson’s having the
“blueprints, finances, and personnel to continue this scheme” satisfy Section 13(b)’s
“about to violate” standard. But the mere capacity to do something does not meet the
requirement that the thing is likely to recur. As in Facebook, “[t]here are no facts alleged
. . . suggesting that the antitrust ‘scrutiny’ the company is facing is ‘about to’ pass or
indeed will pass at any time in the foreseeable future.” Fed. Trade Comm’n v.
Facebook, Inc., 560 F. Supp. 3d 1, 26–27 (D.D.C. 2021). See Shire ViroPharma, 917
F.3d at 153, 160 (finding allegation that “[a]bsent an injunction, there is a cognizable
danger that [defendant] will engage in similar conduct” because it has the “incentive
and opportunity” to do so. Such an argument, without evidence, is “woefully inadequate
to state a claim under Section 13(b).”).
The Court will quickly address two more arguments from the FTC. First,
comments from Welsh Carson executives indicating a desire to consolidate other
healthcare markets do not show that Welsh Carson is about to violate antitrust laws.
The FTC has not sufficiently pled information about those plans to pursue a Section
13(b) case to enjoin Welsh Carson from activities in those non-anesthesia markets.
Second, Welsh Carson’s “lack of contrition” does not indicate an impending violation,
either; the law does not require defendants to admit liability and apologize in order to
avoid an injunction.
15
24-20270 Document
Document:
Page:
55 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 16 of 23
The Court repeats that Congress’ purpose in enacting Section 13(b) was to
“address[] a specific problem, namely, that of stopping seemingly unfair practices from
taking place while the [FTC] determines their lawfulness.” AMG Cap. Mgmt., 593 U.S.
at 76. Again, this Court will not be the first to use this specialized statute to expand
antitrust liability to reach active investors in companies that are alleged to violate
antitrust law. The FTC does not articulate why it cannot return with a new lawsuit under
Section 13(b) if and when Welsh Carlson signals—beyond mere speculation and
conjecture—that it is actually about to violate the law. The Court’s analysis should not
be construed to offer any opinion on Welsh Carson’s conduct except as Section 13(b)
applies to it.
B) USAP
B) 1) The FTC Need Not Bring A Concomitant Administrative Proceeding
USAP’s first argument is that the FTC overreached its authority under Section
13(b) by bringing this suit without initiating a concomitant administrative proceeding.
USAP marshals eloquent and thorough arguments of statutory interpretation to this end.
But as far as the Court is aware, every court to consider this issue has disagreed that
such a proceeding is necessary, including three circuit courts. As the Seventh Circuit
explained:
The statutory language of section 13(b) limits the availability of
preliminary injunctive relief to situations ‘pending issuance of a complaint
by the Commission.’ No similar language is found in the second proviso
relating to permanent injunctive relief . . . Had Congress intended the
16
Document:
24-20270 Document
Page:
56 Date
on 05/13/24
in Filed:
TXSD 07/19/2024
CaseCase:
4:23-cv-03560
14623 Filed
Page 17 of 23
initiation or not of an administrative cease and desist proceeding to affect
the ability of the Commission to seek permanent injunctive relief, it
undoubtedly would have included language similar to that found in the
provision governing preliminary injunctive relief.
United States v. JS & A Grp., Inc., 716 F.2d 451, 456 (7th Cir. 1983). See F.T.C. v. H.
N. Singer, Inc., 668 F.2d 1107 (9th Cir. 1982) & F.T.C. v. U.S. Oil & Gas Corp., 748
F.2d 1431 (11th Cir. 1984).
USAP invokes AMG to argue that this Court should resist these authorities. AMG
Cap. Mgmt., LLC v. Fed. Trade Comm’n, 593 U.S. 67 (2021). The problem is that AMG
indicates the opposite. There, the Supreme Court held that the FTC may not use Section
13(b) to authorize monetary relief. While the Court thus focused on a different issue
than the present one, its analysis included several observations on the FTC’s injunction
authority. Interpreting Section 13(b), the Court opined that the words “permanent
injunction” “might also be read, for example, as granting authority for the Commission
to . . . dispense with administrative proceedings to seek what the words literally say
(namely, an injunction).” Id. at 76. Lest there be any doubt, two pages later, the Court
declared: “the Commission may use § 13(b) to obtain injunctive relief while
administrative proceedings are foreseen or in progress, or when it seeks only injunctive
relief.” Id. at 78 (emphasis added). The FTC seeks only injunctive relief in this case.
Undaunted, USAP brushes this aside as dicta. Even if it is dicta, dicta acquires a
certain luster when it comes from the U.S. Supreme Court. Indeed, “we are generally
bound by Supreme Court dicta, especially when it is ‘recent and detailed.’” Hollis v.
17
24-20270 Document
Document:
Page:
57 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 18 of 23
Lynch, 827 F.3d 436, 448 (5th Cir. 2016) (quoting Gearlds v. Entergy Servs., Inc., 709
F.3d 448, 452 (5th Cir. 2013)). AMG is only three years old, and the Court repeated the
point twice. This Court will not gainsay it.
B) 2) The FTC Alleges Ongoing Violations Under Section 13(b)
Next, like Welsh Carson, USAP argues that the FTC has not alleged that USAP
is currently or about to violate antitrust laws. USAP therefore argues that Section 13(b)
is not the appropriate vehicle for these claims, and that the FTC has exceeded its
statutory authority. The Court has already laid out the framework of this analysis above
with regard to Welsh Carson. Applying it to USAP, however, yields a different result.
The FTC alleges multiple instances of ongoing conduct: USAP continues to own
the anesthesia groups it unlawfully acquired and continues to charge high prices; USAP
currently maintains two price-setting arrangements that result in higher prices; and
USAP’s overall monopolization scheme remains intact.
USAP’s acquisitions constitute ongoing conduct. USAP acquired at least 15
anesthesia groups over the last 12 years. USAP continues to hold these companies. Even
though the acquisitions themselves have closed, maintaining the assets of these
companies could constitute a violation of antitrust law appropriately pursued under
Section 13(b). As explained above, “an injunction under Section 13(b) is a theoretically
available remedy in a Section 2 challenge to long-ago mergers so long as the defendant
still holds the purchased assets or stock.” Fed. Trade Comm’n v. Facebook, Inc., 560 F.
18
24-20270 Document
Document:
Page:
58 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 19 of 23
Supp. 3d 1, 32 (D.D.C. 2021). This is because, for antitrust purposes, acquisitions do
not always end with the close of the deal:
We need not go beyond the Clayton Act itself to conclude that
‘acquisition’ as used in [§] 7 of the Act means holding as well as obtaining
assets. The Act provides that the FTC, if it finds a violation of [§] 7, can
require a party to ‘divest itself of the stock, or other share capital, or assets,
held . . . contrary to the provisions of ([§] 7).’ Thus, the framers of the Act
did not regard the terms ‘acquire’ and ‘acquisition’ as unambiguously
banning only the initial transaction of acquisition; rather, they read the ban
against ‘acquisition’ to include a ban against holding certain assets.
United States v. ITT Cont’l Baking Co., 420 U.S. 223, 240–41 (1975) (cleaned up).
USAP seeks to distinguish ITT because it concerned “materially different factual
circumstances.” USAP highlights that ITT upheld a fine for an ongoing violation of a
consent decree, rather than an antitrust violation. The consent decree is different, USAP
says, because it covered “both the initial transaction and the maintenance of the rights”
acquired in the transaction. But this is misleading, and indeed begs the whole question.
The consent decree did not say that it covered the maintenance of the rights. Rather, the
Supreme Court decided that it covered the maintenance of those rights based on its own
definition of “acquisition” in Du Pont. United States v. ITT Cont’l Baking Co., 420 U.S.
223, 241 (1975) (citing United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586,
592 (1957)). Thus, the distinction USAP points to is not a valid difference.
On the other hand, USAP’s authorities illustrate a distinction with a true
difference. USAP points to cases from the 8th and 6th circuits for the proposition that
mergers do not constitute continuing violations once they are complete: Midwestern
19
24-20270 Document
Document:
Page:
59 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 20 of 23
Mach. Co. v. Nw. Airlines, Inc., 392 F.3d 265 (8th Cir. 2004); Z Techs. Corp. v. Lubrizol
Corp., 753 F.3d 594 (6th Cir. 2014). How do these cases coexist with Du Pont and ITT?
The titles of these cases provide the answer: they do not involve the FTC. Instead, they
feature private plaintiffs, and thus implicate the statute of limitations. The government,
however, is not constrained by a statute of limitations. See Fed. Trade Comm’n v. Credit
Bureau Ctr., LLC, 937 F.3d 764, 783 (7th Cir. 2019) (“[S]ection 13b has no statute of
limitations.”). Thus, these cases are neither binding nor superior to the United States
Supreme Court’s opinion. Moreover, their reasoning was based on a statutory
mechanism not in play here.
Because these acquisitions constitute ongoing activity and plausibly contribute
to the monopoly power and unfair competition that the FTC’s complaint alleges, the
FTC is within its statutory authority to bring claims I-VIII. The FTC’s ninth claim of
price fixing and tenth claim of market allocation are plausibly part of the “large-scale
systematic scheme” alleged by the FTC and supported by the alleged acquisitions.
F.T.C. v. Sw. Sunsites, Inc., 665 F.2d 711, 723 (5th Cir. 1982). Thus, the FTC is within
its statutory authority to bring these claims.4
B) 3) The FTC Is Not An Unconstitutionally Constituted Entity
4 It is worth distinguishing USAP’s conduct from Welsh Carson’s. Welsh Carson owned a noncontrolling
piece of a company that acquired another company; the acquisitions at issue here were thus derivative of a
company in which one Welsh Carson entity owned 23% and had disproportionally few board seats. That is
very different from the direct, wholesale acquisition of one company by its competitor.
20
24-20270 Document
Document:
Page:
60 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 21 of 23
The Court need not spend many words on the constitutional argument.5 The
defendants ask this Court to declare the FTC is unconstitutionally constituted because
its commissioners are not removable at will by the President. Precedent forecloses this
argument.
Almost 90 years ago, the Supreme Court held that the President’s inability to
remove FTC commissioners at will was constitutional. Humphrey’s Ex’r v. United
States, 295 U.S. 602 (1935). The defendants argue that the FTC’s authority has grown
such that Humphrey’s no longer makes sense. But just last year, the Fifth Circuit
rejected this argument: “[A]lthough the FTC’s powers may have changed since
Humphrey’s Executor was decided, the question of whether the FTC’s authority has
changed so fundamentally as to render Humphrey’s Executor no longer binding is for
the Supreme Court, not us, to answer.” Illumina, Inc. v. Fed. Trade Comm’n, 88 F.4th
1036, 1047 (5th Cir. 2023). See also Consumers’ Rsch. v. Consumer Prod. Safety
Comm’n, 91 F.4th 342 (5th Cir. 2024). It is not for this Court to answer, either.
C) The Merits
On the merits, USAP argues that the FTC’s market definition of “hospital-only
anesthesia services” is improper and unsupported by the factual allegations.
Specifically, USAP argues that the FTC does not address interchangeability or crosselasticity of demand, and that the market should also include out-of-hospital
USAP did not spend many words, either. Instead, USAP incorporated Welsh Carson’s constitutional
argument into its own brief with no elaboration.
5
21
24-20270 Document
Document:
Page:
61 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 22 of 23
anesthesiologists. But the FTC’s complaint does address this by saying that hospital
patients get no say in their anesthesiologist; “Patients requiring hospital care cannot
switch to outpatient anesthesia regardless of price.” Thus, it does not matter if,
theoretically, out-of-patient anesthesiologists could perform the same services within
the hospital, because as a practical matter once a patient requires treatment in a hospital,
out-of-hospital anesthesiology services are off the table. The complaint alleges that
industry participants, including USAP and insurers, recognize the distinctions between
in- and out-patient anesthesia care. The complaint also alleges that out-patient
anesthesia services do not adequately constrain prices for in-patient care because
anesthesiologists face significantly different working conditions in hospitals, and
hospitals often have sticky and exclusive anesthesia services contracts. At this stage,
the Court cannot say the FTC has failed to allege a plausible market definition.
Next, USAP argues that the FTC has not sufficiently alleged that USAP enjoys
monopoly power. The FTC quotes an insurance executive describing USAP’s
consolidation strategy as “tak[ing] the highest rate of all . . . and then peanut butter
spread that across the entire state of Texas.” The FTC alleges that USAP has raised
prices significantly, charging the highest rates in Houston and Dallas, and double the
median rate in Texas. No anesthesia group could achieve this before USAP began its
consolidation strategy. USAP also alleges that payors tried to constrain USAP’s high
rates but failed due to insufficient alternatives. Whether USAP charges above a
22
24-20270 Document
Document:
Page:
62 Date
CaseCase:
4:23-cv-03560
14623 Filed
on 05/13/24
in Filed:
TXSD 07/19/2024
Page 23 of 23
competitive price or enjoys monopoly power are factual disputes. These considerations
also apply to USAP’s argument that the FTC has failed to allege anticompetitive
conduct under the Sherman Act or the Clayton Act. The FTC has plausibly alleged
acquisitions resulting in higher prices for consumers, along with a market allocation
and price-setting scheme. It would be premature to dismiss these claims at this stage.
VI.
CONCLUSION
Based on the foregoing analysis and discussion, the Court GRANTS Welsh
Carson’s motion to dismiss and DENIES USAP’s motion to dismiss.
It is so ORDERED.
-rP·~
SIGNED on May 13, 2024, at Houston, Texas.
______________________________
Kenneth M. Hoyt
United States District Judge
23
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.