Reply Brief — Raymond Benitez, Petitioner v. The Charlotte-Mecklenburg Hospital Authority

Supreme Court briefNov 15, 2021

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No. 21-271

IN THE

RAYMOND BENITEZ, individually and on behalf of all

others similarly situated,

Petitioner,

THE CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY,

d/b/a Carolinas HealthCare System,

d/b/a Atrium Health,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fourth Circuit

REPLY BRIEF FOR PETITIONER

R. Stephen Berry

Eric F. Citron

BERRY LAW PLLC

Counsel of Record

1100 Connecticut Ave., NW Tejinder Singh

Suite 645

Daniel Woofter

Washington, DC 20036

GOLDSTEIN & RUSSELL, P.C

(202) 296-3020

7475 Wisconsin Ave.

Suite 850

Bethesda, MD 20814

(202) 362-0636

ec@goldsteinrussell.com

TABLE OF CONTENTS

TABLE OF AUTHORITIES ........................................ ii

INTRODUCTION ........................................................ 1

ARGUMENT ................................................................ 2

The Circuit Split Is Square............................... 2

II. The Fourth Circuit’s Decision Is Wrong .......... 4

A. The Fourth Circuit’s Decision Contravenes

The LGAA’s Text ............................................ 4

B. The Fourth Circuit’s Decision Is Not

Supported By Any Of The Cases Atrium

Cites ................................................................ 7

C. The Fourth Circuit’s Decision Is Not

Supported By North Carolina Statutes ......... 9

III. The Question Presented Is Important,

And The Court Will Not Confront A

Better Vehicle To Address It .......................... 10

CONCLUSION .......................................................... 13

TABLE OF AUTHORITIES

Cases

Borden v. United States,

141 S. Ct. 1817 (2021) .............................................. 3

DiCesare v. Charlotte-Mecklenburg Hosp. Auth.,

852 S.E.2d 146 (N.C. 2020) .................................. 7, 8

Duncan v. Walker,

533 U.S. 167 (2001) .................................................. 6

Leocal v. Ashcroft,

543 U.S. 1 (2004) .................................................. 3, 5

Moncrieffe v. Holder,

569 U.S. 184 (2013) .................................................. 3

Quarles v. United States,

139 S. Ct. 1872 (2019) .............................................. 3

Shular v. United States,

140 S. Ct. 779 (2020) ................................................ 3

Stokeling v. United States,

139 S. Ct. 544 (2019) ................................................ 3

Tarabishi v. McAlester Reg’l Hosp.,

951 F.2d 1558 (10th Cir. 1991) ................................ 2

Taylor v. United States,

495 U.S. 575 (1990) .................................................. 6

Torres v. Lynch,

578 U.S. 452 (2016) .................................................. 3

United States v. Castleman,

572 U.S. 157 (2014) .................................................. 4

United States v. Stitt,

139 S. Ct. 399 (2018) ................................................ 3

iii

Statutes

15 U.S.C. §34(1)(B) .................................................. 5, 6

N.C. Gen. Stat. §40A-3(c)(1) ...................................... 10

N.C. Gen. Stat. §40A-3(c)(3) ...................................... 10

N.C. Gen. Stat. §62-101 ............................................. 10

N.C. Gen. Stat. §131E-24(c) ...................................... 10

N.C. Gen. Stat. §131E-26(a) ...................................... 10

N.C. Gen. Stat. §159-94(a)......................................... 10

2015-288 N.C. Sess. Laws,

http://bit.ly/39UyMTF .............................................. 5

Other Authorities

Atrium Health News, Atrium Health and Floyd

Finalize Strategic Combination

(July 14, 2021), https://bit.ly/3qbAv2B .................... 5

Bank of North Dakota, History of BND,

https://bnd.nd.gov/history-of-bnd/

(last visited Nov. 15, 2021) ...................................... 8

H.R. Rep. No. 98-965 (1984) ........................................ 6

INTRODUCTION

The Fourth Circuit adopted an interpretation of

the phrase “local government” that includes Atrium

Health, an entity that operates in multiple States and

expands to new ones at will, generating $11 billion in

revenue. Atrium cannot pledge the credit of the State

or a political subdivision, levy taxes, exercise eminent

domain on its own say-so, or avoid tort liability as

other local governmental units do. In sum, it looks

nothing like a local government. But under the Fourth

Circuit’s rule, Atrium is completely immune from

damages claims for its antitrust violations.

The petition explains that this holding squarely

conflicts with an indistinguishable decision of the

Tenth Circuit, as well as with this Court’s precedents

and foundational rules of statutory interpretation. A

prestigious group of thirty-three antitrust and health

policy scholars, together with the American Antitrust

Institute, has submitted an amicus brief explaining

that the misconduct at issue in this case is rampant,

and that the Fourth Circuit’s reading of the Local Government Antitrust Act (LGAA) threatens substantial

harm to competition in healthcare markets—which ultimately means higher prices for patients, many of

whom can scarcely afford the increase. This case is the

ideal vehicle to address this important issue. The

Court should grant certiorari and reverse.

ARGUMENT

The Circuit Split Is Square.

The Fourth Circuit below and the Tenth Circuit in

Tarabishi came to precisely opposite conclusions while

looking to the very same characteristics of the public

hospitals at issue in each case. The hospital in Tarabishi was equally a public body (its board was “appointed by the mayor” and “subject to the open meeting laws like other public boards and commissions”);

created by a local government pursuant to state law;

and it was equally formed “for furtherance of public

functions”—indeed, it was “created for the benefit of

the city of McAlester … to provide hospital and public

health services to the residents.”

Tarabishi v.

McAlester Reg’l Hosp., 951 F.2d 1558, 1565 n.6 (10th

Cir. 1991). Thus, the same facts the Fourth Circuit

found dispositive in Atrium’s favor were explicitly considered and rejected by the Tenth Circuit. And the

Fourth Circuit expressly rejected the reasons Tarabishi relied on to find that the hospital authority there

was not a local government: There, as here, the local

taxpayers were not liable for any of the hospital’s

debts, and the hospital was not immune from tort liability. Compare id. at 1566-67, with Pet. App. 15a-17a,

23a. As the court below acknowledged, Tarabishi “is

seemingly at odds with” the Fourth Circuit’s decision,

Pet. App. 23a; that’s because it is—from “first blush”

to final read.

Atrium’s effort to defeat this obvious circuit disagreement essentially denies that this Court could ever

confront a genuine split with respect to the LGAA. On

Atrium’s view, because the lower courts (necessarily)

consider different state-law regimes in evaluating the

governmental character of the defendant in every

LGAA case, there can be no guarantee that lower

courts would have treated seemingly identical public

hospitals differently. Opp.15-20.

But important federal statutes often incorporate

state law in their definitions, and that has never stymied this Court’s review of how the lower courts have

implemented them. Indeed, this Court has frequently

granted certiorari in recent Terms in cases involving

varying state-law regimes (e.g., the Armed Career

Criminal Act (ACCA) and the Immigration and Nationality Act (INA)). See, e.g., Borden v. United States,

141 S. Ct. 1817 (2021) (whether state crimes satisfied

ACCA’s federal definition of “violent felony”); Quarles

v. United States, 139 S. Ct. 1872 (2019) (same); Stokeling v. United States, 139 S. Ct. 544 (2019) (same);

United States v. Stitt, 139 S. Ct. 399 (2018) (same); see

also Shular v. United States, 140 S. Ct. 779 (2020)

(same for ACCA’s federal definition of “serious drug offense”); Torres v. Lynch, 578 U.S. 452 (2016) (same for

INA’s federal definition of “aggravated felony”);

Moncrieffe v. Holder, 569 U.S. 184 (2013) (same).

Every case involving the “categorical approach”

and other “analytical frameworks” like it raises this

issue. And no one would say, for example, that there

wasn’t a split “among the Courts of Appeals on the

question whether state DUI offenses … qualify as a

crime of violence” under the federal definition of that

term, Leocal v. Ashcroft, 543 U.S. 1, 6 (2004), merely

because the courts “looked to State law” and employed

the same “analytical framework,” cf. Opp.15, 21. Nor

would anyone deny the “split of authority among the

Courts of Appeals” regarding whether state domestic

violence laws meet the federal definition of a

“misdemeanor crime of domestic violence,” United

States v. Castleman, 572 U.S. 157, 162 (2014), despite

federal courts looking to state law and “employ[ing]

the same analysis” there as well, cf. Opp.21.

Atrium admits this is precisely the same kind of

case—one where the “meaning of a special function

governmental unit under the LGAA remains a matter

of federal law, informed by how an entity is established

under State law.” Opp.6 (emphasis added). The review this Court provided in those cases is equally justified here.

II. The Fourth Circuit’s Decision Is Wrong.

Atrium cannot be a “local government” under any

sensible understanding of that term. And the Fourth

Circuit’s contrary holding is not supported by (A) the

LGAA’s text, (B) the case law in North Carolina or the

lower courts, or (C) North Carolina statutes.

A. The Fourth Circuit’s Decision Contravenes

The LGAA’s Text.

This Court’s cases instruct that phrases like “special function governmental unit” must be read to include only entities that can reasonably be described as

a “local government,” since that is the term being defined. See Pet.21-22.

There is nothing “local” about Atrium’s character,

and it has made concerted efforts to dispel any such

notion. See Pet.12. Atrium admits that it operated in

South Carolina when petitioner “filed his lawsuit,”

and has expanded into Georgia since. Opp.30-31. And

as of a few months ago, Atrium began operating in Alabama, which does not even border the Carolinas, let

alone Charlotte-Mecklenburg. See Atrium Health

News, Atrium Health and Floyd Finalize Strategic

Combination (July 14, 2021), https://bit.ly/3qbAv2B.

Sure, Atrium’s billions-per-year revenues are smaller

than the budgets of municipalities like New York City.

See Opp.32. But even municipalities with giant budgets are “local,” i.e., geographically constrained. Atrium

is not. *

Thus, Atrium must show that Congress intended

to give “local government” an “unorthodox” meaning

that departs from common usage. Pet.23-24 (citing

this Court’s cases). Atrium does not even attempt to

do so. Instead, it apparently contests this well-established rule of interpretation, urging that “local government” carries no force on its own, and all that matters

is “whatever a ‘special function governmental unit’

may be.” Opp.25. That argument is in the teeth of this

Court’s decisions in cases like Leocal, see Pet.21-24,

confirming the need for this Court’s intervention.

Atrium likewise believes that, despite providing

“school district” and “sanitary district” as exemplars

before “any other” type of “special function governmental unit,” 15 U.S.C. §34(1)(B) (emphasis added), “Congress explicitly chose not to define this term but paired

it with State law to invest it with meaning,” Opp.2526. Atrium thus refuses to derive any meaningful content for the federal definition from the examples that

surround the general term in the federal statute, and

instead believes that a State can create a set of “special

Even if Atrium were correct that its character is “measured

at the time of the events in the Complaint,” Opp.30-31 n.4, that

would make no difference here, because by then Atrium had

already been granted the power to expand into any State it wants

to, see 2015-288 N.C. Sess. Laws 2, http://bit.ly/39UyMTF.

function governmental units” much broader than the

exemplars Congress set out. This, again, is precisely

the opposite approach from the one this Court has applied to similar statutes. See Taylor v. United States,

495 U.S. 575, 599 (1990) (offenses defined as felonies

and called “burglary” under state law do not necessarily meet ACCA’s federal definition).

Independently, the petition explained (at 25-26)

that Atrium cannot qualify as a “special function governmental unit” because it was not established in each

of the States in which it now has substantial operations, as required by the text’s constraint that such

units must be “established by State law in one or more

States.” See 15 U.S.C. §34(1)(B) (emphasis added).

Atrium believes that “established … in one or

more States” means “in at least one State.” Opp.27.

Thus, Atrium argues, petitioner’s reading “effectively

negat[es] the meaning of this phrase to give it a new

and opposite meaning.” Id. But it is Atrium’s reading

that “does substantial damage to the actual statutory

language,” contra id., because it renders the phrase “in

one or more States” wholly superfluous. The plain

meaning of “established by State law” would of course

include any entity established “in at least one State.”

But “every clause and word of a statute” should be

given “effect, if possible,” and should not be treated “as

surplusage in any setting.” Duncan v. Walker, 533

U.S. 167, 174 (2001) (quotation marks omitted).

To dispel any potential doubt: The House Committee on the Judiciary explained that this language

was intended to cover geographically constrained, special-purpose subdivisions that are “established in two

or more States” simultaneously. H.R. Rep. No. 98-965,

at 19-20 (1984) (emphasis added). If “[n]o court has

ever embraced [petitioner’s] reading” of “established

… in one or more States,” Opp.27, it is probably because no court has ever even entertained the argument that a multistate megafirm like Atrium might

qualify as a “local government” akin to a “school district” under this provision of the LGAA.

This Court would not need to look any deeper into

state statutes or case law to hold that the plain text of

the LGAA requires reversal. And such a holding

would establish a uniform threshold rule: A multistate megafirm that is not established in each of the

States in which it operates is not a “local government”

under the Act.

B. The Fourth Circuit’s Decision Is Not

Supported By Any Of The Cases Atrium

Cites.

The primary authority on which both Atrium and

the Fourth Circuit rely is the Supreme Court of North

Carolina’s decision in DiCesare v. Charlotte-Mecklenburg Hospital Authority, 852 S.E.2d 146 (N.C. 2020).

But that case did not analyze whether Atrium is a

“special function governmental unit” under the LGAA.

Rather, DiCesare addressed whether Atrium is a “person” subject to civil-damages actions pursuant to the

State’s antitrust law. Id. at 160. Ultimately, the court

was “persuaded” that North Carolina public corporations are not “person[s]” in this sense because all such

corporations in the State are founded with the “essential function” of providing “governmental … services.”

Id. at 160-62.

As the case makes clear, North Carolina uses

terms like “public purpose,” “public body,” and “body

corporate and politic” in a very broad sense that

includes not only traditional local governmental units

but also all public corporations that have, as “their essential function,” “the governmental provision of services.” See DiCesare, 852 S.E.2d at 149, 162 (quotation

marks omitted). This only demonstrates that North

Carolina understands those terms to be much broader

than the examples listed in the LGAA. Moreover, the

core analysis in DiCesare turns on a distinction between “for profit” and “non-profit” organizations, id. at

156-57, 160, a distinction irrelevant to federal antitrust law.

Based on this “governmental services” language

from DiCesare, see Opp.17, Atrium suggests that “an

entity seeking to qualify under the LGAA must be delivering governmental services,” and that such services must already be recognized as “a legitimate government function,” id. at 31. And whereas “the provision of healthcare” is “indisputably … a legitimate government function,” Atrium apparently believes the

provision of “retail or investment banking services” is

not, and thus outside “the concept of a special function

governmental unit.” Id. at 31-32.

Scour the LGAA, and you will find no indication of

the atextual limiting principle Atrium proposes. And

North Dakota, at least, might have something to say

about Atrium’s characterization of retail banking as

an illegitimate government function, given that it operates a state-owned, state-run general service bank.

See Bank of North Dakota, History of BND,

https://bnd.nd.gov/history-of-bnd/ (last visited Nov. 15,

2021). As the Bank of North Dakota exemplifies, the

government legitimately provides services all the time

that private firms do as well, so Atrium’s proposed limitation is none at all. Local governments also own and

operate golf courses, sports stadiums, lotteries, and

museums, as well as provide and service student loans

and mortgages, to name just a few. As Atrium would

have it, firms originally founded by local governments

that do the same would themselves be “local governments” under the LGAA, and thus exempt from antitrust damages liability, even if they grow into multistate megafirms of their own volition.

None of the other lower court cases Atrium cites

(at 21-22) supports its atextual argument either. See

C.A. Reply 25-27. And these cases were decided before

hospital authorities like Atrium became what they are

today—hospital authorities were only granted the

ability to operate out-of-State in 2015. See supra n.*.

Accordingly, these cases in no way support the remarkable outcome below, where a multistate megafirm has been allowed to don the sheep’s clothing of a

“local government.”

C. The Fourth Circuit’s Decision Is Not

Supported By North Carolina Statutes.

Atrium argues that North Carolina has granted

hospital authorities governmental powers and obligations that “pertain exclusively to a government,” as

distinguished from those possessed also by a private

individual or a private association. See Opp.8 (quotation marks omitted).

The petition addressed (at 28-33) why these socalled governmental “powers” and obligations do not

distinguish hospital authorities from private parties.

In response, Atrium makes two particularly egregious

misrepresentations that warrant attention.

First, Atrium misstates that the tax-exempt

bonds it can issue are “backed by the full faith and

credit of North Carolina.” Opp.9. North Carolina expressly provides that the “principal of and interest on

revenue bonds” issued by hospital authorities “shall

not be payable from the general funds of the State or

the municipality.” N.C. Gen. Stat. §§131E-26(a), 15994(a) (emphasis added). Second, Atrium misrepresents that hospital authorities “hold exactly the same

power of eminent domain” as “sanitary districts.” See

Opp.23. Sanitary districts in North Carolina don’t

have to first obtain permission from another government agency to exercise eminent domain. N.C. Gen.

Stat. §40A-3(c)(1). But a hospital authority like

Atrium must. Id. §§40A-3(c)(3), 131E-24(c). And

Atrium admits that North Carolina grants “the power

of eminent domain” to certain private condemnors.

Opp.23. Just like hospital authorities, private condemnors too must first obtain permission from the

very same agency that serves as the gatekeeper for

Atrium. See, e.g., N.C. Gen. Stat. §62-101.

III. The Question Presented Is Important, And

The Court Will Not Confront A Better

Vehicle To Address It.

Atrium attempts to downplay the importance of

the issue, Opp.6, but amici detail how anticompetitive

behavior by dominant hospitals is a national problem

that significantly harms competition, driven by the recent, endemic consolidation of the hospital industry by

megafirms. See Amicus Br.3-6. The data show that

such behavior has driven up costs, id. at 6-8, and private antitrust suits are an important supplement to

government enforcement, id. at 9-13. Atrium’s anticompetitive behavior and rapid expansion as the second-largest healthcare provider in the United States

is a perfect illustration of their concern. Failure to

address the question presented—and answer it in the

negative—invites dominant hospitals throughout the

country to continue abusing their market power without any real check. Id. at 19-24.

Atrium responds that private damages actions are

unimportant because the United States also sued

Atrium, negotiating “a consent agreement that limits

the use of [anti-steering] provisions.” Opp.33-34. It

“is not clear” to Atrium how a damages action would

have “enhance[d] that enforcement.” Id. at 34. And

damages actions, Atrium assures, would not be barred

“against non-governmental parties who collude or enter into anticompetitive arrangements with special

function governmental units.” Id.

But the danger is apparent from Atrium’s own

brief. It continues to argue that the anti-steering

clauses the U.S. Department of Justice and North Carolina Attorney General identified as anticompetitive

actually “promote competition.” Opp.10. And without

the threat of damages, what incentive does Atrium

have to cease “running the Sherman Act’s red lights,

confident that the only consequence of being caught

will be an order not to do so again”? Pet.13. Atrium

acted anticompetitively all on its own, so its assurance

that private damages actions can still be had against

private co-conspirators provides little comfort.

Atrium also intimates that it would be better to

address the question presented in a case where the

corporation is founded by a local government in one

State, gains monopoly power in another, and then is

sued for anticompetitive conduct away from its home

jurisdiction. Opp.28. In this circumstance, Atrium

suggests, such “‘special function governmental unit’

[may] not enjoy the Act’s immunity.” Id. (quoting Pet.

App. 27a).

To be sure, that fact pattern would more starkly

illustrate the absurdity of the Fourth Circuit’s rule—

but the rule is wrong as applied to any set of facts.

When an entity that is not a local government violates

the antitrust laws, everybody—including the residents

of that entity’s home State—is entitled to a remedy.

Moreover, Atrium’s suggestion that its rule does not

compel immunity for out-of-state conduct is wrong. No

matter Atrium’s scope, it would still meet its own proposed limitation as a “special function governmental

unit” exempt from federal antitrust damages, because

it was established “in at least one State” for the “indisputably … legitimate government function” of providing healthcare. Opp.27, 31. No one should believe

that Atrium—and megafirms like it—will not claim

LGAA immunity based on the Fourth Circuit’s decision if they face an antitrust action outside their

founding State. This Court should grant the petition

to settle the question, on which the circuits disagree,

before dominant hospitals further harm consumers in

the manner Atrium harmed petitioner here.

CONCLUSION

This Court should grant the petition for a writ of

certiorari and reverse.

Respectfully submitted,