Opposition — Hospital Bldg. Co. v. Rex Hospital Trustees

—

IN THE

Supreme Court of the United States

OCTOBER TERM, 1974

No. 74-1452

HOSPITAL BUILDING COMPANY,

7 Petitioner,

TRUSTEES OF REX HOSPITAL, A CORPORATION; JOSEPH

BARNES, GEORGE STOCKBRIDGE, AND RICHARD URQU-

HART, JR., Respondents.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF FOR RESPONDENTS IN OPPOSITION

Ray S. BOLZ E

JOHN R. FORNACIARI

Howrey, SIMON, BAKER & MURCHISON

1730 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

THOMAS W. STEED, JR.

ALLEN, STEED & PULLEN

P. O. Box 2058

Raleigh, North Carolina 27602

JOHN H. ANDERSON

SMITH, ANDERSON, BLOUNT & MITCHELL

P. O. Box 750

Raleigh, North Carolina 27602

LILLARD MOUNT

HOFFLER, MOUNT, WHITE & LONG

102 East Main Street

Durham, North Carolina 27701

June 17, 1975 Attorneys for Respondents

WILSON - EPES PRINTING Co.. INC. - RE 7-6002 - WASHINGTON. D. C. 20001

INDEX

OPINIONS BELOW

JURISDICTION

QUESTION PRESENTED ....

STATUTES INVOLVED

STATEMENT OF THE CASE

A. Nature of the Case

B. The Commerce Allegedly Restrained .............

C. Proceedings in the District Court and Court of

Appeals

ARGUMENT

A. The En Bane Decision Was Correct and Pre-

sents No Important Federal Question or Con-

flict with Other Decisions ................................ 6

B. The En Banc Decision Correctly Affirmed Dis-

missal of the Action on the Amended Com-

plaint Allegations -..... , 17

CONCLUSION — 5 19

e NS do do — —

o

TABLE OF AUTHORITIES

Cases: Page

A. Cherney Disposal Co. v. Chicago & Suburban

Refuse Disposal Ass’n., 484 F.2d 751 (7th Cir.

1973), cert. dented, 414 U.S. 1131 (1974 16

Burke v. Ford, 389 U.S. 320 (1967) 7, 16

Cotillion Club, Inc. v. Detroit Real Estate Board,

303 F.Supp. 850 (E.D. Mich. 1964) . 13, 14

Doctors, Inc. v. Blue Cross of Greater Philadelphia,

490 F.2d 48 (3d Cir. 1973) 10, 13, 14

Elizabeth Hospital, Inc. v. Richardson, 269 F. 2d

167 (8th Cir.), cert. denied, 361 U.S. 884

AA 9, 12, 13, 17

Evanston Cab Co. v. City of Chicago, 325 F.2d

907 (7th Cir. 1963), cert. denied, 377 U.S. 943

GEE? cnesseusnitniciiniiieiiieiaeinaite 17

Goldfarb v. Virginia State Bar, et al., 497 F.2d

1 (4th Cir. 1974), cert. granted, 419 U.S. 963

(1974) (Dkt. No. 74-70) K 14

Greenville Publishing Co., Inc. v. Daily Reflector,

Inc., 496 F.2d 391 (4th Cir. 1974 7

Gulf Oil Corp. v. Copp Paving Co., Inc., —— U.S.

— Wk Ea ee 7, 8, 13

— v. Prather, 435 F. 2d 1168 (Sth Cir.

—K— WW 0 o enn 13

Hotel Phillips, Inc. v. Journeymen Barbers, 195

F.Supp. 664 (W.D. Mo. 1961), aff'd, 301 F.2d

Are ae 17

In re Aston Park Hospital, 282 N.C. 542, 193 S.E.

LI. 3

Jackson v. American Medical Ass’n., 1967 Trade

Nee eee 9,17

Mandeville Island Farms, Inc. v. American Crystal

Sugar Co., 334 U.S. 219 (1948) 7

Marston v. Ann Arber Property Man. Ass’n., 302

F.Supp. 1276 (E.D. Mich. 1969), affd per

curiam, 422 F.2d 836 (6th Cir.), cert. denied,

II .. 7, 10, 12, 17

Nan in Hoepital v. Michigan Hospital Service,

361 F.Supp. 1199 (E.D. Mich. 1973 9

III

TABLE OF AUTHORITIES—Continued .

age

Lieberthal v. North Country Lanes, Inc., 332 F.2d

269 (2d Cir. 1964)))))))))j 7,12,17

Page v. Work, 290 F.2d 323 (9th Cir.), cert. de-

nied, 368 U.S. 875 (1961) 10

Rasmussen V. American Dairy Association, 472

F.2d 517 (9th Cir. 1972), cert. denied, 412 8.

950 (1973) 8, 11, 15

Riggall v. Washington County Medical Society, 249

F.2d 266 (8th Cir. 1957), cert. denied, 355 U.S.

GG CED —ñññññ 9,17

Robinson v. Lull, 145 F.Supp. 134 (N.D. Il.

en 9,17

Spears Free Clinic and Hospital for Poor Children

v. Cleere, 197 F.2d 125 (10th Cir. 1952 9, 10, 12

St. Bernard General Hospital, Inc. v. Hospital

Service Ass’n., —— F.2d —— (5th Cir. April

RO GS, . — 8, 15

Sun Valley Disposal Co. v. Silver State Disposal

Co., 420 F.2d 341 (9th Cir. 1969) 13

United States v. Bensinger Company, 430 F.2d

584 (8th Cir. 1970) 2222 7

United States v. Employing Plasterers’ Ass’n., 347

U.S. 186 (1954) 7,16

United States v. Frankfort Distilleries, 324 U.S.

FE Se ee See 7,10

United States v. Oregon State Medical Society, 343

U.S. 326 (1952), aff’g, 95 F.Supp. 103 (D. Ore.

1 9, 12

United States v. Women’s Sportswear Ass’n., 336

110 7

United States v. Yellow Cab Co., 332 U.S. 218

. — —r—v———˙.4 7, 10, 17

Wolf v. Jane Phillips Episcopal Memorial Medical

Center, —— F.2d ——., Vol. 5 CCH Trade Reg.

Reptr. J 60,251 (10th Cir. April 7, 1975) 7, 12, 17

Yellow Cab Co. of Nevada v. Cab Emp., Auto &

W., Local 881, 457 F.2d 1032 (9th Cir. 1972) 7, 10, 17

IV

TABLE OF AUTHORITIES—Continued

Statutes:

Clayton Act

eee ie eR /

Section 16, 15 U.S.C. § 26

Sherman Act

Section 1, 15 U.S.C. §1

Section 2, 15 U.S.C. §2

General Statutes of North Carolina

——— 75-1 et seq., (Michie Replacement

Sections 90-289 et seq., 1971 Advance Legislative

Service to General Statutes of North Carolina,

Pamphlet No. 13, Repealed, Sessions Laws

1973, c. 113.

Rules:

Federal Rules of Civil Procedure

7

KKK

14

IN THE

Supreme Court of the United States

OCTOBER TERM, 1974

No. 74-1452

HosPITAL BUILDING COMPANY,

Petitioner,

V.

TRUSTEES OF REX HospPITaL, A CORPORATION; JOSEPH

BARNES, GEORGE STOCKBRIDGE, AND RICHARD URQU-

HART, JR.,

Respondents.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF FOR RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The citations to the opinions below are adequately set

forth in the Petition (Pet. 1 and 2).

JURISDICTION

The jurisdictional requisites are adequately set forth

in the Petition (Pet. 2).

2

QUESTION PRESENTED

Whether this Court should review the en banc decision

of the Fourth Circuit Court of Appeals applying the well

established and clear standards for interstate commerce

jurisdiction under Sections 1 and 2 of the Sherman

Act, 15 U.S.C. 881 and 2, to the uncontested facts

alleged in petitioner’s amended Complaint, where the

court below had, after a second review and argument,

again affirmed dismissal of petitioner’s amended Com-

plaint.

STATUTES INVOLVED

The pertinent statutes are reproduced in the Petition

(Pet. 4 and 5).

STATEMENT OF THE CASE

A. Nature of the Case

This is a private antitrust action concerning an al-

leged conspiracy which purportedly resulted in a four-

month delay in the approval of petitioner’s application

to expand the facilities of Mary Elizabeth Hospital in

Raleigh, North Carolina. Petitioner Hospital Building

Company (“HBC”) instituted this antitrust action against

respondents on October 10, 1972, by filing its Complaint

alleging violations of Sections 1 and 2 of the Sherman

Act (15 U.S.C. §$1 and 2) and seeking treble damages

and injunctive relief pursuant to Sections 4 and 16

of the Clayton Act (15 U.S.C. §§ 15 and 26).

Petitioner HBC, a North Carolina corporation having

its principal office and place of business in Raleigh,

North Carolina, operates the Mary Elizabeth Hospital

in Raleigh, North Carolina. (J. App. at 3; Compl. J 3).

J. App.” refers to the joint Appendix to the Briefs submitted

below on appeal which were filed by the parties with the Clerk

of the Fourth Circuit Court of Appeals. “Compl.” refers to the

Complaint filed in this action by petitioner HBC.

Mary Elizabeth Hospital is a 49-bed hospital facility

engaged in “offering general medical-surgical services to

the public” for profit. (J. App. 3 and 6; Compl. {73

and 12.)

Respondent Trustees of The Rex Hospital (“Rex Hos-

pital”) is a public, non-profit, tax-exempt hospital located

in Raleigh, North Carolina, and “offers general medical-

surgical hospital services to the public in Raleigh, North

Carolina.” (J. App. 3; Compl. f 4.) Respondent J oseph

Barnes, a local resident of Raleigh, North Carolina, is the

administrator of Rex Hospital; respondent Richard

Urquhart, Jr., a local resident of Raleigh, North Carolina,

is a member of the board of trustees of Rex Hospital;

and respondent George Stockbridge, a resident of Dur-

ham, North Carolina, is an officer of the Health Planning

Council for Central North Carolina. (J. App. 3 and 4;

Compl. U 5, 6 and 7.)

The Complaint alleges that pursuant to then effective

North Carolina law, petitioner, on November 4, 1971,

applied to the North Carolina Medical Care Commission

(“the Medical Care Commission“), a state agency, for a

“Certificate of Need” approving the petitioner’s planned

expansion of the Mary Elizabeth Hospital, in Raleigh,

North Carolina, from a 49-bed facility to a 140-bed

facility. (J. App. 14; Compl. 17 (C).) According to

the “Certificate of Need Law,” petitioner’s application

was referred to the Health Planning Council for Central

North Carolina (the “Planning Council”), a local health

1 Under the “Certificate of Need Law,” Sections 90-289, et seq.,

Title 21, General Statutes of North Carolina, any person that

desired to increase the number of hospital beds or facilities in

North Carolina was required to obtain a “Certificate of Need

approving the proposed increase from the North Carolina Medical

Care Commission. (J. App. 12; Compl. . 17(B).) The ‘ Certificate

of Need” Law has been declared unconstitutional under the Consti-

tution of North Carolina by the North Carolina Supreme Court.

See, In re Aston Park Hospital, 282 N.C. 542, 193 S.E. 2d 729

(S.Ct. N.C. 1973), a decision which may render moot much if not all

of petitioner’s case.

4

planning agency, for its recommendation. (J. App. 12

14 and 15; Compl. W 17 (B) and (C).) n

It is alleged that respondents Rex Hospital and its

administrator and Wake County Hospital and respond-

ent George Stockbridge, a member of the Planning Coun-

cil, conspired to and did in bad faith oppose petitioner’s

application before the Planning Council. As a result,

the Planning Council entered a negative recommendation

on petitioner’s application with the Medical Care Com-

mission. (J. App. 15 and 16; Compl. J 17(C).)

On June 30, 1972, the Medical Care Commission ap-

proved petitioner’s application, even though the Planning

Council and respondent Rex Hospital, purportedly in

furtherance of the alleged conspiracy, had appeared before

the Medical Care Commission in opposition to petitioner’s

application. (J. App. 17-19; Compl. 9 17(D)-(F).)

Neither the respondents nor any other person sought

or obtained a stay of the Medical Care Commission's

order granting petitioner's Certificate of Need,“ and

petitioner could have initiated its expansion of Mary

Elizabeth Hospital on June 30, 1972. Petitioner admits

that a “Certificate of Need” may not have been granted

until March 1, 1972, even if petitioner’s application were

uncontested. (J. App. 26; Compl. J 24.)

B. The Commerce Allegedly Restrained

The Complaint makes clear that the conduct com-

plained of, the alleged conspiracy described above, was

directed at and affected only the provision of additional

hospital services by Mary Elizabeth Hospital in the

“Raleigh area,” defined in the Complaint as “Wake

County, in the State of North Carolina” (J. App. 5;

Compl. 79). In Count I of its complaint, petitioner

alleges that respondents engaged in a “conspiracy in

Wake County Hospital System, Inc., is organized

laws of the State of North Carolina. (J. App. 5: Compl. sa rm

5

unreasonable restraint of the . . . trade and commerce

in the {urnishing of medical-surgical hospital services.”

(J. App. 9; Compl. J 15.) In Count II, petitioner alleges

that the conduct complained of constitutes “an attempt

by defendant [respondent] Rex to monopolize and to

conspire . . . to attempt to monopolize, the paid hospital

business .. in the Raleigh area.” (J. App. 27; Compl.

Count II, { 3.)

It is alleged that the effect of the conduct complained

of was “to prevent and restrain competition in the fur-

nishing of additional medical-surgical hospital services to

the public... .” (J. App. 24; Compl. . 18; emphasis

added) and to delay petitioner “from proceeding with

construction of the additional medical-surgical hospital

beds....” (J. App. 25; Compl. 1°) The alleged illegal

acts and the product market affected thereby were all

geographically limited to Wake County. (J. App. 5, 7

and 8; Compl. {4 9 and 13.)

C. Proceedings in the District Court and Court of Appeals

On January 2, 1973, respondents, pursuant to Rules

12 (b) (1) and (6) of the Federal Rules of Civil Pro-

cedure, filed motions and supporting memoranda to dis-

miss for lack of subject matter jurisdiction. Petitioner,

on January 29, 1973, filed a detailed factual amendment

to the jurisdictional allegations of its Complaint (J. App.

39-45; Amended Compl. V 14).

Respondents filed an amendment to their motions to

dismiss and oral argument was scheduled and held on

February 22, 1973, in the Raleigh Division of the Federal

District Court for the Eastern District of North Caro-

lina. On March 23, 1973, the District Court entered its

order granting respondents’ motions to dismiss, and stat-

ing: “... the conduct of defendants [respondents] com-

plained of in this case directly affects only a local activity

of plaintiff [petitioner] and only incidentally and insub-

6

stantially does it affect interstate commerce.” (Pet. D-3

to D-4.)

Upon appeal by petitioner, the United States Court

of Appeals for the Fourth Circuit, on February 6, 1974,

affirmed per curiam the order of the District Court.

(Pet. C-1.) On June 11, 1974, the Fourth Circuit Court

of Appeals granted petitioner’s application for a rehear-

ing en bane and withdrew its prior opinion. (Pet. B-1.)

After submission of supplemental briefs and oral argu-

ment, the court below sitting en bane again affirmed dis-

missal of petitioner’s Complaint. The court below found

that the conduct complained of did not occur in inter-

state commerce. (Pet. A-6.) Contrary to petitioner’s

Suggestion (Pet. 2), the dissent below specifically ap-

proved the finding of the majority that the alleged re-

straint on petitioner’s provision of hospital services in

Raleigh, North Carolina, did not occur in interstate com-

merce. (Pet. A-16 n.2.)

The majority of the court also found that the conduct

complained of did not have a substantial effect on in-

terstate commerce. (Pet. A-9 to A-10.) This determina-

tion was reached after a practical analysis of the effect

of the alleged anticompetitive conduct on the flow of

commerce. (Pet. A-12 to A-13.)

ARGUMENT

A. The En Banc Decision Was Correct and Presents No

Important Federal Question or Conflict with Other

Decisions

The en bane decision of the court below expressly ap-

plied the well-established and clear guidelines for juris-

diction under Sections 1 and 2 of the Sherman Act, 15

U.S.C. §§ 1 and 2:

An antitrust plaintiff may establish the necessary

connection with interstate commerce in either of two

7

: emonstrating that the alleged anticompeti-

a * occurred 5 interstate commerce, or by

showing that the conduct, though wholly intrastate,

had a substantial effect on interstate commerce. (Pet.

A-5; emphasis in original.)

Those jurisdictional guidelines were succinctly set forth

and followed in Burke v. Ford, 389 U.S. 320, 321 (1967),

where this court, citing United States v. Employing

Plasterers’ Assn., 347 U.S. 186 (1954), stated that [Ilt

is well established that an activity which does not itself

occur in interstate commerce comes within the scope of

the Sherman Act if it substantially affects interstate

commerce (emphasis in original).”* The application of

those jurisdictional guidelines in the en bane decision

below is in harmony with prior decisions of the Fourth

Circuit and other circuits.’

Nowhere in the Petition is it contended that the en

bane decision below applied incorrect guidelines for de-

termining jurisdiction under Sections 1 and 2 of the

1 il Corp. v. Copp Paving Co., Inc., —— U.S. —, 95

8. on 883 ( 1974 ), the Court recently affirmed — of the

“substantially affects commerce” guideline, stating . . . however

local its immediate object, a ‘contract, combination . + OF con-

spiracy’ nonetheless may constitute a restraint within the 4—

of § 1 [Sherman Act] if it substantially and adversely affects inter-

S

0 US. ‘ : b

— HA, 324 U.S. 293, 297 (1945); United States

v. Yellow Cab Co., 332 U.S. 218, 230 (1947); United States v.

Women’s Sportswear Assn., 336 U.S. 460, 464 (1949).

2 g., Greenville Publishing Co., Inc. v. Daily Reflector, Inc.,

496 P24 S91, 395 (4th Cir, 1974); United States v. Bensinger

Company, 430 F.2d 584, 588 (8th Cir. 1970); Marston v. Ann

Arbor Property Man. Ass’n., 302 F.Supp. 1276 (E.D. Mich. 1969),

aff'd per curiam, 422 F.2d 836 (6th Cir.), cert. denied, yo

929 (1970); Woif v. Jane Phillips Episcopal Memorial —.—

Center, — F.2d ——, Vol. 5 CCH Trade Reg. Reptr. . -

(10th Cir. April 7, 1975) ; Lieberthal v. North Country Lanes, a

332 F.2d 269 (2d Cir. 1964); Yellow Cab Co. of Nevada v.

Emp., Auto & W., Local 881, 457 F.2d 1032 (9th Cir. 1972).

8

Sherman Act, 15 U.S.C. §§1 and 2. Instead, petitioner

argues that the result reached by the court below is

different than the result reached by other courts in ac-

tions concerning alleged conspiracies to restrain the pro-

vision of hospital services and in other cases, and there-

fore, the en bane decision below conflicts with those other

decisions.

Petitioner misses the point. “The judicial inquiry”

relating to interstate commerce jurisdiction under Sec-

tions 1 and 2 of the Sherman Act “turn[s] ... on the

circumstances presented in each case and require[s] a

particularized judicial determination. (Gulf Oil

Corp. v. Copp Paving Company, Inc., — U.S. ——,

95 S. Ct. at 399 n. 12.) Or as stated in Rasmussen v.

American Dairy Association, 472 F. 2d 517, 526 (9th

Cir. 1972), cert. denied, 412 U.S. 950 (1973), a case

relied upon by petitioner: “In this area perhaps more

than most each case must turn on its own facts.“

The Petition conspicuously avoids setting forth the

substance of the Complaint allegations. In the instant

case, it must be emphasized that petitioner has alleged

the purported conspiracy was directed at the “furnish-

ing of medical-surgical hospital services” offered by Mary

Elizabeth Hospital, and the attempt or conspiracy to

monopolize was directed at “the paid hospital business

. .. in the Raleigh area,” which is geographically limited

by the Complaint to Wake County “in the State of

North Carolina.” (J. App. 5, 9 and 27; Compl. W 9,

15 and Count II, 73.) The effect of respondents’ alleged

illegal conduct has been “to prevent and restrain com-

petition in the furnishing of additional medical-surgical

hospital services to the public . . .” in the Raleigh area

This same approach was adopted by the en banc decision below

(Pet. A-8) and emphasized by the court in St. Bernard General

Hospital, Inc. v. Hospital Service Association, —— F.2d —— (5th

Cir. April 7, 1975), (No. 74-2186), (Pet. E-1, at E-11).

and to prevent petitioner from proceeding with construc-

tion of the additional medical-surgical hospital beds.

(J. App. 24-25 Compl. {118 and 19; emphasis added.)

Petitioner does not and cannot contend that the alleged

foregoing effects were accomplished by a conspiracy di-

rected at and intended to regulate the supplies, equip-

ment, financing or any other commercial activity inci-

dental to and separable from the furnishing of hospital

services by Mary Elizabeth Hospital in the Raleigh area.

Petitioner alleges only that the alleged restraint was

perpetrated by respondents’ purported conspiratoria! op-

position to petitioner’s application for a Certificate of

Need before the Medical Care Commission.

Applying the clear guidelines for jurisdiction under

Sections 1 and 2 of the Sherman Act to the Complaint

allegations, the court below analyzed the conduct com-

plained of and correctly found that the Complaint allega-

tions failed to meet the “in commerce” guidelines. (Pet.

A-6.) The dissenters below expressly approved the ma-

jority’s determination that the alleged conspiracy to

restrain the provision of hospital services by Mary Eliza-

beth Hospital did not operate “in commerce.” (Pet. A-

16 n.2.)*

In determining that the conduct complained of failed

to satisfy the “in commerce” guideline, the court below

correctly analyzed the alleged target at which the pur-

ported conspiracy was directed or aimed, (Pet. A-6.)

1 Accord, Elizabeth Hospital, Inc. v. Richardson, 269 F.2d 167

(8th Cir.), cert. denied, 361 U.S. 884 (1959) ; Spears Free Clinic and

Hospital for Poor Children v. Cleere, 197 F.2d 125 (10th Cir.

1952) ; Riggall v. Washington County Medical Society, 249 F. 2d 266

(8th Cir. 1957), cert. denied, 355 U.S. 954 (1958); Robinson v.

Lull, 145 F. Supp. 134 (N. D. III. 1956); United States v. Oregon

State Medical Society, 343 U.S. 326 (1952), aff’g, 95 F. Supp. 103

(D. Ore. 1950); Nankin Hospital v. Michigan Hosiptal Service, 361

F. Supp. 1199 (E.D. Mich. 1973); Jackson v. American Medical

Assn., 1967 Trade Cases {| 71,992 (S.D. Cal. 1967).

10

This approach has been followed by this Court and by

circuit courts as well.’

Contrary to petitioner’s interpretation (Pet. 10), the

court below did not find, as a matter of law, that the

provision of hospital services is a “purely local activity,”

but scrutinized petitioner’s Complaint allegations and

determined :

Here, no matter how entwined in our increasingly

national economy Mary Elizabeth and other Raleigh

area hospitals may be, the fact remains that the con-

spiracy complained of directly affected only one as-

pect of those hospitals’ businesses, namely the pro-

vision of surgical-medical hospital services in the

Raleigh area. And the provision of such services re-

mains what it always has been: a local, intrastate

activity, not interstate commerce. (Pet. A-6.)

Indeed, the court below expressly agreed with Doctors,

Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48

(8rd Cir. 1973), implicitly indicating that, given facts

sufficient to satisfy the jurisdictional requirements of the

Sherman Act, it would also find jurisdiction under the

1 See, e.g., United States v. Yellow Cab Co., 332 U.S. 218 (1947)

(where this Court looking to the object or purpose of the alleged

conspiracy (the commerce “toward which this aspect of the con-

spiracy is directed” (Jd. at 230)), found it lacked jurisdiction

under the Sherman Act); and United States v. Frankfort Distil-

leries, Inc., 324 U.S. 293, 297 (1945) (where this Court stated

„ [Local conduct could be insulated from the operation of the

Anti-Trust laws on the basis of the purely local aims of a combi-

nation, insofar as those aims were not motivated by the purpose

of restraining commerce, and where the means used to achieve the

purpose did not directly touch upon interstate commerce“).

2 See, e.g., Yellow Cab Co. of Nevada v. Cub Emp. Auto. & W.,

Loc. 881, 457 F.2d 1032, 1035 (9th Cir. 1972); Marston v. Ann

Arbor Pronerty Man. Assn., 302 F. Supp. 1276, 1280 (E.D. Mich.

1969), af per curiam, 422 F.2d 836 (6th Cir.), cert. denied, 399

U.S. 929 (1970); Spears Free Clinic and Hospital v. Cleere, 197

F.2d 125, 127 (10th Cir. 1952); Page v. Work, 290 F.2d 323,

330 (9th Cir.), cert. denied, 368 U.S. 875 (1961).

11

Sherman Act over an alleged conspiracy to restrain hos-

pital services. (Pet. A-10.)

The court below also correctly found that the conduct

complained of could not have a substantial effect on

interstate commerce. Quoting from Rasmussen v. Ameri-

can Dairy Association, 472 F.2d 517, 523 (9th Cir.), cert.

denied, 412 U.S. 950 (1973), the court below observed

that .. . such decisions should be exercises of reasoned

economic judgment rather than applications of mechan-

istic formulae... .” (Pet. A-9.) Applying its “rea-

soned economic judgment” (Pet. A-9) to the Complaint

allegations, it held:

. . [[Wie conclude that the various ramifications

noted by HBC do not add up to a sufficiently sub-

stantial effect upon interstate commerce to satisfy

Sherman Act requirements. The effect here seems to

us the indirect and fortuitous consequence of the

restraint of the intrastate Raleigh area hospital mar-

ket, rather than the result of activity purposely di-

rected toward interstate commerce. Although not

controlling, this factor is relevant to the issue of

substantiality. [Citation omitted.] Moreover, when

the various economic consequences are sorted out and

considered in the perspective of their respective mar-

kets, it is obvious that none of them could have more

than negligible impact... (Pet. A-9 to A-10; foot-

notes omitted.)

The court below emphasized the facts in the instant

case concerned .. . one small hospital’s delayed ex-

pansion. ...” (Pet. A-11; emphasis added.) The Com-

plaint allegations make clear that petitioner was success-

ful in obtaining approval from the Medical Care Com-

mission to expand Mary Elizabeth Hospital in Raleigh,

North Carolina, that from the date petitioner filed its

application, November 4, 1971, until petitioner obtained

approval, June 30, 1972, only eight months elapsed, and

that approval by the Medical Care Commission would

12

not have been granted until March 1, 1972, even if re-

spondents had not contested petitioner’s application. Ac-

cordingly, the four-month delay in obtaining approval for

the expansion of Mary Elizabeth Hospital could have no

substantia! adverse effect on interstate commerce in the

travel of potential out-of-state patients or the supply

of drugs and equipment or any other incidental contact

Mary Elizabeth Hospital had with interstate commerce.

In addition, precedent squarely holds that each of the

incidental out-of-state transactions with which Mary

Elizabeth Hospital has contact is insufficient to satisfy

the “substantial effects” guideline. See, United States

v. Oregon Medical Society, 343 U.S. 326, 338-39 (1950),

affg, 95 F.Supp. 103 (D. Ore. 1950) (where this Court

affirmed a finding of lack of jurisdiction over an alleged

local conspiracy to restrain competition in health in-

surance which conspiracy was formed by a statewide

society of doctors who purchased drugs and equipment

from out-of-state, treated patients from out-of-state and

obtained insurance payments from out-of-state, 95 F.

Supp. at 122-23); Lieberthal v. North Country Lanes,

332 F.2d 269 (2d Cir. 1964) (where the alleged local

conspiracy was aimed at limiting the competition in

bowling by preventing the construction of a bowling alley

which was to be constructed with out-of-state materials

and equipment); Marston v. Ann Arbor Property Man.

Ass’n., 302 F.Supp. 1276 (E.D. Mich. 1969), aff'd per

curiam, 422 F.2d 836 (6th Cir.), cert. denied, 399 U.S.

929 (1970) (where the alleged local continuing con-

spiracy was directed at controlling and fixing the con-

struction and rents of apartments in Ann Arbor which

were leased to out-of-state travelers and built with

out-of-state materials).

1 See also, Spears Free Clinic and Hospital v. Cleere, 197 F.2d

125, 126 (10th Cir. 1972); Wolf v. Jane Phillips Episcopal Memorial

Medical Center, —— F.2d ——, Vol. 5 CCH Trade Reg. Rptr.

60,251 (10th Cir. April 7, 1975) (No. 74-1496); Elizabeth Hos-

13

Throughout the Petition, it is argued that the en bane

decision construed the applicable jurisdictional standards

too narrowly. (Pet. A-15.) Petitioner ignores the fact

that after the court found Sherman Act jurisdiction lack-

ing under the well established two-pronged guidelines,

it went on to. . . consider instead the real danger, in a

practical sense, of anticompetitive conduct to the flow of

commerce, or the potential destructive power of a con-

spiracy.” (Pet. A-12.)

Under the foregoing analysis of the effect of the con-

duct complained of on the “flow of interstate commerce,”

an analysis which the petitioner contends was not made

(Pet. 16), the en bane decision found:

In our case, there is no allegation that the Raleigh

Group has the power to put HBC out of business,

or indeed, upon a fair reading of the whole amended

complaint, that it can do any more than delay, at

most, whatever expansion seems economically wise to

the plaintiff. (Pet. A-13; emphasis added.)

Petitioner also suggests, as it did before the court

below, that the “outcome of this case will determine”

whether “hospitals are exempt from the Sherman Act.”

(Pet. 12.) Again, petitioner misses the point of the

judicial determination of jurisdiction under the Sherman

Act. Such determination is dependent upon the circum-

stances in each case and is a particularized judicial de-

termination. See, Gulf Oil Corp. v. Copp Paving Com-

pany, Inc., —— U.S. ——, 95 S.Ct. at 399 n.12 (1974).

In agreeing with Doctors, Inc. v. Blue Cross of Greater

Philadelphia, supra, the court below indicated that, given

pital v. Richardson, 269 F.2d 167 (8th Cir.), cert. denied, 361 U.S.

884 (1959); Sun Valley Disposal Co. v. Silver State Disposal Co.,

420 F.2d 341, 343 (9th Cir. 1969); Harrison v. Prather, 435 F.2d

1168, 1175-76 (5th Cir. 1970) ; Cotillion Club v. Detroit Real Estate

Board, 303 F. Supp. 850 (E.D. Mich. 1964).

14

the proper factual circumstances, jurisdiction would be

found. (Pet. A-10.) Accordingly, this case is not similar,

as petitioner claims (Pet. 23), to Goldfarb v. Virginia

State Bar, et al., 497 F.2d 1 (4th Cir. 1974), cert.

granted, 419 U.S. 963 (1974) (Dkt. No. 74-70), where

the circumstances involve the novel question of the exemp-

tion of alleged professional price fixing of fees by local

associations of a “learned profession” in the multi-state

area surrounding metropolitan Washington, D.C.

Petitioner also argues that “the federal government

has a vital interest in the provision of hospital services”

because it indirectly provides some funds to local agencies

for in-state Medicare payments and, therefore, the con-

duct complained of substantially affects interstate com-

merce. (Pet. 22.) If this were the test for Sherman

Act jurisdiction, virtually every walk of life has some

connection with the Federal bureaucracy and would be

within reach of the Sherman Act. State antitrust laws,

such as North Carolina’s antitrust laws (G.S. North

Carolina, §§ 75-1, et seg., (Michie 1975 Replacement) ),

should then be repealed as ineffective. See, Cotillion Club,

Inc. v. Detroit Real Estate Board, 303 F.Supp. 850, 853-

54 (E.D. Mich. 1964).

Contrary to petitioner’s assertion (Pet. A-12), the en

bane decision is not in conflict with Doctors, Inc. v. Blue

Cross of Greater Philadelphia, 490 F.2d 48 (8rd Cir.

1973). As the en bane decision observed (Pet. A-10 to

A-11), the facts in Doctors, Inc., supra, are vastly dif-

ferent from the facts in the instant case. The alleged

conspiracy in Doctors, Inc., supra, was directed at the

provision of hospital services furnished by approximately

100 hospitals in an interstate geographic market con-

sisting of eight counties located in Pennsylvania and

New Jersey (490 F.2d at 49, n.1 and 51), and the

effect of the conspiracy would have been to close down

Doctors Hospital and “to close down or limit the op-

15

eration” of approximately 100 other hospitals at which

the conspiracy was aimed. (490 F.2d at 51.)

Likewise, the en banc decision is not in conflict with

St. Bernard Generai Hospital, Inc. v. Hospital Services

Association of New Orleans, Inc., —— F.2d —— (5th

Cir. April 7, 1975) (Pet. E-1). The Fifth Cireuit in

St. Bernard, supra, discussed the en banc decision below

and emphasized the significant factual differences be-

tween St. Bernard, supra, and the en bane decision be-

low. (Pet. E-9 to E-10.) The Fifth Circuit in St.

Bernard, supra, specifically stated that “We do not con-

sider our disposition to be in conflict with the very re-

cent en bane opinion by the Fourth Circuit in Hospital

Building Co. v. Trustees of the Rex Hospital, 4th Cir.

[footnotes omitted], and commented with approval that

“the Fourth Circuit affirmed the dismissal of a single

small hospital’s Sherman Act complaint for lack of juris-

diction.” (Pet. E-9 to E-10, footnotes omitted.)

Nor is the en bane decision in conflict with Rasmussen

v. American Dairy Association, 472 F.2d 517 (9th Cir.

1972), cert. denied, 412 U.S. 950 (1973). As the en

bane decision emphasized, the facts in Rasmussen were

not at all similar to the facts in the case below and

involved a conspiracy aimed at restraining the sale of a

product that was in the flow of interstate commerce.

(Pet. A-7.) See also 472 F.2d at 525.

iscrimina health insurance contracts on plaintiff and the class

— ä u —— Gna Gad Gb dine Gam

earning a profit on Blue Cross business. (Pet. E-4.) The com-

plaint contained no allegations as to the effect of the alleged

conspiracy on interstate commerce (Pet. E-6) and the Fifth Cir-

cuit did not find Sherman Act jurisdiction but merely remanded

the case for further proceedings.

16

Petitioner also argues that the en bane decision be-

low conflicts with Burke v. Ford, 389 U.S. 320 (1967)

and United States v. Employing Plasterers’ Assn., 347

U.S. 186 (1954). (Pet. 18.) The facts in those cases

underscore the lack of jurisdiction in the instant case.

In Burke v. Ford, this Court applying the “substantial

and direct” guideline found Sherman Act jurisdiction

existed where all the liquor wholesalers in the state

conspired to allocate territories for the sale of liquor,

all of which liquor sold in the state was shipped into

the state from other states. 389 U.S. at 320-21.

And, in United States v. Employing Plasterers’ Ass’n.,

supra, the Court found jurisdiction present where a labor

union and a trade association of contractors, which con-

tractors did 60% of the plastering contract business in

Chicago, conspired “to prevent out-of-state contractors

from doing any business in the Chicago area and to bar

entry of new local contractors” without union approval.

(347 U.S. at 188.) The Court stated: “A local group

of people were to a large extent able to dictate who could

and who could not buy plastering materials that had to

reach Illinois through interstate” commerce. (347 U.S. at

189.) See also, A. Cherney Disposal Co. v. Chicago &

Suburban Refuse Disposal Ass’n., 484 F.2d 751, 753, n.1

(7th Cir.), cert. denied, 414 U.S. 1131 (1973) (another

case with which petitioner claims the en bane decision

below conflicts (Pet. 20), but where plaintiff alleged de-

fendants refuse collectors, their trade association and out-

of-state equipment manufacturers had conspired “to re-

strain and monopolize the private scavenger business

within the geographic area including Chicago, its suburbs,

parts of Indiana, and Wisconsin . . and St. Joseph,

Missouri,” and where defendants allegedly pressured out-

of-state equipment manufacturers to refuse to deal with

plaintiffs) .

17

The en bane decision dismissing the amended Com-

plaint allegations simply measured those allegations

against the well established jurisdictional guidelines for

Sherman Act jurisdiction. There is no conflict in de-

cisions nor important fundamental issue raised by the

en bane decision.

B. The En Banc Decision Correctly Affirmed Dismissal

of the Action on the Amended Complaint Allegations

The en bane decision correctly affirmed dismissal of

the action on the basis of petitioner’s amended Complaint

allegations. Rules 12(b)(1) and (6) of the Federal

Rules of Civil Procedure specifically contemplate such

action and the case authority is legion on the correct-

ness of this dismissal for failure to state a claim or for

lack of jurisdiction over the subject matter under the

Sherman Act.“

After having respondents’ memorandum in support of

its motion to dismiss for approximately four weeks, pe-

titioner filed a detailed factual amendment to the juris-

diction allegations in its Complaint. (J. App. 39-45;

1 See, e.g., Wolf v. Jane Phillips Episcopal Memorial Medical

Center, —— F.2d ——, Vol. 5 CCH Trade Reptr. . 60,251 (10th

Cir. April 7, 1975) (No. 74-1496); Elizabeth Hospital, Inc. v.

Richardson, 269 F. 2d 167 (8th Cir.), cert. denied, 361 U.S. 884

(1959); Riggall v. Washington County Medical Society, 249 F. 2d

266 (8th Cir. 1957), cert. denied, 355 U.S. 954 (1958); Robinson

v. Lull, 145 F.Supp. 134 (N.D. III. 1956); Jackson v. American

Medical Association, 1967 Trade Cases {| 71,992 (S.D. Cal. 1967) ;

Marston v. Ann Arbor Property Managers Assn., 302 F. Supp.

1276 (E.D. Mich. 1969), aff'd per curiam, 422 F. 2d 836 (6th Cir.),

cert. denied, 399 U.S. 929 (1970); Lieberthal v. North Country

Lanes, Inc., 332 F. 2d 269 (2nd Cir. 1964); Hotel Phillips, Inc. v.

Journeymen Barbers, 195 F. Supp. 664 (W.D. Mo. 1961), aff'd,

301 F. 2d 443 (8th Cir. 1962) ; Evanston Cab Co. v. City of Chicago,

325 F. 2d 907 (7th Cir.), cert. denied, 377 U.S. 943 (1963); United

States v. Yellow Cab Co., 322 U.S. 218 (1947); Yellow Cab Co. of

evada CAB Employers, Automotive & Warehousemen, Local

81, 45

N v.

881, 457 F. 2d 1032 (9th Cir. 1972).

18

Amended Compl. f 14.) Respondents’ memorandum in

support of their motions to dismiss made petitioner fully

aware of the jurisdictional defects in its Complaint.

Petitioner had more than ample opportunity to present

facts to satisfy the Sherman Act’s jurisdictional require-

ments.

It is clear from the Transcript of the hearing before

the District Court that petitioner intended that the facts

in its amended Complaint be conclusive with respect to

jurisdiction under the Sherman Act, and that those

allegations constituted the totality of the purported in-

terstate commerce affected by the conduct complained

of.. Moreover, the Transcript of the hearing is barren

of any suggestion that petitioner had need of discovery

to allege sufficiently the jurisdictional requirements of

the Sherman Act.

In affirming dismissal, the en banc decision made clear

that its decision to affirm dismissal on the Complaint

allegations was a “rare exception.” (Pet. A-3.) Thus,

the court below was aware that the facts in the instant

case were clearly insufficient to satisfy the Sherman Act

jurisdictional requirements.

1 Petitioner stated to the District Court:

We have amended our complaint to set forth in substantial

detail the facts which we intend to prove with respect to the

involvement of interstate commerce because we felt that we'd

like to move forward in this case and get to the merits of it

and we would like the Court to have before it as soon as

possible the facts that we felt justifies this Court in exercising

its jurisdiction to deal with this particular situation, as we

see it, this particular anti-competitive situation that we feel

violates the Sherman Act.

We have set forth the various facts which we believe

satisfy both the tests Mr. Bolze has referred to. (Transcript

before the District Court, Civil No. 4048, February 22, 1973,

at p. 26.)

19

CONCLUSION

The practice of this Court has been to grant writs of

certiorari only in cases invo!ving either principles of

fundamental importance or a direct conflict in circuit

court opinions. Respondents respectfully submit that the

instant Petition presents no important questions of Fed-

eral Law or conflict of decisions calling for settlement

by this Court. The Petition for writ of certiorari should

be denied.

Respectfully submitted,

Ray S. BoLzE

JOHN R. FORNACIARI

Howrey, SIMON, BAKER & MURCHISON

1730 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

THOMAS W. STEED, JR.

ALLEN, STEED & PULLEN

P. O. Box 2058

Raleigh, North Carolina 27602

JOHN H. ANDERSON

SMITH, ANDERSON, BLOUNT & MITCHELL

P. O. Box 750

Raleigh, North Carolina 27602

LILLARD MOUNT

HOFFLER, MOUNT, WHITE & LONG

102 East Main Street

Durham, North Carolina 27701

Attorneys for Respondents

Dated: June 17, 1975