Petition — Hospital Building Co. v. Trustees of Rex Hospital

Supreme Court brief1983

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Office -Suipreme Court, US,

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ALEXANDER L STEVAS,

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

HOSPITAL BUILDING COMPANY,

Petitioner,

Vs.

TRUSTEES OF THE REX HOSPITAL,

a Corporation; JOSEPH BARNES;

and RICHARD URQUHART, JR.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Joun K. Train, III

(Counsel of Record)

Frank G. Situ, III

Kenyon W. Murpuy

Alston & Bird

1200 C&S National Bank Building

Atlanta, Georgia 30335

(404) 586-1500

Joun R. JORDAN, JR.

CHARLES GoRDON Brown

Jordan, Brown, Price & Wall

Post Office Box 1210

Chapel Hill, North Carolina 27514

(919) 968-1111

EuGENE GRESSMAN

Fordham University

School of Law

140 West 62nd Street

New York, New York 10023

(212) 841-5242

Counsel for Petitioner

QUESTIONS PRESENTED

The Fourth Circuit has created a “special rule of

reason”’ as an affirmative defense which is available to

persons whose participation in the “planning” of health

care facilities constitutes classic per se violations of Sec-

tion 1 of the Sherman Act. -ccording to the Fourth

Circuit, such providers are protected from antitrust lia-

bility if (a) their activities are ‘‘undertaken in good

faith’, and (b) the ‘‘actual and intended effects”’ of their

activities are among the consequences ‘‘envisioned’’ by

federal statutes that encourage and fund the planning of

health care facilities. The Questions Presented are:

1. Whether a “‘special rule of reason,”’ premised largely

on the defendants’ good faith, should be an affirmative

defense to a proven horizontal market allocation con-

spiracy and a proven concerted refusal to deal, offenses

that are admittedly per se violations of Section 1 of the

Sherman Act.

2. Whether there should be an affirmative defense,

analogous to the special rule of reason under Section 1,

to a proven attempt to monopolize and a proven con-

spiracy to monopolize in violation of Section 2 of the

Sherman Act.

3. Whether provisions of certain federal statutes that

“envision” and “encourage,” but not ‘“‘mandate,”’ private

participation in the planning of health care facilities are

in such “derogation” of the Sherman Act that planning

activities which otherwise constitute per se violations of

the Sherman Act are protected from the ‘‘normal opera-

tion of the antitrust laws.”’

[cont'd]

Petitioner respectfully reserves the right to argue the

following questions in the event certiorari is granted on

the above questions. These questions are not advanced

as reasons why certiorari should be granted.

4. Whether, as a matter of law, a jury in a civil anti-

trust case must be presented with more than a prepon-

derance of the evidence before it is permitted to find that

a public official participated in a conspiracy in violation

of the antitrust laws.

5. Whether conduct which abuses state adjudicatory

and judicial processes and which is part of a larger con-

spiracy to exclude competition from a market is protected

from the antitrust laws under the Voerr-Pennington

doctrine.

STATEMENT OF RELATED COMPANIES

UNDER RULE 28.!

At the time of the acts which gave rise to the causes of

action in this action, petitioner Hospital Building Com-

pany (‘‘petitioner’” or ‘“‘HBC’’) was a wholly-owned sub-

sidiary of Charter Medical Corporation (‘Charter’), a

publicly held company that owns and manages hospitals

and other health care facilities in many states. The stock of

petitioner has since been sold by Charter to the Hospital

Corporation of America (““HCA’’), and petitioner is

presently a wholly-owned subsidiary of HCA. By con-

tract, Charter retained the right to direct this litigation

and the rights to all proceeds from this litigation; HCA

has no financial interest in this matter.

Petitioner does not have any partially or wholly-owned

subsidiaries. Petitioner’s only current affiliates are wholly-

owned subsidiaries of HCA; its only prior affiliates are

wholly-owned subsidiaries of Charter.

ill

TABLE OF CONTENTS

SN IOI os ace a's ep ca a eR wa i

Statement of Related Companies under Rule 28.1... iii

Dea ee eee ces eee eee iv

eee Or EE a cs a akea ea aes haa heen Vv

SE eis Cy Wives caudal cote cee acca as 1

I er er niet) wie et ts caren ae 2

Statutory Provisions Involved.................005 2

ce 8 Orr ere An are 2

ic EE RIO ccc cece sce ced ona ees ee

ak IC is rer tut nas de kng eee ras 3

Re Ue rc laren wire seuteietey acca ee ee oe ane 4

D. The Fourth Circuit’s Decision................ 8

Reasons for Granting the Writ..................8. 12

A. The Fourth Cireuit’s Decision That ‘Relevant

Federal Health Care Legislation Is In Limited

Derogation Of The Normal Operation Of The

Antitrust Laws’’ Conflicts With Rulings Of

WR oe ca Ae ae a ee eee 12

B. The Fourth Cireuit’s New “Special Rule Of

Reason’’ Will Create Conflicts And Confusion

In Established Antitrust Doctrines........... 16

(. The Fourth Circuit’s Decision Raises New

Issues Of National Importance Under The

UD AIS oe re ee Oo ee 22

RS oe cee ik vcs Sk eran a eee 25

TABLE OF CONTENTS (Continued)

Page

Appendix:

A. Opinion of the Court of Appeals

io ge: Sen set een re la

B. Order of the Court of Appeals Denying

Rehearing En Bane (January 7, 1983)......... 23a

(, Order of the District Court Entering

Judgment (August 18, 1980)................. 24a

D. Excerpts from Petition for Certiorari in

National Gerimedical Hospital and Gerontology

Center v. Blue Cross of Kansas City... ....... .26a

Ek. Excerpts from the Record of the District

CONG FOO. od ss hi 6s ie ae bac eevee 30a

IF. Federal Statutes Which Involve Planning or

Which Regulate Market Entry............... 34a

TABLE OF AUTHORITIES

Anerican Medical Associatipn v. F.T.C., 102 S.Ct.

S7GR (ieee) ks Oe eee ree ry ee ek 19

American Tobacco Co. v. United States, 328 U.S. 781

6 | ae Pere MeNDY ee Ae scree el Ae 21

Arizona v. Maricopa County Medical Society,

Pie AR. ON LE oa isc cue e seen 16, 19, 20

Blue Shield of Virginia v. McCready, 102 8.Ct. 2540

POET sb cp'nces'b neces: bysd 4a base clea oe ai ee 19

In re Certificate of Need for Aston Park Hospital,

282 N.C. 542, 193 S.E.2d 729 (1973)............. 8

Fashion Originators’ Guild of America v. F.T.C.,

Dam Bi Se (OME) oon aciu ces casa eae 17

TABLE OF AUTHORITIES (Continued)

Page

Group Life & Health Insurance Co. v. Royal Drug Co.,

ee ares Se CRI oes Seek mo einen ee Sa ees 19

Hospital Building Co. v. Trustees of Rex Hospital,

511 F.2d 678 (4th Cir. 1975), rev'd, 425 U.S. 738

CN eck cick bday oa abe ike as wn wt 13, 19

Hyde v. Jefferson Parish Hospital District No. 2,

686 F.2d 286 (5th Cir. 1982), cert. granted,

51 U.S.L.W. 3649 (U.S. March 7, 1983).......... 20

Jefferson County Pharmaceutical Association v.

Abbott Laboratories, 103 S.Ct. 1011 (1983).......13, 19

National Gerimedical Hospital and Gerontology

Center v. Blue Cross of Kansas City,

452 U.S. 378 (1981).............13, 14, 15, 16, 19, 24

National Society of Professional Engineers v.

United States, 435 U.S. 679 (1978)..........18, 19, 20

Northern Pacific Railway Co. v. United States,

ee Ns see crceeas easnacueuian 9, 23

Swift & Co. v. United States, 196 U.S. 375 (1905)... 21

Union Labor Life Insurance Co. v. Pireno,

WGN, OT CHOY so etc van ketervcewoarins 19

United States v. National Association of Securities

Dealers, 422°U.8. GO4 (1075)... ce ees 13

United States v. Socony-Vacuum Oil Co.,

Se a rae 17

United States v. Trenton Potteries Co.,

EE Es OE I iv i oS ieee deena odes 04s eases 23

TABLE OF AUTHORITIES (Continued)

Page

Federal Statutes

Clayton Act §4, 15 U.S.C. $15 (1976 and

WOE os es ee De eee A ba are wots 2

National Health Planning and Resources Develop-

ment Act of 1974, codified at 42 U.S.C. §$§$300k —

3001-14 (1976 and Supp. IV 1980).......... 13, 14, 24

Sherman Antitrust Act, 15 U.S.C. $1 (1976 and

he So PUP Beit A Rd A ar ae passim

Sherman Antitrust Act, 15 U.S.C. $2 (1976)...... passim

North Carolina Statutes

Certificate of Need Law, 1971 N.C. Sess. Laws

Ch. BEG4 6900-200 ef 200... ccc eee sass ()

Other

3 P. Areeda & D. Turner, Antitrust Law §822a

PR aie ee ead anes re ee A ke ey 22

Halper, The Health Care Sector and the Antitrust

Laws: Collision Course, 49 Antitrust L. J. 17

1 MS ig ag Sean Oe gis ica a Se —

C. Havighurst, Deregulating the Health Care

DUA SIE Cre ss eas gabe ns tea sks 15

HRA-45, Data Systems Table No. 2, John Gold,

Director, Department of Health and Human

Services, Division of Regulation Activity ......... 24

Is Sa igs orate nap eo gears s Pa ee CUS oe RLS 23

vil

TABLE OF AUTHORITIES (Continued)

Page

Other — Continued:

J. Simpson & T. Bogue, The Guide to Health

Planning Law (1902)... 660ecc dsc deeauewencens 24

Sims & McDonald, Antitrust Concepts Difficult to

Apply to Health Care, Legal Times, Dec. 20,

WO. oo vigki vin 0 bi eee ee ee eee 18, 19

L. Sullivan, Handbook of the Law of Antitrust

(QOTT ces xu Ve Cunan yh hoi eee ene eee 17, 23

viii

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

HOSPITAL BUILDING COMPANY,

Petitioner,

Vs.

TRUSTEES OF THE REX HOSPITAL,

a Corporation; JOSEPH BARNES;

and RICHARD URQUHART, JR.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Hospital Building Company respectfully prays that a

writ of certiorari issue to review the decision of the

United States Court of Appeals for the Fourth Circuit

entered on October 19, 1982.

OPINION BELOW

The opinion of the Court of Appeals for the Fourth

Circuit (Appendix A) is reported at 691 F.2d 678 (1982).

The Court of Appeals’ order denying petitioner’s Petition

for Rehearing and Suggestion for Rehearing En Bane

(Appendix B) is unreported. The District Court issued no

opinion; its unreported order entering judgment for

petitioner based on the jury’s verdict is reproduced as

Appendix C.

JURISDICTION

The judgment of the United States Court of Appeals

for the Fourth Circuit was entered on October 19, 1982.

See Appendix A at la. Petitioner HBC timely filed a

Petition for Rehearing and Suggestion for Rehearing En

Bane which was denied on January 7, 1983. See Appendix

B at 23a. The jurisdiction of this Court is invoked under

28 U.S.C. $1254(1) (1976).

STATUTORY PROVISIONS INVOLVED

Section 1 of the Sherman Act, 15 U.S.C. $1 (1976 and

Supp. V 1981), provides in relevant part:

Every contract, combination in the form of trust

or otherwise, or conspiracy, in restraint of trade or

commerce among the several States, or with foreign

nations, is declared to be illegal.

Section 2 of the Sherman Act, 15 U.S.C. §2 (1976),

provides in relevant part:

Every person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other

person or persons, to monopolize any part of ta

trade or commerce among the several States, or

with foreign nations, shall be deemed guilty of a

felony... .!

STATEMENT OF THE CASE

A. Proceedings Below.

This case is now before this Court for the second time

on a petition for writ of certiorari to review a decision

against petitioner by the United States Court of Appeals

for the Fourth Circuit.

' Section 4 of the Clayton Act, 15 U.S.C. §15 (1976 and Supp. V

1981) provides a private right of action to “{aJny person... injured

in his business or property by reason of anything forbidden in the

antitrust laws... .”

Petitioner filed this action on October 10, 1972, in the

United States District Court for the Eastern District of

North Carolina for violations of Sections 1 and 2 of the

Sherman Act, 15 U.S.C. §$1 and 2 (1976). The District

Court dismissed the case for failure to state a claim affect-

ing interstate commerce. A panel of the Fourth Circuit

affirmed the District Court per curiam; rehearing en banc

was granted, and the entire court affirmed on a 5-3 vote.

511 F.2d 678 (1975). This Court granted certiorari, un-

animously reversed the Fourth Circuit, and held that

respondents’ alleged anti-competitive conduct had a

substantial effect on interstate commerce. 425 U.S. 738

(1976). On remand, the case was tried for six weeks before

a twelve person jury which returned a verdict for peti-

tioner on all counts and awarded damages of over 2.4

million dollars before trebling. Motions for a new trial

and a judgment notwithstanding the verdict were denied

by the District Court. Respondents thereafter appealed,

and the Fourth Circuit reversed the District Court’s

rulings and the jury’s verdict. 691 F.2d 678, Appendix A.

The Fourth Circuit denied HBC’s Petition for Rehearing

and Suggestion for Rehearing En Bane without opinion.

B. The Parties.

Petitioner, Hospital Building Company, is a corpora-

tion organized under the laws of North Carolina. Peti -

tioner owned and operated Mary Elizabeth Hospital

(‘Mary Elizabeth’), a 49 bed, for-profit hospital in

Raleigh, North Carolina.

Respondent Trustees of the Rex Hospital is a North

Carolina corporation which operates the Rex Hospital, a

private, tax-exempt, not-for-profit hospital in Raleigh.?

* For convenience, both the Rex Hospital and the Trustees of the

Rex Hospital, a corporation, will often be referred to as ‘‘Rex.’*

Respondent Joseph Barnes was the executive director of

the Rex dospital as well as a trustee of North Carolina

Blue Cross-Blue Shield, Inc. (‘Blue Cross’’) from 1960 to

1972. Respondent Richard Urquhart, Jr. was vice-chair-

man of the Board of Trustees of the Rex Hospital.

C. The Facts. *

Respondents and their co-conspirators * undertook,

beginning in the late 1960's, to allocate the market for

provision of general medical-surgical hospital services in

the Raleigh, North Carolina, area between Rex and Wake

Memorial. This market allocation scheme eventually was

formalized into a document and published in the name of

the Joint Long Range Hospital Planning Committee of

Wake County (‘Joint Committee’), an entirely private

organization which received no federal or state funding.®

* References to the record on appeal are to the Joint Appendix and

are cited by volume and page number to the Joint Appendix, viz,

(VII 2855). Trial exhibits not in the Joint Appendix are cited by

their numbers and preceded with a “P” or “D”’ to indicate the party

which introduced the exhibit, vzz, “P-1432.”

‘The co-conspirators included, among others, Wake Memorial

Hospital (“Wake Memorial”), a not-for-profit hospital and the only

ot or general medical-surgical hospital in the Raleigh market, and

Blue Cross, the principal third party reimburser for medical care

services in North Carolina.

5 The Fourth Circuit erred factually when it apparently ascribed

some type of official status to the Joint Committee. See 691 F.2d at

682, Appendix A at 3a. The Joint Committee was, in fact, a pri-

vate, voluntary organization established by Rex and Wake Mi mo-

rial. The Joint Committee was comprised of local citizens and con-

trolled by representatives of Rex and Wake Memorial, and it did

not meet or operate under the authority of any state or federal stat-

ute or regulation. Indeed, the Joint Committee had no more official

status than would a committee comprised of representatives of Gen-

eral Motors and Ford who met to “plan” the long range need for

automobiles. In a “long range plan’’ published by the Joint Com-

mittee in May of 1971 and titled “Report of Joint Long Range Hos-

pital Planning Committee of Wake County to the Board of Trustees

The Joint Committee was formed and controlled by

respondents and their co-conspirators.

Respondents’ market allocation scheme, as represented

in the Joint Committee’s report, was threatened by

Charter’s purchase of petitioner in 1970 and by Charter’s

announcement that Mary Elizabeth would be expanded

from epproximately 49 general-medical hospital beds to

approximately 140 such beds through construction of a

new hospital. Respondents and their co-conspirators, in

order to protect and implement their market allocation

scheme, conspired to block this expansion and thus to

prevent and eliminate competition from petitioner in the

Raleigh market.°

The Fourth Cireuit did not contest that respondents

acted jointly to prevent the expansion of Mary Elizabeth

or that respondents’ joint conduct constituted per se vio-

lations of $1. However, the Fourth Circuit focused on

respondents’ intent and ordered a new trial to permit

respondents to present a good faith affirmative defense,

apparently in the belief that respondents acted only out

of a desire to ‘‘plan’’ for the medical needs of the Raleigh

community. The record is susceptible to no such inter-

pretation,?

The conspiracy which is the subject of this case was

of Rex Hospital and Wake County Hospital System, Inc.,”’ the Joint

Committee allocated, according to its “plan,’’ all of Wake County's

new bed needs between Rex and Wake Memorial. (VII 2878-2904),

* Respondents have never contested that the relevant geographic

market was metropolitan Raleigh, i.e., Wake County, North Caro-

lina, or that the relevant product market was medical-surgical hos-

pital beds.

7 Indeed, the record is replete with evidence that the conspirators

acted solely for their own economic self interest and that they de-

liberately set about to delay the construction of a facility that would

have provided some of the badly needed medical-surgical hospital

beds in Raleigh. (2.g., III 1192-1193; IV 1496-1497; VII 2617, 2621-

2624, 2648-2649, 2689-2690, 2702, 2855).

aimed directly at petitioner and, through it, the entry of

Charter, an aggressive and efficient operator of for-profit

hospitals, into the Raleigh market. This conspiracy was

but one aspect, however, of a more general understanding

among non-profit hospitals in North Carolina and their

primary source of payment, Blue Cross, that every effort

should be made to forestall competiton by proprietary

hospital organizations. Thus, when petitioner filed for a

Certificate of Need in order to proceed with construction

of its new hospital, the conspirators put into operation a

“primary plan” (VII 2855) to subvert the procedures

prescribed by North Carolina law for the awarding of a

Certificate of Need by the North Carolina Medical Care

Commission (‘'MCC’’),*

The initial stage in the state procedure was review and

consideration by the ‘“‘areawide health planning council’ *

of petitioner’s application to the MCC. After reviewing

that agency’s recommendation, the MCC was directed to

consider the Certificate of Need application, to hold a

hearing if it was epposed, and then to approve or deny

* North Carolina passed a Certificate of Need law in July, 1971,

1971 N.C. Sess. Laws Ch. 1164 §§90-289 ef seg. Under that oy the

MCC had the exclusive responsibility for determining “need.” The

law also permitted “areawide health planning councils’ to review

and comment on certificate of need applications,

* The “areawide health planning council” in Raleigh at the time

was the Health Planning Council of Central North Carolina (“Cen-

tral Planning Council’), The Central Planning Council was a volun-

tary organization formed in 1964. It was supported almost entirely

by private funds and local government contributions although it did

receive a smal] amount of federal assistance (II 430-431); its purpose

was to provide advisory health service plans to interested entities in

several North Carolina counties, (V 2155-2156, VII 2785, 2990),

“Planning” by the Central Planning Council was not mandated by

any federal statute, and the Central Planning Council did not have

the authority to enforce the antitrust laws or impose any of its

“plans.’’ More importantly, the Central Planning Council was not

authorized to, and did not, consider the competitive consequences

of its decisions under the antitrust laws.

the application. If the MCC’s decision was contrary to

the areawide health planning council’s recommendation,

that agency could request the MCC to reconsider its

decision.

The conspirators (who ineluded the director of the

areawide health planning council) made this procedure a

device to delay and frustrate petitioner's construction of

its new hospital. The conspirators’ scheme included

multiple abuses of the procedures for obtaining a Certifi-

cate of Need by, among other acts, misrepresentations to

the MCC, the enlistment of the assistance of Christine

Denson, an assistant attorney general of the state of

North Carolina,'® and the adoption of an overall course

of conduct which denied effective and meaningful access

by petitioner to the MCC.

When petitioner finally obtained its Certificate of

Need,!! the respondents instigated an appeal of that

decision to the North Carolina courts, despite legal advice

that the appeal was not likely to succeed on the merits

and thus would not prevent petitioner from expanding

Mary Elizabeth, but could delay that expansion. (VII

2790-2792, 2796-2797).

When a decision by the North Carolina Supreme Court

'° The evidence at trial amply demonstrated that Denson, while

serving as legal counsel to the MCC, the state agency empowered to

grant or deny petitioner's Certificate of Need, went beyond her offi-

cial duties and actively conspired with respondents to oppose peti-

tioner's Certificate of Need application, (2.g., VII 2689-2690, 2702).

'! Because respondents were able to subvert the review and com-

ment process of the Central Planning Council and the MCC's pro-

cedures, petitioner’s application was pending before the MCC for

241 days before it was granted, (VII 2789, 3029-3040). In contrast,

Rex's Certificate of Need application, which was filed with the MCC

after petitioner filed its ie, was granted by the MCC in only

67 days. (VII 2759-2772, 2804-2808).

in an unrelated action invalidated the North Carolina

Certificate of Need law,!? the conspirators turned to their

“secondary plan.’’ This plan involved an agreement ‘‘to

keep down proprietary competition” by having co-con-

spirator Blue Cross impose an arbitrary reimbursement

formula upon petitioner in order to make it unprofitable

for petitioner to expand Mary Elizabeth.'* (VII 2855).

These concerted efforts by respondents and their co-

conspirators prevented completion of petitioner’s new

hospital until 1977.14

Based upon these facts, all of which were supported by

substantial evidence at trial, a twelve person jury in

Raleigh, North Carolina returned a unanimous verdict

for petitioner for approximately $2.4 million before

trebling.

D. The Fourth Circuit’s Decision.

The Fourth Circuit reversed the jury verdict for the

'! The Supreme Court of North Carolina held that the Certificate

of Need law was contrary to the state constitution because it (1)

constituted a deprivation of liberty without due process of law, (2)

established a monopoly in the existing hospitals, and (3) granted

existing hospitals exclusive privileges. See Jn re Certificate of Need

for Aston Park Hospital, 282 N.C. 542, 193 8.E.2d 729 (1973).

'’ Blue Cross limited reimbursement to petitioner to a formula

based on an artificially low, fixed percentage of equity. (III 1192-

1198, IV 1496-1497). Not-for-profit hospitals, such as Rex and Wake

Memorial, were reimbursed at a much higher rate calculated on actual

charges. Blue Cross also refused to recognize any of petitioner’s rate

increases for reimbursement purposes, but accepted all of the re-

quests for rate increases made by Rex and Wake Memorial. (I 352-

353; VII 2860-2872).

'4 Petitioner introduced extensive evidence (which respondents did

not controvert with any evidence of their own) that respondents’

conspiracy caused a 51-month delay in the construction of petitioner’s

new hospital, and the jury awarded damages based on that delay.

See 691 F.2d at 689-90, Appendix A at 17a-20a, and P-1432.

petitioner on its claims under §1 and §2 of the Sherman

Act and ordered a new trial on certain aspects of those

claims.'* In so ruling, the Fourth Circuit created a novel

“affirmative defense’ to the per se violations which

petitioner proved respondents committed.

The Fourth Circuit reached these results as follows:

(1) The entirety of the Fourth Circuit’s reasoning was

based on its acknowledgement that petitioner proved, to

the satisfaction of the jury, two per se violations of §1 °°

by respondents: (a) the horizontal market allocation of

medical-surgical hospital beds in the Raleigh area and

(b) a concerted refusal to deal with petitioner. See 691

F.2d at 684, 686, Appendix A at 6a-7a, 12a-13a.

(2) The panel ordered a new trial on these two §1 vio-

lations in order to permit respondents to present a unique

affirmative ‘rule of reason” defense to their per se vio-

lations. Designed to immunize “‘certain planning activi-

ties that would otherwise violate §1,’’—and the imple-

mentation of those activities as well—691 F.2d at 685,

Appendix A at 10a, the ‘special’ rule promulgated by

the Fourth Circuit

is simply that planning activities of private health

services providers are not ‘‘unreasonable”’ restraints

under §1 if undertaken in good faith and if their

actual and intended effects lay within those envision-

'® The Fourth Circuit held that petitioner proved it was “pre-

pared”’ to construct a new hospital in the Raleigh market. The

Fourth Circuit did not order a new trial on that issue. 691 F.2d at

690, Appendix A at 20a.

‘6 Practices which are per se illegal under §1 of the Sherman Act

include price fixing, market allocation, group boycotts (7.e., con-

certed refusals to deal) and certain types of tying arrangements.

Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5 (1958).

ed by specific federal legislation in place at the time

of the challenged activities as desirable consequences

of such planning activities.

691 F.2d at 685, Appendix A at 10a.

(3) This novel ‘‘special rule of reason’”’ defense to

established per se violations of $1 was derived from the

Fourth Cireuit’s own ‘‘view” that “the relevant federal

health care legislation is in limited derogation of the

normal operation of the antitrust laws. .. .”’ 691 F.2d at

686, Appendix A at 12a. More particularly,

(a) The panel rested its ‘‘view” on a reading of various

federal laws, including the Hill-Burton Act of 1946 and

the Comprehensive Health Planning Act of 1966, that

had as their primary purpose the funding of local health

care facilities and which, incidental thereto, encouraged

certain types of planning. Among the purposes of such

legislation, the Fourth Circuit stated, was the prevention

of the use of federal funds for the construction of facilities

not needed or poorly located and thus the avoidance of

duplicative services and facilities. 691 F.2d at 684,

Appendix A at 7a-Sa.

(b) While admitting that the statutes it cited were not

“altogether clear’ on the matter, the panel felt that those

statutes ‘‘clearly anticipated” and ‘‘envisioned’”’ partici-

pation by local hospitals and their administrators in the

planning and development of health care facilities and

services. This type of ‘‘envisioned”’ participation by local

health care providers, the Fourth Circuit emphasized,

“was merely encouraged and authorized and not man-

dated” by federal laws. 691 F.2d at 686, Appendix A at

10a. The Fourth Circuit added its own approval to such

participation by volunteering that ‘‘we think [it] desir-

able.”’ 691 F.2d at 685, Appendix A at 10a.

(ec) From the foregoing ‘“‘envisioned”’ participation,

the panel deemed that ‘‘a very narrow ‘rule of reason’ is

required in order to permit defendants to show, if they

can, that participation in certain planning activities

that would otherwise violate §1 might not under the

circumstances have been an unreasonable restraint on

trade.” 691 F.2d at 685, Appendix A at 10a. Accord-

ing to the Fourth Circuit, the critical question for the

fact-finder was whether the ‘‘resources’”’ under considera-

tion by persons who in some fashion engaged in health

care ‘‘planning’’ were ‘‘needed’”’ to meet the health care

requirements of the public. 691 F.2d at 686, Appendix

A at 12a.

(4) The Fourth Circuit also held that the respondents

were entitled to present an analogous “rule of reason”

defense against petitioner’s §2 charges and its proof that

respondents attempted to monopolize and conspired to

monopolize health care facilities in the Raleigh area. In

the Fourth Circuit’s view, respondents could immunize

themselves from §2 violations by proving that they “‘were

primarily motivated by intent to avoid a ‘needless’ dupli-

cation of health care resources. .. .”’ 691 F.2d at 690,

Appendix A at 2la. By adopting this ‘“‘good motives”

defense in health care antitrust cases, the Fourth Circuit

rejected the traditional §2 ‘legitimate business purposes”

defense used in other areas of antitrust litigation.

(5) The Fourth Circuit also indicated that (a) the

petitioner had not offered enough evidence to allow the

jury to infer that an assistant state attorney general —

who, under normal standards of proof, was clearly shown

to have been a participant in respondents’ conspiracy —

had done anything more than perform her official duties,

and (b) the trial court gave certain erroneous and unneces-

sarily broad instructions with regard to the sham exception

to the Noerr-Pennington doctrine. '’

REASONS FOR GRANTING THE WRIT

A. The Decision Below That ‘Relevant Federal Health

Care Legislation Is In Limited Derogation Of The

Normal Operation Of The Antitrust Laws” Con-

flicts With Rulings Of This Court.

The Fourth Circuit, after admitting that the matter is

not “altogether clear,”’ held that the relevant federal

health care legislation in place at the time of respondents’

planning activities and respondents’ subsequent actions

to enforce those “‘plans’’ were “‘in limited derogation of the

normal operation of the antitrust laws.” 691 F.2d at

686, Appendix A at 12a. That “derogation” was founded

upon the Fourth Circuit’s perception that certain sta-

tutes “envisioned|,| . . . encouraged and authorized”

participation by local health care providers in the local

planning of health facility expansion, The Fourth Circuit

conceded, however, that such participation was “not

mandated.” 691 F.2d at 686, Appendix A at 10a.

Although the Fourth Circuit couched its reasoning in

terms of “derogation,” its decision necessarily provides

that certain private conduct, 7.e., so-called “health care

planning,” is actually cmmune from application of settled

antitrust principles, including the per se doctrine. Simply

put, the Fourth Circuit’s holding cannot be squared

with the principle repeatedly announced by this Court

that “‘liJmplied antitrust immunity is not favored, and

can be justified only by a convincing showing of clear

'7 The Fourth Circuit addressed these issues in the context of

“additional issues raised by the parties that are relevant to a new

trial,”’ 691 F.2d at 687, Appendix A at 13a, but did not rule that

the trial court committed reversible error on these points.

repugnancy between the antitrust laws and the regulatory

system.’’ United States v, National Association of Securi-

ties Dealers, 422 U.S. 694, 719-20 (1975). See also Na-

tional Gerimedical Hospital and Gerontology Center v.

Blue Cross of Kansas City, 452 U.S. 378, 388-89 (1981).

Just a few weeks ago, the Court took pains to re-empha-

size this principle, noting ‘that there is a heavy presump-

tion against implicit exemptions’ from the antitrust

laws. Jefferson County Pharmaceutical Association v.

Abbott Laboratories, 103 8.Ct. 1011, 1016 (1983). In

contrast, the Fourth Circuit here has relied upon an

open-ended, amorphous “‘envisionment”’ of federal health

care legislation to construct a statutory scheme which

was, in the Fourth Circuit’s words, in ‘‘derogation”’ of

the antitrust laws.

Specifically, the Fourth Circuit’s use of its ‘‘envision-

ment” test directly conflicts with this Court’s application

of the “clear repugnancy test’ to health care planning

activities in National Gerimedical, 452 U.S. at 388-89."*

In National Gerimedical, this Court could find no “clear

repugnancy” between the antitrust laws and federal

statutes which actually established a ‘statutory scheme”’

for health care planning.'* The indicia of non-repugnancy

‘8 The petition for certiorari in National Gerimedical relied heavily

on this Court’s decision in Hospital Building Co. v. Trustees of Rex

Hospital, 425 U.S, 738 (1976) (‘Hospital Building Co. I’’), and upon

petitioner’s subsequent jury verdict, See excerpts from the petition

for certiorari in National Gerimedical which are reproduced as Ap-

pendix D. Indeed, the petition in National Gerimedical accurately

pointed out that the lower court's decision in National Gerimedical

would effectively undo the decision in Hospital Building Co. I by

shielding conduct from antitrust scrutiny “not by the statutory in-

terstate commerce hurdle but rather by a much more amorphous

blanket exemption tenuously based on planning.’’ Appendix D at 28a.

‘® National Gerimedical dealt with “planning” under the National

Health Planning and Resources Development Act of 1974, 42 U.S.C.

between the antitrust laws and the federal health care

legislation in National Gerimedical and the instant case

are strikingly similar:

National Gerimedical

. The defendants’ challenged

action “was neither compelled

nor approved by any govern-

mental, regulatory body.” 452

U.S. at 389. Rather, their

conduct Was a “spontaneous

response” to a finding of a

local advisory planning body.

ld.

. Application of the antitrust

laws to the defendant would

not “frustrate a particular

provision of the [relevant fed-

eral statute] or create a con-

flict with the orders of any

regulatory body.” 452 U.S.

at 390,

Instant Case

. Clearly, the respondents’

anti-competitive conduct was

neither compelled nor approved

by any regulatory body; their

acts represented only a ‘“spon-

taneous response’ to peti-

tioner’s efforts to construct

a new hospital which was not

provided for in the conspira-

tors’ murket allocation scheme.

. The Fourth Cireuit pointed

to no such frustration and

conceded that the respon-

dents’ challenged actions were

“not mandated” by federal

law, 691 F.2d at 686, Appen-

dix A at 10a. All it said was

that the relevant federal sta-

tutes ‘merely encouraged and

authorized,” or “envisioned”

participation by local hos-

pitals and administrators in

the local health facility plan-

ning. 691 F.2d at 685-86,

Appendix A at 10a,

$§$300k-300t-14 (1976 and Supp. IV 1980). That statute, in contrast

to the statutes involved in this case, mandated some forms of health

care planning. That statute was not, however, enacted until after

petitioner filed suit in this case, and it has no relevance to the merits

of this action. The Fourth Circuit's decision, however, will clearly

enable violators of the antitrust laws to cloak their conduct under

the “planning” provisions of various statutes and thus to undermine

National Gerimedical’s holding. See infra pp.

22-23,

National Gerimedical Instant Case

3. ‘There was ‘no reason to 3. The Fourth Circuit cited no

believe that Congress spe- federal statutory provision

cifically contemplated . . . giving local hospitals and

‘enforcement’ [of the local administrators enforcement

planning agency’s decisions} powers with respect to the

by private insurance pro- ~Hoeation of local health

viders, let alone relied on facilities.

such actions to put ‘teeth’

into the nonecompulsory local

planning process.”’ 452 U.S.

at 3891,

The Fourth Circuit’s decision pointed to footnote 18 in

National Gerimedical as support for its view that the

statutes it cited were in “derogation of normal operation

of the antitrust laws.” 691 F.2d at 686, Appendix A at

12a. Such a construction constitutes, we submit, « com-

plete misreading of that footnote. Although this Court did

state that some health care activities regulated by federal

law might require a degree of “antitrust immunity in

other factual contexts,” 452 U.S. at 3898 n.18, no such

factual context exists in this ease. None of the ‘tplanning”’

activities of respondents were organized under or conduct-

ed pursuant to any of the statutes cited by the Fourth Cir-

cuit, Furthermore, it is absurd to suggest, as the Fourth

Circuit did, that anti-competitive actions (which actually

subverted the only statutorily mandated health care plan-

ning process involved in this case, ¢.e., the North Carolina

Certificate of Need law) were so integral to what Con-

gress “‘envisioned” as to merit immunity from the per se

doctrine. See C. Havighurst, Deregulating the Health Care

Industry 160-79 (1982).

It is apparent, therefore, that footnote 18 in the Na-

tional Gerimedical opinion has provided an opportunity,

quickly seized upon by the Fourth Circuit, for that court

to impose its own particular ‘‘view’’ as to which conduct

is subject to ‘normal operation of the antitrust laws.”’

691 F.2d at 686, Appendix A at 12a. We submit that

such an opportunity will not be ignored by other courts

and that this Court should restate the plain meaning of

footnote 18, v.e., that National Gerimedical was not in-

tended to encompass each and every aspect of the inter-

play between health care statutes and the antitrust laws.

Before the Fourth Circuit’s opinion becomes precedent

for protecting other per se illegal conduct that courts find

“desirable,” this Court should firmly hold that federal

laws which merely ‘envision’ and “encourage” local

participation in the planning process are ‘‘not so incom-

patible with antitrust concerns as to create a ‘pervasive’

repeal of the antitrust laws as applied to every action

taken in response to the health-care planning process.”

National Gerimedical, 452 U.S. at 393. In National Geri-

medical, as here, “there was no specifie conflict between

the [federal act] and the antitrust laws... .’’ Jd. Where

there is no such conflict, this Court has made clear that

the normal antitrust concepts, including the per se doc-

trine, remain fully applicable in the health care industry.

Arizona v. Maricopa County Medical Society, 102 S.Ct.

2466, 2476 (1982).

B. The Fourth Circuit’s New “Special Rule Of Rea-

son” Will Create Confiicts And Confusion In

Established Antitrust Doctrines.

The new affirmative good faith defense which the Fourth

Circuit labelled a “special rule of reason” can only breed

conflicts and confusion. This novel theory will, if not cor-

rected, significantly undercut the chief purpose of the

per se rule—certainty. Furthermore, the theory of a good

faith defense establishes an entirely new category of anti-

trust analysis which is neither per se nor rule of reason

but rather a hybrid never sanctioned by this Court.

Finally, it is internally inconsistent —there cannot be a

per se offense whose commission can be protected because

it is thought to be “reasonable” or to have been done in

“good faith.”

(1) The Fourth Circuit has exceeded the bounds of

established antitrust analysis by allowing a defendant to

interpose a good faith or ‘rule of reason’’ defense to a

conceded per se violation of $1 of the Sherman Act. Good

motives or ‘‘reasonableness’’ justifications for per se vio-

lations of $1 have never been tolerated by this Court. See,

e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150

(1940); Fashion Originators’ Guild of America v. F.T.C.,

312 U.S. 457 (1941).2° The Fourth Circuit’s decision in

this case dismissed these authorities and held that the

good faith or good intentions of respondents could some-

how justify or excuse their per se violations of §1. While

the Fourth Circuit believed that its new standard “‘in-

volve(d| only a modest practical modification of the per se

rule,” 691 F.2d at 686, Appendix A at 12a, that court’s

unique formulation — which for the first time injects ‘‘good

faith” into the framework by which even the most per-

nicious restraints of trade are to be assessed—is clearly

an ominous dilution of the per se concept under §1.

*° See also L. Sullivan, Handbook of the Law of Antitrust, §71 at

194 (1977) (‘There is an implacable logic in condemning conduct on

the basis of ill effects regardless of benign purposes. It is, in the end,

effects—impacts upon the competitive process—which are of social

consequence .... When competitive processes are or will be stifled

by particular conduct, it is small comfort that those engaging in it

have other ends in view.’’)

(2) The Fourth Circuit further undercut established

antitrust precedent by injecting new elements into the

raditional rule of reason approach.?! In National Society

of Professional Engineers v. United States, 485 U.S. 679

(1978), this Court articulated two clear principles with

regard to the rule of reason: (a) ‘‘the purpose of the [rule

of reason] analysis is to form a judgment about the com-

petitive significance of the restraint; it is not to decide

whether « policy favoring competition is in the public

interest or in the interest of members of an industry,”

Id. at 692; (b) “‘{ujnder {the rule of reason], the inquiry

is confined to a consideration of impact on competitive

conditions.’ Jd. at 690. Instead of confining the rule of

reason to inquiry into the anti-competitive consequences

of a restraint, as mandated by Professional Engineers,

the Fourth Circuit’s decision requires fact-finders to de-

termine the ‘‘desired”’ amount of competition in a mar-

ket, which in this case would require an evaluation of

whether petitioner’s planned expansion was in fact “*need-

less’ duplication of existing resources. See 691 F.2d at

685-86, Appendix A at 10a-12a. Thus, the “special rule

of reason’? compels the fact-finder to substitute its de-

termination of what constitutes adequate or ‘‘needful”’

competition for the free and open functioning of the

marketplace. Such a standard misapprehends the purpose

and application of the rule of reason, and repudiates this

Court’s holding in National Society of Professional En-

2.“(Tlhe 4th Circuit... chose... to blaze new trails in the

Rule of Reason wilderness. ... Such a ‘defense’ surely is not con-

sistent with the ‘rule of reason’ analysis so emphatically limited in

Professional Engineers, nor with the hoary notion that good motives

will not save otherwise illegal conduct from condemnation under the

Sherman Act.’”’ Sims & McDonald, Antitrust Concepts Difficult to

Apply to Health Care, Legal Times, Dec. 20, 1982, 16, 19.

gineers, This cannot be the law. *?

(3) The Fourth Circuit’s decision cannot be recon-

ciled with this Court’s decision in Maricopa County Med-

ical Society, 102 S.Ct. 2466. Further, it ignores other

recent decisions by this Court, including Hospital Build-

ing Co, 1, 425 U.S. 738.** These decisions establish a clear

body of law, which the Fourth Cireuit ignored, that

apply the antitrust laws to the health care industry just

as those laws apply to other segments of the economy.

In Maricopa, this Court emphasized, in the context of

a horizontal maximum fee price-fixing conspiracy, that

the per se test applied in the health care industry to all

“practices which the courts have heretofore deemed to

be unlawful in and of themselves.” 102 8.Ct. at 2473

n.15, 2477, Although the Fourth Circuit recognized that

horizontal market allocation schemes and concerted re-

fusals to deal are per se violations of the antitrust laws,

it nevertheless purported to distinguish Maricopa on the

grounds that “the instant case does not involve price-

fixing.’’ 691 T°.2d at 684 n.38, Appendix A at 6a n.3. Such

reasoning, we submit, misses the whole point of Mari-

** The Fourth Circuit rested its finding of an implied repeal of the

antitrust laws solely upon a determination that some type of plan-

ning by health care providers was “encouraged and authorized” by

federal legislation, 691 F.2d at 684-86, Appendix A at 10a. Thus,

“Iwlhat the 4th Circuit did... was to blur the concepts of implied

repeal and rule of reason, and reach a result which is true to neither,”’

Sims & McDonald, supra note 21, at 19.

“8 See also Group Life & Health Ins. Co. v. Royal Drug Co., 440

U.S, 205 (1979); Nat'l Gerimedical, 452 U.S. 378; American Medical

Ass'n v. F.T.C., 102 S.Ct. 1744 (1982); Blue Shield of Virginia v.

McCready, 102 8.Ct. 2540 (1982); Union Labor Life Ins, Co. v.

Pireno, 102 8.Ct. 3002 (1982); and Jefferson County Pharmaceutical

Ass'n, 103 S.Ct. 1011.

copa.** There can be no principled distinction under §1

between the horizontal price-fixing conspiracy in Mari-

copa and the horizontal market exclusion scheme and the

concerted refusal to deal in this case.

This Court held in Maricopa that per se rules apply in

the health care industry. It is essential that a reaffirma-

tion of this principle be clearly communicated to all lower

courts so that further attempted deviations from Mari-

copa do not occur.

(4) The Fourth Cireuit departed from this Court's

holding that any significant change in application of the

Sherman Act should come from Congress, not the fed-

eral judiciary. See National Society of Professional Engi-

neers, 435 U.S. at 689 (“the argument that because of the

special characteristics of a particular industry, monopo-

listie arrangements will better promote trade and com-

merce than competition... is properly addressed to

Congress... .”’) See also Maricopa County Medical Society,

102 S.Ct. at 2477. Thus, the Fourth Circuit’s decision

departs from this Court’s application of the separation

4 The Fifth Circuit's decision in Hyde v. Jefferson Parish Hospital

District No. 2, 686 F.2d 286 (Sth Cir, 1982), cert. granted, 51 U.S.L.W.

3649 (U.S. March 7, 1983), concluded, based upon Maricopa, that

tying agreements in the health care industry, as in other industries,

were per se illegal and did not provide for any opportunity to excuse

such conduct through an affirmative defense. The petition for cer-

tiorari in Hyde did not challenge this aspect of the Fifth Circuit's

decision, See Petition, No, 82-1031, at 4 n.3 (filed Dee, 17, 1982),

The United States’ amicus brief in support of the petition also does

not question this holding by the Fifth Circuit, but rather acknowl-

edges that proven “per se rules under the Sherman Act are applicable

to the health care industry as to other industries.”’ Brief of the United

States as Amicus Curiae at 4 n.6. Indeed, the aspects of the Hyde

decision that are before this Court on certiorari involve considera-

tion of the nature and extent of tie-ins and do not call into question

whether the per se rules of the antitrust laws apply to the health

care industry.

of powers doctrine in the antitrust field.

(5) The Fourth Circuit recognized a defense under §2

of the Sherman Act which paralleled the novel defense it

created for $1 claims. Although the jury was properly

charged that it must find that respondents had the ‘‘spe-

cifie intent’? to monopolize in order to be held liable for

attempting or conspiring to monopolize under §2, see Ap-

pendix E at 30a, 32a, the Fourth Cireuit held that respon-

dents should have been allowed to prove that they had

a particular type of good motive—the intent to avoid

the “ ‘needless’ duplication” of competitive health care

facilities —in order to evade liability under $2. Accord-

ingly, the Fourth Circuit found erroneous the trial judge’s

charge that good motives were not a defense to violations

of $2. 691 F.2d at 690, Appendix A at 21a.

This Court has long held that §2 is directed against

attempted monopolization where the requisite “intent

and the consequent dangerous probability” of obtaining

a monopoly both exist. Swift & Co. v. United States, 196

U.S. 375, 396 (1905). Similarly, this Court has held that

$2 forbids conspiracies to monopolize where the conspira-

tors acquired or maintained the power to exclude com-

petition from the market and had the specific intent and

purpose to exercise that power. American Tobacco Co, v.

United States, 328 U.S. 781, 809 (1946).

On proper instructions from the trial judge (see Appen-

dix I2), the jury found that respondents had intended to

obtain a monopoly and therefore had violated $2. How-

ever, under the new defense recognized by the Fourth

Circuit, respondents may now be able to avoid liability

by showing that, although they clearly intended to mo-

nopolize, their intent was ‘‘good,”’ because they wished

to avoid the alleged * ‘needless’ duplication” of competi-

tive facilities.2*> The Fourth Cirecuit’s new §2 defense

allows a defendant to escape liability under the Sher-

man Act even if all of the elements of a $2 violation are

proven by the plaintiff. Thus, the defense created by the

Fourth Circuit impermissibly inhibits antitrust enforce-

ment under §2. That defense should be repudiated.

(‘. The Fourth Circuit’s Decision Raises New Issues

Of National Importance Under The Sherman Act.

(1) Although the Fourth Circuit’s decision appexrs to

apply the “special rule of reason”’ (rather than either the

per se standard or the traditional Rule of Reason) only

to health care planning cases, its analysis cannot ra-

tionally be confined to the context of the health care

industry.

At least twenty-three federal statutes (dealing with a

wide variety of federal concerns other than health care)

provide federal funding for some sort of state or local

** The Fourth Circuit analogized the defense to violations of §2

which it created to the often recited rule that specific intent may not

be inferred where the defendants’ activities are motivated by legiti-

mate and proper business considerations. 691 F.2d at 690, Appendix

A at 2la, The Fourth Circuit’s new defense, however, operates differ-

ently and has much broader implications than the rule concerning

legitimate and proper business considerations. A finding that a de-

fendant’s anti-competitive conduct is motivated by legitimate and

proper business considerations simply precludes the conclusion that

the defendant intended to destroy competition. Accordingly, the

“legitimate and proper business considerations” rule can be explained

as an effort to protect an intention to prevail over one’s rivals by le-

gitimate means. Sce 3 P. Areeda & D. Turner, Antitrust Law §822a

(1978). In contrast, the Fourth Circuit’s newly recognized defense

is not concerned with the protection of proper means of competi-

tion. Rather, it protects all forms of anti-competitive conduct —no

matter how pernicious—which are employed to limit competition to

an arbitrarily defined “needed”? amount of competition.

“planning” activity or “regulate” entry into a market by

a competitor.?* If the Fourth Circuit’s decision is left

unreviewed, blatantly anti-competitive conduct, which is

carried out by persons purportedly engaged im ‘fplanning”’

under any of those statutes, could be protected from ap-

plication of the per se test. Thus, the Fourth Circuit's

decision has the far-ranging potential to undercut the

per se test as a tool for antitrust enforcement. Such a de-

velopment would impose significant new burdens on the

federal judiciary in countless antitrust cases. ?7

For this reason, the Fourth Circuit’s opinion raises

major issues of national concern under the antitrust laws.

Whether any type of “‘planning’”’ should be judged under

a special rule of reason because some “planning” is ‘‘en-

visioned”’ is squarely presented in this case. To wait for

the Fourth Circuit’s confusing, aberrational test to be

considered by other lower courts will prolong and imperil

antitrust enforcement in all situations where “planning”

is even arguably “envisioned” by a federal statute.

(2) Even if the Fourth Circuit’s decision is confined to

the health care industry, that decision is still of national

importance to enforcement of the antitrust laws. Anti-

trust cases involving the provision of health care have

increased as the health care sector of our economy has

grown in relative and absolute terms.?* Because of the

°6 These statutes are listed in Appendix F.

*7 The per se test was fashioned by this Court, in part, to relieve

the time consuming burden of permitting every defendant to justify

anti-competitive conduct as somehow being ‘“‘reasonable.’’ See North-

ern Pacific Ry., 356 U.S. at 5, United States v. Trenton Potteries Co.,

273 U.S. 392, 397-98 (1927); L. Sullivan, Handbook of the Law of

Antitrust 193 (1977).

°’ For example, in 1975, only 16 decisions in antitrust /health care

cases were reported; by 1981, that number had almost quadrupled to

61. These statistics were obtained through a LEXIS search. See also

growing importance of health care/antitrust law, this

Court, we submit, should make it clear that, in the ab-

sence of Congressionally mandated protection, there is no

“planning” defense to hard core per se violations of $1.

Under current federal health planning statutes,?* “plan-

ning” is carried out by health systems agencies (“‘HSAs’’),

quasi-governmental agencies that are partially funded by

the federal government, and by State Health Planning

and Development Agencies. There are more than 200

HSAs in the United States, each with jurisdiction over a

particular geographic area.*® HSAs receive, on the av-

erage, over 6000 applications from health care providers

each year.*! Each of these applications presents the pos-

sibility for anti-competitive conduct similar to that suf-

fered by petitioner at respondents’ hands. In order to

prevent other abuses of these processes and to preclude

future market ailocation schemes undertaken in the name

of ‘‘planning,” it is time, we respectfully submit, for this

Halper, The Health Care Sector and the Antitrust Laws: Collision

Course, 49 Antitrust L. J. 17-18 (1980) pointing out that health care

expenditures now constitute 9% of our gross national product and

that five times more health care antitrust cases were brought betwec

1975 and 1980 than between 1890 and 1975.

*9 The National Health Planning and Resources Development Act

of 1974, as amended, 42 U.S.C. §§300k - 300t-14 (1976 and Supp.

IV 1980). The effect of these statutes on application of the antitrust

laws to health care planning was discussed by this Court in National

Gerimedical, 452 U.S. 378. These statutes were enacted after peti-

tioner’s complaint was filed and have no application to the merits

of this case. Certainly, however, cases which do involve the 1974

statute and amendments thereto will be considered under the Fourth

Circuit’s test if that decision is allowed to stand.

°° See J. Simpson & T. Bogue, The Guide to Health Planning Law

xx (1982).

! HRA-45, Data Systems Table No. 2, John Gold, Director, De-

partment of Health and Human Services, Division of Regulatory

Activity. In 1981, 1980 and 1979 there were, respectively, 6410, 7005

and 4771 applications to HSAs.

Court to rule firmly that federal health care planning

legislation does not ‘envision’? or ‘‘encourage’”’ naked

restraints of trade or protect such practices from the per

se doctrine.

CONCLUSION

A writ of certiorari should issue to review the judg-

ment and opinion of the Court of Appeals for the Fourth

Cireuit.

Dated: April 6, 1983

Respectfully submitted,

Joun K. Train, III

(Counsel of Record)

FRANK G. Situ, III

KENYON W. MURPHY

Alston & Bird

1200 C&S National Bank Building

Atlanta, Georgia 30335

(404) 586-1500

JOHN R. JORDAN, JR.

CHARLES GORDON BROWN

Jordan, Brown, Price & Wall

Post Office Box 1210

Chapel Hill, North Carolina 27514

(919) 968-1111

IS UGENE GRESSMAN

Fordham University School of Law

160 West 62nd Street

New York, New York 10023

(212) 841-5242

Counsel for Petitioner

APPENDIX A

IN THE

United States Court of Appeals

FOR THE FOURTH CIRCUIT

No. 81-1134

HOSPITAL BUILDING COMPANY,

Appellee,

vs.

TRUSTEES OF THE REX HOSPITAL,

a Corporation; JOSEPH BARNES;

RICHARD URQUHART, JR,

Appellants,

NORTH CAROLINA HOSPITAL ASSOCIATION

and THE STATE OF NORTH CAROLINA,

Amici Curiae,

Appeal from the United States District Court for the

Eastern District of North Carolina, at Raleigh.

Herbert Maletz, District Judge.

Argued: November 2, 1981 Decided: October 19, 1982

Before HALL, PHILLIPS and CHAPMAN, Circuit

Judges,

Ray 8. Bolze (Mark W. Pennak, Ronald K. Perkowski,

Howrey and Simon; Thomas W., Steed, Jr., Noah H. Huff-

stetler, II], Allen, Steed and Allen, P.A. on brief) for

Appellants; John K. Train, III (Frank G. Smith, ITI,

Leah J. Sears-Collins, Alston, Miller & Gaines; Charles

Gordon Brown; John R. Jordan, Jr., Jerry 8. Alvis,

William M,. Trott, Young, Moore, Henderson & Alvis on

brief) for Appellee; (W. C. Harris, Jr., Harris, Cheshire,

Leager & Southern on brief) for Amicus North Carolina

Hospital Association; (Rufus L. Edmisten, Attorney

General of the State of North Carolina, William I’,

O’Connell, Special Deputy Attorney General, Robert L.

Hillman, Assistant Attorney General on brief) for Amicus

Curiae The State of North Carolina,

CHAPMAN, Circuit Judge:

This appeal is from a $7.3 million dollar treble damages

judgment against appellants Trustees of Rex Hospital,

Joseph Barnes and Richard Urquhart, Jr. The judgment

was entered after a six week jury trial in the District

Court for the Eastern District of North Carolina, The

jury returned a verdict for appellee Hospital Building

Company (‘“‘HBC’’) on its claims under sections 1 and 2 of

the Sherman Act, 15 U.S.C. $$ 1 and 2.!

Appellants seek reversal of the judgment below on

grounds that: (1) the district court applied an incorrect

per se rule of antitrust liability; (2) appellants’ opposition

to HBC’s certificate of need application is protected from

antitrust liability under the Noerr-Pennington doctrine;

(3) HBC failed to prove ‘antitrust damages”’ or to estab-

lish that the alleged antitrust violations proximately

caused HBC’s alleged injuries; and (4) HBC was not pre-

pared to enter the Raleigh, North Carolina area in-patient

services market in 1972. Appellants urge this court to

remand the action for entrance of judgment notwithstand-

' This matter is before us for a second time, HBC's action was ini-

tially dismissed for failure to state a claim affecting interstate com-

merce. A panel of this court affirmed, Dismissal was upheld again

on rehearing en banc, Hospital Building Company v. Trustees of Rex

Hospital, 511 F.2d 678 (4th Cir, 1975), The United States Supreme

Court granted certiorari, 423 U.S, 820 (1975), and reversed, ruling

that the complaint alleges a restraint of trade substantially affecting

interstate commerce, 425 U.S, 738 (1976).

ing the verdict or, in the alternative, to remand for a

new trial,

HBC is a proprietary North Carolina corporation

organized in 1946 to operate Mary Elizabeth Hospital in

Raleigh, North Carolina, Rex Hospital is a non-profit

hospital established in Raleigh in 1840, The trustees of

Rex Hospital are appointed by the Raleigh City Council.

At all times relevant to HBC’s claims, Joseph Barnes was

the chief executive officer of Rex Hospital and Richard

Urquhart, Jr. was vice-chairman of the Board of Trustees

of Rex Hospital.

HBC offered evidence that appellants met with rep-

resentatives of Blue Cross Blue Shield Association of

North Carolina and others in October of 1970 and con-

spired to discourage proprietary competition in the North

Carolina in-patient health services market. HBC’s proof

shows that in 1969 Rex and Wake Memorial Hospitals

organized an ad hoe committee of 26 Raleigh citizens

to study the need for in-patient health services in the

Raleigh area. It is HBC’s position that the committee,

officially known as the Joint Long-Range Hospital Plan-

ning Committee of Wake County (‘Joint Committee”),

was controlled by representatives of Rex Hospital, Wake

Memorial Hospital and Blue Cross Blue Shield,

A national proprietary hospital chain, Charter Medical

Corporation, acquired HBC in December of 1970. Shortly

thereafter Charter Medical announced plans to expand

Mary Elizabeth Hospital, proposing either to enlarge it,

or perhaps to build a new, much larger hospital else-

where in Raleigh.

In May of 1971, the Joint Committee issued its report

on the demand for hospital services in the Raleigh area.

The report recommended that by 1980 Wake Memorial

should expand from 340 to 540 beds and that Rex Hospita]

build a new 500 bed hospital to replace its then existing

facility. The report also contemplated HBC expanding

Mary Elizabeth from 40 to 60 beds.

On July 21, 1971, the North Carolina Legislature en-

acted a certificate of need law, requiring persons to obtain

state agency approval of any expansion of in-patient

facilities prior to commencing construction of the new

facility. On November 1, 1971 HBC filed an application

to replace the existing 49 bed Mary Elizabeth Hospital

with a new 140 bed general proprietary hospital.?

HBC asserts it proved that the co-conspirators formu-

lated a primary and a secondary plan for halting HBC’s

plans to expand Mary Elizabeth Hospital. The primary

plan, HBC asserts, was to kill the planned expansion by

keeping HBC from receiving a certificate of need for con-

struction of its new hospital. The secondary plan HBC

attempted to prove was imposition of a discriminatory

reimbursement schedule to reduce HBC’s profits.

HBC’s application for a certificate of need was initially

referred to the Health Planning Council of Central North

Carolina (“Central Planning Council’). HBC offered evi-

dence that appellants, with the aid of the chairman of the

Central Planning Council, were able to dominate the

council and subvert it to their own purpuses. The Central

Planning Council denied HBC’s application on Janaury

5, 1972.

HBC appealed the Centra! Planning Council’s deci-

sion to the North Carolina Medical Care Commission

(“MCC”), where HBC asserts that Rex, Blue Cross /

* Mary Elizabeth Hospital apparently had 49 beds when the appli-

cation was filed. The Joint Planning Committee proceeded on the

assumption that Mary Elizabeth had only 40 beds.

Blue Shield, the Central Planning Council, and others

conspired to have the MCC reject the application. The

application, according to HBC, met all the criteria for

issuance of the desired certificate of need. When the MCC

yranted HBC’s application on May 5, 1972, HBC asserts

that the conspirators saw that they could not secure re-

jection of HBC’s application. The primary plan of oppos-

ing expansion of proprietary hospital services then shifted

from an attempt to secure rejection of the application to

attempts to tie up the application administratively in

hopes that a series of administrative delays would kill the

planned expansion.

The Central Planning Council successfully petitioned

for a rehearing before the MCC. On June 30, 1972 the

MCC reaffirmed its decision to grant HBC’s application.

On July 28, 1972 the Central Planning Council appealed

the MCC’s decision granting the certificate of need to the

Wake County Superior Court. This appeal was mooted on

January 26, 1973 when the North Carolina Supreme Court

struck down the North Carolina certificate of need law as

violative of the state’s Constitution.

After the certificate of need law was declared uncon-

stitutional, HBC claims the co-conspirators shifted to a

secondary plan of frustrating HBC’s attempts to con-

struct a new hospital. This plan, HBC argued, involved

imposition of a discriminatory reimbursement formula on

HBC and another proprietary hospital operating in North

Carolina. Under this alleged plan, Blue Cross/Blue

Shield limited the amount of insurance reimbursement

proprietary hospitals received.

HBC claims that the delay engendered by the co-con-

spirator’s primary plan and the later discriminatory reim-

bursement prevented it from starting construction on the

new hospital until 1977. At trial HBC was awarded

damages for profits lost due to delay in the opening of the

hospital, increases in construction costs over the period of

the delay and increases in equipment costs over the period

of the delay.

Under current antitrust standards, certain recurring

business practices, ‘because of their pernicious effect on

competition,” are considered illegal per se under the Sher-

man Act. See e.g., United States v. Topco Associates, Inc.,

405 U.S. 596, 607-608 (1972) and North Pacific R. Co. v

United States, 356 U.S. 1, 5 (1958). On its face, $ 1 of the

Sherman Act appears to bar any combination of enter-

preneurs so long as it is “‘in restraint of trade.”’ In lieu of

such a broad interpretation of § 1, the Supreme Court

adopted a “rule of reason” analysis for determining

whether most business combinations or contracts violate

the prohibitions of the Sherman Act. United States v.

Topco Associates, Inc., supra, at 606-07. The practical

difference between a per se offense and arule of reason

offense is that under the per se rule, anticompetitive im-

pact of the alleged offense is presumed, while under the

rule of reason, its anticompetitive impact must be proven.

Arizona v. Maricopa County Medical Society, 50 U.S.L.W.

4687 (1982).° The violations HBC asserts it proved in

this case—horizontal market allocation scheme and a

concerted refusal to deal—are generally per se violations

* The United States Supreme Court decided the Maricopa County

case after argument in this matter had been heard. We recognize that

Maricopa County applies the per se rule to allegations of price fixing

in the health care industry. Unlike Maricopa County the instant case

does not involve price fixing. Furthermore, the limited application

given the rule of reason in this case is justified on much different and

narrower grounds than those discussed in Maricopa County.

of the antitrust laws. United States v. Topco, supra; and

Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207

(1959).

Federal and state laws, enacted at the time the instant

antitrust violations are alleged to have occurred, indicate

that governmental authorities considered oversupply of

health care services and maldistribution of in-patient

health care facilities as substantial roadblocks to more cost

effective operation of the health services market. In an

effort to contain these costs, both state and federal au-

thorities advocated state and local health care planning.

Congressional action on health care planning and con-

trol originated with enactment of the Hill-Burton Act of

1946, Pub. L. No. 79-725, 60 Stat. 1049 (1946) (codified

in scattered sections of 5, 8, 14, 24, 31, 33, 42, 46, 48 and

49 U.S.C.) (1976). The program initiated by the Act was

designed to alleviate deficiencies in the supply and distri-

bution of health care facilities. The Act provided state

agencies with an initial grant to survey and study hos-

pital needs, with federal funds thereafter made available

to participating states to construct, expand or modernize

according to the survey.

By the mid-1960’s Congress had become more con-

cerned with oversupply of hospital services in specific

localities. In 1964 it amended the Hill-Burton Act to

provide fifty percent of the cost of comprehensive regional,

metropolitan area, or other local area plans for coordina-

tion of existing and planned health care facilities. Hos-

pital and Medical Care Facilities Amendments of 1964,

Pub. L. No. 88-443, § 318, 78 Stat. 447 (1964) (codified in

42 U.S.C. $$ 247¢, 291-2910) (1970 and 1976). This fund-

ing was intended to prevent construction of facilities

“which are not needed or are poorly located” and to avoid

“the unnecessary duplication of services and facilities.”’

S.Rept. No. 1279, 88th Cong., 2d Sess. 3 (1964).

In 1966 Congress enacted the Comprehensive Health

Planning Act, Pub. L. No. 89-749, 80 Stat. 1180 (1966)

(codified in 42 U.S.C. $§ 242g, 243, 246 and 247a) (1976).

This act encouraged state and local planning agencies to

draw plans for development of health care facilities, to

review federal grants for health services and to participate

in the planning and development of health care needs.

The act required the state to:

(d) provide for encouraging cooperative efforts

among governmental or nongovernmental agencies,

organizations and groups concerned with health

services, facilities, or manpower, and for cooperative

efforts between such agencies, organizations, and

groups... in the fields of education, welfare, and

rehabilitation. (emphasis added). § 3814(a)(2)(D)

(codified in 42 U.S.C. § 246(a)(2)(b)) (1976).

The House Report stated that approved state plans ‘‘must

provide for cooperative efforts among governmental or

nongovernmental health agencies and groups’’ upon pain

of losing federal funding. H.R. No. 2271, 89th Cong. 2d

Sess. at 12 (1966) (emphasis added).

As noted above, the North Carolina legislature enacted

a certificate of need law on July 21, 1971. 1971 N.C.Sess.

Laws. Ch. 1164 § 90-289. In 1972, Congress enacted the

§ 1122 amendments to the Social Security Act. Social

Security Amendments of 1972, Pub. L. No. 92-603, 86

Stat. 1329 (1972) (codified in scattered sections of 42,

U.S.C.) (1976). The thrust of these amendments was to

require a determination of need for any proposed health

facilities prior to construction. Reimbursement under

medicare and medicaid was conditioned on approval of

the new construction.

According to appellants, the above enactments “‘estab-

lished a ‘public policy contemplating’ that the Health

Planning Council, the defendants and other persons con-

cerned with health care, participate in precisely the sort

of planning efforts engaged in by the Committee.’’

Appellants argue that since these planning activities fell

“within the scope and purposes”’ of federal legislation, the

activities were exempt from the antitrust laws.

None of the above mentioned health planning legisla-

tion contains an express exemption from the antitrust

laws. Therefore, any exemption from the antitrust laws

must be implied. As the Supreme Court recently noted in

National Gerimedical Hospital and Gerontology Center v.

Blue Cross of Kansas City, 425 U.S. 378, 388-89 (1981):

The antitrust laws represent a ‘‘fundamental

national economic policy.”’ Carnation Co. v. Pacific

Westbound Conference, 383 U.S. 213, 218 (1966); see

Lafayette v. Louisiana Power & Light Co., 435 U.S.

389, 398-399 (1978). “Implied antitrust immunity is

not favored, and can be justified only by a convincing

showing of clear repugnancy between the antitrust

laws and the regulatory system.”’ United States v.

National Association of Securities Dealers, 422 U.S.

694, 719-720 (1975); see Gordon v. New York Stock

Exchange, 422 U.S. 659, 682 (1975); United States v.

Philadelphia National Bank, 374 U.S. 321, 350-51

(1963). ‘‘Repeal is to be regarded as implied only if

necessary to make the [subsequent law] work, and

even then only to the minimum extent necessary.

This is the guiding principle to reconciliation of the

two statutory schemes.”’ Silver v. New York Stock

Exchange, 373 U.S. 341, 357 (1963).

HBC argues that none of these enactments ‘‘provides

for self-regulation by the hospital industry.’’ While these

acts do not mandate participation by local hospitals or

their administrators, participation by private health care

10a

providers is clearly anticipated and we think desirable. It

would be wasteful, and potentially impossible to engage

in local health care planning without drawing on the

expertise of local hospital administrators and physicians.

We think a very narrow “rule of reason” is required in

order to permit defendants to show, if they can, that

participation in certain planning activities that would

otherwise violate § 1 might not under the circumstances

have been an unreasonable restraint on trade. The appro-

priate rule, we find, is simply that planning activities of

private health services providers are not “unreasonable”’

restraints under § 1 if undertaken in good faith and if

their actual and intended effects lay within those en-

visioned by specific federal legislation in place at the time

of the challenged activities as desirable consequences of

such planning activities. See, Silver v. New York Stock

Exchange, 373 U.S. 341, 360-61 (1963).

The scope and purpose of such legislation must, of

course, be determined in order to apply this rule of reason

since it must be given to the trier of fact as the benchmark

by which reasonableness of conduct is to be gauged. This

is a question of law —of statutory interpretation —for the

courts, and because it is properly before us on this appeal,

it is appropriate for us to decide it for application in fur-

ther proceedings in this case.

The type and extent of participation in planning by

health care providers that Congress envisioned in the

statutes relied upon by defendants here is not altogether

clear, but it is clear that what was envisioned was merely

encouraged and authorized and not mandated. See,

Hospital and Medical Facilities Amendments of 1964,

supra; 8. Rept. No. 1279, 88th Cong., 2d Sess. 3 (1964) ;

Partnership for Health Amendments of 1967, Pub. L.

lla

No. 90-174, 81 Stat. 533 (1967) (codified in scattered

sections of 42 U.S.C.) (1970 and 1976); 8. Rept. No. 724,

90th Cong., Ist Sess. 3 (1967); Heart Disease, Cancer,

Stroke & Kidney Disease Amendments of 1970, Pub. L.

No. 91-515, 84 Stat. 1297 (1970) (codified in scattered

sections of 42 U.S.C. (1976); H. Rept. No. 91-1297, 91st

Cong., 2d Sess. 12 (1970); Medical l’acilities Construction

& Modernization Amendments of 1970, Pub. L. No. 91-

296, 84 Stat. 336 (1970) (codified in scattered sections of

12, 21 and 42 U.S.C.) (1970 and 1976); and 8. Rept. No.

92-657, 91st Cong., 2d Sess. 13 (1970). This suggests a

fairly narrow interpretation of the range of the conduct

that may properly be given an effect in derogation of

normal operation of the antitrust laws. Cf. National Geri-

medical Hospital and Gerontology Center v. Blue Cross of

Kansas City, 452 U.S. 378, 393 n.18 (1981); Silver v. New

York Stock Exchange, supra.

So construing the statutory authorization relied upon

here we find it runs only to good faith participation in

planning activities aimed at avoiding the needless dupli-

cation of health care resources in an affected area. See e.g.,

Hospital and Medical Facilities Amendments of 1964,

supra, and 8. Rept. No. 1279, 88th Cong., 2d Sess. 3

(1964). Obviously it cannot be interpreted to allow the

blanket use of ‘‘planning’’ as a means by which some

health care providers act to avoid competiton by others

for any other purpose and on any other justification. See

Hospital Building Company v. Trustees of Rex Hospital,

425 U.S. 738 (1976). Specifically we hold that ‘‘planning’’

under this special rule of reason is not ‘‘reasonable’’ if its

purpose or effect is only to protect existing health care

providers from the competitive threat of potential

entrants into or expanders within the same “market.”

l2n

The critical question in application of this rule is likely

always to be whether the ‘‘duplication of resources”

sought to be avoided by planning—almost inevitably a

feature of any planning activity challenged by an outsider

seeking entry or an insider seeking expansion —is in fact

‘needless’? duplication. Proper application of the rule

requires that whether it is ‘‘needless’’ or ‘‘needful’’ be

gauged by the fact-finder in relation to the health care

needs of the consumer public in the market area at the

time in question, objectively assessed, and not in relation

to the economic or other needs of the ‘‘planners’’, either

objectively or subjectively assessed.

Because on this view the relevant federal health care

legislation is in limited derogation of the normal operation

of the antitrust laws, we further think that the burden of

proof to show reasonableness of challenged planning

activities under this special rule of reason should be allo-

cated as an affirmative defense to defendants seeking on

this ground to avoid antitrust liability. On this basis a

claimant, such as plaintiff here, makes out a prima facie

case by showing acts that, but for the health care planning

legislation, would constitute a per se violation of § 1 under

traditional antitrust principles. This establishes liability

for appropriate damages unless the defendants then per-

suade the trier of fact by a preponderance of the evidence

that their planning activities had the purpose (and effect

if plaintiff proves anticompetitive effects) only of avoiding

‘‘needless’’ duplication of health care resources under the

objective standard of need above defined.

While this affirmative defense is concededly a narrow

one that may be thought to involve only a modest practi-

cal modification of the per se rule applied below, defen-

dants are entitled in further proceedings to have it

13a

applied to the extent the evidence on retrial may justify.

Accordingly, we find that the judgment below for HBC

must be reversed and the case remanded for a new trial

applying the above rule of reason rather than a strict per

se basis of antitrust liability.* Since the matter must be

retried, we now address the additional issues raised by

the parties that are relevant to a new trial,

III

Appellants dispute whether the illegal conduct allegedly

attributable to them falls within the so-called sham excep-

tion to Noerr-Pennington antitrust immunity. HBC as-

serts it offered proof: (1) that appellants, aided by the

chairman of the Central Planning Council, appropriated

the powers of the council, effectively denying HBC mean-

ingful access to the Central Planning Council; (2) that

appellants engaged in spurious litigation before the MCC

and the Wake County Superior Court to further the

conspiracy by delaying approval of HBC’s application for

a certificate of need; (3) that appellants suborned the

neutrality of an assistant attorney general of North Caro-

lina assigned to act as counsel for the MCC; and (4) that

appellants made numerous misrepresentations to govern-

ment officials in their efforts to defeat HBC’s application.

* Appellants also seek a new trial on their counterclaims for abuse

of process and libel. Since appellants have asserted no error with

respect to the trial of these issues, and since the retrial of the anti-

trust issues will be sufficiently complicated without introducing these

additional issues, judgment for HBC on appellants’ counterclaims

is affirmed.

* In Eastern Railroads Presidents Conference v. Noerr Motor Freight,

Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington,

381 U.S. 657 (1965), the Supreme Court established that no viola-

tion of the antitrust laws can be predicated upon attempts to influ-

ence the e or enforcement of laws, even if efforts in that regard

are based upon anti-competitive motives.

lda

Actions taken to discourage and ultimately prevent

competitors from meaningful access to the processes of

administrative agencies fall within the sham exception to

Noerr-Pennington immunity. California Motor Transport

Co. v. Trucking Unlimited, 404 U.S. 508, 512-513 (1972).

Thus, proof that appellants conspired to bring the chair-

man of the Central Planning Council and an assistant

attorney general into their conspiracy, with the intent to

foreclose HBC from meaningful access to the Central

Planning Council and the MCC, is within the sham excep-

tion to Voerr-Pennington. Federal Prescription Service, Inc.

v. American Pharmaceutical Assn., 668 F.2d 253 (D.C.Cir.

1981). In California Motor Transport Co., supra, the

court stated that when the proof establishes ‘‘a pattern of

baseless, repetitive claims... which leads the factfinder to

conclude that the administrative and judicial processes

have been abused”, 7d at 513, such actions are not en-

titled to antitrust immunity. As noted in Virginia Acad-

emy of Clinical Psychologists v. Blue Shield of Virginia,

624 F.2d 476, 482 n.9 (4th Cir. 1980), the critical inquiry

with respect to alleged frivolous litigation is whether the

challenged litigation is undertaken with intent to inter-

fere directly with a competitor’s business. See, California

Motor Transport Co., supra, at 511. We believe that appel-

lants are not immune from antitrust liability if the proof

establishes they were engaged in a baseless appeal to the

Superior Court of Wake County with intent to delay ap-

proval of HBC’s application for a certificate of need and

thereby delay its entrance into the Raleigh market.

Appellants raise several objections to Judge Maletz’s

charge on Noerr-Pennington immunity. We agree with

appellants that misrepresentations, to fall within the sham

exception to Noerr-Pennington immunity, must be made

with the requisite intent. In these circumstances, for ex-

lida

ample, misrepresentations made with intent to abuse the

administrative processes so as to deny HBC meaningful

access to the MCC would fall within the sham exception.

At page 27 of its instructions the court says that ‘‘con-

duct in abuse of the adjudicatory or judicial process which

is part of a larger conspiracy to restrain trade or to monop-

olize a market is not immune from the antitrust laws.’’ We

are unprepared at this time to approve such an unneces-

sarily broad definition of the sham exception. As noted

above, HBC asserts that it proved a conspiracy to deny it

meaningful access to the Central Planning Council and

that it proved appellants undertook fruitless appeals

solely to delay approval of HBC’s application. We find

that proof of misrepresentations made with this type of

intent clearly falls within the sharn exception to Noerr-

Pennington, but hesitate at this time to rule that any act

accompanying a larger conspiracy in restraint of trade,

Which also may be fairly characterized as ‘abuse of

process,”’ falls within the sham exception. See Noerr,

supra, at 670.

At page 28 of its instructions the court states: “If the

courts are used or litigation is filed as part of an overall

scheme to attempt to monopolize or exclude competition

from the marketplace or otherwise violaie the antitrust

laws, that conduct does not enjoy antitrust immunity.”

This charge is erroneous in light of California Motor

Transport Co., supra, which extends Noerr-Pennington

immunity to the adjudicatory setting. There is still a

sham exception applicable to judicial proceedings, if such

proceedings are baseless, repetitive and brought with the

intent to abuse the judicial process.

In its capacity as amicus curiae, the State of North

Carolina asserts that the district court erred in allowing

lba

the jury to infer that an assistant attorney general was a

member of the alleged conspiracy. As noted above, the

State of North Carolina has encouraged hospital planning

as a mechanism for controlling costs in the in-patient

health services market. The attorney general of North

Carolina is charged with representing the public interest

at hearings before government agencies, including those

engaged in health services planning. If an assistant at-

torney general appears before a government planning

agency, a jury should not be allowed to infer that the

assistant attorney general was a part of an alleged anti-

trust conspiracy involving that planning council unless

there is some specific evidence the official was not merely

performing his or her assigned duties. Cf., Comfort Trane

Air Conditioning Co. v. Trane Co., 592 F.2d 1373 (Sth Cir.

1979) (affirming a directed verdict on the basis of over-

whelming evidence of independent business purpose).

The attorney general of North Carolina asked assistant

attorney general Christine Denson to meet with repre-

sentatives of the Central Planning Council to insure that

its witnesses were properly presented at the hearing

before the MCC. The Central Planning Council opposed

HBC’s application for a certificate of need as it was statu-

torily authorized to do. The evidence indicated that the

attorney general’s office doubted that the Central Plan-

ning Council’s participation in the hearing would be

effective unless it received assistance from a state at-

torney. Denson was asked to insure that the MCC's

decision was based on a full record. Pursuant to these

instructions, Denson offered to assist both HBC and the

Central Planning Council in preparing proposed findings

of fact. Only the Central Planning Council asked for

assistance.

On the basis of this evidence the district court allowed

the jury to conclude that Denson participated in the

illegal conspiracy. We do not believe that HBC has offered

sufficient evidence that Denson was not merely fulfilling

her duties as an assistant attorney general and was in-

stead knowingly contributing to the illegal conspiracy by

assisting the Central Planning Council in its attempts to

prevail before the (ICC. Absent more telling evidence, a

jury should not be permitted to infer that an assistant

attorney general was a participant in an antitrust con-

spiracy.

Since introduction of the rule of reason into this action

changes the standard of liability, the court below will,

of course, once again address the issue of proximate cause

on remand. Appellants raised the issue of proximate cause

in this appeal, and we believe some discussion of this issue

will be helpful upon remand.

HBC claims that the damage award it received below

was based on the following sequence of events: (1) appel-

lants’ opposition to HBC’s application delaved construc-

tion of the hospital until February 9, 1973, the date the

North Carolina certificate of need law was declared un-

constitutional; (2) the § 1122 amendments to the Social

Security Act further delaved HBC until May 11, 1973,

when federal approval under § 1122 was granted; and (3)

rising interest rates, other unfavorable financial condi-

tions and Blue Cross/Blue Shield’s discriminatory re-

imbursements prevented HBC from resecuring a line of

credit for construction of the new hospital until after its

initial line of credit expired in June of 1973. Appellants

claim HBC failed to prove ‘‘antitrust damages’’ or to

establish that its alleged damages were proximately

caused by the alleged antitrust violations.

Turning first to the proximate cause issue, HBC

alleged, and apparently the jury believed, that appellants

had initially attempted to prevent HBC from receiving a

certificate of need and later, after it became apparent

that the MCC was going to grant HBC a certificate of

need, that appellants attempted to delay the granting of

the certificate of need by engaging HBC in further pro-

ceedings before the MCC and in an appeal before the

Wake County Superior Court. An obvious motivation of

such delaying tactics is the hope that during the interim,

an unforeseen occurrence will discourage or prevent the

opposing party from realizing its plans. Appellants can

hardly claim to have been surprised in this case by two

intervening acts, Congressional enactment of the § 1122

amendments to the Social Security Act and the interest

rate increases. These could have prevented HBC from

beginning construction until 1977. Accordingly, we reject

the appellants’ contentions that these occurrences were

intervening causes of the damages and that a jury could

not find that the damages flowed from the alleged anti-

trust violations.’

The concept of “antitrust injury” is derived from the

decision in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477 (1977). In Brunswich, a company manufac-

turing and supplying bowling equipment acquired several

bowling centers. A number of competing bowling centers

brought an action against the manufacturer and supplier

alleging a violation of § 7 of the Clayton Act. The injuries

* This ruling, of course, does not relieve HBC of the burden of

proving that appellants’ attempts to delay construction of the new

hospital were violative of the Sherman Act under the rule of reason.

1¥a

claimed by the plaintiffs were lost profits that would have

been realized by the plaintiffs if the manufacturer had not

purchased the bowling centers but instead had allowed

them to go out of business as the plaintiffs alleged they

would,

What made the acquisition of the bowling centers

arguably unlawful under the antitrust laws was the manu-

facturer’s potential to use its admittedly overpowering

financial resources to undercut the competing bowling

center, a so-called “deep pocket” offense. Since plaintiffs

had no evidence that the manufacturer and supplier had

attempted to undercut them, plaintiffs could prove no

damages flowing from the alleged illegality and were left

to assert loss of profits that would have accrued to their

benefit had the competing bowling centers been allowed

to wo out of business,

The Supreme Court found these alleged lost profits

were not injury of the type that the violated antitrust

law was designed to prevent and they were not damages of

the type that the claimed violations would be likely to

cause.’ Appellants, in the instant appeal, assert that the

damages HBC seeks in this action flow from enactment of

$ 1122 and from rising interest rates rather than from the

alleged unlawful acts of appellants. We reject this argu-

ment, As was noted in the above discussion of proximate

cause, delay in HBC’s ability to enter the Releigh hos-

pital market is precisely the type of injury that the alleged

“allocation of the market’”’ and “refusal to deal’ were

likely to cause and appellants cannot escape liability

merely because the injurious delay was compounded by

’ See Chief Judge Winter's discussion of the oem. in Brunswick in

Lee-Moore Oil Company v. Union Oil Company of California, 599 F.2d

1299, 1302-1304 (4th Cir. 1979).

20a

enactment of the § 1122 amendments and rising interest

rates,

Since it is not affeeted by our ruling on the rule of

reason and, thus, will not be addressed again on remand,

we also dispose of the issue of HBC's preparedness to

enter the Raleigh area hospital market. Appellants con-

tend that the record supports a finding that HBC could

not have obtained the approval of North Carolina au-

thorities for its G.SS acre “Tucker” site and that HMBC

Was not as a matter of law prepared to enter the Raleigh

area, hospital market in 1972. Entrance of judgment not-

Withstanding the verdict is not proper since the issue was

hotly contested at trial, with considerable evidence being

introduced to support both positions. We also believe

that the question of whether to send a special interroga-

tory to the jury on this issue was within the diseretion of

the trial judge. Tights, Ine. ve. Aeme-MeCrary Corp., 541

K.2d 1047, 1060 (4th Cir, cert. denied, 429 U.S. 980

(1976),

Although the issue was not raised in the briefs, at

argument, HBC asserted the verdict below should be

sustained even assuming the rule of reason applies to its

§ 1 claims. In support of this assertion HBC argued that

any error in applying a per se rule to its § 1 cause of action

did not render objectionable its recovery under its § 2

causes of action.

Section 2 of the Sherman Act supports three distinct

causes of action: (1) monopolization, (2) attempt to

monopolize and (3) conspiracy to monopolize. HBC

sought recovery under the latter two causes of action,

2la

attempt and conspiracy. The district court correctly

charged that an element of both of these offenses is specific

intent to monopolize. American Football League v. Na-

tional Football League, 205 I’.Supp. 60, 64-65 (D.Md.

1962), aff'd 323 F.2d 124 (4th Cir. 1963).

Proof that the transactions in question were primarily

motivated by legitimate business purposes rather than by

specific intent to monopolize is a defense to both attempt

to monopolize and conspiracy to monopolize. Times-

Picayune Publishing Co. v. United States, 345 U.S. 594,

627 (1958), and American Football League, supra at

132-33.

A literal application of the legitimate business purposes

defense, developed in more traditional commercial market

cases, does not, however, readily lend itself to application

by a jury to health care planners. The analogous defense,

and the one appellants should be permitted to pursue

below, is one like that we have formulated for § 1 claims.

Proof that the defendants in this action were primarily

motivated by intent to avoid a ‘‘needless’’ duplication of

health care resources would be a defense to HBC’s § 2

claims. In the instant case the district court charged the

jury that ‘it is no defense to a... conspiracy to monop-

olize and an attempt to monopolize that the acts com-

plained of may have been undertaken with what defen-

dants believe to be proper motives. A claim of good

motives cannot justify or excuse a violation of the anti-

trust laws, and would be no defense in this case.”’

We believe the charge is clearly erroneous in light of the

defendants’ right to prove that they were motivated by

intent to avoid ‘‘needless’’ duplication rather than specific

intent to monopolize. Defendants made a timely objection

to this charge and argued on brief that the § 2 as well as

22a

the § 1 causes of action should be reversed. Plaintiffs § 2

causes of action, therefore, are reversed.

Accordingly, judgment for HBC on appellants’ counter-

claims is affirmed; judgment for HBC on its claims under

§§ 1 and 2 of the Sherman Act is reversed and the case is

remanded for further proceedings consistent with this

opinion.

23a

APPENDIX B

(Filed January 7, 1983, U.S. Court of Appeals

Fourth Circuit)

United States Court of Appeals

FOR THE FOURTH CIRCUIT

No. 81-1134

HOSPITAL BUILDING COMPANY,

Appellee,

versus

TRUSTEES OF THE REX HOSPITAL,

a Corporation; JOSEPH BARNES;

RICHARD URQUHART, JR.,

Appellants,

NORTH CAROLINA HOSPITAL ASSOCIATION,

Amicus Curiae.

ORDER

Upon consideration of the appellee’s petition for re-

hearing en banc and the appellants’ motion to assess costs

on appeal against appellee;

No judge having requested a poll on the suggestion for

rehearing en banc, it is ADJUDGED and ORDERED

that the petition for rehearing and the motion for costs

are both DENIED.

Entered at the direction of Judge Chapman for a

panel consisting of Judge Hall, Judge Phillips and Judge

Chapman.

For The Court,

/s/ WituraM K. State, II

CLERK

24a

APPENDIX C

(Filed August 18, 1980, J. Rich Leonard, Clerk,

U.S. District Court, Eastern North Carolina)

United States District Court

FOR THE

Eastern District of North Carolina

Crvit Action FILE No. 4048

HOSPITAL BUILDING COMPANY |

US. |

TRUSTEES OF THE REX _ JUDGMENT

HOSPITAL, a Corporation;

JOSEPH BARNES and |

RICHARD URQUHART, JR.

This action came on for trial before the Court and a

jury, Honorable Herbert N. Maletz, United States Cus-

toms Judge Presiding by designation, and the issues hav-

ing been duly tried and the jury having duly rendered

its verdict,

It is Ordered and Adjudged that plaintiff Hospital

Building Company recover of defendants Trustees of

Rex Hospital, Joseph Barnes and Richard Urquhart, Jr.,

jointly and severally, treble damages in the sum of Seven

Million Three Hundred Twenty Thousand Ninety and

NO/100 Dollars ($7,320,090.00), plus costs of suit includ-

ing reasonable attorneys’ fees to be determined by the

court at a later date.

it is further adjudged that defendant Trustees of Rex

Hospital recover nothing on its counterclaims for abuse

of legal process and libel and that these counterclaims be

and hereby are dismissed.

25a

Dated at Raleigh, North Carolina, this 18th day of

August, 1980.

/s/ J. Rich LEONARD

Clerk of Court

J. Rich Leonard, at the direction

of Judge Herbert N. Maletz

I certify the foregoing to be a true

and correct copy of the original.

J. Ricu Leonarp, Clerk

United States District Court

Eastern District of North Carolina

By /s/ Susan DEAN

Deputy Clerk

26a

APPENDIX D

EXCERPTS FROM PETITION FOR CERTIORARI

IN NATIONAL GERIMEDICAL HOSPITAL AND

GERONTOLOGY CENTER V. BLUE CROSS

OF KANSAS CITY

C. If allowed to stand, the decision below will impair the

effect of recent decisions of this Court subjecting the

health care industry to antitrust scrutiny.

Until very recently, health care providers and insurers

were largely immune from the federal antitrust laws be-

cause of various legal hurdles which effectively shielded

their conduct from antitrust scrutiny. See, e.g., C. Havig-

hurst, ‘‘Professional Restraints on Innovation in Health

Care Financing,’ 1978 Duke L.J/. 303, 343 (1978). Recent

decisions of this Court have, however, greatly diminished

these barriers.

First, in Goldfarb v. Virginia State Bar, 421 U.S. 773,

and National Society of Professional Engineers v. United

States, 485 U.S. 679, this Court rejected the contention

that the “learned professions’ are exempt from the re-

quirements of the antitrust laws.

Second, in California Retail Liquor Dealers Association

v. Midcal Aluminum Co., 445 U.S. 97, and predecessor

cases,'* this Court significantly narrowed the Parker v.

Brown '* “state action”? exemption, which now provides

only a limited shield for private actions ostensibly taken

by health professionals and third party insurers in re-

sponse to state law and regulatory regimes. See, e.g., Fem-

inist Women’s Health Center, Inc. v. Mohammad, 586 F.2d

'§ See Cantor v. Detroit Edison Co., 428 U.S. 579; City of Lafayette

v. Louisiana Power & Light Co., 435 U.S. 389; Goldfarb v. Virginia

State Bar, 421 U.S. 773. See also Bates v. State Bar of Arizona, 433

U.S. 350; New Motor Vehicle Bd. of California y. Orrin W. Fox Co.,

439 U.S. 96.

'§ 317 U.S. 341.

27a

530, 549-50 (5th Cir. 1978), cert. denied, 444 U.S. $24

Ballard vy. Blue Shield of Southern West Virginia, Inc.,

543 F.2d 1075, 1079 (4th Cir. 1976), cert. denied, 430 U.S.

922. Certainly after Midcal it is clear that private acts

undertaken without state supervision are not exempt

from antitrust scrutiny.

Third, and with special relevance to the health care

industry, are this Court’s recent decisions dealing with

the scope of interstate commerce to which Section 1 of

the Sherman Act (15 U.S.C. § 1) applies. For some time,

hospitals and other health care providers have been able

to contend successfully that the delivery of health ser-

vices was a local activity, and, hence, not subject to the

antitrust laws.'* In Hospital Building Co. v. Trustees of

Rex Hospital, 425 U.S. 738, however, this Court signifi-

cantly broadened the scope of interstate commerce in

antitrust scrutiny of the health professions and other

health care providers. The scope of interstate commerce

under the Sherman Act was further extended by this

C‘ourt’s more recent decision in McLain v. Real Estate

Board of New Orleans, 444 U.S. 232.

The decision below would effectively undo this Court’s

decision in Rex Hospital. Like the present case, Rex Hos-

pital involved private anticompetitive conduct ostensibly

undertaken pursuant to health planning legislation. Under

the present decision, the very conduct in Rex Hospital

ultimately held on remand to have been in violation of

'6 See, e.g., Nankin Hospital v. Michigan Hospital Service, 361 F.

Supp. 1199, 1210 (E.D. Mich. 1973) (no interstate commerce in suit

by private hospitals against Blue Cross for revocation of participat-

ing hospital contract because ‘‘sale of hospital care is personal and

localized in nature’).

28a

the antitrust laws,'*? would be shielded from antitrust

scrutiny —this time not by the statutory interstate com-

meree hurdle but rather by a much more amorphous

“blanket’’ exemption tenuously based on the Planning

Act.

The decision below would also significantly limit the

impact of this Court’s decision in Group Life and Health

Insurance Co. v. Royal Drug Co., 440 U.S. 205. In the

past, antitrust suits against Blue Cross/Plue Shield were

often held to be barred by Seetion 2 of the MeCarran-

Ferguson Act (15 U.S.C. § 1012), which exempts the

“business of insurance” from the Sherman Act if such

business is regulated by state law.'* In Royal Drug, this

Court, noting that “exempting provider sgreements from

the antitrust laws would be likely in at least some cases

to have serious anticompetitive consequences” (440 U.S.

at 232, n. 40), concluded that pharmacy provider agree-

ments were not within the MeCarran-Ferguson Act ex-

emption. Yet, the court below has rendered such agree-

ments and all their surrounding circumstances totally ex-

empt from antitrust serutiny. The impact of this decision

on other related MeCarran-Ferguson Act issues, such as

those involved in Virginia Academy of Clinical Psycholo-

gists v. Blue Shield of Virginia, 624 F.2d 476 (4th Cir.

'7 On August 18, 1980, a judgment for plaintiff in the amount of

$7,320,090 was entered on a jury verdict in the Rex Hospital case.

Post-judgment motions have been filed by defendants.

'§ See, e.g., Travelers Ins. Co. v. Blue Cross of Western Pennsylvania,

481 F.2d 80 (3d Cir. 1973), cert. denied, 414 U.S. 1093; Frankford

Hospital vy. Blue Cross of Greater Philadelphia, 417 F. Supp. 1104

(E.D. Pa. 1976), aff'd per curiam, 554 F.2d 1253 (3d Cir. 1977), cert.

denied, 434 U.S. 860; Doctors, Inc. v. Blue Cross of Greater Philadel-

phia, 431 F. Supp. 5 (E.D. Pa. 1975), aff'd per curiam, 557 F.2d 1001

(3d Cir. 1976). See also St. Bernard Hospital v. Hospital Service Ass'n

of New Orleans, 618 F.2d 1140 (5th Cir. 1980) (reversing lower court

opinion holding participating hospital agreements immune from anti-

trust scrutiny in light of Royal Drug ).

29a

1980). is less clear, but is not likely to be favorable to

antitrust plaintiffs.

In short, the recent decisions of this Court have uni-

formly had the effect of narrowing the traditional anti-

trust exemptions applicable to health care providers and

insurers.'* What the opinion below does is to create a

new blanket ‘Planning Act exemption” at least as broad

as the antitrust exemptions traditionally used by health

care providers and insurers (such as Blue Cross) to shield

their conduct from antitrust scrutiny. Unless this Court’s

recent decisions are to be severely undercut, review of

the decision below is required.

'’ This has been consistent with the general inclination of this

Court to read antitrust exemptions narrowly and to require a clear

showing of Congressional intent before finding conduct exempt from

antitrust scrutiny. Sec, ¢.g., St. Paul Fire and Marine Ins. Co. v.

Barry, 438 U.S. 531; National Broiler Marketing Ass'n y. United

States, 436 U.S. 816.

30a

APPENDIN E

EXCERPTS FROM THE RECORD OF THE

DISTRICT COURT PROCEEDING

Plaintiff’s Claims Under Section 2 of the Sherman Act

We next turn to plaintiff’s claims that in violation of

Section 2 of the Sherman Antitrust Act, the defendants

have attempted to monopolize and have conspired to

monopolize the market for medical-surgical hospital

services in the Raleigh area. These are two separate

claims.

“‘Nionopolize” Defined

‘““Monopolize’”’ means the acquisition of power to ex-

clude actual or potential competitors from the market. It

does not necessarily mean that one business controls an

entire market. A monopoly may be shared between two

or more businesses.

Essential Elements of Claim for Attempted

Monopolization

In order to sustain an action against defendant Rex

Hospital under Section 2 of the Sherman Act for attempted

monopolization, plaintiff must prove by a preponderance

of the evidence each of the following elements:

First, that the defendant Rex Hospital had a specific

intent to monopolize interstate trade and commerce in

medical-surgical hospital services in the Raleigh area;

Second, that one or more of the acts claimed by plain-

Liff to have been done was wrongful, and was in further-

ance of that intent, even though insufficient actually to

produce the intended monopoly;

Third, that both elements—the intent and the act—

must appear and must together result in a reasonable

probability that monopolization will sooner or later occur;

3la

Fourth, that the attempted monopolization so estab-

lished was the proximate cause of damage to the business

or property of plaintiff.

“Attempt to Monopolize’”’ Defined

The term ‘‘attempt to monopolize,’ as used in the

Federal antitrust laws, involves two essential elements:

(1) an intent to monopolize, and (2) some act done in

furtherance of that intent, even though insufficient

actually to produce the intended monopoly. In order to

find an attempt to monopolize, both elements —the intent

and the act —must appear, and must together result in a

reasonable probability that monopolization will sooner or

later occur.

However, in order to constitute an “attempt to monop-

olize,”’ it is not necessary that the acts have actually re-

sulted in monopolization or the exclusion of competitors.

Intent Defined

‘Purpose or intent’’ means the state of mind with which

one acts. A person is usually held to intend to do every-

thing such person does in fact do. It is also reasonable to

infer that a person intends all the natural and probable

consequences of his acts.

Intent—Proof of

Intent ordinarily may not be proved directly because

there is no way of fathoming or scrutinizing the operations

of the human mind. But you may infer a person’s intent

from surrounding circumstances. You may consider any

statement made or act done or omitted by a party whose

intent is in issue, and all other facts and circumstances

which indicate his state of mind.

32u

You may consider it reasonable to draw the inference

and find that a person intends the natural and probable

consequences of acts knowingly done or knowingly omit-

ted. It is for you to decide what facts have been estab-

lished by the evidence.

Essential Elements of Claim for Conspiracy to Monopolize

There are four essential elements which the plaintiff

must prove in order to establish its claim that defendants

conspired with others to monopolize within the meaning

of Section 2 of the Sherman Act:

1. That there was a conspiracy between defendants and

others to monopolize an appreciable amount of identifi-

able interstate commerce in the furnishing of medical-

surgical hospital services in the Raleigh area;

2. That if so, both the defendant and the others entered

into such conspiracy with the specific intent to monopolize

that commerce;

3. That one or more of the acts claimed by the plain-

tiff in its complaint was done; and was in furtherance of

such conspiracy to monopolize;

4. That if so, the conspiracy so established was the

proximate cause of damage to the business or property of

plaintiff.

“Conspiracy to Monopolize” Defined

A “conspiracy to monopolize’ means an agreement or

understanding between two or more parties to acquire the

power to exclude actual or potential competitors from the

market.

Ignorance of Antitrust Laws or Good Motives No Defense

The fact that the defendants may have believed, in

good faith, that what was being done was lawful is not a

33a

defense in this case. Every person is charged with knowing

what the law forbids.

Similarly, it is no defense to a conspiracy in restraint of

trade, conspiracy to monopolize and an attempt to

monopolize that the acts complained of may have been

undertaken with what defendants believe to be proper

motives. A claim of good motives cannot justify or excuse

a violation of the antitrust laws, and would be no defense

in this case.

Statutory

Provision

. 7 USC, §§3701-

3703 (Supp. V

1981)

2. 10 U.S.C. §2391

(Supp. V 1981)

. 12 U.S.C. §27

(1976 & Supp. V

1981)

. 15 U.S.C. §717f

(1976 and Supp.

V 1981)

APPENDIX F

FEDERAL STATUTES WHICH INVOLVE PLANNING

or Wuicu Reautate MARKET EntTRY*

Common Name

Or Heading

Agricultural Sub-

terminal Facilities

Act of 1980.

Military base reuse

studies and com-

munity planning

assistance.

Certificate of

authority to

commence banking.

Construction, exten-

sion, or abandonment

of [natural gas]

facilities.

Description

Authorizes grants to assist states in

the development of plans for sub-

terminal facilities.

Authorizes grants in connection with

planning the closure of military

installations and related community

adjustments.

Regulates entry into banking.

Predicates transportation or sale of

natural gas upon issuance of a certifi-

cate of public convenience and neces-

sity by the Federal Energy Regulatory

Commission.

*In addition to these provisions, research on LEXIS reveals 216 statutory subsections pertaining to public

health and welfare planning.

Statutory

Provision

5. 16 U.S.C. $797(e)

(1976)

6. 16 U.S.C. §1225

(1976)

Common Name

Or Heading

Issue of licenses for

construction, ete., of

dams, conduits, res-

ervoirs, ete. [under the

Federal Power Act.}

State consideration

of protection and

restoration of estuaries

in State comprehen-

sive planning and

proposals for finan-

cial assistance under

certain Federal laws;

grants: terms and

conditions, prohibi-

tion against disposi-

tion of lands without

approval of the

Secretary.

Description

Provides for the issuance of licenses

to persons constructing or operating

dams, reservoirs, or other project

works related to the transmission of

hydroelectric power.

Relates to the protection and restora-

tion of estuaries in connection with

state and local governments’ compre-

hensive planning and proposals for

financial assistance under certain

federal statutes.

Bee

“J

Statutory

Provision

. 16 U.S.C. §2107

(Supp. V 1981)

. 20 U.S.C. §1016

(Supp. V 1981)

23 U.S.C. §134

(1976 & Supp. V

1981)

Common Name

Or Heading

Financial, technical,

and related assistance

to states [under the

Cooperative Forestry

Assistance Act of

1978}.

Federal discretionary

grants [pertaining to

continuing post sec-

ondary education pro-

gram and planning].

Transportation plan-

ning in certain urban

areas.

Description

Authorizes the Secretary of Agricul-

ture to make funds available to non-

federal landowners in connection with

certain forestry assistance programs

and requires the Secretary to use forest

resources planning committees at the

national and state levels in order to

implement a technology program.

Provides for the issuance of grants to

publie and private institutions and

organizations after the state entity

responsible for the comprehensive

planning of certain educational pro-

grams has had an opportunity to

comment on the relationship of the

proposed grant to such planning.

Provides for the development of

transportation plans and programs

and financial assistance in connection

with the development of coordinated

transportation planning.

vay

10.

1].

12.

Statutory

Provision

23 U.S.C. §307

(1976 & Supp. V

1981)

29 U.S.C. §771

(1976 & Supp. V

1981)

29 U.S.C, §819

(Supp. V 1981)

Common Name

Or Heading

Research and plan-

ning [in connection

with federal-aid

highways.]

Grants for construc-

tion of rehabilitation

facilities, staffing, and

planning assistance.

Prime sponsor’s

planning council.

Description

Authorizes the Secretary of Trans-

portation to (1) engage in transporta-

tion research in cooperation with,

inter alia, profit or non-profit cor-

porations and (2) make available

funds for the planning of future

highway programs.

Authorizes grants to public or non-

profit agencies, institutions, or organi-

zations to assist them in meeting the

cost of planning rehabilitation facili-

ties; makes such grants dependent

upon the pertinent state agency’s

approval of the application.

Requires designated units of local

government to establish a planning

council to participate in the develop-

ment of a comprehensive employment

and training plan and requires the

planning council to take into consid-

eration any comments and recommen-

dations of a private industry council.

BLE

13.

14.

16.

Statutory

Provision

38 U.S.C. $§$5051-

5057 (1976 &

Supp. V 1981)

43 U.S.C. §§422a-

422/ (1976 & Supp.

IV 1980)

. 46 U.S.C. §841b

(1976)

47 U.S.C, §214

(1976)

Common Name

Or Heading

Sharing Of Medical

Facilities, Equipment,

And Information,

Construction Of Small

Projects [under the

Federal Reclamation

Laws. |

Licensing of ocean

freight forwarders.

Extension of lines or

discontinuance of

service; certificate of

public convenience

and necessity.

Description

Authorizes the Administrator of

Veterans’ Affairs to enter into agree-

ments with medical schools, hospitals,

and research centers in order to share

medical techniques and information;

authorizes grants in connection with

planning and carrying out such

agreements.

Provides federal assistance, for purposes

of planning and developing water

resource projects, to organizations

which have the capacity to contract

with the United States under the

Federal Reclamation Laws.

Regulates entry into the business of

ocean freight forwarding.

Regulates telephone and telegraph

common carriers; requires any carrier

that is constructing or extending a

line to obtain from the FCC a certifi-

cate that the present or future public

convenience and necessity require or

will require that line.

LSE

18,

19.

Statutory

Provision

. 47 US.C. $301

(1976)

49 U.S.C. $1607

(Supp. IV 1980)

49 U.S.C. §1612

(1976 & Supp. IV

1980)

Common Name

Or Heading

License for radio

communication or

transmission of

energy.

Long-range planning

and technical studies.

Planning and design

of mass transportation

facilities to meet

special needs of the

elderly and the

handicapped.

Description

Authorizes the CC to license and

otherwise regulate—as public con-

venience, interest or necessity requires

—the transmission of energy or

communications or signals by radio.

Authorizes grants to states and local

public bodies and agencies for the

planning and evaluation of public

transportation projects; requires the

development of transportation plans

programs which “encourage to the

maximum extent feasible the partici-

pation of private enterprise.”’

B6E

Authorizes grants and loans to state

and local governmental bodies and

agencies and to private non-profit

corporations for the planning and

provision of certain transportation

services.

Statutory

Provision

20. 49 U.S.C. $1713

(1976 & Supp. IV

1980)

21. 49 U.S.C. §10901

(Supp. IV 1980)

22. 49 U.S.C. $10922

(Supp. IV 1980)

23. 49 U.S.C. $10923

(Supp. IV 1980)

Common Name

Or Heading

Planning grants.

Authorizing construc-

tion and operation of

railroad lines,

Certificates of motor

and water common

carriers.

Permits of motor and

water contract car-

riers and freight

forwarders,

Description

Authorizes grants for the plauining of

airport systems to certain agencies

authorized by the laws of states or

political subdivisions of states.

Precicates the construetion and opera-

tion of a new railroad line upon the

issuance of a certificate of public

convenience and necessity from the

ICC,

Regulates transportation by motor

common carrier or water common

carrier by requiring that a carrier

obtain an authorizing certificate from

the ICC,

Provides for the regulation of trans-

portation by motor contract carriers

or water contract carriers and of ser-

vices by freight forwarders by requir-

ing i person who seeks to provide

such transportation to obtain an

authorizing permit from the ICC,

eOr

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.