Sixth Circuit

Sixth Circuit decisions

No antitrust standing in health system merger challenge

Bearden v Ballad Health

An east Tennessee health system prevailed when the Sixth Circuit rejected a challenge to a merger and reprimanded the plaintiffs’ counsel for his lack of civility and filing of disparaging pleadings in Bearden v Ballad Health.[1] The case began in 2019 when the plaintiffs – residents of east Tennessee – challenged the decision of the Tennessee Department of Health permitting two healthcare providers to merge and become Ballad Health.[2] The plaintiffs alleged that the merged entities – Ballad Health and Medical Education Assistance Corporation (MEAC) – and various individual defendants, had ‘created an interlocking directorate in violation of the Clayton Act.’ [3] The district court dismissed the complaint for lack of jurisdiction, holding that the plaintiffs failed to establish injury in fact because they provided no factual allegations to demonstrate that the harm was specific to them.[4] In particular, the district court found that the complaint failed to indicate how the plaintiffs, as individuals, suffered any injury. The court found that the complaint failed to allege facts to show how the plaintiffs were affected by the alleged ‘interlocking directorate’ that purportedly ‘caused facilities to close, increased travel times to intensive care units, and could potentially lead to increased healthcare costs.’ [5] The district court also denied the plaintiffs’ motion to amend their complaint on the basis that the factual allegations in the proposed amended complaint still failed to demonstrate ‘that the injury is particularized to the named plaintiffs.’ [6] On appeal, the Sixth Circuit panel unanimously affirmed, holding that (1) the plaintiffs failed to demonstrate sufficient injury in fact to support Article III standing, and (2) the Clayton Act did not create a novel injury in fact or otherwise relieve the plaintiffs from their duty of demonstrating injury in fact.[7] The court agreed that amendment would have been futile because the proposed amendment complaint ‘added only insults, not an injury.’ [8]

Although the case focused on antitrust issues, the court’s opinion also devoted significant attention to the topic of attorney conduct and civility. Emphasizing in the first paragraph that ‘counsel’s colorful insults do nothing to show that his clients have standing to bring this lawsuit,’ the Sixth Circuit proceeded to offer guidance on lawyer professionalism.[9] The opinion, penned by Judge Amul Thapar, strongly chastised the plaintiffs’ lawyer for his ‘disparaging statements,’ which could not be dismissed ‘as mere stylistic flourishes or vigorous advocacy.’[10] The court made a point of quoting extensively from the plaintiffs’ proposed amended complaint to emphasize the principle that ‘[c]areful research and cogent reasoning, not aspersions, are the proper tools of our trade.’ [11] The proposed amended complaint included:

  • a comparison of MEAC ‘surrender[ing] to [Ballad] much in the manner Marshal Petain surrendered France to Adolph Hitler’;
  • a characterization of the Ballad merger as an ‘octopus which was birthed by two individuals on one of the local golf courses while they were walking down the green fairways of indifference, to the health, safety and welfare of millions of people’;
  • a description of the defendants’ conduct as ‘an incestuous, antitrust relationship . . . the likes of which have not been seen since the days of Sodom and Gomorrah’; and
  • an analogy that the Tennessee Department of Health’s failure to supervise the defendants was ‘akin to the Tennessee Bureau of Investigation allowing criminals to rape, murder, pillage, loot and plunder on its watch, while its agents stand by.’ [12]

In closing, the court warned the plaintiffs’ counsel that ‘as an officer of the court, he is expected to treat other parties in the case (as well as their counsel) with courtesy and professionalism.’ [13]

Arbitration clause governs no-poach claims

Blanton v Domino’s Pizza Franchising LLC

A widely publicized case involving alleged ‘no poach’ agreements among pizza parlors has been sent to arbitration after the Sixth Circuit delivered an appellate victory for Domino’s Pizza amid allegations that the restaurant chain and its franchises unlawfully agreed not to solicit or hire employees from other franchises. In Blanton, the court affirmed the district court’s ruling that an arbitrator must answer the ‘gateway’ question of arbitrability (i.e., whether plaintiffs ‘had agreed to arbitrate not only the merits of certain claims but also threshold questions about the agreements themselves’ [14]). In 2018, a putative class of former Domino’s employees alleged that the company used ‘franchise agreements to orchestrate a conspiracy among their franchisees to not compete for labor,’ and that the ‘no-hire provision is evidence of that conspiracy and violates the Sherman Antitrust Act because it unreasonably restrains competition for Domino’s franchise employees and depresses employee wages, lessens employee benefits, and stifles employee mobility.’ [15] Domino’s moved to compel under the Federal Arbitration Act, arguing that the named plaintiff was ‘estopped from avoiding arbitration by selectively suing only some of the alleged conspirators.’ [16] The district court agreed and granted Domino’s motion to compel arbitration.[17]

The unanimous Sixth Circuit panel, in an opinion by Judge Thapar, agreed. The Circuit held that the plaintiffs had ‘clearly and unmistakably’ agreed to arbitrate any venue questions when they signed arbitration agreements with the Domino’s franchises. The Sixth Circuit reached this decision even though Domino’s itself was not a signatory to the relevant agreements, but instead those agreements were between the plaintiffs and the Domino’s franchisees.[18] In so ruling, the Sixth Circuit recognized that it was the last Circuit to expressly address this question, noting that ‘every one of our sister circuits to address the question – eleven out of twelve by our count – has found that the incorporation of the AAA Rules (or similarly worded arbitral rules) provides “clear and unmistakable” evidence that the parties agreed to arbitrate “arbitrability.” ’ [19]

Adopting a plain language approach while also embracing an age-old canon of construction – expressio unius, exclusio alterius – the court offered a relatable analogy:

Imagine that during dinner one of your children asks whether she can use the car that evening, and you reply, ‘Sure, you can have the car tonight.’ Your other children will understand that this child is the only person who should use the car that evening even if you don’t expressly say as much. Arbitration agreements may be less fun than a night out with friends. But the same rules of English apply. Most people who read the sentence, ‘[t]he arbitrator shall have the power to rule on his or her own jurisdiction,’ wouldn’t then think ‘but a court may also rule on this issue.’ [20]

The court emphasized the narrowness of the threshold question. ‘Keep in mind that the question here is quite narrow. It’s not about the merits of the case. It’s not even about whether the parties have to arbitrate the merits. Instead, it’s about who should decide whether the parties have to arbitrate the merits.’ [21] The Sixth Circuit also sought to clarify any ambiguity and possible dicta contained in the district court’s opinion. Observing that ‘[a]ppellate courts review judgments, not statements in opinion,’ the court held that ‘whatever else the [district] court’s opinion says, our opinion makes clear that the arbitrator should decide for itself whether Domino’s can enforce the arbitration agreement. We’ll leave matters at that.’ [22] Undeterred, the plaintiffs filed a petition for a writ of certiorari. However, in late January 2021, the Supreme Court denied the petition.[23]

District court decisions

Disqualified expert dooms gasoline price-gouging case

Kentucky v Marathon Petroleum Co LP

In this price-gouging case, the Commonwealth of Kentucky brought claims under the Sherman Act and the Clayton Act, alleging that two gasoline resellers – Marathon and Speedway – employed a series of anticompetitive, specialized supply contracts known as ‘exchange agreements.’ [24] As a result, the defendants allegedly inflated the retail price of reformulated gasoline (RFG) to consumers at the pump.[26] The opinion addressed several important antitrust issues.

The court first analyzed whether personal jurisdiction was proper under the Clayton Act’s national service-of-process provision.[27] It recognized that a circuit split exists as to whether the venue and service-of-process provisions of the Clayton Act should be construed together or separately.[28] The parties argued that district courts within the Sixth Circuit are divided as to ‘whether the provisions are “coupled” or “decoupled” for purposes of statutory interpretation,’ and the court recognized that the ‘Sixth Circuit has not yet considered this discrete question.’ [30]

Next, the court considered the defendants’ motion to exclude Kentucky’s sole expert witness, Michael Sattinger, PhD. The defendants urged the court to reject Sattinger’s methods and his corresponding conclusions as to (1) the relevant market, (2) antitrust injury, and (3) damages on the basis that it ‘was technically deficient and render[ed] his opinion unreliable, irrelevant, and inadmissible.’ [31] The court agreed and, after a meticulous review of the methodologies – or lack thereof – employed by Sattinger for each section of his report, found that his conclusions were simply the ‘ipse dixit of the expert’ and thus did not pass muster under the admissibility requirements prescribed in Daubert.[32]

Of particular note for Sixth Circuit antitrust practitioners, the court made several findings regarding the requisite methodologies for admissible testimony by an antitrust expert. First, with respect to defining the relevant market, the court noted that the Sixth Circuit utilizes the ‘reasonable-interchangeability standard’ which considers (1) whether substitute products can perform the same function and (2) cross-elasticity.[33] Here, the district court found that Sattinger failed both to explain his methodology and to propose a market that would ‘reflect the economic realities of the wholesale RFG market.’ [34] Second, on the question of antitrust injury, the court found that Sattinger’s chosen methodology – the yardstick approach, ‘analyz[ing] the differences in the price of the product at issue among meaningfully comparable markets, firms, or locations’ – failed to account for multiple variables and consequently fell short of the standard for admissibility.[35] Although the Sixth Circuit has held the yardstick approach to be an admissible ‘before-and-after test to establish antitrust damages,’ there is an expectation that the expert will use a methodology that reliably controls for major variables.[36] Here, Sattinger did not account for whether exchange agreements were utilized in the comparison markets, nor did he control for the ‘fundamental differences’ among the cities he examined. As such, the district court determined that his analysis was ‘rendered worthless.’ [37] Third, with regard to damages, the court found that Sattinger failed to disaggregate the effects of any legal, procompetitive conduct by the defendants.[38] In other words, although ‘an antitrust expert is not required to attribute exact sums of damages to particular actions by the defendants . . . an antitrust plaintiff must distinguish between damages attributable to lawful competition and those attributable to the unlawful scheme.’ [39] The court issued a rebuke of the expert’s proffered testimony, finding that Sattinger failed ‘to control for rudimentary differences among cities, but then claimed to calculate damages by comparing [Louisville-Northern Kentucky] to Baltimore and St Louis.’ [40] Accordingly, ‘[b]ecause Sattinger neither employed a scientifically reliable method to arrive at his proposed relevant market nor established an antitrust injury through reliable means,’ the court granted the defendants’ motion to exclude Kentucky’s only expert.[41]

With Sattinger’s report excluded, the district court found that ‘the only other evidence of market definition or dominance offered by the Commonwealth is “lay testimony and internal Marathon documents,” which are insufficient to establish a reliable geographic market.’ [42] Absent a well-defined relevant market, the court held that Kentucky’s antitrust claims could not survive summary judgment. Kentucky declined to appeal the final judgment.

Ohio health system enjoined from terminating contracts with competitor

St Luke’s Hospital v ProMedica Health System, Inc

During the covid-19 pandemic, a financially distressed hospital in Toledo, Ohio, secured a preliminary injunction against ProMedica Health System, the region’s largest healthcare provider, on allegations of unreasonable restraint of trade and attempted monopolization.[43] In early November 2020, St Luke’s Hospital and its affiliated physicians group, brought Sherman Act claims against ProMedica Health System and its wholly-owned health insurance subsidiaries.[44] The case, which follows the Federal Trade Commission’s (FTC) successful challenge of ProMedica and St Luke’s 2012 merger,[45] arose after the defendants announced plans to terminate various insurance and Medicare contracts with the plaintiffs, beginning on 1 January 2021.[46] In late December 2020, the district court granted the plaintiffs’ request for injunctive relief, ordering the defendants to refrain from terminating the contracts at issue.[47] The court held that, ironically, the FTC’s blockage of the 2012 merger and the ‘onerous terms of the divestiture agreement’ likely created a ‘precarious financial situation’ for St Luke’s that gave ProMedica the opportunity to engage in the allegedly anticompetitive and monopolistic conduct in this action.[48]

The opinion offers a blueprint for practitioners and a thorough primer on the Sixth Circuit’s four elements of injunctive relief in a Sherman Act claim. In evaluating the first injunction factor – whether the plaintiffs demonstrated a ‘strong likelihood of success on the merits’ – the court first considered whether the plaintiffs presented sufficient proof that the alleged termination of the contracts constituted a violation of section 1 of the Sherman Act and the Ohio Valentine Act (i.e., a contract, combination or conspiracy that harms or has the potential to harm competition).[49] Second, the court analyzed whether the alleged insurance contract termination notices established attempted monopolization in violation of section 2 of the Sherman Act (i.e., the willful maintenance or enhancement of monopoly power through exclusionary conduct).[50]

Beginning with the relevant market analysis for both claims, the court adopted the Sixth Circuit’s holding on this same issue in the 2012 merger litigation.[51] In other words, the court found that there was a strong likelihood that the plaintiffs would be able to show the relevant market was ‘general acute care inpatient hospital services sold to commercial health plans, excluding tertiary and quaternary services in Lucas County [Ohio].’ [52] The court found that ‘very few patients leave Lucas County for [inpatient] services, further supporting the argument that this is a relevant market.’ With respect to market power, the court determined that ‘[t]here is little reason to believe that the defendants’ market power has changed dramatically since the merger litigation.’ [53] Specifically, the court found that the defendants’ 56 percent share of the relevant market was squarely aligned with Sixth Circuit precedent that ‘courts will generally find a dangerous probability of success when defendant has a market share of fifty percent or more.’ [54] Accordingly, the court found that the plaintiffs showed an actual likelihood of detrimental effects on competition.[55] The court relied on prior FTC evidence that ‘ “St Luke’s was the next best substitute for a substantial and important fraction of ProMedica’s patients, stemming from St Luke’s advantageous location in southwest Lucas County” – a fact which has not changed since the merger litigation.’ [56]

Likewise, the court found there was ‘little doubt’ that the defendants’ conduct was exclusionary.[57] The defendants intended to cancel eight long-standing service agreements as well as Medicare Advantage contracts with the plaintiffs, in addition to putting pressure on ProMedica surgeons to stop practicing at St Luke’s.[58] Pointing to the Supreme Court’s decision in Aspen Skiing, which similarly involved the termination of long-standing profitable agreements between competitors, the district court found that ‘[t]his type of exclusionary conduct is a well-established exception to the general rule that there is no duty to deal with competitors.’ [59] Here, the defendants’ actions and words demonstrated the specific intent required to show an attempt to monopolize.[60]

Having determined that the plaintiffs presented a strong likelihood of success on the merits, the court turned to the three remaining injunction factors. Noting that the harm ‘need not completely eliminate the targeted party, and that “conduct which unnecessarily excludes or handicaps competitors” can be enough,’ the court found that significant irreparable injury would occur absent an injunction.[61] The court reasoned that if the contracts were terminated as scheduled, the plaintiffs would lose significant revenue (an estimated 20 percent of their commercially insured patients and 30 percent of their Medicare Advantage patients).[62] Conversely, the defendants would likely suffer ‘little to no harm’ from a preliminary injunction and a short-term continuation of the contracts would likely prove profitable for all parties.[63] Last, the court found that the injunction would well serve the interests of the public by offering them ‘quality, low-cost healthcare and access to doctors and hospitals they desire’ while preventing the defendants from ‘unlawfully consolidating’ market power that would likely result in ‘lower-quality care, higher prices, or both.’ [64]

On 4 January 2021, the defendants filed a notice of appeal and that same day the district court entered an emergency order staying the case pending a ruling by the Sixth Circuit.[65] In the interim, the preliminary injunction remains in effect. Meanwhile, the Sixth Circuit granted the defendants’ motion for an expedited appeal, and, as at early May 2021, the case is fully briefed and awaiting oral argument.[66]

Tennessee lawyer disciplinary board immune from antitrust action

Manookian v Flippin

A Tennessee lawyer who lost his law license has now lost a lawsuit aimed at recovering his license. In Manookian v Flippin, the district court dismissed a complaint alleging an anticompetitive restraint of trade by the Tennessee Supreme Court’s Board of Professional Responsibility (BPR), Tennessee’s attorney disciplinary body.[67] The case stemmed from the Supreme Court of Tennessee’s suspension of Brian Manookian’s law license based on the recommendation of the BPR in 2018.[68]

In response to the suspension of his license, Manookian filed a federal lawsuit naming nine BPR members as individual defendants and alleging a violation of the Sherman Act. Specifically, he alleged an unlawful agreement among the defendants ‘to exclude one of the state’s most competitively successful medical malpractice lawyers, Mr Manookian, from the market.’ [69] Manookian claimed that the BPR members conspired to ‘punish’ him with a temporary suspension of his law license, to publicize the suspension to the media, and to thwart his efforts ‘to petition for dissolution of the suspension.’ [70] The defendants moved to dismiss and urged the district court to find that Eleventh Amendment immunity and state-action immunity under Parker v Brown barred the Sherman Act claim.[71] In opposition, Manookian characterized the BPR as a ‘non-sovereign state agency controlled by active market participants’ and, therefore, argued that its members were not entitled to Parker immunity.[72]

Ultimately fatal to Manookian’s antitrust claim was the fact that only the Tennessee Supreme Court can suspend an attorney, either temporarily or permanently.[73] Finding that ‘the anticompetitive activity complained of was that of the Tennessee Supreme Court which is ipso facto exempt from the antitrust laws,’ the court rejected Manookian’s attempt to ‘evade state-action immunity by suing only the members of the BPR and not the sovereign entity.’ [74] The court wholly rejected Manookian’s argument that the BPR ‘did not act pursuant to clearly articulated state policy and was not actively supervised by the [Tennessee] Supreme Court.’ [75] Moreover, the district court recognized that when a government actor is independently responsible for alleged antitrust injury, immunity extends to private parties acting under its direction.[76] Accordingly, the court dismissed Manookian’s antitrust claim with prejudice.[77]

Manookian appealed to the Sixth Circuit, but his appeal was denied as untimely in view of his misinterpretation of what constituted a ‘final appealable order.’ [78] In an unpublished decision, the Sixth Circuit held that Manookian missed the 30-day deadline under Rule 4(a)(1)(A) of the Federal Rules of Appellate Procedure when he filed his notice of appeal 177 days after the entry of judgment.[79] The Sixth Circuit held that the final judgment for the purposes of this appeal was the district court’s order granting the BPR’s motion to dismiss on everything except Manookian’s remaining claims for declaratory and injunctive relief, which could be asserted only in state court.[80]


Notes

[1] Bearden v. Ballad Health, 967 F.3d 513 (6th Cir. 2020).

[2] Id. at 515.

[3] Id.

[4] Bearden v. Ballad Health, No. 2:19-CV-55, 2019 WL 6736453, at *5 (E.D. Tenn. Dec. 11, 2019)

[5] Id.

[6] Id.

[7] Bearden, 967 F.3d at 519.

[8] Id. at 517.

[9] Id. at 515.

[10] Id. at 519.

[11] Id. at 519 (quoting U.S.I. Props. Corp. v. M.D. Constr. Co., 860 F.2d 1, 6 n.2 (1st Cir. 1988)).

[12] Id. at 519 (quoting plaintiff’s proposed amended complaint at pages 942–51).

[13] Id.

[14] Id. at 844.

[15] Blanton v Domino’s Pizza Franchising LLC, No. 18-13207, 2019 U.S. Dist. Lexis 87737 at *1 (E.D. Mich. May 24, 2019).

[16] Blanton, No. 18-13207, 2019 U.S. Dist. Lexis 184817 at *3 (E.D. Mich. Oct. 25, 2019).

[17] Blanton, 962 F.3d at 846.

[18] Id. at 849.

[19] Id. at 846 (collecting cases).

[20] Id. at 849.

[21] Id. at 852.

[22] Id. at 852.

[23] Piersing v. Domino’s Pizza Franchising LLC, 141 S. Ct. 1268 (2021) (denying certiorari).

[24] Kentucky v. Marathon Petroleum Co. LP, 464 F. Supp. 3d 880, 885 (W.D. Ky. 2020).

[25] Id. at 884.

[26] Id.

[27] Id. at 855.

[28] Id. at 886.

[29] Id.

[30] Id. at 887.

[31] Id.

[32] Id. at 892 (citing Daubert v. Merrell Dow Pharm., 509 U.S. 579 (1993)).

[33] Id. at 899.

[34] Id. at 891.

[35] Id. at 892–93.

[36] Id. at 892 (citing Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 794 (6th Cir. 2002)).

[37] Id. at 894.

[38] Id. at 894.

[39] Id. at 894–95.

[40] Id. at 895.

[41] Id.

[42] Id. at 896.

[43] St. Luke’s Hosp. v. ProMedica Health Sys., Inc., No. 3:20-cv-2533, 2020 WL 8265497 (N.D. Ohio Dec. 29, 2020).

[44] Id. at *1.

[45] ProMedica Health Sys., Inc. v. F.T.C., 749 F.3d 559, 561 (6th Cir. 2014) (holding that the Federal Trade Commission [FTC] did not abuse its discretion in ordering ProMedica’s divestiture of St Luke’s Hospital after determining that ProMedica’s acquisition of St Luke’s, an independent community hospital, resulted in anticompetitive effects in violation of the Clayton Act).

[46] St. Luke’s Hosp., 2020 WL 8265497. at *1 (explaining that the defendants issued letters to their customers ‘informing them that St Luke’s and its doctors were now out of network, and identif[ying] other hospitals and doctors those patients could utilize’).

[47] Id. at *6.

[48] Id. at *1.

[49] Id. at *2 (citing Realcomp II, Ltd. v. FTC, 635 F.3d 815, 827 (6th Cir. 2011)).

[50] Id.

[51] Id. at *2 citing ProMedica Health Sys., Inc., 749 F.3d at 568.

[52] Id.

[53] Id. at *3.

[54] Id. (citing Defiance Hosp. v. Fauster-Cameron, Inc., 344 F. Supp. 2d 1097, 1112, 1116–7 (N.D. Ohio 2004); Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413, 1443 (6th Cir. 1990)).

[55] Id. at *4.

[56] Id. (quoting In re ProMedica Health Sys., Inc., 2012 WL 1155392, at *39).

[57] Id.

[58] Id.

[59] Id. at *4 (citing Aspen Skiing v. Aspen Highlands Skiing, 472 U.S. 585 (1985)).

[60] Id. at *5.

[61] Id. (quoting Aspen Skiing, 472 U.S. at 597).

[62] Id.

[63] Id.

[64] Id. at *6.

[65] St. Luke’s Hosp. v. ProMedica Health Sys., Inc., No. 3:20-cv-2533 (Jan. 4, 2021), ECF No. 70.

[66] St. Luke’s Hosp, et al v. ProMedica Health Sys, Inc., et al., No. 21-3007 (6th Cir. Feb. 2, 2021).

[67] Manookian v. Flippin, No. 3:19-CV-00350, 2020 WL 978638 (M.D. Tenn. Feb. 28, 2020).

[68] Id.

[69] Id. at *3 (citing Complaint, ¶ 132).

[70] Id.

[71] Id. (citing Parker v. Brown, 317 U.S. 341 (1943) (conferring immunity on anticompetitive conduct by the States when acting in their sovereign capacity)).

[72] Id. at *3.

[73] Id. at *4 (citing Tenn. Sup. Ct. R. 9 § 12.3).

[74] Id.

[75] Id. at *3.

[76] Id. at *4 (citing Edinboro College Park Apartments v. Edinboro Univ., 850 F.3d 567, 574 (3d Cir. 2017) and Zimomra v. Alamo Rent-A-Car, Inc., 111 F.3d 1495, 1500 (10th Cir. 1997)).

[77] Id. at *8.

[78] Manookian v. Flippin, appeal dismissed, No. 20-5979, 2021 WL 688841 (6th Cir. Jan. 5, 2021).

[79] Id. at *2.

[80] Id. at *1.

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