Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02652/USCOURTS-casd-3_11-cv-02652-1/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PRIME HEALTHCARE SERVICES,

INC., a Delaware corporation,

Plaintiff,

CASE NO. 11cv2652-GPC-RBB

NOTICE OF TENTATIVE

RULING

[DKT. NOS. 57, 59, 64]

vs.

SERVICE EMPLOYEES

INTERNATIONAL UNION, a Labor

Union; SERVICE EMPLOYEES

INTERNATIONAL UNION -

UNITED HEALTHCARE WORKERS

WEST, a Labor Union; KAISER

FOUNDATION HEALTH PLAN,

INC., a California Corporation;

KAISER FOUNDATION

HOSPITALS, a California

Corporation; SOUTHERN

CALIFORNIA PERMANENTE

MEDICAL GROUP, INC., a

California Corporation; and Does 1-

10, et al.,

Defendants.

Currently pending before the Court and set for hearing on Friday, April 5, 2013,

is Defendant Service Employees International Union - United Healthcare Workers

West Motion to Dismiss Plaintiff’s First Amended Complaint(Dkt. No. 57), Defendant

- 1 - [11cv2652-GPC(RBB)]

Case 3:11-cv-02652-GPC-RBB Document 83 Filed 04/04/13 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, and Southern

California Permanente Medical Group’s (collectively, “Kaiser Defendants”) Motion

to Dismiss Plaintiff’s First Amended Complaint (Dkt. No. 59), and Defendant Service

Employees InternationalUnion Motion to DismissPlaintiff’s First Amended Complaint

(Dkt. No. 64). Upon the conclusion of the hearing, the Court will take these matters

under submission and issue a written order in due course. Having considered the

submissions of the parties, and in anticipation of the hearing, the Court hereby

tentatively rules:

The Court GRANTS Defendant Kaiser’s motion to dismiss for failure to state a claim. 

(1) Section 1 of the Sherman Act

Plaintiff fails to state an agreement or conspiracy under Section 1 of the

Sherman Act. In order to state a claim under Section 1, claimants must plead “not

just ultimate facts (such as conspiracy), but evidentiary facts which, if true, will

prove: (1) a contract, combination or conspiracy among two or more persons or

distinct business entities; (2) by which the persons or entities intended to harm or

restrain trade or commerce among the several States, or with foreign nations; (3)

which actually injures competition.” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042,

1047 (9th Cir. 2008) (citing Les Shockley Racing Inc. v. Nat’l Hot Rod Ass’n, 884

F.2d 504, 507 (9th Cir. 1989); Bell Atl. Corp. V. Twombly, 550 U.S. 544, 553-558

2007). Plaintiff asserts that it has alleged direct evidence to sufficiently plead the

existence of an unlawful conspiracy, pointing to several instances in which Kaiser

Defendants and Union Defendants met, conferred, and made agreements in

furtherance of a conspiracy. Plaintiff asserts several allegations constitute “direct

evidence” of the existence of a conspiracy, such as a multitude of meetings that

resulted in a series of agreements from December 1995 through 2012 that acted as a

“disguise [to] their unlawful objective - to achieve market domination for Kaiser

and SEIU.” (FAC ¶¶ 98, 113). Throughout the amended complaint, Plaintiff asserts

that the Defendants “work[ed] together as step one in the formation of the

- 2 - [11cv2652-GPC(RBB)]

Case 3:11-cv-02652-GPC-RBB Document 83 Filed 04/04/13 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

conspiracy,” sought “to advance the goals of the conspiracy,” and further

collaborated to “harm and ultimately destroy Kaiser’s competitors, including

Prime,” (FAC ¶¶ 89-92; 111-112; 113-123; 129-131,137, 149, 161, 163). The Court

finds that these allegations do not constitute direct evidence to suggest a conspiracy

in violation of Section 1. “Direct evidence in a Section 1 conspiracy must be

evidence that is explicit and requires no inferences to establish the proposition or

conclusion being asserted.” In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d

Cir. 1999). Merely stating that meetings, negotiations and agreements took place

between the Defendants, which purportedly furthered a broad market domination

conspiracy, does not constitute direct evidence. 

Moreover, Plaintiffs allegations of circumstantial evidence fall short of

establishing an agreement in violation of the Sherman Act. “While a showing of

parallel ‘business behavior is admissible circumstantial evidence from which the

fact finder may infer agreement,’ it falls short of conclusively establishing

agreement or...itself constituting a Sherman Act offense.” Twombly, 550 at 553

(quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)). 

Plaintiff alleges that Defendants worked together to expand Kaiser’s enrollment

membership (FAC ¶ ¶ 151, 158, 164), wrongfully besmirched Kaiser hospital

competitors (FAC ¶ 201), produced inaccurate reports and studies (FAC ¶¶ 9, 111,

142, 169), persuaded government agencies, legislative representatives, and the

media to investigate and publicize Prime’s conduct (FAC ¶¶ 8, 9, 111, 142, 169),

proposed legislation “designed to destroy Prime’s business model” (FAC ¶¶ 8, 170,

323), and other various activities that alleged exemplify a collaborative effort to

conspire. The Court finds that these allegations, as asserted in the amended

complaint, constitute either independent action by Defendant Kaiser and Union

Defendants or parallel business conduct insufficient to suggest an agreed upon

activity. Accordingly, the Court dismisses the first amended complaint on

Plaintiff’s failure to state a claim under Section 1 of the Sherman Act. 

- 3 - [11cv2652-GPC(RBB)]

Case 3:11-cv-02652-GPC-RBB Document 83 Filed 04/04/13 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(2) Noerr-Pennington 

The Court further finds that the allegations against Union Defendants

fall under the protection of the Noerr-Pennington doctrine, which exempts

petitioning activity from antitrust statutory liability unless the activity is a “mere

sham to cover what is actually nothing more than an attempt to interfere directly

with the business relationships of a competitor and the application of the Sherman

Act would be justified.” E. R. R. Presidents Conference v. Noerr Motor Freight,

Inc., 365 U.S. 127, 144 (1961); see also United Mine Workers v. Pennington, 381

U.S. 657, 670 (1965). Here, Plaintiff asserts that it has sufficiently alleged evidence

that Defendants “direct lobbying” constitute a sham. Plaintiff alleges that Union

Defendants used false and misleading studies that intentionally omitted Kaiser,

which led to various federal and state agencies to investigate Prime for having high

rates of septicemia. (FAC ¶¶272-273). Plaintiff also alleges that Union Defendants

lobbied to pass particular senate bills for the purpose of inhibiting Prime’s growth

and success, and causing a drain on Plaintiff’s resources. (FAC ¶¶ 291-292, 294,

312-20). These two allegations, however, appear to exemplify that Defendants

attempted to influence the policies of either the agencies or the legislature - activity

intended to be protected under the Noerr-Pennington doctrine. These allegations

are further distinguishable from the Fifth Circuit’s decision in Woods Exploration &

Producing Co. v. Aluminum Co. of Am., where the Court found Noerr-Pennington

inapplicable to the alleged filing of false nominations by defendants because the

conduct was not action designed to influence policy.” 438 F.2d 1286, 1298 (5th Cir.

1971). As such, and as previously held by Judge Sammartino in dismissing the

original complaint (Dkt. No. 43), Plaintiff has failed to sufficiently allege it is

entitled to the “sham exception” of the lobbying rule to the Noerr-Pennington

doctrine. 

Counsel are advised that the Court’s rulings are tentative, and the Court will

entertain additional argument during the April 5 hearing. Counsel shall also be th

- 4 - [11cv2652-GPC(RBB)]

Case 3:11-cv-02652-GPC-RBB Document 83 Filed 04/04/13 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

prepared to discuss whether the Court should dismiss with or without leave to

amend. 

IT IS SO ORDERED. 

DATED: April 4, 2013

HON. GONZALO P. CURIEL

United States District Judge

- 5 - [11cv2652-GPC(RBB)]

Case 3:11-cv-02652-GPC-RBB Document 83 Filed 04/04/13 Page 5 of 5