Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02652/USCOURTS-casd-3_11-cv-02652-0/pdf.json

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

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PRIME HEALTHCARE SERVICES, INC.,

Plaintiff,

CASE NO. 11-CV-02652 JLS (RBB)

ORDER (1) GRANTING KAISER

DEFENDANTS’ MOTION TO

DISMISS; (2) DENYING AS MOOT

UHW’S MOTION TO DISMISS;

(3) GRANTING IN PART AND

DENYING IN PART UHW’S

MOTION TO STRIKE; AND

(4) DENYING AS MOOT SEIU’S

MOTION TO DISMISS

(ECF Nos. 17, 20, 21, 22)

vs.

SERVICE EMPLOYEES

INTERNATIONAL UNION; SERVICE

EMPLOYEES INTERNATIONAL UNION –

UNITED HEALTHCARE WORKERS

WEST; KAISER FOUNDATION HEALTH

PLAN, INC.; KAISER FOUNDATION

HOSPITALS; SOUTHERN CALIFORNIA

PERMANENTE MEDICAL GROUP, INC.,

and DOES 1-10, inclusive,

Defendants.

Presently before the Court are Defendants Kaiser Foundation Health Plan, Inc., Kaiser

Foundation Hospitals, and Southern California Permanente Medical Group’s (collectively, “Kaiser

Defendants”) Motions to Dismiss and Strike Portions of Complaint of Prime Healthcare Services,

Inc. (“Prime Healthcare”), (Kaiser MTD, ECF No. 17)1

; Defendant Service Employees

1

 Although Kaiser Defendants stylize their motion as one to “Dismiss and Strike,” except in

a footnote, they do not address their purported motion to strike. (Kaiser MTD 12–13 n.15, ECF No.

17); (see also Resp. to UHW MTD & Mot. to Strike 22 n.10, ECF No. 33) Nor do they address the

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International Union – United Healthcare Workers West’s (“UHW”) Motion to Dismiss the

Complaint, (UHW MTD, ECF No. 20), and Motion to Strike Portions of Complaint, (UHW Mot.

to Strike, ECF No. 21); and Defendant Service Employees International Union’s (“SEIU”)2

Motion to Dismiss Complaint, (SEIU MTD, ECF No. 22).3 Also before the Court are the

associated oppositions and replies. (ECF Nos. 32–34, 38–40) Having considered the parties’

arguments and the law, the Court GRANTS Kaiser Defendants’ motion to dismiss, DENIES AS

MOOT UHW’s motion to dismiss, GRANTS IN PART AND DENIES IN PART UHW’s

motion to strike, and DENIES AS MOOT SEIU’s motion to dismiss. 

BACKGROUND4

Prime Healthcare brings this action against Kaiser Defendants and Union Defendants,

alleging that they have together unlawfully conspired to eliminate Prime Healthcare from the

healthcare services market. The presence of Prime Healthcare in the relevant market threatens the

success of Union Defendants’ campaign to increase the cost of labor for healthcare workers, and

threatens the success of Kaiser Defendants’ business model for providing healthcare services. And

so, Kaiser and Union Defendants allegedly joined forces to eliminate Prime Healthcare as a

competitor by, among other things, fixing wage rates for healthcare workers’ services.

Prime Healthcare prides itself on providing quality care to its patients in an expedient

fashion, on a fee-for-service basis. By contrast, Kaiser Defendants provide all covered services to

patients who are Kaiser members and charge their members fixed monthly premiums for those

services. Pursuant to federal and state law, however, Kaiser members may seek emergency care at

motion to strike in their reply brief, other than in a single footnote “incorporat[ing] SEIU-UHW’s

reply arguments in support of its motion to strike.” (Kaiser Reply 1 n.2, ECF No. 39) But, except for

paragraph 185, UHW’s motion to strike and reply in support of that motion do not touch on the

paragraphs Kaiser Defendants seek to have stricken (paragraphs 181–85 and 187–90). (See UHW

Mot. to Strike, ECF No. 21) Thus, the Court construes Kaiser Defendants’ motion only as a motion

to dismiss and declines to consider the request to strike any paragraphs not discussed in UHW’s

motion. 

2

 UHW and SEIU will be referred to collectively as “Union Defendants” throughout this Order.

3

 Kaiser Defendants join in the arguments raised in Union Defendants’ motions, and Union

Defendants likewise join in the arguments raised in Kaiser Defendants’ motion. (Kaiser MTD 3 n.3,

ECF No. 17); (UHW MTD 1, ECF No. 20); (SEIU MTD 1 n.1, ECF No. 22) 

4

 All facts in the Background section are taken from the Complaint. (Compl., ECF No. 1)

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non-Kaiser hospitals (such as Prime Healthcare), and Kaiser Defendants are thereafter required to

reimburse Prime Healthcare for the services rendered. According to Prime Healthcare, this

presents a threat to Kaiser Defendants’ business model and has led Kaiser Defendants to seek out

ways to limit or eliminate Prime Healthcare as an alternative, competing provider. Prime

Healthcare believes that Kaiser Defendants have taken such measures as advising their members to

call a “nurse line” before seeking emergency care, and thereby encouraging the patient to go to a

Kaiser facility rather than non-Kaiser hospital; coercing treating physicians to transfer member

patients from a non-Kaiser hospital to a Kaiser facility; pressuring patients and their families to

seek care only at Kaiser facilities; and unlawfully refusing to reimburse physicians who provide

emergency services to Kaiser members at non-Kaiser hospitals.

Like Kaiser Defendants, Union Defendants too have an apparent incentive to limit or

eliminate Prime Healthcare’s market presence. Union Defendants are alleged to be focused on

eliminating competition in the market for service workers represented by Union Defendants, and

to have unlawfully partnered with non-labor entities such as Kaiser Defendants in order to

accomplish this market-domination strategy. By doing so, Union Defendants ensure that they can

establish supracompetitive wage rates for such services in the relevant market. By way of

example, Prime Healthcare points to the Justice for Janitors campaign (and other such strategies

separate from and unrelated to the instant action) through which the SEIU obtained agreements

from building owners and managers to restrict contracting for janitorial services only to employers

who agreed to work with the SEIU. More pertinent to the instant action, Union Defendants

allegedly engaged in publicity campaigns to mar Prime Healthcare’s reputation in furtherance of

their conspiracy with Kaiser Defendants. 

The complaint alleges that, at a time when Kaiser was struggling to compete in the

marketplace, Kaiser Defendants and Union Defendants formed an alliance with the twin goals of

manipulating the market to insulate Kaiser Defendants from competitive pressures and assisting

Union Defendants in achieving market dominance. To outsiders like Prime Healthcare, the

alliance appeared to disadvantage Kaiser Defendants: at a time when Kaiser Defendants were

struggling to reduce costs, they entered into agreements with Union Defendants that actually

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resulted in an increased cost of labor for healthcare service workers. But in exchange for helping

Union Defendants achieve market dominance, Union Defendants boosted Kaiser Defendants’

competitive advantage by assuring that its competitors would also be burdened by the increased

costs of hospital care. In conjunction with these agreements, Kaiser Defendants allegedly

funneled millions of dollars in illegal payments to Union Defendants, and Kaiser and Union

Defendants collaborated on several legislative lobbying efforts to their mutual benefit.

Faced with this pressure from Kaiser and Union Defendants’ allegedly anticompetitive

actions, Prime Healthcare filed its complaint on November 15, 2011, asserting violations of

Sections 1 and 2 of the Sherman Act. (Compl., ECF No. 1) The various motions to dismiss and to

strike were all filed on January 20, 2012. (ECF Nos. 17, 20–22) The motions were originally set

before the Honorable M. James Lorenz, but were later transferred to this Court’s calendar on

February 16, 2012. Per Judge Lorenz’s Order, the motions were deemed submitted as of April 9,

2012, after they had been fully and completely briefed. (Order, Dec. 8, 2011, ECF No. 7)

LEGAL STANDARD

1. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that

the complaint “fail[s] to state a claim upon which relief can be granted,” generally referred to as a

motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and

sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a “short and plain

statement of the claim showing that the pleader is entitled to relief.” Although Rule 8 “does not

require ‘detailed factual allegations,’ . . . it [does] demand[] more than an unadorned, thedefendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, — US — , 129 S. Ct. 1937, 1949

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a

plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than

labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 

Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Nor does a

complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal,

129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 557).

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“To survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly,

550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts

pled “allow[] the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). That is not to say that the claim must

be probable, but there must be “more than a sheer possibility that a defendant has acted

unlawfully.” Id. Facts “‘merely consistent with’ a defendant’s liability” fall short of a plausible

entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept

as true “legal conclusions” contained in the complaint. Id. This review requires context-specific

analysis involving the Court’s “judicial experience and common sense.” Id. at 1950 (citation

omitted). “[W]here the well-pleaded facts do not permit the court to infer more than the mere

possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is

entitled to relief.’” Id. Moreover, “for a complaint to be dismissed because the allegations give

rise to an affirmative defense[,] the defense clearly must appear on the face of the pleading.” 

McCalden v. Ca. Library Ass’n, 955 F.2d 1214, 1219 (9th Cir. 1990). 

Where a motion to dismiss is granted, “leave to amend should be granted ‘unless the court

determines that the allegation of other facts consistent with the challenged pleading could not

possibly cure the deficiency.’” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.

1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.

1986)). In other words, where leave to amend would be futile, the Court may deny leave to

amend. See Desoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401.

2. Motion to Strike

Under Federal Rule of Civil Procedure 12(f), a court “may order stricken from any

pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” 

Fed. R. Civ. P. 12(f). However, “[m]otions to strike are generally regarded with disfavor because

of the limited importance of pleading in federal practice, and because they are often used as a

delaying tactic.” Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1152 (C.D. Cal.

2003). Moreover, the motion “should not be granted unless the matter to be stricken clearly could

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have no possible bearing on the subject of the litigation. If there is any doubt whether the portion

to be stricken might bear on an issue in the litigation, the court should deny the motion.” Platte

Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004). The court “views the

pleadings in the light most favorable to the non-moving party.” Neilson, 290 F. Supp. 2d at 1152.

ANALYSIS

1. Violation of Section 1 of the Sherman Act (15 U.S.C. § 1)

Prime Healthcare’s first claim is against all Defendants for violation of Section 1 of the

Sherman Act. Section 1 of the Sherman Act provides in pertinent 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.” 15 U.S.C. § 1. This

section has long been interpreted to outlaw only “unreasonable” restraints. See United States v.

Joint Traffic Ass’n, 171 U.S. 505 (1898). 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); Twombly, 550 U.S. at 553–58). In

addition, the plaintiff must establish the relevant market and market power. See Newcal Indus.,

Inc. v. Ikon Office Solution, 513 F.3d 1038, 1045 (9th Cir. 2008).

A. Existence of a Contract, Combination, or Conspiracy

In Kaiser Defendants’ and SEIU’s motions to dismiss, they contest whether the complaint

sufficiently pleads the existence of an agreement in violation of Section 1 of the Sherman Act. 

(Kaiser MTD 8–15, ECF No. 17); (SEIU MTD 24–30, ECF No. 22) The terms “contract,”

“combination,” and “conspiracy” in Section 1 require that there be concerted action in order for

there to be a violation of Section 1 of the Sherman Act. See Monsanto Co. v. Spray-Rite Serv.

Corp., 465 U.S. 752, 761 (1984) (“Independent action is not proscribed.”). “[T]o allege an

agreement between antitrust co-conspirators, the complaint must allege facts such as a ‘specific

time, place, or person involved in the alleged conspiracies’ to give a defendant seeking to respond

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to allegations of a conspiracy an idea of where to begin.” Kendall, 518 F.3d at 1047 (quoting

Twombly, 550 U.S. at 565 n.10). In short, the complaint must “answer the basic questions: who,

did what, to whom (or with whom), where, and when?” Id. at 1048.

Here, Kaiser Defendants argue that Prime Healthcare has failed to state a claim under

Section 1 because the complaint “fails utterly to plead any facts that might plausibly show there

was ever any agreement between Kaiser and the SEIU to eliminate Prime from the market.” 

(Kaiser MTD 8, ECF No. 17) To be sure, the complaint alleges “supposed terms and benefits” of

the alleged agreement, but Kaiser Defendants contend that such assertions are conclusory and fail

to state a Section 1 Sherman Act claim. (Id. at 9) Indeed, according to Union Defendants the

complaint fails even to allege a specific agreement, other than the collective bargaining agreement

(“CBA”),5

 which they argue is immune from antitrust liability.6 (SEIU MTD 3–4, 24–30, ECF No.

22)

Prime Healthcare disagrees, asserting that the “detailed factual allegations” of the

complaint establish “both directly and circumstantially the illegal arrangement among defendants.” 

(Resp. to SEIU MTD 5, ECF No. 32); see also Twombly, 550 U.S. at 556 (indicating that, in the

antitrust context, the plaintiff must allege “enough fact to raise a reasonable expectation that

discovery will reveal the existence of an illegal agreement”). Prime Healthcare does not elaborate

on how the complaint establishes “directly” an illegal agreement between Kaiser and Union

Defendants, instead focusing on circumstances that suggest that the alleged conspiracy and

agreement between Defendants is plausible. (See Resp. to SEIU MTD 5–12, ECF No. 32)

5

 Based on the Court’s reading of the complaint, it is unclear whether Prime Healthcare intends

to assert that the CBA itself is the purportedly illegal agreement between Kaiser and Union

Defendants, if the CBA is evidence of some other, not specifically identified agreement between

Kaiser and Union Defendants, or if the CBA is irrelevant to the antitrust allegations, intended solely

as background to Kaiser and Union Defendants’ long-time relationship. Prime Healthcare’s

opposition briefs do nothing but further muddle the issue. (Compare, e.g., Resp. to UHW MTD &

Mot. to Strike 16, ECF No. 33 (“[T]he Complaint alleges a conspiracy that is not based on any

collective bargaining agreement.”), with id. at 14 (“[T]he Partnership Agreement, and any purported

bargaining agreements were part of the larger illegal conspiracy between Kaiser and SEIU to eliminate

Prime as a competitor.”)

6

 The immunity argument is flushed out in more detail in UHW’s Motion to Dismiss. (See

UHW MTD 3–10, ECF No. 20) In light of the Court’s uncertainty as to whether Prime Healthcare

asserts the CBA as a basis for its antitrust claims and because the Court dismisses the complaint on

alternative bases, the Court does not consider the immunity argument in this Order.

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First, Prime Healthcare points to allegations of “illegal payments from Kaiser to SEIU

pursuant to their conspiracy,” which can only be explained as “payment for participation in an

illegal conspiracy.” (Id. at 6 (citing Compl. ¶¶ 107–10, ECF No. 1)) Second, the complaint

alleges that Kaiser Defendants increased nurse staffing ratios, an action that benefitted the

conspiracy’s objectives but that was against Kaiser Defendants’ business interests. (Id. at 8 (citing

Compl. ¶¶ 113–18)) Third, Prime Healthcare suggests that Kaiser and Union Defendants acted in

concert to push Prime Healthcare out of the market by fabricating or manipulating quality of care

issues by Kaiser Defendants’ competitors while “turn[ing] a blind eye” to Kaiser Defendants’ own

misconduct, (id. at 10 (citing Compl. ¶¶ 181–91)); by preserving Union Defendants’ status as the

union representing Kaiser Defendants’ employees, (id. (citing Compl. ¶¶ 128–29)); and by

endorsing legislation that was originally opposed by the healthcare services industry but endorsed

by Union Defendants, (id. at 11 (citing Compl. ¶¶ 112–17)). 

Even considering the mostly unrelated allegations of the complaint to the alleged

conspiracy, the Court finds that Prime Healthcare has not sufficiently pleaded specific facts

suggesting a conspiracy in violation of Section 1. Prime Healthcare merely identifies the

purported objective of the alleged conspiracy, and the benefits Kaiser Defendants and Union

Defendants allegedly derive from their supposed agreement. But “a conclusory allegation of

agreement at some unidentified point does not supply facts adequate to show illegality” for

purposes of Section 1 of the Sherman Act, Twombly, 550 U.S. at 567, nor does the opportunity or

motive to conspire rationally support an inference of an illegal agreement, see In re Citric Acid

Litig., 191 F.3d 1090, 1103 (9th Cir. 1999); In re Late Fee & Over-Limit Litig., 528 F. Supp. 2d

953 (N.D. Cal. 2007) (holding that allegations of opportunity and motive to conspire are

insufficient to state a Section 1 claim). As alleged, Prime Healthcare has not given Defendants

sufficient notice of who is alleged “to do what activity, when it was supposed to be done and how

the activity was to be accomplished,” so that Defendants can adequately prepare their defense.7

7

 The Court also agrees with Kaiser Defendants that, as pleaded, the complaint fails to “allege

how each named defendant participated in the conspiracy,” and instead “refers generically to ‘Kaiser’

and not to any named Kaiser defendants.” (Kaiser MTD 24–25, ECF No. 17) “[G]eneral allegations

as to all defendants . . . is insufficient to put specific defendants on notice of the claims against them.” 

In re TFT-LCD Antitrust Litig., 586 F. Supp. 2d 1109, 1117 (N.D. Cal. 2008). 

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Stanislaus Food Prods. Co. v. USS-POSCO Indus., 2011 WL 2678879, at *7 (E.D. Cal. July 7,

2011). Moreover, most of the conduct alleged appears to be independent action taken either by

Kaiser Defendants or Union Defendants, but not both. Thus, the Court GRANTS Kaiser

Defendants’ motion to dismiss as to the first claim against all Defendants.8

B. Other Asserted Grounds for Dismissal

Although the Court finds dismissal of the first claim warranted for failure to allege an

essential element of a Section 1 violation—namely, an illegal agreement between Kaiser and

Union Defendants—Prime Healthcare will have an opportunity to amend its complaint to cure the

deficiencies noted. Thus, the Court will address in brief several (but not all) of the alternative

bases for dismissal raised in Defendants’ motions. 

(1) Restraint of Trade 

Kaiser Defendants also assert that the complaint “fails to allege that the claimed agreement

unreasonably restrained trade.” (Kaiser MTD 15, ECF No. 17) The parties initially dispute which

analysis the Court should apply in evaluating whether the alleged agreement constitutes a restraint

of trade: the per se rule or the rule of reason. “Whether a plaintiff’s alleged facts comprise a per se

claim is normally a question of legal characterization that can often be resolved by the judge on a

motion to dismiss.” Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I., 373 F.3d

57, 61 (1st Cir. 2004).

Generally, whether particular conduct violates Section 1 is determined on a case-by-case

basis, under the “rule of reason” analysis. See Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006). Under

this test, “the finder of fact must decide whether the questioned practice imposes an unreasonable

restraint on competition, taking into account a variety of factors, including specific information

about the relevant business, its condition before and after the restraint was imposed, and the

restraint’s history, nature, and effect.” In re ATM Fee Antitrust Litig., 554 F. Supp. 2d 1003, 1010

(N.D. Cal. Mar. 24, 2008) (citing State Oil Co. v. Khan, 522 U.S. 3, 10 (1997)). A court may also

consider the relative market power of the businesses involved. Id. (citing Copperweld, 467 U.S. at

8

 Because the Court grants Kaiser Defendants’ motion to dismiss the first claim against all

Defendants, which UHW and SEIU both joined in, the Court DENIES AS MOOT UHW’s and

SEIU’s motions to dismiss. 

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768). 

“Certain categories of agreements, however, have been held to be per se illegal, dispensing

with the need for case-by-case evaluation.” Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717,

723 (1988). With application of the per se rule, “there is a conclusive presumption that the

restraint is unreasonable.” Arizona v. Maricopa Cnty. Med. Soc’y, 457 U.S. 332, 344 (1982). 

“Per se liability is reserved for only those agreements that are ‘so plainly anticompetitive that no

elaborate study of the industry is needed to establish their illegality.’” Texaco, 547 U.S. at 5

(quoting Nat’l Soc. of Prof. Eng’rs v. United States, 435 U.S. 679, 692 (1978)). Moreover, “the

per se rule is appropriate only after courts have had considerable experience with the type of

restraint at issue.” Leegin Creative Leather Prods. v. PSKS, Inc., 127 S. Ct. 2705, 2713 (2007). 

Prime Healthcare contends that the agreement alleged here warrants per se analysis. 

(Resp. to Kaiser MTD 2–6, ECF No. 34) According to Prime Healthcare, although it is an

“undisputed fact” that Kaiser Defendants do not compete in the same market as union workers, 

such reliance is misplaced because per se antitrust liability may attach to an

individual or entity in a vertical relationship (Kaiser) who participates with the

members of a per se illegal horizontal conspiracy (service workers seeking to

maintain higher wage rates by eliminating non-union employers) to accomplish

the unlawful objectives of the conspiracy.

(Id. at 3 (citing Interstate Circuit v. United States, 306 U.S. 208, 232 (1939)) Thus, argues Prime

Healthcare, because SEIU, UHW, and their members are part of a horizontal conspiracy, and

because Kaiser Defendants have joined in this horizontal conspiracy, the per se analysis applies

here. (Id. at 3–4) But Prime Healthcare either misconstrues or mischaracterizes the allegations of

its complaint. The complaint consistently references an “agreement between SEIU and Kaiser,”9

(Compl. ¶ 9, ECF No. 1), “the Kaiser-SEIU conspiracy,” (id. ¶ 125), or the “SEIU-Kaiser

partnership,” (id. ¶ 152); (see also id. ¶¶ 1, 7, 118, 150–51, 154–55, 158, 191, 201). Nowhere in

the complaint does Prime Healthcare allege or allude to any conspiracy between Union Defendants

and their members. Because of this, the Court is inclined to disregard Prime Healthcare’s

assertions regarding the applicability of the per se rule unless and until the complaint is amended

to reflect this purported “per se conspiracy with both horizontal and vertical elements.” (Resp. to

9

 The complaint refers to SEIU and UHW collectively as “SEIU.” (Compl. ¶ 23, ECF No. 1)

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Kaiser MTD 3, ECF No. 34)10

Prime Healthcare goes on, however, to assert that even if the per se rule does not apply, the

complaint “has satisfied the pleading requirements for a rule of reason antitrust violation.” (Id. at

6) “A restraint violates the rule of reason if the restraint’s harm to competition outweighs its

procompetitive effects.” Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001). 

Application of the rule of reason involves a shifting burden of proof. First, “The plaintiff bears the

initial burden of showing that the restraint produces ‘significant anticompetitive effects’ within a

‘relevant market.’” Id. (quoting Hairston v. Pac. 10 Conf., 101 F.3d 1315, 1319 (9th Cir. 1996)). 

Second, the defendant must proffer “evidence of the restraint’s procompetitive effects.” Id.

Finally, the burden shifts back to the plaintiff to show that “any legitimate objectives can be

achieved in a substantially less restrictive manner.” Hairston, 101 F.3d at 1319.

Here, Kaiser Defendants assert that Prime Healthcare has not properly pleaded a rule of

reason case because it has failed to allege that Kaiser Defendants have market power in any

relevant market. (Kaiser MTD 17, 18 & n.18, ECF No. 17) As to the market definition, Kaiser

Defendants conclusively take issue with the validity of the alleged product market, (see id.), but

the briefing elaborates only on their objections to the relevant geographic market, (id. at 19

(describing the alleged geographic market as “implausible” and unsupported)).

On a motion to dismiss, an antitrust claim will survive “unless it is apparent from the face

of the complaint that the alleged market suffers a fatal legal defect” or is “facially unsustainable.” 

Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir. 2008) (“There is no

requirement that [the market definition and market power] elements of the antitrust claim be pled

with specificity.”); see also Todd v. Exxon Corp., 275 F.3d 191, 200–01 (2d Cir. 2001)

(Sotomayor, J.) (“Because market definition is a deeply fact-intensive inquiry, courts hesitate to

grant motions to dismiss for failure to plead a relevant product market.”). Indeed, “the validity of

the ‘relevant market’ is typically a factual element rather than a legal element, [and so] alleged

10 The Court does not consider and makes no comment as to whether an amendment to include

this type of conspiracy allegation would warrant per se treatment, or whether the complaint could

withstand any future motions to dismiss on the alternative bases raised in Kaiser Defendants’ reply

brief. (See Kaiser Reply 5–6, ECF No. 39)

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markets may survive scrutiny under Rule 12(b)(6) subject to factual testing by summary judgment

or at trial.” Newcal, 513 F.3d at 1045 (citing High Tech. Careers v. San Jose Mercury News, 996

F.2d 987, 990 (9th Cir. 1993)). Here, the validity of the alleged geographic market is prematurely

tested at the motion to dismiss stage. According to Prime Healthcare, 

[E]mergency healthcare services involve very small geographic markets (very

sick or critically injured patients are not going to search for lower prices or even

higher quality services in a very large geographic area) and the Ninth Circuit [has

affirmed] that a relevant geographic market for general acute care hospital

services [can] consist[] of a particular county . . . .

(Resp. to Kaiser MTD 12, ECF No. 34 (citing Forsyth v. Humana, Inc., 114 F.3d 1467, 1476 (9th

Cir. 1997) (affirming a relevant market defined by “the general acute care hospital market in Clark

County, Nevada”))) The Court agrees with Prime Healthcare that it is a factual question whether

the geographic market should be so limited as alleged in the complaint, and the Court is therefore

disinclined to dismiss the complaint on this basis.

(2) Noerr-Pennington Doctrine

SEIU argues that much of the conduct alleged in the complaint is protected by the NoerrPennington doctrine and is therefore outside the scope of the Sherman Act. (SEIU MTD 10–19,

ECF No. 22) The doctrine gets its name from Noerr, which held that the Sherman Act does not

reach concerted efforts to influence political branches of government, E. R.R. Presidents

Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144 (1961), and Pennington, which

extended Noerr to efforts to influence administrative agencies, United Mine Workers v.

Pennington, 381 U.S. 657, 670–71 (1965). See Gen-Probe, Inc. v. Amoco Corp., Inc., 926 F.

Supp. 948, 955 (S.D. Cal. 1996). Generally speaking, the doctrine bars “any claim . . . that has as

its gravamen constitutionally-protected petitioning activity.” Id. at 956; see also Kearney v. Foley

& Lardner, LLP, 590 F.3d 638, 644–45 (9th Cir. 2009) (“The Noerr-Pennington doctrine derives

from the Petition Clause of the First Amendment and provides that ‘those who petition any

department of the government for redress are generally immune from statutory liability for their

petitioning conduct.’” (quoting Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th Cir. 2006))).

Prime Healthcare opposes dismissal under the Noerr-Pennington doctrine on two bases:

(1) the conduct alleged does not constitute “petitioning conduct,” (Resp. to SEIU MTD 13–15,

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ECF No. 32); and (2) the sham exception to the Noerr-Pennington doctrine is sufficiently pleaded

and applies here, (id. at 15–24). First, Prime Healthcare asserts that the complaint alleges

activities “directed towards private individuals and entities (e.g. Prime’s physicians, the Board of

Directors of Prime’s hospitals, the media, and Prime’s customers),” not the government, and thus

the activities do not constitute “petitioning conduct” under the doctrine. (Id. at 13 (citing SEIU

MTD 14–15, ECF No. 22; Compl. ¶¶ 157, 159, 164, 170)) SEIU argues, however, that some of

the conduct alleged is “classic petitioning activity prompted at governmental action,” (SEIU MTD

14, ECF No. 22 (lobbying for legislation, seeking executive enforcement of laws)); other conduct

is “part and parcel of [Union Defendants’] legislative and executive petitioning,” (id. at 14–15

(dissemination of critical reports and flyers)); and that other conduct that might be “arguably

outside Noerr-Pennington” is nevertheless insufficiently pleaded, (id. at 15 (phone

conversations)). Given the intense factual findings required to assess whether the conduct alleged

constitutes petitioning conduct, or is “conduct incidental” to such conduct, Sosa, 437 F.3d at 934

(internal quotation marks omitted), the Court is hesitant to resolve this issue at the motion to

dismiss stage.11 

Even assuming Union Defendants’ conduct falls within the ambit of Noerr-Pennington

protection, Prime Healthcare asserts that the complaint alleges sufficient facts to invoke the “sham

exception” to the Noerr-Pennington doctrine. Petitioning conduct generally protected by NoerrPennington loses its doctrinal protection when it is nothing more than a “mere sham.” Noerr, 365

U.S. at 144. The scope of the so-called sham exception “depends on the type of governmental

entity involved.” Kottle v. Nw. Kidney Ctrs., 146 F.3d 1056, 1060 (9th Cir. 1998). “If it is the

legislature, the sham exception is extraordinarily narrow. But if it is the judicial branch, this

11 The Court recognizes the need to assume the truth of Prime Healthcare’s allegations at the

motion to dismiss stage, Kearney, 590 F.3d at 646, and notes that much of the alleged conduct is not

directed toward the government. (See, e.g., Compl. ¶ 167, ECF No. 1) Simply because Union

Defendants’ conduct was not exclusively communicated directly toward the government is not the end

of the inquiry, however. Indeed, Noerr itself “extended immunity not only to . . . direct

communications with legislators but also to [a] public relations campaign, finding that the latter’s aim

was to influence the passage of favorable legislation.” Sosa, 437 F.3d at 934 (citing Noerr, 365 U.S.

at 140–43)); see also id. at 935 (“[C]ommunications between private parties are sufficiently within

the protection of the Petition Clause to trigger the Noerr-Pennington doctrine, so long as they are

sufficiently related to petitioning activity.”). 

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circuit recognizes three categories of anticompetitive behavior that can amount to a sham . . . .” 

Id. at 1061; see also Manistee Town Ctr. v. City of Glendale, 227 F.3d 1090, 1094 (9th Cir. 2000)

(“The sham exception is more easily applied to litigation . . . than it is to lobbying before executive

or legislative bodies.”). The Court will consider only the narrower lobbying exception here,

saving consideration of the litigation exception for another day.12

As to the purported lobbying efforts, Prime Healthcare characterizes Union Defendants’

conduct as “sham and baseless,” (Resp. to SEIU MTD 16, ECF No. 32), arguing that Union

Defendants “use[d] the governmental process—as opposed to the outcome of that process—as an

anticompetitive weapon,” City of Columbia v. Omni Outdoor Adver., 499 U.S. 365, 380 (1991);

accord Empress LLC v. City & Cnty. of S.F., 419 F.3d 1052, 1057 (9th Cir. 2005); Manistee Town

Ctr., 227 F.3d at 1094–95. Even assuming the truth of Prime Healthcare’s allegations, however,

the Court has a hard time deciphering how the alleged conduct can fall within the sham exception. 

For example, Prime Healthcare alleges that Union Defendants published false accounts of Prime

Healthcare’s noncompliance with seismic safety requirements, (Compl. ¶ 157, ECF No. 1), with

certain financial disclosures mandated by the Securities and Exchange Commission, (id. ¶ 158),

and with Medicare reimbursement criteria or hospital safety standards and licensing requirements,

(id. ¶ 159, 162). And, Prime Healthcare alleges that Union Defendants forwarded such

disparaging information to government officials, (id. ¶ 160), and contacted government officials to

beseech them to stop issuing licenses to Prime Healthcare or to initiate legal action against them,

(id. ¶ 162). Other alleged contacts consist of direct communications with an unnamed state

legislator to pass a bill to restrict Prime Healthcare’s ability to acquire additional hospitals, among

other things. (See id. ¶¶ 168–69, 177). 

In summary, it would appear that all, or substantially all, of the alleged lobbying conduct

was directed toward lobbying executive officials to take action to enforce laws against Prime

Healthcare, or lobbying legislators to pass laws that might adversely affect Prime Healthcare. As

12 The parties dispute whether a heightened pleading requirement applies to sham-exception

allegations. (See SEIU MTD 13, ECF No. 22; Resp. to SEIU MTD 16, ECF No. 32; SEIU Reply 6,

ECF No. 38) Because the Court does not rely on Noerr-Pennington to dismiss the complaint, and

because the Court is skeptical of the sufficiency of Prime Healthcare’s allegations under either

standard, it declines to resolve this dispute at this time.

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alleged, then, Prime Healthcare has alleged only that Union Defendants used the outcome of the

petitioning process—getting laws enforced and bills passed—not the process itself as an

“anticompetitive weapon.” Omni Outdoor Adver., 499 U.S. at 380. As noted above, certain of

Prime Healthcare’s allegations might present a closer call, but considered as a whole, the Court is

doubtful whether Prime Healthcare has sufficiently invoked the sham exception here.

(3) Disparaging Speech

SEIU additionally moves to dismiss on the basis that “the allegations do not overcome the

presumption that allegedly disparaging speech has no actionable effect on competition.” (SEIU

MTD 19, ECF No. 22 (citing Am. Prof’l Testing Serv., Inc. v. Harcourt Brace Jovanovich Legal &

Prof’l Publ’ns, Inc., 108 F.3d 1147, 1152 (9th Cir. 1997)) According to Prime Healthcare,

however, Harcourt Brace’s de minimis presumption is inapplicable here, where “a competitor uses

a non-competitor to make the disparaging statements, which gives them the appearance of

objectivity and lack of bias.” (Resp. to SEIU MTD 25, ECF No. 32 (citing TYR Sport Inc. v.

Warnaco Swimwear Inc., 679 F. Supp. 2d 1120, 1132 (C.D. Cal. 2009)) TYR Sport explains that

“[t]he de minimis presumption rests on the Ninth Circuit’s reasoning that ‘buyer distrust of a

seller’s disparaging comments about a rival seller should caution us against attaching much weight

to isolated examples of disparagement.’” TYR Sport, 679 F. Supp. 2d at 1132 (quoting Harcourt

Brace, 108 F.3d at 1152). But where the disparaging comments are not made by a “rival” or

competitor, the reason for the presumption no longer applies. See id.

Taking the allegations as true, the Court is inclined to agree with Prime Healthcare that the

de minimis presumption has no applicability on these facts. The complaint does not allege that the

disparaging statements about Prime Healthcare’s quality of care were made by its

competitors—namely, Kaiser Defendants—but rather that Union Defendants published these

comments. And Kaiser Defendants allegedly “routinely cite[d]” to these disparaging publications

“as ‘independent’ evidence” of Prime Healthcare’s poor quality of care. (Compl. ¶ 166, ECF No.

1) As “independent” evaluators of the healthcare industry, (id.), Union Defendants had “added

credibility, which [Kaiser Defendants] would not have enjoyed speaking solely [as competitors in

the industry],” TYR Sport, 679 F. Supp. at 1132. For this reason, the Court would be inclined to

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deny SEIU’s motion to dismiss on this basis.13

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

Prime Healthcare’s second, third, and fourth claims against Kaiser Defendants arise out of

Section 2 of the Sherman Act.14 (Compl. ¶¶ 206–38, ECF No. 1) To state a Section 2 claim,

Prime Healthcare must allege the following: “(1) the relevant market that defendant has

monopolized; (2) possession of monopoly power in that market; and (3) willful acquisition or

maintenance of that power through competitively unreasonable means, rather than as a

consequence of a superior product, business acumen, or historic accident.” High Tek USA, Inc. v.

Heat & Control, Inc., 2012 U.S. Dist. LEXIS 100538, at *8 (N.D. Cal. July 18, 2012) (citing

United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)). To prevail on a Section 2 claim

for attempted monopolization, “a plaintiff must demonstrate four elements: (1) specific intent to

control prices or destroy competition; (2) predatory or anticompetitive conduct directed toward

accomplishing that purpose; (3) a dangerous probability of success; and (4) causal antitrust

injury.” Forsyth, 114 F.3d at 1477 (citing Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433

(9th Cir. 1995)). And finally, “[t]o prove a conspiracy to monopolize in violation of § 2, Plaintiff

must show four elements: (1) the existence of a combination or conspiracy to monopolize; (2) an

overt act in furtherance of the conspiracy; (3) the specific intent to monopolize; and (4) causal

antitrust injury.” Stanislaus Food Prods., 2011 U.S. Dist. LEXIS, at *12 (citing Paladin Assocs.,

Inc. v. Mont. Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003)). 

Kaiser Defendants move to dismiss Prime Healthcare’s second claim for monopolization

because “Prime fails to allege beyond mere conclusions that Kaiser possessed market power in any

market,” (Kaiser MTD 18, ECF No. 17), and because “[t]he Complaint also fails to allege facts

13 Notwithstanding the Court’s comments on the arguments raised in SEIU’s motion to dismiss,

as indicated supra at note 8, the motion is denied as moot in light of the Court’s granting of Kaiser

Defendants’ motion to dismiss, which dismissed the first claim against all Defendants. 

14 Section 2 provides that “[e]very person who shall monopolize, or attempt to monopolize,

or combine or conspire with any other person or persons, to monopolize any part of the trade or

commerce among the several States, or with foreign nations, shall be deemed guilty of a felony . . . .”

15 U.S.C. § 2. In claims two through four, Prime Healthcare claims Kaiser Defendants are guilty of

monopolization, attempted monopolization, and conspiracy to monopolize. (Compl. ¶¶ 206–38, ECF

No. 1) 

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showing that Kaiser willfully acquired or maintained any supposed monopoly power,” (id. at 20). 

They further assert that the third claim for attempted monopolization fails because Prime

Healthcare fails to plead specific intent to monopolize or a dangerous probability of achieving

monopoly power. (Id. at 20–21) And finally, Kaiser Defendants move to dismiss the conspiracy

to monopolize claim for failure to plead any conspiracy between Kaiser Defendants and Union

Defendants, and failure to plead specific intent to monopolize. (Id. at 21–22) 

As the Court has already found, Prime Healthcare has failed to allege sufficient facts to

support an actionable agreement or conspiracy between Kaiser Defendants and Union Defendants. 

See supra at 9. Although “[o]ffenses under section 1 and section 2 of the Sherman Act are legally

distinct,” Stanislaus Food Prods., 2011 U.S. Dist. LEXIS 72764, at *39 (citing, inter alia, Am.

Tobacco Co. v. United States, 328 U.S. 781, 788 (1946)), this inadequacy is fatal to Prime

Healthcare’s Section 2 claims as well because those claims are all premised on activity by Union

Defendants, not activity by Kaiser Defendants. (See Kaiser Reply 6–8, ECF No. 39) And, if there

is no agreement between Kaiser Defendants and Union Defendants, then the Court fails to see how

Union Defendants’ conduct can result in a Section 2 violation by Kaiser Defendants. 

For example, in support of its argument regarding supracompetitive pricing,15 Prime

Healthcare points to allegations in the complaint regarding Union Defendants’ “campaigns . . . to

mitigate competition against Kaiser by forcing each hospital system to adopt the same

uncompetitive business model or to make each system’s costs prohibitive by spending money

responding to attacks from the union.” (Compl. ¶ 146, ECF No. 1); (see also Resp. to Kaiser MTD

14, ECF No. 34 (citing Compl. ¶¶ 83–151, ECF No. 1)) The same is true for the allegations which

supposedly provide circumstantial evidence of monopoly power. (Resp. to Kaiser MTD 14–15,

ECF No. 34 (citing Compl. ¶¶ 132–51)) Such conduct was to the independent benefit of Union

Defendants: by convincing other hospital systems to unionize, Union Defendants came closer to

establishing their goal of market dominance. Without an agreement between Union Defendants

15 “Monopoly power . . . is the power to control prices or exclude competition,” and can be

demonstrated “by direct evidence or by circumstantial evidence.” Forsyth, 114 F.3d at 1475 (internal

quotation marks omitted). “Direct proof of market power may be shown by evidence of restricted

output and supracompetitive prices.” Id. at 1475.

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and Kaiser Defendants, none of the allegations of the complaint support a Section 2 claim against

Kaiser Defendants because actions taken by Union Defendants do not support a reasonable

inference that Kaiser Defendants willfully acquired monopoly power or had the specific intent to

monopolize. For these reasons, the Court GRANTS Kaiser Defendants’ motion to dismiss the

second, third, and fourth claims for Section 2 violations.

3. Motion to Strike

Although the motion to strike might be deemed mooted by the Court’s granting of Kaiser

Defendants’ motion to dismiss, because the Court allows Prime Healthcare an opportunity to

amend, it will address the motion to strike now in order to facilitate amendment. Defendants move

to strike several allegations from the complaint as being immaterial, impertinent, or scandalous. 

(UHW Mot. to Strike, ECF No. 21) “Immaterial” or “impertinent” allegations are those which

lack any relationship to the asserted claims. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th

Cir. 1993). “Scandalous” allegations include those which “cast a cruelly derogatory light on a

party.” In re 2TheMart.com, Inc. Sec. Litig., 114 F. Supp. 2d 955, 965 (C.D. Cal. 2000). The

Court agrees that Prime Healthcare has included several allegations that have no bearing on the

instant action, but does not agree that all of the cited paragraphs are immaterial and impertinent, or

scandalous. Accordingly, the Court GRANTS IN PART AND DENIES IN PART the motion to

strike, as detailed. 

First, Defendants request that the Court strike paragraphs 8 and 53–82, which they argue

“have no relationship to the complaint’s antitrust claims,” (UHW Mot. to Strike 2, ECF No. 21),

and characterize as “superfluous historical allegations” properly subject to a motion to strike, (id.

at 3). Prime Healthcare counters that these allegations support the claim that Union Defendants

have “a deliberate market domination plan in place, [are] pursuing that plan, and [have] repeatedly

obtained unlawful agreements with complicit employers,” which demonstrates Union Defendants’

“purpose, motive, and consistent and long-standing pattern of conduct.” (Resp. to UHW MTD &

Mot. to Strike 23, ECF No. 33) The Court, in its discretion, finds it appropriate to strike only the

following “background” paragraphs from the complaint: Paragraphs 60–82. The stricken

paragraphs deal with Union Defendants’ purported illegal agreements in other industries, such as

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in the janitorial services industry, the security guard industry, and the home health care and child

care services industry. These paragraphs cross the line from constituting mere background

allegations to encompassing legal conclusions risking significant expansion of the necessary

discovery in this matter, as well as complicating the litigation by requiring resolution of several

cases within a case. 

Second, Defendants seek to have paragraphs 68–70, 80, 127–28, and 185 and Exhibit G

stricken because these allegations pertain to “litigation and administrative matters that are wholly

unrelated to the issues and claims in this action.” (UHW Mot. to Strike 5, ECF No. 21) Because

the Court has already stricken 68–70 and 80, it focuses on 127–28 and 185 and Exhibit G now. 

The Court declines to strike paragraphs 127 and 128; prior findings of “collusion between Kaiser

and SEIU,” (Compl. ¶ 128, ECF No. 1), even if unrelated to the instant action, are relevant to

whether Defendants illegally conspired as alleged in the complaint. Likewise, the Court finds the

allegations of prior enforcement matters against Kaiser Defendants, for which Union Defendants

have allegedly remained conspicuously silent, potentially relevant to this action and accordingly

declines to strike paragraph 185 or Exhibit G. Platte Anchor Bolt, 352 F. Supp. 2d at 1057. 

CONCLUSION

For the reasons stated above, the Court GRANTS Kaiser Defendants’ motion to dismiss

(ECF No. 17) and DISMISSES the complaint in its entirety WITHOUT PREJUDICE. The

remaining motions to dismiss (ECF Nos. 20, 22) are DENIED AS MOOT. UHW’s motion to

strike is GRANTED IN PART AND DENIED IN PART: Paragraphs 60–82 are Ordered

stricken from the complaint. 

If Prime Healthcare wishes, it SHALL FILE an amended complaint within twenty-one

days of the date this Order is electronically docketed. Failure to file an amended complaint by this

date may result in dismissal with prejudice.

IT IS SO ORDERED.

DATED: August 30, 2012

Honorable Janis L. Sammartino

United States District Judge

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