N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT DJENEB A SIDIB E; e t a l., Pla

i ntiffs - Appe lla

n ts, v. SUTTER HEALTH, De fe nda

nt - Appe lle e . No. 14-16234

D.C . No. 3:12-c v-04854-LB M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Northe rn Distric t of C a lifornia La ure l D. B e e le r, M a gistra

te Judge , Pre siding Argue d a nd Subm itte d July

8, 2016 San Fran c isc o , C a lifornia B e fore : SILVER

M AN a nd NGUYEN, C i rc u it Judge s, a nd ANELLO, * * Distric t Judge . Dje ne ba

Sidibe an d othe r he a lth pla n m e m be rs a ppe a l the dism issa l of the ir third a m e nde d a n t itrust c la ss a c tion c om

p la int unde r §§ 1 a

nd 2 of the She rm an Ac t a ga inst Sutte r He a lth, a

n owne r and ope ra t or of hospita l s a nd othe r he a lthc are 

# FIL ED JUL 15 2016 M OLLY C. DW Y ER, CLERK U . S . CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3. ** The Honora

ble M ic ha e l M . Ane l lo, Distric t Judge for the U.S. Distric t C ourt for the Southe rn Distric t of C a lifornia , sitting by de signa tion.se rvic e provide rs in Northe rn C a lifornia . W e have jurisdic t ion unde r 28 U.S.C .

§ 1291, a nd we re vie w de novo. Se e In reMusic al Instrume nts & Equip. Antitrust Litig. , 798 F.3d 1186, 1191 (9th C i r. 2015). W e re ve rse the distric t c ourt’ s judgm e nt a

nd re m a nd for furthe r proc e e dings. Sutte r se lls inpa

t ie nt hospital se rvic e s to c om m e rc ia l he a lth insura

nc e pla ns. Pla i ntiffs a lle ge tha

t Sutte r forc e d ille ga l ty ing a rran ge m e nts a

nd a nti-ste e ring c la use s upon thehe a lth pla

ns, c a using pla intiffs to pa

y highe r he a lth insura

nc e pre m ium s a

nd othe r he a lthc are c ha

rge s. The y

a lle ge tha

t the re le va

nt ge ogra phic m arke ts for the sa le of inpa tie nt hospital se rvic e s are hospita l se rvic e are a s , or

“ HSAs,” a s de fine d in the Dartmouth Atlas of He alth C are . Ea c h HSA is a c olle c tion of spe c ific a lly -de fine d z ip c ode s whose re side nts re c e ive m ost of the ir hospita liz a tions in tha

t loc a l a re a . W ithin thety ing HSAs, pla intiffs a l le ge tha t the re are no e c onom i c substitute s for Sutte r’ s inpa tie nt hospital se rvic e s sold to he a lth insura

nc e pla ns. In pa rtic ula r, pla intiffs a lle g e that “ Sutte r now owns the only a c ute c are hospita ls” o r offe rs “ the only ava ila ble hospita l fa c ilitie s to he a lth pla n m e m be rs” in se ve ra l Northe rn C a lifornia HSAs, inc luding Antioch , B urlinga m e , R ose ville , Davis, a

nd Va l le jo. B e c a use the m arke t for inpa

tie nt hospita liz a tions is purporte dly loc a l, pla intiffs furthe r a lle ge tha t he a lth pla

n m e m b e rs re siding in a

n HSA ge ne ra lly

do not go outside that HSA to se e k 2inpa

tie nt hospital se rvic e s; a

nd, e ve n if a

hy pothe tic a l or a c tua l m onopolist raise d pric e s, he a lth pla

ns c o u ld not fe a sibly

c ontra c t with hospita

l se rvic e s provide rs outside the HSA in the se ty i ng m arke ts. Se e Saint Alphonsus Me d. C tr.-N ampa, Inc . v . St. Luk

e ’s He alth Sy

s. Ltd. , 778 F.3d 775, 784 (9th C ir. 2015) (e xpla ining that a c om m on m e thod for de te rm ining there le va n t ge ogra phic m arke t “ is to find whe the r a hy pothe tic a l m onopolist c o uld im pose a ‘ sm a ll but signific ant nontra nsitory inc re a se in pric e ’ (‘ SSNIP’ ) in the propose d m arke t ” ). Sutte r a lle ge dly le ve ra ge s its m arke t powe r in the ty ing m arke ts to forc e the he a lth pla ns to inc lude inpa

tie n t se rvic e s in five othe r HSAs (the “ tie d” m arke ts)— suc h a s Sa n Franc i sc o, Oa

kla nd, a nd Sa c ram e nto— and to pa y supra -c om

pe titive ra t e s for the se se rvic e s. Pla intiffs’ ge o g ra

p h ic m arke t a lle gations a

re suffic ie n tly

de ta ile d. A ge ogra phic m arke t is theare a

“ whe re buy e rs c a

n turn for a lte rnative sourc e s of supply .” Id . He re , the third a m e nde d c om

pla int de sc ribe s the purporte d “ ty ing” m arke ts, spe c ific a l l y

av e rs tha t Sutte r owns the only

inpa t ie nt hospital fa c ility

in the s e m arke ts, a

nd a lle g e s tha

t the he a lth pla

ns (a n d the i r m e m

be rs) c annot obta in a lte rnative sourc e s of inpa tie n t c are in the se are a s. At theple a ding sta ge , pla intiffs we re not re quire d to a lle ge e vide ntia ry fa c ts suc h

a s wha t pe rc e nta ge s of pa

t ie nts from inside and outsidea

pa rtic ula r HSA use the hospita ls in tha t HSA, or to 3othe rwise re but e ve ry purporte d fla

w in the Dartmouth Atlas of He althc are ’ s m e thodology . Se e N

e w c al Indus., Inc . v . IK

ON Offic e Solution , 513 F.3d 1038, 1044-45 (9th C ir. 2008). “ [T] he va lidity of the ‘ re le va

nt m arke t’ is ty

p i c a lly a fa c t ua l e le m e nt rat

he r tha n a le g a l e le m e nt,” and inquiry into the c om

m e rc ia l re a l itie s fa c e d by

c onsum e rs is m ore a

ppropria te ly a ddre sse d at

sum m ary judgm e nt or tria l. Id . at 1045; s e e also Flovac, Inc . v . Airv ac, Inc . , 817 F.3d 849, 853 (1st C ir. 2016); Luc as Auto Eng’g, Inc . v . Bridge s tone /Fire stone , Inc . , 275 F.3d 762 (9th C ir. 2002) (re ve rsing sum m ary judgm e nt on the ba sis of a ge nuine issue of m a te ria l fa c t re ga

rding m arke t de finition). Sim ila rly , at this stage , we a lso c annot sa y tha t pla i ntiffs’ ge ogra

phic m arke t a lle gations we re inhe re ntly im pla usible . S e e N e w c al , 513 F.3d a

t 1045. Thethird am e nde d c o m

pla int e xpla ins tha

t HSAs a re are a s within whic h the re side n ts obta in m ost of the ir inpa

t ie nt hospital se rvic e s; it is not inhe re ntly im pla u sible that the se re side nts a lso would be

unwilling to se e k tre a tm e nt e l se whe re , a nd tha t he a l th pla n s the re fore c ould not purc ha se hospita l se rvic e s outside of the a lle ge d HSAs. Se e Hanov e r 3201 Re alty , LLC v . Village

Supe rmark

e t s, Inc . , 806 F.3d 162, 183- 84 (3d C ir. 2015) (holding tha t c om pla int suffic ie ntly

a l le ge d fa c ts sugge sting tha t de fe nda n t c ould ra ise pric e s without c a using c o nsum e rs to drive e lse whe re for fullse rvic e supe rm arke ts), c e rt. de nie d , 2016 W L 1046885 (U.S. M a y 23, 2016) (No. 415-1156); c

f. C onc ord Assoc

s ., L.P. v . Entm’t Props. Trust , 817 F.3d 46, 53-55 (2d C ir. 2016) (a ffirm ing dismissa l of c om p la int on theba sis tha

t pla intiffs’ propose d ra c i ng/ga m ing m arke t in theC a tskills re gion wa s inhe re ntly im pla usible ). The distric t c o urt, e m

ploy ing its judic ia l e xpe rie nc e and c om m on se nse , wa s not bound to c o nc lude tha

t pla i n tiffs’ ge ogra

phic m arke t a lle gations we re unte na ble on the ir fa c e . Se e Ebne r v . Fre

sh, Inc . , 818 F.3d 799, 803 (9th C ir. 2016) (quoting Ashc roft v . Iqbal , 556 U.S. 662, 679 (2009)). RE V E RSE D and RE M ANDE D. 1

1 Appe lle e ’ s re que st for judic ia l notic e of hospita l da ta from C a lifornia ’ s Offic e of State wide He a lth Pla nning a nd De ve lopm e nt, a

nd othe r fa c ts and m a tte rs of public re c ord, is de nie d . 5