FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CASCADE HEALTH SOLUTIONS FKA 

MCKENZIE-WILLAMETTE HOSPITAL,

an Oregon nonprofit corporation,

Plaintiff-Appellant,

v.

PEACEHEALTH, a Washington State

nonprofit corporation,

Defendant-Appellee, No. 05-35627

and  D.C. No.

CV-02-06032-ALH PACIFICSOURCE HEALTH PLANS,

Defendant,

REGENCE BLUECROSS

BLUESHIELD OF OREGON;

PROVIDENCE HEALTH PLAN;

MCKENZIE-WILLAMETTE REGIONAL

MEDICAL CENTER ASSOCIATES, LLC,

Defendant-Intervenors. 

1529
MCKENZIE-WILLAMETTE HOSPITAL, 

Plaintiff-Appellee,

v.

PEACEHEALTH, a Washington State

nonprofit corporation,

Defendant-Appellant,

No. 05-35640 and  D.C. No. PACIFICSOURCE HEALTH PLANS,

CV-02-06032-HA Defendant,

REGENCE BLUECROSS

BLUESHIELD OF OREGON;

PROVIDENCE HEALTH PLAN;

MCKENZIE-WILLAMETTE REGIONAL

MEDICAL CENTER ASSOCIATES, LLC,

Defendant-Intervenors. 

MCKENZIE-WILLAMETTE HOSPITAL, 

Plaintiff-Appellee,

No. 05-36153

v.  D.C. No.

PEACEHEALTH, a Washington State CV-02-06032-HA

nonprofit corporation,

Defendant-Appellant. 

1530 CASCADE HEALTH v. PEACEHEALTH
MCKENZIE-WILLAMETTE HOSPITAL,  No. 05-36202

an Oregon nonprofit corporation, D.C. No.

Plaintiff-Appellant, CV-02-06032-HA

v. ORDER

PEACEHEALTH,  CERTIFYING

Defendant-Appellee. QUESTION TO

THE SUPREME

COURT OF

OREGON 

Filed February 1, 2008

Before: Ronald M. Gould, Richard A. Paez, and

Johnnie B. Rawlinson, Circuit Judges.

ORDER

GOULD, Circuit Judge: 

McKenzie-Willamette Hospital (“McKenzie”) filed a complaint in the district court against PeaceHealth asserting seven

claims for relief, two of which arose under Oregon state law

for price discrimination and intentional interference with prospective economic advantage.1

 The jury found in McKenzie’s

favor on both of the Oregon state law claims, and PeaceHealth appealed. Since the jury’s verdict, an intervening U.S.

Supreme Court ruling, Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), has injected

uncertainty into the status of Oregon’s price discrimination

1The remaining five claims arose under the federal antitrust laws for:

monopolization, attempted monopolization, conspiracy to monopolize,

tying, and exclusive dealing. 

CASCADE HEALTH v. PEACEHEALTH 1531
doctrine. Because McKenzie’s price discrimination claim

raises an important, dispositive issue of Oregon law, we

respectfully certify a question for review by the Supreme

Court of Oregon, pursuant to Or. Rev. Stat. § 28.200, namely

whether Oregon price discrimination law follows the requirements as the U.S. Supreme Court delineated in Brooke Group.

We offer the following statement of relevant facts and explanation of the “nature of the controversy in which the question[ ] arose.” Or. Rev. Stat. § 28.210(2) (2005). 

Background

McKenzie and PeaceHealth are the only two providers of

hospital care in Lane County, Oregon. The jury found, and the

parties do not dispute on appeal, that the relevant market in

this case is the market for primary and secondary acute care

hospital services in Lane County. Primary and secondary

acute care hospital services are common medical services like

setting a broken bone and performing a tonsillectomy. Some

hospitals also provide what the parties call “tertiary care,”

which includes more complex services like invasive cardiovascular surgery and intensive neonatal care. 

In Lane County, PeaceHealth operates three hospitals while

McKenzie operates one. McKenzie’s sole endeavor is

McKenzie-Willamette Hospital, a 114-bed hospital that offers

primary and secondary acute care in Springfield, Oregon.

McKenzie does not provide tertiary care. In the time period

leading up to and including this litigation, McKenzie had been

suffering financial losses, and, as a result, merged with Triad

Hospitals, Inc.2 so that it could add tertiary services to its

menu of care. 

The largest of PeaceHealth’s three facilities is Sacred Heart

2As a result of the merger, McKenzie’s name changed to Cascade

Health Solutions. For the purposes of this order, we, like the parties, continue to refer to Cascade Health Solutions as McKenzie. 

1532 CASCADE HEALTH v. PEACEHEALTH
Hospital, a 432-bed operation that offers primary, secondary,

and tertiary care in Eugene, Oregon. PeaceHealth also operates Peace Harbor Hospital, a 21-bed hospital in Florence,

Oregon and Cottage Grove Hospital, an 11-bed hospital in

Cottage Grove, Oregon. In Lane County, PeaceHealth has a

90% market share of tertiary neonatal services, a 93% market

share of tertiary cardiovascular services, and a roughly 75%

market share of primary and secondary care services. 

An appreciation of the relationship between hospitals and

insurers is necessary to understand the price discrimination

issues in this case. In the transaction between a hospital that

sells care services and an insurer that buys care services, the

price agreed upon is often referred to as a “reimbursement

rate.” For example, in a hospital-insurer contract, the agreed

upon price might be “a 90% reimbursement rate.” A 90%

reimbursement rate price means that, when the insurer must

purchase services from the hospital, the insurer gets a 10%

discount off the hospital’s regular price, also called the charge

master or list price. It follows that hospitals prefer high reimbursement rates and insurers prefer low reimbursement rates,

as each group pursues its own economic interest. 

McKenzie asserts that PeaceHealth offered insurers discounts of 35% to 40% on tertiary services if the insurers made

PeaceHealth their sole preferred provider for all services—

primary, secondary, and tertiary. In 2001, for example, PeaceHealth was the only preferred provider of hospital care under

the preferred provider plan (“PPP”) of Regence BlueCross

BlueShield of Oregon (“Regence”).3 At that time, Regence

was paying PeaceHealth a 76% reimbursement rate for all of

PeaceHealth’s medical services, including primary, secondary, and tertiary services. Around that time, pursuant to Mc3

In a preferred provider plan, health care providers contract with an

insurer to provide health care to the insurer’s customers. The insurer’s customers pay much higher prices if they obtain services from providers other

than those with whom their insurer has contracted. 

CASCADE HEALTH v. PEACEHEALTH 1533
Kenzie’s request, Regence considered adding McKenzie to

the PPP as a preferred provider of primary and secondary services. When Regence’s contract with PeaceHealth came up

for its annual renewal, Regence solicited two proposals from

PeaceHealth. Under one proposal, PeaceHealth would remain

the only preferred provider. Under the other proposal, McKenzie would be added as a preferred provider. PeaceHealth

offered an 85% reimbursement rate for all services if it

remained Regence’s sole preferred provider of primary, secondary, and tertiary services, and a 90% reimbursement rate

if McKenzie was added as a preferred provider of primary and

secondary services. Regence thereafter declined to include

McKenzie as a preferred provider. 

That same year, McKenzie sought and received admission

as a preferred provider of primary and secondary services

under the preferred plan offered by Providence Health Plan

(“Providence”). Until then, PeaceHealth was the only preferred provider of primary, secondary, and tertiary services in

the Providence preferred plan. Upon McKenzie’s admission

as a preferred provider, PeaceHealth increased its reimbursement rate with Providence from 90% to 93%. The evidence

showed that insurers who made PeaceHealth their exclusive

preferred provider across all services, thus purchasing from

PeaceHealth a full complement of primary, secondary, and

tertiary services, paid lower reimbursement rates than insurers

who purchased tertiary services from PeaceHealth, but at least

some primary and secondary services from McKenzie. 

Based on these incidents, McKenzie brought, among other

antitrust law claims, a claim of primary-line price discrimination4

 under Oregon state law. McKenzie’s theory was that

4Price discrimination claims can take three forms: primary line, secondary line, or tertiary line. Primary-line price discrimination includes conduct, like predatory pricing, that injures the direct competitors of the

discriminating seller. See Volvo Trucks N. Am., Inc. v. Reeder-Simco

GMC, Inc., 126 S. Ct. 860, 870 (2006). 

1534 CASCADE HEALTH v. PEACEHEALTH
PeaceHealth discriminated in price as between Regence and

Providence. Specifically, PeaceHealth, who was the exclusive

preferred provider in Regence’s PPP, charged Regence an

85% reimbursement rate while PeaceHealth charged Providence, an insurer with whom PeaceHealth had no exclusive

arrangement, a 93% reimbursement rate. McKenzie alleged

that PeaceHealth’s price discrimination injured McKenzie

because its pricing scheme was the cause of McKenzie’s

inability to obtain preferred status with Regence. 

To decide whether McKenzie established a claim of

primary-line price discrimination under Oregon law, the district court instructed the jury as follows: 

[I]n order for the plaintiff to establish a violation of

the price discrimination statute, it has the burden of

proving each and every one of the following elements by a preponderance of the evidence: (1) That

there were contemporaneous sales by a defendant to

other insurers in the relevant market; (2) that defendant has discriminated in price between insurers in

the contemporaneous sale of hospital services; and

(3) that the effect of defendant’s price discrimination

was to substantially lessen competition or create a

monopoly in the sale of hospital services in the relevant market, or to injure, destroy or prevent competition between plaintiff and defendant. 

The district court derived its instruction from Oregon’s price

discrimination law as stated in the Oregon Supreme Court’s

1978 decision in Redmond Ready-Mix, Inc. v. Coats, 582 P.2d

1340 (Or. 1978). However, in light of what the Oregon

Supreme Court has previously said, an intervening United

States Supreme Court opinion, Brooke Group Ltd. v. Brown

& Williamson Tobacco Corp., 509 U.S. 209 (1993), calls into

question the validity of both Redmond Ready-Mix and the jury

instruction relying on it. 

CASCADE HEALTH v. PEACEHEALTH 1535
After the United States Supreme Court clarified the federal

price discrimination law in Brooke Group, no Oregon court

has published an opinion interpreting section 646.040, leaving

Oregon price discrimination law to this degree currently

unsettled, as we see it. Because resolution of McKenzie’s

price discrimination claim rests on a question of state law, we

must decide how the Oregon Supreme Court would decide the

issue before us. See, e.g., Burlington Ins. Co. v. Oceanic

Design & Constr., Inc., 383 F.3d 940, 944 (9th Cir. 2004).

However, here, after and in light of Brooke Group, it is

unclear to us how the Oregon Supreme Court would decide

the primary-line price discrimination issue at play. 

On the one hand, the Oregon Supreme Court might continue to follow its precedent in Redmond Ready-Mix. In Redmond Ready-Mix, the plaintiff brought a primary-line price

discrimination suit under section 646.040 against the husband

and wife who were the plaintiff’s competitor in the market to

sell retail pre-mixed concrete. 582 P.2d at 1342. The plaintiff

asserted that the defendants sold concrete for a lower price in

the geographic areas in which the plaintiff competed with the

defendants than in the geographic areas in which the plaintiff

did not compete. See id. at 1342-45. The trial court found that

the defendants did not violate section 646.040. See id. at

1342. The trial court reasoned that although the defendants

sold concrete at lower prices in the competitive geographic

area than in other areas, the plaintiff did not establish that the

lower prices lessened competition as required by the section

646.040 because the “defendants were not selling below their

average cost.” Id. The Oregon Supreme Court affirmed.

Id. at 1352. 

In accordance with the prevailing federal case law at the

time, the Oregon Supreme Court noted that a claim of

primary-line price discrimination could be sustained upon a

showing that the defendant price discriminated with a “predatory intent.” See id. at 1348. The Oregon Supreme Court

1536 CASCADE HEALTH v. PEACEHEALTH
pointed out that predatory intent could be implied from

below-cost selling. Id. at 1350. It held, however, that there

was no evidence the defendants priced below cost. See id. It

then held that, alternatively, the plaintiffs could establish a

claim of primary-line price discrimination by showing that the

defendants’ price discrimination resulted in a substantial

impairment of competition. Id. The court considered several

factors to determine whether the defendants’ price discrimination impaired competition. See id. These factors included: (a)

monopoly or overpowering position of the seller in the market; (b) aggressive objectives towards the seller’s smaller

rivals; (c) deep, sustained undercutting of rivals’ prices; (d)

persistent sales below the seller’s cost; and (e) actual or

impending demise of a seller’s sole rival in a market. Id. In

conclusion, and in view of these factors, the Oregon Supreme

Court held that the evidence did not demonstrate any impairment of competition and affirmed the judgment of the trial

court. See id. at 1352. 

If the Oregon Supreme Court would still follow Redmond

Ready-Mix, then the trial court’s jury instruction is valid.

Under Redmond Ready-Mix, unlike under Brooke Group, discussed below, a plaintiff can establish a claim of primary-line

price discrimination by showing either predatory intent, e.g.,

by showing “below cost” sales, id. at 1350, or a substantial

impact on competition, shown by demonstrating some of the

above-mentioned five indicia key to confirming the existence

of competitive impairment, id. 

On the other hand, in the light of its prior pronouncements,

we think it likely that the Oregon Supreme Court will decide

to follow Brooke Group, or at least that is a significant possibility raising question in our mind whether we can properly

affirm a judgment of the district court that was based on the

Redmond Ready-Mix view of the required elements of price

discrimination under Oregon law. While Oregon is entirely

free to chart a state law antitrust course that is independent

from the federal doctrine, we cannot wholly ignore the likeliCASCADE HEALTH v. PEACEHEALTH 1537
hood that the Oregon Supreme Court now would follow federal price discrimination law as set forth in Brooke Group.

For one thing, the Oregon price discrimination statute,5 Or.

Rev. Stat. § 646.040, is nearly identical to and indeed is modeled on the federal price discrimination provisions in § 2 of

the Robinson-Patman Act,6 15 U.S.C. § 13. Second, and more

importantly, the Oregon Supreme Court has previously and

explicitly declared that federal price discrimination law would

5The Oregon statute provides: 

It is unlawful for any person engaged in commerce or food commerce, or both, in the course of such commerce, either directly

or indirectly, to discriminate in price between different purchasers of commodities, or services or output of a service trade, of

like grade and quality or to discriminate in price between different sections, communities or cities or portions thereof or between

different locations in sections, communities, cities or portions

thereof in this state, where the effect of such discrimination may

be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy or prevent competition with any person who either grants or knowingly receives

the benefit of such discrimination, or with customers of either of

them. 

Or. Rev. Stat. § 646.040(1). 

6The Robinson-Patman Act provides: 

It shall be unlawful for any person engaged in commerce, in the

course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like

grade and quality, where either or any of the purchases involved

in such discrimination are in commerce, where such commodities

are sold for use, consumption, or resale within the United States

or any Territory thereof or the District of Columbia or any insular

possession or other place under the jurisdiction of the United

States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in

any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the

benefit of such discrimination, or with customers of either of

them . . . . 

15 U.S.C. § 13(a). 

1538 CASCADE HEALTH v. PEACEHEALTH
guide the interpretation of Oregon price discrimination law in

section 646.040. Yamaha Store of Bend, Or., Inc. v. Yamaha

Motor Corp., 798 P.2d 656, 659 n.6 (Or. 1990), modified on

reconsideration on other grounds, 806 P.2d 123 (Or. 1991);

Redmond Ready-Mix, 582 P.2d at 1346. Also, the Oregon

Supreme Court stated in Redmond Ready-Mix that it was

reaching its decision at a time when “[m]uch of the ‘federal

law’ on [primary-line price discrimination was] in a recognized state of confusion.” Redmond Ready-Mix, 582 P.2d at

1346. 

Brooke Group has now dispelled that confusion in at least

one area—a plaintiff in a federal primary-line price discrimination case must prove that its rival priced below cost. Thus

Brooke Group’s clarification of federal price discrimination

law calls into question whether the Oregon Supreme Court

will continue to interpret Oregon price discrimination law as

outlined in Redmond Ready-Mix. The Oregon Supreme Court

might now decide to follow Brooke Group by analogy in

interpreting the parallel state price discrimination law,7 or

conversely, it might decide to adhere to its prior decision

without change. If the former is the case, then the district

court’s instruction on state law was error, but if the latter is

the case, then the jury instruction and the jury verdict on Oregon price discrimination law should stand. Because we are

uncertain of how the Oregon Supreme Court will now view

this important question, we certify it to the Oregon Supreme

Court. 

7

In Brooke Group, a primary-line price discrimination case brought

under the Robinson-Patman Act, the Supreme Court held that, in a single

product predatory pricing case, a plaintiff must prove (1) below-cost pricing and (2) likelihood of recoupment regardless of “whether the claim

alleges predatory pricing under § 2 of the Sherman Act or primary-line

price discrimination under the Robinson-Patman Act.” Brooke Group Ltd.,

509 U.S. at 222. 

CASCADE HEALTH v. PEACEHEALTH 1539
Question Certified

We respectfully certify the following dispositive question

of law to the Oregon Supreme Court:8

Under the Oregon price discrimination statute, Or. Rev.

Stat. § 646.040, is a plaintiff required to show (1) below-cost

pricing and (2) likelihood of recoupment? In other words,

does Oregon law now follow the elements of a primary-line

price discrimination claim as outlined in Brooke Group? 

Conclusion

We respectfully request the Oregon Supreme Court to exercise its discretionary authority to accept and decide this question of law. We do not intend our framing of this question to

restrict the Oregon Supreme Court’s consideration of any

issues that it determines are relevant. We have previously

acknowledged both the Oregon Supreme Court’s ability to

“reformulate the relevant state law questions as it perceives

them to be in light of the contentions of the parties,” Lombardo v. Warner, 391 F.3d 1008, 1010 (9th Cir. 2004) (en

banc) (citations omitted), and our obligation to abide by that

court’s determination of the state law questions presented, id.

If the Oregon Supreme Court resolves this question, we will

resolve the issue in our case precisely in accord with its

answer. 

The Clerk of this Court is hereby ordered to transmit forthwith to the Oregon Supreme Court, under official seal of the

United States Court of Appeals for the Ninth Circuit, a copy

of this order, signed by the presiding judge, and all relevant

briefs and excerpts of record pursuant to Or. Rev. Stat.

§ 28.215 (2005) and Or. R. App. Proc. 12.20(1)(b). Pursuant

8Even though this course of action was not suggested by either party,

we may properly certify this question sua sponte. See Or. Rev. Stat.

§ 28.205 (2005). 

1540 CASCADE HEALTH v. PEACEHEALTH
to Oregon Rule of Appellate Procedure 12.20(5)(c) the Clerk

of this Court shall transmit to the Oregon Supreme Court all

or any portion of the district court record in this case as that

Court deems necessary or appropriate. 

Further proceedings in our court on the certified question

are stayed pending the Oregon Supreme Court’s decision

whether it will accept review, and if so, our receipt of the

answer to the certified question. The case is withdrawn from

submission, in pertinent part, until further order from this

Court. The panel will resume control and jurisdiction on the

certified question upon receiving an answer to the certified

question or upon the Oregon Supreme Court’s decision to

decline to answer the certified question. When the Oregon

Supreme Court decides whether or not to accept the certified

question, the parties shall file a joint report informing us of

the decision. If the Oregon Supreme Court accepts the certified question, the parties shall file a joint status report every

six months after the date of the acceptance, or more frequently if circumstances warrant. 

IT IS SO ORDERED.

_________________________________

RONALD M. GOULD

Circuit Judge, United States Court of Appeals 

for the Ninth Circuit

CASCADE HEALTH v. PEACEHEALTH 1541


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