Opinion ID: 3010999
Heading Depth: 1
Heading Rank: 3

Heading: Applicability of State Action Immunity

Text: The majority opinion also dismisses Armstrong's complaint on the theory that the Hospital defendants' actions are immunized under the Parker state action immunity doctrine. See Parker v. Brown, 317 U.S. 341 (1943). The state action immunity doctrine has two related aspects. First, as elaborated in Parker, state action immunity protects parties who engage in otherwise actionable antitrust conduct, pursuant to, and in reliance upon, state action. Second, state action immunity applies when the antitrust injury complained of arises directly from state action, as distinguished from the private action alleged in the complaint before us. Noerr, 356 U.S. at 136. In this case, neither aspect of state action immunity is applicable.3 _________________________________________________________________ 3. The staff physicians defendants eschewed reliance upon Parker state action immunity, stating in the catch line of their argument, Plaintiff's Attempt to Reframe this Appeal in Terms of State Action Immunity is 36 It is clear the actions complained of were not pursuant to, or in reliance upon, state action. Indeed, reliance upon the state action of denial of the CON to immunize unlawful anti-competitive conduct which occurred prior to and caused the denial of the CON presents severe conceptual difficulties. The only state action was denial of the CON. The Hospital parties engaged in no alleged unlawful anticompetitive behavior following the denial of the CON. Rather, the misrepresentations combined with the expressed intent to engage in a boycott all occurred before the Board's denial of the CON. With this state of affairs, it is difficult to understand how the misrepresentations coupled with the stated intent to boycott are somehow immunized by the CON, where the alleged wrongful activity itself was directed to and resulted in the denial of the CON. Furthermore, even assuming these conceptual difficulties are not insurmountable, there is no indication the Hospital parties relied upon the denial of the CON in carrying out the alleged unlawful anticompetitive behaviors, or were authorized by the state to do so. Indeed, the Parker court expressly noted that a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful. 317 U.S. at 351. Therefore, the authorization aspect of state action immunity is not applicable to the facts of this case. The second aspect of state action immunity doctrine immunizes antitrust injuries directly caused by state action. It is this second aspect upon which the majority opinion rests, arguing that liability for injuries caused by _________________________________________________________________ Misguided. . . . Individual Appellee's Br. at 20. Further, the Hospital dropped all reference to state action immunity on appeal. Appellee's counsel made a deliberate, reasoned choice not to rely on the theory, going so far as to state that the correctness of the District Court's decision . . . is not accurately analyzed under state action immunity. Individual Appellee's Br. at 22. Thus, this is not a circumstance where a litigant's counsel overlooked a theory. While this Court is not limited by positions advanced by the litigants, caution is warranted where capable counsel expressly disavow reliance on a defense. The majority nonetheless has relied upon a state action defense explicitly and impliedly discarded by the defendants. 37 such state action is precluded even where it is alleged that a private party urging the action did do by unlawful conduct. The defendants' actions are not protected by state action immunity for two reasons. First, at least some of the injuries of which Armstrong complains were not the direct result of the only state action alleged -- the denial of the CON. Second, a misrepresentation exception to state action immunity must apply under the circumstances presented by this case. The majority finds the plaintiff failed to allege that its injuries were caused by the hospital parties' alleged economic boycott and misrepresentations. Rather, the majority asserts the alleged injuries were either directly related to the denial of the CON, or the consequences thereof. Even accepting arguendo that state action immunity applies to this case, some of the injuries alleged by Armstrong are not the direct result of state action, but of the alleged misrepresentations and conspiracy to boycott. After reciting throughout its complaint the boycott and misrepresentations, the Surgical Center lists the following damages: (1) Denial of the CON required to establish and op erate [its ambulatory surgery center]. (2) Denial of [its] ability to establish and operate [the proposed facility]. (3) Delay in securing the required CON, if ultimat ely granted, for the establishment and operation of the [ambulatory surgery center]. (4) Increased costs, legal and otherwise, in pursuing Plaintiff's application for a CON. (5) Complete loss of the value of the CON, or a reduction in its value when and if ultimately granted. (6) Complete loss of the value of Plaintiff's [facility], or reduction of its value when and if permitted to be operated. (7) Complete loss of, or reduction in, the income and cash flow which Plaintiff would have received from operation of the [center]. 38 (8) Other related losses. Because of the threatened boycott, damage claims 5, 6 and 7 would have occurred even if Armstrong had received the coveted CON. The boycott of plaintiff's surgical center by physicians who perform 90% of surgical procedures in the relevant geographic market surely would serve to reduce the value of the plaintiff's facility, either by the loss of business or the increase in costs associated with attracting personnel to the facility. An agreement to exclude the plaintiff from the relevant market by an economic boycott and misrepresentations to the Board may result in antitrust injury. See, e.g., Brader v. Allegheny Gen. Hosp., 64 F.3d 869, 877 (3d Cir. 1995) (finding complaint adequately alleged antitrust injury where plaintiff alleged that defendants unreasonably restricted his ability to practice medicine in the relevant market and thus reduced competition). Therefore, I cannot agree with the majority's conclusion that damage claims 5, 6 and 7 stemmed from denial of the CON. The misrepresentation exception to Noerr-Pennington immunity should also apply to state action immunity in the adjudicatory or administrative context. Where misrepresentations and/or threats of illegal activity subvert the entire decision making process, the direct cause of the injury is not the state action, but rather the misrepresentations or threats which made a decision based on accurate information impossible. See Woods Exploration & Producing Co., Inc. v. Aluminum Co. of Am., 438 F.2d 1286, 1295 (5th Cir. 1971), cert. denied, 404 U.S. 1047 (1972); see also Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 176 (1965) (holding that procurement of patent by fraud on the United States Patent Office is actionable under the Sherman Act, notwithstanding intervening state action of granting the patent). In the legislative arena, it is difficult to say that any particular action, no matter how inappropriate, results in a particular legislation which causes injury. However, in the administrative and judicial arenas, where agencies and courts write reasoned opinions and make decisions based on information supplied by the parties, they must depend 39 on the parties to provide accurate information. 4 As stated above, the Supreme Court has noted different standards apply to conduct in administrative or adjudicatory processes. Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500 (1988); California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 513 (1972); see supra, Part II.A. The misrepresentations here, at the very least, largely influenced and very probably dictated the outcome of the administrative process. Under that circumstance, it is the misrepresentations, not the state action, which caused the alleged injuries and dictated the Board's decision to deny the CON.5 Because Parker and Noerr are complementary expressions of one principle of antitrust law, a misrepresentation exception to Parker immunity is necessary to effectuate the misrepresentation exception to Noerr-Pennington immunity. Without an exception for those misrepresentations which have a pervasive influence on administrative and adjudicative decisions, only those defendants who most effectively subvert the state's process -- the ones whose improper behavior results in favorable results for them from the state's administrative and adjudicatory processes -- would be immune under state action immunity. This would not only be a perverse result, _________________________________________________________________ 4. It is for this reason that reliance by the majority on Sandy River Nursing Care v. Aetna Casualty, 985 F.2d 1138, 1142 (1st Cir.), cert. denied, 510 U.S. 818 (1993), is misplaced. That case involved a decision by a legislature to change the law in the face of a boycott. It is impossible to say that the boycott dictated the outcome of the legislature's decision. 5. The majority's reliance on Massachusetts School of Law at Andover, Inc. v. American Bar Ass'n, 107 F.3d 1026 (3d Cir.), cert. denied, 118 S.Ct. 264 (1997), also is misplaced. There, an unaccredited law school alleged the American Bar Association engaged in anticompetitive conduct because graduates from unaccredited schools could not sit for most state bar examinations. This Court concluded the source of the injury was the action of each of those states because every state retains the final authority to set all the bar admission rules. Id. at 1035. That case is distinguishable from the instant case for two reasons. First, the state action in that case was non-adjudicative in nature. Second, and more importantly, the plaintiff made no allegation that the ABA knowingly made misrepresentations which were central to each state's actions. 40 but would entirely vitiate the misrepresentation exception to Noerr-Pennington immunity. This case is similar to Woods. In Woods, the defendants, partial owners of a natural gas field, intentionally gave false information about their production forecasts to the Texas Railroad Commission. 438 F.2d. at 1295. The Commission used that information to determine allowable production. Id. The court rejected the facile conclusion that action by any public official automatically confers exemption. Id. at 1294 (citations omitted). The court held that state action immunity was not applicable because the misrepresentations dictated the outcome: defendants' conduct here can in no way be said to have become merged with the action of the state since the Commission neither was the real decision maker nor would have intended its order to be based on false facts. Id. at 1295. Thus, the injury was not directly caused by state action, but by the misrepresentations. Similarly in the instant case, the Board relied on the Hospital parties' statements of subjective intent in making its decision. The majority believes that Woods is distinguishable from the present case because the Texas Railroad Commission was wholly dependent on the antitrust defendants for the factual information on which it predicated its allocation of production from a given field. [Majority opinion at 18 n.8]. The court in Woods stated that the Railroad Commission had no opportunity for meaningful supervision or verification of the defendants' statements and therefore, the Commission must rely on the truthfulness of the gas producers. Id. at 1295. I do not find Woods to be so different from this case. Here, the Department and Board had no way of ascertaining whether the Hospital truly intended to complete its ASC. The Department and the Board were reasonable in relying on the defendants' statements, which clearly implied that the Hospital ASC would be completed and utilized. Further, the court in Woods did not require that the government entity be wholly dependent on the information provided by a defendant in order to deny state action immunity. 41