Document: 500 U.S. 322 111 S.Ct. 1842 114 L.Ed.2d 366 SUMMIT HEALTH, LTD., et al., Petitionersv.Simon J. PINHAS. No. 89-1679. Argued Nov. 26, 1990. Decided May 28, 1991. Syllabus Respondent Pinhas, an ophthalmologist on the staff of petitioner Midway Hospital Medical Center, filed a suit in District Court, asserting violation, inter alia, § 1 Sherman Act by and other petitioners, including several doctors. The amended complaint alleged, among things, that petitioners conspired to exclude Pinhas from Los Angeles ophthalmological services market when he refused follow unnecessarily costly surgical procedure used at Midway; initiated peer-review proceedings against him which did not conform congressional requirements resulted termination his privileges; time suit, were preparing distribute adverse report about based proceedings; provision affects interstate commerce because both physicians hospitals serve nonresident patients receive reimbursement Medicare; reports are routinely distributed across state lines affect doctors' employment opportunities throughout Nation. Court dismissed complaint, but Appeals reversed, rejecting petitioners' argument Act's jurisdictional met there was no allegation would be affected Pinhas' removal Midway's staff. Rather, court found obviously hospital's they its entire staff, need make particularized showing effect caused alleged conspiracy. Held: allegations satisfy requirements. To successful, allege actual commerce. Because essence any violation is illegal agreement itself, proper analysis focuses upon potential harm ensue if conspiracy consequences. And as matter practical economics will reduction market. Thus, erroneously contend boycott single surgeon, unlike destroy hospital department or hospital, has remains adequate supply others perform for patients. This case involves restraint practice accomplished misuse congressionally regulated process, been characterized gateway controlling access services. When competitive significance respondent's exclusion measured, evaluation practice, general restraint's impact participants market, covered Act. Pp. 328-333. 894 F.2d 1024 (CA 9 1989), affirmed. STEVENS, J., delivered opinion REHNQUIST, C.J., WHITE, MARSHALL, BLACKMUN, JJ., joined. SCALIA, dissenting opinion, O'CONNOR, KENNEDY, SOUTER, Mark Waxman, Angeles, Cal., petitioners. Lawrence Silver, respondent. G. Wallace, Washington, D.C., amicus curiae, support respondent, special leave Court. Justice STEVENS question presented whether requirement antitrust jurisdiction satisfied duly licensed practicing physician procedure. 2 In 1987, respondent Dr. Simon alleging Summit Health, Ltd. (Summit), Center (Midway), medical others, had entered into drive out business "so ophthalmologists eye [including four petitioners] have greater share care ophthalmic surgery Angeles." App. 39. Among claim violated Act.1 granted defendants' (now petitioners') motion dismiss First Amended Complaint (complaint) without amend, 315, United States Ninth Circuit reinstated claim. (1989).2 We certiorari, 496 ----, 110 3212, 660 (1990), consider contention fails Act, interpreted McLain v. Real Estate Bd. New Orleans, Inc., 444 232, 100 ,S.Ct. 502, 62 441 (1980), it does describe factual nexus between 3 * this comes before us granting pleadings, we must assume truth material facts complaint. Respondent, diplomat American Board Ophthalmology, earned national international reputation specialist corneal problems. 7. Since October 1981, member skills, performed more procedures, cornea transplants cataract removals, than surgeon hospital. Ibid.3 4 Prior 1986, most surgeries primary with assistance second surgeon. Id., 8. significantly increased cost surgery. February year, administrators Medicare program announced longer reimburse assistants, southern California abolished assistant requirement. certain ophthalmologists, asked abandon requirement, do so. Ibid. explained available, $60,000 per year payments competing surgeons need. 9. Although expressed desire maintain preponderance Midway, nevertheless advised eliminated. 5 Petitioners responded request forgo two ways. First, corporate parent offered "sham" contract provided $36,000 (later oral offer $60,000) perform. Second, sign return contract, summarily suspended, subsequently terminated, privileges.4 10. conducted unfair manner biased decisionmakers, ultimately order upholding one seven charges imposing severe restrictions practice.5 action commenced, report6 "preclude continued competition place, only defendant [but also] . California, States." 40. defendants allegedly planned disseminate "to all member, may apply so secure similar actions those hospitals, thus effectuating Pinhas." 6 alleges owns operates 19 49 health facilities six States, Saudia Arabia. 3. Summit, each named individual defendants, well engaged through payments. Reports concerning 7 Appeals, defended Court's dismissal ground rejected " 'as economics' "peer review process general" F.2d, 1032 (citation omitted). added: 8 "Pinhas not, appellees apparently believe, keep working. [McLain U.S., 232] 242-243 [100 509, (1980) ]. He prove commerce, fact can hardly disputed. Appellees' failed absence Pinhas's drastically therefore misses mark rejected." II Congress enacted 1890.7 During past century, dimensions complexity our economy grown, federal power over concomitant coverage experienced expansion.8 history recounted before,9 reiterate today.10 10 begin noting propositions undisputed case. Petitioner unquestionably Moreover, although activity local also engages A prevent expanding even though 'indirect' 'fortuitous.' Bldg. Co. Rex Trustees, 425 738, 744, 96 1848, 1852, 48 338 (1976). No specific purpose restrain required. 745, S.Ct., 1852. As "matter economics," ibid., such "purchases out-of-state medicines supplies revenues insurance companies," id., establish necessary nexus. 11 involve full range activities It seems clear, however, these regularly outof-state generate sources; their importance part operation evident eliminate like contend, obvious deny existence current future ever require. argue insufficient surgeon's 12 There flaws argument. itself—rather overt acts furtherance it, see Kissel, 218 601, 31 124, 54 L.Ed. 1168 (1910)—proper focuses, consequences, rather successful. (1980): 13 "If establishing required unlawful conduct itself defeated demonstration intended anticompetitive effect. rule cases. See Tobacco 328 781, 811 [66 1125, 1139, 90 1575] (1946); Socony-Vacuum Oil Co., 310 150, 225, n. 59 [60 811, 845, 59, 84 1129] (1940). still circumstances civil under liability established proof either Gypsum 438 422, 436, [98 2864, 2873, 13, 57 854] (1978); Container Corp., 393 333, 337 [89 510, 512, 21 526] (1969); National Assn. Boards, 339 485, 489 [70 711, 714, 94 1007] (1950); supra, [310 U.S.,] 224-225, 59]." [444 243 509]. 14 allege, prove, jurisdiction.11 15 McLain, 246, 511 (quoting Building 1852). cases involving horizontal agreements fix prices allocate territories within State, conclusion "almost surely" market-wide Burke Ford, 389 320, 322, 88 443, 444, 554 (1967) (per curiam ), "necessarily affect[ed]" volume residential sales demand financing title concerns. 511. latter, explained: 16 "To element sufficient demonstrate substantial generated respondents' brokerage activity. commission rates, aspects unlawful." 242-243, 509. 17 plaintiffs consumers conspirators' real estate services, plaintiff whose identifies himself victim boycott, same applies. For occurred, necessarily significant fate "just merchant small destruction makes little difference economy." Klor's, Inc. Broadway-Hale Stores, 359 207, 213, 79 705, 710, 741 (1959) (footnote process,12 characterizes controls closed insisted adhering just own rather, excluded. 18 doubt regulate Angeles. members committee abuse thereby jurisdiction. judgment 20 ordered. whom SOUTER join, dissenting. 22 treats competitors. That alone, concludes, restrains trade meaning my judgment, fairly viewed, involved somewhat that; falls far short what I respectfully dissent. 23 "no Angeles," concludes "respondent's jurisdiction." Ante, 1849. agree that. Unfortunately, could reach here wanted to, done via enactment prohibit conspiracies using instrumentalities regulate. Nor constitutional "nexus" regulated. prohibits "in U.S.C. 1. language commands judicial inquiry nature particular restraint. "The prohibitions turning requiring determination, differs defined persons require regulation." Gulf Corp. Copp Paving 419 186, 197, 12, 95 392, 399, 42 378 (1974). 24 Until 1980, (with respect restraints targeted very flow commerce) clear: issue, commercial 741, 1850, (1976); 321-322, ); Mandeville Island Farms, Crystal Sugar 334 219, 237, 68 996, 1006, 92 1328 (1948). Note, Interstate Commerce Test Jurisdiction Cases Its Substantive Applications, Ga.L.Rev. 716-717 (1981). shall discuss due course, criterion called reversal present Oregon Society, 343 326, 72 690, 978 (1952). 25 seemed approach. appeared shift focus away effects asking instead "[defendants'] infected price-fixing insubstantial involved." (emphasis added). result prior test, since subject massive realtors Greater Orleans area, price fixing, suppression information, practices. resort expansive "infected activity" test prompted belief focusing stage. 243, error, approach simply assumed, of, success 26 dictum misconception, activities" introduced law. received enthusiasm. Most courts finessed said nothing changed, i.e., ultimate See, e.g., Cordova & Simonpietri Ins. Agency, Chase Manhattan Bank N.A., 649 36, 45 (CA1 1981); Furlong Long College Hospital, 710 922, 925-926 (CA2 1983); Sarin Samaritan Health 813 755, 758-759 (CA6 1987); Seglin Esau, 769 1274, 1280 (CA7 1985); Hayden Bracy, 744 1338, 1343, (CA8 1984); Crane Intermountain Care, 637 715, 724 (CA10 1980) (en banc also, Thompson Wise General 707 F.Supp. 849, 854-856 (WD Va.1989), aff'd, 896 547 (CA4 1990). Others, took face value—and course immediately fell disagreement application new test. With issue here, example, how decide "activities defendants" "infected"? Are Weiss York 745 786, 824-825, 66 (CA3 1984)? Only department, Mitchell Frank R. Howard Memorial 853 762, 764, (CA9 1988)? who use El Shahawy Harrison, 778 636, 641 (CA11 1985)? Or, case, peer itself? 27 Today cleared up confusion created refocused along marked previous (and adhered circuits), reversed below. Instead, compounds interpretations adding yet third candidate field, commentator suggested, let alone endorsed. determine looks neither restraint, nor activity, seems, understand line excluded excluding effectively (because accord privilges after him), does.* tells substantiality here. 28 Determining "market" product service, scope products compete, many purposes analysis. But today's identify relevant sense. declares pertinent practice. If national, declared "market," quite unlikely competition. cannot why peculiar sense bearing hence attempt provide explanation. 29 some attempting monopolize conspiring (or most) there, cf. (1980). mention Section merely sort group boycott. boycotts se violations (not deprive least preferred supplier, Bork, Antitrust Paradox 331-332 (1978)), area prevail, today apply, answered determining whether, economic substantially restricting or, Inc (1959), interrupts never grips issue. scheme, (if applies) "the applies" competitor applied fixing ante, 331-332. me situations remotely comparable. scheme felt fixed; "black-balling" supplier theoretically excluded, but, most, subportion was, be, doing business. If, conspirators decided effectuate killed, absurd think world affected. undoubtedly true, area; rudimentary gauged according "competition, competitors," Brown Shoe 370 294, 82 1502, 1521, 510 (1962) original). Associated Contractors State Council Carpenters, 459 519, 539, 40, 103 897, 909, 74 723 (1983); Fishman Wirtz, 807 520, 564-568 1986) (Easterbrook, part). suggestion ignores "practical economics" matter. 30 seem correct treat physician. Such rarely exist vacuum; usually means enforcing compliance larger anti-competitive schemes. H. Hovenkamp, Economics Federal Law 275-276 (1985); Posner, 207 Cf. Radovich Football League, 352 445, 448-449, 77 390, 392-393, 456 (1957) (describing black listing pursuant professional football). Charitably read, namely, Hospital. Instead agreeing supercompetitive price, have, contrary prevailing "padded" varieties useless present. so-called "sham contract" compensate hyper-productive participation output. failed, eliminated terminating privileges process. totality conspiracy, enforce it—just as, Monsanto Spray-Rite Service 465 752, 104 1464, 775 (1984), elimination price-cutting distributor Monsanto's (via boycott) distributors. Monsanto, "termination set prices," 757-758, 1467 added), jurisdiction, counts Even viewed broader fashion, naked subtle is, Pursuant standard analysis, define extent "eye city where located"), implies FTC Superior Trial Lawyers Assn., 493 411, 435, 18, 768, 107 851 (1990) (citing 269 (1978)). irrational different led (incidentally) city. 32 basis assuming conspiracy's power—and consequent competition, opposed Pinhas—extended perverted city; "gateway" being way few ways) gain entry. contrary, acknowledged every asserts that, contract," "nearly all" featherbedding object These uncontested reveal truly preclude inference have) Jefferson Parish Dist. Hyde, 466 2, 31, 1551, 1568, 80 (1984). Northern Pacific 356 1, 6-7, 78 514, 518-519, 545 (1958). Any none ) inconsistent simple economics. Matsushita Elec. Industrial Zenith Radio 475 574, 593-595, 106 1348, 1359-1361, 89 538 (1986). III 33 view, should applying workable confused things. On basis, reverse Appeals' stated 34 suggest trivial 725. literally physicians, "engaged commerce." Contrary (undocumented) suggestion, 327 329-330, call anything else)—let number overcharging them create "substantial" States. companies Government pays overcharges, Goldfarb Virginia Bar, 421 773, 783, 2004, 2011, 44 572 (1975); indeed, appears stopped reimbursing featherbedded operations. implements equipment purchased state, appreciable purchases, 741,744. Quite simply, entirely devoid show connection challenged "commerce "it rely identification presume interrelationship unspecified aspect commerce" 242, hand. 35 point fact, compelled decision There, society, eight county providing pre-paid by, allocating served doctor-sponsored plans. direct appeal, argued private associations sufficed requisite argument, holding (the allocation territories), proven, observed, plans "wholly intrastate" 338, 698. made Those "few, sporadic, incidental." 339, straightforward rationale compels 36 37 alleges, ordinarily doctor elsewhere, tort affecting Angeles—or perhaps nationwide. 1343-1345 (various torts, addition arisen negative review). "does purport afford remedies torts committed commerce," Hunt Crumboch, 325 821, 826, 65 1545, 1548, 1954 (1945), unless "among legitimate grievance, redressed 38 Disputes denial common, circuits claims grounds. 854-856, 1990); F. 2d 1283-1284 1342-1343 1984). At Circuits Agency 725 ). mistake overturn view. attractive forum, treble damages Clayton remedy. available routine needlessly destroying sensible statutory federal-state responsibility contributing trivialization courts. 39 Stat. 209, amended, provides part: "Every combination form trust otherwise, foreign nations, illegal." five claims, "Fourth Claim Relief," claim, now. Quality Assurance (BMQA). BMQA, stipulation. 1027, 2. "One reasons rapidity he, distinguished competitors, surgeries. speed completed benefits patient exposure cut tissue reduced. Some competitors require, average, times length complete procedures notified, letter dated April "Medical Staff [his] records, consideration questions raised regarding: indications surgery; appropriateness light patient's condition; adequacy documentation records; ongoing pattern identified problems." 93. After Governing affirmed committee, imposed stringent conditions imposed, petition writ mandate, Cal.Civ.Proc.Code Ann. 1094.5 (West Supp.1991). 1024, 1027 1989). 17, 1989, denied further relief. Pet. Cert. A30-A35. already report, Business Professions Code 805 Report, Cedars-Sinai then there. Brief A-3. Cedars-Sinai, abolish July 1890, ch. 647, 209. floor debates reveal, Senator Sherman's words, intent "g[o] Constitution permits go. ." Cong.Rec. 1167 (1889). views enacting toward 2456 (1890); South-Eastern Underwriters Association, 533, 555-560, 64 1162, 1174-1178, 1440 (1944); Apex Hosiery Leader, 469, 493, 15, 60 982, 992, 1311 decisions long "permitted expand notions power. [186,] 201-202 [95 401-402, (1974) ]." 743, 229-235, 1002-1006, firmly settled passed "left [over commerce] unoccupied." Frankfort Distilleries, 324 293, 298, 661, 664, 951 (1945). "meant deal comprehensively evils resulting contracts, combinations trade, end exercise possessed." Atlantic Cleaners Dyers, 286 427, 52 607, 609, 76 1204 (1932). Staszcuk, 517 53, 60, 1975) banc) ("The protect free exercised punish threatens impair results"), cert. denied, 423 837, 65, 46 56 (1975). Care Improvement 3784, 11101 seq. statute immunity antitrust, other, proceeds accordance 11112. forth 11112, notice, representation attorney, transcript proceedings, right cross-examine witnesses. According House sponsor bill, "[t]he provisions [were] restricted illegitimate taken guise furthering quality care. Actions really protected bill." 132 H9957 (Oct. 14, (remarks Rep. Waxman). so, might note, improper dispense

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