Court Opinion

ID: 9489318
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:11:50.849604+00
Date Added: 2024-06-11T17:53:27.397756
License: Public Domain

*787PREGERSON, Circuit Judge,
dissenting:
Because I believe that certain acts allegedly committed by Delta Dental, if proved, could constitute anticompetitive and predatory conduct within the meaning of the antitrust laws, I dissent.
The majority opinion holds that Delta’s conduct forcing SmileCare and other supplemental plans out of the dental insurance market cannot be interpreted as anticompeti-tive because Delta and SmileCare are not true competitors and because the business policy by which Delta justifies its allegedly anticompetitive conduct is legitimate. Based on the procedural posture of this appeal, I disagree.
On a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), facts alleged by the nonmoving party are presumed to be true. Everest & Jennings v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994). The district court contravened this rule when it made the “finding”— without any evidence — that “SmileCare’s supplemental insurance plan does not compete with Delta’s primary plans.” Smilecare, 858 F.Supp. at 1039. The majority opinion now erroneously concludes that Delta and SmileCare are not true competitors based solely on the district court’s “finding.”
Both the district court’s finding and the majority opinion’s conclusion that Delta Dental’s policy results in no impermissible anti-competitive effects rest on eases interpreting ERISA rather than the Sherman Act. See maj. op. at 784, 785; Smilecare, 858 F.Supp. at 1038-39 (citing Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1479 (9th Cir.1991) and Kennedy v. Connecticut Gen. Life Ins. Co., 924 F.2d 698 (7th Cir.1991)). The purpose of ERISA is to protect employee benefits. By contrast, the purpose of the Sherman Act is to protect competition. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224, 113 S.Ct. 2578, 2588, 125 L.Ed.2d 168 (1993). The issue in Davidowitz, whether a non-assignment clause is barred by ERISA, is an entirely different question from the issue in this case. The issue here is whether, under the Sherman Act, Delta Dental’s actions in refusing to allow participating dentists to accept a co-payment from a supplemental insurer rather than the patient are lawful.
To decide whether Delta and SmileCare are competitors, the district court must first conduct a factual inquiry into the definition of the relevant market. See Thurman Industries, Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir.1989). Defining the product market involves identification of the field of competition: the group or groups of sellers or producers who have actual or potential ability to deprive each other of significant levels of business. Because a factual inquiry is necessary to determine this issue, id., it was improper for the district court to decide it on a motion to dismiss.
The majority opinion then states that, assuming Delta and SmileCare were competitors, the key question is whether Delta’s refusal to accept SmileCare supplemental payments in lieu of patients’ co-payments has anticompetitive effects. The majority opinion holds that Delta’s conduct is not anticom-petitive because Delta has a legitimate business justification for its refusal to accept SmileCare’s supplemental payments. This misguided analysis, however, puts the cart before the horse.
A business justification is a defense to allegations of anticompetitive conduct. Phonetele, Inc. v. American Tel. and Tel., 664 F.2d 716, 739 (9th Cir.1981), modified, 1982 WL 11277 (1982), and cert. denied, 459 U.S. 1145, 103 S.Ct. 785, 74 L.Ed.2d 992 (1983). But to reach the business justification issue, a court must first decide whether the conduct is anticompetitive. If the court finds that the conduct is anticompetitive, the defendant must then affirmatively show that there was a valid business reason for the conduct. Id. Furthermore, whether a valid business reason justifies a monopolist’s conduct is a question of fact. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 604-05, 105 S.Ct. 2847, 2858-59, 86 L.Ed.2d 467 (1985). It is therefore improper for a court to decide on a motion to dismiss whether a business justification exists.
In deciding this issue, what the district court has really done is to ignore the rule that on a motion to dismiss facts alleged by the nonmoving party are presumed true. *788Everest, 23 F.3d at 228. Instead of taking as true all of SmileCare’s allegations about the anticompetitive effects of Delta’s conduct, the district court has turned the standard on its head by taking only Delta’s asserted defense as true. It is improper for the court to make such an evaluation of asserted defenses at this stage in the proceedings. In fact, a court should not consider defenses at all on a motion to dismiss. All the court may do is decide whether or not the well-pleaded facts, if proved, could constitute a claim that would entitle the plaintiff to relief. This is where the inquiry should end.
Because SmileCare has alleged facts which, if proved, could entitle it to relief under the antitrust laws, see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957), this case should have survived a motion to dismiss. I would therefore reverse.