Court Opinion

ID: 221662
Source: CourtListenerOpinion
Date Created: 2011-07-23 00:01:45+00
Date Added: 2024-06-11T17:28:51.378105
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             JUL 22 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

COLONIAL MEDICAL GROUP, INC., a                  No. 10-16490
California corporation,
                                                 D.C. No. 3:09-cv-02192-MMC
              Plaintiff - Appellant,

  v.                                             MEMORANDUM *

CATHOLIC HEALTH CARE WEST, a
California not-for-profit corporation, DBA
Mercy Hospital; GOLDEN EMPIRE
MANAGEMENT CARE, A MEDICAL
GROUP, INC., a California corporation;
MANAGED CARE SYSTEMS, LP,

              Defendants - Appellees.

                  Appeal from the United States District Court
                     for the Northern District of California
               Maxine M. Chesney, Senior District Judge, Presiding

                        Argued and Submitted June 17, 2011
                             San Francisco, California

Before: BYBEE and MURGUIA, Circuit Judges, and SINGLETON, Senior
District Judge.**

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable James K. Singleton, Senior District Judge for the U.S.
District Court for Alaska, Anchorage, sitting by designation.
      Plaintiff-Appellant Colonial Medical Group (“Colonial”) appeals the district

court’s dismissal of its antitrust claims under Federal Rule of Civil Procedure

12(b)(6). Colonial sued Defendants-Appellees Mercy Hospital and Golden Empire

Managed Care (“GEMCare”), alleging that their exclusive dealing arrangement

violated sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1–2. The

district court dismissed Colonial’s complaint on the grounds that it pled an

underinclusive market. We affirm.

      We review de novo a district court’s dismissal under Rule 12(b)(6). Coal.

for ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 501 (9th Cir. 2010).

“[A] plaintiff’s obligation to provide the grounds of his entitlement to relief

requires more than labels and conclusions, and a formulaic recitation of the

elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 555 (2007) (internal quotation marks and alterations omitted). Sections 1 and

2 of the Sherman Act require a plaintiff to plead a relevant product market affected

by the alleged anticompetitive conduct. See Allied Orthopedic Appliances Inc. v.

Tyco Health Care Grp. LP, 592 F.3d 991, 996, 998 (9th Cir. 2010). A properly

defined product market “includes the pool of goods or services that enjoy

reasonable interchangeability of use and cross-elasticity of demand.” Oltz v. St.

Peter’s Cmty. Hosp., 861 F.2d 1440, 1446 (9th Cir. 1988). An antitrust complaint

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can be dismissed if its market definition is “facially unsustainable.” See Newcal

Indus. v. Ikon Office Solution, 513 F.3d 1038, 1045 (9th Cir. 2008).

      Colonial’s complaint defines the relevant market as “healthcare providers in

the business of providing medical services to prison inmates at secure or guarded

hospital facilities within [Central California].” In practical terms, Colonial has

complained that most prisoners in the Central California region are treated at

Mercy Hospital because it has a secure wing, and that GEMCare entered into a

favorable contract with Mercy. This arrangement is not the basis for an antitrust

suit. As the district court found, Colonial defined the market far too narrowly. The

district court concluded that this market is underinclusive because it did not

account for “medical services provided to persons who, for example, are inmates of

local jails or other locked facilities . . . .” We agree. Colonial’s market definition

fails to “encompass the product at issue as well as all economic substitutes for the

product.” Newcal, 513 F.3d at 1045 (citing Brown Shoe v. United States, 370 U.S.

294, 325 (1962)) (emphasis added). Although the complaint alleges facts

distinguishing the market for inmate health care from the general market for health

care, it does not explain, for example, why medical services for state and federal

prisoners are not interchangeable with services for other incarcerated individuals.

Colonial’s limitation of its proposed market to state and federal prison inmates

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would, if accepted, distort the subsequent determination of GEMCare’s market

power. Accordingly, the district court properly dismissed its claims under the

Sherman Act.

      The district court also concluded that, in the alternative, Colonial’s

complaint failed to allege the other elements of its claims under either § 1 or § 2.

Because we conclude that its market definition is facially unsustainable, we do not

reach the questions of whether Colonial has met its burden of pleading with respect

to the other elements of its claims.

      Finally, the parties acknowledge that the requirements for a claim under

California’s Cartwright Act are identical to those for a claim under the Sherman

Act. Accordingly, because we affirm the district court’s dismissal of Colonial’s

Sherman Act claims, we also affirm its dismissal of Colonial’s Cartwright Act

claims.

      AFFIRMED.

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