Court Opinion

ID: 8411972
Source: CourtListenerOpinion
Date Created: 2022-11-02 19:16:47.561818+00
Date Added: 2024-06-11T16:47:08.373933
License: Public Domain

BEAM, Circuit Judge,
dissenting.
Saint Francis Medical Center, on behalf of itself and a class of urological catheter purchasers, appeals the district court’s grant of summary judgment to C.R. Bard in this antitrust class action. I would reverse and remand.
I. BACKGROUND
Bard is the leading manufacturer of Foley catheters and related products and markets its products to healthcare providers. With respect to this action, Bard manufactures three types of catheters: standard Foley catheters, infection-control *619Foley catheters,5 and intermittent catheters. Foley catheters are either silicone or latex devices with an inflatable balloon at one end to hold the catheter in place, allowing the catheter to drain a patient’s bladder over extended periods of time. Unlike a Foley catheter, an intermittent catheter is a single-use catheter. The parties agree that Foley catheters are not interchangeable with intermittent catheters.
Hospitals such as Saint Francis purchase these catheters in one of four ways: (1) without a contract, thereby paying the manufacturer’s list price; (2) by negotiating an individual contract, referred to as a “local agreement”; (3) by belonging to an Integrated Delivery Network (IDN), a collection of affiliated hospitals that conduct centralized purchasing; or (4) by joining a Group Purchasing Organization (GPO), an organization that negotiates supply agreements with multiple manufacturers on behalf of member hospitals. As concerns the purchase of the catheters at issue in this case, the record reveals that hospitals sometimes employ a combination of these methods in purchasing catheters. Thus, if a hospital can achieve a cheaper price for the product it desires by going “off-contract” or by negotiating an individual contract, it may do so despite also being a member of a GPO. It is undisputed, however, that hospitals purchase a large percentage of catheters through the use of a GPO contract. In fact, according to Saint Francis, approximately eighty-five percent of all Foley and intermittent catheters purchased by hospitals are purchased through GPOs.
In an effort to capitalize on GPO sales, Bard bids on numerous GPO contracts. Saint Francis contends that in this “bidding” process, Bard has effectively foreclosed the GPO market from its competitors by only bidding on sole-source or dual-source GPOs and including a variety of anticompetitive terms: (1) share-based requirements; (2) bundled discounts; and (3) tiered rebates. As a result of this conduct, Saint Francis alleges that it has been forced to pay an above-market price for catheters and related products in violation of the antitrust laws. Accordingly, Saint Francis brought this action for violation of Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act and the Missouri Antitrust Law.
Bard filed a motion for summary judgment which the district court granted and Saint Francis now appeals. Because I believe there are disputed questions of material fact, I would reverse and remand.
II. DISCUSSION
“We review de novo a grant of summary judgment, considering the facts in the light most favorable to the nonmoving party. Summary judgment is proper when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.” HDC Med., Inc. v. Minntech Corp., 474 F.3d 543, 546 (8th Cir.2007) (quotation omitted). The primary issue I have with the district court is that it weighed the evidence and resolved disputed questions of fact in favor of Bard, the moving party. Such a resolution of disputed questions of fact is inappropriate on summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
*620A. Relevant Product Market
Under the Sherman Antitrust Act, “it is unlawful to contract or form a conspiracy ‘in restraint of trade or commerce among the several States,’ 15 U.S.C. § 1, or to ‘monopolize or attempt to monopolize ... any part of the trade or commerce among the several States,’ 15 U.S.C. § 2.” Little Rock Cardiology Clinic PA v. Baptist Health, 591 F.3d 591, 596 (8th Cir.2009) (omission in original), cert. denied, — U.S. -, 130 S.Ct. 3506, 177 L.Ed.2d 1092 (2010). Saint Francis has not alleged a per se violation, therefore it must establish a relevant market. See id.; see also Double D Spotting Serv., Inc. v. Supervalu, Inc., 136 F.3d 554, 560 (8th Cir.1998) (“[T]o state a Sherman Act claim under either section 1 or section 2, the plaintiff must identify a valid relevant market.”). “A relevant market consists of both a product market and a geographic market.” Little Rock, 591 F.3d at 596. The parties agree that the geographic market is the United States. Thus, the question for our review is whether Saint Francis has presented sufficient evidence of a relevant product market. See HDC Med., 474 F.3d at 547 (“The relevant product market is a question of fact, which the plaintiff bears the burden of proving.”).
“The boundaries of the product market can be determined by the reasonable interchangeability or cross-elasticity of demand between the product itself and possible substitutes for it.” Id. Saint Francis contends that it presented substantial evidence of (1) a product market for all distributions of Foley catheters and all distributions of intermittent catheters; and/or (2) the separate and distinct submarket for Foley and intermittent catheter sales made through GPOs. The district court disagreed and held that (1) neither Foley nor intermittent catheters constitute a relevant product market because particular consumers prefer particular brands and makes of catheters; and (2) the GPO submarket was not a relevant product market as a matter of law. In my view, Saint Francis has presented sufficient evidence to create a genuine issue of fact as to whether either of these markets constitutes a relevant product market.
1. All Foley and All Intermittent Markets
The district court held that because particular consumers prefer particular brands and makes of Foley and intermittent catheters, there was no cross-elasticity of demand between the product and possible substitutes for it. And, the record does contain evidence tending to show that physicians have preferences for catheters depending on whether they are latex or silicone, the reputation of the manufacturer, the rate of infection control, whether the manufacturer has a full line of ancillary products, and whether the clinicians have experience with the catheters. However, even Bard itself acknowledges that “a Bard Foley catheter sold to a hospital under a GPO contract is ... interchangeable with an equivalent Tyco catheter.” Appellee’s Br. 32. And, there was testimony indicating that the catheters were commodity products, not physician preference items. Appellant’s App. 2309-10, 2455, 3682-85. Finally, the only evidence in the record which conclusively establishes a “lack of interchangeability” of products indicates that Foley catheters are not interchangeable with intermittent catheters. But, the record would support a factual finding that all Foley catheters are interchangeable with all other Foley catheters regardless of brand or presence of antimicrobial agents. Id. 1544 n.34, 3681-82, 3701. And, there was similar evidence on the record supporting a similar conclusion with respect to intermittent catheters. Id. *6212310. Thus, while physician brand preferences might influence a jury to find that a Bard Foley catheter is not interchangeable with a Tyco Foley catheter, “determining the relevant product market is a factual issue which is reserved to the jury, [and] we are not permitted to weigh the evidence.” Gen. Indus. Corp. v. Hartz Mountain Corp., 810 F.2d 795, 805 (8th Cir.1987).
On appeal, Bard does not attempt to defend the district court’s opinion. Instead, Bard asserts that Saint Francis failed to argue — and therefore waived— this definition of a product market. I disagree. First, the fact that the district court discussed this product market belies Bard’s assertion that Saint Francis never made the argument. Second, the record contains facts supporting and discussing this market. Appellant’s App. 4118 n.ll. Third, Saint Francis specifically raised the issue in its complaint. Fourth, Saint Francis at least mentioned this market in its summary judgment papers. And fifth, that Saint Francis chose to focus its argument on the submarket — discussed below — only indicates that it was trying to persuade the district court to adopt this more narrow market. Accordingly, Saint Francis did not waive this argument.
2. The GPO Submarket
Saint Francis also maintains that within the national market for the sale of all Foley and intermittent catheters is a distinct submarket: Foley and intermittent catheters sold through GPOs. “As described in Brown Shoe [Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)], such a submarket may be identified by industry or public recognition of its separate character, special uses or characteristics or production facilities, distinct customers or prices, price sensitivity, and specialized vendors.” Henry v. Chloride, Inc., 809 F.2d 1334, 1342 (8th Cir.1987).
The district court rejected the GPO sub-market because (1) “Plaintiffs have not established that all Foley catheters or all intermittent catheters are reasonably interchangeable products”; and (2) such a market “improperly manipulates the boundaries of the product market by including in the definition the tool by which Plaintiffs allege Bard is restraining trade — the GPOs.” The first of these two arguments fails for the reasons stated above — i.e., there is record evidence from which a reasonable jury could conclude that all Foley catheters are reasonably interchangeable and/or that all intermittent catheters are reasonably interchangeable. The district court’s second proffered reason is similarly inappropriate on summary judgment.
Here Saint Francis does not argue that there are special uses, characteristics, or production facilities for the Foley and intermittent catheters sold through GPOs. However, Saint Francis did present evidence tending to show that (1) both purchasing hospitals and medical manufacturers recognized GPO sales as separate and distinct from non-GPO sales; (2) the GPO prices were distinct from non-GPO prices; (3) a small but significant non-transitory increase in price in the GPO sales did not cause customers to switch to a different distribution channel; and (4) the GPO’s were, in effect, specialized vendors. The only way the district court could conclude, on summary judgment, that the GPO market was not a submarket was to improperly weigh the evidence against Saint Francis. That was error.
On appeal, Bard argues that (1) hospitals themselves consider catheters sold outside GPO contracts to be interchangeable with catheters sold under GPO contracts; and (2) GPO contracts are not part *622of the chain of distribution for catheters. While there may be evidence in the record to support both of these propositions, the record does not compel either of these pronouncements as a matter of law.
In Henry, the plaintiff, a battery wholesaler, attempted to define the relevant product market as battery sales through route salespersons as separate and apart from battery sales from wholesale distributors. We held that although “batteries sold by route salespersons are not different in character, creation, or use from those sold from a warehouse or store ... there was sufficient evidence for a jury to find a narrower market as well.” 809 F.2d at 1342-43. Similarly, in Columbia Broadcasting System, Inc. v. F.T.C., 414 F.2d 974, 978-79 (7th Cir.1969), the Seventh Circuit found sufficient evidence in the record to find that phonograph records sold through record clubs, though of the same character as those records sold in record stores and other outlets, constituted a separate submarket. Accordingly, the fact that the catheters at issue in this case are the same, whether sold under GPOs or not, is not conclusive evidence that the GPO is not a relevant submarket.
B. Sherman Act
Saint Francis avers that Bard violated both Section 1 and Section 2 of the Sherman Act. The district court held that even if there was a relevant product market of Foley and one of intermittent catheters, Saint Francis failed to show that Bard engaged in anticompetitive conduct. I believe the record presents a question of fact on this issue.
1. Monopolization Claim (Sherman Act § 2)
Saint Francis focuses the majority of its discussion on whether it has established a Section 2 violation. I begin there. “To establish a Section 2 violation, plaintiffs must show that 1) the defendant possessed monopoly power in the relevant market and 2) the defendant willfully acquired or maintained this monopoly power by anti-competitive conduct....” Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1060 (8th Cir.2000).
a. Market Power
“Market power generally is defined as the power of a firm to restrict output and thereby increase the selling price of its goods in the market.” Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1232 (8th Cir.1987). “Market power may be shown by a firm’s percentage of sales in the market, especially where there is a strong consumer preference for the firm’s product ... and where there are significant barriers either to the entry of new firms or to increased output by existing firms.” Id. And, “[a]n eighty percent market share is within the permissible range from which an inference of monopoly power can be drawn.” Morgenstern v. Wilson, 29 F.3d 1291, 1296 n. 3 (8th Cir.1994).
If the jury defines the relevant markets as the national market for all Foley catheter sales and for all intermittent catheter sales, then there is evidence that Bard possesses market power in the sale of Foley catheters. Bard’s own expert found that Bard commanded 82.7% of that market. However, there is insufficient evidence to show that Bard maintained market power in the intermittent catheter market. In fact, the record indicates that Bard only has a 34% share of that national market. See id., (“As a matter of law, absent other relevant factors, a thirty percent market share will not prove the existence of monopoly power.”).
If, however, the jury defines the relevant markets as the sale of Foley catheters through GPO sales and the sale of *623intermittent catheters through GPO sales, then there is evidence that Bard possesses market power in both markets. In particular, the record shows that Bard’s share of the GPO market for Foley catheters was 89%. See id. (noting that eighty percent can create an inference of market power.). And, although not as significant, Bard’s share of the GPO market for intermittent catheters was as high as 67.7%. See id. (citing Domed Stadium, Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 489 (5th Cir.1984), for the proposition that sixty percent may not suffice but it is not legally insufficient).
Bard argues that the evidence of market shares alone is not sufficient to withstand summary judgment. See, e.g., Reazin v. Blue Cross & Blue Shield of Kansas, Inc., 899 F.2d 951, 967 (10th Cir.1990) (“Market share is relevant to the determination of the existence of market or monopoly power, but market share alone is insufficient to establish market power.”) (internal quotation omitted). Accordingly, Bard encourages us to consider “other market realities” including “entry barriers” and competition for catheter business to determine whether Bard possesses monopoly power. However, the record is inconclusive as to whether barriers to entry exist and whether Bard had to lower prices to effectively compete for GPO and hospital business. Indeed, Saint Francis presented evidence tending to show that a lengthy and burdensome FDA review process exists as an entry barrier, that a “de mini-mus” number of new competitors entered the market, and that Bard lowered its prices to foreclose others from getting business. Accordingly, there is, in my view, a genuine issue of fact as to whether Bard possesses market power.
b. Anticompetitive Conduct
Saint Francis argues that Bard’s GPO contracts were anticompetitive because they (1) were exclusive or semi-exclusive dealing arrangements; (2) included market-share discounts; and (3) included bundled discounts and rebates. The district court rejected Saint Francis’s arguments and held that the conduct which Bard participated in was not anticompetitive as a matter of law. Again, I believe there are questions of fact on these issues.
“Because cutting prices in order to increase business often is the very essence of competition, ... it ‘is beyond the practical ability of a judicial tribunal to control [above cost discounting] without courting intolerable risks of chilling legitimate price cutting.’ ” Concord Boat, 207 F.3d at 1061 (alteration in original) (quoting Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 223, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993)). Thus, “[i]f a firm has discounted prices to a level that remains above the firm’s average variable cost, ‘the plaintiff must overcome a strong presumption of legality by showing other factors indicating that the price charged is anticompetitive.’ ” Id. (quoting Morgan v. Ponder, 892 F.2d 1355, 1358 (8th Cir.1989)). This court’s decision in Concord Boat is instructive on this issue.
In Concord Boat, we held that because the defendant’s discount programs (1) were not exclusive dealing contracts; (2) did not require the customers to purchase 100% from the defendants; and (3) did not bundle or tie multiple products together, the discount programs were not anticompetitive. Id. at 1062-63. Unlike the discounts in Concord Boat, Saint Francis has here presented evidence tending to show that Bard’s GPO discount pricing schemes bundled discounts by linking monopolistic products with another competitive product. As noted in Concord Boat, such bundled discounts may constitute anticompetitive conduct. Id. at 1062 (collecting cases). *624Additionally, Saint Francis has also presented evidence showing that Bard’s GPO contracts were at least semi-exclusive if not completely exclusive. Moreover, while the evidence shows that hospitals did not feel compelled to buy 100% of their requirements from Bard, Saint Francis also presented evidence showing that the GPO contracts forced hospitals to buy a large percentage of their needs from Bard. And, evidence also indicates that Bard’s competitors would have to offer a product at far below cost in order to compete with Bard’s tiered-pricing scheme. Finally, Saint Francis stated that Bard’s GPO discounts coupled with its sole-source and dual-source agreements effectively foreclosed competitors from the market. Accordingly, I believe there is at least a question of fact as to whether Bard’s bundled and tiered-discount programs were anticompetitive. The district court improperly resolved these factual disputes in favor of Bard.
Finally, Saint Francis’s expert concluded that under the attribution test articulated in Cascade Health Solutions v. Peace-Health, 515 F.3d 883 (9th Cir.2008)6, Bard’s bundled discounts were anticompetitive because the non-catheter products in the bundles were priced below cost. Under Cascade, an anticompetitive bundle is one that prevents a rival from earning a profit on the product bundled with the product that is allegedly monopolized. Id. at 906-07. Bard argues that the expert incorrectly applied the test. To be sure, we should reject an expert opinion “when indisputable record facts contradict or otherwise render the opinion unreasonable.” Concord Boat, 207 F.3d at 1057 (quotation omitted). And, here, the undisputed evidence showed that (1) hospitals did not believe they were prevented from buying off-contract; (2) 30-40% of all catheters are sold outside of GPO contracts; and (3) between 34 and 71% of catheters sold on GPO contracts are not sold at the highest price tier. But, there is also evidence supporting Saint Francis’s expert. Indeed, Bard’s own documents show that a hospital must comply with GPO requirements or lose the discounts. Such requirements include mandating that GPO members look first to the GPO contract for their needs or risk losing the bundled and tiered discounts. Accordingly, this evidentiary dispute presents a question of fact as to whether the contracts were anticompetitive.
2. Antitrust Injury
Where private plaintiffs bring an antitrust action, it is not sufficient for them to merely show that the defendants engaged in anticompetitive conduct. Instead “a private plaintiff must [also] demonstrate that he has suffered an ‘antitrust injury’ as a result of the alleged conduct of the defendants, and that he has standing to pursue a claim under the federal antitrust laws.” In re Canadian Import Antitrust Litig., 470 F.3d 785, 791 (8th Cir.2006). The district court concluded that Saint Francis had not presented any evidence establishing that they were injured by any of Bard’s alleged anticompetitive conduct. I disagree.
An antitrust injury is an “injury of the type that antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). Here Saint Francis presented evidence showing that but for Bard’s ex-*625elusionary conduct, catheter prices would have been approximately 40% lower than the average price paid by Bard’s customers. Additionally, Saint Francis presented evidence showing that certain penalties Bard charged hospitals defecting from their GPO purchasing obligations caused hospitals to continue to buy Bard catheters at a higher price. Such evidence of having to pay a higher price for a product is “assuredly one type of [antitrust] injury.” Blue Shield of Virginia v. McCready, 457 U.S. 465, 482, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982).
Notably, there is evidence in the record indicating that Saint Francis continues to buy Bard catheters, although Tyco’s are lower in price, because that is what its physicians want. However, whether Saint Francis actually purchases such catheters as a matter of preference or because of Bard’s anticompetitive conduct is, in this case, a question of fact.
C. Section 3 of the Clayton Act
Saint Francis also alleged that Bard violated Section 3 of the Clayton Act. Section 3 of the Clayton Act prohibits the offering of a “discount ... or rebate ... on the condition, agreement, or understanding that the ... purchaser ... shall not use or deal in the goods ... of a competitor.” 15 U.S.C. § 14. “Contracts imposing an obligation on a distributor to deal only in the goods of a single supplier will violate Section 3 when ‘performance of the contract will foreclose competition in a substantial share of the line of commerce affected.... That is to say, the opportunities for other traders to enter into or remain in that market must be significantly limited....’” Ryko Mfg. Co., 823 F.2d at 1233 (omissions in original) (quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327-28, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961)). Since Saint Francis has presented evidence showing that the discounts that Bard offered impaired the ability of its competitors to enter the GPO market, and that the discounts encouraged the GPO to only deal in Bard’s goods, Saint Francis has presented enough evidence to survive summary judgment on this count as well.
III. CONCLUSION
This case comes to us after the district court granted summary judgment. Since there are genuine issues of material fact regarding (1) the scope of the relevant product market; (2) the extent of Bard’s market power; and (3) the extent of Bard’s anticompetitive conduct, I would reverse and remand.

. Both standard and infection-control Foley catheters are used for the same purpose. The only difference between the two is that the infection-control Foley catheters are treated with an anti-microbial agent intended to reduce the occurrence of urinary tract infections.

. It is uncertain whether our circuit would adopt the test set forth in this case, but it presents a possible legal and factual rationale for how bundled discounts work to foreclose the market.