Court Opinion

ID: 9461519
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:16:13.777862+00
Date Added: 2024-06-11T17:37:05.981663
License: Public Domain

WINTER, Circuit Judge
(dissenting):
Although I concurred in the panel decision affirming the district court’s dismissal of the amended complaint for failure to allege a sufficient nexus with interstate commerce to sustain a cause of action under the Sherman Act, I am now persuaded that the holding was incorrect. In my view, this amended complaint may not be dismissed on the pleadings. Of course, I express no view as to whether the jurisdictional allegations can be proved, but plaintiff should be afforded the opportunity to establish them, if not at trial, at least by a prima facie showing to defeat any motion by defendants for summary judgment. I therefore dissent from the majority’s affirmance of the district court’s dismissal of the amended complaint under Rule 12, F.R.Civ.P.
I.
The amended complaint alleges that the action is brought to redress actions of the defendants which constitute “(1) a combination and conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and (2) an attempt to monopolize in violation of Section 2 of the Sherman Act. . . . ” Before the specific allegations of fact to support these jurisdictional assertions are considered, it is well to consider the scope of application of the Sherman Act. What combinations and conspiracies in restraint of trade and what attempts to monopolize does the Sherman Act prohibit?
There is no novelty in the answer. The settled law was recently restated in Gulf Oil Corporation v. Copp Paving Company, Inc., 419 U.S. 186, 95 S.Ct. 392, 42 L.Ed.2d 378 (1974). See also Greenville Publishing Co., Inc. v. Daily Reflector, Inc., 496 F.2d 391, 395-96 (4 Cir. 1974). Gulf Oil was a case which turned on the jurisdictional requirements of § 2(a) of the Robinson-Patman Act and §§ 3 and 7 of the Clayton Act. It held that intrastate sales of asphalt for use in the construction of interstate highways were not sales “in commerce” *687within the ambit of the two Acts. In arriving at this result, the Court reviewed the jurisdictional scope of the two Acts and compared them with the jurisdictional scope of the Sherman Act.1
The Court contrasted the “in commerce” concept of the Robinson-Patman Act and the Clayton Act with the jurisdictional scope of the Sherman Act, saying:
This “in commerce” language differs distinctly from that of § 1 of the Sherman Act, which includes within its scope all prohibited conduct “in restraint of trade or commerce among the several States, or with foreign nations. . . . ” The jurisdictional reach of § 1 thus is keyed directly to effects on interstate markets and the interstate flow of goods. Moreover, our cases have recognized that in enacting § 1 Congress “wanted to go to the utmost extent of its Constitutional power in restraining trust and monopoly agreements. . . . ” United States v. South-Eastern Underwriters Association, 322 U.S. 533, 558, 64 S.Ct. 1162, 1176, 88 L.Ed. 1440 (1944). Consistently with this purpose and with the plain thrust of the statutory language, the Court has held that, however local its immediate object, a “contract, combination ... or conspiracy” nonetheless may constitute a restraint within the meaning of § 1 if it substantially and adversely affects interstate commerce. E. g., Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 234, 68 S.Ct. 996, 1005, 92 L.Ed. 1328 (1948). “If it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze.” United States v. Women’s Sportswear Manufacturing Association, 336 U.S. 460, 464, 69 S.Ct. 714, 93 L.Ed. 805 (1949). (Emphasis in text added.) 419 U.S. at 194, 95 S.Ct. at 398.
With the standard of what the Sherman Act encompasses so clearly defined, I have no hesitancy in concluding that plaintiffs have alleged a sufficient adverse effect on interstate commerce to-confer jurisdiction on the district court to decide the case on its merits.2 Under Gulf Oil, the test is one of congressional power, and the question is whether Congress could reach the alleged conduct under the commerce power. This is the clear meaning of the statement that “. . . Congress ‘wanted to go to the utmost extent of its Constitutional power’ . . .” The majority holds in effect that the alleged activity is too tenuously related to interstate commerce in a practical sense to justify federal regulation for antitrust reasons. In reaching this conclusion, the majority opinion, as its addendum demonstrates, applies a test designed for determining the jurisdictional ambit of the Clayton and Robinson-Patman Acts. Gulf Oil, however, teaches that this test is inappropriate for actions brought under the Sherman Act. In any event, the majority’s conclusion is based upon determinations of: (1) the quantitative impact on interstate commerce of the alleged con*688duct, assessed in terms of precedent sustaining and rejecting complaints, and (2) the qualitative importance of the anti-competitive power alleged in the complaint. By both, I think that proper application of the Sherman Act can be demonstrated.
II.
As the majority opinion states, the conspiracy in which defendants allegedly engaged was to prevent Hospital Building Company (HBC) from expanding the capacity of its proprietary Mary Elizabeth Hospital in Raleigh, North Carolina, from 49 to 149 beds. HBC is a wholly-owned subsidiary of Charter Medical Corporation (Charter), which has its principal office in Macon, Georgia, and which, by contract, provides management services to HBC for a fee, including the negotiation of contracts for the purchase of hospital supplies. Suppression of the expansion, it was charged, was to enable defendants to reduce competition in local hospital services by HBC and to enable defendants to control the local hospital service market and thus to allocate it among themselves.
HBC averred that the alleged conspiracy had the following effects on interstate commerce:
(1) It purchases approximately 80% of its supplies and medicines from vendors in states other than North Carolina. In 1972, excluding food and supplies for its kitchen, it purchased $112,846 of supplies for its radiology, medical laboratory, and electrocardiology operations and its pharmacy. If the hospital were enlarged from 49 to 149 beds, such purchases in interstate commerce would not only continue but increase substantially.
(2) It regularly uses interstate communication, including the mails, to carry out its operations. It pays Charter a fee under the management contract with it. The fee is based on gross receipts, and for 1972 the fee was approximately $36,000. If the hospital were expanded, the amount of the fee would increase substantially.
(3) The fees for hospital services and charges for many of the patients at the existing hospital are paid by insurers and other providers outside of North Carolina. Although not alleged, it may be inferred that if the hospital were expanded fees paid by out-of-state providers would increase substantially.
(4) If the hospital were increased from 49 to 149 beds, the cost thereof would exceed $4,000,000. That cost would be financed by one or more loans with one or more lenders located outside of North Carolina. Payment of principal and interest would extend substantially into the future, and it would require regular remittances to a lender outside of North Carolina. Conclusorily, HBC alleged that the
combination and conspiracy which it charged has “a substantial and direct effect on interstate commerce.” I agree. The allegations establish the suppression of an interstate cash flow that would be both substantial and continuing. Cf. Lieberthal v. North Country Lanes, Inc., 332 F.2d 269 (2 Cir. 1964). I therefore am of the view that jurisdiction was alleged to exist in accord with the test reiterated in Gulf Oil.
III.
Doctors, Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48 (3 Cir. 1973), as the majority points out, is a stronger case than the instant one for concluding that the alleged conspiracy had a substantial effect on interstate commerce and that the Sherman Act applied. In Doctors, the named plaintiff purchased $233,430 in supplies from out-of-state suppliers in the test year. Although this figure does not seem to be of any greater magnitude than the projected flow alleged by the plaintiff here, the majority relies on the fact that Doctors’ Hospital was typical of the approximately one-hundred other hospitals in the area against all of which the conspiracy was directed, so that it could properly be inferred that interstate purchases of great magnitude were jeopardized. The dis*689tinction, however, is largely without difference. Gulf Oil reminds us that, in enacting § 1 of the Sherman Act, Congress was exercising to the fullest extent its constitutional power to restrain trusts and monopolies. Thus, it is not only the “big” resultant restraint on interstate commerce that it outlawed; the “little” resultant restraint on interstate commerce is outlawed too so long as a direct adverse effect on interstate commerce is demonstrated and that effect is not de minimis.
To be more specific, in Doctors the argument was advanced, as urged by the defendants here, that the object of the conspiracy was the intrastate activity of the rendition of hospital services and the effect on interstate commerce was indirect and insubstantial, so that the Sherman Act was inapplicable. In Doctors, the argument was rejected in terms which make that case a relevant and persuasive authority for reversing the district court in the instant case. Analyzing Burke v. Ford, 389 U.S. 320, 88 S.Ct. 443, 19 L.Ed.2d 554 (1967), and United States v. Employing Plasterers Ass’n, 347 U.S. 186, 74 S.Ct. 452, 456, 98 L.Ed. 618 (1954), the Third Circuit pointed out that in both the Supreme Court found that a sufficient effect on the flow of out-of-state supplies to local businesses had been alleged to confer Sherman Act jurisdiction. 490 F.2d at 52. More importantly, “there [was not] even a concern with the specific magnitude of the impact on interstate commerce caused by the alleged conspiracy. Instead, the Court in each case ends its inquiry when it has satisfied itself that the logical and therefore probable effect of the alleged act is to reduce the flow of goods in interstate commerce.” 490 F.2d at 53.
I recognize and accept that there are instances in which the effect on interstate commerce of anticompetitive conduct aimed at local activities may be too insubstantial to invoke Sherman Act jurisdiction. Lieberthal v. North Country Lanes, Inc., 332 F.2d 269 (2 Cir. 1964) (the one-time equipping of a new local bowling alley), and Page v. Work, 290 F.2d 323 (9 Cir. 1961) (alleging conspiracy to control legal advertising, thus causing a newspaper specializing in such advertising to sell its assets to another publisher who continued the paper and continued to buy the same quantity of newsprint from out-of-state sources), are good examples. But the instant case is more like Doctors than Lieberthal and Page. If HBC were permitted to expand, its purchases in interstate commerce and its other interstate activities would increase. It follows that an alleged conspiracy to prevent its expansion has an adverse effect on interstate commerce — not de minimis — and should be held to support jurisdiction under § 1 of the Sherman Act.
IV.
Similarly, I view the anticompetitive power alleged here as substantial. In essence the plaintiffs allege that a local conspiracy was able to forestall out-of-state entry into the local hospital market. If by means of conspiracy and harassment those who hold a local market can foreclose or limit the entry of competition, capital, and initiative from out-of-state, then it seems to me that the federal interest in interstate commerce is directly involved. To conclude, as the majority does, that the plaintiffs here do not allege the kind of anticompetitive power which “Congress sought to guard against” is merely to disbelieve the plaintiff’s allegations. In the Sherman Act, not only the “evil of monopoly power,” but the evil of improper attempts to achieve it are condemned. Where, as here, the out-of-state plaintiffs suggest that local official power and processes were used to delay and deter them, the plaintiffs implicate not only antitrust policy as such, but also the “national market” concerns which animate the commerce clause itself.
HBC’s allegations about the flow of financing, management services, and supplies to the hospital from out-of-state have been stated. Additionally, HBC *690alleges that the overwhelming majority of the fees paid to it come from the federal government and from out-of-state providers. Money thus flows from Blue Cross, private insurers, and the federal government to the hospital and thence to out-of-state suppliers, managers, and financiers. While this construction of the facts may not put HBC’s provision of hospital services in the “flow” of commerce as that term is used in the case law, it does make it graphically clear that if HBC is affected, a wide range of interstate connections is affected.
There is, furthermore, a clear and significant federal interest in at least one of these connections — the interstate flow of medicare and medicaid payments, and more generally with the costs of medical care in Wake County. Actual or attempted monopolization of the local market could have a dramatic effect, not only to decrease the flow of hospital payments, but to increase the cost of hospital care in the Raleigh area as well. If hospital care costs are increased, insurance costs will also increase, and federal and out-of-state providers will spread these increased costs beyond the local area in which they are incurred. And this is so even if the overall market for hospital care in the Raleigh area is neither increased nor diminished, but only concentrated in the hands of the hospital defendants.
Under all these circumstances, I think it myopic to maintain that the service itself is rendered locally. Local patient care may be the hub of hospital operation, but the spokes — financing, supplies, management, . and fee payments — all have out-of-state implications. The hub cannot be braked without affecting the spokes.
Judge BUTZNER and Judge FIELD authorize me to say that they, too, dissent and concur in this dissenting opinion.

. The Court noted that § 2(a) of the Robinson-Patman Act forbids “any person engaged in commerce, in the course of such commerce” to make price discriminations “where either or any of the purchases involved in such discrimination are in commerce” and where the effect of the discrimination is to suppress competition “in any line of commerce.” It also recited that § 3 of the Clayton Act renders unlawful tie-in sales or exclusive dealing arrangements by “any person engaged in commerce” where the effect “may be to substantially lessen commerce or create a monopoly in any line of commerce,” and that § 7, forbidding certain acquisitions, similarly applies to acquirers engaged “in commerce” and prohibits them from acquiring the stock or assets of another corporation engaged “in commerce” where the effect may be substantially to lessen competition “in any line of commerce in any section of the country.” It concluded that application of both Acts turned on the concept of “in commerce,” defined in § 1 of the Clayton Act as “trade or commerce among the several States and with foreign nations . . .”

. Of course, if the rendition of local hospital services was “in commerce,” the Sherman Act would clearly apply. But no court has so held, and I think that the majority’s conclusion that HBC’s activities are not “in commerce” is a correct one.