Appellate Court In Kochert Focuses On Plaintiff's Failure To Demonstrate Standing Needed To Prevail On A Summary Judgment Motion In An Antitrust Action

Friday, December 1, 2006 - 00:00

In Kochert v. Greater Lafayette Health Services, Inc. et al., 463 F.3d 710 (7th Cir. 2006), the United States Court of Appeals for the Seventh Circuit found that an anesthesiologist, who left anesthesia practice to set up her own pain management practice when her subcontract with the anesthesia group that held an exclusive services contract with two local hospitals did not renew her subcontract, lacked standing to pursue an antitrust action against the hospital and the anesthesia group with the exclusive service contract.

The Court of Appeals affirmed summary judgment for the defendants against Dr. Carolyn Kochert on all of her claims under Sections 1 and 2 of the Sherman Act. This case emphasizes the importance of careful analysis of fundamental principals of antitrust standing. The Court of Appeals rejected all of Kochert's claims because, in the end, she could not demonstrate that but for the violation she alleged, she would not have suffered an antitrust injury.

Factual Background Of The Case

In 1998 the two hospitals in Lafayette, Indiana merged. Prior to the merger, each hospital had an exclusive contract for anesthesia services with a different anesthesia provider group. Dr. Kochert's subcontract with Anesthesiology Associates, P.C. to provide anesthesia services at Home Hospital was not renewed in 1998, although she continued to provide anesthesia services at St. Elizabeth's Medical Center as part of a competing anesthesia group.

In 1998, Dr. Kochert began preparations for the pain management practice she eventually opened in 2000. In 2001, the administration for the two merged hospitals awarded the exclusive anesthesia contact for both hospitals to a single provider, Anesthe- siology Associates.

Trial Court Grant Of Summary Judgment

The district court granted summary judgment for all defendants on all counts and claims, and specifically found that Kochert had failed to show that granting an exclusive contract to one group for both hospitals produced any anticompetitive affects in the relevant geographic market.

The court found that the 2001 exclusive contract granted to Anesthesiology Associates for both hospitals was not a "group boycott" of Kochert, and that there was no concerted action between the hospital and Anesthesiology Associates.

The court held that no reasonable trier of fact could conclude there had been actual harm to competition or that the defendants had sufficient market power to restrain trade. Kochert's essential facility and state law antitrust claims were also denied.

Focus Of Appellate Court Analysis

The Court of Appeals affirmed the grant of summary judgment in all respects, but focused its decision on Kochert's failure to demonstrate her antitrust standing and antitrust injury. Kochert alleged that the anticompetitive acts that formed the basis of her claim began in 1994 when the first exclusive services contract for anesthesia services was awarded by Home Hospital to Anesthesiology Associates. In 1998, her subcontract with Anesthesiology Associates was not renewed and she ceased to provide anesthesia services at Home Hospital, although she continued to provide anesthesia services at a competing hospital less than one mile away. Even after the two hospitals merged in 1998, two different groups provided anesthesia services at the two hospitals. By 2001, when a single exclusive service contract for both hospitals was awarded to Anesthesiology Associates, Kochert was no longer practicing anesthesia, but had become board certified in pain management and had opened her own pain management practice.

Recognizing that the switch to pain management could create standing issues for her antitrust claims, Kochert argued that her antitrust injury stemmed from a series of acts between 1994-2001 and that the courts must look to the series of act as a "continuum" or whole.

The court rejected Kochert's "chain reaction" theory, and declined to look backward from the 2001 exclusive services contract in search of earlier acts that allowed anticompetitive activity to occur. The nonrenewal of her subcontract and the hospital merger in 1998 were not part of an anticompetitive scheme, but "simply staffing decisions made solely by parties without market control." 463 F.3d at 717.

Contrast With Antitrust Conspiracy Cases

The Court of Appeals contrasted cases involving antitrust conspiracies with this case and stated: "Moreover, none of the plaintiffs in the cases Kochert cites attempted to introduce evidence activity postdating their participation in the market as proof of antitrust injury. Kochert has not introduced evidence supporting her conclusion that anything other than the . . . 2001 [contract for both hospitals with Anesthesiology Associates] should be considered as the starting point for our antitrust injury analysis." Id. at 718.

In the final analysis, the court found that the award of an exclusive contract for both hospitals to a single anesthesia provider was not the cause in fact for Kochert's antitrust injury because she was practicing pain management, and not anesthesia, by the time the contract was awarded. Kochert was unable to demonstrate that her injuries "flowed from that which makes the defendants' acts unlawful," thus failing to establish the antitrust injury prong for antitrust standing under Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).

Kochert Found Not To Be An Efficient Enforcer

The court also found Kochert lacked antitrust standing on the alternative grounds that she was not an efficient enforcer of the antitrust laws, particularly in a case such as this, where consumers and insurers are both clearly identifiable group of persons whose self interest would motivate them to seek redress for any perceived antitrust injury.

The court reiterated the Supreme Court's reasoning in Associated General Contractors of Cal., Inc. v. California State Council of Carpenters, et al., 459 U.S. 519, 542 (1983), and concluded that if the hospital and Anesthesiology Associates are "truly manipulating the anesthesia market in order to raise prices and drive down the quality of care, these effects will not be missed by patient-consumers or insurers." 463 F.3d at 719.

The court went on to find that the record was "bereft of any credible evidence of the type of anticompetitive effects [on price, quantity or quality of anesthesia services] alleged by Kochert." Id.

The court specifically noted that Kochert had offered no evidence that a reasonable jury could find credible, and no evidence by which a jury could compare the price, quantity or quality of anesthesia services before and after the alleged anticompetitive acts.

Daubert Standard Not Applicable

The Court of Appeals decision mentions only briefly Kochert's argument that when the district court permitted her economics expert to testify following denial of a Daubert challenge, the district court was automatically precluded from entering summary judgment for the defendants. See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).

Kochert had argued that admission of any testimony by her economics expert was sufficient to raise a disputed point of fact so as to preclude summary judgment. There was extensive briefing and oral argument before the Court of Appeals on the difference between the standard for admissibility of expert testimony under Daubert and the standard for summary judgment. The court rejected Kochert's arguments, but declined to elaborate because of its finding that Kochert lacked antitrust standing.

Judy L. Woods is a Partner at Bose McKinney & Evans LLP, where she serves on the firm's Executive Management Committee and is the firm's Ethics Officer. She is chair of the Antitrust Practice Group and a member of the Litigation and Appellate Practice Groups at Bose McKinney Evans.

Ms. Woods graduated cum laude from the Indiana University School of Law at Indianapolis in 1987, and was an Associate Editor of the Indiana Law Review and received several academic awards from the Law School. Ms. Woods holds a B. A., magna cum laude, from Macalester College and an M.A. from Bryn Mawr College.

Ms. Woods is a member of the panel of neutrals for the American Arbitration Association's Large and Complex Case and Commercial Case Programs and the panel of neutrals for alternative dispute resolution program of the National Research Exchange (securities industry).

Ms. Woods has litigated many cases at the trial and appellate levels, including the United States and Indiana Supreme Courts, involving questions of business or commercial law, antitrust, corporate governance, RICO and related subjects.

Ms. Woods is the author of several law review articles and other publications on business law topics, civil procedure, legal ethics and related topics. Ms. Woods is the author of volumes 7, 8 and 8A of Ind. Practice (3d ed. 2003 ).

Ms. Woods is a member of the American, Seventh Circuit, Indiana State and Indianapolis Bar Associations.

Please email the author at jwoods@boselaw.com with questions about this article.