Colonial Medical Group Inc. v. Catholic Health Care West et al, No. 3:2009cv02192 - Document 55 (N.D. Cal. 2010)
Court Description: ORDER GRANTING IN PART AND DEFERRING IN PART RULING ON DEFENDANTS' MOTIONS TO DISMISS; DISMISSING FIRST AND SECOND COUNTS WITH LEAVE TO AMEND; CONTINUING CASE MANAGEMENT CONFERENCE. Counts One and Two are dismissed, with leave to amend. To the e xtent the motions seek dismissal of Counts Three, Four, and Five, ruling is deferred. If Colonial elects to file a Second Amended Complaint, Colonial shall file its Second Amended Complaint no later than June 18, 2010. The Case Management Conference is continued from June 25, 2010 to September 3, 2010; a Joint Case Management Statement shall be filed no later than August 27, 2010. (mmclc1, COURT STAFF) (Filed on 5/25/2010)
Download PDF
<![CDATA[
Colonial Medical Group Inc. v. Catholic Health Care West et al Doc. 55 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 For the Northern District of California United States District Court 10 11 COLONIAL MEDICAL GROUP, INC., a California corporation, 14 15 16 17 ORDER GRANTING IN PART AND DEFERRING IN PART RULING ON DEFENDANTS’ MOTIONS TO DISMISS; DISMISSING FIRST AND SECOND COUNTS WITH LEAVE TO AMEND; CONTINUING CASE MANAGEMENT CONFERENCE Plaintiff, 12 13 No. C-09-2192 MMC v. CATHOLIC HEALTHCARE WEST, a California Not-For-Profit Corporation dba MERCY HOSPITAL; GOLDEN EMPIRE MANAGEMENT CARE, A MEDICAL GROUP, INC., a California Corporation; and MANAGED CARE SYSTEMS, LP, Defendants. / 18 19 Before the Court are two motions: (1) defendant Catholic Healthcare West dba 20 Mercy Hospital’s (“Mercy Hospital”) Motion to Dismiss the First Amended Complaint 21 Pursuant to Fed. R. Civ. P. 12(b)(6), filed November 19, 2009; and (2) defendant Golden 22 Empire Management Care, A Medical Group, Inc. and defendant Managed Care Systems, 23 LP’s (collectively, “GEMCare”) Motion to Dismiss the First Amended Complaint Pursuant to 24 Fed. R. Civ. P. 12(b)(6), filed November 19, 2009 and amended by a Notice of Errata also 25 filed on November 19, 2009. Plaintiff Colonial Medical Group (“Colonial”) has filed a single 26 opposition, to which Mercy Hospital and GEMCare have separately replied. Having read 27 and considered the papers filed in support of and in opposition to the motions, the Court 28 hereby rules as follows. Dockets.Justia.com BACKGROUND 1 2 In its First Amended Complaint (“FAC”), Colonial alleges that it is “engaged in the 3 business of providing medical services to individuals who are inmates in prisons or 4 correctional institutions located in Central California, consisting of the counties of Fresno, 5 Kern, Kings, Madera, Monterey, and San Luis Obispo.” (See FAC ¶ 4.) Colonial alleges 6 that in such geographic area, there exists a “product market” it describes as “the provision 7 of medical services to prison inmates at secure or guarded hospital facilities.” (See FAC 8 ¶ 9.) According to Colonial, “secure” hospital facilities are “those which are locked down so 9 that there is no public ingress or egress,” while “guarded” hospital facilities are those with 10 “normally conventional hospital rooms which are, when occupied by an inmate, under 11 armed guard at the door and sometimes in the room as well and protected by barred and/or 12 locked windows.” (See id.) 13 Colonial alleges that two of its “competitors” in the above-described product market 14 are GEMCare and Premier Physicians Alliance Group (“PPAG”). (See FAC ¶ 10.) Colonial 15 also alleges that both Colonial and GEMCare have a “non-exclusive contract” with the 16 California Department of Corrections and Rehabilitation (“CDCR”) to provide medical 17 services to California state inmates. (See FAC ¶¶ 11, 16.)1 Colonial further alleges that 18 Colonial, GEMCare, and PPAG have been “unsuccessful in securing authority to care for 19 federal inmates” in federal prisons located in California City and Taft, each of which is 20 operated by a private corporation, and that the “relatively few inmates at those [federal] 21 institutions are cared for by physicians in those communities.” (See FAC ¶ 12.)2 22 23 Colonial alleges that Mercy Hospital, located in Bakersfield, California, “has a 29 bed guarded unit and other guarded facilities, which other hospitals in the area do not” 24 25 26 27 28 1 Colonial does not state whether PPAG has such a “non-exclusive contract,” or any contract, with the CDCR, but does allege that PPAG “services a small number of inmates at the San Joaquin Community Hospital in Bakersfield.” (See FAC ¶ 10.) 2 The FAC includes no allegations setting forth who provides medical care to persons incarcerated in facilities other than those operated by the CDCR or by private corporations operating federal prisons. 2 1 (see FAC ¶ 11), and that Mercy Hospital has a contract with the CDCR “to provide hospital 2 services to [the] CDCR’s inmates” (see FAC ¶ 6). According to Colonial, the contract 3 between Mercy Hospital and the CDCR requires that “the guarded facilities of defendant 4 Mercy Hospital be devoted exclusively to state prison inmates under the control of [the] 5 CDCR.” (See FAC ¶ 11.) Colonial also alleges that at the time Colonial entered into its 6 contract with the CDCR, it was “understood that Mercy Hospital was the only hospital that 7 Colonial would use for CDCR inmates.” (See id.)3 8 9 Colonial further alleges that when the CDCR determines an inmate needs medical care at a hospital and further determines that Colonial should provide the medical care, the 10 CDCR “customarily” so advises Colonial and then transports the inmate to a facility which 11 “in most instances” is Mercy Hospital. (See FAC ¶ 12.) When the CDCR decides to 12 transport an inmate to Mercy Hospital, Colonial alleges, Colonial “contacts the Emergency 13 Room at [ ] Mercy Hospital and advises the Emergency Room personnel of the anticipated 14 arrival of its inmate patient”; if the Emergency Room physician determines the inmate 15 should be admitted, a Colonial physician admits the inmate to Mercy Hospital and 16 thereafter provides care to the inmate. (See id.)4 17 Colonial alleges that on or about April 28, 2009, Mercy Hospital entered into an 18 “exclusive contract” with GEMCare, under which agreement GEMCare became “the 19 exclusive provider of medical services to CDCR inmates admitted to Mercy Hospital 20 through the Emergency Room.” (See FAC ¶ 22.) Colonial alleges that Mercy Hospital, in 21 connection with its having entered into the above-referenced contract with GEMCare, 22 3 23 24 25 26 27 28 Additionally, Colonial alleges that the CDCR, in connection with “the latest proposed contract between the parties,” has “requested a term that Colonial admit CDCR patients only to Mercy Hospital.” (See id.) Colonial does not allege whether it has agreed or disagreed to such additional term, but alleges that it has “not finalized any new contract” with the CDCR “[g]iven the financial crisis which has engulfed the state of California.” (See id.) 4 Colonial does not specify the procedure employed when the CDCR determines that an inmate needs care, determines that Colonial should provide the care, and transports the inmate to a facility other than Mercy Hospital. Nor does Colonial describe the procedure employed when an inmate treated at Mercy Hospital is not admitted to the hospital through the Emergency Room. 3 1 “unilaterally modified the ‘On Call’ protocol” (see FAC ¶ 20), such that “Emergency Room 2 personnel were to call [d]efendant GEMCare to provide care for inmates to the exclusion of 3 Colonial physicians” (see FAC ¶ 21). According to Colonial, under such new protocol and 4 beginning May 1, 2009, “inmate patients assigned to Colonial by [the] CDCR have been 5 diverted by Mercy Hospital to physicians associated with GEMCare.” (See FAC ¶ 29.) 6 Based on the above allegations, Colonial asserts five causes of action, the first of 7 said causes of action alleging a claim under federal law and the remainder alleging 8 violations of state law. 9 10 LEGAL STANDARD Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure can be based 11 on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a 12 cognizable legal theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 13 1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of the claim 14 showing that the pleader is entitled to relief.’” See Bell Atlantic Corp. v. Twombly, 550 U.S. 15 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, “a complaint attacked by 16 a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.” See id. 17 Nonetheless, “a plaintiff’s obligation to provide the grounds of his entitlement to relief 18 requires more than labels and conclusions, and a formulaic recitation of the elements of a 19 cause of action will not do.” See id. (internal quotation, citation, and alteration omitted). 20 In analyzing a motion to dismiss, a district court must accept as true all material 21 allegations in the complaint, and construe them in the light most favorable to the 22 nonmoving party. See NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). 23 “To survive a motion to dismiss, a complaint must contain sufficient factual material, 24 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 25 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations 26 must be enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. 27 at 555. Courts “are not bound to accept as true a legal conclusion couched as a factual 28 allegation.” See Iqbal, 129 S. Ct. at 1950 (internal quotation and citation omitted); see, 4 1 e.g., Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047-48 (9th Cir. 2008) (holding plaintiff 2 who alleged “only ultimate facts” and “legal conclusions,” rather than “evidentiary facts,” 3 failed to state claim under Sherman Act). DISCUSSION 4 In their respective motions, defendants argue that each of the five counts alleged in 5 6 the complaint is subject to dismissal for failure to state a claim. 7 A. Count One (“Antitrust Under the Sherman Act”) In Count One, Colonial alleges violations of §§ 1 and 2 of the Sherman Act. 8 9 Defendants argue the Sherman Act claims are subject to dismissal. 10 1. Product Market Allegations 11 “Antitrust law requires [an] allegation of both a product market and a geographic 12 market.” Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1045 n.4 (9th Cir. 13 2008). This requirement applies to both § 1 and § 2 of the Sherman Act. See id. at 1044 14 n.3. 15 “The outer boundaries of a product market are determined by the reasonable 16 interchangeability of use or the cross-elasticity of demand between the product itself and 17 substitutes for it.” Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). 18 “Interchangeability implies that one product is roughly equivalent to another for the use to 19 which it is put,” Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 437 (3rd Cir. 20 1997) (internal quotation and citation omitted), while “[c]ross-elasticity of demand is a 21 measure of the substitutability of products from the point of view of buyers,” see id. at 438 22 n.6 (internal quotation and citation omitted). 23 Sherman Act claims are subject to dismissal “if the complaint’s ‘relevant market’ 24 definition is facially unsustainable.” See Newcal Indus., 513 F.3d at 1045 (citing Queen 25 City Pizza, 124 F.3d at 436-37)). “Where the plaintiff fails to define its proposed relevant 26 market with reference to the rule of reasonable interchangeability and cross-elasticity of 27 demand, or alleges a proposed relevant market that clearly does not encompass all 28 interchangeable substitute products even when all factual inferences are granted in 5 1 plaintiff's favor, the relevant market is legally insufficient and a motion to dismiss may be 2 granted.” Queen City Pizza, 124 F.3d at 436; see, e.g., Tanaka v. University of Southern 3 California, 252 F.3d 1059, 1063-64 (9th Cir. 2001) (affirming dismissal of antitrust claims 4 where plaintiff athlete identified product market as “UCLA women’s soccer program” but 5 failed to allege any facts to support “conclusory” assertion that such market existed); Big 6 Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999) (holding, 7 where complaint alleged existence of “product markets for lodging accommodations and ski 8 packages” in Big Bear Valley, district court properly dismissed antitrust claims because 9 plaintiffs failed to allege “there are no other goods or services that are reasonably 10 interchangeable with lodging accommodations or ski packages within [the] geographic 11 market” of Big Bear Valley). 12 Here, in its initial complaint, Colonial alleged that the relevant “product market” was 13 “the provision of inpatient medical services and treatment by medical doctors for inmates of 14 the California prison system.” (See Compl. ¶ 38 (emphasis added).) By order filed 15 September 29, 2009, the Court dismissed the antitrust claims alleged in the initial 16 complaint, for the reason that Colonial had failed to allege a cognizable product market; in 17 particular, Colonial had defined the market by reference to a consumer, specifically, the 18 CDCR. (See Order filed September 29, 2009, at 4-5); see also Newcal Indus., 513 F.3d at 19 1045 (“The consumers do not define the boundaries of the market; the products or 20 producers do.”). 21 In the FAC, Colonial now allege the relevant product market is “the provision of 22 medical services to prison inmates at secure or guarded hospital facilities.” (See FAC ¶ 4 23 (emphasis added).) Other than the addition of an allegation that the services are provided 24 in medical facilities from which an inmate may not readily escape, Colonial’s amended 25 product market differs from the market alleged in the initial complaint only insofar as it 26 replaces the phrase “inmates of the California prison system” with “prison inmates,” and 27 thus now includes federal as well as state prisoners therein. In other words, Colonial is 28 proposing a market in which the only possible consumers of the alleged services, i.e., 6 1 “products,” are the CDCR and the two private corporations that operate federal prisons in 2 the six-county geographic region identified in the FAC. Necessarily excluded from 3 Colonial’s alleged product market are medical services provided at “secure or guarded 4 hospital facilities” to inmates incarcerated in city and county jails, to persons detained in 5 county jails pending the outcome of criminal proceedings, to military personnel held in the 6 detention facility at the United States Naval Air Station in Lemoore, and to persons 7 detained or confined by various federal, state, and local government agencies as a result of 8 orders of civil confinement or commitment. The FAC, however, includes no allegations to support a finding that medical services 9 10 provided by Colonial and its competitors to persons incarcerated in prisons are not 11 reasonably interchangeable with medical services provided to persons who, for example, 12 are inmates of local jails or other locked facilities by reason of criminal or civil proceedings. 13 Consequently, Colonial’s proposed product market is “legally insufficient.” See Chapman v. 14 New York State Division for Youth, 546 F.3d 230, 238-39 (2nd Cir. 2008) (affirming 15 dismissal of antitrust claims; holding plaintiff’s allegation of market for “restraint training 16 services to private child care providers” was legally insufficient, where plaintiff failed to 17 allege facts to “show how the market for restraint training services to child care providers is 18 any different from the larger market for restraint training services to other businesses, 19 agencies, and organizations”); see also Queen City Pizza, 124 F.3d at 436, 438 (affirming 20 dismissal of antitrust claims; holding plaintiff’s allegation of market for “pizza supplies and 21 ingredients for use in Domino’s stores” was legally insufficient, because “dough, tomato 22 sauce, and paper cups that meet Domino’s Pizza, Inc. standards and are used by Domino’s 23 stores are interchangeable with dough, sauce and cups available from other suppliers and 24 used by other pizza companies”). Accordingly, the First Cause of Action is, in its entirety, subject to dismissal for 25 26 failure to allege sufficient facts to support a finding that the product market identified in the 27 FAC is legally cognizable. 28 // 7 1 The Court will afford Colonial one further opportunity to properly allege a product 2 market. For this reason, the Court finds it appropriate to consider at this time defendants’ 3 additional argument that, even assuming a properly alleged product market, Colonial 4 nonetheless fails to state a claim under the Sherman Act. 5 2. Section 1 6 Section 1 of the Sherman Act provides that any “contract, combination . . ., or 7 conspiracy, in restraint of trade or commerce” is “illegal.” See 15 U.S.C. § 1. 8 Colonial alleges that “[t]he modification of the ‘On Call’ protocol and the Exclusive 9 Coverage Services Agreement between defendants GEMCare and Mercy Hospital each 10 constitutes a contract in an unreasonable restraint of trade” (see FAC ¶ 34), in that such 11 agreements constitute “non-price vertical restraint[s]” (see FAC ¶ 36). In its opposition, 12 Colonial clarifies that the alleged “restraint[s]” are “exclusive dealing arrangements.” (See 13 Pl.’s Opp. at 12:18-19.) 14 An “exclusive-dealing arrangement” does not violate antitrust laws unless 15 “performance of the contract will foreclose competition in a substantial share of the line of 16 commerce affected.” See Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327 17 (1961).5 “For exclusive dealing, foreclosure levels are unlikely to be of concern where they 18 are less than 30 or 40 percent.” Stop & Shop Supermarket Co. v. Blue Cross & Blue 19 Shield, 373 F.3d 57, 68 (1st Cir. 2004); see also United States v. Microsoft Corp., 253 F.3d 20 34, 70 (D.C. Cir. 2001) (noting “roughly 40% to 50% share [of the relevant market] usually 21 [is] required in order to establish a § 1 violation”); see, e.g., TCA Building Co. v. 22 Northwestern Resources Co., 873 F. Supp. 29, 39 (S.D. Tex. 1995) (holding plaintiff failed 23 to establish exclusive dealing arrangement violated Sherman Act, where buyer’s 24 “consumption represent[ed] only 33% of the consumption in the [relevant geographic] area 25 26 27 28 5 Although Tampa Electric involved a claim under § 3 of the Clayton Act, the Ninth Circuit has held that the analysis set forth therein is applicable to a claim under § 1 of the Sherman Act, with the exception that the plaintiff alleging a § 1 claim must make a “greater showing of anti-competitive effect.” See Twin City Sportservice, Inc. v. Charles O. Finley & Co., 512 F.2d 1264, 1275 (9th Cir. 1975). 8 1 2 . . ., leaving [the plaintiff] with almost 70% of the [relevant] market open to it”). Defendants argue that the FAC fails to include sufficient facts to support a finding 3 that performance of the contract between Mercy Hospital and GEMCare will foreclose 4 competition in the alleged relevant market. The Court, as discussed below, agrees. 5 Construed in the light most favorable to Colonial, the FAC alleges that as a result of 6 the challenged contract between Mercy Hospital and GEMCare, when the CDCR brings an 7 inmate in its custody to the Emergency Room of Mercy Hospital, such inmate, if thereafter 8 admitted to Mercy Hospital, can only be treated by a GEMCare physician. Stated 9 otherwise, the FAC alleges that medical providers in the relevant market are unable to 10 compete with GEMCare for services rendered to the CDCR, specifically, medical services 11 rendered to inmates in the custody of the CDCR to the extent such services are rendered 12 after inmates are brought to Mercy Hospital’s Emergency Room and thereafter admitted to 13 Mercy Hospital for treatment. 14 The FAC does not allege, however, that the contract between Mercy Hospital and 15 GEMCare has any effect on services sought by the CDCR to the extent the CDCR seeks 16 treatment for inmates it does not bring to the Emergency Room of Mercy Hospital. More 17 significantly, the FAC does not allege that the contract between Mercy Hospital and 18 GEMCare has any effect on any consumer other than the CDCR. Further, as noted above, 19 the FAC alleges that Mercy Hospital’s contract with the CDCR requires Mercy Hospital to 20 “devote[ ] exclusively to state prison inmates under the control of the CDCR” its “guarded 21 facilities” (see FAC ¶ 11);6 by which allegation a reasonable inference can be drawn that all 22 other consumers in the alleged relevant market are using facilities other than Mercy 23 Hospital.7 24 6 25 26 27 28 It would appear that “guarded facilities,” when read in context, is a reference to Mercy Hospital’s “dedicated, secured and guarded floor.” (See FAC ¶ 24.) 7 As defendants note, the FAC alleges that the services rendered by medical providers can be rendered in any hospital room with a locking window, if an armed guard can be placed outside the room, (see FAC ¶ 9), a description that would appear to describe rooms in every hospital facility. Indeed, the FAC expressly alleges that medical services to incarcerated persons are rendered in facilities other than Mercy Hospital, 9 1 In sum, the FAC alleges that the exclusive dealing arrangement between Mercy 2 Hospital and GEMCare only has an effect on competition among medical providers for the 3 business of the CDCR to the extent the CDCR seeks medical care for inmates who are first 4 brought by the CDCR to the Emergency Room of Mercy Hospital. The FAC includes no 5 facts, however, from which it reasonably could be inferred that the percentage of the 6 product market foreclosed is sufficiently substantial to support a claim under § 1 of the 7 Sherman Act. See, e.g., Dickson v. Microsoft Corp., 309 F.3d 193, 209 (4th Cir. 2002) 8 (affirming dismissal of § 1 claim based on “exclusive dealing” contracts; holding that 9 because complaint failed to include “an allegation regarding [defendants’] power or share in 10 the [relevant] market, there [was] no basis for concluding that [the] agreements at issue 11 . . . [were] likely to foreclose a significant share of the relevant [product] markets”). 12 13 Accordingly, the First Cause of Action is subject to dismissal to the extent it is based on a violation of § 1 of the Sherman Act. 14 3. Section 2 15 Section 2 of the Sherman Act provides that it is illegal to “monopolize, or attempt to 16 monopolize, or combine or conspire with any other person or persons, to monopolize any 17 part of the trade or commerce among the several States.” See 15 U.S.C. § 2. Here, 18 Colonial alleges that GEMCare “has monopolized, and engaged in an attempt to 19 monopolize, the provision of medical services at Mercy Hospital for inmates in Central 20 California.” (See FAC ¶ 34.)8 21 “The offense of monopoly under § 2 of the Sherman Act has two elements: (1) the 22 possession of monopoly power in the relevant market and (2) the willful acquisition or 23 maintenance of that power as distinguished from growth or development as a consequence 24 of a superior product, business acumen, or historic accident.” Eastman Kodak Co. v. 25 26 27 28 specifically, in Memorial Hospital and San Joaquin Community Hospital, as well as in facilities, unnamed in the FAC, at which physicians provide medical care to federal prisoners incarcerated at institutions operated by private corporations. (See FAC ¶¶ 6, 10, 11.) 8 Colonial does not allege that Mercy Hospital has violated § 2. 10 1 Image Technical Services, Inc., 504 U.S. 451, 481 (1992). “[T]o demonstrate attempted 2 monopolization a plaintiff must prove (1) that the defendant has engaged in predatory or 3 anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous 4 probability of achieving monopoly power.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 5 447, 456 (1993). 6 At the outset, the Court finds that Colonial fails to state a claim because it does not 7 allege, even as a conclusion, much less with the requisite evidentiary facts, that GEMCare 8 has monopolized or has attempted to monopolize the alleged relevant market. The alleged 9 relevant market is not the “provision of medical services at Mercy Hospital for inmates in 10 Central California” (see FAC ¶ 34), but, rather, the “provision of medical services to prison 11 inmates at secure or guarded hospital facilities” in Central California (see FAC ¶¶ 9, 10).9 12 Nor can the Court reasonably infer, from the facts that are alleged in the FAC, that 13 GEMCare has monopolized or has attempted the monopolize the relevant market. The 14 FAC does not set forth GEMCare’s market share, does not allege that GEMCare provides 15 medical services to any consumer in the relevant market other than the CDCR, and 16 includes no facts to support a finding that GEMCare has the ability to control the prices 17 charged by medical providers in the relevant market. Cf. Cost Management Services, Inc. 18 v. Washington Natural Gas Co., 99 F.3d 937, 950-51 (9th Cir. 1996) (holding allegation 19 defendant had 90% market share in relevant market, coupled with factual allegations to 20 support finding defendant had ability to control prices and to exclude competition, sufficient 21 to allege defendant had monopoly power). Further, as discussed above, Colonial does not 22 allege that the contract between GEMCare and Mercy Hospital has an effect on any 23 consumer in the relevant market other than the CDCR. 24 25 Moreover, because the alleged wrongful conduct by GEMCare consists of its having entered into the above-referenced contract with Mercy Hospital (see FAC ¶ 34), and the 26 27 28 9 As discussed above, however, Colonial has failed to allege sufficient facts to support a finding there exists a market limited solely to the “provision of medical services to prison inmates at secure or guarded hospital facilities.” 11 1 Court has found that Colonial has failed to state a § 1 claim based on such arrangement, 2 Colonial’s § 2 claim fails for this additional reason. See Cascade Cabinet Co. v. Western 3 Cabinet & Millwork Inc., 710 F.2d 1366, 1374 n.3 (9th Cir. 1983) (holding where plaintiff 4 bases § 1 claim and § 2 claim on same “concerted activity,” plaintiff’s failure to establish 5 claim under § 1 precludes finding in favor of plaintiff on claim under § 2). 6 Accordingly, the First Cause of Action is subject to dismissal to the extent it is based 7 on a violation of § 2 of the Sherman Act. 8 B. Count Two (“Violation of the Cartwright Act”) 9 In Count Two, Colonial alleges a violation of California’s Cartwright Act. Such claim 10 is based entirely on the conduct on which Colonial bases its Sherman Act claims. (See 11 FAC ¶¶ 42-44.) 12 “The analysis under California’s antitrust law mirrors the analysis under federal law 13 because the Cartwright Act . . . was modeled after the Sherman Act.” County of Tuolumne 14 v. Sonora Community Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001); see also Marin County 15 Board of Realtors, Inc. v. Palsson, 16 Cal.3d 920, 925 (1976) (holding “federal cases 16 interpreting the Sherman Act are applicable to problems arising under the Cartwright Act”). 17 Accordingly, for the reasons stated above with respect to Count One, Count Two is 18 subject to dismissal. 19 C. Remaining State Law Claims 20 In Count Three, Colonial alleges defendants have violated §§ 650.01 and 650.02 of 21 the California Business & Professions Code by engaging in “prohibited referral[s]” of 22 medical care. (See FAC ¶ 47.) In Count Four, Colonial alleges a violation of 23 § 17200 of the California Business & Professions Code and, in Count Five, Colonial alleges 24 a claim for “tortious interference with contract and prospective economic advantage,” each 25 such claim based on all of the above-described statutory violations. (See FAC ¶¶ 49-50, 26 57-58.) 27 The Court will defer ruling on the sufficiency of Counts Three, Four, and Five, 28 pending amendment, if any, of Colonial’s Sherman Act claims. See 28 U.S.C. § 1367(c)(3) 12 1 (providing where causes of action over which district court has original jurisdiction have 2 been dismissed, court may decline to exercise supplemental jurisdiction over remaining 3 claims). 4 CONCLUSION 5 For the reasons discussed above, defendants’ motions to dismiss are hereby 6 7 8 9 10 11 GRANTED in part and DEFERRED in part, as follows: 1. Counts One and Two are hereby DISMISSED, with leave to amend to cure the deficiencies identified above. 2. To the extent the motions seek dismissal of Counts Three, Four, and Five, ruling is hereby DEFERRED. 3. If Colonial elects to file a Second Amended Complaint to cure the deficiencies 12 identified above, Colonial shall file its Second Amended Complaint no later than June 18, 13 2010. If Colonial does not file a Second Amended Complaint on or before June 18, 2010, 14 the instant action will consist of the state law claims alleged in the FAC. 15 4. The Case Management Conference is hereby CONTINUED from June 25, 2010 16 to September 3, 2010. A Joint Case Management Statement shall be filed no later than 17 August 27, 2010. 18 IT IS SO ORDERED. 19 20 Dated: May 25, 2010 MAXINE M. CHESNEY United States District Judge 21 22 23 24 25 26 27 28 13
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
