United States District Court, Western District of Pennsylvania
January 12, 1999
CHRISTOPHER ALLEN, M.D., BRYAN C. DONOHUE, M.D. AND JOHN CAVA, M.D., PLAINTIFFS,
THE WASHINGTON HOSPITAL, TELFORD W. THOMAS, JOHN FRAZIER, M.D. AND NEIL HART, M.D., DEFENDANTS.
The opinion of the court was delivered by: Ambrose, District Judge.
OPINION and ORDER OF COURT
Plaintiffs Bryan C. Donohue, M.D., and John Cava, M.D., conduct
a medical practice in cardiology located in Washington,
Pennsylvania. Donohue and Cava employ Plaintiff Christopher
Allen, M.D., a black physician, who is certified in and
specializes in internal medicine and cardiology, and who also
holds a sub-specialty in interventional cardiology. The
Plaintiffs filed a five-count Amended Complaint against
Defendants The Washington Hospital ("the Hospital"), Telford W.
Thomas, its President and CEO, John Frazier, M.D., a member of
the Board of Trustees and a staff member, and Nell Hart, M.D., a
staff member. Specifically, the Plaintiffs asserted violations of
42 U.S.C. § 1981 and antitrust statutes, as well as claims for
breach of contract and interference with existing and prospective
contractual relations. Essentially, the Plaintiffs claim that the
Defendants acted in such a manner as to preclude the Plaintiffs
from expanding their practice at the Hospital.
The Defendants previously filed a Motion to Dismiss,
challenging each claim. By prior Opinion and Order, I denied the
Motion in all respects save one. I dismissed Count III — insofar
as it was premised upon a claim for interference with existing
Pending is the Defendants' Motion for Summary Judgment (Docket
No. 35). The Defendants seek the entry of judgment in their favor
on each of the remaining claims. The Plaintiffs oppose. After
careful consideration, and for the reasons set forth below, the
Motion is granted in part and denied in part. It is granted with
respect to the claims set forth in Counts III (interference with
a prospective contractual relation) and Count V (conspiracy to
monopolize under § 2 of the Sherman Act). The Motion is denied,
however, with respect to all remaining counts.
Summary judgment may only be granted if the pleadings,
depositions, answers to interrogatories and admissions on file,
together with any affidavits, show that there is no genuine issue
as to any material facts and that the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(c). Rule 56 mandates
the entry of judgment, after adequate time for discovery and upon
motion, against the party who fails to make a showing sufficient
to establish the existence of an element essential to that
party's case, and on which that party will bear the burden of
proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322,
106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
In considering a motion for summary judgment, the court must
examine the facts in the light most favorable to the party
opposing the motion. International Raw Materials, Ltd. v.
Stauffer Chemical Co., 898 F.2d 946, 949 (3d Cir. 1990). The
burden is on the moving party to demonstrate that the evidence is
such that a reasonable jury could not return a verdict for the
non-moving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is
material when it might affect the outcome of the suit under the
governing law. Id. Where the non-moving party will bear the
burden of proof at trial, the party moving for summary judgment
may meet its burden by showing that the evidentiary materials of
record, if reduced to admissible evidence, would be insufficient
to carry the nonmovant's burden of proof at trial. Celotex, 477
U.S. at 322, 106 S.Ct. 2548. Once the moving party satisfies its
burden, the burden shifts to the nonmoving party, who must go
beyond its pleadings, and designate specific facts by the use of
depositions, admissions, or answers to interrogatories showing
that there is a genuine issue for trial. Id. at 324, 106 S.Ct.
I. Count I — 42 U.S.C. § 1981
Allen contends that the Hospital's and Thomas' failure to
provide him with an application for a staff position in internal
medicine, and the resulting failure to hire him, constitutes a
violation of 42 U.S.C. § 1981. Section 1981 provides:
[a]ll persons within the jurisdiction of the United
States shall have the same right in every State and
Territory to make and enforce contracts, to sue, be
parties, give evidence, and to the full and equal
benefit of all laws and proceedings for the security
of persons and property as is enjoyed by white
citizens, and shall be subject to like punishment,
pains, penalties, taxes, licenses, and exactions of
every kind, and to no other.
42 U.S.C. § 1981. "Section 1981 [thus] grants to all persons
equal rights under the law." Walker v. Comay, 640 F. Supp. 195,
197 (W.D.Pa. 1986).
Here, the Defendants do not dispute that Allen has articulated
a prima facie case of discrimination under § 1981. Accordingly,
under the familiar analysis announced in McDonnell Douglas Corp.
v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 36 L.Ed.2d 668
(1973), the burden shifts to the Defendants to articulate some
legitimate, nondiscriminatory reason for the challenged action.
See Chauhan v. M. Alfieri Co., Inc., 897 F.2d 123, 127 (3d Cir.
1990). The Defendants have met this burden by proffering evidence
that Allen was denied an application because he was a trained
cardiologist, that he worked with a group providing cardiology
services, and that a Moratorium existed which precluded granting
staff privileges to cardiologists.
Consequently, the burden shifts back to Allen to demonstrate
that the articulated reason is merely a pretext for
discrimination. Chauhan, 897 F.2d at 127. The Defendants argue
that Allen cannot establish pretext. I disagree. The record
reveals that Allen assured Thomas that, if given privileges, he
intended only to practice internal medicine. See Plaintiffs'
Appendix, Ex. 40. Yet Allen was denied privileges. However,
Thomas and the Hospital accepted another physician's (Dr. Richard
Hart-who is white) representation that he intended to practice
only internal medicine. As with Allen, Hart's training was in an
area covered by the Moratorium (infectious diseases). See
Thomas Transcript, p. 137. I recognize that Hart's and Allen's
positions differed in some regards.*fn1 Even so, I find the
differences in treatment accorded the physicians to be telling.
Additionally, it does seem implausible that the Hospital would
be concerned that, if it granted Allen staff privileges for
internal medicine, that he would somehow secretly perform
cardiology services. For Allen to do so, he would have to utilize
the cardiology lab and/or an operating room. I agree with the
Plaintiffs that the "notion that any internist could sneak a
patient into a catheterization lab or operating room for a
cardiology is ludicrous." See Plaintiffs' Brief, p. 20.
Furthermore, the Hospital's treatment of white pulmonologists
is revealing. Two pulmonologists appalled for staff privileges in
critical care medicine while a moratorium existed for
pulmonology. The applications were accepted and processing began.
Only after Allen's application was denied were the
pulmonologists' applications and fees returned. While the
Hospital contends that it was initially unaware that the
physicians were pulmonologists (a specialty covered by the
Moratorium), the record suggests otherwise. See Plaintiffs'
Appendix, Ex. 50. A jury could reasonably infer that the
applications and fees were returned only after the Hospital
realized that it had treated a black applicant in a different
Thus, for the reasons set forth above, Allen is entitled to
proceed to trial. Consequently,
the Defendants' Motion for Summary Judgment is denied in this
II. Count IV — Antitrust Violations
In Count IV, the Plaintiffs allege that the Defendants have
unlawfully restrained trade and have attempted to obtain a
monopoly on cardiology services. The Defendants seek the entry of
judgment, in their favor, on both claims, and advance several
bases for such action. I will address each argument separately.
The Defendants assert that the Plaintiffs lack standing to
prosecute the claims. In so urging, the Defendants employ a two
prong test referenced in this Court's earlier decision. While the
Defendants do not challenge the sufficiency of the evidence with
respect to the first prong (whether the plaintiffs have suffered
an antitrust injury), they do challenge the sufficiency of proof
with respect to the second. Essentially, the Defendants contend
that the Plaintiffs cannot establish that they are "the most
efficient enforcers" of the antitrust laws. See Defendants'
Brief, p. 13.
The Plaintiffs counter that the Defendants have impermissibly
altered and truncated the appropriate test. First, Plaintiffs
allege, they need not be the most efficient enforcer, but
merely an efficient enforcer. The case most often cited as the
genesis of "the most efficient enforcer" language is, the
Plaintiffs insist, misquoted. I agree that in Todorov v. DCH
Healthcare Auth., 921 F.2d 1438, 1449 (11th Cir. 1991), the
court spoke of "an" efficient enforcer.
Secondly, the Plaintiffs contend, the inquiry proffered by the
Defendants is actually a compressed version of the five factor
inquiry set forth in an opinion rendered by the United States
Supreme Court. See Associated General Contractors, Inc. v.
California State Council of Carpenters, 459 U.S. 519, 545, 103
S.Ct. 897, 74 L.Ed.2d 723 (1983). According to the Plaintiffs,
these factors are as follows:
(1) the causal connection between the antitrust
violation and the harm to the plaintiff and the
intent by the defendant to cause that harm, with
neither factor alone conferring standing;
(2) whether the plaintiff's alleged injury is the
type for which the antitrust laws were intended to
(3) the directness of the injury, which addresses the
concerns that liberal application of standing
principles might produce speculative claims;
(4) the existence of more direct victims of the
alleged antitrust violation; and
(5) the potential for duplicative recovery or complex
apportionment of damages.
See Plaintiffs' Brief, p. 25, quoting, In re Lower Lake Erie
Iron Ore Antitrust Litigation, 998 F.2d 1144, 1164-65 (3d Cir.
1993). I agree that these factors are relevant to the issue of
standing. Indeed, I identified these same factors in my earlier
Opinion denying the Defendants' Motion to Dismiss.
Unfortunately, the Defendants' have failed to take heed of such
reference. In fact, the Defendants do not provide any substantive
analysis of the Associated General factors, or of the
application of such factors to the nuances of this case.
Certainly the Defendants do cite to a litany of cases for the
proposition that there exist more direct victims of the harm.
See Defendants' Brief, p. 14-15. And this does translate to the
fourth factor under Associated General. Yet this factor is not
dispositive. Indeed, if it were, the Supreme Court's direction to
consider four additional factors in assessing standing would be
Moreover, the Defendants have already conceded (for purposes of
this Motion), that the Plaintiffs have suffered an antitrust
injury — the second factor under Associated General. The only
other passing reference the Defendants make to the Associated
General test is an assertion that the claim is necessarily
speculative (the third factor), because the Plaintiffs' income
has increased steadily over the past few years. Yet I agree with
the Plaintiffs that "[t]he relevant question is not whether
Plaintiffs have been successful, but whether they could have been
more successful in the absence of Defendants' exclusionary
practices." See Plaintiffs' Brief, p. 29 n. 21. The increase in
income and the expansion in their practice may, in
fact, be reflective of the lack of any exclusionary tactics. It
may also, however, be simply a testament to Plaintiffs' skills as
physicians and to their business acumen. Reasonable people could
disagree — it presents a factual question.
In short, it may well be that the Plaintiffs are not efficient
enforcers of the law. However, the Defendants have not persuaded
me of as much at this procedural juncture. As stated in my
earlier Opinion on this issue, the concept of standing
necessarily entails consideration of the factual nuances present
in each case. Here, the Defendants have not discussed the
appropriate standard, nor the standard as it applies to the
factual nuances in this case. Instead, they would have this Court
essentially adopt a per se rule denying standing to any
physician who challenges alleged exclusionary practices. No court
has adopted such a rule, and I decline the Defendants' invitation
to do so.*fn2
(B) Market Power
The Defendants also seek dismissal of Count IV based upon the
alleged lack of market power. Specifically, the Defendants
contend that "[i]n order to establish that conduct violates § 1
under the rule of reason, Plaintiffs have the burden of proving
(1) that Defendants' conduct had an anticompetitive effect in the
relevant market; and (2) that no pro-competitive rationale would
justify the conduct." See Defendants' Brief, p. 17, citing,
Retina v. Southern Baptist Hospital of Florida, 105 F.3d 1376,
1383 (11th Cir. 1997).
While the Defendants proffer evidence in the form of an expert
report suggesting that they lack the requisite market power, the
Plaintiffs provide contrary evidence, also in the form of an
expert report. See Defendants' Ex. 3 and Plaintiffs' Ex. 59.
Genuine issues of material fact exist regarding the issue of
market power, rendering the matter inappropriate for resolution
at this procedural juncture.
(C) Lack of Concerted Action
The Defendants correctly allege that to establish a claim under
§ 1 of the Sherman Act, a plaintiff must prove a "concerted
action by the defendants. . . ." Mathews v. Lancaster General
Hosp., 87 F.3d 624, 639 (3d Cir. 1996). "`Concerted action' is a
`collective reference to the contract combination or
conspiracy.'" Kerth v. Hamot Health Foundation, 989 F. Supp. 691,
698 (W.D.Pa. 1997), aff'd, 159 F.3d 1351 (3d Cir. 1998),
cert. denied, ___ U.S. ___, 119 S.Ct. 618, ___ L.Ed.2d ___
(1998), citing, Mathews, 87 F.3d at 639. "It requires `a unity
of purpose or a common design and understanding or meeting of the
minds in an unlawful arrangement.'" Id., citing. Mathews, 87
F.3d at 639. "A plaintiff's evidence must tend to exclude the
possibility that the defendants were acting independently." Id.
(citations omitted). Accordingly, unilateral action cannot
violate § 1, Id. (citations omitted). Finally, "a plaintiff's
theory of concerted action must be economically plausible." Id.
The Defendants contend that the record is devoid of any proof
of concerted action, and that the Plaintiffs' theory of concerted
action is not economically plausible. See Defendants' Brief, p.
28-30. As to the first assertion, the record suggests that
Frazier, as a member of the Hospital's Board, voted in favor of
the Moratorium. It is reasonable to infer that, in so doing,
Frazier was also acting on behalf of Frazier & Hart, a
beneficiary of the Moratorium. Certainly the Defendants have not
identified any case law suggesting such an inference to be
As to the second assertion, the record is replete with an
economically plausible theory for the action. Evidence suggests
that, in establishing the Moratorium, the Hospital sought to bar
cardiologists from Pittsburgh from obtaining staff privileges and
then have their Washington patients undergo procedures in
Pittsburgh hospitals. Such an outcome would obviously cause the
suffer a loss of revenue. Additionally, Frazier and Hart
benefitted from the Moratorium by securing an exclusive contract
with the Hospital. Granting additional staff privileges would
likely have caused Frazier and Hart a loss of income. Similarly,
absent an exclusive contract, Frazier and Hart could have
performed procedures at other nearby hospitals, again threatening
the Hospital's income stream.*fn3
III. Count V — § 2 of the Sherman Act
In Count V of the Amended Complaint, Plaintiffs contend that:
Defendants Frazier and Hart conspired together to
induce the Hospital to give them an exclusive
contract for the performance and interpretation of
inpatient cardiac procedures; to enact a moratorium
prohibiting the consideration of additional
cardiologists for appointment to the medical staff;
and to direct members of the medical staff to refer
their patients to Defendants only.
See Amended Complaint, ¶ 76. According to Plaintiffs, this
conspiracy constitutes a violation of § 2 of the Sherman Act.
The Defendants counter that a conspiracy to monopolize requires
proof of "an agreement or understanding between two or more
economic entities." Castelli v. Meadville Medical Center,
702 F. Supp. 1201, 1207 (W.D.Pa. 1988), aff'd, 872 F.2d 411 (3d Cir.
1989). As sole shareholders, owners and officers of the same
corporation (Frazier-Hart, Inc.), the Defendants reason, they
cannot have conspired with each other The Defendants cite to a
passage from the Supreme Court's opinion in Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752, 769-71, 104 S.Ct. 2731,
2741, 81 L.Ed.2d 628 (1984), in support of this proposition:
[t]he officers of a single firm are not separate
economic actors pursuing separate economic interests,
so agreements among them do not suddenly bring
together economic power that was previously pursuing
divergent goals. . . . For these reasons officers or
employees of the same firm do not provide the
plurality of actors imperative for section 1
(emphasis added); see Defendants' Brief, p. 32; see also,
Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125,
1135 (3d Cir. 1995) (stating that "[h]ence, Carrier Express and
Oak Management constituted one economic unit. Thus we hold that
Oak Management and the Carrier Express agents could not conspire
with Carrier Express or with each other under section 1. . . .").
The Defendants also cite to authority for the proposition that
the Copperweld "plurality" requirement is equally applicable to
a conspiracy to monopolize under § 2. See Defendants' Brief, p.
32, citing, Re/Max Int'l. v. Realty One, Inc., 900 F. Supp. 132,
153 (N.D.Ohio 1995) and Potters Medical Center v. City Hospital
Assoc., 800 F.2d 568, 574 (6th Cir. 1986).
Significantly, the Plaintiffs offer no response to these
assertions. Because Plaintiffs are clearly represented by
competent counsel, and have vigorously pressed their point in
other matters, I can only presume that their lack of a response
in this matter is a concession to the accuracy of the Defendants'
argument. Consequently, the Defendants' Motion is granted in this
respect and judgment is entered in their favor, and against the
Plaintiffs, on Count V.*fn4
IV. Count II — Breach of Contract
In Count II, Plaintiffs assert a claim for breach of contract
based upon a contractual right to have Allen receive "fair
consideration" when he sought staff privileges at the Hospital.
The Defendants again contend that the evidence unequivocally
establishes that Allen was given fair consideration. I disagree
for the reasons set forth above. I similarly disagree with the
Defendants' contention that the Plaintiffs have not adduced
sufficient evidence of damages on this claim.
See Donohue Dep., p. 138-39, 141-42, 162-64, 171-72, 174,
196-97, and 201-06. Consequently, the Motion for Summary Judgment
is denied with respect to Count II.
V. Count III — Intentional Interference with Prospective
In Count III of the Amended Complaint, the Plaintiffs seek
recovery for the intentional interference with prospective
contractual relations. Specifically, the Plaintiffs argue that
the Defendants' institution of a Moratorium, and the granting of
an exclusive contract to Frazier-Hart, Inc., was intended to
curtail the Plaintiffs' practice. The conspiracy was a success,
the Plaintiffs contend, and they were unable to see a number of
patients at the Hospital.
The Defendants argue that the claim is not cognizable. The
Defendants do acknowledge that Pennsylvania law contemplates a
claim for interference with a contract when the interference is
directed at third persons. Indeed, the Pennsylvania Supreme Court
has explicitly adopted § 766 of the Restatement (Second) of
Torts, which provides that:
[o]ne who intentionally and improperly interferes
with the performance of a contract . . . between
another and a third party by inducting or otherwise
causing the third person not to perform the contract,
is subject to liability to the other for the
pecuniary loss resulting to the other from the
failure of the third person to perform the contract.
See Nathanson v. Medical College of Pennsylvania,
926 F.2d 1368
, 1388 (3d Cir. 1991). Further, the Defendants contend, and I
agree, that Pennsylvania courts have not adopted § 766A, which
addresses interference directed at the plaintiff:
[o]ne who intentionally and improperly interferes
with the performance of a contract . . . between
another and a third person, by preventing the other
from performing the contract or causing his
performance to be more expensive or burdensome, is
subject to liability to the other for the pecuniary
loss resulting to him.
Restatement (Second) of Torts, § 766A; See also Gemini Physical
Therapy and Rehabilitation, Inc. v. State Farm Mut. Auto. Ins.
Co., 40 F.3d 63
, 66 (3d Cir. 1994) (opining that the
Pennsylvania Supreme Court would not adopt § 766A).
The Defendants allege that the claim set forth in Count III is
premised upon action directed at the Plaintiffs. I agree. Given
the Pennsylvania Supreme Court's reluctance to adopt § 766A of
the Restatement, they reason, the Plaintiffs' claim cannot go
I agree with the Defendants' ultimate conclusion, though not
specifically with their argument. Section 766 and § 766A address
interference (directed toward the third party or the plaintiff)
with existing contracts. Here, Plaintiffs complain of
interference with prospective contracts. The elements of a tort
for interference with prospective contracts is governed by §
766B, which provides:
[o]ne who intentionally and improperly interferes
with another's prospective contractual relation . . .
is subject to liability to the other for the
pecuniary harm resulting from loss of the benefits of
the relation, whether the interference consists of
(a) inducing or otherwise causing a third person not
to enter into or continue the prospective relation or
(b) preventing the other from acquiring or continuing
the prospective relation.
See Restatement (Second) of Torts, § 766B.
Research did not disclose any Pennsylvania Supreme Court
decision explicitly adopting, in toto, § 766B. See Windsor
Securities, Inc. v. Hartford Life Ins. Co., 986 F.2d 655, 661
(3d Cir. 1993) and Silver v. Mendel, 894 F.2d 598, 601 (3d Cir.
1990). Section 766B, with its two subsections, parallels sections
766 and 766A. Thus, § 766B(a) is analogous to § 766, in that both
deal with interference directed towards third parties. Similarly,
§ 766B(b) is analogous to § 766A, in that both deal with
interference directed at the plaintiff.
Consequently, I find it reasonable to expect that, as the
Pennsylvania courts have declined to adopt § 766A, they would
similarly be hesitant to adopt § 766B(b). In other words, I
believe that Pennsylvania courts
would declare noncognizable, a claim for intentional interference
with existing or prospective contracts, where the interference
was directed toward the plaintiff, rather than toward a third
party. See Peoples Mortgage Co., Inc. v. Federal National
Mortgage Association, 856 F. Supp. 910, 933 (E.D.Pa. 1994)
(stating that "[w]e would be equally or more reluctant to predict
that the analogous provisions for intentional interference with a
prospective contractual relationship, when the alleged
interference is directed toward the plaintiff, rather than toward
a third party with whom the plaintiff is attempting to establish
a contract, would be adopted by the Pennsylvania Supreme Court").
Significantly, the Plaintiffs offer no response to the
Defendants' argument. For instance, the Plaintiffs do not argue
that the interference complained of was actually directed at
third persons. Nor do they dispute that Pennsylvania courts would
not recognize § 766B(b). Consequently, in light of the reasoning
set forth above, and absent any objection by Plaintiffs, the
Defendants' Motion for Summary Judgment is granted as to Count