United States District Court, M.D. Pennsylvania
FEDERAL TRADE COMMISSION and COMMONWEALTH OF PENNSYLVANIA, Plaintiffs,
PENN STATE HERSHEY MEDICAL CENTER and PINNACLEHEALTH SYSTEM Defendants.
John E. Jones III Judge
before the Court is the Commonwealth of Pennsylvania's
Motion for Attorney's Fees and Costs under Section 16 of
the Clayton Act. (Doc. 143). This Motion arises following the
Third Circuit's opinion in Federal Trade Commission
v. Penn State Hershey Medical Center, 838 F.3d 327 (3d
Cir. 2016) (“Hershey”), issued on
September 27, 2016. Therein, the Third Circuit considered a
proposed merger between Defendants Penn State Hershey Medical
Center and PinnacleHealth System (collectively,
“Defendants”). The Third Circuit granted
Plaintiffs the Federal Trade Commission and the Commonwealth
of Pennsylvania preliminary injunctive relief, enjoining the
merger pending the outcome of an administrative adjudication
on the merits, to be conducted by the Federal Trade
Commission. Hershey, 838 F.3d at 354.
the Commonwealth filed the instant Motion, which has been
fully briefed and is accordingly ripe for our review. (Docs.
144, 146 and 147).For the reasons to follow, the
Commonwealth's Motion shall be denied.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
above-captioned action commenced with the filing of a
Complaint on December 9, 2015. (Doc. 4). Therein, the Federal
Trade Commission (“FTC”), joined by the
Commonwealth of Pennsylvania, sought a preliminary injunction
preventing the merger of two hospitals, Penn State Hershey
Medical Center (“Hershey”) and PinnacleHealth
Systems (“Pinnacle”), pending the outcome of the
FTC's adjudication on the merits. The suit was filed
under Section 13(b) of the Federal Trade Commission Act
(“FTC Act”), 15 U.S.C. § 53(b), and Section
16 of the Clayton Act, 15 U.S.C. § 26.
period of five days in mid-April, this Court held evidentiary
hearings and heard testimony from sixteen witnesses. On May
9, 2016, Plaintiffs' Motion for a Preliminary Injunction
was denied. (Doc. 131). Plaintiffs timely filed a Notice of
Appeal (doc. 132), and thereafter our Court of Appeals heard
oral argument from the parties. On September 27th, the Third
Circuit issued an opinion reversing our denial of the Motion
for Preliminary Injunction and remanded the case, directing
that the merger of Defendants be preliminarily enjoined
pending the outcome of the FTC's administrative
adjudication. FTC v. Penn State Hershey Med. Ctr.,
838 F.3d 327, 353-54 (3d Cir. 2016)
(“Hershey”). We issued an order so doing
on October 20, 2016. (Doc. 142).
on October 14, 2016, the Pennsylvania State University Board
of Trustees voted unanimously to accept Penn State
Health's recommendation terminating the Affiliation
Agreement with Pinnacle. (Doc. 143, ¶ 8). Similarly,
Pinnacle also announced that it was abandoning its merger
efforts with Hershey based on the Third Circuit's opinion
and judgment. (Id., ¶ 9).
noted above, on November 2, 2016, the Commonwealth filed the
instant Motion for Attorney's Fees and Costs under
Section 16 of the Clayton Act. (Id.). Therein, the
Commonwealth seeks $1, 033, 355.50 in attorney's fees and
related costs and $160, 072.76 in litigation costs.
(Id., ¶ 15). Defendants vigorously oppose the
Motion, arguing against it on a variety of procedural and
substantive grounds. We consider each argument in turn below.
16 of the Clayton Act, entitled “[i]njunctive relief
for private parties, ” provides:
[i]n any action under this section in which the plaintiff
substantially prevails, the court shall award the cost of
suit, including a reasonable attorney's fee, to such
15 U.S.C. § 26. Defendants argue that because the Third
Circuit evaluated Plaintiffs' claims solely under Section
13(b) of the FTC Act, the Commonwealth's request for fees
under Section 16 should be denied.
Whether Plaintiffs may seek attorney's fees pursuant to
Section 16 of the Clayton Act
13(b) of the FTC Act and Section 16 of the Clayton Act employ
slightly different standards. Hershey, 838 F.3d at
337 (“The public interest standard is not the same as
the traditional equity standard for injunctive
relief.”). Section 13(b) is a specialized statute
applicable only to suits brought by the FTC, “[t[he
purpose of [which] is to preserve the status quo and allow
the FTC to adjudicate the anticompetitive effects of the
proposed merger in the first instance.” Id. at
352. The public interest standard employs a two-pronged
approach. Under Section 13(b), “[a] district court may
issue a preliminary injunction ‘[u]pon a proper showing
that, weighing the equities and considering the
Commission's likelihood of success, such action would be
in the public interest.'” Id. at 337
(citing 15 U.S.C. § 53(b)). Unlike Section 16 of the
Clayton Act, Section 13(b) does not permit fee shifting.
See FTC v. Staples, Inc., __ F.Supp.3d __, 2017 WL
782877, at *1, (D.D.C., Feb. 28, 2017) (“Unlike the
Clayton Act, the FTC Act does not grant attorney's fees
to prevailing plaintiffs.”).
Section 16 of the Clayton Act states that:
Any person, firm, corporation, or association shall be
entitled to sue for and have injunctive relief . . . against
threatened loss or damage by a violation of the antitrust
laws . . . when and under the same conditions and principles
as injunctive relief against threatened conduct is granted by
courts of equity, under the rules governing such proceedings
. . . .
15 U.S.C. § 26. As noted above, Section 16 contains a
fee shifting provision. 15 U.S.C. § 26.
“[a] plaintiff seeking a preliminary injunction must
establish that he is likely to succeed on the merits, that he
is likely to suffer irreparable harm in the absence of
preliminary relief, that the balance of equities tip in his
favor, and that an injunction is in the public
interest.” Glossip v. Gross, 135 S.Ct. 2726,
2736-37 (2015) (citing Winter v. Natural Res. Def.
Council, Inc., 555 U.S. 7, 20 (2008)). Instead of two
elements then, a court must consider four factors under the
traditional equity standard for injunctive relief.
parties vigorously debate whether the Third Circuit applied
the two-pronged test appropriate for injunctive relief
analyzed under Section 13(b), or the four-pronged test set
forth by the traditional equity standard. Careful review of
the Third Circuit's opinion in Hershey shows
that Defendants are correct to note that our Court of Appeals
solely applied the standard outlined by Section 13(b) of the
FTC Act. Indeed, at the outset of its analysis, the Third
Circuit states that “the Government seeks a preliminary
injunction under Section 13(b) of the FTC Act” with no
mention of the Commonwealth's pursuit of an injunction
pursuant to Section 16. Hershey, 838 F.3d at 337.
The court goes on to describe the public interest standard
applicable to a motion for a preliminary injunction under
Section 13(b), and specifically emphasizes that the standard
differs from the traditional equity standard for injunctive