Class Certification Improperly Denied in Hospital Merger Challenge

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A federal district court abused its discretion when it denied certification to a class of direct purchasers of hospital services in an action challenging a hospital merger, the U.S. Court of Appeals in Chicago has ruled.

Because the denial of class certification was erroneous as a matter of both fact and law, the district court's denial of class certification (2010-1 Trade Cases ¶77,001) was vacated and the matter remanded for further proceedings.

Perfect v. Good Evidence

The degree of uniformity that the district court demanded simply was not required for class certification under Rule 23(b) (3) of the Federal Rules of Civil Procedure, the appellate court ruled. The court explained “it is important not to let a quest for perfect evidence become the enemy of good evidence.”

Antitrust Impact on Proposed Class

The central issue under Rule 23(b) (3) was whether the purchasers could show on a class-wide basis the antitrust impact of the merged entity's actions on the proposed class. Common questions clearly predominate in regard to whether the merger violated federal antitrust law, the appellate court decided. The district court incorrectly applied Rule 23(b)(3)'s predominance requirement when it made uniformity of nominal price increases following the merger a condition for class certification. The plaintiffs’ expert, an economist who specialized in the health care industry, could use common evidence and his proposed methodology to estimate the antitrust impact, if any, of the merger on the members of that class.

Admissibility of Economic Analysis

In addition, the district court failed to determine whether the defense expert's report and opinions were admissible under Federal Rule of Evidence 702 before ruling on the motion for class certification. Before the hearing on class certification, the plaintiffs moved to exclude the report of a private consulting economist. The plaintiffs argued that the expert’s “economic analyses are fundamentally defective” and that the expert’s opinion “should be stricken as a whole.”

The district court's refusal to rule on the plaintiffs' Daubert motion was an error, since the expert’s opinions were critical to the district court's decision. The expert’s report and testimony laid the foundation for the merged entity’s entire argument in opposition to class certification, and the district court relied on the expert’s reasoning when making its decision.

The decision is Messner v. Northshore University Healthsystem, 2012-1 Trade ¶77,763.

Antitrust Agency Heads Discuss Recent Enforcement Efforts at ABA Spring Meeting

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Attendees of the American Bar Association Section of Antitrust Law 59th Annual Spring Meeting on April 1 heard from the heads of the two federal antitrust agencies on recent enforcement efforts.

“Balanced Activism”

FTC Chairman Jon Leibowitz described the past year as another one of “balanced activism.” He suggested that, when viewed in tandem, the FTC’s review of the Google/AdMob transaction and the settlement with Intel Corporation demonstrate this balanced enforcement.

In May 2010, the FTC announced that it would not challenge Google’s proposed acquisition of mobile advertising network company AdMob because the transaction was unlikely to harm competition in the emerging market for mobile advertising networks. The agency’s concerns about the deal were outweighed by Apple’s planned entry into the market (CCH Trade Regulation Reporter ¶16,453).

In August 2010, the agency announced that Intel Corporation agreed to settle FTC charges that it unlawfully maintained its monopoly by stifling competition in the market for computer chips in violation of Sec. 5 of the FTC Act (CCH Trade Regulation Reporter ¶16,483). Chairman Leibowitz cautioned that businesses run the risk of facing a Sec. 5 case if they “compete by sabotaging competitors” instead of using innovation.

Injunction in Hospital Merger Case

The FTC’s recent victory in the federal district court in Toledo, Ohio, in its challenge to ProMedica Health System Inc.’s proposed acquisition of St. Luke’s Hospital was also discussed. Chairman Leibowitz told attendees that he was very pleased with the decision (2011-1 Trade Cases ¶ 77,395). He mentioned that Judge Katz cited extensively to the recently issued Department of Justice/FTC Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100).

Chairman Leibowitz noted that the decision is the first preliminary injunction win in an FTC hospital merger challenge since a federal district court in Missouri temporarily blocked the merger of the only two commercial hospitals in Poplar Bluffs, Missouri (1998-2 Trade Cases¶72,227). That decision was reversed by the U.S. Court of Appeals in St. Louis (1999-2 Trade Cases ¶72,578), however, and the FTC eventually dismissed that matter.

“Last Dollar Fraud”

On the consumer protection front, the FTC’s efforts to combat “last dollar fraud” were highlighted. According to Chairman Leibowitz, the agency is focusing on loan modification, foreclosure rescue, and other scams that are taking the last dollar from consumers suffering from the economic downturn.

Sherman Act, Section 2 Enforcement

Saying that “Section 2 is alive and well,” Assistant Attorney General Christine Varney touted the Justice Department Antitrust Division’s recent settlement with United Regional Health Care System of Wichita Falls (CCH Trade Regulation Reporter ¶50,988). This is the first case in over a decade challenging a monopolist with engaging in traditional anticompetitive unilateral conduct

Criminal Enforcement

In the criminal area, the antitrust chief said that, while the air cargo price fixing inquiry was entering its last chapter, attendees should continue to pay attention to the ongoing municipal bonds industry investigation. The Justice Department has already obtained nine guilty pleas as a result of this investigation. Additionally, a number of former executives at financial service companies and financial institutions have been indicted and are awaiting trial.

AAG Varney also noted Bank of America’s December 2010 agreement to pay a total of $137.3 million in restitution to federal and state agencies as a condition of admission into the Department of Justice's antitrust corporate leniency program for its role in the conspiracy.

State Enforcement

James A. Donahue III, Pennsylvania Chief Deputy Attorney General and Chair of the National Association of Attorneys General Antitrust Task Force, discussed the states’ efforts to ensure that their citizens were “getting the benefits of competition.” Donahue noted the states’ cooperation with the U.S. Justice Department in the municipal bonds investigation.

He also highlighted state actions targeting resale price maintenance. In particular, Donahue noted two settlements between the California attorney general’s office and cosmetics firms in the last year (2010-1 Trade Cases ¶76,922 and 2011-1 Trade Cases ¶77,306).

Donahue also pointed out that the State of New York was appealing a state court’s denial of an order enjoining mattress manufacturer Tempur-Pedic International, Inc. from restricting discounting by its authorized retailers (2011-1 Trade Cases ¶77,311).