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State v. Franciscan Health System

United States District Court, W.D. Washington, Tacoma

March 12, 2018

STATE OF WASHINGTON, Plaintiff,
v.
FRANCISCAN HEALTH SYSTEM d/b/a CHI FRANCISCAN HEALTH; FRANCISCAN MEDICAL GROUP; THE DOCTORS CLINIC, A PROFESSIONAL CORPORATION; and WESTSOUND ORTHOPAEDICS, P.S., Defendants.

          ORDER DENYING DEFENDANTS’ MOTION TO DISMISS, GRANTING DEFENDANTS’ MOTION TO POSTPONE BRIEFING, AND RENOTING PLAINTIFF’S MOTION

          BENJAMIN H. SETTLE United States District Judge.

         This matter comes before the Court on Defendants The Doctors Clinic, A Professional Corporation (“TDC”), Franciscan Health System d/b/a CHI Franciscan Health (“FHS”), and Franciscan Medical Group’s (“FMG”) (collectively “Defendants”) motion to dismiss, Dkt. 39, Plaintiff the State of Washington’s (“State”) motion for partial summary judgment, Dkt. 48, and Defendant’s motion to postpone briefing on the State’s motion, Dkt. 61. The Court has considered the pleadings filed in support of and in opposition to the motions and the remainder of the file and hereby rules as follows:

         I. PROCEDURAL HISTORY

         On August 31, 2017, the State filed a complaint against Defendants FHS, FMG (together with FHS, “CHI Franciscan”), TDC, and WestSound Orthopaedics, P.S., asserting a per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and the Washington Consumer Protection Act (“CPA”), RCW Chapter 19.86; an unreasonable restraint of trade in violation of 15 U.S.C. § 1 and the CPA; and violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and the CPA. Dkt. 1 (“Compl.”).

         On October 30, 2017, Defendants moved to dismiss the State’s per se claim and attached four contracts to their motion. Dkts. 39–39-4. On November 29, 2017, the State responded. Dkt. 45. The State also submitted an agreement and multiple documents from its investigation into the alleged anti-competitive practices. Dkt. 46. On December 8, 2017, Defendants replied and moved to strike the State’s evidence. Dkt. 58.[1]

         On November 29, 2017, the State moved for partial summary judgment on its first claim to establish that CHI Franciscan and TDC are separate entities capable of conspiring under 15 U.S.C. § 1 and RCW 19.86.030. Dkt. 49 at 6.

         On December 15, 2017, Defendants moved to postpone briefing on the State’s motion for partial summary judgment. Dkt. 61. On December 29, 2017, the State responded. Dkt. 67. On January 5, 2018, the State replied. Dkt. 70.

         II. FACTUAL BACKGROUND

         In early September 2016, Defendants entered into a series of agreements. In general, the State alleges that TDC and CHI Franciscan are separate economic entities that entered into an agreement to jointly negotiate the prices for the services they provide to the public. Taken as true, the State asserts that these agreements establish a horizontal price fixing agreement that is per se illegal. Defendants counter that the State mischaracterizes their agreement and that it is an “output” agreement that is not subject to a per se analysis. The Court need not recite any additional allegations because Defendants are dressing a summary judgment motion in Rule 12(b)(6) attire.

         III. DISCUSSION

         A. Standard

         Motions to dismiss brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure may be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under such a theory. Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). Material allegations are taken as admitted and the complaint is construed in the plaintiff’s favor. Keniston v. Roberts, 717 F.2d 1295, 1301 (9th Cir. 1983). To survive a motion to dismiss, the complaint does not require detailed factual allegations but must provide the grounds for entitlement to relief and not merely a “formulaic recitation” of the elements of a cause of action. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965 (2007). Plaintiffs must allege “enough facts to state a claim to relief that is plausible on its face.” Id. at 1974.

         B. Per se Agreements

         Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits “[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States.” Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991, 996 (9th Cir. 2010). In order to state a claim, plaintiff must allege that the defendant (1) engaged in a conspiracy (2) that unreasonably restrained trade under either a per se or rule of ...


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