RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 08a0174p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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B & H MEDICAL, L.L.C., a Michigan limited liability
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company,
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Plaintiff-Appellant,
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Nos. 04-2438; 06-1338/1339
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STEPHEN M. RYAN, P.L.L.C. and STEPHEN M. RYAN, >
Attorneys-Appellants (06-1339), -
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v.
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ABP ADMINISTRATION, INC.; WRIGHT & FILIPPIS,
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INC.,
Defendants-Appellees. -
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N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 02-73615—Gerald E. Rosen, District Judge.
Argued: March 14, 2008
Decided and Filed: May 7, 2008
Before: MOORE, GILMAN, and SUTTON, Circuit Judges.
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COUNSEL
ARGUED: Stephen M. Ryan, Bingham Farms, Michigan, for Appellant. John A. Cook, LAW
OFFICE OF JOHN A. COOK, PLLC, Royal Oak, Michigan, for Appellees. ON BRIEF: Stephen
M. Ryan, Bingham Farms, Michigan, for Appellant. John A. Cook, LAW OFFICE OF JOHN A.
COOK, PLLC, Royal Oak, Michigan, Gerard Mantese, Mark C. Rossman, MANTESE &
ROSSMAN, P.C., for Appellees.
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OPINION
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KAREN NELSON MOORE, Circuit Judge. In this antitrust case, we consider the legality
of an agreement between non-party Blue Cross Blue Shield of Michigan (“BCBSM”) and the
Defendants-Appellees, Wright & Filippis, Inc. and its subsidiary ABP Administration, Inc.
1
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 2
(collectively “W&F”). This agreement began in 1992 and established an exclusive network of
preferred providers to supply durable medical equipment and prosthetics and orthotics to enrollees
in certain health-benefits plans offered to Chrysler Corporation (“Chrysler”) employees and retirees
and later to certain employees and retirees of Ford Motor Company, as well as participants in the
Michigan Public School Employees Retirement System (“MPSERS”). Following a competitive
bidding process, BCBSM selected W&F to administer the network created by the contract, which
has since been renewed multiple times. After its application to join this network was rejected in
2000, Plaintiff-Appellant B & H Medical, L.L.C. (“B&H”), filed this lawsuit in September 2002,
attacking the network under the antitrust laws as an illegal exclusive-dealing arrangement that
allegedly barred B&H from competing in the “sale, lease or rental of medical durable equipment and
medical supplies to large insurance provider networks,” which B&H claimed was the relevant
market. Joint Appendix (“J.A.”) at 32-34 (Am. Compl. at ¶¶ 6-13).
In a lengthy and well-reasoned opinion, the district court granted W&F’s motion for
summary judgment, rejecting B&H’s definition of the relevant market and finding that B&H’s
antitrust claims failed for several reasons, among them that B&H failed to demonstrate antitrust
standing and that the alleged exclusive-dealing agreement foreclosed no more than thirteen percent
of a properly defined relevant market. The district court later granted in part W&F’s motion for
sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure, imposing over $84,000
dollars in sanctions against Attorneys-Appellants Stephen M. Ryan, P.L.L.C., and Stephen M. Ryan
(collectively “Ryan”) for “failing to dismiss this case when a lengthy discovery period failed to
disclose any support for the antitrust claims asserted in the complaint.” B & H Med., L.L.C. v. ABP
Admin., Inc., 354 F. Supp. 2d 746, 748 (E.D. Mich. 2005). In addition to appealing the district
court’s grant of summary judgment, B&H also appeals a discovery order issued by the district court
that limited B&H’s efforts to obtain broad categories of information from nonparty BCBSM, and
Ryan appeals the sanctions award. W&F filed a motion pursuant to Federal Rule of Appellate
Procedure (“FRAP”) 38 seeking the imposition of appellate sanctions against B&H and Ryan for
pursuing a frivolous appeal.
For the reasons discussed below, we AFFIRM the district court in all respects and we
GRANT W&F’s motion for appellate sanctions.
I. BACKGROUND
At the center of this case is an agreement, which BCBSM developed and which the parties
refer to as the SUPPORT contract,1 that empowered W&F to administer a closed network of
suppliers of durable medical equipment (“DME”)2 and prosthetics and orthotics (“P&O”) to
enrollees in certain health-benefits plans that BCBSM offered to employees and retirees of three
large employers in Michigan: Chrysler, Ford, and MPSERS.3 W&F operates fewer than thirty retail
outlets that sell DME/P&O to consumers, and to ensure access to DME/P&O services for covered
enrollees throughout Michigan, the SUPPORT contract included a provision permitting W&F to
1
The program’s acronym SUPPORT stands for the Select Utilization of Providers for Prosthetic, Orthotic, and
Rehabilitative Technology.
2
DME includes “oxygen-related equipment, beds, and walkers.” J.A. at 76 (Op. & Order Granting Summ. J.
at 3).
3
The SUPPORT program does not apply to employees and retirees of Chrysler, Ford, and MPSERS “who are
enrolled in Blue Cross’s health maintenance organization.” J.A. at 980 (William J. Lynk Aff. at ¶ 13 n.16). The
SUPPORT program “applies only to members who are enrolled in Blue Cross’s traditional open-choice, fee-for-service
coverage or in its preferred provider organization coverage.” Id.
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 3
enter subcontracts with additional DME/P&O vendors. B&H claimed that 296 out of the 644
DME/P&O outlets in Michigan, or forty-six percent, were members of the SUPPORT network.
At some point in 2000, B&H received admission to the SUPPORT network, but W&F soon
terminated B&H’s membership, claiming that it had mistakenly admitted B&H. On September 10,
2002, B&H filed this lawsuit, alleging that the SUPPORT contract amounted to an illegal exclusive-
dealing arrangement, constituted a refusal to deal with and a boycott of B&H, and an attempt to
monopolize the DME/P&O market.
The discovery period in this case was lengthy, with the district court twice granting
extensions to B&H, which “repeated[ly] fail[ed] to serve appropriately tailored document requests
upon non-party BCBSM.” B & H Med., 354 F. Supp. 2d at 748 n.2. The district court noted that
B&H “has failed to explain why BCBSM should be required to serve as a source for information
regarding the overall nature and economics of the DME/P&O market in Michigan,” J.A. at 63
(Order Re: Pl.’s Mot. to Compel Produc. at 4), and, after B&H twice served broad subpoenas
seeking information from BCBSM, the district court closely analyzed B&H’s subpoena and granted
in part B&H’s motion to compel, imposing limitations in its Order on the broad categories of
documents that B&H had requested.4
In its Supplemental Brief in Opposition to Summary Judgment, B&H argued that because
the SUPPORT network included 296 out of the 644 outlets for DME/P&O services in Michigan, the
alleged exclusive-dealing arrangement had foreclosed approximately forty-six percent of the market
for DME/P&O services. W&F countered that economic evidence assessed by its expert
demonstrated the SUPPORT network accounted for only six and one-half percent of the DME/P&O
sales revenue for the entire state of Michigan and just twelve and one-half percent of the DME/P&O
sales revenue in the metropolitan Detroit area. Using B&H’s own financial records, W&F’s expert
also calculated that B&H’s revenues had experienced 137.7% growth between 2001 and 2003 while
B&H was excluded from the SUPPORT network. W&F’s expert also noted that the DME/P&O
market did not have many barriers to entry and that 406 of the 644 DME outlets in Michigan were
small, single-store operations. Indeed, even B&H’s economic expert stated that “[i]n a lot of
respects, this market has the earmarks of being one that is fairly competitive in the standpoint that
entry appears to be fairly easy.” J.A. at 1453 (Pisarkiewicz Dep. Tr. at 279).
In October 2004, the district court granted W&F’s motion for summary judgment on all of
B&H’s claims. The district court rejected B&H’s attempt to define the relevant market as
DME/P&O purchases made by individuals covered by a “large insurance provider network[],”
reasoning that the proper market would include “all purchases or rentals regardless of the source of
payment.” J.A. at 92 (Op. & Order at 19). The district court then explained that B&H’s
“percentage-of-outlets approach is uninformative” and that it “provides no meaningful insight into
the market effects” of the SUPPORT contract upon the DME/P&O market in general. J.A. at 99-100
(Op. & Order at 26-27). In light of the evidence placing the sales revenue from the SUPPORT
network’s sales of DME/P&O to certain employees and retirees of Chrysler, Ford, and MPSERS at
approximately thirteen percent of the DME/P&O market, the district court held “that [B&H] has
failed as a matter of law to establish that the SUPPORT program has foreclosed competition in a
substantial share of the relevant market” given that both sides “agree[d] that an exclusive dealing
arrangement that forecloses 12.5 percent of the relevant market . . . does not run afoul of the
‘substantial foreclosure’ standard” of the Supreme Court’s leading case on exclusive-dealing
4
The district court remarked that it was “exceedingly difficult . . . to meaningfully assess [B&H’s] document
requests to BCBSM, when [B&H] steadfastly refuses, even at this late date, to disclose its specific theories of recovery
in this case” and that B&H’s “outstanding discovery requests to BCBSM seemingly have no bearing whatsoever on many
of the issues presented in” W&F’s motion for summary judgment. J.A. at 64, 70 (Discovery Order at 5, 11).
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 4
arrangements, Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961). J.A. at 104, 103 (Op.
& Order at 31, 30).
The district court rejected B&H’s various attacks on the exclusive-dealing characteristics of
the SUPPORT network, noting that “exclusive dealing arrangements are not per se unlawful” and
that “exclusive arrangements have their benefits as well, and these have been repeatedly recognized
by the courts.” J.A. at 106, 105 (Op. & Order at 33, 32); see also id. at 104-110 (Op. & Order at 31-
37). The district court thus held that W&F was entitled to summary judgment on B&H’s exclusive-
dealing claim under § 1 of the Sherman Act, 15 U.S.C. § 1.
The district court similarly rejected B&H’s § 2 monopolization claims, “observ[ing] that
[B&H] and its expert have utterly failed to present any sort of cogent analysis of the market power
possessed by W&F in any plausible DME/P&O market.” J.A. at 110 (Op. & Order at 37). The
district court also noted that “[t]here is absolutely no evidence that competitors have been excluded
from the larger DME/P&O market—to the contrary, the record shows that B&H, at least, has
enjoyed continued growth and strong performance in this market, despite its exclusion from the
SUPPORT network.” J.A. at 112 (Op. & Order at 39).
Finally, beyond these flaws in B&H’s claims under both §1 and § 2, the district court stated
that an additional ground supported awarding summary judgment in favor of W&F: B&H also
failed to demonstrate any “antitrust injury” establishing its standing to assert a claim under antitrust
law. J.A. at 113-17 (Op. & Order at 40-44) (citing Indeck Energy Servs., Inc. v. Consumers Energy
Co., 250 F.3d 972 (6th Cir. 2000)). “While [B&H] has produced an expert opinion as to B&H’s loss
of anticipated income, the record is devoid of evidence that competition as a whole has suffered as
a result of the exclusive SUPPORT program.” J.A. at 116 (Op. & Order at 43).
In January 2005, the district court issued an Opinion and Order granting in part W&F’s
motion seeking the imposition of sanctions against B&H and its attorney Ryan pursuant to Rule 11.
B & H Med., L.L.C. v. ABP Admin., Inc., 354 F. Supp. 2d 746 (E.D. Mich. 2005). The district court
limited the award to “the fees incurred by [W&F] as a result of [B&H’s] continued pursuit of its
claims after discovery failed to reveal any facts or evidence that might lend support to these claims.”
Id. at 747. The district court stated that B&H “manifestly failed to suggest any ground for its
continued opposition to [W&F’s] motion for summary judgment” in that B&H “and its expert failed
to provide any tenable evidence or theory of ‘substantial foreclosure’ in the relevant market of
DME/P&O purchases, leases, and rentals.” Id. at 749. “In short, rather than dismissing its exclusive
dealing challenge upon failing to uncover any relevant economic data to support it, [B&H] advanced
a theory which, if accepted, would condemn each and every exclusive dealing arrangement as
violative of antitrust law.” Id.
Although the district court imposed sanctions against Ryan for failing to dismiss the case,
the district court denied W&F’s request to impose sanctions against the party B&H and also rejected
W&F’s request for sanctions based upon the filing of the lawsuit in the first place. The district court
described W&F’s request for sanctions against the filing of the lawsuit as “present[ing] a close
question,” but the court concluded that sanctions were not appropriate because the legality of an
exclusive-dealing arrangement “is a factual issue that can only be resolved after an opportunity for
discovery” and that “the principal violation here was the continued pursuit of this litigation when
discovery failed to uncover any evidentiary support for the claims asserted in the complaint.” Id.
at 751. For similar reasons, the district court refused to impose sanctions against B&H, stating that
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 5
B&H’s “counsel bore the responsibility to impress upon his client that the record did not warrant
the continued pursuit of this action.” Id. at 752.5
B&H timely filed a notice of appeal from the district court’s order granting summary
judgment and the district court’s discovery order limiting B&H’s broadly worded subpoena of non-
party BCBSM; Ryan timely filed a notice of appeal from the district court’s order imposing
sanctions under Rule 11. Prior to oral argument in our court, W&F filed a motion pursuant to FRAP
38 seeking the imposition of appellate sanctions against B&H and Ryan for pursuing a frivolous
appeal.
II. ANALYSIS
A. B&H’s Antitrust Claims
1. Standard of Review
We review de novo a district court’s ruling granting summary judgment. Blair v. Henry
Filters, Inc., 505 F.3d 517, 523 (6th Cir. 2007). We will affirm a grant of summary judgment “if
the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is
no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(c). “In reviewing the district court’s decision to grant summary judgment,
we must view all evidence in the light most favorable to the nonmoving party.” Blair, 505 F.3d at
523.
2. Analysis
The record in this case clearly demonstrates that B&H’s antitrust claims lack any
conceivable merit. As the analysis in the district court’s thorough opinion demonstrated, B&H’s
claims suffer from numerous fatal defects: the lack of evidence defining a relevant market; the lack
of evidence suggesting that the SUPPORT contract has allowed W&F to foreclose a substantial
portion of the DME/P&O market in Michigan through its exclusive6 arrangement for providing
DME/P&O services to certain employees and retirees of Chrysler, Ford, and the MPSERS; and the
lack of evidence demonstrating an injury to competition establishing B&H’s antitrust standing.
In its opening brief on appeal, B&H failed to challenge the district court’s finding that B&H
had not shown any antitrust injury and therefore had no antitrust standing, and we may affirm the
district court’s judgment on this ground alone.7 See Priddy v. Edelman, 883 F.2d 438, 446 (6th Cir.
1989) (“We normally decline to consider issues not raised in the appellant’s opening brief.”).
Although B&H’s failure to challenge one of the grounds on which the district court ruled against
it dooms its appeal, after discussing antitrust standing we will briefly address B&H’s other
5
In January 2006, the district court issued a second Opinion and Order relating to sanctions, setting the amount
at $84,512.11 after W&F submitted its costs and Ryan contested certain of those costs. J.A. at 131-38 (Second Sanctions
Op. & Order); see also B & H Med., L.L.C. v. ABP Admin., Inc., No. 02-73615, 2006 WL 123785 (E.D. Mich. Jan 13,
2006).
6
In fact, the employees and retirees of the above-mentioned companies who have enrolled in BCBSM plans
covered by the SUPPORT contract are able to purchase DME/P&O services from vendors, like B&H, that are not
members of the SUPPORT network. Plan enrollees may purchase DME/P&O services outside the SUPPORT network
subject to paying an “out-of-network sanction.” J.A. at 80 (Op. & Order at 7).
7
The Statement of Issues Presented portion of B&H’s brief did not include any reference to an argument that
B&H showed antitrust injury and has antitrust standing, Appellant Br. at 2-3, and no such argument appeared anywhere
in its opening brief.
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 6
arguments because their resolution is relevant to B&H’s appeal of the Rule 11 sanctions and W&F’s
motion pursuant to FRAP 38 for appellate sanctions.
a. Antitrust Standing
Antitrust “[p]laintiffs must prove antitrust injury, which is to say injury of the type the
antitrust laws were intended to prevent and that flows from that which makes defendants’ acts
unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977); see also
NicSand, Inc. v. 3M Co., 507 F.3d 442, 450 (6th Cir. 2007) (en banc) (“Antitrust injury . . . is a
‘necessary, but not always sufficient,’ condition of antitrust standing.”) (quoting Cargill, Inc. v.
Monfort of Colo., Inc., 479 U.S. 104, 110 n.5 (1986)). “The antitrust laws . . . were enacted for ‘the
protection of competition not competitors,’” Brunswick, 429 U.S. at 488 (quoting Brown Shoe Co.
v. United States, 370 U.S. 294, 320 (1962)), and we have held that a district court appropriately
dismissed a lawsuit for failing to state a claim when “the only harm allegedly suffered by [the
plaintiff] was in the company’s capacity as a competitor in the marketplace, not as a defender of
marketplace competition” and the record “present[ed] no indication that competition itself was
harmed by any act of the defendants.” Indeck, 250 F.3d at 977.
As stated above, B&H failed to discuss antitrust standing in its opening brief even though
the district court explicitly stated that the absence of antitrust injury was an “additional ground[] for
granting summary judgment in [W&F’s] favor.” J.A. at 113 (Op. & Order at 40). Even after W&F
included a section in its appellate brief arguing that the district court properly found that B&H
suffered no antitrust injury, Appellee Br. at 44-46, B&H devoted only a total of three sentences in
its Reply Brief to the issue of its antitrust standing and then misstated the record, Reply Br. at 26-27.
In its Reply Brief, B&H charged that “[o]nce again, W&F distorts the record below by claiming that
B&H demonstrated no harm to competition but only damages to B&H.” Reply Br. at 26. But B&H
is the party who distorts the record: the district court explicitly stated that although B&H “has
produced an expert opinion as to B&H’s loss of anticipated income, the record is devoid of evidence
that competition as a whole has suffered as a result of the exclusive SUPPORT program.” J.A. at
116 (Op. & Order at 43).
B&H’s Reply Brief ignored the district court’s explicit finding on this point, and B&H
merely referred to a section of the affidavit submitted by its expert witness without quoting from it
or explaining how it demonstrated injury to competition and why the district court was wrong on
this point. Reply Br. at 26-27 (citing J.A. at 1658-67 (Pisarkiewicz Aff. at 20-29)). Furthermore,
in the cited pages B&H’s expert merely referred to “a strong consumer backlash against the
restrictive policies of HMO’s” and even conceded that “it does appear that Chrysler obtained sharp
discounts from W&F.” J.A. at 1660, 1666 (Pisarkiewicz Aff. at 20, 28)). The district court observed
that B&H presented “no evidence, for example, that DME/P&O providers have been driven out of
business or that consumers have been saddled with poor quality goods or services,” and the court
further noted that “the limited duration of the SUPPORT contract affords BCBSM and its customers
. . . the periodic opportunity to make different arrangements if the SUPPORT program or [W&F’s]
performance is not achieving the desired objectives.” J.A. at 116-17 (Op. & Order at 43-44).
We hold that the district court properly granted summary judgment in favor of W&F on the
ground that B&H failed to demonstrate any antitrust injury.
b. B&H’s Exclusive-Dealing Claim Fails as a Matter of Law
Under governing Supreme Court precedent, the legality of the SUPPORT network is not a
close question. In Tampa Electric, the Supreme Court provided the standard for analyzing
exclusive-dealing arrangements, stating that “the competition foreclosed by the contract must be
found to constitute a substantial share of the relevant market.” 365 U.S. at 328 (emphasis added).
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Courts routinely observe that “foreclosure levels are unlikely to be of concern where they are less
than 30 or 40 percent.” See, e.g., Stop & Shop Supermarket Co. v Blue Cross & Blue Shield of R.I.,
373 F.3d 57, 68 (1st Cir. 2004).
B&H lacked any reasonable theory by which its evidence satisfied the basic “substantial
foreclosure” threshold necessary to prevail on an exclusive-dealing claim. B&H asserted that the
evidence in this case satisfied the “substantial foreclosure” threshold purely on the basis of
observing that forty-six percent of DME/P&O retail outlets in Michigan were members of the
SUPPORT network, without regard to any sales or revenue data. J.A. at 1616 (B&H’s Supplemental
Summ. J. Br. at 10) (stating expert’s “conclu[sion] that B&H and other DME competitors are being
excluded from networks which account for 46 percent of the DME provider outlets across the state
of Michigan for the large insurance provider networks”). Revenue data for the SUPPORT network,
as well as estimates for the total size of the market for DME/P&O in Michigan, did exist, and
W&F’s expert determined that the SUPPORT network accounted for only six and one-half percent
of the DME/P&O sales revenue for the entire state of Michigan and just twelve and one-half percent
of the DME/P&O sales revenue in the metropolitan Detroit area.
On appeal, B&H essentially repeats its argument that a provider-based percentage of
participating DME/P&O outlets is meaningful, without responding to the district court’s criticism
of that measure as “pointless and perverse.” J.A. at 99 (Op. & Order at 26); Appellant Br. at 17-20,
33. Further, B&H grossly distorts the district court’s reasoning on this point. B&H claims that the
district court incorrectly rejected the analysis of B&H’s economic expert because the analysis was
based on a “pointless and perverse” method of estimating market shares, and B&H then falsely
claims that “the Court cited approvingly the use by W&F’s economic expert, Dr. Lynk, of the
precise same numerical fraction except that Dr. Lynk excluded from his numerator any [SUPPORT]
providers other than W&F[’s outlets].” Appellant Br. at 18 (citing J.A. at 98). In fact, in the passage
of the district court opinion that B&H quotes in its brief, the district court was clearly referring to
the economic evidence regarding the sales revenue generated by outlets in the SUPPORT network,
not simply a crude percentage of W&F outlets or SUPPORT outlets of the total in the state. J.A. at
98 (Opinion & Order at 25).
We hold that the alleged exclusive-dealing arrangement in this case does not violate the
antitrust laws because the evidence shows that the SUPPORT program foreclosed access to less than
thirteen percent of the relevant market.
c. B&H’s § 2 Claims
By devoting a mere seven sentences to its claims of monopolization and attempted
monopolization under § 2, see Appellant Br. at 40-41, B&H effectively waived its §2 claims. See
United States v. Corrado, 304 F.3d 593, 611 n.12 (6th Cir. 2002) (“Arguments not developed in
briefs on appeal are deemed waived by this court . . . .”).
d. B&H’s New Arguments
B&H devoted large portions of its Opening Brief and its Reply Brief to arguing, for the first
time in this case, that the principal problem with the SUPPORT network is that it amounts to a price-
fixing conspiracy. See Appellant Br. at 21 (“All of these providers in the Support Network have
come together and agreed to accept a fee schedule, so there is a horizontal price fixing agreement
. . . ”); Appellant Br. at 27-28 (stating that “‘[n]aked’ agreements among competitors to fix prices
are per se illegal” and that “[t]he Support [Network] is per se illegal”); Reply Br. at 7 (stating the
SUPPORT contracts “are primarily price fixing agreements”); id. at 10 (stating the SUPPORT
contracts “just happen to be primarily price fixing agreements”). Nowhere below did B&H describe
the SUPPORT network as a conspiracy to fix prices. The phrase “price fixing” does not appear
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 8
anywhere in B&H’s Amended Complaint.8 J.A. at 33-37 (Am. Compl.). Rather, the entire case
focused on whether the SUPPORT network was an exclusive-dealing arrangement that potentially
foreclosed a substantial portion of the market.
B&H claims that its price-fixing arguments are not new because courts analyze both price
fixing and exclusive dealing under § 1 of the Sherman Act, which prohibits unreasonable restraints
of trade, Reply Br. at 7-8, but this argument manifestly lacks merit and borders on bad faith. Price
fixing and exclusive dealing are two entirely separate theories of antitrust liability, with vastly
different applicable standards and analyses relying on very different kinds of evidence.
“We generally ‘cannot consider an issue not passed on below,’” and “[w]e exercise our
discretion to rule on an issue not decided below only in ‘exceptional cases.’” St. Mary’s Foundry,
Inc. v. Employers Ins. of Wausau, 332 F.3d 989, 995-96 (6th Cir. 2003) (quotations omitted). This
is not such an exceptional case.
Similarly, on appeal, B&H also relies heavily, for the first time, on Statements 8 and
9 from the U.S. Department of Justice and Federal Trade Commission’s Statements of
Antitrust Enforcement Policy in Health Care (Aug. 1996), available at
http://www.usdoj.gov/atr/public/guidelines/0000.pdf (“Health Care Enforcement Guidelines”).
Although it is not improper for a party to cite a case or an authority to an appellate court for the first
time, see Costantino v. TRW, Inc., 13 F.3d 969, 981 n.13 (6th Cir. 1994), Statements 8 and 9, and
particularly B&H’s use of them,9 primarily concern a price-fixing theory of liability, which B&H
did not assert below. We therefore decline to address B&H’s arguments that, under Statements 8
and 9, the SUPPORT network is an illegal agreement to fix prices because B&H did not present this
theory of antitrust liability to the district court. See St. Mary’s Foundry, 332 F.3d at 995-96.
B. B&H’s Discovery Claim
1. Standard of Review
“When reviewing a district court’s decision to limit discovery, we will intervene only if the
decision was an abuse of discretion resulting in substantial prejudice.” Hahn v. Star Bank, 190 F.3d
708, 719 (6th Cir. 1999).
2. Analysis
As with its antitrust claims, B&H’s appeal of the district court’s discovery order, which
limited B&H’s efforts to obtain broad categories of information from nonparty BCBSM, suffers
from fatal flaws. W&F correctly observes that, although B&H devoted a large portion of its
8
In fact, in its initial Complaint, B&H did allege that W&F “engaged in price fixing to deny B&H access to
the relevant market,” J.A. at 22 (Compl. at ¶ 14), but it dropped this claim in its Amended Complaint and accordingly
may not rely on that theory. See Drake v. City of Detroit, No. 06-1817, 2008 WL 482283, at *2 (6th Cir. Feb. 21, 2008)
(stating that a prior “complaint is a nullity, because an amended complaint supercedes all prior complaints”); see also
6 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 1476 (2d
ed. 1990) (stating that “[a] pleading that has been amended under Rule 15(a) supersedes the pleading it modifies” and
that “[o]nce an amended pleading is interposed, the original pleading no longer performs any function in the case”).
9
Terming the SUPPORT program a “provider-controlled contracting network,” or “PCN,” B&H asserts that
in “an antitrust analysis of the Support PCN under Statement 9, the first question is whether the Support PCN should
be analyzed as per se illegal or under the rule of reason.” Appellant Br. at 28. B&H then declares that “the Support PCN
is a cartel or a ‘sham’ network which is per se illegal because ‘antitrust law condemns naked agreements among
competitors which fix prices or allocate markets.’” Id. (quoting Statement 9, Health Care Enforcement Guidelines at
135). Finally, B&H argues that “under a rule of reason analysis pursuant to Statements 8 and 9, the issues are four: (1)
determine if the horizontal price fixing agreement is ancillary . . . .” Appellant Br. at 32 (emphasis added).
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 9
appellate brief to complaints about the discovery process, nowhere did B&H include a discussion
of the standard of review for such claims. As it apparently did before the district court, on appeal
B&H simply asserts that the additional discovery was necessary, without offering any reasonable
explanation for why information possessed by BCBSM would have assisted B&H’s efforts to define
properly a relevant market and estimate the percentage of DME/P&O business foreclosed by the
agreement that established the SUPPORT network as the exclusive source for DME/P&O services
for certain employees and retirees of Chrysler, Ford, and the MPSERS. Indeed, much of B&H’s
“argument” relating to the discovery issue appears in its “Statement of the Case” portion of its brief,
where B&H declares that it “was denied legitimate discovery in the proceedings below.” Appellant
Br. at 7 (emphasis added).
We affirm the district court’s discovery order because B&H has failed to demonstrate either
that the district court abused its discretion in limiting B&H’s efforts to obtain information from
nonparty BCBSM or that its meritless antitrust claims were substantially prejudiced by the limited
discovery.
C. Ryan’s Appeal of the Rule 11 Sanctions
1. Standard of Review
“We review a district court’s imposition of sanctions pursuant to Federal Rule of Civil
Procedure 11 for abuse of discretion.” Tropf v. Fidelity Nat’l Title Ins. Co., 289 F.3d 929, 936 (6th
Cir. 2002).
2. Analysis
As the above analysis has demonstrated, B&H and Ryan pursued (and have appealed) an
obviously meritless antitrust lawsuit long beyond the time at which discovery demonstrated that the
claims lacked support. The district court’s summary judgment opinion, as well as its two opinions
relating to sanctions, show that the court carefully analyzed all the claims in this case and pointed
out the numerous flaws plaguing B&H’s theories and evidence. On appeal, Ryan’s argument
pertaining to the sanctions largely repeats complaints earlier in the brief regarding the denied
discovery, continuing to assert without reasoned explanation that the extra discovery would have
somehow assisted the lawsuit. The district court expressed “frustration at the apparent inability of
[B&H] and its counsel to explain how a particular discovery request was reasonably calculated to
lead to the discovery of evidence bearing upon a viable theory of antitrust liability.” B & H Med.,
354 F. Supp. 2d at 751. Indeed, two of the most obvious flaws in B&H’s lawsuit were the failure
to show an antitrust injury to competition and the failure to show that the SUPPORT network
foreclosed a substantial portion of the market; additional information from BCBSM would not have
assisted B&H on either point.
We conclude that the district court did not abuse its discretion in imposing sanctions against
Ryan pursuant to Rule 11.
D. W&F’s Motion for Appellate Sanctions Pursuant to FRAP 38
1. Standard for Evaluation of Motions Under FRAP 38
FRAP 38 provides that “[i]f a court of appeals determines that an appeal is frivolous, it may,
after a separately filed motion or notice from the court and reasonable opportunity to respond, award
just damages and single or double costs to the appellee.” In Wilton Corp. v. Ashland Castings Corp.,
188 F.3d 670 (6th Cir. 1999), we held that sanctions under FRAP 38 were appropriate when an
appeal is “wholly without merit” and when the appellant’s “arguments essentially had no reasonable
expectation of altering the district court’s judgment based on law or fact.” Id. at 677. We have
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 10
“conclud[ed] that a finding of bad faith is not required before sanctions under Rule 38 may be
imposed by this court.” Id.; see also Tareco Props., Inc. v. Morriss, 321 F.3d 545, 550 (6th Cir.
2003) (“An appellee does not have to demonstrate that the appellant or his attorneys acted in bad
faith to succeed on a motion for sanctions.”) (citing Jones v. Continental Corp., 789 F.2d 1225, 1230
(6th Cir. 1986)). Nonetheless, we have observed that “[w]e will usually impose Rule 38 . . .
sanctions only where there was some improper purpose, such as harassment or delay, behind the
appeal.” Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1212 (6th Cir. 1997) (emphasis added).
Other circuits approach requests for appellate sanctions in a similar fashion. In one
particularly relevant case from the Fifth Circuit, that court imposed a sanction of double costs in an
antitrust case when “appellate counsel made no attempt to address most of the issues raised in the
district court’s opinion.” Olympia Co. v. Celotex Corp., 771 F.2d 888, 893 (5th Cir. 1985). The
court further stated that “[w]hile we realize that the lack of damages or injury was enough to dispose
of [the plaintiff’s] action, we note that [the plaintiff] did not address enough of the requisite elements
to obtain reversal on any of its substantive claims.” Id. Other courts of appeals have found appellate
sanctions appropriate when appellants have “failed to explain how the district court decision was
in error,” including failing to discuss key aspects of the court’s holding, Spiegel v. Continental Ill.
Nat’l Bank, 790 F.2d 638, 650 (7th Cir. 1986), and when appellants “merely reiterate[] the
arguments [they] made to the district court” and that the district court sanctioned below, Optyl
Eyewear Fashion Int’l Corp. v. Style Cos., 760 F.2d 1045, 1052 (9th Cir. 1985).
2. Analysis
Our analysis above has already highlighted the numerous blatant deficiencies in B&H’s
lawsuit, as well as the improper and baseless nature of its appellate briefing. Here we summarize
the most egregious examples of B&H and Ryan’s conduct in support of our decision to impose
sanctions against both.
First, perhaps the most frivolous and sanction-worthy aspect of this appeal is B&H’s entirely
new argument that the SUPPORT network constituted a price-fixing conspiracy when it never
pursued such a theory in the district court. Given that arguments relating to price fixing constitute
a large portion of B&H’s appellate brief, this conduct alone might warrant sanctions.
Second, although B&H dedicated substantial space in its briefing to propounding a brand
new theory of liability, in its opening brief B&H neglected to challenge the district court’s crucial
determination that B&H lacked antitrust standing because B&H had failed to show that the
SUPPORT network had caused an injury to competition. Even when W&F argued this point in its
responsive brief, B&H offered only three conclusory sentences in its Reply Brief to purport to show
that it had demonstrated an injury to competition and satisfied the requirements of antitrust standing.
B&H could not possibly prevail on any of its antitrust claims without demonstrating that it had
antitrust standing,10 and the district court clearly rested its decision to grant W&F’s motion for
summary judgment in part on the lack of antitrust standing. See J.A. at 113-17 (Op. & Order
Granting Summ. J. at 40-44). B&H’s effective failure to challenge the antitrust-standing basis of
the district court’s decision renders the remainder of its antitrust appeal essentially meaningless.
Third, the district court imposed, and we affirm, Rule 11 sanctions against Ryan for “failing
to dismiss this case when a lengthy discovery period failed to disclose any support for the antitrust
claims asserted in the complaint.” B & H Med., 354 F. Supp. 2d at 748. Indeed, the district court
10
Indeed, we have recently held that the absence of antitrust standing is an appropriate ground on which to
dismiss a complaint for failing to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure. NicSand, Inc. v. 3M Co., 507 F.3d 442, 449 (6th Cir. 2007) (en banc) (“[W]e not only
may—but we must—reject claims under Rule 12(b)(6) when antitrust standing is missing.”).
Nos. 04-2438; 06-1338/1339 B & H Medical, L.L.C. et al. v. ABP Admin. Inc. et al. Page 11
stated that it was a “close question” whether Rule 11 sanctions were warranted against B&H and
Ryan simply for filing the lawsuit at all. Id. at 751. B&H should have voluntarily dismissed this
case at the close of discovery; pursuing an appeal—especially one that raises entirely new theories
of liability and fails to challenge crucial grounds of the district court’s opinion—is the essence of
frivolity.
Our final consideration is whether to impose sanctions against Ryan only or against B&H
as well. The district court elected not to impose sanctions pursuant to Rule 11 against B&H because
it found that “counsel bore the responsibility to impress upon his client that the record did not
warrant the continued pursuit of this action.” Id. at 752. At that point, however, B&H should have
been well aware of the many fundamental weaknesses in its case and it should not have requested
that Ryan pursue its antitrust claims on appeal. We therefore find that B&H and Ryan must jointly
pay W&F the costs incurred in defending this appeal. W&F shall have fifteen days from the filing
of this opinion to file an affidavit setting forth the hourly rates of their counsel and the number of
hours spent in defending this appeal, and whatever documentation and argument in support thereof
they deem appropriate. B&H and Ryan may then file a response to this documentation within ten
days. See Tareco Props., 321 F.3d at 550 (citing Wilton Corp., 188 F.3d at 678 (Gilman, J.,
concurring)); see also Blachy v. Butcher, 129 F. App’x 173, 181 (6th Cir. 2005).
We do note that the decision to impose appellate sanctions is a difficult one, and “[w]e do
not wish to chill any appeal, especially in the criminal context, which involves serious, controversial,
doubtful, or even novel questions.” Wilton Corp., 188 F.3d at 677. Sanctions are not appropriate
simply because an appellant’s case “may indeed be quite weak,” Uhl v. Komatsu Forklift Co., 512
F.3d 294, 308 (6th Cir. 2008), and we generally impose sanctions only in the rare case when an
appeal involves “an improper purpose, such as harassment or delay,” Barney, 110 F.3d at 1212, or
when, as here, an appeal consists of baseless or improperly raised arguments, see Blachy, 129 F.
App’x at 181 (6th Cir. 2005) (granting motion for FRAP 38 sanctions when “[t]he result of the
[appellants’] appeal was obvious since their arguments were either untimely, could not be raised for
the first time to this Court, or were objectively meritless”).
In sum, B&H’s antitrust claims lack any conceivable merit, and this has been apparent for
a long time. B&H’s appeal failed to address meaningfully the district court’s reasoning regarding
the evidence pertaining to the DME/P&O market, failed utterly to address the district court’s
conclusion that B&H had not demonstrated antitrust injury, and inappropriately devoted much of
its appellate briefing to introducing an entirely new theory of antitrust liability. Such conduct on
appeal deserves sanction pursuant to FRAP 38.
III. CONCLUSION
For the reasons discussed above, we AFFIRM the judgment of the district court and
GRANT W&F’s motion for appellate sanctions. W&F shall have fifteen days from the filing of this
opinion to file an affidavit setting forth the hourly rates of their counsel and the number of hours
spent in defending this appeal, and whatever documentation and argument in support thereof they
deem appropriate. B&H and Ryan may then file a response to this documentation within ten days.