FILED
NOT FOR PUBLICATION
JUL 15 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
DJENEBA SIDIBE; et al., No. 14-16234
Plaintiffs - Appellants, D.C. No. 3:12-cv-04854-LB
v.
MEMORANDUM*
SUTTER HEALTH,
Defendant - Appellee.
Appeal from the United States District Court
for the Northern District of California
Laurel D. Beeler, Magistrate Judge, Presiding
Argued and Submitted July 8, 2016
San Francisco, California
Before: SILVERMAN and NGUYEN, Circuit Judges, and ANELLO,** District
Judge.
Djeneba Sidibe and other health plan members appeal the dismissal of their
third amended antitrust class action complaint under §§ 1 and 2 of the Sherman Act
against Sutter Health, an owner and operator of hospitals and other healthcare
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Michael M. Anello, District Judge for the U.S. District
Court for the Southern District of California, sitting by designation.
service providers in Northern California. We have jurisdiction under 28 U.S.C.
§ 1291, and we review de novo. See In re Musical Instruments & Equip. Antitrust
Litig., 798 F.3d 1186, 1191 (9th Cir. 2015). We reverse the district court’s
judgment and remand for further proceedings.
Sutter sells inpatient hospital services to commercial health insurance plans.
Plaintiffs allege that Sutter forced illegal tying arrangements and anti-steering
clauses upon the health plans, causing plaintiffs to pay higher health insurance
premiums and other healthcare charges. They allege that the relevant geographic
markets for the sale of inpatient hospital services are hospital service areas, or
“HSAs,” as defined in the Dartmouth Atlas of Health Care. Each HSA is a
collection of specifically-defined zip codes whose residents receive most of their
hospitalizations in that local area. Within the tying HSAs, plaintiffs allege that
there are no economic substitutes for Sutter’s inpatient hospital services sold to
health insurance plans. In particular, plaintiffs allege that “Sutter now owns the
only acute care hospitals”or offers “the only available hospital facilities to health
plan members” in several Northern California HSAs, including Antioch,
Burlingame, Roseville, Davis, and Vallejo. Because the market for inpatient
hospitalizations is purportedly local, plaintiffs further allege that health plan
members residing in an HSA generally do not go outside that HSA to seek
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inpatient hospital services; and, even if a hypothetical or actual monopolist raised
prices, health plans could not feasibly contract with hospital services providers
outside the HSA in these tying markets. See Saint Alphonsus Med. Ctr.-Nampa,
Inc. v. St. Luke’s Health Sys. Ltd., 778 F.3d 775, 784 (9th Cir. 2015) (explaining
that a common method for determining the relevant geographic market “is to find
whether a hypothetical monopolist could impose a ‘small but significant
nontransitory increase in price’ (‘SSNIP’) in the proposed market”). Sutter
allegedly leverages its market power in the tying markets to force the health plans
to include inpatient services in five other HSAs (the “tied” markets)—such as San
Francisco, Oakland, and Sacramento—and to pay supra-competitive rates for these
services.
Plaintiffs’ geographic market allegations are sufficiently detailed. A
geographic market is the area “where buyers can turn for alternative sources of
supply.” Id. Here, the third amended complaint describes the purported “tying”
markets, specifically avers that Sutter owns the only inpatient hospital facility in
these markets, and alleges that the health plans (and their members) cannot obtain
alternative sources of inpatient care in these areas. At the pleading stage, plaintiffs
were not required to allege evidentiary facts such as what percentages of patients
from inside and outside a particular HSA use the hospitals in that HSA, or to
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otherwise rebut every purported flaw in the Dartmouth Atlas of Healthcare’s
methodology. See Newcal Indus., Inc. v. IKON Office Solution, 513 F.3d 1038,
1044-45 (9th Cir. 2008). “[T]he validity of the ‘relevant market’ is typically a
factual element rather than a legal element,” and inquiry into the commercial
realities faced by consumers is more appropriately addressed at summary judgment
or trial. Id. at 1045; see also Flovac, Inc. v. Airvac, Inc., 817 F.3d 849, 853 (1st
Cir. 2016); Lucas Auto Eng’g, Inc. v. Bridgestone/Firestone, Inc., 275 F.3d 762
(9th Cir. 2002) (reversing summary judgment on the basis of a genuine issue of
material fact regarding market definition).
Similarly, at this stage, we also cannot say that plaintiffs’ geographic market
allegations were inherently implausible. See Newcal, 513 F.3d at 1045. The third
amended complaint explains that HSAs are areas within which the residents obtain
most of their inpatient hospital services; it is not inherently implausible that these
residents also would be unwilling to seek treatment elsewhere, and that health
plans therefore could not purchase hospital services outside of the alleged HSAs.
See Hanover 3201 Realty, LLC v. Village Supermarkets, Inc., 806 F.3d 162, 183-
84 (3d Cir. 2015) (holding that complaint sufficiently alleged facts suggesting that
defendant could raise prices without causing consumers to drive elsewhere for full-
service supermarkets), cert. denied, 2016 WL 1046885 (U.S. May 23, 2016) (No.
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15-1156); cf. Concord Assocs., L.P. v. Entm’t Props. Trust, 817 F.3d 46, 53-55 (2d
Cir. 2016) (affirming dismissal of complaint on the basis that plaintiffs’ proposed
racing/gaming market in the Catskills region was inherently implausible). The
district court, employing its judicial experience and common sense, was not bound
to conclude that plaintiffs’ geographic market allegations were untenable on their
face. See Ebner v. Fresh, Inc., 818 F.3d 799, 803 (9th Cir. 2016) (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 679 (2009)).
REVERSED and REMANDED.1
1
Appellee’s request for judicial notice of hospital data from
California’s Office of Statewide Health Planning and Development, and other facts
and matters of public record, is denied.
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