NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 8 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NORTHBAY HEALTHCARE GROUP, No. 18-16769
INC.; NORTHBAY HEALTHCARE
CORPORATION, D.C. No. 3:17-cv-05005-LB
Plaintiffs-Appellants,
MEMORANDUM*
v.
KAISER FOUNDATION HEALTH PLAN,
INC.; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Laurel D. Beeler, Magistrate Judge, Presiding
Argued and Submitted February 3, 2020
San Francisco, California
Before: PAEZ and BEA, Circuit Judges, and JACK,** District Judge.
Dissent by Judge BEA
Plaintiffs-Appellants NorthBay Healthcare Group, Inc. and NorthBay
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Janis Graham Jack, United States District Judge for
the Southern District of Texas, sitting by designation.
Healthcare Corporation (collectively, “NorthBay”) appeal the district court’s
dismissal of their antitrust claim under § 2 of the Sherman Act against Defendants-
Appellees Kaiser Foundation Health Plan (“Kaiser Health”), Kaiser Foundation
Hospitals, Inc. (“Kaiser Hospitals”), and The Permanente Medical Group
(“Permanente”) (collectively, “Defendants”). The district court dismissed
NorthBay’s antitrust claim for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6). We have jurisdiction under 28 U.S.C. § 1291. Reviewing de
novo, Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078, 1079 (9th Cir. 2005), we
reverse.1
NorthBay alleges that, amid its unprecedented investment campaign to
improve its hospital facilities and services, Defendants monopolized and conspired
to monopolize the healthcare-insurance market in Solano County by injuring
NorthBay, in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. NorthBay
identifies two campaigns Defendants undertook to achieve this goal. The first is
that Permanente physicians at Kaiser’s trauma center instructed emergency
personnel to “steer” uninsured and indigent patients away from two Kaiser
hospitals2 and toward NorthBay’s hospitals; and to “steer” insured trauma patients
1
Because the parties are familiar with the facts and procedural history, we recount
only the most pertinent ones.
2
Those hospitals are Kaiser Permanente Vallejo Medical Center and Kaiser
Permanente Vacaville Medical Center, each owned and operated by Kaiser
Hospitals.
2
away from NorthBay’s hospitals and toward the same two Kaiser hospitals (the
“steering” allegation). The second is that Permanente terminated a 2010
reimbursement agreement with NorthBay and began reimbursing NorthBay at less
than half the previously reimbursed rate (the “reimbursement” allegation).
NorthBay further alleges that with these anticompetitive acts, Defendants would
have succeeded in driving out their competitor, non-party Western Health
Advantage (“Western”), whose network includes NorthBay’s hospitals. Such
conduct, if true—as we must assume it to be, Ashcroft v. Iqbal, 556 U.S. 662, 696
(2009)—is sufficient to survive the strictures under Federal Rule of Civil
Procedure 8.
The district court dismissed NorthBay’s complaint on the ground that it
failed to allege four essential elements of “causal antitrust injury”—an essential
ingredient to both its monopolization and conspiracy to monopolize claims. We
disagree.
Unlawful Conduct. Contrary to the district court’s conclusion, NorthBay
sufficiently alleges Defendants engaged in “unlawful conduct.” See Somers v.
Apple, Inc., 729 F.3d 953, 963 (9th Cir. 2013). NorthBay asserts Permanente’s
physicians at Kaiser Hospitals directed lucrative patients away from its hospitals
and indigent patients towards them to drain NorthBay of its revenue. NorthBay
thus goes beyond merely “recit[ing] . . . the elements” of a § 2 antitrust claim
3
because it describes the facts that form the alleged unlawful conduct. See Iqbal,
556 U.S. at 681. However “fanciful” these facts may seem is irrelevant. See id.
(“It is the conclusory nature of respondent’s allegations, rather than their
extravagantly fanciful nature, that disentitles them to the presumption of truth.”);
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (stating a court must
proceed “on the assumption that all the allegations in the complaint are true (even
if doubtful in fact)”). Given that only the claim needs to be plausible, and not the
facts themselves, we disagree with the district court’s conclusion that any further
factual enhancement was necessary. See NorthBay Healthcare Grp. v. Kaiser
Found. Health Plan, Inc., No. 17-CV-05005-LB, 2018 WL 4096399, at *7 (N.D.
Cal. Aug. 28, 2018).
Similarly, the reimbursement allegations are also sufficient to meet the
element of “unlawful conduct.” By terminating the 2010 reimbursement
agreement and reimbursing NorthBay at substantially lower rates than originally
agreed upon, Defendants exposed themselves to potential liability under California
law and engaged in business activities that appear contrary to its own interests
down the line, unless to achieve the immediate—and anticompetitive—goal of
injuring NorthBay. See Cal. Health & Safety Code § 1317.2a(d) (stating third
party-payor must pay the “reasonable charges” of the transferring hospital); see
also Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 610–11
4
(1985); Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S.
398, 409 (2004).
Injury. NorthBay also pleads facts that are sufficient for the second element
to demonstrate causal antitrust injury—that it suffered “some credible injury”
caused by Defendants’ unlawful conduct. Am. Ad Mgmt. v. Gen. Tel. Co. of Cal.,
190 F.3d 1051, 1056 (9th Cir. 1999). The operative complaint describes at length
the financial injuries NorthBay suffered because of Defendants’ alleged steering
and reimbursement practices.
Injury Flowing from Anticompetitive Conduct. Relatedly, NorthBay has
adequately alleged the third element of causal antitrust injury—that its injuries
“flow[ed] from an anticompetitive aspect or effect of the defendant’s behavior . . .
. ” Pool Water Prods. v. Olin Corp., 258 F.3d 1024, 1034 (9th Cir. 2001)
(quotation marks omitted). NorthBay’s steering and reimbursement allegations
caused financial injuries that go to the heart of anticompetitive conduct. Each
campaign, according to NorthBay, was undertaken to prevent NorthBay from
following through with “procompetitive investments in its hospital facilities and
services.” And NorthBay alleges that Defendants’ unlawful conduct has worked
because, to date, it has had to curb future investment plans, close departments, lay
off employees, and reduce services available to the public. These alleged injuries
to NorthBay undoubtedly “hurt competition.” See id. As NorthBay describes it,
5
Western is Kaiser Health’s “only significant healthcare insurance rival” in Solano
County, and Western’s ability to compete with Kaiser Health depends on
consumers seeing NorthBay hospitals as favorable alternatives to Kaiser Hospitals.
And the alleged injuries NorthBay has suffered because of Defendants’
purportedly anticompetitive behavior has prevented NorthBay from competing
with Kaiser Hospitals, and even forced NorthBay to make cutbacks that have
rendered it a less desirable alternative to Kaiser Hospitals. We thus conclude that
NorthBay’s alleged injuries flowed from Defendants’ alleged anticompetitive
conduct.
Conduct Antitrust Laws Were Meant to Prevent. NorthBay’s alleged injury
also meets the fourth element of antitrust injury—that is, it was “of the type the
antitrust laws were intended to prevent.” Am. Ad Mgmt., 190 F.3d at 1057.
NorthBay’s steering and reimbursement allegations were, in its view, done
intentionally to prevent NorthBay from completing major investments in its
facilities, which would have improved the quality of services. Such disruption
could, as alleged, diminish the quality of services for the public and thus fall under
the type of protection the antitrust laws were intended to afford.
Market Participant / Inextricable Intertwinement. Last, although the district
court did not address the final element to show causal antitrust injury, we conclude
the record sufficiently shows that NorthBay satisfies it. Generally, this element is
6
satisfied if the injured party shows that it “[was] a participant in the same market as
the alleged malefactors,” as, for example, a “consumer” or “competitor.” See
Somers, 729 F.3d at 963. Additionally, the injured party can satisfy the element by
showing its injuries are “inextricably intertwined with the injury the [Defendants]
sought to inflict on” marketplace participants. See Blue Shield of Va. v. McCready,
457 U.S. 465, 484 (1982); Am. Ad Mgmt., 190 F.3d at 1057 n.5 (“We recognize
that the Supreme Court has carved a narrow exception to the market participant
requirement for parties whose injuries are ‘inextricably intertwined’ with the
injuries of market participants.”).3
The parties do not dispute that NorthBay was neither a consumer nor a
competitor in the Solano County healthcare-insurance market, but NorthBay
3
We disagree with the dissent’s characterization of McCready. The Supreme
Court began by emphasizing that the standing requirement, 15 U.S.C. § 15, “does
not confine its protection to consumers, or to purchasers, or to competitors, or to
sellers.” McCready, 457 U.S. at 472 (quoting Mandeville Island Farms, Inc. v.
Am. Crystal Sugar Co., 334 U.S. 219 (1948)). While McCready was a health plan
participant, the Court’s reasoning emphasized that she was directly targeted for
harm by parties seeking to injure a competitor. The Court stated that the harm to
McCready was “clearly foreseeable; indeed, it was a necessary step in effecting the
ends of the alleged illegal conspiracy.” Id. at 479. Moreover, the Court provided a
hypothetical to further explain its reasoning: “If a group of psychiatrists conspired
to boycott a bank until the bank ceased making loans to psychologists, the bank
would no doubt be able to recover the injuries suffered as a consequence of the
psychiatrists’ actions.” Id. at 484 n.21. In the hypothetical, the bank is not a
competitor or consumer in the psychotherapy market, but it was used to directly
harm a competitor; McCready was used in a similar way. So too here—the
complaint alleges that Kaiser sought to use NorthBay to harm Western.
7
nonetheless falls within McCready’s holding because its injuries are “inextricably
intertwined” with an injury to Western. As alleged, Kaiser Health’s one significant
competitor in the Solano County healthcare-insurance market is Western. Because
NorthBay is Western’s Solano County in-network hospital system, any acts that
injure NorthBay in turn hurt Western. Thus, Defendants sought to injure
NorthBay’s investment projects by steering patients and cutting reimbursement
rates, which, in effect, aided its efforts to squeeze Western out of that market and
maintain a monopoly. Thus, although “the goal of the [steering and reimbursement
allegations] was to exclude [Western] from [the Solano County healthcare-
insurance market],” NorthBay’s alleged financial injuries “[were] the very means
by which it [was] alleged that [Defendants] sought to achieve its illegal ends.” See
McCready, 457 U.S. at 479, 484 n.21. The Supreme Court’s rule in McCready
therefore applies.
Because we reverse the district court’s dismissal of NorthBay’s federal
claims, on remand the district court should reconsider its decision declining to
assert supplemental jurisdiction over the state-law claims. See Lacey v. Maricopa
Cnty., 693 F.3d 896, 940 (9th Cir. 2012) (en banc).
REVERSED and REMANDED.
8
FILED
NorthBay Healthcare Group v. Kaiser Foundation Health Plan, No. 18-16769
DEC 8 2020
BEA, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
The majority reverses the district court’s third dismissal of this case because
it concludes NorthBay plausibly alleged “causal antitrust injury” for claims against
the Kaiser Defendants under the anti-monopolization provision of the Sherman
Act, 15 U.S.C. § 2. In my view, the majority errs by sidestepping governing law
on two essential elements of “causal antitrust injury”: (1) that the defendant’s
conduct be unlawful and (2) the proximate cause requirement that the plaintiff
participate in the market the defendant is allegedly monopolizing. NorthBay’s
final amended complaint failed adequately to allege these elements as required by
law and should be dismissed. I respectfully dissent from the majority’s contrary
disposition.
I.
The majority reads two theories alleged in NorthBay’s third and final
complaint as alleging sufficient facts to plead unlawful conduct on the part of the
Kaiser Defendants. First, NorthBay alleges that Kaiser abused its physicians’
emergency routing privileges to “steer” insured patients away from NorthBay’s
hospitals in Solano County, California, and to “steer” uninsured patients to
NorthBay’s hospitals. Second, NorthBay claims that Kaiser violated California
law by refusing to reimburse NorthBay at reasonable rates for emergency care
provided to Kaiser insurance subscribers. Properly understood, however, these
allegations are legal conclusions that claim Kaiser violated the law, rather than
factual allegations of what Kaiser did, so to render NorthBay’s claims of steering
and underpaying reimbursement plausible as required by Ashcroft v. Iqbal, 556
U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
Because NorthBay failed to carry its burden of supporting each theory of unlawful
conduct with allegations of fact, I would affirm the dismissal of the complaint.
To survive a motion to dismiss, plaintiffs must push their claim across “the
line between possibility and plausibility” by alleging facts that are more than
“‘merely consistent with’ a defendant’s liability.” Iqbal, 556 U.S. at 678 (quoting
Twombly, 550 U.S. at 557). It is well established, as the district court recognized,
that courts must presume the truth of factual allegations when deciding a motion to
dismiss. But it is equally well established that the presumption of truth “is
inapplicable to legal conclusions,” no less to “a legal conclusion couched as
a factual allegation.” Id. (quoting Twombly, 550 U.S. at 555).
NorthBay alleges that the Kaiser Defendants engaged in two forms of
unlawful conduct to accomplish a conspiracy to monopolize the Solano County
health insurance market. The majority concludes each of the two claims of
lawbreaking are factual allegations that render NorthBay’s antitrust claim plausible
as a collective whole. Maj. Op. 3–4. Yet accusations that another party has broken
2
the law are quintessentially legal claims, and legal claims require supporting
factual allegations to survive a motion to dismiss. Plaintiffs may not impose on
a defendant the substantial costs of discovery by pleading multiple claims under
the same statutory cause of action and arguing each makes the other plausible. The
problem the district court identified in NorthBay’s final complaint is not, as my
colleagues put it, that NorthBay’s assertions are “fanciful.” The problem is that
NorthBay’s theories of unlawful conduct are independent legal claims that lack
supporting facts. See Twombly, 550 U.S. at 555–57. The legal claim that
a defendant trespassed by disposing of waste on a plaintiff’s land, for example,
must be supported by factual allegations that the defendant drove his truck onto the
property and dumped waste thereon; alleging mere trespass is an accusation, not
a well pleaded complaint entitling the plaintiff to discovery. “Steering” and
“underpaying” are, like “disposing,” conclusions or claims, not allegations of fact.
First, NorthBay claims that the Kaiser Defendants abused their physicians’
emergency routing privileges by steering lucrative insured patients to Kaiser
hospitals and steering uninsured patients to NorthBay hospitals. As the district
court correctly noted, NorthBay’s complaint is devoid of factual allegations
capable, if proven, of establishing the steering claim. Kaiser Vacaville, one of the
hospitals operated by the Kaiser Defendants, is the only “Level II” trauma center in
Solano County certified to treat severe emergency injuries. When a routing
3
physician identifies a patient’s injury as “Level II” rather than the less serious
designation of “Level III,” the patient, insured or not, generally must be
transported to a “Level II” hospital even if the “Level III” trauma center were
closer. NorthBay fails to allege specific instances in which Kaiser physicians
directed emergency personnel to transport insured patients to a more distant Kaiser
facility or uninsured patients near a Kaiser facility to a more distant NorthBay
facility, or that such directions cannot be explained by the physicians’ remote
evaluation of the severity of the patient’s injury.
NorthBay includes specific allegations in its complaint that do nothing to
make the steering allegations more plausible. For example, NorthBay alleges that
its hospitals posted lower revenues, treated more uninsured patients, and treated
fewer emergency trauma patients in 2017 than 2016. But these statistics are at best
consistent with misconduct by the Kaiser Defendants and are more plausibly
explained by ordinary competitive activity and market conditions, including
fluctuation in the number of “Level III” trauma patients NorthBay was eligible to
receive as compared to “Level II” patients only Kaiser might receive. See
Twombly, 550 U.S. at 566 (finding no plausible suggestion of antitrust conspiracy
where “nothing in the complaint intimates … anything more than the natural,
unilateral reaction” of each market player). NorthBay does not allege specific facts
to build on a single unsourced and undated allegation in its complaint that the
4
Kaiser Defendants “instructed” local fire department paramedics to steer insurance
subscribers towards Kaiser facilities. See id. at 564 (discounting “a few stray
statements” in a complaint when “on fair reading [they] are merely legal
conclusions resting on the prior allegations”). Who, what, where, and when are
left to the imagination. In fact, far from alleging instances in which paramedics
complied with suspect instructions by the purported doctor-conspirators in charge
of routing ambulances, NorthBay cited examples of paramedics ignoring routing
instructions in favor of their own judgment as to where patients should be
delivered.
Nor does NorthBay allege a number or pattern of “Level III” injuries at
locations close to NorthBay hospitals that were nevertheless directed by the
defendants’ physicians to Kaiser hospitals. Instead, NorthBay’s complaint recites
one incident of alleged steering in which a Kaiser physician directed an ambulance
carrying a Kaiser subscriber to a Kaiser hospital, and another in which Kaiser
transferred one homeless patient to a NorthBay facility. In the first, NorthBay fails
to link the incident with general steering practices on Kaiser’s part or to make
a monopolization scheme more plausible than obvious alternative explanations,
such as the physician’s confusion about the ambulance’s location, the severity of
the patient’s injury, or the patient’s own preference to be treated at a Kaiser
facility. In the second, the incident involved a post-admission transfer from one
5
facility to another rather than emergency routing. In any case, the patient in
question was in fact insured through Medi-Cal.
This is thin gruel indeed upon which to attempt to shirk the duty to
investigate before suing, and thereby seek to open the door to expensive and,
perhaps, unjustified discovery which the Supreme Court sought to stanch with its
decisions in Twombly and Iqbal. See Iqbal, 556 U.S. at 678–79 (“Rule 8 … does
not unlock the doors of discovery for a plaintiff armed with nothing more than
conclusions.”); Twombly, 550 U.S. at 558–59 (“[I]t is one thing to be cautious
before dismissing an antitrust complaint in advance of discovery, but quite another
to forget that proceeding to antitrust discovery can be expensive. …[T]he threat of
discovery expense will push cost-conscious defendants to settle even anemic cases
before reaching [summary judgment] proceedings.”).
Second, NorthBay claims that the Kaiser Defendants violated California law
by reimbursing NorthBay at unreasonable rates for out-of-network emergency
services provided to Kaiser subscribers. See Cal. Health & Safety Code
§ 1317.2a(d) (requiring third party payor to pay “reasonable charges” to the
transferring hospital). NorthBay’s complaint again fails to allege facts capable of
proving a violation of the law, such as allegations that Kaiser’s reimbursements fall
below industry custom or that Kaiser knowingly reimburses for less than
NorthBay’s actual costs contrary to practice in the State.
6
NorthBay argues its allegation that Kaiser’s reimbursement rates are below
NorthBay’s stated rates alleges a violation of California law. A litigant’s stated
rates are not controlling, however, because California does not define the
reasonableness of rates by “what the provider unilaterally says its services are
worth.” Children’s Hosp. Cent. Cal. v. Blue Cross of Cal., 226 Cal. App. 4th
1260, 1275 (2014). Nor does it matter that Kaiser terminated a 2010 agreement
with NorthBay that had offered higher reimbursement rates since NorthBay does
not allege the termination was itself unlawful. See Pac. Bell Tel. Co. v. Linkline
Commc’ns, Inc., 555 U.S. 438, 448 (2009) (“As a general rule, businesses are free
to choose the parties with whom they will deal, as well as the prices, terms, and
conditions of that dealing.”). 1
II.
Although the failure to allege unlawful conduct by the Kaiser Defendants is
1
The unlawful conduct requirement bleeds into another essential element of
a monopolization claim under Section 2 of the Sherman Act: “willful acquisition or
maintenance” of monopoly power “as distinguished from growth or development
as a consequence of a superior product, business acumen, or historic accident.”
Linkline, 555 U.S. at 448 (quoting United States v. Grinnell Corp., 384 U.S. 563,
570–71 (1966)). The Kaiser Foundation Health Plan’s dominant market position
in the Solano County health insurance market makes Kaiser an unlawful
monopolist only if NorthBay alleges its monopoly position is maintained
unlawfully. The failure to allege unlawful conduct as the cause of Kaiser’s market
success defeats both the “causal antitrust injury” and the “willfully acquired and
maintained” elements of NorthBay’s monopolization claim.
7
sufficient reason to dismiss this case, my colleagues further err by anticipatorily
holding NorthBay adequately alleged proximate cause, another element of “causal
antitrust injury,” even though the district court did not resolve this issue. Congress
implicitly limits the scope of private rights of action according to the common law
principle embodied in the concept of proximate cause: that “[t]he general tendency
of the law, in regard to damages at least, is not to go beyond the first step” in the
causal chain. Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of
Carpenters, 459 U.S. 519, 534 (1983) (quoting S. Pac. Co. v. Darnell-Taenzer
Lumber Co., 245 U.S. 531, 533 (1918)). In the antitrust context, plaintiffs must
allege that the defendant’s anti-competitive scheme proximately caused injury to
the plaintiffs by targeting a market in which they are direct participants for
monopolization. See id. at 539; Somers v. Apple, Inc., 729 F.3d 953, 963 (9th Cir.
2013).
Here, NorthBay alleged that the Kaiser Defendants’ unlawful conduct
toward NorthBay was intended to damage a health insurance company, Western
Health Advantage. As a healthcare services provider—a hospital—NorthBay is
not a participant—an insurer—in the health insurance market that it alleges the
Kaiser Defendants seek to monopolize. NorthBay is a seller of medical services,
not a seller or a buyer of medical insurance policies used to purchase medical
services. Had the district court not already decided to dismiss the complaint for
8
failure to allege other elements of “causal antitrust injury,” NorthBay’s failure to
allege market participation by NorthBay in the health insurance market would
have, and does, warrant dismissal.
Relying on Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982), the
majority nevertheless holds that NorthBay’s complaint sufficiently alleged
proximate cause because NorthBay’s injuries are “inextricably intertwined” with
those inflicted on Western, a competitor of Kaiser Foundation Health Plan in the
local health insurance market. Maj. Op. 7–8. Western treats NorthBay’s hospitals
as “in network,” meaning Western subscribers pay significantly less than market
rates for healthcare provided at NorthBay facilities, under preexisting contractual
arrangements. This causation theory asserts that the Kaiser Defendants targeted
NorthBay with their unlawful steering and underpaying of reimbursement conduct
so that NorthBay will reduce services and future service expansion and make
Western’s health insurance plans less attractive to potential subscribers. By
accepting this causal chain as sufficient to allege proximate cause, the majority
commits two serious errors.
The first error is that McCready did not abrogate the requirement that an
antitrust plaintiff participate in the market he claims is being monopolized by the
defendant. McCready involved an antitrust suit by the beneficiary of a group
health insurance plan. The plaintiff beneficiary of a health plan claimed the insurer
9
conspired to restrain competition in the psychotherapy market by reimbursing
beneficiaries for treatment by psychiatrists but not for comparable treatment by
psychologists, and injured her (and members of her putative class) by depriving
would-be patients of psychologists’ services. The Supreme Court held that
consumers like the plaintiff who participate in the same market as the competitors
targeted by the defendants’ anticompetitive scheme could sue the alleged
wrongdoers because the alleged anticompetitive harms were “borne directly by the
customers of the competitors.” 457 U.S. at 483 (emphasis added). In other words,
in McCready the beneficiaries were marketplace participants in the psychotherapy
market capable of suffering direct antitrust injury consistent with proximate cause
principles. By contrast here, NorthBay is neither directly providing nor directly
consuming health insurance benefits.
McCready elaborated on but did not replace the marketplace participant
requirement, as the Supreme Court and this court have recognized on multiple
occasions. See, e.g., Associated Gen. Contractors, 459 U.S. at 529 n.19 (noting
that in McCready “the actual plaintiff was directly harmed by the defendants’
unlawful conduct”); Or. Laborers-Employers Health & Welfare Trust Fund v.
Philip Morris, Inc., 185 F.3d 957, 967 (9th Cir. 1999) (rejecting the argument that
McCready eliminated the market participant requirement). This court has
previously rejected the notion that plaintiffs may recover for antitrust violations in
10
a different market. See Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051,
1057 (9th Cir. 1999) (“Antitrust injury requires the plaintiff to have suffered its
injury in the market where competition is being restrained. Parties whose injuries,
though flowing from that which makes the defendant's conduct unlawful, are
experienced in another market do not suffer antitrust injury.”); Legal Economic
Evaluations, Inc. v. Metro. Life Ins. Co., 39 F.3d 951, 956 (9th Cir. 1994)
(rejecting extension of McCready where “the asserted harm to competition takes
place in different markets”).2 NorthBay, a healthcare services provider, did not
allege it participates in the health insurance market at the center of this case. The
majority is wrong to assume McCready’s permissive definition of marketplace
participant includes plaintiffs operating in an entirely different market.
The second error is that the majority assumes proximate cause is satisfied
whenever injury to the plaintiff in one market could harm an affiliated third party
in a different market subject to the defendant’s alleged antitrust scheme. Maj. Op.
8. That is not so. As the Supreme Court explained in McCready, proximate cause
2
The majority cites a footnote in American Ad Management stating that McCready
“carved a narrow exception to the marketplace participant requirement for parties
whose injuries are ‘inextricably intertwined’ with the injuries of market
participants.” Maj. Op. 7 (quoting 190 F.3d at 1057 n.5). As in McCready,
however, American Ad Management allowed antitrust claims to proceed because
the relevant market included the plaintiffs. American Ad Management did not, and
could not have, extended McCready into a freestanding exception to the
marketplace participation requirement after the Supreme Court and the Ninth
Circuit had refused to do the same.
11
requires a direct causal relationship between injury to the plaintiff and antitrust
injury to the targeted third party. Plaintiffs may sue under the antitrust laws when
their injury is “the very means” by which a defendant sought to injure his
competitors, such that the parties’ injuries are “inextricably intertwined.” 457 U.S.
at 479. It is not enough to allege an indirect chain of causation where one or more
intervening causes may control whether the plaintiff’s injury will translate into an
antitrust injury to competitors in the defendant’s targeted market. See, e.g.,
Associated Gen. Contractors, 459 U.S. at 540 (rejecting antitrust claim where “the
chain of causation between the Union’s injury and the alleged restraint in the
market … contains several somewhat vaguely defined links”); cf. Painters &
Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharma. Co., 943 F.3d
1243, 1257 (9th Cir. 2019) (allowing suit against drug manufacturer despite
physician intermediaries because the drug “was required to be prescribed by
physicians” for the scheme to succeed).
By NorthBay’s own account, “the very means” by which the Kaiser
Defendants sought to pressure Western out of the health insurance market are not
the alleged steering and underpaying reimbursement practices, but the effect of
NorthBay’s own choices about whether and when to invest in patient services.
NorthBay’s complex financial decision-making processes, based on multiple
assumptions and predictions made apart from any intervention by Kaiser, sever the
12
legal relationship between Kaiser’s alleged unlawful conduct toward NorthBay and
resulting injury to Western in the health insurance market. To use a pool example,
this means the difference between hitting the cue ball on a straight shot that sinks
the eight-ball into the pocket as opposed to sending the cue ball careening into the
racked billiard balls at the beginning of the game, when the eight-ball is nestled in
the middle of the racked balls, and hoping for the best. The former outcome is
direct causation; the outcome of the latter is famously beyond ordinary human
ability accurately to predict. Like the multiple assumptions and predictions of
NorthBay, the balls racked around the eight-ball sever the proximate causal
relationship between the cue ball and the eight-ball, which may, or may not, end up
in the side pocket by the effort of the player.
By choosing to litigate this case on the theory that the Kaiser Defendants
sought to monopolize the health insurance market in which the two parties are not
direct competitors, NorthBay set for itself an uphill climb on the element of
proximate cause. The majority is wrong to push NorthBay over the top by
unmooring McCready entirely from the market participant rule.
* * *
NorthBay failed to nudge its theories of “causal antitrust injury” “across the
line from conceivable to plausible.” Iqbal, 556 U.S. at 680 (quoting Twombly, 550
U.S. at 570). Because the majority recasts NorthBay’s legal claims as factual
13
allegations and decides the proximate cause issue contrary to binding precedent,
I respectfully dissent.
14
Northbay Healthcare Group v. Kaiser Foundation Health Plan
Combined Opinion