108 F. Supp. 3d 827
N.D. Cal.2015Background
- Plaintiffs (three individuals) allege Quest Diagnostics used exclusionary conduct (kickbacks/discounts to providers, deals with Aetna and Blue Shield, and acquisitions) to monopolize the plan/out‑patient market for routine diagnostic testing in Northern California and thus charge supracompetitive prices.
- Plaintiffs claim they paid Quest directly (co‑payments/deductibles) and seek to represent a class of out‑patients and health plans who paid Quest since Jan 29, 2011.
- Causes of action: (1) Sherman Act § 2 monopolization; (2) California UCL § 17200; (3) California Unfair Practices Act (UPA) §§ 17043–17044; (4) California Cartwright Act monopolization.
- Quest moved to dismiss under Rule 12(b)(6) arguing lack of Article III/statutory standing, failure to plead antitrust injury or substantial foreclosure, and inadequate pleading of prices/costs for the UPA claim.
- The court found plaintiffs failed to plead that they were injured by Quest’s alleged anticompetitive conduct or that competition was foreclosed in a substantial share of the relevant market; dismissal was granted with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III / statutory standing | Purchases of an overcharged product (co‑pays/deductibles) suffice to show injury | Plaintiffs don’t allege their payments were increased by Quest’s conduct or what portion related to Quest testing | Plaintiffs lack Article III and statutory standing; claims dismissed with leave to amend |
| Standing to represent health plans | Out‑patients and plans were injured the same way (both paid Quest) | Named plaintiffs (individuals) cannot represent plans because injury differs by contractual relationships | Plaintiffs lack shown identity of injury; cannot assert claims on behalf of health plans as pleaded |
| Sherman Act § 2 monopolization (kickbacks/discounts) | Below‑cost pricing to providers produced pull‑through sales and allowed Quest to add a monopoly premium on plan/out‑patient business | Discounts are procompetitive (loss leaders); plaintiffs don’t allege Quest raised plan/out‑patient prices or provide price comparisons | Allegations do not show antitrust injury or supra‑competitive pricing; monopolization claim dismissed with leave to amend |
| Sherman Act § 2 monopolization (agreements with insurers & acquisitions) | Quest paid insurers to exclude rivals and acquired competitors, eliminating rivals and foreclosing competition | Plaintiffs fail to allege foreclosure of a substantial share of the relevant market or market shares of excluded firms; FTC cleared prior acquisition | Agreements and acquisitions, as pleaded, show harm to competitors not competition; insufficient to show substantial foreclosure; dismissed with leave to amend |
| UPA (Cal. Bus. & Prof. Code §§ 17043–17044) | Quest sold physician‑billed testing below cost to suppress competition in plan/out‑patient market | UPA requires pleading of sales price, product cost, and cost of doing business; plaintiffs don’t plead prices/costs and show no consumer injury | UPA claim dismissed for failure to plead prices/costs and injury (with leave to amend) |
| UCL (§ 17200) | Derivative of monopolization and UPA claims | Fails for same reasons as underlying claims | UCL claim dismissed with leave to amend |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead enough facts to state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court need not accept legal conclusions; factual enhancement required)
- Eastman Kodak Co. v. Image Technical Servs., 504 U.S. 451 (1992) (elements of § 2 monopolization; must show willful acquisition/maintenance)
- Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320 (1961) (foreclosure of a substantial share of the market required to show anticompetitive effect)
- United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir.) (monopolist’s conduct must have anticompetitive effect on the market, not just harm competitors)
- Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (predatory pricing standards and need to show anticompetitive effect)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (price cutting can be procompetitive; speculative inferences insufficient)
- Gerlinger v. Amazon.com, Inc., 526 F.3d 1253 (9th Cir.) (plaintiff lacked standing where no allegation of paying a higher price due to defendant’s conduct)
- County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148 (9th Cir.) (Cartwright Act analysis parallels Sherman Act)