311 F. Supp. 3d 468
D.R.I.2018Background
- Steward (for‑profit hospital system) sought to acquire failing Landmark Medical Center in receivership; an agreement with Blue Cross & Blue Shield of Rhode Island (BCBSRI) on reimbursement and cooperation was essential to the deal.
- Negotiations between Steward and BCBSRI (2011–2012) over rates and quality metrics broke down; BCBSRI initiated a material‑modification process and briefly allowed Landmark to go out‑of‑network, increasing pressure on the receivership and negotiations.
- BCBSRI formed an internal “Red Team” to evaluate competitive threats (including Steward/ACO entry); BCBSRI viewed Steward’s risk‑based model as a potential disintermediation threat to insurers.
- After Steward withdrew, Prime acquired Landmark; BCBSRI reached rate/quality terms with Prime that Steward contends BCBSRI had refused to offer Steward.
- Steward sued under Sections 1 and 2 of the Sherman Act and Rhode Island antitrust law (also state tort claims), alleging BCBSRI unlawfully refused to deal, conspired with Lifespan and Thundermist, and caused Steward’s lost opportunity; Court denied BCBSRI’s motion for summary judgment and sent all counts to trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Refusal to deal (§2 monopolization/monopsonization) | BCBSRI refused to deal with Steward (or imposed unattainable terms), sacrificed short‑term profit (letting Landmark go out‑of‑network) to block Steward’s entry | BCBSRI acted for legitimate business reasons (rate setting, quality standards, regulatory constraints); Steward walked away | Denied summary judgment — factual disputes (intent, bad‑faith bargaining, sacrifice of short‑term profit) require jury determination |
| Conspiracy in restraint of trade (§1) | Tacit/express coordination among BCBSRI, Lifespan, Thundermist (treat‑and‑transfer plan, patient shifts, payments, coordinated communications) to exclude Steward | Conduct was independent, legitimate business decisions; parallel conduct insufficient | Denied summary judgment — plus‑factor circumstantial evidence could permit reasonable juror to infer agreement |
| Causation & damages | BCBSRI’s conduct materially caused Steward to abandon purchase; damages model estimates losses but may be uncertain because BCBSRI blocked evidence of Steward’s entry | Other causes (failed APA conditions, OHIC regulation limits) fully account for failure; damages speculative/mitigable | Denied summary judgment — material questions of fact on causation, mitigation, and damages remain for jury; nominal damages available if appropriate |
| State‑action / regulatory defenses | OHIC oversight does not immunize BCBSRI; OHIC’s role limited to insurers and allowed exceptions; no active state supervision of the alleged anticompetitive acts | State regulation compelled or licensed BCBSRI rate conduct; state‑action immunity applies | Denied summary judgment — disputed facts about OHIC’s role and lack of active state supervision preclude immunity as a matter of law |
Key Cases Cited
- Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) (refusal to deal can be exclusionary where defendant forsakes short‑term profits and terminates a cooperative arrangement)
- Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) (rare circumstances for unilateral‑conduct liability; distinguishes Aspen Skiing)
- Data General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994) (refusal‑to‑deal analysis lacks a single formula; burden‑shifting framework for business justification)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (§1 conspiracy at summary judgment requires plus‑factors that tend to exclude independent action)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (summary judgment in antitrust requires ruling out equally plausible innocent explanations)
- Sullivan v. National Football League, 34 F.3d 1091 (1st Cir. 1994) (proof of present competition not strictly required; potential competition and responsiveness to consumer preference can show harm to competition)