This antitrust case requires us to examine the structure and operation of healthcare delivery in an era marked by a bewildering array of insurer and provider arrangements. The plaintiffs, appellants here, represent the interests of podiatrists in Puerto Rico. They Sued La Cruz Azul de Puerto Rico (Blue Cross) and Triple-S, Inc. (Triple-S) in the federal district court complaining, inter alia, that the defendants had conspired with medical doctors to exclude podiatric care from their standard benefits packages during the period from 1995 to 1999. The district court concluded that the plaintiffs had offered insufficient evidence that physicians controlled the plans’ policymaking functions with respect to either insurance benefits or reimbursement' rates (and, therefore, had offered insufficient evidence of concerted action). Accordingly, the court granted summary judgment in the defendants’ favor. Relat-edly, the court dismissed a Lanham Act claim against Blue Cross. The plaintiffs appeal from these determinations. We affirm.
I. BACKGROUND
Except for the Lanham Act count (as to which the allegations of the amended complaint control), we glean the relevant facts from the summary judgment record. We draw all reasonable inferences in the plaintiffs’ favor.
Griggs-Ryan v. Smith,
A. The Protagonists.
The plaintiffs include the Podiatrist Association (a non-profit trade association), a number of practicing podiatrists, their spouses, and their conjugal partnerships. Inasmuch as the podiatrists are the real parties in interest, we shall discuss the matters sub judice as if they were the sole plaintiffs.
Podiatrists are licensed health-care providers in Puerto Rico (as elsewhere). They afford medical care to the foot and lower extremities. Podiatrists attend four-year schools of podiatric medicine. Those who successfully complete the curriculum are awarded D.P.M. degrees and become doctors of podiatric medicine. Once admitted to practice, podiatrists provide services that are similar to those offered by some medical doctors, so that the two groups compete against each other for certain patients. One court has suggested that podiatrists can furnish comparable services at lower costs.
See Hahn v. Or. Physicians’ Serv.,
The defendants are Puerto Rico’s two major providers of health-care insurance.
1
Triple-S is a for-profit corporation. From 1995 forward, its board of directors has been composed of nineteen members, eight of whom are medical doctors. The other members include a dentist, hospital officials, and community representatives. The board has complete control over corporate policymaking, and all changes in the benefits packages and reimbursement rates established by Triple-S are subject to board approval. The executive committee, which exercises responsibility over corporate policies between board meetings, consists of seven board members. Since 1995, three of those members — the president, vice-president, and secretary — have been medical doctors. The medical director, who reports to the board, is required by the corporation’s bylaws to have an M.D. degree.
Blue Cross has a more complicated corporate history. Before 1998, it functioned as a non-profit corporation. Its twenty-eight board members included seven medical doctors, seven hospital executives, and fourteen subscriber representatives. Blue Cross became a for-profit corporation in 1998. Upon its conversion to for-profit status, Blue Cross established a fourteen member board of directors. All the members represented subscribers; none of them were medical doctors. In November of that year, Independence Holdings, a wholly-owned subsidiary of Independence Blue Cross, acquired a majority of its shares. At that time, the board was pared to seven members (none of whom are medical doctors).
When it functioned as a non-profit, Blue Cross had a fees and contracts committee that was responsible for proposing and evaluating benefits packages and reimbursement policies. The committee consisted of eight members: two medical doctors, two hospital executives, and four subscriber representatives. Blue Cross also maintained a medical advisory committee composed of three medical doctors (all of whom doubled in brass as board members). Despite the existence of these committees, all major decisions concerning benefits and reimbursement rates remained subject to the board’s approval.
B. The Plaintiffs’Allegations.
The plaintiffs’ amended complaint mounts two kinds of claims. The first set, involving alleged antitrust violations, are rooted in Section 1 of the Sherman Act, 15 U.S.C. § 1, and a parallel local-law provision, 10 P.R. Laws Ann. § 258 (1997). In a related vein, the plaintiffs charged both defendants with having engaged in unfair business practices in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and Article 1802 of the Civil Code, 31 P.R. Laws Ann. § 5141 (1990).
The plaintiffs’ antitrust claims start with the premise that the defendants have favored medical doctors by excluding podiatrists, podiatric care, and ancillary services essential to podiatric care from their basic
In support of these antitrust claims, the plaintiffs point to the following evidence. First, they remark that physicians have served on the defendants’ boards of directors and have occupied key decision-making positions within the defendants’ organizational structures. In contrast, no podiatrist has ever participated in either defendant’s governance apparatus. Second, the plaintiffs identify specific meetings in which the defendants’ exclusionary benefits policies were discussed and approved. They assert that those meetings were dominated by physicians.
The second type of claim mounted by the plaintiffs accuses the defendants of making false representations regarding the quality of podiatric care. In this regard, the plaintiffs allege that the defendants spread misinformation to subscribers regarding the competency of podiatrists, the relative professionalism of podiatrists vis-a-vis medical doctors, and the limited availability of reimbursement for podiatric care. The plaintiffs claim that these disparaging comments caused them both economic loss and reputational damage.
The current dispute is emblematic of the nationwide conflict between physicians and other participants in the health-care market.
See, e.g., Flegel v. Christian Hosp.,
C. Travel of the Case.
The plaintiffs sued on December 9, 1999, and filed an amended complaint on March 28, 2000. Shortly thereafter, Blue Cross moved for summary judgment with respect to the antitrust claims and for dismissal of the remaining claims. The district court permitted the plaintiffs to undertake discovery on the issues raised in the summary judgment motion. While those motions were pending, Triple-S moved for summary judgment on all claims asserted against it. The parties appear to have assumed that discovery could go forward on the issues framed by this motion.
Having disposed of most of the causes of action asserted under federal law, the court declined to exercise supplemental jurisdiction over the claims asserted under Article 1802 of the Civil Code. Those claims were dismissed without prejudice.
See
28 U.S.C. § 1367(c);
see also Martinez v. Colon,
II. ANALYSIS
On appeal, the plaintiffs hawk several assignments of error. First, they challenge the district court’s resolution of the “physician control” issue. Second, they maintain that the lower court evaluated only one of a myriad of antitrust theories set forth in their amended complaint. Finally, they contend that the court improperly granted Blue Cross’s motion to dismiss the Lanham Act claim. We first confront the arguments relating to the antitrust claims and then discuss the district court’s disposition of the Lanham Act claim. 2
A. The Principal Antitrust Claim.
Section 1 of the Sherman Act prohibits “[ejvery contract, combination ... or conspiracy, in restraint of trade.” 15 U.S.C. § 1. That language establishes two prerequisites for a Section 1 claim. First, the plaintiff must show concerted action between two or more separate parties.
Monsanto Co. v. Spray-Rite Serv. Corp.,
1.
The Standard of Review.
The role of summary judgment is “to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.”
Garside v. Osco Drug, Inc.,
We afford plenary review to orders granting or denying summary judgment.
Garside,
To be sure, the Supreme Court has cautioned that, in antitrust cases, “dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.”
Hosp. Bldg. Co. v. Trustees of Rex Hosp.,
2.
Sufficiency of the Evidence.
Against this backdrop, we turn to the plaintiffs’ basic allegation: that the evidence supports a finding of an anticompetitive conspiracy between and among those physicians who served on the defendants’ boards and the defendants themselves. This allegation does not get them very far, for the Supreme Court has largely dismissed the possibility of an intraenterprise conspiracy as a basis for liability under Section 1 of the Sherman Act.
See Copperweld Corp. v. Independence Tube Corp.,
That does not end our inquiry, for the
Copperweld
Court intended to exempt conduct from the rigors of Section 1 only when the actors, collectively, “pursue[ ] the common interests of the whole rather than interests separate from those of the corporation itself.”
Id.
at 770. A different analysis is required when the alleged co-conspirators, regardless of their status, pursue interests that diverge from those of the enterprise itself.
Sullivan v. Nat’l Football League,
In a variation on this theme, the plaintiffs argue that physicians controlled the defendants and their benefits policies, so that each defendant was little more than a corporate carapace housing a conspiracy among physicians. According to this argument, the defendants’ benefits policies were products of the antecedent conspiracy-
This argument focuses our attention on the issue of physician control. After all, when competing health-care providers challenge an insurer’s benefits policies, alleging exclusionary practices instigated by physicians, those providers must make a threshold showing that the physicians effectively control the health-care plan.
Hahn, 868 F.2d
at 1029;
Pa. Dental Ass’n v. Med. Serv. Ass’n,
The district court characterized the inquiry as one involving whether the physicians operated a “structural conspiracy” within the defendants’ corporate skeletons. It examined the makeup of the defendants’ boards and the identity of key decision-makers. Based on this appraisal, the court ruled that the record did not contain evidence adequate to establish that physicians either dictated the defendants’ benefits policies or otherwise exercised the requisite degree of control. The plaintiffs challenge this assessment.
The inquiry into whether an ox-ganization represents, or is a reflection of, the concerted action of conspiring economic actors is a functional one.
See United States v. Sealy, Inc.,
Regarding Triple-S, the plaintiffs managed to establish nothing more than that physicians held eight of the nineteen seats on the board. That is a minority position — and plainly not enough to show control. The corporate bylaws make manifest that board action requires a majority vote, and the physicians simply do not constitute a majority. Nor can they achieve control under the extant circumstances; the bylaws specify that at least ten of the nineteen board members must at all times be non-physicians.
The plaintiffs’ fallback position covers a great deal of ground. They asseverate that physicians have enough representation on the board to influence board deci
The first two statements are argumentative. The mere fact that physicians have some input into Triple-S’s decisionmaking processes does not show control.
See, e.g., Barry v. Blue Cross,
The second two statements are factual, but not probative. It is true that certain of Triple-S’s ranking executives are medical doctors and that three of them serve on its executive committee. But such facts, without more, prove very little.
See Pa. Dental Ass’n,
Here, there is no “more.” The plaintiffs have wholly failed to show how the placement of these individuals translates into control. Equally as important, they have not shown how their placement suffices to overcome the significance and role of the board. The corporate bylaws state unambiguously that all business decisions and policy changes are subject to board approval, and nothing in the record suggests that the board relinquished this authority. Absent some probative evidence that board approval was a rubber stamp — an ingredient that is lacking here — the antitrust claim against Triple-S cannot stand.
The plaintiffs likewise have failed to adduce sufficient evidence to suggest that Blue Cross is under physician control. The record shows that, during the period from 1995 to 1998, physicians constituted a distinct minority of the board (holding seven out of twenty-eight seats). This was not fortuitous: both the corporation’s former bylaws and the relevant provisions of Law 152, 6 P.R. Laws Ann. § 43(1) (1994), demanded this minority status. From 1998 forward, the possibility of physician control seems even more remote; the corporation became a for-profit entity, and the board became a physician-free zone.
In a creative formulation, the plaintiffs attempt to change the arithmetic by pointing out that physicians and hospital executives collectively held half of the seats on Blue Cross’s non-profit board. This is mathematically accurate — the twenty-eight member board included seven physicians and seven hospital representatives- — -but legally irrelevant. The record is barren of any evidence indicating that these two groups worked as a unit or even that they shared common economic interests. Certainly, we cannot infer as much in the absence of any proof. Physicians and hospitals are in some respects natural enemies, squabbling over how to divide the steadily shrinking portion of premium dollars that insurers devote to provider reimbursement. See, e.g., Jeffrey E. Harris, Regulation and Internal Control in Hospitals, 55 Bull. N.Y. Acad. of Med. 88, 90-95 (1979) (discussing structural and historical tensions pitting hospital administrators against medical staff).
The plaintiffs’ next initiative is to note that physicians occupied certain ancillary offices, such as‘positions on the fees and
To sum up, the plaintiffs have failed to establish the first foundational element of their argument. The defendants’ boards retained the ultimate say over their benefits policies and reimbursement rates, and physicians were represented sparsely (if at all) on these boards. By the same token, the plaintiffs have not established that physicians exercised the requisite degree of control over policymaking in any other fashion. Accordingly, the district court did not err in granting summary judgment on the plaintiffs’ “structural conspiracy” antitrust claim.
Let us be perfectly clear. We base this ruling on the plaintiffs’ failure to muster evidence showing physician control. We hasten to add, however, that for purposes of Section 1 of the Sherman Act, control is a necessary but not a sufficient condition for finding concerted action.
See, e.g., Arizona v. Maricopa County Med. Soc’y,
B. The Puerto Rico Antitrust Claims.
The plaintiffs recast their Sherman Act claims as separate causes of action under Puerto Rico’s antitrust law, 10 P.R. Laws Ann. § 258. That statute prohibits “[e]very contract, combination ... or conspiracy in unreasonable restraint of trade or commerce in the Commonwealth of Puerto Rico.”
Id.
Because this language mirrors the language of Section 1 of the Sherman Act, we have treated the two provisions as coextensive.
See Caribe BMW, Inc. v. Bayerische Motaren Werke Aktiengesellschaft,
C. The Plaintiffs’ Alternative Antitrust Theories.
The plaintiffs next contend that they presented three alternative antitrust theories before the district court, namely, (1) that the physician members of the defendants’ boards were part of an anticompetitive conspiracy that included non-phy
To put these nascent claims into perspective, we examine the record below. None of these additional theories is readily apparent from a thoughtful reading of the amended complaint, and neither Triple-S nor Blue Cross addressed them in their initial summary judgment memoranda. The plaintiffs sought to widen the playing field by mentioning the additional theories in their oppositions to the defendants’ motions. Triple-S disregarded these allusions. Blue Cross, however, argued in a reply brief that none of the three alternative theories, as stated, articulated a claim upon which relief could be granted, and that, in all events, the evidence did not support any of them.
In allowing Blue Cross’s motion for summary judgment, the district court deemed these alternative theories to be within the umbrella of the plaintiffs’ “structural conspiracy” claim. The court did, however, entertain the possibility that the third theory amounted to a separate claim but ruled that the plaintiffs’ failure to provide any semblance of detail doomed it. The court handled the matter differently in regard to Triple-S. Because that defendant, unlike Blue Cross, had not responded to the plaintiffs’ belated exposition, the district court allowed the alternative theories to survive as against Triple-S. The plaintiffs later stipulated to dismissal without prejudice of the residuum of these claims vis-á-vis Triple-S. We must deal, therefore, only with the three alternative theories as they affect Blue Cross.
This motley need not detain us long. The first alternative theory suggests the existence of a physician-dominated conspiracy that included non-physicians (and, thus, constituted a majority of the Blue Cross board sufficient to exercise control). But this theory is not anchored in the record. The plaintiffs have neither identified a single non-physician participant in this alleged cabal nor otherwise furnished even a scintilla of evidentiary detail. Because the claim relies solely on unsupported conjecture, it cannot withstand summary judgment.
See Medinctr-Munoz v. R.J. Reynolds Tobacco Co.,
The plaintiffs’ second alternative theory suggests that a minority coalition of physicians unduly influenced the formulation of Blue Cross’s benefits packages. That claim is factually unsupported, and we swiftly discard it based on the logic previously articulated. See supra Part 11(A)(2).
The third alternative theory, like the first two, is a barebones allegation wrapped in the gossamer strands of speculation and surmise. The plaintiffs have neither identified a single physician outside Blue Cross who is part of the alleged conspiracy nor pinpointed any agreement with such a physician that might violate Section 1. Because this theory lacks evi-dentiary support, it was not a barrier to the entry of summary judgment.
The plaintiffs attempt to confess and avoid. They blame the dearth of evidence on a denial of discovery and complain that summary judgment was premature because they had insufficient opportunity to flesh out these alternative theories and pursue supporting evidence through discovery. A careful perscrutation of the rec
Blue Cross’s motion for brevis disposition broadly requested the entry of summary judgment on the “[plaintiffs’ claims under Section 1 of the Sherman Act and Article 2 of Puerto Rico’s antitrust statute.” Blue Cross did not limit this prayer to any particular antitrust theory, but, rather, sought to scotch the antitrust claims as a whole. The district court’s ensuing order matched the scope of Blue Cross’s motion; it permitted discovery, without limitation, as “to the issues raised in [Blue Cross’s] motion for summary judgment on the antitrust claims.” Consequently, to the extent that the amended complaint raised alternative theories of antitrust liability, the plaintiffs had adequate opportunity to discover facts in support of them. They cannot now complain that the lack of evidence in the record should be excused.
See Maldonado-Denis v. Castillo-Rodriguez,
We add one final note. Had the plaintiffs genuinely believed that they had been unfairly limited in the availability of discovery, they had an obligation to bring the matter to the district court’s attention by means of a timely motion under Fed. R.Civ.P. 56(f).
See Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass’n,
D. The Lanharn Act Claim.
In pertinent part, Section 43 of the Lan-ham Act prohibits the use of any communication “in commercial advertising or promotion [that] misrepresents the nature, characteristics, qualities, or geographic origin of ... goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B). The plaintiffs assert in their amended complaint that Blue Cross violated this statute when it “falsely disparaged the health care services provided by podiatrists and actively encouraged patients to seek services from medical doctors instead.” Beyond this statement, the plaintiffs make only the skimpy allegations that “patients have falsely been told by [Blue Cross] that [it] cannot reimburse them for podiatrist services because podiatrists are not ‘real’ doctors,” and that these misrepresentations were “disseminated widely to patients who needed foot care.” The amended complaint contained no allegation or information regarding the means through which these misrepresentations were communicated. Blue Cross moved under Fed. R.Civ.P. 12(b)(6) to dismiss this claim, and the district court obliged.
We afford plenary review to a district court’s order of dismissal for failure to state a claim upon which relief can be granted.
Arruda v. Sears, Roebuck & Co.,
Despite this generous standard, we repeatedly have cautioned that “Rule 12(b)(6) is not entirely a toothless tiger .... The threshold for stating a claim may be low, but it is real.”
Dartmouth Rev. v. Dartmouth Coll.,
Against this backdrop, we turn to the plaintiffs’ Lanham Act claim. The relevant statutory language prohibits misrepresentations only in “commercial advertising or promotion.” This is a crucial limitation — and one that the district court thought dispositive here. Accordingly, we must plot the boundaries of that phrase and then determine whether the plaintiffs’ allegations fall within those boundaries.
The courts have developed a four-part test to ascertain which representations fall into the category of “commercial advertising or promotion” for purposes of Section 43(a)(1)(B). The test requires that a representation must (a) constitute commercial speech (b) made with the intent of influencing potential customers to purchase the speaker’s goods or services (c) by a speaker who is a competitor of the plaintiff in some line of trade or commerce and (d) disseminated to the consuming public in such a way as to constitute “advertising” or “promotion.”
See Proctor & Gamble Co. v. Haugen,
While the Lanham Act’s commercial disparagement provision covers more than classic advertising campaigns, it is nonetheless aimed at specific forms of communication.
See, e.g., First Health Group Corp. v. BCE Emergis Corp.,
The plaintiffs, in their appellate brief, belatedly endeavor to plug this hole. They claim for the first time that “[w]hen prospective patients contact [Blue Cross] inquiring about foot care,” Blue Cross representatives habitually “disparag[e] podiatrists as not being ‘real doctors.’ ” We need not decide whether this method of responsive communication would fall under the rubric of “commercial advertising or promotion” within the meaning of the Lanham Act or whether such a statement, if articulated in the amended complaint, would have satisfied the pleading requirements. It is elementary that a plaintiff cannot constructively amend his complaint with an allegation made for the first time in an appellate brief.
Royal Bus. Group, Inc. v. Realist, Inc.,
III. CONCLUSION
We need go no further. Suffice it to say that close scrutiny of the record reveals that the district court appropriately granted the defendants’ dispositive motions on both the antitrust and commercial disparagement claims. The plaintiffs may have a remedy in the marketplace, the Puerto Rico legislature, or the local courts, but for aught that appears they do not have one in the domain of the federal judiciary.
Affirmed.
Notes
. Describing the defendants’ product line as "insurance” is somewhat of a misnomer. The McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015, exempts "the business of in
. The plaintiffs do not appeal the entry of summary judgment in favor of Triple-S on the Lanham Act claim. Consequently, we limit our Lanham Act discussion to the claim against Blue Cross.
. Although this test bears the imprimatur of several respected courts, the Seventh Circuit has expressed "serious doubts about the wisdom of displacing the statutory text in favor of a judicial rewrite with no roots in the language Congress enacted ... for when the Lanham Act was adopted there were no constitutional limits on the regulation of commercial speech.”
First Health Group Corp. v. BCE Emergis Corp.,