PDSC, on April 7, 2009, filed its Second Amended Complaint alleging a tying arrangement by SFMC in violation of Section 1 of the Sherman Act and the Illinois Antitrust Act, tortious interference with contractual relations and prospective economic advantage between PDSC and Caterpillar, tortious interference with PDSC’s prospective economic advantage with Midwest Orthopedic Center (MOC), and tortious interference with contractual relations and prospective economic advantage between PDSC and Humana, Defendant SFMC, after discovery, moved for summary judgment.
Antitrust claims
District Judge Michael Mihm refused to grant SFMC summary judgment on Peoria Day’s Sherman Act and Illinois antitrust claims. Here, the judge notes:
“When the record is viewed in the light most favorable to PDSC, this Court cannot say as a matter of law that SFMC is entitled to summary judgment on PDSC’s antitrust claims. PDSC has presented evidence, particularly Dr. Dranove’s expert opinions, which present material questions of fact as to whether SFMC’s 2001 exclusive contract with Caterpillar led to anticompetitive effects. The parties additionally dispute whether SFMC had sufficient market power to actually threaten competition, and cite to facts which otherwise preclude granting SFMC’s motion for summary judgment. As PDSC’s Illinois Antitrust Act claim is interpreted according to federal precedent, the above analysis applies to that claim as well. Therefore, SFMC’s motion for summary judgment as to Counts I and II of PDSC’s Second Amended Complaint is denied.”
Tortious interference claims
Count V of PDSC’s Second Amended Complaint alleges that SFMC interfered with its reasonable expectation of entering into a valid business relationship with Midwest Orthopedic Center.
The Court ruled that PDSC could pursue claims that SMFC interfered with PDSC’s potential partnership with MOC. MOC, in 2003, had began discussion with PDSC, SFMC and other hospitals in the area regarding a possible investment in an ASC. MOC informed PDSC in 2004 that “[a]fter review of the risks and the current potential rewards of the investment, the directors voted not to pursue the purchase of shares in [PDSC’s] ASC any further,” according to Court documents. After another round of failed negotiations in 2005, MOC decided to partner with SFMC’s surgery center in 2006.
PDSC argues that SFMC wrongfully interfered in its prospective relationship with MOC in many ways, including disparaging PDSC in Peoria’s medical community, misrepresenting PDSC’s financial status with Caterpillar at the time in 2004 when MOC was most interested in PDSC and providing MOC with materially false information to induce it to invest in SFMC rather than PDSC.
The Court stated as follows:
“Consequently, when considered in the context of the totality of the record and viewed in the light most favorable to PDSC, the Court finds that PDSC has provided evidence sufficient to create a triable issue as to whether SFMC intentionally and unjustifiably interfered so as to prevent PDSC’s expectancy from developing into a valid business relationship with MOC. See Miller, 878 N.E.2d at 178-79 (quoting Soderlund Brothers, Inc. v. Carrier Corp., 663 N.E.2d 1 (Ill. App. 1st Dist. 1995)) (discussing unprivileged acts of competition, including fraud, and explaining that a representation is fraudulent when the utterer knows it is false in the sense in which it was intended to be understood by the recipient). SFMC’s motion for summary judgment on Count V must be denied..”
Court grants summary judgment to SFMC on certain claims
The Court agreed to grant summary judgment to SFMC on Counts III, IV, VI and VII of the Complaint.
Trial
The case will likely now proceed to trial. The case will be closely watched by surgery centers, hospitals and physician-owned hospitals.
Read the full District Court opinion (pdf).
Note: Mr. Becker, the publisher of Becker’s Healthcare Alert, is a partner at McGuireWoods LLP. McGuireWoods represents Peoria Day Surgery Center in this case.
