Raymond Benitez v. Charlotte-Mecklenburg Hospital ( 2021 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 19-2145
RAYMOND BENITEZ, individually and on behalf of all others similarly situated,
Plaintiff - Appellant,
v.
THE CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY, d/b/a Carolinas
HealthCare System, d/b/a Atrium Health,
Defendants - Appellee.
Appeal from the United States District Court for the Western District of North Carolina, at
Charlotte. Robert J. Conrad, Jr., District Judge. (3:18-cv-00095-RJC-DSC)
Argued: January 29, 2021 Decided: March 23, 2021
Before GREGORY, Chief Judge, KEENAN, and QUATTLEBAUM, Circuit Judges.
Affirmed by published opinion. Judge Quattlebaum wrote the opinion, in which Chief
Judge Gregory and Judge Keenan joined.
ARGUED: Eric Franklin Citron, GOLDSTEIN & RUSSELL, P.C., Bethesda, Maryland,
for Appellant. James P. Cooney, III, WOMBLE BOND DICKINSON (US) LLP,
Charlotte, North Carolina, for Appellee. ON BRIEF: Robert Stephen Berry, BERRY
LAW PLLC, Washington, D.C.; Tejinder Singh, GOLDSTEIN & RUSSELL, P.C.,
Bethesda, Maryland, for Appellant. Debbie W. Harden, Mark J. Horoschak, Sarah Motley
Stone, Matthew F. Tilley, WOMBLE BOND DICKINSON (US) LLP, Charlotte, North
Carolina; Hampton Y. Dellinger, Richard A. Feinstein, Nicholas A. Widnell, BOIES
SCHILLER FLEXNER LLP, Washington, D.C., for Appellee.
2
QUATTLEBAUM, Circuit Judge:
This appeal involves the Local Government Antitrust Act of 1984, 15 U.S.C. § 34et seq. Congress passed the Act “in order to broaden the scope of antitrust immunity
applicable to local governments” after a surge in the filing of antitrust lawsuits threatened
to “undermine a local government’s ability to govern in the public interest.” Sandcrest
Outpatient Servs., P.A. v. Cumberland Cnty. Hosp. Sys., Inc., 853 F.2d 1139, 1142 (4th
Cir. 1988) (internal quotation marks omitted). Although the Act does not preclude
injunctive or declaratory claims, it immunizes “local government[s]” from antitrust
damages. See 15 U.S.C. § 35. Today, we consider whether the Charlotte-Mecklenburg
Hospital Authority (the “Hospital Authority”) qualifies as a “local government” under the
Act.
The Act defines “local government” in two ways. First, the Act covers traditional
subdivisions of a state, such as “a city, county, parish, township, village, or any other
general function governmental unit established by State law . . . .” 15 U.S.C. § 34(1)(A).
That provision does not apply here. Second, the Act applies to more specialized
governmental entities, such as “a school district, sanitary district, or any other special
function governmental unit established by State law in one or more states.” Id. § 34(1)(B).
We must decide if the Hospital Authority falls into the final category—a “special function
governmental unit established by State law in one or more states.” Id.
After the Hospital Authority moved for judgment on the pleadings, the district court
concluded that it was such an entity and, therefore, dismissed the class action antitrust
claims brought by Raymond Benitez against the Hospital Authority. Benitez now appeals
3
on two grounds. First, he argues that the Hospital Authority is not a “local government,”
and, therefore, not covered by the Act because it lacks the powers traditionally associated
with “local government[s],” such as the power to tax and issue general obligation bonds.
Second, he contends that, even if the Hospital Authority at one time qualified as a “special
function governmental unit,” it has now grown so large—by operating in three states and
generating $11 billion in annual revenue—that it can no longer be considered a “local
government.”
As to Benitez’s first argument, we disagree. Congress’s broad definition of “local
government” does not impose the requirements he advances, and we decline to rewrite the
Act to include those requirements. As to Benitez’s second argument, while not addressed
by the district court, it also fails. Despite having some common-sense appeal, it again seeks
a limitation not contained in the Act. Accordingly, we affirm.
I.
Benitez—who had been treated at a Hospital Authority inpatient facility in 2016—
filed a class action complaint against the Hospital Authority, alleging violations of Section
1 of the Sherman Act. He alleges the Hospital Authority “is the second largest public health
system in the United States.” J.A. 12. It is also, Benitez asserts, the largest inpatient
healthcare provider in the Charlotte, North Carolina area, with approximately twelve
million patient encounters every year. Because of this, it receives more than fifty percent
of all inpatient revenue in the Charlotte area. According to Benitez, insurers recognize the
Hospital Authority’s large market share and—out of necessity—contract with the Hospital
4
Authority so that Charlotte-area residents can easily receive inpatient services. Thus, in
reaching these contractual agreements, the Hospital Authority’s “market power has enabled
it to negotiate high prices (in the form of high ‘reimbursement rates’) for treating insured
patients.” J.A. 12. Additionally, Benitez claims the Hospital Authority “has imposed
steering restrictions in its contracts with insurers.” J.A. 13. He alleges these provisions are
anticompetitive because they preclude “insurers from providing financial incentives to
patients to encourage them to consider utilizing lower-cost but comparable or higher
quality alternative healthcare providers.” J.A. 13. And without such incentives, patients are
effectively required to go to the Hospital Authority where the rates are higher.
Previously, the United States Department of Justice and the North Carolina Attorney
General’s Office filed a lawsuit in the Western District of North Carolina (the
“Enforcement Action”), seeking a declaration that the steering restrictions violate Section
1 of the Sherman Act and an injunction prohibiting the Hospital Authority from seeking,
agreeing to or enforcing any steering restrictions in its insurance contracts. See Complaint
at 11–12, United States v. Charlotte-Mecklenburg Hosp. Auth., d/b/a Carolinas Healthcare
Sys., No. 3:16-cv-00311-RJC-DCK (W.D.N.C. June 9, 2016), ECF No. 1. After several
years of litigation, the Enforcement Action was resolved by a settlement that prohibited
steering restrictions. See Final Judgment, United States v. Charlotte-Mecklenburg Hosp.
Auth., d/b/a Carolinas Healthcare Sys., No. 3:16-cv-00311-RJC-DCK (W.D.N.C. April
24, 2019), ECF No. 99.
With claims that mirrored, in large part, the allegations made in the ongoing
Enforcement Action, Benitez also asserted that the Hospital Authority’s steering
5
restrictions violated Section 1 of the Sherman Act. On top of declaratory and injunctive
relief, however, Benitez also sought monetary damages on behalf of a class of individuals
residing in the Charlotte area who made direct payments for inpatient procedures to the
Hospital Authority.
The Hospital Authority answered, disputing Benitez’s factual allegations, defending
the legality of the steering restrictions and asserting a variety of affirmative defenses,
including immunity from damages, costs and attorneys’ fees pursuant to the Act.
Additionally, the Hospital Authority moved for judgment on the pleadings, arguing that it
was immune from monetary damages because it was a “special function governmental
unit”—and, therefore, a “local government”—under the Act. 1 To that end, it relied in large
part on Sandcrest, which—according to the Hospital Authority—held that a North Carolina
municipal hospital was a “local government” exempt from monetary damages under the
Act.
Benitez responded first by detailing the Hospital Authority’s evolution from a local
hospital, “originally founded in 1943 to provide hospital services to the residents of
Charlotte,” to “the largest healthcare system in North and South Carolina and the second
largest public health system in the United States.” J.A. 80 (internal quotation marks
omitted). Next, Benitez argued that the Hospital Authority is not a “special function
governmental unit” under the Act because “large healthcare enterprises like [the Hospital
1
The Hospital Authority also claimed that insured patients are barred from seeking
damages because they are not direct purchasers and that Benitez does not have antitrust
standing. Since the district court did not reach these issues, they are not before us.
6
Authority] bear no resemblance to the sorts of entities that the [Act] and its legislative
history mention as examples of ‘local government’ . . . .” J.A. 89. Finally, Benitez offered
an alternative argument—even if the Hospital Authority is a “special function
governmental unit,” it is nonetheless not a “local government” under the Act because
“Congress cannot possibly have had sprawling healthcare enterprises like [the Hospital
Authority] in mind when it created an immunity specifically for ‘local’ government
entities.” J.A. 92.
The district court found that the Hospital Authority is a “local government” and,
therefore, immune from monetary damages. In making that finding, the district court
detailed the Hospital Authority’s creation and operation under North Carolina law and
concluded that it had “powers which are typically characterized as governmental powers.”
J.A. 195. The district court also heavily relied on our Sandcrest decision. It noted that
“[p]reviously, the Fourth Circuit has granted absolute immunity from antitrust damages to
a municipal hospital established under Chapter 131E [of the North Carolina General
Statutes], upholding the determination that the hospital qualified as a ‘special function
government[al] unit’ under the [Act].” J.A. 196 (citing Sandcrest, 853 F.2d at 1139). The
district court did not, however, address Benitez’s alternative argument that the Hospital
Authority’s multistate operations and explosive growth precluded a finding that it was a
“local government.” The district court then stayed Benitez’s claim for injunctive relief
pending a resolution of the Enforcement Action. After the Enforcement Action settled, the
Hospital Authority filed a renewed motion for judgment on the pleadings, which Benitez
7
did not oppose. The district court granted the motion, dismissing all claims against the
Hospital Authority.
Benitez filed a timely Notice of Appeal, and we have jurisdiction over the appeal.
28 U.S.C. § 1291.
II.
A.
Before addressing Benitez’s arguments on appeal, we begin with some history.
“Congress enacted the Sherman Act in 1890.” Summit Health, Ltd. v. Pinhas, 500 U.S.
322, 328 (1991). Section 1 of the Sherman Act prohibits “[e]very contract, combination in
the form of trust or otherwise, or conspiracy, in restraint of trade or commerce . . . .” 15
U.S.C. § 1. This provision works in conjunction with Section 4 of the Clayton Act, which
provides a private right of action for violations of the Sherman Act. See 15 U.S.C. § 15. As
a result, any person who is “injured in his business or property” due to a violation of the
Sherman Act, or other antitrust provisions, may bring a cause of action in federal court and
recover treble damages. Id.In 1943, the Supreme Court recognized that states, “as sovereign[s],” are immune
from antitrust liability when they impose anticompetitive restraints on trade or commerce
“as an act of government.” Parker v. Brown, 317 U.S. 341, 352 (1943). In reaching this
holding, the Supreme Court found “nothing in the language of the Sherman Act or in its
history which suggests that its purpose was to restrain a state or its officers or agents from
8
activities directed by its legislature.” 2 Id. at 350–51. State action immunity, however, did
not extend to local governments. Instead, more than thirty years after Parker, a series of
Supreme Court decisions opened the door to substantial municipal antitrust liability.
First, in 1978, the Court held that local governments were not automatically exempt
from antitrust liability, recognizing the “serious economic dislocation which could result
if cities were free to place their own parochial interests above the Nation’s economic goals
reflected in the antitrust laws . . . .” City of Lafayette, La. v. La. Power & Light Co., 435
U.S. 389, 411–13 (1978). A plurality of the Court suggested, without deciding, that local
governments were exempted only when they acted “pursuant to state policy to displace
competition with regulation or monopoly public service” and when the state policy was
“clearly articulated and affirmatively expressed.” 3 Id. at 410, 413. Four years later, the
2
Parker was decided during “the most vigorous period of antitrust enforcement in
American history.” Michael J. Sandel, The Constitution of the Procedural Republic:
Liberal Rights and Civic Virtues, 66 FORDHAM L. REV. 1, 9 (1997). The increase in
antitrust enforcement at the tail end of the Great Depression followed President Franklin
D. Roosevelt’s 1938 appointment of Thurmond Arnold as head of the Antitrust Division
of the Department of Justice. See id. But 1938 was not only a watershed year for
competition in the marketplace; it was also the year of “the greatest horserace in history”
when an “undersized, crooked-legged race horse” named Seabiscuit became a national hero
by trouncing the legendary War Admiral. See Scott S. Brinkmeyer, A Winning
Combination, 82-OCT MICH. B. J. 12, 12 & n.4 (2003). Ironically, early on, Seabiscuit
seemed uninterested in racing. But during one training session, after he caught sight of
another horse on the track, he took off with the ferocity and determination that propelled
him to success and fame. His trainer, Tom Smith, at that moment remarked “sometimes
they just hanker for a little competition.” SEABISCUIT (DreamWorks Pictures 2003).
Benitez apparently “hankers” for the same.
3
The Court also suggested that the municipal action must be “actively supervised”
by the state. Id. at 410. The Court addressed this issue in Town of Hallie v. City of Eau
Claire, where it held that “[o]nce it is clear that state authorization exists, there is no need
9
Court again addressed the issue of a local government’s exemption from antitrust laws in
Community Communications Co., Inc. v. City of Boulder, Colorado, 455 U.S. 40 (1982).
There, the Court held that Colorado’s Home Rule Amendment, which vested local
governments with the power to govern local affairs, did not constitute a clearly articulated
and affirmatively expressed policy “to enact specific anticompetitive ordinances . . . .” Id.at 54–57.
After these decisions, antitrust litigation against local governments spiked. See
Sandcrest, 853 F.2d at 1142 (noting the pendency of more than one hundred federal
antitrust lawsuits when Congress was debating the Act). Recognizing the potential for large
judgments and attorneys’ fees, which would be borne by taxpayers, Congress passed the
Act in order to legislatively shield local governments from antitrust damages. See id.; see
also Genty v. Resol. Trust Corp., 937 F.2d 899, 914 n.8 (3d Cir. 1991) (“In response to
[Lafayette and Boulder] holding municipalities liable, Congress subsequently amended the
anti-trust laws to exempt local government entities from liability for damages arising under
the antitrust statute.”). Thus, the Act was passed to prevent taxpayers from bearing the
financial burden of their local governments’ anticompetitive activity and to allow local
governments to effectively govern without devoting significant time and resources to
antitrust litigation. The Act does not, however, preclude lawsuits seeking injunctive relief. 4
to require the State to supervise actively the municipality’s execution of what is a properly
delegated function.” 471 U.S. 34, 47 (1985).
4
A local government may, nonetheless, be immune from all liability—including
injunctive relief—if it “demonstrate[s] that it is engaging in the challenged activity
10
To that end, the Act provides that “[n]o damages, interest on damages, costs, or
attorney’s fees may be recovered under section 4, 4A, or 4C of the Clayton Act (15 U.S.C.
§ 15, 15a, or 15c) from any local government, or official or employee thereof acting in an
official capacity.” 15 U.S.C. § 35(a) (emphasis added). A “local government” is defined as
follows:
(A) a city, county, parish, town, township, village, or any other general
function governmental unit established by State law, or
(B) a school district, sanitary district, or any other special function
governmental unit established by State law in one or more States.
15 U.S.C. § 34(1).
B.
With that background in mind, we turn to Benitez’s appeal. 5 Benitez first claims
that the Hospital Authority is not a “special function governmental unit” under § 34(1)(B)
because it does not share any of the hallmarks of a governmental entity and does not have
pursuant to a clearly expressed state policy” to displace competition. Town of Hallie, 471
U.S. at 40. In this instance, a local government is, in effect, afforded state action immunity.
5
We review the district court’s grant of the Hospital Authority’s Rule 12(c) motion
de novo, applying the same legal standards as the district court. See Priority Auto Grp., Inc.
v. Ford Motor Co., 757 F.3d 137, 139 (4th Cir. 2014). While courts “should strive to
resolve the immunity issue as early as possible, with a minimum of expense and time to
the parties . . . in order to further the purpose underlying the provision of immunity,”
Sandcrest, 853 F.2d at 1148 n.9, a Rule 12(c) motion “should only be granted if, ‘accepting
all well-pleaded allegations in the plaintiff’s complaint as true and drawing all reasonable
factual inferences from those facts in the plaintiff’s favor, it appears certain that the plaintiff
cannot prove any set of facts in support of his claim entitling him to relief.’” Priority Auto,
757 F.3d at 139 (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999)).
11
any of the attendant powers associated with general or special purpose “local
government[s].” Benitez advances four arguments in support of his contention. First, he
argues that our Sandcrest decision did not address the issues presented here and is,
therefore, not controlling. Second, he asserts that the Hospital Authority does not share the
functional characteristics of the specific examples that precede “special function
governmental unit” in the Act—school districts and sanitary districts—and does not exhibit
the core governmental powers of “a city, county, parish, town, township, village, or . . .
other general function governmental unit established by State law,” such as the power to
tax, issue general obligation bonds or exercise eminent domain. 15 U.S.C. § 34. Third, he
argues that the Hospital Authority is not viewed by North Carolina as a traditional
governmental body because it is not immune from tort liability. Finally, he contends that
the Hospital Authority does not share the same relationship with North Carolina as the
other entities listed in 15 U.S.C. § 34 because it is not a political subdivision of the state.
1.
Addressing each of Benitez’s arguments in turn, we turn first to his claim that the
district court erred in interpreting Sandcrest. The district court determined that in
Sandcrest, we held that a North Carolina quasi-municipal hospital, established pursuant to
the North Carolina Hospital Authorities Act, is a “special function governmental unit”—
and thus a “local government”—under the Act. It explained “[p]reviously, the Fourth
Circuit has granted absolute immunity from antitrust damages to a municipal hospital
established under Chapter 131E, upholding the determination that the hospital qualified as
a ‘special function government unit.’” J.A. 196 (citing Sandcrest, 853 F.2d 1139). Benitez
12
argues that this interpretation of Sandcrest is incorrect. He contends that Sandcrest did not
address, much less decide, the issues we face here. We agree. Respectfully, the district
court and the Hospital Authority misread our decision in Sandcrest.
In Sandcrest, a county hospital was established under Chapter 131E of the North
Carolina General Statutes. That hospital, owned and operated by the Cumberland County
Hospital System, Inc., declined to renew a contract with a professional association of
emergency room physicians. 853 F.2d at 1141. The physicians filed an antitrust action
against the county hospital authority, its corporate manager and several individuals. Id. The
district court granted summary judgment in favor of all defendants, finding they were
entitled to immunity under the Act. Id.On appeal, we noted that the physicians did not challenge the district court’s
determination that the county hospital authority was a “local government.” Id. at 1142.
Instead, the physicians only argued that the corporate manager and individual defendants
were not entitled to immunity. See id. This argument implicated a different subsection of
the Act, which provides that monetary damages may not be recovered “in any claim against
a person based on any official action directed by a local government, or official or
employee thereof acting in an official capacity.” 15 U.S.C. § 36(a). Thus, while we
assumed that the county hospital authority was a “local government” for purposes of this
13
analysis, we did so only because the physicians did not appeal the district court’s finding. 6
See Sandcrest, 853 F.2d at 1142.
The Hospital Authority, in an attempt to buttress the district court’s analysis of
Sandcrest, argues that we could not have determined that the defendants were immune
“unless [we] also concluded the county hospital system constituted a unit of local
government.” Br. of Appellee at 41. But that would give an assumption far more weight
than it deserves. Appellate courts frequently assume unappealed findings to be true, even
when the underlying premise involves a question of law. See, e.g., Campbell-Ewald Co. v.
Gomez, 577 U.S. 153, 160–66 (2016) (holding that “an unaccepted settlement offer or offer
of judgment does not moot a plaintiff’s case” but noting that the Supreme Court had
previously “simply assumed, without deciding, that an offer of complete relief pursuant to
Rule 68, even if unaccepted, moots a plaintiff’s claim” when a plaintiff did not challenge
the lower court’s finding on that point). Doing so efficiently allows claims that are clearly
presented, and perhaps dispositive, to be considered without unnecessarily deciding
issues. 7 But, as we have previously held, “[w]e are bound by holdings, not unwritten
6
We ultimately concluded that all defendants were entitled to immunity because
their conduct was “undertaken within the scope of their authority and under adequate
supervision” of the county hospital authority and the county hospital’s board of trustees.
Id. at 1146.
7
There are many reasons assumptions arise in cases. Sometimes, like in Sandcrest,
an issue was assumed because it was not appealed by the parties. Other times, a court
assumes an issue to further an important doctrine like constitutional avoidance. See United
States v. Reed, 780 F.3d 260, 269 (4th Cir. 2015) (assuming a violation of the Confrontation
Clause because any alleged error “was harmless beyond a reasonable doubt”). Or there can
14
assumptions.” Fernandez v. Keisler, 502 F.3d 337, 343 n.2 (4th Cir. 2007). Accordingly,
we write today on a blank slate.
2.
Benitez’s remaining three arguments can be considered together. They all suggest
that “special function governmental unit” as described in § 34(1)(B) applies only to
governmental entities with certain powers and/or characteristics—the power of taxation,
immunity from tort liability and characterization as a political subdivision—that Benitez
insists the Hospital Authority lacks. To support this argument, he draws on the legislative
history of the Act, which he claims reflects a desire to protect taxpayers from bearing the
burden of large antitrust awards. See, e.g., H.R. Rep. No. 98-965, at 11 (1984) (“[P]ayment
of any antitrust judgment would ultimately be drawn from the ‘general revenues,’ thus
shifting the burden of the punitive damage award . . . from the local officials to the
‘innocent’ taxpayers—a most misdirected and inequitable result.”). According to Benitez,
a governmental entity that would not be required to increase taxes on its citizens to satisfy
an antitrust damages award, or that lacks the power to even do so, falls outside Congress’
intent in passing the Act.
If we were to look solely at the Act’s legislative history, this argument might be
persuasive. The argument falls short, however, when we evaluate the Act’s actual text. The
text includes none of the limitations on a “special function governmental unit” that Benitez
be other reasons. The key point here is that, regardless of the reason, assumptions are not
holdings. Nor are they even dicta.
15
advances. Congress could have defined “special function governmental unit” to only
include those entities that have the powers and characteristics Benitez describes. But it did
not do so—not originally nor in the thirty-seven years since its passage. Since Congress
did not include those limitations, we decline to impose them. Our job is to interpret and
apply the law, not to make it.
Benitez insists, however, that the text actually supports his arguments. He relies on
the statutory interpretation principle noscitur a sociis—“a word is known by the company
it keeps.” Yates v. United States, 574 U.S. 528, 543 (2015). According to Benitez, “because
‘any other special function governmental unit’ comes at the end of an illustrative list of
examples, we should expect the ‘other’ units referred to here to share the most definitive
elements of the illustrations (i.e., ‘school districts’ or ‘sanitary districts’).” Appellant’s Br.
at 33. Put differently, Benitez claims that the Hospital Authority must share the powers and
characteristics of school districts or sanitary districts in order to be a “special function
governmental unit.” This argument is predicated on the idea that every “school district”
and “sanitary district” is a political subdivision, with the corresponding power to tax and
immunity from tort liability. For two reasons, we disagree.
First, as noted above, the plain text suggests otherwise. Tools of statutory
construction like the one Benitez employs can be helpful. But we must not use them in a
way that contravenes plain statutory text. Indeed, the Supreme Court has held that courts
should “rely on the principle of noscitur a sociis . . . to ‘avoid ascribing to one word a
meaning so broad that it is inconsistent with its accompanying words, thus giving
unintended breadth to the Acts of Congress.’” Yates, 574 U.S. at 543 (quoting Gustafson
16
v. Alloyd Co., 513 U.S. 561, 575 (1995)). As discussed in more detail below, we do not
find the district court’s interpretation of “special function governmental unit” to diverge
from the accompanying words in § 34(1)(B).
Second, the premise of Benitez’s argument is not at all certain. Take, for example,
the issue of taxation. While many school districts and sanitary districts may be fiscally
independent and have the ability to raise their own revenues, some states limit the power
to tax to the legislature or cities or counties. See, e.g., Marshall v. N. Va. Transp. Auth.,
657 S.E.2d 71, 78–80 (Va. 2008) (discussing various provisions of the Virginia State
Constitution that require a majority vote of the Virginia Senate and House of Delegates to
impose a tax, unless a “special act for the organization, government, and powers of any
county, city, town, or regional government” authorizes the power to tax). 8 This leads to a
paradox that exposes the fallacies of Benitez’s arguments. Benitez argues that a “special
function governmental unit” must have the power to tax because the two specific entities
the Act lists—school districts and sanitary districts—have that power. But in some states,
8
In Marshall, the Supreme Court of Virginia invalidated a statute that delegated the
power of taxation to the Northern Virginia Transportation Authority (“NVTA”)—“a
political subdivision narrowly charged by the General Assembly with the responsibility of
addressing certain regional transportation issues in the Northern Virginia localities it
encompasses.” 657 S.E.2d at 79. Relying on several state constitutional provisions, the
Court held that “NVTA is not a county, city, town, or regional government, and thus it is
not a political subdivision to which the General Assembly may constitutionally delegate
its legislative taxing authority . . . .” Id.
17
school districts and sanitary districts are prohibited from imposing taxes. 9 See id. Thus, the
premise of Benitez’s argument is flawed.
For these reasons, we are unpersuaded that either the Act’s text or the statutory
interpretation principle noscitur a sociis supports Benitez’s position.
3.
Without the limits advanced by Benitez, we turn to the ultimate question of whether
the Hospital Authority qualifies as a “special function governmental unit” under the Act.
The ultimate answer is a function of federal law. But Congress’ pairing of the term “special
function governmental unit” with the phrase “established by State law in one or more
States” requires that we also consider state law. Thus, we review the Supreme Court of
North Carolina’s recent decision in DiCesare v. Charlotte-Mecklenburg Hospital
Authority, 852 S.E.2d 146 (N.C. 2020), which involved state-law unfair trade practices and
antitrust claims arising out of the same type of contractual steering restrictions at issue
here.
In DiCesare, the Supreme Court of North Carolina described the Hospital
Authority’s creation and operation as follows:
The Hospital Authority was established in 1943 pursuant to the North
Carolina Hospital Authorities Act, N.C.G.S. §§ 131E-15 et seq., and is
jointly chartered by Mecklenburg County and the City of Charlotte. The Act
states that “[t]he General Assembly finds and declares that in order to protect
9
According to a white paper issued by the North Carolina School Board
Association, school boards in most states are considered independent units of government.
But others are not; instead, they are dependent on the general government. NCSBA, FISCAL
INDEPENDENCE ISSUE BRIEF, https://www.ncsba.org/wp-content/uploads/2016/08/NC
SBA-Fiscal-Independence-Issue-Brief.pdf.
18
the public health, safety, and welfare, including that of low income persons,
it is necessary that counties and cities be authorized to provide adequate
hospital, medical, and health care and that the provision of such care is a
public purpose.” N.C.G.S. § 131E-1(b) (2019). The Act is intended “to
provide an alternate method for counties and cities to provide hospital,
medical, and health care,” id., and defines a hospital authority as “a public
body and a body corporate and politic organized under the provisions of [the
Act].” N.C.G.S. § 131E-16(14). The Hospital Authority is governed by a
Board of Commissioners, whose members are appointed by the mayor or
chairman of the county commission. N.C.G.S. § 131E-17(b).
The Hospital Authority provides, among other things, a suite of general acute
care inpatient hospital services, including a broad range of medical and
surgical diagnostic and treatment services, to individuals insured under
group, fully-insured, and self-funded healthcare plans. The Hospital
Authority has a large general acute-care hospital located in downtown
Charlotte and nine other general acute-care hospitals in the Charlotte area.
There are at least two other inpatient hospitals or multi-hospital systems
operating within the Charlotte area: Novant, which operates five inpatient
hospitals in the Charlotte area, and CaroMont Regional Medical Center.
Id. at 148–49 (footnote omitted).
The Court further characterized the Hospital Authority as a “quasi-municipal
corporation,” which was “created ‘to serve a particular government purpose,’ with the
General Assembly having ‘giv[en] to these specially created agencies [certain] powers and
call[ed] upon them to perform such functions as the Legislature may deem best.’” Id. at
160–61 (alterations in original) (quoting Greensboro-High Point Airport Auth. v. Johnson,
36 S.E.2d 803, 809 (N.C. 1946)). Quasi-municipal corporations, such as the Hospital
Authority, are commonly used in North Carolina “to perform ancillary functions in
government more easily and perfectly by devoting to them, because of their character,
special personnel, skill and care.” Id. at 161 (internal quotation marks omitted). “In such
instances, ‘for purposes of government and for the benefit and service of the public, the
19
[S]tate delegates portions of its sovereignty, to be exercised within particular portions of
its territory, or for certain well-defined public purposes.’” Id. (alteration in original)
(quoting Gentry v. Town of Hot Springs, 44 S.E.2d 85, 86 (N.C. 1947)).
Against this backdrop, the Court then detailed the Hospital Authority’s “particular
government purpose” and the powers and functions delegated to it by the North Carolina
General Assembly. See id. at 160–61 (internal quotation marks omitted).
[T]he Hospital Authority was created in accordance with N.C.G.S. § 131E-
17(a) when the Charlotte city council adopted a resolution in which it
“[found] that the public health and welfare, including the health and welfare
of persons of low income in the City and said surrounding area, require the
construction, maintenance, or operation of public hospital facilities for the
inhabitants thereof.” At that point, the mayor of Charlotte appointed eighteen
individuals to serve as commissioners of the Hospital Authority pursuant to
N.C.G.S. §§ 131E-17(b), -18, with the mayor having maintained the
authority to remove commissioners “for inefficiency, neglect of duty, or
misconduct in office” in accordance with N.C.G.S. § 131E-22. The Hospital
Authority possesses the authority to acquire real property by eminent domain
pursuant to N.C.G.S. § 131E-24 and to issue revenue bonds under the Local
Government Revenue Bond Act pursuant to N.C.G.S. § 131E-26. The
Hospital Authority is subject to annual audits by the mayor or the chairman
of the county commission pursuant to N.C.G.S. § 131E-29; to the Public
Records Law, and to regulation by the Local Government Commission. In
sum, the Hospital Authority was clearly created by the City of Charlotte,
pursuant to statute, to provide public healthcare facilities for the benefit of
the municipality’s inhabitants.
Id. at 161 (citations omitted).
DiCesare’s thorough analysis provides a helpful foundation for evaluating whether
the Hospital Authority is a “special function governmental unit established by State law in
one or more States.” See 15 U.S.C. § 34(1)(B). Undoubtedly, the Hospital Authority was
“established by” North Carolina law. See DiCesare, 852 S.E.2d at 148–49 (“The Hospital
Authority was established in 1943 pursuant to the North Carolina Hospital Authorities Act,
20
N.C.G.S. §§ 131E-15 et seq., and is jointly chartered by Mecklenburg County and the City
of Charlotte.” (footnote omitted)). The legislative purpose of the Hospital Authorities Act
is express: “The General Assembly finds and declares that in order to protect the public
health, safety, and welfare, including that of low income persons, it is necessary that
counties and cities be authorized to provide adequate hospital, medical, and health care and
that the provision of such care is a public purpose.” N.C.G.S. § 131E-15(b) (emphasis
added). The Hospital Authorities Act specifically defines a “hospital authority” as “a public
body and a body corporate and politic organized under the provisions of this [Act].” Id.
§ 131E-16(14). As the Supreme Court of North Carolina held in DiCesare, “[a]lthough
quasi-municipal corporations are not subject to all of the requirements applicable to other
governmental entities, it is clear that their essential function is, at its core, the governmental
provision of services.” 852 S.E.2d at 162.
Further, as the district court noted, the Hospital Authority has many “powers which
are typically characterized as governmental powers,” including the power to:
(1) construct and maintain hospitals, (2) issue bonds, (3) acquire real or
personal property, (4) establish a fee schedule for services received from
hospital facilities and make the services available regardless of ability to pay,
(5) contract with other governmental or public agencies, (6) lease any
hospital facility to a nonprofit corporation, and (7) to exercise the power of
eminent domain to acquire real property.
J.A. 195–96 n.7. To be sure, private hospitals also share several of these powers, but the
authority to acquire real property by eminent domain and the “power to issue revenue
bonds under the Local Government Revenue Bond Act . . . for the purpose of acquiring,
21
constructing, . . . or operating hospital facilities” are uniquely governmental powers. Id.
§§ 131E-24, 26.
There is no magic combination of powers that a governmental body must have to
be classified as a “special function governmental unit.” However, those of the Hospital
Authority, as outlined by the Supreme Court of North Carolina, readily qualify.
4.
We recognize that the Tenth Circuit, in Tarabishi v. McAlester Regional Hospital,
951 F.2d 1558 (10th Cir. 1991), reached a different conclusion in finding an Oklahoma
public trust hospital was not a “special function governmental unit.” In reaching this
conclusion, the Tenth Circuit was guided by two considerations: (1) that citizens of the
Oklahoma city were beneficiaries of the public trust and would not be liable for any
antitrust damages award; and (2) state law “viewed public trust hospitals as entities
different from political subdivisions.” Id. at 1566.
At first blush, Tarabishi is seemingly at odds with our holding. After all, it, like
Benitez, places significant emphasis on the Act’s legislative history. See id. at 1564. There,
the hospital “was formed as a trust for furtherance of public functions under [Oklahoma
state law].” Id. at 1565 n.6. In contrast, the Hospital Authority is “a public body and a body
corporate and politic organized under the provisions of [the North Carolina Hospital
Authorities Act].” Id. § 131E-16(14). Importantly, however, Tarabishi recognized that how
an entity is classified under state law is critical and cited to a variety of cases where
hospitals were held to be “local governments.” See Tarabishi, 951 F.2d at 1565–66
(collecting cases). The Tenth Circuit did not question the validity of these cases and,
22
instead, emphasized that the structure of a public trust hospital was unique and
distinguishable. See id. at 1566 (“None of these cases directly answers the question of
whether a hospital operated as a public trust for furtherance of public functions with a city
as its beneficiary should be considered a special function governmental unit.”).
Indeed, we note that the Hospital Authority is far more similar to the hospital in
Sweeney v. Athens Regional Medical Center, which was distinguished by Tarabishi, than
to the public trust hospital in Tarabishi. See Sweeney, 705 F. Supp. 1556, 1561–62 (M.D.
Ga. 1989) (holding that Athens Regional Medical Center, “a public hospital authority
organized under the Georgia Hospital Authorities Law,” is a “local governmental unit for
purposes of the Act” because it is “deemed to exercise public and essential governmental
functions and shall have all the powers necessary or convenient to carry out and effectuate
the purposes and provisions of [the Hospital Authorities Law]” (quoting Ga. Code Ann.
§§ 31-7-75, 77 (1985))). Thus, while we reach a different result than Tarabishi, our holding
is not inconsistent with its reasoning.
In sum, we conclude that the Hospital Authority is a “special function governmental
unit” under the Act.
C.
Having rejected Benitez’s primary argument, we now turn to his alternative
position. Benitez has consistently argued that even if the Hospital Authority was a “local
government” when it was established, it has outgrown its immunity. Specifically, in
response to the Hospital Authority’s motion for judgment on the pleadings, Benitez
claimed that the Hospital Authority “now operates in 47 different locations spread across
23
North and South Carolina,” with nearly two-thirds of those locations being located “outside
the Charlotte metropolitan area,” and “recently announced plans to open in Georgia.” J.A.
80–81. Because of this rapid expansion, Benitez argued that the Hospital Authority “is not
a local entity in any sense of the term.” J.A. 90. Benitez insists this argument is supported
by the Act’s text because the Act “is the Local Government Antitrust Act, and by its terms
applies only to ‘local government’ entities.” Appellant’s Br. at 59.
The Hospital Authority offers several responses. First, it argues the text does not
support Benitez’s position. According to the Hospital Authority, if Congress intended to
impose the limitation Benitez advances, it could easily have done so. But it did not. Instead,
Congress defined “local government” to include “a school district, sanitary district, or any
other special function governmental unit established by State law in one or more States.”
15 U.S.C. § 34(1)(B). That means, according to the Hospital Authority, any boundaries,
geographic or otherwise, depend on North Carolina law.
Next, the Hospital Authority contends that the Act’s “established by State law in
one or more States” language contemplates a “local government” that operates in more
than one state. In fact, the Hospital Authority points to entities that operate in many states
that have been held immune as a “local government” under the Act. See, e.g., Cap. Freight
Servs., Inc. v. Trailer Marine Transp. Corp., 704 F. Supp. 1190, 1199–1200 (S.D.N.Y.
1988) (finding that a Puerto Rican international shipping authority was a “local
government” entitled to immunity under the Act and noting “there is no requirement that
the governmental instrumentality have a geographically defined jurisdiction”).
24
After carefully considering the parties’ arguments, we acknowledge that Benitez’s
argument has some initial appeal. It does seem unusual for an organization of the
geographic and financial scope of the Hospital Authority to qualify as a “local
government.” The problem with this argument, however, is that the language of the Act
does not support it. The text asks only whether an organization qualifies as a “local
government,” as defined by the Act. And that determination requires examining the state
law applicable to the entity’s creation. See 15 U.S.C. § 34(1)(B) (defining “local
government” to include various entities “established by State law in one or more States”).
As with Benitez’s other argument, he asks us to re-write the Act to impose a limitation it
does not currently contain.
And even if we were to adopt Benitez’s position, how would we determine the
boundaries of a “local government”? If an organization was able to simply outgrow the
Act’s protection, what would be the lines that would disqualify it? Would they be
financially based? That would be difficult given that the revenues of some cities, which are
clearly “local government[s]” under the Act, dwarf those of the Hospital Authority. 10 Or
would the limitations be geographic? If so, would an entity cease to be “local” if it grew
beyond the city or county that created it, even if allowed by state law? Would any growth
beyond those borders be disqualifying? Or would it require going into another state? In
other words, how much growth is too much?
10
For example, New York City’s budget in 2017 was approximately $85 billion.
Understanding New York City’s Budget A Guide, New York City Independent Budget
Office at 2, https://www.ibo.nyc.ny.us/iboreports/understandingthebudget.pdf.
25
The answers to these questions involve complex policy considerations. Navigating
these considerations is the work of lawmakers, not judges. It may make eminent sense to
amend the Act to impose some sort of limitation beyond which an entity could no longer
qualify as a “local government.” But if that is to be done, it should be done by Congress,
not us. Thus, we reject Benitez’s argument that the Hospital Authority has outgrown its
status as a “local government.”
But our decision is limited to Benitez’s argument. Benitez does not allege, for
example, that the Hospital Authority is operating outside the purview of a its statutory
authority under North Carolina law or even that it committed anticompetitive acts outside
of the local area where it was created. Indeed, as the Hospital Authority pointed out at oral
argument, both Benitez’s treatment and the alleged anti-competitive activity took place in
the Charlotte area. Because of that, Benitez’s allegations involve only “local” conduct.
There may be circumstances where a “special function governmental unit” does not
enjoy the Act’s immunity. For example, if Benitez alleged that the Hospital Authority was
operating in contravention of North Carolina law or if the Hospital Authority was sued in
Georgia involving alleged anticompetitive conduct in a Georgia geographic market, we
might reach a different conclusion. But since those issues are not presented to us, we
express no view on them and leave them for another day.
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III.
For the reasons stated above, we agree with the district court that the Hospital
Authority is a “special function governmental unit” and, therefore, a “local government”
under the Act. Accordingly, the district court’s order is
AFFIRMED.
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