arthur-marlin-appellantscross-appellees-v-frank-robertson ( 2009 )

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OPINION
No. 04-08-00428-CV
Arthur MARLIN, M.D.; Sarah J. Gaskill, M.D.;
and Pediatric Neurosurgery of South Texas, P.A.;
Appellants and Cross-Appellees
v.
Frank ROBERTSON, M.D.; Barry Cofer, M.D.; John Doski, M.D.; and Bexar County Pediatric
Surgery Associates, P.L.L.C.; Methodist Healthcare System of San Antonio, Ltd., L.L.P.;
Methodist Children’s Hospital of South Texas; Children’s Hospital Intensive Care Associates;
Mahendra Patel, M.D.; Dan Sedillo, M.D.; Kevin Browne, M.D.;South Texas Radiology Group,
P.A.; Joel Dunlap, M.D.; and Christus Santa Rosa Health Care Corp.;
Appellees and Cross-Appellants
From the 407th Judicial District Court, Bexar County, Texas
Trial Court No. 2005-CI-03786
Honorable Karen H. Pozza, Judge Presiding
Opinion by: Sandee Bryan Marion, Justice
Sitting: Sandee Bryan Marion, Justice
Rebecca Simmons, Justice
Marialyn Barnard, Justice
Delivered and Filed: December 9, 2009
AFFIRMED
This is an appeal from summary judgments rendered in favor of the appellees who were the
defendants below. We affirm.
04-08-00428-CV
BACKGROUND
Arthur Marlin and Sarah Gaskill (collectively, “the plaintiffs”) are board-certified pediatric
neurosurgeons who practiced at Methodist Children’s Hospital of South Texas (“Methodist
Children’s) in San Antonio for years. Marlin was the hospital’s CEO from October 1998 through
March 2003. In the summer of 2003, Marlin and Gaskill began to move their practice to North
Central Baptist Hospital (“North Central Baptist”). In December 2003, Gaskill resigned her
Methodist Children’s privileges and Marlin took a leave of absence; they both, however, continued
to practice at North Central Baptist. In August 2004, Marlin applied to Methodist Children’s for
reinstatement of his privileges, but later withdrew his application. Gaskill and Marlin also had
privileges at Christus Santa Rosa Health Care (“Christus”) until Gaskill resigned in 2001 and Marlin
resigned in 2000. In July 2004, both re-applied to Christus for their privileges, but later withdrew
the applications. In November 2004, Marlin and Gaskill closed their practice at North Central
Baptist. In March 2005, they closed their practice in San Antonio and moved to Florida, where they
teach and practice pediatric neurosurgery at the University of South Florida.
The plaintiffs sued all defendants for violations of the Texas Free Enterprise and Antitrust
Act (“Texas Antitrust Act”), libel, slander, business disparagement, tortious interference with
business and prospective advantage, and intentional infliction of mental anguish. In large part, these
claims arise from the plaintiffs’ allegations that the defendant-hospitals’ peer review or
administrative review process ultimately resulted in the plaintiffs’ applications for reinstatement at
Methodist Children’s and for privileges at Christus being denied. The plaintiffs also alleged, in
addition to these claims, a breach of contract claim against Methodist Healthcare System of San
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Antonio (“MHS”). Finally, the plaintiffs alleged MHS violated their due process rights based on
malicious and sham peer review. All defendants counterclaimed for attorney’s fees, costs, and
sanctions.
All defendants separately moved for summary judgment, and the plaintiffs filed a
consolidated response. On December 20, 2007, the plaintiffs non-suited their claims for libel,
slander, defamation, and business disparagement. On January 11, 2008, the trial court first
considered the defendants’ motions for summary judgment on plaintiffs’ affirmative claims,
ultimately sustaining defendants’ objections to plaintiffs’ summary judgment evidence and granting
the defendants’ motions for summary judgment. On May 22, 2008, the trial court considered the
defendants’ counterclaims for fees and costs, ultimately overruling defendants’ objections to
plaintiffs’ summary judgment evidence and rendering a take-nothing judgment against all
defendants. Also on May 22, 2008, the trial court signed a final judgment (1) concluding the nonsuit
was effective and dismissing with prejudice the plaintiffs’ claims for libel, slander, defamation, and
business disparagement; (2) ordering plaintiffs to take nothing on their claims; and (3) ordering that
defendants were not entitled to recover fees or costs on their respective counterclaims.
All parties appealed. The plaintiffs appeal the take-nothing summary judgment rendered
against them on their antitrust and breach of contract claims.1 The defendants appeal the take-
nothing judgment against them on their counterclaim for fees and costs.
1
… Plaintiffs do not challenge the summary judgment rendered against them on their due process violation
claims. Therefore, the trial court’s take-nothing judgment as to that claim is affirmed without further discussion.
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THE PLAINTIFFS’ STANDING TO BRING THEIR ANTITRUST CLAIMS
Antitrust law imposes a threshold standing requirement upon persons seeking liability for
antitrust violations. See Bowen v. Wohl Shoe Co., 389 F. Supp. 572, 578 (S.D. Tex. 1975); Scott v.
Galusha, 890 S.W.2d 945, 950 (Tex. App.—Fort Worth 1994, writ denied). “Standing in an
antitrust case involves more than the ‘case or controversy’ requirement that drives constitutional
standing.” Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1449 (11th Cir. 1991). “Antitrust
standing is best understood in a general sense as a search for the proper plaintiff to enforce the
antitrust laws.” Id. Standing to bring an antitrust claim is a question of law. Roberts v. Whitfill, 191
S.W.3d 348, 354-55 (Tex. App.—Waco 2006, no pet.). Standing to pursue an antitrust suit exists
if the plaintiff shows the following: (1) injury-in-fact, which is an injury to the plaintiff proximately
caused by the defendant’s conduct; (2) antitrust injury; and (3) proper plaintiff status, which assures
that other parties are not better situated to bring suit. Doctor’s Hosp. of Jefferson, Inc. v. Southeast
Med. Alliance, Inc., 123 F.3d 301, 305 (5th Cir. 1997); see also Todorov, 921 F.2d at 1449.2
In their motions for summary judgment on the issue of whether the plaintiffs had standing
to bring their claims, none of the defendants challenged the first element of antitrust standing, i.e.,
whether the plaintiffs established an injury-in-fact. Only Christus challenged the third element, i.e.,
plaintiff status. However, because all defendants challenged the second element, i.e., antitrust injury,
we begin with a discussion of that element.
2
… The Texas Antitrust Act is modeled on both the Sherman Antitrust Act and the Clayton Act. Caller-Times
Publ’g Co. v. Triad Commc’ns, Inc., 826 S.W .2d 576, 580 (Tex. 1992). The Texas Antitrust Act provides that it is to
be interpreted “in harmony with federal judicial interpretations of comparable federal antitrust statutes to the extent
consistent with this purpose.” T EX . B U S . & C O M . C O D E A N N . § 15.04 (Vernon 2002). Therefore, it is appropriate that
we look to federal case law for guidance.
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An antitrust injury is “injury of the type the antitrust laws were intended to prevent and that
flows from that which makes the defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-
Mat, Inc., 97 S. Ct. 690, 697 (1977); Roberts, 191 S.W.3d at 355. Antitrust laws are designed to
protect competition rather than individual competitors. See TEX . BUS. & COM . CODE ANN . § 15.04
(Vernon 2002); Oksanen v. Page Mem’l Hosp., 945 F.2d 696, 709 (4th Cir. 1991). Therefore, “[t]he
injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made
possible by the violation.” Brunswick Corp., 97 S. Ct. at 697. “It should, in short, be ‘the type of
loss that the claimed violations . . . would be likely to cause.’” Id. “This limitation is essential
because it ‘requires the private antitrust plaintiff to show that his own injury coincides with the
public detriment tending to result from the alleged violation . . . increas[ing] the likelihood that
public and private enforcement of the antitrust laws will further the same goal of increased
competition.’” Todorov, 921 F.2d at 1449-50 (citation omitted).
The defendants all argued that whether a plaintiff has established an antitrust injury for
standing purposes must be viewed from the consumer’s viewpoint. According to the defendants, the
plaintiffs were required to show that the defendants’ conduct affected the prices, quantity, or quality
of a specific product within a relevant market. However, we believe the defendants’ analysis
confuses the distinction between antitrust injury for standing purposes and “the merits-related
perspective of the impact of a defendant’s conduct on overall competition.”3 Doctor’s Hosp., 123
3
… The confusion arises from cases that use the phrase “antitrust injury” in the context of a discussion of
standing as well in the context of a discussion of the merits of a plaintiff’s antitrust claim. See, e.g., Mathews v.
Lancaster Gen. Hosp., 87 F.3d 624, 641 (3rd Cir. 1996) (in analyzing merits of antitrust claim, and not standing, court
held analysis of “antitrust injury” must be from consumer’s viewpoint); Oksanen, 945 F.2d at 708 (in analyzing merits
of antitrust claim, and not standing, court held antitrust plaintiff held burden of proving concerted action caused “antitrust
injury” by imposing unreasonable restraint on trade).
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F.3d at 305. In Doctor’s Hospital, the Fifth Circuit discussed the type of proof a plaintiff needed to
produce in order to show that he suffered an antitrust injury for purposes of standing. The court held
that “the antitrust laws do not require a plaintiff to establish a market-wide injury to competition,”
which often is a component of substantive liability, “as an element of standing.” Id. “To require
summary judgment proof of the substantive violations as a prerequisite to antitrust injury and
therefore standing to sue . . . is inefficient and confusing.” Id. at 306. The court instead held that
“antitrust injury for standing purposes should be viewed from the perspective of the plaintiff’s
position in the marketplace. . . .” Id. at 305. The court explained as follows:
When a court concludes that no violation has occurred, it has no occasion to
consider standing . . . . An increasing number of courts, unfortunately, deny standing
when they really mean that no violation has occurred. In particular, the antitrust
injury element of standing demands that the plaintiff’s alleged injury result from the
threat to competition that underlies the alleged violation. A court seeing no threat to
competition in a rule-of-reason case may then deny that the plaintiff has suffered
antitrust injury and dismiss the suit for lack of standing. Such a ruling would be
erroneous, for the absence of any threat to competition means that no violation has
occurred and that even suit by the government—which enjoys automatic
standing—must be dismissed.
Id. at 306 (quoting Levine v. Central Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1545 (11th Cir. 1996));
accord Angelico v. Lehigh Valley Hosp., Inc., 184 F.3d 268, 275 n.2 (3rd Cir. 1999) (holding district
court erred by incorporating issue of anticompetitive market effect into its standing analysis,
“confusing antitrust injury with an element of a claim under section 1 of the Sherman Act” and
stating district court’s approach may have been result of the similar “antitrust injury” label applied
to injury component of antitrust standing analysis and to marketplace harm element under section
1.).
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Because the defendants’ analysis too narrowly focused on injury as a component of
substantive liability, rather than as an element of standing, we conclude the defendants did not
establish their entitlement to summary judgment as a matter of law on the issue of standing.
Therefore, we next address whether the plaintiffs raised a fact issue on the existence of any
anticompetitive effect resulting from the defendants’ behavior.4
MERITS OF PLAINTIFFS’ ANTITRUST CLAIMS
The Texas Antitrust Act provides, in relevant part, that “[e]very contract, combination, or
conspiracy in restraint of trade or commerce is unlawful,” and that “[i]t is unlawful for any person
to monopolize, attempt to monopolize, or conspire to monopolize any part of trade or commerce.”
TEX . BUS. & COM . CODE ANN . § 15.05(a), (b) (Vernon 2002 ). The plaintiffs alleged conspiracy in
restraint of free trade under subsection (a) and monopolization of or attempts to monopolize the
practice of pediatric neurosurgery in Bexar County, Texas under subsection (b).
In their various motions for a traditional summary judgment, all defendants argued the
plaintiffs’ claims fail as a matter of law because there was no antitrust injury to the Bexar County
pediatric market. The defendants alleged the plaintiffs’ departure from Methodist Children’s, and
later San Antonio and Bexar County, was caused by the plaintiffs themselves and not by any conduct
on the part of the defendants. The defendants relied on their contention that the plaintiffs’ privileges
were never terminated, revoked, suspended, or denied; instead, defendants asserted (1) Gaskill
4
… In examining whether the defendants were entitled to summary judgment as a matter of law on the merits
of plaintiffs’ claims, we examined all evidence cited to by the plaintiffs in their consolidated response without regard
to the admissibility of the evidence. Therefore, because we assume for the purpose of this appeal that the defendants’
objections to the plaintiffs’ evidence should have been denied and because we reviewed all evidence in the light most
favorable to the plaintiffs, we do not reach the plaintiffs’ first four issues on appeal, all of which dealt with the trial
court’s evidentiary rulings.
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resigned, Marlin took a leave of absence from Methodist Children’s, and Marlin later withdrew his
application for reinstatement of privileges at Methodist Children’s; (2) both plaintiffs decided to
leave North Central Baptist because the hospital began terminating support services needed for
pediatric neurosurgery;5 and (3) they both withdrew their re-applications for privileges at Christus.
The defendants also alleged the plaintiffs could not show that any restraint on competition affected
the prices, quantity, or quality of pediatric neurosurgery services in Bexar County.
A. Section 15.05(a) Violation: Use of Peer Review Process & Interference with Patients
To establish that a defendant contracted, combined, or conspired in restraint of trade in
violation of section 15.05(a), a plaintiff must show that the alleged contract, combination, or
conspiracy is unreasonable and has an adverse effect on competition in the relevant market. See
Winston v. Am. Med. Int’l, 930 S.W.2d 945, 951-52 (Tex. App.—Houston [1st Dist.] 1996, writ
denied). The Texas Antitrust Act does not prohibit all restraints of trade; instead, it prohibits only
those that restrain trade unreasonably. See DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 687 (Tex.
1990). When assessing the reasonableness of a restraint on trade, courts look to one of two
categories of “contracts, combinations, or conspiracies.” The first category is restrictive practices
whose “nature and necessary effect are so plainly anticompetitive that no elaborate study of the
industry is needed to establish their illegality—they are ‘illegal per se.’” Nat’l Soc’y of Prof’l Eng’rs
v. United States, 98 S. Ct. 1355, 1365 (1978). The second category is restrictive practices whose
competitive effect can only be evaluated by analyzing the facts peculiar to the business, the history
of the restraint, and the reasons for its imposition. Id. For this category, courts apply the “rule of
5
… The plaintiffs alleged no complaints against North Central Baptist in the underlying lawsuit.
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reason” under which the fact-finder weighs all the circumstances of a case in deciding whether a
restrictive practice should be prohibited as imposing an unreasonable restraint on competition.
Cont’l T.V., Inc. v. GTE Sylvania, Inc., 97 S. Ct. 2549, 2557 (1977). We examine each category in
turn.
1. Per se violation
A per se analysis is appropriate only after courts have had considerable experience with the
type of restraint at issue, and only if courts can predict with confidence that it would be invalidated
in all or almost all instances under the rule of reason. Leegin Creative Leather Prods. v. PSKS, Inc.,
127 S. Ct. 2705, 2713 (2007). Thus, courts have been “slow to condemn rules adopted by
professional associations as unreasonable per se and, in general, to extend per se analysis to restraints
imposed in the context of business relationships where the economic impact of certain practices is
not immediately obvious.” F.T.C. v. Indiana Fed’n of Dentists, 106 S. Ct. 2009, 2018 (1986)
(citations omitted) (holding that “category of restraints classed as group boycotts is not to be
expanded indiscriminately”).
In their consolidated summary judgment response, the plaintiffs alleged the defendants
“engineered a boycott of plaintiffs’ North Central Baptist practice with Methodist Children’s itself
instructing its emergency room physicians not to refer patients to plaintiffs’ practice at North Central
Baptist, and even going so far as to send a memo instructing its staff to refer any patients to Drs.
Tullous and Mancuso at [Christus].” Plaintiffs also alleged that when plaintiffs’ patients called
Methodist Children’s seeking care, they were not referred to plaintiffs’ new practice at North Central
Baptist. Plaintiffs allege the purpose of the boycott was for the financial benefit of defendants.
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Plaintiffs alleged a per se boycott whereby defendants “cut off access to a supply, facility or market
necessary to enable plaintiffs to compete.” The plaintiffs also alleged defendants, individually and
in combination, “directly interfered with plaintiffs’ existing and potential patients, which has
independently been held to constitute an unlawful agreement to restrain trade even if competition is
not entirely driven out of the market.”
Group boycotts are a type of economic activity that merits per se invalidation under antitrust
laws. NW. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 105 S. Ct. 2613, 2619
(1985). However, assuming the defendants did, in fact, engage in a group boycott, a group boycott
is not always a per se violation. Merely alleging a group boycott is not sufficient because not all
group boycotts are predominantly anticompetitive. Id. at 2621. The per se rule generally applies in
cases in which firms with market power boycott suppliers or customers for the purpose of
discouraging them from doing business with a competitor. Indiana Fed’n of Dentists, 106 S. Ct. at
2018. In Goss v. Memorial Hospital System, the Fifth Circuit declined to apply the per se rule to a
physician’s claim that the hospital for which he worked and its medical staff conspired to deprive
him of his staff privileges. 789 F.2d 353, 355-56 (5th Cir. 1986). The court held that finding a
restraint to be unreasonable as a matter of law was inappropriate in a case where the plaintiff had
failed to show that the hospital had “‘market power or exclusive access to an element essential to
effective competition . . . .’” Id. at 355 (quoting NW. Wholesale Stationers, 105 S. Ct. at 2620-21).
The court also noted that the plaintiff’s “challenged expulsion from the staffs of [two hospitals]
through the use of the hospitals’ internal review procedure [did] not imply anticompetitive state of
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mind” because such review procedures are “necessary to insure that hospital staff members are
competent medical practitioners.” Id.
Here, the plaintiffs’ summary judgment evidence consists of their own depositions, in which
they contend Methodist Children’s stopped sending them patients or referred patients to other
doctors and instructed the emergency room not to call them. Even if the plaintiffs’ allegations that
Methodist Children’s stopped referring patients to them are true, we conclude their claims should
be evaluated under the rule of reason, and not as a per se violation, because courts have generally
been reluctant to
hold that a group of physicians who decide that they do not want to refer patients to
a particular surgeon, because they doubt his qualifications, have committed a per se
violation of the Sherman Act. Because actions on the part of hospitals and
physicians, which might resemble group boycotts, may well be mandated by an
ethically grounded concern for patients’ well-being . . . such behavior, in the medical
service industry, should be analyzed in terms of the rule of reason.
Pontius v. Children’s Hosp., 552 F. Supp. 1352, 1370 (W.D. Pa. 1982); see also Jackson v.
Radcliffe, 795 F. Supp. 197, 205 (S.D. Tex. 1992) (applying rule of reason to physician’s contention
that termination of his contract with hospital was illegal restraint of trade); Oksanen, 945 F.2d at
708-09 (analyzing denial or revocation of medical staff privileges under rule of reason); Marin v.
Citizens Mem’l Hosp., 700 F. Supp. 354, 360 (S.D. Tex. 1988) (applying rule of reason to
physician’s claim that hospital for which he worked and its medical staff formed group boycott to
reduce or eliminate his competitive potential).
2. Rule of Reason
To establish a violation under the rule of reason, a plaintiff must prove the restrictive practice
has an adverse effect on competition in the relevant market. DeSantis, 793 S.W.2d at 688. “Rule
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of reason analysis tests the effect of a restraint of trade on competition.” Id. As a result, a plaintiff
cannot demonstrate the unreasonableness of a restraint merely by showing that it caused him an
economic injury. Oksanen, 945 F.2d at 708. For example, the fact that a hospital’s decision caused
a disappointed physician to practice medicine elsewhere does not of itself constitute an antitrust
injury. Id. “If the law were otherwise, many a physician’s workplace grievance with a hospital
would be elevated to the status of an antitrust action.” Id. “To keep the antitrust laws from
becoming so trivialized, the reasonableness of a restraint is evaluated based on its impact on
competition as a whole within the relevant market.” Id.
To meet this burden, a plaintiff must prove what market it contends was restrained and that
the defendants played a significant role in the relevant market. Id. at 709. Absent this market power,
any restraint on trade created by the defendants’ actions is unlikely to implicate Texas Antitrust Act
section 15.05(a). See id. “There must be evidence of ‘demonstrable economic effect’ not just an
inference of possible effect.” Coca-Cola Co. v. Harmer Bottling Co., 218 S.W.3d 671, 689 (Tex.
2006).
In their consolidated response, the plaintiffs asserted they were driven from the “market” by
an “improper” use of the peer review process, and they alleged the denial of their applications for
reinstatement of their privileges was a rule of reason violation under section 15.05(a). The plaintiffs
relied on their own affidavits and deposition testimony, as well as a report submitted by Dr. L.R.
Huntoon on “sham peer review.” Marlin asserted he resigned his position as CEO of Methodist
Children’s “under pressure as a result of the complaints pursued by the Defendant doctors and the
administration of Methodist Healthcare System.” He alleged all the defendant-doctors, with one
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exception, threatened to resign if he was not removed as CEO. He also alleged he was accused of
hiding medical complications in his cases, and his request for a four-year review of his charts for the
purpose of clearing his name and reputation was denied. According to Marlin, Gaskill’s “forced”
resignation left him with no choice but to take a leave of absence because he was unable to provide
the required backup for emergency and on-call coverage. When he asked for help finding such
backup, he was refused help. When he ultimately found backup help and took steps to end his leave
of absence and return to full staff privileges, Methodist Children’s informed him he would need to
reapply for credentialing. Marlin contended he withdrew his requests for reinstatement of his
privileges because he was threatened with “being reported to the National Practitioner Data Bank
due to a denial of credentials.”6 Marlin also asserted that his and Gaskill’s applications for privileges
at Christus “were in jeopardy of being denied” and with that denial “there was the threat and
probability of being reported to the National Practitioner Data Bank.” For this reason, they withdrew
their applications. The plaintiffs also alleged the defendants gained financially from the plaintiffs’
ouster from Bexar County. According to plaintiffs, it made economic sense for the defendants to
replace the plaintiffs with other doctors the defendants could more easily control.
6
… The granting or retention of a doctor’s hospital privileges is a process known as “credentialing.” St. Luke’s
Episcopal Hosp. v. Agbor, 952 S.W .2d 503, 505 (Tex. 1997). Hospitals and physicians are not only encouraged to report
professional incompetence on the part of other doctors, but in some instances, they are required to report it. Under the
federal Health Care Quality Improvement Act (“HCQIA”) of 1986, a health care entity must report to the state board
of medical examiners any professional review action that adversely affects the clinical privileges of a physician. See 42
U.S.C. § 11133(a)(1). This information is then forwarded by the state board to the National Practitioner Data Bank. See
id. § 11133(b). Upon request, the data bank must provide the adverse action information it receives to state licensing
boards, hospitals, and other organizations that have entered into, or may be entering into, an employment or affiliation
relationship with the subject physician or to which the physician has applied for clinical privileges or appointment to the
staff. Id. § 11137(a). The HCQIA requires this information be kept confidential by the recipient, and any breach of
confidentiality is subject to a civil monetary penalty. Id. § 11137(b).
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As to effect on the market, the plaintiffs alleged the relevant product market was for pediatric
neurosurgery services, and the relevant geographic market was in and around San Antonio. The
plaintiffs argued that defendants’ actions “were antithetical to the welfare of consumers of pediatric
neurosurgery services by damaging the free market’s ‘allocative efficiency’ and causing a decrease
in the quality of services available by restricting consumers to non-board certified physicians who
would not even always be available to treat them.” In their affidavits, both plaintiffs stated that other
doctors, surgeons, and neurosurgeons “are not interchangeable with pediatric neurosurgeons, thus,
the realities are that [their] patients could not easily switch to other surgeons . . . .” In support of this
argument, the plaintiffs alleged that only twelve physicians in all of Texas practice pediatric
neurosurgery and only at certain hospitals, with two of these hospitals located in San Antonio
(Methodist Children’s and Christus). The plaintiffs also alleged that after they left Bexar County,
only two neurosurgeons practicing pediatric neurosurgery remained in the market, Drs. Tullous and
Mancuso at Christus, neither of whom are board certified in pediatric neurosurgery. However,
Marlin admitted at his deposition that pediatric neurosurgery is part of a general neurosurgeon’s
training and the Board of Neurological Surgeons considers general neurosurgeons qualified to
perform pediatric neurosurgery.
Although plaintiffs argued that quality of care was diminished because patients were
restricted to physicians not board-certified in pediatric neurosurgery and who were not always
available to treat them, the plaintiffs did not contend prices for pediatric neurosurgery services would
increase over the competitive level; no evidence was offered that pediatric patients were unable to
obtain necessary services in Bexar County; and no evidence was offered to support the plaintiffs’
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speculation that the welfare of consumers of pediatric neurosurgery services was damaged, that there
was a decrease in the quality of services available, that the cost of pediatric neurosurgery has risen,
or that the hospitals have raised their rates or changed their behavior in any anti-competitive way.
We conclude the plaintiffs’ section 15.05(a) antitrust claims fail as a matter of law because
they failed to carry their burden of submitting summary judgment proof sufficient to raise a fact issue
on whether defendants’ alleged actions had an adverse effect on competition in the relevant market.
B. Section 15.05(b) Violation: Monopolization or Attempted Monopolization
The Texas Antitrust Act prohibits monopolies or attempts to monopolize. TEX . BUS. & COM .
CODE ANN . § 15.05(b). However, merely possessing a monopoly or market power is not forbidden.
Chromalloy Gas Turbine Corp. v. United Techs. Corp., 9 S.W.3d 324, 327 (Tex. App.—San
Antonio 1999, pet. denied). Moreover, the prohibition against attempted monopoly does not
encompass all efforts to acquire market power. Id. For example, the Act was not intended to protect
against increasing competition. Id.
To establish that a defendant monopolized in violation of section 15.05(b), a plaintiff must
show (1) the defendant’s possession of monopoly power in the relevant market and (2) the
defendant’s willful acquisition or maintenance of that power, as distinguished from growth or
development as a consequence of a superior product, business acumen, or historical accident.
Caller-Times Publ’g Co. v. Triad Commc’ns, Inc., 826 S.W.2d 576, 580 (Tex. 1992). To establish
attempted monopolization, a plaintiff must show “(1) that the defendant has engaged in predatory
or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability
of achieving monopoly power.” Spectrum Sports, Inc., v. McQuillan, 113 S. Ct. 884, 890-91 (1993).
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The first element of an attempted monopolization claim considers the conduct, the second looks to
the motivation behind the conduct, and the third looks to the defendant’s market power and
commensurate “ability to lessen or destroy competition in that market.” Id. at 891. Therefore, “[t]he
difference between actual monopoly and attempted monopoly rests in the requisite intent and the
necessary level of monopoly power.” Chromalloy Gas Turbine, 9 S.W.3d at 327. Monopoly power
is “the power to raise prices to supra-competitive levels or . . . the power to exclude competition in
the relevant market either by restricting entry of new competitors or by driving existing competitors
out of the market.” Am. Key Corp. v. Cole Nat’l Corp., 762 F.2d 1569, 1581 (11th Cir. 1985). Such
predatory conduct is conduct that reasonably appears capable of making a significant contribution
to creating or maintaining monopoly power. Taylor Publ’n Co. v. Jostens, Inc., 216 F.3d 465, 475-
76 (5th Cir. 2000).
The plaintiffs contend, and for the purpose of this appeal we assume, the relevant market
is pediatric neurosurgery. We first note that none of the defendant-doctors are pediatric
neurosurgeons.7 Nevertheless, in their consolidated response, the plaintiffs alleged the elements of
7
… To support their argument that there was no anticompetitive affect, the defendants rely on a “document”
they allege the plaintiffs provided to the Department of Justice, which states as follows:
STRUCTURE OF PEDIATRIC NEUROSURGERY IN SAN ANTONIO
Interestingly, Manhattan has only 4 board certified pediatric neurosurgeons with a significantly greater
population.
The children of San Antonio could be easily served by 2 pediatric neurosurgeons in terms of volume
of cases. Call coverage then becomes the only issue. W e have provided 24/7 call coverage between
the two of us for 10 years. [Emphasis added.]
The problem with this “document” is that it is attached to the M ethodist Defendants’ brief in support of their
counterclaims, and it does not appear to have been included in the summary judgment proof offered by any of the
defendants. Therefore, we do not consider this document on appeal.
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monopolization, or a dangerous probability of monopolization, was shown by evidence that the
defendant-doctors increased their business in the relevant market. According to the plaintiffs, the
defendant-doctors worked to eliminate them from their practice, which then left only Tullous and
Mancuso at Christus and “cleared the way for Methodist to hire its own [doctor, Gennuso]—thus
‘monopolizing the care among the two hospitals, among the three (captive) neurosurgeons, so that
all pediatric neurosurgery is now done by hospital-employed physicians.’” In support of this
contention, the plaintiffs relied on the following testimony at Marlin’s deposition:
Q. [Y]ou also accuse the Defendant Doctors of monopolizing and inhibiting
competition for pediatric neurosurgery services in the San Antonio area.
How—explain that. How could any of these doctors . . . monopolize and
inhibit competition of pediatric neurosurgery in San Antonio?
A. They did it as a group. They eliminated two pediatric neurosurgeons from
practice in the city, which left only basically two others that worked for
[Christus] which let Methodist [Children’s] hire one part of CHICA, thus
monopolizing the—the care among the two hospitals, among the three
neurosurgeons, so that all pediatric neurosurgery is now done by hospital-
employed physicians.
We do not believe the evidence that the defendant-hospitals elected to hire or grant privileges
to Tullous, Mancuso, and Gennuso creates a genuine issue of material fact about whether any of the
defendants possessed monopoly power in the relevant market. Nor does the fact that the three
remaining pediatric neurosurgeons worked at the two defendant-hospitals create a genuine issue of
material fact about whether any of the defendants had a dangerous probability of achieving
monopoly power. Even if the hospitals chose to engage the services of hospital-employed
physicians, this aspect of the defendants’ behavior is consistent with competition. Further, “[h]iring
talent cannot generally be held exclusionary even if it does weaken actual or potential rivals and
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strengthen a monopolist . . . [because] there is a high social and personal interest in maintaining a
freely functioning market for talent.” Taylor Pub. Co., 216 F.3d at 479 (citation omitted). Also,
other than their contention that they were “run out of business,” the plaintiffs offered no evidence
indicating the defendants prevented other pediatric neurosurgeons from entering the relevant market.
We conclude the plaintiffs’ section 15.05(b) antitrust claims fail as a matter of law because
they failed to carry their burden of submitting summary judgment proof sufficient to raise a fact issue
on any of the elements of the claim.
THE PLAINTIFFS’ BREACH OF CONTRACT CLAIM
The plaintiffs alleged a breach of contract claim only against MHS. The plaintiffs asserted
MHS’s actions breached the Methodist Children’s Medical Staff Bylaws (“the Medical Staff
Bylaws”). In their petition, the plaintiffs argued the Medical Staff Bylaws and the Bylaws Governing
the Community Board of Methodist Healthcare System of San Antonio, Ltd. (“the Hospital
Bylaws”), taken together, afford contractual due process rights to the Methodist Children’s medical
staff. MHS moved for summary judgment on the grounds that the Medical Staff Bylaws did not
create a contract between MHS and the plaintiffs. The plaintiffs countered, in their consolidated
response, that although the Medical Staff Bylaws may not create contractual rights, such rights were
created by the Hospital Bylaws.
The plaintiffs are correct that procedural rights established in hospital bylaws can constitute
contractual rights. See Stephan v. Baylor Med. Ctr. at Garland, 20 S.W.3d 880, 887 (Tex.
App.—Dallas 2000, no pet.); Gonzalez v. San Jacinto Methodist Hosp., 880 S.W.2d 436, 439 (Tex.
App.—Texarkana 1994, writ denied). But rights created by medical staff bylaws are not necessarily
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binding on a hospital. Stephan, 20 S.W.3d at 887; see also Weary v. Baylor Univ. Hosp., 360
S.W.2d 895, 897 (Tex. Civ. App.—Waco 1962, writ ref’d n.r.e.). Medical staff bylaws that do not
define or limit the power of a hospital as it acts through its governing board do not create contractual
obligations for the hospital. Stephan, 20 S.W.3d at 888; Powell v. Brownwood Reg’l Hosp., Inc.,
No. 11-03-00171-CV, 2004 WL 2002929, at *3 (Tex. App.—Eastland Sept. 9, 2004, pet. denied).
The plaintiffs’ allegations regarding MHS’s breach of an alleged contract arise from how they
were treated when they attempted to reapply for privileges at Methodist Children’s and how Gaskill
was treated in the peer review process. These claims are governed by the Medical Staff Bylaws and
the Credentials Manual and Fair Hearing Plan (“Credentials Manual”). Therefore, we determine
whether the Medical Staff Bylaws define or limit MHS’s power to act through its governing board.8
The Hospital Bylaws provide that the “hospital,” defined to include Methodist Children’s,
is owned by MHS, and MHS “retains all authority and control over the business, policies, operations,
and assets of the” hospital via the MHS Board of Governors. Pursuant to the Hospital Bylaws, the
“MHS Board of Governors has delegated certain duties to the MHS Officers and to [the] Community
Board.” The Hospital Bylaws define the Community Board as the hospital’s “local governing body.”
The “rights and duties delegated to the Community Board, acting in its capacity as the authorized
agent of MHS, are described in” the Hospital Bylaws, which charge the Community Board with
“establish[ing] and defin[ing] the structures of an organized Medical Staff composed of qualified
physicians . . . .” The Hospital Bylaws also state as follows:
8
… The plaintiffs contend this case is “exactly the same” as the case considered by the Texarkana court in
Gonzalez, in which that court held the procedural rights under the hospital’s bylaws were contractual. 880 S.W .2d at
439. W e disagree because here the contractual rights claimed to have been breached arise not from the Hospital Bylaws,
but instead, from the Medical Staff Bylaws.
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The MHS Board of Governors has appointed the Community Board . . . to
assist and advise the MHS President/CEO, the Partnership,[9] the MHS Board of
Governors, and the Medical Staff. The primary function of the Community Board
shall be to assure that the [hospital] and its Medical Staff provide quality medical
care that meets the needs of the community. For this purpose, the MHS Board of
Governors has delegated to the Community Board the authority to receive and
evaluate periodic reports from the Medical Staff and its officers, to make decisions
in compliance with the Partnership’s policies regarding Medical Staff appointments,
reappointments, and the granting of clinical privileges, to oversee performance
improvement, utilization review, risk management, and similar matters regarding the
provision of quality patient care at the [hospital], and to establish policies regarding
such matters. . . . .
The MHS Board of Governors . . . retains authority for the [hospital’s]
business decisions and financial management . . . . The MHS Board of Governors
expressly reserves the right to amend, modify, rescind, clarify, or terminate at any
time and without notice any delegation of authority given to the Community Board
and, if deemed necessary by the MHS Board of Governors, to override decisions
made by the Community Board.
The Hospital Bylaws also charge the Medical Staff with “adopt[ing] and maintain[ing]
current Bylaws, Rules and Regulations . . . establishing a framework for self-governance within
which Medial Staff members can act with a reasonable degree of freedom and confidence, while
remaining acceptable to the Board.” However, the Community Board “shall maintain complete
responsibility and authority over the operation of the Medical Staff.” The Medical Staff Bylaws are
required to “contain certain procedures to provide a fair hearing and appeal process for an applicant
to, or member of, the Medical Staff or other individuals applying for, or holding clinical privileges,
who may be subject to an adverse decision regarding his/her appointment, reappointment, continued
appointment to the Medical Staff and/or exercise of privileges granted or requested.” In the Medical
9
… The hospital bylaws define the “Partnership” as the “The legal owner of the Hospital, the Methodist
Healthcare System of San Antonio, Ltd., L.L.P. . . . .”
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Staff Bylaws, the medical staff “recogniz[ed] that it must assume . . . responsibility [for the medical
care rendered in the hospital of MHS] subject to the ultimate authority of the Board of Governors.”
The Credentials Manual was created “pursuant to and under the authority of the Medical Staff
Bylaws . . . .” The Credentials Manual was “subject to approval and amendment by the Community
Board upon recommendation of the Medical Board[,]” which was “empowered to represent and act
for the Medical Staff.” One of the purposes of the Credentials Manual was to “serve as a primary
means for accountability to the Community Board concerning professional performance of
Practitioners and others with clinical privileges authorized to practice at the Hospital . . . . [and to]
provide a mechanism for recommending to the Community Board the appointment and
reappointment of qualified Practitioners and making recommendations regarding clinical privileges
for qualified and competent Healthcare Professionals.”
We conclude the Medical Staff Bylaws do not attempt to define or limit MHS’s power to act
through its Board of Governors because “[t]he MHS Board of Governors expressly reserves the
right[,] if deemed necessary by the MHS Board of Governors, to override decisions made by the
Community Board.” Accordingly, because the Medical Staff Bylaws do not define or limit the
power of MHS as it acts through its governing board, neither the Medical Staff Bylaws, nor the
Credentials Manual created pursuant to those bylaws, give rise to contractual rights. Therefore, the
trial court properly rendered summary judgment in favor of the MHS because, as matter of law, no
contract existed between MHS and the plaintiffs.
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THE DEFENDANTS’ COUNTERCLAIMS
All defendants asserted counterclaims for attorney’s fees and costs pursuant to three statutes.
They asserted they were entitled to attorney’s fees under the federal Health Care Quality
Improvement Act (“HCQIA”) of 1986, pursuant to which “the court shall, at the conclusion of the
action, award to a substantially prevailing party defending against any such claim the cost of the suit
attributable to such claim, including a reasonable attorney’s fee, if the claim, or the claimant’s
conduct during the litigation of the claim, was frivolous, unreasonable, without foundation, or in bad
faith.” 42 U.S.C. § 11113. The defendants also asserted they were entitled to attorney’s fees under
the Texas Medical Practice Act (“TMPA”), pursuant to which “a defendant subject to this section
may file a counterclaim in a pending action . . . to recover defense costs, including court costs,
attorney’s fees, and damages incurred as a result of the civil action, if the plaintiff’s original action
is determined to be frivolous or brought in bad faith.” TEX . OCC. CODE ANN . § 160.008(c) (Vernon
2004). Finally, the defendants asserted they were entitled to attorney’s fees under the Texas
Antitrust Act, pursuant to which “[o]n a finding by the court that an action under this section was
groundless and brought in bad faith or for the purpose of harassment, the court shall award to the . . .
defendants a reasonable attorney’s fee, court costs, and other reasonable expenses of litigation.”
TEX . BUS. & COM . CODE ANN . § 15.21(a)(3).
We review a trial court’s decision regarding the award of attorney fees and costs for an abuse
of discretion. See Muzquiz v. W.A. Foote Mem’l Hosp., Inc., 70 F.3d 422, 432 (6th Cir. 1995)
(HCQIA case); Smith v. Ricks, 31 F.3d 1478, 1487 (9th Cir. 1994) (HCQIA case); Med. Specialist
Group, P.A. v. Radiology Assocs., L.L.P., 171 S.W.3d 727, 735 Tex. App.—Corpus Christi-
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Edinburg 2005, pet. denied) (Texas Antitrust case); Dallas County Med. Soc’y v. Ubinas Brache,
68 S.W.3d 31, 44 (Tex. App.—Dallas 2001, pet. denied) (HCQIA case). An action is frivolous “if
it lacks an arguable basis either in law or fact.” Jeung v. McKrow, 264 F. Supp. 2d 557, 574-75
(E.D. Mich. 2003) (HCQIA case). Similarly, a claim is groundless if it has no basis in law or fact
and is not warranted by good faith argument for extension, modification, or reversal of existing law.
Donwerth v. Preston II Chrysler-Dodge, Inc., 775 S.W.2d 634, 637 (Tex. 1989). To find that a
lawsuit was brought in “bad faith,” a defendant must show that the suit was motivated by a malicious
or discriminatory purpose. Riddick v. Quail Harbor Condo. Ass’n, Inc., 7 S.W.3d 663, 677 (Tex.
App.—Houston [14th Dist.] 1999, no pet.). In applying these criteria, the United State Supreme
Court provided the following caveat:
[I]t is important that a district court resist the understandable temptation to engage
in post hoc reasoning by concluding that, because a plaintiff did not ultimately
prevail, his action must have been unreasonable or without foundation. This kind of
hindsight logic could discourage all but the most airtight claims, for seldom can a
prospective plaintiff be sure of ultimate success. No matter how honest one’s belief
that he has been the victim of discrimination, no matter how meritorious one’s claim
may appear at the outset, the course of litigation is rarely predictable. Decisive facts
may not emerge until discovery or trial. The law may change or clarify in the midst
of litigation. Even when the law or the facts appear questionable or unfavorable at
the outset a party may have an entirely reasonable ground for bringing suit.
Christiansburg Garment Co. v. EEOC, 98 S. Ct. 694, 700-01 (1978).
With this caveat in mind and after careful review of the record, we conclude the trial court
did not abuse its discretion in impliedly ruling that the plaintiffs’ claims were not frivolous,
unreasonable, without foundation, groundless, or brought in bad faith or for the purpose of
harassment. All defendants initially argued the plaintiffs’ antitrust claims were frivolous,
unreasonable, without foundation, and brought in bad faith based on the immunity provided by
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HCQIA and TMPA. But, not all of the plaintiffs’ claims relied upon actions allegedly taken in the
context of a peer review or medical committee; therefore, any immunity under HCQIA and TMPA
did not entirely shield the defendants from liability. See Austin v. McNamara, 979 F.2d 728, 738
(9th Cir. 1992) (holding that allegations of refusal to provide coverage and that other physicians
“openly attacked [plaintiff-doctors] before nurses and in neurosurgical group meetings” “cannot be
brought within HCQIA’s immunity”); Jeung, 264 F. Supp. 2d at 574 (holding that statute “does not
purport to confer immunity for actions unrelated to review process”).
Also, because we cannot conclude the plaintiffs knew the defendants were immune at the
outset of the litigation; we cannot say their challenge to the defendants’ immunity was not legitimate.
See Meyers v. Columbia/HCA Healthcare Corp., 341 F.3d 461, 473 (6th Cir. 2003) (holding “it was
not unreasonable, frivolous, without foundation, or in bad faith for plaintiffs to oppose the LMH
Defendants’ position on HCQIA immunity [because] Plaintiffs had valid questions concerning the
manner in which the LMH Defendants conducted the professional review of Dr. Robert Meyers and
chose to resolve those issues in this Court”); Leak v. Grant Med. Ctr., 893 F. Supp. 757, 763 (S.D.
Ohio 1995), aff,d 103 F.3d 129 (6th Cir. 1996) (noting there is no “per se rule that a healthcare
professional could never have standing to asserts antitrust claims arising from the denial of staff
privileges”). Moreover, the fact that several of the plaintiffs’ claims either lacked sufficient evidence
to go forward or were determined to be precluded by legal precedent does not mean that those claims
were groundless or completely without foundation. See Hughes v. Rowe, 101 S. Ct. 173, 179 (1980)
(“Allegations that, upon careful examination, prove legally insufficient to require a trial are not, for
that reason alone, ‘groundless’ or ‘without foundation’ as required by Christiansburg.”). Finally,
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the case law governing the circumstances under which physicians may bring antitrust suits is not so
well-settled that we can say the plaintiffs’ suit was inconsistent with the Texas statute or applicable
state and federal case law, and therefore, lacked a basis in law.
Accordingly, although the plaintiffs did not carry their summary judgment burden with regard
to the merits of their antitrust claims, we will not engage in post hoc reasoning by concluding that,
because they did not ultimately prevail, their claims must have been unreasonable or without
foundation. Therefore, we conclude the trial court did not abuse its discretion in determining the
plaintiffs’ claims were not frivolous, unreasonable, without foundation, or brought in bad faith. See
Leak, 893 F. Supp. at 762 (“We begin with the general proposition that the health care profession
is not immune from scrutiny under federal antitrust laws.”).
Finally, defendants argued the plaintiffs’ conduct warranted fees under HCQIA because the
plaintiffs filed “kitchen sink” pleadings asserting a variety of causes of action, many of which were
nonsuited prior to the summary judgment hearing. Over the several years this litigation remained
pending, defendants did not move for sanctions against the plaintiffs based upon their conduct, such
as for the filing of a frivolous pleading, for discovery abuse, or for any other reason. Therefore, after
a complete review of the record, we conclude the trial court did not abuse its discretion in
determining the plaintiffs’ conduct did not warrant an award of attorney’s fees.
CONCLUSION
For these reasons, we overrule all issues on appeal and affirm the trial court’s judgment.
Sandee Bryan Marion, Justice
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