Shahriar "James" Ekbatani v. Community Care Health Network, LLC

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[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-12322
Non-Argument Calendar
____________________
SHAHRIAR "JAMES" EKBATANI,
SHAHRZAD EKBATANI,
as Trustee for Nobility Trust and Dignity Trust,
TERRENCE DIAZ,
Plaintiffs-Appellants,
versus
COMMUNITY CARE HEALTH NETWORK, LLC,
d.b.a. Matrix Medical Network,
FRAZIER MANAGEMENT, LLC,
d.b.a. Frazier Healthcare Partners,
FRAZIER HEALTHCARE VENTURES,
FRAZIER HEALTHCARE VII, L.P.,
FRAZIER HEALTHCARE VII-A, L.P.,
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2 Opinion of the Court 21-12322
THE PROVIDENCE SERVICE CORPORATION,
a Delaware Corporation,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 6:20-cv-02224-PGB-DCI
____________________
Before WILSON, BRASHER, and ANDERSON, Circuit Judges.
PER CURIAM:
Shahriar Ekbatani and related parties appeal the district
court’s order dismissing their antitrust suit for lack of standing.
Ekbatani and his co-plaintiffs sold their company, which we will
call “HealthFair,” to a buyer we will call “Matrix.” Matrix allegedly
reduced HealthFair’s business output after the sale so that Health-
Fair’s services would not compete with Matrix’s services. This re-
duction in output allegedly caused the sellers to lose a contractually
obligated payment that was contingent on the company’s post-sale
performance. The sellers brought an action under Section 7 of the
Clayton Act, 15 U.S.C. § 18, alleging that Matrix’s reduced output
violated the antitrust laws. Because the district court correctly con-
cluded that the sellers lack antitrust standing, we affirm.
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21-12322 Opinion of the Court 3
I.
HealthFair and Matrix both provide risk adjustment services
to payors in the American healthcare system. The sellers decided
to sell their equity interests in HealthFair to Matrix. Under the
terms of their agreement, the sellers received cash, shares in Ma-
trix’s parent holding company, and the promise of an “earnout”
payment if HealthFair’s profits reached a certain threshold over the
following year.
After the acquisition, Matrix allegedly reduced the daily ap-
pointments to HealthFair’s business, resulting in a significant drop
in revenue. At the same time, Matrix increased prices for its own
services. Matrix notified the sellers that it did not owe them an
earnout payment because HealthFair’s profits fell below the
threshold stated in the contract.
The sellers sued Matrix and connected parties under Section
7 of the Clayton Act, 15 U.S.C. § 18, arguing that Matrix’s conduct
substantially lessened competition in the market. Matrix then filed
a motion to dismiss for failure to state a claim, which the district
court granted. The court concluded that the sellers lacked antitrust
standing because they failed to allege an antitrust injury. The sellers
timely appealed.
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4 Opinion of the Court 21-12322
II.
This Court reviews a district court’s dismissal for lack of an-
titrust standing de novo. Fla. Seed Co. v. Monsanto Co., 105 F.3d
1372, 1374 (11th Cir. 1997). To survive a motion to dismiss under
Federal Rule of Civil Procedure 12(b)(6), “a complaint must con-
tain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).
III.
To determine whether a plaintiff has antitrust standing, we
evaluate two elements. First the plaintiff must have “suffered an
antitrust injury . . . . Second, the plaintiff must ‘be an efficient en-
forcer of the antitrust laws.’” Duty Free Americas, Inc. v. Estee
Lauder Cos., Inc., 797 F.3d 1248, 1272–73 (11th Cir. 2015) (cleaned
up) (quoting Sunbeam Television Corp. v. Nielsen Media Rsch.,
Inc., 711 F.3d 1264, 1271 (11th Cir. 2013)). Because the district court
dismissed for lack of antitrust injury alone and we believe that rul-
ing is dispositive, we limit our discussion to that element.
“Antitrust injury is injury of the type the antitrust laws were
intended to prevent and that flows from that which makes the de-
fendant’s acts unlawful.” Id. at 1272 (cleaned up) (quoting Palmyra
Park Hosp., Inc. v. Phoebe Putney Mem’l Hosp., 604 F.3d 1291,
1299 (11th Cir. 2010)). Usually, an antitrust plaintiff can establish an
antitrust injury because it participates as a buyer or seller in the
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21-12322 Opinion of the Court 5
market in which the defendant has restrained competition. Here,
however, the sellers are not participants in the market for
healthcare risk adjustment services; they do not provide services in
that market, and that they are not consumers in that market. They
argue that they remain in the market by virtue of their rollover eq-
uity in Matrix’s parent holding company. But they allege no injury
as shareholders of that company. And they obviously couldn’t—if
anything, shareholders in Matrix’s parent company would benefit
from anticompetitive measures that increased its profits.
When a plaintiff is not a participant in the relevant market,
it can establish antitrust standing only if its injury is “inextricably
intertwined with the injury the conspirators sought to inflict on . . .
the . . . market.” Feldman v. Am. Dawn, Inc., 849 F.3d 1333, 1341
(11th Cir. 2017) (quoting Blue Shield of Va. v. McCready, 457 U.S.
465, 484 (1982)). An injury meets this standard if it is “a necessary
component of the alleged anticompetitive purpose.” See Mr. Fur-
niture Warehouse, Inc. v. Barclays Am./Com. Inc., 919 F.2d 1517,
1521 (11th Cir. 1990); see also McCready, 457 U.S. 465 at 479. It is
not enough that the injury is “‘secondary’ to the goal of reduced
competition” or a mere “effect” of the anticompetitive behavior.
Feldman, 849 F.3d at 1341 (quoting Nat’l Indep. Theatre Exhibi-
tors, Inc. v. Buena Vista Distrib. Co., 748 F.2d 602, 608 (11th Cir.
1984)).
The sellers maintain that their contractual right to an
earnout payment, which was allegedly affected by Matrix’s output
reduction, is “inextricably intertwined” with the harm that Matrix’s
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6 Opinion of the Court 21-12322
anticompetitive conduct caused to the market. We disagree. Ma-
trix’s failure to meet the profit threshold that would trigger the
earnout is at most an incidental “effect” of the alleged anticompet-
itive behavior. This “earnout” injury is not a “necessary compo-
nent” of Matrix’s alleged anticompetitive purpose; the company
could have failed to meet the earnout threshold without commit-
ting anticompetitive conduct, or it could have met the earnout
threshold while committing anticompetitive conduct. This kind of
tenuous connection between a plaintiff’s injury and the injury to
the market is not enough to establish a nonmarket participant’s an-
titrust standing. See id.; see also McDonald v. Johnson & Johnson,
722 F2d 1370 (8th Cir. 1983) (no antitrust injury when buyer of
company did not meet seller’s earnout threshold).
IV.
The district court is AFFIRMED.