Armstrong Surgical Center, Inc. v. Armstrong County Memorial Hospital

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
7-27-1999
Armstrong Surgical v. Armstrong Memorial
Precedential or Non-Precedential:
Docket 97-3440
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Filed July 27, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-3440
ARMSTRONG SURGICAL CENTER, INC.,
Appellant,
v.
ARMSTRONG COUNTY MEMORIAL HOSPITAL; ROGELIO
BORJA; RICHARD BOSCO; ZAFAR CHOWDHRY; JEFFREY
DAVID; FRANK DAVIE; EGBERT DEVRIES; PAUL L.
FREDERICK; JOHN GARROTT; FRANK N. GENOVESE;
IRVING KLEIN; DAVID H. KOHL; LEE H. KOSTER; JOHN
MARTY; MICHAEL P. ONDICH; KARL R. SALTRICK;
WILLIS SHOOK; ANTHONY SMALDINO; PETER SOTOS;
JAE T. YANG
On Appeal From The United States District Court
For The Western District Of Pennsylvania
(D.C. Civil No. 96-01384)
District Judge: Honorable Gustave Diamond
ARGUED APRIL 23, 1998
BEFORE: NYGAARD and STAPLETON, Circuit Judges
and SCHWARTZ,* District Judge.
(Filed July 27, 1999)
_________________________________________________________________
* Honorable Murray M. Schwartz, Senior Judge for the United States
District Court for the District of Delaware, sitting by designation.
John L. Laubach, Jr.
John P. Klee
Laubach & Fulton
104 Broadway Avenue
Carnegie, PA 15106-2421
James G. Park (Argued)
374 Midway Road
Pittsburgh, PA 15216
Attorneys for Appellant
Alan A. Garfinkel
Klett, Lieber, Rooney & Schorling
One Oxford Centre, 40th Floor
Pittsburgh, PA 15219-6498
Jules S. Henshell (Argued)
Klett, Lieber, Rooney & Schorling
240 North Third Street, Suite 600
Harrisburg, PA 17101
Attorneys for Appellee
Armstrong County Memorial
Hospital
Wendelynne J. Newton (Argued)
Sheila S. DiNardo
Buchanan Ingersoll Professional
Corporation
One Oxford Centre, 20th Floor
301 Grant Street
Pittsburgh, PA 15219-1410
Attorneys for Appellees
Rogelio Borja, Richard Bosco,
Zafar Chowdhry, Jeffrey David,
Frank Davie, Egbert Devries, Paul
L. Frederick; John Garrott, Frank
N. Genovese, Irving Klein, David H.
Kohl, Lee H. Koster, John Marty,
Michael P. Ondich, Karl R. Saltrick,
Willis Shook, Anthony Smaldino,
Peter Sotos and Jae T. Yang
2
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Appellant Armstrong Surgical Center, Inc. (the "Surgical
Center") contends that Armstrong County Memorial
Hospital and nineteen of its staff physicians (the"Hospital
Defendants") conspired to prevent it from establishing an
ambulatory surgery center, thereby restraining and
monopolizing trade in violation of sections 1 and 2 of the
Sherman Act. The District Court dismissed the complaint
after concluding that the alleged conduct was immune from
antitrust scrutiny. We will affirm.
I.
We review the District Court's order dismissing the
Surgical Center's complaint de novo. See Jeremy H. v.
Mount Lebanon Sch. Dist., 95 F.3d 272, 277 (3d Cir. 1996).
In reviewing that order, we employ the same standard the
District Court used, accepting as true all factual allegations
contained in the complaint and all reasonable inferences
that can be drawn therefrom. See Schuylkill Energy
Resources, Inc. v. Pennsylvania Power & Light Co. , 113 F.3d
405, 411 n.2 (3d Cir.), cert. denied, 118 S. Ct. 435 (1997).
II.
The Surgical Center has plans to build a free-standing
ambulatory surgery center in the city of Kittanning,
Armstrong County, Pennsylvania. If constructed, that
facility would provide outpatient surgical services, including
both general surgery and various specialities. Currently, the
Hospital is the only facility with operating rooms in
Armstrong County, and the nineteen staff physician
defendants perform the vast majority of surgeries in the
county. Only one independent ambulatory surgery center
operates in the four counties that border Armstrong
County, and this center is approximately fifty miles from
the Surgical Center's proposed site. If constructed, the
Surgical Center's facility would compete directly with the
3
Hospital and its staff physicians in the outpatient surgery
market. Moreover, the Surgical Center alleges that it would
offer outpatient surgical services at prices significantly
lower than the Hospital's.
Under the Pennsylvania Health Care Facilities Act,
anyone proposing to establish a new health care facility
must first obtain a Certificate of Need ("CON") from
Pennsylvania's Department of Health. See Pa. Stat. Ann. tit.
35, S 448.701(a)(2). The Act seeks to ensure"the orderly
and economical distribution of health care resources to
prevent needless duplication of services." Id. at S 448.102.
The Department individually reviews CON applications in
an extensive proceeding consisting of an investigation, an
evaluation of submitted materials, and a public hearing.
During this review, the Department considers various
health planning issues, including the adequacy of existing
health care providers and the need for additional services
or facilities. See id. S 448.707. Interested parties, including
health care providers who supply similar services in the
area, may petition for public meetings or hearings and
submit information to the Department on any CON
application. See id. SS 448.103, 448.704(b).
In March of 1991, the Surgical Center filed an application
for a CON with the Department as required. Thereafter,
according to the Surgical Center's complaint, the Hospital
defendants, including fourteen physicians who originally
supported the Surgical Center's project, entered into a
conspiracy to subvert establishment of the new facility. The
alleged conspiracy involved: (1) the physicians announcing
that they would boycott the proposed outpatient center and
(2) the Hospital defendants submitting false and misleading
information to the Department. Specifically, the Surgical
Center alleges that the Hospital defendants informed the
Department that its nineteen physicians would not use the
Surgical Center facility in the hope that this information
would convince the Department that the proposed facility
could not meet the statutory requirements for a CON. In
addition, the Surgical Center claims that the Hospital
defendants sought to mislead the Department into believing
that the Hospital intended to open its own outpatient
center, which was then under construction, and that this
4
facility would satisfy all of Armstrong County's outpatient
surgery needs. The Hospital's partially constructed facility
was designed to provide alternative space for outpatient
surgeries then conducted in three of the Hospital's six
mixed-use operating rooms. According to the Surgical
Center, however, the Hospital defendants knew that the
construction of the Hospital's facility had been stopped with
only the shell of the building completed and that the
Hospital had made no commitment to resume construction.
Despite this knowledge, it is alleged that the Hospital
defendants falsely represented to the Department that its
new center was either in use or very near completion.
The Department denied the Surgical Center's CON
application. The Surgical Center appealed that decision to
the Commonwealth of Pennsylvania State Health Facility
Hearing Board, which conducted its own hearing and
received additional evidence.1 The Board affirmed the
Department's decision after finding that (1) the Surgical
Center's facility would result in needless duplication of
existing facilities and health care services, and (2) the
Surgical Center would not be economically viable because
the nineteen Hospital surgeons who performed ninety
percent of Armstrong County's surgeries would not use the
Surgical Center facility. According to the Board,"the most
damaging evidence [against the Surgical Center's
application] is that the number of physicians who might
have been expected to support the facility decreased
significantly after the Applicant had submitted its
projections." The Surgical Center appealed the Board's
decision to the Commonwealth Court of Pennsylvania,
which affirmed the Board's decision.
The Surgical Center filed this antitrust action seeking
treble damages for, inter alia, denial of the CON, lost value
of the CON and the proposed outpatient center, and lost
profits. It contends that the Hospital defendants' conspiracy
_________________________________________________________________
1. The Act of Feb. 23, 1996, P.L. 27, 1996 Pa. Laws 10, S 9(a) (repealing
Pa. Stat. Ann. tit. 35, SS 448.501-448.507), has since eliminated the
Health Facility Hearing Board and transferred its review functions to the
Health Care Policy Board. This change does not affect our review of the
Surgical Center's appeal.
5
caused the Department to deny its CON application. The
District Court dismissed the Surgical Center's suit for
failure to state a claim upon which relief may be granted,
see Fed. R. Civ. P. 12(b)(6), holding that the Hospital
defendants' conduct was immune from antitrust scrutiny.
III.
We begin by considering the Surgical Center's claim that
the Hospital defendants conspired to boycott its outpatient
center, thereby violating sections 1 and 2 of the Sherman
Act. To state a claim under section 1, a plaintiff must allege
"a contract, combination or conspiracy; a restraint of trade;
and an effect on interstate commerce." Fuentes v. South
Hills Cardiology, 946 F.2d 196, 201 (3d Cir. 1991). Section
2 of the Sherman Act prohibits both monopolies and
attempts to monopolize. See 15 U.S.C. S 2. A claim under
section 2 must allege "(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, 506 U.S. 447, 456, 113 S. Ct. 884, 890-91
(1993); see also Schuylkill Energy Resources, 113 F.3d at
413.
"A classic boycott involves concerted action with a
purpose either to exclude a person or group from the
market, or to accomplish some other anticompetitive object,
or both." Fuentes, 946 F.2d at 202 (internal quotes
omitted); see also St. Paul Fire & Marine Ins. Co. v. Barry,
438 U.S. 531, 541, 98 S. Ct. 2923, 2929-30 (1978). Such
commercially motivated group boycotts, or concerted
refusals to deal, generally are considered illegal per se
under section 1. See F.T.C. v. Superior Court Trial Lawyers
Ass'n, 493 U.S. 411, 431-32, 110 S. Ct. 768, 779-80
(1990); Weiss v. York Hospital, 745 F.2d 786, 818 (3d Cir.
1984). When a boycott's aim is to monopolize trade, it
might also violate section 2. See Retina Associates v.
Southern Baptist Hosp. of Fla., Inc., 105 F.3d 1376, 1384
(11th Cir. 1997).
The Hospital defendants do not deny that the complaint
alleges a threat of a boycott that might under other
6
circumstances constitute an antitrust violation. They insist,
however, that the complaint alleges facts establishing that
they are immune from antitrust liability. Specifically, they
contend that their activities are insulated from antitrust
scrutiny because their allegedly wrongful conduct occurred
in the context of supplying information to the Pennsylvania
Department of Health during the Surgical Center's CON
application process and because the injuries alleged
resulted solely from the Department's denial of the CON.
In Parker v. Brown, 317 U.S. 341 (1943), an agricultural
producer challenged a marketing program adopted by
California's Director of Agriculture as invalid under the
Sherman Act. The program served to restrict competition
among growers and maintain prices in commodity
distribution. "Relying on principles of federalism and state
sovereignty, [the Supreme Court] held that the Sherman
Act did not apply to anticompetitive restraints imposed by
the States ``as an act of government.' " City of Columbia v.
Omni Outdoor Adver., Inc., 499 U.S. 365 (1991).
In Eastern R.R. Presidents Conference v. Noerr Motor
Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers
v. Pennington, 381 U.S. 657 (1965), the Supreme Court
held that antitrust liability cannot be predicated solely on
petitioning to secure government action even where those
efforts are intended to eliminate competition. As the Court
explained in Noerr, "[t]he right of the people to inform their
representatives in government of their desires with respect
to the passage or enforcement of laws cannot properly be
made to depend on their interest in doing so." Noerr, 365
U.S. at 139.
The Parker doctrine and the Noerr-Pennington doctrine
have been interpreted as complementing each other to
protect the two related but distinct principles upon which
they are founded. As the Supreme Court has more recently
observed:
Parker and Noerr are complementary expressions of the
principle that the antitrust laws regulate business, not
politics; the former decision protects the States' acts of
governing, and the latter the citizens' participation in
government.
7
Omni, 499 U.S. at 383.
As the Surgical Center emphasizes, however, the
immunity afforded to a private party under Noerr is not
unlimited. Where the challenged private conduct is only
"sham" petitioning -- i.e., where it "is not genuinely aimed
at procuring favorable government action as opposed to a
valid effort to influence government action"-- Noerr
immunity is not available. Professional Real Estate
Investors, Inc. v. Columbia Pictures, Inc. 508 U.S. 49 (1993)
("PRE"). In essence, sham petitioning entails "the use of the
governmental process -- as opposed to the outcome of that
process -- as an anticompetitive weapon." PRE, 508 U.S. at
61 (emphasis added). Accordingly, the sham petitioning
exception does not apply in a case like the one before us
where the plaintiff has not alleged that the petitioning
conduct was for any purpose other than obtaining favorable
government action.2
_________________________________________________________________
2. Plaintiff 's allegations that both the threatened boycott and the
claimed
misrepresentations were intended to secure denial of the CON
distinguish the situation before us from cases like Cheminor Drugs, Ltd.
v. Ethyl Corp., 168 F.3d 119 (3d Cir. 1999), that deal with the "sham"
exception to the Noerr doctrine. In Cheminor, the defendant, Ethyl, had
petitioned the International Trade Commission and the Department of
Commerce, alleging that Cheminor was dumping bulk ibuprofin on the
U.S. market and seeking the imposition of extra duties to offset the
alleged subsidies that enabled it to do so. Although Cheminor withdrew
from the U.S. market prior to a final decision on Ethyl's petition, it
alleged injuries resulting from the petition and brought an antitrust suit
against Ethyl. In response to Ethyl's reliance on Noerr immunity,
Cheminor asserted that the petition was a "sham" and Noerr immunity
thus was unavailable. We analyzed and rejected Cheminor's argument
under the teachings of PRE.
PRE holds that Noerr immunity is lost when the petition is a "sham,"
i.e., "is not genuinely aimed at procuring favorable government action."
PRE, 508 U.S. at 58. As we noted in Cheminor, PRE further holds that
determining whether a petition is a sham requires a two-step process.
First, the Court determines whether the petition is "objectively
baseless;"
if not, the petition is not a sham without regard to the subjective intent
of the petitioner. Second, if the petition is objectively baseless (and
only
if it is objectively baseless), the Court is to look to the petitioner's
"subjective motivation" and determine "whether the baseless [petition]
conceals an attempt to interfere directly with the business relationships
8
It is also true that a private party can be held liable even
for bona-fide petitioning conduct where that conduct has
caused direct antitrust injury in the market place. F.T.C. v.
Superior Court Trial Lawyers Ass'n., 493 U.S. 411 (1990). In
Trial Lawyers, for example, the public defenders of the
District of Columbia engaged in a concerted refusal to
represent indigent defendants in order to pressure the
District into raising the hourly rate paid. The Court held
that the defendants could be held liable under the Sherman
Act for injuries that resulted directly from the boycott, even
though the boycott was intended to secure government
action.
The limitation on Noerr immunity recognized in Trial
Lawyers is inapplicable, however, to a case where the sole
antitrust injury is caused directly by the government action
that the private defendant has helped to secure. Thus, even
where the same petitioning conduct might give rise to
antitrust liability for injury directly caused to a competitor
in the marketplace, if relief is sought solely for injury as to
which the state would enjoy immunity under Parker, the
_________________________________________________________________
of a competitor through the use of governmental process -- as opposed
to the outcome of that process -- as an anticompetition weapon." 508
U.S. at 60-61 (emphasis in original) (quoting Noerr, 365 U.S. at 144, and
Omni, 499 U.S. at 380).
Cheminor holds that where the petitioning effort allegedly involves
misrepresentations, the Court, at the first step, must "determine whether
[the] petition was objectively baseless under[PRE] without regard to those
facts that the [plaintiff] alleges [the petitioner] misrepresented."
Cheminor,
168 F.3d at 123 (emphasis in original). Such a determination is
unnecessary here, however, because the plaintiff affirmatively alleges
that defendants' purpose was to secure the outcome of the process --
denial of the CON. Thus, even if defendants' opposition to the CON were
found to be objectively baseless (a conclusion that could not be reached
on this record), defendants would pass the second, "subjective" test and
the sham exception to Noerr immunity would be inapplicable here.
While Cheminor focuses on the sham exception to Noerr immunity, it
also rejects Cheminor's more general argument that "Noerr-Pennington
immunity does not apply at all to petitions containing
misrepresentations." Id. To that extent, it supports the conclusion
reached below with respect to the misrepresentation claim.
9
private petitioner also enjoys immunity. As the Supreme
Court explained in Allied Tube & Conduit Corp. v. Indian
Head, Inc.:
Concerted efforts to restrain or monopolize trade by
petitioning government officials are protected from
antitrust liability under the doctrine established by
[Noerr; Pennington, and California Motor Transport Co.
v. Trucking Unlimited]. The scope of this protection
depends, however, on the source, context, and nature
of the anticompetitive restraint at issue. "[W]here a
restraint upon trade or monopolization is the result of
valid governmental action, as opposed to private
action," those urging the governmental action enjoy
absolute immunity from antitrust liability for the
anticompetitive restraint.
486 U.S. 492, 499 (1987) (citations omitted) (quoting Noerr,
365 U.S. at 136).
We applied this principle in Mass. School of Law at
Andover, Inc. v. American Bar Assoc., 107 F.3d 1026 (1997)
("MSL"). There, the plaintiff, an unaccredited law school,
complained of injuries resulting from the fact that, without
ABA accreditation, the school's graduates were refused
admittance to most states' bar examinations. We identified
the critical issue as "whether state or private conduct
caused the injury MSL alleges it suffered." Id. at 1035.
Looking to the source of the restraint-causing injury, we
found that because "every state retains the final authority
to set all the bar admission rules," any injury the plaintiff
suffered "is the result of state action and thus immune." Id.
at 1035-36.
This reasoning was similarly applied in Sandy River
Nursing Care v. Aetna Casualty, 985 F.2d 1138, 1147 (1st
Cir. 1993), where the defendant insurers allegedly employed
a boycott in an effort to force the legislature to enact
legislation permitting rate increases. Because all the
plaintiff 's claimed injuries were associated with increased
rates charged by the defendants after the legislature
removed the rate limits, the court concluded that
"[plaintiff's injuries] must be viewed as a product of state
action" and that the defendants were, accordingly, immune
from liability.
10
Here, looking to the source of the complained of injuries,
we find that all of the Surgical Center's alleged injuries
arise solely from the denial of the CON: the denial of the
ability to operate the proposed facility; the loss of the CON's
value, the value of the facility, and the value of the
operation's proceeds; the delay in securing the CON; and
"other related losses." Each of the injuries the plaintiff
claims is a direct result of the Department's decision to
deny the plaintiff's application for a CON.3
In sum, where, as here, all of the plaintiff 's alleged
injuries result from state action, antitrust liability cannot
be imposed on a private party who induced the state action
by means of concerted anticompetitive activity. It follows
that the complaint fails to state a boycott claim upon which
relief can be granted. See Noerr, 365 U.S. at 136; Parker,
317 U.S. at 352.
IV.
The Surgical Center's second claim is that the Hospital
defendants, as a part of their conspiracy, misled the
Department, the Board, and the Commonwealth Court into
believing that the Hospital's partially constructed facility
would soon open and meet the needs of the relevant market
when the Hospital defendants knew that the facility would
not be completed. The resulting injury, it is said, was the
denial of the Surgical Center's application for a CON. The
Center would have us deny antitrust immunity to the
Hospital defendants on the grounds that they successfully
opposed the issuance of a CON using information known to
be false.
Although the Supreme Court suggested in California
Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508,
512-13 (1972), that petitioning activity involving knowingly
_________________________________________________________________
3. While plaintiff also claims "increased costs, legal and otherwise, in
pursuing Plaintiff's application for a CON," the referenced costs
apparently relate to the appeal plaintiff prosecuted from the Board's
decision. Plaintiff does not contend that it incurred costs at the Board
level in excess of the cost it would have incurred had the threat of a
boycott (or the alleged misrepresentations) not been made.
11
false information submitted to an adjudicative tribunal
might not enjoy antitrust immunity, the Court has never so
held. See PRE, 508 U.S. at 61 n.6 (suggesting that the
issues of whether there is a misrepresentation exception to
Noerr and, if so, the extent thereof, remain open). Moreover,
since California Motor, the Supreme Court has decided a
case that casts doubt on whether such an exception exists
under any circumstances and dictates that, in the
circumstances of this case, we honor the Hospital
defendants' claim to immunity.
In Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365
(1991), Columbia Outdoor Advertising, Inc. ("COA")
controlled 95 percent of the billboard rental business in
Columbia, South Carolina. According to respondent Omni
Outdoor Advertising, Inc. ("Omni"), a newcomer to the
market, COA and city officials conspired to restrain
competition in the market through adoption of a zoning
ordinance limiting the size, spacing, and location of
billboards in the city. Omni filed suit against the city and
COA alleging a violation of the Sherman Act. A jury found
the existence of a conspiracy between the city and COA,
and both were held liable for Omni's injuries despite their
insistence that they were entitled to antitrust immunity
under Parker and Noerr, respectively.
The Court first concluded that Omni's alleged injury was
the result of state action. South Carolina had authorized its
municipalities to regulate land use and construction and,
in doing so, had provided a "clear articulation of state
policy to authorize anticompetitive conduct by the
municipality in connection with its regulation." Omni, 499
U.S. at 372 (quoting Town of Hallie v. City of Eau Claire,
471 U.S. 34, 40 (1985)). As the Court explained:
The very purpose of zoning regulation is to displace
unfettered business freedom in a manner that regularly
has the effect of preventing normal acts of competition,
particularly on the part of new entrants. A municipal
ordinance restricting the size, location, and spacing of
billboards (surely a common form of zoning) necessarily
protects existing billboards against some competition
from newcomers.
12
Id. at 373 (footnote omitted).
Having thus concluded that "the city's restriction of
billboard construction was prima facie entitled to Parker
immunity," id. at 374, the Court turned to the issue of
whether the existence of a conspiracy between city officials
and COA had stripped the city of that immunity. Itfirst
noted the foundation of Parker immunity:
The rationale of Parker was that, in light of our
national commitment to federalism, the general
language of the Sherman Act should not be interpreted
to prohibit anticompetitive actions by the States in
their governmental capacities as sovereign regulators.
Id. It then observed that if conspiracy was taken to mean
"nothing more than an agreement to impose the regulation
in question," the purpose of Parker immunity would be
defeated because "it is both inevitable and desirable that
public officials often agree to do what one or another group
of private citizens urges upon them." Id. at 375.
Because the jury had been instructed that a conspiracy
was "an agreement . . . to accomplish an otherwise lawful
result in an unlawful manner," id. at 376 n.5, the Court
next considered whether Parker immunity is lost when it is
shown that an agreement between the defendants involved
governmental corruption, bribery, or other violations of
state or federal law. It held that Parker immunity remains
in such circumstances. The Court found "impractical" the
contention that Parker immunity is forfeited by
governmental corruption, "defined variously as
``abandonment of public responsibilities to private interests,'
. . . ``corrupt or bad faith decisions,' . . . and ``selfish or
corrupt motives.' " Id. at 376. Such a rule would call upon
antitrust courts to speculate as to whether state action
purportedly taken in the public interest was the product of
an honest judgment or desire for private gain. The Court
stressed that Parker "was not meant to shift [judgments
about the public interest] from elected officials to judges
and juries." Id. at 377.
With respect to the contention that Parker immunity
should be forfeited at least where bribery or other illegal
activity may have subverted the state decision making
13
process, the Court observed that this approach had "the
virtue of practicality but the vice of being unrelated to" the
purposes of the Sherman Act and Parker. Id. at 378. It
chose to rely on sanctions other than the Sherman Act to
discourage such behavior:
To use unlawful political influence as the test of
legality of state regulation undoubtedly vindicates (in a
rather blunt way) principles of good government. But
the statute we are construing is not directed to that
end. Congress has passed other laws aimed at
combating corruption in state and local governments.
Id. at 378-79.
For these reasons, the Court rejected "any interpretation
of the Sherman Act that would allow plaintiffs to look
behind the actions of state sovereigns to base their claims
on [charges that the state's decision making process was
corrupted by bribery or other unlawful activity]." Id. at 379.
It concluded its discussion of the city's immunity by
"reiterat[ing] that, with the possible market participant
exception,4 any action that qualifies as state action is ``ipso
facto . . . exempt from the operation of the antitrust laws.' "
Id. at 379 (emphasis in original) (quoting Hoover v. Ronwin,
466 U.S. 558, 568 (1984)).
Turning to the liability of Omni, the Court addressed
whether Noerr's immunity for private parties was subject to
any of the exceptions that had been urged in the context of
Parker immunity.5 It declined to restrict Noerr immunity in
this way for the same reason it had declined to so restrict
Parker immunity:
Insofar as the identification of an immunity-destroying
"conspiracy" is concerned, Parker and Noerr generally
_________________________________________________________________
4. The referenced possible exception relates to state action as a
purchaser or seller in the market rather than as a sovereign regulator.
5. The Court first concluded that the "sham" exception to Noerr
immunity was inapplicable because that exception"encompasses
situations in which persons use the governmental process -- as opposed
to the outcome of that process -- as an anticompetitive weapon." Id. at
380. COA had sought to use only the outcome of the process to suppress
competition.
14
present two faces of the same coin. . . . The same
factors which, as we have described above, make it
impracticable or beyond the purpose of the antitrust
laws to identify and invalidate lawmaking that has
been infected by selfishly motivated agreement with
private interests likewise make it impracticable or
beyond that scope to identify and invalidate lobbying
that has produced selfishly motivated agreement with
public officials. "It would be unlikely that any effort to
influence legislative action could succeed unless one or
more members of the legislative body became . . .``co-
conspirators' " in some sense with the private party
urging such action. And if the invalidating"conspiracy"
is limited to one that involves some element of
unlawfulness (beyond mere anticompetitive motivation),
the invalidation would have nothing to do with the
policies of the antitrust laws. In Noerr itself, where the
private party "deliberately deceived the public and
public officials" in its successful lobbying campaign, we
said that "deception, reprehensible as it is, can be of no
consequence so far as the Sherman Act is concerned. "
365 U.S. at 145.
Id. at 383-84 (emphasis added).
The teachings of Omni are pertinent here. Considerations
of federalism require an interpretation of the Sherman Act
that forecloses liability predicated on anticompetitive
injuries that are inflicted by states acting as regulators.
Liability for injuries caused by such state action is
precluded even where it is alleged that a private party
urging the action did so by bribery, deceit or other wrongful
conduct that may have affected the decision making
process. The remedy for such conduct rests with laws
addressed to it and not with courts looking behind
sovereign state action at the behest of antitrust plaintiffs.
Federalism requires this result both with respect to state
actors and with respect to private parties who have urged
the state action.
Here, the Department is authorized by state statute to
regulate the number, size, and spacing of health care
facilities. Like the statute in Omni, this statute provides a
"clear articulation of state policy" which authorizes the
15
Department "to displace unfettered business freedom in a
manner that regularly has the effect of preventing normal
acts of competition, particularly on the part of new
entrants." Id. at 373. While it is true that the challenged
decision of the Department involved an individualized
application of established criteria, rather than the
establishment of criteria as in Omni, the Department's
action was every bit as essential to the execution of the
sovereign's regulatory policy as was the adoption of the
zoning ordinance by the Columbia city council.
The Surgical Center's CON application called upon the
Department to determine whether the opening of a new
ASC was in the public interest. The Department conducted
its own investigation and then held a hearing at which all
interested parties had the opportunity to tender evidence
and argument. It then made findings and determined that
the issuance of the CON was not in the public interest.
After a second hearing, that determination was concurred
in by the Board, and the Commonwealth Court thereafter
concluded that the Board's decision was supported by
substantial evidence.
It is not clear to us that the issue of whether the
Hospital's new facility would be completed was considered
important by the Department or the Board. Neither made
an express finding on that issue.6 It is clear from the
_________________________________________________________________
6. The Board's "need projection formula" projected a need for 6.5
operating rooms. The Hospital currently had six general purpose
operating rooms and a room used for "short procedures" such as
endoscopies, colonoscopies and sigmoidoscopies. If and when the
Hospital's proposed facility was completed, three of the general purpose
operating rooms would be closed and the ambulatory surgical services
provided in the main building would be provided in the new facility. The
Surgical Center proposed to add two operating rooms under
circumstances where the State Health Plan's need-project formula
indicated, at most, need for one additional (seventh) operating room. In
terms of the population to be served and the surgical services to be
rendered, the Surgical Center's project would do little other than raise
the number of operating rooms in Armstrong County above the limit set
by the State Health Plan. The Board, therefore, concluded that approval
of the instant CON application would result in needless duplication of
existing facilities and health care services. While the Surgical Center
16
Board's written decision, however, that the Board heard
evidence on the issue, knew construction had been halted,
and believed "there was credible evidence that the project
ha[d] not been abandoned." Board Op. at 14. Thus, to the
extent this issue was material, the record reflects that the
decision makers recognized that there was a dispute and
made a credibility determination concerning it.
On the facts alleged in the complaint, it is also clear that
the state decision makers were disinterested, conducted
their own investigation, and afforded all interested parties
an opportunity to set the record straight. The initial
decision was then twice reviewed. Finally, anyone who
believed that a fraud was committed on the Department or
Board could have moved to reopen the proceeding and
attempted to persuade them that they were materially
misled. See, e.g., 1 Pa. Code SS 35.231, 35.233 (authorizing
a reopening of an administrative proceeding on motion of a
participant or by the agency whenever the public interest
requires). As matters currently stand, however, the
Department's decision concerning where the public interest
lies remains in place as the final decision of the Board and
the judgment of the Commonwealth Court.
In these circumstances, Omni compels us to affirm the
District Court.7 Indeed, such a result seems to follow, a
fortiori, from Omni given the conceded presence here of
_________________________________________________________________
projected a higher need and suggested that its facility would serve a
larger area than the hospital, the Board found its projections flawed. The
opinion of the Commonwealth Court establishes that it also understood
this to be the basis for the Board's ruling, a basis for which it found
support in the record.
7. We acknowledge that the result we reach is in conflict with the holding
of the court in St. Joseph's Hospital v. Hospital Corp. of America, 795
F.2d 948 (11th Cir. 1986) and with the analysis of the courts in Kottle
v. Northwest Kidney Centers, 146 F.3d 1056 (9th Cir. 1998) and Potters
Medical Center v. City Hospital Ass'n., 800 F.2d 568 (6th Cir. 1986). To
the extent of that conflict, we respectfully disagree with the views there
expressed. We note that the courts in St. Joseph's Hospital and Potters
Medical Center did not have the benefit of the Supreme Court's 1991
decision in Omni and that Kottle's brief analysis does not reference that
decision.
17
disinterested decision makers, an independent
investigation, an open process, and extensive opportunities
for error correction. The risk that the plaintiff 's injury is
not the result of a bona fide execution of state policy is far
less substantial here than in Omni and there is,
accordingly, far less justification for federal court review of
the state's policy judgment. For these reasons, we must
decline the Surgical Center's invitation to look behind the
decisions of the Department, the Board, and the
Commonwealth Court. Rather, based on Omni, we are
constrained to honor the Hospital defendants' claim to
Noerr immunity.8
V.
Accordingly, we will affirm the District Court's order
dismissing the Surgical Center's complaint for failure to
state a claim upon which relief may be granted.
_________________________________________________________________
8. This is not a case like Walker Process Equip., Inc. v. Food Machinery
and Chem. Corp., 382 U.S. 172 (1965), or Woods Exploration & Prod. Co.,
Inc. v. Aluminum Company of America, 438 F.2d 1286 (5th Cir. 1971). In
Walker, the state action was the issuance of a patent which allegedly
had been procured by fraud. The attempted enforcement of the patent
against the plaintiff was held actionable under the Sherman Act. The
decision making process there was an ex parte one in which the Patent
Office was wholly dependent on the applicant for the facts. While the
Patent Office can determine the prior act from its own records, it
effectively and necessarily delegates to the applicant the factual
determinations underlying the issuance of a patent. Accordingly, when
the applicant has submitted false factual information, the state action is
dependent on financially interested decision making. See Einer Elhauge,
Making Sense of Antitrust Petitioning Immunity, 80 Calif. L. Rev. 1177,
1249 (1992) (suggesting that the immunity exception recognized in
Walker is "very narrow" and applies only when financially interested
parties essentially made the factual determinations that triggered the
governmental restraint). The same is true of the situation in Woods
where the Texas Railroad Commission was wholly dependent on the
antitrust defendants for the factual information on which it predicated
its allocation of production from a given field.
18
SCHWARTZ, Senior District Judge, Dissenting:
With its decision today, the majority holds private parties
who make misrepresentations that pervasively influence the
decision making process of public entities are entitled to
immunity under both the state action immunity doctrine
and the Noerr-Pennington immunity doctrine. The majority
opinion conflicts with the teaching of this Court in an
opinion issued less than four months ago, which held that
under certain circumstances applicable here, material
misrepresentations that affect the core of a litigant's
submissions to an administrative body are not entitled to
Noerr-Pennington immunity. See Cheminor Drugs, Ltd. v.
Ethyl Corp., 168 F.3d 119 (3d Cir. 1999).
I respectfully dissent for three reasons. First, I believe the
misrepresentation exception to the Noerr-Pennington
doctrine should be applied when intentional falsehoods
pervade the entire state administrative proceeding leading
to the denial of plaintiff 's application for a certificate of
need ("CON"). Second, the majority's position that the
misrepresentation exception has no place in the
jurisprudence of this Circuit is not supported by case law.
Finally, the majority relies on a Supreme Court decision
that is not applicable to this case. As a consequence, the
defendant should not be able to escape liability for its
misrepresentations under either the state action or Noerr-
Pennington immunity doctrines.
According to the majority opinion, the defendants are
immune from antitrust liability for their conduct during the
course of petitioning the Pennsylvania State Health Facility
Hearing Board ("Board") to deny plaintiff 's application for a
CON. The majority opinion finds City of Columbia v. Omni
Outdoor Advertising, Inc., 499 U.S. 365 (1991), supports the
dismissal of plaintiff's claim. First, the majority finds that
the District Court properly dismissed the boycott and
misrepresentation claims under the Noerr-Pennington
doctrine. The majority believes that Omni and Cheminor
Drugs cast doubt on whether a misrepresentation exception
to Noerr-Pennington immunity exists under any
circumstances. Further, even if a misrepresentation
exception exists, the majority asserts that the alleged
misrepresentations were irrelevant because the Board
19
denied the CON on grounds independent of the
misrepresentations. The majority emphasizes that the
decision makers were disinterested, conducted an
independent investigation, and the process afforded
opportunities for error correction. In summary, the majority
has essentially found the denial of the CON was untainted
by the alleged misrepresentations or boycott threats.
Second, the majority decision argues it was not the
boycott or misrepresentation, but rather the denial of the
CON that was the direct cause of the Surgical Center's
alleged injuries. The majority concludes denial of the CON
was state action and the Hospital parties are therefore
immunized from antitrust liability under state action
immunity, arguing that "[l]iability for injuries caused by
such state action is precluded even where it is alleged that
a private party urging the action did so by . . . wrongful
conduct that may have affected the decision making
process." [Majority opinion at page 15]. Given the
procedural posture of a motion to dismiss, I believe the
majority's conclusion is not only impermissible fact-finding,
but also contrary to the Surgical Center's entitlement to all
favorable inferences and resolution of factual disputes in its
favor.1
DISCUSSION
I. The Hospital Parties' Actions
Armstrong Surgical Center asserts the Hospital parties
conspired to subvert the establishment of its facility by
_________________________________________________________________
1. In ruling on a motion to dismiss, the court must accept the well-
pleaded facts as true and resolve them in the light most favorable to the
plaintiff. Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140
F.3d 478, 483 (3d Cir. 1998); Morse v. Lower Merion Sch. Dist., 132 F.3d
902, 906 (3d Cir. 1997). In addition, the court may consider allegations
contained in the complaint, exhibits attached to the complaint, and
matters of public record. See City of Pittsburgh v. West Penn Power Co.,
147 F.3d 256, 259 (1998); Steinhardt Group, Inc. v. Citicorp, 126 F.3d
144, 145 (3d Cir. 1997). Accordingly, this dissent, like the majority,
considers both the Board's decision and the Commonwealth Court
decision.
20
announcing to the Board, which was reviewing the Surgical
Center's CON application, their intent to boycott the facility,
and by submitting false and misleading information to the
Board regarding the Hospital's ASC. The purpose of the
boycott and misrepresentations was to eliminate a potential
new entrant whose competition would adversely affect all
the defendants. The Hospital has a complete area monopoly
in providing operating room services. The nineteen
physicians who sent boycott letters performed nearly 90%
of all surgery in the relevant geographic area. Thus, the
Hospital parties' actions targeted two criteria the Board
considers in reviewing a CON application: (1) the need for
the facility, and (2) its prospective economic viability.
The nineteen physicians in question sent letters to the
Board, as it was considering the CON application, stating
they would not use the plaintiff's ASC, but would only use
the (fictional) ASC provided by the Hospital. The letters
stated:
I do not intend to perform surgery at the proposed
Armstrong Surgical Center. I intend to use the services
of the Ambulatory Surgery Center at Armstrong County
Memorial Hospital. The hospital's Ambulatory Surgical
Center provides the highest quality medical care at the
most reasonable cost.
The letters go on to suggest that since the Hospital's ASC
is superior, the proposed ASC is unnecessary: "It duplicates
services already being provided, and it is not cost effective."
All nineteen letters submitted to the Board were on the
Hospital stationery, and contained the same language.
The Pennsylvania Department of Health ("Department")
disapproved plaintiff 's CON application on November 23,
1993. The Board affirmed the Department's decision on
March 13, 1996. The Board relied on two grounds for
affirming the denial of the CON: (1) the Board found the
Hospital ASC made Armstrong's ASC duplicative and
unnecessary, and (2) Armstrong's ASC would not be
economically viable because 90% of the staff physicians
would not use it.
The Hospital misrepresented to the Board that its ASC
was substantially built and would be ready for use in the
21
near future. When the Hospital parties made their
misrepresentations, they knew the Hospital had ceased
construction of its outpatient facility months before the
hearing, and that construction had not resumed. The fact
that the Department learned that this representation was
false before it denied the CON does not detract from the
falsity of the representation. The Department and the Board
learned construction on the Hospital ASC had been
interrupted, but they did not know the Hospital had no
intent to build or operate a Hospital ASC. In fact, the Board
opinion demonstrates the opposite was true. Although the
Board knew the Hospital was using the building as a
storage facility, it was led to believe that the Hospital had
not abandoned the project. Further, because it was not in
its economic interest, the Hospital did not plan to resume
construction if Armstrong's CON application was denied.
The Board's decision relied on the misrepresentation that
the Hospital ASC was or would be built and the threat of a
boycott.
Armstrong's ASC would not be economically viable
because the nineteen physicians who performed nearly all
surgeries in the area would not use the new facility if
completed because they would use the Hospital ASC. The
Board noted the effect of the boycott letters sent by the
physicians in explaining its denial of Armstrong's CON
application:
[T]he most damaging evidence is that the number of
physicians who might have been expected to support
the facility decreased significantly after the Applicant
had submitted its projections. . . . The nineteen
physicians who opposed the project in writing are
responsible for approximately 90 percent of all surgery
performed at the Hospital and each is on the Hospital's
staff.
In other words, after the application was submitted
(and for whatever reason) support for the facility
eroded among physicians who either had supported it
initially or were being counted upon for their eventual
participation. Because the Applicant would therefore
have to generate much of its volume from outside the
service area or from patients who reside in the service
22
area but currently "migrate" to other locales for
ambulatory surgery, we seriously doubt that the
volume projections made for the facility can be
achieved.
Board Op. at 47-48 (citations and footnote omitted).
With these facts in mind, I turn to the majority
conclusion that the Hospital parties have immunity for the
injuries resulting from their misrepresentations.
II. Applicability of the Noerr-Pennington Doctrine
The Hospital parties contend the Noerr-Pennington
immunity doctrine applies because their announced
intentions not to perform operations at Armstrong's ASC
facility and statements regarding the existence of the
Hospital ASC came in the context of supplying information
to state agencies. In general, the Noerr-Pennington doctrine
immunizes concerted efforts to restrain or monopolize trade
when petitioning the government. Eastern R.R. Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961);
see Professional Real Estate Investors, Inc. v. Columbia
Pictures Indus., Inc. ("PRE"), 508 U.S. 49 (1993). The
purpose or motive in petitioning government officials is
irrelevant; the fact that the sole purpose might be to
destroy a competitor does not undermine the protection
afforded by the immunity. Noerr, 365 U.S. at 139. This is
true even if "some direct injury" is an "incidental effect" of
legitimate petitioning activity, regardless of whether the
petitioner is aware of the infliction of such injury. Id. at
143-144.2
_________________________________________________________________
2. The Court in Noerr stated:
It is inevitable, whenever an attempt is made to influence
legislation
by a campaign of publicity, that an incidental effect of that
campaign may be the infliction of some direct injury upon the
interests of the party against whom the campaign is directed. And
it seems equally inevitable that those conducting the campaign
would be aware of, and possibly even pleased by, the prospect of
such injury. To hold that the knowing infliction of such injury
renders the campaign itself illegal would thus be tantamount to
outlawing all such campaigns.
23
If the physicians had simply expressed their opposition to
the proposed facility without intentionally misleading
administrative decision makers about their intent to use
the uncompleted Hospital ASC, the Noerr-Pennington
doctrine would protect their statements. Similarly, if the
Hospital had not informed the administrative decision
makers it was going to build and operate a Hospital ASC,
or if it had informed the decision makers it originally
intended to build and operate a Hospital ASC but had
concluded it would no longer do so, Noerr-Pennington
immunity would be available to them. However, as set forth
above and in the majority opinion, that is not what
occurred.
A. Courts Have Distinguished Between
Misrepresentations Made In The Political
Context As Opposed to the Administrative or
Adjudicative Context
The majority's reliance on City of Columbia v. Omni
Outdoor Advertising, Inc., 499 U.S. 365 (1991), for the
proposition that there is no misrepresentation exception to
Noerr-Pennington immunity is misplaced. In Omni, one
defendant sought to persuade the city of Columbia to create
zoning ordinances, which had a detrimental effect on the
plaintiff, who was a competitor of that defendant. The
Supreme Court held that the defendant was not liable for
antitrust violations for statements made to the city. 499
U.S. at 382. Omni reaffirmed that deliberate
misrepresentations in the legislative arena, "reprehensible
as [they are], can be of no consequence so far as the
Sherman Act is concerned." Id. at 384. The majority's
reliance on Omni is not persuasive because here, the
setting is an adjudicatory arena, not a lobbying or
legislative one as in Omni.
The majority cites Omni for the proposition that there is
no misrepresentation exception. PRE, which was decided
two years after Omni, suggests that the issue of whether
there is a misrepresentation exception to Noerr-Pennington
remains an open question. 508 U.S. at 61 n.6. While PRE
cited California Motor Transport Co. v. Trucking Unlimited,
404 U.S. 508, 512-13 (1972), with approval, the Supreme
Court in PRE declined to decide whether Noerr permits
24
antitrust liability for a litigant's fraud or other
misrepresentations. 508 U.S. at 61 n.6.
The Supreme Court has stated, not once, but twice, that
"[m]isrepresentations, condoned in the political arena, are
not immunized when used in the adjudicatory process."
California Motor Transp., 404 U.S. at 513. Allied Tube &
Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499-500
(1988), stated that unethical and deceptive practices in
"less political arenas," such as administrative or
adjudicatory settings, could violate antitrust laws. Thus,
the Supreme Court has broadly hinted Noerr-Pennington
immunity is not intended to shield petitioning activities that
do not further, but rather distort, the decision-making
process in the non-legislative context.
Several Circuit Courts of Appeal also have distinguished
between the level of immunity afforded to
misrepresentations made in different forums. In Potters
Medical Center v. City Hospital Ass'n, 800 F.2d 568, 571
(6th Cir. 1986), the plaintiff alleged that the defendant
hospital's certificate of need application contained
materially false statements about the plaintiff. The court
stated that "the knowing and willful submission of false
facts to a government agency falls within the sham
exception to the Noerr-Pennington doctrine." Id. at 580. The
Fifth Circuit in Woods Exploration & Producing Co. v.
Aluminum Co. of America, 438 F.2d 1286, 1296-98 (5th Cir.
1971), cert. denied, 404 U.S. 1047 (1972), held that Noerr
did not protect, inter alia, the filing of false production
forecasts with a state regulatory commission. The court
stated that the Noerr-Pennington doctrine seeks to protect
attempts to influence policies and held that "the abuse of
the administrative process here alleged does not justify
antitrust immunity." Id. at 1298.
Other cases have held the Noerr-Pennington doctrine does
not immunize misrepresentations made in the
administrative or adjudicative context. See, e.g., Cheminor
Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 124 (3d Cir. 1999)
(holding that material misrepresentations in an adjudicative
arena are not protected by Noerr-Pennington immunity);
Whelan v. Abell, 48 F.3d 1247, 1255 (D.C. Cir. 1995)
(finding that if sham claim involves administrative agencies,
25
then Noerr does not protect "petitions based on known
falsehoods"); St. Joseph's Hosp., Inc. v. Hospital Corp. of
Am., 795 F.2d 948, 955, reh'g denied en banc , 801 F.2d
404 (11th Cir. 1986), see infra; Ottensmeyer v. Chesapeake
& Potomac Tel. Co., 756 F.2d 986, 994 (4th Cir. 1985)
(suggesting that knowing submission of false information to
police -- communications which "do not constitute the type
of ``political activity' protected by the Noerr-Pennington
doctrine" -- would fall within the sham exception); Clipper
Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690
F.2d 1240, 1261 (9th Cir. 1982) (stating that Noerr does not
immunize false information given to an administrative or
adjudicatory body), cert. denied, 459 U.S. 1227 (1983);
Israel v. Baxter Labs., Inc., 466 F.2d 272, 278 (D.C. Cir.
1972) ("No actions [efforts to deceive the Food and Drug
Administration] which impair the fair and impartial
functioning of an administrative agency should be able to
hide behind the cloak of an antitrust exemption.").
The rationale for limiting immunity for private actors'
efforts to mislead adjudicatory or administrative officials is
that these entities, as compared to legislative bodies, rely
on information supplied by the parties to a greater extent
than legislative bodies. Allied Tube, 486 U.S. at 499-500.
The Ninth Circuit in Clipper Exxpress, 690 F.2d at 1261,
explained:
There is an emphasis on debate in the political sphere,
which could accommodate false statements and reveal
their falsity. In the adjudicatory sphere, however,
information supplied by the parties is relied on as
accurate for decision making and dispute resolving.
The supplying of fraudulent information thus threatens
the fair and impartial functioning of these agencies and
does not deserve immunity from the antitrust laws.
The majority recognizes the decision by the Department
to deny the CON involved an individualized application of
established criteria. However, it attempts to reconcile the
difference between the adjudicative context and legislative
context by arguing that the Department's decision to deny
the certificate of need was "essential to the execution of the
sovereign's regulatory policy" regarding health care
facilities. [Majority opinion at page 16]. This distinction is
26
unpersuasive. Although the government agency's decision
on the certificate of need application could be viewed as
essential to regulating health care facilities, St. Joseph's
Hospital, 795 F.2d at 955, and Kottle v. Northwest Kidney
Centers, 146 F.3d 1056, 1063 (9th Cir. 1998), cert. denied,
119 S. Ct. 1031 (1999), both held that misrepresentations in
this context do not have Noerr immunity. Every adjudicative
decision could be viewed as essential to a sovereign's
regulatory policy and thus, the majority would nullify the
distinction the Supreme Court and other appellate courts
have made between misrepresentations made in the
legislative context as opposed to the administrative or
adjudicative context.
The majority appears to argue that the process employed
by the Department could uncover misrepresentations
because the Department conducted its own investigation.
However, in Cheminor, the governmental bodies -- the
Department of Commerce ("DOC") and the International
Trade Commission ("ITC") -- also conducted their own
investigation, but another panel of this Court still held
material misrepresentations that affect the core of the
defendant's petition will preclude Noerr-Pennington
immunity. 168 F.3d at 121, 124 (stating that the "DOC and
ITC make final determinations after they have conducted
their own investigations . . . and after they have heard
further arguments from the parties involved"); see Clipper
Exxpress, 690 F.2d at 1261-62 (stating that submitting
false information in an adjudicatory proceeding can be the
basis for antitrust liability even if the agency was not
misled by the information). The majority's view, carried to
its logical extreme, would allow the more skillful liar to
avoid antitrust liability so long as the decision maker
conducts its own investigation.
Moreover, it is not clear the Department conducted an
independent investigation. Rather, the Department relied
on the Hospital defendants to give truthful information so
that it could make a fully informed decision. The majority's
opinion recognizes the Board was misled because the Board
"made a credibility determination" "that the project ha[d]
not been abandoned." [Majority opinion at page 17].
However, the majority refuses to acknowledge that the
27
Board opinion demonstrates that the denial of the CON was
based on the false belief, nurtured by the Hospital
defendants, that the Hospital would build its ASC.
B. Similar Cases Have Held That Misrepresentations
Relating to a CON Application Do Not Enjoy Noerr
Immunity
The facts in St. Joseph's Hospital closely parallel those
alleged by the plaintiff. The defendant, Memorial Medical
Center ("MMC"), was the sole provider of cardiac surgery
services in the relevant market area. 795 F.2d at 952. It
opposed St. Joseph's CON application, claiming it already
had the capacity to perform more heart procedures in the
region than required, thus making its competitor's services
unnecessary. Id. The Board relied upon this information in
denying St. Joseph's request for a CON. Id. St. Joseph's
sued, asserting MMC provided false information to the
Board. Id. at 953. The court found that the
misrepresentations were not made in the political arena
and held that parties furnishing false information to a
government agency passing on specific certificate
applications are not entitled to Noerr-Pennington petitioning
immunity. The court held:
When a governmental agency such as [the State Health
Planning Agency] is passing on specific certificate
applications it is acting judicially. Misrepresentations
under these circumstances do no not enjoy Noerr
immunity.
Id. at 955. Accordingly, the court reversed the district
court's decision granting the defendant's motion to dismiss.
Id. at 957.
The Ninth Circuit, like the Eleventh Circuit in St.
Joseph's Hospital, also held Noerr-Pennington immunity
does not protect a party's intentional misrepresentations in
similar circumstances. Kottle v. Northwest Kidney Centers,
146 F.3d 1056 (9th Cir. 1998), cert. denied, 119 S. Ct. 1031
(1999). As in this case, the district court in Kottle granted
the defendant's motion to dismiss. Id. at 1058-59. The
Kottle court also examined allegedly false information
relating to a CON application. Id. at 1058. The court stated
that if misrepresentations made by a defendant were of
28
such magnitude that the "entire CON proceeding was
deprived of its legitimacy," then the sham exception to
Noerr-Pennington immunity would apply. Id. at 1063.
The misrepresentations in Kottle were made in an
administrative or adjudicatory arena because the
Department of Health, the decision maker, conducted
public hearings, accepted written and oral arguments,
permitted representation by counsel, issued written
findings, and its decision was appealable. Id. at 1062. In
this case, the Department also conducted public hearings,
accepted evidence and argument from interested parties,
made findings, and its decision was appealable. Since the
court in Kottle found that the misrepresentations were not
made in the political or lobbying context, the court applied
a different standard than the one set forth in Omni. Id.
(stating that "intentional misrepresentation to government
officials" is treated differently "outside of the political
realm"). The court found, however, that the plaintiff 's
complaint fell short of invoking the sham exception because
the plaintiff 's vague allegations of misrepresentation were
insufficient to overcome the defendant's Noerr-Pennington
immunity. Id. at 1064. The court could not ascertain "what
representations [the defendant] made, or to whom; with
whom [the defendant] conspired . . . or what other
testimony the Department may have had that could have
influenced its decision to deny [plaintiff]'s CON application."
Id. In contrast, the plaintiff 's complaint in this case details
the alleged misrepresentations made by the defendants,
and the Board decision demonstrates that such material
misrepresentations influenced its decision, as well as that
of the Commonwealth Court. See infra.
C. The Defendants' Actions Nullify Their Noerr-
Pennington Immunity
Our recent decision in Cheminor Drugs, Ltd. v. Ethyl
Corp., 168 F.3d 119 (3d Cir. 1999), does not support the
majority's position. In Cheminor, the defendant Ethyl
Corporation complained to the ITC and the DOC that
plaintiff Cheminor was dumping and selling ibuprofen at
less than fair value. Id. at 120. Cheminor brought antitrust
claims in which it alleged that Ethyl's statements to the ITC
were baseless, made in bad faith, contained false
29
statements, and were brought only for anti-competitive
reasons. Id. The issue decided by this Court was whether
alleged misrepresentations by Ethyl vitiated its Noerr-
Pennington immunity. The Court in Cheminor found the
alleged misrepresentations were neither material, nor
affected the core of the defendant's petition because the
misrepresentations relating to the defendant's profitability
were "only a small proportion of the numerous factors the
ITC must consider when making a determination of
material injury." Id. at 126. Therefore, we affirmed the
decision to grant summary judgment in favor of Ethyl
because Cheminor did not satisfy the first step of PRE's
sham exception to the Noerr-Pennington doctrine. Id. at 127.
Cheminor held material misrepresentations that "infect
the core" of the defendant's claim and the government's
resulting actions are not entitled to Noerr-Pennington
immunity under the "objectively baseless" prong of PRE. Id.
at 123. Cheminor requires evaluation of misrepresentations
in determining whether a defendant is entitled to Noerr-
Pennington immunity. The majority relies on the following
language in Cheminor to assert Cheminor stands for the
proposition that this Circuit has held the misrepresentation
exception is not part of its jurisprudence.
We decline to carve out a new exception to the broad
immunity that Noerr-Pennington provides. Rather, we
will determine whether [defendant]'s petition was
objectively baseless under the Supreme Court's test in
PRE, without regard to those facts that [plaintiff]
alleges [defendant] misrepresented.
Id. There are three answers to the majority position. First,
it ignores the immediately succeeding sentence in the
opinion:
If the alleged misrepresented facts do not infect the
core of Ethyl's claim and the government's resulting
actions, then the petition had an objective basis and
will receive Noerr-Pennington immunity under the first
step of PRE.
Id. I read this language as meaning that prior to
determining whether the "petition had an objective basis"
the Court must determine "[i]f the alleged misrepresented
30
facts do . . . infect the core of Ethyl's claim." Id. If they do,
the misrepresentation exception applies and there can be
no "objective basis" for the defendant's position. If, on the
other hand, the misrepresentation exception is not
applicable, the defendant's petition could well have an
objective basis.
Second, the majority has not explained why, if the
Cheminor court held there was no misrepresentation
exception to the Noerr-Pennington doctrine, it formulated a
test for the misrepresentation exception and then
painstakingly applied the test analyzing whether the
misrepresented facts affected "the core of Ethyl's claim and
the government's resulting action. . . ." Id. Third, the court
in Cheminor relied on a district court case, Music Center
S.N.C. Di Luciano Pisoni & C. v. Prestini Musical Instruments
Corp., 874 F. Supp. 543, 549 (E.D.N.Y. 1995). The specific
language cited with approval by Cheminor reads:
[A] determination [of objective basis] requires
consideration, inter alia, of . . . the nature of the
particular allegations of the petition or actions before
the administrative agency claimed to be fraudulent or
improper, and whether these claimed
misrepresentations or improper actions would have been
significant to the ultimate outcome or continuation of the
proceeding.
Cheminor, 169 F.3d at 124 (citing Music Center, 874 F.
Supp. at 549) (emphasis added). If there were any doubts
regarding the court's reliance on Music Center and its
approval of the misrepresentation exception to Noerr-
Pennington immunity, the Cheminor court set them to rest:
If the government's action was not dependent upon the
misrepresented information, the misrepresented
information was not material and did not go to the core
of Ethyl's petition. In sum, a material misrepresentation
that affects the very core of a litigant's . . . case will
preclude Noerr-Pennington immunity, but not every
misrepresentation is material to the question of whether
a petition such as Ethyl's had an objective basis.
Id. at 124 (second emphasis added and footnote omitted). I
am simply unable to accept the majority's reading of
Cheminor.
31
Further, the test set forth in Cheminor is applicable here
because the alleged misrepresentations in Cheminor were
made in the adjudicative context. Omni is not applicable
because the alleged misrepresentations in that case were
made in a legislative context. In a factually similar case, the
11th Circuit found that "[w]hen a government agency . . .
is passing on specific certificate [of need] applications it is
acting judicially." St. Joseph's Hospital, 795 F.2d at 955.
Misrepresentations made under these circumstances do not
enjoy Noerr immunity. Id.
There is a final troubling aspect of the majority's opinion.
Assuming this dissent's position is correct that Cheminor
recognizes a misrepresentation exception as part of this
Circuit's jurisprudence and that the majority holds there is
no misrepresentation exception to the Noerr-Pennington
immunity doctrine, the majority has done something it
cannot do. Under Rule 9.1 of the Internal Operating
Procedures of this Court, "no subsequent panel overrules
the holding in a published opinion of a previous panel."
1. The Defendants' Alleged Misrepresentations
Were Material And Infected The Core Of The
Defendants' Statements To The Department
The legitimacy of the Board's decision is in question
because it relied upon materially false information and was
influenced by threats of an illegal boycott. As stated
previously, at this stage of the litigation, the plaintiff is
entitled to all favorable inferences and resolution of factual
disputes in its favor. Therefore, the court must examine
whether Armstrong Surgical is entitled, at a minimum, to
an inference that the misrepresentations were not only
material, but also affected the core of the defendant's
claims.
The majority concluded the Board would have denied the
CON application regardless of whether the Hospital ASC
would be completed. However, the Board's opinion clearly
shows that it premised the denial of the CON upon the
Hospital's misrepresentation that it would complete and
operate a Hospital ASC. In successive Findings of Fact the
Board found:
32
25. The Hospital has partially completed
construction of a building on its premises that would
house a dedicated outpatient surgical facility.
26. Upon completion of the Hospital's outpatie nt
surgical facility, three of its existing operating rooms
would be moved into the new building.
27. The proposed ambulatory surgery center and the
one which has been partially constructed by the
Hospital would serve the same population and would
provide essentially the same surgical services.
28. The Applicant's proposed ambulatory surger y
center would needlessly duplicate existing facilities and
health care services in Armstrong County.
Board Op. at 6 (citations omitted). Taken in context the
phrase "needlessly duplicate existing facilities," supra, can
only mean that Armstrong's proposed ASC would duplicate
the proposed Hospital ASC. In addition, the letters from the
19 physicians stated that the proposed facility duplicated
the services already being provided. As previously
rehearsed, the Hospital parties knew there was no
commitment or intent to complete a functioning Hospital
ASC.
Not only the Findings of Fact, but also the Board opinion
make clear that the Board, relying upon the
misrepresentations of the Hospital parties, premised its
denial of the CON and its entire discussion of need-
projection upon there being no need for two ASCs-- the
Hospital's ASC and Armstrong's ASC:
Although outpatient surgery at the Hospital is now
performed in the same operating room as inpatient
surgery, the Hospital has partially9 completed
construction of a building on its premises to house a
dedicated outpatient surgery facility. Upon completing
construction, the Hospital would move three existing
operating rooms into the new building.
With regard to the population to be served and the
surgical services to be offered, there would be little
difference between the Applicant's ambulatory surgical
center and the one that the Hospital has partially
33
completed, except that the Applicant's project would
raise the number of operating rooms in Armstrong
County above the limit set by the SHP. We conclude
that approval of the instant CON application would
result in needless duplication of existing facilities and
health care services.
We believe that the factors set forth above, in
themselves, are sufficient to support a finding that the
Applicant has failed to establish need for the proposed
facility by the population to be served. . . .
_________________
9. Apparently, after construction of the building and
some of the interior walls had been completed, staff
physicians at the Hospital began to question whether a
separate outpatient facility was necessary. Although
the building is currently being used as a storage
facility, there was credible evidence that the project has
not been abandoned.
Board Op. at 14 (citations omitted). It is noteworthy that
the three Commonwealth Court judges, conducting judicial
review, were of the belief that the Hospital ASC would be
completed:
The hospital has partially completed construction of
a building on its premises that would house a
dedicated outpatient surgical facility. Upon completion
of the hospital's outpatient surgical facility, three of its
existing operating rooms would be moved into the new
building.
The proposed ambulatory surgery center and the one
which has been partially constructed by the hospital
would serve the same population and would provide
essentially the same surgical services. Armstrong's
proposed ambulatory surgery center would needlessly
duplicate existing facilities and health care services in
Armstrong county.
Commonwealth Court Op. p. 5. At the very least four judges
-- three Commonwealth judges and this judge -- read the
Board opinion as indicating that the Department believed
the Hospital ASC would be completed.
34
The presence or absence of a Hospital ASC was
significant. A CON is granted if a proposed health care
expenditure will meet medical needs of the target
population in an effective and cost efficient manner. See Pa.
Stat. Ann. tit. 35 S 448.707. There is no question that an
ASC was more cost efficient than the continued use of the
six hospital operating rooms. The Hospital's own
accountant documented projected average cost savings of
$400 per case if an ASC were used relative to the current
Hospital operating rooms.
The issue before the Board was whether there would be
overcapacity of ASCs if a CON were issued to Armstrong.
Because the misrepresentations led the Board to believe
there would be a Hospital ASC, it never reached the issue
of delivering effective and cost efficient medical services
under the scenario in which there was no Hospital ASC.
There is simply no way for the District Court or this Court
to determine whether the Board would have granted the
CON had it known the true facts. With the Court having to
accept all well-pleaded facts as true and resolve them in the
light most favorable to the nonmovant, see Trump Hotels &
Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478,
483 (3d Cir. 1998), the plaintiff is surely entitled to the
reasonable inference that the Board predicated its decision,
in major part, on the belief that a Hospital ASC would be
completed. Therefore, I would hold the alleged
misrepresentations deprive the Hospital parties of Noerr-
Pennington immunity because their misrepresentations
were material and infected the very essence or core of the
administrative proceeding and consequent denial of the
CON by the Board and affirmance of the Board's decision
by the Commonwealth Court. Where as here, the
misrepresentations caused the Board and Commonwealth
Court to make their determinations based upon the
existence of a fictional Hospital ASC, the administrative
proceeding and Commonwealth Court review have been
deprived of their legitimacy.
2. Noerr-Pennington Immunity Does Not Protect
Threats of an Illegal Boycott
While an issue of first impression, the question of
whether Noerr-Pennington petitioning immunity protects
35
threats of an illegal boycott must also be answered in the
negative. The Supreme Court has stated, "[t]here are many
other forms of illegal and reprehensible practice which may
corrupt the administrative or judicial processes and which
may result in antitrust violations." California Motor Transp.,
404 U.S. at 513. If the Supreme Court would not immunize
misrepresentations in the judicial or administrative context,
it surely would not immunize threats of illegal activity when
they corrupt the administrative adjudication process.
Where a threat of illegal activity plays such a strong role in
the administrative decision-making process and forms part
of the basis for an administrative decision, it is impossible
to say that the process has not been corrupted. Denying
Noerr-Pennington immunity to those who provide false
information to the government in its deliberative decision-
making process can only improve the information flowing to
the government.
Attention is now turned to whether the Hospital parties
are protected by state action immunity as urged by the
majority.
III. Applicability of State Action Immunity
The majority opinion also dismisses Armstrong's
complaint on the theory that the Hospital defendants'
actions are immunized under the Parker state action
immunity doctrine. See Parker v. Brown, 317 U.S. 341
(1943). The state action immunity doctrine has two related
aspects. First, as elaborated in Parker, state action
immunity protects parties who engage in otherwise
actionable antitrust conduct, pursuant to, and in reliance
upon, state action. Second, state action immunity applies
when the antitrust injury complained of arises directly from
state action, as distinguished from the private action
alleged in the complaint before us. Noerr, 356 U.S. at 136.
In this case, neither aspect of state action immunity is
applicable.3
_________________________________________________________________
3. The staff physicians defendants eschewed reliance upon Parker state
action immunity, stating in the catch line of their argument, "Plaintiff's
Attempt to Reframe this Appeal in Terms of State Action Immunity is
36
It is clear the actions complained of were not pursuant
to, or in reliance upon, state action. Indeed, reliance upon
the state action of denial of the CON to immunize unlawful
anti-competitive conduct which occurred prior to and
caused the denial of the CON presents severe conceptual
difficulties. The only state action was denial of the CON.
The Hospital parties engaged in no alleged unlawful anti-
competitive behavior following the denial of the CON.
Rather, the misrepresentations combined with the
expressed intent to engage in a boycott all occurred before
the Board's denial of the CON. With this state of affairs, it
is difficult to understand how the misrepresentations
coupled with the stated intent to boycott are somehow
immunized by the CON, where the alleged wrongful activity
itself was directed to and resulted in the denial of the CON.
Furthermore, even assuming these conceptual difficulties
are not insurmountable, there is no indication the Hospital
parties relied upon the denial of the CON in carrying out
the alleged unlawful anticompetitive behaviors, or were
authorized by the state to do so. Indeed, the Parker court
expressly noted that "a state does not give immunity to
those who violate the Sherman Act by authorizing them to
violate it, or by declaring that their action is lawful." 317
U.S. at 351. Therefore, the "authorization" aspect of state
action immunity is not applicable to the facts of this case.
The second aspect of state action immunity doctrine
"immunizes" antitrust injuries directly caused by state
action. It is this second aspect upon which the majority
opinion rests, arguing that liability for injuries caused by
_________________________________________________________________
Misguided. . . ." Individual Appellee's Br. at 20. Further, the Hospital
dropped all reference to state action immunity on appeal. Appellee's
counsel made a deliberate, reasoned choice not to rely on the theory,
going so far as to state that "the correctness of the District Court's
decision . . . is not accurately analyzed under state action immunity."
Individual Appellee's Br. at 22. Thus, this is not a circumstance where
a litigant's counsel overlooked a theory. While this Court is not limited
by positions advanced by the litigants, caution is warranted where
capable counsel expressly disavow reliance on a defense. The majority
nonetheless has relied upon a state action defense explicitly and
impliedly discarded by the defendants.
37
such state action is precluded even where it is alleged that
a private party urging the action did do by unlawful
conduct.
The defendants' actions are not protected by state action
immunity for two reasons. First, at least some of the
injuries of which Armstrong complains were not the direct
result of the only state action alleged -- the denial of the
CON. Second, a misrepresentation exception to state action
immunity must apply under the circumstances presented
by this case.
The majority finds the plaintiff failed to allege that its
injuries were caused by the hospital parties' alleged
economic boycott and misrepresentations. Rather, the
majority asserts the alleged injuries were either directly
related to the denial of the CON, or the consequences
thereof. Even accepting arguendo that state action
immunity applies to this case, some of the injuries alleged
by Armstrong are not the direct result of state action, but
of the alleged misrepresentations and conspiracy to boycott.
After reciting throughout its complaint the boycott and
misrepresentations, the Surgical Center lists the following
damages:
(1) Denial of the CON required to establish and op erate
[its ambulatory surgery center].
(2) Denial of [its] ability to establish and operate [the
proposed facility].
(3) Delay in securing the required CON, if ultimat ely
granted, for the establishment and operation of the
[ambulatory surgery center].
(4) Increased costs, legal and otherwise, in pursuing
Plaintiff's application for a CON.
(5) Complete loss of the value of the CON, or a
reduction in its value when and if ultimately granted.
(6) Complete loss of the value of Plaintiff's [facility], or
reduction of its value when and if permitted to be
operated.
(7) Complete loss of, or reduction in, the income and
cash flow which Plaintiff would have received from
operation of the [center].
38
(8) Other related losses.
Because of the threatened boycott, damage claims 5, 6 and
7 would have occurred even if Armstrong had received the
coveted CON. The boycott of plaintiff's surgical center by
physicians who perform 90% of surgical procedures in the
relevant geographic market surely would serve to reduce
the value of the plaintiff's facility, either by the loss of
business or the increase in costs associated with attracting
personnel to the facility. An agreement to exclude the
plaintiff from the relevant market by an economic boycott
and misrepresentations to the Board may result in
antitrust injury. See, e.g., Brader v. Allegheny Gen. Hosp.,
64 F.3d 869, 877 (3d Cir. 1995) (finding complaint
adequately alleged antitrust injury where plaintiff alleged
that defendants unreasonably restricted his ability to
practice medicine in the relevant market and thus reduced
competition). Therefore, I cannot agree with the majority's
conclusion that damage claims 5, 6 and 7 stemmed from
denial of the CON.
The misrepresentation exception to Noerr-Pennington
immunity should also apply to state action immunity in the
adjudicatory or administrative context. Where
misrepresentations and/or threats of illegal activity subvert
the entire decision making process, the direct cause of the
injury is not the state action, but rather the
misrepresentations or threats which made a decision based
on accurate information impossible. See Woods Exploration
& Producing Co., Inc. v. Aluminum Co. of Am., 438 F.2d
1286, 1295 (5th Cir. 1971), cert. denied, 404 U.S. 1047
(1972); see also Walker Process Equip., Inc. v. Food Mach. &
Chem. Corp., 382 U.S. 172, 176 (1965) (holding that
procurement of patent by fraud on the United States Patent
Office is actionable under the Sherman Act,
notwithstanding intervening state action of granting the
patent).
In the legislative arena, it is difficult to say that any
particular action, no matter how inappropriate, results in a
particular legislation which causes injury. However, in the
administrative and judicial arenas, where agencies and
courts write reasoned opinions and make decisions based
on information supplied by the parties, they must depend
39
on the parties to provide accurate information. 4 As stated
above, the Supreme Court has noted different standards
apply to conduct in administrative or adjudicatory
processes. Allied Tube & Conduit Corp. v. Indian Head, Inc.,
486 U.S. 492, 500 (1988); California Motor Transp. Co. v.
Trucking Unlimited, 404 U.S. 508, 513 (1972); see supra,
Part II.A. The misrepresentations here, at the very least,
largely influenced and very probably dictated the outcome
of the administrative process. Under that circumstance, it
is the misrepresentations, not the state action, which
caused the alleged injuries and dictated the Board's
decision to deny the CON.5
Because Parker and Noerr are complementary
expressions of one principle of antitrust law, a
misrepresentation exception to Parker immunity is
necessary to effectuate the misrepresentation exception to
Noerr-Pennington immunity. Without an exception for those
misrepresentations which have a pervasive influence on
administrative and adjudicative decisions, only those
defendants who most effectively subvert the state's process
-- the ones whose improper behavior results in favorable
results for them from the state's administrative and
adjudicatory processes -- would be immune under state
action immunity. This would not only be a perverse result,
_________________________________________________________________
4. It is for this reason that reliance by the majority on Sandy River
Nursing Care v. Aetna Casualty, 985 F.2d 1138, 1142 (1st Cir.), cert.
denied, 510 U.S. 818 (1993), is misplaced. That case involved a decision
by a legislature to change the law in the face of a boycott. It is
impossible
to say that the boycott dictated the outcome of the legislature's
decision.
5. The majority's reliance on Massachusetts School of Law at Andover,
Inc. v. American Bar Ass'n, 107 F.3d 1026 (3d Cir.), cert. denied, 118
S. Ct. 264 (1997), also is misplaced. There, an unaccredited law school
alleged the American Bar Association engaged in anticompetitive conduct
because graduates from unaccredited schools could not sit for most state
bar examinations. This Court concluded the source of the injury was the
action of each of those states because "every state retains the final
authority to set all the bar admission rules." Id. at 1035. That case is
distinguishable from the instant case for two reasons. First, the state
action in that case was non-adjudicative in nature. Second, and more
importantly, the plaintiff made no allegation that the ABA knowingly
made misrepresentations which were central to each state's actions.
40
but would entirely vitiate the misrepresentation exception
to Noerr-Pennington immunity.
This case is similar to Woods. In Woods, the defendants,
partial owners of a natural gas field, intentionally gave false
information about their production forecasts to the Texas
Railroad Commission. 438 F.2d at 1295. The Commission
used that information to determine allowable production.
Id. The court rejected "the facile conclusion that action by
any public official automatically confers exemption." Id. at
1294 (citations omitted). The court held that state action
immunity was not applicable because the
misrepresentations dictated the outcome: "defendants'
conduct here can in no way be said to have become merged
with the action of the state since the Commission neither
was the real decision maker nor would have intended its
order to be based on false facts." Id. at 1295. Thus, the
injury was not directly caused by state action, but by the
misrepresentations. Similarly in the instant case, the Board
relied on the Hospital parties' statements of subjective
intent in making its decision.
The majority believes that Woods is distinguishable from
the present case because the Texas Railroad Commission
"was wholly dependent on the antitrust defendants for the
factual information on which it predicated its allocation of
production from a given field." [Majority opinion at 18 n.8].
The court in Woods stated that the Railroad Commission
had "no opportunity for meaningful supervision or
verification" of the defendants' statements and therefore,
the Commission "must rely on the truthfulness of the gas
producers." Id. at 1295. I do not find Woods to be so
different from this case. Here, the Department and Board
had no way of ascertaining whether the Hospital truly
intended to complete its ASC. The Department and the
Board were reasonable in relying on the defendants'
statements, which clearly implied that the Hospital ASC
would be completed and utilized. Further, the court in
Woods did not require that the government entity be
"wholly" dependent on the information provided by a
defendant in order to deny state action immunity.
41
CONCLUSION
For the reasons stated above I would hold state action
immunity does not protect the defendants' actions. I also
conclude there is a misrepresentation exception to Noerr-
Pennington immunity and that it applies in this case. My
view that material misrepresentations can vitiate Noerr-
Pennington immunity is supported by Cheminor, 168 F.3d
at 124, and the case law of other circuits, specifically the
Fifth, Woods Exploration & Producing Co., Inc. v. Aluminum
Co. of America, 438 F.2d 1286, 1298 (5th Cir. 1971), Sixth,
Potters Medical Center v. City Hospital Ass'n, 800 F.2d 568,
580 (6th Cir. 1986), Ninth, Kottle v. Northwest Kidney
Centers, 146 F.3d 1056, 1060 (9th Cir. 1998), cert. denied,
119 S. Ct. 1031 (1999), Eleventh, St. Joseph's Hospital v.
Hospital Corp. of America, 795 F.2d 948, 955 (11th Cir.
1986), and District of Columbia, Whelan v. Abell , 48 F.3d
1247, 1254-55 (D.C. Cir. 1995). See also Cheminor, 168
F.3d at 131 (Sloviter, J., dissenting) (citing Whelan and
Kottle for the proposition that PRE preserves a fraud
exception to antitrust immunity).
The misrepresentations were material as there is an
overpowering inference that in denying the CON the Board
accepted the Hospital parties' misrepresentation that the
Hospital would complete construction and operate a
Hospital ASC. These same misrepresentations caused the
Board and Commonwealth Court to pass upon the question
of whether there was a need for two ASCs. Specifically, the
misrepresentations deprived the Board from passing upon
the CON application based upon the true facts -- six
hospital rooms vis-a-vis the grant of Armstrong's
application for a CON, with concomitant cost savings of
$400 per case, thereby meeting the statutory goal of
meeting medical needs in an effective and cost efficient
manner. We do not know, of course, whether the Board
would have granted or denied the CON application had its
proceeding not been so pervasively infected by the
misrepresentations and threat of boycott.
I respectfully and regrettably dissent for all of the reasons
set forth above. While respecting my colleagues differing
views, I cannot agree with them. I regret the majority result
for two reasons. First, the majority opinion, in light of
42
Cheminor, has provided little, if any, guidance to the bar,
future litigants or the public. Second, to the extent the
majority result provides guidance, it signals that it is willing
to immunize clear antitrust violations if they can be
disguised, however disingenuously, as petitioning activities
without regard to whether they are legitimate, and without
distinguishing the arena in which they are made.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
43