McCready v. Blue Shield

THOMSEN, Senior District Judge:

Carol McCready brought this action in the United States District Court for the Eastern District of Virginia, claiming that defendants Blue Shield of Virginia, Blue Shield of Southwestern Virginia, Medical Services of the District of Columbia (collectively, Blue Shield) and the Neuropsychiatric Society of Virginia participated in an unlawful combination and conspiracy to exclude clinical psychologists from receiving compensation under Blue Shield’s prepaid health care plans in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1¹ and Section 4 of the Clayton Act, 15 U.S.C. § 15.² McCready brought the case as a class action on behalf of all Blue Shield subscribers in Virginia who incurred costs for psychological services since 1973 but who were not reimbursed for those costs under the applicable health care plans of Blue Shield. She sought treble damages and attorney’s fees as provided by the antitrust laws. The district court dismissed her complaint on the grounds that McCready had no standing to bring such an action and had suffered no antitrust injury because her injury was not suffered within the sector of the economy endangered by defendants’ alleged violations of the antitrust laws.³

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From September 1975 until January 1978, McCready, an employee of Prince William County, Virginia, was a subscriber to one of the health care plans administered by Blue Shield. The county provided its employees group coverage purchased from Blue Shield of Virginia. That group plan provided for reimbursement to subscribers for treatment by psychiatrists, or by psychologists whose services were supervised and billed by a treating physician. No reimbursement was allowed for treatment by psychologists unless billed through a treating physician.

During the period of her health care coverage through Blue Shield, McCready received treatment from a clinical psychologist. She unsuccessfully sought reimbursement of those bills from Blue Shield.⁴ In 1978, she brought this action, claiming a conspiracy by defendants to boycott psychologists, which she alleged was effectuated by Blue Shield’s refusal to reimburse its subscribers for costs of psychological services because those services were rendered and billed by a psychologist and not by a physician.

The alleged conspirators are the Blue Shield defendants, listed above (all of which are separate non-stock corporations engaged in the business of health care plans), Neuropsychiatric Society of Virginia, a not-for-profit nonstock corporation whose members are psychiatrists practicing in Virginia, and other unnamed co-conspirators. By agreement among themselves, it was alleged, those parties sought to exclude psychologists from reimbursement coverage under Blue Shield’s contracts in the State of Virginia.

A related action was filed in the same district court by the Virginia Academy of Clinical Psychologists (VACP), and the two cases were consolidated for pretrial discovery purposes. Motions to dismiss were filed by the defendants in each case and were heard together.

The district court granted the motion to dismiss the case now before us on appeal, but denied the motion to dismiss the VACP case.

In its opinion granting defendants’ motion to dismiss the instant case, the district court concluded that “the section of the economy competitively endangered by a violation by the defendants goes no further than that area occupied by the psychologists.” (Emphasis in original) Therefore, it reasoned, McCready was “operating in a market” which was “unrestrained insofar as she is concernedand her injury was “too indirect and remote” to be an antitrust injury. The district court also stated that “[wjhile standing and antitrust injury may or may not be treated as the same issue, in this case Jane Doe [McCready]⁵ does not have the former because she has not sustained the latter.” As a result, the district court dismissed McCready’s complaint because of lack of standing to sue.

The VACP case went to trial on the merits and resulted in a judgment for defendants. Virginia Academy, etc. v. Blue Shield of Virginia, 469 F.Supp. 552 (E.D.Va.1979). That judgment was affirmed in part, vacated and remanded in part, by another panel of this court, 4 Cir., 624 F.2d 476 (1980), which should be read in connection with this opinion, although it did not deal with all the issues presented by this appeal.

McCready contends that she not only has suffered a property injury within the meaning of the antitrust laws but that her injuries were suffered by reason of the antitrust violations alleged. Since McCready appeals the granting of defendants’ motion to dismiss, we take as true all facts well pleaded in her complaint.

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The Clayton Act provides that an antitrust plaintiff must have been injured in his “business or property,” and further, that such injury must result by reason of something “forbidden in the antitrust laws.”

McCready’s contention, that consumers who have suffered non-commercial monetary injury as a result of an antitrust violation have been injured in their property within the meaning of the Clayton Act, was decided favorably to her position by the Supreme Court in Reiter v. Sonotone Corp., 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979), after the district court had entered its order. The district court, however, did not rely on the fact that her claimed injury was non-commercial in dismissing the complaint.

The plaintiff in Sonotone was a consumer who alleged that as a result of antitrust violations, including horizontal and vertical price-fixing, she was forced to pay an artificially high price for a hearing aid. She brought a class action against the hearing aid manufacturers. The district court certified for interlocutory review the issue of consumer standing. In reversing the decision of the Court of Appeals denying such standing, the Supreme Court held that “[a] consumer whose money has been diminished by reason of an antitrust violation has been injured ‘in his ... property’ within the meaning of § 4 [of the Clayton Act]”. Id. at 339, 99 S.Ct. at 2331. Therefore, Reiter’s allegation of financial loss because she paid a higher price as a result of Sonotone’s anti-competitive conduct was sufficient to make out an injury to her “property” within the meaning of § 4 of the Clayton Act.

McCready can no longer be denied standing simply because she is a consumer with a non-commercial monetary loss. Sonotone, however, is not dispositive of all of the issues here. The consumer still must prove that her injury resulted from an antitrust violation.

Although the ultimate goal of the conspiracy alleged by plaintiff was the exclusion of clinical psychologists from a large segment of the market, the direct victims of the conspirators include McCready and the class of similarly situated patients whom she seeks to represent, as well as the clinical psychologists; both were in the target area. The complaint alleges that the conspirators exclude psychologists by making it too expensive for Blue Shield subscribers to consult them. This is accomplished by Blue Shield’s refusal to reimburse a subscriber for the services of a psychologist unless the patient also consulted a physician. In contrast, Blue Shield would reimburse a subscriber who received similar treatment from a psychiatrist without further consultation. McCready alleges that as a result of the conspiracy, Blue Shield denied her reimbursement for sums she paid for treatment when she consulted a psychologist instead of a psychiatrist.

Section 4 of the Clayton Act affords relief to “[a]ny person .. . injured in his .. . property by reason of anything forbidden in the antitrust laws ... . ” By its terms the Act does not restrict standing to competitors who are the targets of anticompetitive behavior. Sonotone, supra. It encompasses “any person” whose property loss is directly or proximately caused by violation of the law. See South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414, 417 (4 Cir. 1966). McCready satisfies these requirements. Her injury was immediate and direct. Although denial of reimbursement was designed to divert her and other subscribers from psychologists to psychiatrists, this goal does not make her loss too remote or indirect to be covered by the Act.

Use of the catch words “target area” is convenient to deny standing, but it can be justified only when the underlying purposes of the phrase are served. It is generally recognized that the target area test for denial of standing serves two purposes. First, it bars suits by persons whose damages are speculative and difficult to prove. See Calderone Enterprises Corp. v. United Artists Theatre Circuit, 454 F.2d 1292, 1295 (2 Cir. 1971). This reason for denying standing does not apply to McCready. Her damages can be readily ascertained to the penny; they are her reimbursable costs of treatment. These are fixed by her Blue Shield contract as 80% of the amount she paid the psychologist.

The second purpose of the target area is the prevention of multiple recoveries by different plaintiffs against the same defendants for a single injury. Ames v. American Telephone & Telegraph Co., 166 F. 820, 823 (C.C.D.Mass.1909). The second reason for denying standing also does not apply to McCready. There can be no double recovery. She has already paid her psychologist’s bills; the psychologist suffered no damage in this respect. Although McCready is a consumer and not a competitor, her allegations of direct pecuniary loss by reason of antitrust violations are sufficient to confer standing. Sonotone, supra; South Carolina Council of Milk Producers, supra.

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The judgment of the district court is reversed and the case is remanded for further proceedings to determine the propriety of certifying the class and the merits of plaintiff’s claim as alleged in her complaint.

REVERSED AND REMANDED WITH INSTRUCTIONS.

1 . § 1 of the Sherman Act provides in part:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal:

2 . § 4 of the Clayton Act provides:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in the district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.

3 . McCready also sought relief through the court’s pendant jurisdiction, on a breach of contract claim. The dismissal of the pendant claim is not before us on appeal.

4 . McCready was mistakenly paid $128.00 by Blue Shield after submission of claims for psychological services. Once the error was discovered, Blue Shield sought to obtain a refund from McCready of that amount.

5 . McCready brought this action under the pseudonym “Jane Doe,” but the district judge required her to disclose her true name.