Ralph Read v. Medical X-Ray Center

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_____________
No. 95-3396SD
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Ralph Read, M.D., *
*
Plaintiff-Appellee, *
*
v. *
*
Medical X-Ray Center, P.C., a *
South Dakota professional *
corporation; *
*
Defendant-Appellant, *
*
Lynn A. Hendrickson; Daryl R. *
Wierda, *
*
Defendants. *
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No. 95-3530SD
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Ralph Read, M.D., *
*
Plaintiff-Appellant, *
* Appeals from the United States
v. * District Court for the
* District of South Dakota.
Medical X-Ray Center, P.C., a *
South Dakota professional *
corporation; Lynn A. *
Hendrickson, M.D.; Daryl R. *
Wierda, M.D., *
*
Defendants-Appellees. *
_____________
No. 95-3897SD
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Ralph Read, M.D., *
*
Plaintiff-Appellant, *
*
v. *
Medical X-Ray Center, P.C., a *
South Dakota professional *
corporation, *
*
Defendant-Appellee. *
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Submitted: October 21, 1996
Filed: April 2, 1997
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Before FAGG, HEANEY, and HANSEN, Circuit Judges.
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FAGG, Circuit Judge.
After twelve years as a partner in Medical X-Ray Center, P.C., a
group of radiologists in Sioux Falls, South Dakota, Dr. Ralph Read quit and
set up a competing independent practice. When his own practice failed, Dr.
Read brought this antitrust lawsuit against Medical X-Ray Center and two
of its doctors, Lynn A. Hendrickson and Daryl R. Wierda (collectively MXC),
asserting MXC engaged in anticompetitive conduct and MXC’s conduct
prevented Read from competing successfully in the Sioux Falls area. A jury
found in Dr. Read’s favor on his Sherman Act conspiracy and monopolization
claims. See 15 U.S.C. §§ 1, 2 (1994). Finding no evidence of conspiracy,
the district court overturned the jury’s verdict on Dr. Read’s conspiracy
claim and entered judgment as a matter of law (JAML). The district court
upheld the jury’s verdict on Dr. Read’s monopolization claim, however, even
though the court believed Read’s practice failed because of his practice’s
competitive shortcomings rather than any anticompetitive conduct by MXC.
MXC appeals, and Dr. Read cross appeals. Viewing the evidence in the light
most favorable to Dr. Read, see Amerinet, Inc. v. Xerox Corp., 972 F.2d
1483, 1505 (8th Cir. 1992), we conclude a
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reasonable jury could only find Dr. Read’s business failed because of his
own competitive flaws. Thus, Dr. Read did not establish causation, an
essential element of his case, and we reverse on MXC’s appeal and affirm
on Dr. Read’s cross appeal.
In 1987, Dr. Read decided his MXC work schedule was too rigorous.
Dr. Read’s family wanted to stay in Sioux Falls, but his contract with MXC
contained a covenant not to compete for two years within a twenty-five mile
radius of the city. Read proposed several options for reduced workload and
compensation. Most were rejected, but MXC agreed to employ Read as an
independent contractor and continued to include Read on its hospital
schedules. Read left the partnership in 1988, worked as an independent
contractor for a year, and renewed the contract for a second year. When
the second contract expired, MXC offered to renew it, but Read told MXC he
was being exploited and he intended to launch his own practice. According
to Dr. Read, MXC’s Dr. Soye told him MXC “would fight [him] every step of
the way.”
When he started his own business in June 1990, Read targeted only a
hospital-based diagnostic radiology practice. For several years, MXC
radiologists had been the only ones practicing at Sioux Falls’ largest
hospitals, Sioux Valley Hospital (SVH) and McKennan Hospital. MXC rather
than the hospitals scheduled the individual radiologists to ensure 24-hour
coverage. Dr. Read informed SVH, McKennan, and MXC that he was willing to
take his fair share of night call and weekends, but that he would not be
available himself 24 hours every day of the week. SVH had an open staff
and Read had privileges to practice radiology, so Read posted schedules at
SVH showing the hours he would be on the premises. On one schedule, Read
indicated he would only be at SVH for three hours a day. Dr. Read carried
a beeper, but the schedule stated any urgent work should be performed by
other radiologists, that is, MXC doctors, when Read was not there.
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Dr. Aspaas, SVH chief of staff at the time, felt SVH’s primary care
doctors should be able to choose between MXC or Dr. Read for their
patients’ radiology needs. When Dr. Aspaas suggested a choice card system,
Read proposed language that would permit SVH’s physicians to choose Read
to interpret their x-rays if he was available, but to default their choice
to MXC if Read was not at the hospital. MXC would not agree to become Dr.
Read’s safety net, however. Instead, the choice card system put in place
allowed doctors to choose between MXC and Dr. Read’s independent practice
on a case-by-case basis. Dr. Read then sent letters to the SVH doctors
advertising quality care at prices well below MXC’s. MXC did not retaliate
against the SVH doctors who chose Dr. Read, but actually provided coverage
when Dr. Read was not there.
MXC was willing to incorporate Read on its SVH schedule to ensure 24-
hour coverage of his patients if Dr. Read signed a coverage contract and
provided his own schedule in advance. The proposed contract stated Read
would pay MXC an unspecified sum to cover Read’s cases when Read was not
on SVH premises, and MXC would bill the patients directly for its services.
Read did not acknowledge the offer for three months because he thought it
was a practical joke. Read believed MXC had an ethical obligation to cover
his patients, and he did not have to pay MXC anything for backing him up.
In February 1991, Read informed MXC of his refusal to negotiate a coverage
contract for any price. Around the same time, Dr. Read accepted a
fellowship at the University of Nebraska Medical Center in Omaha that he
had applied for the previous December.
On appeal, MXC asserts the district court should have granted JAML
on Read’s § 2 monopolization claim because the failure of Read’s practice
was caused by the practice’s deficiencies rather than any predatory conduct
by MXC. According to MXC, Read caused
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his own injury by failing to provide 24-hour service for his patients and
by refusing to work a reasonable schedule. On the other hand, Dr. Read
contends his practice failed because MXC had foreclosed every viable
practice option by refusing to cooperate at SVH, entering into exclusive
contracts at the other hospitals and the Central Plains Clinic, and placing
restrictive covenants in MXC’s employment contracts. Having carefully
reviewed the record, we agree with MXC that Dr. Read caused his own
business’s demise.
To prevail on his antitrust claims, Dr. Read had to show a reasonable
jury could find MXC’s allegedly anticompetitive conduct was “a material
cause” of his injury. National Ass’n of Review Appraisers & Mortgage
Underwriters, Inc. v. Appraisal Found., 64 F.3d 1130, 1135 (8th Cir. 1995),
cert. denied, 116 S. Ct. 1676 (1996); Amerinet, 972 F.2d at 1490; see Brown
v. Presbyterian Healthcare Servs., 101 F.3d 1324, 1335 (10th Cir. 1996)
(causation requirement applies to private plaintiffs seeking to invoke
antitrust laws), pet. for cert. filed, 65 U.S.L.W. 3611 (Feb. 26, 1997)
(No. 96-1365). A material cause is a “substantially contributing factor.”
National Ass’n of Review Appraisers, 64 F.3d at 1135. Dr. Read cannot
recover if the decline of his business was attributable to causes other
than MXC’s behavior. Id.As the district court observed, Dr. Read did not take reasonable
steps to compete head-to-head with MXC in the inpatient radiology market.
The hospitals and primary care doctors desired 24-hour service for their
patients. MXC provided this service, and Dr. Read did not. When MXC
proposed a reasonable written contract that would have solved Dr. Read’s
coverage problem, Read refused to discuss the proposal. Thus, Read’s lack
of coverage cannot be blamed on MXC. Dr. Read made the voluntary choice
not to provide round-the-clock service, either by doing it himself, or by
hiring someone else, and this was his downfall. Dr. Read presented no
evidence that any individual MXC doctor wanted to cover Dr. Read
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but could not because of MXC’s restrictive covenants. Simply put, Read was
trying to force MXC to cover his business without following the medical
community’s normal coverage practices--paying MXC compensation for the
service or agreeing to back up MXC doctors in exchange. Read wanted to
“free-ride,” avoid the cost of 24-hour coverage by forcing MXC to provide
it to him for free, so he could undercut MXC’s prices.
Read’s lack of coverage cost him business at SVH and McKennan. Some
SVH doctors who initially chose Dr. Read switched to MXC when Dr. Read told
them he could not provide 24-hour coverage. When McKennan expressed
concern to Dr. Read about his coverage deficiency, Dr. Read did nothing to
address it. McKennan then made a unilateral decision to deal with MXC
exclusively, despite MXC’s refusal of an exclusive contract, because of
concerns about patient care.
As for other potential clients, Dr. Read made little or no effort to
pursue them. The Sioux Falls Veterans’ Administration (VA) Hospital had
an open bid process for an exclusive contract. Dr. Read did not submit a
bid, even though his restrictive covenant had expired before the bidding
closed. MXC submitted the lowest bid and was awarded the exclusive
contract. Similarly, Dr. Read failed to compete for a contract at Central
Plains Clinic (CPC). The CPC business manager testified Dr. Read never
asked for clinic business, and Read admitted he never made “a special
effort to seek them out.” At Canton-Inwood Hospital, a facility twenty
miles from Sioux Falls, Dr. Read refused to commit to a partnership with
the MXC radiologist who had an independent contract there, so the
radiologist sought the help of other MXC doctors. As for the SVH Outreach
program, SVH alone decided not to use Dr. Read because of his limited
availability. See Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1459,
1462 (11th Cir. 1991) (no causation under §§ 1 or 2 where radiologists,
regardless of their personal wishes,
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were not causally responsible for hospital’s unilateral decision to deny
competing radiologist privileges).
We conclude no reasonable jury could find MXC’s conduct was a
“substantially contributing factor” to the failure of Dr. Read’s
independent practice. National Ass’n of Review Appraisers, 64 F.3d at
1135. The decline of Dr. Read’s business was caused by factors other than
MXC’s allegedly anticompetitive behavior. See id. Dr. Read rejected MXC’s
offer to negotiate a formal coverage agreement, did not respond to
McKennan’s concern that he would not cover his practice there, did not
compete with MXC for contracts at the VA and CPC, and was excluded from the
SVH Outreach program and Canton because of unilateral decisions by their
administrators. Thus, the district court properly granted JAML on the §
1 conspiracy claim, and should have granted JAML on the § 2 monopolization
claim as well. See id. at 1136 (causation is an essential element of 15
U.S.C. §§ 1, 2 claims).
Given the absence of causation, we need not decide whether MXC
engaged in illegal anticompetitive behavior. See id. at 1134.
Nevertheless, we believe Dr. Read’s injury was caused by legitimate
competition rather than anticompetitive conduct. In our view, MXC’s
insistence on a coverage contract from a price-chopping competitor was not
unreasonable or anticompetitive. See Blue Cross & Blue Shield v.
Marshfield Clinic, 65 F.3d 1406, 1413-14 (7th Cir. 1995), cert. denied, 116
S. Ct. 1288 (1996); Konik v. Champlain Valley Physicians Hosp. Med. Ctr.,
733 F.2d 1007, 1014 (2d Cir. 1984). MXC had legitimate business
justifications for its actions towards Dr. Read. See Trace X Chem., Inc.
v. Canadian Indus., 738 F.2d 261, 266 (8th Cir. 1984); Konik, 733 F.2d at
1014.
We now turn to the points raised in Dr. Read’s cross appeal. Given
our rejection of the monopolization claim for lack of causation, the
district court properly dismissed the attempted
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monopolization claim. Absence of causation also disposes of the tortious
interference claim. See National Ass’n of Review Appraisers, 64 F.3d at
1137. Because we have reversed Dr. Read’s only prevailing claim, we need
not consider his arguments about certain jury instructions, which are
unrelated to our decision, future damages, and dismissal of the individual
defendants. Since Dr. Read suffered no antitrust injury, we reverse the
award of attorney fees. See 15 U.S.C. § 15(a).
Without doubt, an independent practice is a challenging undertaking.
Dr. Read sought the perks of independent practice, setting his own hours
and not having to deal with other partners, without one of the drawbacks,
always being on call. Dr. Read chose not to provide the coverage and
availability offered by his competitor, MXC, and for this reason potential
clients chose MXC over Dr. Read’s competing practice. Dr. Read’s problem
is, the antitrust laws were enacted to protect competition, not
competitors. See Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S.
328, 338 (1990).
Accordingly we reverse the district court’s judgment on MXC’s appeal,
and we affirm the district court’s judgment on Dr. Read’s cross appeal.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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