U.S. Court of Appeals for the Fifth Circuit, Shah v. VHS San Antonio Partners, LLC, Docket No. 20-50394

 

Antitrust

Definition of the Relevant Market

Rule of Reasonable Interchangeability

Cross-Elasticity of Demand

Tiered Discovery

Tying Arrangement

 

 

Pediatric anesthesiologist Dr. Jaydeep Shah alleges that Baptist Health System (BHS), its officers, and its parent company (collectively, the BHS parties) (1) committed violations of §§ 1 and 2 of the Sherman Antitrust Act and (2) tortiously interfered with a business relationship by entering into an agreement with STAR Anesthesia, P.A. (STAR) through which STAR became the exclusive provider of anesthesia services to several of BHS’s hospitals in the San Antonio area. Because Shah’s definition of the relevant market is insufficient as a matter of law, we affirm the district court’s grant of summary judgment in favor of the BHS parties.

 

(…) The parties conducted tiered discovery, with Tier One involving the issues of the “relevant market” and “damages/antitrust injury.” The BHS parties then moved for summary judgment.

 

(…) As a prerequisite to both Sherman Act claims, Shah must define the relevant market.

 

“To establish a § 1 violation, a plaintiff must prove that: (1) the defendants engaged in a conspiracy; (2) that restrained trade; (3) in the relevant market.” (citing Apani Sw., Inc. v. Coca-Cola Enters., Inc., 300 F.3d 620, 627 (5th Cir. 2002)); Surgical Care Ctr. of Hammond, L.C. v. Hosp. Serv. Dist. No. 1 of Tangipahoa Par., 309 F.3d 836, 839-40 (5th Cir. 2002) (“To establish Section 2 violations . . . a plaintiff must define the relevant market.” (quoting Dr.’s Hosp. of Jefferson, Inc. v. Se. Med. All., Inc., 123 F.3d 301, 311 (5th Cir. 1997)).

 

The relevant market is « the area of effective competition » « in which the seller operates, and to which the purchaser can practicably turn for supplies. » The relevant market has two components: a product market and a geographic market.

 

« Whether a relevant market has been identified is usually a question of fact; however, in some circumstances, the issue may be determined as a matter of law. » If Shah fails to define his « proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed relevant market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in his favor, the relevant market is legally insufficient. » That is, in order for Shah’s definition to be legally sufficient, it “must include all ‘commodities reasonably interchangeable by consumers for the same purposes.’”

 

Shah, a pediatric anesthesiologist, sued BHS, a hospital system, alleging Sherman Act violations related to the pediatric anesthesiologist product market. Shah did not attempt to identify, either at summary judgment or in his opening brief, hospitals or clinics “where people could practicably go” for pediatric anesthesia services within Bexar County and the seven contiguous counties. He did not even specify individual pediatric anesthesiologists from whom patients could practicably obtain health care services. Rather, he provided tallies, by county, of pediatric anesthesiologists in Texas that fit the anesthesiology requirements of the BHS-STAR Agreement.

 

Moreover, as the BHS parties argue, Shah’s proposed relevant market does not encompass all interchangeable substitute products because it does not include the two non-BHS facilities that the BHS parties contend serve as viable alternatives to BHS facilities. Shah has not provided evidence or any persuasive argument to raise a genuine dispute as to either of those facilities. In fact, in his reply brief, Shah appears to identify those two hospitals as “included in the relevant geographic market.” But claims raised for the first time in a reply brief are forfeited.

 

Drawing all factual inferences in Shah’s favor, his relevant market definition is insufficient as a matter of law.

 

To bolster his § 1 Sherman Act claim, Shah argues that the exclusive BHS-STAR Agreement is a per se illegal tying arrangement. A tying arrangement is « an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier. » The BHS parties, citing Keelan v. Majesco Software, Inc., argue that Shah waived his tying arguments because he did not raise those arguments in his pleadings or summary judgment response. Assuming without deciding that Shah did not forfeit the argument, it nevertheless fails.

 

In Jefferson Parish (fn. 21) the Supreme Court held that an exclusive agreement between a hospital and a group of anesthesiologists « does not provide a basis for applying the per se rule against tying. » « Tying arrangements need only be condemned if they restrain competition on the merits by forcing purchases that would not otherwise be made. » The Court explained that “every patient undergoing a surgical operation needs the services of an anesthesiologist”; the record contained « no evidence that the hospital ‘forced’ any such services on unwilling patients. » (fn. 24) The same is true here. Shah’s tying arrangement fails.

 

21 Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984), abrogated on other grounds by Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006)

24 Id. at 28 (emphasis added); see also id. at 43 (O’Connor, J., concurring) (“There is no sound economic reason for treating surgery and anesthesia as separate services. Patients are interested in purchasing anesthesia only in conjunction with hospital services, so the Hospital can acquire no additional market power by selling the two services together.”).

 

 

 

 

(U.S. Court of Appeals for the Fifth Circuit, January 13, 2021, Shah v. VHS San Antonio Partners, LLC, Docket No. 20-50394)