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Internal Medicine Nephrology, Inc. v. Bio-Medical Applications of Indiana, Inc.

United States District Court, S.D. Indiana, Terre Haute Division

September 26, 2019




         Plaintiff Internal Medicine Nephrology, Inc. alleges that Defendant Fresenius Medical Care Holdings Inc. and various related entities (collectively, “Fresenius”) attempted to monopolize and monopolized the dialysis services market in the Terre Haute area in violation of section 2 of the Sherman Act, 15 U.S.C. § 2. Plaintiff also alleges various related state-law antitrust, tort, contract, and quasi-contract claims.[1]

         Defendants move to dismiss Plaintiff’s Sherman Act claim for lack of antitrust injury and lack of antitrust standing. For the reasons below, Defendants’ motion to dismiss (ECF No. 44) is granted, and Plaintiff’s Sherman Act claim is dismissed without prejudice to amending its complaint. Because courts should generally relinquish supplemental jurisdiction over pendant state-law claims when all federal claims are dismissed, see Kennedy v. Schoenberg, Fisher & Newman, Ltd., 140 F.3d 716, 727 (7th Cir. 1998), Plaintiff’s state-law claims are also dismissed without prejudice.

         Background [2]

         Plaintiff is a nephrology practice group based in Terre Haute, Indiana. “When a nephrologist’s patient requires dialysis services, the nephrologist refers the patient to a dialysis provider.” (Compl. ¶ 14.) Medicare requires that every dialysis facility have a medical director-“one or more nephrologists who oversee the delivery and quality of care provided at the dialysis facility.” (Compl. ¶ 15.) Due to the time-consuming and repetitive nature of dialysis, patients typically will not drive more than 30 to 45 minutes for dialysis services. (Compl. ¶ 23.) Plaintiff identifies the relevant market as “dialysis services within a 30–45 minute travel distance of Terre Haute.” (Compl. ¶ 34.)

         Fresenius provides dialysis services at its dialysis clinics in Terre Haute and the surrounding area. “Fresenius has had significant market power in the provision of kidney dialysis services in that it could control prices by controlling supply, and/or excluding competition with the effect of not keeping historical costs in check which negatively impact reimbursement rates paid by payors, including Medicare.” (Compl. ¶ 32.) From 2006 until 2017, Fresenius was the only dialysis service provider in the relevant market, and Plaintiff served as medical director at all six facilities-four outpatient and two inpatient. Plaintiff was also involved in Fresenius’s efforts to open a facility in Paris, Illinois, and Defendants promised that Plaintiff would serve as medical director of that facility. (Compl. ¶¶ 45–53.) Plaintiff alleges that under federal law and regulations relating to Medicare reimbursements, “neither a dialysis provider nor a nephrologist can dictate which dialysis facility a patient must use[, ] and a dialysis provider cannot financially reward a patient or a physician for a specific referral.” (Compl. ¶ 17.)

         In October 2017, DaVita entered the relevant market, opening three dialysis facilities in the Terre Haute area. The only other nephrology practice group in Terre Haute served as medical director of the DaVita facilities. (Compl. ¶ 58.) After DaVita’s entry, Fresenius (1) insisted that Plaintiff interfere with patient choice by barring its employee-physicians’ nephrology patients from transferring to DaVita facilities; (2) threatened Plaintiff and its employee-physicians that “IMN needs Frese-nius more than Fresenius needs IMN”; (3) ordered Fresenius employees to tell patients that Plaintiff’s physicians were “liars”; and (4) “[c]oerced Fresenius employees and staff to engage in consistent and targeted acts intended to coerce patients” to remain at Fresenius facilities or transfer back to Fresenius facilities. (Compl. ¶ 56.)

         Plaintiff and its employee-physicians refused to comply with Fresenius’s demands, so Fresenius terminated its medical director agreements with Plaintiff for four facilities and selected a different medical director for the Paris facility, replacing Plaintiff with an Indianapolis-based medical director that acquiesced in Fresenius’s demands. (Compl. ¶¶ 61, 63.) After replacing Plaintiff as medical director, Fresenius began to solicit Plaintiff’s nephrology patients to leave Plaintiff for Fresenius’s new medical director. (Compl. ¶ 61.) Fresenius falsely told others that Plaintiff was replaced as medical director due to concerns about quality. (Compl. ¶¶ 73, 76.)

         Plaintiff’s medical director agreements with Fresenius for each facility included noncompete provisions prohibiting Plaintiff from serving as medical director for a competing dialysis facility within 25 miles of the respective Fresenius facility. (Compl. ¶ 43.)

         Legal Standard

         To survive a motion to dismiss for failure to state a claim, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In considering a Rule 12(b)(6) motion to dismiss, the court takes the complaint’s factual allegations as true and draws all reasonable inferences in the plaintiff’s favor. Orgone Capital III, LLC v. Daubenspeck, 912 F.3d 1039, 1044 (7th Cir. 2019). The court need not “accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). “[I]f a plaintiff pleads facts that show its suit [is] barred . . ., it may plead itself out of court under a Rule 12(b)(6) analysis.” Orgone Capital, 912 F.3d at 1044 (quoting Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 608 (7th Cir. 1995)); Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013) (on a motion to dismiss “district courts are free to consider ‘any facts set forth in the complaint that undermine the plaintiff’s claim’”) (quoting Hamilton v. O’Leary, 976 F.2d 341, 343 (7th Cir. 1992)).


         Defendants argue that Plaintiff has not suffered “antitrust injury” and that Plaintiff lacks “antitrust standing.” Section 4 of the Clayton Act, 15 U.S.C. § 15, provides a private right of action for violation of the antitrust laws: “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States . . ., and shall recover threefold damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.” Despite the Clayton Act’s apparent breadth, the Supreme Court-drawing on congressional intent and common-law principles-has developed two related doctrines that limit the scope of the private right of action: antitrust injury and antitrust standing. Neither antitrust injury nor antitrust standing implicates the limits of the “judicial Power” under Article III. See U.S. Gypsum Co. v. Ind. Gas Co., 350 F.3d 623, 627 (7th Cir. 2003) (noting the “potential for confusion with Article III standing”).

         Antitrust injury limits private antitrust actions to those alleging “injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Antitrust standing, on the other hand, limits private antitrust actions to those plaintiffs positioned to enforce the antitrust laws most efficiently. See Serfecz v. Jewel Food Stores, Inc., 67 F.3d 591, 598 (7th Cir. 1995) (“From the class of injured persons suffering an ‘antitrust injury’ only those parties who can most efficiently vindicate the purposes of the antitrust laws have antitrust standing to maintain a private action under § 4.”) (quoting In re Indus. Gas Antitrust Litig., 681 F.2d 514, 516 (7th Cir. 1982)). Antitrust injury is a necessary, but not necessarily sufficient, condition for antitrust standing. See Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, ...

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