Cascade Health Sols. v. PeaceHealth - 515 F.3d 883 (9th Cir. 2008)

Rule:

Section 2 of the Sherman Act, 15 U.S.C.S. § 2, makes it illegal to attempt to monopolize any part of the trade or commerce among the several states, or with foreign nations. 15 U.S.C.S. § 2. To demonstrate attempted monopolization a plaintiff must prove (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.

Facts:

McKenzie-Willamette Hospital ("McKenzie") and PeaceHealth were the only providers of hospital care in the county. They both provided primary and secondary acute care, while only PeaceHealth provided tertiary care. McKenzie alleged that PeaceHealth coerced insurers into purchasing primary and secondary services from it in order for the insurers to obtain tertiary services. McKenzie  filed a complaint in the district court against PeaceHealth asserting seven claims for relief. Five of the claims arose under the federal antitrust laws: monopolization, attempted monopolization, conspiracy to monopolize, tying, and exclusive dealing. The other two claims arose under Oregon state law: price discrimination and intentional interference with prospective economic advantage. Before trial, the district court granted summary judgment in favor of PeaceHealth on McKenzie's tying claim. After a two-and-a-half-week trial, the jury rendered a verdict in favor of PeaceHealth on McKenzie's claims of monopolization, conspiracy to monopolize, and exclusive dealing. However, the jury found in favor of McKenzie on McKenzie's claims of attempted monopolization, price discrimination, and tortious interference. The jury awarded McKenzie $ 5.4 million in damages, which the district court trebled for a final award of $ 16.2 million. The district court also awarded McKenzie $ 1,583,185.57 in attorneys' fees, costs, and expenses. McKenzie appealed and PeaceHealth cross-appealed.

Issue:

Did the district court err in instructing the jury about when bundled discounting could amount to anticompetitive conduct?

Answer:

Yes

Conclusion:

 In vacating the judgment on the attempted monopolization claim under § 2 of the Sherman Act, 15 U.S.C.S. § 2, the court held that the district court incorrectly instructed the jury about when bundled discounting could amount to anticompetitive conduct. The court held that a plaintiff had to establish that, after allocating the discount given by the defendant on the entire bundle of products to the competitive product or products, the defendant sold the competitive product or products below its average variable cost of producing them. In vacating the judgment on the tying claim under § 1 of the Sherman Act, 15 U.S.C.S. § 1, the court held that there were genuine factual disputes about whether PeaceHealth forced insurers through its bundled discounting to take its primary and secondary services if the insurers wanted tertiary services.