Continental Orthopedic Appliances, Inc. v. Health Ins. Plan..., 40 F.Supp.2d 109 (1999) 1999-1 Trade Cases P 72,430 Complaint 40 F.Supp.2d 109 In order to dismiss an antitrust case, for failure United States District Court, to state claim, it must appear on the face of E.D. New York. the complaint that the plaintiff could prove no set of facts to sustain a recovery. Fed.Rules CONTINENTAL ORTHOPEDIC APPLIANCES, Civ.Proc.Rule 12(b)(6), 28 U.S.C.A. INC., New York Orthopedic, Stahl Surgical Supply Inc., United Orthopaedic Appliances, Inc., A–1 Surgical and Medical Supplies, Inc., 2 Antitrust and Trade Regulation Archfame, Inc., Ortho Surgical, J.C. Orthopedic Injury to Business or Property Co., Inc., Day Drug & Orthopedic Treatment In order to state claim of antitrust violation, Facility, Orthotic Consultants, Inc., James complaint need only allege sufficient facts to Case Enterprises, Inc., Certified Orthopedic, state elements of injury from act prohibited by Prothotic Labs, Elmont Pharmacy & Surgical, antitrust laws. Fed.Rules Civ.Proc.Rule 12(b)(6), 28 U.S.C.A. Foot Molds, Inc., and A Personal Touch Garment Corporation, on behalf of themselves and all others similarly situated, Plaintiffs, 3 Antitrust and Trade Regulation v. Complaint HEALTH INSURANCE PLAN OF GREATER NEW Standard that defendant is required to meet in YORK, INC., Advanced Orthopedic Technologies, order to obtain dismissal of antitrust complaint Inc., A wholly owned subsidiary of Novacare is more stringent than usual standard, as proof Prosthetics and Orthotics, Inc., Novacare Prosthetic is often in hands of alleged antitrust conspirators and Orthotics, Inc., and Arimed Orthotics, and complainant may need opportunity to Prosthetics, and Pedorthics Inc., Andrew H. discover facts necessary to withstand motion. Meyers, Matthew Mironis, Steven Mironis, Bernard Fed.Rules Civ.Proc.Rule 12(b)(6), 28 U.S.C.A. Neeck and Anthony L. Watson, Defendants. No. CV 95–4541. | Jan. 15, 1999. 4 Antitrust and Trade Regulation Suppliers of orthopedic and prosthetic (O&P) devices sued Complaint two suppliers and health maintenance organization (HMO), Antitrust and Trade Regulation claiming that exclusive dealing agreement under which HMO Injury to Business or Property agreed to approve O&P devices only from two suppliers Antitrust complaint must adequately define the violated federal and state antitrust laws. Defendants moved to relevant product market, allege antitrust injury, dismiss. The District Court, Spatt, J., held that: (1) exclusive and allege conduct in violation of antitrust laws. dealing agreement was not per se violation of Sherman Act Sherman Act, § 1 et seq., as amended, 15 prohibition of contracts, combinations or conspiracies in U.S.C.A. § 1 et seq.; Fed.Rules Civ.Proc.Rule restraint of trade; (2) for purposes of determining whether 12(b)(6), 28 U.S.C.A. antitrust claim was stated, relevant market would be deemed to include all health maintenance organizations within 11 county area; and (3) purchaser of assets of favored O&P 5 Antitrust and Trade Regulation supplier was included in suit. Complaint Motions to dismiss denied. In order to state claim for contract, combination or conspiracy in restraint of trade, under rule of West Headnotes (13) reason test, complainant must identify relevant product market and allege how net effect of 1 Antitrust and Trade Regulation alleged violation is to restrain trade in relevant © 2012 Thomson Reuters. No claim to original U.S. Government Works. 1 Continental Orthopedic Appliances, Inc. v. Health Ins. Plan..., 40 F.Supp.2d 109 (1999) 1999-1 Trade Cases P 72,430 market. Sherman Act, § 1 et seq., as amended, 15 a relevant geographic and product market in U.S.C.A. § 1 et seq. which trade was unreasonably restrained or monopolized. Sherman Act, § 1 et seq., as 1 Cases that cite this headnote amended, 15 U.S.C.A. § 1 et seq. 6 Antitrust and Trade Regulation Complaint 10 Antitrust and Trade Regulation In stating claim for contract, combination or Rule of Reason conspiracy in restraint of trade, under per se Antitrust and Trade Regulation test, claimant need not define relevant product Product Market market. Sherman Act, § 1 et seq., as amended, 15 In determining relevant product market, as part U.S.C.A. § 1 et seq. of applying rule of reason test to antitrust claim, the relevant product market must include all 1 Cases that cite this headnote reasonable substitutes for a product. Sherman Act, § 1 et seq., as amended, 15 U.S.C.A. § 1 et 7 Antitrust and Trade Regulation seq. Per Se Antitrust and Trade Regulation Rule of Reason 11 Antitrust and Trade Regulation Antitrust and Trade Regulation Medical Services Presumptions and Burden of Proof Health maintenance organization and providers A contract, combination or conspiracy will be of medical devices did not engage in per found in restraint of trade, under the “rule of se violation of Sherman Act prohibition on reason” test, only in a limited class of cases contracts, combinations and conspiracies in in which a defendant's actions are so plainly restraint of trade when they entered into exclusive harmful to competition and so obviously lacking dealing agreement under which providers became in any redeeming pro-competitive values that only approved source orthopedic and prosthetic they are conclusively presumed illegal without devices; there was no evidence of price-fixing, further examination. Sherman Act, § 1 et seq., as bid-rigging, conspiracy to reduce output or amended, 15 U.S.C.A. § 1 et seq. other conduct traditionally considered as per se violations. Sherman Act, § 1 et seq., as amended, 15 U.S.C.A. § 1 et seq. 8 Antitrust and Trade Regulation Presumptions and Burden of Proof 12 Antitrust and Trade Regulation Under the rule of reason, a plaintiff who alleges an Insurance antitrust violation bears the burden of establishing that the challenged action has had an actual For purposes of stating claim that exclusive adverse effect on competition as a whole in the dealing agreement, under which health relevant market. Sherman Act, § 1 et seq., as maintenance organization contracted to approve amended, 15 U.S.C.A. § 1 et seq. orthopedic and prosthetic devices from only two suppliers, was contract, combination or 1 Cases that cite this headnote conspiracy in restraint of trade, relevant market was all health maintenance organizations in eleven county area, even though there were other 9 Antitrust and Trade Regulation forms of health care and financing providing Complaint orthopedic and prosthetic coverage, including To state a claim of antitrust violation, under traditional indemnity plans, preferred provider the rule of reason test, a claimant must allege organizations, and Medicare or Medicaid © 2012 Thomson Reuters. No claim to original U.S. Government Works. 2 Continental Orthopedic Appliances, Inc. v. Health Ins. Plan..., 40 F.Supp.2d 109 (1999) 1999-1 Trade Cases P 72,430 programs. Sherman Act, § 1 et seq., as amended, prosthetic (“O & P”) providers within the five boroughs of 15 U.S.C.A. § 1 et seq. New York City and the surrounding six Counties of Nassau, Suffolk, Westchester, Rockland, Orange and Putnam (the “11 Counties”), by the defendants Health Insurance Plan 13 Antitrust and Trade Regulation of Greater New York, Inc. (“HIP”), Advanced Orthopedic Insurance Technologies, Inc. (“Advanced”), Novacare Orthotics and Prosthetics, Inc. (“Novacare”), Arimed Orthotics, Prosthetics Purchaser of assets of orthopedic and prosthetic and Pedorthics, Inc. (“Arimed”), and five individual officers supply provider was subject to antitrust claim and executives of the corporate defendants, beginning on against provider, arising out of exclusive dealing or about July 31, 1995, and continuing to date. Presently agreement under which provider and another before the Court are the motions of the defendants to supplier were the sole sources of orthopedic and dismiss the plaintiffs' Second Amended Complaint pursuant prosthetic equipment that would be approved to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon by health maintenance organization; purchaser which relief can be granted. expressly assumed liabilities of provider, and purchaser participated in aspects of antitrust conspiracy, including termination of other I. BACKGROUND orthopedic and prosthetic device suppliers. Sherman Act, § 1 et seq., as amended, 15 A. Factual background U.S.C.A. § 1 et seq. This lawsuit arises from a decision made by HIP, a health management organization (“HMO”), to enter into certain exclusive contracts for O & P service with Advanced and Arimed, which became effective on August 1, 1995 and February 13, 1997. On or about November, 1996, Novacare, Attorneys and Law Firms through a wholly-owned subsidiary, purchased all the assets *110 Steven L. Wittels, Armonk, NY, Jeremy Heisler, New of Advanced and the surviving corporation allegedly agreed York City, *111 Meister Seelig & Fein, LLP, New York to assume all of Advanced's liabilities. Accordingly, the City by Scott N. Gelfand, of counsel, for plaintiffs. plaintiffs submit that Novacare is liable for any wrongful Stroock & Stroock & Lavan LLP, Bernard Neeck and activities committed by Advanced as alleged in the Second Anthony Watson, New York city by Bruce H. Schneider, Amended Complaint. Therefore, this Opinion will refer David Markowitz, Claude G. Szyfer, of Counsel, for to Advanced as “Advanced/Novacare,” unless specifically defendants Health Insurance Plan of Greater New York, Inc. referring separately to either “Advanced” or “Novacare.” Herrick, Feinstein LLP, New York City, by Joshua F. Scheier, Orthotics is the design, fabrication, fitting, and supervised Susan T. Dwyer, of counsel, for defendants Advanced use of custom-made braces and other devices that Orthopedic Technologies, Inc., Novacare Prosthetic and provide external support to treat musculoskeletal disorders. Orthotics, Inc., and Andrew H. Meyers. Prosthetics is the design, fabrication, and fitting of custom- Capetanakis & Preite, Matthew Mirones and Steven Mirones, made artificial limbs for patients who have lost limbs as a Brooklyn by Charles Capetanakis, of counsel, for defendants result of traumatic injuries, diabetes, cancer, mastectomy, Arimed Orthodics, Prosthetics, and Pedorthics, Inc.