Eastern District Of Pennsylvania Allows Hospital Merger To Proceed
On December 14, 2020, Judge Gerald Pappert of the United States District Court for the Eastern District of Pennsylvania denied the Federal Trade Commission’s (“FTC”) emergency motion for an injunction pending appeal. Federal Trade Commission, et al. v. Thomas Jefferson University, et al., 2:20-cv-01113 (E.D. Pa. Dec. 14, 2020). The decision comes after the district court, on December 8, denied the FTC’s request to enjoin Jefferson Health from acquiring Albert Einstein Healthcare Network. The FTC has appealed the December 8 decision and sought an injunction pending that appeal to prevent the acquisition from going forward on December 15 in accordance with the stipulated terms of a prior temporary restraining order entered in the case. The Court denied the FTC’s motion, explaining that the emergency motion—rather than maintaining the status quo—would alter the parties’ circumstances by imposing an injunction where there was none.
The FTC brought suit to enjoin Jefferson Health from acquiring Albert Einstein Healthcare Network, arguing that the merged entity would control at least 60% of the market for acute care and rehabilitation services in North Philadelphia and 45% of the market for those services in Montgomery County. The FTC also argued that the merger would eliminate competition for investing in new facilities and technologies. On December 8, 2020, the Court denied the FTC’s request for a preliminary injunction. Two days later, the FTC filed an emergency motion for an injunction pending appeal to the Third Circuit, citing defendants’ intent to consummate the merger. The FTC argued that an injunction pending appeal would be necessary to preserve the status quo. Addressing the factors for granting an injunction, the FTC argued that (i) it was likely to have success on the merits, (ii) there would be irreparable harm because the hospitals would consolidate their assets and share competitively sensitive and strategic information that the Court recognized would make it difficult, if not impossible, to restore competition to pre-merger levels, and (iii) defendants would not be harmed by the injunction given that the merger had already been pending for three years and, on the other hand, the public would be harmed by the closing and relocation of hospital services.
The Court rejected the FTC’s arguments and denied the motion. In a footnote to the two-page order, the Court found that permitting the acquisition to go forward on December 15, 2020, in accordance with the parties’ prior stipulated restraining order, would not materially alter the status of the case on appeal. Indeed, the Court suggested that the emergency motion sought to circumvent the denial of the preliminary injunction and would alter the status quo by instituting an injunction where there was not one. The Court also stated that if the emergency motion sought reconsideration of the legal merits of the case, then the court lacked jurisdiction given the pending appeal.
The decision stands in contrast to grants of such injunctions pending appeal by other district courts in recent FTC challenges to hospital mergers and indicates that courts may be unwilling to enjoin mergers or acquisitions pending appeal that are unsuccessfully challenged at the district court level and may instead permit them to go forward despite potential difficulties of unwinding if the appeal is successful.