Seventh Circuit Affirms Dismissal Of Section 1 Complaint Against Medical Board For Failure To Plead Facts Supporting Conspiracy Allegations
11/16/2021On October 8, 2021, the United States Court of Appeals for the Seventh Circuit affirmed the Northern District of Illinois’ dismissal of a complaint alleging that a nonprofit provider of medical certifications violated Section 1 of the Sherman Act by conspiring to restrain trade in the alleged nationwide market for medical care. The three-judge panel found that plaintiff, an association of medical practitioners, alleged only conclusory claims against defendant and failed to plead adequate facts to state a claim for unlawful conspiracy under Section 1 of the Sherman Act. Ass’n of Am. Physicians & Surgeons, Inc. v. Am. Board of Med. Specialties, No. 20-3072 (7th Cir. Oct. 8, 2021).
Plaintiff is the Association of American Physicians & Surgeons (“AAPS”), a national organization and political advocacy group comprised of medical care providers. Defendant is the American Board of Medical Specialties (“Board”), an organization of member boards that offer certifications to physicians who meet specialized certification standards and comply with annual recertification requirements. Plaintiff alleged that the Board conspired with hospitals and health insurers nationwide to condition the granting of staff privileges and in-network status on physicians’ continued participation in the Board’s “Maintenance of Certification” (“MOC”) program. Plaintiff’s initial complaint alleged a conspiracy among the Board, its member boards, and the Joint Commission (an accreditor of healthcare providers) to restrain trade in the market for medical care in hospitals, asserting that the Board entered into agreements with these entities to force doctors on hospital staffs to participate in the Board’s MOC program. After the district court dismissed AAPS’s first complaint for failure to plead facts establishing its claims, plaintiff filed an amended complaint expanding its allegations to assert that defendant conspired with 80% of U.S. hospitals, as well as an unspecified number of health insurers, in order to require practitioners to maintain Board certifications in order to work at those hospitals and accept insurance from those providers. The Seventh Circuit characterized the amended complaint as appearing “to define the relevant market to encompass almost all medical care nationwide.” Finding that allegations in the new complaint were also conclusory and lacking in factual support, the lower court granted defendant’s motion to dismiss a second time and plaintiff appealed.
The Seventh Circuit, in an opinion by Judge Michael Y. Scudder, affirmed, agreeing that plaintiff did not plead the elements required to allege a Sherman Act violation. Most fundamentally, plaintiff failed to allege any facts giving rise to a plausible inference that defendant entered into agreements with hospitals and health insurers to restrain trade in the alleged medical care market. Although plaintiff made conclusory assertions that defendant colluded with insurers and hospitals to force physicians to maintain Board certifications, the appellate court agreed with the district court that the allegations that hospitals and insurers required certifications merely established parallel conduct, not concerted action. Highlighting the pleading standard in Bell Atlantic Corp. v. Twombly, the Seventh Circuit explained that a Sherman Act claim cannot survive a motion to dismiss when plaintiff alleges only “parallel conduct unfavorable to competition, absent some factual context suggesting agreement as distinct from identical, independent action.”
Because plaintiff had already amended its complaint once without adding necessary factual support, plaintiff’s counsel had essentially conceded that an additional amendment would be futile without discovery, and plaintiff had failed to petition the district court for permission to amend again, the Seventh Circuit affirmed the lower court’s dismissal with prejudice.
Turning to the Board’s request for sanctions, the Seventh Circuit concluded that the appeal was indeed frivolous in its disregard of the Twombly standard, but did not award sanctions because defendant had simply requested fees in its appellate brief rather than in a separate motion under Federal Rule of Appellate Procedure 38, as required under Seventh Circuit precedent.