Kissing Camels: Court Ruling Highlights Antitrust Perils for Affiliates in Joint Ventures
Authors: Ashley Antler, Associate, Healthcare Industry | Shoshana Speiser, Associate, Litigation
On August 28, 2015, relying on limited and arguably ambiguous evidence, a Colorado federal district court upheld the antitrust conspiracy and monopolization claims made by Kissing Camels Surgery Center, LLC and three other ambulatory surgery centers (ASCs) against two health systems, several health insurers, a competing ASC, and a trade association.1 This case highlights that independent legal entities affiliated through a joint venture may face unexpected antitrust risks as a result of their affiliates' actions.
Kissing Camels: An Overview of the Antitrust Claims
Plaintiff ASCs perform outpatient surgical procedures and treatments in non-hospital environments. Defendant Centura Health Corporation (Centura) operates numerous hospitals and ASCs as joint ventures with private physicians. The other defendants include Colorado Ambulatory Surgery Center Association Inc. (CASCA), a trade association; several health insurers; Audubon Ambulatory Surgery Center LLC, a joint venture with Centura (which subsequently settled with plaintiffs); and another health system. The parties operate in Denver and Colorado Springs, Colorado.
The plaintiff ASCs alleged Centura and another health system (against which Plaintiffs have dismissed their claims) conspired to reduce competition for ambulatory surgical services by refusing to do business with the plaintiffs ASCs and by exercising their market power to pressure physicians and several insurers not to do business with the plaintiff ASCs. CASCA allegedly participated in this scheme by holding strategy meetings at which the conspiratorial objectives were discussed and excluding the plaintiff ASCs from these discussions.
Centura moved for summary judgment, arguing that the plaintiff ASCs presented insufficient evidence to support their claims. The court denied the motion for summary judgment, finding sufficient evidence of both the conspiracy and monopolization claims to proceed to trial.
With respect to the conspiracy claim, the plaintiff ASCs alleged that the defendants viewed them as a competitive threat and colluded to put them out of business, thereby restraining trade in the relevant Colorado markets for ambulatory surgical services. The plaintiff ASCs presented evidence of:
- A meeting between the chief executive officers of Centura and another health system regarding concerns about new ASCs in Colorado, but not indicating that Centura agreed to take action against the plaintiffs; and
- Handwritten notes taken during a meeting of insurer and CASCA representatives referencing concerns about "bad ASC's"2 along with possible solutions. No Centura representatives were present at this meeting, but an Audubon representative attended.
In addition, the plaintiffs provided corroborating deposition testimony from the note taker at the meeting of insurer and CASCA representatives. The note taker explained that he understood the insurers present were asked to investigate ways to alter the ASCs' billing practices, an issue which also had been discussed during a prior conference call between the insurer and CASCA representatives.
The Court agreed with Centura that the first piece of evidence alone was insufficient to establish a conspiracy. However, the Court found that a reasonable jury could infer an agreement pursuant to which insurers would take action against the plaintiffs from the notes expressing concerns about "bad ASC's." Notably, the Court rejected Centura's absence from this meeting as a defense to any wrongdoing in light of two-year-old documents indicating that Audubon may have previously acted on Centura's behalf.
On the monopolization claim, the plaintiff ASCs alleged that defendants conspired to monopolize the Colorado Springs market for outpatient surgical procedures. Centura argued that because its market share was only 4.3% for ambulatory surgery patient visits and it only had 16.4% of the operating rooms used for such surgeries, this fell short of Centura having "dangerous probability" of achieving the monopoly power to control prices or exclude competition. The Court, however, determined that a reasonable jury could find Centura and Audubon were acting as affiliates whose market shares should therefore be combined. The Court determined that Centura's and Audubon's combined market share of 62% was sufficient to infer they would have enough market power to control prices or exclude competition.
In further support of their monopolization claim, the plaintiff ASCs argued that Centura engaged in conduct to exclude them from the relevant ambulatory surgery market. For example, the plaintiff ASCs cite to evidence that Centura cancelled a hospital transfer agreement with Kissing Camels because it saw Kissing Camels as a competitive threat to Audubon.
Centura argued, and the Court conceded, that the antitrust laws do not require Centura to deal with a competitor. Nonetheless, the Court found that the plaintiffs' evidence could support a finding that Centura's actions were intended to exclude the plaintiffs from the market. As a result, the Court ruled that summary judgment on the monopolization claim was inappropriate.
Lessons for Parties to Joint Ventures
This case highlights the antitrust risks that may arise as a result of association with joint venture affiliates. In this case, the Court determined that Audubon's actions could be imputed to Centura, even though the parties were two legally distinct entities and Centura had been absent from the meeting at which suspicious notes were recorded. That determination was based on two-year-old emails in which Centura expressed interest in Audubon acting on its behalf regarding its competitive concerns about the plaintiff ASCs. While acknowledging that these emails were "far from definitive," the Court rejected Centura's argument that such evidence was too ambiguous to permit the claims to proceed to trial.
In a similar vein, the Court combined the affiliated parties' market shares to find that the total share was sufficient to infer a dangerous probability of achieving monopoly power. The Court rejected Centura's argument that the market shares should not be combined, because there was no evidence that Centura controlled Audubon.
The Court's ruling in Kissing Camels shows that parties to a joint venture may be responsible for consequences not only of their joint actions, but also of their affiliates' seemingly independent actions toward mutual competitors. The ruling also underscores that joint venture affiliates must be mindful that all evidence of prior interactions, including but not limited to written correspondence, may generate antitrust risks. As this case demonstrates, even one ambiguous handwritten note could play an important role in preventing antitrust claims from being summarily dismissed by a court, and become fodder for prolonged and expensive litigation.
1Kissing Camels Surgery Ctr., LLC v. Centura Health Corp., No. 12-cv-3012 (D. Col. Aug. 28, 2015).
2Handwritten notes from that follow-up meeting state, "Bad ASC's haven't shown where huge revenue is coming from…They feel the ball is in our court *** strategy → *** can the flow of $ stop on our end."
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