Benitez v. Charlotte-Mecklenburg Hosp. Auth.

992 F.3d 229

Raymond BENITEZ, individually and on behalf of all others similarly situated, Plaintiff - Appellant,

v.The CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY, d/b/a Carolinas Healthcare System, d/b/a Atrium Health, Defendants - Appellee.

No. 19-2145

United States Court of Appeals, Fourth Circuit.

Argued: January 29, 2021

Decided: March 23, 2021

ARGUED: Eric Franklin Citron, GOLDSTEIN & RUSSELL, P.C., Bethesda, Maryland, for Appellant. James P. Cooney, III, WOMBLE BOND DICKINSON (US) LLP, Charlotte, North Carolina, for Appellee. ON BRIEF: Robert Stephen Berry, BERRY LAW PLLC, Washington, D.C.; Tejinder Singh, GOLDSTEIN & RUSSELL, P.C., Bethesda, Maryland, for Appellant. Debbie W. Harden, Mark J. Horoschak, Sarah Motley Stone, Matthew F. Tilley, WOMBLE BOND DICKINSON (US) LLP, Charlotte, North Carolina; Hampton Y. Dellinger, Richard A. Feinstein, Nicholas A. Widnell, BOIES SCHILLER FLEXNER LLP, Washington, D.C., for Appellee.

Before GREGORY, Chief Judge, KEENAN, and QUATTLEBAUM, Circuit Judges.

Affirmed by published opinion. Judge Quattlebaum wrote the opinion, in which Chief Judge Gregory and Judge Keenan joined.

QUATTLEBAUM, Circuit Judge:

This appeal involves the Local Government Antitrust Act of 1984, 15 U.S.C. § 34 et seq . Congress passed the Act "in order to broaden the scope of antitrust immunity applicable to local governments" after a surge in the filing of antitrust lawsuits threatened to "undermine a local government's ability to govern in the public interest." Sandcrest Outpatient Servs., P.A. v. Cumberland Cnty. Hosp. Sys., Inc. , 853 F.2d 1139, 1142 (4th Cir. 1988) (internal quotation marks omitted). Although the Act does not preclude injunctive or declaratory claims, it immunizes "local government[s]" from antitrust damages. See 15 U.S.C. § 35. Today, we consider whether the Charlotte-Mecklenburg Hospital Authority (the "Hospital Authority") qualifies as a "local government" under the Act.

The Act defines "local government" in two ways. First, the Act covers traditional subdivisions of a state, such as "a city, county, parish, township, village, or any other general function governmental unit established by State law ...." 15 U.S.C. § 34(1)(A). That provision does not apply here. Second, the Act applies to more specialized governmental entities, such as "a school district, sanitary district, or any other special function governmental unit established by State law in one or more states." Id. § 34(1)(B). We must decide if the Hospital Authority falls into the final category—a "special function governmental unit established by State law in one or more states." Id.

After the Hospital Authority moved for judgment on the pleadings, the district court concluded that it was such an entity and, therefore, dismissed the class action antitrust claims brought by Raymond Benitez against the Hospital Authority. Benitez now appeals on two grounds. First, he argues that the Hospital Authority is not a "local government," and, therefore, not covered by the Act because it lacks the powers traditionally associated with "local government[s]," such as the power to tax and issue general obligation bonds. Second, he contends that, even if the Hospital Authority at one time qualified as a "special function governmental unit," it has now grown so large—by operating in three states and generating $11 billion in annual revenue—that it can no longer be considered a "local government."

As to Benitez's first argument, we disagree. Congress's broad definition of "local government" does not impose the requirements he advances, and we decline to rewrite the Act to include those requirements. As to Benitez's second argument, while not addressed by the district court, it also fails. Despite having some common-sense appeal, it again seeks a limitation not contained in the Act. Accordingly, we affirm.

I.

Benitez—who had been treated at a Hospital Authority inpatient facility in 2016—filed a class action complaint against the Hospital Authority, alleging violations of Section 1 of the Sherman Act. He alleges the Hospital Authority "is the second largest public health system in the United States." J.A. 12. It is also, Benitez asserts, the largest inpatient healthcare provider in the Charlotte, North Carolina area, with approximately twelve million patient encounters every year. Because of this, it receives more than fifty percent of all inpatient revenue in the Charlotte area. According to Benitez, insurers recognize the Hospital Authority's large market share and—out of necessity—contract with the Hospital Authority so that Charlotte-area residents can easily receive inpatient services. Thus, in reaching these contractual agreements, the Hospital Authority's "market power has enabled it to negotiate high prices (in the form of high ‘reimbursement rates’) for treating insured patients." J.A. 12. Additionally, Benitez claims the Hospital Authority "has imposed steering restrictions in its contracts with insurers." J.A. 13. He alleges these provisions are anticompetitive because they preclude "insurers from providing financial incentives to patients to encourage them to consider utilizing lower-cost but comparable or higher quality alternative healthcare providers." J.A. 13. And without such incentives, patients are effectively required to go to the Hospital Authority where the rates are higher.

Previously, the United States Department of Justice and the North Carolina Attorney General's Office filed a lawsuit in the Western District of North Carolina (the "Enforcement Action"), seeking a declaration that the steering restrictions violate Section 1 of the Sherman Act and an injunction prohibiting the Hospital Authority from seeking, agreeing to or enforcing any steering restrictions in its insurance contracts. See Complaint at 11–12, United States v. Charlotte-Mecklenburg Hosp. Auth., d/b/a Carolinas Healthcare Sys. , No. 3:16-cv-00311-RJC-DCK, 2016 WL 3202191 (W.D.N.C. June 9, 2016), ECF No. 1. After several years of litigation, the Enforcement Action was resolved by a settlement that prohibited steering restrictions. See Final Judgment, United States v. Charlotte-Mecklenburg Hosp. Auth., d/b/a Carolinas Healthcare Sys. , No. 3:16-cv-00311-RJC-DCK, 2019 WL 2767005 (W.D.N.C. April 24, 2019), ECF No. 99.

With claims that mirrored, in large part, the allegations made in the ongoing Enforcement Action, Benitez also asserted that the Hospital Authority's steering restrictions violated Section 1 of the Sherman Act. On top of declaratory and injunctive relief, however, Benitez also sought monetary damages on behalf of a class of individuals residing in the Charlotte area who made direct payments for inpatient procedures to the Hospital Authority.

The Hospital Authority answered, disputing Benitez's factual allegations, defending the legality of the steering restrictions and asserting a variety of affirmative defenses, including immunity from damages, costs and attorneys’ fees pursuant to the Act. Additionally, the Hospital Authority moved for judgment on the pleadings, arguing that it was immune from monetary damages because it was a "special function governmental unit"—and, therefore, a "local government"—under the Act.¹ To that end, it relied in large part on Sandcrest , which—according to the Hospital Authority—held that a North Carolina municipal hospital was a "local government" exempt from monetary damages under the Act.

Benitez responded first by detailing the Hospital Authority's evolution from a local hospital, "originally founded in 1943 to provide hospital services to the residents of Charlotte," to "the largest healthcare system in North and South Carolina and the second largest public health system in the United States." J.A. 80 (internal quotation marks omitted). Next, Benitez argued that the Hospital Authority is not a "special function governmental unit" under the Act because "large healthcare enterprises like [the Hospital Authority] bear no resemblance to the sorts of entities that the [Act] and its legislative history mention as examples of ‘local government’ ...." J.A. 89. Finally, Benitez offered an alternative argument—even if the Hospital Authority is a "special function governmental unit," it is nonetheless not a "local government" under the Act because "Congress cannot possibly have had sprawling healthcare enterprises like [the Hospital Authority] in mind when it created an immunity specifically for ‘local’ government entities." J.A. 92.

The district court found that the Hospital Authority is a "local government" and, therefore, immune from monetary damages. In making that finding, the district court detailed the Hospital Authority's creation and operation under North Carolina law and concluded that it had "powers which are typically characterized as governmental powers." J.A. 195. The district court also heavily relied on our Sandcrest decision. It noted that "[p]reviously, the Fourth Circuit has granted absolute immunity from antitrust damages to a municipal hospital established under Chapter 131E [of the North Carolina General Statutes], upholding the determination that the hospital qualified as a ‘special function government[al] unit’ under the [Act]." J.A. 196 (citing Sandcrest , 853 F.2d at 1139 ). The district court did not, however, address Benitez's alternative argument that the Hospital Authority's multistate operations and explosive growth precluded a finding that it was a "local government." The district court then stayed Benitez's claim for injunctive relief pending a resolution of the Enforcement Action. After the Enforcement Action settled, the Hospital Authority filed a renewed motion for judgment on the pleadings, which Benitez did not oppose. The district court granted the motion, dismissing all claims against the Hospital Authority.

Benitez filed a timely Notice of Appeal, and we have jurisdiction over the appeal. 28 U.S.C. § 1291.

II.

A.

Before addressing Benitez's arguments on appeal, we begin with some...