St. Joseph's Hosp. Health Ctr. v. Am. Anesthesiology of Syracuse

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ST. JOSEPH'S HOSPITAL HEALTH CENTER, Plaintiff, v. AMERICAN ANESTHESIOLOGY OF SYRACUSE, P.C., AMERICAN ANESTHESIOLOGY, INC., NMSC II, LLC, and NORTH AMERICAN PARTNERS IN ANESTHESIA, L.L.P, Defendants.

AMERICAN ANESTHESIOLOGY OF SYRACUSE, P.C., AMERICAN ANESTHESIOLOGY, INC., NMSC II, LLC, and NORTH AMERICAN PARTNERS IN ANESTHESIA, L.L.P, Counter-Claimants, v. ST. JOSEPH'S HOSPITAL HEALTH CENTER, Counter-Defendant.

No. 5:24-cv-276 (BKS/ML)

United States District Court, N.D. New York

December 2, 2024

For Plaintiff and Counter-Defendant: John F. Queenan Rivkin Radler LLP

David A. Ettinger Benjamin VanderWerp Honigman LLP

For Defendants and Counter-Claimants: Jon P. Devendorf J.J Pelligra Barclay Damon LLP

W Scott O'Connell Jennifer Lada Marc L. Antonecchia Holland & Knight LLP

William M. Katz, Jr. Holland & Knight LLP

MEMORANDUM-DECISION AND ORDER

Hon Brenda K. Sannes, Chief United States District Judge

I. INTRODUCTION

Plaintiff St. Joseph's Hospital Health Center (“St. Joseph's”) initiated this action on February 26, 2024, against Defendants American Anesthesiology of Syracuse, P.C., American Anesthesiology, Inc., NMSC II, LLC, and North American Partners in Anesthesiology, L.L.P. (together, “NAPA”), asserting antitrust claims under the Sherman Act, 15 U.S.C. § 1 et seq. and the Donnelly Act, N.Y. Gen. Bus. Law § 340 as well as a breach of contract claim. (Dkt. No. 1.) Defendants subsequently filed counterclaims alleging breach of contract, tortious interference with contract, and claims for injunctive and declaratory relief. (Dkt. No. 53).^[1] Presently before the Court is Plaintiff's motion to dismiss counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, (Dkt. No. 57), and Defendants' partial motion to dismiss Plaintiff's antitrust claims for monetary damages for lack of standing, (Dkt. No. 77). The motions are fully briefed. (Dkt. Nos. 57-1, 64, 68, 77-1, 79-80). For the following reasons, the Court grants in part and denies in part Plaintiff's motion to dismiss counterclaims and denies Defendants' partial motion to dismiss.

II. FACTS^[2]

A. Parties

Plaintiff St. Joseph's operates a 431-bed hospital in Syracuse, New York, that offers “a variety of inpatient and outpatient services, including cardiology, obstetrics, surgery, and Level II trauma care.” (Dkt. No. 1, ¶¶ 8-9).

Defendant American Anesthesiology of Syracuse, P.C. is “the exclusive provider of anesthesia care at St. Joseph's and at Crouse Health, one of the other two hospitals in Onondaga County.” (Id. ¶ 13). Defendant American Anesthesiology, Inc. is the parent corporation of American Anesthesiology of Syracuse. (Id. ¶ 14). Both entities are headquartered in Melville, New York. (Id. ¶¶ 13-14). Defendant NMSC II, LLC, a Delaware limited liability company, is the parent corporation of American Anesthesiology, Inc. (Id. ¶ 15). NMSC is a subsidiary of Defendant North American Partners in Anesthesia, L.L.P., a New York limited liability partnership, also based in Melville, New York that employs 5,000 clinicians and provides services at 400 facilities nationwide in 22 states, making it the “largest anesthesia services provider in North America.” (Id. ¶ 16).

B. Underlying Agreement

St. Joseph's and American Anesthesiology of Syracuse entered into an Administrative and Clinical Services Agreement (the “Agreement”), effective December 31, 2018. (Dkt. No. 53, ¶ 6, at 21). The Agreement “established an exclusive services arrangement between St. Joseph's and [American Anesthesiology of Syracuse] for the provision of anesthesiology services for St. Joseph's patients,” including anesthesiologists and certified registered nurse anesthetists (“CRNAs”). (Id.; Dkt. No. 1, ¶ 2). Under the original Agreement, St. Joseph's was to pay “a negotiated subsidy for Clinical and Administrative Services,” (Dkt. No. 24-1, at 9), and under the amended agreements, St. Joseph's paid a “Fixed Administrative Fee.” (Dkt. No. 24-2, at 15; Dkt. No. 24-3, at 8).^[3]

On March 1, 2021, by an Assignment and Assumption Agreement, American Anesthesiology of Syracuse assigned the Agreement to North American Partners in Anesthesia. (Dkt. No. 53, ¶ 3, at 20). The parties extended the Agreement several times, until St. Joseph's sent a notice of nonrenewal on December 29, 2023 such that the contract was set to expire on July 1, 2024. (Id. at ¶ 7, at 21; Dkt. No. 1, ¶ 32).

The Agreement includes a non-solicitation clause, section XIII.D, that reads in pertinent part:

During the Term of this Agreement and for two (2) years from the date of termination of this Agreement, either Party will not directly or indirectly, whether as an individual advisor, employee, agent, or otherwise take any action to induce any employee to cease his or her employment with the other Party.

(Dkt. No. 53, ¶ 8, at 21).^[4]

C. Relevant Conduct

On December 29, 2023, St. Joseph's informed NAPA that it would not renew the Agreement when the term ended on July 1, 2024. (Dkt. No. 1, ¶ 64). During subsequent contract negotiations, NAPA representatives discussed the possibility of negotiating a buyout. (Id. ¶ 6567). Negotiations, however, were unsuccessful. (Id. ¶ 70.) St. Joseph's states that it would have been “faced with a critical shortfall in anesthesia care” if not for seeking to employ Defendants' anesthesiologists and CRNAs, which would have “seriously harm[ed] patients” and forced St. Joseph's to “face an impossible financial situation that would not allow it to remain in operation.” (Id. ¶¶ 56, 58).

To that end, “to avoid these staffing and payment problems, and because of its inability to obtain reasonable terms from Defendants,” St. Joseph's offered employment to NAPA's anesthesiologists and CRNAs (together, “Clinicians”), effective on expiration of the Agreement. (Id. ¶ 72). On February 26, 2024, St. Joseph's issued an email to its medical staff stating its intention to offer employment,^[5] delivered offer letters to NAPA-employed clinicians, and filed the present lawsuit. (Dkt. No. 53, ¶¶ 48-49, at 31).

On March 1, 2024, NAPA sent St. Joseph's a cease-and-desist letter demanding that St. Joseph's refrain from inducing the Clinicians to terminate their contracts with NAPA. (Id. ¶ 50, at 31).

St. Joseph's did not rescind the offers of employment in response to the cease-and desist. (Id.). At least “some” NAPA clinicians had accepted St. Joseph's employment offer as of April 18, 2024. (Id.).

III. PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIMS UNDER RULE 12(b)(6)

A. Standard of Review

To survive a motion to dismiss under Rule 12(b)(6) for failure to state a claim, “a complaint must provide ‘enough facts to state a claim to relief that is plausible on its face.'” Mayor & City Council of Balt. v. Citigroup, Inc., 709 F.3d 129, 135 (2d Cir. 2013) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Mere “labels and conclusions” are insufficient; rather, a plaintiff must provide factual allegations sufficient “to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The Court must “accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.” E.E.O.C. v. Port Auth., 768 F.3d 247, 253 (2d Cir. 2014) (citing ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)). Additionally, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

The same standards apply to a motion to dismiss a counterclaim as to a motion to dismiss a complaint, with pleadings “construed ‘in the light most favorable to [the counter-claimant], resolving all doubts in [the counter-claimant's] favor.'” Zurich Am. Life Ins. Co. v. Nagel, 571 F.Supp.3d 168, 175 (S.D.N.Y. 2021) (alterations in original). “[C]ounterclaims must meet the pleading requirements of Rule 8(a), as interpreted by Twombly and Iqbal, in order to survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).” Erickson Beamon Ltd. v. CMG Worldwide, Inc., No. 12-cv-5105, 2014 WL 3950897, at *7, 2014 U.S. Dist. LEXIS 112437, at *18 (S.D.N.Y. Aug. 12, 2014) (citing Orientview Techs. LLC v. Seven for All Mankind, LLC, No. 13-cv-0538, 2013 WL 4016302, at *2, 2013 U.S. Dist. LEXIS 111107, at *5-6 (S.D.N.Y. Aug. 7, 2013) (“A motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint.”)).

B. Discussion

Pursuant to Rule 12(b)(6), Plaintiff seeks to dismiss Defendants' counterclaims for (1) breach of contract, (2) injunctive relief stemming from the breach of contract, (3) declaratory relief requiring St. Joseph's to indemnify NAPA for attorneys' fees and costs in connection with this lawsuit, and (4) tortious interference with contractual relations. (Dkt. No. 57).

1. Breach of Contract

“Under New York law, a breach of contract claim requires proof of (1) an agreement, (2) adequate performance by the [claimant], (3) breach by the [other party], and (4) damages.” Fischer & Mandell LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011).^[6] With respect to the first element, NAPA must demonstrate that the restrictive covenants are enforceable. Testing Servs., N.A. v. Pennisi, 443 F.Supp.3d 303, 333 (E.D.N.Y. 2020). As this Court previously stated:

“Courts analyze restrictive covenants in ordinary commercial contracts . . . ‘under a simple rule of reason, balancing the competing public policies in favor of robust competition and freedom to contract.'” Mathias v. Jacobs, 167 F.Supp.2d 606, 611 (S.D.N.Y. 2001) (quoting DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F.Supp.2d 192, 197 (E.D.N.Y. 1999)). “Courts typically consider the legitimate business

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