United States District Court, Northern District of Illinois, E. D
September 3, 1980
R. ANTHONY MARRESE, M. D., AND MICHAEL R. TREISTER, M. D., PLAINTIFFS,
AMERICAN ACADEMY OF ORTHOPAEDIC SURGEONS, DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
OPINION AND ORDER
Defendant American Academy of Orthopaedic Surgeons
("Academy") has moved to dismiss the Amended Complaint (the
"Complaint") filed by plaintiffs R. Anthony Marrese and
Michael R. Treister (respectively "Dr. Marrese" and "Dr.
Treister"). For the reasons stated in this opinion and order
the Academy's motion is denied.
Plaintiffs' Amended Complaint
Drs. Marrese and Treister are Board-certified practicing
orthopaedic surgeons. They complain of allegedly having been
arbitrarily excluded, by procedures amounting in legal effect
to a group boycott, from membership in the Academy.
Although Academy membership is not a condition to practice
as an orthopaedic surgeon, the Academy is characterized by the
Complaint as "in a word, a monopoly in its field, possessed of
substantial power to control the market for orthopaedic
surgical services, especially by denying access to any of the
various subspecialty organizations of the practice." Appendix
A to this Opinion sets forth Paragraphs 8-12 of the Complaint,
the principal allegations dealing with the claimed
significance of membership or non-membership in the Academy.
Prior Illinois Proceedings
Most of the Academy's attack on the Complaint is based on
Drs. Marrese and Treister having sued in the Illinois courts
on virtually the same set of facts alleged in
the Complaint — with important exceptions stemming from the
lack of jurisdiction in the state courts to enforce the federal
antitrust laws. In their Illinois actions Drs. Marrese and
Treister sued separately for declaratory relief as to the
claimed illegality of the Academy's hearing procedures in
denying them membership.
Dr. Treister's complaint was ultimately dismissed with
prejudice for failure to state a cause of action, by a 2-1
decision of the Illinois Appellate Court.*fn1 Dr. Marrese's
separate complaint had been stayed by the Circuit Court of
Cook County pending the Treister appeal. Though the parties
are in dispute as to the final disposition of the Marrese
case, this Court will assume for purposes of this opinion that
it has been or will be similarly dismissed with prejudice.
Memoranda filed by the Parties
Counsel have provided the Court with more than 135 pages of
briefs (sic!). Eighty-five of those pages reflect the
Academy's efforts to set aloft a cluster of barrage balloons
to prevent what it views as plaintiffs' proposed raid on the
fellowship of the Academy.
This Court will not seek to emulate either party in length
of discussion. It will instead deal as briefly as possible
with the effect of the two critical elements that let the air
out of the Academy's balloons:
1. Federal courts have exclusive jurisdiction
over the federal antitrust laws.
2. Dr. Treister's Illinois lawsuit was disposed
of on a motion to dismiss and not after a
hearing on the merits.
Res Judicata and Collateral Estoppel
There can of course be no difference between the parties as
to the essential principles of the doctrine of res judicata
and collateral estoppel. As another Judge of this Court put it
briefly in Batiste v. Furnco Construction Co., 350 F. Supp. 10,
14 (N.D.Ill. 1972):
Res judicata usually means that when a court of
competent jurisdiction has rendered a final
judgment on the merits of an action, equity will
bar a subsequent suit between the same parties on
the same cause of action not only as to matters
which were decided but also as to those matters
which might have been decided.
And if the identity of actions is not sufficient to invoke res
judicata, principles of collateral estoppel operate in the
manner expressed by the Restatement (Second) of the Law of
Judgments (the "Restatement") § 68 (Tent. Draft No. 4, 1977)
When an issue of fact or law is actually litigated
and determined by a valid and final judgment, and
the determination is essential to the judgment, the
determination is conclusive in a subsequent action
between the parties, whether on the same or a
1. Res Judicata
Res judicata cannot apply here by its very definition. No
federal antitrust claim was in fact decided by the Illinois
courts on the merits. It is equally clear that, because of
their lack of jurisdiction to do so, no federal antitrust
claim "might have been decided" by the Illinois courts —
because for that purpose they are not courts of "competent
jurisdiction." As our Court of Appeals succinctly put the legal
principle in a related (though factually distinguishable)
context, Kurek v. Pleasure Driveway & Park District of Peoria,
583 F.2d 378, 379 (7th Cir. 1978):
Defendants' arguments that the antitrust claims
have been adjudicated in state court proceedings
are insupportable both because the state courts
have not in fact purported to do so, and because
jurisdiction of federal antitrust suits is
exclusively in the federal courts.
It is that fact that makes inapplicable the principal
precedents on which the Academy seeks to rely: cases in which
earlier proceedings in a federal court (one by definition
having the power to adjudicate federal antitrust claims) were
held to preclude later antitrust suits whether or not the first
court had actually decided such a claim.*fn2
In that respect
Judge Decker's opinion in Lincoln National Bank v. Lampe,
414 F. Supp. 1270, 1279-80 (N.D.Ill. 1976), dealing with a like
argument in the securities field, might well have been written
for this case:
Despite the extensive treatise on res judicata
submitted in the defendant's memorandum, if fails
to address the implication of the statutory
provision of § 27 of the 1934 Act which vests
exclusive jurisdiction for violations of that Act
in the federal courts. Furthermore, § 28 of the
same Act provides that the remedies under the Act
are given in addition to any other remedies
existing in law or equity. Thus it appears that
plaintiff could neither bring its 1934 Act claim
before the Circuit Court, nor is it barred from
seeking additional relief under that Act in federal
That this accurately reflects the general law in this field is
confirmed by the squarely applicable language of Section
61.2(1)(c) of Tentative Draft No. 5 (1978) of the Restatement,
and even more specifically by Official Comment (1) thereon and
Illustration 2 thereunder (from which the present case follows
A. Co. brings an action against B. Co. in a state
court under a state antitrust law and loses on
the merits. It then commences an action in a
federal court upon the same facts, charging
violations of the federal antitrust laws, of
which the federal courts have exclusive
jurisdiction. The second action is not barred.
In this Court's view Judge Merhige's opinion in Nash County
Board of Education v. Biltmore Co., 464 F. Supp. 1027 (E.D.N.C.
1978) may be distinguished from this case because of what he
characterized (464 F. Supp. at 1030) as the manner in which "the
North Carolina antitrust enforcement mechanism almost
completely mirrors its federal counterpart, especially with
respect to the availability of treble damages." In any case,
however, this Court does not agree that the approach suggested
by Judge Merhige ought to apply here as against the principles
announced and applied in Judge Learned Hand's opinion in Lyons
v. Westinghouse Electric Corp., 222 F.2d 184
, 189 (2d Cir.
1955); or in Cream Top Creamery v. Dean Milk Co., 383 F.2d 358
(6th Cir. 1967); or in the Lincoln National Bank and
Kurek cases previously cited; or in the Restatement; cf.
Butterman v. Steiner, 343 F.2d 519
, 520 (7th Cir. 1965).
2. Collateral Estoppel
As for collateral estoppel, the teaching of that doctrine
(again to quote the Restatement) is that the effect of the
Illinois litigation is limited to "questions of fact or law
actually litigated and determined" in the first action between
the parties. There is thus a critical difference between an
earlier case in which the parties have gone to trial or
otherwise had a factual determination and a case, like the
Illinois cases here, disposed of on a motion to dismiss the
complaint — that is, on questions of law.
Illinois has decided that the facts there alleged by Drs.
Marrese and Treister were not sufficient as a matter of law to
state a cause of action under Illinois law.*fn3 Indeed the
entire concept of a motion to dismiss is not that plaintiffs'
have or have not been determined to be true, but rather that
even assuming them to be true plaintiff has no legal right to
Thus the issue that has really been adjudicated between the
parties is that the Academy's conduct complained of by Drs.
Marrese and Treister afforded no remedy under Illinois law.
There has been no "issue of fact [essential to the judgment]
actually litigated and determined by" the Illinois courts.*fn5
This Court is of course free to determine whether the federal
antitrust laws are breached by that same conduct. Nothing the
Illinois Appellate Court has said did — or could — decide
Because we are at the threshold pleading stage, the test to
be applied to the sufficiency of the Complaint is that stated
in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2
L.Ed.2d 80 (1957):
[A] complaint should not be dismissed for failure
to state a claim unless it appears beyond doubt
that the plaintiff can prove no set of facts in
support of his claim which would entitle him to
While this Court is thus not expressing its views as to
whether Drs. Marrese and Treister can ultimately sustain the
burdens of proof they have undertaken by their Complaint, it
upholds the Complaint against the several attacks contained in
the Academy's motion and supporting memoranda:
1. Claims based on plaintiffs' alleged lack of standing to
sue under the federal antitrust laws are ill-founded. They are
based on a mistaken view of the "target area" concept, because
plaintiffs are claiming direct damage to their "business" as
surgeons as the result of the Academy's alleged antitrust
violations. This charge is in turn based on the adequately
alleged nexus between lack of Academy membership and
plaintiffs' competitive disadvantage in the practice of
2. Though often conclusory in nature, the allegations of
the Complaint are no more so than is contemplated by the
"notice pleading" approach of the Federal Rules of Civil
Procedure. See for example Complaint Paragraphs quoted in
Appendix A and the allegations of Complaint Paragraphs 49-63.
3. As for the Academy's claim that there are no adequate
allegations of a "group boycott," the allegations just
referred to are plainly sufficient to overcome the Academy's
motion to dismiss.
4. There is some limited case support for the Academy's
argument that the Complaint fails adequately to allege a
conspiracy. Several decisions involving ordinary business
corporations have held that antitrust claims cannot be
premised on a "conspiracy" between such a corporation and its
own officers. Those decisions are of course distinguishable
from the situation involving an association (an entity
separate from its constituent members); but one decision
(Hatley v. American Quarterhorse Association, 552 F.2d 646, 654
n.7 (5th Cir. 1977)) has extended that concept to a trade
association. In the opinion of this Court, that analysis cannot
fairly apply to an association such as the Academy, and this
Court declines to follow Hatley. Where the necessary
anticompetitive allegations are present, the very fact that an
association of competitors is involved and enforces its
activities by by-laws or similar internal means is itself
sufficient to ground an antitrust complaint. As then District
Judge (now Circuit Judge) Harlington Wood, Jr. said in McCreery
Angus Farms v. American Angus Ass'n, 379 F. Supp. 1008, 1017
(S.D.Ill. 1974), aff'd by unpublished order 506 F.2d 1404 (7th
The Defendants' contention is not well taken. The
requisite agreement needed to bring the activity
in question within the ambit of the Sherman Act
is provided by the very bylaw under which the
Defendants are alleged to have acted. In
Silver v. New York Stock Exchange, 373 U.S. 341, 83
S.Ct. 1246, 10 L.Ed.2d 389 (1963), the Supreme
Court found the bylaws of the Exchange pursuant to
which the Plaintiffs' direct wire privileges were
suspended provided the sufficient "agreement". As
stated in one comment, "The mere involvement of an
association generally would provide the requisite
element of combination or conspiracy."
This is but one of a veritable host of cases, including
Silver v. New York Stock Exchange, 373 U.S. 341
, 83 S.Ct. 1246,
10 L.Ed.2d 389 (1963), that have found the requisite
"conspiracy" and sustained antitrust claims against
associations alleged to have engaged in exclusionary or other
5. Much the same analysis applies to reject the claim that
"the Complaint merely alleges a unilateral refusal to deal."
That claim reflects too narrow and formalistic — and
unrealistic — a view of the Academy as a single entity
distinct from its membership.
6. Freedom of association concepts cannot serve as a
protective mantle for the anticompetitive conduct alleged in
the Complaint. Associated Press v. United States, 326 U.S. 1,
65 S.Ct. 1416, 89 L.Ed. 2013 (1945), though it involved a
different type of antitrust violation, is of course the classic
illustration of that proposition.
Defendant Academy's motion to dismiss the Amended Complaint
is denied, and the Academy is ordered to file its answer on or
before September 24, 1980.
8. Defendant, Academy, is the sole generally recognized
organization of its kind in the orthopaedic surgical
profession and freely holds itself out to be such. It is
closely affiliated with the American Medical Association,
which officially recognizes the Academy as the spokesman for
9. In turn, although the American Board of Orthopaedic
Surgery (ABOS) certifies orthopaedic surgeons, the Academy was
largely responsible for the formation of that certifying body
and continues to be intimately involved with it through, among
other things, interlocking boards of directors. All members of
the board of directors of ABOS are also present or past
members of the board of the Academy, and the Academy is
empowered by the ABOS to
nominate the candidates for the latter's board.
10. The Academy is, in a word, a monopoly in its field,
possessed of substantial power to control the market for
orthopaedic surgical services, especially by denying access to
any of the various subspecialty organizations of the practice.
10A. On information and belief, membership in the Academy is
a requirement for membership in most of the above subspecialty
organizations including, among others, the American
Orthopaedic Foot Society and the American Orthopaedic Society
for Sports Medicine.
11. Active fellowship in the Academy is a factor relied upon
by hospitals in the granting of orthopaedic surgical
privileges, by physicians in making referrals of patients'
cases, by insurance companies in the setting of malpractice
insurance premiums, by courts and other adjudicative panels in
determining the expertise of orthopaedic surgeons whose
testimony is offered as expert witnesses, and by aspiring
orthopaedic surgeons choosing a clinic in which to practice.
11A. Members enjoy significant competitive advantages over
nonmembers in regard to advancement, and particularly
sustained, long-term advancement, in the orthopaedic surgical
12. Conversely, rejection for Academy membership, which must
be disclosed to hospitals where staff privileges are sought,
to insurance companies whose liability coverage is sought, to
other professional societies to which admission is sought, and
to any court or similar authority in response to questions
about an expert witness's qualifications, is a subject of
suspicion and disgrace.