United States District Court, Northern District of Illinois, E.D
September 13, 1983
SLOBODAN D. VUCIECEVIC, M.D., PLAINTIFF,
MACNEAL MEMORIAL HOSPITAL, AN ILLINOIS NOT-FOR-PROFIT CORPORATION, BERWYN ORTHOPEDIC SURGEONS, LTD., AN ILLINOIS PROFESSIONAL CORPORATION, J. LUKE MCGINNESS, EUGENE J. CULBERTSON, PETER GIAMMANCO, JR., VINCENT GUARNA, PH.D, ROBERT NOVAK, M.D., ROBERT KAMINSKI, M.D., GEORGE R. BUCKUN, M.D., ASOK K. RAY, M.D., TARIQ IFTIKHAR, M.D., KENT BORKEVEC, M.D., MILES CERMACK, M.D., HAROLD S. FIRFER, D.D.S., JAROSLAV NESKODNY, M.D., AND GERALD J. SEBESTA, DEFENDANTS.
The opinion of the court was delivered by: William T. Hart, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff charges that the defendants have engaged in a
conspiracy — a group boycott — in restraint of trade in violation
of section one of the Sherman Antitrust Act, 15 U.S.C. § 1 (Count
I) and national origin employment discrimination contrary to
section 601 of Title VI of the Civil Rights Act of 1964,
42 U.S.C. § 2000d (Count II).
This matter is before the Court on the defendants' motion to
dismiss the complaint for failure to state a claim upon which
relief can be granted, Fed.R.Civ.P. 12(b)(6), and for lack of
subject matter jurisdiction, Fed.R.Civ.P. 12(b)(1). The parties
have supported and responded to the motions by bringing before
the Court matters outside the pleadings. Accordingly, the motions
to dismiss will be treated as if for summary judgment and
disposed of as provided for in Fed.R.Civ.P. 56. In compliance
with Fed.R.Civ.P. 12, all parties have been given reasonable
opportunity to present all pertinent matters.
Plaintiff Slobodan Vuciecevic is of Serbian-Yugoslavian
national origin and is a permanent resident of the United States.
He is a licensed physician and maintains a medical practice in
and around Berwyn, Illinois specializing in orthopedics and
Defendant MacNeal Memorial Hospital ("MacNeal") is a public
health care facility located in Cook County, Illinois. Defendant
Berwyn Orthopedic Surgeons, Ltd. is a professional corporation
engaged in the medical practice of orthopedics and orthopedic
surgery. The officers and shareholders of the corporation include
defendants Robert Kaminski, Tariq Iftikhar and Asok Ray. The
remaining individual defendants are members of the administrative
and medical staff and the board of directors of MacNeal.
Beginning in September of 1980, plaintiff inquired of
defendants Kaminski and Ray concerning the possibility of his
practicing orthopedic surgery in Berwyn with the expectation that
he would be granted medical staff privileges by MacNeal. Kaminski
was chairman of MacNeal's division of surgery and Ray was on the
medical staff specializing in orthopedic surgery. According to
plaintiff, Kaminski and Ray told him that they did not want to
lose any patients to him in the event that he established a
medical practice in Berwyn and they advised him not to seek staff
Plaintiff alleges that he did establish a medical practice in
Berwyn in February, 1981 and applied for membership on MacNeal's
medical staff. Subsequently, he appeared before a committee of
the division of surgery chaired by Kaminski. The committee
recommended that plaintiff be denied membership on the medical
staff for reasons allegedly unrelated to his medical
qualifications. Thereafter plaintiff appeared before MacNeal's
credentials' committee. Again without stating any reason and
allegedly without cause, the credentials' committee voted to deny
plaintiff's application for membership on the staff.
Plaintiff's application was next presented to the full
medical/dental staff. In September, 1981 the full staff, by a
vote of 60-45, approved his application for staff privileges. Its
recommendation was conveyed to the hospital's board of directors.
In November, 1981 plaintiff was notified that the board had
rejected his application for staff membership. In January, 1982
plaintiff, at his request, appeared before a committee of the
board of directors. In March, 1982 he was notified by letter that
the board of directors had reviewed the report of the interview
committee and would take no further action on the application.
II. Count I
A. Liability Standard
In Count I, plaintiff alleges that his denial of staff
privileges at MacNeal evidences a concerted refusal to deal and
a group boycott, in violation of section one of the Sherman Act.
The result of the denial, he says, prevents him from competing
effectively in his profession*fn1 and impermissibly restrains
interstate commerce throughout Cook County, Illinois and
northwest Indiana, southern and southwest Wisconsin.
Plaintiff's allegation of an unlawful effect on interstate
commerce proceeds from his contention that the defendants are
directly involved in the delivery of medical/surgical and
hospital services in Cook County, Illinois where MacNeal is
located. These activities, in turn, allegedly have had a
continuous and substantial effect on interstate commerce in that
numerous nonresidents of Illinois come into Illinois to purchase
medical services from plaintiff and defendants; that the purchase
of services affects the financing of materials and equipment from
outside Illinois which are delivered for use in Illinois; and
that delivery of materials and the purchase of service in
Illinois has caused other materials to flow between Illinois and
Defendants move to dismiss Count I on the basis that plaintiff
has failed to allege a substantial adverse effect on competition
in a relevant market. Furthermore, the defendants assert that
neither a product market nor a geographic market is described.
Plaintiff contends that the allegations in the
complaint state a per se violation of section one of the Sherman
Act and, therefore, it is unnecessary to plead an adverse impact
on competition in a relevant market. Plaintiff argues, however,
that the complaint does sufficiently allege an adverse impact on
competition in the delivery of medical services — the product —
and describes the boundaries of the relevant geographic market.
Thus, plaintiff says that his complaint states a cause of action
even under defendants' approach.
Generally the "Rule of Reason" is applied to determine the
lawfulness of a claimed restraint on competition. Continental
T.V., Inc. v. GTE Sylvania, 433 U.S. 36, 49, 97 S.Ct. 2549, 2557,
53 L.Ed.2d 568 (1977). An element of the Rule of Reason is the
determination of the adverse effect on product competition in a
relevant market. See, e.g., Independence Tube Corp. v. Cooperweld
Corp., 691 F.2d 310, 322 (7th Cir. 1982); Phil Tolkan Datsun,
Inc. v. Greater Milwaukee Datsun Dealers' Advertising
Association, 672 F.2d 1280, 1287 (7th Cir. 1982). There are,
however, those agreements or practices which because of their
pernicious effect on competition and lack of any redeeming virtue
are conclusively presumed to be unreasonable and therefore
illegal per se. United States v. Topco Associates, Inc.,
405 U.S. 596, 607-08, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515 (1972). For
these per se violations, an adverse effect on competition is
presumed to exist as a matter of law. Continental T.V., Inc. v.
GTE Sylvania, Inc., supra 433 U.S. at 49-50, 97 S.Ct. at 2557.
Plaintiff is correct that refusals to deal and group boycotts
typically have been among those categories of anticompetitive
conduct deemed to be per se violations of the Sherman Act. See,
e.g., United States v. General Motors Corp, 384 U.S. 127, 86
S.Ct. 1321, 16 L.Ed.2d 415 (1966); Klor's, Inc. v. Broadway-Hale
Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959).
Nonetheless not all alleged group boycotts or refusals to deal
will be characterized as per se violations. Because the Rule of
Reason is presumptively applicable except in extreme
circumstances, this Circuit holds that
a particular course of conduct will generally be
termed a per se violation of the Act only after
courts have had considerable experience with the type
of conduct challenged and application of the Rule of
Reason has inevitably resulted in a finding of
Havoco of America, Ltd. v. Shell Oil Company, 626 F.2d 549, 555
(7th Cir. 1980). Similarly in U.S. Trotting Association v.
Chicago Downs Association, Inc., 665 F.2d 781, 787 (7th Cir.
1981), the Court of Appeals stated
the danger of rote application of the per se rule to
all conduct that can be called "group conduct" is
that the sound teachings of experience will be
extended into new and unfamiliar areas where they
have no proper application.
Accord Phil Tolkan-Datsun, Inc. v. Greater Milwaukee Datsun
Dealers' Advertising Association, Inc., supra at 1285.
Thus, the type of conduct alleged as anticompetitive here,
denial of medical staff privileges, could be considered a per se
violation only after the courts have become familiar with that
conduct and any anticompetitive effect it causes. Moreover,
although the Supreme Court has repeatedly disavowed any
professional exemption from antitrust liability, it has
nonetheless consistently indicated that the antitrust laws
ordinarily will be applied less rigorously to professions than to
trades or industries. Arizona v. Maricopa County Medical Society,
457 U.S. 332, 102 S.Ct. 2466, 2475-76, 73 L.Ed.2d 48 (1982);
National Society of Professional Engineers v. United States,
435 U.S. 679, 696, 98 S.Ct. 1355, 1367, 55 L.Ed.2d 637 (1978),
Goldfarb v. Virginia State Bar Association, 421 U.S. 773, 787 n.
17, 95 S.Ct. 2004, 2013 n. 17, 44 L.Ed.2d 572 (1975).
The most recent case similar to this one decided by the Seventh
Circuit is Dos Santos v. Columbus-Cuneo-Cabrini Medical Center,
684 F.2d 1346 (7th Cir. 1982). In Dos Santos a preliminary
injunction barring the enforcement of an exclusive contract
between a professional association of anesthesiologists
and a hospital was challenged as an antitrust violation. The
injunction had been entered on the motion of Dr. Dos Santos who
was unable to sell her anesthesia services to the hospital
because she did not belong to the association. The district court
characterized the disputed behavior as a per se violation. On
appeal, the injunction was reversed. The court indicated that the
case was properly treated as one involving the Rule of Reason
because the practice of a profession was involved. See also
Marrese v. The American Academy of Orthopedic Surgeons,
706 F.2d 1488 (7th Cir. 1982).
In Marrese v. American Academy of Orthopedic Surgeons, the
Seventh Circuit also described an exception to its holding that
an alleged refusal to deal or group boycott generally should be
tested by the Rule of Reason. An exception exists if the boycott
used to enforce agreements that are themselves
illegal per se — for example price fixing agreements
(citations omitted). . . . At least that is the rule
for organized associations having some lawful
purposes; and we need not decide whether a conspiracy
or other ad hoc "association" if anti-competitive in
intent would be treated under a harsher standard.
Id. at 1495.
This case involves the regulation of health care by members of
a profession. The courts, although no strangers to such cases are
not well-acquainted with them either. Certainly it is not
contended that any boycott here was used to enforce an agreement
illegal per se in its own right, such as to fix the price of
The disputed behavior also may be regarded as a species of
industry regulation. In Silver v. New York Stock Exchange,
373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), the Supreme Court
laid down a three-part test which, if passed, permits the
application of Rule of Reason analysis to alleged concerted
refusals to deal in an industry seeking to self-regulate. The
three requisites are if (1) there is a mandate for
self-regulation; (2) the action is consistent with the policy
justifying self-regulation and no more extensive than necessary;
and (3) procedural safeguards are applied. See also U.S. Trotting
Association v. Chicago Downs Association, supra, on remand
487 F. Supp. 1008 (1980). If these three elements are unsatisfied, the
boycott of one professional by a group of professionals likely
will be termed a per se violation.
The issue of appointment to a medical staff of a hospital meets
the first Silver criterion for Rule of Reason testing. Because
hospitals may be liable for the conduct of staff physicians, the
boards of directors have an obligation to ensure that all staff
physicians are competent. Darling v. Charleston Community
Memorial Hosp., 33 Ill.2d 326, 333, 211 N.E.2d 253 (1965), cert.
denied, 383 U.S. 946, 86 S.Ct. 1204, 16 L.Ed.2d 209 (1966)
(hospital's failure to review staff competence constitutes
negligence). See also Early v. Bristol Memorial Hosp.,
508 F. Supp. 35, 38 (E.D.Tenn. 1980); Hospital Liability for
Negligence, 21 Hastings L.J. 1 (1969); Hospital Liability:
Changing Patterns of Responsibility, 8 U.S. F.L.Rev. 247, 254-57
A board of directors of a hospital, composed as it typically is
largely of lay persons, is not capable of evaluating the
credentials and performance of physicians without the assistance
of its medical staff. For this purpose, the board must rely on
the reports and recommendations of the professionals on and off
the board. Without such advice, the hospital board would be
unable to effectively monitor its staff, guard against legal
liability and maintain the confidence of the public in the
hospital as a provider of first class health care. The Court
finds that the nature of the service that a hospital provides
mandates critical self-regulation of its medical staff.
The second requirement under Silver, the prudent imposition of
the regulatory process, also appears to be applicable to the
staff privilege review. Staff physicians are in the best position
to evaluate the competence of other physicians and to advise the
board whether to accept or reject a candidate.
Consequently their action theoretically is no more extensive than
necessary because the advice must be based on a review of the
applicant's qualifications, training, experience and competence.
The third prerequisite necessary to justify the application of
the Rule of Reason is the adoption of procedural safeguards to
ensure that regulation does not masquerade for anticompetitive
intent. For a denial of staff privileges to avoid per se
illegality, it must have been the outcome of fair procedures. The
hospital must give the physician notice of the hearings
concerning his application and an opportunity to establish his
competence and respond to any alleged deficiencies in his
qualifications. If proper procedural safeguards are provided, a
hospital's denial of staff privileges based on staff
recommendations falls within the exception to per se treatment of
concerted refusals to deal and group boycotts. All three prongs
of the Silver exception to per se treatment for denial of staff
privileges are met.
The Court finds that the violations alleged here do not deserve
to be characterized as per se violations; the plaintiff is not
relieved of the burden of alleging an anticompetitive injury.
Contrary to defendants' arguments the plaintiff has
sufficiently alleged an anticompetitive injury in a relevant
product market and interstate nexus.*fn2 The Court notes, however,
that the plaintiff's position with respect to the relevant
geographic market has changed since the filing of the complaint.
Plaintiff now contends that the relevant market may only be the
immediate MacNeal hospital area. As in Dos Santos v.
Columbus-Cuneo-Cabrini Medical Center, the Court questions
whether the relevant market "can be sliced so small as to embrace
only a single hospital." 684 F.2d at 1353. It is more likely that
as in Marrese v. American Academy of Orthopedic Surgeons, supra,
the plaintiff will have the burden at trial of showing that
competition in the local market will be insufficient to assure
the consuming public the benefits of competition if he is denied
The Rule of Reason analysis will focus on the power, purpose
and effects of the restraint. If it is established that
anticompetitive efforts predominate over professional concerns,
the refusal will be unlawful so long as an anticompetitive effect
also is proven. Plaintiff will have to establish to the
satisfaction of the Court that he either meets the tests
suggested in the cited recent opinions of the Court of Appeals
for the Seventh Circuit or show that another applicable test is
met in order to prevail on Count I. At this point, however, it
would be improper to determine without further discovery that
plaintiff cannot meet whatever test is applicable. The Court
cannot now find whether a genuine issue of material fact exists
as to anticompetitive effect. Thus the granting of summary
judgment for the defendants is precluded as premature. See, e.g.
Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272,
1282 (7th Cir. 1983).
III. Count II
In Count II, the plaintiff contends that the defendants
violated section 601 of the Civil Rights Act of 1964, 42 U.S.C. § 2000d,
in that defendants conspired to deny him staff
privileges because he is of Serbian-Yugoslavian origin.
Section 601 provides
No person in the United States shall, on the grounds
of race, color, or national origin, be excluded from
participation in, be denied the benefits of, or be
subjected to discrimination under any program or
activity receiving federal financial assistance.
Plaintiff contends that MacNeal is a recipient of federal funds
under various federal programs and, therefore, that Title VI
provides relief to him for discriminatory failure to grant staff
privileges. Defendants concede only that MacNeal is a recipient
of Medicare/Medicaid funds. And, in fact, plaintiff's pleadings
in this regard expressly relate only to MacNeal's
In discussing Title VI, the Seventh Circuit recently stated in
Simpson v. Reynolds Metals Co., 629 F.2d 1226, 1235 (7th Cir.
1980), that Congress did not intend to extend the protection
under Title VI to any person other than an "intended beneficiary
of, an applicant for, or a participant in a federally funded
program." Support for this position comes especially from section
2000d-3, which reads
Nothing contained in this subchapter shall be
construed to authorize action under this subchapter
by any department or agency with respect to any
employment practice of any employer, employment
agency, or labor organization except where a primary
objective of the Federal financial assistance is to
provide employment. (emphasis added)
42 U.S.C. § 2000d-3. Read together these sections require a
logical connection between the use of federal funds and the
practice toward which the agency action is directed.
The plaintiff relies only on Medicare/Medicaid payments to
MacNeal as the basis for suing under Title VI: he obviously is
not an intended beneficiary of such programs. The complaint is
devoid of any other allegations which indicate that MacNeal
participates in a federally funded program which is intended,
primarily or otherwise, to benefit the employment of physicians.
Count II does not state a cause of action under Title VI. See
Association Against Discrimination in Employment, Inc. v. City of
Bridgeport, 647 F.2d 256, 276 (2nd Cir. 1981), cert. denied,
455 U.S. 988, 102 S.Ct. 1611, 71 L.Ed.2d 847 (1982); Trageser v.
Libby Rehabilitation Center, Inc., 590 F.2d 87 (4th Cir.), cert.
denied, 442 U.S. 947, 99 S.Ct. 2895, 61 L.Ed.2d 318 (1979); Carmi
v. Metropolitan St. Louis Sewer Districts, 620 F.2d 672 (8th
Cir.), cert. denied, 449 U.S. 892, 101 S.Ct. 249, 66 L.Ed.2d 117
(1980); and Choudhury v. Reading Hospital and Medical Center,
677 F.2d 317 (3rd Cir. 1982).
IT IS THEREFORE ORDERED that
(1) Plaintiff's claim of a group boycott or concerted refusal
to deal will be analyzed according to the Rule of Reason.
(2) The motion for summary judgment on Count I is denied
because at this time the Court cannot find that there is no
genuine issue of fact as to whether the conduct alleged has an
anticompetitive effect within the meaning of section one of the
(3) Count II of the complaint is dismissed for failure to state
a claim upon which relief can be granted.
(4) This case is set for a status hearing on October 3, 1983 at