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In re Evanston Northwestern Healthcare

May 29, 2008


The opinion of the court was delivered by: Judge Joan H. Lefkow


Defendant, Evanston Northwestern Healthcare Corporation ("ENH"), merged with Highland Park Hospital ("Highland Park") on January 1, 2000. Plaintiffs Jeffrey Porter, Amit Berkowitz, and Gerald and Noreen Lekas (collectively, "plaintiffs") filed their original class action complaints against ENH on August 7, August 10, and September 18, 2007, respectively, alleging violations of Section 2 of the Sherman Act. On September 25, 2007, these three cases were consolidated,*fn1 and on November 29, 2007, plaintiffs filed a consolidated amended class action complaint, alleging two alternative counts under Section 2 of the Sherman Act, 15 U.S.C. § 2, for unlawful monopolization or attempt to monopolize, and one count under Section 7 of the Clayton Act, 15 U.S.C. § 18.

Before the court is ENH's motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. ENH argues that under 15 U.S.C. §15b, plaintiffs' claims are subject to a four-year statute of limitations that expired in January 2004, and are thus time barred. For the following reasons, ENH's motion to dismiss [#32] is denied.


A defendant may bring a motion under Rule 12(b)(6) to dismiss a complaint for failure to state a claim on which relief may be granted. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007). "To state such a claim, the complaint need only contain a 'short and plain statement of the claim showing that the pleader is entitled to relief.'" Id. (quoting Fed. R. Civ. P. 8(a)(2)). For the purposes of a Rule 12(b)(6) motion, the court takes as true all well-pleaded allegations in the plaintiff's complaint and draws all reasonable inferences in favor of the plaintiff. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999). In order to survive a motion under Rule 12(b)(6), the complaint must describe the claim in sufficient detail to give the defendant "fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, - U.S. -, 127 S.Ct. 1955, 1964, 167 L.Ed. 2d 929 (2007) (internal quotation marks and citations omitted). The allegations must also be "enough to raise a right to relief above the speculative level." Id. at 1965 (citing 5 Charles Alan Wright & Arthur Miller, Federal Practice and Procedure § 1216, at 235--36 (3d ed. 2004)).

Affirmative defenses such as the statute of limitations are generally not resolved with a motion to dismiss under Rule 12(b)(6). See Hollander v. Brown, 457 F.3d 688, 691 n.1 (7th Cir. 2006). Nevertheless, dismissal under Rule 12(b)(6) may be appropriate when a plaintiff effectively pleads himself out of court by alleging facts demonstrating that his suit is barred by the statute of limitations. See id.; Zitka v. Vill. of Westmont, No. 07 C 0949, 2007 WL 3334336, at *2 (N.D. Ill. Nov. 6, 2007).


ENH is a not-for-profit corporation that consists of three hospitals located in suburbs just north of Chicago: Evanston Hospital, Glenbrook Hospital, and Highland Park. ENH acquired Highland Park on January 1, 2000. Since that date, ENH has operated the three hospitals as a single, integrated entity.

More than four years after the merger, on February 10, 2004, the Federal Trade Commission ("FTC" or "the Commission") filed an administrative complaint against ENH, alleging that the merger between ENH and Highland Park substantially lessened competition and enabled ENH to raise its prices to private payers above the prices that the hospitals would have charged absent the merger, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. The complaint also alleged that the contracting for physician services in which ENH engaged on behalf of its independent physicians constitutes unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.

After a trial before an FTC Administrative Law Judge ("ALJ"), ENH was found to be in violation of Section 7 of the Clayton Act and ordered to divest the acquired assets of Highland Park. On appeal to the full Commission, the ALJ's finding of liability was affirmed, but the Commission reversed the divestiture order. See In re Evanston Northwestern Healthcare, Dkt. No. 9315, 2007 WL 2286196 (F.T.C. Aug. 6, 2007) (Order). Instead, the Commission found that a conduct remedy (rather than a structural remedy, such as divestiture) was appropriate, and ordered that ENH establish two separate and independent teams for negotiating contracts with payors-one team for Evanston Hospital and Glenbrook Hospital and another for Highland Park. Id.

Plaintiffs, direct purchasers of healthcare services from ENH, seek damages on behalf of themselves and similarly situated direct purchasers. Plaintiffs first filed a complaint on August 7, 2007, more than seven and a half years after the merger and nearly three and a half years after the FTC commenced its administrative action. Plaintiffs allege that "[b]y virtue of [the merger] on January 1, 2000, ENH acquired monopoly power in the marketing of healthcare services in the relevant geographic market and has abused and continues to abuse that power to maintain and enhance its market dominance in the marketing and sale of healthcare services by unreasonably restraining trade." Complaint ¶ 43. In terms of timing, plaintiffs allege that "[a]lmost immediately after the [merger], prices . . . at the three . . . hospitals were substantially increased." Id. ¶ 34. In their complaint, plaintiffs also quote the Commission's August 6, 2007 finding that "the merged firm did in fact raise its prices immediately and substantially after completion of the transaction." Id. ¶ 16 (quoting In re Evanston Northwestern Healthcare, Dkt. No. 9315 (F.T.C. Aug. 6, 2007) (Opinion of the Commission)); see also id. ¶ 35 ("ENH rapidly increased the prices it charged to its customers . . . ") (internal quotation marks and citations omitted); id. ¶ 36 ("A month after the merger, ENH's President Neaman stated in a memorandum that 'Some $24 million of revenue enhancements have been achieved . . . and none of this could have been achieved by either Evanston or Highland Park alone.'") (additional quotation marks omitted) (emphasis in original).


ENH argues that even if the allegations of plaintiffs' complaint are accepted as true and construed in a light most favorable to the plaintiffs with all reasonable inferences drawn in favor of the plaintiffs, the complaint nonetheless must be dismissed under Rule 12(b)(6) because plaintiffs' claims are time barred. ENH cites 15 U.S.C. § 15b, which requires that any private cause of action brought under the federal antitrust laws "be forever barred unless commenced within four years after the cause of action accrued." 15 U.S.C. § 15b; see also id. § 15. ENH further relies on two opinions of the Eighth Circuit, Midwestern Machinery Co., Inc. v. Northwest Airlines, Inc., 392 F.3d 265 (8th Cir. 2004), and Concord Boat Corp v. Brunswick Corp., 207 F.3d 1039, 1050 (8th Cir. 2000), for the proposition that an action challenging the initial acquisition of another company's stocks or assets accrues at the time of the merger or acquisition. Thus, ENH contends, because plaintiffs' complaint was filed more than four years after January 1, 2000-the day the merger was consummated and, consequently, the date on which their claims accrued-plaintiffs have effectively pleaded themselves out of court.

In response, plaintiffs contend that the date on which their claims accrued cannot be decided on this motion dismiss and, in any case, occurred at some time after January 1, 2000. ENH's contention that their claims accrued on the day the merger was consummated is, plaintiffs argue, both legally incorrect and inconsistent with the factual allegations pleaded in their complaint. Plaintiffs cite a number of decisions in which the Seventh Circuit has noted that "[u]nless the complaint alleges facts that create an ironclad defense, a limitations argument must await factual development." Foss v. Bear, Stearns & Co., 394 F.3d 540, 542 (7th Cir. 2005) (citing United States v. ...

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