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Mercatus Group LLC v. Lake Forest Hospital

February 16, 2010


The opinion of the court was delivered by: Blanche M. Manning United States District Judge


Plaintiff Mercatus Group LLC sued Lake Forest Hospital, the Village of Lake Bluff, and Village Trustees Michael Peters, David Barkhausen, and Rick Lesser in connection with an alleged plot to monopolize the diagnostic medical imaging market in Eastern Lake County by preventing Mercatus from opening a facility in that market.*fn1 Lake Forest Hospital's motion for summary judgment on Mercatus' antitrust and supplemental state claims is before the court. For the following reasons, Lake Forest Hospital's motion is granted as to Mercatus' federal claims and the court declines to exercise jurisdiction over the remaining state law claims.

I. Background

The following facts are undisputed unless otherwise noted.

A. The Parties

Lake Forest Hospital is an Illinois nonprofit corporation with its principal place of business in Lake Forest, Illinois. Mercatus was founded in 2003 by Mr. Chris Joseph. It partners with independent physicians to develop and operate physician centers, which are off-campus medical office buildings that provide a variety of services to physicians. The clinical services enable participating practices to offer comprehensive care to their patients, including diagnostic imaging. Mercatus also leases office space to physicians and provides business services including billing services, electronic medical records hosting, telecommunications services, claims processing, marketing support, staffing, and collections.

Mercatus allows physicians to share in the profits from the center, including as real estate partners. Mercatus also initially allowed physicians to share in the profits from ancillary services, including imaging but ceased doing so in March of 2007.

B. Mercatus' Efforts to Expand into Lake Bluff

Mercatus operates a physician center in Vernon Hills, Illinois, at which it delivers diagnostic imaging services including nuclear imaging, magnetic resonance imaging and computed tomography scans. In 2004, Mercatus began plans to construct a physician center in Lake Bluff, Illinois. It thus sought appropriately zoned land. It ultimately reached an agreement to lease the Shepard Land (so-called because it already featured an automotive sales dealership on part of the property called Shepard Chevrolet), which was zoned L-2, a zone that generally permits medical office buildings.

1. The Nature of the Proceedings Before the Board

Mercatus participated in a number of hearings before the Village Board in an attempt to gain support for its proposed development. Some attorneys attended at least some of these hearings. Letchinger Tr. (Tab 14) at 39:24 to 40:16 (attorneys Sandy Stein -- attorney for an unidentified party-- and Peter Friedman -- the Village of Lake Bluff's attorney -- were present at a Board meeting); 96:12-24 (unidentified attorneys were present at Board meetings).*fn2 As noted by Lake Forest Hospital, however, Mercatus has not directed the court's attention to any evidence indicating that the Hospital's counsel were among the attorneys present at any of the Board proceedings. The Board conducted the hearings before it in an orderly fashion, recorded them, and provided notice of the hearings and a written decision.

2. Mercatus' Efforts to Secure Approval for its Project

In April of 2006, Mercatus presented its plans for the proposed Lake Bluff physician center to the Lake Bluff Board of Trustees ("Village Board"). Lake Forest Hospital representatives spoke against Mercatus' proposed development. Mercatus believed that some of these statements were inaccurate and designed to thwart its planned project. During the April 2006 meeting, the Village Board did not reference any special use ordinance governing the Shepard land or state that Mercatus needed to obtain development approval prior to proceeding with its project.

In September of 2006, the Lake Bluff Architectural Board of Review unanimously approved Mercatus' site plan, contingent upon review of proposed lighting and signage plans. Assuming Mercatus satisfied these contingencies, the Architectural Board of Review's decision meant that the Village Board could only deny site plan approval to Mercatus based on a two-thirds vote.

The parties, however, disagree as to the Village Board's consideration of development approval for Mercatus' proposed facility separately from site plan approval. According to Lake Forest Hospital, the Village Board had unfettered discretion in deciding whether to grant development approval to Mercatus. Lake Bluff's special use ordinance (Df. Ex. 10) and the amendments to that ordinance in 1976 (Df. Ex. 11) and 1979 (Df. Ex. 12) contain the discretionary factors the Village Board was required to consider when deciding whether to grant development approval. In addition, Lake Forest Hospital directs the court's attention to the conclusion of the Village Attorney (Trustee Peters) that denial of development approval did not require written findings or a written resolution but, instead, could be done via an oral motion and vote. Finally, Lake Forest Hospital stresses that the Village Board considered comments from the public but representatives from Mercatus and Lake Forest Hospital never provided sworn testimony before the Board regarding development or special use approval.

On the other hand, Mercatus asserts that the Village Board's decision to split off the decision to vote on developmental approval from the decision to vote on site plan approval was improper and flowed from the Board's desire to illegitimately deny Mercatus' site plan. It also challenges the reliance on Trustee Peters' views regarding the procedure that the Village Board was obligated to follow vis-a-vis Mercatus' project, contending that: (1) Trustee Peters' employment by Lake Forest Hospital renders his views suspect; and (2) Lake Bluff's zoning code (§ 10-2-6(E), Df. Tab 16 at pp. 33-39) is at odds with Trustee Peters' position as his method of ruling on a special use permit is not prescribed by ordinance.

On October 23, 2006, Mercatus came before the Village Board to seek approval of its site plan. The meeting then followed the same path as the April meeting, as Lake Forest Hospital representatives spoke against Mercatus' plan, and Mercatus believed that some of these statements were inaccurate and designed to thwart its project. Mercatus contends that as a result of Lake Forest Hospital's influence on the proceedings (particularly through the presence of Trustee Peters -- a Lake Forest Hospital employee -- on the Village Board), the Village Board improperly created a separate "land use"/development approval requirement that is not based on Lake Bluff's zoning code.

In response, Lake Forest Hospital contends that the Village Board proceedings were proper, arguing that: (1) Mercatus failed to cite to evidence showing that Lake Forest Hospital was responsible for the Village Board's decision to require Mercatus to seek development approval; (2) the Village attorney sufficiently explained the basis for the Board's decision to require Mercatus to seek development approval in addition to site plan approval; and (3) Mercatus' reading of the impact of Lake Bluff's zoning ordinances on the Shepard land is incorrect. The October meeting ended with a vote by the Village Board to grant development approval to Mercatus based upon the text of the special use ordinance and its amendments and to postpone deliberation on whether to grant site plan approval to Mercatus until the next meeting.

C. Mercatus' Proposed Project Flatlines

In November of 2006, the Village Board voted to reconsider its earlier approval of a portion of Mercatus's project. In early 2007, the Board considered Mercatus' proposal again and denied both development and site plan approval.*fn3 Mercatus contends that the lack of approval was due to improper influence by Lake Forest Hospital, pointing to a statement by Village Board President Christine Letchinger to the effect that Mercatus' project failed for political reasons. Mercatus' spin on this statement is that "political reasons" was a euphemism for a desire to protect Lake Forest Hospital.

The record shows, however, that while Ms. Letchinger knew that Lake Forest Hospital opposed Mercatus' project, her "political reasons" comment also referred to her belief that supporting the Mercatus project would not further her efforts to get support for a housing development project. Ms. Letchinger also testified at her deposition that the Board considered the Village's comprehensive plan for the area, which called for retail projects, as well as concerns about traffic and economic impact, the good of the community, and overdevelopment when voting on Mercatus' ...

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