Page 1
IN THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
____________________
No. 96-3805
____________________
BLUE CROSS AND BLUE SHIELD OF OHIO,
Petitioner-Appellant,
v.
ANNE K. BINGAMAN, Assistant Attorney General,
Respondent-Appellee.
____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OHIO
____________________
OPPOSITION OF THE UNITED STATES OF AMERICA TO BLUE CROSS AND BLUE
SHIELD OF OHIO'S MOTION FOR STAY PENDING APPEAL
___________________
Of Counsel:
PAUL J. O'DONNELL
EVELIO J. YERA JESSE M. CAPLAN Attorneys
Antitrust Division
U.S. Department of Justice 325 7th Street
Washington, D.C. 20530
| JOEL I. KLEIN
Acting Assistant Attorney General
A. DOUGLAS MELAMED Deputy Assistant Attorney General
ROBERT B. NICHOLSON
MARK S. POPOFSKY Attorneys
Antitrust Division
U.S. Department of Justice 950 Pennsylvania Ave., N.W.
Washington, D.C. 20530-0001 (202) 514-3764 |
Page 1
IN THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
____________________
No. 96-3805
____________________
BLUE CROSS AND BLUE SHIELD OF OHIO,
Petitioner-Appellant,
v.
ANNE K. BINGAMAN, Assistant Attorney General,
Respondent-Appellee.
____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OHIO
____________________
OPPOSITION OF THE UNITED STATES OF AMERICA TO BLUE CROSS AND BLUE
SHIELD OF OHIO'S MOTION FOR STAY PENDING APPEAL
___________________
INTRODUCTION
The district court properly rejected the only argument Blue
Cross and Blue Shield of Ohio's ("BCBSO") advanced for setting
aside a Civil Investigative Demand ("CID") issued by the
Antitrust Division: that BCBSO's use of so-called most-favored
nations ("MFN") clauses, regardless of what facts an
investigation might reveal, can never violate the antitrust laws.
BCBSO now repeats this baseless argument. It also, however,
seeks a stay on grounds that it specifically did not ask the
district court to address and that it advances for the first time
in this Court. This strategy of interposing objections to the
government's subpoena seriatim flies in the face of elemental
principles of appellate review and confounds the public interest
in the expeditious enforcement of administrative subpoenas.
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BCBSO's claims of irreparable harm are equally unpersuasive; and
granting a stay will impair the public interest in the prompt
resolution of antitrust investigations. Accordingly, BCBSO's
motion for a stay pending appeal should be denied.
STATEMENT OF FACTS
On October 17, 1994, the Antitrust Division of the
Department of Justice served BCBSO with CID No. 11466. The CID,
which was issued following a preliminary investigation into
possible anticompetitive practices pertaining to the delivery of
hospital, medical services, and health insurance in Northern
Ohio, called for the production of documents and responses to
interrogatories.
On November 7, 1994, BCBSO asked the district court to set
aside the CID on the ground that it requested information
pertaining to its use of MFN clauses, conduct BCBSO claimed is
"wholly lawful" and cannot "violate Section 1 or 2 of the Sherman
Act." Petition to Side Aside CID 2-5 ("Petition") (Exhibit 1).
Accordingly, BCBSO argued, the CID impermissibly sought
information that "could not possibly be relevant to any civil
antitrust investigation." Id. at 5. As it concedes, see Motion
For Stay Pending Appeal 1 (Oct. 21, 1996) ("Motion"), BCBSO
advanced no other argument in support of its petition.
On January 5, 1995, the United States filed a cross-petition
seeking the CID's enforcement. In opposition, BCBSO again argued
that its use of MFN clauses cannot possibly violate the antitrust
laws. BCBSO did not, as it now claims it did, ask the district
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court to set aside the CID on grounds that it "was oppressive."
Motion at 1. Plainly seeking to delay a dispositive ruling on
the United States' cross-petition as long as possible, BCBSO
instead requested the court permit briefing "as to the
particulars of the CID" at some later date. Memorandum in
Opposition to Petition to Enforce 20 n.23 (Jan. 30, 1995) ("Mem.
in Op.") (Exhibit 2) ("To devote time and space to that issue now
would be premature."). BCBSO, consequently, merely presented to
the court conclusory assertions that the CID "[i]n many instances
. . . seek[s] every shred of paper in a given department" and
that "[t]he total number of documents requested could easily
total in the range of one to several million." Id.
On June 24, 1996, the Court denied BCBSO's petition and
granted the United States' cross-petition. Fully addressing the
arguments BCBSO advanced, the court rejected BCBSO's assertion
that its use of MFN clauses could never violate the antitrust
laws, no matter what the facts uncovered in an investigation
might show. See Blue Cross & Blue Shield of Ohio v. Bingaman,
No. 1:94 CV 2297, at 12 (June 24, 1996) (Exhibit 3). Implicitly
rejecting BCBSO's attempt to hold further objections to the CID's
scope "in reserve," the court ordered the CID enforced. See id.
at 14.
BCBSO filed a notice of a notice of appeal on July 15, 1996,
and simultaneously sought a stay pending appeal from the district
court. The court denied a stay on October 7, 1996. After
receiving a two-week extension of time, BCBSO filed its opening
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brief in this Court on September 17, 1994. The United States'
brief is due November 8, 1996.
ARGUMENT
THE COURT SHOULD DENY THE MOTION FOR A STAY PENDING APPEAL
I. APPLICABLE LEGAL STANDARD
A party invoking this Court's authority under Fed. R. App.
P. 8(a) to grant the extraordinary relief of a stay pending
appeal must meet a "heavy" burden. FTC v. Weyerhaeuser Co., 648
F.2d 739, 741 (D.C. Cir.), vacated on other grounds, 665 F.2d
1072 (D.C. Cir. 1981); 11 Charles A. Wright and Arthur R. Miller,
Federal Practice and Procedure § 2094, at 505 (2d ed. 1995). In
determining whether the applicant has met its burden, courts
consider: "(1) the likelihood that the party seeking the stay
will prevail on the merits of the appeal; (2) the likelihood that
the moving party will be irreparably harmed absent a stay; (3)
the prospect that others will be harmed if the court grants the
stay; and (4) the public interest in granting the stay." Michigan
Coalition v. Griepentrog, 945 F.2d 150, 153 (6th Cir.
1991); accord Hilton v. Braunskill, 481 U.S. 770, 776 (1981) .
Although this Court has stated that these factors are
"interrelated considerations that must be balanced together" and
"not prerequisites that must be met," Griepentrog, 945 F.2d at
153, "[t]he basis of injunctive relief in the federal courts has
always been irreparable harm and inadequacy of legal remedies," Sampson
v. Murray, 415 U.S. 61, 88 (1974) (internal quotations
omitted). Failure to demonstrate irreparable harm accordingly
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requires denial of a stay. See
Friendship Materials, Inc. v. Michigan Brick, Inc., 679
F.2d 100, 104-05 (6th Cir. 1982)(citing Dataphase Sys., Inc. v.
C.L. Sys., Inc., 640 F.2d 109, 114 n.9 (8th Cir. 1981) (en banc)).
Moreover, when, as here, issuance of a stay will harm the public interest,
"the moving party faces a heavy burden in demonstrating that he is likely to
prevail on the merits." Dataphase, 640 F.2d at 113.1 As
explained below, BCBSO has not met its burden.
II. BCBSO HAS NO LIKELIHOOD OF SUCCESS ON THE MERITS OF ITS
APPEAL
BCBSO raises three objections to the district court's Order.
First, it maintains that its "MFN clause is so clearly legal that
an investigation as to whether [it] violates the Sherman Act serves
no legitimate investigative purpose." Motion at 6-10.
Second, it argues that "the CID is so broadly drafted as to be
oppressive." Id. at 6, 14-16. Third, it contends that because
the CID is unduly burdensome, to justify enforcement the
government needed to adduce evidence demonstrating that BCBSO's
MFN clauses violate the antitrust laws. See id. at 10-11.
BCBSO's first argument wholly lacks merit and its other
contentions, in addition to lacking substantiation, have been
waived.
A. BCBSO's MFN Clauses Are An Appropriate Subject Of An
Antitrust Division Investigation
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1. The district court correctly recognized that BCBSO, in
arguing the Antitrust Division's request for information
concerning MFN clauses serves no legitimate investigative
purpose, took upon itself an extraordinary burden. The Antitrust
Division issues CIDs pursuant to "broad investigatory powers"
bestowed by Congress. Associated Container Transp. (Australia)
Ltd. v. United States, 705 F.2d 53, 58 (2d Cir. 1983). As with
any "administrative subpoena," H.R. Rep. No. 1343, 94th Cong., 2d
Sess. 13 (1976), reprinted in 1976 U.S.C.C.A.N. 2596, 2607, the
Antitrust Division generally may exercise its investigatory power
"`merely on suspicion that the law is being violated, or even
just because it wants assurance that it is not.'" United States
v. Markwood, 48 F.3d 969, 977 (6th Cir. 1995) (quoting United
States v. Morton Salt Co., 338 U.S. 632, 641-43 (1950)).
Although a CID should not be employed when "the activities at
issue enjoy a clear exemption from the antitrust laws, H.R. Rep.
No. 1343, supra, at 11, reprinted in 1976 U.S.C.C.A.N. at 2606,
Congress also recognized that when the applicability of an
exemption is not "precisely clear" and may be the "central issue
in the case" "the mere assertion of the exemption should not be
allowed to halt the investigation." Id. at 2606 n.30. Congress
thus endorsed the long-established rule that because the very
purpose of a grant of investigatory power is to facilitate the
gathering of evidence upon which a charge may be based, the claim
of an exemption that depends on facts should not pretermit an
investigation. See Oklahoma Press Pub. Co. v. Walling, 327 U.S.
Page 7
186, 216 (1946); FTC v.
Markin, 532 F.2d 541, 543-44 (6th Cir.
1976) (per curiam).
BCBSO's contention that MFN clauses are not a proper subject
an Antitrust Division investigation is essentially a claim that
use of MFN clauses is exempt from the antitrust laws. BCBSO,
consequently, must demonstrate that no matter what facts the
Division's investigation might unearth, its use of MFN clauses
cannot violate the antitrust laws. This Blue Cross has not
shown.
MFN clauses, when embodied in contracts between an insurer
and provider, are subject to evaluation under Sherman Act section
1, 15 U.S.C. 1, which proscribes unreasonable agreements in
restraint of trade. See, e.g., Standard Oil Co. v. United
States, 221 U.S. 1, 69-70 (1911). Application of the Sherman
Act's "Rule of Reason" is fact-specific, and generally requires a
detailed evaluation of the challenged practice's purpose and
probable effect on competition. See, e.g., Continental T.V.,
Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49 & n.15 (1977).
According to BCBSO, however, MFN clauses never can cause
anticompetitive effects the Rule of Reason condemns because MFN
clauses simply reflect "a purchaser of health care services"
"bargain[ing] for a seller's best price" and can only result in
lower prices to consumers. Motion at 6-9.
Depending on the facts, however, MFN clauses in
insurer/provider contracts may well cause anticompetitive
effects, including higher prices. It long has been recognized
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that MFN clauses may deter
discounting. See Connell Constr. Co.,
Inc. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S.
616, 623-25 & nn.1-2 (1975). Absent the MFN clause, a seller
might provide certain purchasers with greater discounts than it
provides to other purchasers. However, the MFN clause requires
granting the purchaser imposing it the same discount bestowed on
any other purchaser. If that purchaser comprises a significant
portion of the seller's income, the MFN clause may inhibit the
seller from giving any purchaser a discount.
In health care markets, this discount-inhibiting effect may
have several adverse consequences on competition. Among other
things, MFN clauses might cause providers (such as hospitals or
individual physicians) to limit or eliminate discounts granted to
particular insurers that, but for the MFN clause with another
insurer, the providers would offer. The result may be higher
premiums to those who purchase health insurance. Similarly,
insurers may use MFN clauses to exclude rivals who would seek to
enter and build market share by offering lower prices; and MFN
clauses may impede the development of innovative methods of
delivering healthcare. For instance, an MFN clause may deter a
physician from participating in a health plan offering a limited-
panel of providers at lower reimbursement rates when the cost --
imposed by the MFN clause -- is accepting lower reimbursement
rates from an insurer that comprises a greater percentage of the
physician's fees. Depending on the facts, this may deprive the
limited-panel plan of enough providers to survive and result in
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less competition and higher prices. See generally Jonathan B.
Baker, Vertical Restraints with Horizontal Consequences:
Competitive Effects of "Most-Favored-Customer" Clauses, 64
Antitrust L.J. 517 (1996) (describing the possible
anticompetitive effects of MFN clauses).
The case law recognizes that MFN clauses may be
anticompetitive and may violate the Sherman Act. Indeed, the
court in United States v. Delta Dental of Rhode Island, No. 96-
113/P, 1996 WL 570397 (D.R.I. Oct. 2, 1996) (Exhibit 4) -- a
decision BCBSO ignores -- recently rejected the very argument
BCBSO now makes. "[B]lanket condonation of MFN clauses," the
court explained, would "run counter to the Sherman Act's
preference for fact-specific inquiries, implausibly reject the
premise that MFN clauses produce substantial anticompetitive
effects in particular circumstances and contradict the Sherman
Act's animating concern for low consumer prices." Id. at *4.
Other courts similarly have recognized that MFN clauses may run
afoul of the Sherman Act. See Blue Cross & Blue Shield United of
Wisconsin v. Marshfield Clinic, 65 F.3d 1406, 1415 (7th Cir.
1995) (noting the absence of evidence that the MFN before it
resulted in anticompetitive effects), cert. denied, 116 S. Ct.
1288 (1996); Willamette Dental Group, P.C. v. Oregon Dental Serv.
Corp., 882 P.2d 637, 642 (Or. App. 1994) (acknowledging that "in
some circumstances, the enforcement of most favored nation
clauses can have severe anticompetitive effects"); cf.
Reazin v. Blue Cross & Blue Shield of Kan., 899 F.2d 951, 971 (10th Cir.)
Page 10
(noting "considerable testimony on the effect of Blue Cross's
most favored nations clause" and explaining that the trial court
"could reasonably have concluded that [the MFN clause]
contributed to Blue Cross' power over price"), cert. denied, 479
U.S. 1005 (1990); Blue Cross & Blue Shield of Michigan v. Michigan
Ass'n of Psychotherapy Clinics, 1980-2 Trade Cas. (CCH)
¶ 63,351 (E.D. Mich. 1980) (merely rejecting the claim that MFN
clauses constituted per se unlawful price fixing).
The cases cited by BCBSO do not hold to the contrary.2 Ocean
State Physicians Health Plan, Inc. v. Blue Cross & Blue
Shield of Rhode Island, 883 F.2d 1101 (1st Cir. 1989), cert.
denied, 494 U.S. 1027 (1990), simply rejected the claim that the
MFN clause before it was "exclusionary," and therefore violated
Sherman Act section 2, because it was instituted for an
anticompetitive purpose, see id. at 1104, 1110-12. The court did
have before it evidence of anticompetitive effects, and did not
address whether MFN clauses might violate section 1. As the Delta
Dental court explained, Ocean State cannot plausibly be
read to preclude a Sherman Act claim when adverse effects
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stemming from MFN clauses are alleged. See Delta Dental, 1996 WL
570397 at *6-*7.3
As for Kartell v. Blue Shield of Massachusetts, 749 F.2d 922
(1st Cir. 1984), cert. denied, 471 U.S. 1029 (1985), it did not
involve an MFN clause, but simply a policy by which providers
agreed to charge patients only what Blue Shield specified. There
was no claim that the policy stopped providers "from charging . .
. other patients what they like[d]." Id. at 927. Plaintiffs'
challenge to the policy, then, was nothing more than an objection
to a party with market power bargaining for the best price, and
the court rejected the claim. See id. at 928-29. The court,
however, carefully distinguished the case from one in which the
challenged policy acted "as if it were a `third force,'
intervening in the marketplace in a manner that prevents willing
buyers and sellers from independently coming together to strike
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price/quality bargains." Id. at
924. As explained above, it is
precisely this effect of deterring providers form dealing with
third parties that MFN clauses may have.4
Accordingly, because neither policy nor precedent supports
BCBSO's proposed novel rule that MFN clauses may never run afoul
of the antitrust laws, BCBSO's argument that conduct is exempt
from investigation by the Antitrust Division must fail. See
Associated Container, 705 F.2d at 58, 59-60; FTC v. Markin, 532
F.2d 541, 543-44 (6th Cir. 1976).
2. For similar reasons, BCBSO's contention that even if MFN
clauses "are not procompetitive as a matter of law, BCBSO's MFN
clause is clearly procompetitive under the facts of this case,"
Motion at 11, is mistaken and irrelevant to its stay application.
An investigating agency is not required to accept protestations
that the conduct investigated is lawful. Rather, "it is entitled
to determine for itself" whether the law is violated. United
States v. R. Enterprises., Inc., 498 U.S. 292, 303 (1991)
citing Morton Salt, 338 U.S. at 642-43); see also Oklahoma Press, 327
U.S. at 216 (explaining that an administrative investigation must
not "be `limited . . . by forecasts of [its] probable result'"
(quoting Blair v. United States, 250 U.S. 273, 282 (1919)));
United States v. Powell, 379 U.S. 48, 57 (1964).
Further, even if the supposed "evidence" advanced by BCBSO
Page 13
concerning the state of healthcare markets in Northern Ohio were
relevant to the issues involved in this case, nothing in BCBSO's
submission precludes the possibility that BCBSO's MFN clauses
might have anticompetitive effects. According to BCBSO, since it
began employing MFN clauses, prices in relevant markets have
experienced a relative decline and new entry has occurred. See
Motion at 11-14. However, even if BCBSO's assertion is
unassailably correct, it may well be the case that, but for
BCBSO's employment of MFN clauses, prices would have declined
further, and that additional, more innovative entry would have
occurred. BCBSO's MFN clauses may also harm competition on a
prospective basis. To make these determination, of course, is
the very reason why the government conducts investigations.
3. Finally, BCBSO objects to the district court's reliance
on the affidavit of chief of the Antitrust Division's Cleveland
Field Office, John Weedon, which confirms that the Antitrust
Division issued the CID for a proper investigatory purpose. See
Motion at 10. BCBSO seems to assert that the district court
should not have enforced the CID absent a "basis upon which to
test the validity" of Mr. Weedon's averments because
"[o]therwise, all the government would ever need to issue a CID
would be an affidavit alleging that it has a belief that a
party's acts are anticompetitive." Id. at 10-11 (emphasis in
original). However, as explained above, it is entirely
appropriate for an agency to use its investigatory power "`merely
on suspicion that the law is being violated, or even just because
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it wants assurance that it is not.'" Markwood, 48 F.3d at 977
(quoting United States v. Morton Salt Co., 338 U.S. at 642-43).
It need not establish "probable cause" that a violation has
occurred. See R. Enterprises, 498 U.S. at 297.
As to whether the Antitrust Division has a legitimate basis
for its "suspicion" here, courts routinely rely on affidavits
such as that provided in this case. See, e.g., In re McVane, 44
F.3d 1127, 1136 (2d Cir. 1995); United States v. Witmer, 835 F.
Supp. 208, 221 (M.D. Pa. 1993), aff'd, 30 F.3d 1489 (3d Cir.
1994) (Table). And, because a subpoena is entitled to a
presumption of regularity, R. Enters., 498 U.S.
at 300-01; Finnell v. United States Dep't of Justice, 535 F. Supp. 410, 411
(D. Kan. 1982), courts refuse to test official representations
absent a substantial showing of bad faith or improper purpose.
See, e.g., In re Petition of Maccaferri Gabions, Inc., No. MJG-
95-1270, 1996 WL 494311, at *5 (D. Md. Aug. 25, 1996); cf.
Markwood, 48 F.3d at 983. There is, of course, no evidence
of either here.
B. BCBSO Waived Its Claim That The CID Is Oppressive
BCBSO also argues that the district court abused its
discretion by "failing . . . to consider" BCBSO's claim that "the
CID actually issued was so burdensome as to be overbroad,
unreasonable, and oppressive." Motion at 15. But BCBSO did not
specifically object to the CID on this basis in its petition or
answer to the United States' cross-petition. Even if it had, the
sum-total of its presentation to the district court on the matter
Page 15
was a single footnote asserting in conclusory fashion that "[i]n
many instances, the requests seek every shred of paper in a given
department" and that "[t]he total number of documents requested
could easily total in the range of one to several million." Mem.
in Op. at 20 n.23. These vague statements fail to constitute a
clear presentation of the issue to the district court.
Consequently, BCBSO's objection to the CID on the basis that it
is overbroad or burdensome should be deemed waived. See, e.g.,
Building Serv. Local 47 Cleaning Contractors Pension Plan v. Grandview
Raceway, 46 F.3d 1392, 1398-99 (6th Cir. 1995); Banks
v. Rockwell Int'l N. Am. Aircraft Operations, 855 F.2d 324, 326
(6th Cir. 1988).
Even if petitioner has not waived the issue, a remand for
the district court to consider the merits of petitioner's
contention would be futile. The conclusory assertions made fall
far short of the concrete proof of "oppressiveness" that courts
require. See, e.g., In re August, 1993 Regular Grand Jury, 854
F. Supp. 1392, 1401-02 (S.D. Ind. 1993); In re PHE, Inc., 790 F.
Supp. 1310, 1314 (W.D. Ky. 1992); SEC v. Kaplan, 397 F. Supp.
564, 571 (E.D.N.Y. 1975) (rejecting allegations that compliance
would result in significant expense and devotion of "a
substantial portion" of "time and energies" and explaining that
"respondent should have `made a record that would convince [the
District Court] of the measure of [its] grievance rather than ask
[the District Court] to assume it'" (quoting Morton Salt, 338
U.S. at 654 (alternations in original))).
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To be sure, BCBSO sought to reserve the right to further
brief these issues at a later time. See Mem. in Op. at 20 n.23.
But the district court properly rejected this attempt at
"sandbagging," Wainwright v. Sykes, 433 U.S. 72, 89 (1977), and
so should this Court. The seriatim presentation of objections to
a CID's enforcement is patently inconsistent with the purpose of
summary subpoena enforcement procedures, which is to ensure that
the government, if it is entitled to the materials sought, may
obtain them without undue delay. See In re Subpoenas, 99 F.R.D.
582, 590 (D.D.C. 1983) ("There are important values in the
prompt, crisp enforcement of subpoenas and in discouraging
delaying tactics by which justice can often be denied."); cf.
Markwood, 48 F.3d at 979 (explaining the need for "expeditious
enforcement" of administrative subpoenas).5 Petitioner withheld
its challenge to the CID's "particulars" at its peril. To permit
it a second bite at the apple would only "place a potent weapon
in the hands of [potential antitrust violators] who have no
interest in complying voluntarily with the Act, who wish instead
to delay [investigations] as long as possible." University of
Pennsylvania v. EEOC, 493 U.S. 182, 194 (1990) (internal
Page 17
quotations and citations omitted).6
C. BCBSO'S Contention That The Government Must Demonstrate
Probable Cause Lacks Foundation
BCBSO's final objection to the district court's ruling is
that, because the CID requests "millions of documents," the court
erred in not requiring the government to produce "some evidence
that [its] suspicions [of anticompetitive conduct] are
reasonable." Motion at 10-11. BCBSO has manufactured this
argument for the first time on appeal. Thus, it is waived.7
But even if the argument may properly be advanced, BCBSO failed
to prove its criminal premise: that the CID involved here is
excessively burdensome. As explained above, BCBSO made no effort
to substantiate this contention before the district court and,
Page 18
consequently, waived any such claim. See supra pp.12-13.
8
III. BCBSO'S CLAIM OF IRREPARABLE HARM IS BASELESS
BCBSO asserts that absent a stay it will suffer three
sources of "serious[]" irreparable harm. First it "will have to
spend hundreds of thousands of dollars and months (if not years)
of time combing through millions of documents"; second, it will
have "essentially lost its appeal before the court has ruled upon
it" because the "primary purpose" of the appeal is to avoid this
expenditure of effort; and third, "BCBSO will suffer from
unlawful intrusion into its affairs." Motion at 17. Each
contention is entirely groundless.
1. BCBSO's assertion of irreparable harm stemming from
extraordinary compliance costs -- a claim it failed to advance in
its stay application in district court -- lacks substantiation.
Irreparable harm cannot merely be asserted; it must be proved.
Page 19
See Griepentrog, 945 F.2d at 154. Consequently, "the movant must
. . . provid[e] specific facts and affidavits supporting [its]
assertion[] that" irreparable harm exists. Id. BCBSO has
provided nothing of the kind. All the Court has is BCBSO's
extravagant, bald assertion that complying with the CID will
impose upon it an excessive burden. This, however, is
insufficient. See Railroad P.B.A. of New York, Inc. v. Metro-
North Commuter R.R., 699 F. Supp. 40, 43 (S.D.N.Y. 1988); Emanuele
v. Kuriale, No. 93 CIV 3316, 1994 WL 9674, at *3
(S.D.N.Y. Jan. 10, 1994) (rejecting unsubstantiated allegations
that compliance with subpoena will cause "great inconvenience and
expense"); see also sources cited supra pp.12-13.
To be sure, complying with the CID will place upon BCBSO some
burden. But irreparable harm does not include the ordinary
burden of production imposed by complying with an administrative
subpoena. "Any time a corporation complies with a government
regulation that requires corporation action, it spends money and
loses profits; yet it could hardly be contended that proof of
such an injury, alone," qualifies as irreparable harm. A.O.
Smith Corp. v. FTC, 530 F.2d 515, 527 (3d Cir. 1976). Thus,
"unrecoverable costs of compliance" can constitute irreparable
harm to a corporation only when they are in some way "peculiar,"
such as when the corporation involved is small, the burden on the
corporation would result in insolvency, or the "cost of
compliance would be so great vis a vis the corporate budget that
significant changes in [the] company's operations would be
Page 20
necessitated. " Id. at 527-28 (internal
quotations omitted).
BCBSO, of course, has failed even to assert, much less prove,
this sort of injury. But even if the argument were not now
forfeited, it is fanciful to believe that complying with the CID
would inflict such harm on BCBSO, a company with $2 billion in
annual revenues.9
2. BCBSO's failure to substantiate its first source of
irreparable harm defeats its second argument, which merely
restates the first. If the cost of complying with the CID
pending appeal, even if unrecoupable, does not constitute
irreparable harm, that a successful appeal cannot obviate the
harm is merely to say that the costs cannot be recouped. It does
mean those costs rise to the level of irreparable harm.10
3. Finally, BCBSO's claim of irreparable harm from an
"unlawful intrusion into its affairs" is wholly insubstantial.
BCBSO does not identify any harm to the corporation that would
Page 21
flow from the asserted "unlawful intrusion." To the extent BCBSO
claims irreparable harm from some unspecified "stigma" to the
corporation from complying with a government subpoena that turns
out to be unlawful, BCBSO impermissibly claims irreparable harm
from an ordinary burden of complying with government regulation.
See A.O. Smith, 530 F.2d at 527-28.
IV. ISSUANCE OF A STAY WILL HARM THE PUBLIC INTEREST
In contrast to BCBSO's complete failure to demonstrate
irreparable harm, granting the stay will harm the "[p]ublic
interest" in "the prompt enforcement" of administrative subpoenas.
SEC v. Prentiss, [1981-82 Transfer Binder] Fed. Sec.
L. Rep. (CCH) ¶ 98,370 (6th Cir. Dec. 3, 1981) (Keith, J.); see
also United States v. Markwood, 48 F.3d 969, 979 (6th Cir. 1995)
("[T]he very backbone of an administrative agency's effectiveness
in carrying out the congressionally mandated duties of industry
regulation is the rapid exercise of the power to investigate . .
. .'" (internal quotations omitted)). Indeed, because of the
"substantial public interest in effective and immediate
enforcement of the antitrust laws," in a subpoena enforcement
action such as this, "[a]bsent unique compelling circumstances,
stays are particularly inappropriate." FTC v. Anderson, 1978-1
Trade Cas. (CCH) ¶ 61,851, at 73,564 (D.D.C. Jan. 11, 1978); see
also United States v. Nutrition Serv., Inc., 234 F. Supp.
578, 579 (W.D. Pa. 1964) (explaining that delay should not be
tolerated when the public interest will be harmed), aff'd, 347
F.2d 233 (3d Cir. 1965), application denied, 430 U.S. 1000
Page 22
(1975).11
These concerns apply with particular force in this case.
The Division's CID has gone unanswered by BCBSO for almost two
years. BCBSO's withholding of the information sought by the
Division has hindered its investigation and may have facilitated
the continuing infliction of unlawful restraints of trade on
consumers of healthcare in Northern Ohio.
BCBSO derides this compelling public interest in the swift
enforcement of administrative subpoenas, claiming that the
government, in seeking a total of three additional weeks in which
to file its brief on the merits, demonstrated that it did not
"really believe[] that this case was time-sensitive." Motion at
18. But this disingenuous argument12 overlooks the fact that
BCBSO is presently under a court order to comply with the CID.
The slight delay in the filing of the government's merits brief,
given how things now stand, has no relation to how promptly BCBSO
produces the requested documents and interrogatory answers and
how quickly the investigation proceeds. Indeed, under BCBSO's
reasoning, the government should have moved for expedition even
though it prevailed below.13
Page 23
V. THE BALANCE OF EQUITIES POINTS DECISIVELY AGAINST GRANTING A
STAY
BCBSO has established neither irreparable harm nor a
likelihood of possibility of success on the merits. Either
conclusion is a sufficient basis for denying the motion. But
even if BCBSO had demonstrated serious questions going to the
merits and cognizable irreparable harm, these factors are
outweighed by the continuing harm to the public interest in
prompt and efficient enforcement of the antitrust laws that a
stay would engender..
Page 24
CONCLUSION
For the foregoing reasons, BCBSO's motion for a stay pending
appeal should be denied.
Respectfully submitted.
Of Counsel:
PAUL J. O'DONNELL
EVELIO J. YERA
JESSE M. CAPLAN
Attorneys
Antitrust Division
U.S. Department of Justice
325 7th Street
Washington, D.C. 20530
|
JOEL I. KLEIN
Acting Assistant Attorney General
A. DOUGLAS MELAMED
Deputy Assistant Attorney General
ROBERT B. NICHOLSON MARK S. POPOFSKY Attorneys
Antitrust Division U.S. Department of Justice
950 Pennsylvania Ave., N.W.
Washington, D.C. 20530-0001 (202) 514-3764
|
CERTIFICATE OF SERVICE
I hereby certify that on October 25, 1996, I caused a copy
of the foregoing OPPOSITION OF THE UNITED STATES OF AMERICA TO
BLUE CROSS AND BLUE SHIELD OF OHIO'S MOTION FOR STAY PENDING
APPEAL to be served upon the following counsel in this matter by
federal express:
Paul S. Lefkowitz, Esq.
David W. Neel, Esq.
Climaco, Climaco, Seminatore, Lefkowitz
& Garofoli, Co.,
9th Floor, The Halle Building
1228 Euclid Avenue
Cleveland, Ohio 44115-1891
(216) 621-8484
_______________________
Mark S. Popofsky
Attorney
Antitrust Division
U.S. Department of Justice
10th & Pennsylvania, Ave., N.W.
Washington, D.C. 20530
(202) 514-3764
Page 26
EXHIBIT 1.
Page 27
EXHIBIT 2.
Page 28
EXHIBIT 3.
Page 29
EXHIBIT 4.
Page 30
.
FOOTNOTES
1
The moving party's burden is particularly heavy when, in
this case, the trial judge has denied a stay. See Long v.
Robinson, 432 F.2d 977, 979 (4th Cir. 1970) (Winter, J.).
2
In Michigan Ass'n of Psychotherapy Clinics v. Blue Cross &
Blue Shield of Mich., 1982-83 Trade Cas. (CCH) ¶ 65,035 (Mich.
Ct. App. 1982), the court merely concluded that the MFN clause at
issue did not constitute unlawful "price-fixing"; the court did
not consider evidence of anticompetitive effects. See id. at
70,775. The court in Kitsap Physician Serv. v. Washington Dental
Serv., 671 F. Supp. 1267 (W.D. Wash. 1987), conducted a
superficial evaluation of an MFN clause's legality under Sherman
Act § 2 in the context of a motion for a preliminary injunction.
The court did not consider the possible anticompetitive effects
of MFN clauses, and for support cited two cases merely holding
MFN clauses not to constitute "price fixing." See id. at 1269.
3
Indeed, even under BCBSO's reading of Ocean State, its stay
application must be denied. BCBSO concedes that MFN clauses may
violate Sherman Act § 2 if they cause providers to charge prices
below incremental costs. See Motion at 14. This concession is
fatal to BCBSO's claim that MFN clauses may never violate the
antitrust laws -- the premise of its argument that an
investigation of MFN clauses cannot garner materially possibly
relevant to a lawful antitrust investigation. BCBSO asserts that
the district court "never considered whether any of the documents
requested under the CID had anything to do with the incremental
costs hospitals incur in dealing with BCBSO and other insurers,"
id., but the argument is not well taken. As explained below,
BCBSO expressly asked the court not to consider objections to the
CID based on "its particulars." Mem. in Op. at 20 n.23.
The United States believes that MFN clauses may violate § 2
even when the factual context does not involve below-cost
pricing. However, it is enough to respond fully to BCBSO's
argument that MFN clauses may in some circumstances violate
Sherman Act § 1.
4
Austin v. Blue Cross & Blue Shield of Ala., 903 F.2d 1385
(11th Cir. 1990), also cited by BCBSO, involved the same factual
situation as Kartell, see id. at 1390, and is inapposite for
precisely the same reason.
5
Indeed, for precisely these reasons, courts do not
ordinarily permit the government to hold in "reserve" objections
to a request for documents made under the Freedom of Information
Act, a context in which comparable values are at stake. See Ryan
v. Department of Justice, 617 F.2d 781, 792 & n.38a (D.C. Cir.
1980) (refusing to permit a the government to raise an exemption
to the Freedom of Information Act that it sought to preserve in a
footnote, but made no attempt to substantiate, in district
court).
6
BCBSO's failure to move for reconsideration, a more direct
route of bringing before the district court the issues it
supposedly reserved, demonstrates that BCBSO's interest lies
solely in delay.
BCBSO alternatively asks this Court to modify the CID. See
Motion at 15. But even if this were a proper action for an
appellate court to take, evaluation of the objections BCBSO
raises would require further development of the record. This
consideration -- even apart from the compelling concern with not
permitting litigants to present seriatim objections to CIDs --
precludes excusing BCBSO's waiver. See Foster v. Barilow, 6 F.3d
405, 407 (6th Cir. 1993).
7
BCBSO arguably did ask the district court to require the
Antitrust Division to produce additional evidence because
"precedent and the body of publicly available information . . .
shows that the DOJ's assumptions are without any factual
foundation." Mem. in Op. at 20. This quite different argument
for requiring the government to produce the very facts an
investigation is designed to discover is, as explained above,
similarly without merit.
8
In any event, BCBSO's argument that a particularly
burdensome subpoena might in some instances require a showing
amounting to probable cause is wrong. The Supreme Court in R.
Enterprises rejected a heightened relevancy requirement, as
Justice Stevens, on whose concurrence BCBSO relies, recognized.
Compare R. Enters., 498 U.S. at 297 ("[T]he Government cannot be
required to justify the issuance of a grand jury subpoena by
presenting evidence sufficient to establish probable cause
because the very purpose of requesting the information is to
ascertain whether probable cause exists.") with id. at 304-05
(describing the majority's approach to relevancy as "truncated").
See also In re August, 1993 Regular Grand Jury, 854 F. Supp. at
1400 n.7. To be sure, if an administrative subpoena is found
oppressive it may be modified or the parties may be required to
negotiate a modification. See, e.g., Phoenix Bd. of Realtors,
Inc. v. United States Dep't of Justice, 521 F. Supp. 828, 832 (D.
Ariz. 1981). But the proper remedy to an oppressive
administrative subpoena is not, as BCBSO insists, to impose on
the government a heightened relevancy requirement for all the
information requested.
9
See Robert Kuttner, Welcome to Hospitals R Us, Sacramento
Bee, Sept. 29, 1996, available in 1996 WL 3318414. For the same
reasons, time spent by BCBSO employees and attorneys effectuating
compliance with the subpoena cannot constitute irreparable harm.
That quite ordinary hardship too is "part of the social burden of
living under government." FTC v. Standard Oil Co. of Cal., 449
U.S. 232, 244 (1980) (explaining that "[m]ere litigation expense,
even substantial and unrecoupable cost, does not constitute
irreparable injury" (internal quotations omitted)).
10
BCBSO wisely does not contest that failure to obtain a stay
will moot its appeal, the irreparable injury it claimed in the
district court. Compliance with the CID plainly will not have
this effect. See Church of Scientology of Cal. v. United States,
506 U.S. 9, 13 (1992); United States v. Florida Azalea
Specialists, 19 F.3d 620, 622 (11th Cir. 1994); USEPA v. Alyeska
Pipeline Serv. Co., 836 F.2d 443, 445 (9th Cir. 1988).
11
BCBSO's argument that the "public interest" relates only to
the breadth of CIDs, and not their prompt enforcement, see Motion
at 19, is accordingly wrong.
12
BCBSO itself received a two-week extension of time.
13
BCBSO also argues that the public interest lies in
"reducing bureaucratic regulation of business and protecting the
spare time and family lives of BCBSO personnel." Motion at 19.
But these concerns -- even if properly part of the public
interest equation, which they are not -- could be raised in
opposing the enforcement pending appeal of any administrative
subpoena, and plainly prove too much. BCBSO additionally points to the
district court's statement that "granting the stay will not harm
anyone." Motion at 17. However, the district court simply meant
that granting the stay will not harm any third parties. See id.
Ex. 2 at 5. The district court plainly did not mean that
granting a stay will not harm the public interest, for it
expressly so found. See id. In this Court, BCBSO identifies no
harm that will befall nonlitigants if its stay application is
denied.