A recently issued federal court opinion further demonstrates that the question of an agreement to restrain trade is almost always an issue for the trier of fact.

In U.S. v. Hillsdale Community Health Center , 5:15-cv-12311 (E.D. Mich. May 31, 2017), the United States and the state of Michigan sued two Michigan-based hospitals under Section 1 of the Sherman Act and Section 2 of the Michigan Antitrust Reform Act, a parallel state statute. The governments alleged that the remaining defendant, W.A. Foote Memorial Hospital d/b/a Allegiance Health, agreed with former defendant, Hillsdale Community Health Center (HCHC), to allocate markets among them. Allegiance allegedly agreed it would not market competing services in HCHC’s home county in exchange for HCHC referring patients to Allegiance for higher acuity services that HCHC did not offer, including oncology, cardiovascular and orthopedic care. Allegiance moved for summary judgment, asserting that no agreement existed between the hospitals; rather, Allegiance “engaged in unilateral conduct as part of a business strategy to obtain referrals for its higher acuity services.” Allegiance also asserted that the rule of reason analysis, rather than the per se or “quick look” rule of reason analysis should apply.

The United States and state of Michigan filed a cross motion for summary judgment asserting the evidence conclusively proved a horizontal agreement to allocate markets between two competitors, which is per se unlawful, or alternatively illegal under a “quick look” analysis. The governments attached numerous internal emails among several senior Allegiance employees referring to a “gentlemen’s agreement” with HCHC and appearing to enforce the agreement when Allegiance did market its services in HCHC’s county and HCHC complained. The court noted “plaintiff put forward a compelling argument that there is an agreement.” Nevertheless, the court also noted those emails conflicted with some of the deposition testimony of Allegiance’s CEO disclaiming and characterizing Allegiance’s decision to limit marketing in HCHC’s county as a unilateral business strategy to obtain referrals. As the court explained, “the inconsistencies between the emails and [the Allegiance CEO’s] deposition testimony cannot be resolved absent determinations as to which of her statements or explanations are credible.”

As a result, the court denied both cross motions for summary judgment. In denying the motions, the court also denied the parties’ request that the court apply either a per se, quick look, or full blown rule of reason analysis. The court explained that because it could not “determine whether an agreement exists, and therefore how it may be structured, the Court also is unable to determine which antitrust principle should be used to analyze the legality of any agreement.”

The court’s ruling demonstrates what has become apparent in a long line of Section 1 Sherman Act cases: agreements among competitors are notoriously hard to conclusively prove or disprove. It stands to reason that the intent of two parties to an agreement is difficult to determine if those parties deny such an intent once they are sued. Judging the credibility of such denials is often a jury question, even when it may not be a hard one. Nevertheless, whether the agreement should be judged under a per se, quick look, or rule of reason analysis is a legal question. Thus, the court will eventually have to instruct the jury which analysis to apply when deciding the case, which is why that question of law often hangs in the balance until the court holds a jury charge conference at trial.

Copyright 2017, American Health Lawyers Association, Washington, DC. Reprint permission granted.