MERCATUS GROUP, LLC v. LAKE FOREST HOSPITAL (May 26, 2011)

Mercatus Group and Evanston Northwestern Healthcare planned to build a medical center in Lake Bluff, Illinois. A short distance away stood Lake Forest Hospital. Threatened by the competition the new medical center would create, the Hospital attempted to stop the project. Its strategy took several forms. First, it lobbied Lake Bluff officials to deny necessary approvals. Second, it encouraged Hospital employees and community members to do the same through a public relations campaign. Third, it disparaged Mercatus to its partner. Fourth, it offered incentives to two practice groups that intended to leave the Hospital, in order to get them to stay. The Hospital's campaign was quite successful. Mercatus never opened the medical center. Instead, it brought suit under the Sherman Act, alleging that the Hospital had monopolized or attempted to monopolize the market for physician services. Judge Manning (N.D. Ill.) dismissed some of the case for failure to state a claim and granted summary judgment to the Hospital on the rest. She concluded that the Hospital’s lobbying activity was protected by the First Amendment and that the other conduct did not violate the antitrust laws. Mercatus appeals.

In their opinion, Judges Bauer, Manion, and Hamilton affirmed. Mercatus concedes that the Noerr-Pennington doctrine would immunize the Hospital’s lobbying efforts if they were truthful, but asserts that they fall within the fraud exception and are not immunized. But the Noerr-Pennington fraud exception only applies to adjudicative proceedings. So the Court proceeded to consider whether the Village Board proceedings were legislative or adjudicative. Before considering the number of factors that bear on that question, the Court noted that it had to tread lightly because the fraud exception was an exception to a doctrine created on constitutional grounds. Ultimately the Court concluded that the Board acted legislatively, not adjudicatively. The Board: a) generally makes policy, b) is ill-equipped to conduct adjudicative proceedings, c) conducts its business informally, d) allows ex parte lobbying activity, e) does not follow rules of evidence or hear testimony under oath, and f) operates with significant discretion. Summary judgment on the claim based on the Hospital’s activities before the Village Board was proper. The Court reached the same result for much the same reason with respect to the public relations campaign. The Hospital’s conduct was protected by the Noerr-Pennington doctrine. With respect to the Hospital’s allegedly false communications with other businesses, the Court concluded that they were not related to the lobbying efforts and not immunized. However, the Court also found an absence of any coercive conduct. Even if the statements were false, they are not actionable under the antitrust law. Finally, with respect to the Hospital’s successful efforts to retain physician groups that had originally decided to leave, the Court found no evidence in the record of any anticompetitive conduct. The Hospital is not required to sit back and allow these groups to leave. They simply did what the Mercatus group did to get them to leave – it offered them incentives.