Chapter V. Industry-Specific Application of the Doctrine

• Pages: 83-108

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CHAPTER V

INDUSTRY-SPECIFIC APPLICATION

OF THE DOCTRINE

There are certain industries in which the state action doctrine is most

commonly encountered. These include health care, energy and utilities,

transportation, and the regulation of professionals. This chapter

addresses the application of the state action doctrine in each of these

sectors.

A. Health Care

The state action doctrine is frequently invoked by participants in the

health care industry. The doctrine’s application to state-operated or

owned hospitals, certificates of need, and staff privileges and peer

review, is discussed below.

1. State-Operated or Owned Hospitals

Several states have enacted legislation allowing municipalities or

other political subdivisions to operate hospitals or health care districts.

Courts generally have held that public hospitals are municipal or political

actors entitled to the protections of the state action doctrine so long as the

challenged regulation or conduct stems from a clearly articulated state

policy.1 Based on their status as municipalities, public hospitals are not

1. See, e.g., Lafaro v. N.Y. Cardiothoracic Group, 570 F.3d 471, 477-78 (2d

Cir. 2009) (treating public benefit corporation that operated medical

center as a municipality for purposes of state action doctrine); Jackson,

Tenn. Hosp. Co. v. W. Tenn. Healthcare, 414 F.3d 608, 611-12 (6th Cir.

2005) (holding that public hospital constituted political subdivision and

was immune from antitrust challenge so long as it acted “pursuant to a

‘clearly expressed’ state policy”); Crosby v. Hosp. Auth. of Valdosta &

Lowndes County, 93 F.3d 1515, 1525 (11th Cir. 1996) (Crosby) (holding

that public hospital authority qualified as a political subdivision and was

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required to meet the active supervision prong of the Midcal test in order

to establish an antitrust exemption for a challenged regulation or course

of conduct.2

For example, in Crosby v. Hospital Authority of Valdosta and

Lowndes County,3 the Eleventh Circuit determined that, based on a state

statute conveying broad public powers to the hospital authority,

combined with the state supreme court’s historical interpretation of the

hospital as a “governmental entit[y],” the defendant hospital authority

constituted a municipality for state action purposes.4 The court then had

only to examine whether the state, through its statutes, “clearly

articulate[d] a policy authorizing the challenged anticompetitive

conduct.”5

The Eleventh Circuit noted that the Supreme Court does not require

the state, as part of its clear articulation requirement, to expressly

authorize or anticipate anticompetitive effects; “[r]ather, it simply

requires that the anticompetitive conduct be a foreseeable result of the

powers granted to the political subdivision.”6 Applying this standard, the

subject only to clear articulation test); Martin v. Mem’l Hosp. at Gulfport,

86 F.3d 1391, 1398-99 (5th Cir. 1996) (Martin) (holding that public

hospital was a state subdivision or municipal corporation, and “need

prove only that it acted pursuant to a clearly articulated and affirmatively

expressed state policy”); FTC v. Hosp. Bd. of Dirs. of Lee County, 38

F.3d 1184, 1188 (11th Cir. 1994) (holding that health care authority was a

political subdivision subject only to clear articulation test because it was a

“special purpose unit” of local government).

2. See, e.g., Crosby, 93 F.3d at 1521-25; Martin, 86 F.3d at 1397; Hosp. Bd.

of Dirs. of Lee County, 38 F.3d at 1188.

3. 93 F.3d 1515.

4. Id. at 1523-26.

5. Id. at 1532 (quoting Hosp. Bd. of Dirs. of Lee County, 38 F.3d at 1187-

88).

6. Id. (quoting Hosp. Bd. of Dirs. of Lee County, 38 F.3d at 1189 (emphasis

added), and citing Town of Hallie v. City of Eau Claire, 471 U.S. 34, 42

(1985)); see also id. at 1534 (citing to cases observing “that ‘reasonable

anticipation’ does not require explicit authorization to engage in

anticompetitive conduct”); Jackson, Tenn. Hosp., 414 F.3d at 612 (“The

state legislature need not explicitly authorize anticompetitive conduct, as

long as anticompetitive effect would logically result from the authority

granted by the state.”); Redwood Empire Life Support v. County of

Sonoma, 190 F.3d 949, 955 (9th Cir. 1999) (noting that the Supreme

Court does not require explicit authorization for a municipality to engage