FTC v. Penn State Hershey Medical Cen , 914 F.3d 193 ( 2019 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
No. 17-2270
__________
FEDERAL TRADE COMMISSION;
COMMONWEALTH OF PENNSYLVANIA
v.
PENN STATE HERSHEY MEDICAL CENTER;
PINNACLE HEALTH SYSTEM
Commonwealth of Pennsylvania,
Appellant
__________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(District Court Civil No. 1-15-cv-02362)
District Judge: Honorable John E. Jones III
Argued July 10, 2018
BEFORE: SHWARTZ, NYGAARD, and RENDELL,
Circuit Judges.
(Filed: January 23, 2019)
Wesley G. Carson, Esq.
Peggy Bayer Femenella, Esq.
James W. Frost, Esq.
Lynda Lao, Esq.
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
William H. Efron, Esq.
Ryan F. Harsch, Esq.
Jared P. Nagley, Esq.
Jonathan W. Platt, Esq.
Gerald A. Stein, Esq.
Geralyn J. Trujillo, Esq.
Nancy Turnblacer, Esq.
Theodore Zang, Esq.
Federal Trade Commission
One Bowling Green
Suite 318
New York, NY 10004
Counsel for Plaintiff Federal Trade Commission
Howard G. Hopkirk, Esq. [Argued]
Tracy W. Wertz, Esq.
Office of Attorney General of Pennsylvania
Strawberry Square
Harrisburg, PA 17120
2
Kemal A. Mericli, Esq.
Office of Attorney General of Pennsylvania
1251 Waterfront Place
Pittsburgh, PA 15222
Counsel for Appellant Commonwealth of Pennsylvania
William D. Coglianese, Esq. [Argued]
Christopher N. Thatch, Esq.
Adrian Wager-Zito, Esq.
Jones Day
51 Louisiana Avenue, N.W.
Washington, DC 20001
Counsel for Appellees Penn State Hershey Medical
and Pinnacle Health System
Luminita Nodit, Esq.
Office of Attorney General of Washington
800 Fifth Avenue
Suite 2000
Seattle, WA 98104
Counsel for Amicus Appellants
__________
OPINION OF THE COURT
__________
NYGAARD, Circuit Judge.
3
I.
In March 2015, the Boards of Penn State Hershey
Medical Center and PinnacleHealth System (“Hershey” and
“Pinnacle,” respectively) formally approved a plan to merge.
They had announced the proposal a year earlier, so the
Commonwealth of Pennsylvania and the Federal Trade
Commission (“FTC”) were already investigating the impact
of the proposed merger when the Boards approved it. This
joint probe resulted in the FTC filing an administrative
complaint alleging that the merger violated Section 7 of the
Clayton Act. 1 The FTC scheduled an administrative hearing
on the merits for May 2016. At the same time, the
Commonwealth and the FTC jointly sued Hershey and
Pinnacle under Section 16 of the Clayton Act, 2 and Section
13(b) of the Federal Trade Commission Act (“FTC Act”), 3 to
“prevent and restrain Hershey and Pinnacle from violating
Section 7 of the Clayton Act . . . pending the Commission’s
administrative proceeding.” 4 They sought a preliminary
injunction and a temporary restraining order.
The District Court denied relief. 5 But, on September
27, 2016, we reversed the District Court’s order and directed
it to preliminarily enjoin the merger “pending the outcome of
1
15 U.S.C. § 18.
2
15 U.S.C. § 26.
3
15 U.S.C. § 53(b).
4
Amended Complaint at 7 ¶ 14, FTC v. Penn State Hershey
Med. Ctr., 185 F. Supp. 3d 552 (M.D. Pa. 2016) (No. 1:15-
cv-2362) (“Hershey I”).
5
Hershey I, 185 F. Supp. 3d at 564.
4
the FTC’s administrative adjudication.” 6 Within three weeks,
Hershey and Pinnacle terminated their Agreement,
referencing our remand ordering the temporary injunction as
the impetus. The District Court ultimately issued the
injunction on October 20, 2016.
The Commonwealth then moved for attorneys’ fees
and costs, asserting that it “substantially prevailed” under
Section 16 of the Clayton Act, but the District Court denied
the motion. 7 In doing so, the District Court rejected
Hershey’s and Pinnacle’s argument that the Commonwealth
could not seek attorneys’ fees and costs under Section 16 of
the Clayton Act because, in ordering the injunction, we
applied Section 13(b) of the FTC Act instead. The District
Court denied the fee request, however, because the
Commonwealth had not “substantially prevailed” under
Section 16 of the Clayton Act. The Commonwealth timely
appealed. We will affirm, because we credit Hershey’s and
Pinnacle’s argument that we ordered the injunction based on
Section 13(b) of the FTC Act, not Section 16 of the Clayton
Act.
II.
6
FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 354
(3d Cir. 2016) (“Hershey II”).
7
FTC v. Penn State Hershey Med. Ctr., No. 1:15-cv-2362,
2017 WL 1954398, at *9 (M.D. Pa. May 11, 2017) (“Hershey
III”).
5
Ordinarily, we review the District Court’s denial of
attorneys’ fees for abuse of discretion. 8 As explained below,
however, our decision turns on the legal question as to which
statute applies. Our review of that legal question is plenary. 9
III.
The American Rule, grounded in longstanding
common law tradition, requires parties to pay their own legal
costs “win or lose, unless a statute or contract provides
otherwise.” 10 One such statute is Section 16 of the Clayton
Act. That section provides in relevant part:
Any person, firm, corporation, or
association shall be entitled to sue
for and have injunctive relief, in
any court of the United States
having jurisdiction over the
parties, against threatened loss or
damage by a violation of the
antitrust laws . . . . In any action
under this section in which the
plaintiff substantially prevails, the
court shall award the cost of suit,
including a reasonable attorney’s
fee, to such plaintiff. 11
8
Raab v. City of Ocean City, 833 F.3d 286, 292 (3d Cir.
2016).
9
See id.10
Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2164
(2015).
11
15 U.S.C. § 26.
6
The District Court concluded that the Commonwealth
did not “substantially prevail” under this section for two
reasons. First, the District Court ruled that the termination of
the merger did not render the Commonwealth a prevailing
party because the injunction itself did not terminate the
merger and, even though the injunction motivated Hershey
and Pinnacle to do so on their own, the Supreme Court has
rejected the “catalyst theory” of prevailing-party status. 12
Second, the District Court determined that, because our ruling
was based on the holding that the Commonwealth and FTC
were merely likely to succeed on the merits, our ruling was
not a grant of relief “on the merits” as required for prevailing-
party status by Singer Management Consultants, Inc. v.
Milgram. 13
The Commonwealth contests both conclusions. But
Hershey and Pinnacle argue that we need not address them
because Section 16 of the Clayton Act and its attorneys’ fees
provision do not apply at all. Hershey and Pinnacle contend
that the preliminary injunction on which the Commonwealth
relies for its claim of attorneys’ fees was not entered “in an
action under this section” as required for application of
Section 16 of the Clayton Act. Instead, they argue, the
injunction was issued under the authority of Section 13(b) of
the FTC Act, which does not provide for attorneys’ fees. 14
Thus, they argue, the Commonwealth does not have any legal
ground to claim entitlement to attorneys’ fees on the basis of
12
See Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of
Health & Human Res., 532 U.S. 598, 605, 610 (2001).
13
650 F.3d 223, 228-29 (3d Cir. 2011) (en banc).
14
15 U.S.C. § 53(b).
7
the injunction (or the merger termination that it prompted) in
this case.
We ultimately agree with Hershey and Pinnacle. We
will therefore assume without deciding that the
Commonwealth is a prevailing party, leaving for another day
the questions of whether the Supreme Court’s rejection of the
catalyst theory controls claims for fees under Section 16 of
the Clayton Act and whether a preliminary injunction entered
pursuant to that section can constitute relief “on the merits.”
Our sole focus here is to examine the Commonwealth’s claim
that it has a statutory basis to be awarded its fees.
IV.
We conclude that it does not. The Commonwealth
claims attorneys’ fees under Section 16 of the Clayton Act.
The District Court noted that, in ordering the injunction, our
Court “solely applied the standard outlined by Section 13(b)
of the FTC Act.” 15 And, as noted above, Section 13(b) of the
FTC Act makes no provision for attorneys’ fees. The District
Court nevertheless determined that the Commonwealth was
potentially entitled to fees under Section 16 of the Clayton
Act because the Commonwealth referenced that section when
it joined with the FTC to seek a preliminary injunction
against Hershey and Pinnacle, 16 and policy and Supreme
Court precedent supported the allowance of fees.
15
Hershey III, 2017 WL 1954398, at *2.
16
Id. at *3.
8
The District Court’s initial conclusion that we ordered
the injunction under Section 13(b) of the FTC Act and not
Section 16 of the Clayton act was correct, and its inquiry
should have ended there. The strongest indication that the
injunction rested solely on Section 13(b) of the FTC Act was
the standard that we used in ordering that injunction. When
considering requests for injunctive relief under Section 16 of
the Clayton Act, courts generally apply the traditional four-
part preliminary injunction standard that includes a
consideration of: (1) the likelihood of success on the merits;
(2) the threat of irreparable harm in the absence of an
injunction; (3) the possibility of substantial harm to other
interested parties; and (4) the public interest. 17 In ordering
the injunction in Hershey II, we referenced the “traditional
equity standard for injunctive relief,” 18 but we did not use it.
Instead, we determined that the standard governing
injunctions under Section 13(b) of the FTC Act is different,
and we went on to apply that different standard. 19
In particular, and drawing directly from the statute, we
said that the question of preliminary injunctive relief under
Section 13(b) of the FTC Act is resolved by “weighing the
equities and considering the Commission’s likelihood of
ultimate success” to determine whether “such action would be
in the public interest.” 20 In doing so, we emphasized that the
17
See Holland v. Rosen, 895 F.3d 272, 285-86 (3d Cir. 2018)
cert. denied 139 S. Ct. 440 (2018); see also Julian O. von
Kalinowski, Antitrust Laws and Trade Regulations §
172.02[3][b] & n.60 (2d ed. 2018) (collecting cases).
18
Hershey II, 838 F.3d at 337.
19
Id.
20
Id. (quoting 15 U.S.C. § 53(b)).
9
public interest standard in the second prong of this analysis
differs from “the traditional equity standard for injunctive
relief.” 21 This assessment aligns with the judgment of other
Courts of Appeals, which have concluded that the Section
13(b) standard is not only different from, but easier to satisfy
than the traditional standard for injunctive relief that courts
apply to claims under Section 16 of the Clayton Act. 22
In sum, in ordering the injunction on which the
Commonwealth relies, we expressly applied Section 13(b) of
the FTC Act and its lower evidentiary bar instead of Section
16 of the Clayton Act. Thus, to the extent that the
Commonwealth can be said to have “prevailed,” it did so
under Section 13(b) of the FTC Act and not Section 16 of the
Clayton Act. For similar reasons, the only court of which we
are aware to have addressed the issue has concluded that an
injunction issued under Section 13(b) of the FTC Act does
not trigger potential entitlement to attorneys’ fees under
21
Id.22
See, e.g., FTC v. H.J. Heinz Co., 246 F.3d 708, 714 (D.C.
Cir. 2001) (explaining that Congress, in drafting Section
13(b), “intended th[e Section 13(b)] standard to depart from .
. . the then-traditional equity standard” so that the FTC “was
not held to the high thresholds applicable where private
parties seek interim restraining orders”) (quotation marks
omitted); FTC v. Affordable Media, LLC, 179 F.3d 1228,
1233 (9th Cir. 1999) (recognizing that Section 13(b) “places a
lighter burden on the Commission than that imposed on
private litigants by the traditional equity standard”)(quotation
marks omitted).
10
Section 16 of the Clayton Act. 23 We agree with that
conclusion.
The District Court relied on a number of factors in
concluding otherwise, but none is persuasive. The District
Court first pointed to the legislative history of the Clayton
Act to justify its relevance here. It noted that “Congress
intended that an individual plaintiff should not bear ‘the very
high price of obtaining judicial enforcement of . . . the
antitrust laws.’” 24 However, we have examined the extensive
history of this Act and find nothing that clearly shows
Congress’s intent to empower us to extend the fee-shifting
provision of the Clayton Act to cover an action for injunctive
relief under another statute. 25 As a result, we are not
persuaded that the legislative history of the Clayton Act
supports the District Court’s conclusion.
The District Court also cited Supreme Court precedent,
Maher v. Gagne, 26 for the proposition that the fee-shifting
provisions of one statute can apply to pendent claims brought
under other statutes. Maher, however, does not support
23
See FTC v. Staples, Inc., 239 F. Supp. 3d 1, 4-5 (D.D.C.
2017).
24
Hershey III, 2017 WL 1954398, at *3 (quoting H.R. Rep.
No. 94-499, part 1, at 19-20 (1976)).
25
See H.R. Rep. No. 94-499, pt. 1, at 18-20 (1976); see also
Buckhannon Bd., 532 U.S. at 608 (holding that, “in view of
the ‘American Rule’ that attorney’s fees will not be awarded
absent explicit statutory authority, . . . [ambiguous] legislative
history is clearly insufficient to alter the accepted meaning of
the statutory term”) (quotation marks omitted).
26
448 U.S. 122 (1980).
11
application of the Clayton Act’s fee-shifting provision in this
case. In Maher, the plaintiff brought claims under 42 U.S.C.
§ 1983, alleging that Connecticut’s Aid to Families with
Dependent Children program violated Section 402(a)(7) of
the Social Security Act, 27 as well as the Equal Protection and
Due Process Clauses of the Fourteenth Amendment. 28 After
the District Court approved a settlement between the parties,
the plaintiff sought attorneys’ fees under 42 U.S.C. § 1988,
which authorizes fees for parties who prevail under Section
1983 (among other statutes). Responding to objections that
the Eleventh Amendment prevented a federal court from
ordering fees against a state for statutory, non-civil rights
claims like the plaintiff’s claim under the Social Security Act,
the Supreme Court held that Section 1988 allows for “the
award of fees in a case in which the plaintiff prevails on a
wholly statutory, non-civil-rights claim pendent to a
substantial constitutional claim or in one in which both a
statutory and a substantial constitutional claim are settled
favorably to the plaintiff without adjudication.” 29 The Court
went on to say: “The legislative history makes it clear that
Congress intended fees to be awarded where a pendent
constitutional claim is involved, even if the statutory claim on
which the plaintiff prevailed is one for which fees cannot be
awarded under the Act.” 30
Stretching the logic of Maher, the Commonwealth
argues that it is entitled to attorneys’ fees because its claim
under Section 16 of the Clayton Act was pendent to the
27
42 U.S.C. § 602(a)(7).
28
Maher, 448 U.S. at 125.
29
Id. at 132.
30
Id. at 132 n.15.
12
FTC’s claim under Section 13(b) of the FTC Act. But the
issue in Maher was fundamentally different. The issue in
Maher was whether the plaintiff’s including the Social
Security Act violation in its Section 1983 complaint
disqualified it from receiving fees authorized by Section
1988. The theory was that the fees were only to vindicate
violations of the Fourteenth Amendment. But the Supreme
Court held that the plaintiff could recover attorneys’ fees
under Section 1988 because she had alleged violations of her
Fourteenth Amendment Due Process and Equal Protection
rights. As for the fact that she had also alleged a purely
statutory violation (of the Social Security Act), the Supreme
Court held that this did not preclude an award of attorneys’
fees under Section 1988 because this was pendant to the
constitutional claims. 31
But—as we noted earlier—Section 16 of the Clayton
Act specifies that a party must substantially prevail “[i]n any
action under this section.” 32 This language limits the
application of Chapter 13’s fee-shifting provision to parties
who obtain relief under that section. 33 As we noted above,
requests for relief under that section are assessed on a
31
Id. at 132.
32
15 U.S.C. § 26 (emphasis added).
33
See John T. ex rel. Paul T. v. Del. Cty. Intermediate Unit,
318 F.3d 545, 560 (3d Cir. 2003) (“When the [Individuals
with Disabilities Education Act] fee-shifting provision
authorizes attorneys[’] fees ‘in any action or proceeding
brought under this section,’ it not only limits the universe to
which it applies but also clarifies the type of proceeding on
which a party must ‘prevail.’”) (first emphasis added)
(quoting 20 U.S.C. § 1415(i)(3)).
13
different and more lenient standard than are requests for relief
under Section 16 of the Clayton Act, and we clearly decided
that the injunction should issue based on the standard of
Section 13(b), not Section 16. Such differences were not
evident in Maher. As also noted above, the legislative history
does not justify extending the Clayton Act’s fee-shifting
provisions to other statutory schemes. For all of these
reasons, we are not persuaded that Maher gives us any basis
to extend the fee-shifting provisions of the Clayton Act to a
claim raised and adjudicated under the FTC Act. 34
34
The Commonwealth maintains that it did raise its claim
under the Clayton Act and that we acknowledged this in
Hershey II. It is true that we referenced both the Clayton Act
and the FTC Act as a basis for the suit brought jointly by the
Commonwealth and the FTC. In particular, we noted that the
Commonwealth and the FTC “filed suit . . . under” both
Section 16 of the Clayton Act and Section 13(b) of the FTC
Act, Hershey II, 838 F.3d at 333, and we also stated that
“[t]he District Court had jurisdiction” under both Section 16
of the Clayton Act and Section 13(b) of the FTC Act, id. at
335. But the Commonwealth does not have standing to
pursue a claim under the FTC Act, and these statements
merely declare that the Clayton Act gave them standing in
this case. The issue of standing aside, the facts remain that
the Commonwealth and the FTC litigated their request for an
injunction under Section 13(b) of the FTC Act and that we
ordered the injunction under that section and the more lenient
standard that applies thereto. As one court explained in
rejecting the Commonwealth’s claim for attorneys’ fees in a
similar case, the Commonwealth “cannot have it both ways”
by “rid[ing] the FTC’s claim to a successful preliminary
injunction under the more permissive Section 13(b) standard
14
Finally, the District Court raised concerns that failing
to allow the Commonwealth to seek attorneys’ fees in this
situation would be contrary to the interests of judicial
economy. Forcing the Commonwealth to pursue a separate
case to bring a claim under Section 16, the District Court said,
could result in “duplicative litigation, separate filings, and
repetitive arguments” because this would be the only avenue
for claiming attorneys’ fees. 35 We are not persuaded that
such concerns outweigh the plain language of the statutes.
V.
In sum, we conclude that the authority for this
injunction arose from Section 13(b) of the FTC Act, which—
unlike Section 16 of the Clayton Act—does not provide for
attorneys’ fees. Hence, for all of the foregoing reasons, the
Commonwealth has no legal basis to claim attorneys’ fees in
this case and we will affirm the order of the District Court on
that ground.
and then cit[ing] that favorable ruling as the sole justification
for fee-shifting under the more rigorous Clayton Act
standard.” Staples, 239 F. Supp. 3d at 5.
35
Hershey III, 2017 WL 1954398, at *3.
15