United States v. Mercy Health Serv. ( 1997 )

___________
No. 95-4253
___________
United States of America, *
*
Appellant, *
*
v. *
*
Mercy Health Services; Finley *
Tri-States Health Group, Inc., *
*
Appellees. *
*
--------------------- *
* Appeal from the United States
State of Arkansas; State of * District Court for the
Delaware; State of Florida; * Northern District of Iowa.
State of Illinois; State of *
Louisiana; State of Maryland; *
Commonwealth of Massachusetts; *
State of Minnesota; State of *
Missouri; State of New *
Hampshire; State of New Mexico; *
State of North Carolina; State *
of North Dakota; State of Ohio; *
State of Oregon; Commonwealth *
of Pennsylvania; State of Rhode *
Island; State of South Dakota; *
State of Texas; State of *
Virginia; State of Washington; *
State of West Virginia; State *
of Wisconsin; State of New York;*
American Association of Health *
Plans; Missouri Managed Health *
Care Association; California *
Association of HMOs; *
Massachusetts Association of *
HMOs; Oklahoma Association of *
HMOs; Deere & Company; John *
Deere Health Care, Inc.; *
International Union, United *
Automobile, Aerospace & *
Agricultural Implement Workers *
of America; Iowa Managed Care *
Association; Illinois *
Association of Health *
Maintenance Organizations; *
American Hospital Association; *
Association of Iowa Hospitals *
and Health Systems; Barnstead/ *
Thermolyne; Dubuque Bank and *
Trust; FDL Foods, FDL Foods, *
Inc.; Flexsteel Industries, *
Flexsteel Industries *
Incorporated; Flynn Ready-Mix; *
Galena State Bank; Interstate *
Power Company; The Metrix *
Company; Molo Companies; Myers- *
Cox and Portzen Construction, *
*
Amici Curiae. *
___________
No. 96-1051
___________
United States of America, *
*
Appellee, *
*
v. *
*
Mercy Health Services; Finley *
Tri-States Health Group, Inc., *
*
Appellants. *
*
--------------------- *
*
State of Texas; State of *
Virginia; State of Washington; *
State of West Virginia; State *
of Wisconsin; State of Arkansas;*
State of Delaware; State of *
Florida; State of Illinois; *
State of Louisiana; State of *
Maryland; Commonwealth of *
Massachusetts; State of *
Minnesota; State of Missouri; *
State of New Hampshire; State *
of New Mexico; State of North *
Carolina; State of North Dakota;*
State of Ohio; State of Oregon; *
Commonwealth of Pennsylvania; *
State of Rhode Island; State of *
South Dakota; State of New York;*
American Association of Health *
Plans; Missouri Managed Health *
-2-
2
Care Association; California *
Association of HMOs; *
Massachusetts Association of *
HMOs; Oklahoma Association of *
HMOs; Deere & Company; John *
Deere Health Care, Inc.; *
International Union, United *
Automobile, Aerospace & *
Agricultural Implement Workers *
of America; Iowa Managed Care *
Association; Illinois *
Association of Health *
Maintenance Organizations; *
American Hospital Association; *
Association of Iowa Hospitals *
and Health Systems; Barnstead/ *
Thermolyne; Dubuque Bank and *
Trust; FDL Foods; Flexsteel *
Industries; Flynn Ready-Mix; *
Galena State Bank; Interstate *
Power Company; The Metrix *
Company; Molo Companies; Myers- *
Cox and Portzen Construction, *
*
Amici Curiae. *
___________
Submitted: October 24, 1996
Filed: February 26, 1997
___________
Before FAGG, ROSS, and MAGILL, Circuit Judges.
___________
MAGILL, Circuit Judge.
The United States brought this action for injunctive relief under
Section 7 of the Clayton Act and Section 1 of the Sherman Act to prevent
Mercy Health Services (Mercy) and Finley Tri-States Health Group, Inc.
(Finley) from merging. The district court1 denied the injunction, see
United States v. Mercy Health Serv., 902 F. Supp. 968, 989 (N.D. Iowa
1995), and the United States appeals.
1
The Honorable Michael J. Melloy, United States Chief Judge
for the Northern District of Iowa.
-3-
3
Following the submission of this appeal, Finley formally announced its
abandonment of the proposed merger. Contrary to the positions of the
parties, we conclude that the appeal in this case is moot, and accordingly
we vacate the district court's decision and dismiss this appeal.
I.
Mercy and Finley operate the only two acute-care hospitals in
Dubuque, Iowa, a city of 86,403. While there are several small rural
hospitals near Dubuque, the closest comparable hospitals to Mercy and
Finley are regional hospitals located between 70 and 100 miles away in
Waterloo, Iowa, Cedar Rapids, Iowa, Iowa City, Iowa, Davenport, Iowa,
Madison, Wisconsin, and Freeport, Illinois (Regional hospitals).2
In 1993, Mercy and Finley began pursuing a partnership which would
have merged the two entities into Dubuque Regional Hospital Systems. The
United States investigated the proposed merger and filed a complaint on
June 10, 1994, seeking to prevent the merger of Mercy and Finley under
Section 7 of the Clayton Act, 15 U.S.C. § 18 (1994), and Section 1 of the
Sherman Antitrust Act, 15 U.S.C. § 1 (1994).
Following a two-week trial, the district court held that the United
States had failed to carry its burden of proving that the
2
In 1994 Mercy had approximately 320 staffed beds and an
average daily census of 127, while Finley was estimated to have 124
staffed beds and an average daily census of 63. The Regional
hospitals, which "generally offer the same or greater range of
services as provided by Mercy and Finley," United States v. Mercy
Health Serv., 902 F. Supp. 968, 972 (N.D. Iowa 1995), had between
143 and 868 staffed beds and an average daily census of between 70
and 677. By contrast, the rural hospitals, which "mainly provide
primary care services and do not provide the breadth of services
Mercy and Finley offer," id. at 971, had between 25 and 99 licensed
beds and an average daily census of between 3 and 12.4.
-4-
4
merger would have anticompetitive effects and denied the requested
injunction. Key to the district court's conclusion was its finding that
the United States had not proven that the relevant geographic market did
not include the Regional hospitals, a necessary prerequisite to finding
anticompetitive effects. See Mercy Health Serv., 902 F. Supp. at 987.3
The district court also held that if the United States had proven a more
limited geographic market, then the court would have rejected Mercy's and
Finley's argument that efficiencies stemming from the merger justified any
anticompetitive effects. Id. at 989.
On appeal, the United States argues that the district court clearly
erred in finding that the United States failed to prove a more limited
geographic market. On cross-appeal, Mercy and Finley contend that the
district court erred in rejecting their efficiency arguments.
3
In FTC v. Freeman Hosp., 69 F.3d 260 (8th Cir. 1995), this
Court described the relevant geographic market for antitrust
purposes:
The determination of the relevant market is a "necessary
predicate" to a finding of a Clayton Act violation.
Without a well-defined relevant market, an examination of
a transaction's competitive effects is without context or
meaning. . . .
A relevant market consists of two separate
components: a product market and a geographic
market. . . . A geographic market is that geographic area
to which consumers can practically turn for alternative
sources of the product and in which the antitrust
defendants face competition. In order to meet its
burden, the FTC is required to present evidence
addressing the critical question of where consumers of
acute care inpatient hospital services could practicably
turn for alternative sources of the product should the
Hospitals' merger be consummated and [the] hospital
prices become anti-competitive.
Id. at 268 (quotations and citations omitted).
-5-
5
On January 15, 1997, after this appeal had been submitted to this
Court, Finley formally announced that it had abandoned its proposed merger
with Mercy. In a press release, Kevin L. Rogols, the president and chief
executive officer of Finley, announced Finley's
decision to withdraw from the Dubuque Regional Health System
(DRHS), a planned partnership between Finley and Mercy Health
Center, where both hospitals would have shared operating
revenues.
Reprinted in Resp. of the United States of America to Letter from the Court
Dated January 21, 1997 (Feb. 7, 1997). The release was circulated to the
national press, and was reported in the Wall Street Journal. See Two Iowa
Hospitals Drop Plan to Merge Operations, Wall St. J., Jan. 21, 1997, at A4.
In response to this Court's request for a statement from counsel regarding
the nonmerger decision, counsel for Mercy and Finley explained that:
Though [Mercy and Finley] have dissolved their partnership, the
parties desire to have the opportunity to combine some or all
of their operations in the future. They are unwilling to
commit that they would not do so. . . . A decision that the
case was moot would leave an issue unresolved that could be of
great importance to the parties in the future.
Defs.' Position Statement Regarding Status of the Case at 2 (Feb. 7, 1997).
The United States also asserted that the appeal was not rendered moot by
Finley's decision to abandon the merger. See Resp. of the United States
of America to Letter from the Court Dated January 21, 1997 at 1.
-6-
6
II.
This Court does not have jurisdiction to hear an appeal in a matter
that no longer constitutes a live case or controversy. As the Supreme
Court has stated:
The exercise of judicial power under Art. III of the
Constitution depends on the existence of a case or controversy.
. . . [A] federal court has neither the power to render
advisory opinions nor to decide questions that cannot affect
the rights of litigants in the case before them. Its judgments
must resolve a real and substantial controversy admitting of
specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be
upon a hypothetical state of facts. . . . The rule in federal
cases is that an actual controversy must be extant at all
stages of review, not merely at the time the complaint is
filed.
Preiser v. Newkirk, 422 U.S. 395, 401 (1975) (quotations and citations
omitted). See also Keevan v. Smith, 100 F.3d 644, 647 (8th Cir. 1996) ("A
claim is properly dismissed as moot if it has lost its character as a
present, live controversy of the kind that must exist if we are to avoid
advisory opinions on abstract questions of law." (citations and quotations
omitted)); Beck v. Missouri State H.S. Activities Ass'n, 18 F.3d 604, 605
(8th Cir. 1994) (per curiam) ("During the course of litigation, the issues
presented in a case may lose their life because of the passage of time or
a change in circumstances. When this happens and a federal court can no
longer grant effective relief, the case is moot. Federal courts lack power
to decide moot cases." (citations omitted)). We may not consider an
appeal, even if all of the parties involved wish us to, if the relief
ultimately obtained would be meaningless and the resultant opinion no more
than advisory.
Generally, the "voluntary cessation of allegedly illegal conduct does
not deprive the tribunal of power to hear and
-7-
7
determine the case, i.e., does not make the case moot." United States v.
W.T. Grant Co., 345 U.S. 629, 632 (1953). This is because
[a] controversy may remain to be settled in such circumstances,
e.g., a dispute over the legality of the challenged practices.
The defendant is free to return to his old ways. This,
together with a public interest in having the legality of the
practices settled, militates against a mootness conclusion.
Id. (citations and note omitted). See also City of Mesquite v. Aladdin's
Castle, Inc., 455 U.S. 283, 289 (1982) ("It is well settled that a
defendant's voluntary cessation of a challenged practice does not deprive
a federal court of its power to determine the legality of the practice.
Such abandonment is an important factor bearing on the question whether a
court should exercise its power to enjoin the defendant from renewing the
practice, but that is a matter relating to the exercise rather than the
existence of judicial power." (note omitted)). Thus, where "resumption of
the challenged conduct depends solely on the defendants' capricious actions
by which they are free to return to their old ways," Steele v. Van Buren
Pub. Sch. Dist., 845 F.2d 1492, 1494 (8th Cir. 1988) (quotations,
citations, and alterations omitted), a case is not rendered moot by the
defendant's abandonment of allegedly illegal conduct.
A case "may nevertheless be moot if the defendant can demonstrate
that there is no reasonable expectation that the wrong will be repeated.
The burden is a heavy one." W.T. Grant Co., 345 U.S. at 633 (quotations
and note omitted). See also Gwaltney v. Chesapeake Bay Foundation, 484
U.S. 49, 66 (1987) ("The defendant must demonstrate that it is absolutely
clear that the allegedly wrongful behavior could not reasonably be expected
to recur." (quotations and citations omitted) (emphasis in original));
Aladdin's Castle, 455 U.S. at 289 n.10 ("The test for mootness in
-8-
8
cases such as this is a stringent one. . . . A case might become moot if
subsequent events made it absolutely clear that the allegedly wrongful
behavior could not reasonably be expected to recur." (quotations and
citations omitted)).
The parties suggest that this is a case where, despite Finley's
decision to abandon the proposed merger, Mercy and Finley are free to
"return to [their] old ways." W.T. Grant Co., 345 U.S. at 632 (note
omitted). We disagree. The genesis of this case is not any allegedly
anticompetitive conduct that Mercy and Finley have actually engaged in, but
the alleged threat that their proposed merger posed to competition. There
is no illegal conduct for Mercy and Finley to return to, and Mercy and
Finley have obviated the threat of illegal conduct by abandoning their
proposed merger.
To be sure, Mercy and Finley could, at some time in the future, again
decide to merge. But this hypothetical renewed attempt to merge would
neither be prevented, nor allowed, by a decision of this Court at this
time. If we were to reverse the district court's judgment and direct the
imposition of an injunction, we would not be disabling Mercy and Finley
from ever again seeking a merger. See Association For Retarded Citizens
of North Dakota v. Sinner, 942 F.2d 1235, 1239 (8th Cir. 1991) ("It is well
settled that a district court retains authority under Rule 60(b)(5) to
modify or terminate a continuing, permanent injunction if the injunction
has become illegal or changed circumstances have caused it to operate
unjustly."); see also King-Seeley Thermos Co. v. Aladdin Indus., Inc., 418
F.2d 31, 35 (2d Cir. 1969) ("While we hold there is power to modify an
injunction even in the absence of changed conditions, the power should be
sparingly exercised."). Rather, we would be holding that the 1993 merger
attempt, which has now been abandoned, would have been anticompetitive.
Considering the significant changes experienced by the hospital industry
in the recent past and the profound changes likely facing the industry in
-9-
9
the near future, see Mercy Health Serv., 903 F. Supp. at 973-75 (discussing
health care market trends), we believe that a merger, deemed
anticompetitive today, could be considered procompetitive tomorrow.
Similarly, by affirming the district court's decision that, as of
October 27, 1995, the United States had failed to prove that the now-
abandoned merger would have had anticompetitive effects, we would not be
granting a permanent license to Mercy and Finley to merge whenever they
would like, regardless of the passage of time or the change of
circumstances. It is beyond argument that a merger which would have been
legal in the past may well be anticompetitive in the future; indeed, the
district court's denial of injunctive relief was heavily informed by the
volatile nature of the hospital industry. See id. Because a favorable
decision by this Court would not give Mercy and Finley an eternal license
to merge regardless of circumstances, the United States would have the
opportunity to investigate the anticompetitive effects of a proposed merger
in the future.4 The United States could then seek injunctive relief to
halt this new merger attempt. A district court trying the case would then
have to examine the factual circumstances extant at the time of this
hypothetical future suit to determine if the new merger would have
anticompetitive effects.
We decline to issue a judgment which has no present relevance on the
mere chance that it could have some marginal utility in an uncertain
future. While we understand that the parties in this case have expended
significant resources in this litigation, and
4
Indeed, if the merging entities met certain statutory and
regulatory guidelines, they would be required to file with the
United States a statement of their intent to merge. See 16 C.F.R.
§§ 801-803 (1996) (regulations implementing the Hart-Scott-Rodino
Antitrust Improvements Act of 1976). Even if premerger
notification was not mandated, the hospitals could request a review
of the proposed merger by the United States. See 28 C.F.R. § 50.6
(1996) (Antitrust Division business review procedure).
-10-
10
that each would like a favorable decision from this Court to influence
possible future litigation, the parties' mere desire for a ruling does not
revive a dead case into a live controversy. Now that the United States has
been given all of the relief it has sought by its party opponents' decision
to abandon the merger, the United States has no continuing stake in this
litigation. In discarding its merger attempt today, Mercy and Finley
cannot seek an advisory decision by this Court for their use tomorrow. We
5
conclude, in all of the circumstances, that this case is moot.
III.
Accordingly, we vacate the district court's decision and remand to
the district court with directions to dismiss this case as moot. See
United States v. Munsingwear, Inc., 340 U.S. 36, 39 (1950).
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
5
We note that the court in R.C. Bigelow, Inc. v. Unilever
N.V., 867 F.2d 102 (2d Cir. 1989), came to a contrary conclusion,
and held that the abandonment of a proposed merger did not moot a
challenge to the merger. Unlike the circumstances in R.C. Bigelow,
we do not believe that here the "abandonment of challenged conduct
seems timed to head off an adverse determination on the merits."
Id. at 106. Indeed, it is apparent that Mercy and Finley would
prefer this Court to render a decision on the merits, and that the
timing of the decision to abandon the merger during the pendency of
the appeal was no more than coincidence.
-11-
11