fact, Wesley's competitors have gained market share vis-a-vis Wesley since the acquisition -- clear proof the acquisition is not likely to have the anticompetitive effects posited by BCBSK.
Equally lacking merit is BCBSK's argument HCA's acquisitions eliminated a potential entrant. There is no record evidence HCA had any inclination to enter the Wichita hospital services or health care financing markets until it was approached by Wesley and HCP. (SMF paras. 70, 71.) HCA certainly did not abandon plans to construct a new hospital or establish a new HMO in Wichita when these opportunities arose. BCBSK's references to internal position papers prepared by Wesley prior to its approach to HCA are not probative of HCA's intent; even if they were, however, they establish nothing more than the possibility an investor-owned chain might enter the Wichita market by purchasing a hospital. This is precisely the type of entry which in fact occurred, but it does not demonstrate the likelihood of de novo entry -- by constructing a hospital -- which is required under the potential entrant doctrine. FTC v. Atlantic Richfield Co., 549 F.2d 289, 294-95 (4th Cir. 1977) ("clear proof" that acquiring firm would in fact have entered the relevant market is required).
Finally, the contention HCA's acquisition of HCP somehow "solidified" the alleged conspiracy to boycott HMOK is clearly unfounded. Even if such a conspiracy existed (contrary to the evidence), HCA's purchase of HCP dissipated rather than "cemented" the ties between physicians and HCP by eliminating the stock ownership which, according to BCBSK itself, created the motivation for the "boycott". There is no evidence in the record, then, that even tends to suggest HCA's acquisition of HCP will make it more difficult for competing HMOs to contract with providers, including Wesley. Indeed, Wesley has had, and continues to have, a contract with HMOK. (SMF para. 82.)
BCBSK has failed to present any evidence it has suffered antitrust injury as a result of HCA's acquisitions of Wesley and HCP. That these acquisitions may make Wesley and HCP more formidable competitors does not constitute antitrust injury to BCBSK. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977).
BCBSK's argument regarding the likely anticompetitive effects of HCA's vertical integration in the Wichita market is premised on the notion HCA's purchases of Wesley and HCP created a "closed, fully integrated system." This argument is contrary to the evidence, and the law.
The undisputed evidence shows Wesley is still a participant (and wishes to continue to participate) in BCBSK's CAP program and HMOK. (SMF paras. 81-82.) Similarly, HCP maintains contracts with all of the hospitals in Wichita. In fact, prior to HCP's sale to HCA, HCP sought and received assurances from HCA that it would not be required to deal solely with Wesley after the acquisition, and the evidence conclusively demonstrates this has been the case. (Tran. 17, pp. 2968-70.) Thus, there is no evidence of the actual or probable market foreclosure that is the harm which Dr. Christianson imagined could possibly occur from the creation of a closed system. The capitation agreement between Wesley and HCP was signed long before the integrated system allegedly created by HCA's acquisitions was even conceived. (SMF para. 75.) The purported "channeling mechanisms" of HCA were fully explored at trial, and it is clear on the record no such mechanisms are in place, or are even under consideration, in Wichita. (SMF paras. 79-80.)
The absence of any actual or probable market foreclosure also distinguishes this case from the vertical integration cases relied upon by BCBSK. As BCBSK concedes, vertically integrated systems are not a concern per se; it is only when the vertical integration produces probable or actual anticompetitive effects of a substantial nature that § 7 is implicated. In this case, despite HCA's "track record" of almost two years, BCBSK is unable to identify any such actual or probable anticompetitive effects, much less any injury to BCBSK, arising out of HCA's acquisitions.
The contention these acquisitions somehow raised the barriers to entry in the health care services or health care financing markets is similarly without foundation. The only evidence in the record -- other than Dr. Christianson's speculation -- is that at least three vertically integrated competitors have entered the market since the acquisition: HMO Kansas re-entered the market through Kansas Health Plans; BCBSK has reestablished its Choice Care PPO; and St. Francis established its own PPO. (SMF paras. 85-86.) Not only is there no evidence that entry barriers have been raised, but Dr. Christianson's assumption the payment of "premium prices" for Wesley and HCP will deter entry by vertically integrated competitors is legally and logically suspect. As the Court noted in Missouri Portland Cement Co. v. Cargill, Inc., 498 F.2d 851, 866 n. 32 (2d Cir.), cert. denied 419 U.S. 883, 42 L. Ed. 2d 123, 95 S. Ct. 150 (1974), "mere recitation of the 'deep pocket' shibboleth [is] not enough" to establish a § 7 violation. BCBSK fails to produce any evidence demonstrating how the presence of a "deep pocket" company in the Wichita market will increase barriers to entry. This failure of proof distinguishes the instant case from Kennecott Copper Corp. v. FTC, 467 F.2d 67 (10th Cir. 1972), cert. denied 416 U.S. 909, 94 S. Ct. 1617, 40 L. Ed. 2d 114 (1974), where the Court approved the FTC's finding Kennecott would use its "deep pocket" to acquire vast coal reserves and compete for long-term utility supply contracts, thus gaining new market share and increasing concentration in the market. Even assuming arguendo HCA did pay substantially more for Wesley and HCP than their "true values", that would not increase the cost of entry for an integrated competitor. BCBSK's speculation that other vertically integrated competitors might view opportunities in other geographical markets to be more attractive than Wichita, does not demonstrate that HCA's acquisitions have had, or will have, any anticompetitive effects in Wichita; to the contrary, it demonstrates the highly competitive nature of the hospital services market in Wichita.
In conclusion, the undisputed record demonstrates nothing more than that HCA purchased the largest hospital and the only existing HMO in Wichita in 1985, and since that time Wesley has lost market share and BCBSK has introduced new programs in Wichita in competition with HCP to Choice Care and Kansas Health Plans. Lacking any evidence of actual or probable anti-competitive effects (or antitrust injury), BCBSK has utterly failed to sustain its burden of proof under § 7. In fact, the evidence of record demonstrates, with the exception of BCBSK's own unlawful conduct, that the acquisitions in question have neither occasioned nor threatened any anticompetitive consequences.
Counterclaim defendants are therefore entitled to summary judgment on BCBSK's § 7 claims.
-- State Tort Claims --
The last two counts of BCBSK's counterclaim allege HCP interfered with BCBSK's prospective advantage and contractual relations by causing Hillside Medical Office and Wichita Clinic to terminate their agreements with HMOK. Counterclaim paras. 31, 32. There is no issue whatsoever as to these claims as they relate to Hillside Medical Office, because the evidence demonstrates HCP did not interfere with Hillside's relations with HMOK in any manner. Hillside's decision to terminate its contract with HMOK was made independently, without any input from HCP or any other third party. Nor can BCBSK's tort claims relating to the Wichita Clinic survive this motion for summary judgment.
It is fundamental that the tort of interference with contractual relations requires proof HCP induced Wichita Clinic to breach its contract with HMOK. Professional Investors Life Ins. Co. v. Roussel, 528 F. Supp. 391, 397 (D. Kan. 1981); see also Prudential Ins. Co. of Amer. v. Sipula, 776 F.2d 157, 162 (7th Cir. 1985). The contract between Wichita Clinic and HMOK, however, was terminable at will upon 30 days' notice, and the Wichita Clinic therefore committed no breach by terminating the contract in accordance with its terms.
Further, it is well settled under Kansas law that not all interference in present or future contractual relations is tortious. Turner v. Halliburton Co., 240 Kan. 1, 12, 722 P.2d 1106, 1115 (1986). Rather, a necessary predicate for both causes of action is "malice". Turner, 240 Kan. at 12-13. Malice is defined as "intentional interference without justification." Restatement (Second) of Torts § 766 comment s (1979); see also May v. Santa Fe Trail Transp. Co., 189 Kan. 419, 370 P.2d 390 (1962) ("While it is true that an action will lie for unjustifiably inducing a breach of contract by a party thereto, the inducement must be wrongful and not privileged.").
One's privilege to engage in business and to compete with others implies a privilege to induce third persons to do their business with him rather than with his competitors. Restatement (Second) of Torts § 768 comment b (1979); see also Prudential Ins. Co., 776 F.2d at 162-63 ("lawful competition . . . constitutes a privileged interference with another's business"). Consequently, no tort is committed by a competitor who causes a third person not to enter into a prospective contractual relation, or not to continue in existing contracts terminable at will, so long as the actor does not employ improper means and his purpose is at least in part to advance his interest in competing with the other. Restatement (Second) of Torts § 768 (1979).
It is clear HCP's discussions with the Wichita Clinic regarding a possible "exclusive arrangement" were made to advance HCP's competitive interests vis-a-vis HMOK; indeed, the discussions in 1984 were prompted by HMOK's own overtures regarding an exclusive arrangement with that group.
Nor is there any evidence to suggest HCP engaged in fraud, coercion, or any other arguably wrongful or illegal means in an effort to convince the Wichita Clinic (or any other group for that matter) to deal "exclusively" with HCP -- yet another failure of proof distinguishing BCBSK's claims of tortious interference from those of plaintiff Wesley. At most, the evidence shows HCP sought to persuade the Wichita Clinic that it was in the clinic's best interest to continue to deal with HCP. Persuasion, however, is not wrongful, and such efforts do not support a claim for tortious interference. Restatement (Second) of Torts § 770 comment d (1979).
Counterclaim defendant HCP is granted summary judgment on BCBSK's claims of tortious interference with prospective advantage and contractual relations.
-- Counterclaim --
To avoid summary judgment under Rule 56 requires the non-moving party to demonstrate the existence of genuine issues of material fact. The massive record before the court portrays not anticompetitive conduct by counterclaim defendants, but competition and BCBSK's fear of competition. In 1984, HMOK lost the competitive contest to HCP; HCP was able to persuade medical groups to do business with it, often at the expense of HMOK, by offering a better product: more patients, an acceptable risk level, more profits, and the possibility of future equity returns as to the limited number of physicians who purchased the stock. HMOK failed to respond effectively and voluntarily decided to withdraw from the marketplace. In 1985, HCA acquired Wesley and HCP, acquisitions which left the number of Wichita hospitals and health care financing organizations unchanged. The structure of neither market was altered. BCBSK, however, became frightened because it perceived the arrival of even more effective competition.
BCBSK's litany of "conspiracy", "force-out", "lock-up", "payoff", and the like, unsupported by probative admissible evidence does not alter these truths. I read the Tenth Circuit's recent decision in Gibson v. Greater Park City Co., supra, with no small sense of deja vu. Plaintiffs Gibson, et al., pursued an approach to their antitrust allegations striking in its similarity to the approach undertaken by BCBSK in this case. BCBSK has seized on a plethora of "facts", isolating and attributing to each a conspiratorial motive, as did plaintiff Gibson. Gibson's evidence was ambiguous because respondents Greater Park City Co., et al., offered plausible nonconspiratorial explanations for each action about which he complained. BCBSK's evidence in this case is, at best, equally ambiguous because the counterclaim defendants have done the same. Plaintiff Gibson was unable to respond with evidence tending to exclude the possibility the alleged conspirators acted independently, and his antitrust complaint was summarily judged and dismissed. Greater Park City Co., supra, slip op. at 6-7. BCBSK has likewise failed in this case, and summary judgment is, for the same reasons, required.
Counterclaim defendants' motion for summary judgment is sustained in its entirety.
Reviewing the evidence and testimony relating to both the complaint and counterclaim, the quintessence is this: for the first time in its corporate existence Blue Cross and Blue Shield of Kansas faces vigorous, efficient, well-managed, and effective price and product competition, attracting the attention and business of Kansas consumers of health care financing products. The allegations in the counterclaim are unsupported; Blue Cross and Blue Shield of Kansas, and HMO Kansas, suffered no anti-competitive, illegal or remotely impermissible competition from Hospital Corporation of America, Health Care Plus, or Wesley Medical Center. After hearing the evidence on plaintiffs' complaint, the jury found Blue Cross and Blue Shield chose to react to this competition not on the merits of its own products but in a manner violating federal antitrust and state laws, injuring the very consumers defendant professes to serve, competition in the market for health care financing products, and plaintiff Wesley Medical Center. That verdict is supported by prevailing law and abundant evidence, and will not be disturbed. Therefore, in order to restore the rights of Kansas consumers, the competition in the relevant market, and the respective positions of the parties required by law:
IT IS ACCORDINGLY ORDERED this 22nd day of May, 1987, the motion of defendant Blue Cross and Blue Shield of Kansas, Inc., to set aside the jury's verdict and dismiss this case for lack of jurisdiction under the McCarran-Ferguson Act is overruled.
IT IS FURTHER ORDERED defendant's motions for directed verdict, taken under advisement during trial and at the close of evidence, are overruled.
IT IS FURTHER ORDERED defendant's motion for judgment notwithstanding the verdict or alternatively for a new trial is overruled.
IT IS FURTHER ORDERED that judgment this day is entered upon the jury's verdict of September 30, 1986, in favor of plaintiff HCA Health Services of Kansas, Inc., d/b/a Wesley Medical Center, against defendant Blue Cross and Blue Shield of Kansas, Inc., in the amount of $ 5,378,941.00, representing trebled actual antitrust damages in the amount of $ 4,628,940.00, actual nominal damages of $ 1.00, and punitive damages of $ 750,000.00. Interest thereon shall be calculated from May 22, 1987, the date of the entry of judgment. 28 U.S.C. § 1961.
IT IS FURTHER ORDERED the motion of plaintiffs Walter L. Reazin, M.D., HCA Health Services of Kansas, Inc., d/b/a Wesley Medical Center, Health Care Plus, Inc., and New Century Life Insurance Company for injunctive relief against defendant Blue Cross and Blue Shield of Kansas, Inc., is overruled.
IT IS FURTHER ORDERED plaintiffs' application for an award of attorneys' fees and costs through September 30, 1986, in the combined amount of $ 2,423,828.74, consisting of attorneys' fees of $ 2,176,983.75, expert witness fees and other reimbursable items of $ 209,767.77, and allowable costs of $ 37,077.22, is granted against defendant Blue Cross and Blue Shield of Kansas, Inc.
IT IS FURTHER ORDERED plaintiffs are hereby granted 30 days to file application, with supporting records and affidavits, for an award of attorneys' fees and costs representing services associated with their complaint provided after September 30, 1986. Defendant is provided 10 days thereafter to respond in writing.
IT IS FURTHER ORDERED the motion of counterclaim defendants Walter L. Reazin, M.D., HCA Health Services of Kansas, Inc., d/b/a Wesley Medical Center, Health Care Plus, Inc., New Century Life Insurance Company, and Hospital Corporation of America for summary judgment on the counterclaim of Blue Cross and Blue Shield of Kansas, Inc., and HMO Kansas, Inc., is sustained. The counterclaim is dismissed with prejudice in its entirety.