Federal Court Grants Medical Center’s Request for Transfer of FTC Suit

As explained in prior posts, the Federal Trade Commission (“FTC”) filed suit in the U.S. District Court for the District of Columbia seeking to enjoin Louisiana Children’s Medical Center (“LCMC”) from continuing to integrate three hospitals it previously acquired because it failed to file the pre-merger notification required under the Hart-Scott-Rodino Act (“HSR Act”).

LCMC filed a separate suit in the U.S. District Court for the Eastern District of Louisiana where LCMC operates. That suit seeks a declaratory judgment that the HSR Act does not apply because of the issuance by the Louisiana Attorney General of a certificate of public advantage (“COPA”) under Louisiana’s COPA law permitting the acquisitions, and because the issuance of the COPA constituted state action conferring immunity from federal antitrust law. LCMC also filed a motion requesting that the case be transferred to the District Court for the Eastern District of Louisiana. The FTC opposed the transfer.

On May 23, the D.C. District Court issued an order granting LCMC’s request to have the case transferred.

In issuing the order, the Court explained that:

  • The determination of the effect of the COPA on subsequent federal action will involve the interpretation and application of state law consistent with the Supreme Court’s decision in Parker Brown, which held that the Sherman Act must be taken to be a prohibition of individual and not state action and therefore requires the court to address whether and when the involvement of a state regulatory scheme could lead to the characterization of a transaction between private parties as “state action;”
  • The question whether the hospitals are immune because they received a COPA from the state will turn not only on the text of Louisiana’s COPA statute and any intentions expressed by the legislature when it was enacted, but more importantly on the ‘nitty-gritty” of the state’s implementation of the statutory scheme;
  • While it is unclear based on the record whether the state has “covered the waterfront” in terms of supervision and management such that state action immunity would apply, it is clear that deciding the issue will require an analysis of the statute, its regulations, and the state’s implementation of both;
  • Considering the question of ”public interest,” Louisiana’s interest in having its COPA statute litigated at home weighs significantly in favor of transfer, i.e., the significant local interest in the state hospital merger approval process and how it bears on the enforcement of the antitrust laws with respect to hospitals in the state (the Louisiana Attorney General has intervened as a party); and the interpretation of the COPA statute and its effect not only on the LCMC hospitals, but also on other entities in Louisiana, which in turn may trigger action by the state’s legislature and regulatory bodies; and
  • While the interpretation of Louisiana’s statute will affect the FTC’s ability to enforce the HSR filing requirements in Louisiana, it will not necessarily bear on its enforcement of the HSR Act or other antitrust laws in other states.