N.C. Business Court Dismisses Counterclaims of an ALF Medical Provider for Lack of Standing.

In Doctors Making Housecalls-Internal Medicine, P.A. v. Onsite Care, PLLC, 2019 NCBC 5 (N.C. Super. Ct. Jan. 16, 2019), Judge McGuire granted the Plaintiff’s motion to dismiss the counterclaims of its competitor for lack of standing because the allegations were insufficient to show actual injury. See Order and Opinion.

Takeaways

  • In order to allege an injury in fact based on a state-law claim of attempted market monopolization, a claimant should allege that it lost a specific opportunity (or that it faces the imminent threat of losing one) as a result of the defendant’s conduct.
  • When a claim for unfair or deceptive acts or practices derives solely from an antitrust claim, the failure of the antitrust claim also defeats liability under N.C.G.S. § 75-1.1.
  • There is no abuse of process when the action complained of is confined to its regular and legitimate function in relation to the cause of action stated in the complaint.

Plaintiff Doctors Making Housecalls and Defendant Onsite Care compete to provide medical services to residents of assisted living facilities (“ALFs”) in North Carolina. While residents (or their guardians) must select their own healthcare providers, ALFs often identify and promote their “preferred providers” to their residents. This preferred status plays a significant role in residents’ selections. As a result, providers compete for the lucrative designation.

Previous Litigation

The current trouble began after the Defendant allegedly conferred with an ALF about replacing the Plaintiff as its preferred provider, and after three-quarters of its residents transferred their care to the Defendant. The Plaintiff quickly filed a lawsuit against Onsite Care and the ALF, alleging that the ALF’s residents lacked capacity to transfer their care and seeking injunctive relief. After a Temporary Restraining Order issued, the Plaintiff settled against the ALF and dismissed the case.

Current Litigation

Within weeks, the Plaintiff initiated this matter against Onsite Care, alleging a variety of tortious interferences and unfair and deceptive acts and practices.

Onsite Care counterclaimed, asserting claims for attempted monopolization (which conferred Business Court jurisdiction), unfair and deceptive acts and practices (based on the antitrust claim), and abuse of process (resulting from the previous litigation).

The Plaintiff filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) for lack of standing. The Court analyzed the issue under Rule 12(b)(6) because the Plaintiff did not rely on matters outside the pleadings.

Attempted Monopolization

Judge McGuire determined the Defendant’s allegations of injury resulting from the Plaintiff’s alleged anticompetitive conduct to be legally deficient and insufficient to confer standing. Standing is “among the justiciable doctrines developed by federal courts” (and adopted by North Carolina courts) to give meaning to the “case or controversy” requirement of the United States Constitution.  Op. ⁋ 27 (citing Neuse River Found. v. Smithfield Foods, Inc., 155 N.C. App. 110, 114 (2002)).  It refers to whether a claimant has a sufficient stake in a controversy as to properly seek its adjudication. Id. At a minimum, a claimant must allege a concrete and particularized injury that is fairly traceable to the challenged action and that likely will be remedied by a favorable decision. Id. The injury must be “actual” or “imminent,” not “hypothetical or conjectural.” While a claimant does not have to allege that the injury has already occurred, it must at least allege that the injury is “immediate” or “threatened.” Even though the claim of attempted monopolization is an inchoate offense (i.e., actionable when a defendant has not yet completed its effort to monopolize, but merely shows “a dangerous probability” of successful monopolization), the claim of resulting injury must be concrete.

To support its claim of attempted monopolization, the Defendant asserted:

  • The Plaintiff’s “conduct has the potential to chill competition in the relevant market, which harms [the Defendant] by foreclosing cooperative opportunities and harms consumers in the form of lower quality medical care and increased prices.” Op. ⁋ 15 (emphasis added).
  • The Plaintiff’s “threats of litigation may dissuade risk-adverse [ALFs] from working with alternative medical providers.” Op. ⁋ 30(a) (emphasis added).
  • The Plaintiff’s conduct “may dissuade [ALFs] from attempting to change service providers,” and ALFs “may hesitate to recommend other providers” out of fear of litigation. Op. ⁋ 30(c) (emphasis added).
  • The Plaintiff filed the lawsuits “for the purpose of interfering with competitors….” Op. ⁋ 30(b) (emphasis added).

The Court believed the injuries asserted were not distinct and palpable, but rather hypothetical and speculative. In order to properly allege an actual injury for attempted monopolization, the Defendant would have to allege a specific opportunity that it lost or one for which it faces the imminent threat of losing as a result of the Plaintiff’s alleged anticompetitive conduct. The Defendant’s typical catch-all allegation that the Plaintiff’s conduct proximately caused it injury in an amount to be proven at trial was too conclusory by itself to be accepted as true.

The Court did not address the allegation that the Plaintiff’s conduct allowed it to “raise prices in the relevant market” based on a special fee that it charged. It is likely that, while this type of harm may be actionable by some party, it would not support the Defendant’s claim of injury because it is too attenuated to cause it harm.

Unfair and Deceptive Act and Practices

The Court dismissed the Defendant’s unfair and deceptive practices claim because it was solely derivative of the attempted monopolization claim. It could not survive dismissal of the predicate claim.

Abuse of Process

The Court expressed skepticism about the merits of the Defendant’s abuse of process claim. To state a claim for abuse of process, a claimant must show: (1) an ulterior motive and (2) an act in the use of the legal process not proper in the regular prosecution of the proceeding. The motive requirement is satisfied when the claimant alleges that the defendant initiated a prior action to achieve a collateral purpose outside the normal scope. The act requirement is satisfied when the claimant alleges that after the prior proceeding began, the defendant committed an act using the existence of the proceeding to gain advantage in a collateral matter.

The Defendant alleged that the Plaintiff initiated the prior lawsuit against it and the ALF with the improper purpose of restricting competition and that it improperly sought to enforce a TRO against one of the Defendant’s employees to gain an advantage over the Defendant. However, the Court believed the Plaintiff sought and obtained the TRO for the proper purpose of determining the residents’ capacity. It stated that there is no abuse of process when the action complained of “is confined to its regular and legitimate function in relation to the cause of action stated in the complaint.” Op. ¶ 38.

The Court ultimately based its dismissal of the claim, however, on its standing analysis—the Defendant lacked sufficient allegations of injury in fact.

The Business Court may face these claims again. Judge McGuire dismissed the Defendant’s claims without prejudice, and, while the parties subsequently dismissed this action pursuant to a stipulation of dismissal, the dismissals were without prejudice.

Thanks to Sean Placey, Fox Rothschild summer associate, for his work on this post.