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Talone v. The American Osteopathic Association

United States District Court, D. New Jersey

June 12, 2017

ALBERT TALONE, D.O., CRAIG WAX, D.O., RICHARD RENZA, D.O., ROY STOLLER, D.O., individually and on behalf of all others similarly situated, Plaintiffs,
v.
THE AMERICAN OSTEOPATHIC ASSOCIATION, Defendant.

          JAMES GREENBERG, DUANE MORRIS LLP, SETH A. GOLDBERG, DUANE MORRIS LLP On behalf of Plaintiffs

          JACK R. BIERIG, STEVEN J. HOROWITZ, NEIL G. NANDI, SIDLEY AUSTIN LLP JEFFREY WARREN LORELL SAIBER LLC JEFFREY S. SOOS JENNIFER ROSE O'CONNOR SAIBER LLC On behalf of Defendant

          OPINION

          NOEL L. HILLMAN, U.S.D.J.

         HILLMAN, District Judge

         This case concerns antitrust and fraud claims brought by osteopathic physicians against the American Osteopathic Association for its alleged unlawful tying of board certification and professional association membership. Presently before the Court is the motion of the American Osteopathic Association to dismiss Plaintiffs' claims, or in the alternative, transfer venue to the Northern District of Illinois. For the reasons expressed below, Defendant's motion will be denied in its entirety.

         BACKGROUND

         Plaintiffs are osteopathic physicians (“DOs”) who have been board certified as medical specialists by the American Osteopathic Association (“AOA”), and who have also purchased membership in the AOA. Approximately 48, 000 practicing DOs are members of the AOA, and approximately 32, 000 of those DOs are AOA board certified. The AOA has notified Plaintiffs and AOA board certified DOs that their board certification will be invalidated and cancelled unless they purchase annual membership in the AOA. Plaintiffs claim that in order to avoid the loss of their board certification, Plaintiffs and AOA board certified DOs have been forced to purchase AOA membership even though it serves no purpose with respect to, and has no actual connection with, AOA board certification or their practice as physicians.

         Plaintiffs further claim that the AOA's unlawful tying arrangement has reduced the number of DOs willing to purchase membership in other professional physician associations and has thereby foreclosed competition in the market for membership in professional physician associations (the “Association Membership Market”). Plaintiffs claim that the reduction in purchases by AOA board certified DOs of non-AOA professional physician association memberships has erected barriers to entry, and thus has prevented potential rivals to the AOA from entering the Association Membership Market. In addition, Plaintiffs claim that the AOA's unlawful tying arrangement has raised the costs faced by its existing rivals, as well as softened price competition between the AOA and its existing rivals.

         By reducing competition in the Association Membership Market through its unlawful tying arrangement, Plaintiffs claim that the AOA has been able to increase the price of its annual membership dues to almost double the price that its competitors in the Association Membership Market charge for membership in their associations, and there has been a corresponding reduction in competitive offerings.[1] Plaintiffs further claim that there is no evidence that the AOA's tying arrangement enhances the efficiency of its product offerings, meaning there is no pro-competitive business justification for its unlawful tying arrangement.[2]

         In addition to the tying arrangement, Plaintiffs claim that DOs who received their AOA board certification prior to 2000 were promised by the AOA that it was a “lifetime” certification that would never expire, and that promise was renewed in 2013, when the AOA initiated its Osteopathic Continuous Certification program (“OCC”). Plaintiffs claim, however, that the AOA knowingly concealed that lifetime certification holders would also have to purchase annual membership in the AOA to avoid the invalidation and cancellation of their prior “lifetime” certifications.

         Based on the foregoing, Plaintiffs, on their own behalf and on behalf of the class and sub-classes, have brought the present action to obtain injunctive and monetary relief against the AOA for this alleged anticompetitive tying arrangement, alleging that it violates Section 1 of the Sherman Act, 15 U.S.C. § 1 (“Section 1”) and Section 3 of the New Jersey Antitrust Act (“NJAA”), N.J.S.A. 56:9-3 (“Section 3”), and the New Jersey Consumer Fraud Act (“NJCFA”) N.J.S.A. 56:8-1, et. seq.

         The AOA has moved to dismiss Plaintiffs' claims, or in the alternative, transfer venue to the Northern District of Illinois. Plaintiffs have opposed the AOA's motion on both premises.

         DISCUSSION

         A. Subject matter jurisdiction

         This Court has jurisdiction over Plaintiffs' federal claims under 28 U.S.C. § 1331, and supplemental jurisdiction over Plaintiffs' state law claims under 28 U.S.C. § 1367.

         B. Standard for Motion to Dismiss

         When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005). It is well settled that a pleading is sufficient if it contains “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Under the liberal federal pleading rules, it is not necessary to plead evidence, and it is not necessary to plead all the facts that serve as a basis for the claim. Bogosian v. Gulf Oil Corp., 562 F.2d 434, 446 (3d Cir. 1977). However, “[a]lthough the Federal Rules of Civil Procedure do not require a claimant to set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.” Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S. 147, 149-50 n.3 (1984) (quotation and citation omitted).

         A district court, in weighing a motion to dismiss, asks “‘not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claim.'” Bell Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007) (quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil actions' . . . .”); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (“Iqbal . . . provides the final nail-in-the-coffin for the ‘no set of facts' standard that applied to federal complaints before Twombly.”).

         Following the Twombly/Iqbal standard, the Third Circuit has instructed a two-part analysis in reviewing a complaint under Rule 12(b)(6). First, the factual and legal elements of a claim should be separated; a district court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Fowler, 578 F.3d at 210 (citing Iqbal, 129 S.Ct. at 1950). Second, a district court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “‘plausible claim for relief.'” Id. (quoting Iqbal, 129 S.Ct. at 1950). A complaint must do more than allege the plaintiff's entitlement to relief. Id.; see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (stating that the “Supreme Court's Twombly formulation of the pleading standard can be summed up thus: ‘stating . . . a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element. This ‘does not impose a probability requirement at the pleading stage, ' but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element”). A court need not credit either “bald assertions” or “legal conclusions” in a complaint when deciding a motion to dismiss. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir. 1997). The defendant bears the burden of showing that no claim has been presented. Hedges v. U.S., 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).

         A court in reviewing a Rule 12(b)(6) motion must only consider the facts alleged in the pleadings, the documents attached thereto as exhibits, and matters of judicial notice. S. Cross Overseas Agencies, Inc. v. Kwong Shipping Grp. Ltd., 181 F.3d 410, 426 (3d Cir. 1999). A court may consider, however, “an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document.” Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). If any other matters outside the pleadings are presented to the court, and the court does not exclude those matters, a Rule 12(b)(6) motion will be treated as a summary judgment motion pursuant to Rule 56. Fed.R.Civ.P. 12(b).

         C. Analysis

         Before addressing the viability of Plaintiffs' antitrust and fraud claims, some background information on the AOA board certification process explained in Plaintiffs' complaint is ...


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