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HOSPITAL BUILDING CO. v. TRUSTEES REX HOSPITAL ET AL.

May 24, 1976

HOSPITAL BUILDING CO
v.
TRUSTEES OF REX HOSPITAL ET AL.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Burger, Brennan, Stewart, White, Marshall, Blackmun, Powell, Rehnquist, and Stevens.

Author: Marshall

[ 425 U.S. Page 739]

 MR. JUSTICE MARSHALL delivered the opinion of the Court.

This is a suit brought under §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1-2. Petitioner has alleged that respondents are engaged in an unlawful conspiracy to restrain trade and commerce in the furnishing of medical and surgical hospital services, and that they are attempting to monopolize the hospital business in the Raleigh, N.C., metropolitan area. The District Court dismissed petitioner's amended complaint on the pleadings, finding that petitioner had not alleged a sufficient nexus between the alleged violations of the Sherman Act and interstate commerce. The Court of Appeals for the Fourth Circuit, sitting en banc, affirmed the judgment of the District Court, holding that the provision of hospital services is only a "local" activity, 511 F.2d 678, 682 (1975), and that the amended complaint did not adequately allege a "substantial effect" id., at 684, on interstate commerce. We granted certiorari, 423 U.S. 820 (1975), and now reverse. We hold that the amended complaint, fairly

[ 425 U.S. Page 740]

     read, adequately alleges a restraint of trade substantially affecting interstate commerce and that dismissal on the pleadings of petitioner's amended complaint was therefore inappropriate.

I

A

Since we are reviewing a dismissal on the pleadings, we must, of course, take as true the material facts alleged in petitioner's amended complaint. See, e.g., Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 222 (1948). Petitioner is a corporation organized for profit under the laws of North Carolina. It operates the Mary Elizabeth Hospital, a 49-bed proprietary hospital in Raleigh, N.C., which offers a general range of medical and surgical services to the public. Respondent Trustees of Rex Hospital (Rex) is a North Carolina corporation which operates Rex Hospital, a private, tax-exempt hospital also located in Raleigh. The other three respondents are the administrator of Rex, one of its individual trustees, and the executive secretary of the local agency responsible for making recommendations to state officials concerning the Raleigh community's need for additional hospital beds. The amended complaint alleges that respondents, along with several co-conspirators not named as defendants in this action, have acted in concert to block the planned relocation of Mary Elizabeth Hospital within the city of Raleigh and its expansion from 49 beds to 140 beds. According to the amended complaint, respondents and their co-conspirators orchestrated a plan to delay and, if possible, prevent the issuance of the state authorization that was a necessary prerequisite to the expansion of Mary Elizabeth. After a delay of some months, the authorization was finally granted, but since then, it is alleged, respondents and

[ 425 U.S. Page 741]

     their co-conspirators have employed a series of bad-faith tactics, including the bringing of frivolous litigation, to block the implementation of the expansion. The amended complaint also alleges that respondents have maliciously instigated the publication of adverse information about petitioner's expansion plan in order to block the expansion. All these actions, it is contended, have been taken as part of an attempt by Rex to monopolize the business of providing compensated medical and surgical services in the Raleigh area.

Petitioner identifies several areas of interstate commerce in which it is involved. According to the amended complaint, petitioner purchases a substantial proportion - up to 80% - of its medicines and supplies from out-of-state sellers. In 1972, it spent $112,000 on these items. A substantial number of the patients at Mary Elizabeth Hospital, it is alleged, come from out of State. Moreover, petitioner claims that a large proportion of its revenue comes from insurance companies outside of North Carolina or from the Federal Government through the Medicaid and Medicare programs. Petitioner also pays a management service fee based on its gross receipts to its parent company, a Delaware corporation based in Georgia. Finally, petitioner has developed plans to finance a large part of the planned $4 million ...


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