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ELIZABETH HOSPITAL, INC. v. RICHARDSON

November 6, 1958

ELIZABETH HOSPITAL, INC., PLAINTIFF,
v.
FOUNT RICHARDSON, FRIEDMAN SISCO, RUTH ELLIS LESH, STANLEY APPLEGATE, INDIVIDUALLY AND AS PRESIDENT OF WASHINGTON COUNTY MEDICAL SOCIETY, WASHINGTON COUNTY MEDICAL SOCIETY, AND AMERICAN MEDICAL ASSOCIATION, DEFENDANTS.



The opinion of the court was delivered by: John E. Miller, Chief Judge.

  The plaintiff, a hospital incorporated under the laws of Delaware and authorized to do business in Arkansas, brought this suit on May 28, 1958, against the Washington County Medical Society, the American Medical Association, and several individual members of the Washington County Medical Society, to recover damages for alleged violations of the Anti-Trust Acts, Title 15 U.S.C.A. §§ 1, 2, 12, and 15, and to obtain a mandatory injunction requiring the defendant associations to admit one Dr. Frank Riggall to full membership. The plaintiff also alleges a violation of the constitution, statutes, and common law of Arkansas, thus offering a two-fold basis for jurisdiction, first, under the Clayton Act, Title 15 U.S.C.A. § 15, and, second, on the ground of diversity of citizenship. The individual defendants are all residents of Arkansas and of the Fayetteville Division of the Western District as is the Washington County Medical Society. The defendant, American Medical Association, is a nonprofit organization organized under the laws of Illinois, where it maintains its principal place of business.

Except that the plaintiff hospital alleges violations of common, statutory, and constitutional law of Arkansas, the factual allegations of the complaint are virtually identical with those contained in a recent case, wherein the plaintiff was Dr. Frank Riggall, decided by this court on March 28, 1957, and affirmed in Riggall v. Washington County Medical Society, 8 Cir., 1957, 249 F.2d 266.

Briefly stated, the plaintiff alleges that its stockholders are Frank, Eva, and Cecil Riggall, and Robert Douglas Manning, each of whom owns 25 percent of the capital stock; that it operates a hospital as Prairie Grove, Arkansas, which is approved by various schools and organizations, and which purchases and uses large quantities of various medical instruments, drugs and medicine purchased from suppliers in various states outside of Arkansas. The plaintiff alleges that its Chief of Staff is Dr. Frank Riggall, who was the plaintiff in the former suit, and, after setting forth in detail his qualifications and experience in the practice of medicine, alleges a combination, confederation, and conspiracy on the part of the defendants which substantially interferes with the referral of patients to the plaintiff hospital from other physicians outside the State of Arkansas.

The conspiracy alleged is based upon the refusal of the Washington County Medical Society to admit the plaintiff's Chief of Staff, Dr. Frank Riggall, to membership. The defendant, Washington County Medical Society, is a member of the defendant, American Medical Association, which is described as a "federacy of its constituent associations." No person who is not a member of a local association is eligible for membership in the American Medical Association under its constitution and bylaws. The plaintiff alleges that membership in such association by its Chief of Staff, Dr. Riggall, would be of great economic benefit to the plaintiff and to its patients and that because of the denial of membership, Dr. Riggall is not allowed to become a member of the staff of certain hospitals and obtain other substantial benefits for himself and for the plaintiff hospital. The alleged conspiracy to deny Dr. Riggall membership in the Washington County Medical Society, which refused his membership after a vote of the membership of the association, is claimed to have resulted in a substantial interference with, a restraint of, and burden on trade and commerce between Arkansas and other states and countries. In 24 subparagraphs, denoted (a) through (x), numerous effects of the refusal of admission of Dr. Riggall to membership in the Society are set forth. The gist of these allegations is that Dr. Riggall and members of the plaintiff's staff are denied staff privileges in several hospitals, are prevented from obtaining consultations with members of the Society, and from receiving referrals of patients from physicians outside of Arkansas, and that numerous efforts have been made by some of the defendants seeking revocation of licenses of physicians employed by the plaintiff hospital. In paragraph numbered 22(q) of the complaint, the plaintiff charges that the defendants "imposed a professional boycott upon the plaintiff and thereby prevented the plaintiff from receiving great numbers of patients from outside the State of Arkansas and elsewhere."

On June 19, 1958, all of the defendants except the American Medical Association moved to dismiss the complaint on the grounds that the complaint failed to state a claim upon which relief could be granted, that the court had no jurisdiction under the Sherman Anti-Trust Act because it had no application to the allegations of the complaint, that the allegations were identical with those in the case of Riggall v. Washington County Medical Society, and that the courts have no jurisdiction over the admission or rejection to membership in private clubs.

On July 9, the defendant, American Medical Association, moved to dismiss for lack of jurisdiction over it, improper venue, and insufficiency of process, and also upon the ground that the complaint failed to state a claim upon which relief could be granted. Briefs of all of the parties are now in, and those motions are now before the court.

It appears that the motion of the American Medical Association must be sustained. Title 15 U.S.C.A. § 22, provides:

    "Any suit, action, or proceeding under the
  antitrust laws against a corporation may be brought
  not only in the judicial district whereof it is an
  inhabitant, but also in any district wherein it may
  be found or transacts business; and all process in
  such cases may be served in the district of which it
  is an inhabitant, or wherever it may be found."

Process was served upon the American Medical Association at its principal place of business in the State of Illinois by serving a summons upon its office manager. There is no allegation in the complaint that the American Medical Association transacts business or can be found in the State of Arkansas. The venue provision set forth clearly indicates that suits based upon the anti-trust acts may be brought against a corporation only where it may be found or where it transacts business or in the district of which it is an inhabitant. The complaint affirmatively shows that the defendant, American Medical Association, is an "inhabitant" of the State of Illinois. Unless the relation of the American Medical Association with its local member associations is such that the Washington County Medical Society is an agent of the American Medical Association, nothing in the complaint can be construed to indicate any "presence" of the American Medical Association in Arkansas, or the transaction of any business in this State by that corporation. The American Medical Association, as shown by its constitution and bylaws, is a "federacy" composed of the member associations. So far as the complaint reflects, the local associations may be obliged to follow the constitution and bylaws of the American Medical Association, but are not otherwise controlled by the American Medical Association. Under these circumstances, the American Medical Association is no more "present" in the state by virtue of the presence of a local independent member than the United States is present by virtue of the presence of a state government which is a member of the Federal Union. Just as a state is not an agent for the Government of the United States, the Washington County Medical Society is not an agent of the American Medical Association, at least so far as the complaint shows. Since the service of process was obtained in the manner prescribed by Title 15 U.S.C.A. § 22, and since that section has no applicability in this instance, the process is insufficient to confer jurisdiction upon this court as to the American Medical Association unless process directed outside the district is authorized on some other ground. Rule 4(f), Fed.Rules Civ.Proc., 28 U.S.C.A., provides:

    "All process other than a subpoena may be served
  anywhere within the territorial limits of the state
  in which the district court is held and, when a
  statute of the United States so provides, beyond the
  territorial limits of that state."

If there is any other statute authorizing such process as was issued in this case, it has not been called to the court's attention. The court, therefore, concludes that it has no jurisdiction of any claim against the American Medical Association.

With regard to the remaining defendants, substantially the same issues were raised in Riggall v. Washington County Medical Society, 8 Cir., 1957, 249 F.2d 266, at page 268, where the court said:

    "It is to be noted that the complaint is confined
  to plaintiff's private medical practice. It charges
  no economic burden on the public by reason of the
  alleged acts of the defendants. There is no charge
  that the rejection of plaintiff's application for
  membership in the Washington County Medical Society
  resulted in the raising or fixing of fees charged the
  public by other physicians. There is no allegation in
  the complaint remotely suggesting that the acts of
  defendants cast any burden upon interstate commerce.
  The mere fact that plaintiff at his location in
  Arkansas may be treating patients from other states
  who must travel interstate does not result in
  practicing his profession in interstate commerce as
  the transportation of such patients is incidental.
  The practice of his profession as disclosed by the
  allegations of his complaint is neither trade nor
  commerce within Section 1 of the Sherman Anti-Trust
  Act, nor are there any allegations in the complaint
  indicating that the actions of defendants here
  complained of resulted in a monopoly within the
  provisions of Section 2 of the Act. Plaintiff has not
  been prevented from practicing his profession, but in
  the final analysis his complaint is that he could
  practice it more profitably but for the acts of the
  defendants. The Sherman Anti-Trust Act was not
  primarily to protect the individual but to protect
  the general public economically, and a private party
  may not recover under the act unless there has been
  an injury to the general public economically. Apex
  Hosiery Co. v. Leader, 310 U.S. 469, 60 S.Ct. 982, 84
  L.Ed. 1311; Spears Free Clinic and Hospital for Poor
  Children v. Cleere, 10 Cir., 197 F.2d 125; United
  States v. Oregon State Medical Society, D.C.Ore.,
  95 F. Supp. 103; United States v. Oregon State Med. Soc.,
  343 U.S. 326, 72 S.Ct. 690, 96 L. Ed. 978; Northern
  California M[onument] D[ealers] Ass'n v. Interment
  Ass'n, D.C.S.D.Cal., 120 F. Supp. 93; Kolb v. Pacific
  Maritime Association, D.C.N.D.Cal., 141 F. Supp. 264.
  "

Although the defendants urge that the plaintiff, Elizabeth Hospital, is merely the alter ego of Dr. Frank Riggall, and that, therefore, this case is rendered res judicata by the former decision, it is not necessary to decide that question because it may be said with certainty that the Riggall case is stare decisis and controlling in the case at bar unless the mere fact that the plaintiff here is a hospital rather than an individual doctor is of crucial importance. The facts as alleged in this suit are identical in almost every detail to those alleged in the Riggall case except with respect to those facts which relate peculiarly to the corporate hospital rather than to the individual plaintiff in the former suit. The primary difference in that respect is an allegation in the present case that the hospital purchases ...


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