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Sisters of Providence in Washington v. A.A. Pain Clinic, Inc. (12/19/2003) sp-5764
Sisters of Providence in Washington v. A.A. Pain Clinic, Inc. (12/19/2003) sp-5764
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
SISTERS OF PROVIDENCE IN )
WASHINGTON, d/b/a PROVIDENCE ) Supreme Court No. S-10390
HOSPITAL, ANCHORAGE, a Washington )
nonprofit corporation, and PROVIDENCE )
ANCHORAGE ANESTHESIA MEDICAL )
GROUP, )
)
Appellants, )
)
v. )
)
A.A. PAIN CLINIC, INC., an Alaska )
corporation, MICHAEL T. BORRELLO, )
M.D., and ALASKA PAIN MANAGEMENT )
CLINIC, LLC, )
)
Appellees. )
)
A.A. PAIN CLINIC, INC., and )
MICHAEL T. BORRELLO, M.D., ) Supreme Court No. S-10419
)
Cross-Appellants, )
) Superior Court No.
v. ) 3AN-98-4312 CI
)
SISTERS OF PROVIDENCE IN )
WASHINGTON, d/b/a PROVIDENCE )
HOSPITAL, ANCHORAGE, a Washington ) O P I N I O N
nonprofit corporation, PROVIDENCE )
ANCHORAGE ANESTHESIA MEDICAL )
GROUP, and ALASKA PAIN )
MANAGEMENT CLINIC, LLC, ) [No. 5764 - December 19, 2003]
)
Cross-Appellees. )
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Rene J. Gonzalez, Judge.
Appearances: John A. Treptow, Jeffrey J.
Jarvi, Dorsey & Whitney LLP, Anchorage, for
Appellants and Cross-Appellees. Richard W.
Maki, David H. Shoup, Tindall Bennett &
Shoup, Anchorage, for Appellees and Cross-
Appellants A.A. Pain Clinic, Inc., and
Michael T. Borrello.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
MATTHEWS, Justice.
Sisters of Providence in Washington, d/b/a Providence
Hospital Anchorage ("Providence"), entered into an exclusive
contract with Providence Anchorage Anesthesia Medical Group ("the
Group") for chronic pain management services. Leon Chandler,
M.D., and Michael Borrello, M.D., are anesthesiologists who were
excluded by the contract and claim to have been harmed by it.
They sued for anti-competitive conduct and received a jury award
that was in part set aside by the trial court. This case
involves a number of challenges to the verdict and to the trial
court's rulings.
BACKGROUND
The following facts appear to be uncontested. In 1989
Dr. Leon Chandler launched A.A. Pain Clinic, Inc. ("A.A. Pain")1
to devote more of his practice to pain management.2 Within the
relevant time periods Chandler has also had medical staff
privileges at Providence.
On August 25, 1992, Providence and the Group finalized
an agreement ("1992 exclusive") granting the Group exclusive
rights to provide "anesthesia services" at Providence for two
years. The 1992 exclusive defined "anesthesia services" as "the
practice of medicine dealing with the management of procedures
for rendering a patient insensitive to pain and emotional stress
during surgical, obstetric, and other medical procedures and the
support of life functions under the stress of anesthetic and
surgical procedures." Nothing in the contract indicated that
chronic pain management and treatment, as opposed to acute pain
treatment, was within its range of services - a possibility
previously considered but apparently not adopted by the Group.
In April 1994 the Group hired Dr. James Laidler, an
anesthesiologist trained in chronic pain management. Also around
that time, the Group opened up its own chronic pain treatment
facility, the Alaska Pain Management Clinic, LLC ("APMC").
Providence and the Group renewed and amended their
exclusive contract in 1994 ("1994 exclusive"), for the first time
including "pain management" within the professional services
definition. Also new to this definition was a provision stating,
"[n]otwithstanding the above, this agreement is not intended to
reduce or limit the existing practice of Dr. Leon Chandler."
Though expressing concerns about the impact the
exclusive would have on his practice, Chandler chose not to join
the Group before or after either the 1992 or 1994 exclusive. He
did however communicate his concerns in at least two letters in
1994 to Dr. Michael Norman, Chief of Anesthesia Department at
Providence, and a prominent shareholder of the Group. In those
letters Chandler asked for an assurance in writing which would
delineate his established privileges at the hospital, as it was
his understanding that he was being "grand-fathered in to do pain
management at Providence." He also inquired about the privilege
status of his colleague, Dr. Swift, suggesting that Swift was
needed to cover any problems that might arise when Chandler was
out of town.
In January 1995 Providence and the Group signed a
"Letter of Understanding," indicating that it came in direct
response to questions raised by Chandler: "He is specifically
concerned about whether his privileges are being reduced and
whether he will be able to obtain coverage for his patients
during his absence." The Letter of Understanding purported not
to affect Chandler's existing privileges at Providence and
further stated that doctors having "the appropriate medical staff
privileges" would be allowed to cover for Chandler during his
absence.
In August 1995 A.A. Pain hired anesthesiologist Dr.
Michael Borrello. Borrello immediately applied for clinical
privileges for both anesthesia and pain management at several
hospitals, including Providence. Providence granted him limited
privileges confined to covering Chandler's patients when Chandler
was out of town.
Meanwhile, APMC had problems retaining the services of
its chronic pain management physicians and twice had to shut down
operations for lack of specialists. During the closures some
pain management patients were referred to Chandler.
In February 1998 Chandler's patient S.H., a "more or
less" comatose woman suffering from severe spasticity, required a
treatment intended to reduce her condition. Because he was
leaving on vacation the next day, Chandler referred S.H. to
Borrello. Borrello scheduled the procedure at Providence, but
because Chandler had by that time returned from vacation,
Providence canceled the procedure in response to objections from
the Group's Dr. Norman. Chandler (through A.A. Pain) and
Borrello immediately filed a complaint together with a motion for
a temporary restraining order. The motion was granted and the
procedure was performed at Providence after at least a one-day
delay. The initial complaint was then twice amended, pleading
the claims that are the subject of this appeal.
In October 1998 Providence and the Group removed the
clause regarding chronic pain management from their exclusive
contract, and since November 1, 1998, both Borrello and Chandler
have had full privileges at the hospital.
PROCEEDINGS
Borrello and Chandler (through his professional
corporation A.A. Pain Clinic, Inc. ("Chandler")) sued Providence,
the Group and APMC for various types of anti-competitive conduct.
Their amended complaint included common law claims for
intentional interference with a contract, intentional
interference with prospective economic advantage, breach of
contract, and breach of the implied covenant of good faith and
fair dealing. They also pleaded two state anti-trust claims, one
for unreasonable restraint of trade in violation of AS 45.50.562,
and one for attempted monopolization in violation of AS
45.50.564.
A jury trial ensued. On a special verdict form the
jury reached a verdict that was generally favorable to the
plaintiffs. The jury found that the defendants had unreasonably
restrained trade and that as a result Chandler had been damaged
in the sum of $44,958 by Providence and in the sum of $89,916 by
the Group. The jury found that Chandler had not been damaged by
APMC by an unreasonable restraint of trade, and that Borrello had
not been damaged by any of the defendants by reason of an
unreasonable restraint of trade. The jury also found that at
least one of the defendants had engaged in predatory or
exclusionary conduct with a specific intent to achieve monopoly
power, but there was no probability that such a defendant would
achieve its goal of monopoly power in the relevant market. In
view of this, the jury did not assess damages under the attempted
monopolization claim.
As to the tort claims, the jury found that all three
defendants had intentionally interfered with a contract between
Chandler and patient S.H. The jury also found that the Group,
but not APMC, had intentionally interfered with a contract
between Borrello and Providence. As to the claim of intentional
interference with prospective economic advantage, the jury found
that only the Group had intentionally interfered with Chandler
and Borrello's prospective economic advantages. Three contract
claims were presented. The jury found Providence did not breach
its medical staff agreement with Borrello, nor did it breach the
covenant of good faith and fair dealing in a contract with
Borrello. The jury found that Providence breached the covenant
of good faith and fair dealing in a contract with Chandler.
The jury assessed damages on the tort and contract
claims as follows: in favor of Chandler against Providence,
$292,480; in favor of Chandler against the Group, $292,480; in
favor of Chandler against APMC, $146,240; in favor of Borrello
against the Group, $365,600.
Subsequent to the verdict the defendants moved for
judgment notwithstanding the verdict ("j.n.o.v."). The court
granted their motion in part. Specifically, the court granted
j.n.o.v. as to the award of $292,480 in favor of Chandler against
Providence for breach of the covenant of good faith and fair
dealing. The court concluded that there was no evidence that
A.A. Pain, as distinct from Chandler personally, had a contract
with Providence. That same damages award also included
Chandler's successful claim against Providence for intentional
interference with the S.H. contract. The superior court vacated
this claim as well because it found that Chandler had not
presented any evidence as to the monetary loss arising from
interference with this contract. For the same reason, the court
also granted j.n.o.v. on the verdict for Chandler against APMC
for $146,240 for intentionally interfering with the contract
between Chandler and S.H. But the court did not grant j.n.o.v.
as to Chandler's $292,480 award against the Group based on
intentional interference with the S.H. contract. The court found
that even though this particular claim lacked evidentiary support
as to damages, the monetary award also included Chandler's claim
against the Group for interference with prospective economic
advantage and adequate evidence supported the award in full for
this latter claim.
Ultimately, final judgment was entered as follows:
Chandler against Providence - $44,958 in antitrust
damages, trebled to $134,874.
Chandler against the Group - $89,916 in antitrust
damages, trebled to $269,748.
Chandler against the Group - $292,480 in tort
damages for intentional interference with prospective
economic advantage.
Borrello against the Group - $365,600 in tort
damages for intentional interference with prospective
economic advantage and intentional interference with
the medical staff agreement between Borrello and
Providence.
Attorney's fees were awarded as follows:
Full reasonable attorney's fees of $252,862.50
under the antitrust statute in favor of Chandler and
Borrello against Providence and the Group, jointly and
severally.
Partial fees under Civil Rule 82 of $33,183.25 in
favor of APMC against Chandler and Borrello, jointly
and severally.
ISSUES ON APPEAL AND CROSS-APPEAL AND SUMMARY OF DECISION
Providence and the Group have appealed, and Chandler
and Borrello have cross-appealed. The issues on appeal and on
cross-appeal and summaries of our decision concerning each issue
are set out below.
Appeal Issues
1. For the sixth element of the claim of intentional
interference with prospective advantage, did the court err in
failing to instruct the jury that the plaintiffs had the burden
of proving the absence of privilege?
Decision: No, the jury was properly instructed that
the plaintiffs had this burden.
2. Was the evidence sufficient to satisfy the elements of
the plaintiffs' claims of intentional interference with
prospective economic advantage?
Decision: Yes, the evidence was sufficient as to each
element.
3. Was the evidence sufficient to satisfy the elements of
Chandler's claim of restraint of trade?
Decision: Yes, the evidence was sufficient as to each
element.
4. Was the evidence sufficient to warrant an award of lost
profits to the plaintiffs?
Decision: Yes, the evidence was sufficient.
5. Was the award of attorney's fees to both Chandler and
Borrello under the full reasonable fee standard of the antitrust
act erroneous because only Chandler prevailed on an antitrust
theory?
Decision: The award was erroneous as to Borrello since
he did not prevail on his antitrust claims. He is entitled to
attorney's fees under Civil Rule 82 against the Group but not
against Providence.
Cross-Appeal Issues
1. Did the court err in granting j.n.o.v. in favor of APMC
and Providence on Chandler's claim of intentional interference
with contractual relations?
Decision: Yes, Chandler showed a compensable injury
for loss of professional time due to the delay of S.H.'s
procedure and was at least entitled to nominal damages for this
loss.
2. Did the court err in granting j.n.o.v. in favor of
Providence on Chandler's claim of violation of the implied
covenant of good faith and fair dealing on the ground that
Providence's contract was with Chandler rather than A.A. Pain?
Decision: Yes, the court erred because Chandler was
practicing through A.A. Pain as his professional corporation.
3. Did the court err in awarding prevailing party fees of
$33,183.35 to APMC? Decision: As to Chandler, the
court should consider whether APMC was a prevailing party in
light of our decision that the grant of j.n.o.v. in favor of APMC
on Chandler's claim of intentional interference with contractual
relations was erroneous. As to Borrello, the court did not abuse
its discretion in making the award. The fact that APMC had an
indemnity agreement with Providence under which APMC did not have
to pay its own fees did not require that fees not be awarded to
APMC.
We proceed to a discussion of these issues in the order that they
are set forth.
Appeal Issue 1 Did the court err in failing
to instruct the jury that the plaintiffs had
the burden of proving the absence of
privilege element of the intentional
interference with prospective advantage tort?
This issue and the second issue involve the tort of
intentional interference with prospective economic advantage. We
have identified six elements of this tort. There must be
sufficient evidence that: (1) a prospective business relationship
existed; (2) the defendant knew of the prospective relationship
and intended to prevent its fruition; (3) the prospective
business relationship did not culminate in pecuniary benefit to
the plaintiff; (4) the defendant's conduct interfered with the
prospective relationship; (5) the interference caused the
plaintiff's damages; and (6) the defendant's conduct was not
privileged or justified.3
Providence and the Group claim that the trial court
improperly instructed the jury as to the sixth element by placing
on them the burden of proving that their conduct was privileged
or justified rather than requiring Chandler and Borrello to prove
that the defendants' conduct was not privileged or not justified.4
The trial court indicated in a pretrial ruling that the
defendants should have the burden of proving that their conduct
was privileged or justified. Instructing the jury in accordance
with such a ruling would be erroneous, because the absence of
justification or privilege is an element of the tort. Typically
the burden is placed on a plaintiff to prove each element of a
tort. Specifically, we have stated that "the plaintiff must
prove" each of the six elements of the tort.5 But an examination
of the jury instructions as given does not reflect that the jury
was instructed that the burden of proving privilege or
justification was on the defendants.
An instruction on burden of proof tells the jury which
party must lose if the jury is not persuaded that a particular
set of circumstances existed.6 For the following reasons, we
conclude that the jury was instructed that if it did not find
that the defendants' conduct was not privileged the plaintiffs
must lose, and thus the burden of proof was properly allocated to
the plaintiffs.
An instruction that tells a jury that if it finds that
each element of a tort has been proved it must find for the
plaintiff, but if it finds otherwise it must find for the
defendant, places on the plaintiff the risk of losing if the
proof is insufficient. Such an instruction allocates the burden
of proof to the plaintiff even if no mention of burden of proof
is made. The challenged instruction in this case contained this
structure.
There was no general burden of proof instruction. But
the instruction pertaining to the intentional interference tort
told the jury that if it found that the first five elements of
the tort were proven by the plaintiffs by a preponderance of the
evidence, then the jury would have to decide "if the defendants'
conduct was legally justified or privileged."7 The instruction
went on to say that if the jury decided that the five elements
were established and "that the defendants' conduct was not
legally justified or privileged" then a verdict must be returned
in favor of the plaintiffs; but if the jury found "otherwise," a
verdict for the defense was required. With the word "otherwise"
the court addressed the subject of what should be done if the
jury failed to find that defendants' conduct was not justified or
privileged. In that event the jury was instructed that it must
find for the defendants.8
Thus the jury was told that if it found that all six
elements of the tort had been proved it should find for the
plaintiffs; if not, it should find for the defendants. The
instruction properly placed on the plaintiffs the risk of losing
if any element was not proved. Although not a model of clarity,
the instruction was legally sufficient to allocate the burden of
proof to the plaintiffs.
Appeal Issue 2 Was the evidence sufficient to
satisfy the elements of the plaintiffs'
claims for intentional interference with
prospective economic advantage?
The appellants' first contention here is that the tort
of interference with a prospective economic advantage requires
specifically identified third parties and that interfering with a
doctor's ability to form a professional relationship with
patients who are unidentified at the time of the challenged
conduct is insufficient.
We have not so limited this tort. We have described it
in the following terms: "Under the theory of intentional
interference with prospective economic advantage, `a person who
is involved in an economic relationship with another, or who is
pursuing reasonable and legitimate prospects of entering such a
relationship, is protected from a third person's wrongful conduct
which is intended to disrupt the relationship.' "9 The
highlighted language contemplates a broader range of third
parties than merely those that are specifically identified.
The Group also argues that there was insufficient
evidence to demonstrate any prospective business relationships.10
We do not find this argument persuasive. Chandler testified that
he began seeing a twenty percent decrease in referrals to his
office after the 1994 exclusive went into effect. He explained
in detail exactly how the referral process changed, and named one
physician who stopped making referrals to Chandler's office.
Chandler's testimony that he had heard of such a prohibition on
referrals was corroborated by Providence employees. From this
testimony, it would be reasonable for a juror to conclude that
Chandler was seeking reasonable and legitimate business
opportunities which were at least in part frustrated by
defendants' actions. Furthermore, other testimony, such as that
from one of Chandler's former patients, who described her
frustrated attempts to have Chandler contacted, helped
demonstrate that there was a class of third parties being
affected by the interference. Coupled with the testimony
regarding patient S.H., the evidence is sufficient; a reasonable
juror could have resolved this element in favor of plaintiffs.
To satisfy the tort of intentional interference with
prospective economic advantage, Chandler and Borrello also had to
demonstrate that defendants were responsible for causing any
prospective business relationship not to materialize.11
Contrary to the Group's suggestions that Chandler and
Borrello only provided self-serving testimony, other evidence
exists. Two pieces of evidence implicate the Group by
demonstrating a policy bent on centralizing the referral process
to insure that only Chandler's former patients would see him. A
memo to Providence nursing and supervisors staff stated:
(1) All orders for Pain Management will be
referred to [the Group] pain MD by the nurse
or health unit coordinator. . . .
(2) [The Group] pain doctor will determine
if the patient has previously been seen by
Dr. Chandler, and, if so, will inform him
that his patient is here.
Providence's pain service clinician verified that this policy was
in place throughout the entirety of the exclusive contract.
There also exists evidence suggesting that this policy resulted
in occasions where Borrello and Chandler were actually prevented
from seeing their own patients. There was sufficient evidence
for a reasonable juror to decide in favor of Chandler and
Borrello.12
As discussed above, the superior court correctly
instructed the jury that plaintiffs had the burden of proving the
Group's actions were not privileged. The Group now argues that
Chandler and Borrello were not able to satisfy that burden
because no evidence demonstrated the Group was motivated by
spite, malice, or some other improper objective. We disagree.
Plaintiffs presented evidence that Dr. Norman13 held a
personal grudge against Chandler based on a prior business
association and lawsuit. While Norman disputed this inference,
whether there was a grudge and, if so, its impact were jury
questions. Other evidence was presented that members of the
Group felt Borrello, as an associate of Chandler, was "tainted."
One witness testified to overhearing Norman saying that "there
was no way he was going to credential" Borrello because he
"didn't want to give Chandler any extra help at Providence
Hospital." Such evidence, coupled with the expressed intentions
of Norman and other Group members to drive Chandler out of the
hospital and out of business could have led a reasonable juror to
decide in favor of defendants as to the privilege element.
The Group next argues that Chandler and Borrello's
damages awards for intentional interference with prospective
economic advantage were excessive because they exceed plaintiffs'
own expert's estimates. The Group claims this expert's only
testimony with regard to this claim referenced injuries stemming
from lost referrals, estimating damages at $136,212 for Borrello
and $116,256 for Chandler. But the jury eventually awarded
$365,600 to Borrello and $292,480 to Chandler.
The Group concedes having not addressed this point at
the j.n.o.v. stage. Thus it is only entitled to relief if we
find plain error "so substantial as to result in injustice."14
The superior court found that "there [was] an
evidentiary basis for the award of damages to [Dr. Chandler] and
to Dr. Borrello for the tort of intentional interference with
prospective advantage." We agree. The expert's testimony
encompassed more than just referrals, also referencing "Medicare
dumping" and restrictions on the doctors' practices, estimating
additional damages exceeding the amount awarded. It would be
reasonable for a juror to include these practices within the
scope of the tort of intentional interference with prospective
advantage, and to allow them to do so was not plain error.
Appeal Issue 3 Was the evidence sufficient to
satisfy the elements of Chandler's claim of
restraint of trade?
Alaska Statute 45.50.562 provides that "[e]very
contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce is unlawful."15
When appropriate, this court is guided by federal Sherman Act
cases in construing Alaska antitrust law.16
In order to establish a prima facie case under Alaska's
restraint of trade statute, a plaintiff must prove three
elements: (1) the existence of an agreement or conspiracy among
two or more persons or distinct business entities; (2) intent on
the part of those persons or entities to harm or restrain
competition; and (3) the agreement or conspiracy actually injured
competition in the relevant market.17
Unless a case involves a per se violation,18 Here
both sides agreed - and still agree - with the superior court
that there was no per se violation and thus the rule of reason
test applied. See Lee, 999 P.2d at 762 ("[A] contract between a
hospital and a group of anesthesiologists is not considered a per
se violation of the Sherman Act."). most jurisdictions, including
ours, utilize a "rule of reason" test to determine whether or not
competition has actually been damaged:19 "Under the rule of
reason test `[a]fter the claimant has proven that the conspiracy
harmed competition, the fact finder must balance the restraint
and any justifications or pro-competitive effects of the
restraint in order to determine whether the restraint is
unreasonable.' "[20]
After the presentation of plaintiffs' evidence, the
defense moved for directed verdict on the antitrust claim,
attacking plaintiffs' case on several grounds. This motion was
denied. After a jury verdict against both Providence and the
Group on the antitrust claim, the defense again raised all their
arguments in a motion for j.n.o.v., which was subsequently
denied. Providence and the Group renew their arguments on
appeal. In addition, they argue that Chandler failed to establish
cognizable antitrust injury and antitrust standing.
Providence and the Group contend that "the critical
question is where the consumer of chronic pain services can
reasonably turn for alternative care"21 and conclude that
Chandler, in only describing "out-of-office" procedures performed
at Providence, has not answered this question. They cite
authority holding that one hospital is not a relevant market
unless it "is the only one serving a particular area or offers
unique set of services."22 They claim Chandler provided no other
information such as prices or patient volumes about other market
participants, especially pain clinics, and conclude that the jury
had no framework for deciding whether competition had been
impaired.
Appellants' representation of the evidence is
deficient.23 The evidence was replete with references to the pain
services market, which for the relevant periods of time only
contained two to four providers and did not extend outside the
Anchorage area. Though this evidence comes from self-interested
parties, that does not mean that it is presumptively worthless.
Hard data is not necessarily required in antitrust cases. In
Oltz v. St. Peter's Community Hospital, a case heavily relied on
by this court in interpreting our antitrust statute, the Ninth
Circuit stated that "the failure to pinpoint precisely the
relevant market through detailed market analysis is not uniformly
fatal to a claim under Sherman Act 1."24
Furthermore, Chandler presented statistical evidence
describing the market at trial. Chandler's estimates that around
sixty to sixty-five percent of hospital patients in Anchorage
"run through Providence" were corroborated by statistical data
published by the Department of Health and Social Services and by
Providence.25 Though much of this evidence only considers
hospital in-patients, Chandler testified that Providence retains
a similar market percentage in out-patient services. We believe
that a reasonable juror could conclude that this evidence
demonstrates Providence's powerful position in the Anchorage area
pain management market.
Providence and the Group next argue that Chandler
failed to present any evidence that Providence and the Group
entered into an agreement26 whose object was to harm or restrain
competition.27 They point out that simple competitive desires to
maximize profits at the expense of rivals, to even drive
competitors out of business, are not objective bases upon which
antitrust liability may be found.28
As Professors Areeda and Hovenkamp note in their
treatise on antitrust law, proving a conspiracy intended to harm
competition is complicated by certain features inherent in any
restraint of trade agreement: (1) conspirators will seldom admit
to their unlawful agreement; (2) "behavior can sometimes be
coordinated without any communications or other observable and
reprehensible behavior"; and (3) the causal connection between
observable acts and subsequent corroborating acts may be obscure.29
Thus, courts will often have before them agreements which on
their face offer legitimate and lawful profit-seeking motives.30
Because of this, courts must look deeper to the longer term
effects of the agreement to discover whether it is intended to
harm competition:
It is not the form of the combination or
the particular means used but the result to
be achieved that the statute condemns. It is
not of importance whether the means used to
accomplish the unlawful objective are in
themselves lawful or unlawful. Acts done to
give effect to the conspiracy may be in
themselves wholly innocent acts. Yet, if they
are part of the sum of the acts which are
relied upon to effectuate the conspiracy
which the statute forbids, they come within
its prohibition.[31]
Because of the difficulty of proving intent, as well as
the necessity of considering the long-term effects of a
defendant's behavior, it would be natural to conclude then that
proof of intent and proof of injury are closely related, and that
the latter is inferential proof of the former. Professors Areeda
and Hovenkamp reach just this conclusion:
It is often said that agreements do not
offend the Sherman Act in the absence of a
purpose or effect to restrain trade, or that
a restraining agreement may be redeemed by a
legitimate purpose. Such statements seem to
call for inquiry into a defendant's state of
mind. That inquiry often seems to invite the
parties to examine thousands of documents, to
depose nearly everyone, to resist early
disposition on the ground that disputed
intent requires trial, to burden the judge
and jury with ambiguous evidence, and to
invite decision on the basis of relative
purity of heart rather than competitive
impact.
These problems cannot be entirely avoided, because
mental state is sometimes relevant, particularly when
conduct is ambiguous. However, intent seldom
determines reasonableness. Indeed, intent is often
superfluous to the analysis of reasonableness, for it
adds nothing to the conduct from which it is usually
inferred.[32]
As the United States Supreme Court has noted:
Often crimes are a matter of inference
deduced from the acts of the person accused
and done in pursuance of a criminal purpose.
Where the conspiracy is proved, as here, from
the evidence of the action taken in concert
by the parties to it, it is all the more
convincing proof of an intent to exercise the
power of exclusion acquired through that
conspiracy. The essential combination or
conspiracy in violation of the Sherman Act
may be found in a course of dealings or other
circumstances as well as in any exchange of
words.[33]
Keeping these principles in mind, we conclude that
there was evidence upon which a reasonable juror could decide
defendants had an intent to harm competition. As discussed above,
testimony indicated that numerous members of the Group,
especially Norman, were not particularly fond of Chandler, and
that some intended to put Chandler out of business; Borrello,
too, was labeled by some in the Group as tainted because of his
close association with Chandler. Other evidence suggested
defendants' motives went beyond mere competition. Chandler's
efforts to treat his patients at Providence - something he was
permitted to do by the terms of the agreement - appeared at times
to be frustrated by defendants' refusal to contact him. On at
least one occasion hospital staff were prevented from calling
Borrello to see one of Chandler's patients when it was evident
that Chandler was out of town. A reasonable juror could piece
together defendants' declarations with their actions and find
intent to harm competition.
Appellants respond that this evidence only shows one-
half of the picture, indicating at most that the Group wanted to
drive Chandler out of business, and indicating nothing about
Providence. They argue, "[w]ithout evidence showing that
Providence `knowingly became members of that conspiracy with the
intent to further its purposes,' no conspiracy existed as a
matter of law."34
Unilateral conduct by a single entity is not actionable
as an agreement in restraint of trade.35 But the Group did not
act unilaterally. The exclusive contracts were bilateral, and if
they caused injury to competition, an inference of intent may be
drawn against Providence as well as against the Group.
The plaintiffs presented substantial evidence of harm
to competition. In order to demonstrate harm to competition in
an antitrust claim, a plaintiff must show proof of actual harm to
competition reaching beyond mere harm to itself as a competitor.36
Reduced output, decreased consumer welfare, and higher prices are
all relevant considerations.37 Unlike tort law, in antitrust law
"the `reasonableness' of a restraint is judged by its general
effect on the market, not by the circumstances of a particular
application."38
With regard to consumer welfare, or quality of care,
Chandler presented evidence which, when viewed in its best light,
painted the following picture. The Group often had difficulty
retaining chronic pain management specialists, resulting in
understaffing, which, when coupled with the exclusive, meant
patients had to needlessly suffer in pain. For example, the lack
of availability of physicians, sometimes only amounting to one
available physician, resulted in a lack of continuity among
physicians, backlogs of patients and overall delays.39 Other
evidence suggested that the Group's pain doctors gave less
priority to pain services than other forms of anesthesia. One
former Providence nurse went so far as to agree that "the Group
never developed the depth of staff to provide sufficient coverage
for the pain service."
Evidence also suggested that medical knowledge within
the Group was deficient: for extended periods certain pain
management procedures, such as implantable pumps, were outside
the realm of expertise of any of the Group's physicians. One
doctor testified that Chandler had a very good set-up for
implantable pumps and that he saw no reason why Chandler's
practice should be restricted. A former pain service clinician
from Providence testified: "People that needed further [pain
treatment beyond steroid injections], I don't think that we have
served their needs." Despite its purported inability to fully
serve patients' needs, the Group and Providence continued to
enforce the exclusive agreement. One nurse testified that she
would have referred patients to Chandler and Borrello had she
been allowed because it would have helped alleviate many of the
understaffing and quality control problems Providence was
experiencing.
Chandler presented other evidence suggesting that the
Group "dumped" unprofitable patients, thereby decreasing consumer
welfare and creating market barriers by saturating competitors
with low-paying patients. One physician testified that his
superiors instructed him to dump Medicare and Medicaid patients
"by being too busy to see them." Chandler observed the effects
on his own practice: the Group would neglect to follow up on
cases when they became less profitable, and these patients would
end up at Chandler's practice for the less-profitable
reevaluations.
Other evidence suggested that the Group's activities
manipulated prices by "unbundling" procedures, making them more
expensive and possibly less effective for patients. Unbundling
can be described as the separation of a medical procedure into
its parts, i.e., a number of separately billed sub-procedures
which, in their totality, incur a greater total charge then if
all were billed as one procedure.40 Witnesses testified that one
physician within the Group, Dr. Davy, proposed that a certain
pain treatment be applied post-operatively so that he could
charge more for it as a separate procedure. Though some objected
that the proposal was not good patient care, at least one
physician remembers his superiors "stat[ing] that that would be
the policy from that point forward." One pain service clinician
was told that doing the procedure post-operatively meant the
patient could be billed additionally; on ten or more occasions
she observed Davy or another doctor performing the procedure post-
operatively. Other testimony suggested that others also were
aware of this practice.41
In an effort to demonstrate a decrease in consumer
welfare, Chandler refers to problems experienced by specific
patients. Appellants counter that Chandler's anecdotal evidence
fails to establish a baseline standard of care. Appellants'
argument would be sound were Chandler solely relying on the
stories of three out of several thousand patients; we note again
that antitrust law considers general effects on the market rather
than particular applications.42 But here, a former Group doctor
testified that, in his opinion, the exclusive contracts reduced
choices to patients without any added benefit. Furthermore, as
discussed above, Chandler presented evidence of serious
understaffing in the Group. Chandler also presented relevant
testimony demonstrating that one or more members of the Group
were motivated more by profit concerns than with patients' pain.
It is with this evidence in mind that the three patients' stories
might be of use to a juror as illustrative of the adverse
consequences of the Group's exclusive contract with Providence.
In summary, we conclude that the evidence was
sufficient to satisfy each element of Chandler's restraint of
trade claim.
Appeal Issue 4 Was the evidence sufficient to
warrant an award of lost profits to the
plaintiffs?
In connection with their antitrust claims for restraint
of trade, Chandler and Borrello requested damages in the form of
lost profits and lost income, respectively,43 resulting from the
exclusive contract between Providence and the Group. They relied
on their expert, economist Dr. Bradford Tuck, to estimate the
extent of three sources of loss: (1) losses stemming from
Borrello's exclusion from Providence and/or his inability to
freely treat patients there; (2) losses resulting from a loss of
pain management patient referrals due to interference by
Providence; and (3) losses resulting from the referral of only
Medicare, Medicaid and other low paying or nonpaying patients.44
After two failed directed verdict motions and a jury
verdict in favor of Borrello and Chandler with regard to the lost
profits claim, the defendants moved for j.n.o.v. The court again
rejected defense arguments. The court did however inquire as to
the correct measure of corporate profits for professional
corporations, i.e., whether or not to consider
employee/shareholder salaries and other compensation as income or
expenses. Noting a split in authority, the court sided with
plaintiffs' measure, reasoning "if a professional corporation
could not prove lost profits via salary compensation, then it
would never be able to prove damages for lost profits if the
wrongful act of another caused it harm."
Providence and the Group renew all of their arguments
on appeal.
They first argue that Tuck did not calculate "lost
profits" for Chandler's corporation A.A. Pain correctly. They
point out that while A.A. Pain's total income increased by
seventy-two percent between 1995 and 1998, its corporate profits
decreased each of those years because the doctors were receiving
increased salaries and other compensation. They argue that
damages should have been assessed according to the average profit
margin over the four years, here approximately 1.06%, a figure
which would have greatly reduced Chandler's measure of damages.
Chandler's witness Tuck utilized a different margin,
one that included the salaries and "other compensation" of the
doctors in the corporate profits/losses category. Chandler
argues that this was appropriate under the circumstances because,
like most professionals who are both shareholders of their
professional corporation and employees of that same corporation,
he avoids double taxation by compensating himself with a salary
taken from the corporation's pre-tax revenues. In this way
corporate net income is kept to a minimum and only Chandler
personally is taxed. But Chandler contends that this unnaturally
low figure would not be a good basis for his damages award
because it does not reflect the corporation's actual financial
condition.
No Alaska authority effectively deals with this issue.45
In examining other jurisdictions, it is apparent that there is a
split in authority. Anesthesiologists Associates of Ogden v. St.
Benedict's Hospital46 effectively represents Providence's argument
that salaries in a professional corporation should be treated as
saved expenses for purposes of lost profits. There the Supreme
Court of Utah held that shareholders of a professional
organization make a choice to reap the many benefits of
incorporation, such as limited liability.47 "In so doing, they
[assume] all the attendant advantages as well as the
disadvantages of the corporate form. One of the disadvantages of
doing business as a corporation is that losses suffered by
individual doctors cannot be recovered by the corporation."48 In
essence, then, this line of authority refuses to treat
professional corporations as different from other corporations.49
Bettius & Sanderson, P.C. v. National Union Fire
Insurance Co. represents the opposite view.50 Citing the
difference in corporate structure which distinguishes a
professional corporation from the more traditional corporation,
the Fourth Circuit concluded that eliminating salary
compensation from the lost profits calculation for professional
corporations would make it virtually impossible to ever prove
damages.51 This would result in an unrealistic picture of
corporate profits and an injustice to the professional
shareholder.52 The court elaborated that one distinguishing mark
of a professional corporation is that its shareholders actually
earn their compensation through services rendered rather than
through ownership.53 As a result the corporation ends up
calculating its net income with different goals in mind.54
In our opinion, the Bettius line of thinking better
reflects actual losses of a professional corporation. It
prevents a situation where a wrongdoer can avoid liability simply
because of a technicality in the corporate structure. We
conclude therefore that the superior court did not err in
adopting the Bettius approach.
We next turn to the sufficiency of the evidence.
"[L]ost profits must be proven with reasonable certainty."55 For
all three of their lost profits theories, Chandler and Borrello
rely almost exclusively on their own testimony coupled with the
conclusions of Tuck, which Providence and the Group assert are
nothing more than a series of "assumptions" relayed to him by the
doctors' own self-serving testimony.
Appellants question several of Tuck's assumptions.
First, with regard to Borrello's practice, Tuck assumed that the
addition of a second doctor to a clinic should have doubled gross
receipts within six months. Appellants argue that more evidence
was necessary since both doctors "always [had] work to do" and
were both attempting to shift their practices in other
directions.
With regard to referrals, Tuck assumed that, because
Chandler told him he observed a twenty percent decrease in clinic
income or billings during the exclusive, A.A. Pain's figures
during the exclusive would have been twenty percent higher,
absent the restraint.56 But Chandler testified in court that he
had no idea how many referrals his clinic received before or
during the time the exclusive contract was in effect.
With regard to the Medicare and Medicaid patients, Tuck
admitted that he had not conducted any independent research on
the matter, relying instead solely on Chandler and Borrello's
estimates.57
The applicable standard is that "[t]he evidence must
afford sufficient data from which the court or jury may properly
estimate the amount of damages, which data shall be established
by facts rather than by mere conclusions of witnesses."58 Were
only Tuck's testimony available, the evidence might be
insufficient to meet this standard.
But other evidence exists. Appellants' own witnesses
and documents provided support: in particular, preliminary
estimates made by the hospital as to how much revenue its
proposed pain service would generate, and the testimony of two
doctors who were able to build their successful pain service
practices in a relatively short time. Such data also
demonstrated the Group's own caseload around the time of the
exclusive. A juror could have compared this to Borrello and
Chandler's own caseload. In addition, Chandler's estimated
percentage of Medicare and Medicaid patients were substantially
higher than the Group's; this is significant when coupled with
evidence of the Group's patient-screening practices and its
"dumping" of unprofitable patients. Given this corroborative
evidence, a juror's finding consistent with Tuck's testimony
would be reasonable.
Appeal Issue 5 Was the award of attorney's
fees to both Chandler and Borrello under the
antitrust act erroneous because only Chandler
prevailed on an antitrust theory?
The Alaska antitrust statute, AS 45.50.576(a)(1),
establishes that prevailing parties are entitled to full,
reasonable attorney's fees.59 Alaska Rule of Civil Procedure
82(b)(1) only allows for partial attorney's fee recovery.
Because some of his prevailing claims were under the
antitrust statute, Chandler asked for full reasonable attorney's
fees. Because he did not prevail on any antitrust claim and only
recovered on common law claims, Borrello sought a partial award
under Civil Rule 82.60
Appellants' sole contention is that the superior court
erred in awarding Borrello attorney's fees under the Alaska
Antitrust Act when he did not prevail on any of his antitrust
claims.
We agree that the superior court abused its discretion
in awarding Borrello full reasonable attorney's fees.61 Because
Borrello only prevailed on common law claims, he was not entitled
to recovery under the full reasonable fees standard of AS
45.50.576(a)(1). Rather, under Rule 82, he was only entitled to
an award of partial fees. Further, since he only prevailed on
common law claims against the Group, his Rule 82 award should
only run against the Group, and not Providence. The superior
court exceeded its "bounds of broad discretion"62 in awarding
Borrello fees that could only be justified by a claim on which he
did not prevail, and against a defendant against whom he did not
prevail.
Cross-Appeal Issue 1 Did the court
err in granting j.n.o.v. in favor of
APMC and Providence on Chandler's claim
of intentional interference with
contractual relations?
Chandler alleged that Providence, the Group, and APMC
interfered with Chandler's contract with S.H. when they canceled
her procedure so as to move it off-site. In part because those
acts required him to obtain a temporary restraining order to
perform the procedure as scheduled, Chandler asked for damages
"[i]n an amount in excess of $50,000.00, to be proven at trial."
At trial, the only evidence regarding damages on this
issue came from Chandler's and Borrello's own testimony
describing discussions between themselves and S.H.'s family about
how to proceed in light of the cancellation, as well as their
subsequent attempts to get the restraining order:
[W]e called our attorney, which was Stan
Lewis, and I met with Stan and told him the
situation. We went to his office in the
afternoon, after we had met with [the
patient's husband]. And we were up the
entire night preparing the documents. He
pulled in the whole staff, and the documents
were prepared for the next morning in court.
The jury found Providence, the Group, and APMC liable
to Chandler for interfering with his contract with patient S.H.,
awarding damages of $146,240 against APMC, and $292,480 against
Providence. Subsequently, the defendants moved for j.n.o.v.,
arguing that Chandler had not presented any evidence of damages
arising from contractual interference. The superior court agreed
that there was insufficient evidence to justify that claim.
Chandler argues that the record reflects sufficient
injury since he had to both hire a lawyer and work all night to
prepare paperwork to file the eventually successful restraining
order.63 Alternatively, Chandler asks for nominal damages in
order to negate APMC's prevailing-party status and avoid the
consequential attorney's fees award. Chandler cites Grant v.
Stoyer for the proposition that the court cannot award zero
damages when it is "beyond legitimate controversy" that there was
a compensable injury.64
The rule of law is clear that attorney's fees for work
in the case under review are not recoverable as damages.65 Thus,
Lewis's fees cannot be considered a part of a damage award.
Neither should the superior court consider Chandler's time spent
actually preparing this litigation.66
However, the cancellation and rescheduling of the
procedure led to a disruption in Chandler's professional schedule
apart from litigation preparation. Although not specifically
quantified, this loss of professional time is without question a
compensable injury,67 entitling Chandler to at least nominal
damages. We therefore reverse the superior court on this issue
and remand for entry of a nominal damage award in favor of
Chandler on this claim.
In view of this disposition, the superior court on
remand should reconsider whether APMC is still the prevailing
party with regard to Chandler's claim.
Cross-Appeal Issue 2 Did the court
err in granting j.n.o.v. in favor of
Providence on A.A. Pain's claim of
violation of the implied covenant and
fair dealing on the ground that
Providence's contract was with Chandler
rather than A.A. Pain?
Citing the hospital privileges agreement between
Chandler and Providence and the limited privileges afforded to
Borrello, Chandler and Borrello argued at trial that Providence's
actions during the exclusive violated the covenant of good faith
and fair dealing.
The jury decided against Borrello but in favor of
Chandler. Providence moved for j.n.o.v., arguing that in order
to prove a breach of the covenant of good faith and fair dealing,
one must preliminarily prove the existence of a contract.
Providence contended that A.A. Pain "never produced any evidence
of a contract between Providence and A.A. Pain Clinic, and it is
undisputed that no such contract ever existed." Given that
Chandler was suing in the name of A.A. Pain rather than
personally, whereas his privileges at the hospital were personal,
Providence argued that A. A. Pain was not entitled to maintain
this claim. The superior court granted Providence's motion,
reasoning that because no contract existed between A.A. Pain and
Providence, there could be no breach of the covenant of good
faith and fair dealing.
Chandler argues that the superior court erred because
it failed to consider that a party who contracts with an agent
may be held directly liable to the agent's principal for breach
of that contract. Chandler relies on section 292 of the
Restatement (Second) of Agency, regarding disclosed agency:
The other party to a contract made by an
agent for a disclosed or partially disclosed
principal, acting within his authority,
apparent authority or other agency power, is
liable to the principal as if he had
contracted directly with the principal,
unless the principal is excluded as a party
by the form or terms of the contract.[68]
Comment (a) to section 292 adds that "a principal may be bound as
a party to such a transaction even though the other party did not
enter into it in reliance upon the appearance of authority in the
agent."69
Providence argues that the above rules have no
application because there is no evidence that Chandler was acting
as an agent for A.A. Pain when he "contracted" for his privileges
at Providence. Providence notes that A.A. Pain was not
incorporated until 1994, more than twenty years after Chandler
received his privileges at Providence. Regarding the 1995 Letter
of Understanding, which purported not to "reduce Dr. Chandler's
existing practice," Providence argues that the language - never
mentioning A.A. Pain - simply stresses the continuity of the
privileges agreement personal to Chandler.
Before the drafting of the 1995 Letter of
Understanding, Chandler wrote two letters to Dr. Norman of the
Group, seeking to delineate the scope of his privileges under the
1994 exclusive. These letters were also provided to Providence
Hospital. The letters were on A.A. Pain stationary and list
Chandler as A.A. Pain's Medical Director. Chandler elicited
testimony at trial showing that these letters led directly to the
drafting of the Letter of Understanding. Again, viewing the
evidence in the light most favorable to Chandler, we find there
was sufficient evidence that A.A. Pain was a known principal when
the 1995 Letter of Understanding was drafted.
It is uncontested that Chandler, in practicing chronic
pain management at Providence, did so as an employee of A.A.
Pain. In Alaska a physician may practice through a professional
corporation, and when this occurs the professional corporation,
as well as the physician, is considered to be rendering the
professional services.70 Providence knew that Chandler was
practicing through A.A. Pain, and when Providence breached
Chandler's contractual privileges it knew or should have known
that this hindered his performance as an employee of A.A. Pain.
It does no damage to established principles of law to allow A.A.
Pain to sue for the loss thereby suffered. Just as a
professional corporation may recover as damages for lost profits
lost compensation to its principals,71 it should be entitled to
recover as damages earnings losses suffered by its principals.
We therefore conclude that A. A. Pain had the right to sue for
the breach of Chandler's hospital privileges. We thus reverse
the superior court on this issue.
Cross-Appeal Issue 3 Did the court
err in awarding prevailing party
attorney's fees of $33,183.35 to APMC?
The only jury verdict not in favor of APMC was on
Chandler's claim for interference with contract. This verdict
was subsequently overturned by the superior court's grant of
j.n.o.v. As a result, the superior court deemed APMC to be a
prevailing party and, over objection, granted it attorney's fees
of $33,183.25 against both Chandler and Borrello. The award
against Chandler should be reconsidered in light of our holding
that Chandler was at least entitled to nominal damages on his
claim against APMC. The discussion that follows applies to the
award against Borrello and may apply to Chandler if the superior
court concludes that APMC was the prevailing party on Chandler's
claim despite his nominal award.
APMC, because of an indemnification agreement with
Providence, was not obligated to pay for its own attorney's fees.
As justification for granting attorney's fees, the superior court
relied on Gregory v. Sauser72 and Civil Rule 82. The superior
court explained:
Civil Rule 82 mandates the award of
attorney's fees to the prevailing party. The
fact that a particular defendant or plaintiff
did not pay for any attorney's fees out [of]
his own pocket does not affect that
individual's right to attorney's fees. In
discussing whether Civil Rule 82 attorney's
fees should be awarded in cases where a party
did not have an obligation to pay for those
services, the Alaska Supreme Court has stated
"any further distinction, based upon whether
the client has an obligation to pay for the
legal services rendered, is untenable."
Therefore, the fact that APMC did not have
[an] obligation to pay for attorney's fees is
not relevant to its right to recover
attorney's fees.
(Citations omitted.)
Chandler and Borrello argue that, though Gregory should
indeed be applicable to cases where a party's attorney is
provided through legal aid or is paid by an insurer, "where the
party's attorney is provided and paid by a non-prevailing party,
a different rule should apply." (Emphasis omitted.) They cite
no authority for this proposition. Instead, they request that in
the interest of justice a wrongdoer should not be able to benefit
from such awards.
The trial court retains a great amount of discretion
both in deciding whether or not to characterize a party as
"prevailing" for purposes of awarding attorney's fees and in
deciding whether or not to actually award a prevailing party
attorney's fees.73
This court has held that Rule 82 should be construed to
allow awards of attorney's fee to any "party" who qualifies for
the fee under the terms of the rule.74 Parties who are served by
in-house counsel, legal services, and insurance indemnification
are all put "on the same footing as other litigants."75
Chandler and Borrello do not contest the fact that APMC
was a separate and distinct party in this litigation. Instead,
they simply assert that attorney's fees should not have been
awarded because the effect is that a nonprevailing party who
agreed to indemnify a prevailing party will ultimately benefit.
Though Chandler and Borrello are correct when they assert that a
court may deny a prevailing party fees provided an explanation is
given, it is clear that such an option is discretionary, not
mandatory.76 In this instance we do not find sufficient grounds
for concluding that the superior court abused its discretion.
We therefore affirm the superior court's award of fees
to APMC as against Borrello.
CONCLUSION
In summary, all of Chandler's judgments against
Providence and the Group including the award of attorney's fees
are AFFIRMED. Borrello's judgment against the Group is AFFIRMED.
The award of full reasonable fees in favor of Borrello against
Providence and the Group is REVERSED. On REMAND Borrello should
be awarded fees under Civil Rule 82 against the Group, but not
against Providence. J.n.o.v. in favor of Providence on
Chandler's award of $292,480 in damages on his claim of breach of
the covenant of good faith and fair dealing is REVERSED.
J.n.o.v. in favor of APMC and Providence on Chandler's claim for
intentional interference with contractual relations is REVERSED;
on REMAND the court should enter an award of nominal damages in
favor of Chandler and consider whether APMC is still the
prevailing party on this claim. The award of attorney's fees in
favor of APMC is AFFIRMED as against Borrello and VACATED as to
Chandler. If the court concludes that APMC is still the
prevailing party as against Chandler the award may be reinstated.
AFFIRMED in part, REVERSED and VACATED in part, and
REMANDED for further proceedings consistent with this opinion.
_______________________________
1A.A. Pain was eventually incorporated in 1994.
2Chandler describes his chronic pain management practice as the
application of anesthesiology techniques to the treatment of
chronic pain.
3Odom v. Fairbanks Mem'l Hosp., 999 P.2d 123, 132 (Alaska 2000);
Oaksmith v. Brusich, 774 P.2d 191, 198 (Alaska 1989).
4"We review de novo jury instructions to which timely objection
was made. . . . A jury instruction containing an erroneous
statement of law constitutes reversible error if it prejudices
one of the parties; prejudice exists if it can be said that the
verdict may have been different had the erroneous instruction not
been given." Reich v. Cominco Alaska, Inc., 56 P.3d 18, 25
(Alaska 2002).
5Fairbanks Mem'l Hosp., 999 P.2d at 132.
6United Bank Alaska v. Dischner, 685 P.2d 90, 93 (Alaska 1984)
(the party bearing the burden of proof "bears the risk of losing
if the trier of fact is not persuaded").
7Jury Instruction No. 59 provided:
Plaintiffs' fourth theory of
recovery is intentional interference with
prospective economic advantage. In order
to recover on this claim, plaintiffs [Dr.
Chandler] and Dr. Borrello must prove the
following five things by a preponderance
of the evidence:
1. a prospective business
relationship existed between plaintiffs
and patients;
2. defendants had knowledge of the
prospective relationship and intended to
prevent its fruition;
3. the prospective business
relationship did not culminate in
pecuniary benefit to plaintiffs;
4. defendants' conduct interfered
with the prospective relationship; and
5. the interference caused the
plaintiffs' damages.
If you find that plaintiffs have
proven each of the above five things by a
preponderance of the evidence, you have
determined that defendants intentionally
interfered with plaintiffs' prospective
business relationship with patients. If
you do not find that plaintiffs have
proven each of the above five things by a
preponderance of the evidence, you must
return a verdict for the defendants on
this claim.
If you decide it is more likely true
than not true that all these things
happened with respect to one or more of
the defendants and one or more of the
plaintiffs, then you must decide if the
defendants' conduct was legally justified
or privileged. I previously told you how
to determine whether the defendants'
conduct is legally justified or
privileged . . . . [deleted orally]. If
you decide that [it is] more likely true
than not true as to all of these elements
and you decide that the defendants'
conduct was not legally justified or
privileged, then you must return a
verdict in favor of that plaintiff or
plaintiffs and against that defendant or
those defendants on this claim.
Otherwise, you must return a verdict for
the defendants on this claim.
I have already defined "intent" and
"legal cause" for you. I have also
instructed you on how to determine
whether a defendant's conduct was legally
privileged or justified.
The court instructed on how to
determine whether a defendant's conduct
was justified or privileged as follows.
Jury Instruction No. 57 provided: I will
now instruct you on how to determine
whether a defendant's conduct was
justified or privileged. The law
recognizes that certain kinds of conduct
under certain circumstances are not
improper, or in legal terms, are
justified or privileged. A defendant's
interference with a contract is justified
or privileged when he has a direct
financial interest related to the
contract, and his conduct is
predominately motivated by a desire to
protect his economic interest. A
defendant's conduct is not justified or
privileged when it is motivated by spite,
malice, or some other improper objective.
8In the preceding sentence the jury was told that if it found the
other five elements and that "defendants' conduct was not legally
justified or privileged" it was to find in favor of plaintiffs.
Even without the "otherwise" sentence, this phrasing implied that
if the jury were to fail to find that the conduct was not legally
justified it could not find in favor of the plaintiffs.
9Fairbanks Mem'l Hosp., 999 P.2d at 132 (quoting Ellis v. City of
Valdez, 686 P.2d 700, 707 (Alaska 1984)) (emphasis added).
10"In reviewing a superior court's ruling on a motion for JNOV, we
will not weigh conflicting evidence or judge the credibility of
witnesses. Rather we will determine whether the evidence, when
viewed in the light most favorable to the non-moving party, is
such that reasonable persons could not differ in their judgment."
Blumenshine v. Baptiste, 869 P.2d 470, 473 n.3 (Alaska 1994). To
the extent that a ruling on a motion for j.n.o.v. involves
questions of law, those questions will be reviewed de novo. This
standard applies to Appeal Issues 2 through 4 and Cross-Appeal
Issues 1 and 2.
11Fairbanks Mem'l Hosp., 999 P.2d at 132; Oaksmith, 774 P.2d at
198.
12Appellants make three additional arguments as to the loss of
business element; all three are unpersuasive. They argue (1)
that physicians, not hospitals, make referrals, (2) that Chandler
and Borrello had no legal right to referrals, and (3) that
Chandler's business was in fact growing from 1995 to 1998 but
made less money after the exclusive was lifted. As to the first,
although the Group's argument may be true, it does not
necessarily eliminate Providence from liability if, as evidence
demonstrated here, Providence allowed the Group to impose itself
as a clearinghouse for referrals by hospital employees. As to
the second, though the doctors had no right to referrals, some
Providence employees testified that they would have referred
patients to Borrello and Chandler but for the exclusive, and that
it would have been beneficial if more patients were referred to
outside doctors. As to the third, the issue is not whether
Chandler's business was growing, but rather whether Chandler
demonstrated injury by producing evidence that he would have
earned more money but for the exclusive. See, e.g., Phillip E.
Areeda, Herbert Hovenkamp & Roger D. Blair, II Antitrust Law
396 (2d ed. 2000).
13Norman became medical director at the Group around 1994 and was
also a shareholder. He also had ties to Providence Hospital,
practicing there and holding the position of chairman of the
anesthesia department.
14Shields v. Cape Fox Corp., 42 P.3d 1083, 1087 n.8 (Alaska 2002).
15AS 45.50.562; Odom v. Lee, 999 P.2d 755, 761 (Alaska 2000).
16Lee, 999 P.2d at 761; see also West v. Whitney-Fidalgo Seafoods,
Inc., 628 P.2d 10, 14 n.6 (Alaska 1981).
17Lee, 999 P.2d at 762 (citing Oltz v. St. Peter's Comty. Hosp.,
861 F.2d 1440, 1445 (9th Cir. 1988)).
18Most federal courts have determined that there are certain
activities which are, per se, considered illegal. They do not
require the plaintiff to prove actual damage to competition.
Lee, 999 P.2d at 762.
19Federal courts have uniformly adopted the rule of reason test.
This court embraced the rule of reason test in Odom v. Lee, 999
P.2d at 761-762. There is a presumption in favor of applying the
rule of reason standard. See Business Elecs. Corp. v. Sharp
Elec. Corp., 485 U.S. 717, 726 (1988); Lee, 999 P.2d at 762.
20Lee, 999 P.2d at 762 (quoting Oltz, 861 F.2d at 1445).
21The appellants cite Davies v. Genesis Med. Ctr. Anesthesia &
Analgesia, P.C., 994 F. Supp. 1078, 1097 (S.D. Iowa 1998), for
this proposition.
22Brader v. Allegheny Gen. Hosp., 64 F.3d 869, 877 (3d Cir. 1995).
23Defining the relevant market is a factual inquiry ordinarily
reserved for the jury. Oltz, 861 F.2d at 1446.
24861 F.2d 1440, 1448 (9th Cir. 1988).
25Providence's own statistical data included in a strategic plan,
albeit from 1990, lends credence to Chandler's testimony. It
notes a 50% and still increasing share of the outpatient surgery
market for its Surgery Center. It adds, "Surgery Center has long
been the marketshare leader in outpatient surgery." That same
report also notes that "Providence's outpatient volume is also
increasing . . . with over 300 visits per day," although it does
not give overall market figures. Finally, additional commentary
and statistical evidence published by Providence around 1999 or
2000 indicates that Providence experienced growth between 1990
and 2000.
26No one denies that there was an agreement between the two
defendants. This agreement came in the form of the exclusive
agreement between the Group and Providence, expanded in 1994 to
include pain management services. No one disputes that such an
exclusive contract for medical services is not in itself illegal
or evidence of a conspiratorial intent. Lee, 999 P.2d at 762.
27Providence and the Group essentially ask us to combine the first
two elements of the restraint of trade prima facie case: i.e.,
whether (1) there was an agreement or conspiracy; and (2) whether
the persons intended to harm or restrain competition. Id. at
762. As we detail below, we choose to expand this discussion to
include considerations of the consequences of defendant's
conduct, an often essential inquiry when considering proof of
intent.
28See, e.g., SCFC ILC, Inc. v. Visa USA, Inc., 36 F.3d 958, 969-70
(10th Cir. 1994); Olympia Equip. Leasing Co. v. Western Union
Tel. Co., 797 F.2d 370, 379 (7th Cir. 1986) ("Most businessmen
don't like their competitors, or for that matter competi
tion. . . . That is fine, however, so long as they do not use
methods calculated to make consumers worse off in the long
run."); Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472
U.S. 585, 605 (1985) ("If a firm has been attempting to exclude
rivals on some basis other than efficiency it is fair to
characterize its behavior as predatory.").
29Phillip E. Areeda & Herbert Hovenkamp, VI Antitrust Law 1400a
(2d ed. 2003).
30See P. Areeda, VI Antitrust Law 1400b (2d ed. 2003).
31American Tobacco Co. v. United States, 328 U.S. 781, 809 (1946).
32P. Areeda, VII Antitrust Law 1506 (2d ed. 2003).
33American Tobacco, 328 U.S. at 809-10.
34Appellants cite Capital Imaging Assocs., P.C. v. Mohawk Valley
Med. Assocs. Inc., 996 F.2d 537, 545 (2d Cir. 1993), for this
proposition.
35Oltz, 861 F.2d at 1449-50.
36See, e.g., Consol. Metal Prods., Inc. v. American Petroleum
Inst., 846 F.2d 284, 292-93 (5th Cir. 1988).
37Id.
38Id. at 297.
39One pain service clinician from Providence Hospital testified
that patients had to sometimes wait up to eight hours for a
consultation.
40Several physicians testified that they felt unbundling was
unethical and at times could be even illegal (such as when
Medicare or Medicaid was involved).
41The Group objects to this evidence because the procedure in
question "is part of acute pain management, and not chronic pain
management at issue in this case." Regardless, other evidence
demonstrated that Davy's duties included oversight of the chronic
pain management service at issue, and his salary package
regarding these duties included incentives for profitability of
the pain clinic. One physician observed of Davy generally, "[m]y
understanding was that he was indifferent to whether the patients
had pain or not, as long as he was able to charge for it."
Another observed that Davy was eventually fired because of
billing irregularities and the quality of his operating room
care.
42See Consol. Metal Prods., 846 F.2d at 297 (measuring
reasonableness of restraint by general effects on market rather
than circumstances of particular application).
43Tuck estimated that Chandler would have received $351,523 more in
compensation between 1996 a
44Tuck estimated that Chandler would have received $351,523 more
in compensation between 1996 and 1998 but for the restrictions on
the practice of Borrello, $252,468 more in compensation between
1995 and 1998 but for the prohibition on patient referrals to
Chandler or Borrello, and $627,681 more in compensation between
1995 and 1998 but for the "dumping" of Medicare patients. In
all, this amounted to $1,231,672 in total estimated lost profits.
45Questions of law are reviewed de novo; under this standard, it
is this court's duty "to adopt the rule of law that is most
persuasive in light of precedent, reason, and policy." Langdon
v. Champion, 752 P.2d 999, 1001 (Alaska 1988) (quoting Brooks v.
Brooks, 733 P.2d 1044, 1055 (Alaska 1987)).
46884 P.2d 1236 (Utah 1994).
47Id. at 1240.
48Id.
49Id. at 1240-41.
50839 F.2d 1009 (4th Cir. 1988).
51Id. at 1013.
52Id.
53Id. at 1014.
54Id. at 1013-14.
55Geolar, Inc. v. Gilbert/Commonwealth, Inc., 874 P.2d 937, 946
(Alaska 1994).
56Tuck's math appears to be faulty. After a 20% decline of
profits, profits would be 4/5 of pre-decline profits. To regain
the pre-decline profits would take a 25% increase (4/5 * 5/4 =
1).
57Tuck surmised that he could not have investigated patients'
records because billing records were purged from the computer
system every year.
58City of Whittier v. Whittier Fuel & Marine Corp., 577 P.2d 216,
223 (Alaska 1978) (quoting Levene v. City of Salem, 229 P.2d 255,
263 (1951)).
59AS 45.50.576(a) provides in part:
A person who is injured in business or
property by a violation of AS 45.50.562 --
45.50.570 . . . may bring a civil action (1)
for damages sustained by the person, and if
the judgment is for the plaintiff and the
trier of fact finds that the defendant's
conduct was wilful, the plaintiff shall be
awarded threefold the amount of damages
sustained by the person, plus the costs of
the suit including reasonable attorney
fees[.]
60Borrello sought $47,822, a reduction of $108,294 from his
alleged incurred fees (based on a 40/60 division between him and
Chandler, respectively).
61This court reviews a trial court's award of attorney's fees for
an abuse of discretion. Davila v. Davila, 908 P.2d 1027, 1031
(Alaska 1995).
62Blackford v. Taggart, 672 P.2d 888, 891 (Alaska 1983).
63Procedurally, Chandler also argues that defense never moved for
directed verdict on this particular issue of damages, and thus
was barred the right to seek a j.n.o.v. Alaska Civil Rule 50(a),
describing motions for directed verdicts, simply requires that
the motion "shall state the specific grounds therefor." The
record demonstrates that Providence and the Group moved for
directed verdict on "all damage claims." As opposed to our
federal counterpart, which requires the motion to raise both the
law and the facts on which the moving party is entitled to
judgment, Federal Rule of Civil Procedure 50(a)(2), this court
simply looks to whether or not the party moving for j.n.o.v. made
an adequate motion as to the grounds for directed verdict. See,
e.g., Metcalf v. Wilbur, Inc., 645 P.2d 163, 170 (Alaska 1982).
Here that requirement was met.
6410 P.3d 594, 599 (Alaska 2000).
65Fairbanks Fire Fighters Ass'n, Local 1324, Int'l Ass'n of Fire
Fighters v. City of Fairbanks, 934 P.2d 759, 761-62 & n.5 (Alaska
1997); Ehredt v. DeHavilland Aircraft Co., 705 P.2d 446, 452 n.8
(Alaska 1985).
66Curt's Trucking Co. v. City of Anchorage, 578 P.2d 975, 981
(Alaska 1978).
67See, e.g., State v. Stanley, 506 P.2d 1284, 1293 (Alaska 1973)
(allowing shipowner to recover for lost earnings, citing basic
principle of tort damages that "an injured person is entitled to
be replaced as nearly as possible in the position he would have
occupied had it not been for the defendant's tort"); Miller
Indus. v. Caterpillar Tractor Co.,733 F.2d 813, 818-20 (11th Cir.
1984) (allowing crew members to recover for lost wages which were
dependent on tortiously incapacitated vessel's catch); Kisor v.
Tulsa Rendering Co., 113 F. Supp. 10, 19 (W.D. Ark. 1953)
(allowing personal injury victim to recover for loss of time);
Denco Bus Lines, Inc. v. Hargis, 229 P.2d 560, 562 (Okla. 1951)
(listing loss of work time and consequent loss of earnings as
part of pecuniary loss).
68Restatement (Second) of Agency 292 (1957) (emphasis added).
69Id. at cmt. (a).
70See AS 10.45.020-.030; AS 10.45.140(a).
71See supra discussion at pp. 28-30 and Bettius & Sanderson, P.C.
v. Nat'l Union Fire Ins. Co., 839 F.2d 1009, 1013-14 (4th Cir.
1988).
72 574 P.2d 445 (Alaska 1978).
73Tobeluk v. Lind, 589 P.2d 873, 878 (Alaska 1979); Davidsen v.
Kirkland, 362 P.2d 1068, 1070 (Alaska 1961).
74Greater Anchorage Area Borough v. Sisters of Charity of House of
Providence, 573 P.2d 862, 863 (Alaska 1978).
75Id.; see also Gregory, 574 P.2d at 445.
76See Hansen v. Stroecker, 699 P.2d 871, 875 (Alaska 1985).
