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JUNG v. ASSOCIATION OF AMERICAN MEDICAL COLLEGES

August 12, 2004.

PAUL JUNG, M.D., et al., Plaintiffs,
v.
ASSOCIATION OF AMERICAN MEDICAL COLLEGES, et al., Defendants.



The opinion of the court was delivered by: PAUL FRIEDMAN, District Judge

OPINION

This matter is before the Court for consideration of Defendants' Motion for Judgment on the Pleadings. Plaintiffs in this putative class action are medical school graduates currently or formerly enrolled in resident physician "residency" programs. The defendants can be categorized into two groups: the organizational defendants (organizations and associations that participate in the administration of graduate medical education in the United States) and the institutional defendants (universities, medical schools, foundations, hospitals, health systems and medical centers that sponsor medical residency programs). Plaintiffs filed suit charging that the defendants have violated Section 1 of the Sherman Act, 15 U.S.C. § 1. Specifically, plaintiffs allege that the defendants have contracted, combined and conspired among themselves to "displace competition in the recruitment, hiring, employment and compensation of resident physicians, and to impose a scheme of restraints which have the purpose and effect of fixing, artificially depressing, standardizing and stabilizing resident physician compensation and other terms of employment." Complaint ("Compl.") ¶ 2. On February 11, 2004, the Court issued an Opinion and Order addressing certain defendants' motions to dismiss this action on various grounds. See Jung v. Association of American Medical Colleges, 300 F. Supp.2d 119 (D.D.C. 2004) ("February 11 Opinion and Order"). After the Court issued this Opinion and Order, Congress enacted and President George W. Bush signed into law the Pension Funding Equity Act of 2004, Pub.L. No. 108-218, 118 Stat. 596 (2004), which includes a provision entitled "Confirmation of Antitrust Status of Graduate Medical Resident Matching Programs," an amendment to the antitrust laws that has been codified as 15 U.S.C. § 37b. Certain defendants now move under Rule 12(c) of the Federal Rules of Civil Procedure for judgment on the pleadings on the ground that the action must be dismissed in light of this new legislation which creates or confirms an antitrust exemption for graduate medical education residency matching programs.

I. BACKGROUND

  A. Plaintiffs' Allegations

  In their class action complaint in this case, plaintiffs assert that there are three intertwining prongs to the antitrust conspiracy they allege. The first prong of the alleged conspiracy concerns the annual assignment of fourth-year medical students to the institutional defendants' residency programs by the National Resident Matching Program ("NRMP"). The NRMP, an Illinois not-for-profit corporation, is managed and operated by defendant American Association of Medical Colleges ("AAMC") from AAMC's principal office in Washington, D.C. See Compl. ¶ 15. The AAMC also is an Illinois not-for-profit corporation, whose membership includes all 125 accredited medical schools, including those medical schools named in the complaint, and approximately 375 major teaching hospitals and health systems, some of which also are named in the complaint. These hospitals and health systems are member hospitals of a subsection of the AAMC, the Council of Teaching Hospitals and Health Systems ("COTH") Section. See id. ¶ 17.

  Plaintiffs further allege that in order to effectuate the assignment, or the "Match," as it is commonly called, prospective medical residents enter into contracts with and submit to the NRMP a ranked list of desired medical resident positions with various institutions ("Student Match Contract"). The institutions themselves also enter into contracts with the NRMP and submit ranked lists of the medical students whom they are interested in hiring ("Institutional Match Contract"). On a date certain, the NRMP through an algorithm "matches" the students' lists against the institutions' rankings, resulting in the assignment of each prospective medical resident to one residency program. See Compl. ¶¶ 15, 83-86. Plaintiffs allege that this system eliminates a free and competitive market and substitutes a centralized, anticompetitive allocation system that assigns prospective resident physicians to a single, specific and mandatory residency program. Plaintiffs further allege that the defendants designed and implemented this system and collectively agreed to comply with it in violation of the antitrust laws. See id. ¶ 83.

  Several specific features of this assignment system allegedly serve to impose anticompetitive restraints on medical residency hiring. Plaintiffs allege that a medical student is required to enter into the Match if he or she wishes to gain employment in a residency program accredited by defendant Accreditation Council for Graduate Medical Education ("ACGME"). See Compl. ¶ 71. An individual's participation in an ACGME-accredited residency program in turn allegedly is a prerequisite for specialty certification by a member board of defendant American Board of Medical Specialties ("ABMS"), an Illinois not-for-profit corporation consisting of 24 recognized medical specialty certification boards, upon completion of the residency. See id. ¶¶ 20, 69. Plaintiffs allege that eventual specialty certification by an ABMS board is considered critical to prospective residents inasmuch as they desire to be "certified" to practice within a specialty following the completion of their residencies. The practical effect of this structure, plaintiffs charge, is that the vast majority of medical students are compelled to participate in the Match, which is a substitute for all aspects of competitive individual negotiations and requires applicants to commit contractually to any assigned position as a condition of enrolling in the Match Program. See id. ¶¶ 69, 86. Furthermore, certain implementing policing mechanisms of the Match allegedly compel compliance with the foregoing restraints. These alleged mechanisms include the requirement that program participants immediately report suspected policy violations to the NRMP and advise the relevant organizational authorities of institution or resident physician violations. See id. ¶ 86(c).

  In the second prong of the alleged conspiracy, plaintiffs assert that certain aspects of the aforementioned ACGME accreditation standards, with which the institutional defendants allegedly voluntarily comply, function to further restrict residency employment. Specifically, plaintiffs allege that the ACGME (1) has the authority to regulate the number of employment positions in a residency program; (2) imposes substantial obstacles to the ability of a resident to transfer employment from one employer to another during the period of a residency, thereby effectively making NRMP assignments permanent for the duration of a residency; (3) encourages and/or requires participation in the Match by an institution as a condition of accreditation; and (4) directly reviews compensation and other terms of employment with the purposes of fixing and depressing them. See Compl. ¶ 88.

  The third prong of the alleged conspiracy concerns the exchange by defendants of information on resident compensation and other terms of employment through surveys and databases that plaintiffs allege has the purpose and effect of standardizing and stabilizing compensation and other terms of employment. See Compl. ¶¶ 73-82. This exchange allegedly occurs in two ways. First, the AAMC annually surveys members of its COTH Section seeking compensation levels for the employment year, aggregates the results into various categories and distributes its findings in an annual report (the "COTH Survey" or "Survey"). See id. ¶¶ 74-79. Second, hospitals and health systems access similar information through an electronic database known as the Fellowship and Residency Electronic Interactive Database ("FREIDA"), which is maintained by defendant American Medical Association ("AMA"). See id. ¶ 80. Plaintiffs allege that this exchange of information allows institutional defendants to fix resident salaries and benefits each year at depressed, anticompetitive levels.

  Plaintiffs charge that the execution of the Match program, the enforcement of the ACGME-accreditation standards, and the coordinated collection and distribution of residency program compensation information together produce a significant depression of residents' salaries and working conditions by removing residents' ability to achieve enhanced salaries and working conditions through competition. See Compl. ¶¶ 92-96. Plaintiffs allege that defendants have violated Section 1 of the Sherman Act by contracting, combining and conspiring to unreasonably restrain trade and commerce. Plaintiffs filed this antitrust action as a proposed class action and have moved to certify both plaintiff and defendant classes. See Motion for Class Certification, filed November 3, 2003.

  B. The February 11 Opinion and Order

  In its February 11 Opinion and Order, the Court (1) denied certain institutional defendants' motion to dismiss for lack of personal jurisdiction; (2) granted the motion to dismiss for lack of personal jurisdiction of defendants Washington University Medical Center, the American Board of Medical Specialties and the Council of Medical Specialty Societies; (3) denied defendant National Resident Matching Program's motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure and its motion to compel arbitration, and denied the motion to compel arbitration filed by the American Medical Association; (4) denied the motions to dismiss for failure to state a claim upon which relief can be granted filed by the Association of American Medical Colleges and the Accreditation Council for Graduate Medical Education; and (5) granted the motions to dismiss for failure to state a claim filed by the American Hospital Association, the American Medical Association and Yeshiva University.

  Specifically, the Court first concluded that it had personal jurisdiction over certain institutional defendants under the "conspiracy theory" of personal jurisdiction. The Court found that plaintiffs adequately had alleged "a conspiracy to depress resident compensation between, inter alia, those institutional defendants that participated in the Match and the NRMP" and that certain acts in furtherance of the conspiracy had taken place in the District of Columbia. See Jung v. Association of American Medical Colleges, 300 F. Supp.2d at 142. The Court further concluded that it did not have personal jurisdiction over those moving defendants that plaintiffs had not adequately alleged participated in the conspiracy. See id. at 143. Second, the Court denied defendant NRPM's motion to compel arbitration of those elements of the conspiracy claim that concerned the Match, concluding that the Supreme Court's decision in Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690 (1962), and its progeny manifested "a clear and compelling countervailing interest in the comprehensive adjudication of conspiracy claims brought under the Sherman Act." Jung v. Association of American Medical Colleges, 300 F. Supp.2d at 156. The Court denied the motion of the American Medical Association to compel arbitration on similar grounds. See id.

  Third, the Court denied the motions to dismiss for failure to state a claim filed by the Association of American Medical Colleges and the Accreditation Council for Graduate Medical Education, concluding that "plaintiffs adequately have alleged a common agreement to displace competition in the recruitment, hiring, employment and compensation of resident physicians and to impose a scheme of restraints that has the purpose and effect of fixing, artificially depressing, standardizing and stabilizing resident physician compensation and other terms of employment among certain defendants" and that the moving defendants participated in that conspiracy. Jung v. Association of American Medical Colleges, 300 F. Supp.2d at 173-74. In considering the Rule 12(b)(6) motions, the Court assessed the conspiracy allegations holistically rather then parsing out and considering those allegations that expressly related to the individual moving defendants. See id. at 160-61 (citing Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. at 699, and American Tobacco Co. v. United States, 328 U.S. 781, 809 (1946)).*fn1

  C. The New Legislation

  On April 10, 2004, President Bush signed into law the Pension Funding Equity Act of 2004, Pub.L. No. 108-218, 118 Stat. 596 (2004), which includes Section 207 entitled "Confirmation of Antitrust Status of Graduate Medical Resident Matching Programs," now codified as 15 U.S.C. § 37b ("Section 207"). At its core, Section 207 provides that "[it] shall not be unlawful under the antitrust laws to sponsor, conduct, or participate in a graduate medical education residency matching program, or to agree to sponsor, conduct, or participate in such a program." 15 U.S.C. § 37b(b)(2) (the "substantive" provision). In addition, the statute provides that "[e]vidence of any of the conduct described in the preceding sentence shall not be admissible in Federal court to support any claim or action alleging a violation of the antitrust laws." Id. (the "evidentiary prohibition"). The stated purposes of the law are to "confirm that the antitrust laws do not prohibit sponsoring, conducting, or participating in a graduate medical education residency matching program, or agreeing to do so; and . . . [to] ensure that those who sponsor, conduct or participate in such matching programs are not subjected to the burden and expense of defending against litigation that challenges such matching programs under the antitrust laws." 15 U.S.C. § 37b(a)(2)(A)-(B). Section 207 creates a price-fixing exemption for a certain class of antitrust claims, providing that "[n]othing in this section shall be construed to exempt from the antitrust laws any agreement on the part of 2 or more graduate medical education programs to fix the amount of the stipend or other benefits received by students participating in such programs." 15 U.S.C. § 37b(b)(3).

  Section 207 took effect on April 10, 2004, and applies "to conduct whether it occurs prior to, on, or after such date of enactment" and "to all judicial and administrative actions or other proceedings pending on such date of enactment." 15 U.S.C. § 37b(c). Defendants argue that judgment must be entered on their behalf because Section 207 precludes plaintiffs from pursuing their claim in light of the Court's conclusion in the February 11 Opinion and Order that plaintiffs allege a single overarching conspiracy with three interrelated prongs with the Match program at its center. Section 207 requires this conclusion, defendants argue, both by expressly exempting the Match program and its participants from the antitrust laws and by forbidding the consideration of evidence related to any entities' sponsorship, conduct, or participation in a graduate medical education residency matching program, or agreement to sponsor, conduct, or participate in such a program, in support of any antitrust claim. See Defendants' Motion for Judgment on the Pleadings ("Defs.' Mot.") at 5-6. Defendants further argue that the legislation expressly applies to this action and that the "price-fixing" clause does not save plaintiffs' claim. See id. at 6-7. II. DISCUSSION

  A. Procedural Posture of Defendants' Motion

  Plaintiffs first argue that defendants' motion for judgment on the pleadings is premature because fifteen of the moving defendants have not yet answered the complaint. See Plaintiffs' Response Opposing Defendants' Rule 12(c) Motion for Judgment on the Pleadings ("Pls.' Opp.") at 2-3. Rule 12(c) of the Federal Rules of Civil Procedure states that "[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." FED. R. CIV. P. 12(c). This argument must fail, however, because if a party files a Rule 12(c) motion before its answer, the Court may treat it as a motion to dismiss under Rule 12(b)(6) for failure to state a claim. See Dale v. Executive Office of the President, 164 F. Supp.2d 22, 24 (D.D.C. 2001) (citing Seber v. Unger, 881 F. Supp. 323, 325 n. 2 (N.D. Ill. 1995)); Moran v. Peralta Community College Dist., 825 F. Supp. 891, 894 (N.D. Cal. 1993) (considering Rule 12(c) motion even though all defendants had not yet answered because otherwise plaintiff could avoid Rule 12(c) motion simply by not serving one defendant).

  No prejudice to any party results from treating a Rule 12(c) motion as a Rule 12(b)(6) motion because the standard of review for motions for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure is essentially the same as that for motions to dismiss under Rule 12(b)(6). See Ramirez v. Dep't of Corrections, 222 F.3d 1238, 1240-41 (10th Cir. 2000); Haynesworth v. Miller, 820 F.2d 1245, 1254 (D.C. Cir. 1987); Transworld Products Co. v. Canteen Corp., 908 F. Supp. 1, 2 (D.D.C. 1995). On either motion, the Court may not rely on facts outside the pleadings and must construe the complaint in the light most favorable to the non-moving party. See Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Granting judgment on the pleadings pursuant to Rule 12(c) or a motion to dismiss for failure to state a claim under Rule 12(b)(6) is warranted only if it appears beyond doubt, based on the allegations contained in ...


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