Jung v. Association of American Medical Colleges

Citations: 339 F. Supp. 2d 26; 2004 U.S. Dist. LEXIS 16099; 2004 WL 1803198Docket: CIV.A.02-0873 PLF

Court: District Court, District of Columbia; August 12, 2004; Federal District Court

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Plaintiffs, consisting of medical school graduates involved in residency programs, filed a class action lawsuit against the Association of American Medical Colleges and other organizations and institutions involved in graduate medical education. They allege violations of Section 1 of the Sherman Act, claiming the defendants conspired to limit competition regarding the recruitment, hiring, employment, and compensation of resident physicians. Specifically, they assert that the defendants engaged in actions that fixed, depressed, standardized, and stabilized compensation and employment terms for residents. Prior to this case, the Court had addressed motions to dismiss from certain defendants. Following the Court's prior ruling, Congress enacted the Pension Funding Equity Act of 2004, which included a provision confirming the antitrust status of graduate medical resident matching programs, now codified as 15 U.S.C. 37b.

Defendants are seeking a judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure, arguing that recent legislation grants an antitrust exemption for residency matching programs in graduate medical education, warranting dismissal of the action. Plaintiffs' class action complaint alleges an antitrust conspiracy involving three key elements. The first element concerns the National Resident Matching Program (NRMP), which assigns fourth-year medical students to residency programs operated by institutional defendants, including the American Association of Medical Colleges (AAMC) and its member hospitals.

The NRMP facilitates this process through contracts with both medical students and institutions, where each party submits ranked lists of preferences. An algorithm then matches students to residency programs, which plaintiffs argue creates an anticompetitive system that undermines a free market. They claim this centralized allocation forces prospective residents into a mandatory match system, violating antitrust laws.

Key allegations include that medical students must participate in the Match to secure positions in ACGME-accredited programs, which are necessary for obtaining specialty certification from the American Board of Medical Specialties (ABMS). The plaintiffs contend that this system compels most medical students to comply with the Match, effectively eliminating competitive negotiations and requiring contractual commitment to assigned positions. Additional enforcement mechanisms within the Match are said to ensure adherence to these anticompetitive practices, including mandatory reporting of policy violations by participants.

Plaintiffs allege a conspiracy among defendants related to ACGME accreditation standards, which they claim restrict residency employment. Key assertions include that ACGME regulates residency positions, creates barriers for residents seeking to transfer employment, mandates participation in the Match for accreditation, and reviews compensation to suppress salaries. Additionally, the plaintiffs contend that defendants exchange compensation information through the COTH Survey and the FREIDA database, standardizing and depressing resident salaries and benefits, thus inhibiting competition. The plaintiffs argue these practices violate Section 1 of the Sherman Act by unreasonably restraining trade and commerce, and they have filed a proposed class action seeking class certification. 

In the February 11 Opinion and Order, the Court ruled on various motions: it denied some institutional defendants' motions to dismiss for lack of personal jurisdiction, granted dismissal for Washington University Medical Center and other defendants on the same grounds, and denied motions by the National Resident Matching Program and the American Medical Association to dismiss for lack of subject matter jurisdiction or to compel arbitration. Motions to dismiss for failure to state a claim were denied for the Association of American Medical Colleges and the ACGME, while those from the American Hospital Association, the American Medical Association, and Yeshiva University were granted.

The Court established personal jurisdiction over certain institutional defendants based on a 'conspiracy theory' of personal jurisdiction, determining that plaintiffs sufficiently alleged a conspiracy to depress resident compensation involving these defendants and the NRMP, with relevant actions occurring in the District of Columbia. However, personal jurisdiction was not found over defendants not adequately alleged to have participated in the conspiracy. The Court denied NRPM's motion to compel arbitration concerning the conspiracy claim related to the Match, citing the Supreme Court's decision in Continental Ore Co. v. Union Carbide, which emphasized the importance of comprehensive adjudication of Sherman Act conspiracy claims. The American Medical Association's similar motion was also denied for the same reasons. Additionally, the Court dismissed motions to dismiss by the Association of American Medical Colleges and the Accreditation Council for Graduate Medical Education, concluding that plaintiffs had sufficiently alleged a common agreement to restrict competition in the recruitment and compensation of resident physicians. In assessing the motions, the Court analyzed the conspiracy allegations holistically. 

On April 10, 2004, the Pension Funding Equity Act of 2004 was enacted, including Section 207, which confirms that participation in graduate medical education residency matching programs is lawful under antitrust laws. This section prohibits the admissibility of evidence supporting antitrust claims against such programs in federal court. The law aims to clarify that these programs are not subject to antitrust litigation burdens while explicitly stating that agreements to fix stipends or benefits among programs are still subject to antitrust laws.

Section 207, effective April 10, 2004, applies to conduct before, on, or after its enactment and to all judicial and administrative actions pending on that date. Defendants seek judgment in their favor, asserting that Section 207 prohibits plaintiffs from pursuing their claims based on a single overarching conspiracy related to the Match program, which is exempt from antitrust laws. They argue that the legislation specifically excludes the Match program and related activities from antitrust considerations. Plaintiffs counter that the motion for judgment on the pleadings is premature since fifteen defendants have not yet answered the complaint. However, the court can treat a premature Rule 12(c) motion as a Rule 12(b)(6) motion to dismiss for failure to state a claim. The standards for both motions are similar, requiring the court to rely solely on the pleadings and view the complaint favorably towards the non-moving party. Judgment can only be granted if it is clear that the plaintiff cannot establish any facts supporting their claim for relief.

Fourteen defendants have filed answers to the complaint, while 15 have not submitted an answer or a motion to dismiss under Rule 12(b)(6). Some in the latter group filed motions to dismiss based on lack of personal jurisdiction under Rule 12(b)(2), but these do not prevent them from later moving to dismiss for failure to state a claim. Under Rule 12(g), any omitted defenses cannot be raised later, except as specified in Rule 12(h)(2), which includes motions for failure to state a claim. The Court will proceed with motions under Rule 12(c) for defendants who have answered and under Rule 12(b)(6) for those who have not; thus, the motion is not premature for any defendant.

Regarding antitrust claims, defendants assert that Section 207 clarifies that participation in the Match is not inherently unlawful. However, plaintiffs do not claim that the Match itself is a per se antitrust violation. Instead, they argue that the Match, along with the COTH Survey and ACGME accreditation standards, suppresses competition in hiring and compensation, leading to lower salaries and benefits. The Court noted that lawful actions can still facilitate an unlawful antitrust conspiracy, as established in precedents. Consequently, congressional affirmation that the Match does not constitute a per se violation does not negate the plaintiffs' antitrust claim.

Additionally, Section 207(b)(2) states that evidence of the conduct described cannot be used in federal court to support antitrust claims. Defendants contend this provision bars plaintiffs from using allegations related to the Match for their claims. In response, plaintiffs argue that their price-fixing conspiracy claim was upheld in a prior order without heavily relying on Match-related allegations, suggesting that the evidentiary prohibition does not undermine their claim.

Plaintiffs reference the February 11 Opinion to support their assertion regarding the conspiracy claim involving the AAMC and ACGME, arguing that the Court's focus was primarily on aspects other than the Match. However, they overlook that the Court's analysis consisted of two steps, with the first heavily reliant on the Match allegations. The initial inquiry addressed whether an antitrust conspiracy was adequately alleged, concluding affirmatively by emphasizing the interconnected nature of the allegations, particularly highlighting the Match's central role. 

In the second step, the Court examined the participation of individual defendants in the conspiracy, which involved specific allegations against AAMC and ACGME, yet this did not negate the earlier conclusion regarding the Match's importance in the conspiracy claim. Plaintiffs incorrectly assert that the Court considered claims against AAMC and ACGME without regard to the Match.

Additionally, plaintiffs claim that the complaint meets the requirements for a Section 1 Sherman Act claim even absent Match allegations, arguing it still presents a price-fixing conspiracy. This assertion is unsupported as the complaint outlines a comprehensive antitrust conspiracy centered on the Match, with elements of ACGME's accreditation standards linked to Match-related allegations. This stance contradicts both the Court's previous characterization of the claims and the plaintiffs' prior assertions that described their allegations as a single, overarching conspiracy aimed at suppressing competition in the market for resident services and stabilizing wages. The alleged conspiracy encompasses conduct far beyond the Match program's specific operations.

Plaintiffs argue that certain conduct related to the operation of the match supports their claims of a conspiracy to suppress residents' wages. However, the complaint clarifies that the alleged anticompetitive conduct is not confined to the National Resident Matching Program (NRMP) but is interconnected with other alleged anticompetitive actions. Despite asserting that the conspiracy claim remains valid without the Match allegations, plaintiffs fail to demonstrate that the court would still recognize a conspiracy based solely on the other claims. The court emphasizes that it cannot separate the Match-related allegations from the overall conspiracy claims due to their interdependence. Consequently, the court finds that it must dismiss the plaintiffs' complaint under 15 U.S.C. § 37b(b)(2) because Congress has prohibited federal courts from considering evidence pertaining to Match-related conduct. 

Regarding the 'Savings' Clause, plaintiffs argue that it preserves their price-fixing claims despite the evidentiary prohibition of Section 207. They interpret this clause as excluding all claims related to resident wage price-fixing. However, the court finds this interpretation overly broad; the clause only excludes claims alleging agreements among residency programs to fix stipends and benefits. The plaintiffs' allegations do not suggest such agreements among residency programs but rather assert an agreement between institutional and organizational defendants to suppress competition. The court references a prior case to support this distinction. Additionally, plaintiffs claim that the savings clause should exempt them from the evidentiary restrictions in Section 207, arguing that the language indicates no exemptions apply to price-fixing claims.

Plaintiffs misinterpret the statute regarding the evidentiary provision and the savings clause, which does not bar price-fixing claims that are unrelated to the Match program. The provision only prevents the Match program from being used as evidence in antitrust lawsuits, including those involving price-fixing. Plaintiffs express frustration over Congress's actions that have seemingly nullified their court victory, highlighting the lack of hearings, testimonies, or significant debate surrounding Section 207's passage. They criticize the legislative process, noting that the Match legislation was attached as a rider to an unrelated bill without public scrutiny, paralleling the process to the unsavory making of sausage. Despite these concerns, the court emphasizes its role to interpret and apply the law as enacted, absent compelling constitutional challenges. Plaintiffs argue that Section 207 violates separation of powers by effectively allowing Congress to adjudicate the pending case. They reference United States v. Klein, where Congress attempted to direct court decisions regarding property claims based on loyalty during the Civil War. The court concludes that none of the plaintiffs' constitutional arguments invalidate their conspiracy claim under Section 207.

The Supreme Court identified two constitutional issues with the statute. First, it ruled that Congress cannot dictate how cases pending before the judiciary should be decided, referencing United States v. Klein, where the Court found the statute unconstitutional for restricting the Supreme Court's ability to assess evidence in a pending case. This restriction effectively mandated a specific outcome contrary to the evidence. Second, the statute undermined the effect of presidential pardons, infringing on executive powers, as the Court asserted that the legislature cannot alter the implications of a pardon.

Plaintiffs contended that the evidentiary restrictions imposed by Congress on the Match were unconstitutional under Klein, as Congress cannot assume judicial functions regarding evidence in ongoing cases. However, the D.C. Circuit acknowledged that the interpretation of Klein is ambiguous. It is established that Klein's restrictions do not apply when Congress amends existing law rather than alters case outcomes under previous laws. If legislation modifies the underlying law rather than dictating results under that law, it does not breach separation of powers principles. The Court concluded that Congress had indeed altered the scope of antitrust claims, exempting certain challenges to the Match program from antitrust prosecution and imposing new evidentiary limitations on related cases. The statute created an exemption to antitrust laws and established new procedural restrictions, as indicated in 15 U.S.C. 37b(b)(2).

Changes to antitrust law do not alter the outcome of specific cases, as clarified in Klein. The distinction between a statute that sets court standards and one that mandates specific results can be complex, as noted in Benjamin v. Jacobson and Axel Johnson Inc. v. Arthur Andersen Co. However, in this instance, the distinction is clear, with Section 207 being applicable to actions beyond the current lawsuit and precluding challenges to the antitrust status of the Match Program. Consequently, the court finds no support for the plaintiffs' claims under Klein.

Regarding the argument of unconstitutional taking under the Fifth Amendment, the plaintiffs contend that dismissal under Section 207 would deprive them of property interests in future wages and working conditions. However, such interests can only be deemed "lost" if the plaintiffs prevail in their action, as established by case law indicating that causes of action are not actionable property interests until a final judgment is reached. Therefore, claims of past wage loss due to defendants' anticompetitive behavior would also be compensable only after a final judgment.

Additionally, the plaintiffs assert that dismissal under Section 207 would infringe upon their due process rights, access to the courts, and equal protection under the law. They reference Logan v. Zimmerman Brush Co. to argue that excluding relevant evidence would lead to a summary dismissal of their claim, denying them an adjudication on the merits. However, the Supreme Court in Logan did not affirm a due process right to such adjudication.

The Court determined that denying a judicial forum when the state removes a property right constitutes a violation of due process. However, in this case, the plaintiffs' reference to a prior case, Logan, is inappropriate because Section 207 does not eliminate their opportunity to pursue claims; it simply restricts the grounds for an antitrust cause of action, which is permissible if rationally based. The right of access to the courts is contingent upon the existence of an underlying claim; if no cause of action exists, the right to access is moot. The plaintiffs assert that the dismissal due to Section 207 denies them access, but the statute effectively abolishes the cause of action itself. Additionally, the plaintiffs argue that the evidentiary rule creates an irrational restriction, yet the Court emphasizes that legislative measures regarding national economic policy enjoy a strong presumption of constitutionality. The burden is on the plaintiffs to prove that the legislation is arbitrary or irrational. After evaluating the statute's stated policies, the Court concludes that Congress did not act irrationally in instituting the evidentiary prohibition in Section 207.

Subsection (a) of Section 207 provides Congress's rationale for exempting the Match Program and its participants from antitrust laws, emphasizing the historical need for efficiency, fairness, and protection for medical students. It asserts that antitrust litigation could jeopardize the operational integrity of the Match, which has effectively served the interests of medical students, teaching hospitals, and patients for over fifty years. The costs associated with such litigation could detract from essential functions of teaching hospitals, including patient care and medical training. The legislative intent behind Section 207 was to ensure the continuation of the Match system and safeguard the financial resources of educational institutions from antitrust-related lawsuits. The Court acknowledges that Congress's decision to protect the Match from antitrust prosecution is neither irrational nor arbitrary, and that retroactive application of the statute to ongoing cases is permissible. Congress intended for Section 207 to apply to all relevant judicial and administrative actions pending at the time of enactment, and the Court concludes that the retroactive application serves a legitimate legislative purpose supported by rational means, aligning with established legal precedents.

The retroactive application of Section 207 is deemed a rational method for achieving its intended goals, specifically protecting the Match Program and its participants from the costs associated with antitrust litigation. The lawsuit in question falls within this category, thereby aligning with Congress's objective to preserve medical education resources. Although plaintiffs contest Congress's findings and the statute's underlying policies, the court asserts that the findings are not irrational and maintain a rational connection to the enacted policies. The plaintiffs have not successfully demonstrated that the statute is arbitrary or lacks a legitimate congressional purpose.

The plaintiffs also argue that Section 207 violates their equal protection rights. Citing precedent, the court maintains that in matters of social and economic policy, a statutory classification is upheld against equal protection challenges if it is not based on suspect classifications and does not infringe upon fundamental rights, as long as there exists any conceivable rational basis for the classification. Since the plaintiffs do not belong to a suspect class, their equal protection challenge fails under the rational basis standard, mirroring the outcome of their due process claim.

The court concludes by granting the motion for judgment on the pleadings under Rule 12(c) for the 14 defendants that filed answers. For the remaining 15 defendants, the motion is treated as a motion to dismiss under Rule 12(b)(6) and is also granted. Other pending motions are denied as moot. A separate order will be issued consistent with this opinion.

Multiple motions filed by the plaintiffs and defendants have been denied as moot, including motions for class certification, protective orders, and amendments related to discovery and jurisdiction rulings. The court has dismissed the case for failure to state a claim and entered judgment in favor of the defendants, constituting a final judgment. It noted that the plaintiffs failed to sufficiently allege participation by certain defendants in the alleged conspiracy. The court rejected plaintiffs' arguments regarding jurisdiction and the relevance of previous rulings, reiterating that conspiracy allegations must be considered cohesively rather than in isolation. The order is deemed final and appealable, with specific references to the earlier opinions and rulings in the case.

The statute in question prescribes a decision rule favoring the Government in a pending case, infringing on the President's constitutional power to issue pardons, as highlighted in United States v. Sioux Nation of Indians. Plaintiffs contend that interpreting Section 207 to favor the defendants is unconstitutional, but the Court finds that Section 207 does not mandate judgment for the defendants, thus not addressing this argument. The statute is characterized as more than a mere confirmation of existing law, with its titles indicating an intent that does not create ambiguity in the statute itself. The Court emphasizes that the statute is clear and unambiguous. Additionally, had the Court not granted the current motion, it would have approved a motion from certain defendants to certify an immediate appeal under 28 U.S.C. § 1292(b).