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Western Star Hospital Authority Inc. v. City of Richmond

United States District Court, E.D. Virginia, Richmond Division

August 8, 2019

WESTERN STAR HOSPITAL AUTHORITY, INC., d/b/a METRO HEALTH EMS, Plaintiff,
v.
CITY OF RICHMOND, VIRGINIA, and RICHMOND AMBULANCE AUTHORITY, Defendants.

          OPINION

          John A. Gibney, Jr. Judge

         For years, the Richmond Veteran's Administration Medical Center ("VA") has used the Richmond Ambulance Authority ("RAA") to provide non-emergency medical transportation for its patients. In 2018, however, the VA decided to consider other providers and opened a bidding process for these services. Western Star Hospital Authority, doing business as Metro Health EMS ("Metro Health"), says that it won the bid from the VA, but that RAA and the City of Richmond ("City") have prevented it from performing its contract by denying it a permit to operate emergency medical services ("EMS") vehicles.

         Metro Health sued RAA and the City and moved for a preliminary injunction to prevent the defendants from interfering with its VA contract. RAA and the City moved to dismiss the operative complaint. For the reasons set forth in this Opinion, the Court will deny the plaintiffs motion for a preliminary injunction and grant the defendants' motions to dismiss.

         I. FACTS ALLEGED IN THE SECOND AMENDED COMPLAINT

         RAA, a public corporation created and controlled by the City, provides non-emergency interfacility medical transport services for VA patients. In April, 2018, the VA solicited bids for these services. RAA and Metro Health, a provider of non-emergency ambulance transportation for other veterans' hospitals, submitted bids. The VA awarded the work to Metro Health on the condition set forth in the bid that Metro Health obtain a permit from the City to operate EMS vehicles. Metro Health, through its Chief Operating Officer Lamont Doyle, received conflicting information from the City about whether it needed to obtain a permit and how to do so. Eventually, the City said that Metro Health must apply for a permit, but that no application process existed.

         For months, Metro Health pestered the City about creating an application process. The City insisted that it could not act without the city council's approval. In August, 2018, the City finally posted an application on the fire department website. Although the application requirements "were arbitrary, extreme, and unfair," Metro Health applied for a permit. (Dk. No. 49, at 10.)

         On September 21, 2018, Metro Health sued the City and the VA and requested a temporary restraining order to prevent the City from interfering with its contract with the VA. At a hearing on October 3, 2018, the Court denied Metro Health's motion for a temporary restraining order, but said that Metro Health could ask for a preliminary injunction after gathering more evidence. The Court also allowed Metro Health to amend its complaint. Metro Health later dismissed the VA and added RAA as a defendant.

         On November 13, 2018, the Court stayed the case while the city council considered Metro Health's application. Despite the fire department's approval, the council denied the application in December, 2018, and the Court lifted the stay. In the interim, RAA has continued to provide transport services to the VA. Metro Health asserts that it could provide these services at a substantially lower cost, but the VA has suspended Metro Health's bid until it can obtain a permit. On January 31, 2019, the Court allowed Metro Health to file a second amended complaint.

         Metro Health brings seven counts against the City and RAA: (1) monopolization in violation of the Sherman Act, 15 U.S.C. § 2; (2) attempted monopolization; (3) preemption by the Competition in Contracting Act, 41 U.S.C. §3301; (4) a § 1983 claim for substantive and procedural due process violations; (5) a § 1983 claim for equal protection violations; (6) violations of the Contract Clause; and (7) tortious interference with Metro Health's contract or business expectancy. Metro Health moved for a preliminary injunction, both defendants moved to dismiss, and the parties agreed to a consolidated briefing schedule.

         II. MOTION FOR PRELIMINARY INJUNCTION

         Metro Health asks the Court to enter a preliminary injunction to enjoin the defendants from "continuing their unlawful acts," without specifying what the Court should precisely order. (Dk. No. 52, at 23.) Presumably, Metro Health wants the Court essentially to give it a license or permit to transport VA patients. This relief would not just preserve the status quo but would mandate action by, at least, the City. Courts disfavor mandatory preliminary injunctions. Taylor v. Freeman, 34 F.3d 266, 270 n.2 (4th Cir. 1994). The Court can only award mandatory preliminary relief after "exacting review." Handsome Brook Farm v. Humane Farm Animal Care, 193 F.Supp.3d 556, 566 (E.D. Va. 2016).

         Under Federal Rule of Civil Procedure 65(a)(1) a court may award the "extraordinary remedy" of a preliminary injunction only if the movant can "demonstrate [four factors] by 'a clear showing.'" Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342, 345 (4th Cir. 2009) (quoting Winter v. Nat. Res. Def. Council, 555 U.S. 7, 22 (2008)). A movant "must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter, 555 U.S. at 20.

         Metro Health's motion fails on the likelihood of success element.[1] As set forth below, Metro Health's claims do not survive the motions to dismiss, so Metro Health cannot establish a clear likelihood of success on the merits. See Attorney First, LLC v. Ascension Entm't, Inc., 144 Fed.Appx. 283, 285 n.2 (4th Cir. 2005) (observing that the district court properly considered a motion to dismiss "as going to the likelihood of success on the merits" on a preliminary injunction motion). The Court thus will deny the preliminary injunction.[2]

         III. MOTIONS TO DISMISS

         The defendants argue that (1) they enjoy immunity from the antitrust claims in Counts One and Two; (2) the preemption claim in Count Three fails because the VA required compliance with the City ordinance requiring a permit for EMS vehicles ("Ordinance"); (3) Metro Health does not have a protected interest or fundamental right to support its constitutional claims in Counts Four and Five; (4) Count Six fails because the permit requirement existed when Metro Health submitted its bid, so the Ordinance did not interfere with the alleged VA contract; and (5) the City is immune from the state tort claim in Count Seven, but in any event, Metro Health does not have a contract with the VA, and cannot show that RAA interfered with its business expectancy.

         A. Monopolization and Attempted Monopolization (Counts One and Two)

         The defendants argue that the state action immunity doctrine prevents Metro Health from pursuing its antitrust claims against them. The Court will consider whether immunity applies to the City and RAA in turn.

         1. State Action Immunity for the City

         The state action immunity doctrine shields state governments from Sherman Act claims. Parker v. Brown, 317 U.S. 341, 350-51 (1943). Because immunity does not automatically extend to municipalities, they must act pursuant to a "clear articulation of a state policy to authorize anticompetitive conduct" to receive immunity. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 40 (1985). The state must "affirmatively express[]" its policy to displace competition. Cmty. Commc'ns Co. v. City of Boulder, 455 U.S. 40, 52 (1982). A municipality invoking the Parker doctrine, however, does not need to show "a specific, detailed legislative authorization," or an explicit statement that the state "expected the City to engage in conduct that would have anticompetitive effects." Hallie, 471 U.S. at 39, 42. The anticompetitive conduct must be a "foreseeable result" of the state policy. Id. at 42. Courts should not apply the for eseeability requirement too loosely. FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, 229 (2013).

         In a similar case, this Court held that the City of Richmond enjoyed immunity from an ambulance service provider's antitrust claims. Forest Ambulance Serv., Inc. v. Mercy Ambulance of Richmond, Inc., 952 F.Supp. 296 (E.D. Va. 1997). Pursuant to Hallie, the Court looked for a "clear articulation of a state policy to authorize anticompetitive conduct." Id. at 299. Specifically, the Court reviewed a Virginia law that allows municipalities to regulate ambulance services:

A. Upon finding as fact, after notice and public hearing, that exercise of the powers enumerated below is necessary to assure the provision of adequate and continuing emergency medical services and to preserve, protect and promote the public health, safety and general welfare, the governing body of any county or city is empowered to:
1. Enact an ordinance making it unlawful to operate any emergency medical services vehicle or class thereof established by the Board in such county or city without having been granted a franchise, license or permit to do so;
2. Grant franchises, licenses or permits to emergency medical services agencies based within or outside the county or city;...
3. Limit the number of emergency medical services vehicles to be operated within the county or city and by any emergency medical services agency;
4. Determine and prescribe areas of franchised, licensed or permitted service within the county or city; 5. Fix and change from time to time reasonable charges for ...

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