Physician Work Stoppage: The Legal Dilemma

There are two types of antitrust violations. The first are known as per se violations, which are typically transparent attempts to collude among competitors to stifle competition and obtain a greater economic benefit. Agreements to fix or raise prices, to restrict output, eliminate competitors or to artificially stifle supplies are so plainly anti-competitive that they are presumed to be illegal. The second type of violation is more difficult to gauge and is measured by what the courts have called the “rule of reason.” This is an attempt to balance what may be anti-competitive with what may otherwise be permissible competition. Under the rule of reason, a party that believes it has been injured by antitrust activity of its competitor must demonstrate: 1) the anti-competitive effect of the participant's conduct on the relevant market; and 2) that the conduct has no pro-competitive effect or justification. This balancing act attempts to accommodate the competing interests of the parties.

The essence of the antitrust laws is the preservation of a free market in which competition is allowed to flourish. As a result, the test is whether the challenged behavior is anti-competitive in nature. More importantly, the implication of the antitrust laws is not just an academic exercise. There are stiff penalties that apply to those who are found to have violated the Sherman Act. A violation is a felony, conviction of which could result in an immediate revocation of a license to practice medicine. Furthermore, prison terms and significantly high monetary penalties can be imposed on violators.

The Noerr-Pennington Doctrine

If physicians who are considered to be competitors agree or combine to withhold services and obtain an economic benefit for themselves, such as a reduction in malpractice premiums, then such action can be construed to be in violation of the Sherman Act. However, there is an important judicially-created, but limited, exception, known as the Noerr-Pennington Doctrine, that was instituted to protect the First Amendment and to assure that free speech and the right to petition the government for legislative change is not curtailed.

In Eastern Railroad Conference v. Noerr Motor Freight Inc., 365 U.S. 127, 81 S.Ct. 523 (1961), a group of competing railroad companies launched a publicity campaign against the trucking industry, a competitor to all the railroad companies. The purpose of the campaign was to put truckers in a bad light and demand legislation that would limit the size and weight of loads, impose user taxes, require truckers to pay their fair share of the costs of road damage and comply with certain laws. The U.S. Supreme Court in this seminal 1961 case held that it did not matter whether the campaign may have produced an anti-competitive effect; what counted was that the railroad campaign did not have an anti-competitive purpose and that it was directed toward obtaining governmental action and therefore deserved to be protected.

The courts have subsequently held that the antitrust laws are meant for the business world, not the political arena. The doctrine therefore permits individuals and groups to act together if their intent is to effect legislation and/or executive, administrative and judicial decision-making, because such activities are protected by the First Amendment. The courts further noted that having an anti-competitive effect is not enough to invoke an antitrust challenge; however, the immunity will not apply if the activity is characterized as being intended to affect legislation but is really a sham to cover up an attempt to interfere directly with a competitor's business.

FTC v. Superior Court Trial Lawyers Association

The case that is perhaps most cited by opponents of a physician work stoppage is the 1990 Supreme Court decision in FTC v. Superior Court Trial Lawyers Assn., 493 U.S. 411, 110 S.Ct. 768 (1990), in which a concerted effort by a group of lawyers was held to run afoul of the Sherman Act. The underlying facts involved a group of criminal defense lawyers who sought to compel a legislative change that would increase the hourly rates at which they were being paid — an amount defined by statute. These attorneys agreed among themselves that if they did not receive their requested rate increase they would stop accepting new assignments. When no legislative rate increase was approved, the lawyers followed through on their threat, and, within weeks, the system was teetering on the edge of collapse. The legislature then enacted the rate increase and the lawyers returned to work.

Suffice it to say, the Federal Trade Commission was none too pleased. It brought an action against the committee of lawyers as well as four of its individual leaders. The FTC contended that the boycott was a classic restraint of trade that was intended solely to bestow an economic benefit on the lawyers. The lawyers, on the other hand, contended that the boycott was intended to enact legislative change and that the Sixth Amendment's right to counsel was being adversely impacted, as the low wages negatively impacted the quality of representation provided to indigent defendants. The case wound its way through the FTC's administrative proceedings and ultimately to the Supreme Court. After balancing the competing positions, the Court sided with the FTC, concluding that the boycott was an impermissible restraint of trade because “the undenied objective of their boycott was an economic advantage for those who agreed to participate … No matter how altruistic the motives of [the lawyers] may have been, it is undisputed that their immediate objective was to increase the price that they would be paid for their services.”

The NOW and NAACP Cases

The challenge remains: How to avoid the consequences of the Supreme Court's holding in the Superior Court Trial Lawyers case? How can physicians avoid the charge of an economic benefit being the objective of a work stoppage? These questions require examination of two cases: Missouri v. National Organization for Women Inc., 620 F.2d 1301 (8th Cir. 1980) and NAACP v. Claiborne Hardware Co., 458 U.S. 886, 102 S.Ct. 3409 (1982).

In Missouri v. National Organization for Women Inc., the National Organization of Women (NOW) organized a boycott against all states that did not ratify the proposed Equal Rights Amendment (ERA). The boycott involved lobbying organizations to convince them not to hold their conventions in these states. The State of Missouri filed for an injunction and claimed that these activities violated federal antitrust law. The lower court decided that NOW did not violate antitrust law, and the Eighth Circuit affirmed. The factors examined by the court in reaching its decision deserve mention because these very same issues need to be addressed if contemplating a physician work stoppage.

First, the boycott related to a political issue; even if it inflicted economic injury, its ultimate goal was the ratification of the ERA, which was not a financial or commercial piece of legislation, but a social or political piece of legislation. Second, the court concluded that the boycott was not a sham, but a symbolic gesture that was designed to attract attention and bring public visibility to the issue. Third, the participants were not in a competitive relationship with the State of Missouri, the entity impacted by the boycott, and NOW was not motivated by any type of anti-competitive purpose. The court noted that the antitrust laws condemn trade restraints, not political activity, and that a public campaign to influence government action clearly falls into the category of political activity. Fourth, the boycott was only part of a group of concerted activities and a publicity campaign, which included the distribution of circulars, the making of speeches, the publishing of newspaper and magazine articles and other activities.

In NAACP v. Claiborne Hardware Co., the National Association for the Advancement of Colored People (NAACP) launched a boycott against Caucasian merchants in Claiborne County, MS, for the purpose of achieving equality and racial justice. Several Caucasian merchants filed suit for injunctive relief and damages. The lower court held that the boycott was unlawful, but the Supreme Court disagreed. The Supreme Court held that the purpose of the boycott was to influence government action, not destroy legitimate competition, and that a peaceful assembly for lawful discussion or political action cannot be made a crime since such activities are protected by the rights of free speech, free assembly and the freedom to petition for a redress of grievances. The Court stressed that these rights are to be preserved as First Amendment rights, which are used to bring about political, social and economic changes.

How Do These Cases Apply to a Physician Work Stoppage?

To date, there is no case on point that will guarantee physicians that any work stoppage they are engaged in will be immune to a finding of antitrust violation. As a result, it might be advantageous for such physicians first to meet with the Attorney General or representatives from the Department of Justice and Federal Trade Commission to determine their positions. Nevertheless, during this time of medical crisis, physicians must be able to speak out to their colleagues, their patients and representatives, and the public. That is the physicians' First Amendment right and it must be exercised if the public is to continue having access to the high quality medical care the United States has for so long been reputed to provide.

So, how can the physician work stoppage activity be protected by the Noerr-Pennington doctrine? What can we take from the NOW and NAACP cases to minimize an attack on a physician work stoppage on antitrust grounds?

First, it should be clearly indicated that in the physician work stoppage, there is no boycott. The physicians are not refusing to pay insurance premiums or to treat patients altogether. They are not taking any actions against their competitors. Thus, the stoppage should not be characterized as a strike or boycott, but as part of a lobbying effort, or a rally, during which time doctors are taking time from work to communicate with legislators and other public officials.

Second, the intent must be to change or create legislation, and the goal of the stoppage is to increase public awareness of the problems and need for tort reform. It is critical to communicate to the public that this action is in response to a crisis that involves the public's ability to have access to high quality medical care.

Third, the boycott must not be the primary activity used to create or change legislation; it must be one of several activities undertaken to create change and should be “incidental” to other valid efforts to lobby the legislature to enact changes in support of tort reform. It must basically be a symbolic gesture.

Fourth, the stoppage cannot be “economic.” Thus, the stoppage should not address the affordability of premiums or advance the economic self-interest of the participants by design.

Fifth, the physicians cannot be coerced in any way into joining the rally; they must make up their own minds on whether to participate and how to participate.

Sixth, the physicians must make sure their patients are covered for emergency and essential services to ensure that those patients' health and interests are not jeopardized. Patients should be notified in advance of the rally and informed that it will not impact “essential” care. This may require physicians to cooperate with the various hospitals in the community to ensure that hospitalized patients are cared for and that the time frame of the stoppage is not excessive, but appropriate.

Conclusion

While these practical suggestions are derived from the legal framework that is most likely to arise in a judicial forum, they are intended only as examples of how a physician work stoppage might seek to take shelter from the potential storm of an antitrust challenge. There are, of course, no guarantees on how any given court or state attorney general would view a physician walkout action, and whether they would see it as a means of political expression or merely a bid for economic gain. However, being able to advise physician clients of the pitfalls to be avoided may help them stay on the right side of the antitrust laws.

Over the past year, with the medical malpractice crisis growing to encompass an ever-increasing number of states, physicians have wanted to implement strategies to force the issues out in the open and stimulate reforms. One strategy, which many physicians considered and far fewer implemented, was conducting some form of work stoppage. The concept of a work stoppage has generated a great deal of debate among physicians, medical societies, attorneys, law enforcement officials and legislators, both on legal and ethical grounds. What is the effect of antitrust law on these movements, and how can the outcomes of prior antitrust cases help to frame the legal debate concerning a physician work stoppage? If you have physician clients who are contemplating such actions as part of their efforts toward tort reform, what should you advise them?

The Antitrust Laws

The obvious starting point of any inquiry into the legal consequences of a physician work stoppage is antitrust law. Referred to by its formal title, the Sherman Act, or more commonly as a “restraint of trade,” the antitrust statute prescribes that “[e]very contract, combination … or conspiracy in restraint of trade … is declared to be illegal.” Thus, the hallmark of antitrust violations occurs when two or more parties (typically competitors) combine to restrain trade in an effort to derive some economic benefit to themselves that they could not otherwise obtain in a lawful manner.

There are two types of antitrust violations. The first are known as per se violations, which are typically transparent attempts to collude among competitors to stifle competition and obtain a greater economic benefit. Agreements to fix or raise prices, to restrict output, eliminate competitors or to artificially stifle supplies are so plainly anti-competitive that they are presumed to be illegal. The second type of violation is more difficult to gauge and is measured by what the courts have called the “rule of reason.” This is an attempt to balance what may be anti-competitive with what may otherwise be permissible competition. Under the rule of reason, a party that believes it has been injured by antitrust activity of its competitor must demonstrate: 1) the anti-competitive effect of the participant's conduct on the relevant market; and 2) that the conduct has no pro-competitive effect or justification. This balancing act attempts to accommodate the competing interests of the parties.

The essence of the antitrust laws is the preservation of a free market in which competition is allowed to flourish. As a result, the test is whether the challenged behavior is anti-competitive in nature. More importantly, the implication of the antitrust laws is not just an academic exercise. There are stiff penalties that apply to those who are found to have violated the Sherman Act. A violation is a felony, conviction of which could result in an immediate revocation of a license to practice medicine. Furthermore, prison terms and significantly high monetary penalties can be imposed on violators.

The Noerr-Pennington Doctrine

If physicians who are considered to be competitors agree or combine to withhold services and obtain an economic benefit for themselves, such as a reduction in malpractice premiums, then such action can be construed to be in violation of the Sherman Act. However, there is an important judicially-created, but limited, exception, known as the Noerr-Pennington Doctrine, that was instituted to protect the First Amendment and to assure that free speech and the right to petition the government for legislative change is not curtailed.

In Eastern Railroad Conference v. Noerr Motor Freight Inc. , 365 U.S. 127, 81 S.Ct. 523 (1961), a group of competing railroad companies launched a publicity campaign against the trucking industry, a competitor to all the railroad companies. The purpose of the campaign was to put truckers in a bad light and demand legislation that would limit the size and weight of loads, impose user taxes, require truckers to pay their fair share of the costs of road damage and comply with certain laws. The U.S. Supreme Court in this seminal 1961 case held that it did not matter whether the campaign may have produced an anti-competitive effect; what counted was that the railroad campaign did not have an anti-competitive purpose and that it was directed toward obtaining governmental action and therefore deserved to be protected.

The courts have subsequently held that the antitrust laws are meant for the business world, not the political arena. The doctrine therefore permits individuals and groups to act together if their intent is to effect legislation and/or executive, administrative and judicial decision-making, because such activities are protected by the First Amendment. The courts further noted that having an anti-competitive effect is not enough to invoke an antitrust challenge; however, the immunity will not apply if the activity is characterized as being intended to affect legislation but is really a sham to cover up an attempt to interfere directly with a competitor's business.

FTC v. Superior Court Trial Lawyers Association

The case that is perhaps most cited by opponents of a physician work stoppage is the 1990 Supreme Court decision in FTC v. Superior Court Trial Lawyers Assn. , 493 U.S. 411, 110 S.Ct. 768 (1990), in which a concerted effort by a group of lawyers was held to run afoul of the Sherman Act. The underlying facts involved a group of criminal defense lawyers who sought to compel a legislative change that would increase the hourly rates at which they were being paid — an amount defined by statute. These attorneys agreed among themselves that if they did not receive their requested rate increase they would stop accepting new assignments. When no legislative rate increase was approved, the lawyers followed through on their threat, and, within weeks, the system was teetering on the edge of collapse. The legislature then enacted the rate increase and the lawyers returned to work.

Suffice it to say, the Federal Trade Commission was none too pleased. It brought an action against the committee of lawyers as well as four of its individual leaders. The FTC contended that the boycott was a classic restraint of trade that was intended solely to bestow an economic benefit on the lawyers. The lawyers, on the other hand, contended that the boycott was intended to enact legislative change and that the Sixth Amendment's right to counsel was being adversely impacted, as the low wages negatively impacted the quality of representation provided to indigent defendants. The case wound its way through the FTC's administrative proceedings and ultimately to the Supreme Court. After balancing the competing positions, the Court sided with the FTC, concluding that the boycott was an impermissible restraint of trade because “the undenied objective of their boycott was an economic advantage for those who agreed to participate … No matter how altruistic the motives of [the lawyers] may have been, it is undisputed that their immediate objective was to increase the price that they would be paid for their services.”

The NOW and NAACP Cases

The challenge remains: How to avoid the consequences of the Supreme Court's holding in the Superior Court Trial Lawyers case? How can physicians avoid the charge of an economic benefit being the objective of a work stoppage? These questions require examination of two cases: Missouri v. National Organization for Women Inc. , 620 F.2d 1301 (8th Cir. 1980) and NAACP v. Claiborne Hardware Co. , 458 U.S. 886, 102 S.Ct. 3409 (1982).

In Missouri v. National Organization for Women Inc., the National Organization of Women (NOW) organized a boycott against all states that did not ratify the proposed Equal Rights Amendment (ERA). The boycott involved lobbying organizations to convince them not to hold their conventions in these states. The State of Missouri filed for an injunction and claimed that these activities violated federal antitrust law. The lower court decided that NOW did not violate antitrust law, and the Eighth Circuit affirmed. The factors examined by the court in reaching its decision deserve mention because these very same issues need to be addressed if contemplating a physician work stoppage.

First, the boycott related to a political issue; even if it inflicted economic injury, its ultimate goal was the ratification of the ERA, which was not a financial or commercial piece of legislation, but a social or political piece of legislation. Second, the court concluded that the boycott was not a sham, but a symbolic gesture that was designed to attract attention and bring public visibility to the issue. Third, the participants were not in a competitive relationship with the State of Missouri, the entity impacted by the boycott, and NOW was not motivated by any type of anti-competitive purpose. The court noted that the antitrust laws condemn trade restraints, not political activity, and that a public campaign to influence government action clearly falls into the category of political activity. Fourth, the boycott was only part of a group of concerted activities and a publicity campaign, which included the distribution of circulars, the making of speeches, the publishing of newspaper and magazine articles and other activities.

In NAACP v. Claiborne Hardware Co., the National Association for the Advancement of Colored People (NAACP) launched a boycott against Caucasian merchants in Claiborne County, MS, for the purpose of achieving equality and racial justice. Several Caucasian merchants filed suit for injunctive relief and damages. The lower court held that the boycott was unlawful, but the Supreme Court disagreed. The Supreme Court held that the purpose of the boycott was to influence government action, not destroy legitimate competition, and that a peaceful assembly for lawful discussion or political action cannot be made a crime since such activities are protected by the rights of free speech, free assembly and the freedom to petition for a redress of grievances. The Court stressed that these rights are to be preserved as First Amendment rights, which are used to bring about political, social and economic changes.

How Do These Cases Apply to a Physician Work Stoppage?

To date, there is no case on point that will guarantee physicians that any work stoppage they are engaged in will be immune to a finding of antitrust violation. As a result, it might be advantageous for such physicians first to meet with the Attorney General or representatives from the Department of Justice and Federal Trade Commission to determine their positions. Nevertheless, during this time of medical crisis, physicians must be able to speak out to their colleagues, their patients and representatives, and the public. That is the physicians' First Amendment right and it must be exercised if the public is to continue having access to the high quality medical care the United States has for so long been reputed to provide.

So, how can the physician work stoppage activity be protected by the Noerr-Pennington doctrine? What can we take from the NOW and NAACP cases to minimize an attack on a physician work stoppage on antitrust grounds?

First, it should be clearly indicated that in the physician work stoppage, there is no boycott. The physicians are not refusing to pay insurance premiums or to treat patients altogether. They are not taking any actions against their competitors. Thus, the stoppage should not be characterized as a strike or boycott, but as part of a lobbying effort, or a rally, during which time doctors are taking time from work to communicate with legislators and other public officials.

Second, the intent must be to change or create legislation, and the goal of the stoppage is to increase public awareness of the problems and need for tort reform. It is critical to communicate to the public that this action is in response to a crisis that involves the public's ability to have access to high quality medical care.

Third, the boycott must not be the primary activity used to create or change legislation; it must be one of several activities undertaken to create change and should be “incidental” to other valid efforts to lobby the legislature to enact changes in support of tort reform. It must basically be a symbolic gesture.

Fourth, the stoppage cannot be “economic.” Thus, the stoppage should not address the affordability of premiums or advance the economic self-interest of the participants by design.

Fifth, the physicians cannot be coerced in any way into joining the rally; they must make up their own minds on whether to participate and how to participate.

Sixth, the physicians must make sure their patients are covered for emergency and essential services to ensure that those patients' health and interests are not jeopardized. Patients should be notified in advance of the rally and informed that it will not impact “essential” care. This may require physicians to cooperate with the various hospitals in the community to ensure that hospitalized patients are cared for and that the time frame of the stoppage is not excessive, but appropriate.

Conclusion

While these practical suggestions are derived from the legal framework that is most likely to arise in a judicial forum, they are intended only as examples of how a physician work stoppage might seek to take shelter from the potential storm of an antitrust challenge. There are, of course, no guarantees on how any given court or state attorney general would view a physician walkout action, and whether they would see it as a means of political expression or merely a bid for economic gain. However, being able to advise physician clients of the pitfalls to be avoided may help them stay on the right side of the antitrust laws.