author: HAROLD H. GREENE, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, et al., Defendants.
    Civ. A. No. 82-0192.
    United States District Court, District of Columbia.
    Jan. 9, 1985.

      James P. Denvir, Michael F. Altschul, Luin P. Fitch, J. Philip Sauntry, Jr., Antitrust Div., U.S. Dept, of Justice, Washington, D.C., for U.S. Dept, of Justice.
    Alfred A. Green, Francine J. Berry, Jim G. Kilpatric, John D. Zeglis, New York City, Lee M. Mitchell, Ben W. Heineman, Jr., Washington, D.C., for American Telephone and Telegraph Co.; Howard J. Trienens, George V. Cook, William L. Keefauver, Sidley & Austin, Washington, D.C., of counsel.
    James D. Ellis, John S. Luckstone, Joseph A. Klein, Charles P. Featherstun, Livingston, N.J., for Bell Operating Companies.
    R.V.R. Dalenberg, Robert L. Barada, Marion J. Stanton, San Francisco, Cal., for Pacific Bell and Nevada Bell.
    J. Roger Wollenberg, Roger M. Whitten, Margaret L. Tobey, Wilmer, Cutler & Pickering, James E. Magee, Washington, D.C., for intervenor GTE Sprint Communications.
    Chester T. Kamin, Michael H. Salsbury, Jenner & Block, John R. Worthington, Senior Vice President and General Counsel, MCI Communications Corp., Washington, D.C., for MCI Communications Corp.
    Sean A. McCarthy, McLean, Va., for Satellite Business Systems; William E. Willis, Margaret K. Pfeiffer, Robert B. Bell, Sullivan & Cromwell, Washington, D.C., of counsel.
    James M. Lyons, Frederick J. Baumann, Rothgerber, Appel & Powers, Denver, Colo., for Utah Public Service Commission.
    Neil F. Hartigan, Atty. Gen. of the State of Ill., Hercules F. Bolos, Sp. Asst. Atty. Gen., Chief Counsel — Ill—CC, E. King Poor, Asst. Atty. Gen., Chicago, Ill., for Illinois Commerce Commission.
    Stephen G. Oxley, Asst. Secretary and Staff Counsel, Cheyenne, Wyo., for Public Service Commission of Wyoming.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

The issue before the Court is whether AT & T’s database system should be made available to the Operating Companies on a temporary basis as a means of enabling other interexchange carriers to operate a sophisticated “800 Service” system.

On July 8, 1983, this Court entered an Order approving the Plan of Reorganization submitted by AT & T and the Department of Justice which implemented the decree in this case. This complex, detailed Plan included a number of provisions concerning post-divestiture provision of so-called “in-WATS” or 800 Service, a unique interexchange service in which the receiver, rather than the originator of the call, subscribes to and is billed for the calls that are made. Insofar as here relevant, the Plan provides that not only AT & T but also the other interexchange carriers and the Operating Companies would be entitled to use the 800 prefix for in-WATS service; that the Operating Companies’ Central Staff Organization would administer the North American Numbering Plan, including the assignment of 800 numbers; and that 800 directory assistance would be considered an interexchange, inter-LATA service. The Plan also mandates that AT & T would lease access to its Common Channel Interoffice Signalling (CCIS) system to the Operating Companies “for their provision of intraLATA ... 800 Service ... provided, however, that AT & T will have no obligation to allow [Operating Company] use of CCIS facilities under any arrangement that would allow access directly or indirectly to AT & T’s CCIS network ... by other interexchange carriers.”

On December 20, 1983, the Department of Justice filed a motion to amend the Plan of Reorganization and to obtain a temporary waiver of the decree’s prohibition on the provision of interexchange service by the Operating Companies with respect to 800 Service. The motion would in effect (1) grant to the Operating Companies access to portions of AT & T’s CCIS database system for several years (during the period when they developed their own analogous 800 database facilities) for the purpose of sorting and routing the 800 Service calls of interexchange carriers other than AT & T; (2) permit the Operating Companies to provide the interexchange access services necessary for access to the CCIS system; and (3) require AT & T to give to the Operating Companies development assistance and access to the CCIS 800 database in order to facilitate the development by the Operating Companies of their own database systems.

The Department’s motion is premised upon the proposition that, given the current structure of the 800 Service system, the restriction imposed by the Plan of Reorganization on Operating Company and interexchange carrier access to AT & T’s CCIS system is inconsistent with the decree itself because allegedly (1) it conflicts with the requirement of section 1(A)(1) of the decree that AT & T shall make available to the Operating Companies “sufficient facilities, personnel, systems, and rights to technical information to permit the [Operating Companies] to perform, independently of AT & T ... exchange access functions;” (2) it prevents the Operating Companies from fulfilling their obligation under section 11(B) and Appendix B of the decree to provide equal access to all interexchange carriers with respect to 800 Service; and (3) it will hinder the development of competition in the lucrative 800 Service market, in contravention of the underlying principles of the decree.

I

800 service, which was commercially introduced by AT & T in 1967, affords businesses and other organizations a means of providing potential customers or others with a ready, free method of contacting them to obtain goods and services.

From 1967 until 1981, 800 Service calls were handled by designated interexchange switching systems called “Originating Screening Offices” and “Terminating Screening Offices”. That system worked as follows. An Originating Screening Office encoded the first six digits in the 800 number (800-NXX) into a special three-digit or six-digit routing code that both directed the routing of the call across the interexchange network to the appropriate Terminating Screening Office and identified the service area from which the call originated. The final four digits in the 800 number (XXXX) identified the customer, the end office serving the customer, and the service areas to which the customer had subscribed. The Terminating Screening Office used the special routing code and the last four digits in the 800 number to verify that the call had originated from within a subscribed service area, and to route the call to the local network for completion. Because all of the digits in 800 numbers had significance for screening and routing 800 Service calls, subscribers had no choice of 800 Service numbers, and they were required to change their 800 numbers if they changed their receiving location or required different geographic coverage.

In 1981, AT & T implemented a new, more sophisticated 800 Service routing system that utilized its CCIS system. Under this new system, screening and routing information is not encoded into the 800 number itself. Instead, these functions are performed by Network Control Points, consisting of a computer and related software, that contain 800 Service databases. These Points receive 800 numbers transmitted by the Originating Screening Office, and they screen the numbers to make certain that the call is originating from a subscribed 800 Service area. If the answer is in the affirmative, the Network Control Point reads and translates the 800 Service number to a standard, ten digit “Plain Old Telephone Service” number contained in the database. That number is returned to the Originating Screening Office, which continues to route the 800 Service call across AT & T’s interexchange network to the subscriber.

AT & T’s use of this new, more sophisticated CCIS database system has enabled it to offer 800 Service subscribers several innovative service options. Since the digits in the 800 number no longer have significance for screening and routing purposes, subscribers are able to obtain 800 Service numbers with verbal significance (e.g., 800-CAR-RENT) that promote product or service identification and presumably increase customer response. The Network Control Points can also be programmed to route 800 Service calls to different destinations at different times of day, or to alleviate call congestion at one subscriber receiving location. Finally, the system’s data collection capabilities permit AT & T to offer its 800 Service customers statistical studies concerning the volume of calls received at different times of day from different geographic locations; this information can, of course, assist subscribers in planning their 800 Service operations.

Since both the Operating Companies and the other interexchange carriers at present have neither database 800 number translation systems of their own nor access to AT & T’s CCIS database system for interexchange 800 service, these carriers must rely on a modified version of the pre-1981 NXX system. It is this disadvantage which has prompted the Department to file its motion.

II

Those who support the Department of Justice motion contend that, unless the Operating Companies are enabled to make available to the interexchange carriers AT & T’s CCIS database, the decree’s equal access requirements will be violated in that the Operating Companies will be able to offer the carriers only an inadequate, inferior 800 Service system that will not permit them to compete effectively with AT & T. In particular, they claim that the following defects exist under the current Plan of Reorganization.

First, under the NXX system, the Operating Companies and the interexchange carriers will be unable to compete with AT & T for those subscribers who desire verbally significant 800 Service numbers; and, in any event, use of the NXX system will require 800 Service subscribers to use different 800 numbers for different interexchange carriers, and for inter-LATA and intra-LATA service. Second, the NXX system establishes economic barriers to the development of effective 800 Service competition, in that the Operating Companies and the interexchange carriers will be required to spend significant sums to make the software modifications necessary to accomplish the screening and routing tasks required for NXX 800 Service. Third, implementation of the NXX system may subject the Operating Companies to liability for failing to provide the non-AT & T interexchange carriers with “equal access” as required under section 11(B), III(F), and Appendix B, of the decree.

In essence, the Department of Justice and those supporting its position argue that neither the NXX system nor any other not founded on AT & T’s CCIS database would be functionally equal to the AT & T system. While that premise is correct, it does not end the inquiry. The real question here is whether the relegation of the interexchange carriers to the NXX system by the Plan of Reorganization violates the decree, and does so so clearly that the Plan should be amended long after it was adopted by the parties and approved by the Court. These issues will now be considered.

Ill

There is no question but that both the litigants and the public have a strong interest in the finality of judgments, including consent decrees. Finality permits the parties and others to order their present and future conduct on a decree’s provisions. Such settled expectations should not be lightly disturbed, except in compelling circumstances similar to those identified in Rule 60(b), Fed.R.Civ.P., or by courts exercising their residual equity jurisdiction with respect to changed conditions or otherwise. It is also relevant to the inquiry in this particular case that, in its comments on the Plan, the Department of Justice raised no objection of the sort now asserted with regard to the Plan’s 800 Service provisions, and that approval of that Plan was preceded by more than a year of adversarial judicial proceedings in which not only the Department but also the Operating Companies, the interexchange carriers, and other interested parties had extensive opportunities to comment.

It is upon the basis of these considerations that AT & T argues that not only would it be unfair for the Court to grant the government’s motion and thereby to upset the compromise embodied in the Plan, but that such an action would also improperly prejudice AT & T and constitute an abuse of discretion. Although there is some merit to the AT & T position, there are also substantial countervailing considerations.

The unprecedented scope of this case, which involves the reorganization of the world’s largest corporation, coupled with the technical complexity of many of the issues involved in the reorganization, necessarily created a significantly greater possibility of delayed recognition of problems than would be present in the ordinary case. This consideration is enhanced by another, related factor. The technical expertise required for an in-depth evaluation of the terms of the Plan was necessarily disproportionately concentrated in the hands of AT & T which drafted the Plan and whose personnel, more than those of any other entity, were intimately familiar with the operations of the Bell System as a whole. It is for reasons such as these that the standards for modification must be more flexible than would ordinarily be true.

The decisions cited by AT & T (see note 27, supra) are not directly applicable for yet another reason. All of those cases dealt with decrees, the terms of which were constrained only by applicable law and the court’s discretion. Here, by contrast, the parties have proceeded in two stages. The initial decree negotiated by the parties and approved by the Court was, indeed, a carefully crafted compromise. However, the Plan was a subordinate agreement providing for the detailed implementation of the more general principles of the decree, and it was not to be inconsistent with the decree.

For these reasons, the Court concludes that it has the power to order modifications to the Plan of Reorganization to remedy inconsistencies between the Plan and the decree. However, in passing upon requests to amend the Plan, the Court does not write on a slate as clean as that which it had before it when the Plan was first submitted for its approval. To put it another way, a party claiming an inconsistency between the decree and the Plan after the Plan has been approved has a substantially higher burden than it would have had prior to such approval. That burden is increased if the issue under consideration is one that was apparent but was not, for whatever reason, addressed before the Plan was finally approved. It is on the basis of this standard that the Court now considers the Department’s substantive claims.

IV

First. It is not seriously disputed that the NXX system, which is functionally similar to the 800 Service system employed by AT & T until 1981, will permit the interexchange carriers to provide an 800 Service with a level of signal quality equivalent to that provided by AT & T. That system will permit up to 583 interexchange carriers to provide the Service to a total of twenty times as many customers as those presently served by AT & T. It is true, of course, that implementation of the NXX plan will require the Operating Companies to acquire increased switching capability to enable them to perform the six-digit translation necessary to sort 800 Service calls and forward them to the appropriate interexchange carrier. However, it appears that such modifications were to have been made by September, 1984, and, in any event, AT & T has offered to make its Originating Screening Offices available to Bell Operating Companies in those situations where modifications have not yet been effected.

The Court therefore concludes that the NXX system is capable of providing a technologically viable alternative 800 Service system that can be used by the interexchange carriers during the period in which they and the Bell Operating Companies lack their own databases.

Second. An Operating Company will not be in violation of the decree’s equal access provisions merely because during an interim period the interexchange carriers will lack AT & T’s ability to perform a database translation of an 800 Service number forwarded by such a company. The Operating Companies will be providing to AT & T and to the various interexchange carriers information identical as to type and signal quality — i.e., the dialed 800 number. To be sure, only AT & T currently possesses the technology to perform more advanced 800 Service operations upon the receipt of the 800 number, but this does not alter the fact that the Operating Companies will be providing all interexchange carriers with identical information at an identical quality level. That is what the equal access provisions of the decree require, and that is all they require in this context. These provisions do not require the Operating Companies to employ interexchange access technology possessed by AT & T — or by any other interexchange carrier — to compensate for lack of such capabilities by other interexchange carriers. Indeed, were the Operating Companies to do so, they might conceivably be charged with violating section 11(D)(1) of the decree,- which prohibits them from providing interexchange services.

The Department also makes the related point that the Operating Companies’ role in assigning NXX prefixes may leave them open to charges that they are discriminating among interexchange carriers. However, this objection is at this time entirely speculative. If the Operating Companies do discriminate in this manner, the problem can adequately be dealt with under the decree’s enforcement provisions.

Third. Although it is undoubtedly true that the lack of 800 database technology will force the Operating Companies and the interexchange carriers to incur some expenditures, this does not, by itself, provide a basis for amending the Plan of Reorganization. None of the supporters of the Department’s motion has asserted either (1) that the cost of the interexchange carriers of developing their own database (or alternative 800) systems will be prohibitive and thus entirely frustrate entry into the 800 Service field during the interim period (see Part V, infra), or (2) that a delay in the availability of competitive interexchange carrier 800 Service during that period will preclude effective 800 Service competition thereafter. The effect of a denial of the government’s motion will simply be to require the interexchange carriers to weigh the economic costs and benefits of offering 800 Service at all, or of offering it before or after they or the Operating Companies have developed and deployed their own database systems. No purpose of the decree will be frustrated if the interexchange carriers must undertake such cost-benefit analyses. .

Indeed, such cost-benefit analysis by the interexchange carriers in deciding whether, where, when, and how to offer various sorts of interexchange service is precisely what is contemplated by the decree. As the Court indicated when it rejected the argument that the Plan of Reorganization should be amended to provide that 800 Service directory assistance should be assigned to the Operating Companies (thereby affording the interexchange carriers access to this information), it is not the purpose of the decree either to punish AT & T or to compensate for the interexchange carriers’ economic and technological deficiencies of the interexchange carriers by granting them free access to AT & T technology, equipment, and information. The theory of the decree is that equal access will permit various interexchange carriers to compete as they choose in the interexchange markets by developing their own technology and marketing strategy, with the public benefitting from the resulting technological innovation and choice of services. The purpose of the decree in this regard is thus a limited one: to remove barriers to entry and to create a truly competitive environment for interexchange services. It is not the artificial creation of competition by enabling the interexchange carriers to share AT & T’s interexchange capabilities and facilities to which they are not otherwise entitled. If the interexchange carriers wish to fulfill the decree’s promise of flourishing interexchange competition, it will be up to them to make the necessary financial investments and to develop the appropriate technology.

V

In any event, the database plan proposed by the Department of Justice constitutes a problematic alternative. To begin with, as noted above, that plan may itself be in some conflict with the decree by permitting the Operating Companies to provide interexchange services.

The Department’s proposal is also flawed on broader grounds. Given the present capabilities of the Operating Companies and of the AT & T CCIS system, it appears that, at least initially, only three interexchange carriers in addition to AT & T could provide 800 Service using that system. Thus, at least in the short run, that proposal will hardly provide equal access in the sense that all interexchange carriers will be able to compete on an equal basis with AT & T.

Moreover, even if the system could be modified to accommodate more interexchange carriers, as the Department and the Operating Companies contend, the necessity for such modifications raises significant problems of timing and enforcement. If, as is asserted, the Operating Companies are able to develop their own database systerns within two years, thereby at that point mooting the entire 800 Service controversy, it makes little practical sense to require the adoption of a plan which by any measure cannot itself be fully implemented until shortly before the time when it will become irrelevant. The Operating Companies believe that the modifications necessary for implementation of the Department of Justice plan could be made within a year (Bell Operating Companies’ Reply at 26 n. 14), while AT & T contends that such modifications would take considerably longer. (AT & T Opposition, Ohnsorg Affidavit at 2.) Either way, the current problem is clearly only an interim one.

The relatively short time period during which the database plan would be operational also raises significant problems of enforcement: inasmuch as the necessary modifications of the equipment and the software to provide access to the CCIS system to entities other than AT & T would be under AT & T’s control, the question whether these modifications were being implemented as rapidly and as effectively as possible would necessarily be largely subjective. Given that fundamental fact, it would be difficult for the interested parties to raise, and for the Court to decide, motions to compel compliance sufficiently quickly for the entire process to be of significant practical value.

In sum, numerous considerations of policy and practicality militate against granting the Department’s motion with respect to the use by the Operating Companies of AT & T’s CCIS facilities, and that portion of the government’s motion is accordingly denied.

VI

As the foregoing discussion indicates, the asserted ability of the Operating Companies to deploy their own database system within a relatively brief period of time constitutes a factor in the Court’s decision to deny the major portion of the Department’s motion. The Operating Companies claim that to enable them to effect such deployment in the most effective manner, AT & T should be required to furnish them the existing 800 database source codes and related documentation and, temporarily, with “seed personnel.”

Under the Plan of Reorganization, the Operating Companies are given the rights to “obtain from Western Electric CCIS, STP and NCP hardware and software, including ‘know how’ and existing applications software associated with related operations systems, for the provision of any services they are authorized to provide under the Decree.” This provision does not, in terms or in purpose, require AT & T to provide the Operating Companies with existing source codes and related documentation for its CCIS 800 database system. Moreover, as far as an amendment of the Plan to require AT & T to provide the Operating Companies with such information is concerned, it would be inappropriate for the reasons elaborated above. The Operating Companies are entitled under the Plan to obtain from AT & T the hardware, software, and know-how necessary to develop their own database systems; they are not entitled to replicate AT & T’s existing system by simple use of AT & T’s database.

What the Plan envisions is that the Operating Companies, once provided with the necessary equipment and know-how, will develop their own database system — a system which may be similar to AT & T’s or which may be different. This approach is not only consistent with the language of the Plan; it is also consistent with the decree’s goal of establishing the Operating Companies as entities that are truly independent of AT & T. Accordingly, the motion is denied with respect to the provision of source codes and related documentation. However, AT & T shall furnish to the Operating Companies, upon .their request, the hardware, software, and know-how necessary for the development of their own database system and, if the Operating Companies experience problems in that regard they, or others, may return to the Court for appropriate relief.

Finally, as noted, the Operating Companies also request the assignment of AT & T “seed personnel.” Under the terms of the Plan provision cited above, AT & T is obligated to provide the Operating Companies with the know-how required to develop their own databases. Most of this know-how will presumably consist of technical papers and other training materials, but it is conceivable that some of this information can effectively be made available only by means of the temporary assignment of “seed personnel.” However, it would be inappropriate to order the temporary assignment of such personnel absent a motion based upon a clear showing that the assignment is necessary to effectuate the terms of the Plan. No such motion has been filed and no such showing has been made, and the Operating Companies’ request is therefore denied.

      . United States v. Western Electric Co., 569 F.Supp. 1057, aff'd sub. nom. California v. United States, - U.S. -, 104 S.Ct. 542, 78 L.Ed.2d 719 (1983). The Court conditioned its approval of the Plan of Reorganization upon the parties’ agreement to certain amendments necessary to correct inconsistencies between the Plan and the decree.

      . United States v. Western Electric Co., 552 F.Supp. 131 (1982), aff’d. sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983).

      . Department of Justice Response to Public Comments on the Plan of Reorganization (March 24, 1983) at 58; Plan of Reorganization, Appendix A, Amendment 33.

      . Plan of Reorganization Appendix A, Amendment 33.

      . The acronym “LATA” stands for "Local Access and Transport Area.” LATAs are geographic areas within which the Bell Operating Companies are authorized by the Decree to provide exchange telecommunications service.

      . 569 F.Supp. at 1102.

      . Plan of Reorganization at 26 note 36 and Amendment 1.

      . The motion is supported by the Operating Companies and by several interexchange carriers (GTE Sprint, MCI, Western Union, and Satellite Business Systems).

      . Section 11(D)(1) of the decree.

      . See section VII of the decree.

      . Department of Justice Memorandum at 2.

      . Department of Justice Reply Brief at 18; Operating Companies' Memorandum at 2-3.

      . According to one of the comments, "800 Service ... is a $2.8 billion interexchange communications service which is growing rapidly.” SBS Comment, at 3 (quoting AT & T Communications, October 3, 1983), filed January 13, 1984.

      . As the Court explained in its Opinion approving the decree, the purpose of the decree was to create a truly competitive environment in the telecommunications industry, particularly with respect to interexchange services. 552 F.Supp. at 188.

      . Customers were not required to subscribe to nationwide 800 Service; rather, they could choose to subscribe to such service with respect to limited geographic areas.

      . Under the modified NXX system, the NXX prefixes are assigned by the Operating Companies to different interexchange carriers. Exchange carrier switches at the originating Operating Company location are programmed to undertake the six digit translation necessary to route the 800-NXX calls to the proper interexchange carrier, which then provides the interexchange service necessary to complete the call, relying on the subscriber specific XXXX digits.
      To the extent that Operating Company switches have not yet been programmed to accomplish the six-digit translation necessary to identify the appropriate interexchange carrier, AT & T has offered to make its Originating Screening offices available for an interim period during which the Bell Operating Companies are making the necessary adjustments to their switches. Ohnsorg Affidavit at 10, AT & T Opposition.

      . The Operating Companies claim that access to the CCIS database that would be permitted under the proposed amendment is also justified because of the substantial role they played in developing the 800 database system. Operating Companies’ Support Memorandum at 16, 17. However, as the Operating Companies recognize, since the effect of granting the present motion would be to facilitate the provision of 800 Service by interexchange carriers who had no part in developing the system, the Operating Companies’ argument has force essentially only if a denial of the requested access will subject them to liability for violating the decree’s equal access requirements. Id. As the Court indicates below, no such violation of the equal access provisions exists here.

      . Appendix B of the decree.

      . Because the NXX digits will be used to identify the various intcrexchange carriers, a change in carrier will necessarily result in a change in the NXX portion of the 800 number. Moreover, since the interexchange carriers will use the last four digits (XXXX) of the dialed 800 number for screening and routing purposes, and since it is unlikely that they will use identical coding systems for such functions, a change in interexchange carriers will also result in a change in the last four digits of the 800 number.

      . That will be so for any subscriber who does not use inter-LATA and intra-LATA services from the same interexchange carrier, for the NXX digits will be carrier-specific. Thus, if a subscriber uses an interexchange carrier for inter-LATA 800 Service and an Operating Company for intra-LATA 800 Service, the NXX digits in the numbers assigned by the service providers will differ. In addition, the last four digits (XXXX) in the number will also probably differ, for the reasons explained in note 19, supra.

      . Moreover, it is said, these modifications will become superfluous as soon as the Operating Companies have their own 800 Service databases in place.

      . In this regard, it is claimed that the existence of a limited number of NXX prefixes could raise charges that the Operating Companies are discriminating in their assignment of the prefixes, and that, since AT & T’s CCIS database system permits it to provide greater services with the 800 numbers forwarded to it by the Operating Companies, these companies could be claimed to be providing AT & T with greater benefits than those enjoyed by the other interexchange carriers.

      . Fed.R.Civ.P. 60(b) provides in relevant part that:
      On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect: (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.

      . United States v. Swift & Co., 286 U.S. 106, 109, 52 S.Ct. 460, 76 L.Ed. 999 (1932).

      . See EEOC v. Safeway Stores, Inc., 611 F.2d 795, 799 (10th Cir.1979).

      . See Department of Justice Response to Public Comments on the Plan of Reorganization (March 24, 1983).

      . Arizona v. California, 460 U.S. 605, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983); Ford Motor Co. v. United States, 335 U.S. 303, 69 S.Ct. 93, 93 L.Ed. 24 (1948); United States v. Swift & Co., 286 U.S. 106, 52 S.Ct. 460, 76 L.Ed. 999 (1932).

      . Moreover, as the Court has stated many times, because of the vastness and complexity of the problems, the decree in this case, unlike some other judgments, must be interpreted and enforced not only in accordance with its literal terms but also in conformity with its principal purposes. See generally, United States v. Western Electric Co., 592 F.Supp. 846 (D.D.C.1984).

      . The lengthy public review and comment procedure, ordered by the Court in accordance with the requirements of the Antitrust Penalties and Procedures Act (commonly known as the Tunney Act), 15 U.S.C. §§ 16(b)-(h), undoubtedly mitigated this problem somewhat. However, for the reasons discussed infra, it cannot be concluded that the public review and comment period could or did totally eliminate the possibility that significant defects would remain undetected.

      . To be sure, the Department of Justice had retained its own technical experts, and the intervenors also undoubtedly employed expert personnel. Nevertheless, it does not seem unreasonable to conclude that the AT & T technical staff, who were intimately involved both in the operation of the Bell System and in the preparation of the Plan of Reorganization, had a greater opportunity to familiarize themselves with the many details of the Plan and the technical considerations it involved than anyone else.

      . Several of the grounds for modifying a judgment provided by Fed.R.Civ.P. 60(b) would justify such subsequent alterations of the Plan. Given the complexity of that Plan, the Department’s failure to identify initially the defects now alleged to exist with respect to 800 Service could conceivably be characterized as "mistake, inadvertence, surprise, or excusable neglect” (Fed.R.Civ.P. 60(b)(1)), or alternatively as constituting an "other reason justifying relief from the operation of the judgment.” Fed.R.Civ.P. 60(b)(6).

      . 569 F.Supp. at 1120.

      . AT & T Opposition at 21.

      . AT & T Opposition, Ohnsorg Affidavit at 10. Because Originating Screening Offices do not exist in every LATA, it is possible that some Operating Companies temporarily relying on the use of an Originating Screening Office will be required to perform inter-LATA communications to contact the closest Originating Screening Office. See Department of Justice Memorandum at 13-14. In such cases the Court will entertain specific requests for temporary waivers of the decree's prohibition on Operating Company provision of interexchange services for the purpose of providing 800 Service only, and only until such time as the petitioning company has (1) developed its own six-digit translation capability or (2) implemented its own database system.

      . For that reason, the Department's proposed amendment to the Plan of Reorganization might violate the terms of the decree. As both AT & T (AT & T Reply at 19-20) and several of the other interexchange carriers (see, e.g., Sprint at 7) have observed, that amendment to the Plan would raise the danger that the Operating Companies could use the capacity, information, and functions they acquired as a consequence of the amendment improperly to provide interexchange services.

      . See sections §§ VII, VIII(I) of the decree.

      . Thus, to the extent that the use of the interim NXX plan would require the interexchange carriers to make investments in equipment or software that would become superfluous within two or three years, it will be up to them to determine whether it is commercially desirable to incur such costs.

      . See 569 F.Supp. at 1102.

      . See note 35, supra.

      . Bell Operating Companies’ Reply at 26; AT & T Reply at 21.

      . Indeed, it should be noted in this regard that the interexchange carriers and the Operating Companies disagree over the method that should be used to select the three additional interexchange carriers. GTE Sprint proposes an assertedly neutral test based on the competing interexchange carriers' existing areas of geographic coverage (GTE Sprint Comment at 2). However, this test would likely favor more established interexchange carriers at the expense of less established ones, a result hardly consistent with any reasonable notion of equal access. A truly random selection scheme such as that suggested by the Operating Companies (Reply at 26) might be more consistent with the equal access requirement, but it might fail to select viable competitors to AT & T, or to select interexchange carriers who provide 800 Service of broad geographic scope, with the result that meaningful competition with AT & T would not be established. Possibly a workable third selection scheme, combining elements of these two, could be developed. Nevertheless, the foregoing discussion establishes the essential point: any selection scheme runs the dual risks of being unworkable from the standpoint of providing effective competition for AT & T or of violating the equal access requirement.

      . Operating Company Reply, Handler Affidavit at 8.

      . As the government aptly observes, "it is not clear that the disagreement can be resolved on the basis of the filings made to date.” Reply Brief at 26.

      . See Department of Justice Reply Brief at 24-26; see also note 43, supra.

      . Operating Companies’ Support Memorandum at 24. The Department of Justice, while not explicitly taking a position as to what the Plan presently requires, has moved to amend the Plan so as to reflect the Operating Companies' understanding with respect to the source codes and related documentation. Department of Justice Motion at 2.

      . Plan of Reorganization at 26 note 36.

      . United States v. AT & T, 552 F.Supp. at 226-230.

      . The denial of the Department’s motion to modify the plan is warranted not only the merits, but also because the Department has failed to carry its "substantially higher burden" of establishing the necessity for the proposed change. See Part III, supra.


source: Caselaw Access Project

author: EISELE, Chief Judge.

license: Public Domain

text:
    Steve W. GARST and Neema A. Garst, Plaintiffs, v. STOCO, INC., d/b/a Mountain View General Hospital; Carl T. Beck; James Zini; Nicholas J. Piediscalzi; Tom Isbell; Carolyn Wilson; Tom Webb; and Josephine Hart, Defendants.
    No. LR-C-83-564.
    United States District Court, E.D. Arkansas, W.D.
    Jan. 9, 1985.

      Carol S. Arnold, The Rose Firm, Little Rock, Ark., for plaintiffs.
    Jim Simpson, Friday, Eldredge & Clark, Roger Glasgow, Wright, Lindsey & Jennings, Little Rock, Ark., David Blair, Batesville, Ark., for defendants.
   PARTIAL SUMMARY JUDGMENT

EISELE, Chief Judge.

I. INTRODUCTION

Pending before the Court is defendants’ motion for partial summary judgment. Plaintiffs in the action are two physicians, Steve Garst and Neema Garst. Defendants are Mountain View General Hospital and various individuals who are either staff members or part owners of the hospital. Plaintiffs allege that defendants have violated the Sherman Act, the Clayton Act, Section 1983, and Arkansas state law. 15 U.S.C. §§ 1, 2, 26; 42 U.S.C. § 1983. Specific allegations relevant to the instant motion are: (1) that defendants conspired to oppose plaintiffs’, application for a certificate of need, (2) that defendants conspired to instigate and/or refer to the State Medical Board certain complaints against plaintiffs, and (3) that defendants took certain adverse actions regarding Neema Garst’s employment at Mountain View Hospital without affording her due process of law.

Defendant has moved for partial summary judgment, arguing that even if plaintiffs’ allegations are true, no recovery can be made. Defendants argue that opposition to plaintiffs’ application for a certificate of need may not be subject to antitrust liability. Similarly, defendants argue that referral of complaints to the State Medical Board may not be the basis of antitrust liability. Defendants finally argue that the hospital is a private actor, not a state actor, and thus cannot be liable under section 1983.

To prevail on the motion for partial summary judgment, defendants must show that there is no genuine factual issue and that plaintiffs could not prevail under any circumstance. Portis v. Folk Construction Company, Inc., 694 F.2d 520 (8th Cir.1982). Motions for summary judgment are particularly disfavored in antitrust actions because motive and intent are so important, and the proof is often in the hands of the defendants. Poller v. CBS, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976); Fusco v. Xerox Corporation, 676 F.2d 332 (8th Cir.1982).

II. FACTS

The facts, which for the purpose of this motion are taken as stated by the plaintiffs, are that plaintiffs were members of the medical staff of Mountain View Hospital. Mountain View Hospital is the only hospital in Stone County, Arkansas. Like most hospitals, Mountain View relies heavily on federal and state funds, and is extensively regulated by the state and federal governments.

In May 1982, plaintiffs decided to build a four-bed “birthing center.” Unlike a regular hospital, the birthing center was to be a home-like, family-centered facility. At some point after plaintiffs had decided to build such a facility, Mountain View came up with plans for its own birthing center.

In January 1983, after learning that construction of a birthing facility required a certificate of need, plaintiffs filed fin application for a certificate with the Arkansas State Planning Agency. A local advisory body to the state agency, the Delta Hills Health Systems Agency, held a hearing and received public comment concerning the Garsts' application. The Delta Hills Agency then made a recommendation that the certificate not be issued. Later the Arkansas State Planning Agency denied plaintiffs’ application for a certificate.

Defendants actively opposed plaintiffs’ application before the Delta Hills Agency. Defendants wrote letters, met with members of the Delta Hills Agency, solicited others to write letters, circulated petitions, and solicited attendance at the hearing on the application. During this time period, defendants are also alleged to have conspired in a successful attempt to revoke plaintiffs’ staff privileges at Mountain View Hospital. Defendants are further alleged to have referred and even encouraged past patients of plaintiffs to file complaints concerning plaintiffs with the State Medical Board.

III. DEFENDANTS’ ACTIVITIES BEFORE THE DELTA HILLS HEALTH SYSTEMS AGENCY

Defendants’ first argument in support of their motion to dismiss is that all opposition to plaintiffs’ application before the Delta Hills Health System Agency is protected under the Noerr-Pennington doctrine. The Noerr-Pennington doctrine protects concerted efforts to procure government action, even where motivated by anti-competitive intent. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965).

A. Statutory Background:

Before the extent of Noerr-Pennington protection can be analyzed, an understanding of the health planning process is necessary. The basis for the health planning is the National Health Planning and Resources Development Act of 1974 (the Act or the National Act). 42 U.S.C. § 300k-l, et seq. This Act was intended to prevent over-investment in and mal-distribution of health facilities. § 300k. The Act extensively details a process wherein federal, state and local bodies cooperate in planning the resources devoted to health care. States are given strong financial incentives to participate in the process, and almost every state, including Arkansas, has chosen to participate. Ark.Stat.Ann. § 82-2301-2314.

The local bodies set up by the Act, Health Systems Agencies (HSAs), are nonprofit, private corporations. § 300Í-1. Each HSA is responsible for developing what is referred to as a “health systems plan” for its geographical area. § 300Z -2. A newly created state agency, the State Health Planning and Development Agency (the State Agency) integrates all the local plans into one preliminary State Health Plan. § 300m-2. The preliminary plan is sent to another body, the State Health Coordinating Council (SHHC). The SHHC, whose members are appointed by the Governor, makes a final State Health Plan. The plan must then be approved by the Governor, 300m-3, and by the Secretary of Health and Human Services. Approval by the Secretary will be given only if the plan conforms to the National Act and to federal regulations promulgated thereunder. § 300m-l.

The State Health Plan in turn largely determines whether a person will be granted a certificate of need. In order to build or expand a hospital, a person must request and receive from the State Agency a certificate of need. The HSA first considers an application for a certificate and makes a recommendation to the State Agency for approval or nonapproval. Ark. Stat.Ann. § 82-2311. The State Agency then itself reviews the application and approves or disapproves it. If the State Agency’s decision is contrary to the HSA’s recommendation, the HSA has standing to appeal the State Agency’s decision. Of course, the applicant denied a certificate also has standing to appeal an adverse decision. In Arkansas, the State Agency’s discretion concerning the certificates is rather limited because the decision to grant a certificate must be consistent with the State Health Plan. Statewide Health Coordinating Council v. General Hospitals of Humana, Inc., 280 Ark. 443, 660 S.W.2d 906 (1983).

B. Noerr-Pennington:

When examining the applicability of Noerr-Pennington to proceedings before an HSA, it should first be noted that the doctrine protects only actions taken to procure government action. In the instant case, it is not clear that an HSA should, for the purposes of affording Noerr-Penning ton protection, be treated as a government body. The Supreme Court has previously characterized HSAs as private planning bodies, not government bodies. National Gerimedical Hospital and Gerontology Center v. Blue Cross of Kansas City, 452 U.S. 378, 101 S.Ct. 2415, 69 L.Ed.2d 89 (1981). In National Gerimedical, a hospital was built without having obtained a favorable recommendation from the local HSA. At the time, no state planning agency existed in Missouri, and hospitals were not required to have certificates of need for construction. HSAs did exist, however, and would make recommendations concerning new construction.

Because the hospital construction had not been recommended by the HSA, Blue Cross of Kansas City refused to do business with the hospital. The hospital then brought an antitrust action against Blue Cross. Blue Cross defended on the grounds that the National Act had impliedly repealed the antitrust laws with respect to the implementation of HSA plans. The Supreme Court rejected that defense, holding that, at least with respect to the conduct at issue, no direct conflict existed between the National Act and the antitrust laws, and thus the antitrust laws remained applicable to the conduct complained of. The Court also held that HSAs were only private advisory boards, and those who cooperated with them were not entitled to antitrust immunity. Id. at 390, 101 S.Ct. at 2422.

Because the instant case arises in an entirely different context, this Court does not believe the Supreme Court’s characterization of HSAs is necessarily applicable. In National Gerimedical, the Supreme Court emphasized that its holding should not automatically be applied in other factual situations. Id. at 393, n. 18, 101 S.Ct. at 2424, n. 18. And, indeed, when the Fourth Circuit was later presented with a claim for antitrust immunity in a factually dissimilar situation concerning certificates of need, it did not follow National Gerimedical. Hospital Building Company v. Trustees of Rex Hospital, 691 F.2d 678 (4th Cir.1982).

In Rex Hospital, the Fourth Circuit determined that participants in the health planning process were entitled to some antitrust immunity, although such immunity was not absolute. There, a plaintiff hospital which had sought a certificate of need brought an action for Sherman Act violations against the trustees of another hospital. The evidence presented indicated “that the defendants had dominated the HSA and subverted it to their own purposes,” and the jury found that the Sherman Act had been violated. Id. at 683. The defendants sought reversal, arguing that the district court applied an incorrect per se rule of antitrust liability and that their opposition to plaintiff’s application for a certificate of need was protected under Noerr-Pennington.

The Fourth Circuit reversed and remanded, holding that a per se rule was not appropriate. The court stated that while the provisions of the National Act “do not mandate participation by local hospitals or their administrators, participation by private health care providers is clearly anticipated and we think desirable.” Id. at 685. Thus, the court found that

We think a very narrow “rule of reason” is required in order to permit defendants to show, if they can, that participation in certain planning activities that would otherwise violate § 1 might not under the circumstances have been an unreasonable restraint on trade. The appropriate rule, we find, is simply that planning activities of private health services providers are not “unreasonable” restraints under § 1 if undertaken in good faith and if. their actual and intended effects lay within those envisioned by specific federal legislation in place at the time of the challenged activities as desirable consequences of such planning activities. See, Silver v. New York Stock Exchange, 373 U.S. 341, 360-61, 83 S.Ct. 1246, 1258-1259, 10 L.Ed.2d 389 (1963)____ Specifically we hold that “planning” under this special rule of reason is not “reasonable” if its purpose or effect is only to protect existing health care providers from the competitive threat of potential entrants into or ex-panders within the same “market.”

Regarding appellants’ claim that their activities were protected by Noerr-Pennington, the Court stated:

Actions taken to discourage and ultimately prevent competitors from meaningful access to the processes of administrative agencies fall within the sham exception to Noerr-Pennington immunity. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 512-513, 92 S.Ct. 609, 612-613, 30 L.Ed.2d 642 (1972). Thus, proof that appellants conspired to bring the chairman of the Central Planning Council and an assistant attorney general into their conspiracy, with the intent to foreclose HBC from meaningful access to the Central Planning Council and the MCC, is within the sham exception to Noerr-Pennington. Id. at 687.

The Fourth Circuit does not make explicit to whom and to which activity it is applying its good faith requirement. The fact that the court treated the rule of reason and Noerr-Pennington in separate discussions would indicate that the court did not intend the good faith requirement to apply to private parties' efforts before the HSA. Further, its holding that defendant’s activities before the HSA fell within the sham exception to Noerr-Pennington assumes that, absent an exception, Noerr-Pennington would protect such activities.

Plaintiffs in the instant case, however, believe that the Fourth Circuit intended that its good faith requirement be read as part of the sham exception. Plaintiffs argue that, unless a party’s opposition to a certificate of need is in good faith, plaintiffs’ activities before the HSA fall within the sham exception. Because in Rex Hospital, the primary allegation concerned the defendant’s conduct before the HSA, and because, absent a contrary indication, a court normally addresses its holding to the primary allegation, plaintiffs’ belief that the Fourth Circuit intended its good faith standard to apply to such conduct is not illogical.

Some policy considerations also would support the application of a stricter standard with respect to conduct before the HSA. Rhodes, Antitrust and Health Planning, 7 J.Corp.L. 311 (1982). An HSA may not be as well-insulated from improper influences as are most government bodies. It is a localized body and a large portion of its membership is health care providers. Such providers may have vested interest in the outcome, or may be too susceptible to pressure from their business peers. Further, there may be less need for NoerrPennington protection in the HSA context. The HSA is already a localized body with a mixture of health care providers and consumers. Input from others, presumably similarly situated, may be unnecessary. Finally, those other persons who do wish input always have the right to petition the ultimate decision maker, the State Agency.

On the other hand, some characteristics of the HSA work to make a dilution of Noerr-Pennington protection both unnecessary and/or inappropriate. Miller, Antitrust and Certificate of Need: Health Systems Agencies, the Planning Act, and Regulatory Capture, 68 Geo.L.J. 873 (1981). Most important is the fact that HSAs have limited authority in that they only make recommendations concerning certificates of need; the State Agency makes the ultimate decision. The State Agency should be able to evaluate the merits of the certificate of need application, the HSA’s recommendation, and the influences on the HSA. Further, the fact that a majority of HSA members are health care consumers renders it less likely that HSAs will be improperly influenced.

It must also be noted that the Noerr-Pennington doctrine itself encompasses safeguards from abuse. Where a party, through improper means, denies an individual meaningful access to a government body, the party’s actions will not be protected under the so-called “sham exception.” California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). Another exception, the “co-conspirator” exception, provides that where a party conspires with a member of the governmental agency, the party will not be protected by Noerr-Pennington immunity. Id.; Duke & Co. Inc., v. Foerster, 521 F.2d 1277 (3rd Cir.1975). In reality a finding of co-conspiracy indicates that a party was denied meaningful access to the government body, and would support the application of the sham exception. Accordingly, some courts prefer to treat co-conspiracy as part of the sham exception rather than as a separate exception. Rex Hospital, supra. See also Westborough Mall v. City of Cape Girardeau, 693 F.2d 733 (8th Cir.1982), cert. denied, 461 U.S. 945, 103 S.Ct. 2122, 77 L.Ed.2d 1303.

Although the Court is aware that the co-conspirator exception has been criticized by the Eighth Circuit, Westborough Mall v. City of Cape Girardeau, supra; First American Title Company of South Dakota v. South Dakota Land Title Association, 714 F.2d 1439 (1983), it appears that such criticism is directed at the automatic and blind application of the doctrine and not at the underlying rationale for the exception. The Court believes that where a party is thereby denied meaningful access to a body, a finding of co-conspiracy could be reason not to apply Noerr-Pennington. The Court further believes that, for the policy reasons described above, the HSA and certificate of need process may represent a situation particularly appropriate for application of the co-conspirator exception. See Rhodes, Antitrust and Health Planning, supra; Miller, Antitrust and Certificate of Need, supra.

In arguing for and against NoerrPennington protection, both parties to this action have implicitly assumed that the HSA is a government body with respect to its recommendations concerning certificates of need. The Fourth Circuit and commentators have, explicitly or implicitly, made the same assumption. Rex Hospital, supra; Miller, supra; Rhodes, supra. The Court believes the assumption correct, and so finds. The only question is whether, because of its unusual nature, it is the type of government body which should be afforded complete Noerr-Pennington protection. This Court holds that it should. No existing rule of law would support a limitation of Noerr-Pennington, and the Court declines to fashion such a limitation on its own initiative. Sufficient protection from abuse already exists through the exceptions to Noerr-Pennington and through the safeguards in the certificate of need process.

Once it is determined that NoerrPennington protection does apply, it is clear that plaintiffs could not prevail on their claim concerning defendants’ activities before the Delta Hills Agency. Plaintiffs’ claim is simply that defendants opposed plaintiffs’ application before the Delta Hills Agency and that their opposition was motivated solely by anticompetitive intent. Noerr-Pennington protects such opposition from antitrust liability. Plaintiffs have made no allegations which could support an exception to Noerr-Pennington; defendants have not been accused of fraudulent conduct or of conspiracy with HSA members. Thus, with respect to plaintiffs’ claim concerning defendants’ activities before the Delta Hills Agency, defendants’ motion for partial summary judgment will be granted.

IV. DEFENDANTS’ ACTIVITIES BEFORE THE STATE MEDICAL BOARD

Defendants’ second argument in support of their motion for partial summary judgment is directed at plaintiffs’ allegation that some of the defendants conspired to influence former patients of plaintiffs to file complaints with the State Medical Board. Defendants argue that the State Medical Board is a state agency, and thus Noerr-Pennington protects any communications to the Board. Plaintiffs correctly concede that the Board is here functioning as a state agency, but claim that defendants’ activity falls within the sham exception to Noerr-Pennington. Plaintiffs here, as in the discussion above, understand, under Rex Hospital, supra, the sham exception to include actions taken for the sole purpose of destroying competition. This Court, however, does not so understand the sham exception.

The sham exception is intended to protect meaningful access to government bodies; it is directed at essentially fraudulent actions. California Motors, supra. If plaintiffs alleged that defendants manufactured false complaints before the State Medical Board, which had no factual basis, then Noerr-Pennington protection would probably be inappropriate. Here, however, no allegations have been made that those individuals who complained to the State Medical Board did not have legitimate bases for their complaints. The allegation is only that defendants, motivated solely by anti-competitive intent, referred and even encouraged individuals to file their complaints with the State Medical Board. The Court finds such conduct to be protected by Noerr-Pennington.

Therefore, with respect to those claims arising out of defendants’ actions before the State Medical Board, defendants’ motion for partial summary judgment will be granted.

V. STATE ACTION FOR SECTION 1983

Defendants’ final argument is that plaintiff Neema Garst’s section 1983 claim must be dismissed because the actions complained of, refusal to restore staff privileges and the issuance of a formal reprimand, were not actions of the state. Mountain View Hospital is a private hospital, although it receives federal and state funds and is regulated by federal and state law.

It is the regulation by the state which, according to plaintiffs, makes the actions at issue state action. Specifically, the Arkansas Department of Health Regulations, promulgated pursuant to Ark.Stat.Ann. § 82-329, requires hospitals to adopt written bylaws setting out the method of appointing the medical staff, the requirements for medical staff membership, and an appeal process for physicians to follow in challenging adverse recommendations. Arkansas Department of Health Rules and Regulations for Hospitals and Related Institutions (1979), § I — II. Mountain View Hospital does have such bylaws which include provisions for disciplinary procedures and appeals from adverse decisions.

Plaintiffs believe these bylaws were mandated by the state, and therefore the state specifically regulates and controls disciplinary actions and revocation of privileges. Mountain View Hospital’s actions in this regard, according to plaintiffs, can thus be seen as state action.

The Supreme Court has identified three factors to be considered in determining whether particular conduct constitutes “state action.” Blum v. Yaretsky, 457 U.S. 991, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982). First, there must be a “ ‘sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may fairly be treated as that of the State itself.’ (citations omitted) ... The purpose of this requirement is to assure that constitutional standards are invoked only when it can be said that the State is responsible for the specific conduct of which the plaintiff complains.” Id. 102 S.Ct. at 2786.

Second, the nexus must be such that the state “has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the state, (citations omitted) Mere approval of or acquiescence in the initiatives of a private party is not sufficient to justify holding the State responsible for those initiatives under the terms of the Fourteenth Amendment.” (citations omitted) Id.

And finally, the required nexus “may be present if the private entity has exercised powers that are ‘traditionally the exclusive prerogative of the State.’ ” Id.

The Court believes it is clear that, under the analysis set out by the Supreme Court, the actions complained of by the plaintiffs in the instant case cannot be considered state action. See also, Briscoe v. Bock, et al., 540 F.2d 392 (8th Cir.1976); Lubin v. Crittenden Hospital Association, 713 F.2d 414 (8th Cir.1983). The state’s only involvement is a general requirement that a hospital have some form of bylaws. The state does not approve the bylaws adopted by a hospital, nor does the state monitor any actions taken by a hospital pursuant to its bylaws. Actions taken pursuant to such bylaws cannot then be fairly said to be that of the state. Therefore, plaintiff cannot prevail on a section 1983 claim. Defendants’ motion for partial summary judgment with respect to the section 1983 claim will also be granted.

VI. CONCLUSION

It is therefore Ordered that defendants’ motion for partial summary judgment be, and it is hereby, granted.

      . The Court notes that it has not made any ruling on the extent to which HSAs, themselves, are entitled to antitrust immunity; its ruling is directed at the petitions of private parties before the HSA.


author: SHAPIRO, District Judge.

text:
    Francis B. PAYNE v. Margaret M. HECKLER, Secretary of Health and Human Services.
    Civ. A. No. 82-1516.
    United States District Court, E.D. Pennsylvania.
    Jan. 9, 1985.

      Gregory B. Montgomery, Camden, N.J., for plaintiff.
    Richard S. Schweiker, Secretary of Health and Human Services, Washington, D.C. by Richard J. Stout, Asst. U.S. Atty., Philadelphia, Pa., for defendant.
   MEMORANDUM OF DECISION

SHAPIRO, District Judge.

Francis B. Payne, a Black female, brought this action under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e-16 and § 2000e-3, following a final adverse decision by the Equal Employment Opportunity Commission (“EEOC”). Plaintiff alleged her August 8, 1980 removal from employment as a Quality Control Specialist in the Office of Field Assessment, Social Security Administration (“SSA”), Department of Health and Human Services, was based on racial and/or sexual discrimination or reprisal for having filed previous discrimination complaints.

At the conclusion of plaintiffs case, defendant moved to dismiss under Fed.R. Civ.P. 41(b) for failure to state a prima facie case of employment discrimination. The Court, as finder of fact, agrees with the government that:

1. There is no credible evidence that plaintiffs removal was in any way influenced by the fact that plaintiff is a Black female.

2. There is no credible evidence that plaintiffs removal was influenced by or in reprisal for the plaintiffs having filed prior administrative complaints of discrimination.

This memorandum of decision constitutes the findings of fact and conclusions of law required by Fed.R.Civ.P. 52(a).

FINDINGS OF FACT

The following facts were agreed upon prior to trial:

Mr. Niles Brown, a (Black) male, who became plaintiffs first-line supervisor in March, 1979, notified plaintiff by memorandum dated May 9, 1980 that he proposed to remove plaintiff from federal service based on four reasons:

1. Plaintiffs failure to comply with appropriate leave procedures and her being absent without leave.

2. Plaintiffs misrepresentation of the amount of work she had performed.

3. Plaintiffs failure to meet Agency productivity standards and her failure to perform work assigned to her.

4. Plaintiffs prior disciplinary record which included five disciplinary actions against her between May, 1979 and January, 1980.

A. The first reason for proposing plaintiffs removal was plaintiffs failure to comply with appropriate leave procedures and her being absent without leave (A.R. 18-22). With the exception of two days (February 29 and March 6, 1980), plaintiff was absent from work beginning February 22, 1980 until the date of the proposed removal, May 9, 1980 (A.R. 18-22, 30-46, 49-94). Of the 67 working days in this period, plaintiff at various times requested one day of emergency annual leave (February 28, 1980), four days of sick leave (February 22, 25, 26 and 27, 1980), and 36 days of advance sick leave (March 3-5, 10-21, 24-28, 31, April 1-5, 7-23, 1980). Plaintiff submitted no leave request for the remainder of the period.

Plaintiffs extended absence from work was preceded by Mr. Brown’s instructions to her on February 21, 1980 to undertake a field assignment in West Virginia; the trip was to commence on February 26, 1980 (A.R. 45, 63). Plaintiff protested the assignment on the ground that she was afraid to fly; she did not appear for work the following day or week, and telephoned Mr. Brown to request four days of sick leave and one day of emergency annual leave for this period (A.R. 63-65). Mr. Brown conditionally approved the leave pending receipt of medical documentation of a bona fide illness and some explanation of the basis for emergency annual leave (A.R. 63). When plaintiff returned to work on February 29, 1980, the medical documentation which she submitted consisted of a note dated February 21, 1980 from the office of L.A. Principato, M.D., that stated the plaintiff was under his care and that, “Patient is truly apprehensive of traveling in arears [sic] of mountains and super highways and expressways. Patient is unable to travel in arears [sic] of this type due to a traumatic experience in the Western Park of Maryland, while conducting utilization reviews” (A.R. 38-39).

Upon inquiry, Dr. Principato stated that the note had been written by one of his office staff, that his information concerning plaintiff was based solely upon his conversation with her, that plaintiffs complaints had been limited to fear of automobile travel, and that he felt plaintiff could travel by plane, train and, quite possibly, by automobile, if accompanied by another (A.R. 41-42, 48).

Mr. Brown accordingly denied the requested sick leave on February 29, 1980 (A.R. 36) and instructed plaintiff to undertake the field assignment (A.R. 31-32, 41-42, 44-46).

The only explanation plaintiff provided for the request for emergency annual leave was “personal business” (A.R. 36, 67). Mr. Brown denied the emergency annual leave for plaintiffs failure to indicate any unforeseen circumstances preventing plaintiff from requesting annual leave, as normally required (A.R. 90), in advance of taking the leave (A.R. 31-32, 36, 44-46).

Thereafter, plaintiff telephoned the office on March 3 and 4, 1980 to request advanced sick leave for those days and last returned to work on March 6, 1980 (A.R. 45-46). At that time, the only medical documentation she submitted in support of her request for advance sick leave for March 3-5, 1979 was a leave request form which she had filled out and which appears to have been signed by Dr. Principato (A.R. 37). Mr. Brown, in a memorandum dated March 7, 1980, explained the basis for denying the request (A.R. 56-57) and again advised plaintiff in a memorandum dated March 21, 1980 that her continued absences without approved leave could be the basis for disciplinary action (A.R. 45-55).

Plaintiff then requested advance sick leave again on March 24, and once more on April 7, 1980 (A.R. 58, 79). On both occasions, she requested an additional two weeks of advance sick leave. Id. In support thereof, she submitted two briefs, notes signed by Dr. Principato; the first, dated March 23, 1980, stated that “Pt has been ill and is under my care till further notice — Pt next appointment 2 wk” (A.R. 60); and the second, dated April 7, 1980, stated “Pt is still ill and unable to work. She is making some progress” (A.R. 80). Plaintiff also submitted a note dated April 10, 1980, signed by Dr. Principato, stating, “Patient has been under my care from 3-3-80 to 3-5-80, 3-10-80 to present and continues to be. Because of her illness I have advised not to return to work at this time. She may return to work in approximately 2 to 4 wks, if the progress she is now making continues. Please refer to my note on 4-7-80” (A.R. 82).

Mr. Brown denied the first request by memorandum dated April 4, 1980 (A.R. 61-78) because of a lack of sufficient evidence justifying the grant of advance sick leave. In addition, Mr. Richard Colletti (White), a second-line-supervisor, advised plaintiff on April 23, 1980 that her request for advance sick leave from March 10 to April 23, 1980 was denied because plaintiff had failed to submit a physician’s report or any explanation for her continued absence that met the guidelines for administratively acceptable evidence (A.R. 83-94).

B. The second reason for the proposed removal was that plaintiff misrepresented the amount of work she had performed. Plaintiff’s position description described the basic duty of the position was to conduct reviews or audits of determinations made by various State agencies under a federally funded program, Aid to Families with Dependent Children (AFDC), to assess the error rate in the state determinations of eligibility and amount of benefits (A.R. 31-35). Plaintiff’s duties also required her to submit a weekly report, “AFDC Federal Case Review Status Report,” to notify her supervisor of the work she had performed each week.

In the work report for the week ending February 15, 1980, plaintiff stated that six new cases were assigned to her and that she had reviewed but was awaiting outstanding correspondence in all six cases (A.R. 95). These six cases comprised plaintiff’s entire work product for the week. Id. However, “Field Reviewer’s Finding Sheets,” in the actual files (A.R. 99-128, 129-135, 137-184, 185-215, 216-244, 245-284, 285-317), showed that the Federal Monitor’s Guide requires all contacts made in the course of a review to be documented (A.R. 318), showed no work done in any of the cases (A.R. 99-102, 124-127, 185-188, 216-219, 245-246, 285-288, 639-642). Indeed, all of the field reviewer’s sheets are blank. Id.

In May, June and July, 1979, Mr. Brown had repeatedly asked plaintiff to report all work undertaken and any outstanding contacts on the field reviewer’s sheets (A.R. 326, 453, 513-521). Upon plaintiff’s continued failure to do so, Mr. Brown advised plaintiff that the weekly report submitted by her stating there was outstanding correspondence in her cases when, in fact, a review of the actual files revealed no activity on the field reviewer’s sheets, was a distortion of the work plaintiff had performed that week (A.R. 511-512). Plaintiff was reprimanded in December, 1979 for this conduct (A.R. 499-598) but, nonetheless, continued to report that her cases were pending until the arrival of outstanding material when the actual case files did not reveal any material outstanding (A.R. 320, 445-446). As late as February, 1980, plaintiff continued to submit weekly reports showing work performed which was not, in fact, documented in the actual case files.

C. The third reason for the proposed removal was plaintiff’s failure to meet agency productivity standards and failure to perform work assigned to her. In March, 1979, a reminder of the weekly production goal for staff members employed in plaintiff’s position was sent to the staff (A.R. 328). This was a national goal and consisted of three desk reviews per day or 15 cases per 40 hour work week. Id. The Monitor's Control Logs for the period July 2, 1979 to February 1, 1980 (dates are shown under the column “Date Records Requested”) (A.R. 331-443, 837-949) show that, with the exception of two weeks, plaintiff reviewed no more than one-fourth of the cases available to her each week for review (A.R. 25, 331-443). Moreover, a tally extrapolated from the logs shows that plaintiff was assigned the lowest number of new eases of any member of the staff during that period (A.R. 444), despite the fact that Mr. Brown had reassigned 21 of plaintiff’s cases to other staff members (A.R. 26, 445-446). Plaintiff’s performance was thus clearly substandard for the period in question.

D. The fourth reason for the proposed removal was plaintiff’s past disciplinary record, which included five disciplinary actions between May, 1979 and January, 1980. All of these actions were taken after affording plaintiff all of the rights to which she was entitled.

After receipt of plaintiff’s response to the proposal to remove (A.R. 611-640), a decision to remove dated August 1, 1980 (A.R. 641-649) was issued; it became effective on August 8, 1980 (A.R. 679).

Prior to trial, the parties agreed that there were only two triable issues:

1. Whether plaintiff’s removal from federal employment was the result of prohibited discrimination by agency officials; and

2. Whether plaintiff’s removal by the agency was in retaliation for plaintiff’s having filed previous complaints of racial and sexual discrimination.

DISCUSSION

The respective burdens of the parties under Title VII are summarized in Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 252-253, 101 S.Ct. 1089, 1093, 67 L.Ed.2d 207 (1981):

First, the plaintiff has the burden of proving by the preponderance of the evidence a prima facie case of discrimination. Second, if the plaintiff succeeds in proving a prima facie case, the burden shifts to the defendant, ‘to articulate some legitimate, nondiscriminatory reason for the employee’s rejection’, [citation omitted]. Third, should the defendant carry this burden, the plaintiff must then have an opportunity to prove by a preponderance of the evidence that the legitimate reasons offered by the defendant were not its true reasons, but were a pretext for discrimination [citation omitted].

Four elements are necessary to establish a prima facie case in the context of alleged discriminatory hiring:

(1) plaintiff belongs to a statutorily protected group;
(2) plaintiff was qualified for the job for which she applied;
(3) plaintiff was not selected for that position; and
(4) after plaintiff’s rejection, the position remained open and the employee continued to seek applicants from persons with plaintiff’s qualifications. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 [93 S.Ct. 1817, 1824, 36 L.Ed.2d 668] (1973).

These elements may be flexibly tailored to the particular circumstances of a case. Id. at 802 n. 13, 93 S.Ct. at 1824 n. 13. Where the case involves a discharge, plaintiff may make a prima facie case by showing:

(1) she is a member of a protected class;
(2) she was qualified for the job she was performing;
(3) she was satisfying the normal requirements of the job; and
(4) she was the object of an adverse action.

See McCann v. Delaware River Port Authority, 548 F.Supp. 1206, 1214 (E.D.Pa.1982), citing Whack v. Peabody & Wind Engineering Co., 452 F.Supp. 1369 (E.D.Pa.1978), aff'd per curiam, 595 F.2d 190 (3d Cir.1979); see also McClain v. Mack Trucks, Inc., 532 F.Supp. 486, 489 (E.D.Pa.1982).

Thus, as part of a prima facie hiring case, plaintiff must eliminate the most common nondiscriminatory reasons for plaintiff’s rejection: the absence of vacancy in the job sought or an absolute or relative lack of qualifications. International Brotherhood of Teamsters v. United States, 431 U.S. 324, 358 n. 44, 97 S.Ct. 1843, 1866 n. 44, 52 L.Ed.2d 396 (1977). Similarly, in the case of alleged discriminatory discharge, plaintiff must satisfactorily demonstrate competency at the normal requirements of her job; “[e]vidence of paper credentials ... does not demonstrate competence once hired,” Jackson v. City of Killeen, 654 F.2d 1181, 1186 (5th Cir.1981). Plaintiff “must carry the initial burden of offering evidence adequate to create an inference that an employment decision was based on a discriminatory criterion illegal under the Act.” International Brotherhood of Teamsters v. United States, 431 U.S. at 358, 97 S.Ct. at 1866.

To establish a prima facie case of retaliation, plaintiff must show that: (1) she engaged in an activity protected under the Act; (2) she was the object of an adverse action; and (3) there was a causal connection between the participation in a protected activity and the adverse action. Goff v. Continental Oil Co., 678 F.2d 593, 599 (5th Cir.1982); Novotny v. Great American Federal S & L Assoc., 584 F.2d 1235 (3d Cir.1978), rev’d on other grounds, 442 U.S. 366, 99 S.Ct. 2345, 60 L.Ed.2d 957 (1979).

If plaintiff successfully meets her burden of production and persuasion and establishes these prima facie elements, then there is an inference of discrimination or retaliation because “these acts, if otherwise unexplained, are more likely than not based on consideration of impermissible factors.” Furnco Constr. Co. v. Walters, 438 U.S. 567, 577, 98 S.Ct. 2943, 2949, 57 L.Ed.2d 957 (1978).

Payne’s prima facie ease of racial and/or sexual discrimination fails because she did not credibly demonstrate that she was meeting the ordinary performance requirements of her job. Plaintiff admitted that she reviewed slightly less than an average of three cases a week during a seven-month period between July 2, 1979 and February 1, 1980, and that this was the lowest number of cases reviewed by any reviewer during this period. Indeed, the majority of reviewers performed two or three times more case reviews than plaintiff. Plaintiff herself admitted prior to trial that her performance was clearly substandard. Her trial testimony that by her own estimation she did her job adequately is not sufficient proof; it simply cannot be credited.

From February 22, 1980 until the date of proposed removal, May 9, 1980, she was absent from work with the exception of only 2 days (February 29 and March 6, 1980) so that her competence could not have been established in the months immediately preceding her termination. But earlier, despite warnings and a reprimand in December, 1979, for failure to document and accurately report her weekly work flow and production, she continued to report that she had reviewed cases when the actual files showed no evidence that any work had been performed by her. Plaintiff’s work was at an unacceptable level prior to and until her termination.

During the Spring of 1980, Payne was absent from work two and one-half months without adequate medical explanation, without a definite date of return, and without contacting her supervisor for days at a time. Payne submitted four brief notes from her physician, Dr. Luigi Principato, but these notes were intentionally vague and omitted any mention of a diagnosis or prognosis of an illness. In fact, Payne had polymyositis, or muscle inflammation, a (partially) disabling condition, controllable by appropriate medication. It is undisputed that Payne refused repeated requests from her supervisors to provide information concerning her illness and that Dr. Principato did not have his patient’s consent to release any specific information. The evidence provides no basis for inferring that Payne’s supervisor should have believed her extended absence was due to illness.

Rather it was logical to assume that her absence was due to her unwillingness to travel in connection with her work. Her extended absence immediately followed instructions for her to travel to West Virginia on February 26,1980. Her treating physician’s note stated that she was “truly apprehensive of traveling in arears [sic] of mountains and superhighways and expressways” because of a prior traumatic experience while working in Maryland. Brown could legitimately deny an excuse based simply on plaintiff’s stated fearfulness.

Payne contended she should have been given a Fitness for Duty Examination to determine whether she was physically and mentally competent to perform her job. But she never requested such an examination prior to her notice of termination. Moreover, there was no reason to suspect that she was suffering from physical or mental illness warranting such an examination. She refused to allow her physician to reveal that she suffered from polymyositis and was being treated with Prednisone, which may have made her upset and nervous at times. Payne also did not display noticeable signs of mental illness to her supervisors, and there was not at the time (or even at trial) expert testimony that Payne was mentally ill. Perhaps a particularly aware supervisor would have suspected that Payne had neurotic (and/or depressive) tendencies from her repeated difficulties in dealing with authority, see infra at p. 341, although it is not clear that Niles Brown knew of such problems with previous supervisors.

All these factors regarding Payne’s concealing her illness from her supervisors distinguish her ease from that of co-workers terminated for known physical or psychiatric disability. There is no need to differentiate in greater detail other instances where a Fitness for Duty Examination was ordered and an employee terminated for physical or emotional reasons. The issue of whether or not Payne was entitled to such a disability termination was not before the Court by agreement of the parties. Evidence as to the availability of a Fitness for Duty Examination was admitted and considered only to the extent it was relevant to whether there was prohibited discrimination by agency officials or termination in retaliation for plaintiff’s previous complaints of racial and sexual discrimination and it does not persuade the Court of either.

Because of Payne’s failure to demonstrate ordinary competency at her job, she has not made out a prima facie case of discrimination.

Payne has also failed to establish a prima facie case of retaliation. Although she filed four administrative complaints alleging discrimination against supervisors of the Social Security Administration from December, 1975 until her notice of proposed removal in May, 1980, the mere act of filing administrative complaints does not establish a prima facie case of retaliation. Payne failed to produce any credible evidence showing a causal connection between her complaints and her removal. It is unclear that Brown, the supervisor who recommended her termination, even knew of her complaints prior to his supervision.

There is no evidence that anyone in the Social Security Administration threatened to discipline or fire Payne for filing any grievance. Instead, the record is replete with evidence warranting plaintiff’s legitimate discharge. Her failure to perform work, refusal to follow directions, and prolonged, unexcused absences amply justified removal. At times, Payne spent 75 percent of her working hours preparing her administrative complaints. While this is a protected activity, it does not justify unsatisfactory performance.

Payne also demonstrated contempt for her superiors. She consistently resisted supervision and was repeatedly insubordinate. She was counseled, warned, and reprimanded for her refusal to follow directions and failure to document and adequately report her work every week but her performance did not improve. She failed to understand the needs of the workplace and assumed co-workers and supervisors alike had to adjust to her idiosyncratic needs that were inconsistent with the requirements of the position. (With one possible exception, she deemed all of her supervisors incompetent and less qualified than she at performance review.) Plaintiff’s own evidence leads a factfinder to conclude that her own failure to perform her job, for whatever reason, and not retaliation or discrimination caused her termination.

Payne was recommended for termination by Brown, a Black male. She claimed Brown was brought in to supervise and then fire her because he was Black; that is, he could protect the agency against her claims of discrimination. But Payne’s assertion is simply not credible. Her own witness, Marion Douglas, who was also Black, described the negative opinions plaintiff’s supervisors had of her, and found nothing to suggest these opinions were racially motivated. Only the testimony of Jose Ocasio supported plaintiffs claim of discrimination by Niles Brown. The Court cannot credit Ocasio’s testimony, which was hostile and biased because of his dissatisfaction at having been pressured to resign his position with the Health and Human Services Administration.

There was not even a scintilla of persuasive evidence on the alleged sexual discrimination. The only suggestion of sexual discrimination was one witness’s response to a question on cross-examination by the government that, in the opinion of that witness, a Black supervisor such as Niles Brown would treat a White man better than a Black woman. In the absence of any factual corroborating evidence whatsoever and in view of the positions of responsibility held by female employees in the agency involved, including plaintiff’s witness Marion Douglas, the Court cannot find that plaintiff has met the burden of establishing any causal connection between her sex and her termination.

CONCLUSIONS OF LAW

1. This Court has jurisdiction over the parties and the subject matter.

2. The findings of the Merit Systems Protection Board and Equal Employment Opportunity Commission, which are based on an extensive evidentiary process, are entitled to some weight by this Court, Chandler v. Roudebush, 425 U.S. 840, 863 n. 39, 96 S.Ct. 1949, 1960 n. 39, 48 L.Ed.2d 416 (1976).

3. Those portions of the administrative record designated by plaintiff and trial testimony offered by plaintiff to the extent the Court gives it credence do not establish a prima facie case that plaintiff was discharged because of her race and/or sex or in retaliation for filing grievances and complaints.

4. The evidence and record offered by plaintiff demonstrates that she did not perform her job competently; they do not support the conclusion that her supervisors’ allegations of incompetence were pretextual reasons for racial or sexual discrimination or for retaliation for her complaints of discrimination.

5. Plaintiff has failed to meet her burden of establishing a prima facie violation of Title VII. Accordingly, defendant’s Motion to Dismiss will be granted.

6. Judgment will be entered for defendant.

      . Plaintiffs removal was sustained by the Merit Systems Protection Board, 6 M.S.P.B. 189, 6 M.S.P.R. -. The EEOC concurred in this decision and issued a "right to sue” letter on February 5, 1982.

      . The proposal to remove was accompanied by 28 Exhibits which are found in the administrative record (hereinafter "A.R.”) at the following pages:
      Exhibit Number A.R. Paite Number - -b-
      #1 ................................p. 30-35
      #2 ................................p. 36-39
      #3 ................................p. 40-42
      #4 ................................p. .43-57
      #5 ................................p. 58-60
      #6 ................................p. 61-79
      #7 ....................... p. 79-80
      #8 ................................p. 81-82

        #9 ................................p. 83-94
      #10................................p. 50-55, 84-89
      #11................................p. 49, 90
      #12...............................p. 48-49, 91-92
      Exhibit Number A.R. Page Number
      #13 . p. 93-94
      #14........ . p. 95
      #15 . p. 318
      #16. p. 319
      #17 . p. 326-327
      #18 . p. 328
      #19 . p. 329-330
      #20 . p. 331^443
      #21 . p. 444
      #22 . p. 445-446
      #23 . p. 447-449
      #24 . p. 450-452
      #25 . p. 453-454
      #26 . p. 455-458
      #27 . p. 499-541
      #28 . p. 542-549, 599-610

      . These files are also found in a more complete form at A.R. 605-638, 639-690, 691-721, 722-750, 751-790, 791-823).

      . Fed.R.Civ.P. 52 notes that "due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.”

      . During the relevant period, the actual dosage of Prednisone went from 7 to 1.5 mg depending on how plaintiff felt; the exact dosage could not be determined from the evidence. See Principato Dep., pp. 10-11.

      . December 24, 1975 against Anthony Salvi (White); February 27, 1978 against Anthony Salvi and Lois Fausch (Black); July 17, 1978 against Victor Naseef (White); and January 11, 1980 against Niles Brown (Black) and Robert Zowney (White). A fifth administrative complaint was filed in October, 1980 after the proposed removal; it alleged daily harassment by several supervisors between March, 1979 and August, 1980.