Case 1:18-cv-02074-RMI Document 1 Filed 04/05/18 …Alexey Shereshevsky, MD, of the St. Joseph...

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Francis O. Scarpulla (State Bar No. 41059) Patrick B. Clayton (State Bar No. 240191) LAW OFFICES OF FRANCIS O. SCARPULLA 456 Montgomery Street, 17th Floor San Francisco, California 94104 Telephone: (415) 788-7210 Facsimile: (415) 788-0706 Email: [email protected] [email protected] Attorneys for Plaintiff WAHIDULLAH MEDICAL CORP., d/b/a REDWOOD URGENT CARE AND LABORATORY

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

WAHIDULLAH MEDICAL CORP., a California corporation d/b/a REDWOOD URGENT CARE AND LABORATORY,

Plaintiff,

v. ST. JOSEPH HOSPITAL OF EUREKA, a California nonprofit corporation d/b/a ST. JOSEPH HEALTH – HUMBOLDT COUNTY; HUMBOLDT MEDICAL SPECIALISTS, INC., a California corporation d/b/a ST. JOSEPH HEALTH MEDICAL GROUP; ST. JOSEPH HEALTH NORTHERN CALIFORNIA, LLC, a California limited liability company; ST. JOSEPH HEALTH SYSTEM, a California nonprofit corporation; ST. JOSEPH HEALTH, a California nonprofit corporation; ST. JOSEPH HERITAGE HEALTHCARE, a California nonprofit corporation; PROVIDENCE ST. JOSEPH HEALTH NETWORK, a California nonprofit corporation; PROVIDENCE ST. JOSEPH HEALTH, a State of Washington nonprofit corporation; JOHN ARYUNPUR, MD, an individual; PETRA KUHFAHL, MD, an individual; BRUCE KESSLER, MD, an individual; STUART CATALDO, MD, an individual; ALEXEY SHERESHEVSKY, MD, an individual; GREGORY HOLST, MD, an individual; CAROLINE CONNOR, MD, an individual; STEVEN KORENSTEIN, MD, an

Case No. _______________________ COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF DEMAND FOR JURY TRIAL

Case 1:18-cv-02074-RMI Document 1 Filed 04/05/18 of 27

mailto:[email protected]

mailto:[email protected]

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individual; LEO LEER, MD, an individual; ALLAN WILKE, MD, an individual; MIRIAM STEINBERG, DO, an individual; AMANDA JAMES, NP, an individual; AMBER FLOWERS, FNP, an individual; RACHEL HATCHIMONJI, FNP, an individual; ROBIN FRASER, PA-C, an individual; and DOES 1-100, inclusive,

Defendants.


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COMPLAINT -2-

Plaintiff, Wahidullah Medical Corporation, doing business as Redwood Urgent Care and

Laboratory, based on knowledge as to itself and its own acts, and on information and belief as to

all other matters, files this Complaint against the above-named Defendants, and, demanding trial

by jury, complains and alleges as follows: I

JURISDICTION AND VENUE

1. The federal antitrust claims stated herein are filed and these proceedings are

instituted against the above-named Defendants under Section 4 of the Clayton Act (15 U.S.C. § 4)

to recover treble the actual damages sustained by Plaintiff to its business and property by reason of

the above-named Defendants’ violations of Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1,

2), as hereinafter alleged. Plaintiff also claims damages by reason of Defendants’ violations of the

Lanham Act (15 U.S.C. § 1051, et seq.). This Court has original jurisdiction over Plaintiff’s

federal antitrust treble-damage claims, which arise under the Sherman Act and the Clayton Act, as

well as Plaintiff’s damage claims arising under the Lanham Act. Title 28, U.S.C. §§ 1331,

1337(a). This Court has supplemental jurisdiction pursuant to Title 28, United States Code Section

1367(a), over the related claims for violations of California statutory and common law alleged

herein, because those claims are so related to the federal claims that they form part of the same

case or controversy under Article III of the United States Constitution.

2. Venue is proper in this District under Title 28, United States Code, Section 1391(b),

because Plaintiff and all Defendants are residents of this District, and a substantial part of the acts

and circumstances giving rise to this action occurred in this District, and all Defendants are subject

to personal jurisdiction in this District.

3. The interstate trade and commerce involved with and affected by the alleged

violations was carried on, in part, within this District and substantially all of the unlawful acts

described herein were conceived, performed, or made effective within this District.

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COMPLAINT -3-

II THE PARTIES

A. Plaintiff

4. Plaintiff, Wahidullah Medical Corp., d/b/a Redwood Urgent Care and Laboratory

(referred to as “Plaintiff,” “Redwood,” or “Redwood Lab”), a medical office providing patient

care, is a California corporation with its principal place of business at 2440 23rd Street, Eureka,

California 95501.

B. St. Joseph Health Defendants

5. St. Joseph Hospital of Eureka, a California nonprofit corporation d/b/a St. Joseph

Health – Humboldt County, which is a 138-bed health care facility, with its principal place of

business at 2700 Dolbeer Street, Eureka, California 95501, is hereby made a Defendant herein.

6. Humboldt Medical Specialists, Inc., a California corporation d/b/a St. Joseph Health

Medical Group, which is a multispecialty medical group providing patient care, with its principal

place of business at 2725 Myrtle Avenue, Suite B, Eureka, California 95501, is hereby made a

Defendant herein.

7. St. Joseph Health Northern California, LLC, a California limited liability company,

which is an integrated health delivery network, with its principal place of business at 3345

Michelson Drive, Suite 100, Irvine, California 92612, is hereby made a Defendant herein.

8. St. Joseph Health System, a California nonprofit corporation, with its principal

place of business at 3345 Michelson Drive, Suite 100, Irvine, California 92612, is hereby made a

Defendant herein. It controls St. Joseph Hospital of Eureka and is the sole corporate member of St.

Joseph Health Northern California, LLC.

9. St. Joseph Health, a California nonprofit corporation which is a health care system,

with its principal place of business at 3345 Michelson Drive, Suite 100, Irvine, California 92612, is

hereby made a Defendant herein.

10. St. Joseph Heritage Healthcare, a California nonprofit corporation which is the

California healthcare-professional network of St. Joseph Health, with its principal place of


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COMPLAINT -4-

business at 200 West Center Street Promenade, Suite 800, Anaheim, California 92805, is hereby

made a Defendant herein.

11. Providence St. Joseph Health Network, a California nonprofit corporation which is

the parent corporation of St. Joseph Health, with its principal place of business at 20555 Earl

Street, Torrance, California 90503, is hereby made a Defendant herein.

12. Providence St. Joseph Health, a State of Washington nonprofit corporation with its

principal place of business at 1801 Lind Avenue Southwest, Renton, Washington 98057, is hereby

made a Defendant herein. It is the ultimate parent corporation of each of the foregoing Defendants.

13. Each of Defendants named in Paragraphs 5 through 12, above, are referred to

collectively as “St. Joseph Health Defendants” or “St. Joseph Health.”

C. Medical-Professional Defendants

14. John Aryunpur, MD, the Medical Director of the St. Joseph Health Medical Group,

with his principal place of business at 2752 Harrison Avenue, Eureka, California 95501, is hereby

made a Defendant herein.

15. Petra Kuhfahl, MD, of the St. Joseph Health Medical Group, with her principal

place of business at 2280 Harrison Avenue, Eureka, California 95501, is hereby made a Defendant

herein.

16. Bruce Kessler, MD, of the St. Joseph Health Medical Group, with his principal


herein.

17. Stuart Cataldo, MD, of the St. Joseph Health Medical Group, with his principal


herein.

18. Alexey Shereshevsky, MD, of the St. Joseph Health Medical Group, with his

principal place of business at 2280 Harrison Avenue, Eureka, California 95501, is hereby made a

Defendant herein.


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COMPLAINT -5-

19. Gregory Holst, MD, of the St. Joseph Health Medical Group, with his principal


herein.

20. Caroline Connor, MD, of the St. Joseph Health Medical Group, with her principal


herein.

21. Steven Korenstein, MD, of the St. Joseph Health Medical Group, with his principal


herein.

22. Leo Leer, MD, of the St. Joseph Health Medical Group, with his principal place of

business at 2280 Harrison Avenue, Eureka, California 95501, is hereby made a Defendant herein.

23. Allan Wilke, MD, of the St. Joseph Health Medical Group, with his principal place

of business at 2280 Harrison Avenue, Eureka, California 95501, is hereby made a Defendant

herein.

24. Miriam Steinberg, DO, of the St. Joseph Health Medical Group, with her principal


herein.

25. Amanda James, NP, of the St. Joseph Health Medical Group, with her principal


herein.

26. Amber Flowers, FNP, of the St. Joseph Health Medical Group, with her principal


herein.

27. Rachel Hatchimonji, FNP, of the St. Joseph Health Medical Group, with her

principal place of business at 2280 Harrison Avenue, Eureka, California 95501, is hereby made a

Defendant herein.


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COMPLAINT -6-

28. Robin Fraser, PA-C, of the St. Joseph Health Medical Group, with her principal


herein.

29. Each of the Defendants named in Paragraphs 14 through 28, above, are referred to

as “Medical-Professional Defendants.”

D. Doe Defendants

30. The true names and capacities of DOES 1 through 100, referred to as “Doe

Defendants,” are presently unknown to Plaintiff. Plaintiff will seek leave from this Court to amend

the Sixth and Seventh Claims for relief in this Complaint to identify Doe Defendants’ true names

and capacities, once such information has been ascertained. Plaintiff alleges that Doe Defendants

participated in St. Joseph Health Defendants’ and Medical-Professional Defendants’ misconduct,

as herein alleged, and are therefore liable to Plaintiff for damages.

E. Agency

31. St. Joseph Health Defendants, Medical-Professional Defendants, and Doe

Defendants are referred to as “Defendants.” Plaintiff is informed and believes and thereon alleges

that at all times mentioned herein, each of Defendants was the agent of each of the remaining

Defendants, and that in doing the acts hereinafter set forth, each of Defendants was acting within

the course and scope of that agency, with the knowledge and consent and/or the ratification of each

of the remaining Defendants.

F. Co-Conspirators

32. Various persons, firms, partnerships, and corporations, currently unknown to

Plaintiff, participated as co-conspirators with Defendants named in the First, Second, and Fourth

Claims for Relief. When Plaintiff learns the identity of any co-conspirator, it will seek leave of

this Court to add such co-conspirator as a Defendant herein.

III RELEVANT MARKET

33. The relevant market for the First, Second, and Third Claims for Relief is the market

for out-patient medical laboratory testing services in the relevant geographic market. The term


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COMPLAINT -7-

“out-patient medical laboratory testing services” as used in this Complaint excludes medical

laboratory testing services for patients who are hospitalized, and excludes medical laboratory

testing services where specimen collection and specimen testing are not performed within the

relevant geographic market.

34. The relevant geographic market is the City of Eureka, situated in Humboldt County,

California. Eureka is a distinct and defined geographic market, with its own “hospital service

area” (“HSA”) as defined in the DARTMOUTH ATLAS OF HEALTH CARE, a recognized and

authoritative source of information about healthcare in the United States.

35. Providing out-patient medical laboratory testing services directly involves and

affects interstate and foreign commerce. The violations of the antitrust laws alleged hereafter in

the First, Second, and Third Claims for Relief have had the effect of substantially lessening,

suppressing, eliminating, and interfering with competition in the business of providing out-patient

medical laboratory services in Eureka.

IV NATURE OF THE CASE

36. Until 2017, healthcare consumers in Eureka, California (i.e., residents of Eureka,

and patients of medical providers located in Eureka) who needed an out-patient medical laboratory

test, such as a blood panel to determine cholesterol levels, or a urinalysis to assess kidney function,

had no real choice for lab-testing services. The region’s healthcare giant, St. Joseph Health, which

has been serially acquiring formerly-independent healthcare providers throughout Humboldt

County and beyond, offered the only out-patient medical laboratory testing services in Eureka.

37. To the extent that out-patient medical laboratory testing services were available

outside of Eureka, they did not provide practical or reasonable alternatives to St. Joseph Health’s

lab services. Some eight miles north of Eureka, on the other end of Arcata Bay, the Mad River

Community Hospital, a small independent hospital with a five-bed emergency room, operates an

out-patient medical lab in the City of Arcata, which constitutes a distinct and separate HSA from

Eureka. But Eureka healthcare consumers would not benefit by, for example, going to a doctor’s

appointment in Eureka, travelling to the Arcata hospital for lab testing ordered by the doctor, and


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COMPLAINT -8-

then returning to the doctor in Eureka to consult regarding the results. Alternatively, travelling

some 18 miles to the south of Eureka, to the Redwood Memorial Hospital in the City of Fortuna,

with an outpatient lab at its 35-bed facility, would also yield no benefits. The distance to Fortuna

(itself a distinct and separate HSA from Eureka), and thus the patient’s time and expense lost to

travel, would be even greater. And in any event, Redwood Memorial Hospital is part of St. Joseph

Health, meaning there would be no competition between the commonly-owned lab facilities in

Eureka and Fortuna. There were no other out-patient medical laboratory testing services within 80

miles of Eureka.

38. St. Joseph Health profited from this lack of competition. With no alternatives, St.

Joseph Health’s lab-testing services became an entrenched monopoly. Without having to compete

on price and service, a predictable result ensued: prices increased, and service quality declined.

This fit a familiar pattern for Eureka healthcare consumers. In 2014, St. Joseph Health closed what

was Eureka’s only urgent-care facility, forcing Eureka healthcare consumers with urgent, but non-

life-threatening, conditions to seek prohibitively expensive care at St. Joseph Health’s emergency

room, simply because there was no other choice.

39. Sensing an opportunity to improve the choices available to Eureka healthcare

consumers, Dr. Wahidullah Wahidullah opened Redwood Urgent Care in Eureka in 2014,

providing a much-needed alternative to the St. Joseph Health emergency room. By providing

quality medical services at more-affordable prices, Redwood flourished. It supported its own in-

house lab to provide testing services to its urgent-care patients. For Dr. Wahidullah, the natural

next step was to invest in expanding and improving the in-house lab so that it could be certified as

a full-service, out-patient medical laboratory, and thereby bring the same competitive dynamic to

out-patient lab testing services in Eureka as he had done with urgent care.

40. In January 2017, Plaintiff’s fully-accredited out-patient medical lab opened for

business as Redwood Urgent Care and Laboratory, allowing any patient to obtain medical lab

testing services at its facility. The community response was overwhelmingly positive, with Eureka

healthcare consumers finally enjoying price competition, and in the process, laying bare the extent

to which St. Joseph Health’s lab services were overcharging its captive-customer base.


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COMPLAINT -9-

41. For instance, some routine tests were nearly ten times more expensive at St. Joseph

Health’s lab services compared to those same tests at Redwood Lab. Using a cash-paying patient

(i.e., one with no insurance coverage) rate as a reference point, a Vitamin D test at St. Joseph

Health’s lab costs about $327, while that same test at Redwood Lab costs $36. For a

Comprehensive Metabolic Panel at St. Joseph Health’s lab, the charge to a cash-paying patient is

about $116, while the cost at Redwood Lab is about $13. And a Complete Blood Count test at St.

Joseph Health’s lab costs a cash-paying patient about $86, while at Redwood Lab the same patient

would pay just $10 for the same test.

42. Independent doctors (i.e., those not affiliated with St. Joseph Health) likewise felt

confident in receiving patient test results from Redwood Lab, because it was staffed by the most-

qualified laboratory personnel in the area, and because it utilized the most-current electronic

medical record technology.

43. Unfortunately, St. Joseph Health, having already seen its lucrative emergency room

business undercut by Redwood’s urgent-care facility, decided to protect its lab-testing business

from fair competition by resorting to tortious and anticompetitive behavior designed to put

Redwood Lab out of business and thereby leave consumers of out-patient medical laboratory

testing services in Eureka with no option but St. Joseph Health.

44. Specifically, Defendants have monopolized and/or attempted to monopolize and/or

conspired to monopolize the market for out-patient medical laboratory testing services in Eureka,

as well as engaging in a conspiracy to restrain trade, organizing group boycott activities, and

committing other tortious and anticompetitive conduct, all to the financial and competitive harm to

Redwood Lab, as well as to consumers of out-patient medical laboratory testing services in Eureka.

45. Defendants have also harmed competition in the relevant market as defined herein

by, among other things, preventing patient lab-test results from Redwood Lab from being

electronically transmitted to medical practices acquired by St. Joseph Health, despite such medical

practices having the technological capacity to receive such electronic medical records. Medical-

Professional Defendants have also falsely informed patients that they are required to use St. Joseph

Health’s lab facilities, when in fact patients are free to use the medical lab of their own choosing.


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COMPLAINT -10-

46. In doing so, and as alleged below, St. Joseph Health Defendants, Medical-

Professional Defendants, Doe Defendants, and their co-conspirators and accomplices have violated

a number of federal and state laws, including Sections 1 and 2 of the Sherman Antitrust Act (15

U.S.C. §§ 1, 2); the Lanham Act (15 U.S.C. § 1051); the California Unfair Competition Law (Cal.

Bus. & Prof. Code, §§ 17200, et seq.); and other state laws.

V FACTUAL ALLEGATIONS

47. Redwood Lab provides out-patient medical laboratory testing services in Eureka. It

collects specimens and performs specimen testing at its facility in Eureka. Redwood Lab is

licensed by the State of California, certified by the U.S. Centers for Medicare and Medicaid

Services, and accredited by “COLA,” the national clinical laboratory accreditor. Its facility is

located in downtown Eureka, among a cluster of several other medical-service providers, and is

situated approximately one block away from St. Joseph Hospital of Eureka, and approximately one

block away from the medical offices of the St. Joseph Health Medical Group, making it

conveniently accessible from any of the medical-service providers in Eureka.

48. Redwood Lab endeavors to provide its patients with superior service, competitive

pricing, and the latest electronic medical record technology. To that end, Redwood Lab utilizes the

industry-leading laboratory technology software “LabDAQ” to enable the electronic recording,

analysis, and transmission of medical lab test results.

49. Furthermore, to facilitate the seamless electronic transmission of lab tests ordered

by a medical provider, and then to securely transmit the results of those tests back to the medical

provider, Redwood Lab is connected to the North Coast Health Improvement and Information

Network (“NCHIIN”). NCHIIN is the non-profit health information exchange for Humboldt

County, acting as an intermediary to facilitate the secure, electronic exchange of patient

information among local medical providers. Thus, for example, a doctor’s office may

electronically send an order for a patient’s lab tests to NCHIIN, which lab-test order will then be

accessible to the medical lab that is also connected to NCHIIN. When the lab tests are complete,

the results can be sent back securely through NCHIIN, and then become available to the patient’s


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COMPLAINT -11-

doctor, all without the delay and dangerous potential for medical errors caused by having the

doctor’s office manually input test results to a patient’s electronic chart from a paper record.

50. St. Joseph Health is the dominant healthcare provider in Humboldt County. St.

Joseph Health operates the 138-bed St. Joseph Hospital of Eureka (the sole hospital in the Eureka

HSA), as well as the Redwood Memorial Hospital, a 35-bed facility in Fortuna, California (the sole

hospital in the Fortuna HSA). St. Joseph Health has acquired several local medical practices in

recent years, including, for example Humboldt Medical Specialists. After acquiring these

previously-independent medical practices, St. Joseph Health re-brands the practice under the St.

Joseph Health Medical Group banner. The St. Joseph Health Medical Group is connected to

NCHIIN.

51. St. Joseph Health provides out-patient medical laboratory testing services in Eureka.

It collects specimens and performs specimen testing at its facilities in Eureka. St. Joseph Health

operates a facility located within the St. Joseph Hospital of Eureka, and a facility located within the

medical offices housing the St. Joseph Health Medical Group. The St. Joseph Health lab facilities

are connected to NCHIIN.

52. St. Joseph Health Defendants, Medical-Professional Defendants, Doe Defendants,

and their co-conspirators and accomplices, have engaged in a concerted effort to eliminate

Redwood Lab as a competitor because Plaintiff generally charges consumers of out-patient medical

laboratory testing services in Eureka less than St. Joseph Health does for the same services.

Plaintiff also provides better quality of service to healthcare consumers in Eureka than St. Joseph

Health.

53. Defendants’ crusade against Redwood Lab is designed to remove the choice that

Eureka healthcare consumers have when it comes to out-patient medical laboratory testing

services, so that St. Joseph Health can continue to charge more for its out-patient medical

laboratory testing services than it could by honestly competing with Redwood Lab.

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COMPLAINT -12-

A. Defendants’ Illegal, Tortious, and Anti-Competitive Scheme

54. For at least the past year, Defendants have been organizing and plotting ways to

remove the choice that Eureka healthcare consumers have when it comes to selecting out-patient

medical lab services.

i. St. Joseph Health Unilaterally Blocks Test Results from Redwood Lab

55. For example, Defendants unilaterally block receipt by the St. Joseph Health Medical

Group of electronic medical lab test results performed at Redwood Lab and transmitted through

NCHIIN. Defendants have accomplished this by intentionally configuring their own computer

networks so as not to accept through NCHIIN an electronic medical lab test result generated by

Redwood Lab – and only Redwood Lab. Thus, a medical lab test result generated by Redwood

Lab will successfully transmit from Redwood Labs’ computer network to the NCHIIN computer

network, but when that record is thereafter transmitted to Defendants’ computer network,

Defendants’ computer network responds with the equivalent of a telephone “busy” signal, thus

denying receipt of the record. There is no technological reason for this blocking. Instead,

Defendants are seeking to degrade Redwood Lab as a competitor in the marketplace, in hopes of

eliminating it altogether. The NCHIIN system is designed to facilitate transmission of electronic

medical records among separate medical providers, for the benefit of the patient. Defendants’

refusal to accept Redwood Lab results electronically places the economic self-interest of

Defendants ahead of patient care.

56. Redwood Lab is unaware of any medical provider other than St. Joseph Health

Medical Group connected to NCHIIN that has blocked receipt of electronic medical test results

from Redwood Lab.

57. Because of Defendants’ unilateral blocking of the electronic test results, Redwood

Lab is required to print-out test results and then transmit those paper test results to St. Joseph

Health Medical Group by fax, because that is the only way clinicians with the St. Joseph Health

Medical Group will agree to receive such results. This arrangement thwarts the purposes of

electronic medical records, which provide speed, accuracy, and overall improvements to patient

care, while reducing the risk of life-threatening medical errors. Furthermore, because Defendants


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COMPLAINT -13-

will transmit test results conducted at their own lab facilities electronically, the unilateral blocking

of Redwood Lab’s electronic test results creates an artificial burden on users of out-patient medical

lab testing services who prefer to use Redwood Lab. ii. St. Joseph Health Interferes with Redwood Lab’s Clients and Defames

Redwood Lab

58. During the past year, Defendants have only escalated their anti-competitive tactics,

waging a campaign of disinformation designed to eliminate the choice that Eureka healthcare

consumers have in selecting a provider of out-patient medical lab services.

59. For instance, when a patient of one of the clinicians of St. Joseph Health Medical

Group comes to Redwood Lab, the patient’s lab-test order will not be accessible to Redwood Lab

through NCHIIN, due solely to Defendants’ unilateral blocking. When a Redwood Lab staff

member contacts the patient’s doctor’s office to request a fax version of the order, the doctor’s

office will typically insist that the patient walk to the doctor’s office to obtain a paper lab order,

presumably to be walked back over by the patient to Redwood Lab.

60. When the patient arrives at the St. Joseph Health Medical Group doctor’s office to

obtain the paper lab order, the patient is typically told that he or she went to the “wrong” lab, and

that the patient must go to the “right” lab, which, the patient is told, is St. Joseph Health’s lab.

This is false and misleading, and is designed to deprive Plaintiff of the opportunity to provide

outpatient medical-lab testing services to the patient, and to further Defendants’ scheme to boycott

Plaintiff and require that St. Joseph Health clinicians send their patients to St. Joseph Health lab

facilities. More specifically, during the 12 months preceding the filing of this Complaint:

a. John Aryunpur, MD, the Medical Director of the St. Joseph Health Medical Group

in Eureka, has advised patients that Redwood Lab is the “wrong” lab for the patient

to use for outpatient medical lab-testing, and that the patient needs to use St. Joseph

Health’s lab;

b. Petra Kuhfahl, MD, practicing with the St. Joseph Health Medical Group in Eureka,

has advised patients that Redwood Lab is the “wrong” lab for the patient to use for


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COMPLAINT -14-

outpatient medical lab-testing, and that the patient needs to use St. Joseph Health’s

lab;

c. Bruce Kessler, MD, practicing with the St. Joseph Health Medical Group in Eureka,



lab;

d. Stuart Cataldo, MD, practicing with the St. Joseph Health Medical Group in

Eureka, has advised patients that Redwood Lab is the “wrong” lab for the patient to

use for outpatient medical lab-testing, and that the patient needs to use St. Joseph

Health’s lab;

e. Alexey Shereshevsky, MD, practicing with the St. Joseph Health Medical Group in



Health’s lab;

f. Gregory Holst, MD, practicing with the St. Joseph Health Medical Group in Eureka,



lab;

g. Caroline Connor, MD, practicing with the St. Joseph Health Medical Group in



Health’s lab;

h. Steven Korenstein, MD, practicing with the St. Joseph Health Medical Group in



Health’s lab;

i. Leo Leer, MD, practicing with the St. Joseph Health Medical Group in Eureka, has

advised patients that Redwood Lab is the “wrong” lab for the patient to use for


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COMPLAINT -15-


lab;

j. Allan Wilke, MD, practicing with the St. Joseph Health Medical Group in Eureka,



lab;

k. Miriam Steinberg, DO, practicing with the St. Joseph Health Medical Group in



Health’s lab;

l. Amanda James, NP, practicing with the St. Joseph Health Medical Group in



Health’s lab;

m. Amber Flowers, FNP, practicing with the St. Joseph Health Medical Group in



Health’s lab;

n. Rachel Hatchimonji, FNP, practicing with the St. Joseph Health Medical Group in



Health’s lab;

o. Robin Fraser, PA-C, practicing with the St. Joseph Health Medical Group in



Health’s lab.

61. Frustrated by the misinformation, inconvenience, and substandard patient care

provided by Defendants with respect to out-patient lab services, several patients have filed formal


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complaints against St. Joseph Health with the Office of Inspector General at the Centers for

Medicare and Medicaid.

62. Medical-Professional Defendants and St. Joseph Health Defendants derive financial

benefit by steering the ancillary medical spending of their patients to St. Joseph Health, so that

overall corporate revenues (and therefore individual compensation) are increased when outpatient

medical lab testing is performed by St. Joseph Health. This is consistent with St. Joseph Health’s

strategy to dominate the market for healthcare services in Eureka, as demonstrated by its ongoing

accumulation of formerly independent medical practice groups such as Humboldt Medical

Specialists.

B. Market Power within Relevant Product Market

63. The relevant market is the market for out-patient medical laboratory testing services

in Eureka, California. Out-patient medical laboratory testing services excludes medical laboratory

testing services for patients who are hospitalized, and excludes medical laboratory testing services

where specimen collection and specimen testing are not performed in Eureka.

64. As described above, Defendants’ conduct affects the market for out-patient medical

laboratory testing services in Eureka.

65. As a result of St. Joseph Health’s serial acquisition of formerly-independent

medical practices, St. Joseph Health controls nearly 90% of the medical practices in the Eureka

area and therefore steers nearly 90% of the market for out-patient medical laboratory testing

services in Eureka to St. Joseph Health’s facilities. Defendants require that clinicians with St.

Joseph Health send their patients to St. Joseph Health’s lab facilities, while boycotting Redwood

Lab.

66. By engaging in illegal, tortious, and anticompetitive conduct alleged herein,

Defendants leveraged their collective dominance of out-patient medical laboratory testing services

in Eureka to undermine competition in that market and harm Eureka healthcare consumers.

C. Anticompetitive Effects and Damages

67. Defendants have engaged in significant overt acts in furtherance of their unlawful

scheme within this District. For example, Medical-Professional Defendants’ statements to patients


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– in which they falsely and misleadingly encouraged patients not to use Redwood Lab, and

engaged in other anti-competitive conduct – took place in or around Eureka, California.

68. As a direct and proximate result of Defendants’ unlawful actions, competition has

been substantially harmed by, among other things, eliminating the ability of Eureka healthcare

consumers to choose their provider of out-patient medical lab services, thwarting the

implementation of electronic medical record technology via NCHIIN, and forcing Eureka

healthcare consumers to accept lower-quality out-patient medical lab services at higher costs. By

undermining competition in the market for out-patient medical lab services in Eureka, Defendants

have affected a substantial volume of commerce – and proximately injured not only Redwood Lab,

but also Eureka healthcare consumers. If Defendants’ conduct is not stopped, and they achieve the

restraints on trade in the market that they seek, these injuries will only continue and become more

egregious.

VI CLAIMS FOR RELIEF

FIRST CLAIM FOR RELIEF

Group Boycott in Violation of Section 1 of Sherman Act (15 U.S.C. § 1)

69. Plaintiff repeats and realleges each and every allegation contained in Paragraphs 1 –

68 of this Complaint with the same force and effect as if they were fully set forth herein.

70. Defendants have entered into a continuing illegal contract, combination, or

conspiracy in restraint of trade, the purpose and effect of which is to eliminate competition in out-

patient medical laboratory testing services in Eureka, California, by, among other practices:

a. boycotting Redwood Lab (a group boycott); and

b. blocking Redwood Lab’s use of NCHIN with the purpose and intent of

driving Redwood Lab out of business.

Each of these agreements independently and both together violate Section 1 of the Sherman Act

(15 U.S.C. § 1) and these agreements have as their purpose and effect the stabilizing and raising of

prices in the market for out-patient medical laboratory testing services in Eureka, in violation of


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Section 1 of the Sherman Act (15 U.S.C. § 1). These agreements are, in and of themselves per se

violations of this statute.

71. Because St. Joseph Health is the dominant healthcare provider in Eureka, its boycott

of Redwood Lab threatens the continued viability of Plaintiff. As a direct consequence of St.

Joseph Health’s boycott of Redwood Lab, interstate commerce has been adversely affected in

Humboldt County and more specifically in Eureka.

72. St. Joseph Health’s acts and practices have had and, unless enjoined, will continue

to have the following injurious effects:

a. competition in the market for out-patient medical laboratory testing services

in Eureka has been suppressed and diminished;

b. consumers in the market for out-patient medical laboratory testing services

in Eureka have had their freedom of choice suppressed and diminished;

c. competition in the market for out-patient medical laboratory testing services

in Eureka has been suppressed and diminished; and

d. consumers of out-patient medical laboratory testing services in Eureka are

being forced to pay higher prices for lab tests.

73. These contracts, combinations, agreements, or conspiracies are illegal as a per se

violation of Section 1 of the Sherman Act (15 U.S.C. § 1).

74. Defendants possess and exercise market power in the relevant market for out-

patient medical laboratory testing services in Eureka.

75. These contracts, combinations, agreements, or conspiracies have caused substantial

anticompetitive effects.

76. These contracts, combinations, agreements, or conspiracies have excluded

competition from providers offering out-patient medical laboratory testing services in Eureka, have

reduced the quality of out-patient medical laboratory services available to patients in Eureka, and

have caused, or will likely cause, an increase in price of out-patient medical laboratory testing

services in Eureka.


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COMPLAINT -19-

77. These contracts, combinations, agreements, or conspiracies have no legitimate

business purpose or offsetting pro-competitive impact.

78. Plaintiff has suffered and will continue to suffer injury as a direct result of

Defendants’ conspiratorial actions. Plaintiff has been deprived of the opportunity to compete fairly

in the market for out-patient medical laboratory testing services in Eureka. Plaintiff has suffered

antitrust injury proximately caused by Defendants’ conspiratorial acts.

79. As a direct and proximate result of these violations of Section 1 of the Sherman Act

(15 U.S.C. § 1), Plaintiff has been injured in its business and property in an amount not presently

known.

SECOND CLAIM FOR RELIEF Conspiracy to Monopolize in Violation of Section 2 of Sherman Act

(15 U.S.C. § 2)



81. Defendants’ conduct in foreclosing competition in the market for out-patient

medical laboratory testing services in Eureka, California constitutes a conspiracy to monopolize

that market in violation of Section 2 of the Sherman Act (15 U.S.C. § 2).

82. To foreclose competition in the market for out-patient medical laboratory testing

services in Eureka Defendants have coordinated their efforts to force consumers of out-patient

medical laboratory testing services in Eureka to use St. Joseph Health’s lab facilities. Defendants

have willfully, knowingly, and with specific intent, combined or conspired to monopolize the

market for out-patient medical laboratory testing services in Eureka.

83. If Defendants’ exclusionary conduct is not enjoined, there is a dangerous likelihood

that Defendant will monopolize the market for out-patient medical laboratory testing services in

Eureka.

84. Defendants’ exclusion of Plaintiff has substantial anticompetitive effects.

Defendants’ illegal conduct will prevent users of out-patient medical laboratory testing services in

Eureka from obtaining the benefit of Plaintiff’s state-of-the-art technology and exceptional


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COMPLAINT -20-

customer service. Such practices have resulted in an increase in costs to consumers of out-patient

medical laboratory testing services in Eureka.

85. Plaintiff has suffered and will continue to suffer injury as a direct and proximate

result of Defendants’ exclusionary conduct. Plaintiff has been deprived of the opportunity to

compete fairly in the market for out-patient medical laboratory testing services in Eureka. Plaintiff

has suffered antitrust injury from Defendants’ conspiracy to monopolize.



known.

THIRD CLAIM FOR RELIEF Attempt to Monopolize in Violation of Section 2 of Sherman Act

(15 U.S.C. § 2)



88. Defendants have unlawfully attempted, through their combination, to monopolize

the market for out-patient medical laboratory testing services in Eureka, California.

89. Defendants have a specific intent to monopolize the relevant market in Eureka.

Their specific intent to monopolize is apparent from their array of anticompetitive conduct as

alleged herein that lacks any legitimate business justification. They conspired to boycott Plaintiff,

and to interfere with Plaintiff’s customers by, among other things, making unfounded and

fraudulent statements about Plaintiff.

90. Left unabated, Defendants have a dangerous probability of achieving monopoly

power in the relevant market, where Defendants likely already have monopoly power given their

control of nearly 90% of the market for out-patient medical laboratory testing services in Eureka.

91. Through their attempted monopolization as alleged herein, Defendants have harmed

competition.



known.


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FOURTH CLAIM FOR RELIEF Violation of Cartwright Act

(Cal. Bus. & Prof. Code, §§ 16700, et seq.)



94. Defendants entered into and engaged in a conspiracy in unreasonable restraint of

trade in violation of the California Cartwright Act (Cal. Bus. & Prof. Code §§ 16700, et seq.), for

all the reasons set forth in the preceding allegations. Defendants’ conspiracy is a per se violation

of the Cartwright Act and is, in any event, an unreasonable and unlawful restraint of trade and

commerce.

95. As a direct and proximate result of Defendants’ unlawful conduct in violation of the

Cartwright Act, Plaintiff has suffered injury to its business or property in an amount not presently

known.

FIFTH CLAIM FOR RELIEF False Advertising in Violation of Lanham Act

(15 U.S.C. § 1125)



97. Defendants’ statements described herein misrepresent the nature, quality, and

characteristics of Plaintiff’s products and constitute literally false and/or misleading descriptions

and misrepresentations of fact in commerce. Accordingly, these representations constitute false

advertising in violation of Section 43(a)(1)(B) of the Lanham Act (15 U.S.C. § 1125(a)(1)(B)).

98. Plaintiff is within the zone of interests protected by the statute and whose injury as

described herein was proximately caused by Defendants’ violation of the statute.

99. Defendants’ statements, as alleged above, are false and misleading because Plaintiff

can fully perform the out-patient medical laboratory testing services for healthcare consumers in

Eureka, California. Potential customers of Plaintiff targeted by these statements are likely to be

deceived into thinking that Defendants’ statements are authorized or endorsed by Plaintiff.


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100. Defendants transmitted these statements to existing and potential customers in

nationwide markets through among other things, telephone conversations and via the internet.

Thus, Defendants introduced their false and misleading statements into interstate commerce.

101. These false and misleading statements have deceived and have the capacity to

deceive a substantial segment of customers and potential customers to the commercial detriment

and business reputation of Plaintiff.

102. Defendants’ deception is material, in that it has, or is likely to influence customers’

purchasing decisions.

103. Indeed, Defendants’ deception already caused customers to leave Plaintiff’s lab

unnecessarily on the mistaken belief that they could only go to St. Joseph Health’s lab facilities,

causing Plaintiff financial and reputational harm.

104. Defendants’ acts complained of herein have been deliberate, willful, and

intentional, with full knowledge and in conscious disregard of Plaintiff’s rights.

105. As a direct and proximate result of Defendants’ conduct, Plaintiff has suffered, and

will continue to suffer, irreparable injury in the form of, among other things, damage to its business

reputation and lessening of the goodwill and consumer confidence associated with its services.

106. Plaintiff has been and is likely to continue to be damaged by Defendants’ false and

misleading representations, entitling Plaintiff to recover damages, including Defendants’ profits

from their false and misleading misrepresentations, in an amount to be proven at trial.

SIXTH CLAIM FOR RELIEF Violation of California Unfair Practices Act

(Cal. Bus. & Prof. Code, §§ 17200 et seq.)



108. California Business & Professions Code Section 17200 defines as “unfair

competition” any unlawful business practice. An unlawful business practice is any practice that

violates a statute or other law. Defendants’ conduct as herein alleged violates Sections 1 and 2 of

the Sherman Act, has injured Plaintiff, and caused Plaintiff to lose money and/or other property.


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109. Moreover, Defendants’ illegal, tortious, and anticompetitive scheme constitutes

unlawful and unfair conduct. That conduct has caused significant adverse effects on commerce in

the State of California, including within this District. Defendants have undermined and foreclosed

competition in the market for out-patient medical laboratory testing services in Eureka, California,

and caused substantial injury to California businesses and consumers through higher prices and

continued abuse of the system.

110. As a direct and proximate result of Defendants’ illegal, tortious, and anticompetitive

scheme, Defendants have been unjustly enriched in an amount to be determined at trial.

111. Unless enjoined, Defendants’ unlawful and unfair conduct will continue and cause

further injury to Plaintiff for which there is no adequate remedy at law.

112. Plaintiff therefore seeks equitable and injunctive relief pursuant to California

Business & Professions Code Section 17203, to correct for the injurious and anticompetitive

effects caused by Defendants’ unlawful conduct, and other relief so as to assure that such conduct

does not continue or reoccur in the future.

SEVENTH CLAIM FOR RELIEF Tortious Interference with Prospective Economic Advantage



114. Plaintiff possesses or has possessed economic relationships with consumers of out-

patient medical laboratory testing services in Eureka, California. In each of these relationships,

there is or was a reasonable probability of future economic benefit to Plaintiff.

115. Defendants had knowledge of these relationships.

116. Defendants committed intentional acts designed to disrupt these relationships with

Plaintiff. These acts include but are not limited to falsely and fraudulently advising patients that

they could only use St. Joseph Health’s lab facilities, and/or representing that patients who used

Plaintiff’s lab had gone to the “wrong” lab.

117. These claims were and are false, and Defendants knew they were false or reasonably

should have known they were false when they made them.


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118. As previously alleged, Defendants have committed unlawful, anticompetitive, and

tortious acts that are independently unlawful because they violate the Sherman Act, among other

statutes, laws and regulations.

119. As a direct and proximate result of Defendants’ unlawful, anticompetitive, and

tortious conduct, Defendants actually disrupted Plaintiff’s economic relationships with third

parties.

120. As a direct and proximate result of Defendants’ unlawful, anticompetitive, and

tortious conduct, Plaintiff suffered economic harm.

121. Plaintiff is informed and believes, and on that basis alleges, that this conduct was

despicable, and carried out with willful and conscious disregard to Plaintiff’s rights and out of

hatred or ill-will. As such, it constitutes “malice” under Section 3294 of the California Civil Code.

The foregoing conduct of Defendants was also intended to and did subject Plaintiff to cruel and

unjust hardship in conscious disregard of its rights, and as such constituted “oppression” under

Section 3294 of the California Civil Code. As such, Plaintiff is entitled to punitive or exemplary

damages under Section 3294 of the California Civil Code against Defendants in an amount

sufficient to punish and deter it from further similar misconduct.

VII PRAYER FOR RELIEF

WHEREFORE, Plaintiff respectfully demands judgment for the following relief:

A. For an injunction, permanently and pending final judgment in this case, precluding

Defendants and each of them and the agents, employees, and representatives of each of them from

attempting to in any way restrain trade in the business of out-patient medical laboratory testing

services in Eureka, California, and from financing or otherwise aiding or abetting any of the acts so

enjoined;

B. For an injunction, permanently and pending final judgment in this case, precluding

Defendants and each of them and the agents, employees, and representatives of each of them from

attempting to in any way institute any group boycotts in the market for out-patient medical


Case 1:18-cv-02074-RMI Document 1 Filed 04/05/18 …Alexey Shereshevsky, MD, of the St. Joseph...

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Transcript of Case 1:18-cv-02074-RMI Document 1 Filed 04/05/18 …Alexey Shereshevsky, MD, of the St. Joseph...