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On Behalf of Sagamore Health Network, Crowell & Moring Attorneys Successfully Defeated a Preliminary Injunction Motion Brought by Gateway Contracting Services in the Southern District of Indiana

March 19, 2002

Crowell & Moring's team consisted of partners Arthur Lerner and David Florin, counsel Barbara Ryland, and associates Shari Lahlou and Darren Shulman.

In its complaint seeking injunctive relief and damages, Gateway alleged that Sagamore and St. Francis Hospital conspired to exclude Gateway in the market for health network services in violation of section 1 of the Sherman Act, section 3 of the Clayton Act, and section 24-1-2-1 of Indiana's Combinations in Restraint on Trade Act.

Gateway is a marketer of a supplemental health care network featuring selected high-cost health care services such as cardiac and orthopedic care for a global case rate. Gateway is a supplemental network because it is offered in conjunction with a comprehensive network that offers a full range of coverage. Sagamore is a managed care company that offers networks of providers who agree to give a discount to Sagamore enrollees in exchange for the steerage the network provides. Sagamore was concerned that Gateway's supplemental network, when operating alongside of Sagamore's, reduced the steerage to Sagamore. Gateway's contracts with employers required the employers offer the Gateway network's services on a zero copayment basis. The fear was that providers would react to this by reducing their discount to Sagamore. As a result, Sagamore did not want its network co-offered with Gateways supplemental "carve-out" network.

The court denied Gateway's motion, finding "that Gateway has less than a negligible chance of success on the merits." Specifically, the court found that plaintiff failed to prove the existence of any of the several conspiracies alleged.

First, the court found that plaintiff was not likely to prove a conspiracy between hospitals because there was no evidence that any communication occurred between competing hospitals. Second, the court found that there was no conspiracy between Sagamore and third party administrators and brokers to boycott Gateway because they had acted independently and Sagamore did not cut off access to a market necessary for Gateway to compete. The evidence also showed that brokers and third party administrators could offer Gateway with other Rental PPO networks. Third, the court held that plaintiff had little likelihood of success on its theory that St. Francis and Sagamore conspired to raise prices.

Finally, the court reviewed the report of the expert offered by plaintiff and excluded it because it was conclusory and unsupported by data or accepted methodology. Gateway failed to show that the challenged restraint had adversely impacted competition in the relevant market, the court stated. In reaching this conclusion, the court noted that although Sagamore is an important player in the managed care market in Indianapolis, Gateway provided no evidence that Sagamore could raise prices above a competitive level and maintain its business.

Plaintiff is considering whether to appeal the court's ruling. Crowell & Moring's attorneys teamed with attorneys from Sommer & Barnard in Indianapolis.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Barbara H. Ryland
Senior Counsel – Washington, D.C.
Phone: +1.202.624.2970