592 F.

2d 1191
1979-1 Trade Cases 62,481

James P. KARTELL, M.D., et al., Plaintiffs, Appellants,

v.
BLUE SHIELD OF MASSACHUSETTS, INC., and Blue Cross
of
Massachusetts, Inc., Defendants, Appellees.
No. 78-1349.

United States Court of Appeals,

First Circuit.
Argued Nov. 9, 1978.
Decided Feb. 2, 1979.

David I. Shapiro, Washington, D.C., with whom James van R. Springer,

Dickstein, Shapiro & Morin, Washington, D.C., John F. Sherman, III, and
Warner & Stackpole, Boston, Mass., were on brief, for appellants.
Daniel O. Mahoney, Boston, Mass., with whom Reginald H. Howe, and
Palmer & Dodge, Boston, Mass., were on brief, for appellees.
Before COFFIN, Chief Judge, ALDRICH and BOWNES, Circuit Judges.
ALDRICH, Senior Circuit Judge.

Defendant Blue Shield of Massachusetts, Inc. and Blue Cross of Massachusetts,

Inc. are nonprofit, tax exempt medical service and hospital service
corporations, organized to provide "for the preservation of the public health by
furnishing medical services at low cost to members of the public who become
subscribers. . . . " 1941 Mass.Acts c. 306, preamble. Mass.G.L. c. 176B (Blue
Shield); c. 176A (Blue Cross). Defendant Blue Shield pays physicians who
participate in its plan directly for services rendered to premium-paying
subscribers in scheduled amounts, while Blue Cross provides coverage for
hospital care and procedures. Participating physicians, in turn, agree to accept
Blue Shield's payments in full satisfaction for their services. Blue Shield pays
nothing, however, on account of the services of nonparticipating physicians,

unless rendered in an emergency, or outside of the Commonwealth.

2

At the present time defendants' subscribers constitute some 60% Of the

population of Massachusetts, and 99% Of Massachusetts licensed physicians
participate. Plaintiffs are four licensed physicians. Two do not participate in the
Blue Shield plan; the other two presently do participate, but have given notice
of their intent to resign. All are dissatisfied with Blue Shield participation
because it requires physicians to limit themselves to the amounts of the Blue
Shield schedules, and forbids what is termed balance billing of the patient.
Hence physicians who wish to charge more than Blue Shield's schedules are
cut off from a substantial number of possible patients who, because they would
lose their Blue Shield benefits, must pay personally not merely a balance, but
the entire bill. Claiming a conspiracy to monopolize, and unlawful boycott and
coercion, in violation of the Sherman Act, 15 U.S.C. 1 and 2 (1976),
plaintiffs bring this suit under 15 U.S.C. 26 (1976), seeking injunctive relief.

The district court, on motion, dismissed the complaint. Before the district court
and on this appeal, defendants contend, Inter alia, that their challenged practices
are immunized from federal antitrust attack under the state action doctrine of
Parker v. Brown, 1943, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315, and its
progeny, or, alternatively, under the McCarran-Ferguson Act, 15 U.S.C.
1011 Et seq. (1976), as "the business of insurance . . . regulated by State law."
Id., 1012(b). Finally, defendants ask us to abstain if we find the underlying
issues of state law insufficiently clear. Since we conclude we should abstain,
our opinion will be restricted to considerations relevant thereto.

We start with the fact that not only was Blue Shield established by special act
of the state legislature for the public purpose previously stated, but its contracts
with participating doctors, and its methods for compensating them, are subject
to regulation, Viz., the written approval of the Massachusetts Commissioner of
Insurance. So are the fee schedules, and the provision against balance billing.
Also subject to such approval are its subscriber contracts, level of benefits, and
premium rates. Defendants point to the fact that the statute, in terms, provides
for payments "upon receiving medical service from any participating physician
or, in the discretion of (Blue Shield), upon receiving medical service from any
non-participating physician in an emergency or when outside the
commonwealth," c. 176B 7, and contend that this affirmative provision
expressly negatives any broader scope.

Plaintiffs reject this statutory construction. In addition, they show that Blue
Cross has made a separate contract with state employees to include
nonparticipating physicians without limit. This agreement troubled the district

court, but we do not pursue it, except to note that it presents a serious statutory
question as to the extent that Blue Cross is permitted to invade the traditional
province of Blue Shield by providing benefits for physicians' services.
6

Continuing, by G.L. c. 176B, 3, Blue Shield is permitted to join with Blue

Cross for the joint administration of their affairs and the issuance of joint
subscriber contracts for both medical and hospital services. Under this overall
statutory scheme, defendants, together, have become a pervasive and powerful
force in the Massachusetts health insurance industry. At the same time, they are
prohibited from engaging in acts of boycott, coercion or intimidation and it
appears the legislature did not intend Blue Cross and Blue Shield to
monopolize, or eliminate competition in, the private health insurance industry.
See G.L. c. 176D, 3; c. 176B, 16. Just what this means, in view of the
seemingly inevitable consequences of defendants' success, is a serious state
question.1

Plaintiffs say that defendants, at a minimum, have accomplished what they

were forbidden to do, and that their agreements with their subscribers
prohibiting the payment of benefits to nonparticipating doctors, and the steps
they take to publicize and enforce them, and the ban against balance billing,
constitute a concerted refusal to deal intended to coerce adherence to a
maximum fee schedule, and as such are unlawful, per se, under the Sherman
Act.2 As to defendants' asserted exemption under Parker v. Brown, ante,
plaintiffs, agreeing with the district court, maintain that the threshold inquiry
for determining whether anticompetitive conduct by private parties, such as
defendants, enjoys immunity under the state action doctrine, is whether under
state law defendants are compelled to engage in the challenged conduct.
Plaintiffs assert, further, however, that even assuming state compulsion, a
federal court must also find that state law compelling the conduct is necessary
to effectuate state policy, and is not fundamentally inconsistent with federal
antitrust policy, before immunity can be granted, thereby raising the question of
the extent of the state policy. See Lafayette v. Louisiana Power & Light Co.,
1978, 435 U.S. 389, 417-18, 98 S.Ct. 1123, 55 L.Ed.2d 364 (Marshall, J.,
concurring); Id., at 425-26, 98 S.Ct. 1123 (Burger, C. J., concurring); Cantor v.
Detroit Edison Co., 1976, 428 U.S. 579, 595-98, 96 S.Ct. 3110, 49 L.Ed.2d
1141; Id., at 605-11, 96 S.Ct. 3110, (Blackmun, J., concurring); L. Sullivan,
Antitrust, 238, at 736-37 (1977).

Without explicitly analyzing the compatibility of state and federal policy, the
district court held that G.L. c. 176B, 7 requires Blue Shield's refusal to deal
with nonparticipating physicians. Additionally implicit was its view that
proscribing balance billing is an integral part of the Blue Shield system,

working in tandem with the participating requirement to promote the statutory

purpose of low cost medical care. Accordingly, the court dismissed the action
under Parker v. Brown.3 In so holding, the court rejected several arguments
based upon statutory construction, and failed to consider the implication, vis-avis the existence of state compulsion, of the conceded fact that for many years
Blue Shield had allowed balance billing to high income subscribers, Cf.
Massachusetts Med. Serv. v. Commissioner, 1962, 344 Mass. 335, 338, 182
N.E.2d 298, and that the change was self-generated.
9

Resolution of these complex questions of state law presents serious difficulties.

This is not to say, particularly where the ultimate issue is a federal one, that we
should not do so. See Propper v. Clark, 1949, 337 U.S. 472, 69 S.Ct. 1333, 93
L.Ed. 1480. On the other hand, even here our obligation is not absolute. See, e.
g., Colorado River Water Cons. Dist. v. United States, 1976, 424 U.S. 800,
813-17, 96 S.Ct. 1236, 47 L.Ed.2d 483. We are informed that there are
presently pending before the Massachusetts Supreme Judicial Court
consolidated class actions seeking to raise several aspects of Blue Shield's
relationship with participating physicians, including the ban on balance billing.
Nelson v. Blue Shield of Mass., Inc. and Massachusetts Fed'n of Physicians &
Dentists, Inc. v. Blue Shield of Mass., Inc., No. 1497. Since an opinion in these
cases may substantially, perhaps even fully, answer certain questions of state
law in a way that will permit easy answers, relatively speaking, to the federal
ones, this has great appeal.4 Especially if by any chance the proper
interpretation of state law is such that a comprehensive health scheme affecting
a majority of the public must be faulted, it would be better that the state court
be the one to make it, or, conversely, to reject it.

10

In this circumstance we could take advantage of the Supreme Judicial Court's

Rule 3:21, and certify questions, including, in that court's discretion, very
general ones. See, e. g., Baird v. Attorney General, 1977 Mass.Adv.Sh. 96, 360
N.E.2d 288. However, in view of the cases that are already pending before it, in
the interest of saving time and procedures in the long run, we prefer to consider
simple abstention at this time.

11

In Colorado River Water Cons. Dist. v. United States, ante, the Court defined
three limited categories of cases where "important countervailing interests" of
federalism make abstention proper. First, abstention is appropriate "in cases
presenting a federal constitutional question which might be mooted or presented
in a different posture by a state court determination of pertinent state law. . . . "
424 U.S. at 814, 96 S.Ct. at 1244, quoting County of Allegheny v. Frank
Mashuda Co., 1959, 360 U.S. 185, 189, 79 S.Ct. 1060, 3 L.Ed.2d 1163. The
second category, and the one most applicable here, allows abstention, "where

there have been presented difficult questions of state law bearing on policy
problems of substantial public import whose importance transcends the result in
the case then at bar. Louisiana Power & Light Co. v. City of Thibodaux, 360
U.S. 25, (79 S.Ct. 1070, 3 L.Ed.2d 1058) (1959) . . . Kaiser Steel Corp. v. W. S.
Ranch Co., 391 U.S. 593, (88 S.Ct. 1753, 20 L.Ed.2d 835) (1968).
.12. . In some cases, however, the state question itself need not be determinative of
state policy. It is enough that the exercise of federal review of the question in a case
and in similar cases would be disruptive of state efforts to establish a coherent policy
with respect to a matter of substantial public concern . . . Burford v. Sun Oil Co., 319
U.S. 315, (63 S.Ct. 1089, 87 L.Ed. 1424) (1943); . . . Alabama Pub. Serv. Comm'n v.
Southern R. Co., (341 U.S. 341 (71 S.Ct. 762, 95 L.Ed. 1002) (1941)). " 424 U.S. at
814, 96 S.Ct. at 1244.
13

Finally, abstention may also be appropriate under the doctrine of equitable

restraint of Younger v. Harris, 1971, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d
669, where federal jurisdiction is invoked to enjoin a state criminal prosecution
or other state enforcement proceeding.5 See 424 U.S. at 816-17, 96 S.Ct. 1236.

14

Under the second category of abstention represented by the leading case,

Louisiana Power & Light Co. v. City of Thibodaux, ante, the exercise of federal
jurisdiction is not denied, but merely deferred pending a definitive resolution of
the difficult state law questions involved by the state courts. See id., 27 n. 2, 3031; Kaiser Steel Corp., ante.

15

It is true that if we abstain without certifying, plaintiffs themselves are not

personally present in the pending state court proceedings. We may assume,
however, that their positions, so far as relevant, are well represented and will
not be neglected by the court. Moreover, were we to certify questions, unless
the Massachusetts court were to delay its pending proceedings plaintiffs
presumably will find themselves faced with a decision in the pending cases
before they are personally reached for hearing in any event.

16

Simple abstention will avoid unnecessary friction and possibly serious

consequences to state policy "whose importance transcends the results in the
case . . . at bar." Colorado River, ante, at 814. Indeed, this seems a clearer case
for it than many earlier ones. See, e. g., Kaiser Steel Corp., Ante, (water rights);
Thibodaux, ante, (municipality's power of eminent domain); Naylor v. Case &
McGrath, Inc., 2 Cir., 1978, 585 F.2d 557, 564-65 (standing to sue under state
Unfair Trade Practices Act); Construction Aggregates Corp. v. Rivera de
Vicenty, 1 Cir., 1978, 573 F.2d 86, 96 (Puerto Rico workmen's compensation
rate making process); Druker v. Sullivan, 1 Cir., 1972, 458 F.2d 1272 (city's

authority to impose rent control); Allegheny Airlines, Inc. v. Pennsylvania Pub.

Util. Comm'n, 3 Cir., 1972, 465 F.2d 237, Cert. denied, 410 U.S. 943, 93 S.Ct.
1367, 35 L.Ed.2d 609 (state regulations governing termination of intrastate air
service); Dome Condominium Ass'n v. Goldenberg, S.D.Fla., 1977, 442
F.Supp. 438 (state regulation of condominium development); Meicler v. Aetna
Cas. & Sur. Co., S.D.Tex., 1974, 372 F.Supp. 509 (insurance risk
reclassification). The judgment dismissing the complaint is vacated. The case is
remanded to the district court with instructions to retain jurisdiction and to
abstain pending resolution of state law questions by the Massachusetts courts.
We leave it to the district court to determine whether the decision of the
Supreme Judicial Court in the pending cases, when rendered, provides
sufficient guidance, or whether further state proceedings of some kind may be
required. In this connection the district court should permit the parties to be
heard on the alternative of certifying, not only as to the form of the particular
questions, but as to the record to be made to permit their full consideration.
17

COFFIN, Chief Judge (dubitante).

18

While I share the court's desire to defer to the Massachusetts courts for all the
help we can get, and feel its resolution makes sense, I confess to some
uneasiness about our privilege as an appellate court simply to abstain when the
district court has not seen fit to do so.

19

My doubts stem from what I assume is the continuing vitality of Meredith v.

Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9 (1943), that, absent
exceptional circumstances of a recognized nature, a federal court is not
permitted to deny litigants a resolution of their problems "merely because the
answers to the questions of state law are difficult or uncertain or have not yet
been given by the highest court of the state". Id. at 234-35, 64 S.Ct. at 11. 1A
Moore's Federal Practice, P 0.203(4) at 2135 (2d ed. 1978). Moreover,
Meredith was a diversity case, while here the ultimate issue is one of exclusive
federal jurisdiction, antitrust law, a factor which may "raise the level of
justification for abstention." Colorado River Water Conservation District v.
United States, 424 U.S. 800, 815 n. 21, 96 S.Ct. 1236, 1245, 47 L.Ed.2d 483
(1976). The court concludes, however, that this case possesses the exceptional
character of the second category of abstention cases recognized in Colorado
River Water Conservation District v. United States, supra, 424 U.S. at 814-15,
96 S.Ct. 1236.

20

I hope the court is correct. But I question whether, even though litigation is and
was at the outset of the federal suit pending in the state court, any question was
presented there which is likely to be significant in resolving the federal question

before us. The court in its footnote 4 cites to a brief which raises the issue
"whether Blue Shield's refusal to compensate subscribers for nonparticipating
services, except in emergencies, is legislatively dictated" and whether
agreements escape being unfair contracts of adhesion because of the
compulsion of statutes. I have no judgment on this, except that my reading of
the Massachusetts Superior Court opinion suggests instead that the relevant
issue is whether the anticompetitive conduct is "permitted" and not whether it
is "compelled" by state law. M.G.L. ch. 93A, 3(1)(a).
21

If there is, in the pending state litigation, a state law question which bears on
the federal case, Colorado River requires that it bear on "policy problems of
substantial public import whose importance transcends the result in the case at
bar." 424 U.S. at 814, 96 S.Ct. at 1244. This is a delphic formula. I am not sure
that the instant case measures up. It is true that regulating the amounts of
medical and hospital bills is an important function. But the precise question
whether Massachusetts law requires, or authorizes or forbids any official to
require that there be no balance billing does not pose a fundamental question of
state power such as is contemplated by Colorado River and the cases it invokes.

22

If no such basic policy problem is implicated, I suspect that the other basis for
this kind of abstention is also missing the prospect that federal review here and
in similar cases "would be disruptive of state efforts to establish a coherent
policy". Id. at 814, 96 S.Ct. at 1245. The result of federal decision here would
be either that the ban on balance billing is or is not a violation of the antitrust
laws. Once the answer is known, state policy can be as coherent as it wishes to
be.

23

The court's opinion would first require the district court to abstain, but would
leave open the possibility of certifying. This has the merit of allowing the
district court to perfect the record before questions are certified. But even
though the court deferred certification "in the interest of saving time and
procedures", such deferment threatens, if decision on pending state cases
proves unhelpful, to involve a needless delay. I would immediately certify, with
no qualms about the legal responsibility of so doing. Lehman Bros. v. Schein,
416 U.S. 386, 94 S.Ct. 568, 38 L.Ed.2d 467 (1974). This would start the wheels
in motion. If, before decision on the certified questions were forthcoming,
decisions on pending Massachusetts cases resolved any such questions, they
need not be addressed again. And if, in the process of considering the questions
certified the Massachusetts court finds the record to be inadequate, I would see
no reason why it could not require the record to be supplemented as might be
necessary.

On the other hand, construction of 15 U.S.C. 1013(b) withholding from the

protection of the McCarran-Ferguson Act, ante, "any agreement to boycott,
coerce, or intimidate, or act of boycott, coercion, or intimidation," See generally
St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 98 S.Ct. 2923, 57
L.Ed.2d 932 (U.S., 1978), Aff'g 1 Cir., 1977, 555 F.2d 3, is, of course, a matter
for us to decide

It is, of course, axiomatic that agreements to establish maximum prices stand

no better than those to fix minimums. Albrecht v. Herald Co., 1968, 390 U.S.
145, 152-53, 88 S.Ct. 869, 19 L.Ed.2d 998; Kiefer-Stewart Co. v. Joseph E.
Seagram & Sons, 1951, 340 U.S. 211, 213, 71 S.Ct. 259, 95 L.Ed. 219

The court thus did not reach defendants' alternate claim of exemption under the
McCarran-Ferguson Act

Many procedural attacks are made on the decision of the superior court, but, if
these fail, the Supreme Judicial Court is presented with the question whether
Blue Shield's refusal to compensate subscribers for nonparticipating services,
except in emergencies, is legislatively dictated (Blue Shield S.J.C. brief, 25,
n.); whether Blue Shield is engaged in "trade or commerce" (Id., 17, 54 Et
seq.), and whether the agreements are "contract(s) of adhesion, containing
various unfair and oppressive provisions," (Id., 10) or cannot be such because
of the statutory provisions. (Id., 62)

In arguing against abstention, plaintiffs seek to rely on Vendo Co. v. LektroVend Corp., 1977, 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 and Miller v.
Granados, 5 Cir., 1976, 529 F.2d 393. They are not helpful. In those cases, both
federal antitrust actions, abstention under the Younger doctrine was
unsuccessfully urged on the ground that there were civil actions pending in the
state courts involving the same subject matter. These cases do not suggest that
abstention may not be justified in an antitrust action where the requirements of
Colorado River's other categories are satisfied. See Puerto Rico Int'l Airlines v.
Silva Recio, 1 Cir., 1975, 520 F.2d 1342, 1344-45 n. 4; Cf. California New
Motor Veh. Bd. v. Orrin W. Fox Co., --- U.S. ----, ----, 99 S.Ct. 403, 58 L.Ed.2d
361 (1978) (abstention in federal antitrust action not warranted because no
ambiguity in state law); Mach-Tronics, Inc. v. Zirpoli, 9 Cir., 1963, 316 F.2d
820 (no need to determine questions of state law); Schenley Ind., Inc. v. New
Jersey Wine & Spirit Whole. Ass'n, D.N.J., 1967, 272 F.Supp. 872 (same)
Moreover, the holding in Vendo Co., ante, that section 16 of the Clayton Act
generally does not provide an express exception to the Anti-Injunction Act, 28
U.S.C. 2283, so as to allow a federal antitrust court to enjoin a state civil

action, suggests that considerations of federalism, which underlie both the AntiInjunction Act and the abstention doctrine, have force even in the antitrust field.
See also Parker v. Brown, 1943, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315.