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JEFFREY M. SHOHET, Bar No. 067529 jeffrey. shohet@dlapiper.com VERONICA L. JACKSON, Bar No. 243095 veronica.jackson@dlapiper.com DLA PIPER LLP (US) 401 B Street, Suite 1700 San Diego, CA 92101-4297 Tel: 619.699.2700 Fax: 619.699.2701 Attorneys for Plaintiff PRIME HEALTHCARE SERVICES, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA PRIME HEAL THCARE SERVICES, INC., a Delaware Corporation, Plaintiff,

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Civil Action No.

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v.
SERVICE EMPLOYEES INTERNATIONAL UNION, a Labor Union; SERVICE EMPLOYEES INTERNATIONAL UNION - UNITED flEALTHCARE WORKERS WEST,a Labor Union; KAISER FOUNDATION HEALTH PLAN, INC., a California Corporation; KAISER FOUNDATION HOSPITALS, a California Corporation; SOUTHERN CALIFORNIA PERMANENTE MEDICAL GROUP, INC., a California Corporation; and Does 1-10, inclusive, Defendants.

COMPLAINT FOR VIOLATION OF THE SHERMAN ACT AND DEMAND FOR JURY TRIAL

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NATURE OF THE ACTION
1. This action challenges an antitrust conspiracy between and among Defendants to Services, Inc.

eliminate the hospitals in Southern California owned by Prime Healthcare ("Plaintiff' or "Prime").

As more fully discussed below. Prime is the only independent hospital

system in The Market (as defined below), in that Prime hospitals are not owned by or otherwise affiliated with health care service plans or health maintenance -1EAST\46883 149.12

organizations

(collectively

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"HMOs") and Prime's business model is based on being largely non-contracted with such payor controlled plans, including Kaiser. therefore threatens the dominance To that extent, Prime offers a unique alternative to, and of, the payor-controlled, closed-staff model on which

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Defendant Kaiser (as defined below) has based its multi-billion dollar business, particularly with regard to emergency care services. Ultimately, this is an action to protect some of the most

vulnerable of consumers - consumers making life and death choices regarding where and when they will receive hospital treatment. 2. Most patients enter Prime hospitals through emergency rooms and therefore tend

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to be more sick or injured than most hospital patients. Prime has made a significant investment in capital, equipment, and human resources in order to provide the required care for these critically sick and severely injured patients and thereby improve choices for this patient population. Such

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improvements include shorter waiting times for emergency services and faster admissions where necessary to stabilize emergency patients. 3. Federal and State regulations permit Kaiser members to seek emergency care at

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any hospital, and to remain in that hospital until they are stable and ready to be discharged or transferred to a Kaiser owned, affiliated, contracted, or approved hospital. Therefore, Kaiser

members with emergency medical conditions, including the severely injured or critically ill, their families, and in some cases ambulance drivers or others Who transport patients to hospitals, may choose to seek emergency care at a Prime facility based on the location, accessibility, and services available at Prime facilities. When Kaiser members receive emergency care at a Prime facility, Kaiser must compensate Prime for the care provided to those Kaiser members. 4. As further alleged below, the presence of Prime in The Market threatens the As to Defendant SEIU (defined below), Prime's position in The

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objectives of Defendants.

Market threatens the success of the SEIU's campaign to expand its representation of and raise the price oflabor for Healthcare Workers (as defined below) in The Market. As to defendant Kaiser, the presence of Prime presents a competitive alternative to consumers that threatens Kaiser's profits and ultimately the success of its business model. Defendants have joined forces to address

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this common threat by seeking to raise Prime's costs of doing business, with the ultimate objective of eliminating Prime from The Market. 5. In furtherance of this conspiracy, Kaiser, among other acts as described below,

often refuses to pay Prime for services rendered to Kaiser members and requires Prime to pursue administrative appeals and litigation to recover payment for Prime's treatment of Kaiser

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members. The sheer amount of the receivable at any point in time (currently believed to exceed $100 million) and the time and expense incurred in litigating a majority of claims for reimbursement for services rendered to Kaiser members has a significant adverse impact on Prime's operations. 6. In contrast to the Kaiser model, the success of Prime's model depends on offering,

delivering, and preserving its reputation for offering and delivering quality medical care to its patients. Thus, by eliminating Prime from The Market, Kaiser threatens to eliminate the

potentially life saving competitive choice Prime offers to Kaiser members and other consumers in need of emergency care and avoid the higher costs associated with such vital care. 7. As noted above, Kaiser and SEIU share a common objective, to protect their In

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respective business models from the competitive threat presented by Prime in The Market.

furtherance of their common objective, Kaiser joined forces with the SEIU, in an illegal conspiracy in violation of Sections 1 and 2 of the Sherman Antitrust Act of 1890 ("Sherman Act"), 15 U.S.C. §§ 1-2. This illegal conspiracy included an agreement to engage in

anti competitive, unfair, exclusionary, and deceptive conduct to eliminate Prime as a competitor in The Market. 8. The SEIU's engagement in unlawful activities to achieve market domination is As the SEIU's chief

part and parcel of the SEIU's approach to forcing employer capitulation.

strategist, Stephen Lerner, stated when arguing for the adoption of the market domination strategy that the SEIU has long since implemented: We can't engage in successful mass organizing or protect existing collective bargaining if we operate within the confines of the law because activities that allow us to exercise power are increasingly ineffective and/or illegal.

-3EASTl.46883 149. 12

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Stephen Lerner, Stephen Lerner Replies: Counter Response on "Reviving Unions ", Boston Review (Summer 1996), available at http://www.bostonreview.neVBR21.3I 9. Lerner.html.

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In this case, the agreement between SEIU and Kaiser was not part of the collective

bargaining process which, under current case law, may be protected by exemptions granted to labor unions under the antitrust laws. To the contrary, the agreement at issue involves the

provision of assistance by a union (SEIU) to an employer (Kaiser) in restraining competition in the product/service market in which the employer competes in exchange for favorable

concessions on wages or other terms of employment.

Such an agreement is not protected under

any antitrust exemptions and constitutes aper se illegal restraint of trade. 10. Defendants have engaged in a pattern of concerted practices in furtherance of their

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conspiracy, all of which were intended to protect Kaisers' financial performance and raise Prime's costs of doing business in order to make it more difficult for Prime to compete with Kaiser and to ultimately drive Prime from the Market. It. Defendants have acted in concert to fix wage rates for Healthcare Workers'

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services in The Market and force Prime to adopt the high-cost labor practices of the conspirators with the ultimate goal of eliminating Prime as the sole remaining independent hospital provider in The Market. Defendants seek to accomplish these objectives by engaging in a pattern and

practice of overt acts designed to damage the business of Prime by producing the inaccurate reports and studies described herein below, working with complicit media outlets to publicize the sham and baseless allegations described herein below, initiating certain sham and baseless complaints causing regulatory and administrative investigations and sham and baseless litigation, wrongfully withholding reimbursement for care provided to Kaiser members, coercing and

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threatening Kaiser members and others who may direct Kaiser members to Prime hospitals to keep Kaiser members from exercising their right to seek and, where their condition requires, continuing to receive treatment at Prime hospitals, and undertaking various other activities for the purpose of diminishing Prime's revenue and raising Prime's costs, thereby eliminating Prime as a competitor in the Market.

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EASl'l46883 149. 12

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12.

That Kaiser's motivation to eliminate Prime as a competitor lies in its desire to

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reduce the places its Members can seek emergency treatment outside of Kaiser owned. affiliated, and contracted hospitals is evidenced in Healing Together: The Labor-Management Partnership at Kaiser Permanente, the definitive book on the Kaiser-SElU partnership. Together: From its beginnings, Kaiser has been able to be cost-effective when members' medical services are kept in-house; but it pays a heavy price when members are referred outside of Kaiser facilities and networks. Thomas A. Kochan et al., Healing Together: The Labor-Management Permanente 34 (2009). 13. In other words, Kaiser's financial success, and ultimately its entire model, depends and preventing hospitals that are not Kaiser owned, affiliated, or Partnership at Kaiser As stated in Healing

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on restricting consumerchoice

contracted from offering Kaiser members a better choice for emergency services. 14. Plaintiff brings this action seeking injunctive relief and to recover damages,

including treble damages, and attorney's fees and costs for Defendants' violations of Sections 1 and 20f the Sherman Act, 15 U.S.C. §§ 1 and 2, pursuant to Sections 4 and 16 of the Clayton Antitrust Act of 1914 ("Clayton Act"), 15 U.S.C.§§ 15 and 26, and any other damages this Court may deem appropriate.

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15.

Both the Prime model and the Kaiser managed care model have an important place

in a free and competitive health care market. They offer competitive choices to consumers and others who finance the provision of health care to the ultimate consumer. By this action, Prime

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does not seek the elimination of Kaiser or its model nor does it suggest that the Kaiser model is inferior or fundamentally flawed. To the contrary, by this action, Prime seeks to stop the

anticompetitive actions of Defendants to eliminate the choice Prime offers to consumers and other purchasers of vital health care services in The Market.

PARTIES
16. Prime is a Delaware corporation, with its principal place of business located at Prime, by and through its subsidiaries,

3300 East Guasti Road, Ontario, California 91761.

operates twelve acute care hospitals located in San Bernardino, San Diego. Los Angeles, Orange,

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EASn46883149.12

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and Shasta Counties. Prime hospitals are primarily operated without affiliation or reciprocal care agreements with Kaiser or any other managed care networks. 17. Defendant Service Employees International Union (the "International Union") is labor association with its principal place of business located at 1800

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an unincorporated

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Massachusetts Avenue, N.W., Washington, DC 20036. The International Union represents units of workers and attempts to negotiate terms and conditions of employment for the workers it represents. The International Union transacts business activities in interstate commerce,

including in this judicial district. 18. Defendant Service Employees International Union - United Healthcare Workers

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West ("SEIU-UHW") is a local union affiliate of the International Union with its principal place of business located at 560 Thomas L Berkley Way, Oakland, CA 94612. SEIU-UHW represents, among others, individuals working in California's hospitals and clinics as nurses, aides (e.g., operating room, physical therapy), assistants (e. g., laboratory, nurse, physical therapy), case managers, secretaries, radiology, clerks, coordinators, counselors, food service services, workers, dietary, maintenance laboratory, workers, pharmacy, and

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schedulers,

technicians

(e. g. , central

surgical, ultrasound),

respiratory

care practitioners,

therapists,

transporters,

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housekeeping

staff (hereinafter "Healthcare Workers") and attempts to negotiate terms and SEIU-UHW transacts

conditions of employment for the Healthcare Workers it represents. business activities in interstate commerce, including in this judicial district. 19. Defendant Kaiser Foundation

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Health Plan. Inc. ("KFHP")

is a California

corporation with its principal place of business in the County of Alameda, California. KFHP is a licensed health care plan under the Knox Keene Act and regulated by the Department of Managed Health Care. 20. Defendant Kaiser Foundation Hospitals C"KFH") is a California corporation with

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its principal place of business located in the County of Alameda, California. KFH is a subsidiary ofKFHP. KFH owns and operates hospitals throughout the United States, including in California

and this judicial district.

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EAS'1"I46883 149.12

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21.

Defendant Southern California Pennanente

Medical Group ("SCPMG")

is a

professional medical group qualified to do business in the State of California with its principal place of business in the County of Los Angeles, California. SCPMG is a for-profit partnership of physicians that has responsibility for providing and arranging medical care for KFHP members at KFH hospitals in Southern California. 22. The true names and capacities of the defendants named herein as Does

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1 through 10, inclusive, whether individual. corporate, associate, or otherwise, are currently unknown to Prime; therefore, Prime alleges that each of these fictitiously named defendants is responsible in some manner for the events sued upon. Prime will seek leave of this Court to

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amend the Complaint to assert the true identities and capacities of the defendants named herein as Does 1 through 10, inclusive, when said identities and capacities have been ascertained. 23. Throughout this Complaint, unless otherwise indicated, "SElU" shall mean and

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refer to both the International Union and SEIU-UHW; "Kaiser" shall mean and refer to KFHP, KFH, and SCPMG; and "Defendants" shall mean and refer to SElU, Kaiser. and Does I through 10, and each of them. JURISDICTION 24. Jurisdiction over Prime's AND VENUE Act is proper under

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claims under the Shennan

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28 U.S.C. §§ 1331 and 1337(a). Jurisdiction over the Shennan Act claims is also proper under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26. 25. Personal jurisdiction over Defendant SElU is proper because the SEIU organizes

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California workers and collects dues from such workers in this State and has employees in this State. In addition, the exercise of specific personal jurisdiction is proper because the intended effects of the SEIU's conduct were expressly directed at Prime, a company which maintains its headquarters in this State, and, in fact, caused harm (as the SEIU intended) to Prime in this State. 26. Personal jurisdiction over Defendant Kaiser is proper because Kaiser conducts

substantial business. including sales. in this State, has employees in this State, maintains its headquarters in this State, and is authorized to conduct business in this State. In addition, the exercise. of specific personal jurisdiction is proper because the intended effects of Kaiser's -7EASTI4.6883 14.9.12

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conduct were expressly directed at Prime, a company which maintains its headquarters in this State, and, in fact, caused harm (as Kaiser intended) to Prime in this State. 27. Venue is proper in this judicial district pursuant to 28 U.S.C.

§ 1391,
Also, a

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15 U.S.C. § 15, andlor 15 U.S.C. § 22. Defendants transact business in this District.

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substantial part of the events giving rise to the claims were intended to, and did, cause effects in this District. THE RELEVANT MARKET

A. The Relevant Service Markets
28. The relevant service markets for purposes of this action are (1) hospital emergency

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care services provided to the general public, including Kaiser members, consumers covered by non-Kaiser commercial insurers and health plans, Medicare and Medicaid beneficiaries. and the underinsured and uninsured; (2) general acute-care hospital services, which encompasses a broad cluster of basic medical diagnostic and treatment services including nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary services; and (3) the services provided by Healthcare Workers, including but not limited to direct patient care duties and responsibilities essential to the provision of the services described in (1) and (2).

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B. The Relevant Geographic Market and Submarkets
29. The relevant geographic market is determined by examining the geographic

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boundaries within which a hypothetical monopolist for the services at issue could profitably raise prices or diminish the quality of its offering by a small but significant amount. Due to residents' clear preference for local emergency room and acute care services, hospitals operate within relatively small relevant geographic markets. 30. The relevant geographic markets are San Bernardino. San Diego, Los Angeles, and

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Orange Counties, California. 3J. In addition, there are several relevant geographic submarkets wherein patients

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would not be expected to travel outside the submarket for emergency room or acute care services in response to a sustained price increase or reduction in quality by a provider within the submarket.
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These submarkets include, but are not limited to: the High Desert area serviced by

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Prime's Desert Valley Hospital ("Desert Valley") in Victorville, California; the South Los Angeles Area serviced by Prime's Centinela Hospital Medical Center ("Centinela") in Inglewood. California; and the South San Diego area serviced by Prime's Paradise Valley Hospital ("Paradise Valley") in National City, California. 32. The elimination of Prime as a competitor to Kaiser in the relevant geographic

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markets and subrnarkets would result in harm to consumers and increased profit to Kaiser. 33. For example, Kaiser has approximately 50,000 members in the High Desert area

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but the closest Kaiser hospital, Kaiser Permanente Fontana Medical Center, is more than 40 miles away via the Cajon Pass, which is often closed or otherwise non-passable due to inclement weather. Desert Valley is more accessible and on "diversion" less than Kaiser's Fontana Medical Center. 1 As a result, Desert Valley serves an important role in providing emergency care to the High Desert community, including Kaiser members. 34. If Kaiser and the SEIU's illegal conspiracy is successful, and Prime is forced to

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shut down its hospitals, including Desert Valley, consumers will be denied the important and, in some cases, life saving option of obtaining emergency care at a hospital within the relevant geographic market. Such patients may be forced to travel long distances to the nearest Kaiser or other available hospitals, which may increase such patient's risk of harm, complications, or mortality. Due to the high baniers to entry and reduced incentives for Kaiser and its hospitals to respond to consumer demand for shorter wait times and closer travel distances, the elimination of Prime in these markets will have serious consequences to consumer welfare. Moreover, the

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competitive pressure on Kaiser to expend the resources to provide adequate acute care and emergency services within the relevant market will be eliminated. 35. Prime owns or operates eleven hospitals in The Market. Prime is informed and

believes that Kaiser owns fifteen hospitals, is affiliated with at least ten hospitals, and otherwise contracts with over 100 hospitals in The Market.
I Diversion is a situation where a hospital notifies the local emergency medical services agency that the hospital's emergency department is closed to new ambulance traffic due to lack of available resources.

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36.

Throughout this Complaint, unless otherwise indicated, the relevant services and

geographic markets and submarkets will be referred to as "The Market." FACTS

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A.

Prime's Business Model
37. Prime's business model, unlike Kaiser's model, is based on offering quality care

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on a fee for service basis to consumers. Prime's model is rooted in providing care to patients who enter Prime's hospitals through the hospital emergency rooms, including Medicare and Medi-Cal patients, patients insured by commercial plans, and the uninsured. Prime enters written contracts with commercial plans only on a very limited basis,2 and Prime does not accept deep discounts in exchange for inclusion in a health plan's network. As a result, Prime does not agree to terms that reduce Prime's effectiveness in The Market. Prime's model rewards the company for providing quality emergency care with shorter wait times to the general public, many of whom have the choice of selecting the closest emergency room not on diversion, which oftentimes is a Prime hospital, to seek life saving emergency care. 38. In contrast, Kaiser's model is based on providing all covered services to its Kaiser controls costs by employing, Specifically. through

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members in exchange for fixed monthly premiums,

managing. and incentivizing the physicians who treat Kaiser members.

Kaiser's direct control over the physicians treating Kaiser members, Kaiser is able to dictate, control. and manage the nature, quantity, and quality of health care services delivered to Kaiser members at its hospitals. 39. Prime attracts patients by, among other things, investing in the latest equipment

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and utilizing additional staffing and other management tools in order to reduce wait time and increase throughput through the emergency room. For example, When Prime purchased Centinela Hospital, revenues initially decreased due to Prime's expenditures on capital equipment and 2 Only Prime's Garden Grove Hospital & Medical Center ("Garden Grove") and San Dimas Community Hospital ("San Dimas") rely on managed care agreements, both of which arose out of the respective hospitals' prior ownership by a different entity.
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staffing. Within a year, wait times in the emergency room improved significantly, the length of stays decreased, and the overall emergency room throughput increased as a result. Centinela

Hospital is now one of the largest, if not the largest, emergency care providers in South Los Angeles, with more than 170 emergency room visits per day. 40. Although the efficiency of Prime's hospitals does attract a disproportionate

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number of uninsured patients, the bulk of Prime's revenue is from Medicare and Medi-Cal patients for which Prime's reimbursement reimbursement rates. is limited to applicable Medicare and Medi-Cal

Similarly. reimbursement for emergency services provided to Medicare

managed care enrollees (Medicare + Advantage) and Medi-Cal managed care enrollees is limited to the applicable Medicare and Medi-Cal rates. 41. As required by the Emergency Medical Treatment and Active Labor Act

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("EMTALA") and State law, Prime also treats patients who are enrolled in managed care plans, including Kaiser members, that seek emergency care at Prime's hospitals. Because Prime is, for the most part, not under contract with managed care plans, including Kaiser, Prime is entitled to be reimbursed at Prime's reasonable and customary rates for care provided to commercial managed care enrollees (not Medicare and Medi-Cal managed care enrollees). 42. Treatment of a commercial enrollee at a hospital provider like Prime has a

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significant impact on Kaiser's costs, profits, and reputational interests. This in tum has lead to Kaiser seeking to eliminate Prime as a ptovider irrespective of the important service Prime provides in The Market and the risk of harm to Kaiser members and the general public. 43. In addition, in an emergency situation, Medicare and commercial patients,

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including those who are enrolled under an HMO plan administered

by a managed care

organization like Kaiser, prefer Prime's shorter emergency room waiting times to Kaiser's demonstrably longer waiting times. Also, emergency responders seek to transport Medicare and commercial patients in need of emergency services to the nearest emergency room that is not on diversion, which most often is a Prime hospital. 44. Medicare pays hospitals for inpatient services using a "case base" system which

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means that hospitals receive one single payment for an entire inpatient episode of a given type.
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Medicare categorizes all hospital inpatient care into a distinct "medical-severity diagnosis-related grouping" ("MS-DRO").

adjusted,

Fora given case grouping, Medicare pays hospitals

one single, bundled payment to cover the cost of all the supplies and services that a hospital with average efficiency would use in managing that particular case. Inpatient episodes are first

grouped by principal diagnosis and then subdivided by the nature of co-morbid conditions and complications, if any. Co-morbid conditions that necessitate an increased level of care by the hospital may increase the payment a hospital receives from Medicare. If a patient is transferred to another hospital like Kaiser, the first hospital that has rendered critical and costly services is paid only a portion of the MS-DRO payment, which financially benefits Kaiser. If a patient is

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transferred to a Kaiser hospital without being admitted for further stabilizing care, the first hospital does not receive a MS-DRO payment but instead receives a much lower Ambulatory Payment Classification ("APC") payment, which again financially benefits Kaiser. 45. Because Prime offers Medicare. Medi-Cal, commercially insured and HMO

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patients, and underinsured

and uninsured patients the opportunity to seek prompt, quality

healthcare in their own communities, Prime has a competitive advantage over Kaiser. In an effort to diminish Prime's competitive advantage and enrich itself financially, Kaiser has engaged in a number of tactics designed to harm Prime, limit the choices available to patients. and remove the competitive pressure to match Prime's wait time performance and other quality of care standards. 46. On information and belief, Kaiser encourages its members to call a "nurse line"

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before seeking emergency care and uses these calls to direct its enrollees to bypass closer nonKaiser hospitals and instead travel to a Kaiser facility located farther away even though such travel puts the well-being of the Kaiser member at risk. If a Kaiser member arrives at a nonKaiser emergency room (either by emergency transport or on hislher own), Kaiser then seeks to transfer the member to a Kaiser emergency room at all costs regardless of whether the treating physician has determined that the patient could be safely transferred. 47. In order to accomplish the transfer of its members to Kaiser facilities, Kaiser. by

and through its EPRP Program, which is staffed by Kaiser employed physicians, seeks to harass, intimidate, and coerce the treating physician into transferring the Kaiser member even though
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Kaiser's

employed physicians have never seen the patient and the treating physician has

oftentimes already determined that the patient is not stable for transfer. If the treating physician resists Kaiser's efforts to compel a transfer of the Kaiser member, Kaiser then embarks upon a campaign of harassment, intimidation, and coercion against its own member and the member's family. 48. Kaiser's representatives routinely call critically ill patients while they are in a non-

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Kaiser emergency room or hospital bed and threaten them with financial harm if they do not demand a transfer to a Kaiser hospital against the medical advice of the treating physician. Kaiser representatives also call family members of Kaiser's members so that the Kaiser representative can seek to convince the family members to sign the enrollee out of the hospital against medical advice and transport the member to a Kaiser facility. In both cases, Kaiser falsely claims that the Kaiser member and his/her family members may receive bills for as much as $200,000 unless they demand a transfer to a Kaiser facility even though Kaiser knows that reimbursement for Medicare and Medi-Cal managed care enrollees is limited to the applicable Medicare and MediCal reimbursement rate. 49. As part of its efforts to diminish Prime's competitive advantage, Kaiser unlawfully

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refuses to pay those physicians who provide critically needed emergency services ("On-Call Physicians") to Kaiser members at non-Kaiser hospitals. Since non-Kaiser hospitals like Prime

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do not employ physicians as Kaiser does, Kaiser's refusal to pay On-Call Physicians limits the availability of such physicians for all members of the community, including Kaiser members, who seek care at non-Kaiser hospitals. 50. As a result of Kaiser's refusal to pay On-Call Physicians, non-Kaiser hospitals like

Prime are forced to compensate On-Call Physicians for providing emergency services so that all critically ill patients have access to such physicians. Kaiser hospitals like Prime. 51. Kaiser also refuses to pay claims from non-Kaiser hospitals like Prime on the basis This results in increased costs for non-

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that the care provided was not medically necessary or did not constitute emergency care, which 11111
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forces Prime and other non-Kaiser hospitals to spend time and substantial financial resources to seek payment. 52. Because Prime's independent model threatens Kaiser's profitability and potentially

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its very existence and threatens the SEIU's objectives to preserve and increase wage rates for its members, Kaiser and the SEIU embarked on an illegal conspiracy to eliminate Prime from The Market. As the SElU is a combination of competitors who benefit from higher prices for

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Healthcare Workers' labor, the conspiracy constitutes aper se violation of the antitrust laws.

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B.

The SEIU's Market Density Strategy
53. Until the mid-1990s, the SEIU focused primarily on what would be considered

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traditional organizing. Traditional organizing involved seeking support among workers and then invoking the election processes of the National Labor Relations Board C"NLRB") in order to become the legally certified bargaining representative for a group of employees. 54. By the late 1990s, however, the SEIU was moving away from the traditional The SEIU's new strategy was based on a belief that laws were an

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model of organizing.

impediment to its objectives. 55.

In the place of a lawful organizing model, the SEIU adopted a strategy that spoke

in terms of market domination. This new approach, based heavily on a February 2003 document drafted by Stephen Lerner - United We Win: A Discussion of the Crisis Facing Workers and the Labor Movement - served as the call to arms behind the formation of the New Unity Partnership which later became the Change to Win Federation and split off from the AFL-CIO in 2005.

56.

Under the SEIUlNew Unity Partnership plan: The key aim of any organizing effort, . . . , is for unions to win a decisive market share in industries by increasing "union density" and controlling the "labor supply" and so gain the ability "to take wages out of competition and raise standards,"

Herman Benson, Organize, Union

The New Unity Partnership: Democracy Review,

Sweeney

Critics

Would Bureaucratize 2003, available

to at

December/January

http://www.uniondemocracy.org/UDRl52-New%20Unity%20Partnership.htm#wheel.

In other

words, the goal of the density strategy is to eliminate competition in the market for service -14EAST\46883149.12

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workers represented by SEIU and establish supracompetitive wage rates for such services in the relevant market. 57. Although the SEIU's efforts to expand its representation of service workers in the

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relevant market ate questionable given the tactics used to accomplish that goal, so long as the SEIU acts in the unilateral pursuit of the legitimate objectives of a labor organization, the SEIUs collective action is likely protected under current caselaw. However, when the SEIU, itself a

combination of competitors, partners with non-labor entities to accomplish its market domination strategy. as the SElU has done on many prior occasions and is now doing with Kaiser, that combination is per se unlawful under the antitrust laws.

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C.

Achieving SEIUMarket Dominance .
58. The SEIU recognized that it could not achieve market dominance as long as the

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market place remained open to competition - competition not from the organizing efforts of other unions but competition from companies operating in the same market as companies organized by the SEIU. The SEIU knows that it cannot achieve its goals in a competitive market because union employers would resist incurring higher wage costs and risk losing market share to competitors who maintain lower costs structures. The SEIU concluded, therefore, that unless the majority of employers were bound to union agreements
Of

the SElU was able to raise those

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employers' costs in some other way, the SEIU's contracts and representations would become untenable and its model would collapse. 59. The SEIU also recognized that it was incapable of organizing sufficient employees

through traditional and lawful means to mitigate the threat to its market dominance model of unionization. follows: Currently our organizing is driven by the questions: "How do we win a majority of votes?" Instead we need to ask ... : "How do we develop power to force employers to recognize the union and sign good contracts?" The SEIU's Lerner succinctly described the problem and the SEIU solution as

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Stephen Lerner, Let's Get Moving: Labor's Survival Depends on Organizing Industry- Wide for Justice and Power, Labor Research Review: Volume 1, No. 18, Article 10 (1991), available at http://digitalcornmons.ilr.comell.edullrr/Yol1/issI8/1 60. O.

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Consequently, the SEIU began seeking agreements with employers in which the

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parties would work together to achieve market dominance for the SEIU while reducing or eliminating the competitive threat from non-union employers. Many of these agreements on their face violate the labor laws and the antitrust laws because they (1) constitute a combination with a non-labor group; and (2) involve conduct that is not undertaken in the pursuit of the legitimate self-interest of the SEIU. As such, they are outside the antitrust exemptions afforded to legitimate orgariizing and collective bargaining activities. See, e.g., United Mine Workers v. Pennington,

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381 U.S. 657,662 (1965); Allen Bradley Co. v. Local No.3, IBEW, 325 U.S. 797, 806-07 (1945); USS-POSCO Indus. v. Contra Costa Cnty. Bldg. & Constr. Trades Council, APL-CIO, 31 F.3d 800,806-07 (9th Cir. 1994); Bodine Produce, Inc. v. United Farm Workers Org. Comm., 494 F.2d 541, 557-58 (9th Cir. 1974). But such unlawful conspiracies have become "business as usual" for the SEIU. 61. "Justice for Janitors" is a prime example of the SEIU's prototypical pressure Because the SEIU originally was a building

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campaign targeting not employees, but employers.

services union, primarily janitorial staff, the SEIU's early efforts were focused on these areas. In major cities and suburbs throughout the United States, the SEIU sought to organize the employees of cleaning contractors that performed cleaning services for major office buildings. 62. When organizing these cleaning contractor employees, however, the SEIU's

primary efforts were directed not at the contractors that employed employees, but rather at the building owners and managers that contracted work to the cleaning contractors. Throughout the

country, the SEIU sought and obtained from various associations, building owners, and managers clauses that restrict contracting only to employers who either had a contract with the SEIU or agreed to be bound by a contract with the SEIV. For example, there are agreements in, among other places, New York, Chicago, and Los Angeles.

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63.

The SEIU's own description of the campaign is instructive: When we have the janitors campaign, as with any campaign, we set some simple goals. First, we have to organize top-down, bottom-up and sideways! We have to organize a majority of contractors, a majority of buildings and a majority of workers! Then we've got to get a master agreement that everybody signs.

Stephen Lerner, It's Time for Strategic Labor Organizing: How Unions Can Win Against

the Most Daunting Odds Imaginable, The Baltimore Chronicle, June 7, 1996.
64. The recent union agreement with International Service System, Inc. ("ISS"), a

large international cleaning company, is an example of the unions' unlawful collaboration with union employers in restraining competition in the product/service markets in which they compete. ISS was the original target of the SEIV's Justice for Janitors campaign. In June 2008, ISS signed a Global Agreement with the Property Services Division of UNI Global Union, a global union federation in which the SEIU is highly influential. In fact, Torn Balanoff, the President of SEIU Local 1, is also the President of UNI Global Union's Property Services Division. The ISSIUNI Global Agreement requires ISS to pay the unions 100,000 Euro a year to engage in organizing of ISS's competitors so as to raise their costs and render them less competitive. 65. The ISS agreement is a stark example of the extent to which density tactics will

skirt the law to achieve the unions' objectives. A payment by one company to a labor union for the express purpose of organizing competitors can serve no purpose other than to injure competition. If such money makes its way to a labor union operating under United States law, it

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would constitute a criminal violation of the Taft-Hartley Act, which prohibits payments from employers to labor unions. 66. Around 2001, the SElU sought to replicate its Justice for Janitors campaign,

among other building service workers; primarily security guards. Once again, the model involved pressuring employers to enter into illegal agreements restricting contracting. 67. As the model for the security guard campaign, the SEIV looked to Chicago where

the SEIU already had developed a strangle-hold on the market of the security guard industry. The agreements between the SEIU and the Chicago Building Owners and Management Association ("BOMA") contained a clause stating:
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With respect to any subcontractor that does not have a collective bargaining agreement with the Union, the Employer shall require that said contractor will meet all of the standards of this Agreement. SOMA/Chicago-SElU, 68. Local 1, 2004 Security Agreement, Art. XXIII, June 4, 2004.

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Wackenhut, a security services subcontractor, challenged the SEIU agreement on

the grounds that it violated the "hot cargo" provisions of the National Labor Relations Act (''NLRA''). The NLRB agreed, finding that: By entering into, maintaining and giving effect to a provision in the 2004 SOMA/Chicago-SEIU, Local 1 ... , specifically Article XXIII ... [citing Art. 23 language quoted in ~ 39] and applying such provision to require subcontractors to observe and be bound by the agreement's requirements for payments into its fringe benefit funds and by otherwise in effect requiring security subcontractors as a condition of their contract to become signatories to an agreement with SEIU Local I, SOMA has violated Section 8(e) of the Act. Wackenhut Corp., 2007 WL 4570695 (N.L.R.S. Div. of Judges Dec. 21, 2007). 69. WackeIlhut also filed an action against the SElD and other parties alleging that the

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unlawful agreement violated Sections 1 and 2 of the Sherman Act. 70. As a result of these challenges from Wackenhut, BOMA sent a letter to Tom

Salanoff, President of SEIU Local 1, stating that "effective immediately" the clauses being challenged by Wackenhut were being "suspended or limited."

71.

The SEIU also has entered into what it calls "organizing agreements" but which in

reality are agreements with employers to assist the SEIU's dominance campaign in specific targeted markets. For example, early on in its security guard campaign, the SElU entered into an organizing agreement with Securitas, one of the world's largest security firms. Under the

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Securitas agreement, the company agreed not to oppose union organizing efforts and the SEIU agreed to organize the company only in certain named markets. 72. The most striking feature of the Securitas agreement, however, are provisions that The offending provisions

on their face create an illegal conspiracy under the antitrust laws.

relieved Securitas of any obligation to bargain until the SEIU had organized a percentage of the defined market:

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Because of the competitive nature of the sub-contracted security industry, the parties agree not to commence collective bargaining until contractors who agree to these principles and/or who have already recognized SEIU as the collective bargaining agent for their employees as defined in the foregoing procedure service the majority of the agreed upon area/market. This recognition procedure meets the organizational objectives of SEIU, Securltas' need to remain competitive, the inability of SEIU to file for elections conducted by the National Labor Relations Board and the rights of employees to choose freely whether or not to be represented by a union of their choosing.

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73.

Framework Agreement between Securitas and SEIU, Points of Understanding, March 13,2003.
The Securitas agreement also prohibits Securitas from entering into a similar

agreement with any other labor union. This restriction is itself a violation of Section 8(a)(2) of the NLRA, which prohibits an employer from creating an in-house union or favoring one union over another. The purported purpose for this unlawful restriction is a vaguely stated

comprehensive program of the SEIU to raise standards in the security industry. 74. Under the NLRA, due to concern over the danger of divided loyalties of security

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guards, the NLRB is prohibited from certifying "mixed-unions" - unions that represent guard employees along with non-guard.' employees - as representatives of guard employees.

See

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29 U.S.C. § 159(b)(3). Nevertheless, Securitas entered into this illegal agreement with the SEIU even though the NLRA effectively completely exempts Securitas from any obligation to recognize or bargain with the SEIU, and the SEJU entered into this agreement with Securitas despite the fact that the SEIU is not a legitimate bargaining representative for security employees under the NLRA. 75. In short, the SEIU entered into an agreement to negotiate that was tied to an

express level of market control, where no obligation to negotiate even exists. The pact guarantees that a select group of employers working with the SEIU will dominate the defined markets. In

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exchange, Securitas and those other contractors receive the SEIU's guarantee that they would never be at a competitive disadvantage in any of the defined markets. Similar agreements have

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been found to violate the antitrust laws. See Pennington, 381 U.S. at 662.

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76.

In recent years, the SEID has demonstrated a complete disregard for the antitrust As the name implies, these The workers are hired

2

laws in another area: home health care and child care workers. workers perform services for individuals in the individuals' directly by the individuals requiring services.

3
4

homes.

The terms of employment are set between the

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individuals requiring services and the worker. In other words, home health care and child care workers are independent contractors in every sense of the term, and they are treated as such for
tax

and other purposes. 77. The SElU sought to organize the home health care and child care workers, but

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could not do so through legitimate means due to the home workers' decentralization and status as independent contractors. What the SEIU realized, however, was that many of the individuals who hire home health care or child care workers receive assistance from the state or federal government. Consequently, the SEIU decided to implement a plan where the state would deduct money from the payments of individuals receiving state assistance to the home workers and forward that money to the SEIU as "union dues." 78. For the SEIU to provide a legitimate facade for this dues collection sham. it

13
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needed to overcome the fact that these workers were independent contractors.

If the SEIU

attempted to organize or organized independent contractors, that would immediately be seen as a violation of the antitrust laws. See Taylor v. Local No.7, Int'l Union of Journeyman Horseshoers of

us. & Can., AFL-CIO,
79.

353 F.2d 593, 602-06 (4th Cir. 1965). Consequently, the SEIU needed

to "convert" these independent contractors to employees. The SEIU accomplished this goal in many California counties when, in 1992, it

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won passage of a law that established county-level public authorities to oversee home health service delivery, and also established an employment relationship between the home health care workers and the public authority for purposes of collective bargaining. As a result, in 1999, SEIU won an election to represent 74,000 home health care workers in Los Angeles County, workers that the California courts had previously ruled were not employees but rather independent contractors and could not be organized without violating the law. Since that time, the SEIU has worked with relative success to spread this model across the country. -20EASTl46883J49,12

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80.

The Federal

Trade Commission

("FTC")

looked into one of these SEIU

arrangements with the State of Ohio and issued an opinion on February 14, 2008, which concluded that the arrangement likely violated the antitrust laws. stated with regard to the SElU arrangement: Since the advent of active antitrust enforcement in health care services markets, health Care providers have sought antitrust exemptions in state and federal legislatures. Although varied in certain regards, such proposals have all, at bottom, sought protection from antitrust scrutiny for anti-competitive conduct that would tend to raise the prices of health care services without conferring countervailing benefits on health care consumers. Recognizing that many Americans face hard health care choices in the market already, the FTC consistently has opposed such proposals. In staff's judgment, the Executive Order raises the same competition concerns raised by those legislative proposals. Horizontal price fixing by independent health care providers tends to work to the substantial detriment of health care consumers and is inconsistent with federal antitrust law. Claims of immunity from antitrust scrutiny based on, for example. federal labor laws. are, in our judgment, problematic. In brief, FTC staff is concerned that the Executive Order is likely to foster certain anticompetitive conduct that is inconsistent with federal antitrust law and policy, and that such conduct could work to the detritnent of Ohio home health care consumers. In its conclusion, the FTC

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Letter from Maureen K. Olhausen, Dir. Office of Policy Planning. et al., Federal Trade Commission, to Hon, William J. Seitz, U.S. Senator, Ohio, Feb. 14,2008, attached as Exhibit A. 81. Despite the clearly anti competitive and anticonsumer nature of the SEIU's

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organizing home health or child care worker plan, the SElU continues to attempt to implement that model in order to line its coffers with the "dues" from those workers. For example, in

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California the SEIU sponsored and has long pushed for the passage of legislation under which the SEIU would be allowed to organize and collect dues from California's 40,000 home child care workers - legislation that was vetoed three times by former California Governor Arnold Schwarzenegger October 4,2011. and was most recently vetoed by California Governor Jerry Brown on

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82.

The SEIU-Kaiser relationship, as detailed below, has all the earmarks of another

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illegal SElD scheme to interfere with the competitive dynamics of markets.

D.

Kaiser's Self-Imposed Competitive Disadvantage
83. Kaiser was created for the express purpose of providing health care to union

5

workers, and, as a result, it always has had a close relationship with unions. After World War II, Kaiser grew rapidly by adding additional union health plans to its customer base. Given that

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Kaiser was so heavily dependent on union customers, it necessarily was unionized very early in its history. 84. The hospital industry is a labor intensive industry. While labor costs for

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businesses generally average approximately thirty percent of expenses, labor costs in the hospital industry are significantly higher. By way of example, for 2008, the year that Prime acquired

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Garden Grove, which was formerly owned by Tenet Healthcare Corporation ("Tenet"), Garden Grove's labor costs were 59 percent of its total operating expenses and 60 percent of its total operating revenue. For the year ending December 2010, as a result of Prime's more competitive business model, Garden Grove's labor costs were 47 percent of the hospital's total operating expenses and 41 percent of its total operating revenue. 85. Despite the high labor costs imposed by unionization, up until the 1980s, Kaiser

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was able to provide competitively priced services. As commentators have observed, the reason Kaiser could do so was not related to any superiority of its business model. Rather, during that time, Kaiser "could use some cost-plus pricing and thereby pass on the costs of improvements in its labor contracts to its customers." Susan C. Eaton et al., The Kaiser Permanente Labor

Management

Partnership:

The

First

Five

Years

15

(2003),

available

at

http://mitsloan.mit.eduliwer/pdfIKPFinaIReport.pdf. 86. In the 1980s, Kaiser's ability to stick consumers with the bill for its overly friendly

relationship with labor unions began to erode. The federal government moved from a "cost-plus" reimbursement structure to a flat-rate reimbursement program for Medicare and Medicaid. 87. When Medicare was established in 1965, Congress adopted the private health

insurance sector'S retrospective cost-based reimbursement system to pay for hospital services.
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Medicare made interim payments to hospitals throughout their fiscal year. which payments were reconciled with the hospitals' cost reports at the end of each year. Because the payment

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methodology created an incentive for hospitals to provide more services, Medicare hospital costs under this system increased dramatically over the following 15 years. 88. In 1982, to control hospital costs, Congress mandated the implementation of a

prospective per-case reimbursement system designed to motivate hospitals to change the way they delivered services. Under this prospective payment system ("PPS"), which remains in effect today, inpatient admission cases are divided into MS-DRGs, and Medicare pays hospitals a flat rate per case for inpatient hospital care. That is, for example, a hospital receives a single set payment amount for a Medicare beneficiary'S in-patient hospital stay, based on diagnosis and standardized functional assessments, in exchange for which the hospital must render whatever healthcare services are needed by the Medicare beneficiary exceptions). during the stay (with some

7 8
9 10 11

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Accordingly, the PPS system rewards efficient hospitals and inefficient hospitals

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have an incentive to become more efficient. As implementation occurred and progressed in the 1980s, hospital revenues dropped and many hospitals went out of business because they could not deliver care within the payment limits. 89. With the advent of PPS, which was based on the model HMOs had developed in During the 1980s, most hospitals became involved in of an HMO, offering HMO discounts, or

the 1960s, HMOs expanded significantly. managed

care through ownership/sponsorship

participating with medical staffs in economic joint ventures - all designed to shift financial risk to providers and promote cost-savings. 90. This shift in payment created increased cost pressures, which necessarily meant With labor costs being such a large part of hospital

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increased pressure to control labor costs.

expenses, this necessarily created conflict with the labor unions that represented many hospital employees, particularly the SEIU and the CaliforniaNursesAssociation 91. C·CNA").

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Kaiser was placed in a particularly difficult position by these new competitive Not

pressures because of its long relationship with and reliance on the labor movement.

surprisingly, Kaiser was one of the most heavily unionized health care providers in the United

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States. At the same time, unions constituted its largest member groups. Kaiser was so identified with unions that it has been referred to as "the HMO that labor built." See Steve Early, The 9, 2009),

Kaiser

Partnership,

Then

and

Now,

Talking

Union

(October

htip:!ltalkingunion. wordpress.coml2009/1 OI09/the-kaiser-partnership-then-and-now/.

This reality

5
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placed Kaiser in a difficult position - its need to remain friendly with unions meant it had to operate under a unionized model that was unsustainable in the new economic reality of health care. 92. Meanwhile. the labor unions. particularly the SEIU. were also threatened by the of healthcare membership at Kaiser

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same new financial realities due to the concentration hospitals.

The new economic realities meant increased fights over contracts and unionization,

resulting in the plummeting of the SElU's membership. 93. In 1987, these market forces led to a bitter strike at Kaiser. The result was

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humbling for the SEIU: a two-tier wage system. The lesson that SEIU took from the 1987 strike was that market density - the exclusion of non-union participants - was critical to the survival of its model, The SElU concluded that in order to succeed. Kaiser's competition had to be brought to its knees. In economic terms, that meant making certain that Kaiser's competitors' costs were increased to a level at or above Kaiser's costs or forced to withdraw from the market completely.

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E.

The SEIU-Kaiser Relationship
94. For the SEIU's plan to succeed, the SElU had to protect the inroads that it already

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had made with Kaiser. Initially, in 1992, SEIU Local 250, which had been targeting Kaiser,
formed a labor management partnership with Kaiser. 95. The partnership was ineffective to stem the decline at unionized Kaiser due to the By 1995, Kaiser's market share was rapidly

entrance of more efficient non-union competitors.

declining due to its inability to compete in the changing marketplace - Kaiser was incurring losses in excess of$250 million a year. 96. As a result, labor relations became more strained as Kaiser sought to gain control

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over the excessive labor costs that were crippling its ability to compete and destroying its business. By 1996, the relationship had become so strained that the AFL-CIO launched a targeted -24EAST\46883149.12

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effort to combat Kaiser's cost cutting strategy, At the time, AFL-CIO President John Sweeney commented that "[wje're going to renovate the HMO that labor built." Carl T. Hall, Unions

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Stepping Up Pressure on Kaiser: AFL-CIO President Condemns HMO's Cost-Cutting Plans, San Francisco Chronicle, March 20, 1996, available at http://articles.sfgate.com/1996-03-

20/businessl17771227 97.

1 kaiser-spokesman- tom-debley-kaiser-s-plan- kaiser-oakland-hospi tal.

The result of the AFL-CIO's focus on Kaiser was a joint announcement by the Sweeney had only

AFL-CIO and Kaiser of what they termed a new "strategic partnership."

become President of the AFL-CIO two years earlier. having previously been International President of the SEIU. The most significant aspect of the partnership was that it facilitated union organizing of Kaiser employees. At a time when industry cost pressures were threatening

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Kaiser's union model, Kaiser inexplicably entered into an agreement that to outsiders appeared to increase the problem. 98. A June 1997 Labor Notes article about the partnership highlights the problems and

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the illicit objectives of the partnership. See Martha Gruelle, APL-CIO Launches Partnership with Health Care Giant, Labor Notes, June 1997, at 5, available at

http://www.cpcs.umb.edullabor

notes/files/21905.pdf.

The article notes that the health care

industry was restructuring "as for-profit providers invade markets where public and charity systems once dominated." Id. The article observes that Kaiser was responding to these market

pressures by closing hospitals and departments, and by contracting out significant portions of its operations.

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Id. The article states that "[tjhe [Kaiser-Union] agreement mark[ed] the first time

that the AFL-CIO has agreed to promote the interests of a specific business in this way on a national basis." Id.The article further states that the joint purpose behind the agreement was to

make "Kaiser Permanente the preeminent deliverer of health care in the United States." Id. 99. Thus; the Kaiser-Union partnership agreement committed the unions not merely to

a new bargaining paradigm. but invested them with competitors. 100.

an

interest in Kaiser's success over its

The illegal objectives of the partnership are apparent from the many public

descriptions of the partnership and its purposes.
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Labor advocates have observed that "[t]he

SAN DJEGO

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partnership is not between management and Kaiser employees,

It is a partnership between

2
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management and the leadership of the union, which 'owns the contract,' against the members if necessary." Mike Parker, Who Are the Partners in Kaiser Partnershipr, Labor Notes, Feb. 25,

2010, available at http://labornotes.org/blogs/20 10/02/who-are-partners-kaiser-partnership. 101. In Healing Together. the authors observe that the partnership "creates a high-level

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labor-management committee to work on marketing, product development, and other strategic issues needed to attract the new customers and to secure Kaiser Permanente 'sfuture." supra. at 3 (emphasis added), 102. A 1998 report on the progress illustrates that the partnership's focus is market Kochan,

control, and not collective bargaining, Partnership Progress Report,

See Labor Day 1998: Kaiser PermanentelAFL-CIO

BW

HealthWire

(Aug,

31, AFL-

1998).

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http://www.thefreelibrary.comlLabor+Day+

1998%3A+Kaiser+Permanente%2F

CIO+Partnership+Progress+Report.-a050273497,

Indeed, the report observes that "collective

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bargaining is explicitly excluded from the partnership, . , ." Id. Meanwhile, the partnership does include 'joint participation in strategic business planning efforts!' Jd. Thus, the essence of the

agreement was cooperation in attacking the threat represented by a competitive marketplace, not labor issues, 103. In 2005. SEIU Locals 250 and 399 merged to form SEIU-UHW. The new union

became the dominant labor force within Kaiser. By 2007, this dominance led other unions in the partnership to express concern about the SEIU using the partnership for its own selfish interests. However, Kaiser continued to have a need to manipulate the market to insulate itself from competitive pressures, and the unions viewed the partnership as the only effective vehicle to assist Kaiser in that effort. 104. In 2010, Kaiser and the Coalition of Kaiser Permanente Unions entered into a new See National Agreement

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23

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agreement that further emphasized the focus on market dominance.

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between Kaiser Permanente and The Coalition of Kaiser Permanente Unions (Oct. 1. 2010), attached as Exhibit B (hereinafter "Partnership Agreement'} Obligations of Partnership," states:
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I

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The parties commit to the involvement of high-level Union. Pennanente and Health Plan leaders to work together on growth strategies. The parties will work in a proactive manner on other growth potential, including discussing both contiguous and noncontiguous opportunities, new geographies and regions. mergers and acquisitions that best position opportunities for KP to grow more quickly and respond to opportunities, and will explore new health care vehicles that could be made available to union trust funds. multiemployer trust funds and single employers. The parties shall work together to explore and utilize available growth opportunities. This requires positioning to ensure that we are a major player in current and future debates over national health care reform, The parties shall emphasize the unique advantages of the Kaiser Pennanente model. Id. at 5. 105. The extent to which the unions are involved in all aspects of Kaiser's business, and

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11

consequently committed to Kaiser's market dominance, is illustrated by the subsection of the Partnership Agreement titled "Partnership Governance and Structure," which states: Integration of labor into the normal business structures of the organization does not mean co-management, but rather full participation in the decision-making forums and processes at every level of the organization as described on pages 14-16 of the Labor Management Partnership Vision: Reaffirmation, and subject only to the capacity of the unions to fully engage and contribute. Id. at 6. 106. The partnership Agreement also commits the unions to aggressively marketing

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18

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Kaiser Permanente. Specifically, the Partnership Agreement states: The parties reaffirm their commitment to market Kaiser Permanente to new and existing union groups and to establish the necessary strategic and policy oversight. as well as appropriate funding, to ensure the joint Labor Management Partnership marketing effort becomes a successful sustainable model, resulting in increased enrollment in the Kaiser Foundation Health Plan. The Coalition and its affiliated unions, acting in the interest of and in support of the Partnership, will use their influence to the greatest extent possible to assure that unionized Employers, union health and welfare trusts and Taft-Hartley trusts operating in, or providing benefits to union members in areas served by Kaiser Permanente, offer the Kaiser Foundation Health Plan. National oversight and sponsorship of the joint marketing effort will be provided by the Strategy Group; The foundation of the joint marketing efforts will require organizational alignment, integration (e.g., participating in the regional rate-setting process), and coordination between the Coalition and departments engaged in promoting Kaiser
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Pennanente at the regional level. [d. at 18. Pursuant to the Partnership Agreement, on an annual basis, the parties also create a Joint Labor Management Partnership Marketing.Action Plan. [d. 107. The Partnership also requires what appear to be illegal payments by Kaiser to the

unions in the millions, if not tens of millions of dollars. Id. at 8. Under the Partnership, Kaiser pays approximately $16 million a year - a $10 million direct payment plus nine cents per hour worked per union member employee - to the Labor Management Partnership Trust, a trust fund ostensibly established for the purpose of carrying out activities under the Partnership, such as labor management administration and other "Partnership activities." [d. However, the

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Partnership Trust transfers tens of millions of dollars - $7 million dollars in 2010 alone - to the Coalition of Kaiser Permanente Unions (the "Coalition"), a labor organization under the labor laws, which then transfers some ofthat money back to the member unions. See Exhibit C 108. If Kaiser had paid these tens of millions of dollars directly to the Coalition or its

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member unions, the payments would have been blatant violations of the Taft-Hartley Act, which prohibits an employer from paying anything of value to a union. See 29 U.S.C. § 302(2). In

addition, under this scenario, the failure of both Kaiser and the Coalition to report these payments to the U.S. Department of Labor would constitute a violation of the Labor Management Reporting and Disclosure Act ("LMRDA"), a labor anti-corruption statute designed to avoid precisely such collusion between employers and unions. 109.

The use of the Partnership Trust to funnel money to the Coalition appears to

be nothing more than an attempt to disguise the illegal transfer of money from Kaiser to the Coalition, which means primarily the SElU. Ignoring the smoke screen created by the Partnership Trust, the reality of what is happening is a direct and apparently illegal

transfer of millions of dollars from Kaiser to the SEIU, and other unions. are part of the benefits the SEIU receives directly for participating conspiracy between Kaiser and the SEIU.
110.

These payments

in the per se illegal

In addition, the Partnership requires the establishment of Kaiser-paid "Contract

Specialists" - individuals who are paid and provided benefits by Kaiser but are appointed by the

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Coalition and directed and accountable to the Coalition - responsible for filling the union's contract interpretation and enforcement needs. Partnership Agreement, at 26. On its face this is a violation of the Taft-Hartley Act as a payment to a union as a thing of value, as well as a failure to report under the LMRDA. See 29 U.S.C. § 302(2). 111. Kaiser's objectively inexplicable and likely illegal agreements were accompanied

by cooperation between Kaiser and the SElU on the legislative level that were contrary to Kaiser's clear business interests and the interests of Kaiser members. Some of this criticism came from other unions representing Kaiser employees. For example. in Healing Together, the authors recite: In particular, CNA seemed troubled by the unions' agreement to promote Kaiser as a quality health care provider "regardless of the facts, the decreasing quality of care at Kaiser, and the ongoing harm to workers and consumers resulting from current Kaiser business initiatives sanctioned by the Agreement." Kochan, supra, at 44. 112. SElU. with the assistance of Kaiser, pursued a legislative agenda that provided few

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benefits to consumers, but which mandated the excessive costs of the Kaiser-SEIU model for the entire industry. As described by one admirer of the SEIU, "[f]or employers who engaged

constructively, SEIU would lend its political muscle to common objectives. particularly funding. Resources would increase; the need to squeeze workers decrease; and care would improve, along with the providers' reputations." Katherine Sciacchitano, Unions and Health Care Reform,

Dissent, Summer 2004, available at http://www.dissentmagazine.org/articlel?article=350. 113. In 2001. Kaiser announced that it endorsed a proposal by the SEIU regarding the Support of

establishment of nurse staffing ratios. See CHA Responds to Kaiser Permanente's

SEIU's Proposed Nurse Ratios; New Federal Report Calls into Question Impact of Ratios on Patient Care, Business Wire HealthWire (July 19, 2001). http://www.highbeam.com/doc/1Gl76633270.html. 114. Interestingly, even other unions saw that Kaiser's endorsement was not a

principled position, but merely part of the conspiracy to benefit Kaiser and the SEIU to the detriment of other employers and unions. Specifically:
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1

2
3

4

The reNA] fears that, to save money, Kaiser will use licensed vocational nurses, who are less broadly skilled than registered nurses, for tasks that require a registered nurse's expertise. The [SEIU] represents a large number of licensed vocational nurses. The [CNA] on Thursday called Kaiser's move a "death-bed conversion. " Charles Ornstein, Kaiser Backs Union Plan to Boost Nurse Staffing Levels, Los Angeles Times, july 20,2001, available at http://articles.latimes.com/printl2001/juV20/10callme-24602.

5
6

7
8

115.

Kaiser's position is understandable only in the context of the SElU's objectives.

Historically, and to this day, one objective of the SEW has been to mandate increased staffing at hospitals in order to increase its membership. Hospitals have opposed such efforts for obvious

9 10 11

reasons - the increased staffing results in increased costs. without any measurable benefit to consumers. 116. Significantly. C. Duane Dauner, President of the California Healthcare

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Association, noted in 2001 that the evidence failed to support the SEIU's claims that increased staffing resulted in improved care. See CHA Responds to Kaiser Permanente 's Support oISE/U's Proposed Nurse Ratios; new Federal Report Calls into Question Impact of Ratios on Patient Care, Business Wire Health Wire, July 19, 2001, available at

15
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http://www.thefreelibrary.com//printlPrintArticle.aspx?id=76633270.

Specifically, the Agency

for Healthcare Research and Quality. a research ann of the U.S. Department of Health and Human Services, concluded that there was "insufficient evidence" that nurse staffing ratios lead to improved patient outcomes. See id. 117. Indeed, in 1999. when the Kaiser-Union partnership was relatively new, Kaiser

19

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23 24

took the position that "[t]here is no research conducted on the effect of ratios on patient outcomes." Ornstein, supra. Kaiser at that time also criticized the proposal for staffing ratios on the basis that a shortage of nurses existed, suggesting that such ratios would only make the problem worse. Id. 118. Kaiser's change of heart and support for the legislation made sense only when

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looked at in the context of an illegal agreement whereby Kaiser helps the SEIU increase the ranks and wages of its membership in exchange for assurances that Kaiser's competitors will also be

-30EAS 1146883 I 49, 12

1

burdened by the increased costs of hospital care. Of course, the big loser is the consumer who has to pay for the increased costs of care resulting from the diminution of competition in the relevant market. 119. In 20Q3, as part and parcel of its efforts to lessen competition in The Market, the California Assembly Bill 1628, which imposed additional

2
3

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SEIU and Kaiser co-sponsored

requirements on non-Kaiser hospitals with regard to the treatment of Kaiser member patients seeking emergency care at non-Kaiser hospitals. allowed Kaiser to skirt its responsibility to pay for medically necessary healthcare services, and put the lives of patients at risk - all to increase Kaiser's revenue and decrease competition. With the SEIU's support, Kaiser used and uses

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California Health and Safety Code Section 1262.8, the statute enacted by Assembly Bill 1628, to force the transfer of Kaiser-member patients who were not stable and ready for transfer,

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intimidate physicians and hospitals into believing that Kaiser was entitled to dictate care, and otherwise put the safety of patients at risk. Kaiser's actions in this regard are particularly

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troubling as they have led to the tragic deaths of patients. 120. organizations The SEIU has not merely sought to diminish the ability of other business to compete with Kaiser, it also has attacked and undermined other labor

organizations with collective bargaining disputes with Kaiser.

For example, the partnership

18
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between Kaiser and the AFL-CIO was announced in the middle of a strike by the CNA against Kaiser. 121. This undermining of other labor organizations has continued, with the SEIU At Kaiser Permanente Medical

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working against a recent strike of the CNA against Kaiser. Center-Richmond

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[the] SEIU not only opposed the strike but colluded with Kaiser management to break it. Kaiser workers were told by SEIU staff that they were prohibited from joining the strike; they might be terminated if they did. SEIU told members they would not be defended if they were disciplined. They circulated management warnings. Again at [Kaiser Pennanente Medical Center- ]Redwood City, management used a mandatory monthly department meeting as a platform for an SEIU representative - inviting him to warn workers that they would face discipline, indeed that the whole unit's scheduled pay increases might be jeopardized. -31EAST\46883 149. 12

I

Cal

Winslow.

Biggest

Healthcare

Strike

Ever.

CounterPunch

(Sept.

27,

2011).

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5

http://www.counterpunch.org!2011/09/2 122.

7/biggest -healthcare-strike-ever/.
interests and the broader objectives of the For example, during

The SEIU also has put Kaiser's

conspiracy ahead of the interests of the members it purportedly represents.

the summer of 2009, the SElU entered into what another California union chatacterized as a secret agreement with Kaiser to terminate the employment of hundreds of SElU-represented Kaiser employees. See Layoff Agreement of Trustee Regan/Deputy Trustee Gorilla Exposed,

6 7 8 9 10 11 12
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http://www.nuhw,org!storage/toolkit/SEIU%20Layoff%20Exposed.pdf. 123. The negotiations for the controversial layoffs took place at a time When Kaiser was

experiencing a significant increase in its net income - Kaiser reported net income of $620 million for the quarter ending June 30, 2009, up from net income of $451 million for the same quarter a year before. Business Kathy Robertson, Kaiser Union Workers Rally Against Job Cuts. Sacramento Journal, Sept. 22, Approximately 2009, 1,350

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http://www.bizjoumals.com/sacramento/stories!2009l09/211daily29.html.

SEIU-represented Kaiser employees were terminated as a result of the agreement between Kaiser and SEIU. Id. 124. This massive termination was expressly contrary to one of the key stated

objectives of the partnership, the creation of job security for union members. 125. That the primary purpose of the Kaiser-SEIU conspiracy is not collective

bargaining, hut rather to maintain unlawful market dominance, is further evidenced from the behavior of the parties in a recent union representation election. Given the principles behind the Partnership and Kaiser's commitments thereunder. Kaiser should not be opposing unionization or attempting to influence selection of the representative of its employees, much less engage in a multitude of illegal conduct to preserve its relationship with the SEIV. But the latter is precisely what Kaiser has done. 126. A September/October 2010 union election at several Kaiser facilities involving the

National Union of HeaIthcare Workers C'NUHW"), a union that competes with SEIU for representation of hospital service workers in California, was challenged by the NUHW in
EASTI46883 149.12

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connection with Defendants'

threats that employees would face a loss of benefits or other NUHW

reprisals if they selected NUHW as opposed to SEID as their bargaining representative.

alleged that Kaiser offered assistance by. among other things, having its regional President. Dr. Benjamin Chu, make a statement during a conference call with employees on August 3, 2010 in which he threatened that certain benefits would not be available if employees joined the NUHW. 127. On December 13, 2010, a NLRB administrative law judge found that Kaiser

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engaged in unfair labor practices C'ULPs") in violation of the NLRA by refusing to provide employees who had voted in February 2010 to switch from SEIU representation to NDHW representation with tuition-reimbursement and development benefits and time for monthly shop-steward training See Southern Cal. The

10 11 12
13

and by refusing to grant scheduled wage increases.

Permanente Med. Group. Inc., 2010 WL 5101082 (N.L.R.B. Div. of Judges Dec. 13,2010).

judge ruled that Kaiser's actions were "inherently destructive" of employee rights under the

14 15
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NLRA.Id.
128. Several months later, on July 14,201 La separate NLRB administrative lawjudge

overturned the September/October election, holding that the collusion between Kaiser and SEIU so "interfered with the employees' exercise of a free and reasoned choice" that a new election was required. See Kaiser Foundation Health Plan, Inc., Case 32-RC-5775, JD(SF)-19-11

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26

(N.L.R.B. Div. of Judges July 14, 2011). In particular, the judge cited the impact of the earlier Kaiser unfair labor practices on the September/October election: "Kaiser's ULPs figured as silent, menacing reminders that Kaiser not only could, but already had, unilaterally withheld benefits when other employees had chosen to be represented by NUHW." Id. 129. Kaiser's blatant illegal conduct to preserve the SEID's status as the collective

bargaining representative is inexplicable under labor law. It is even more so when one considers the union security agreement in the original 1997 Kaiser Pennanente National Labor-

Management Partnership Agreement, which states: The parties to this agreement believe that Kaiser Permanente employees should exercise free choice and decide for themselves whether or not they wish to be represented by a labor organization.

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-33EASn46883149.12

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Kaiser Permanente National Labor-Management Partnership Agreement, Union Security (1997),

available at http://businesspractices.kaiserpapers.org/pdfs/NLMP
130.

Agreement 1997.pdf.

Of course, once one ignores the self-serving statements about the Kaiser-SEIU

4
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Partnership, it becomes clear that the Partnership has nothing to do with employee choice and everything to do with eliminating competitors. extending this so-called "enlightened" Indeed, the Partnership Agreement says as much,

approach only to unions that signed the Partnership

Agreement - an agreement that requires the affirmative marketing and promotion of Kaiser. 131. Kaiser's conduct is inconsistent with the typical arms-length relationship between

labor and management but completely consistent with the relationship of participants in an unlawful, anti-competitive scheme. Kaiser's actions make clear that Kaiser is protecting its

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ability to partner with a select group of unions, primarily the SEIU, committed to working illegally to destroy Kaiser's competitors.

F.

Destroying Competition from Companies that Challenge KaiserlSEIU
132. Kaiser is the largest not-for-profit HMO in the United States, serving

approximately 8.6 million members in 9 states and the District of Columbia. The vast majority of its operations, however, are located in California - fully 80% of its business. 133. The inability of Kaiser to grow significantly outside of California, despite massive

marketing and other support from labor unions, strongly suggests that its model simply is not competitive outside of California. Indeed, from 1995 to 1997, Kaiser experienced severe

financial losses of approximately $900 million as it sought to expand into new areas, including predominantly non-union areas such as North Carolina and Georgia. without heavy support of unions, Kaiser's business model was a failure. 134. That Kaiser has been able to become a dominant force in the California market The The lesson was clear,

suggests that there is something unique about that market that enables Kaiser to succeed.

available facts suggest that the unique feature is not Kaiser's business model or the quality of its services. Rather, it is the result of an illegal alliance between Kaiser and the SEIU to prevent

competitors from entering or succeeding in The Market.

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135.

Kaiser has the largest SEIU membership of any other hospital in The Market. The SElU's success in

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Union representation adds significant operating costs to an employer.

organizing Kaiser's Healthcare Workers has increased Kaiser's costs; affected Kaiser's ability to compete with healthcare providers in The Market whose Healthcare Worker employees are not represented by the SEIU, and threatens Kaiser's dominant position in The Market. 136. The SEIU benefits from the increased pressure placed on Kaiser's non-union

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competitors to accept the inevitability of union representation of their workers and the potential increase in the membership ranks of the SEID resulting therefrom. The SEID also benefits by

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preserving the viability of Kaiser and the significant union membership that continues as a result of that relationship. Kaiser benefits from a reduction in the competitive threat the non-union

companies represent as long as they remain non-union competitors with a lower cost structure competing in the relevant market. 137. In order to accomplish this goal, the SElU relied on its market density approach As defined by the

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and initiated large-scale corporate campaigns against Kaiser's competitors.

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United States Court of Appeals for the District of Columbia, a corporate campaign . . . encompasses a wide and indefmite range of legal and potentially illegal tactics used by unions to exert pressure on an employer. These tactics may include, but are not limited to, litigation, political appeals, requests that regulatory agencies investigate and pursue employer violations of state or federal law, and negative publicity campaigns aimed at reducing the employer's goodwill with employees, investors, or the general public. Food Lion, Inc. v. United Food & Commercial Workers Int'l Union, AFL-CIO, et al., 103 F.3d 1007, 1014 n.9 (D.C. Cir. 1997). 138. The SEIU corporate campaign approach and tactics are best detailed in its secret

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"Contract Campaign Manual." A few pages of an outdated copy of the manual published in the early 1990's recently surfaced in a Racketeer Influenced and Corrupt Organizations Act lawsuit filed by Sodexo, Inc. against the SEIU. Intimidation for Dummies, The See F. Vincent Vernuccio, Labor's New Strategy: Times. July 15, 2011, available at

Washington

http://www.washingtontimes.com!newsl20 dummies!.
EASTl46883149.12

11!ju)!15!labors-new-strategy-intimi dation- for-

A revised and updated version of the SEIU's corporate campaign handbook was

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published in 2005. The cover and introduction section of the current version of the SEIU manual are attached as Exhibit D. 139. The manual is

2 3 4 5 6 7
8 9
10

a 300-plus

page "how to" book for union activists that explains how

to identify targets and engage in illegitimate activities to force those targets to give in to union demands. In fact, an entire section of the manual, Section 4, expressly deals with nothing but

"Pressuring the Employer." 140. These illegitimate tactics have been an integral part of the SEIU's role in the The SEIU has spent more than a decade waging such pressure

SElU-Kaiser partnership.

campaigns against several Kaiser competitors to render those companies less competitive. Specifically, the SEIU has targeted ColumbiaIHCA, ("CHW"). 141. In 1988, Columbia Healthcare was formed in partnership with just two hospitals in In the new competitive environment, Columbia's ability to provide superior Tenet, and Catholic Hea1thcare West

11 12

13 14 15 16 17
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EI Paso, Texas.

services at lower costs enabled it to grow rapidly. By September of 1993, it owned 99 hospitals. In February of 1994, Columbia merged with Hospital Corporation ColumbiaIHCA, a $10 billion company. 142. Cclumbia/HCa experienced this rapid growth at around the same time Kaiser was of America to form

failing in its expansion plans and losing hundreds of millions of dollars a year. 143. Beginning in 1995, ColumbiaIHCA was targeted by the SEIU's "Code Columbia"

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campaign, which so damaged ColumbiaIHCA's business, CoIumbiaIHCA was compelled to enter into an agreement with the SETU. The SEIU's tactics included raising allegations of Medicare and Medicaid fraud, blocking hospital acquisitions, and issuing "reports" filled with patient care horror stories. Those actions significantly damaged ColumbialHCA's business. For example, the SEIU's actions and allegations of impropriety at ColumbiaIHCA resulted in the Joint

Commission on Accreditation of Healthcare Organizations C"JCAHO"). a hospital accrediting agency, rescinding its award of an "accreditation with commendation" hospital and downgrading that hospital's accreditation. to a ColumbiaIHCA

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144.

The SEIV's next target was Tenet.

At the time, Tenet was the nation's second

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largest for-profit hospital chain and its biggest market was California, where it owned 42 of the State's 450 hospitals. As part of its campaign, the SEIV alleged, among other things. that Tenet inflated costs for hospital care, ran up taxpayer funded Medicare bills. increased the amounts insurers were required to pay, and put patients at risk, Those allegations were based on SEIV "reports" and "studies" designed to cast the worst possible light on Tenet's patient services and health care practices. The SEIV's actions also resulted in investigations of Tenet by the Federal Bureau of Investigation, the Department of Health and Human Services. Medicare, and the California Office of Statewide Health Planning and Development (,'OSHPD"), the SEIV's attacks any longer, Tenet struck a deal with the SEIV in 2003, 145, In the early 2000s, the SEIV took on a new threat to the Kaiser-SEIV empire, Unable to endure

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That threat consisted of a hospital chain sponsored by nine orders of Catholic nuns: CHW, In the decade preceding the initiation of the SEIV attack. CHW had grown from 12 hospitals to the "largest not-for-profit health care system in the West" according to its 1998 annual report, operated 48 hospitals in California, Nevada, and Arizona. It

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In addition to its ordinary litany of

patient care and billing and Medicare fraud allegations. the SEIV used CHW's status as a Catholic health care provider against the Company. Specifically. the SEIV leveraged the support of the U ,S, Conference of Catholic Bishops and the Cardinal of Los Angeles to force CHW to reach an agreement with the SEIV, 146.
SEIV's

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thinly-disguised

goal with these campaigns was simply to mitigate

competition against Kaiser by forcing each hospital system to adopt the same uncompetitive business model or to make each system's costs prohibitive by spending money responding to attacks from the union. As Bruce Raynor, former International President of UNITE HERE! and at the time a close partner of the SEIV, stated in another campaign: I think Cintas has a decision to make, Are they in the business of serving shareholders and owners or fighting the union? You can't do both. We will set the stage so the company will not do both. , . ,

IIIII IIIII
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LLP (US)

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I

Andy Meisler, A High-Stakes Union Fight: Who Will Fold First?, Workforce Management, January 2004, at 28-38, available at

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http;!IW\\-W.workforce.comlarticle/200401 05lNEWS02/30 1059966. 147. The pressure of the SEIU campaign was eventually too much for each of the

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hospital systems to bear and each hospital system finally capitulated and reached an agreement with the SEIU. Once the targeted hospital system agreed to do business the SEIUlKaiser way, any alleged problems that the SEIU had identified with the respective system disappeared. 148. In these campaigns. SEIU Locals 250 and 399 (now SEIU-UHW) took the lead.

Part of their strategy involved educating members of the need to ensure that all competitors of Kaiser faced the same challenges and increased costs. Specifically, the SEIU explained that it

10
11

would be unable to improve collective bargaining agreements with Kaiser until other hospitals were organized. 149. The SEIU has employed and is currently employing these same tactics in many

12
13

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19

other industries and against many other companies, including Golden Living (formerly Beverly Healthcare). Sodexo, Sutter Health, Wackenhut, Securitas, and many others. 150. Of course, there is nothing improper or illegal in a union organizing a particular

industry or unilaterally expanding its coverage of the employers in the relevant market. Had the SEIU not conspired with employers in its efforts to advance its interests, its conduct might well have been protected action under labor law. But the SEIV did not so limit its conduct. To the contrary, the SEIU entered into unlawful contracts and conspiracies with Kaiser the purpose and effect of which were to change the competitive dynamics for emergency and other hospital services and the terms and conditions of employment for Healthcare Workers in The Market. 151. These contracts and conspiracies, as alleged herein, were necessary to achieve the In exchange for

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SEIU's goals because Kaiser could not survive in a competitive environment.

higher wages and other benefits flowing to SEIU-represented employees, the SEIU engaged in corporate campaign tactics designed to eliminate competitors that provided lower cost or better service. In other words, the SEIU struck a bargain with Kaiser in which Kaiser agreed to

compensation and benefits packages above the prevailing competitive level in exchange for an

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EAsn46883149.12

1

agreement from the SEIU to assist in the elimination of Prime and protect Kaiser from the competitive disadvantage created by is concessions to the SEW.

2 3
4

G.

Targeting Prime, the NewestThreat to KaiserlSEIU

152.

The destructive campaigns by the SEIU against ColumbialHCA, Tenet, and CHW Through those

5 6 7 8
9

illustrate the early execution and success of the illegal SEW-Kaiser partnership.

campaigns, the SEIU and Kaiser had largely succeeded in mitigating the competitive pressure faced by Kaiser. However, because the Kaiser-SElU model was based on unsustainable labor

costs, it was inevitable that new entrants with innovative business models and offering new choices to consumers would challenge Kaiser's model. That challenge arose in the form of

10 11 12
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Prime, which purchased its first hospital in California in 2001. Since that time, Prime has become the fastest growing and most successful hospital group in California. 153. Prime's success became a serious and immediate threat to the dominance of the

SEIU and Kaiser, and their anti-competitive and unsustainable business model. Because Kaiser is incapable of competing with Prime on the relative merits of the companies' respective services, beginning in at least

15 16 17
18 19

2010.and

continuing through today, Kaiser and the SEIU have engaged in a

pernicious and escalating pattern of anticompetitive, unfair, and deceptive practices designed to thwart competition from Prime, and to exclude Prime from The Market. 154. Kaiser's combination with the SEIU to increase Healthcare Workers wages and

eliminate Prime was an attempt to mask its anticompetitive conduct from antitrust scrutiny by taking advantage of the antitrust exemption afforded labor unions under current case law. However, the combination of a labor union and an employer to achieve these objectives itself is an unlawful antitrust conspiracy per se and the SEIU's activities have not been limited to matters relating solely to collective bargaining agreements or otherwise related to legitimate protected union activities, as discussed above and in more detail below. 155. Defendants have joined forces and entered into an agreement pursuant to which

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24

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the SEIU has provided assistance to Kaiser in injuring Prime as a viable competitor in The Market in exchange for concessions on wages and working conditions for its members.

111//
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5 6 7

156.

Starting as early as February 2010, Defendants launched a campaign to have the

SEIU. as a purported independent party without a competitive motive to injure Prime, attack Prime's business practices! its patient care, and its hospitals and employees, as hereinafter alleged. 157. The SElU's first overt attacks against Prime involved sham and baseless

allegations that Prime was failing to bring its hospitals into compliance with California's seismic safety requirements. The purpose of the seismic safety requirements is to prevent damage to

8
9

buildings and allow for uninterrupted operation of hospitals during an earthquake. State Bill 1953 ("SB 1953") allows hospitals to request an extension until 2013 to bring their facilities into compliance with the law. The SEIU caused the publication on the internet and in print media of false claims that Prime was not incompliance with the State of California's mandate with respect to the seismic safety requirements. Building safety is of concern to consumers in general and However,

10
11

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IS

especially when making choices about where they will receive hospital care. consumers cannot readily verify a hospital's compliance with SB 1953. maintains this data.

California OSHPD

The publication of the false information about Prime's compliance with

16
17

SB 1953 continued over a prolonged period of time. Predictably, since the SEID targeted Prime, no other competitor had any incentive to offset or neutralize the baseless allegations regarding Prime's SB 1953 compliance. Although the SEIU directly caused the publication of these

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baseless allegations, its conspiracy with Kaiser had already developed (as set forth above) and, indeed, the publication of the baseless allegations about Prime's compliance with seismic safety requirements was in furtherance of the illegal Kaiser-SEIU conspiracy. 158. A related chain of attacks perpetrated by SEIU and Kaiser as part of their illegal

conspiracy included sham and baseless allegations that Medical Properties Trust ("MPT"). a real estate investment trust that owns ten of the hospitals operated by Prime, had failed to make adequate financial disclosures regarding the alleged costs of remedying the alleged deficiencies at the Prime hospitals, and included a direct request by the SEIU to the U.S. Securities and Exchange Commission C~SEC") to investigate MPT. financial disclosures.
EAST\46883 149.12

In fact, MPT had made all the requisite

The allegations that MPT had not made the necessary disclosures and of

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1 2 3
4
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the supposed deficiencies

at the Prime hospitals, including the already mentioned seismic

compliance allegations, were published on the internet and in print media to the general public, including potential Prime patients. The purpose of the publication was to create doubt about the integrity of Prime's facilities and create conflict between MPT and Prime. A consumer would not know whether or not MPT complied with the law in this regard and that Prime's facilities are seismically safe. A consumer would have concern over receiving treatment at a facility that fails to comply with the law. SEIU and Kaiser did not make an isolated publication about MPT's alleged failure to make the requisite financial disclosures to the SEC. Rather, they made such allegations over a prolonged and continued period of time. Since the SEIU targeted MPT and

7 8 9
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Prime, no other competitor had any incentive to offset or neutralize the baseless allegations regarding MPT's fmancial disclosures or the alleged deficiencies at Prime's hospitals.

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159.

At around the same time. the SEIU prepared and published a "study" attacking In its propaganda piece. the SEIU

Prime and its hospitals - "Septicemia at Prime Hospitals."

alleged that, based on the SEru's analysis of 2008 Medicare data, Prime's hospitals experienced unusually high rates of septicemia, a serious and often life-threatening blood infection, as either a result of pervasive patient care and quality problems or that those hospitals were engaged in Medicare fraud by "upeoding" for cases of septicemia

IS

16 17 18 19 20 21 22 23 24
25

0.e.,

that a patient who did not have

septicemia was nevertheless coded for septicemia so that the hospital would receive a higher Medicare reimbursement). Interestingly, around the same time, as part of a coordinated attack on

Prime, Kaiser also asserted sham counterclaims in the pending litigation between Prime and Kaiser.captioned Prime Healthcare Cases, Case No. BC 390969, California Superior Court, Los

Angeles County (the "LA Litigation"), relating to Kaiser's failure to reimburse Prime amounts owed for services rendered to Kaiser members based on false claims that Prime "upcodes." 160. In an effort to bring the full power of the Federal and State governments to bear on

Prime, the SEIU forwarded the information contained in its septicemia propaganda piece to, among others. the California Attorney General, members of the U.S. House of Representatives, and members of the California Senate and Assembly. As a result, it was reported in October 2010 that investigations of Prime and its hospitals were initiated by the U. S. Department of Health and
EAS T\46883 149. 12

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Human Services, by the California Attorney General, and by the California Department of Public Health ("CDPH").

2
3

See Christina Jewett & Lance Williams, State Health Officials Launch Probe

into Hospitals with High Infection Rates, California Watch, Oct. 13, 2010, available at
http://californiawatch.org/dailyreport!state-health-ofticials-launch-probe-hospitals-high-infectionrates-5692. 161. At this time, it became apparent that the SEIU had enlisted the services of

4 5 6
7

California Watch, a purportedly independent investigative media organization, to serve as the SElU's ally and spokesperson. Beginning on or about October 11,2010 and continuing through

8
9

the present, California Watch published numerous articles attacking Prime on the baseless issues created by the SEIU alleged herein and dedicated an entire section of its website - "Decoding Prime" - to furthering the SElU's campaign.

10

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See hUp:llcaliforniawatch.org/prime.

During that

time, California Watch has not published a single article critical of any other California hospital or hospital operating company, indeed often excluding Kaiser from its reports and studies, and no other hospital or operating company shares the notorious distinction of its own dedicated section on California Watch's website. In addition, in order to further spread word of the SEIU's attacks against Prime, California Watch's writers have penned articles raising the same sham and baseless allegations against Prime for other news organizations, including the Los Angeles Times.

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162.

The SEID followed its initial septicemia-related attacks with its first attempts to

prevent Prime from acquiring additional hospitals in California. These efforts included a call to California State officials to stop issuing licenses to Prime until the investigations regarding septicemia were complete. SEIU also reached out directly to CDPH following Prime's

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November 2010 acquisition of Alvarado Hospital in San Diego, California, falsely alleging that Prime was in violation of California hospital licensing law and demanding that CDPH initiate legal action against Prime and prohibit Prime from operating the hospital. 163. It was at this time that the SEID first publicly released its "Septicemia at Prime

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Hospitals" propaganda piece, available for download on the portion of the SEIU-UHW's website dedicated to its attacks against Prime - originally titled "Eye on Prime Healthcare'' and now called "Holding Prime Healthcare Accountable." See http://uhw.seiu.org/page/s/prime.
EAsn46883149.12

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3

164.

In January 2011, the SEIU published "Care and Coding at Prime Healthcare

Services," another "study" attacking Prime, this time based on the SEIU's analysis of 2009 Medicare data. "Care and Coding" included the same sham and false and unsupported septicemia allegations as its original propaganda article and also included similar allegations regarding malnutrition at Prime's hospitals (i.e., that Prime's hospitals had extraordinarily high rates of malnutrition because of either extremely poor patient care or Medicare fraud). The publication of "Care and Coding" coincided with a series of articles by California Watch attacking Prime for the septicemia and malnutrition issues raised in the SEIU's propaganda. See Lance Williams et al.,

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10

Hospital Chain, Already Under Scrutiny, Reports High Malnutrition Rates, Feb.

19, 2011,

available at http://califomiawatch.orglhealth-and-welfare/hospital-chain-already-under-scrutinyreports-high-malnutrition-rates-8786. 165. propaganda The SElU's articles false "Septicemia the "SEIU at Prime Hospitals" Propaganda and "Care and Coding" were published and

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(hereinafter

Articles")

disseminated on the Internet and print media over a continued and prolonged period of time. Potential patients are understandably interested in whether they are more likely to be

malnourished or contract a blood infection if they visit a Prime facility versus some other facility. Because the baseless SElU Propaganda Articles are solely directed at Prime, in furtherance of Kaiser's goal of eliminating Prime as a competitor due to the unique threat Prime represents to the Kaiser model, no other competitor has any incentive to offset or neutralize the baseless allegations regarding Prime's alleged patient care issues. 166. In furtherance of their conspiracy, Defendants, along with their agents and

surrogates, routinely cite to the SEIU Propaganda Articles as "independent" evidence of Prime's alleged poor performance in The Market. In fact, Defendants inundated Prime's customers,

prospective customers, physicians, hospital boards of directors. government officials, public interest organizations, and the public at large with the highly disparaging SEIU Propaganda Articles aimed solely at harming Prime. 167. Beginning in late February 2011, Defendant SEIU sent flyers to Prime's current

and prospective patients attacking Prime's hospitals for blood poisoning.
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Examples of flyers

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3

mailed to Prime patients, including one mailed as recently as late October 2011, are attached as Exhibit E. To make matters worse, the SElU resorted to the use of phone banks to scare elderly patients into believing that those patients had already or would in the future obtain blood infections when they sought care at a Prime hospital and that Prime's hospitals had improperly disclosed private information about the patients to the caller. 168. On March 16,2011, a reporter from California Watch, Lance Williams, sent Prime

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an email asking whether Prime wanted to comment on the request by a California State Legislator (the "State Legislator") to the CDPH to investigate the SEIU reported septicemia and malnutrition rates at Prime's hospitals. 169. The State Legislator has a close relationship with and financial ties to both Kaiser

and SEIU. For example, SEIU and its local union affiliates have provided approximately $30,000 in direct financial support to the State Legislator for his recent election campaigns. Also, it has

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been reported that the State Legislator has financially benefited from a business relationship with Kaiser, while at the same time, being involved in and voting on bills directly affecting Kaiser and the California healthcare market. 170. On April 12,2011, Defendant SEIU sent a letter to Prime's Centinela Hospital's

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Board of Directors. The letter claims that California Watch published an "independent" analysis of Prime's Medicare bills and "their expose ... revealed extraordinarily high rates of septicemia and malnutrition Medicare." or possibly a systematic practice to collect higher reimbursements under

The letter further claims that in 2009, eight of the nine hospitals in California with

the highest malnutrition rates were operated by Prime. The same false and baseless allegations as those in the SEIU Propaganda Articles. 171. Of course, the highly disparaging, false, and inflammatory SEIU Propaganda Rather. they are

Articles relied on by the SElU and its allies are not independent studies.

contrived propaganda pieces organized by Kaiser and the SEIU to disparage Prime and weaken its position as a competitor in The Market. Defendants create the appearance of "evidence"

against Prime and then cite to their own creation in order to demonstrate the credibility of their accusations.
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4

172.

In fact, even a cursory analysis of the SElU Propaganda Articles demonstrate that

the SEIU's sole objective was to misrepresent the record for no purpose other than to prevent Prime from continuing to threaten the Kaiser-Slill.J model. Propaganda Articles themselves. That is obvious from the SEIU

For example, the SEIU "analysis" regarding the reporting by

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Prime facilities of septicemia and malnutrition incidence for patients is insufficient to support any specific causality argument of a deliberate manipulation for financial gain. Other obvious causes disregarded in the SEIU Propaganda Articles explain the phenomena presented, some of which are notably positive in terms of Prime's performance. 173. The fraudulent nature of the SElU Propaganda Articles is further illustrated by a

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June 2011 report on sepsis by the Center for Disease Controls (CDC). See Margaret Jean Hall et al., Inpatient Care for Septicemia or Sepsis: A Challenge for Patients and Hospitals, NCHS

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Data Brief, No. 62., June 2011, available at http://www.cdc.gov/rtchs/dataldatabriefs/db62.pdf: The CDC report observes that sepsis has become a substantial and growing problem in hospitals, and that the proper course of treatment is for hospitals to aggressively treat patients when sepsis is suspected; even before sepsis has been diagnosed in a patient. See td. 174. The approach recommended by the CDC is precisely one that Prime had adopted Yet, once again

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19

with great success, including a substantial decrease in mortality from sepsis.

placing the Kaiser-SElU model ahead of patient health. the SEIU has extensively criticized Prime for engaging in precisely the course of conduct recommended by the CDC. The attack would be completely irrational unless one understands that it has nothing to do with healthcare and everything to do with closing the healthcare market to parties who challenge the Kaiser-SEIU hegemony. 175. In addition. on or about September 30, 2011, CDPH officially withdrew its charges

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and ceased its investigations related to the diagnosis and coding of septicemia and malnutrition at Prime hospitals that were initiated by CDPH in response to the baseless allegations of SEIU and repeated by the State Legislator. 176. CDPH's findings were consistent with those of JCAHO and the Healthcare

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Facilities Accreditation Program ("HFAP"), the nation's largest and second largest Medicare

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accreditation organizations, respectively.

JCAHO and HFAP conducted surveys at ten Prime

2

hospitals in response to the SElU's and the State Legislator's allegations regarding septicemia and found no evidence to support those allegations. 177. The SEIU also put its campaign machine to work in an effort to directly restrict For example, the SEIUand the State Legislator worked

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Prime's ability to grow its business.

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together to champion California Senate Bill 408, a bill prepared in retaliation for Prime's November 2010 acquisition of Alvarado Hospital and designed for no purpose other than to restrict Prime's ability to acquire additional hospitals. See Prime Healthcare Should be Denied New Hospital Licenses Until Federal, State Investigations into Extraordinarily High Septicemia, Malnutrition Rates and Risk to Patients Are Complete, SEIU-UHW (Feb. 21, 2011)

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http://www.seiuuhw.org/2011/02/211prime healthcare should be denied new hospital licenses until federal s

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tate investigations into extr/. Despite opposition from other major hospitals and the California Hospital Association to the sweeping and overly broad nature of Senate Bill 408, Kaiser stood on the sidelines, complicit in this attempt to restrict hospital competition. California Governor Jerry

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Brown vetoed Senate Bill 408 on October 7, 2011. See Kathy Robertson, Governor Vetoes New Licensing/or Health Care Facilities After Changes, Sacramento Business Journal, Oct. 10, 2011, available at http://www.bizjournals.comlsacramento/newsI20 heal th-care- fa.html ?page=aIL 178. Similarly, the SElU. again with the assistance of the State Legislator, campaigned Hospital ("VVCH") to Prime

11/1 011O/governor-vetoes-l icensing-

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to block the bankruptcy sale of Victor Valley Community

Healthcare Services Foundation (the "Foundation"), a 501(c)(3) nonprofit public charity founded by Dr. Prem Reddy and his family. Despite the SEIU's efforts to the contrary, including in the proceedings before the bankruptcy court, the sale of VVCH to the Foundation was approved by the bankruptcy court and VVCH's Board of Directors. In addition, a medical expert hired by the California Attorney General recommended approval of the sale upon certain conditions to which the Foundation had agreed. Nevertheless, on September 20,2011, the Attorney General. without providing any specific reason for doing so, denied the sale. Notably, during the hearing on the

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sale of VVCH before the bankruptcy court, SEIV, through its counsel. explicitly stated that the Attorney General would not approve the sale. 179. In an attempt to keep VVCH open following the Attorney General's denial of the to enter into a stop-gap financing plan and consulting

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sale to the Foundation, VVCHsought

agreement with Prime. Dan Holland, State Seeks to Block VVCH Rescue Plan, Victorville Daily Press, Oct. 31, 20] 1. available victorville.html. at http://www.vvdailypress.comlarticles/seeks-30966-state-

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The financing and consulting plan was tentatively approved by the bankruptcy

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court on October 20, 2011, and backed by several California healthcare agencies. [d. Despite the support for the plan and with nothing in the law that requires State approval for such temporary financing plans, on October 28, 2011. the Attorney General inexplicably filed a request for a temporary restraining order to prevent VVCH from moving forward with the financing plan and consulting agreement. ld. As with the Attorney General's initial decision to deny the sale of

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VVCH to the Foundation, the Attorney General did not explain her opposition to the financing and consulting plan. Indeed, when the bankruptcy judge directly asked the Attorney General to explain her opposition, a State attorney declined to offer any explanation whatsoever. ld. 180. On October 31,2011, the San Bernardino County Superior Court judge hearing the

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Attorney General's request for a temporary restraining order denied the Attorney General's attempt to prevent the financing and consulting agreement between VVCH and Prime. Doug

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Sanders, Judges OK VVCH Financing Plan, Victorville Daily Press, Oct. 31,2011, available at http://www.vvdai1ypress.com!articles/judges-30984-oks-plan.htm1. In his ruling, the judge stated

that "[tjhe Attorney General's office hasn't come up with sufficient proof that shows a temporary restraining order is warranted in this case." ld. That same day, the bankruptcy court approved the financing and consulting plan. ld. 181. At the same time as the SEIV and its allied organizations were pretending to be

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acting as consumer advocates, they failed to turn the same alleged critical eye on Kaiser. Tellingly, the SEIV Propaganda Articles created and circulated by the SEIV and its allies omit reference to Kaiser, which had the highest rates for malnutrition of any hospital studied as part of a study by California OSHPD in 2009.
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182.

Similarly, there are no separate studies by the SEIU, California Watch, or any

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other SEIU ally alleging patient care issues and/or Medicare fraud at Kaiser, despite Kaiser reporting a disproportionately higher number of certain health conditions that result in

significantly higher monthly Adjusted Average Per Capita Cost (AAPCC) premium payments from Medicare to Kaiser. 183. Based on 2009 Medicare data, Kaiser received a potential overpayment of

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approximately $300 million for its California business alone in 2009 for reporting excess cases of diabetes with certain types of complications, malnutrition. and major psychiatric illnesses. example: • incidences of diabetes with kidney, vascular, and eye complications reported by Kaiser hospitals were five time higher than for all other California hospitals; • approximately ninety percent of all California cases involving proliferative For

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diabetic retinopathy and vitreous hemorrhage (essentially bleeding in the eye), a very rare complication of diabetes, were reported at Kaiser hospitals; • Kaiser hospitals reported over four times higher incidences of diabetes with neurological complications than other California hospitals; • Kaiser hospitals reported twice the number of malnutrition cases as compared to all other California hospitals; and • incidences of major psychiatric illnesses were two and a-half times higher at Kaiser hospitals than all other California hospitals. These figures are even more significant because Kaiser provides and is responsible for the overall care of the patients at issue. Nonetheless, Kaiser's disproportionate reporting of these health

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conditions and the potentially huge yearly overpayment by Medicare to Kaiser have received not a single mention from the SEIU or its allies. 184. This practice of presenting itself as a "consumer advocate" when attacking targets

like Prime, while giving Kaiser a pass for real and serious problems is a consistent pattern for the SEIU. In fact, Kaiser has a long history of violations with the California Department of Managed Health Care ("DMHC").
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For example, a letter dated April 2, 2007 from the DMHC to Kaiser

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referring to Enforcement Matter 05-326 states that it found sufficient support for complaints that Kaiser failed to "pay claims for out-of-network emergency services .... " DMHC assessed

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Kaiser with a $500,000 penalty for these violations, but deferred $250,000 contingent upon Kaiser implementing a corrective action plan. Kaiser failed to even submit any such plan to

DMHCand the agency reinstated the $250,000 deferred penalty. See Exhibit F. Yet despite the SEru's supposed concern for consumers, it never criticized Kaiser for this violation. 185. The behavior of the SElU would be sufficiently offensive and questionable if this However, this pattern has repeated itself frequently;

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were the only instance of such misconduct.

encompassing the following Enforcement Matters: 05-326; 07-027; 07-053; 07-054; 07-071; 07204; 07-275; 07-304; 07-329; 07-374; 08-064; 08-167; 08-188; 08-227; 08-228; 08-240; 08-331; 08-414; 08-510; 08-511; 08-513; 09-154; 09-155; 09-156; 09-165; 09-166; 09-167; 09-197; 09223; 09-304; 09-368; 09.. 46; 10-002. 4 Exhibit O. 186. Prime; however, has confronted Kaiser over its misconduct. Nine Prime hospitals Copies of these enforcement matters are attached as

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have engaged in litigation against Kaiser for its failure to properly pay all amounts due for medical care rendered by those hospitals to Kaiser members (i. e. the LA Litigation). As a result of its misconduct, Kaiser owes the hospitals more than $100 million. In response to Prime's

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PIPER
SAN

attempts to recover amounts properly owed, Kaiser filed sham counterclaims alleging and has pursued theories based on the same accusations described above that the SEIV and its allies have leveled against Prime during their campaign. 187. Despite this extensive record of violations by Kaiser, including its practice of

failing to remedy the violations, the SEIU failed completely to engage in the kind of so-called consumer advocacy it has engaged in against targets such as Prime. The SEID was silent even when the media identified clear health care problems at Kaiser.

See, e.g., Kathy Robertson;

Mixed Quality Record for Local Kaiser Hospitals, Sacramento Business Journal, December 30, 2010; available at http://www.biziournals.comlsacramento/news/20 local-Kaiser-hospitals.html ("'Kaiser Pennanente's 10/12/3 OlMixed-record- forMedical Center had a

SacramentolRoseviIle

higher rate of death than the statewide average in 2009" for certain classes of patients).

LLP (US)

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EASTI46883 149 .12

188.

Indeed, the SEIU was noticeably absent when Kaiser was assessed record

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penalties. See Tracey Weber & Charles Ornstein, State Fines Kaiser Again, Los Angeles Times, July 26, 2007, available at http://articles.latimes.coml2007/iuIl261l0callme-kaiser26 ("'Kaiser

Permanente will be assessed a record . . . fine for its haphazard investigations of questionable care, physician performance and patient complaints at its California hospitals ... ."), Even more shocking, the SEIU failed to comment even though Kaiser essentially admitted its misconduct. A Kaiser official called the findings "thorough and actually very constructive." 189.

Id.

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The SEIU's absence is particularly notable given the mortality rates identified in

Kaiser's kidney transplant program. Specifically, "[ijn Kaiser's program, twice as many patients died on the waiting list in 2005 as received kidneys, The Times found. The statewide pattern was the reverse: Twice as manypatients received kidneys as died." Id. 190. The same pattern of ignorance is evident with respect to the SEIU's behavior

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regarding Occupational Safety and Health complaints filed against Kaiser. Kaiser has been cited for violations by the California Department of Industrial Relations, Division of Occupational Safety and Health, but with no comment from the SEIU. See, e.g., Exhibit H. 191. The SEIU's conduct demonstrates that it has little concern for consumers and that

its consumer advocate role merely is a shroud to obscure its true purposes: attacking any threats to the anti-competitive, anti-consumer Kaiser-SEIU model. The SEIU's sole concern is to

manipulate the record for the purpose of making baseless charges in order to advance its conspiracy with Kaiser by destroying any competitive threats to Kaiser. 192. The SEIU has. also directly engaged in sham and baseless litigation against Prime.

Specifically, the SEW filed a Worker Adjustment Relocation and Notification ("WARN") Act action against Prime and MPT following Prime's take over of management at Shasta Regional Medical Center ("Shasta") in November 2008. The U.S. District Court for the Eastern District of California granted summary judgment in Prime's and MPT's favor. holding that the SEIU had failed to offer any evidence that there was an employment loss at Shasta sufficient to constitute a mass layoff requiring advance notification under WARN. See Service Employees Int 'I Union v. Prime Healthcare Services, Inc., 2010 WL2843942, *3-5 (E.D. Cal. July 19,2010) (slip copy).
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193.

Despite the clear ruling from the district court rejecting the SEIU's legal theories,

the SEIU appealed that decision, and. on November I, 2011, the U.S. Court of Appeals for the Ninth Circuit summarily affirmed the district court decision. See Service Employees lnt'l Union, United Healthcare Workers West v. Prime Healthcare Services, 2011 WL 5147897, *1 (9th Cir, Nov. 1,2011) (slip copy). 194. Neither the antitrust laws nor this action are intended to inhibit Kaiser from

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competing on the merits with Prime or to inhibit the SEIU from acting unilaterally in its own self interest to expand the representation of Healthcare Workers in The Market. Rather. this

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Complaint challenges Defendants' concerted attempts to restrain competition in the markets for (1) emergency care services provided to the general public; (2) general acute-care hospital services; and (3) the services provided by Healthcare Workers, including but not limited to direct patient care duties and responsibilities essential to the provision of the services described in (l) and (2), through deceptive disparagement campaigns and other anticompetitive acts. 195. The Defendants' campaign to disparage Prime as alleged herein in Paragraphs

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155~68 and 170~93 above involved the publication of purported "studies" and other "information" that was: clearly false; clearly material; clearly likely to induce reasonable reliance on the part of patients and others on whom Prime depended for its business; directed to patients and others who lacked true knowledge of the subject tnatter of such material; continued for prolonged periods; and was not readily susceptible of neutralization or other offset by rivals. 196. The purposes and effect of Defendants' conduct with respect to The Market has

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been and, if not restrained by this Court, will continue to be: a. to preclude or lessen competition on the merits between Kaiser and Prime; b. to enable Kaiser to acquire. maintain, monopoly power in The Market; c. to unfairly prejudice consumer choice through artificial manipulation of "studies" and reports on the quality of care at Prime's hospitals; d. to raise the price paid for the services provided by Healthcare Workers. e. to eliminate the competitive pressure placed on Kaiser by the presence of Prime in andlor expand its market share and

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197.

The Market to reduce waiting times, add hospitals in locations poorly served by the existing Kaiser hospital network, and expand emergency care capacity to meet the demands of its members; and f. to reduce the quality of medical service available to the general public, including Kaiser members, other managed care members, Medicare and Medicaid

beneficiaries, and the uninsured. INJURY TO COMPETITION Kaiser's AND ANTITRUST INJURY

unlawful conduct has inj ured, and threatens to continue to injure,

competition in The Market. Consumers, including Kaiser members, members of other managed care organizations, consumers covered by commercial insurers and health plans, Medicare and Medi-Cal beneficiaries, consumers with other forms of medical care financing, and the

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12
13

underinsured and uninsured, have faced and will continue to face higher prices, reductions in quality of care, and have been and will continue to be deprived of a free, unfettered competitive market for (1) emergency care services provided to the general public; (2) general acute-care hospital services; and (3) the services provided by Healthcare Workers, including but not limited to direct patient care duties and responsibilities essential to the provision of the services described in (l) and (2). Prime's position as one of the few remaining successful competitors threatening Kaiser'S market power in The Market has been and continues to be undermined by Defendants' anticompetitive conduct. 198. Prime is an actual competitor of Kaiser and a purchaser of the labor of Healthcare

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Workers in The Market. As such, Prime has suffered antitrust injury as a result of Defendants' anticompetitive conduct including, hut not limited to, higher than competitive wages for the services of Healthcare Workers generally in The Market resulting from the inflated wages Kaiser agreed to pay to SEIU members pursuant to the conspiracy as well as the loss of actual and potential customers, lost profits, and the loss of business goodwill resulting from the campaign to eliminate Prime from The Market. Prime has been deprived of the opportunity to freely compete in the marketplace with Kaiser as a direct result of Defendants' wrongful conduct.

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CLAIMS FOR RELIEF First Claim for Relief: Violation of Section 1 of the Sherman Act (Against All Defendants) 199. Plaintiff incorporates by reference all of the above allegations as if expressly

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general

realleged herein. 200. There is a relevant market for emergency care services offered and provided to the including Kaiser members; general acute-care hospital services, which

public

encompasses a broad cluster of medical and surgical diagnostic and treatment services and the services provided by Healthcare Workers for hospitals in San Bernardino, San Diego, Los Angeles,and Orange Counties in California, which has been referred to herein as The Market.

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There are also relevant submarkets within The Market which include the High Desert, South Los Angeles:, and South San Diego. 201. As detailed herein; Kaiser and SElU have embarked on a concerted campaign to

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raise prices and destroy Prime as a competitor in The Market. The combination of Kaiser and SEIU as alleged herein constitutes a per se illegal horizontal conspiracy to raise, fix, or stabilize the price of Healthcare Workers' services in The Market and eliminate Prime as a competitor in The Market in violation of Section 1 of the Shennan Act, 15 U.S.C. § 1. 202. In addition, the purpose and effect of Kaiser's and SEIU's agreement is to

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unreasonably restrain trade and competition in The Market. The agreement between Kaiser and SEIU is, therefore, also a contract, combination, and/or conspiracy that unreasonably restrains trade in violation of Section 1 of the Shennan Act, 15 U.S.C. § 1. 203. Defendants' conduct has occurred in, and is having a substantial effect on,

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interstate commerce. Plaintiffs

Eliminating Plaintiff as a competitor of Defendant Kaiser would affect

(1) substantial (in the tens of millions of dollars) out-of-state purchases in medicines

and supplies; (2) substantial revenues from out-of-state insurance companies, including federally funded Medicare reimbursement; and (3) substantial sums from out-of-state sources to help Plaintiff run its daily operations.

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204.

As a direct competitor of Kaiser that was targeted and damaged by Kaiser's

anticompetitive conduct, and purchaser of services from HealthCare Workers in The Market, Prime has suffered antitrust injury and has standing to bring this claim. 205. Prime is entitled to recover treble damages under Section 4 of the Clayton Act, 15

U.S.C. § 15, and to injunctive relief under Section 16 of the Clayton Act. 15 U.S.C. § 26.

Second Claim for Relief: Monopolization in Violation of Section 2 of the Sherman Act (Against Kaiser)
206. Plaintiff incorporates by reference all of the above allegations as if expressly

realleged herein. 207. There is a relevant market for emergency medical care and treatment services and

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general acute-care hospital services, which encompasses a broad cluster of basic medical, surgical diagnostic and treatment services, in Southern California, which has been referred to herein as The Market. 208. 209. Kaiser possesses monopoly power in The Market. Kaiser has taken affirmative predatory and exclusionary steps to acquire and

maintain its monopoly power in The Market. 210. Through the anticompetitive, unfair, exclusionary, predatory, and deceptive

conduct described herein, Kaiser has willfully achieved and maintained, and unless restrained by the Court, will continue to willfully maintain and expand, that monopoly power. 211. Kaiser's acts and the continuing course of Kaiser's anticompetitive conduct have

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26 27 § 2.

harmed and threaten to continue to harm customers, end-users, and competition in The Market. 212. Kaiser's acts, undertaken with the intent to acquire and maintain its monopoly

power in The Market, violated and continue to violate Section 2 of the Sherman Act, 15 U.S.C.

213. commerce.

Kaiser's conduct has occurred in, and is having a substantial effect on, interstate If Kaiser's scheme to monopolize The Market succeeds, Defendant Kaiser would (1) substantial (in the tens of millions of dollars) out-of-state purchases in

affect Plaintiffs

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medicines and supplies; (2) substantial revenues from out-of-state insurance companies, including
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federally funded Medicare reimbursement; and (3) substantial sums from out-of-state sources to help Plaintiff run its daily operations. 214. As a direct and proximate result of Kaiser's exclusionary and anti competitive

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conduct, Prime has been injured and has sustained substantial damages in its business or property. Prime will continue to sustain foreseeable damages in the future as a result of Kaiser's wrongful conduct. Unless the activities complained of are enjoined, Prime will suffer immediate and

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irreparable injury for which Prime will have no adequate remedy at law. 215. As a direct competitor that was targeted by Kaiser's anticompetitive conduct,

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Prime has suffered antitrust injury and has standing to bring this claim. 216. Prime is entitled to recover treble damages under Section 4 of the Clayton Act. 15

U.S.C. § 15. Prime is also entitled, under Section 16 of the Clayton Act, 15 U.S.C. § 26, to a permanent injunction restraining Kaiser from engaging in the anticompetitive acts. Third Claim for Relief: Attempted Monopolization in Violation of Section 2 of the Sherman Act

13
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(Against Kaiser)
Plaintiff incorporates by reference all of the above allegations as if expressly

17

realleged herein. 218. There is a relevant market for emergency medical care and treatment services and

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general acute-care hospital services, which encompasses a broad cluster of basic medical, surgical diagnostic and treatment services, in Southern California, which has been referred to herein as The Market. 219. 220. The Market. 221. Kaiser has willfully and affirmatively engaged in. and is engaging in, a course of Kaiser has attempted to monopolize The Market. Kaiser has a specific intent to monopolize, and to destroy effective competition in,

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exclusionary and predatory conduct. as alleged above, in an attempt to monopolize The Market. 222. Kaiser's alleged prior acts and the continuing course of Kaiser's anti competitive

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conduct have harmed and threaten to continue to harm consumers and competition in The Market. -55EASTl46881149.12

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223.

There is a dangerous probability that, unless restrained by this Court, Kaiser will

2

succeed in acquiring, maintaining, and/or expanding its monopoly power in The Market, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. 224. commerce. Kaiser's conduct has occurred in, and is having a substantial effect on, interstate If Kaiser's scheme to monopolize The Market succeeds. Defendant Kaiser would (1) substantial, in the tens of millions of dollars, out-of-state purchases in

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affect Plaintiffs

medicines and supplies; (2) substantial revenues from out-of-state insurance companies, including federally funded Medicare reimbursement; and (3) substantial sums from out-of-state sources to help Plaintiff run its daily operations. 225. As a direct and proximate result of Kaiser's exclusionary, predatory, and

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anticompetitive conduct, Prime has been injured and has sustained damages. Prime will continue to sustain foreseeable damages in the future as a result of result of Kaiser's exclusionary, predatory, and anticompetitive conduct. Unless the activities complained of are enjoined, Prime will suffer immediate and irreparable injury for which Prime will have no adequate remedy at law. 226. As a direct competitor that was targeted by Kaiser's anticompetitive conduct,

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Prime has suffered antitrust injury and has standing to bring this claim. 227. Prime is entitled to recover treble damages under Section 4 of the Clayton Act, 15

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U.S.C. § 15. Prime is also entitled, under Section 16 of the Clayton Act, 15 U.S.C. § 26, to a permanent injunction restraining Kaiser from engaging in anticompetitive acts. Fourth Claim for Relief: Conspiracy to Monopolize in Violation of Section 2 of the Sherman Act (Against Kaiser) 228. Plaintiff incorporates by reference all of the above allegations as if expressly

22 23 24 25 26
27 realleged herein. 229.

There is a relevant market for emergency medical care and treatment services and

general acute-care hospital services, which encompasses a broad cluster of basic medical,

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surgical, diagnostic and treatment services, in Southern California, which has been referred to herein as The Market. 230.

As set forth above, Kaiser and SEIU have formedan illegal conspiracy per se in an

effort to eliminate Prime as a competitor in The Market. 231. Each of the acts described herein, specifically including but not limited to the acts

5 6
7
8 9 10

alleged in Paragraphs 155-68 and 170-93 above, was undertaken and constitute overt acts in furtherance of Kaiser's and SEIU's unlawful conspiracy. 232. Kaiser has willfully and affirmatively engaged in, and is engaging in, a course of

exclusionary and predatory conduct, as alleged above, with the specific intent to monopolize The Market. 233. Kaiser's alleged prior acts and the continuing course of Kaiser's anticornpetitive

11
12

conduct have harmed and threaten to continue to harm consumers and competition in The Market. 234. There is a dangerous probability that, unless restrained by this Court, Kaiser will

13
14

succeed in acquiring, maintaining, and/or expanding its monopoly power in The Market, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. 235. commerce. Kaiser's conduct has occurred in. and is having a substantial effect on, interstate If Kaiser's scheme to monopolize The Market succeeds, Defendant Kaiser would (1) substantial, in the tens of millions of dollars, out-of-state purchases in

15 16 17
18

affect Plaintiffs

19
20 21 22 23 24

medicines and supplies; (2) substantial revenues from out-of-state insurance companies, including federally funded Medicare reimbursement; and (3) substantial sums from out-of-state sources to help Plaintiffrun its daily operations. 236. As a direct and proximate result of Kaiser's exclusionary, predatory, and

anticompetitive conduct, Prime has been injured and has sustained damages. Prime will continue to sustain foreseeable damages in the future as a result of Kaiser's exclusionary, predatory, and anticompetitive conduct. Unless the activities complained of are enjoined, Prime will suffer

25 26 27
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immediate and irreparable injury for which Prime will have no adequate remedy at law. 237. As a direct competitor that was targeted by Kaiser's anticompetitive conduct,

Prime has suffered antitrust injury and has standing to bring this claim.
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238.

Prime is entitled to recover treble damages under Section 4 of the Clayton Act, 15

U.S.C. § 15. Prime is also entitled, under Section 16 of the Clayton Act, 15 U.S.C. § 26, to a permanent injunction restraining Kaiser from engaging in anti competitive acts. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment against Defendants, and each of them jointly and severally, as follows: 1. For temporary, preliminary, and permanent injunctions and specific performance: a. enjoining Defendants from:
1.

5
6

7 8 9
10 11 12 13 14

continuing

their

collusive

"corporate

campaign"

of

baseless

disparagement of Plaintiff in concert with each other;
11.

colluding to disrupt Plaintiffs

business through the dissemination of

biased research studies, reports, or similar publications regarding the quality of care at Plaintiffs hospitals;
111.

coercing and threatening patients, not to seek or continue their care at Plaintiffs hospitals where such care would be authorized and

IS
16 17 18 iv,

appropriate under applicable laws and regulations; coercing and threatening physicians to transfer patients currently under care at Plaintiffs hospitals where such transfer is not appropriate or

19 20
21 22 23 24 vi. v.

authorized under applicable laws and regulations; coercing and threatening others not to transport or direct patients to Plaintiffs hospitals where the care of such patients would be authorized and appropriate under applicable laws and regulations; withholding payment from Plaintiff for services rendered to Kaiser members without just cause; and vii. taking any other steps or engaging in any other concerted conduct, directly or indirectly. having the purpose or effect of destroying, restricting. or hampering Plaintiffs market; and
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ability to compete in the relevant

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b.

compelling Defendants to issue corrective advertising and statements to correct the false and misleading statements set forth above;

2
3
2.

For general damages, the exact amount to be determined at trial, to compensate Prime for the harm caused by Defendants' anticompetitive acts;

4
5
3. 4.

For trebling of Prime's damages pursuant to the federal antitrust laws; For Prime's reasonable attorneys' fees and costs incurred in connection with this action; and

6 7
8

5.

For such other legal and equitable relief as this Court deems just and proper, including disgorgement by Defendants of all sums obtained pursuant to the scheme described herein. JURY DEMAND

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11

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13

Plaintiff hereby demands a trial by jury for each and every one of the foregoing claims for relief so triable. Respectfully submitted, Dated: November 15,2011 DLA PIPER LLP (US) By lsi Jeffrey M. Shohet Jeffrey M. Shohet (Bar No. 067529) Veronica Jackson (Bar No. 243095) Attorneys for Plaintiff PRIME HEALTHCARE SERVICES, INC.

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TABLE OF CONTENTS - EXHIBITS

Exhibit
A

Description
Federal Trade Commission Staff Comment to The Honorable William J. Seitz National Agrement Coalition of Kaiser Permanent Unions SEIU Corporate Campaign Manual Excerpt SEIU Flyers DMHC Letter to Kaiser re 05-326 Combined Enforcement Action Pages 60 to 70

B C D E F G

Pages 71 to 181 Pages 182 to 200 Pages 201 to 210 Pages 201-216 Pages 217 to 220 Pages 221 to 290

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