SmileCare Dental Group v. Delta Dental Plan of California, Inc.

Delta Dental Plan of California, Inc. (Delta Dental) (defendant) sold dental insurance. Under its plan, customers were required to partially pay for dental treatment through means of a copayment made to their dental provider at the time of service. SmileCare Dental Group (SmileCare) (plaintiff) offered supplemental dental insurance. Under this supplemental plan, SmileCare paid any copayment required under a primary dental-insurance plan directly to the dental provider. Delta Dental was not happy about this, and Delta Dental made clear to its dental providers they were not to accept payments from SmileCare supplemental insurance as copayments on behalf of patients. Delta Dental believed that any dental provider who did so would be in breach of contract. SmileCare sued Delta Dental, alleging a violation of § 2 of the Sherman Act. SmileCare argued that Delta Dental unlawfully restricted competition by refusing to honor SmileCare’s supplemental insurance. Delta Dental argued that SmileCare was not actually a competitor with Delta Dental. It was undisputed that SmileCare’s supplemental insurance had no impact on Delta Dental’s pricing of its copayments, and that the purpose of the copayments was to incentivize insured individuals to only seek treatment that was actually necessary. The evidence also suggested that if dental providers accepted SmileCare’s supplemental insurance, Delta Dental would reduce insurance payouts to such providers and either threaten or actually terminate its insurance contracts with such providers. Delta Dental moved to dismiss SmileCare’s lawsuit for failure to state a claim, which the district court granted. SmileCare appealed.