Ropes & Gray Secures Dismissal of High-Profile Class Action Antitrust Suit Against WCAS

Following a high-profile victory over the Federal Trade Commission earlier this year, a Ropes & Gray litigation team secured a full dismissal for our client, Welsh, Carson, Anderson & Stowe, in a class action antitrust lawsuit brought against Welsh Carson and its portfolio company, U.S. Anesthesia Partners, Inc., a leading provider of anesthesiology services. As a result of this decision, Welsh Carson has been dismissed from a lawsuit seeking substantial civil damages for the alleged antitrust violations of its portfolio company arising from the same allegations that were asserted by the FTC.

In September 2023, the FTC sued Welsh Carson and USAP in a novel enforcement action against a private equity firm, alleging that defendants had collectively engaged in a scheme to consolidate anesthesiology practices and raise prices in Texas.  According to the FTC, Welsh Carson created USAP in 2012 and then orchestrated a “roll-up strategy” by which USAP would acquire large anesthesiology practices and use anticompetitive arrangements with other providers to monopolize the anesthesiology market. The FTC’s lawsuit generated significant media coverage and was closely followed by the private equity industry. A Ropes & Gray litigation team moved to dismiss the FTC’s complaint, and in May 2024, U.S. District Judge Kenneth M. Hoyt of the Southern District of Texas agreed with Ropes & Gray’s arguments that the FTC failed to allege any ongoing or imminent antitrust violations by Welsh Carson.  Judge Hoyt adopted Ropes & Gray’s core corporate separateness argument, finding that the private equity sponsor (Welsh Carson) could not be liable for the actions of its portfolio company (USAP).  The victory by the Ropes & Gray team was highlighted in the media and in the industry, including by the Wall Street Journal’s editorial board, which, in a standalone editorial dedicated to the dismissal, titled “Another Lina Khan Theory Loses in Court,” (May 15, 2024), noted that the FTC had “hoped to use the case to expand liability under the antitrust laws.”

Shortly after the FTC filed suit, two Texas employee benefit plans represented by prominent plaintiff firm Lieff Cabraser filed a class action complaint against Welsh Carson and USAP, asserting antitrust claims materially identical to the FTC’s and seeking hundreds of millions of dollars in damages, which would be trebled under the antitrust laws.  Ropes & Gray moved to dismiss this civil suit, arguing that the plaintiffs’ claims were time-barred because Welsh Carson’s alleged conduct took place outside of the applicable four-year limitations period.  The motion emphasized that Welsh Carson, as a private equity investor, was legally incapable of conspiring with USAP, and that Welsh Carson was not alleged to have independently participated in any of USAP’s alleged violations during the relevant period. Ropes & Gray made strategic use of Judge Hoyt’s dismissal of the FTC’s complaint, which was on different grounds, and again highlighted its core corporate separateness argument.

On September 27, U.S. District Judge Alfred H. Bennett of the Southern District of Texas granted Welsh Carson’s motion to dismiss with prejudice. Of note, Judge Bennett adopted Ropes & Gray’s argument in concluding that Welsh Carson was not liable for the alleged antitrust violations of its portfolio company under a conspiracy theory because its economic interests were aligned with the economic interests of its portfolio company.  This dismissal marks Ropes & Gray’s second prominent victory for Welsh Carson in 2024.

The team was led by litigation & enforcement partners David Hennes and Jane Willis and included Kathryn Caldwell, senior attorney David Young, associates Elena Davis, Sandra Hough Masselink, Ioana Moldovan, Logan Hovie, Rebecca Michelson, and Rory Skowron, and paralegal Jerome Genova.