# Opposition Brief — Winterthur Reinsurance Corp. of America v. California > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0029%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1993 - **Citation:** 509 U.S. 921 ## Text L/ - re Nos. 91-1111, 1128, 1131, & 1146 , GEES In The Supreme Court of the United States October Term, 1991 * HARTFORD FIRE INSURANCE CO., et al., Petitioners, STATE OF CALIFORNIA, et al., Respondents. + Petitions For A Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit ° RESPONDENTS’ CONSOLIDATED BRIEF IN OPPOSITION TO PETITIONS FOR WRITS OF CERTIORARI + J]. JoserH CURRAN, Jr. Attorney General of Maryland ELLEN S. CoorerR Assistant Attorney General Counsel of Record 200 St. Paul Place, 19th Floor Baltimore, Maryland 21202 (410) 576-6470 Counsel for Respondent the State of Maryland (For Further Appearances See Signature Page) COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 OR CALL COLLECT (402) 342-2831 QUESTIONS PRESENTED 1. Whether allegations that insurers’ enlistment of reinsurers and others in agreements not to trade, as a means of compelling competitors to stop selling certain insurance products to American consumers, are sufficient to state a claim of “boycott, coercion or intimidation” within the meaning of section 3(b) of the McCarran- Ferguson Act. 2. Whether insurers’ participation in unregulated, and, therefore, nonexempt, conspiratorial conduct even qualifies for the antitrust exemption provided by section 2(b) of the McCarran-Ferguson Act. 3. Whether, under the state action doctrine, approval of an insurance policy form developed by a trade association results in antitrust immunity for unauthorized and unsupervised marketplace activities to compel competing insurers to use the form and stop selling certain insurance products to American con- sumers. 4. Whether foreign reinsurers’ self-regulation of some aspects of their business should preclude a federal court from exercising jurisdiction over the foreign rein- surers’ anticompetitive conduct when (i) that conduct was targeted at American markets; (ii) that conduct had direct, substantial and foreseeable effects on American commerce; and (iii) no relevant regulation, foreign or domestic, compels or authorizes the anticompetitive con- duct. ii QUESTIONS PRESENTED - Continued 5. Whether American insurance consumers have standing to sue for injunctive relief and damages under the antitrust laws when they suffer antitrust injury to business or property as a result of a restraint of trade in the market in which they purchase insurance aarew a tr? | ili PARTIES TO THE PROCEEDING AND RULE 29.1 STATEMENT The other petitions to which this consolidated oppo- sition brief apply are styled: Merrett Underwriting Agency Management Limited, et al. v. State of California, et al., No. 91-1128; Winterthur Reinsurance Corp. of America v. State of California, et al, No. 91-1131; and Unionamerica Insurance Co. Ltd., et al. v. State of California, et al, No. 91-1146. Governmental Plaintiffs (Respondents): State of Alabama State of Alaska State of Arizona State of California State of Colorado State of Connecticut State of Louisiana State of Maryland Commonwealth of Massachusetts State of Michigan State of Minnesota State of Montana State of New Jersey State of New York State of Ohio Commonwealth of Pennsylvania State of Washington State of West Virginia State of Wisconsin Borough of Chambersburg, Pennsylvania City of Altoona, Pennsylvania iv PARTIES TO THE PROCEEDING AND RULE 29.1 STATEMENT - Continued City of Baton Rouge, Louisiana City of Birmingham, Alabama City of Clay, West Virginia City of Eunice, Louisiana City of Lafayette, California City of Mobile, Alabama City of Nachitoches, Louisiana City of New Orleans, Louisiana City of San Francisco, California City of Slidell, Louisiana City of York, Pennsylvania County of Cowlitz, Washington County of Hancock, West Virginia County of Hardin, Ohio County of Mineral, West Virginia County of San Benito, California County of San Francisco, California County of Schuylkill, Pennsylvania County of Teton, Montana County of Wirt, West Virginia Roosevelt Island [New York] Operating Authority, Inc. Town of Hanover, Massachusetts Town of Milford, Massachusetts Township of Jackson, Ohio Village of Lake Success, New York Village of Groton, New York Private Plaintiffs (Respondents): Ace Check Cashing, Inc. Acme Corrugated Box Company, Inc. Anastasios Markos, t/a Municipal Exxon Bay Harbor Park Homeowners’ Association, Inc. Bensalem Township Authority ia PARTIES TO THE PROCEEDING AND RULE 29.1 STATEMENT - Continued Big D Building Supply Corporation Carlisle Day Care Center, Inc. Carmella M. “Boots” Liberto, t/a R.J. Liberto, Inc. Durawood, Inc. Environmental Aviation Sciences, Inc. Glabman Paramount Furniture Mfg. Co., Inc. Henry L. Rosenfeld, t/a Mobile Check Cash Jerry Grant Chemical Associates, Inc. Keyboard Communications, Inc. Kirklington Park, Inc. Les Ray Bobcat, Inc. P & J Casting Corp. Defendants (Petitioners): Allstate Insurance Company Aetna Casualty & Surety Company CIGNA Corporation Hartford Fire Insurance Company Insurance Services Office, Inc. Reinsurance Association of America Constitution Reinsurance Corporation General Reinsurance Corporation Mercantile & General Reinsurance Company of America North American Reinsurance Company Prudential Reinsurance Company Winterthur Swiss Insurance Company Thomas A. Greene & Company, Inc. C.J.W. (Underwriting Agencies) Limited D.P. Mann Underwriting Agency Limited Edwards & Payne (Underwriting Agencies) Limited Janson Green Management Limited vi PARTIES TO THE PROCEEDING AND RULE 29.1 STATEMENT - Continued Lambert Brothers (Underwriting Agencies) Limited Merrett Underwriting Agency Management Limited Murray Lawrence & Partners Sturge Reinsurance Management Ltd. Peter N. Miller Robin A.G. Jackson Three Quays Underwriting Management Limited R.K. Carvill & Company Unionamerica Insurance Company Ltd. Continental Reinsurance Corporation (U.K.) Limited CNA Re (U.K.) Ltd. Kemper Reinsurance London, Ltd. Excess Insurance Company, Ltd. Terra Nova Insurance Company Limited Ballantyne, McKean & Sullivan Limited Private plaintiffs do not have any corporate parents or subsidiaries within the meaning of Rule 29.1. Vii TABLE OF CONTENTS Page SpemeMnetee PRESEINIGD .... 1.1... cece eee e ee an es i PARTIES TO THE PROCEEDING AND RULE 239.1 RE errr iii ND MEO cy cote canisndevewscnenosncs 1 ee yy 6 ou or isd nals eae ek bo 1 STATUTORY PROVISIONS INVOLVED............. 1 pemsememmeee Qh ifte CAGE. ...............0.0005. 1 MISSTATEMENTS IN THE PETITIONS............. 4 REASONS FOR DENYING THE WRIT............. 6 I. THIS CASE PRESENTS NO OPPORTUNITY TO CLARIFY THE REACHES OF THE MCCAR- ng SE a ee 7 A. Defendants’ petition for certiorari asks this Court to reject the definition of boycott expressed in St. Paul Fire & Marine Insurance Co. v. Barry, and used by this Court eee 8 B. Defendants’ exemption forfeiture arguments actually seek to expand the scope of the limited antitrust exemption established by the McCarran-Ferguson Act............... 12 Il. THE DECISION BELOW RESTS ON A CON- VENTIONAL APPLICATION OF THE STATE ms og fo | 16 Ill. THE DECISION TO EXERCISE JURISDICTION IN THIS CASE PROPERLY APPLIES SETTLED PRINCIPLES OF INTERNATIONAL COMITY.. 20 viii TABLE OF CONTENTS - Continued Page A. This Case Provides No Occasion to Refine the General Principle Favoring the Exercise of Jurisdiction Where American Effects Are Direct, Substantial and Foreseeable ....... 20 B. No Genuine Conflict Exists Between United States and United Kingdom Law.......... 24 IV. PLAINTIFFS HAVE STANDING AS CON- SUMERS IN THE MARKET RESTRAINED BY THE REINSURER BOYCOTTS. ...............- 25 A. Plaintiffs Meet This Court’s Test for Stand- Pee Tere Tee TSE rere eT ere vere ree 26 B. This Case Does Not Challenge the Bound- aries of Standing Doctrine ................ 27 C. Plaintiffs Suffered Distinct Injuries........ 29 ee ee re ree ee eee OCR Te Poe 30 ix TABLE OF AUTHORITIES Page CASES Abbott Laboratories v. Portland Retail Druggists Pe ee A OI oa os whee owen heed ens 13 Arizona v. Shamrock Foods, 729 F.2d 1208 (9th Cir.), cert. denied, 467 U.S. 1252 (1984) ........... 29 Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 Se ee Ee a a iinc ba Gelka uae. 26, 28, 29, 30 Beltz Travel Service v. International Air Transport Assn., 620 F.2d 1360 (9th Cir. 1980)............... 12 Blue Shield of Virginia v. peresactes 457 U.S. 465 CG cn aig pe eae ry cn oN aT 26, 27, 30 California Liquor Dealers Assoc. v. Midcal Alumi- num, inc., 445 US. 97 (1960) ........6.045. 16, 17, 18 California v. American Stores Co., Inc., 495 U.S. og Ac. IRR TR Ie TS ate tier cae Ree eg apa indy ee 26 Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. ne ee a res ena coe 26, 28 City of Columbia v. Omni Outdoor Advertising, i he ee, Bo ROWED Gs ack wee ue ece sean 19 Connell Construction Co. v. Plumbers & Steamfit- re ce See ee See. Se gas ee ec le eras 13 Continental Ore Co. v. Union Carbide, 370 U:S. ee Pe es re os pre ee wie eres 21 Eastern States Retail Lumber Dealers’ Association v. United States, 234 U.S. 600 (1914).............. 10 Fashion Originators Guild v. FTC, 312 U.S. 457 CRUE eee ec ee ee ee he eee heres 10 TABLE OF AUTHORITIES - Continued Page FMC v. Seatrain Lines, Inc., 411 U.S. 726 (1973)..... 13 Fontana Aviation v. Cessna Aircraft Co., 617 F.2d re Sn Us sc va a aoe oc nana ue kaka cannes 29 Georgia v. Pennsylvania Railroad Co., 324 U.S. 439 Dt eivelt bot corr OLUee ta keuk webs Ab ceiees 26 Grant v. Erie Ins. Exchange, 542 F. Supp. 457 (M.D. Pa. 1982) aff'd mem. 716 F. 2d 890 (3rd Cir.), Cort. Gam, GHG Ua. Fae CUE os na weccecsnndeaccnds 11 Group Life & Health Ins. Co. v. Royal Drug Co., ee Se ee a cue a cae ncaae eee eens 7, 13 Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) . .29, 30 Laker Airways, Ltd. v. Sabena, Belgian World Air- lines, 731 F.2d 909 (D.C. Cir. 1964)............. 20, 21 Mannington Mills, Inc. v. Congoleum Corp., 595 Pe SE GR Os REF OE inc skin ak csves aa baeen tees 21 Mine Workers v. Pennington, 381 U.S. 657 (1965) .13, 14 Patrick v. Burget, 486 U.S. 94 (1988) ................ 16 St. Paul Fire & Marine Insurance Co. v. Barry, 438 oS BS. ee rere [sas wee aes oe Summit Health Ltd. v. Pinhas, 111 S.Ct. 1842 SC Sos Chae ba Care wee ewe eee eee Nae 1 Timberlane Lumber Co. v. Bank of America, 549 F.2d 597 (9th Cir.'1976) (Timberlane I), after remand 749 F.2d 1378 (9th Cir. 1984) (Tim- berlane II), cert. denied, 472 U.S. 1032 (1985) te Ne rh, ests BP iyl be Sas Ae A on AD EEK, Se 20, 21, nN Nm hN nes Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 SURG. Ch Se ga ye eet ett i ie ea Atee e ee eae 13, 14 xi TABLE OF AUTHORITIES - Continued Page United States v. Aluminum Co. of America (Alcoa) we Pia SIG Cle Cie. WOES qo. nw ccc cnc cccsccsces 21 United States v. McKesson & Robbins, Inc., 351 ns a re ee rhe a adel aie 13 United States v. Socony-Vacuum Oil Co., 310 U.S. I a ate eve re ER a a on 14 United States v. South-Eastern Underwriters a | | a rr 10 UNR Industries Inc. v. Continental Ins. Co., 607 F. supp. 655 (N.D. TH. 1964)...............-. Circe ty 11 W.S. Kirkpatrick & Co. v. Environmental Tectonics Re, See WD. SD CIGID qn woo ccc cee cccsses 20, 21 STATUTES, RULES AND TREATIES FEDERAL 3 | Ripe Aree pag Ae Reo Seb ESP Se AGS ae 1 eee oe a ha ca a glee ak eae 1, 21 Se Es EN os aly owe Vr pe coe wenn Deeeb cn ees 1 re on. ts vate teagan Bins Cae 1 ee ee a ny OE a Rees nhac ceacae aa iis 1 er ence ae EE or ts nae 7, 14 See me EG ott SN eh is Se ee 7 Federal Rules of Civil Procedure, Rule 12(b).........7 Federal Rules of Civil Procedure, Rule 56............ 7 Re GS UE WOE hen cca kecnal'ciren ShaNGE EATS 4 xii TABLE OF AUTHORITIES - Continued Page STATE Md. Ann. Code Art. 48A, § 220 (1986)............ 5, 17 N.j. Stat. Ann. 17:298-4(4) CI9GD). ... «0-5 cs cncnanss 5, 17 FOREIGN I GR SE Ties sik c ke recs coticnauaesens 24 SURGE GE TOI, FAT Bee sin Ra eee Tw, 24 OTHER 9 E. Kintner & J. Bauer, Federal Antitrust Law 245 OE A iks kan cthh ve cans ew VESVAUANAMER Saba es eRh bat 11 Restatement (Third) of Foreign Relations 443, CIS BO kn csc nview casctnsaceusaevene Wes 20 Thompson, Critical Issues of the Eighties: Hot Trends in Reinsurance Will Affect Legal, Legis- lative, and Regulatory Actions, 16 Forum 1038 ee er rete ee ree ere ee .. 16 P. Areeda & H. Hovenkamp, Antitrust Law (1991 PES CNAs kK Aa aRAD NERA EKA TEN RNE Vee atv ee ueey ee ee eer eres rer ree 9 RESPONDENTS’ CONSOLIDATED BRIEF IN OPPOSITION TO PETITIONS FOR WRITS OF CERTIORARI OPINIONS BELOW The opinion of the court of appeals is reported at 938 F.2d 919 (UA App. A1-A35)! The opinion of the district court is reported at 723 F.Supp. 464 (UA App. A36-A86). JURISDICTION The judgment of the court of appeals was entered on June 18, 1991. Timely petitions for rehearing were denied on October 15, 1991. UA App. A87-A99. The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). STATUTORY PROVISIONS INVOLVED The statutory provisions involved in these petitions are sections 1 and 7 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 & 6a (Merrett App. A93); the McCarran- Ferguson Act, 15 U.S.C. §§ 1011, et seq. (Hartford App. 98a- 99a); and sections 4 and 16 of the Clayton Antitrust Act, 15 U.S.C. §§ 15(a) & 26 (UA App. A100-A102). STATEMENT This case comes to this Court without the develop- ment of a factual record, in a posture in which the allega- tions of the plaintiffs’ complaints and the reasonable inferences to be drawn from them must be taken as true.” 1 Of the four petitions filed with this Court, the appendix to the petition filed in Unionamerica Insurance Co., Ltd., et al., No. 91-1146 is the most complete. Respondents’ Consolidated Brief uses that appendix where possible, citing it as “UA App.” 2 Summit Health Ltd. v. Pinhas, 111 S.Ct. 1842, 1845 (1991). Despite its appearance before this Court, this case remains in (Continued .on following page) 1 2 Plaintiffs’ allegations are reviewed by the Court of Appeals at 938 F.2d at 922-924 (UA App. A13-A18). At its core, this case is about the enlistment of “rein- surers to compel capitulation” to the demands of a hand- ful of firms. 938 F.2d at 929, UA App. A26. The goal of these firms was to limit the scope of insurance products sold in the United States. Id. More specifically, the com- plaints allege as follows. In 1984, defendant primary insurers were dissatisfied with the breadth of risks covered by commercial general liability insurance policies.* They wanted to shrink the coverage offered in the market, but could not unilaterally cease offering the broader coverages without risking the loss of market share to competitors who remained willing to sell the broader coverage. See, e.g., Conn. Cmpt. 47 65-67, UA App. A175. Consequently, the primary insurer defendants, and the domestic and foreign reinsurers they enlisted, con- spired to force unwilling competitors to stop insuring certain risks.4 Collectively, they withdrew necessary inputs required by competing primary insurers who wanted to continue writing these risks. They agreed to withhold reinsurance from U.S. primary insurers who (Continued from previous page) its infancy, having been confined by the trial court to motions designed to test the legal sufficiency of the pleadings. Pre-Trial Order No. 2, ¥ 3. The trial court allowed discovery “insofar as necessary for these motions” (UA App. 38, n. 2), but expressly limited that discovery to matters not likely to raise disputed issues of fact. Pre-Trial Order No. 2, 4 5. As a result, no discovery was conducted. 3 Commercial general liability (CGL) insurance provides coverage against third party claims for businesses and state and local governments. 4 For example, defendants sought to exclude all pollution coverage. 3 were unwilling to comply with the conspirators’ demands. Without reinsurance, a critical input, the capac- ity of primary companies to offer coverage to their cus- tomers would be drastically eroded. Thereafter, defendant Insurance Services Office, Inc. (ISO), the trade association of primary insurers, withdrew statistical sup- port for the risks.> See, e.g., Cal. Cmpt. 74 63-100, UA App. A123-131. To achieve the full goals of the conspiracy, defen- dants also moved to limit excess and umbrella coverage as well as property insurance coverage, to conform to changes effectuated in CGL coverages. By these coordi- nated steps, defendants were largely able to compel com- peting insurers to stop selling insurance written on policy forms that would have provided the broader coverage, and to use exclusively the lesser forms which the conspir- ators forced upon ISO.° See, e.g., Cal. Cmpt. 9] 101-110, UA App. A131-133. No state insurance regulator reviewed or approved the coercive conduct that generated these lesser forms. No state insurance regulator reviewed or approved the conduct that forced the use of these forms in the mar- ketplace. 938 F.2d at 931, UA App. A29. As the complaints allege, the United States argued’, and the court of appeals found, this case is about > Statistical support provides information that insurers need to price an insurance product. ® No state’s approval of the conspirators’ new policy forms constituted disapproval of older forms. Absent the con- spiracy, all forms would have remained available for use in the marketplace. ? The United States filed a brief as amicus curiae in the court of appeals. In its brief, the United States argued that (i) (Continued on following page) 4 agreements by a few primary insurers and reinsurers to replace existing insurance products with a lesser quality product, and the enforcement acts taken by defendants to compel the market success of the lesser product. Defen- dants’ enforcement acts, most notably the withholding of necessary reinsurance and statistical support services, are central to this case. Defendants used these economic weapons to force unwilling firms to stop offering higher quality insurance products to American consumers. MISSTATEMENTS IN THE PETITIONS. The petitions contain numerous contradictions and misstatements of fact. In compliance with Supreme Court Rule 15.1, plaintiffs note the following major misstate- ments in the petitions: 1. The Hartford petition describes this case as involving “nothing more” than “agreements among” insurers and reinsurers “over coverage risks they were willing to accept”. Hartford Ptn. 2. This case, however, involves “much more.” 938 F.2d at 929, UA App. A25. The complaints expressly allege that primary insurer defen- dants met with reinsurers to formulate and set in a motion a joint strategy to eliminate specific coverages from the market. See, e.g., Conn. Cmpt. 7] 68, 69, 73, UA App. A175-A177. The complaints also allege that, in fur- therance of this goal, reinsurers “threaten[ed] to withhold (Continued from previous page) the complaints allege conduct constituting boycott, coercion or intimidation under the McCarran-Ferguson Act; (ii) the state action doctrine does not prohibit antitrust scrutiny of the alleged boycotts; and (iii) principles of international comity do not preclude judicial review of these cases. The decision of the Court of Appeals is in accord with these arguments. MO —— 5 reinsurance from the market for primary companies” that persisted in offering this coverage (Cal. Cmpt. 7 71, UA App. A124); reinsurers “threatened a boycott of North American CGL risks unless” the coverages were elimi- nated (Cai. Cmpt. ¥ 74, UA App. A125); reinsurers collec- tively refused to cover certain risks (Cal. Cmpt. 7] 95 & 108, UA App. A130 & A133); and ISO withdrew support services for coverages that included these risks. Conn. Cmpt. | 103, UA App. A183-A184; See also Conn. Cmpt. q 116-117, VA App. A186-A187; 938 F.2d at 929, UA App. A25. The Winterthur petition even concedes that plain- tiffs alleged that primary insurers “induced defendant reinsurers to refuse to provide reinsurance to insurers writing CGL policies on existing ISO forms.” Winterthur Ptn. 3. 2. The Hartford petition asserts that states sanc- tioned the defendants’ activities because “state law authorized collective forms development”. Hartford Ptn. 27. States, however specifically prohibit boycotts, which is the conduct at issue in these cases. See e.g., Md. Ann. Code Art. 48A, § 220 (1986); N.J. Stat. Ann. i17:29B-4(4) (1985); See also UA App. A61. As the Ninth Circuit found, the challenged conduct “was neither a reasonable nor necessary consequence of the conduct regulated and approved by the state.” 938 F.2d at 931, UA App. A30. 3. The Hartford petition asserts that “state agencies made substantive determinations of conformity with state policy.” Hartford Ptn. 28. The regulators reviewed forms, not market conduct. As the court of appeals found, noth- ing in the evidence shows that the relevant states super- vised or approved the boycotts used to produce agreement on the content or use of the forms. 938 F.2d at 931, UA App. A29. 4. The Hartford petition asserts that insurance and reinsurance markets are so intimately entwined that state regulation of primary insurers is de facto regulation of 6 reinsurers. Hartford Ptn. 15. The Winterthur petition, on the other hand, states that it “strains credulity” to suggest that activities in one market, including boycotts, affect any other market. Winterthur Ptn. 19-20. 5. The Merrett and Unionamerica petitions state that the Ninth Circuit “dismissed” the global conspiracy claim in the Connecticut-style complaints. Merrett Ptn. 4, n. 2; Unionamerica Ptn. 6-7, n. 6. The Ninth Circuit found this count “consistent” with its opinion and mandated that “[o]n remand to the district court, plaintiffs should be afforded the opportunity to amend” to cure a technical pleading defect. 938 F.2d at 931, UA App. A30. REASONS FOR DENYING THE WRIT The court of appeals decision does not warrant review. Defendants’ real challenge is not to the legal standards applied by the court of appeals. Rather, defen- dants contest the court of appeals’ construction of the facts of these cases as alleged in plaintiffs’ complaints. Still seeking to mischaracterize those allegations, defen- dants seek certiorari on questions not presented by this case. In resolving the questions actually presented by plaintiffs’ allegations, the decision below is faithful to this Court’s prior interpretations of the McCarran-Fer- guson Act and the state action doctrine. The decision also accords with this Court’s articulated principles of inter- national comity and standing. It accords as well with the decisions of other circuits. In no respect does the case present questions of exceptional legal and practical importance. Defendants cannot seriously contend that the egregious conduct described in plaintiffs’ complaints must be countenanced to assure the survival of the insurance industry. No basis for certiorari has been presented. 7 The decision below concerned motions brought under Federal Rules of Civil Procedure 12(b) and 56 to “test the validity of . . . critical allegations in the com- plaint[s].” RT at 21 (June 23, 1988). No discovery was conducted in advance of these motions. Nevertheless, at this early stage of the litigation, defendants continue to press a view of the case that differs categorically from the view of plaintiffs. Disputes over case characterization provide no basis for certiorari. Defendants have stated no reasonable basis for review of the decision of the court of appeals and, on the limited factual record before this Court, there is no basis for review. I. THIS CASE PRESENTS NO OPPORTUNITY TO CLARIFY THE REACHES OF THE MCCARRAN- FERGUSON ACT. The McCarran-Ferguson Act “embod[ies] a legisla- tive rejection of the concept that the insurance industry is outside the scope of the antitrust laws.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 220 (1979). In striking a balance between competition and regulation, the Act exempts from antitrust scrutiny conduct that is the business of insurance and is regulated by the state. 15 U.S.C. § 1012 (b). Otherwise qualified conduct is denied this exemption, however, if it constitutes an agreement or act of boycott, coercion or intimidation. 15 U.S.C. § 1013 (b). These cases allege boycott, coercion and intimidation. Further, these cases allege participation by domestic insurers in unregulated foreign reinsurance activity — conduct that does not even qualify for the McCarran exemption in the first instance. Delicate questions of bal- ance do not arise. The antitrust laws apply. The court of appeals’ holdings on the McCarran- Ferguson Act defenses are unsuited to review by this Court. They present numerous issues, each of which this 8 Court would need to resolve in defendants’ favor before the outcome of these cases would change. Defendants have asked this Court to reject the court of appeals’ reading of the complaints; to reverse the court of appeals’ opinion that the challenged conduct is a boycott under the McCarran Act; and to reverse the court of appeals’ conclusion that the McCarran Act does not shield con- spirators’ participation in nonexempt’' conduct. These issues are fact-bound. Moreover, each was resolved below based on conventional applications of legal principles established by this Court. A. Defendants’ petition for certiorari asks this Court to reject the definition of boycott expressed in St. Paul Fire & Marine Insurance Co. v. Barry, and used by this Court throughout its history. The court of appeals observed the clear line between conduct constituting an actionable boycott and conduct constituting permissible joint activity. It correctly found, 938 F.2d 929; UA App. A27, as the United States had urged in its amicus curiae brief at 16, that the conduct alleged in this case falls well on the boycott side of the distinguishing line. The court of appeals’ decision rested squarely on St. Paul Fire & Marine Insurance Co. v. Barry, 438 U.S. 531 (1978), this Court’s explanation of the boycott exception in the McCarran-Ferguson Act. In Barry, this Court sur- veyed the long line of Supreme Court precedent giving rise to a “common understanding” of the term boycott. Barry, 438 U.S. at 541-45. The court of appeals found that the plaintiffs’ allegations fit “exactly” within this com- mon understanding. 938 F.2d at 929, UA App. A26. In its brief amicus curiae, the United States had urged that result, commenting that 9 the combination of primary insurers and reinsurers alleged by plaintiffs falls well within the ‘common understanding’ (Barry, 438 U.S. at 552) of boycott, coercion or intimidation. Indeed, it is precisely the kind of conduct char- acterized as a boycott, coercion and intimidation in the Sherman Act case that led to the passage of the McCarran-Ferguson Act and with which Congress was specifically concerned when it included [the boycott exclusion in the McCar- ran-Ferguson Act]. Brief for the United States as amicus curiae, filed below, at 16.8 Defendants, however, attempt to manufacture a con- troversy from the colloquy between the majority and dissent in Barry. Yet, the majority and dissent in Barry would agree that the facts presented here constitute a 8 The legislative history of the McCarran-Ferguson Act demonstrates that Congress carefully distinguished voluntary agreements among insurers on policy terms —- which could claim antitrust immunity if regulated by the state —- from com- binations designed to force unwilling competitors to adhere to terms through the concerted denial of necessary trade relation- ships — which were expressly denied immunity. Barry, 438 U.S. at 547-50. Indeed, the Act recognizes that “the vice in the industry was not that there were rating bureaus, but that there was in the industry a system of private government which had been built up by a small group of insurance companies.” Barry, 438 U.S. at 548, quoting Senator O’Mahoney. Senator O’Mahoney describes as “absolutely” unprotected “any attempt by a small group of insurance companies to enter into an agreement by which they would penalize any person or any business which is attempting to do business in the insurance field in any way that was disapproved by them... .” 91 Cong. Rec. 1480 (1945) (Statement of Senator O’Mahoney). The cen- tral allegations of the complaints concern these kinds of pro- hibited agreements. 10 boycott. The majority in Barry described a boycott as “(t]he enlistment of third parties in an agreement not to trade, as a means of compelling capitulation of the boy- cotted group... .” Barry, 438 U.S. at 544-45. The dissent in Barry chose different words, but approved the same concept, concluding that McCarran boycotts concern “attempts by members of the insurance business to force other members to follow the industry’s private rules and practices.” Barry, 438 U.S. at 565. Thus, the Barry majority and minority agree on a bright line test. Whatever else a McCarran boycott may be, it indisputably includes what is alleged here: agree- ments and acts to withhold an essential input from other insurers as means of forcing their acquiescence. The court of appeals’ application of Barry was conventional and correct. Grasping at straws, defendants claim that a McCar- ran-Ferguson boycott does not exist unless “competing. insurance companies [are] absolutely excluded from the market” or there is a “total refusal to deal on any terms”. Hartford Ptn. 24. This Court has never required such a finding. Indeed, the case that served as the model for the boycott exception in the McCarran-Ferguson Act, United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 535 (1944), involved neither situation. South-Eastern Underwriters involved a conditional refusal to deal.? The facts of South-Eastern Underwriters are markedly similar to those involved here. Both cases 9 So-called “conditional” refusals are classic boycotts. E.g., Fashion Originators Guild v. FTC, 312 U.S. 457 (1941); Eastern States Retail Lumber Dealers’ Association v. United States, 234 U.S. 600 (1914). These boycotts are not designed to drive competi- tors from the market. Rather, they are designed to force unwill- ing competitors to adhere to particular terms of trade. 11 concern conspirators who refused to deal in order to force unwilling competitors to acquiesce to their terms. In both, reinsurance was withdrawn as the means of forcing acquiescence. Both allege conduct falling well within the common understanding of boycott. Defendants refer to a “debate” in which some lower courts attempt to distinguish between refusals to deal on any terms (absolute refusals) and refusals to deal on some terms (partial refusals). They would classify only the former as a boycott. This debate is not pertinent here because it only concerns consumer boycotts.!° The pre- sent case does not allege consumer boycotts. It alleges concerted refusals to deal to force competitors to adopt conspirators’ trade restrictions.!! Some lower courts may seek to confirm that a partic- ular consumer boycott is coercive by inquiring into the absolute or partial nature of the refusal to deal. However, a boycott to force a competitor to adhere to trade terms dictated by conspirators is by definition coercive.'? Thus, 10 The cases cited by defendants as holding that an abso- lute refusal to deal is essential are consumer boycott cases. See Grant v. Erie Ins. Exchange, 542 F. Supp. 457 (M.D. Pa. 1982), aff'd mem., 716 F. 2d 890 (3d Cir.), cert. den., 464 U.S. 938 (1983) and UNR Industries Inc. v. Continental Ins. Co., 607 F. Supp. 855 (N.D. Ill. 1984). 11 Defendants’ citation to 9 E. Kintner & J. Bauer, Federal Antitrust Law 245 (1989) is, thus, curious. Kintner & Bauer distinguish consumer boycott cases from those where “a par- tial or conditional refusal to deal . . . is designed to coerce the target to conform to certain conduct.” In the latter situation, Kintner & Bauer note the lack of conflict among lower courts, citing the overwhelming majority of cases holding that an absolute refusal to deal is not required. Id. at 245-46. 12 Contrary to defendants’ assertions, this case is not about ordinary course-of-business arrangements against which (Continued on following page) 12 courts confronting boycotts against competitors have not used, and need not use, the elusive distinction between partial and absolute refusals to deal to corroborate coer- cion. Decided well within the contours of the “common understanding” of boycott, this case simply presents no opportunity for this Court to test the reaches of its defini- tion of boycott under the McCarran-Ferguson Act. B. Defendants’ exemption forfeiture arguments actually seek to expand the scope of the limited antitrust exemption established by the McCar- ran-Ferguson Act. As an additional and independent ground for deny- ing McCarran-Ferguson protection to the defendants’ conduct, the court of appeals held that the Act’s protec- tion did not extend to the domestic defendants’ participa- tion in unregulated agreements with the foreign defendants.'? Relying on Beltz Travel Service v. Interna- tional Air Transport Assn., 620 F.2d 1360 (9th Cir. 1980), the (Continued from previous page) other insurers found it difficult or expensive to compete. This case is about one group of competitors (defendant primary insurers) seeking to discipline another group of competitors (the unwilling primary insurers) by inducing suppliers (rein- surers and ISO) not to provide necessary supplies (reinsurance and statistical support) unless the unwilling primary insurers acceded to the trade terms of the defendant primary insurers. Thus, there is no necessity in this case to distinguish between “economic exigencies” that flow from the need to respond to protected horizontal agreements and “coercion.” The facts as alleged are well within the traditional concept of a boycott. 13 Petitioners do not challenge the court of appeals’ hold- ing that the conduct of the foreign reinsurers fails to qualify for the McCarran exemption because it is not regulated by the states. 13 court of appeals found an “exemption forfeiture” as a result of domestic insurers’ joining in the unregulated (and therefore non-exempt) conduct of foreign reinsurers. In its holding, the court of appeals applied well- accepted principles. First, “[i]t is well settled that exemp- tions from the antitrust laws are to be narrowly con- strued.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 231 (1979).14 Second, there is nothing novel about holding an otherwise exempt entity liable when it conspires in non-exempt conduct. For example, in the labor exemption context, this Court has stated: A union may make wage agreements with a multi-employer bargaining unit and may in pur- suance of its own union interests seek to obtain the same terms from other employers. . . . But we think a union forfeits its exemption from the antitrust laws when it is clearly shown that it had agreed with one set of employers to impose a certain wage scale on other bargaining units. One group of employers may not conspire to eliminate competitors from the industry and the union is liable with the employers if it becomes a party to the conspiracy. Mine Workers v. Pennington, 381 U.S. 657, 665-66 (1965) quoted in Royal Drug, 440 U.S. at 232, n.39 (emphasis added).'5 14 See, e.g., Abbott Laboratories v. Portland Retail Druggists Assn., 425 U.S. 1, 11-12 (1976); Connell Construction Co. v. Plumbers & Steamfitters, 421 U.S. 616, 622 (1975); FMC Corp. v. Seatrain Lines, Inc., 411 U.S. 726, 733 (1973); United States v. McKesson & Robbins, Inc., 351 U.S. 305, 316 (1956). 15 Defendants claim that the court of appeals exemption forfeiture decision is contrary to Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982). Hartford Ptn. 16. However, there is “(Continued on following page) 14 The record as it currently stands provides no basis for a reconsideration of these long-standing principles. The line between exempt and non-exempt conduct can best be drawn on a well developed factual record, and not on the bare allegations of even a well-pleaded com- plaint. Moreover, defendants’ exemption forfeiture argu- ment would expand the limited exemption established by the McCarran-Ferguson Act. There is no legal justification for doing so. The present record fails to indicate in anyway that the insurance industry will become less efficient if this Court fails to expand the McCarran exemption to include insurer conspiracies involving unregulated foreign rein- surance activity. The unavailability of the McCarran (Continued from previous page) nothing in Pireno that is inconsistent with the decision below. In Pireno, this Court considered the factors for determining what is the “business of insurance” under the McCarran Act, and noted that involvement of non-insurance companies in challenged conduct does not necessarily disqualify conduct from being characterized as the “business of insurance.” This discussion is not relevant to the present cases, however, because the exemption forfeiture analysis of the court of appeals rested on the “state regulation” prong of the McCarran Act, and not on “the business of insurance” requirement. In short, the court of appeals’ unchalienged finding is that the foreign reinsurers’ conduct fails to qualify for the McCarran exemption because it is not state regulated. 15 U.S.C. § 1012(b). In finding that the domestic insurers also had no McCarran exemption, the court of appeals below followed this Court’s precedent making all conspirators liable for the unlawful acts of their co-conspirators. See, e.g., Mine Workers v. Pennington, 381 U.S. at 665-66; United States v. Socony-Vacuum Oil Co., 310 '. U.S. 150, 253-54 (1948). 15 exemption does not automatically impose antitrust lia- bility on insurers for joint conduct with foreign rein- surers. If an insurer has no exemption with respect to certain conduct, that conduct simply becomes subject to antitrust scrutiny, not necessarily antitrust liability.'® Moreover, most companies have no trouble discern- ing the difference between lawful agreements regarding the supply of important inputs and unlawful agreements to deny competitors such inputs unless the competitors accept particular terms of doing business. The court of appeals’ decision leaves insurers free to purchase rein- surance but properly warns them against using such arrangements as exclusionary devices directed against competitors. The insurance industry ought not be surprised or confused by the court of appeals’ ruling. Reinsurers have long regarded themselves as being without antitrust exemption, and have generally conducted their business accordingly.!7 Certainly, primary insurers cannot claim to 16 Agreements between insurers and reinsurers are akin to purchase and sale agreements between vertically related firms in any other industry. Reinsurance is an input into insurance, the finished product. An insurer purchasing reinsurance is like Chrysler purchasing steel. Both transactions secure inputs into the finished product. Neither transaction is ordinarily an anti- trust violation. 17 N. David Thompson, president and chief executive offi- cer of Defendant North American Re, expressed this view in Forum, a publication of the American Bar Association: Reinsurers have generally conducted their opera- tions free from the type of regulation to which pri- mary insurers are subject in most jurisdictions. Reinsurance rates are not approved or filed. Rein- surance treaty provisions are not governed by stat- ute or regulation, except for special matters such as (Continued on following page) 16 be hamstrung in their ordinary operations because the court in this case followed settled law and refused to expand an antitrust exemption to include the egregious conduct alleged in the complaints. The McCarran-Fer- guson Act has never protected the conduct challenged in these complaints. II. THE DECISION BELOW RESTS ON A CONVEN- TIONAL APPLICATION OF THE STATE ACTION DOCTRINE. This Court has repeatedly held that the state action doctrine immunizes the conduct of private persons from antitrust scrutiny only when that conduct is: (1) under- taken pursuant to a clearly articulated and affirmatively expressed state policy; and (2) actively supervised by the State. California Liquor Dealers Assoc. v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980) (“Midcal”). This two-pronged test assures that the challenged anticompetitive conduct is that of the State itself. Patrick v. Burget, 486 U.S. 94 (1988). Contrary to defendants’ assertion that the court of appeals did not apply “the Midcal criteria,” Hartford Ptn. 9, the court faithfully applied these criteria. Defendants simply failed to meet the requirement of either prong of the test. (Continued from previous page) the nearly universal insolvency clause. . . . Thus, r.insurers have been outside the protection of the McCarran Act and so, at least, since the decision in the South Eastern Underwriters case, they are fully exposed to the enforcement of the antitrust laws, state as well as federal. (Footnote omitted.) N. David Thompson, Critical Issues of the Eighties: How Trends in Reinsurance Will Affect Legal, Legislative, and Regulatory Actions, 16 Forum 1038, 1055 (1980-1981). 17 First, defendants’ conduct was not authorized by any state policy. Indeed, state unfair insurance practices laws expressly prohibit boycotts. See, e.g., Md. Ann. Code Art. 48A, § 220 (1986). N.J. Stat. Ann. 17:29B-4(4) (1985). Sec- ond, as the court of appeals found, there is nothing in the record to demonstrate that states supervised or approved the boycotts alleged. 938 F2d at 931, UA App. A29. Moreover, because some of the anticompetitive acts occurred after the approval of policy forms, supervision was impossible.'® This case presents no issue as to either prong of Midcal, and, therefore, no basis for certiorari. Defendants argue that if states have a clearly articu- lated policy of permitting joint forms development, then they implicitly have a clearly articulated policy permit- ting ali behind-the-scenes coercive activity that might conceivably be related to the creation and use of a partic- ular form. This argument would expand the state action doctrine to immunize agreements denying competitors access to essential inputs, and the boycotts implementing those agreements, even absent any evidence of public authorization, approval or supervision of the agreements and boycotts. Such an expansion of the state action doc- trine would be completely at odds with the decisions of this Court. In St. Paul Fire & Marine Insurance Co. v. Barry, 438 U.S. 531 (1978), this Court summarily rejected the defen- dants’ approach. There, four medical malpractice insur- ance companies agreed that three would not sell insurance to doctors in Rhode Island in order to force _18 For example, a key boycott allegation of the complaints is the withdrawal of support for competing ISO forms. Conn. Cmpt. 7] 101-104, UA App. A183-A184; See also Cal. Cmpt. W171 97-100, UA App. A131. As defendants admit, this was not accomplished until “more than a year after the approved 1986 forms had become effective.” Hartford Ptn. 6. qusE> qa Eww eee 18 them to accept new coverage terms set by St. Paul, the fourth insurer. There, as here, defendants had filed forms with state insurance regulators related to the boycotted coverages. Nevertheless, this Court found no suggestion that the State had authorized the concerted refusals to deal with St. Paul’s policyholders. Barry, 438 U.S. at 554, n. 26. The court of appeals adopted the same reasonable distinction in the present case. Approval of policy forms is not approval of market boycotts. The conduct of defen- dants in these cases “was neither a reasonable nor neces- sary consequence of the conduct regulated by the state.” 938 F.2d at 931, UA App. A30. Defendants simply fail to meet either prong of the Midcal test. No further review is warranted. Because the facts of this case are so unaccommodat- ing, defendants seek to recast them as mere forms devel- opment. Operating within this distorted construct, defendants focus on the process by which ISO drafts and obtains approval for insurance forms. But, contrary to defendants’ characterization, this case alleges mar- ketplace activities directed at an insurers’ individual decision what coverage to offer. Review is also inappropriate on the present unde- veloped record. in support of their summary judgment motion, defendants relied upon the affidavit of Carole Banfield.'? The Banfield affidavit merely asserts that rein- surers expressed their views cn proposed coverages.?° 19 Defendants also submitted an appendix of state insur- ance statutes. 20 At its most forceful, the affidavit states: ISO and the insurance regulators also discussed the proposed new forms with other interested par- ties, including insurers, agents, brokers, domestic (Continued on following page) 19 Nothing in this affidavit, or anywhere else in the record, suggests that the various agreements and their attendant boycotts were ever submitted for regulatory review and approval in any of the states subject to the state action motion. 938 F.2d at 931, UA App. A29. Nothing in this affidavit or anywhere else in the record supports a find- ing that any state regulator actively supervised these activities. Contrary to defendants’ hyperbole, the decision of the court of appeals will not create a crisis in federalism. Nowhere do the complaints attack or even question the regulatory acts of state officials. Accordingly, defendants’ invocation of this Court’s recent decision in City of Colum- bia v. Omni Outdoor Advertising, Inc., 111 S.Ct. 1344 (1991), is misplaced. What plaintiffs do challenge are back-room deals, unknown and unapproved by regulators, to force unwill- ing companies to toe a line drawn by a handful of power- ful firms. Open comment and debate are not at issue in these cases. If these boycotts are immune from antitrust scrutiny simply because state regulators see some public manifestation of the boycott, private regulation of the insurance industry by a few firms will supplant public regulation. By deterring these boycotts and forcing full and fair use of state regulatory processes, the court of appeals acted to strengthen state regulation, not to sup- plant it. a (Continued from previous page) and foreign reinsurers, and corporate risk managers. The discussions were sometimes heated and the industry-wide scrutiny was intense. Banfield Afft. { 9 at 5. 20 Ill. THE DECISION TO EXERCISE JURISDICTION IN THIS CASE PROPERLY APPLIES SETTLED PRINCIPLES OF INTERNATIONAL COMITY. A. This Case Provides No Occasion to Refine the General Principle Favoring the Exercise of Jurisdiction Where American Effects are Direct, Substantial and Foreseeable. As a general principle, “[c]ourts in the United States have the power, and ordinarily the obligation, to decide cases and controversies properly presented to them.” W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400, 409 (1990).21 This strong presumption in favor of the exercise of jurisdiction may nonetheless be overcome and principles of comity may come into play where the interests of, and links to, the United States are attenuated. Timberlane I, 549 F.2d 613. See also, Laker Airways, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 949 (D.C. Cir. 1984). Such is not the case here. The anticompetitive effects of the defendants’ conduct in the United States 21 Although Kirkpatrick is an act of state case, its powerful logic applies to this case as well. Moreover, its analysis stems from the same roots as the comity doctrine. Compare Restate- ment (Third) of Foreign Relations 443, comment a [The act of state doctrine has two policy bases: “deference to the executive branch and avoid[ing] disrespect for foreign states”] with Tim- berlane Lumber Co. v. Bank of America, 549 F.2d 597, 612 (9th Ci:. 1976) (Timberlane I), after remand, 749 F.2d 1378 (9th Cir. 1984) (Timberlane II), cert. denied, 472 U.S. 1032 (1985) {[“Only respect for the role of the executive and for international notions of comity and fairness limit [the] constitutional grant” of power that enables American courts to protect Americans from for- eign actions that have anticompetitive effects in the United States]. 23 were direct, substantial and foreseeable22; the action of the foreign government creates no true conflict with American antitrust laws. The lower courts have had occasion to articulate when principles of international comity require absten- tion from the exercise of jurisdiction.23 Timberlane, supra; Laker Airways, Ltd., supra; Mannington Mills, Inc. v. Con- goleum Corp., 595 F.2d 1287 (3d Cir. 1979). These articula- tions derive from the venerable Alcoa “effects” test. United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416 (2d Cir. 1945) (sitting by certification of this Court).24 The minor variations in these articulations are of no moment in the present case.?5 To the contrary, a court *2 As both courts below found, the complaints explicitly allege conduct with a “direct, substantial and reasonably fore- seeable” impact on American commerce. 723 F.Supp. at 486, UA App. A73; 938 F.2d at 932, 1'A App. A31. 23 Kirkpatrick cautions against treating such principles as “doctrines unto themselves” and thereby “expanding judicial incapacities.” 493 U.S. at 409. *4 Under Alcoa, “a state may impose liabilities, even upon persons not within its allegiance, for conduct outside its bor- ders that has consequences within its borders which the state reprehends.” Alcoa, 148 F.2d at 443. The conduct should, how- ever, “significantly” or “directly” affect the United States com- merce or be intended to have that effect. This Court cited Alcoa with approval in Continental Ore Co. v. Union Carbide, 370 U.S. 690, 705 (1962). 23 Defendants argue that the court of appeals’ Timberlane analysis was wrongly “constrained” by reference to the For- eign Trade Antitrust Improvements Act of 1982 (FTAIA), 15 U.S.C. § 6a. This misstates the use to which the court of appeals put the FTAIA. Indeed, ii simply concluded that its Timberlane analysis should be informed, but not superseded, by the “direct, substantial and foreseeable effect” standard articu- lated in the FTAIA. 938 F.2d at 932; UA App. A31. Thus, the (Continued on following page) ll ll... LG 22 would exercise jurisdiction over the facts of this case under any recognized comity test.?¢ The conduct challenged in this case has its principal effects in the United States. The complaints allege a com- plex and overlapping pattern of conspiratorial activity engaged in by both foreign and domestic actors that targeted United States markets. Initially conceived by the American domestic primary insurer defendants, the con- spiratorial scheme sought to limit the number of insur- ance products offered to insurance consumers in the United States. Foreign and domestic réinsurers were recruited as parties necessary to guarantee that unwilling American competitors would comply with the scheme. The integral involvement of domestic companies in the scheme to withhold reinsurance belies any notion that such activity was “wholly foreign.” 938 F.2d at 932, UA App. A33. Only by ignoring the overarching American focus of the complaints can defendants represent that their motion to dismiss on comity grounds involves solely British actors in British markets. Merrett Ptn. 3-4.27 (Continued from previous page) court of appeais concluded: “as the [FTAIA] does not eliminate comity, a court should look to see if the case before it is one in which comity still has a role to play.” Id., VA App. A32. This is precisely what the court of appeals did here. 26 The Timberlane balancing test employed by the court of appeals is the one most favorable to defendants. Defendants, notably, do not claim that any other circuit court of appeals would have reached a different result. 27 The so-called “global claim” for relief in the complaints of many plaintiffs explicitly alleges that all defendants partici- pated in a single, overarching conspiracy. Conn. Cmpt. {7 115-119, UA App. A188-A190. While the court of appeals (Continued on following page) 23 Moreover, the complaints expressly allege that foreign and domestic reinsurers entered into a written agreement to use their “best endeavors to ensure that all U.S.A. and Canadian exposed insurance/reinsurance business attaching on or after 1st January, 1987, will only be writ- ten where the original business includes a seepage and pollution exclusion wherever legal and applicable.” Conn. Cmpt. J 112, UA App. A185-A186; Cal. Cmpt. {@ 108, UA App. A133. This clear focus on American commerce justifies the decision of the court of appeals to exercise jurisdiction.28 At the very most, defendants have only raised factual disputes as to whether the conspirators were exclusively foreign nationals and whether the relevant anticompeti- tive conduct occurred exclusively abroad.29 Jurisdiction (Continued from previous page) recognized that the trial court had properly dismissed that claim on a narrow technicality of pleading, it directed the trial court on remand to allow plaintiffs an opportunity to cure that deficiency by amendment. 938 F.2d at 931, UA App. A30. Defendants’ claim that those allegations were simply dis- missed, Merrett Ptn. 4, n. 2, is misleading. 28 Urging that jurisdiction be exercised, the United States as amicus curiae below commented that “[i]nternational comity principles do not mandate automatic deference to the domestic law or jurisdiction objections of foreign states . . . where the conduct challenged has its competitive effects principally in the United States.” Brief for the United States of America as Amicus Curiae, at 27. In fact, the United States contended that the district court “failed to accord adequate weight to the fact that the competitive effects of the alleged conspiracy were felt primarily within the United States or to the resulting interest of the United States in enforcing its law.” Id. 29 No discovery preceded this Rule 12(b)(1) motion and there is no factual record beyond the face of the complaints (Continued on following page) 24 should not be denied on the mere assertion of these factual disputes. B. No Genuine Conflict Exists Between United States and United Kingdom Law. ~ In an attempt to counterbalance the compelling rea- sons for the exercise of jurisdiction, defendants claim that the British “tradition of self-regulation” creates an inter- national conflict of sufficient scope to warrant denying jurisdiction in these cases. Defendants do not suggest that British law requires the foreign defendants to take actions forbidden by American law, that British law forbids what American law requires, nor even that compliance with American antitrust law would substantially interfere with the foreign defendants’ mode of conducting business at home and within the European economic community. Merrett Ptn. 6, n. 4. They point to no inconsistency between American antitrust law and the United King- dom’s Competition Act of 1980 or Article 85(1) of the Treaty of Rome, governing competitive practices in the EEC.30 The supposed conflict is in reality nothing more than a dispute about the propriety of subjecting British subjects to the jurisdiction of American courts and (Continued from previous page) that can be evaluated to conduct comity analysis. See Tim- berlane I and Timberlane II, supra (decided only after substantial discovery and on a full factual record). 30 Defendants do not here, nor did they below, cite any statute, regulation or court decision to show that English law requires, Or even acquiesces in, the conduct challenged by plaintiffs. 25 interfering with a British tradition of self regulation.?! The conflict asserted is manifestly insufficient to over- come the interest of the United States in enforcing its own law. IV. PLAINTIFFS HAVE STANDING AS CONSUMERS IN THE MARKET RESTRAINED BY THE REIN- SURER BOYCOTTS. Reinsurers have filed two separate petitions? argu- ing that plaintiffs lack standing to pursue certain claims against them. Both petitions are based upon a fundamen- tal mischaracterization of plaintiffs’ complaints. To obscure plaintiffs’ unquestionable standing as consumers in the market restrained by reinsurer boycotts, the peti- tions focus attention on activities in the reinsurance mar- ket. Plaintiffs’ complaints plainly allege, however, that the reinsurers’ boycotts restrained the primary insurance market in which the plaintiffs are consumers. Cal. Cmpt. WY 112, 117, 122 & 127, UA App. A134, A136, A137, A139: Conn. Cmpt. 7] 116 & 121, UA App. A186 & A188. The 31 Defendants have effectively asked this Court to show greater deference to the supposed regulatory interests of the United Kingdom than to the regulatory interests of one of the states of this country. If the two-pronged Midcal test were applied to the conduct of foreign defendants, no immunity would attach. The boycott conduct at issue here is neither permitted by British law, Pet. at 6, n.4, nor actively supervised by the British government. 32 These are: 1. Docket No. 91-1131 (Winterthur Rein- surance Corp of America); and 2. Docket No. 91-1146 (Union- america Insurance Co. Ltd. et al.). 26 plaintiffs, thus, have standing as consumers that have been injured by the elimination of competing insurance products in this market.*% A. Plaintiffs Meet This Court's Test for Standing. These petitions do not warrant review by this Court because the court of appeals decided the standing issues in these cases strictly in accordance with this Court's decisions in Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983) (AGC); and Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982). AGC involved a boycott allegedly organized by building contractors to coerce prospective developers to use nonunion contractors instead of union contractors. This Court acknowledged that both the developers and the union contractors would have had standing to chal- lenge the boycott because “their injuries would be direct.” 459 U.S. at 541.%4 Thus, AGC established that those upon whom the immediate pressure of a boycott falls (developers) agd 33 Regardless of their standing as insurance purchasers, the state plaintiffs also have standing to seek injunctive relief as common law parens patriae on behalf of their respective citizens. Georgia v. Pennsylvania Railroad Co., 324 U.S. 439 (1944). Because citizens in each state have suffered antitrust injury, even as defined by defendants in their standing peti- tions, nothing in this Court's opinion in Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986), would limit the states’ parens authority in these cases. See California v. American Stores Co., Inc., 495 U.S. 271 (1990). 34 However, the mere employees of these victims (or the union which represents them, the plaintiff in AGC) would not have standing. 27 their suppliers (union contractors) whose goods or ser- vices have been diminished in value because of the boy cott each have standing to recover antitrust damages This principle is fully consistent with the Court's prior decision in McCready. There, both the psychologists who felt the immediate pressure of a boycott and the patients who purchased the boycotted product, psycho- logical services, had standing to sue. McCready, 457 U.S. at 469 n.4, 478-81. In McCready, the patient was consid- ered “the direct victim of unlawful coercion.” AGC, 459 U.S. at 540, n.44. Indeed, to the extent that there might be a difference between suppliers to the direct boycott vic- tim (the union contractors in AGC) and purchasers from the direct boycott victim (the patient in McCready), the courts have tended to favor the latter. See P. Areeda & H. Hovenkamp, Antitrust Law 9 340.1d (1991 Supp.). In the instant case the initial victims of the boycott are non-defendant primary insurers who were coerced by reinsurer and primary insurer defendants. Plaintiffs are purchasers of the diminished insurance products sold by the defendant primary insurers and their victims, com- peting, non-defendant primary insurers. Plaintiffs, thus, are in the same position as the patient in McCready and are in an analogous position to the union contractors in AGC. B. This Case Does Not Challenge the Boundaries of Standing Doctrine. In AGC this Court established a multi-factor test for standing.*> As to the claims for damages, each petition 35 The AGC factors are: the intent of the conspirators (459 U.S. at 537); the causal connection between the violation alleged and harm claimed (id.); the nature of plaintiffs’ injury, (Continued on following page) 28 advocates a different formulation of that test. Review is not warranted, however, because plaintiffs have standing under either formulation for both damages and injunctive relief.36 The Winterthur petition argues that plaintiffs must satisfy all of the AGC factors to have standing. The deci- sion below correctly holds that plaintiffs satisfy each factor for all claims. The court of appeals noted that the “character-of-damages” factor as applied to the reinsurer- only claims presented some problems of damage alloca- tion tending against standing for these claims. However, even as to that factor the court of appeals held that, on balance, the factor “is in favor of standing.” 938 F.2d at 926, UA App. A20. Furthermore, the global conspiracy claim?’ over- comes any “character-of-damages” concerns. Under the (Continued from previous page) i.e., antitrust injury (id. at 538); the directness or indirectness of the claimed injury in the chain of causation (id. at 540-541); existence of a better class of plaintiffs (id. at 542); and whether the damages claimed are either speculative in terms of causa- tion or duplicative (id. at 542-545). 36 Cargill recognizes important differences between dam- ages and injunctive remedies and holds that “some” AGC factors “are not relevant under § 16,” i.e. factors addressing multiple lawsuits and duplicative recoveries. Cargill, 479 U.S. at 111 n.6. 37 The Unionamerica petition does not challenge plaintiffs’ standing under the global conspiracy claim, but misleadingly refers to it as “dismissed.” UA Ptn. 6-7, n.6. The court of appeals granted plaintiffs leave to amend that claim to cure technical problems. See n.27, supra. The Winterthur petition concedes the continued vitality of the claim, but apparently contends that the Court should ignore direct purchases from coconspirators and deny standing. Winterthur Ptn. 20 n.8. 29 global claim, the reinsurers are coconspirators of the defendant primary insurers from which plaintiffs made direct purchases. See Arizona v. Shamrock Foods, 729 F.2d 1208 (9th Cir.), cert. denied, 467 U.S. 1252 (1984); Fontana Aviation v. Cessna Aircraft Co., 617 F.2d 478 (7th Cir. 1980). When a plaintiff purchases directly from a named cocon- spirator of an antitrust violator, none of the policy con- cerns of Illinois Brick?® are implicated. P. Areeda & H. Hovenkamp, Antitrust Law § 337.2e (1991 Supp.). Any issues of duplicative liability and allocation can be resolved because all potentially conflicting claimants are joined in the litigation. In light of plaintiffs’ standing to sue defendants under the global claim, a fragmented review of the reinsurance-only claims would be prema- ture and potentially futile. The Unionamerica petition argues that “directness” and “the nature of the injury” are separate and indepen- dent limitations on standing. Because the court of appeals correctly held that plaintiffs satisfied both requirements, consideration of this question should await a case in which one of the two elements, and, therefore, the out- come of the case, is in doubt. C. Plaintiffs Suffered Distinct Injuries. Defendants’ suggestion that the damages sought by the plaintiffs in these cases are either speculative or duplicative is simply without merit. The speculativeness referred to in AGC only relates to causation of injury and not to its quantification. AGC, 459 U.S. at 542 (“the 38 Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). ee 30 alleged effects on the Union may have been produced by independent factors”). The danger of duplicative recoveries does not exist here. This is not a passing-on case where there will be “conflicting claims to a common fund,” id. at 544, that might give rise to concerns similar to those in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The boycotts in these cases give rise to two types of injury that are suffered by distinct and different classes of potential plaintiffs. The plaintiffs currently before the Court were injured by the product output restrictions and the over- charges that flowed from the violation. The competing, non-defendant primary insurers were injured by the enforcement effects of defendants’ cartel. Each class of potential plaintiffs suffered distinct and separable inju- ries. Indeed, this Court’s decisions in both AGC and McCready expressly recognized the separate standing of different classes of plaintiffs for each of these types of injuries. No court has ever held that it would be duplicative to allow standing for the victims of violations which also cause actionable injury to defendants’ competitors. Such a holding would limit standing to competitors in a wide variety of cases. Such a holding would, for example, deny standing to consumers who pay the overcharges imposed by a monopolist that unlawfully excludes competitors from the market. Defendants have not offered this Court any princi- pled basis for denying standing to the consumers of cartellized insurance products in this case. Thus, they have not provided any basis for review of the decision of the court of appeals. CONCLUSION For the foregoing reasons, the petitions for writs of certiorari should be denied. DATED this 14th day of February, 1992 31 Respectfully submitted, For the Plaintiff States: J. JoserH CurRRAN, Jr., Attorney General of the State of Maryland Rosert N. McDona tp, Assistant Attorney General Chief, Antitrust Division ELLEN S. Cooper Assistant Attorney General Deputy Chief, Antitrust Division 200 St. Paul Place, 19th Floor Baltimore, Maryland 21202 Telephone: (410) 576-6470 James H. Evans, Attorney General of the State of Alabama Marc GIVHAN Chief, Antitrust Division 11 South Union Street Montgomery, Alabama 36130 Telephone: (205) 242-7300 CuHares E. Cote, Attorney General of the State of Alaska RON ZOBEL Assistant Attorney General Department of Law 1031 W. Fourth Avenue, Suite 200 Anchorage, Alaska 99501 Telephone: (907) 269-5100 32 GRANT Woops, Attorney General of the State of Arizona SUZANNE M. DALLIMORE Antitrust Unit Chief Jer! K. AUTHER Assistant Attorney General Consumer Protection & Antitrust Section 1275 West Washington Phoenix, Arizona 85007 Telephone: (602) 542-3702 DanieL E. LUNGREN, Attorney General of the State of California Roperick E. WALSTON, Chief Assistant Attorney General SANFORD N. GRUSKIN Assistant Attorney General THOMAS GREENE, Supervising Deputy Attorney General Administrative Liaison Counsel for the States KATHLEEN E. FOOTE Jesse W. MARKHAM, Jr. Deputy Attorneys General 455 Golden Gate Avenue, Room 6200 San Francisco, California 94102 Telephone: (415) 703-2131 ee 33 Gace A. Norton, Attorney General of the State of Colorado James R. Lewis, Assistant Attorney General, Antitrust Unit 110 Sixteenth Street - 10th Floor Denver, Colorado 80202 Telephone: (303) 620-4590 RICHARD BLUMENTHAL, Attorney General of the State of Connecticut RosBert M. LANGER WiLuiAM M. RuBENSTEIN Assistant Attorneys General 110 Sherman Street Hartford, Connecticut 06105 Telephone: (203) 566-5374 RICHARD T. IEYous, Attorney General of the State of Louisiana JoserH ErwIN Kopsa CLiFFTON O. BINGHAM Assistant Attorneys General Louisiana Department of Justice P.O. Box 94095 Baton Rouge, Louisiana 70804-9095 Telephone: (504) 342-8495 34 Scott HARSHBARGER, Attorney General of the Commonwealth of Massachusetts GEORGE K. WEBER Assistant Attorney General Chief, Antitrust Division THomas M. ALPERT Assistant Attorney General Antitrust Division Public Advocacy Bureau One Ashburton Place, Room 1902 Boston, Massachusetts 02108 Telephone: (617) 727-2200 FRANK J. KELLEY, Attorney General of the State of Michigan Harry C. Iwasko, Jr. FREDERICK H. HoIFFECKER Rospert C. WARD, Jr. Assistant Attorneys General 740 Law Building 525 W. Ottawa Lansing, Michigan 48913 Telephone: (517) 373-7117 35 Husert H. Humpnrtry, III Attorney General of the State of Minnesota THomas F. Purse, Deputy Attorney General Lisa TIEGEL, Special Assistant Attorney General 520 Lafayette Road Suite 200 St. Paul, Minnesota 55155 Telephone: (612) 297-8753 Marc Racicor, Attorney General of the State of Montana PAUL JOHNSON Assistant Attorney General Justice Building 215 North Sanders Helena, Montana 59620-1401 Telephone: (406) 444-2026 Rosert J. Det Turo, Attorney General of the State of New Jersey LAUREL A. PRICE Deputy Attorney General Division of Criminal Justice Antitrust Section 25 Market Street - CN085 Trenton, New Jersey 08625 Telephone: (609) 984-5683 36 Ropert ABRAMS Attorney General of the State of New York GEORGE SAMPSON Chief, Antitrust Bureau RicHARD L. SCHWARTZ Assistant Attorney General 120 Broadway, Suite 2601 New York, New York 10271 Telephone: (212) 341-2277 Lee FISHER, Attorney General of the State of Ohio DorrREEN C. JOHNSON Marc B. BANDMAN Assistant Attorneys General 65 East State Street, Suite 708 Columbus, Ohio 43266-0590 Telephone: (614) 466-4328 ErNest D. PREATE, Jr. Attorney General of the Commonwealth of Pennsylvania THomas L. WELCH Davip R. Wey Deputy Attorneys General 1435 Strawberry Square Harrisburg, Pennsylvania 17120 Telephone: (717) 787-4530 37 KENNETH O. EIKENBERRY Attorney General of the State of Washington JOHN R. E us, Deputy Attorney General James M. BEAULAURIER Tina E. Konno | Assistant Attorneys General Office of the Attorney General 900 Fourth Avenue Suite 2000 Seattle, Washington 98164 Telephone: (206) 464-6432 Mario J. PaLumso, Attorney General of the State of West Virginia Donatp L. Daruinc Deputy Attorney General DONNA S. QUESENBERRY Senior Assistant Attorney General 812 Quarrier Street, Sixth Floor Charleston, West Virginia 25301 Telephone: (304) 348-8986 James E. Doyte, Attorney General of the State of Wisconsin Kevin J. O’CoNNoR Assistant Attorney General Post Office Box 7857 Madison, Wisconsin 53707-7857 Telephone: (608) 266-8986 38 For the private plaintiffs: H. Lappie Montacug, Esq. ALAN M. SANDALS, Esa. BERGER & MONTAGUE 1622 Locust Street Philadelphia, Pennsylvania 19103 (215) 875-3000 Attorneys for Henry L. Rosenfield JERRY S. COHEN, Esq. COHEN, Mitstein & HaAusre_p 1401 New York Avenue, N.W. Suite 600 Washington, D.C. 20005 (202) 628-3500 Attorneys for Anastasios Markos T/A Municipal Exxon and Carlisle Day Care Center, Inc. NicHotas E. Cuimictes, Esq. KATHY MEARMANS, Esq. GREENFIELD & CHIMICLES One Haverford Center 361 Lancaster Avenue Haverford, Pennsylvania 19041 (215) 641-8500 Attorneys for Big D Building Supply Corporation 39 Guipo Savert, Esq. SAVERI & Saveri 111 Sutter St., Suite 2140 San Francisco, CA 94104 (415) 391-3000 Liaison Counsel JONaTHAN W. Cuneo, Esq. Law OFFICES OF JONATHAN W. CuNEO 1300 I Street, N.W. Suite 480-E Washington, D.C. 20005 (202) 962-3860 Attorney for Anastasios Markos T/A Municipal Exxon JEREMIAH F. HALtusey, Esq. Hauuisey & JOHNSON 300 Montgomery St., Suite 538 San Francisco, CA 94104 (415) 433-5300 Attorneys for Day Harbor Park Homeowner's Association, Inc. STANLEY Nemser, Esq. Roy L. Jacoss, Esq. Wotr, Poprrer, Ross, Wo tr & JONES 845 Third Avenue New York, N.Y. 10022 (212) 759-6400 Attorneys for Ace Check Cashing, Inc. 40 HowarpD J. CRESKOFF Law OFFICES OF HowarpD J. CRESKOFF 200 Lippincott Building 227 South Sixth Street Philadelphia, PA 19106 (215) 922-5056 JEFFREY KL Laster, Esq. BERNSTEIN, Litow!Tz, BERCER & GROSSMAN 1285 Avenue of the Americas New York, NY 10019 (212) 554-1400 Attorneys for Jerry Grant Chemical Associates, Inc. ARNOLD LeEviIN, Esq. Levin, FisHBEIN, SEDRAN & BERMAN 320 Walnut Street Suite 600 Philadelphia, PA 19106 (215) 592-1500 Attorneys for Carlisle Day Care Center, Inc. WarREN RuBin, Esq. Gross & METZGER 1500 Walnut St. 4th Floor Philadelphia, PA 19102 (215) 561-3600 Attorneys for Acme Corrugated Box, Inc. CC 41 Rosert M. RoseMAN, Esq. Mark S. GoLpMAN, Esq. RUDOLPH, SEIDNER, GOLDSTEIN, RocuHestig & SALMON 300 Lewis Tower Building 225 South 15th Street Philadelphia, PA 19102 (215) 735-5858 Attorneys for Bensalem Township Authority, et al. Louis M. Tarasi, JR., Esq Tarasi & JOHNSON 510 Third Avenue Pittsburgh, PA 15219 (412) 391-7135 Attorneys for Carmelia M. “Boots” Liberto Trading as R. J. Liberto, Inc. J. Dante Sacarin, Esq. Hurwitz & SAGARIN 147 North Broad Street P.O. Box 112 Milford, CT 06460-0112 (203) 877-6071 Attorneys for Durawood, Inc. Mark W. Gareney, Esq. KAPLAN, KILSHEIMER & FoLey 122 East 42nd Street New York, NY 10168 (212) 687-1980 Attorneys for Environmental Aviation Sciences, Inc. 42 CHarRies R. VAN De WALLE, Esq. MArTIN, VAN De WALLE, GUARINO & DONOHUE 17 Barstow Road Room 206 Great Neck, NY 11021 (516) 482-6100 Attorneys for Keyboard Communications, Inc. LAWRENCE WALNER, Esq. LAWRENCE WALNER & ASSOCIATES, INC. 321 North Clark Street Suite 3150 Chicago, IL 60610 (312) 527-9494 Attorneys for P & J] Casting Corp. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0029%3A3. Public record. Not legal advice.