Supplemental Brief — Winterthur Reinsurance Corp. of America v. California

r

No. 91-1131

Euoreme Court, U.S, |

FILED

|

IN THE

Sigreme Court of the UWuited Sta

AUG 25 1992 |

iPr OF THE CLERK

OCTOBER TERM, 1992

WINTERTHUR REINSURANCE CorRP. OF AMERI(

V.

STATE OF CALIFORNIA, et al.,

Re sponde ny: :

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

SUPPLEMENTAL MEMORANDUM FOR PETIT

PURSUANT TO RULE 15.7

RONALD C. REDCAY

ad ot Bann ng

ARNOLD & PORTER

777 South Figueroa Street

Forty-Fourth Floor

Los Angeles, California 9'

(213) 243-4000

PHILIP H. CURTIS

[_- ————

<

IONER

WILSON - Epes PRINTING Co., INC. - 789 96 - WASHINGTON, D.C

TABLE OF AUTHORITIES

Cases: Page

issociated General Contractors of Califernia \

California State Council of Carpenters, 459 U.S.

519 (1983) passim

Blue Shield of Va. v. McCready, 457 U.S. 465

(1982) 3, 4

A

IN THE

Suprenwe Court of the United Siates

OCTOBER TERM, 1992

No. 91-1131

WINTERTHUR REINSURANCE CORP. OF AMERICA,

Petitioner,

v.

STATE OF CALIFORNIA, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

SUPPLEMENTAL MEMORANDUM FOR PETITIONER

PURSUANT TO RULE 15.7

Petitioner. Winterthur Reinsurance Corp. of America

(“Winterthur”), respectfully submits this supplemental

memorandum in response to the brief filed by the Solicitor

General as amicus curtae on behalf of the United States.

1. What Antitrust Standing Test Did The Ninth Cir-

cuit Apply? The Ninth Circuit’s ruling on antitrust stand-

ing in this case is as confused as the general state of

antitrust standing law in the lower courts. In its deci-

sion, the Ninth Circuit explicitly states that plaintiffs have

standing to sue because “|a]lmost all of the Associated

General Coniractors factors” are satisfied. Winterthur

Pet. App. 16a. Needless to say, if the antitrust standing

test established by Associated General Contractors of Cali-

fornia, Inc. Vv. California State Council of Carpenters, 459

U.S. 519 (1983), requires a plaintiff to satisfy all the

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L1-IS), there is considerable confusio} In the lower courts

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( at POW@r applcactlon if he s<issociated Geh-

eral Contractor: est. The Solicitor General does no

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that this Court uid not attempt to clarify the scope of

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That is precisely why this Court should grant certiorari,

In the nine years since Associated Creneral Contractors

was decided, the lower courts have failed to come to any

consensus as to how the Associated General Contractors

standing test should be applied. This Court should not

forgo this opportunity to ensure that the lower courts

properly apply the analytical framework set. forth in

Associated General Contractors. The Solicitor General’s

ittempted reconciliation of the interna] inconsistencies

in the Ninth Circuit's analysis should not be the basis

for denying certiorari.

2. This Case Is Not Controlled By This Court's Deci-

sion In The McCready Case. The Solicitor General also

argues that certiorari should be denied because plaintiffs’

position in this case is comparable to the position of the

samba who was granted ae ae in Blue Shield of

Va. McCready, 457 U.S. 465 (1982). This is simply

not so. In McCready, the plaintiff had standing to sue

Blue Shield because she was directly injured by Blue

Shield’s refusal to reimburse her for payments that she

had made to her psychologist. There was no other direct

Victim in the Met ‘yeady ecuse, As the McCready Court

expressiy ruled the plaintiff’s psychologist (the alleged

arget”’ of the Blue Shield boycott) could assert “no

claim of injury,” because the psychologist had been “full ly

paid” by the plaintiff and was not affected by Blue Shield’s

refusal to reimburse the plaintiff. /d. at 475.

“In another footnote, the Solicitor General also suggests that “it

is not clear” that Winterthur preserved its standing arguments on

appeal, since the standing issue was addressed in a footnote rather

than in the text of petitioners’ brief in the court of appeals. U.S. Br.

18 n.15. Yet, as the Solicitor General] concedes, the court of appeals

in fact decided the supposedly en issue-—“the ee

have standing to maintain this antitrust suit against all defendants

Winterthur Pet. App. 17a (emphasis added). Moreover, as noted in

its Petition for Certiorari, Winterthur also filed a separate, independ

ent joinder to the petition for rehearing in the court of appeal

that expressly raised the standing issue. Winterthur Pet. 5-6 n.4.

d

In short, in McCready, the plaintiff clearly suffered a

direct injury; the other potential plaintiff (her psychol-

ogist! suffered no such injury. The facts of McCready

aie a far cry from the facts of this case, where “the

action of the reinsurers took effect through the primary

insurers” (Winterthur Pet. App. 15a), and where the

alleged direct victims (i.e., the primary insurers) could

sue if they were so inclined."

3. Plaintiffs’ Alleged Injuries Were Not Direct. It is

undisputed that Winterthur never sold (or refused to

sell) insurance to plaintiffs or other consumers. Winter-

thur soid reinsurance only to other insurers. Neverthe-

less, the Solicitor General argues that plaintiffs should

have standing to sue Winterthur because Winterthur and

other reinsurers allegedly conspired with four primary

insurers, who sell directly to consumers. In the Solicitor

General’s view, the allegation that four primary insurers

conspired with Winterthur and other reinsurers makes

this case “analogous to resale price maintenance” cases—

Where consumers have been granted standing to sue both

the dealer from whom they purchased and the manufac-

turer who engaged in the vertical price-fixing conspiracy

with the direct-selling dealer. U.S. Br. 20-21,

The Solicitor General’s characterization of the case,

however, cannot withstand analysis. Plaintiffs do not

allege that Winterthur conspired with each primary in-

surer who sold (or refused to sell) to plaintiffs. Far from

it. There are over 1400 primary insurers nationwide.

see U.S. Br. 2. Only four of these primary insurers are

*Thus, the risk of duplicative recovery was not present in

McCready. Here, however, that risk is clearly present. since non-

defendant primary insurers might well file suit. The Solicitor Gen-

eral, acknowledging the risk that primary insurers might also sue,

secks to minimize this risk by speculating that primary insurers

“presumably would allege a different type of injury.” U.S. Br. 21.

In fact, it is more likely that primary insurers would allege exactly

the same type of injury as insurance consumers —i.e., that the alleged

conspiracy made it impossible or more costly to obtain the insurance

product they wanted.

on

0

alleged to have conspired with Winterthur; the remainder

were allegedly the victims of this purported conspiracy.

According to plaintiffs’ allegations, the four defendant

primary insurers induced Winterthur (and other reinsur-

ers! to refuse to offer reinsurance to the 1400 noncon-

spiring primary insurers.

Thus, Winterthur’s alleged misconduct consists of its

refusal—induced by the defendant primary insurers—

to sell reinsurance to the nondefendant primary insurers.

None of the primary insurers is alleged to have partici-

pated in a “vertical conspiracy” that is analogous to a

“resale price maintenance” scheme. The 1400 nonde-

fendant primary insurers are alleged victims, not con-

spirators; they—not plaintiffs—suffered the most direct

alleged injury. As a result, the problems of complex

damage apportionment and the risks of duplicative recov-

eries are present notwithstanding the allegations that

four of the primary insurers induced the alleged refusal

to sell reinsurance.

Indeed, even the four defendant primary insurers are

not in the same position as a direct-selling dealer in a

vertical price-fixing case. Plaintiffs’ allegation is not

that the reinsurers induced the four defendant primary

insurers to refuse to offer insurance policies to consum-

ers; rather, plaintiffs’ allegation is that the four defend-

ant primary insurers induced the reinsurers to refuse

to offer reinsurance to other primary insurers. There is

simply no vertical link between the reinsurers and the

consumer plaintiffs.

By the same token, plaintiffs should not be able to

create standing simply by alleging that Winterthur’s re-

fusal to sell reinsurance was “intended to disrupt” the

primary insurance market. U.S. Br. 19. Intent alone

is insufficient as a matter of law to create standing, even

when combined with a claim of consequential harm flow-

ing from an alleged antitrust violation. See, e.g., Asso-

ciated General Contractors, 459 U.S. at 545. Moreover,

the fact that a refusal to sell in one market has reper-

6

cussions in an adjacent market cannot suffice to confer

standing upon all consumers in the adjacent market. See

Winterthur Pet, 23-24. When all is said and done, plain-

tiffs are still consumers of primary insurance, and Win-

terthur and other reinsurers are stil! sellers only of re-

insurance. Plaintiffs are not consumers of the product

sold by reinsurers; any injury suffered by them is by

definition an “indirect” injury.

* * * *

In the final analysis, it remains undisputed that the

Associated General Contractors test for antitrust stand-

ing is currently being applied in divergent ways by the

lower courts. This case presents an opportunity for this

Court to eliminate the confusion that is reflected in the

lower courts’ application of that test. Winterthur re-

spectfully submits that its petition for certiorari should

be granted.

Respectfully submitted,

RONALD C, REDCAY

Counsel of Record

ARNOLD & PORTER

777 South Figucroa Street

Forty-Fourth Floor

Los Angeles, California 90017

(218) 243-4000

PHILIP H. CurTIS

WILLIAM H. VoTH

ARNOLD & PORTER

399 Park Avenue

New York, NY 10022

(212) 715-1000

DouGLAS L. WALD

ANNETTE M. LANG

ARNOLD & PORTER

1200 New Hampshire Ave., N.W.

Washington, D.C. 20036

(202) 872-6700

August 1992 Counsel for Petitioner

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