Jeanine for Herself v. ITT Hartford , 102 F.3d 494 ( 1996 )

United States Court of Appeals,
Eleventh Circuit.
No. 95-3257.
Jeanine SLAGLE, For Herself and All Others Similarly Situated,
Plaintiff-Appellant,
v.
ITT HARTFORD, State Farm Fire and Casualty Company, Allstate
Insurance Company, Aetna Casualty & Surety Company, and Florida
Windstorm Underwriting Association, The Hartford Company,
Defendants-Appellees.
Dec. 31, 1996.
Appeal from the United States District Court for the Northern
District of Florida. (No. 94-40563-WS), William Stafford, Judge.
Before EDMONDSON, Circuit Judge, FAY, Senior Circuit Judge, and
ALDRICH*, Senior District Judge.
ANN ALDRICH, Senior District Judge:
The appellant, Jeanie Slagle, a consumer of windstorm
insurance in the state of Florida, brought the instant antitrust
action against the appellees, insurance companies licensed to
transact business in Florida and members of the Florida Windstorm
Underwriting Association (FWUA). Slagle's complaint alleged that
the appellants' business practices in the insurance industry limit
competition in violation of section 1 of the Sherman Act, 15 U.S.C.
§ 1. Thereafter, the appellees moved for judgment on the pleadings,
contending that their alleged conduct was exempt under the
McCarran-Ferguson Act, 15 U.S.C. § § 1011-1015. The magistrate
judge assigned to the case agreed, and recommended granting the
motion. Upon review of that decision and the filed objections, the
*
Honorable Ann Aldrich, Senior U.S. District Judge for the
Northern District of Ohio, sitting by designation.
district court adopted the magistrate judge's decision as its own
and dismissed Slagle's complaint. Slagle appealed. For the
reasons that follow, we AFFIRM.
I.
Briefly, the FWUA is a joint underwriting association
comprised of property insurers licensed to do business in Florida.
The Florida legislature created the FWUA in 1970 in response to the
voluntary market's inability to provide windstorm-only insurance in
Florida's high-risk coastal areas. Fla.Stat. § 627.351 (1993).
State law mandates that the described insurers belong to the FWUA
and provide windstorm coverage to eligible applicants who are
unable to obtain such coverage through ordinary means. See
American Ins. Assoc. v. Florida Dep't of Ins., 646 So.2d 784, 785
(Fla.Dist.Ct.App.1994) (construing Fla.Stat. § 627.351(2)(b)1).
Member insurers are required to pay for the FWUA's losses on a
proportionate basis. Fla.Stat. § 627.351(2). Moreover, Florida's
Department of Insurance may regulate the rates charged by the FWUA.
Id. § 627.351(2)(a).
Slagle brought this action on behalf of herself and others as
part of an insured class alleging that the appellee insurers, as
1
Fla.Stat. § 627.351(2)(b) reads:
The department shall require all insurers licensed to
transact property insurance on a direct basis in this
state to provide windstorm coverage to applicants from
areas determined to be eligible pursuant to paragraph
(c) who in good faith are entitled to, but are unable
to procure, such coverage through ordinary means; or
it shall adopt a reasonable plan or plans for the
equitable apportionment or sharing among such insurers
of windstorm coverage. The commissioner shall
promulgate rules which provide a formula for the
recovery and repayment of any deferred assessments.
members of the FWUA, violated the antitrust laws by refusing to
issue windstorm insurance on an open market in certain Florida
coastal areas. Specifically, Slagle alleged that the appellees
have engaged in concerted anticompetitive conduct by the "fixing,
pegging or stabilizing of insurance premiums and prices among
ostensible competitors through horizontal price fixing and unlawful
allocation of markets, customers and territories and the
establishment and agreement upon a boycott." According to Slagle,
the appellees have agreed among themselves on the rates charged for
windstorm insurance coverage sold to the public. Consumers
desiring to purchase windstorm insurance coverage in designated
coastal areas of Florida are directed by the insurance carrier,
issuing their other coverages, to the FWUA as the only source for
the issuance of windstorm coverage. None of the insurance
companies which combined to form the FWUA will offer for sale any
windstorm insurance coverage to their customers, or the marketplace
of customers for whom they would otherwise compete. Consequently,
the sole source of windstorm insurance coverage for those customers
is the FWUA. See Appellant's Brief, p. 10-11. Slagle maintains
that such conduct violates the Sherman Act, as provided in 15
U.S.C. § 1, and falls within the "boycott" exception in § 3(b) of
the McCarran-Ferguson Act.
The Sherman Act establishes that "[e]very contract,
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with
foreign nations, ... to be illegal." 15 U.S.C. § 1. As applicable
to the present case, and notwithstanding the antitrust laws of the
Sherman Act, the McCarran-Ferguson Act provides that regulation of
the insurance industry is generally a matter for the states, 15
U.S.C. § 1012(a), and that "[n]o Act of Congress shall be construed
to invalidate, impair, or supersede any law enacted by any State
for the purpose of regulating the business of insurance." Id. §
1012(b). Section (3)(b) of the McCarran-Ferguson Act creates an
exception to the Act's antitrust exemption, stating that the
Sherman Act shall remain applicable, in any event, "to any
agreement to boycott, coerce, or intimidate, or act of boycott,
coercion, or intimidation." 15 U.S.C. § 1013(b). In effect,
section 3(b) creates an exception to the general rule that state
regulated insurance activities are immune from federal regulation
under the Sherman Act.
Prior to discovery, the appellees moved for judgment on the
pleadings reasoning that the McCarran-Ferguson Act bars Slagle's
federal antitrust claims because the alleged activity involves the
"business of insurance," and is currently regulated by Florida
state law. The appellees further maintained that the alleged
conduct did not fall within the "boycott" exception to the
McCarran-Ferguson Act. After a review of the magistrate judge's
report and recommendation, which agreed with the appellees on both
issues, the district court granted that motion. See Slagle v. ITT
Hartford Ins. Group, 904 F.Supp. 1346 (N.D.Fla.1995).
On appeal, Slagle contends that the appellees' alleged conduct
is not entitled to McCarran-Ferguson immunity because such conduct
in refusing to deal with consumers relates to the "business of
insurers" and not the "business of insurance." Alternatively,
Slagle argues that the appellees' conduct constitutes a "boycott"
and thus falls within the exception to the McCarran-Ferguson Act's
bar on antitrust claims.
In response, the appellees assert that the district court
correctly ruled that the challenged conduct pertains to the
"business of insurance" as applicable to § 2(b) of the McCarran-
Ferguson Act, 15 U.S.C. § 1012(b). Moreover, the appellees argue
that Slagle fails to plead the type of conduct which would
constitute a "boycott" as that term has been defined by the Supreme
Court in the context of § 3(b) of the McCarran-Ferguson Act, 15
U.S.C. § 1013(b).
II.
Judgment on the pleadings is appropriate when "no issues of
material fact exist, and the movant is entitled to judgment as a
matter of law." Ortega v. Christian, 85 F.3d 1521, 1524 (11th
Cir.1996) (citing Fed.R.Civ.P. 12(c)). The complaint may not be
dismissed "unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would entitle
him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99,
102, 2 L.Ed.2d 80 (1957). See also Hartford Fire Ins. Co. v.
California, 509 U.S. 764, 811, 113 S.Ct. 2891, 2917, 125 L.Ed.2d
612 (1993). "When reviewing a judgment on the pleadings, we accept
the facts in the complaint as true and view them in the light most
favorable to the nonmoving party." Ortega, 85 F.3d at 1524 (citing
Swerdloff v. Miami Nat'l Bank, 584 F.2d 54, 57 (5th Cir.1978));
see also Hartford, 509 U.S. at 770, 113 S.Ct. at 2895; General
Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist
Congregational Church, 887 F.2d 228, 230 (9th Cir.1989), cert.
denied, 493 U.S. 1079, 110 S.Ct. 1134, 107 L.Ed.2d 1039 (1990).
Accordingly, as a decision on the merits, we review a judgment on
the pleadings de novo. Ortega, 85 F.3d at 1524-25 (citing General
Conference Corp., 887 F.2d at 230).
III.
As stated above, the McCarran-Ferguson Act exempts conduct
from the federal antitrust laws if it is "the business of
insurance" and is "regulated by state law." 15 U.S.C. § 1012(b).
However, under Section 3(b), the exemption does not apply if the
challenged conduct involves an act or agreement of "boycott,
coercion, or intimidation." 15 U.S.C. § 1013(b).
A. The Business of Insurance and the McCarran-Ferguson Act
The district court concluded2 that the appellees' conduct as
alleged in the complaint is the "business of insurance." Slagle v.
ITT Hartford Ins. Group, 904 F.Supp. 1346, 1349 (N.D.Fla.1995).
According to the district court, the appellees' conduct pertains to
transferring and spreading a policyholder's risk, and that "[t]he
setting of premium rates and terms is an integral part of the
policy relationship between the insurer and the insured, and that
activity is limited to entities in the insurance industry." Id.Consequently, because the conduct is also regulated by the State of
Florida, Fla.Stat. § 627.062 (1993), the McCarran-Ferguson Act
exemption is applicable. Slagle challenges the district court's
conclusion by asserting that the appellees' alleged boycott and
2
The opinion issued by the district court incorporates the
entire decision of the magistrate judge.
enforcement activities are not the "business of insurance," but are
more accurately characterized as the "business of insurers." We
disagree.
The Supreme Court has developed a three-part test for
determining whether particular conduct constitutes the "business of
insurance." See Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119,
129, 102 S.Ct. 3002, 3008, 73 L.Ed.2d 647 (1982). Here, this Court
examines:
first, whether the practice has the effect of transferring or
spreading a policyholder's risk; second, whether the practice
is an integral part of the policy relationship between the
insurer and the insured; and third, whether the practice is
limited to entities within the insurance industry.
Uniforce Temp. Personnel v. National Council on Compensation Ins.,
Inc., 87 F.3d 1296, 1300 (11th Cir.1996) (quoting Pireno, 458 U.S.
at 129, 102 S.Ct. at 3008) (emphasis in the original).
In this case, we find, as did the district court, that
appellees' conduct fulfills each of these requirements. There is
no doubt that the appellees' conduct in setting the FWUA premium
rate has the effect of spreading and transferring a policyholder's
risk. See In re Workers' Compensation Ins. Antitrust Litig., 867
F.2d 1552, 1556 (8th Cir.) ("it is axiomatic that the fixing of
rates is central to transferring and spreading the insurance
risk"), cert. denied, 492 U.S. 920, 109 S.Ct. 3247, 106 L.Ed.2d 593(1989). Nor can it be questioned that this practice, which affects
only the parties within the insurance industry, remains an
essential part of the policy relationship. Accordingly, we
conclude that appellees' alleged rate-fixing conduct is the
"business of insurance." See Group Life & Health Ins. v. Royal
Drug Co., 440 U.S. 205, 224 n. 32, 99 S.Ct. 1067, 1080 n. 32, 59
L.Ed.2d 261 (1979) ("It is clear from the legislative history [of
the McCarran-Ferguson Act] that the fixing of rates is the
"business of insurance.' "); SEC v. National Sec., Inc., 393 U.S.
453, 460, 89 S.Ct. 564, 568, 21 L.Ed.2d 668 (1969) ("Certainly the
fixing of rates is part of the business [of insurance].");
Uniforce, 87 F.3d at 1300 (holding that the rate-making activity of
insurers in allegedly depriving temporary help industry of access
to voluntary market for workers compensation insurance and
providing coverage under assigned risk policies involved "business
of insurance"); Ocean State Physicians Health Plan v. Blue Cross
& Blue Shield, 883 F.2d 1101, 1108 (1st Cir.) (the marketing and
pricing of insurance policies is the business of insurance), cert.
denied, 494 U.S. 1027, 110 S.Ct. 1473, 108 L.Ed.2d 610 (1990).
B. The Boycott Exception
In the alternative, Slagle argues that appellees' conduct
falls within the "boycott" exception to the McCarran-Ferguson Act's
antitrust exemption. Specifically, Slagle contends that the
appellees have "stepped out from under the cloak of McCarran-
Ferguson protection by agreeing upon and carrying out a plan to
create a cartel and foreclose the windstorm insurance market by
boycotting and refusing to deal with customers within the windstorm
prone coastal counties of Florida." Slagle therefore claims that
the McCarran-Ferguson Act does not entitle the appellees to
immunity from her antitrust claims. In response, the appellees
argue that Slagle's complaint alleges nothing more than a
"cartelization," and the allegations, taken as true, do not amount
to a "boycott." We agree.
In Hartford Fire Ins. v. California, 509 U.S. 764, 113 S.Ct.
2891, 125 L.Ed.2d 612 (1993), the Supreme Court explained the term
"boycott" for purposes of the McCarran-Ferguson Act. Conduct
constitutes a "boycott" where, in order to coerce a target into
certain terms on one transaction, parties refuse to engage in
other, unrelated or collateral transactions with the target. Id.
at 802-03, 113 S.Ct. at 2912. Specifically, it is "the refusal to
deal beyond the targeted transaction that gives great coercive
force to a commercial boycott: unrelated transactions are used as
leverage to achieve the terms desired." Id. at 802-03, 113 S.Ct.
at 2912; Uniforce, 87 F.3d at 1298 (establishing that a "boycott"
is the "refusal to deal in a collateral transaction as a means to
coerce terms respecting a primary transaction"). In terms of the
McCarran-Ferguson Act, the term "boycott" means more than just "an
absolute refusal to deal on any terms." Id. at 801, 87 F.3d at
2911.3
In this case, Slagle contends that the appellees refuse to
deal with her directly in her attempt to purchase windstorm
insurance. However, such alleged conduct does not constitute a
boycott because the conditions of their refusal to deal relate
3
As acknowledged by the district court in this case, the
Hartford Court explained that "no one would call [a labor strike]
a boycott, because the conditions of the "refusal to deal'
related directly to the terms of the refused transaction (the
employment contract)." Slagle v. ITT Hartford Ins. Group, 904
F.Supp. 1346, 1350 (N.D.Fla.1995) (quoting Hartford, 509 U.S. at
805, 113 S.Ct. at 2913). Here, "[a] refusal to work changes from
strike to boycott only when it seeks to obtain action from the
employer unrelated to the employment contract." Id. (quoting
Hartford, 509 U.S. at 805, 113 S.Ct. at 2913).
directly to the terms of the purchase of windstorm insurance, the
primary transaction, and not to some collateral transaction. In
essence, Slagle claims that the appellees conspired to fix prices
at an unlawful rate, but as clearly announced in Hartford, a
conspiracy to charge an inflated price is not a "boycott". Id. at
802, 113 S.Ct. at 2912.4 Slagle simply fails to allege that the
appellees are using "unrelated transactions ... as leverage to
achieve the terms desired." Hartford, 509 U.S. at 803, 113 S.Ct.
at 2912. Accordingly, we conclude that the acts alleged in
Slagle's complaint do not come within the "boycott" exception to
the McCarran-Ferguson Act.
This conclusion is supported by our recent decision in
Uniforce Temporary Personnel, Inc. v. National Council on
Compensation Ins., 87 F.3d 1296 (11th Cir.1996). In Uniforce,
temporary employment companies brought an action against a workers
compensation insurance rating organization, insurers, and a
reinsurance pool. The plaintiffs alleged that the defendants'
conduct in depriving the temporary help industry of access to the
voluntary market for workers compensation insurance and providing
coverage under assigned risk policies constituted a "boycott" under
the McCarran-Ferguson Act, and thereby permitted the application of
the Sherman Act. The Uniforce court disagreed. Examining the
4
Here, the Court noted that "if a concerted agreement, say,
to include a security deposit in all contracts is a "boycott'
because it excludes all buyers who won't agree to it, then by
parity of reasoning every price fixing agreement would be a
boycott also. The use of the single concept, boycott, to cover
agreements so varied in nature can only add to confusion."
Hartford, 509 U.S. at 802, 113 S.Ct. at 2912 (quoting L.
Sullivan, Law of Antitrust 257 (1977)).
plaintiffs' claim using the Hartford definition of "boycott," the
court concluded that the primary transaction in that case concerned
the purchase of workers compensation insurance. Id. at 1300.
Because the plaintiffs were unable to allege that the defendants
refused to deal with them in a collateral transaction (i.e., the
purchase of health insurance), the court held that the alleged
conduct did not constitute a "boycott" within the meaning of the
McCarran-Ferguson Act. Id. Consequently, the McCarran-Ferguson Act
barred the plaintiffs' antitrust claims. Id. The factual
similarities in the present case lead us to the same conclusion as
that reached in Uniforce.
IV.
For the reasons stated herein, we hold that the McCarran-
Ferguson Act bars Slagle's antitrust claims. Accordingly, the
district court's order dismissing Slagle's claims is AFFIRMED.