Bogan v. Hodgkins

• Citation: 166 F.3d 509
• Decision Date: 02 February 1999
• Docket Number: Docket No. 97-9295
• Parties: 1999-1 Trade Cases P 72,428 Robert BOGAN and Scott Bogan, Plaintiffs-Appellants, v. Austin E. HODGKINS, Jr., Defendant-Appellee, Northwestern Mutual Life Insurance Company, Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 509

166 F.3d 509

1999-1 Trade Cases P 72,428

Robert BOGAN and Scott Bogan, Plaintiffs-Appellants, v. Austin E. HODGKINS, Jr., Defendant-Appellee, Northwestern Mutual Life Insurance Company, Defendant.

Docket No. 97-9295

United States Court of Appeals,

Second Circuit.

Argued April 22, 1998.

Decided Feb. 2, 1999.

Michael S. Devorkin (Doar Devorkin & Rieck, New York, NY), for Plaintiffs-Appellants.

Timothy P. Coon (Bleakley Platt & Schmidt, White Plains, NY), for Defendant-Appellee.

Before: WALKER and CALABRESI, Circuit Judges, and RESTANI, ^* Judge.

RESTANI, Judge:

This is an appeal from a partial final judgment and order of the District Court for the Southern District of New York, Conner, J., granting the motion of Robert and Scott Bogan ("the Bogans" or "plaintiffs") to reconsider its prior opinion, Bogan v. Northwestern Mut. Life Ins. Co., 953 F.Supp. 532 (S.D.N.Y.1997). The District Court vacated its judgment entered February 6, 1997, and (i) adhered to its prior decision granting partial summary judgment dismissing the Bogans' antitrust claims under Section 1 of the Sherman Anti-Trust Act, 15 U.S.C. § 1 (1994) [hereinafter the "Sherman Act"], against Austin E. Hodgkins, Jr.; (ii) vacated that part of its prior opinion, and reserved decision on the exercise of supplemental jurisdiction over various state law claims against Plaintiff-appellants contend that the District Court erred in granting partial summary judgment dismissing their antitrust claims against Hodgkins. ¹ Defendant-appellees defend the District Court's grant of summary judgment but argue that the District Court erred in finding that defendants had the capacity to conspire and that the dispute was not exempt from antitrust enforcement under the McCarran-Ferguson Act, 15 U.S.C. § 1013 (1994).

Hodgkins and Northwestern Mutual Life Insurance Company ("NML") pending a decision on this appeal of the dismissal of the antitrust claims; (iii) denied in all other respects the Bogans' motion to vacate and amend the prior judgment; and (iv) directed entry of a partial final judgment, pursuant to Fed.R.Civ.P. 54(b).

Jurisdiction

This court has jurisdiction under 28 U.S.C. § 1291 (1994).

Standard of Review

This court reviews a grant of summary judgment de novo. Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1072 (2d Cir.1993). Summary judgment is appropriate "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). We determine whether there are disputed facts after resolving "all ambiguities and draw[ing] all factual inferences in favor of" the non-movant. A.F.A. Tours, Inc. v. Whitchurch, 937 F.2d 82, 89 (2d Cir.1991).

Background

The Insurance Company

Northwestern Mutual Life Insurance Company operates in the New York metropolitan area through a multi-tiered structure of independent contractor insurance agents with exclusive contracts; agents have the exclusive NML policy franchise and may sell policies for other carriers only after granting NML a right of first refusal. NML contracts with six General Agents, who in turn contract with Special Agents and with District Agents, who contract with Soliciting Agents. ² General Agents for NML usually have exclusive territories, but six General Agents share the New York area.

Agents are compensated by commission on policy writings and renewals according to their structural position in the NML hierarchy. Thus, General and District Agents receive an override commission on the commissions paid to Sales Agents contracted to them. The rates of compensation are incorporated into the agents' contracts and reflect a uniform commission and fee schedule used by all NML agents in each tier. Actual policy terms and premiums are established by NML. General Agents pay for recruiting and training their own District and Sales Agents.

The Metropolitan Agreement and NML Transfer Restriction Policy

What plaintiffs refer to as the "Metropolitan Agreement" ("the Agreement") is an agreement among NML General Agents not to recruit and hire each others' existing District or Sales Agents without the consent of the agent's current General Agent. According to Hodgkins, agent transfer restrictions initially were determined by "whatever the general agents agreed upon." A senior NML vice president characterized the Agreement as "among the general agents." At some point, the Agreement was reduced to a writing entitled the "Agreement for Open Territory for Both Solicitation and Development of the New York Metropolitan Area," providing that "[t]ransfer of agents between the General Agents will not be permitted."

NML literature referred to "friendly agreements" between NML General Agents which "restrict Agents from transferring from one agency to another within [a] metropolitan area," adding that exceptions are In November 1989, NML met with the General Agents to discuss the transfer restriction policy, issuing a memo regarding the meeting entitled "New York Metropolitan Agreement." By December 1989, NML was referring to the Agreement as "Company Policy." NML viewed its own potential participation in the Agreement as arbitrating disputes over transfers.

                made "by the mutual agreement of the General Agents involved."   NML's legal staff, aware of the possibility that "a no-transfer policy can be considered to be a boycott or a refusal to deal," expressed concern about the antitrust implications of such agreements--that is, about "whether the 'no transfer' rule is effectively a restraint of trade."   NML has made various references to the Agreement as an agreement of or among the General Agents
                

The Bogans

Robert Bogan began his relationship with NML as a Sales Agent in 1976. In 1987, he became a District Agent, under Hodgkins' General Agency. Robert Bogan claims to have been a very successful District Agent, ranked fourth out of 300 nationwide. He also purports to have invested $1.5 million in the development and improvement of his District Agency. He asserts that during his tenure as District Agent, the District Agency increased from three to fifteen agents, while annual sales increased from $11 to $120 million.

Scott Bogan, Robert's brother, became a Sales Agent in 1985 under Robert's predecessor District Agent. After working briefly under Hodgkins, in 1987 he signed a Sales Agent's contract with Robert Bogan.

The Bogans' Termination

Robert Bogan and Hodgkins were involved in a long-running dispute concerning two Sales Agents whom Bogan accused of writing policies with other carriers in violation of the exclusive dealing clause in their NML contract. ³ Bogan claims Hodgkins told him not to interfere, as part of a plot to take over his District Agency and to give it to the two Sales Agents, who were Hodgkins' friends.

As the culmination of this dispute, on May 29, 1990, Robert Bogan was terminated by Hodgkins with thirty days notice, effective June 30, 1990. Upon Robert Bogan's termination, all Sales Agent contracts under him, including Scott Bogan's, were automatically terminated. In accordance with Bogan's District Agent contract, Hodgkins requested the records of the two Sales Agents. When Robert Bogan stalled and refused to comply with this request, on June 4, 1990, Hodgkins terminated him for cause, allegedly as a pretext to trigger the agent transfer restrictions.

During the dispute, Hodgkins had cited the transfer restriction, warning Bogan in writing shortly before his termination that "recontracting/transferring to another Metro/NYC office is NOT an option," and verbally that he could "either work for [Hodgkins] or get out of the business." Following his termination, Robert Bogan signed a Sales Agent contract with Gerald Gilbert, another of the six NML New York General Agents. On June 11, 1990, Scott Bogan allegedly tried to contract as a Sales Agent under Robert Bogan acting as a District Agent under Gilbert as General Agent. NML refused to approve Robert Bogan's contract with Gilbert.

Robert and Scott Bogan then contracted as agents for Massachusetts Mutual Life Insurance Company, also in the New York area, retaining the offices they occupied as NML agents.

Issues on Appeal

On appeal, the Bogans raise several arguments to support their contention that the District Court erred in granting summary judgment to Hodgkins on their antitrust claim pursuant to the so-called "rule of

                reason." 4  First, they argue that the Agreement is per se illegal both as a horizontal agreement in restraint of trade and as a group boycott.  Second, they ask that if we disagree with them that the Agreement fits into one of these established categories of per se illegal conduct, we establish a new category of per se illegal action to apply here.  Third, they urge us to view the Agreement as a "naked restriction" so that it would invoke the abbreviated version of the rule of reason known as "quick look."   Finally, the Bogans challenge the District Court's determination that the Agreement enhances interfirm competition, arguing (1) that the relevant market for analysis is the intrafirm (i.e., within NML) submarket for experienced NML agents services;  and (2) that the Agreement deleteriously affects that submarket by preventing NML General Agents from competing for the services of experienced NML agents.  Because we find that the Bogans do not succeed on any of their theories, we need not reach Hodgkins' contentions on appeal that the District Court erred in not deciding in favor of Hodgkins on other grounds as well
                

DISCUSSION

The parties disagree as to the origin and character of the transfer restriction policy. The Bogans' antitrust case depends on their allegation that the Agreement was primarily and initially a horizontal agreement between the General Agents rather than an NML policy. ⁵ The company's publication of the Agreement and later...