St Paul Fire Marine Insurance Company v. Barry
| Decision Date | 29 June 1978 |
| Docket Number | No. 77-240,77-240 |
| Parties | ST. PAUL FIRE & MARINE INSURANCE COMPANY et al., Petitioners, v. David M. BARRY et al |
| Court | U.S. Supreme Court |
Respondents, licensed physicians practicing in Rhode Island and their patients, brought a class action against petitioners, four insurance companies writing medical malpractice insurance in the State, alleging a conspiracy in violation of the Sherman Act in which three of the four companies refused to deal on any terms with the policyholders of the fourth as a means of compelling them to submit to new ground rules set by the fourth, whereby coverage on an "occurrence" basis would not be renewed and coverage would issue only on a "claims made" basis. Petitioners' motion to dismiss the antitrust claim on the ground that it was barred by the McCarran-Ferguson Act was granted by the District Court. The Court of Appeals reversed, holding that the complaint stated a claim within the "boycott" exception in § 3(b) of that Act, which provides that the Sherman Act shall remain applicable "to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation." Held :
1. The antitrust claim is not mooted by the fact that after the complaint was filed Rhode Island formed a Joint Underwriters Association to provide medical malpractice insurance and to require all personal-injury liability insurers in the State to pool expenses and losses in providing such insurance. Since Rhode Island now permits the writing of such insurance outside of the Association, it cannot be said that "subsequent events ma[ke] it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur," United States v. Phosphate Export Assn., 393 U.S. 199, 203, 89 S.Ct. 361, 364, 21 L.Ed.2d 344. Pp. 537-538.
2. The "boycott" exception of § 3(b) applies to certain types of disputes between policyholders and insurers and is not limited to concerted activity directed against competitor insurers or agents or, more generally, against competitors of members of the boycotting group. Pp. 538-551.
(a) The language of § 3(b) is broad and unqualified, covering "any" act or agreement amounting to a "boycott, coercion, or intimidation." Had Congress intended to limit its scope to boycotts of competitor insurer companies or agents, and to preclude all Sherman Act protection for policyholders, it presumably would have made this explicit. The customary understanding of "boycott" at the time of enactment, as elaborated in th Sherman Act decisions of this Court, does not support a definition of the term that embraces only those combinations that target competitors of the boycotters as the ultimate objects of a concerted refusal to deal. Pp. 541-546.
(b) The legislative history, while not unambiguous, provides no substantial evidence that Congress sought to attach a special meaning to the language of § 3(b) that would exclude policyholders from all Sherman Act protection from restrictive agreements and practices by insurers falling outside of the realm of state-supervised cooperative action. Congress intended to preserve Sherman Act review of certain forms of regulation by private combinations and groups, including but not limited to the eradication of "blacklisting" and other exclusionary devices directed at independent insurance companies or agents. Pp. 546-550.
(c) Nor does the structure of the McCarran-Ferguson Act support the proposed limitation on the reach of § 3(b). Section 3(b) is an exception to § 2(b), which limits the general applicability of the federal antitrust laws "to the business of insurance to the extent that such business is not regulated by State law." Congress intended in the "boycott" clause of § 3(b) to carve out of the overall framework of plenary state regulation an area that would remain subject to Sherman Act scrutiny. Pp. 550-551.
3. The type of private conduct alleged to have taken place here, directed against policyholders, constitutes a "boycott" within the meaning of § 3(b). Pp. 552-555.
(a) Such conduct accords with the common understanding of a boycott. The agreement binding petitioners erected a barrier between respondents and any alternative source of the desired coverage, effectively foreclosing all possibility of competition anywhere in the relevant market. Pp. 552-553.
(b) The conduct with which petitioners are charged appears to have occurred outside of any regulatory or cooperative arrangement established by the laws of Rhode Island. This is not a case where a State has decided that regulatory policy requires that certain risks be allocated in a particular fashion among insurers or has authorized insurers to decline to insure particular risks. Here a group of insurers decided to resolve by private action the problem of escalating damages claims and verdicts by coercing policyholders of one of the insurers to accept a severe limitation of coverage. Pp. 553-555.
555 F.2d 3, affirmed.
Sidney S. Rosdeitcher, New York City, for petitioners.
Leonard Decof, Providence, R. I., for respondents.
Daniel M. Friedman, Washington, D. C., for the United States, as amicus curiae, by special leave of Court.
Respondents, licensed physicians practicing in the State of Rhode Island and their patients, brought a class action, in part under the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1 et seq. (1976 ed.), against petitioners, the four insurance companies writing medical malpractice insurance in the State. The complaint alleged a private conspiracy of the four companies in which three refused to sell respondents insurance of any type as a means of compelling their submission to new ground rules of coverage set by the fourth. Petitioner insurers successfully moved in District Court to dismiss the antitrust claim on the ground that it was barred by the McCarran-Ferguson Act, § 1 (Act), 59 Stat. 33, as amended, 15 U.S.C §§ 1011-1015 (1976 ed.).1 The Court of Appeals reversed, holding that respondents' complaint stated a claim within the "boycott" exception in § 3(b) of the Act, which provides that the Sherman Act shall remain applicable "to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation," 15 U.S.C. § 1013(b) (1976 ed.). 555 F.2d 3 (CA1 1977). We are required to decide whether the "boycott" exception applies to disputes between policyholders and insurers.
As this case comes to us from the reversal of a successful motion to dismiss, we treat the factual allegations of respondents' amended complaint as true.2 During the period in question, petitioners St. Paul Fire & Marine Insurance Co. (St. Paul), Aetna Casualty & Surety Co., Travelers Indemnity of Rhode Island (and two affiliated companies), and Hartford Casualty Co. (and an affiliated company) were the only sellers of medical malpractice insurance in Rhode Island. In April 1975, St. Paul, the largest of the insurers, announced that it would not renew medical malpractice coverage on an "occurrence" basis, but would write insurance only on a "claims made" basis.3 Following St. Paul's announcement, and in furtherance of the alleged conspiracy, the other petitioners refused to accept applications for any type of insurance from physicians, hospitals, or other medical personnel whom St. Paul then insured. The object of the conspiracy was to restrict St. Paul's policyholders to "claims made" coverage by compelling them to "purchase medical malpractice insurance from one insurer only, to wit defendant, St. Paul, and that [such] purchase must be made on terms dictated by the defendant, St. Paul." App. 25. It is alleged that this scheme was effectuated by a collective refusal to deal, by unfair rate discrimination, by agreements not to compete, and by horizontal price fixing, and that petitioners engaged in "a purposeful course of coercion, intimidation, boycott and unfair competition with respect to the sale of medical malpractice insurance in the State of Rhode Island." Id., at 24-27.4 On November 19, 1975, the District Court for the District of Rhode Island granted petitioners' motion to dismiss. The District Court declined to give the "boycott" exception the reading suggested by its "broad wording," declaring instead that "the purpose of the boycott, coercion, and intimidation exception was solely to protect insurance agents or other insurance companies from being 'black-listed' by powerful combinations of insurance companies, not to affect the insurer-insured relationship." Id., at 44.
On May 16, 1977, a divided panel of the Court of Appeals for the First Circuit reversed in pertinent part. The majority reasoned that the "boycott" exception was broadly framed, and that there was no reason to decline to give the term "boycott" its "normal Sherman Act scope." 555 F.2d, at 8. "In antitrust law, a boycott is a 'concerted refusal to deal' with a disfavored purchaser or seller." Id., at 7. The court thought that this reading would not undermine state regulation of the industry. "Regulation by the state would be protected; concerted boycotts against groups of consumers not resting on state authority would have no immunity." Id., at 9.
On August 12, 1977, petitioners sought a writ of certiorari in this Court. To resolve the conflicting interpretations of § 3(b) adopted by several Courts of Appeals,5 we granted the writ on October 31, 1977. 434 U.S. 919, 98 S.Ct. 391, 54 L.Ed.2d 275. We now affirm.
At the threshold, we confront a question of mootness. Although not raised by the parties, this issue implicates our jurisdiction. See, e. g., Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 7-8, 98 S.Ct. 1554, 1559, 56 L.Ed.2d 30 (1978); Sosna v. Iowa, 419 U.S. 393, 398, 95 S.Ct. 553, 556, 42 L.Ed.2d 532 (1975).
The Court of Appeals requested the parties to brief the question whether the antitrust claim was mooted by Rhode...
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