Modern Home Institute, Inc. v. Hartford Acc. & Indem. Co.

• Decision Date: 11 March 1975
• Docket Number: No. 371,D,371
• Citation: 513 F.2d 102
• Parties: 1975-1 Trade Cases 60,216 MODERN HOME INSTITUTE, INC. and Romac Resources, Inc., Plaintiffs-Appellants, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY et al., Defendants-Appellees. ocket 74-1965.
• Court: U.S. Court of Appeals — Second Circuit

Page 102

513 F.2d 102

1975-1 Trade Cases 60,216

MODERN HOME INSTITUTE, INC. and Romac Resources, Inc., Plaintiffs-Appellants, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY et al., Defendants-Appellees.

No. 371, Docket 74-1965.

United States Court of Appeals, Second Circuit.

Argued Jan. 8, 1975.

Decided March 11, 1975.

J. Daniel Sagarin, Bridgeport, Conn. (Leonard A. Schine, Joel C. Karp, Westport, Conn., of counsel), for plaintiffs-appellants.

John L. Warden, New York City (Alan M. Reinke, Sullivan & Cromwell, New York City, of counsel), for defendants-appellees Hartford Acc. and Indem. Co. and Hartford Fire Ins. Co.

Richard M. Reynolds, Hartford, Conn. (Robert M. Stephan, Hartford, Conn., Roger Skok Little, Day, Berry & Howard, Hartford, Conn., of counsel), for defendant-appellee The Aetna Cas. and Sur. Co.

George D. Brodigan, Hartford, Conn. (McNamara & Brodigan, Hartford, Conn., of counsel), for defendants-appellees The Travelers Ins. Co. and The Travelers Indem. Co.

George Levine, Hartford, Conn., for defendant-appellee The Connecticut Assn. of Independent Ins. Agents, Inc.

Before MEDINA, MANSFIELD and MULLIGAN, Circuit Judges.

MANSFIELD, Circuit Judge:

The central issue on this appeal is whether, in this treble-damage suit brought under § 1 of the Sherman Act, 15 U.S.C. § 1, charging defendants-appellees with a concerted refusal to deal with plaintiffs-appellants, the district court was warranted in granting summary judgment dismissing the complaint; more specifically whether the evidence was susceptible of inferences that would raise genuine issues as to material facts, entitling plaintiffs to a trial. We hold that upon the record the defendants were entitled to judgment as a matter of law, and affirm.

The gist of the action as set out in the amended substituted consolidated complaint ¹ is that the six defendants, Hartford Accident and Indemnity Company and Hartford Fire Insurance Company (collectively referred to as "Hartford"), The Travelers Insurance Company and Whether the district court correctly determined that plaintiffs had failed to adduce evidence supporting the inference of conspiracy which they seek to have drawn requires a review of the relevant undisputed events, which follows. In 1960 plaintiff Modern Home Institute was engaged in the business of gathering by individual telephone interviews information known as "family profiles" which it sold to merchants. In late 1960 or early 1961, after its Cleveland office had at the request of Nationwide Insurance Company obtained by telephone interviews the expiration dates of automobile insurance policies owned by those interviewed, Modern Home entered the business of acquiring X-dates with a view to selling them to insurance companies for use in soliciting individuals to buy insurance. X-dates are considered by some to be a useful selling tool for automobile insurance agents, since they enable an agent to solicit insureds at the time when they are most likely to be interested in their automobile insurance coverage and when a switch of insurers is most economically feasible. Without knowing the expiration date of a prospect's current automobile insurance policy an agent may solicit him at a time when he is unwilling or unable to consider changing his insurance coverage. For this reason plaintiffs considered the acquisition and sale of lists of insureds and their X-dates to be a promising new line of business. However, the idea had never been tested on any substantial scale and no one knew whether the information would prove of sufficient use to enable plaintiffs to gather and sell it at a profit. In short, it was in the embryonic stage.

The Travelers Indemnity Company (collectively referred to as "Travelers"), The Aetna Casualty and Surety Company ("Aetna") and The Connecticut Association of Independent Insurance Agents, Inc. ("CAIIA"), contracted, combined and conspired with each other to restrain insurance companies from purchasing lists of names of holders of automobile insurance policies along with the dates on which their policies expired ("X-dates") from plaintiffs, Romac Resources, Inc. and its parent, Modern Home Institute, Inc. The conspiracy allegedly took two related forms: (1) a tacit agreement between defendants and their independent insurance agents, based on a practice and/or custom in the agency insurance industry of ceding exclusively to such agents the ownership and development of the names of their respective customers and X-dates of their policies, to restrain and restrict competition in the sale and ownership of lists of names and X-dates; (2) a campaign of pressure and influence against plaintiffs' proposed business, instituted by certain defendants and state associations of independent insurance agents, which was acquiesced in by other defendants, resulting in an agreement to restrain and restrict competition in the sale and ownership of lists of names and X-dates. After eight years of voluminous discovery and pretrial motions the district court, in an opinion by Judge Blumenfeld reported at 378 F.Supp. 543 (D.Conn.1974), granted summary judgment to all defendants on the ground that plaintiffs had failed to produce any evidence, direct or circumstantial, rebutting defendants' showing that each rejection of plaintiffs' proposal was a unilateral business decision independently arrived at or that would lead a reasonable man to agree that plaintiffs' interpretation of the defendants' actions created any disputed issues of material fact as to the existence of a conspiracy. We affirm.

Plaintiffs began their attempt to market X-dates on a large scale in 1962. Romac Resources was organized as a wholly owned subsidiary of Modern Home to act as sales agent. Plaintiffs planned to sell their entire output of X-dates on an exclusive basis to one direct-writer insurance company and to one agency company. A direct-writer company sells insurance solely through its own salaried employee-agents who only handle insurance sold by their employer. An agency company obtains insureds The first defendant approached was Travelers. On April 18, 1962, Messrs. D'Arpa and Wallach, who controlled Modern Home and Romac, explained to Travelers' representatives their proposal to acquire and sell X-dates. Their proposal was later presented by the Travelers' representatives to Virgil Roby, the official having authority to decide on such a purchase. Roby testified that he rejected the proposal immediately, because it undermined the basic principle of the American Agency System; that is, that the name of each insured and the X-date of his policy are the property of the independent agent who sold the policy to the insured. ² On May 18, 1962, Travelers wrote D'Arpa that it would not purchase lists of X-dates because of Travelers' commitment to the American Agency System. Travelers, however, suggested that the X-dates might be offered to its independent agents for sale directly to them, a suggestion that was not pursued by plaintiffs.

through the placement of risks with it by independent agents who usually are able to place risks with more than one insurer. The lists offered by plaintiffs were to be broken down by geographic areas. Between May and August 1962 they approached approximately 30 insurance companies, including defendant companies, but were unable to induce any to agree to purchase any significant percentage of the X-dates which plaintiffs proposed to acquire through future interviews. Romac never engaged in business after 1962.

There is no evidence that in arriving at its decision Travelers communicated directly or indirectly with any other alleged co-conspirator or insurance agent. Indeed, the only evidence is that there was no such communication. No other defendant had rejected or reached a decision to reject plaintiffs' proposal (indeed, most had not yet been approached) and there is no evidence that Travelers even knew that any other defendant had been approached.

Meanwhile, beginning in May 1962, D'Arpa also approached the Hartford companies, meeting on May 8 with Channing Barlow and several other Hartford officials. Although initially interested, Barlow and his colleagues soon expressed concern over numerous problems, including the quality of plaintiffs' product, whether certain depressed areas could be eliminated, whether plaintiffs could develop a viable organization, and plaintiffs' inability to supply the names of policy issuers. Hartford did not want to pay for lists of its own policyholders or have its agents soliciting them. To avoid the latter possibility it would be necessary, if Hartford bought the names, to weed out the names of Hartford insureds from the lists, which would involve much work and expense. Furthermore, unless it knew the name of each policyholder's existing agent (which plaintiffs also could not supply) Hartford might supply one of its agents with information about the clients of another of its agents, which it clearly wanted to avoid. Because of this last problem one of Barlow's colleagues, Mr. Gilmore, immediately advised against accepting the proposal. The cost of the names was also seen as a problem by Hartford. The names were to cost 30 cents each on a test basis and 45 cents each thereafter. Hartford had previously been paying another company two cents each for names and addresses broken down by geographic area.

According to Hartford's officials a further problem was seen in the possibility of a direct-writer insurance company buying plaintiffs' product and thereby gaining a significant competitive advantage. Such companies would not have The decision to reject the proposal and to send a bulletin to all Hartford agents was made at a staff meeting on May 21, 1962. On May 31 Barlow wrote Romac, informing it of Hartford's decision. In reaching this decision Hartford did not communicate with any competitors and was unaware of any action taken by any other insurance company with respect to plaintiff...