Proctor v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 16 March 1982 |
| Docket Number | No. 80-2437,80-2437 |
| Citation | 675 F.2d 308 |
| Parties | , 1982-1 Trade Cases 64,606 Phillip M. PROCTOR, et al., Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeal from the United States District Court for the District of Columbia (D. C. Civil Action No. 249-72).
Jerry S. Cohen, Washington, D. C., with whom Michael D. Hausfeld, Washington, D. C., was on the brief, for appellants.
Bruce L. Montgomery, Washington, D. C., with whom James F. Fitzpatrick, Melvin C. Garbow, David P. Towey, Washington, D. C., for State Farm Mutual, Alan H. Silberman, Chicago, Ill., for Allstate, Robert M. Osgood and Margaret K. Pfeiffer, New York City, for Travelers Indemnity were on the joint brief for appellees, State Farm Mutual Automobile Insurance Co., et al.
John P. Arness, Washington, D. C., with whom David B. Waller and David A. Kikel, Washington, D. C., were on the brief for appellee, Liberty Mutual Insurance Co.
Larry L. Williams and J. Griffin Lesher, Washington, D. C., were on the brief for appellee, Nationwide Mutual Insurance Co.
Before ROBINSON, Chief Judge, and WRIGHT and EDWARDS, Circuit Judges.
Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.
TABLE OF CONTENTS
Page
I. HISTORY OF THE PROCEEDINGS IN THIS CASE ......... 312
A. The First District Court Decision ........... 312
B. The Court of Appeals Decision ............... 313
C. The Supreme Court's Remand in Light
of Royal Drug ............................... 314
D. The District Court Decision on
Remand ...................................... 315
II. ISSUES ON APPEAL ................................ 316
III. APPELLANTS' CLAIM OF A HORIZONTAL
RESTRAINT OF TRADE .............................. 318
A. Whether the Alleged Horizontal
Agreement Constitutes the "Business of
Insurance" Under the McCarran Act ........... 318
1. The Interpretation of the "Business
of Insurance" After Royal Drug ........... 318
2. Application of Royal Drug to the
Facts of this Case ....................... 321
B. Inadequacy of Evidentiary Support for
Appellants' Claim of a Horizontal
Price-Fixing Agreement or Conspiracy ........ 325
1. Scope of Review by an Appellate
Court .................................... 325
2. Basic Antitrust Principles Governing
Appellants' Claim ........................ 327
3. The Record Evidence in this Case ......... 327
(a) Evidence Cited in Appellants'
Brief on Appeal ...................... 328
(b) Evidence Cited by Appellants in
Opposition to the Renewed Motions
for Summary Judgment Below ........... 330
(c) Self-Serving Statements and
Conclusionary Allegations in
Appellants' Affidavits ............... 333
4. Summary of Evidence and Findings ......... 334
IV. APPELLANTS' CLAIM OF VERTICAL RESTRAINTS
OF TRADE ........................................ 335
A. Whether the Alleged Vertical Arrangements
Constitute the "Business of
Insurance" Under the McCarran Act ........... 336
B. The Legality of the Alleged Vertical
Arrangements ................................ 337
V. CONCLUSION ...................................... 339
This case is before us for the second time on appeal from a grant of summary judgment by the District Court. Appellants, several automobile repair shops, brought this suit ten years ago alleging that appellees five automobile insurance companies, 1 had conspired to fix the price of automobile body damage repair work in violation of section 1 et seq. of the Sherman Anti-Trust Act, 15 U.S.C. § 1 et seq. (1976). 2 Appellants' theory of liability has changed somewhat over the course of this litigation. Essentially, they now claim that the insurance companies agreed to a common formula for reimbursing their insureds for the cost of automobile damage repair work. In particular, they allege a horizontal agreement among appellees to pay automobile damage claims on the basis of an agreed "prevailing" hourly labor rate, thereby artificially depressing the price of automobile repair work. 3 Appellants claim that appellees implemented this alleged horizontal agreement by entering into vertical arrangements with certain "preferred" or "captive" repair shops that agreed to perform repair work at the rates prescribed by appellees. When this suit was initiated a decade ago, appellants also claimed that appellees had engaged in a group "boycott" of "independent" repair shops; however, appellants abandoned their "boycott" claim during their last appearance before the District Court, and they have not pressed the argument on this appeal.
The District Court first granted summary judgment to appellees in 1975, on the ground that the challenged practices-both horizontal and vertical-were immunized from federal antitrust attack under the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (1976) (). This judgment was premised on findings that the disputed practices constituted the "business of insurance" and were "regulated by State Law." Id. § 1012(b). 4 This court affirmed, but the Supreme Court subsequently vacated and remanded for further consideration in light of its decision in Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S. 205, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979), concerning the definition of the "business of insurance" under the McCarran Act. On remand, the District Court again granted summary judgment to appellees, holding that (1) Royal Drug did not alter the ruling of the Court of Appeals that the McCarran Act immunized the alleged horizontal agreement from antitrust scrutiny, (2) the McCarran Act probably also immunized the alleged vertical arrangements and (3) even if the Act did not provide immunity, the vertical arrangements did not violate the antitrust laws. 5
Appellants attack the District Court's decision primarily on the ground that the McCarran Act antitrust exemption applies to neither the horizontal nor the vertical practices challenged in this case because they do not constitute the "business of insurance." Both sides argue on appeal that the Supreme Court's decision in Royal Drug clearly dictates a result in their favor on this issue. On the contrary, we have found it difficult to apply the Court's definition of the "business of insurance" in Royal Drug to the facts of this case. We are not alone in this struggle to interpret Royal Drug ; courts and commentators have offered widely divergent views about the scope of the McCarran Act antitrust exemption following Royal Drug. 6
After fully considering the Court's analysis in Royal Drug, we hold that, as to the horizontal claim, appellees are entitled to summary judgment because the alleged agreement between the insurance companies constitutes the "business of insurance" and, therefore, is exempt under the McCarran Act. In addition, we have carefully reviewed, and liberally construed, the documents and testimony in the record cited by appellants in support of their horizontal claim. We find that none of this evidence supports their allegations of a horizontal agreement or conspiracy among appellees to fix the price of automobile repair work. Thus, even if we assume, arguendo, that the McCarran Act exemption does not apply to the alleged horizontal agreement, we can find no merit to the antitrust claim on this portion of the case. Consequently, we hold, in the alternative, that appellees have demonstrated that there exists no genuine issue of fact material to appellants' horizontal claim and that they are entitled to judgment as a matter of law.
As to the alleged vertical arrangements, we hold that the District Court erred in concluding that these arrangements constitute the "business of insurance" under the McCarran Act. Nonetheless, we affirm the District Court's grant of summary judgment on this issue because we agree with its conclusion, not disputed on appeal, that the vertical arrangements themselves do not violate the antitrust laws. Finally, because we find no evidentiary support for the alleged horizontal agreement, we reject appellants' claim that appellees implemented a horizontal scheme by entering into vertical agreements with preferred or captive repair shops. We offer no opinion, however, as to the legality of any such implementation if shown to exist in another case.
Appellants brought this suit against five insurance companies on February 9, 1972. On December 18, 1975, the District Court granted summary judgment in favor of the five insurance companies on the ground that their activities were exempt from the antitrust laws under the McCarran Act. To qualify for exemption under that Act, the challenged practices must (1) constitute the "business of insurance," (2) be "regulated by State Law," and (3) not involve any "boycott, coercion or intimidation." 15 U.S.C. §§ 1012(b), 1013(b) (1976). 7 The District Court found that the practices and procedures involved in adjusting and settling automobile damage claims, which were an integral part of the activities challenged by appellants, constituted the "business of insurance."
To conclude, the settlement and payment of damage repair claims is (1) a basic part of the contractual obligation owed by the insurance company to the insured, whether or not the payment is made to the insured...
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