Seasongood v. K and K Ins. Agency
Decision Date | 06 January 1977 |
Docket Number | No. 76-1194,76-1194 |
Citation | 548 F.2d 729 |
Parties | 1977-1 Trade Cases 61,237 Lester SEASONGOOD, Appellant, v. K & K INSURANCE AGENCY et al., Appellees. |
Court | U.S. Court of Appeals — Eighth Circuit |
Edward G. Farmer, Jr., St. Louis, Mo., for appellant; Jim J. Shoemake, St. Louis, Mo., on the brief.
John F. Rudy, II, Tampa, Fla., and Richard M. Stout, Kirkwood, Mo., filed brief for K & K Ins. Agency.
William I. Rutherford, St. Louis, Mo., for Foremost Ins. Co.; Elihu M. Hyndman and William E. Buckley, St. Louis, Mo., filed brief.
Edwin S. Taylor, St. Louis, Mo., for Sports Car Club of America; Veryl L. Riddle and John J. Hennelly, Jr., St. Louis, Mo., filed brief.
Before VAN OOSTERHOUT, Senior Circuit Judge, and HEANEY and HENLEY, Circuit Judges.
VAN OOSTERHOUT, Senior Circuit Judge.
This case raises substantial questions concerning the exemption from the federal antitrust laws provided to the business of insurance by the McCarran-Ferguson Act, as amended, 15 U.S.C. §§ 1011-1015. The district court, for reasons stated in its memorandum opinion, 414 F.Supp. 698 (E.D.Mo.1976), granted defendants' motion to dismiss plaintiff's complaint with prejudice for failure to state a claim upon which relief could be granted. 1 We reverse.
The factual allegations of plaintiff's complaint, which for purposes of reviewing the propriety of the dismissal we assume to be true, are relatively simple. Plaintiff Lester Seasongood, a licensed insurance agent and broker, had for a period of eighteen years provided a master plan of insurance for defendant Sports Car Club of America (SCCA), a corporation organized to promote and sanction sports car races and other events. SCCA is affiliated with ninety-nine regional sports car clubs across the country, each of which is a separate corporation and each of which sponsors the various sports car events within its respective region. For each event the regional affiliate is issued a "sanction" by SCCA, and no event is "authentic" unless sanctioned by SCCA. One requirement for an SCCA sanction is the purchase by the regional affiliate of insurance coverage approved by SCCA.
Prior to February 1975 plaintiff, under the master plan he had developed with SCCA, provided substantial coverage for the regional affiliates and in connection therewith collected in excess of $750,000 in premiums annually. In February 1975, however, SCCA and defendant K & K Insurance Agency (K & K) entered into an "exclusive contract" by which SCCA in effect switched its master plan from plaintiff to K & K. SCCA has since "coerced" its regional affiliates into procuring insurance through K & K by "impliedly or implicitly" threatening to withhold or withdraw its sanction if the policies are not so procured. As a result, K & K has recently provided over ninety-five per cent of the coverage for sanctioned sports car events. K & K has placed such insurance with defendant Foremost Insurance Company (Foremost), which has designated K & K as its exclusive agent for such business and which was itself an active participant in the alleged combination and conspiracy.
Moreover, the actions of SCCA, K & K and Foremost, and the actions of the regional affiliates (which were not named as defendants), were not prompted by independent business judgment, but were motivated by a desire to "restrain, hinder or eliminate" plaintiff from the business of writing sports car event coverage and thereby to eliminate plaintiff as a competitor.
Plaintiff claims that the conduct complained of is, in various respects, exclusive, coercive, monopolistic and otherwise anticompetitive, in violation of Sections 1 and 2 of the Sherman Act, as amended, 15 U.S.C. §§ 1 and 2, respectively. 2 He seeks treble damages and other relief pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, as well as injunctive relief.
Each of the defendants contended before the district court, and each of them contends here, that its actions are shielded from federal antitrust scrutiny by the McCarran-Ferguson Act. The controlling provisions of this Act are Sections 2(b) and 3(b), as amended, 15 U.S.C. §§ 1012(b) and 1013(b), respectively, which provide as follows:
Section 2(b). No 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, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance: Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended, shall be applicable to the business of insurance to the extent that such business is not regulated by State law.
Section 3(b). Nothing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation.
The district court held that Section 2(b) did apply and that Section 3(b) did not. It accordingly dismissed plaintiff's complaint with prejudice.
In an effort to escape the result reached by the district court, plaintiff advances three contentions, all of which concern the appropriate construction of Section 2(b) or 3(b) and the appropriate application of Section 2(b) or 3(b) to the facts at hand. These contentions are that the activities complained of (1) are not the "business of insurance" within the meaning of Section 2(b); (2) are not "regulated by State law" within the meaning of Section 2(b); and (3) constitute "act(s) of boycott, coercion, or intimidation" within the meaning of Section 3(b).
We hold that the complaint does not conclusively demonstrate that the activities complained of are regulated by state law within the meaning of Section 2(b) and that it was for this reason improperly dismissed. We do not reach the other issues raised.
We are met at the outset with a procedural objection. At least one of the defendants contends that plaintiff is precluded from arguing in this court that the activities complained of are not regulated by state law because plaintiff did not present that issue to the district court. Although we can hardly commend plaintiff for his belated pursuit of this issue, neither can we accede to defendants' contention. It was defendants' burden to establish the availability of the McCarran-Ferguson exemption, and defendants chose the procedural device of a motion to dismiss. In thus moving to dismiss, defendants not only assumed a heavy burden, but they also necessarily placed in issue themselves each component of the exemption. Thus, however perfunctory the district court's resolution of this issue may have been, and notwithstanding plaintiff's failure to bring this issue fully to light before that court, the issue was properly before the district court and is properly before us. 3
We reiterate familiar principles governing motions to dismiss, both for the purpose of explaining why we reject defendants' procedural contention and for the purpose of reviewing generally the manner in which we view the complaint in the instant case. These principles were exhaustively set forth in Great Atlantic & Pacific Tea Company v. Amalgamated Meat Cutters, 410 F.2d 650, 652-53 (8th Cir. 1969). We said:
(T)he Supreme Court has held that "(i)n appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a claim 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). . . .
It is established doctrine that a pleader is not required to set forth specific facts to support its general allegations, . . . and pleadings are to be construed liberally in favor of the pleader(.) . . .
The philosophy and intent of the Federal Rules concerning pleadings is authoritatively explained by the Supreme Court in Conley, supra, at 47-48, 78 S.Ct. at 103:
We note, too, that the courts are especially reluctant to dismiss a complaint for failure to state a claim in the rapidly developing antitrust area. . . .
(Citations omitted in part).
With these principles firmly in mind, we proceed to the merits of plaintiff's contention.
The judicial setting in which the McCarran-Ferguson Act was passed is a familiar one and was aptly summarized by the Fifth Circuit as follows:
In 1869 the Supreme Court held that "(I)ssuing a policy of insurance is not a transaction of commerce." Paul v. Virginia, 75 U.S. (8 Wall.) 168, 183, 19 L.Ed. 357 (1869). After that decision it was widely assumed that congressional regulation of the insurance business was improper. But in 1944 the Supreme Court held that insurance...
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