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HARTFORD FIRE INSURANCE CO., ET AL., PETITIONERS 91-1111 V. CALIFORNIA
ET AL.; AND MERRETT UNDERWRITING AGENCY MANAGEMENT LIMITED, ET
AL., PETITIONERS 91-1128 V. CALIFORNIA ET AL.
No. 91-
SUPREME COURT OF THE UNITED STATES
509 U.S. 764; 113 S. Ct. 2891; 125 L. Ed. 2d 612; 1993 U.S. LEXIS 4404; 61 U.S.L.W. 4855; 1993-1 Trade Cas. (CCH) P70,280; 93 Cal. Daily Op. Service 4830; 93 Daily Journal DAR 8186; 7 Fla. L. Weekly Fed. S 638
February 23, 1993, Argued June 28, 1993 * , Decided
Together with No. 91-1128, Merrett Underwriting Agency Management Ltd. et al. v. California et al., also on certiorari to the same court.
PRIOR HISTORY: ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.
DISPOSITION: 938 F.2d 919, affirmed in part, reversed in part, and remanded.
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DECISION: Conspiracy claims under Sherman Act against domestic and foreign insurers held (1) cognizable as within McCarran-Ferguson Act's boycott exception; and (2) not barred by international comity.
SUMMARY: According to complaints filed in multiple federal actions by 19 states and many private plaintiffs, certain members of the insurance industry had conspired to restrict the terms of coverage of commercial general liability (CGL) insurance available in the United States, in violation of 1 of the Sherman Act (15 USCS 1). Among the allegations made in the complaints, it was claimed that four domestic primary insurers had conspired with domestic and foreign reinsurers, insurance brokers, and insurance associations to procure desired changes with respect to insurance coverage in the terms of the standard CGL forms used in the United States, and in particular that (1) some reinsurers had threatened to withdraw from reinsuring primary insurers who used a CGL form which the reinsurers disfavored; (2) reinsurers had threatened to boycott reinsuring North American CGL risks; (3) foreign and domestic reinsurers had presented positions at an insurance association meeting that the standard CGL forms had to be changed or else there would be no reinsurance; (4) insurers and reinsurers had told insurance brokers and agents that a reinsurance boycott would ensue if revised CGL forms were not approved; (5) the largest domestic reinsurer had agreed either to coerce the adoption of demands for changes in CGL forms or to derail the forms program; and (6) domestic reinsurers had agreed to boycott the CGL forms unless certain terms were added. The complaints also alleged that (1) a group of reinsurers and brokers based in London, England, had conspired to coerce primary insurers in the United States to offer CGL coverage only for claims made during the policy period; (2) a group of London reinsurers had conspired to withhold reinsurance for certain coverage; (3) a group of domestic primary insurers, the association which issued the CGL forms, and foreign reinsurers had conspired to restrain trade in the markets for excess and
"umbrella" insurance; and (4) a group of London and domestic retrocessional reinsurers--that is, insurers of the risks of reinsurers--had conspired to withhold retrocessional reinsurance for certain risks. The actions were consolidated for litigation in the United States District Court for the Northern District of California. The District Court granted the defendants' motions to dismiss the Sherman Act claims for failure to state a cause of action (723 F Supp 464). On appeal, the United States Court of Appeals for the Ninth Circuit, reversing, expressed the view that (1) the domestic defendants were not exempt from federal antitrust liability under 2(b) of the McCarran-Ferguson Act (15 USCS 1012(b)), which provides that the Sherman Act applies to the business of insurance to the extent that such business is not regulated by state law, because the domestic defendants forfeited their exemption when they conspired with the foreign reinsurers, who were not exempt; (2) even if the defendants' alleged conduct was exempt from Sherman Act liability under 2(b), such conduct was within the exception to immunity under the McCarran-Ferguson Act provided by 3(b) (15 USCS 1013(b)) for any "act of boycott, coercion, or intimidation"; and (3) the principle of international comity did not bar the exercise of federal jurisdiction against the foreign defendants (938 F2d 919).
On certiorari, the United States Supreme Court affirmed in part, reversed in part, and remanded the case for further proceedings. It was held, with different majorities of the Justices for each holding, that (1) the domestic insurers were immune from antitrust liability under 2(b); (2) there were sufficient allegations of a "boycott" under 3(b)--defined as the refusal to deal with another in unrelated transactions in order to achieve the terms desired in a targeted transaction--to sustain several counts of complaint against a motion to dismiss; and (3) international comity did not counsel against exercising jurisdiction over the London-based reinsurers.
In those portions of the opinion of Souter, J., which constituted the opinion of the court, it was held in pertinent part (1) in a portion (Part II-A) expressing the unanimous view of the court, that domestic insurers did not lose their immunity from antitrust liability under 2(b) by acting in concert with foreign insurers that were assumed for the sake of argument not to be regulated by state law within the meaning of 2(b); and (2) in a portion (Part III) joined by Rehnquist, Ch. J., and White, Blackmun, and Stevens, JJ., that, even assuming that in a proper case a court could decline to exercise Sherman Act jurisdiction over foreign conduct, the principle of international comity did not counsel against exercising jurisdiction with respect to allegations that the London-based reinsurers had engaged in unlawful conspiracies to affect the market for insurance in the United States and that their conduct in fact had produced substantial effect, because there was no conflict with British law, where the London reinsurers did not claim that (a) British law required them to act in some fashion prohibited by the law of the United States, or (b) their compliance with the laws of both countries was otherwise impossible. Also, Souter, J., in a portion (Part II-B) joined by White, Blackmun, and Stevens, J., expressed the view that (1) neither the Supreme Court's precedents nor 3(b) warranted a definition of "boycott" which was confined to refusals to deal that were unrelated or collateral to the objective sought by those refusing to deal; and (2) those claims which asserted a conspiracy among the primary insurers, reinsurers, brokers, and associations to procure changes in the CGL forms alleged one or more acts of "boycott" under 3(b) and were thus sufficient to survive a motion to dismiss.
In that portion (Part I) of the opinion of Scalia, J., which constituted the opinion of the court, it was held by Scalia, J., joined by Rehnquist, Ch. J., and O'Connor, Kennedy, and Thomas, JJ., that (1) for purposes of 3(b), a "boycott" meant the refusal to deal with another in unrelated transactions in order to achieve the terms desired in a targeted transaction; and (2) there were sufficient allegations of a "boycott" under such standard to sustain counts of complaint against a motion to dismiss, with respect to those claims asserting a conspiracy to procure changes in the CGL forms. Also, Scalia, J., in a dissenting portion (Part II) joined by O'Connor, Kennedy, and
CONFLICT OF LAWS §
comity -- Sherman Act -- foreign reinsurers --
Headnote: [3A] [3B] [3C] [3D] Even assuming that, in a proper case a court may decline to exercise jurisdiction under the Sherman Act (15 USCS 1 et seq.) over foreign conduct, the principle of international comity does not counsel against exercising jurisdiction with respect to Sherman Act allegations that reinsurers based in London, England, engaged in unlawful conspiracies to affect the market for insurance in the United States and that their conduct in fact produced substantial effect, because there is no conflict with British law, where the London reinsurers do not claim that (1) British law requires them to act in some fashion prohibited by the law of the United States, or (2) their compliance with the laws of both countries is otherwise impossible. (Scalia, O'Connor, Kennedy, and Thomas, JJ., dissented from this holding.)
[***HN4] APPEAL § complaint -- acceptance of allegations --
Headnote: [4] On certiorari to review a Federal Court of Appeals' judgment reversing a Federal District Court's grant of motions to dismiss complaints in a consolidated action alleging a conspiracy among members of the insurance industry in violation of 1 of the Sherman Act (15 USCS 1), the United States Supreme Court will take the allegations of the complaints as true.
[***HN5] APPEAL § model complaint -- assumptions -- consideration on remand --
Headnote: [5A] [5B] On certiorari to review a Federal Court of Appeals' judgment reversing a Federal District Court's grant of motions to dismiss complaints by states and private parties in a consolidated action alleging a conspiracy among members of the insurance industry in violation of 1 of the Sherman Act (15 USCS 1), the United States Supreme Court will assume that where the private parties have chosen in their brief to use one state's complaint as a representative model of their claims, the private parties' complaints track that state's complaint; upon the Supreme Court's remand of such case, the courts below will be free to take into account any relevant differences among the complaints that the parties may bring to their attention.
[***HN6] APPEAL § complaints -- assumptions --
Headnote: [6A] [6B] With respect to complaints in a consolidated action against members of the insurance industry in violation of 1 of the Sherman Act (15 USCS 1), the United States Supreme Court, on certiorari to review a Federal Court of Appeals' judgment reversing a Federal District Court's grant of motions to dismiss such complaints, will assume that domestic reinsurers alleged to be involved in a conspiracy to withhold retrocessional insurance--that is, insurers of the risks of reinsurers--for certain risks are among the unnamed coconspirators mentioned in the complaints where (1) the complaints' statements of facts describe the conspiracy as involving reinsurers in "London and the United States"; but (2) the claims for relief name only the London reinsurers.
[***HN7]
RESTRAINTS OF TRADE, MONOPOLIES, AND UNFAIR TRADE PRACTICES §9.
insurance exemption --
Headnote: [7] With respect to the provision of 2(b) of the McCarran-Ferguson Act (15 USCS 1012(b)) that "the business of insurance" is exempt from antitrust liability to the extent that such business is regulated by state law, the definite article before the word "business" shows that such word is most naturally read to refer to mercantile transactions, buying and selling, and traffic; for purposes of 2(b), "the business of insurance" is not meant to refer to a single entity and should be read to single out one activity from others, rather than to distinguish one entity from another.
[***HN8] EVIDENCE §343. antitrust -- assumption --
Headnote: [8A] [8B] The grant of immunity, under 2(b) of the McCarran-Ferguson Act (15 USCS 1012(b)), from liability under the Sherman Act (15 USCS 1 et seq.), the Clayton Act (15 USCS 12 et seq.), or the Federal Trade Commission Act (15 USCS 41 et seq.) for acts constituting "the business of insurance" to the extent that such business is regulated by state law assumes that acts which, but for that grant, would violate such federal statutes are part of "the business of insurance."
[***HN9] RESTRAINTS OF TRADE, MONOPOLIES, AND UNFAIR TRADE PRACTICES § labor unions --
Headnote: [9A] [9B] Labor unions are not immune from federal antitrust liability for certain types of agreements with employers, such as agreements to impose a certain wage scale on other bargaining units.
[***HN10] APPEAL § question left open on remand --
Headnote: [10A] [10B] Upon reversing a Federal Court of Appeals' judgment to the extent that such judgment held that domestic primary insurers, reinsurers, insurance trade associations, and a reinsurance broker lost their exemption from antitrust liability under 2(b) of the McCarran-Ferguson Act (15 USCS 1012(b)) because they acted in concert with foreign reinsurers, the United States Supreme Court will leave to the Court of Appeals on remand the question whether the activities of the domestic reinsurers were "regulated by state law" within the meaning of 2(b).
[***HN11] CONFLICT OF LAWS §97.
INTERNATIONAL LAW §
RESTRAINTS OF TRADE, MONOPOLIES, AND UNFAIR TRADE PRACTICES § comity --
[***HN16]
BOYCOTT §
activities --
Headnote: [16A] [16B] "Boycott" is a multifaceted phenomenon that includes conditional boycotts, punitive boycotts, coercive boycotts, partial boycotts, labor boycotts, political boycotts, and social boycotts, but it does not include refusals to deal because of objections to proposed terms.
[***HN17] LABOR § boycott --
Headnote: [17] A refusal to work changes from strike to boycott only when it seeks to obtain action from the employer which is unrelated to the employment contract.
[***HN18] RESTRAINTS OF TRADE, MONOPOLIES, AND UNFAIR TRADE PRACTICES §9. insurance exemption -- McCarran-Ferguson Act --
Headnote: [18A] [18B] [18C] For purposes of 3(b) of the McCarran-Ferguson Act (15 USCS 1013(b))--which provides that nothing in such Act, under which the business of insurance generally is exempt from antitrust liability to the extent that such business is regulated by state law, renders the Sherman Act ( USCS 1 et seq.) inapplicable to any act of "boycott, coercion, or intimidation"--the alleged insistence by a number of reinsurers upon certain primary insurance terms as a condition of writing reinsurance is a concerted agreement to terms and not a "boycott," since the terms of primary insurance policies are the subject matter insured by reinsurance; furthermore, it follows from such determination that the reinsurers' alleged actions do not constitute "coercion" or "intimidation" within the meaning of 3(b). (Souter, White, Blackmun, and Stevens, JJ., dissented from this holding.)
[***HN19] PLEADING § dismissal --
Headnote: [19] A complaint should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief.
[***HN20] RESTRAINTS OF TRADE, MONOPOLIES, AND UNFAIR TRADE PRACTICES §9. insurance exemption -- McCarran-Ferguson Act --
Headnote: [20A] [20B] Claims for relief made in complaints in a consolidated action in Federal District Court fail to allege any boycotts within the meaning of 3(b) of the McCarran-Ferguson Act (15 USCS 1013(b))--which provides that nothing in such Act, under which the business of insurance generally is exempt from antitrust liability to the extent that such business is regulated by state law, renders the Sherman Act (15 USCS 1 et seq.) inapplicable to any act of boycott--where
such claims allege a conspiracy among a group of domestic primary insurers, some foreign insurers, and an association of domestic insurers, to draft restrictive model forms and policy language for "umbrella" and "excess" insurance.
SYLLABUS: Nineteen States and many private plaintiffs filed complaints alleging that the defendants -- four domestic primary insurers, domestic companies who sell reinsurance to insurers, two domestic trade associations, a domestic reinsurance broker, and reinsurers based in London -- violated the Sherman Act by engaging in various conspiracies aimed at forcing certain other primary insurers to change the terms of their standard domestic commercial general liability insurance policies to conform with the policies the defendant insurers wanted to sell. After the actions were consolidated for litigation, the District Court granted the defendants' motions to dismiss. The Court of Appeals reversed, rejecting the District Court's conclusion that the defendants were entitled to antitrust immunity under § 2(b) of the McCarran-Ferguson Act, which exempts from federal regulation "the business of insurance," except "to the extent that such business is not regulated by State Law." Although it held the conduct involved to be "the business of insurance," the Court of Appeals ruled that the foreign reinsurers did not fall within § 2(b)'s protection because their activities could not be "regulated by State Law," and that the domestic insurers had forfeited their § 2(b) exemption when they conspired with the nonexempt foreign reinsurers. Furthermore, held the court, most of the conduct in question fell within § 3(b), which provides that nothing in the McCarran-Ferguson Act "shall render the... Sherman Act inapplicable to any... act of boycott... ." Finally, the court rejected the District Court's conclusion that the principle of international comity barred it from exercising Sherman Act jurisdiction over the three claims brought solely against the London reinsurers.
Held: The judgment is affirmed in part and reversed in part, and the cases are remanded.
JUSTICE SOUTER delivered the opinion of the Court with respect to Parts I, II-A, III, and IV, concluding that:
- The domestic defendants did not lose their § 2(b) immunity by conspiring with the foreign defendants. The Court of Appeals's conclusion to the contrary was based in part on the statement, in Group Life & Health Ins. Co. v. Royal Drug Co. , 440 U.S. 205, 231, 59 L. Ed. 2d 261, 99 S. Ct. 1067, that, "in analogous contexts, the Court has held that an exempt entity forfeits antitrust exemption by acting in concert with nonexempt parties." Even assuming that foreign reinsurers were "not regulated by State Law," the Court of Appeals's reasoning fails because the analogy drawn by the Royal Drug Court was a loose one. Following that language, the Royal Drug Court cited two cases dealing with the Capper-Volstead Act, which immunizes certain "persons" from Sherman Act liability. Ibid. Because, in contrast, the McCarran- Ferguson Act immunizes activities rather than entities, an entity-based analysis of § 2(b) immunity is inappropriate. See id. , at 232-233. Moreover, the agreements at issue in Royal Drug Co. were made with "parties wholly outside the insurance industry," id. , at 231, whereas the alleged agreements here are with foreign reinsurers and admittedly concern "the business of insurance." Pp. 781-784.
- Even assuming that a court may decline to exercise Sherman Act jurisdiction over foreign conduct in an appropriate case, international comity would not counsel against exercising jurisdiction in the circumstances alleged here. The only substantial question in this litigation is whether "there is in fact a true conflict between domestic and foreign law." Societe Nationale Industrielle Aerospatiale v. United States Dist. Court for Southern Dist. of Iowa , 482 U.S. 522, 555, 96 L. Ed. 2d 461, 107 S. Ct. 2542 (BLACKMUN, J., concurring in part and dissenting in
Assistant Attorneys General, Ernest D. Preate, Jr., Attorney General of Pennsylvania, Thomas L. Welch and David R. Weyl, Deputy Attorneys General, Kenneth O. Eikenberry, Attorney General of Washington, John R. Ellis, Deputy Attorney General, Tina E. Kondo, Assistant Attorney General, Mario J. Palumbo, Attorney General of West Virginia, Donald L. Darling, Deputy Attorney General, Donna S. Quesenberry, Senior Assistant Attorney General, James E. Doyle, Attorney General of Wisconsin, and Kevin J. O'Connor, Assistant Attorney General. H. Laddie Montague, Jr., Howard Langer, Nicholas E. Chimicles, Eugene Gressman, Jerry S. Cohen, and Robert Miller filed a brief for private respondents in both cases.
Deputy Solicitor General Wallace argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Acting Solicitor General Bryson, Acting Assistant Attorney General Clark, Robert A. Long, Jr., Robert B. Nicholson, Marion L. Jetton, Charles S. Stark, and Edward T. Hand. +
- Briefs of amici curiae urging reversal were filed for the Government of Canada by Douglas E. Rosenthal; for the Government of the United Kingdom of Great Britain and Northern Ireland by Mark R. Joelson; for the American Insurance Association et al. by John E. Nolan, Jr., Craig A. Berrington, and Patrick J. McNally; for the National Association of Casualty & Surety Agents et al. by Anthony C. Epstein and Ann M. Kappler; for the National Conference of Insurance Legislators by Stephen W. Schwab, Seymour Simon, and Reuben A. Bernick; and for the Washington Legal Foundation by Daniel J. Popeo and Richard A. Samp.
Briefs of amici curiae urging affirmance were filed for the State of Texas et al. by Dan Morales, Attorney General of Texas, Will Pryor, First Assistant Attorney General, Mary F. Keller, Deputy Attorney General, and Thomas P. Perkins, Jr., Mark Tobey, Katherine D. Farroba, and Floyd Russell Ham, Assistant Attorneys General, Charles M. Oberly III, Attorney General of Delaware, John J. Polk, Deputy Attorney General, Robert A. Butterworth, Attorney General of Florida, Scott E. Clodfelter, Assistant Attorney General, Robert A. Marks, Attorney General of Hawaii, Larry EchoHawk, Attorney General of Idaho, Brett T. DeLange, Deputy Attorney General, Bonnie J. Campbell, Attorney General of Iowa, John R. Perkins, Deputy Attorney General, Chris Gorman, Attorney General of Kentucky, Robert V. Bullock, Assistant Attorney General, Mike Moore, Attorney General of Mississippi, Jim Steele, Special Assistant Attorney General, William L. Webster, Attorney General of Missouri, Henry T. Herschel, Tom Udall, Attorney General of New Mexico, Frankie Sue Del Papa, Attorney General of Nevada, Lacy H. Thornburg, Attorney General of North Carolina, James C. Gulick, Special Deputy Attorney General, and K. D. Sturgis, Assistant Attorney General, Nicholas J. Spaeth, Attorney General of North Dakota, David W. Huey, Assistant Attorney General, James E. O'Neil, Attorney General of Rhode Island, Maureen G. Glynn, Special Assistant Attorney General, T. Travis Medlock, Attorney General of South Carolina, Mark Barnett, Attorney General of South Dakota, Jeffrey P. Hallem, Assistant Attorney General, R. Paul Van Dam, Attorney General of Utah, Patrice Arent and Cy H. Castle, Assistant Attorneys General, Jeffrey L. Amestoy, Attorney General of Vermont, Julie Brill, Assistant Attorney General, and Mary Sue Terry, Attorney General of Virginia; for the National League of Cities et al. by Lawrence Kill and Anthony P. Coles; and for the Service Station Dealers of America by Dimitri G. Daskalopoulos.
Richard I. Fine filed a brief for the Service Industry Council et al. as amicus curiae.
JUDGES: SOUTER, J., announced the judgment of the Court and delivered the opinion for a unanimous Court with respect to Parts I and II-A, the opinion of the Court with respect to Parts III and IV, in which REHNQUIST, C. J., and WHITE, BLACKMUN, and STEVENS, JJ., joined, and an opinion concurring in the judgment with respect to Part II-B, in which WHITE,
BLACKMUN, and STEVENS, JJ., joined. SCALIA, J., delivered the opinion of the Court with respect to Part I, in which REHNQUIST, C.J., and O'CONNOR, KENNEDY, and THOMAS, JJ., joined, and a dissenting opinion with respect to Part II, in which O'CONNOR, KENNEDY, and THOMAS, JJ., joined, post, p. 800.
OPINIONBY: SOUTER
OPINION: [769] [621] [2895] JUSTICE SOUTER announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II-A, III, and IV, and an opinion concurring in the judgment with respect to Part II-B. *
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- JUSTICE WHITE, JUSTICE BLACKMUN, and JUSTICE STEVENS join this opinion in its entirety, and THE CHIEF JUSTICE joins Parts I, II-A, III, and IV.
- - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[HR1A] [1A] [HR2A] [2A] [HR3A] [3A] The Sherman Act makes every contract, combination, or conspiracy in unreasonable restraint of interstate or foreign commerce illegal. 26 Stat. 209, as amended, 15 U.S.C. § 1. These consolidated cases present questions about the application of that Act to the insurance industry, both here and abroad. The plaintiffs (respondents here) allege that both domestic and foreign defendants (petitioners here) violated the Sherman Act by engaging in various conspiracies to affect the American insurance market. A group of domestic [622] defendants argues that the McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U.S.C. § 1011 et seq. , precludes application of the Sherman Act to the conduct alleged; a group of foreign defendants argues that the principle of international comity requires the District Court to refrain from exercising jurisdiction over certain claims against it. We hold that most of the domestic defendants' alleged conduct is not immunized [*770] from antitrust liability by the McCarran-Ferguson Act, and that, even assuming it applies, the principle of international comity does not preclude District Court jurisdiction over the foreign conduct alleged.
I
[HR4] [4] [HR5A] [5A] The two petitions before us stem from consolidated litigation comprising the complaints of 19 States and many private plaintiffs alleging that the defendants, members of the insurance industry, conspired in violation of § 1 of the Sherman Act to restrict the terms of coverage of commercial general liability (CGL) insurance n1 available in the United States. Because the cases come to us on motions to dismiss, we take the allegations of the complaints as true. n
- - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n1 CGL insurance provides "coverage for third party casualty damage claims against a purchaser of insurance (the 'insured')." App. 8 (Cal. Complaint P4.a).
[***HR5B] [5B]
policy's stated limits of coverage; the defendants [*772] wanted legal defense costs to be counted against the stated limits (providing a "legal defense cost cap").
To understand how the defendants are alleged to have pressured the targeted primary insurers to make these changes, one must be aware of two important features of the insurance industry. First, most primary insurers rely on certain outside support services for the type of insurance coverage they wish to sell. Defendant Insurance Services Office, Inc. (ISO), an association of approximately 1,400 domestic property and casualty insurers (including the primary insurer defendants, Hartford Fire Insurance Company, Allstate Insurance Company, CIGNA Corporation, and Aetna Casualty and Surety Company), is the almost exclusive source of support services in this country for CGL insurance. See id. , at 19 (Cal. Complaint P38). ISO develops standard policy forms and files or lodges them with each State's insurance regulators; most CGL insurance written in the United States is written on these forms. Ibid. (Cal. Complaint P39); id. , at 74 (Conn. Complaint P50). All of the "traditional" features of CGL insurance relevant to this litigation were embodied in the ISO standard CGL insurance form that had been in use since 1973 (1973 ISO CGL form). Id. , at 22 (Cal. Complaint PP51-54); id. , at 75 (Conn. Complaint [**2897] PP56-58). For each of its standard policy forms, ISO also supplies actuarial and rating information: it collects, aggregates, interprets, and distributes data on the premiums charged, claims filed and paid, and defense costs expended with respect to each form, id. , at 19 (Cal. Complaint P39); id. , at 74 (Conn. Complaint PP51-52), and on the basis of these data it predicts future loss trends and calculates advisory premium rates, id. , at 19 (Cal. Complaint P39); id. , at 74 (Conn. Complaint P53). Most ISO members cannot afford to continue to use a form if ISO withdraws these support services. See id. , at 32-33 (Cal. Complaint PP97, 99).
Second, primary insurers themselves usually purchase insurance to cover a portion of the risk they assume from the [773] consumer. This so-called "reinsurance" may serve at least two purposes, protecting the primary insurer from catastrophic [**624] loss, and allowing the primary insurer to sell more insurance than its own financial capacity might otherwise permit. Id. , at 17 (Cal. Complaint P29). Thus, "the availability of reinsurance affects the ability and willingness of primary insurers to provide insurance to their customers." Id. , at 18 (Cal. Complaint P34); id. , at 63 (Conn. Complaint P4(p)). Insurers who sell reinsurance themselves often purchase insurance to cover part of the risk they assume from the primary insurer; such "retrocessional reinsurance" does for reinsurers what reinsurance does for primary insurers. See ibid. (Conn. Complaint P4(r)). Many of the defendants here are reinsurers or reinsurance brokers, or play some other specialized role in the reinsurance business; defendant Reinsurance Association of America (RAA) is a trade association of domestic reinsurers.
B
The prehistory of events claimed to give rise to liability starts in 1977, when ISO began the process of revising its 1973 CGL form. Id. , at 22 (Cal. Complaint P55). For the first time, it proposed two CGL forms (1984 ISO CGL forms), one the traditional "occurrence" type, the other "with a new 'claims-made' trigger." Id. , at 22-23 (Cal. Complaint P56). The "claims- made" form did not have a retroactive date provision, however, and both 1984 forms covered "'sudden and accidental' pollution" damage and provided for unlimited coverage of legal defense costs by the insurer. Id. , at 23 (Cal. Complaint PP59-60). Within the ISO, defendant Hartford Fire Insurance Company objected to the proposed 1984 forms; it desired elimination of the "occurrence" form, a retroactive date provision on the "claims-made" form, elimination of sudden and accidental pollution coverage, and a legal defense cost cap. Defendant Allstate Insurance Company also expressed its desire for a retroactive date provision on [*774] the
"claims-made" form. Id. , at 24 (Cal. Complaint P61). Majorities in the relevant ISO committees, however, supported the proposed 1984 CGL forms and rejected the changes proposed by Hartford and Allstate. In December 1983, the ISO Board of Directors approved the proposed 1984 forms, and ISO filed or lodged the forms with state regulators in March 1984. Ibid. (Cal. Complaint P62).
Dissatisfied with this state of affairs, the defendants began to take other steps to force a change in the terms of coverage of CGL insurance generally available, steps that, the plaintiffs allege, implemented a series of conspiracies in violation of § 1 of the Sherman Act. The plaintiffs recount these steps as a number of separate episodes corresponding to different claims for relief in their complaints; n4 because it will become important to distinguish among these counts and the acts and defendants associated with them, we will note these correspondences.
- - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n4 The First Claim for Relief in the Connecticut Complaint, id. , at 88-90 (PP115-119), charging an overarching conspiracy encompassing all of the defendants and all of the conduct alleged, is a special case. See n. 18, infra.
- - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
The first four Claims for Relief in the California Complaint, id. , at 36-43 (PP111-130), [2898] and the Second Claim for Relief in the Connecticut Complaint, id. , at 90-92 (PP120- 124), charge [625] the four domestic primary insurer defendants and varying groups of domestic and foreign reinsurers, brokers, and associations with conspiracies to manipulate the ISO CGL forms. In March 1984, primary insurer Hartford persuaded General Reinsurance Corporation (General Re), the largest American reinsurer, to take steps either to procure desired changes in the ISO CGL forms, or "failing that, [to] 'derail' the entire ISO CGL forms program." Id. , at 24 (Cal. Complaint P64). General Re took up the matter with its trade association, RAA, which created a special committee that met and agreed to "boycott" the 1984 ISO CGL forms unless a retroactive-date provision was added to the [775] claims-made form, and a pollution exclusion and defense cost cap were added to both forms. Id. , at 24- (Cal. Complaint PP65-66). RAA then sent a letter to ISO "announcing that its members would not provide reinsurance for coverages written on the 1984 CGL forms," id. , at 25 (Cal. Complaint P67), and Hartford and General Re enlisted a domestic reinsurance broker to give a speech to the ISO Board of Directors, in which he stated that no reinsurers would "break ranks" to reinsure the 1984 ISO CGL forms. Ibid. (Cal. Complaint P68).
The four primary insurer defendants (Hartford, Aetna, CIGNA, and Allstate) also encouraged key actors in the London reinsurance market, an important provider of reinsurance for North American risks, to withhold reinsurance for coverages written on the 1984 ISO CGL forms. Id. , at 25-26 (Cal. Complaint PP69-70). As a consequence, many London-based underwriters, syndicates, brokers, and reinsurance companies informed ISO of their intention to withhold reinsurance on the 1984 forms, id. , at 26-27 (Cal. Complaint PP71-75), and at least some of them told ISO that they would withhold reinsurance until ISO incorporated all four desired changes, see supra , at 771, and n. 3, into the ISO CGL forms. App. 26 (Cal. Complaint P74).
For the first time ever, ISO invited representatives of the domestic and foreign reinsurance markets to speak at an ISO Executive Committee meeting. Id. , at 27-28 (Cal. Complaint P78). At that meeting, the reinsurers "presented their agreed upon positions that there would be changes in the CGL forms or no reinsurance." Id. , at 29 (Cal. Complaint P82). The ISO
[***HR6B] [6B]
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n5 The California and Connecticut Complaints' Statements of Facts describe this conspiracy as involving "specialized reinsurers in London and the United States." App. 34 (P106); id. , at 87 (Conn. Complaint P110). The claims for relief, however, name only London reinsurers; they do not name any of the domestic defendants who are the petitioners in No. 91-1111. See id. , at 48 (P147); id. , at 96 (Conn. Complaint P136). Thus, we assume that the domestic reinsurers alleged to be involved in this conspiracy are among the "unnamed co-conspirators" mentioned in the complaints. See id. , at 48 (Cal. Complaint P147); id. , at 96 (Conn. Complaint P136).
n6 The Ninth, Tenth, and Eleventh Claims for Relief in the California Complaint, id. , at 49- (PP151-156), and the Seventh Claim for Relief in the Connecticut Complaint, id. , at 98 (PP145- 146), allege state-law violations not at issue here.
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C
Nineteen States and a number of private plaintiffs filed 36 complaints against the insurers involved in this course of events, charging that the conspiracies described above violated § 1 of the Sherman Act, 15 U.S.C. § 1. After the actions had been consolidated for litigation in the Northern District of California, the defendants moved to dismiss for failure to state a cause of action, or, in the alternative, for summary judgment. The District Court granted the motions to dismiss. In re Insurance Antitrust Litigation , 723 F. Supp. 464 (1989). It held that the conduct alleged fell within the grant of antitrust immunity contained in § 2(b) of the McCarran- Ferguson Act, 15 U.S.C. § 1012(b), because it amounted to "the business of insurance" and was "regulated by [**2900] State Law" within the meaning of that section; none of the conduct, in the District Court's view, amounted to a "boycott" within the meaning of the § 3(b) exception to that grant of immunity. 15 U.S.C. § 1013(b). The District Court also dismissed the three claims that named only certain London-based defendants, n7 invoking international comity and applying the Ninth Circuit's decision in Timberlane Lumber Co. v. Bank of America, N. T. & S. A. , 549 F.2d 597 (1976).
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n7 These are the Fifth, Sixth, and Eighth Claims for Relief in the California Complaint, and the corresponding Third, Fourth, and Fifth Claims for Relief in the Connecticut Complaint.
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The Court of Appeals reversed. In re Insurance Antitrust Litigation , 938 F.2d 919 (CA9 1991). Although it held the conduct involved to be "the business of insurance" within the meaning of § 2(b), it concluded that the defendants could [*779] not claim McCarran-Ferguson Act antitrust immunity for two independent reasons. First, it held, the foreign reinsurers were beyond the regulatory jurisdiction of the States; because their activities could not be "regulated by State Law" within the meaning of § 2(b), they did not fall within that section's grant of immunity. Although the domestic insurers were "regulated by State Law," the court held, they forfeited their § 2(b) exemption when they conspired with the nonexempt foreign reinsurers. Second, the
Court of Appeals held that, even if the conduct alleged fell within the scope of § 2(b), it also fell within the § 3(b) exception for "act[s] of boycott, coercion, or intimidation." Finally, as to the three claims brought solely against foreign defendants, the court applied its Timberlane analysis, but concluded that the principle of international comity was no bar to exercising Sherman Act jurisdiction.
We granted certiorari in No. 91-1111 to address two narrow questions about the scope of McCarran-Ferguson [***628] Act antitrust immunity, n8 and in No. 91-1128 to address the application of the Sherman Act to the foreign conduct at issue. n9 506 U.S. 814 (1992). We now affirm in part, reverse in part, and remand.
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n8 We limited our grant of certiorari in No. 91-1111 to these questions: "1. Whether domestic insurance companies whose conduct otherwise would be exempt from the federal antitrust laws under the McCarran-Ferguson Act lose that exemption because they participate with foreign reinsurers in the business of insurance," and "2. Whether agreements among primary insurers and reinsurers on such matters as standardized advisory insurance policy forms and terms of insurance coverage constitute a 'boycott' outside the exemption of the McCarran-Ferguson Act." Pet. for Cert. in No. 91-1111, p. i; see 506 U.S. 814 (1992).
n9 The question presented in No. 91-1128 is: "Did the court of appeals properly assess the extraterritorial reach of the U.S. antitrust laws in light of this Court's teachings and contemporary understanding of international law when it held that a U.S. district court may apply U.S. law to the conduct of a foreign insurance market regulated abroad?" Pet. for Cert. in No. 91-1128, p. i.
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[*780] II
The petition in No. 91-1111 touches on the interaction of two important pieces of economic legislation. The Sherman Act declares "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations,... to be illegal." 15 U.S.C. § 1. The McCarran-Ferguson Act provides that regulation of the insurance industry is generally a matter for the States, 15 U.S.C. § 1012(a), and (again, generally) that "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," § 1012(b). Section 2(b) of the McCarran-Ferguson Act makes it clear nonetheless that the Sherman Act applies "to the business of insurance to the extent that such business is not regulated by State Law," § 1012(b), and § 3(b) provides that nothing in the McCarran-Ferguson Act "shall render the... Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation," § 1013(b).
[**2901] Petitioners in No. 91-1111 are all of the domestic defendants in the consolidated cases: the four domestic primary insurers, the domestic reinsurers, the trade associations ISO and RAA, and the domestic reinsurance broker Thomas A. Greene & Company, Inc. They argue that the Court of Appeals erred in holding, first, that their conduct, otherwise immune from antitrust liability under § 2(b) of the McCarran-Ferguson Act, lost its immunity when they conspired with the foreign defendants, and, second, that their conduct amounted to "act[s] of boycott" falling within the exception to antitrust immunity set out in § 3(b). We conclude that
nonexempt foreign insurers, lost their McCarran-Ferguson Act antitrust immunity. See 938 F.2d at 928. This reasoning fails, however, because even if we were to agree that foreign reinsurers were not subject to state regulation (a point on which we express no opinion), the quoted language from Royal Drug Co. , read [*783] in context, does not state a proposition applicable to this litigation.
[***HR8B] [8B]
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n10 The activities in question here, of course, are alleged to violate federal law, and it might be tempting to think that unlawful acts are implicitly excluded from "the business of insurance." Yet § 2(b)'s grant of immunity assumes that acts which, but for that grant, would violate the Sherman Act, the Clayton Act, or the Federal Trade Commission Act, are part of "the business of insurance."
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[***HR1C] [1C]
[***HR9A] [9A]
[***HR10A] [10A]
The full sentence from Royal Drug Co. places the quoted fragment in a different light. "In analogous contexts," we stated, "the Court has held that an exempt entity forfeits antitrust exemption by acting in concert with nonexempt parties." 440 U.S. at 231. We then cited two cases dealing with the Capper-Volstead Act, which immunizes from liability under § 1 of the Sherman Act particular activities of certain persons "engaged in the production of agricultural products." n11 Capper-Volstead Act, § 1, 42 Stat. 388, 7 U.S.C. § 291; see Case- Swayne Co. v. Sunkist Growers, Inc. , 389 U.S. 384, 19 L. Ed. 2d 621, 88 S. Ct. 528 (1967); United States v. Borden Co. , 308 U.S. 188, 84 L. Ed. 181, 60 S. Ct. 182 (1939). Because these cases relied on statutory language referring to certain "persons," whereas we specifically acknowledged in Royal Drug Co. that the McCarran-Ferguson Act immunizes activities rather than entities, see 440 U.S. at 232-233, the analogy we were drawing was of course a loose one. The agreements that insurance companies made with "parties wholly outside the insurance industry," id. , at 231, we noted, such as the retail pharmacists involved in Royal Drug Co. itself, or "automobile body repair shops or landlords," id. , at 232 (footnote omitted), are unlikely [784] to be about anything that could be called "the business of insurance," as distinct from the broader "'business of insurance companies,'" id. , at 233. The alleged agreements [631] at issue in the instant litigation, of course, are entirely different; the foreign reinsurers are hardly "wholly outside the insurance industry," and respondents do not contest the Court of Appeals's holding that the agreements concern "the business of insurance." These facts neither support even the rough analogy we drew in Royal Drug Co. nor fall within the rule about acting in concert with nonexempt parties, which derived from a statute inapplicable here. Thus, we think it was error for [2903] the Court of Appeals to hold the domestic insurers bereft of their McCarran- Ferguson Act exemption simply because they agreed or acted with foreign reinsurers that, we assume for the sake of argument, were "not regulated by State Law." n
[***HR9B] [9B]
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n11 We also cited two cases dealing with the immunity of certain agreements of labor unions under the Clayton and Norris-LaGuardia Acts. See 440 U.S. at 231-232. These cases, however, did not hold that labor unions lose their immunity whenever they enter into agreements with employers; to the contrary, we acknowledged in one of the cases that "the law contemplates agreements on wages not only between individual employers and a union but agreements between the union and employers in a multi-employer bargaining unit." Mine Workers v. Pennington , 381 U.S. 657, 664, 14 L. Ed. 2d 626, 85 S. Ct. 1585 (1965). Because the cases stand only for the proposition that labor unions are not immune from antitrust liability for certain types of agreements with employers, such as agreements "to impose a certain wage scale on other bargaining units," id. , at 665, they do not support the far more general statement that exempt entities lose immunity by conspiring with nonexempt entities.
[***HR10B] [10B]
n12 The Court of Appeals's assumption that "the American reinsurers... are subject to regulation by the states and therefore prima facie immune," 938 F.2d at 928, appears to rest on the entity-based analysis we have rejected. As with the foreign reinsurers, we express no opinion whether the activities of the domestic reinsurers were "regulated by State Law" and leave that question to the Court of Appeals on remand.
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III
Finally, we take up the question presented by No. 91-1128, whether certain claims against the London reinsurers should have been dismissed as improper applications of the Sherman Act to foreign conduct. The Fifth Claim for Relief in the California Complaint alleges a violation of § 1 of the Sherman Act by certain London reinsurers who conspired to coerce primary insurers in the United States to offer CGL coverage on a claims-made basis, thereby making "occurrence CGL coverage... unavailable in the State of California for many risks." App. 43-44 (PP131- 135). The Sixth Claim for Relief in the California Complaint alleges that the London reinsurers violated § 1 by a conspiracy to limit coverage of pollution risks in North America, thereby rendering "pollution liability coverage... almost entirely unavailable for the vast majority of casualty insurance purchasers in the State of California." Id. , at 45-46 (PP136-140). The Eighth Claim for Relief in the California Complaint alleges a further § 1 violation by the London reinsurers who, along with domestic retrocessional reinsurers, conspired to limit coverage of seepage, pollution, and property contamination risks in North America, thereby eliminating such coverage in the State of California. n20 Id. , at 47-48 (PP146-150).
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n20 As we have noted, see supra , at 776-777, each of these claims has a counterpart in the Connecticut Complaint. The claims each name different groups of London reinsurers, and not all of the named defendants are petitioners in No. 91-1128; but nothing in our analysis turns on these variations.
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