1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-23-1998

Sabo v. Metropolitan Life

Precedential or Non-Precedential:

Docket 96-3663

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Recommended Citation

"Sabo v. Metropolitan Life" (1998). 1998 Decisions. Paper 33.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/33
Filed February 23, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 96-3663 

RICHARD SABO, 

 Appellant 

v. 

METROPOLITAN LIFE INSURANCE COMPANY; GARY 

ANTONINO; JOEL SHERMAN; RONALD SCHRAM; UNITED 

FOOD AND COMMERCIAL WORKERS INTERNATIONAL 

UNION, AFL-CIO, CLC. 

On Appeal from the United States District Court 

for the Western District of Pennsylvania 

(D.C. No 94-cv-00307) 

Argued October 16, 1997 

Before: STAPLETON, ALITO, and SEITZ, Circuit Judges. 

(Opinion Filed: February 23, 1998) 

 Stanley M. Stein, Esquire (Argued) 

 Michelle S. Katz, Esquire 

 Jeffrey B. Yao, Esquire 

 Feldstein, Grinberg, Stein & McKee 

 428 Boulevard of the Allies 

 Pittsburgh, PA 15219 

 ATTORNEYS FOR APPELLANT 

 RICHARD SABO 
 Frederick N. Egler, Jr., Esquire 

 (Argued) 

 J. Stephen Purcupile, Esquire 

 Egler, Garrett & Egler 

 428 Forbes Avenue 

 2100 Lawyers Building 

 Pittsburgh, PA 15219 

 ATTORNEYS FOR APPELLEE 

 METROPOLITAN LIFE INSURANCE 

 COMPANY 

 Kim M. Watterson, Esquire 

 Richard M. Smith, Esquire 

 Katarincic & Salmon 

 625 Liberty Avenue 

 2600 CNG Tower 

 Pittsburgh, PA 1522 

 ATTORNEYS FOR APPELLEE 

 GARY ANTONINO 

OPINION OF THE COURT 

Seitz, Circuit Judge. 

This appeal primarily presents an issue that divides 

sister Courts of Appeals and is of first impression in our 

court -- namely, whether the McCarran Ferguson Act, 15 

U.S.C. SS 1011-1015 (1994) ("The Act"), precludes a cause 

of action under the Racketeer Influenced and Corrupt 

Organizations Act ("RICO"), 18 U.S.C. SS 1961-1968 (1994), 

where the challenged predicate acts arise out of the 

defendant's insurance business. The district court exercised 

jurisdiction over plaintiff 's federal claims pursuant to 28 

U.S.C. S 1331 and over supplemental state tort claims 

under 28 U.S.C. S 1367. Our appellate jurisdiction arises 

under 28 U.S.C. S 1291 to review the district court's final 

orders. 

I. Factual Background 

The Metropolitan Life Insurance Company ("MetLife")

terminated the employment of Richard Sabo as an 

 2 
insurance sales agent in alleged retaliation for his refusal to 

participate in illegal trading activity. Mr. Sabo ("Plaintiff ") 

then sued MetLife and several MetLife employees 

("Antonino", "Sherman", and "Schram") in the district court, 

alleging causes of action under RICO as well as a claim 

based on the common law tort of defamation. In particular, 

the complaint recited the existence of three predicate acts 

under RICO: (1) a "churning" scheme, whereby MetLife 

encouraged and coerced agents to fraudulently trade

insurance policies in order to accumulate commissions and 

decrease the value of outstanding policies; (2) a"50/50" 

insurance plan that MetLife fraudulently advertised as a 

retirement savings plan; and (3) an organized poli cy of 

intimidation and harassment by MetLife management 

directed toward its insurance agents to participate in these 

fraudulent activities. 

The district court first granted a motion by all defendants 

to dismiss the RICO claims on the ground that the 

McCarran-Ferguson Act precluded such claims where the 

causes of action arose from MetLife's insurance business. 

At the close of discovery, the district court, under a 

summary judgment standard, dismissed the remaining 

defamation action on the ground that the alleged 

defamatory statements were not sufficiently directed toward 

the plaintiff so that a jury could reasonably conclude that 

they referred to him. Plaintiff now appeals these two orders. 

II. The McCarran-Ferguson Act 

Because the central issue in plaintiff 's RICO claims 

implicates an application of the McCarran-Ferguson Act, we 

turn first to that Act. Our standard of reviewing the district 

court's grant of a motion to dismiss is plenary. Chester 

County Intermediate Unit v. Pennsylvania Blue Shield, 896 

F.2d 808, 810-811 (3d Cir. 1990). 

Section 2 of the Act, codified at 15 U.S.C. S 1012, reads 

as follows: 

 Regulation by State law; Federal law relating 

 specifically to insurance; applicability of certain 

 Federal laws after June 30, 1948 

 3 
 (a) State regulation. The business of insuranc e, and 

 every person engaged therein, shall be subject to the 

 laws of the several States which relate to the regulation 

 or taxation of such business. 

 (b) Federal regulation. 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. 

The stated purposes of the Act, as expressed in section 1, 

are to leave regulation and taxation of the insurance 

business to the states and to ensure that "silence on the 

part of the Congress shall not be construed to impose any 

barrier to the regulation or taxation of such business by the 

several States." 15 U.S.C. S 1011. 

In considering the defendants' motion to dismiss the 

RICO claims, the district court adopted a four-part test 

announced in Wexco Inc. v. IMC, Inc., 820 F.Supp. 194, 198 

(M.D.Pa. 1993) which provides that the McCarran-Ferguson 

Act precludes federal litigation if: 

 (1) the federal statute under which the allegedly 

 precluded action is brought ... does not specifically 

 relate to the "business of insurance"; (2) the 

 complained-of activities constitute the "business of 

 insurance"; (3) the relevant state has enacted laws for 

 the purpose of regulating these complained-of 

 activities; and (4) the application of the federal statute 

 would, "invalidate, impair[,] or supersede" such laws. 

Applying this test, the district court held that RICO does 

not specifically relate to the business of insurance, thus 

satisfying the first element of preclusion. As to the second 

element, the district court found that the plaintiff's 

 4 
complained-of activities did indeed constitute activity within 

the "business of insurance." Although plaintiff's complaint 

alleged fraud and coercion under RICO, the district court 

reasoned that the defendants' "underlying activity" involves 

the "promotion and sale of insurance policies to MetLife 

customers," which is central to the insurance business. 

Next, the district court found that Pennsylvania had 

enacted a comprehensive system of insurance regulation so 

that the third element of the preclusion analysis was met. 

Finally, the district court held that the application of RICO 

in an insurance context would "invalidate, impair, or 

supersede" Pennsylvania's insurance laws. The court

arrived at this conclusion by comparing the remedial 

provisions of civil RICO (namely treble damages, attorney's 

fees, and costs) with Pennsylvania's insurance laws

primarily providing for administrative remedies. It thus 

reasoned that all the elements of preclusion under the 

McCarran-Ferguson Act were satisfied which mandated a 

dismissal of the plaintiff's RICO claims. 

The parties to this appeal focus their arguments on two 

rulings of the district court. First, they disagree as to the 

scope of the "insurance business" covered by the statute, 

and whether it applies to the conduct alleged in the 

complaint. Plaintiff emphasizes that the alleged predicate 

acts of racketeering activity stem from systematic behavior 

of "coercive and intimidating tactics" and thus cannot be 

construed to embrace the business of insurance. 

Defendants, on the other hand, assert that plaintiff's 

complaint necessarily relates to the insurance business 

because it attacks the heart of the insurance industry -- 

specifically, how MetLife manages the licensing of its 

agents, the agents' authority to solicit insurance, and how 

agents receive commissions. 

Second, both sides contest the proper construction of the 

"invalidate, impair, or supersede" phrase in 15 U.S.C. 

S 1012(b) quoted above. Plaintiff urges this court to adopt a 

"direct conflict" test, in which a federal statute would not 

"invalidate, impair, or supersede" a state law unless the 

federal legislation directly conflicts with substantive duties 

governed by state insurance law. Conversely, the 

defendants argue that any analysis of the Act's impairment 

 5 
should not focus on substantive conflict but instead should 

compare the plaintiff's broad federal RICO remedies with 

the exclusively administrative scheme adopted under

Pennsylvania insurance laws. We will address these two 

arguments in turn. 

A. Preclusion Analysis Under the McCarranFerguson Act 

As with any other issue of statutory construction, the 

starting point in the Act's interpretation is the language of 

the statute itself. Group Life & Health Ins. Co. v. Royal Drug 

Co., 440 U.S. 205, 210 (1979). Section 2(a) of the statute, 

by its terms, affirmatively subjects the business of 

insurance to state regulation. 15 U.S.C. S 1012(a). The 

statute then takes the further step of proscribing 

unintended federal interference of state insurance laws by 

a general mandate that no federal law "shall . . . invalidate, 

impair, or supersede" any state law enacted "for the 

purpose of regulating the business of insurance." 15 U.S.C. 

S 1012(b). This preclusionary mandate does not apply when 

the federal statute in question "specifically relates to the 

business of insurance," in which case normal supremacy 

rules control and the federal statute trumps conflicting 

state law.1 

The Supreme Court has extensively reviewed the Act's 

legislative history, see, e.g., United States Dep't of the 

Treasury v. Fabe, 508 U.S. 491, 499-500 (1993), Securities 

and Exchange Comm'n v. National Securities, Inc., 393 U.S. 

453, 458-59 (1969), and has fully explained the legislative 

intent behind the statute's preclusionary approach to 

federal intrusion on state insurance laws: 

 [C]ongress' purpose was broadly to give support to the 

 existing and future state systems for regulating and 

 taxing the business of insurance. This was done in two 

_________________________________________________________________ 

1. Because the plaintiff 's complaint is not grounded in federal antitrust 

laws, we focus our analysis on the first clause of section 1012(b). As the 

Supreme Court noted, the language of the Act distinguishes preclusion 

analysis where antitrust laws are at issue. United States Dep't of the 

Treasury v. Fabe, 508 U.S. 491, 504 (1993). 

 6 
 ways. One was by removing obstructions which might 

 be thought to flow from its own power, whether 

 dormant or exercised, except as otherwise provided in 

 the Act itself or in future legislation. The other was by 

 declaring expressly and affirmatively that continued 

 state regulation and taxation of this business is in the 

 public interest and that the business and all who 

 engage in it "shall be subject to" the laws of the several 

 states in these respects. 

Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429-30 

(1946) (footnote omitted); see also Lac D'Amiante du 

Quebec, Ltee v. American Home Assurance Co., 864 F.2d 

1033, 1038-39 (3d Cir. 1988). 

If it is determined that the alleged conduct at issue 

broadly constitutes the "business of insurance," and is 

therefore subject to state regulation under section 1012(a), 

the next issue is whether the anti-preemption mandate of 

section 1012(b) precludes a federal cause of action. Here, 

the statute makes clear that a party is barred from suing 

under federal law if three distinct requirements are met. 

First, the federal law at issue does not "specifically relate" 

to the business of insurance. Second, the state law

regulating the challenged conduct was "enacted for the 

purpose of regulating the business of insurance." Finally, 

an application of federal law would "invalidate, impair, or 

supersede" such state law.2 Fabe, 508 U.S. at 501. 

_________________________________________________________________ 

2. We note at the outset that federal courts have seemingly disagreed as 

to the proper analytic inquiry into McCarran-Ferguson Act preclusion. 

See, e.g., Dornberger v. Metropolitan Life Ins. Co. , 961 F.Supp. 506, 516 

n.4 (S.D.N.Y. 1997); Ambrose v. Blue Cross & Blue Shield of Virginia, 

Inc., 

891 F.Supp. 1153, 1158 n.4 (E.D. Va. 1995), aff'd, 95 F.3d 41 (4th Cir. 

1997) (unpublished per curiam). Some courts draw upon a four-part 

inquiry similar to that used by district court and the Wexco court. See 

Kenty v. Bank One, Columbus, N.A., 92 F.3d 384, 391-92 (6th Cir. 1996); 

American Deposit Corp. v. Schacht, 84 F.3d 834, 838-43 (7th Cir. 1996); 

Merchants Home Delivery Service, Inc. v. Frank B. Hall & Co., 50 F.3d 

1486, 1489 (9th Cir. 1995); Cochran v. Paco, Inc. 606 F.2d 460, 464 (5th 

Cir. 1979). Other courts have announced a more truncated three-part 

test that does not require a specific conclusion that the defendant's 

conduct constitutes the business of insurance. See Doe v. Norwest Bank 

Minn., 107 F.3d 1297, 1305 n.8 (8th Cir. 1997); United States. v. Rhode 

Island Insurers' Insolvency Fund, 80 F.3d 616, 619 (1st Cir. 1996). 

Because of this apparent divergence, it is important to discuss our 

analysis in detail. 

 7 
The threshold question in determining whether the antipreemption mandate of 15 U.S.C. S 1012(b) applies is 

whether the challenged conduct broadly constitutes the 

"business of insurance" in the first place. 15 U.S.C. 

S 1012(a). If the contested activities are wholly unrelated to 

the insurance business, then the McCarran-Ferguson Act 

has no place in analyzing federal regulation because only 

when "[insurance companies] are engaged in the `business 

of insurance' does the act apply." National Securities, 393 

U.S. at 459-60. 

In addressing the issue of preclusion under S 1012(b), we 

read no more into the statute than what it says: unless a 

federal law specifically relates to the business of insurance, 

it will not be applied when it "invalidates, impairs, or 

supersedes" a state law "enacted for the purpose of

regulating the business of insurance." If the defendant's 

conduct does not constitute "the business of insurance," 

then the Act simply does not apply and there is no need to 

confront preclusion issues under S 1012(b). We cannot 

imagine how section 1012(b) protects a state law enacted 

for the purpose of regulating the insurance business when 

the activity in question does not relate to insurance. To 

hold otherwise would require us to abandon the structure 

and purpose of the McCarran-Ferguson Act. 

Our reading of the Act is amply supported by its 

legislative history and Supreme Court precedent. As

explained by the Supreme Court: 

 The statute did not purport to make the States 

 supreme in regulating all the activities of insurance 

 companies; its language refers not to the persons or 

 companies who are subject to state regulation, but to 

 laws "regulating the business of insurance." Insurance 

 companies may do many things which are subject to 

 paramount federal regulation; only when they are 

 engaged in the "business of insurance" does the statute 

 apply. Certainly the fixing of rates is part of this 

 business. . . . The selling and advertising of policies, 

 and the licensing of companies and their agents are 

 also within the scope of the statute. Congress was 

 concerned with the type of state regulation that centers 

 around the contract of insurance, the transaction 

 8 
 which [the Court has previously held] was not 

 "commerce." The relationship between insurer and 

 insured, the type of policy which could be issued, its 

 reliability, interpretation, and enforcement--these were 

 the core of the "business of insurance." Undoubtedly, 

 other activities of insurance companies relate so closely 

 to their status as reliable insurers that they too must 

 be placed in the same class. But whatever the exact 

 scope of the statutory term, it is clear where the focus 

 was--it was on the relationship between the insurance 

 company and the policyholder. Statutes aimed at 

 protecting or regulating this relationship, directly or 

 indirectly are laws regulating the "business of 

 insurance." 

National Securities, 393 U.S. at 459-60 (citations omitted). 

Thus, under S 1012(a), the Act initially recognizes that 

regulating the "business of insurance" rests in the hands of 

the states. 

Of these state "laws relat[ing] to the regulation or 

taxation" of the insurance business, 15 U.S.C. S 1012(a), 

the next subsection protects from federal preemption a 

special class of state laws "enacted . . . for the purpose of 

regulating the business of insurance." 15 U.S.C. S 1012(b). 

But as explained by the Supreme Court, the categories of 

laws protected by S 1012(b) "necessarily encompasses more 

than just the `business of insurance' " and include those 

laws that possess the " `end, intention, or aim' of adjusting, 

managing, or controlling the business of insurance." Fabe, 

508 U.S. at 505 (citation omitted). The focus of section 

1012(b) is not directed toward the business of insurance 

itself, but rather toward a certain subset of laws relating to 

insurance regulation under section 1012(a). That 

demarcation line is found in S 1012(b) as laws "enacted . . . 

for the purpose of regulating the business of insurance." 

Thus, even though the state has a law regulating the 

challenged activity, a court must still address whether that 

law was meant to fall within the ambit of the Act's

protection. This is achieved by deciding whether the activity 

in question constitutes the business of insurance and 

whether the specific state law was enacted with the " `end, 

intention, or aim' of adjusting, managing, or controlling the 

business of insurance." Fabe, 508 U.S. at 505. 

 9 
B. Application of the McCarran-Ferguson Act 

We first ask whether the challenged activity alleged in the 

complaint constitutes the "business of insurance" in order 

to determine whether the Act applies. The Supreme Court 

has provided guidance as to what conduct falls within 

"business of insurance" for purposes of the McCarranFerguson Act. In National Securities, the Court held that the 

core of the insurance business "centers around the contract 

of insurance." 393 U.S. at 460. The Court further set forth 

typical activity that would unquestionably constitute the 

business of insurance: "[t]he relationship between insurer 

and insured, the type of policy which could be issued, its 

reliability, interpretation, and enforcement." Id. 

Similarly, in Group Life & Health Ins. Co. v. Royal Drug 

Co., the Supreme Court formulated a three part inquiry in 

interpreting the phrase "business of insurance": 

(1) whether the practice has the effect of transfe rring or 

spreading a policyholder's risk; (2) whether the p ractice is 

an integral part of the policy relationship between the 

insurer and the insured; and (3) whether the pract ice is 

limited to entities within the insurance industry. 440 U.S. 

205, 211-21 (1979); see also Union Labor Life Ins. Co. v. 

Pireno, 458 U.S. 119, 129 (1982). While this inquiry was 

directed to the antitrust clause in section 1012(b), it may 

nevertheless provide guidance in a more generalized

analysis under this Act. See Fabe, 508 U.S. 503-504.3 

In this case, we agree with MetLife and its named 

employees that their activity constitutes the business of 

insurance. The challenged conduct appearing in the 

plaintiff 's complaint unquestionably centers around the 

insurance contract, and specifically the activities

surrounding its sale and marketing. MetLife's "50/50 plan," 

_________________________________________________________________ 

3. Some courts have concluded that this three part test is simply not 

relevant in determining what constitutes the business of insurance in a 

non-antitrust context. See, e.g., Doe, 107 F.3d at 1305 n.8. We disagree. 

As Fabe makes clear, the Royal Drug test is only a starting point in the 

analysis for non-antitrust cases. 508 U.S. at 503-5. However, because 

laws "enacted . . . for the purpose of regulating the business of 

insurance" necessarily encompass more than just the insurance 

business, the analysis here is broader. 

 10 
"churning" trades, and management's organized 

intimidation of sales agents, all strike at the insurance 

business "core" enumerated in National Securities because 

they directly impact on the sale of insurance policies and 

ultimately affect the relationship between insurer and 

insured. 393 U.S. at 460. Indeed, whatever the precise 

contours of the insurance business phrase may be, there is 

nothing more basically "insurance" than the sale of an 

insurance contract and the insurer's unique approach in 

trading, advertising, or valuing that product. We need not 

delve into a sophisticated three part analysis under Royal 

Drug or Pireno to reach this conclusion, but instead look to 

the defendants' conduct to ascertain whether it centers 

around the contract of insurance and the relationship 

between insurer and insured. 

Plaintiff's assertion that the challenged activity cannot 

constitute the business of insurance because it is illegal is 

unpersuasive. By pointing to a practice that may violate 

federal law, and claiming that it is not the "business of 

insurance," plaintiff demonstrates a fundamental 

misunderstanding of the Act. The language and purpose of 

the Act speak not of legal insurance transactions, but 

instead seek to allow states to regulate and enforce the 

insurance business without fear of unintended federal 

interference. We agree with the Court of Appeals for the 

Ninth Circuit that if we were to construe the "business of 

insurance" phrase by reference to federal legality, the 

statute would be read out of existence. Merchants, 50 F.3d 

at 1490. As noted by the Seventh Circuit Court of Appeals, 

"it is not helpful to point to a practice forbidden by federal 

law . . . and observe that this practice is not itself 

insurance." NAACP v. American Family Mut. Ins. Co., 978 

F.2d 287, 294 (7th Cir. 1992). It is not surprising, 

therefore, that the majority of courts have rejected this 

same argument advanced here by the plaintiff, and so do 

we. See Dornberger, 961 F.Supp. at 517 (surveying cases). 

C. Preclusion of RICO Claims Under the McCarranFerguson Act 

Having found that the activity challenged in the 

complaint constitutes the business of insurance, and is 

 11 
therefore within the ambit of the Act, we consider whether 

plaintiff 's RICO cause of action is precluded under 

S 1012(b). No party to the appeal argues that RICO 

specifically relates to insurance. Indeed, virtually every 

court considering this issue has held that RICO is not a 

federal statute exempt from the McCarran-Ferguson Act. 

See, e.g., Kenty, 92 F.3d at 391; Merchants, 50 F.3d at 

1489; Dornberger, 961 F.Supp. at 516. Nor is it disputed 

that the applicable Pennsylvania insurance statute is a 

state law enacted for the purpose of regulating the

insurance business. Thus, all that is left for us to consider 

under the Act is whether an application of RICO to the 

instant case would "invalidate, impair, or supersede" state 

law. 

1. Pennsylvania Insurance Laws and RICO 

In order to determine whether a cause of action under 

RICO would "invalidate, impair, or supersede" Pennsylvania 

insurance law, we must initially juxtapose RICO with a 

specific state law enacted for the purpose of regulating the 

insurance business. The district court, along with both 

sides on appeal, point to Pennsylvania's Unfair Insurance 

Practices Act, 40 Pa. Cons. Stat. Ann. SS 1171.1 to 1171.15 

(West 1992) ("UIPA"), as the relevant state law governing 

MetLife's challenged activity. The Act prohibits persons 

from engaging in unfair or deceptive practices in the 

business of insurance. Id. S 1171.4. An exhaustive list of 

activity is set forth in section 1171.5 as deceptive or unfair 

practices forbidden under section 1171.4. The UIPA further 

empowers the Pennsylvania insurance commissioner to

investigate illegal insurance practices and to take certain 

remedial actions including the imposition of monetary 

penalties, "cease and desist" orders, the suspension or 

revocation of an insurance license, or additional injunctive 

relief. Id. SS 1171.7 to 1171.11. 

By judicial precedent, the Pennsylvania Insurance 

Commissioner alone may seek to enforce the UIPA. See 

Wright v. North Am. Life Assurance Co., 372 Pa. Super. 272, 

279, 539 A.2d 434, 438 (1988) ("[T]he provisions of this 

statute were not intended to confer a right of private action. 

Rather, the Unfair Insurance Practices Act vests 

 12 
enforcement powers in the Pennsylvania Insurance 

 539<!>Commissioner."); Wexco, 820 F.Supp. at 203-204. 

Pennsylvania courts, however, have not barred common law 

actions for fraud and deceit arising out of insurance 

practices even though the UIPA does not allow private 

causes of action. Wright, 372 Pa. Super. at 279, 539 A.2d 

at 438. These private lawsuits, in addition to other private 

actions authorized by Pennsylvania law,4 provide the only 

judicial remedies available to plaintiffs victimized by illegal 

insurance practices. 

RICO, on the other hand, grants a private cause of action 

to any person injured as a result of a pattern of 

racketeering activity. 18 U.S.C. S 1964(c). The statute also 

authorizes the award of treble damages, attorney's fees, and 

costs. Id. Pursuant to 18 U.S.C. S 1961(2), a pattern of 

racketeering activity is defined as at least two acts of illegal 

activity identified in section 1961(1) and includes both mail 

fraud and wire fraud. Beyond the general classes of crimes 

enumerated in section 1961(1), RICO does not specifically 

address insurance practices. 

2. "Invalidate, Impair, or Supersede" 

Given this comparison of RICO with the UIPA, the legal 

question before us is whether allowing plaintiff 's suit under 

RICO would "invalidate, impair, or supersede" Pennsylvania 

law as that phrase is understood under the Act. The phrase 

"invalidate, impair, or supersede" is not defined anywhere 

in the Act and we are faced with the considerable task of 

grappling with its construction in the present context. 

Courts of Appeals jurisprudence is in disarray as to the 

extent and meaning of invalidate, impair, or supersede 

under the Act. One line of cases, spearheaded by thefirst, 

seventh, and ninth circuit Courts of Appeals, looks to a 

_________________________________________________________________ 

4. In addition to common law fraud and deceit, Pennsylvania courts have 

sanctioned the use of the Pennsylvania Unfair Trade Practices and 

Consumer Protection Law, 73 Pa. Cons. Stat. Ann. SS 201-1 to 201-9.2 

(West 1993), to allow aggrieved insureds recovery against insurance 

fraud. See Pekular v. Eich, 355 Pa. Super. 276, 285-90, 513 A.2d 427, 

432-41 (1986). 

 13 
direct conflict in the substantive provisions of the federal 

and state statutes at issue. See Merchants Home Delivery 

Service, Inc. v. Frank B. & Hall Co., 50 F.3d 1486, 1491-92 

(9th Cir. 1995); NAACP v. American Family Mut. Ins. Co., 

978 F.2d 287, 295-97 (7th Cir. 1992); Villafane-Neriz v. 

FDIC, 75 F.3d 727, 736 (1st Cir. 1996). These courts 

typically reason that the Act is a form of inverse preemption 

where federal laws must yield to state laws when the state 

enacts a statute for the purpose of regulating the insurance 

business and the federal statute does not specifically apply 

to insurance. Logic then drawn from ordinary rules of 

federal preemption under the supremacy clause is reversed 

so that a state law will not preempt a federal law unless the 

laws of both sovereigns directly conflict in terms of 

governing the behavior of insurance carriers. See American 

Family, 978 F.2d at 296 (citing Silkwood v. Kerr-McGee 

Corp., 464 U.S. 238 (1984)). The Act's preemption is 

appropriate, these courts will conclude, where it is simply 

not possible for the insurance carrier to comply with both 

state and federal law. However, because "duplication is not 

conflict," differences in state remedies and federal remedies 

could not be the basis of preemption when both statutes 

proscribe the same insurance practices. Id. 

In further support for the foregoing analysis, these courts 

reason that the Act was not intended to cede the entire field 

of insurance regulation to the states. Where a state law or 

regulation is silent as to remedy, or does not provide a 

private cause of action, federal regulation will not be 

preempted. Merchants, 50 F.3d 1492. A contrary 

interpretation of the statute, these courts will conclude, 

would essentially rewrite the Act to read: No federal statute 

shall be construed to apply to the business of insurance, 

unless such federal statute specifically relates to the 

business of insurance. The Congress did not so provide and 

therefore state silence surrounding the assurance of a 

private remedy does not provide the basis for federal 

preemption. Id. 

The fourth, eighth, and to a certain extent the sixth, 

circuit Courts of Appeals disagree. When state insurance 

laws provide for enforcement through an administrative 

process to the exclusion of private damage actions, treble 

 14 
damages, attorney's fees, and costs, these courts reason 

that RICO's expanded remedial framework cannot coexist 

with state law based on a plain meaning of the words 

"invalidate," "impair," and "supersede."5 See Doe v. Norwest 

Bank Minn., 107 F.3d 1297, 1307 (8th Cir. 1997); Ambrose 

v. Blue Cross & Blue Shield of Virginia, Inc., 891 F.Supp. 

1153, 1165 (E.D.Va. 1995), aff'd, 95 F.3d 41 (4th Cir. 

1997) (unpublished per curiam). They say the Act was 

designed to allow state legislatures to adopt their own 

regulatory framework governing how insurance grievances 

are redressed. If a state chose a private forum for redress 

through administrative enforcement, then the Act would 

protect such a decision and federal law would not be 

allowed to upset this balance. Thus, they conclude that the 

drastic nature of federal remedies is directly relevant to 

assessing the application of the "invalidate, impair, or 

supersede" phrase in the Act. See Doe, 107 F.3d at 1307; 

Kenty v. Bank One, Columbus, N.A., 92 F.3d 384, 392 (6th 

cir. 1996). 

To be sure, a direct conflict in the substantive provisions 

of RICO with those provided for in the UIPA would fall 

within the ambit of laws that invalidate, impair, or 

supersede state insurance law. If, for example, 

Pennsylvania explicitly authorizes certain insurance 

practices that RICO would clearly prohibit, the McCarranFerguson Act would eviscerate the federal cause of action. 

Cf. American Family, 978 F.2d at 297 ("If Wisconsin wants 

to authorize redlining, it need only say so; if it does, any 

challenge to that practice under the auspices of the Fair 

Housing Act becomes untenable."). This would be the case 

no matter how the phrase "invalidate, impair, or supersede" 

is to be construed, as we cannot imagine any more 

impairment then an absolute contradiction in legalfiat 

concerning insurance practices. But we cannot find any 

such conflict in the UIPA when compared to RICO, at least 

in the present context. Consequently, the more critical 

_________________________________________________________________ 

5. "Invalidate" is defined as "to weaken or make valueless"; "impair" 

means to "make worse . . . diminish in quantity, value, excellence or 

strength"; "supersede" means to "make obsolete, inferior, or outmoded". 

Webster's Third New International Dictionary 1199, 1131, 2295 (1986). 

See Ambrose, 891 F.Supp. at 1165. 

 15 
issue is whether we may look to divergent state and federal 

implementation of similar legal norms. 

Part of this puzzle has been answered by the Supreme 

Court in National Securities. There, the Securities and 

Exchange Commission sought to unwind a merger between 

two insurance companies based on violations of Rule

10b-5. The merger had already been approved by the 

Arizona State Director of Insurance in his capacity as 

licensor of insurers within the state. This approval was 

predicated upon a finding that the merger would not

"substantially reduce the security of and service to be 

rendered to policyholders." 393 U.S. at 462 (quoting Ariz. 

Rev. Stat. Ann. S 20-731(B)(3) (1969)). 

Upon the foregoing factual scenario, the Supreme Court 

phrased the issue as whether the "McCarran-Ferguson Act 

bars a federal remedy which affects a matter subject to 

state insurance regulation." Id. The Court reasoned that 

any "impairment" in the case would be indirect--the federal 

government sought to protect security holders while the 

Arizona sought to safeguard insurance policy holders. Id. at 

463. 

Moreover, the Court noted that there was no true 

"conflict" in remedies at all because "Arizona has not 

commanded something which the Federal Government 

seeks to prohibit." Id. at 463. The Court also found that the 

paramount federal interest in prohibiting securities fraud 

was perfectly compatible with the state interest in

protecting policyholders. Thus, because of the nature of the 

indirect impairment, and because "the remedy the 

Commission seeks does not affect a matter predominantly 

of concern to policyholders alone," the Court held that it 

saw no reason to emasculate securities laws through an 

application of the McCarran-Ferguson Act. In the end, the 

Supreme Court "simply [could] not see the conflict" and 

allowed the federal government to unwind the merger

notwithstanding Arizona's explicit approval. Id. 

We too cannot see the conflict in this case andfind no 

invalidation, impairment, or supersedence, however 

defined, of Pennsylvania insurance law. The federal policies 

embodied in RICO, namely, the grant of a liberal federal 

 16 
remedy to those who have been victimized by organized 

crime, see Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 487 

(1985), are in no way inconsistent with the stated purpose 

of the UIPA, which is to "regulate trade practices in the 

business of insurance . . . by defining . . . such practices . . . 

which constitute unfair methods of competition or unfair or 

deceptive acts . . . ." 40 Pa. Cons. Stat. Ann. S 1171.2; see 

also D'Ambrosio v. Pennsylvania Nat. Mut. Cas. Ins. Co., 

494 Pa. 501, 508, 431 A.2d 966, 970 (1981) (stating that 

the UIPA serves to deter bad faith conduct in the insurance 

business). Borrowing from the Supreme Court's analysis in 

National Securities, the RICO remedy does not exclusively 

affect matters predominantly of concern to those protected 

only by the UIPA. 393 U.S. at 463. RICO, whether in effect 

or purpose, is not an attempt to regulate the "sphere 

reserved primarily to the States by the McCarran-Ferguson 

Act." Id. 

Of course, this court would be remiss not to recognize 

MetLife's argument that an application of RICO may affect, 

in a more abstract sense, Pennsylvania's overall 

implementation of insurance norms and its decision to 

enforce certain insurance violations in an administrative 

context. As acknowledged by the Court of Appeals for the 

Seventh Circuit: 

 Undoubtedly there is a sense in which any overlap 

 between state and federal law upsets a balance struck 

 by one of the two legislatures. . . . Laws enforced only 

 be administrative agencies with limited budgets are less 

 potent than laws enforced by both agencies and private 

 litigants. One could say that a federal rule increasing 

 the probability that a state norm will be vindicated (or 

 augmenting the damages assessed in the event of a 

 violation) conflicts with a decision by the state that 

 remedies should be limited or rare. 

American Family, 978 F.2d at 295 (citations omitted). While 

such an argument may be compelling, there is no place for 

it in the present context. We find no indication, through 

legislative intent or judicial interpretation, that

Pennsylvania's non-recognition of a private remedy under 

the UIPA represents a reasoned state policy of exclusive 

administrative enforcement or that the vindication of UIPA 

 17 
norms should be limited or rare. Private actions for fraud 

and deceit in the insurance business coexist with the UIPA 

even though the same conduct may be covered by both the 

common law and the UIPA. See, e.g., 40 Pa. Cons. Stat. 

Ann. SS 1171.5(1) to 1171.5(3) (generally prohibiting "false", 

"misleading" or misrepresentative statements and 

omissions). In addition, Pennsylvania courts have held that 

the state's general consumer protection statute, 73 Pa. 

Cons. Stat. Ann. SS 201-1 to 201-9.2, provides a private 

remedy and treble damages for victims of insurance fraud. 

See Peckular, 355 Pa. Super. at 285-90, 512 A.2d at

430-41. This certainly undercuts any purported balance 

struck by the Pennsylvania legislature favoring 

administrative enforcement to the exclusion of private 

damages actions and we see no reason why a federal 

private right of action cannot coexist with the UIPA in these 

circumstances. 

We therefore conclude that a RICO cause of action and 

remedy would not "invalidate, impair, or supersede"

Pennsylvania's scheme of insurance regulation in this 

context. Because we need not reach the issue here, we will 

leave for another day the question of whether different 

federal and state remedies could ever be the basis for 

preclusion under the Act. Accordingly, the district court's 

dismissal of the plaintiff 's RICO claims for failure to state 

a claim will be reversed to the extent it relied on the 

McCarran-Ferguson Act as a basis for preclusion. We will 

also reverse the district court's denial of the motion to 

amend the complaint since the amendment would no longer 

be futile under our application of the McCarran-Ferguson 

Act. In so doing, however, we express no opinion as to 

whether the plaintiff has stated proper claims under RICO 

law itself. 

III. The Defamation Claim 

The plaintiff 's complaint also included a defamation 

claim against MetLife alone based on Pennsylvania law. In 

due course, MetLife filed a motion for summary judgment 

on such a claim which was granted. We will review 

plaintiff 's appeal of this order under a summary judgment 

standard. The district court's grant of summary judgement 

 18 
will be affirmed if, after a plenary review of the record, there 

is no genuine issue of material fact. Fed. R. Civ. P. 56(c). 

This court will not weigh the evidence in the record itself, 

but instead determine whether there is a genuine issue for 

trial. See Anderson v. Liberty Lobby, Inc., 447 U.S. 242, 247 

(1986); Petruzzi's IGA v. Darling-Delaware, 998 F.2d 1224, 

1230 (3d Cir. 1993). An issue is "genuine" if the evidence is 

such that a reasonable jury could return a verdict for the 

non-moving party. Anderson, 477 U.S. at 248. 

Plaintiff's defamation claim arises out of the following 

circumstances as set forth in the affidavit of Fred Newstrom 

("Newstrom"), a sales agent for MetLife who worked with 

plaintiff at one time. The affidavit is based on personal 

knowledge, as required by Fed. R. Civ. P. 56(e). 

About August 23, 1993, MetLife convened a meeting of its 

sales agents in the Pittsburgh region. Several hundred 

agents were in attendance, including Newstrom. There were 

various speakers, including Gary Antonino ("Antonino"), 

Pittsburgh Regional Manager, and Robert Crimmons, 

MetLife Executive Vice President for Personal Insurance. 

Other senior managers of MetLife were also on the dais. 

During the course of an address given to the agents by 

Antonino, a brief clip from the movie Ghostbusters was 

shown. In the clip, an animated ghost figure known to 

those familiar with the movie as "slimer" charges down a 

long hallway and attacks one of the other characters. 

"Slimer" is a short, fat, malformed green ghost who attacks 

his victims by covering them with a slimy or gooey material. 

Immediately following the showing of the movie clip, 

Antonino made statements to the audience about the way 

the media were portraying MetLife. 

The affidavit then goes on: 

 At or about the time of this meeting at the Royce 

 Hotel, MetLife was the subject of an ongoing

 investigative report on the Channel 11 news, in which 

 statements were made that MetLife was under 

 investigation by the Pennsylvania Insurance 

 Department for illegal deceptive sales and trade 

 practices. 

 19 
 Also during this time period, Antonino was letting it 

 be known through the region that he "had it in" for 

 Sabo, and that Sabo was at fault for all of MetLife's 

 difficulties. 

 Based upon the showing of the movie clip and the 

 statements made by Antonino immediately thereafter, 

 Herrmann understood Antonino to be saying that it was 

 Sabo [plaintiff] who was spreading false information to 

 the media, and that Sabo was attempting to wrongfully 

 bring about the demise of MetLife. 

App. at 487 (alteration in original). After the meeting, other 

MetLife agents who attended the meeting informed 

Newstrom that they also believed that Antonino's message 

was that Sabo was responsible for the information about 

MetLife in the media. Id. 

In addition to the affidavit of Newstrom, an affidavit by 

agent Ronald Herrmann was filed. It also was based on 

personal knowledge. In it he recited that he also attended 

the meeting and that he also understood Sabo to be Slimer 

and the evil presence at MetLife. However, Herrmann did 

not state that Antonino "had it in" for the plaintiff. 

A copy of the Report and Recommendation of the 

Magistrate Judge who heard the matter recommended to 

the district court that summary judgment be granted to 

MetLife on the defamation claim based solely on the ground 

that there was no support in the record for a finding that 

plaintiff was the intended target of any comments made 

during the "Ghostbuster" presentation. Thereafter, the 

district court granted MetLife's motion for summary

judgment on the defamation claim solely on the ground 

recommended by the Magistrate Judge. 

We note at the outset of this appeal that in an action for 

defamation under Pennsylvania law, the plaintiff has the 

burden of proving: (1) the defamatory character of the 

communications; (2) its publication by the defenda nt; 

(3) its application to the plaintiff; (4) the u nderstanding by 

the recipient of its defamatory meaning; (5) under standing 

by the recipient of it as intended to be applied to the 

plaintiff; (6) special harm resulting to the plain tiff from its 

 20 
publication; and (7) abuse of a conditionally priv ileged 

occasion. 42 Pa. Cons. Stat. Ann. S 8343(a). 

We analyze the record keeping in mind that we are 

reviewing summary judgment and that the sole basis for 

granting the motion in the district court was the absence of 

evidence to meet this fifth requirement of the Pennsylvania 

statute, viz., understanding by the recipients of it that it 

was intended to be applied to plaintiff. 

Plaintiff concedes that the alleged defamatory matter, 

standing on its own, is insufficient to support a jury finding 

that it refers to him. However, he argues that the 

defamation analysis must nevertheless proceed as to the 

fifth element if the defamatory statements may point to the 

defamed through "description or circumstances tending to 

identify him." Cosgrove Studio & Camera Shop, Inc. v. Pane, 

408 Pa. 314, 319, 182 A.2d 751, 753 (1962). We turn to 

that contention. 

Taking the recited contents of the affidavits as true, we 

think it reasonable to infer at this point that the affiants 

were aware at the time of the meeting of rumors with 

respect to MetLife's controversy with the plaintiff. When 

this circumstance is combined with the contents of the 

movie clip and Antonino's remarks thereafter, a genuine 

issue of material fact was created with respect to the fifth 

requirement of the Pennsylvania statute. Consequently, the 

resolution of that factual issue was for the finder of fact. 

Thus, summary judgment should not have been granted

based on a failure to meet this requirement. 

But our conclusion that the district court erred in its 

ruling on the foregoing issue does not end the matter. We 

cannot tell from the record whether MetLife asserted 

grounds other than a failure to meet the fifth element of the 

Pennsylvania statute in support of its summary judgment 

motion. Thus, we conclude that our reversal of the order 

granting summary judgment must be without prejudice to 

the district court's right to consider other asserted grounds 

for summary judgment, if any, that are still before it. 

IV. Conclusion 

The order of the district court dismissing plaintiff 's RICO 

claim will be reversed, and the order denying plaintiff 's 

 21 
motion to amend the complaint will be vacated. The order 

of the district court granting MetLife's motion for summary 

judgment on plaintiff's defamation claim will be reversed to 

the extent it was based on the ground relied on by the 

district court. It is further ordered that this ruling is 

without prejudice to a consideration by the district court of 

other asserted grounds, if any, for summary judgment. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 22