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ST. PAUL FIRE & MARINE INS. CO. V. BARRY, 438 U. S. 531 - Volume 438 - 1978 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 438 > ST. PAUL FIRE & MARINE INS. CO. V. BARRY, 438 U. S. 531 (1978) > Full Text
POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. STEWART, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 438 U. S. 555.
As this case comes to us from the reversal of a successful motion to dismiss, we treat the factual allegations of respondents' amended complaint as true. [Footnote 2] During the period in
Id. at 24-27. [Footnote 4]
On August 12, 1977, petitioners sought a writ of certiorari in this Court. To resolve the conflicting interpretations of § 3(b) adopted by several Courts of Appeals, [Footnote 5] we granted the writ on October 31, 1977. 434 U.S. 919. We now affirm.
The Court of Appeals requested the parties to brief the question whether the antitrust claim was mooted by Rhode Island's formation, after the initial complaint was filed, of a Joint Underwriting Association (JUA) to provide malpractice insurance to all licensed providers of health care services and to require the participation of all personal injury liability insurers in the State in a scheme to pool expenses and losses in providing such insurance. [Footnote 6] The court noted that, while the State's action prevented St. Paul from "gather[ing] the fruits of the alleged conspiracy," it was "convinced that, for purposes of [its] jurisdiction, the state's act did not extinguish plaintiffs' every claim for relief." 555 F.2d at 6, n. 2. We agree.
(1869), that the issuance of an insurance policy was not a transaction in interstate commerce, and that the States enjoyed a virtually exclusive domain over the insurance industry. South-Eastern Underwriters held that a fire insurance company which conducted a substantial part of its transactions across state lines is engaged in interstate commerce, and that Congress did not intend to exempt the business of insurance from the operation of the Sherman Act. [Footnote 8] The decision provoked widespread concern that the States would no longer be able to engage in taxation and effective regulation of the insurance industry. Congress moved quickly, enacting the McCarran-Ferguson Act within a year of the decision in South-Eastern Underwriters.
Prudential Insurance Co. v. Benjamin, 328 U. S. 408, 328 U. S. 429 (1946). Our decisions have given effect to this purpose in construing the operative terms of the § 2(b) proviso, which is the critical provision limiting the general applicability of the federal antitrust laws "to the business of insurance to the extent that such business is not regulated by State Law." See SEC v. National Securities, Inc., 393 U. S. 453, 393 U. S. 460 (1969); FTC v. National Casualty Co., 357 U.S.
560 (1958); infra at 438 U. S. 550-551. Section 2(b) is not in issue in this case. [Footnote 9] Rather, we are called upon to interpret, for the first time, the scope of § 3(b), the principal exception to this scheme of preemptive state regulation of the "business of insurance."
The generic concept of boycott refers to a method of pressuring a party with whom one has a dispute by withholding, or enlisting others to withhold, patronage or services from the target. [Footnote 11] The word gained currency in this country largely as a term of opprobrium to describe certain tactics employed by parties to labor disputes. See, e.g., State v. Glidden, 55 Conn.46, 8 A. 890 (1887); Laidler, Boycott, in 2 Encyclopaedia of the Social Sciences 662-666 (1930). Thus it is not surprising that the term first entered the lexicon of antitrust law in decisions involving attempts by labor unions to encourage third parties
Petitioners define "boycott" as embracing only those combinations which target competitors of the boycotters as the ultimate objects of a concerted refusal to deal. They cite commentary that attempts to develop a test for distinguishing the types of restraints that warrant per se invalidation from other concerted refusals to deal that are not inherently destructive of competition. [Footnote 14] But the issue before us is whether the conduct in question involves a boycott, not whether it is per se unreasonable. In this regard, we have not been referred
Whatever other characterizations are possible, [Footnote 16] petitioners' conduct fairly may be viewed as "an organized boycott," Fashion Guild v. FTC, 312 U. S. 457, 312 U. S. 465 (1941), of St. Paul's policyholders. Solely for the purpose of forcing physicians and hospitals to accede to a substantial curtailment of the coverage previously available, St. Paul induced its competitors to refuse to deal on any terms with its customers. This agreement did not simply fix rates or terms of coverage; it effectively barred St. Paul's policyholders from all access to alternative sources of coverage, and even from negotiating for more favorable terms elsewhere in the market. The pact served as a tactical weapon invoked by St. Paul in support of a dispute with its policyholders. The enlistment of third parties in an agreement not to trade, as a means of compelling capitulation by the boycotted group, long has been
91 Cong.Rec. 1486 (1945) (emphasis supplied). The rules and regulations of private associations in the industry, while providing Senator O'Mahoney with a vivid example of "the sort of agreement which ought to be condemned," ibid., exemplified a larger evil -- "regulation by private combinations and groups," id. at 1483 -- that required the continued application of the Sherman Act. [Footnote 22]
Petitioners rely on a syllogism that is faulty in its premise, for it ignores the fact that § 3(b) is an exception to § 2(b), and that Congress intended in the "boycott" clause to carve out of the overall framework of plenary state regulation an area that would remain subject to Sherman Act scrutiny. The structure of the Act embraces this exception. Unless § 3(b) is read to limit somewhat the sweep of § 2(b), it serves no purpose whatever. Petitioners do not press their argument that far, but they suggest no persuasive reason for engrafting a particular limitation on § 3(b) that is justified neither by its language nor by the legislative history. [Footnote 24]
Appeals' decision, see 555 F.2d at 9, and petitioners do not aver that state law or regulatory policy can be said to have required or authorized the concerted refusal to deal with St. Paul's customers. [Footnote 26]
Here the complaint alleges an attempt at "regulation by private combinations and groups," 91 Cong.Rec. 1483 (1945) (remarks of Sen. O'Mahoney). This is not a case where a State has decided that regulatory policy requires that certain categories of risks be allocated in a particular fashion among insurers, or where a State authorizes insurers to decline to insure particular risks because the continued provision of that insurance would undermine certain regulatory goals, such as the maintenance of insurer solvency. In this case, a group of insurers decided to resolve by private action the problem of escalating damages claims and verdicts by coercing the policyholders of St. Paul to accept a severe limitation of coverage essential to the provision of medical services. See n 4, supra. We conclude that this conduct, as alleged in the complaint, constitutes a "boycott" under § 3(b). [Footnote 27]
We have not addressed respondents' claim for damages arising out of their inability "to obtain medical malpractice insurance on a reasonable basis after June 30, 1975," App. 26. Such a claim might itself preclude a finding of mootness, see e.g., Memphis Light, Gas & Water Div. v. Craft, 436 U. S. 1, 436 U. S. 8-9 (1978), but the parties have not advised the Court whether this claim survives the formation of the JUA. The Court of Appeals stated that respondents were "entitled to seek both injunctive relief and treble damages," noting, in a separate discussion, that "the change in malpractice coverage has increased costs for the doctors." 555 F.2d at 12, and n. 7. The validity of the damages claim, in light of the role of the JUA and the considerations identified in this decision, is a matter for initial determination by the courts below.
Section 2(b) of the McCarran-Ferguson Act provides that the Sherman Act "shall be applicable to the business of insurance to the extent that such business is not regulated by State Law." [Footnote 2/1] Section 3(b) limits the antitrust immunity
The Court accurately reads the Act as not conferring broad-scale antitrust immunity on the insurance industry, at least not for practices that "occurred outside of any regulatory or cooperative arrangement established by the laws of Rhode Island." Ante at 438 U. S. 553. Although Congress plainly intended to give the States priority in regulating the insurance industry, it just as plainly intended not to immunize that industry from federal antitrust liability "to the extent that such business is not regulated by State Law." [Footnote 2/3] In thus construing the Act's
general purpose, the Court is true to the legislative history. But I cannot understand why the Court then tries to achieve that statutory purpose by giving an unduly expansive reading to § 3(b), when the provision that obviously was meant to accomplish that purpose was § 2(b). Properly read, § 2(b) suspends the federal antitrust laws only to the extent that an area or practice is regulated by state law. [Footnote 2/4] Although the
It is true, as the Court says, that the McCarran-Ferguson Act fails to tell us in so many words that the phrase "boycott, coercion, or intimidation" should be read in some light other than that "tradition of meaning, as elaborated in the body of decisions interpreting the Sherman Act." Ante at 438 U. S. 541. Yet the very selection of precisely those three words from the entire antitrust lexicon indicates that they were intended to
This proposal formed the basis for S. 340, which was reported out with the unanimous support of the Senate Committee on the Judiciary in January 1945. [Footnote 2/18] The list of specific practices immunized from antitrust liability was dropped, leaving the provision that suspended the Clayton and Sherman Acts for several years, during which time the States could accommodate their regulatory activities to the federal antitrust laws. [Footnote 2/19] Even during the moratorium, however, the Sherman Act was to remain applicable to "any act of boycott, coercion, or intimidation." [Footnote 2/20] This provision was not needed
From the legislative debates on S. 340, the Committee Reports, and the design of the statute itself, it is evident that the "boycott, coercion, or intimidation" provision is most fairly read as referring to the kinds of antitrust violations alleged in South-Eastern Underwriters -- that is, attempts by members of the insurance business to force other members to follow the industry's private rules and practices. Repeatedly, Congressmen involved in the drafting of the statute drew a distinction between state regulation and private regulation. [Footnote 2/24] Congress plainly wanted to allow the States to authorize anticompetitive practices which they determined to be in the public interest, as indicated by formal state approval. [Footnote 2/25] Section 2(b) does just that. Congress just as plainly wanted to make sure that private organizations set up to govern the industry, such as the South-Eastern Underwriters Association, would not escape the reach of the federal antitrust laws. Section 2(b) also meets this concern to the extent that States do not authorize or sanction anticompetitive practices promoted by such organizations. But § 2(b) leaves open the possibility that States might, at the prompting of these powerful organizations, enact merely permissive regulations sufficiently specific to confer antitrust immunity, thus leaving those organizations free to coerce compliance from uncooperative competitors. Properly construed, § 3(b) fills this gap by keeping the Sherman Act fully applicable to private enforcement -- by the means described in the South-Eastern
The report also appeared to reflect the testimony of Attorney General Biddle, who, on the day after H.R. 3270, see n. 10 supra, passed the House, appeared before the Senate Judiciary Subcommittee that was considering this same legislation. He assured the Subcommittee that the Government did not intend to bring new prosecutions while Congress was considering legislation on the subject, but he insisted that the South-Eastern case should and would go forward because of the seriousness of the charges. After quoting a portion of the Court's opinion set out in the text, supra at 438 U. S. 560-561, he stated:
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