Opinion ID: 698115
Heading Depth: 1
Heading Rank: 2

Heading: Delta's Federal Antitrust Claim

Text: 8 A dismissal under Fed.R.Civ.P. 12(b)(6) for failure to state a claim is a ruling on a question of law that we review de novo. Everest and Jennings v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994). Review is limited to the contents of the complaint. Buckey v. Los Angeles, 968 F.2d 791, 794 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 599 (1992). If matters outside the pleadings are submitted, the motion to dismiss is treated as one for summary judgment. Del Monte Dunes at Monterey, Ltd. v. Monterey, 920 F.2d 1496, 1507 (9th Cir.1990). All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Everest and Jennings, 23 F.3d at 229. A complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Id. 9 Section 2(b) of the McCarran-Ferguson Act grants antitrust immunity to acts constituting the business of insurance to the extent such activities are regulated by state law. 15 U.S.C. Sec. 1012(b); see also Hartford Fire Ins. Co. v. California, --- U.S. ----; 113 S.Ct. 2891; 125 L.Ed.2d 612 (1993). Section 3(b) of the Act creates an exception to this general immunity for acts amounting to a boycott. 15 U.S.C. Sec. 1013(b). In this case, the district court held that McCarran-Ferguson immunized the appellees' activities as the business of insurance and that the boycott exception did not apply. 10 A) The Business of Insurance 11 In Hartford Fire Ins. Co. v. California, the Supreme Court recently reiterated what constitutes the business of insurance within the meaning of section 2(b) of the McCarran-Ferguson Act. In determining whether an activity is the business of insurance, we must focus on the activity in question rather than on the nature of the entity conducting the activity. Id. at 2900. Three criteria are relevant to this inquiry: [f]irst, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry. Id. Delta argues that the appellees' activities do not meet any of the three prongs of this test. 12 Annuities, like life insurance policies, are formulated on the basis of actuarial tables. Life insurance protects against the economic risk of premature death while an annuity protects against the risk of outliving one's resources. We conclude that, in this case, the business of annuities entails the transfer of policyholder risk. California Insurance Code Secs. 101, 700(a) (West 1993). Accordingly, this prong of the business of insurance test is met. 13 Delta argues that the act of issuing TDA's is not integral to the business of insurance. Delta misunderstands the nature of this prong. The activity does not have to be integral to the business of insurance, but rather to the policy relationship between the insurer and insured. We agree with the appellees that the change in identity of the insurer is of fundamental importance to the policy relationship between insurer and insured. 14 Delta also argues that buying and selling annuities is not an activity limited to the insurance industry because entities outside the insurance industry engage in the annuity business. Because these other entities are not immune from antitrust laws, Delta argues, then neither should the appellees be immune simply because they are insurance companies. 15 The McCarran-Ferguson Act exempts from federal antitrust law the business of insurance to the extent that such business is regulated by the state. California Insurance Code Sec. 101 specifically includes the purchasing and disposing of annuities as part of the business of life insurance. (West 1993) (Life insurance includes insurance upon the lives of persons or appertaining thereto, and the granting, purchasing, or disposing of annuities.). Section 700(a) of that same code states: A person shall not transact any class of insurance business in this state without first being admitted for that class. Therefore, even if a business that is not strictly an insurance company were selling annuities, it would be transacting a class of insurance business as regulated by California law and would, by definition, be part of the insurance industry. Thus, the activity in issue, buying and selling annuities, is limited to the insurance industry and the third prong of the business of insurance test is met. We conclude that the activities at issue in the present case are regulated by the State of California as the business of insurance and, accordingly, the McCarran-Ferguson Act applies to bar Delta's claims. B) Boycott Exception 16 Section 3(b) of the McCarran-Ferguson Act, 15 U.S.C. Sec. 1013(b), states that nothing in it shall render the ... Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation. Thus, this section creates an exception to the general rule that state regulated insurance activities are immune from federal regulation. Delta argues that the appellees' activities constituted a boycott. We disagree. 17 Again, the Supreme Court in Hartford offers the most recent guidance on identifying boycott activities for purposes of an exemption to the McCarran-Ferguson Act. See Hartford, 113 S.Ct. at 2911. In Hartford, the Court differentiated between boycotts and other related activities such as cartelization, and strikes. Id. at 2912. Although all of these activities involve coercive pressure against a target to achieve a specific result, the Court noted that boycotts, unlike the other activities, employ economic coercive pressure outside of the targeted transaction to achieve the desired result. Id. In other words, where a group of workers refuses to work until they get higher wages, they are engaged in a strike. But, where the workers also refuse to otherwise deal with the employer, e.g., by not buying the employer's products or by not dealing with anyone who buys the employer's products, then the activity becomes a boycott. 18 The acts alleged by Delta do not rise to the level of a boycott. The only coercive pressure alleged was applied to the TDA holders, not Delta. Delta alleged that the TDA holders were duped into believing the only available charge-free transfer of their accounts was through Freeman and Safeco Insurance Company. This alleged act, though not an admirable business practice, does not constitute a boycott. We agree with the district court's characterization of this activity as nothing more than the sale of one business's accounts to another, although involving alleged misrepresentation. We conclude that the boycott exception to McCarran-Ferguson does not apply. Accordingly, the acts of which Delta complain are immunized from federal regulation by the McCarran-Ferguson Act because they are regulated as the business of insurance by the State of California.