Opinion ID: 3006618
Heading Depth: 3
Heading Rank: 3

Heading: Boycott, coercion, or intimidation

Text: Even when conduct involves the business of insurance that is regulated by state law, the McCarran-Ferguson Act does not exempt it from antitrust scrutiny when it amounts to a “boycott, coercion, or intimidation.” At first glance, the allegations in this case may seem close to the “paradigm situation [involving] the collective refusal by insurance companies to deal with agents doing business with other insurers.” Areeda & Hovenkamp, supra, ¶ 220, at 35. But the allegations in this case focus on a single broker, HUB, which turns out to make a big difference. Sanger’s primary argument on appeal is that HUB’s activities alone constituted a boycott—the company’s briefing repeatedly argues that “HUB engaged in a boycott” by using its alleged monopoly power to pressure insurers into not doing business with Sanger. But “conduct by individual actors falling short of concerted activity is simply not a ‘boycott’ within § 3(b).” St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 555 (1978); see also Areeda & Hovenkamp, supra, ¶ 220a, at 36 (“[T]he term ‘boycott’ clearly requires an agreement of at least two firms to exclude or discriminate against another.”). HUB’s independent conduct seeking to leverage its supposed monopoly position as sole broker for the Program with insurers thus cannot constitute a boycott within the meaning of the exemption. Though less emphasized on appeal than its allegations that HUB is engaging in monopolization, Sanger also intimates that the unlawful 25 Case: 14-40854 Document: 00513215665 Page: 26 Date Filed: 10/01/2015 No. 14-40854 arrangement is a horizontal agreement between HUB and the insurers. 10 If that is the case, there is a different problem for Sanger: the refusal to deal at issue in a boycott must expand “beyond the targeted transaction” to “unrelated transactions [that] are used as leverage to achieve the terms desired.” Hartford Fire Ins. Co. v. California, 509 U.S. 764, 802–03 (1993). In other words, a boycott is “the refusal to deal in a collateral transaction as a means to coerce terms respecting a primary transaction.” Gilchrist v. State Farm Mut. Auto. Ins. Co., 390 F.3d 1327, 1335 (11th Cir. 2004) (citing Hartford Fire, 509 U.S. at 801–05). For example, the Supreme Court long ago held that an agreement by lumber retailers not to purchase from lumber wholesalers that sell directly to customers is a boycott because it seeks an objective—“the wholesale dealers’ forbearance from retail trade”—that is collateral to the retailers’ transactions with the wholesalers. 11 See Hartford Fire, 509 U.S. at 803 (citing E. States Retail Lumber Dealers’ Ass’n v. United States, 234 U.S. 600 (1914)). The only “collateral transaction” plausibly claimed in this case is 10 Sanger also claims that HUB’s agreements with the American Veterinary Medical Association constitute contracts, combinations, or conspiracies in restraint of trade, but it does not appear to claim that the Association had a role in any alleged boycott. 11 Sanger contends that HUB and the insurers’ refusal to deal is a boycott under the definition used in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959). In that case, a retail chain used its “‘monopolistic’ buying power to bring about” a conspiracy with manufacturers and distributers of appliances to exclude Klor’s, an independent retailer, from selling their brands. Id. at 209. The Court characterized the conspiracy as a group boycott forbidden by the Sherman Act, though the opinion does not disclose any “collateral transaction” involved. Id. at 209–11. To the extent Klor’s conflicts with Hartford Fire, we follow the latter case, which is the only one that involves the McCarran-Ferguson Act’s boycott exception. See Hartford Fire, 509 U.S. at 803 (“The proper definition of ‘boycott’ is evident from the Court’s opinion in Eastern States Retail Lumber . . . . [T]he associations’ activities were a boycott because they sought an objective—the wholesale dealers’ forbearance from retail trade—that was collateral to their transactions with the wholesalers.”); but see NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 134–37 (1998) (citing and relying upon Klor’s in a non-insurance case). 26 Case: 14-40854 Document: 00513215665 Page: 27 Date Filed: 10/01/2015 No. 14-40854 HUB’s refusal to work with insurers who would insure Sanger’s clients, but as discussed above that transaction does not involve concerted action. The actions of the insurers as a group—refusing to work with Sanger—do not involve any “collateral transactions” (they directly implicate potential transactions between the insurers and Sanger) and therefore do not constitute a boycott. Sanger has thus not alleged a boycott that avoids the McCarran-Ferguson exemption. 12