Court Opinion

ID: 72684
Source: CourtListenerOpinion
Date Created: 2010-04-26 07:41:52+00
Date Added: 2024-06-11T09:35:26.708442
License: Public Domain

United States Court of Appeals,

                                          Eleventh Circuit.

                                            No. 97-2334.

                        BANKERS INSURANCE CO., Plaintiff-Appellant,

                                                   v.

   FLORIDA RESIDENTIAL PROPERTY AND CASUALTY JOINT UNDERWRITING
ASSOCIATION, James W. Newman, Jr., et al., Defendants-Appellees.

                                           March 26, 1998.

Appeal from the United States District Court for the Middle District of Florida. (No. 96-785-CIV-T-
25A), Henry Lee Adams, Jr., Judge.

Before COX and CARNES, Circuit Judges, and FAY, Senior Circuit Judge.

        PER CURIAM:

        Bankers Insurance Company sued the Florida Residential Property and Casualty Joint

Underwriting Association (the Association) and several of its officers and counsel, alleging a

conspiracy to restrain trade in violation of federal and Florida antitrust law. The district court

granted the Association judgment on the pleadings. Bankers appeals, and we affirm.

                                            I. Background

        Florida's legislature reacted to Florida's post-Hurricane Andrew insurance crisis by creating

an involuntary association of all Florida residential-property insurers. See Fla. Stat. § 627.351(6)(a).

This association, the Florida Residential Property and Casualty Joint Underwriting Association, is

directed to write policies for citizens who are unable to obtain property and casualty insurance on

the "voluntary" insurance market. Id. The insurers required to participate in the Association make

up the Association's losses pro rata, according to each insurer's market share.              See id. §

627.351(6)(b)(3).
        The Association is authorized to contract for the servicing of policies it has written. See Fla.

Stat. § 627.351(6)(c). Bankers, a Florida insurer, provided a substantial part of these services from

the Association's inception in 1993. In 1995, the Association announced competitive bidding for

servicing contracts. The Association ultimately accepted three of the ten bids; Bankers was one of

the disappointed bidders. Bankers alleges that the rejection of its bid was unjustifiable because the

Association revised bid standards in mid-review and because the Association disregarded the

preferences of the independent insurance agents who sell the Association's policies.

        After Bankers' bid was refused, Bankers pursued its administrative remedies. When those

failed, it sued the Association and the committee that controlled the bidding process for violations

of the Sherman Antitrust Act and Florida Antitrust Act of 1980, Fla. Stat. § 542.15 et seq. Bankers

makes no monopoly- or monopsony-related claims under § 2 of the Sherman Antitrust Act; it claims

only that the Association and the four individual defendants conspired to restrain trade in violation

of § 1 of that Act.

        The district court granted the defendants judgment on the pleadings. It reasoned that the

Association was protected by the Parker doctrine, see Parker v. Brown,1 which excludes from the

Sherman Act's scope anticompetitive conduct by a state as sovereign, or by state political

subdivisions under certain circumstances. Alternatively, the district court ruled that the Association

and its agents could not conspire to restrain trade as a matter of law under the doctrine of

Copperweld Corp. v. Independence Tube Co.2 because they lack the requisite diversity of interests.

Bankers appeals. It contends that the district court erred in treating the Association as a political

   1
    317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943).
   2
    467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984).

                                                   2
subdivision of the state and in viewing the Association as a single entity incapable of conspiring

with itself.3 We review the district court's grant of judgment on the pleadings de novo. See Slagle

v. ITT Hartford, 102 F.3d 494, 497 (11th Cir.1996).

                                           II. Discussion

        Judgment on the pleadings is appropriate when material facts are not in dispute and

judgment can be rendered by looking at the substance of the pleadings and any judicially noticed

facts. See id.; Hebert Abstract Co. v. Touchstone Properties, Ltd., 914 F.2d 74, 76 (5th Cir.1990).

For these purposes, we accept the facts alleged in the complaint as true and draw all inferences that

favor the nonmovant, here Bankers. See Slagle, 102 F.3d at 497.

                                      A. Ability to Conspire

        Purely unilateral action does not violate § 1 of the Sherman Antitrust Act; therefore, agents

and employees of a single entity cannot conspire to restrain trade, as a matter of law. See Tiftarea

Shopper, Inc. v. Georgia Shopper, Inc., 786 F.2d 1115, 1118 (11th Cir.1986); see also Copperweld,

467 U.S. at 769, 104 S.Ct. at 2740-41. The district court thus correctly granted judgment in favor

of the four individual defendants. The complaint alleges that the individual defendants are the

executive director, counsel, and director of operations of the Association. As officers and counsel

of the Association, they are its agents and submitted to its control in all matters relating to the

Association. Their interests are, therefore, to that extent aligned, and the "plurality of persons"

needed for a § 1 violation is missing. See Copperweld, 467 U.S. at 769, 104 S.Ct. at 2740-41. We

   3
   Bankers also asserts that the district court erred in not permitting Bankers to amend its
complaint to add more conspirators. Bankers never sought to amend its complaint during the
months between the motion for judgment on the pleadings and the district court's order, or at any
time after that order. The district court did not abuse its discretion in not sua sponte inviting
Bankers to amend.

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need not address whether a different conclusion would be appropriate if the individual defendants

also represented other interests, cf. St. Joseph's Hosp., Inc. v. Hospital Corp. of Am., 795 F.2d 948,

956 (11th Cir.1986), because the complaint contains no such allegations.

       The question for the Association itself is more difficult. As Bankers argues, associations

differ from corporations or other unitary entities enough that they may sometimes fall outside this

intraenterprise conspiracy rule. See Chicago Prof'l Sports, Ltd. v. National Basketball Ass'n, 95 F.3d

593, 598-99 (7th Cir.1996). We decline to reach this issue, however, because in any event the

Association is entitled to state action immunity, as discussed below.

                                      B. State Action Immunity

        Out of federal deference to state sovereignty, states are immune from federal antitrust law

for their actions as sovereign. Parker v. Brown, 317 U.S. 341, 351-53, 63 S.Ct. 307, 314, 87 L.Ed.

315 (1943). Three rules limit this immunity, according to the antitrust defendant's status. See

Crosby v. Hospital Auth., 93 F.3d 1515, 1521-22 (11th Cir.1996), cert. denied, --- U.S. ----, 117

S.Ct. 1246, 137 L.Ed.2d 328 (1997). First, state legislatures and courts are completely immune from

antitrust liability. Hoover v. Ronwin, 466 U.S. 558, 569, 104 S.Ct. 1989, 1995, 80 L.Ed.2d 590

(1984). Second, political subdivisions such as municipalities are immune from antitrust liability if

their anticompetitive acts follow a "clearly articulated and affirmatively expressed state policy." See

Town of Hallie v. City of Eau Claire, 471 U.S. 34, 44, 105 S.Ct. 1713, 1719, 85 L.Ed.2d 24 (1985)

(quoting City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 415, 98 S.Ct. 1123, 1138,

55 L.Ed.2d 364 (1978) (opinion of Brennan, J.)); Crosby, 93 F.3d at 1522-23. Third, private actors

benefit from state immunity only if they act pursuant to a "clearly articulated and affirmatively

expressed state policy" and the state actively supervises the anticompetitive conduct. Southern

                                                  4
Motor Carriers Rate Conference v. United States, 471 U.S. 48, 57, 105 S.Ct. 1721, 1727, 85 L.Ed.2d

36 (1985); California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 104, 100

S.Ct. 937, 943, 63 L.Ed.2d 233 (1980).          The central dispute in this case is into which

category—political subdivision or private actor—the Association falls, and thus whether the

Association must show active state supervision to obtain Parker immunity.

       No simply stated rule draws the line between the two categories. Cases before the Supreme

Court have concerned only municipalities, the paradigm of a political subdivision. See City of

Columbia v. Omni Outdoor Advertising, 499 U.S. 365, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991);

Town of Hallie, 471 U.S. at 34, 105 S.Ct. at 1713. This circuit, however, has found hospital and

transit authorities to be political subdivisions. See, e.g., Crosby, 93 F.3d at 1523-26; FTC v.

Hospital Bd. of Dirs., 38 F.3d 1184, 1188 (11th Cir.1994); Askew v. DCH Reg'l Health Care Auth.,

995 F.2d 1033, 1038 (11th Cir.1993); Bolt v. Halifax Hosp. Med. Ctr., 980 F.2d 1381, 1386 (11th

Cir.1993); Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1460-62 (11th Cir.1991); Commuter

Transp. Sys., Inc. v. Hillsborough County Aviation Auth., 801 F.2d 1286, 1290 (11th Cir.1986).

Other circuits have conferred political-subdivision status on a state bar organization, Hass v. Oregon

State Bar, 883 F.2d 1453, 1461 (9th Cir.1989), a transportation authority, Interface Group v.

Massachusetts Port Auth., 816 F.2d 9, 13 (1st Cir.1987), and a rural electric cooperative, Fuchs v.

Rural Elec. Convenience Coop., 858 F.2d 1210, 1217 (7th Cir.1988).

                                                  5
        Each of these cases has focused on the government-like attributes of the defendant entity.

Factors favoring political-subdivision treatment include open records,4 tax exemption,5 exercise of

governmental functions,6 lack of possibility of private profit,7 and the composition of the entity's

decisionmaking structure. See Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 212.7, at

208-10 (1997 Supp.). The presence or absence of attributes such as these tells us whether the nexus

between the State and the entity is sufficiently strong that there is little real danger that the entity

is involved in a private anticompetitive arrangement. See Crosby, 93 F.3d at 1524. The more public

the entity looks, the less we worry that it represents purely private competitive interests, and the less

need there is for active state supervision to ensure that the entity's anticompetitive actions are indeed

state actions and not those of an alliance of interests that properly should be competing. See Town

of Hallie, 471 U.S. at 45, 105 S.Ct. at 1717; Fuchs, 858 F.2d at 1214.

        The Association is not short on public-entity trappings that suggest it is entitled to

political-subdivision status.8 The Association is subject to Florida's "sunshine laws." See Fla. Stat.

   4
    Commuter Transp. Sys., Inc., 801 F.2d at 1290; Hass, 883 F.2d at 1460; see also id. at
1466-67 (Ferguson, J., dissenting) (noting absence of mandatory disclosure obligations for state
bar that majority found to be political subdivision).
   5
    See Crosby, 93 F.3d at 1525; Commuter Transp. Sys., Inc., 801 F.2d at 1290.
   6
    See Crosby, 93 F.3d at 1525 (running a hospital); Interface Group, Inc., 816 F.2d at 13
(issuing tax-exempt bonds, rulemaking).
   7
    See Fuchs, 858 F.2d at 1217.
   8
    Bankers argues that the Florida Supreme Court advisory opinion, In re Advisory Opinion to
the Governor—State Revenue Cap, 658 So.2d 77 (1995), is dispositive of the issue whether the
Association is a political subdivision. This argument overlooks the difference between the issue
there (whether Association revenue falls within Florida's constitutional state revenue cap) and
here (whether the Association is a political subdivision for antitrust purposes). Cf. Crosby, 93
F.3d at 1525 (refusing to view a Georgia Supreme Court opinion concerning sovereign immunity
as dispositive of a hospital authority's state-related status).

                                                   6
§ 627.351(6)(n). It is exempt from corporate tax. See id. § 627.351(6)(j). It is authorized to issue

tax-free bonds. See id. § 627.351(6)(c)(3). Upon its dissolution, its assets become property of the

state. See id. § 627.351(6)(k). The Association operates under a detailed plan that must be approved

by the Department of Insurance. See id. § 627.351(6)(a), (c). A board of governors supervises the

Association's operations; the 13-member board includes five consumer representatives, the

insurance consumer advocate, and two representatives of the insurance industry appointed by the

state insurance commissioner. Only five of the members are appointed by the insurance industry,

and even those serve at the insurance commissioner's pleasure. See id. § 627.351(c)(4).

       On the other hand, the Association has one attribute that at first blush would seem to weigh

on the private side of the public/private scale: it is at bottom an association of private, competing

insurers. Two facts, however, suggest that this attribute matters little here. First, the Association

was not created to compete in or regulate an existing market; rather, it invented a market where—by

definition—none existed before. See Fla. Stat. § 627.351(6)(a) (creating Association to serve

"applicants who are in good faith entitled, but are unable, to procure insurance through the voluntary

market"). The members of the Association are not, therefore, competing in the market the

Association serves. This impossibility of competition is an indicator that the Association represents

public interests, rather than competing private interests. Cf. Hass, 883 F.2d at 1465-66 (Ferguson,

J., dissenting) (contending that a state bar should not be considered a political subdivision because

its members compete in the very market the bar regulates). Second, the Association is involuntary.

See id. § 627.351(6)(b). Coerced private participation is yet another clue that the Association is an

entity created by Florida's legislature to serve public interests and not a private, anticompetitive

alliance formed with the state's blessing.

                                                  7
        All things considered, the Association is entitled to be treated as a political subdivision for

antitrust purposes. It thus merits state-action immunity if its allegedly anticompetitive actions were

pursuant to a clearly articulated state policy. The Association's actions pass this test. Bankers'

complaint appears to assert that the Association and its agents engaged in two kinds of improper

conduct during the bid-review process: first, the Association in several respects altered its selection

criteria during the bidding process; and second, the Association disregarded the preferences of

independent agents who sell Association policies. These actions were for the purpose, Bankers

alleges, of knocking Bankers out of the running and thereby reducing competition for servicing

contracts.

        A state anticompetitive action is pursuant to a clearly articulated policy when the action is

both authorized by statute and its anticompetitive effect is an intended (meaning foreseeable) result

of this authorization. See Crosby, 93 F.3d at 1532; Lee County, 38 F.3d at 1189. The first prong

of this test is satisfied. Florida's legislature has granted the Association open-ended authority to plan

to have its policies serviced by outside contractors:

        The plan of operation of the association [m]ay provide for one or more designated insurers,
        able and willing to provide policy and claims service, to act on behalf of the association to
        provide such service. Each licensed agent shall be entitled to indicate the order of preference
        regarding who will service the business placed by the agent. The association shall adhere
        to each agent's preferences unless after consideration of other factors in assigning agents,
        including, but not limited to, servicing capacity and fee arrangements, the association has
        reason to believe it is in the best interests of the association to make a different assignment.

Fla. Stat. § 627.351(6)(c)(1).

        The second prong is also satisfied. The legislature's selection of the modal "may," rather

than "shall," "will," or "must," shows that all of the first sentence of the section authorizing servicing

contracts is permissive, not mandatory. The Association is therefore freely permitted to "provide

                                                    8
for" policy service as it sees fit —or not to contract at all. It is foreseeable that conferring such

unfettered discretion on the Association to select policy servicing services could result in potentially

anticompetitive adjustment and revision of standards and selection criteria. Cf. Hass, 883 F.2d at

1458 (general authorization for state bar to require malpractice insurance, and to establish its own

insurance fund, made it foreseeable that bar would require lawyers to purchase insurance from the

bar); Kern-Tulare Water Dist. v. City of Bakersfield, 828 F.2d 514, 519-20 (9th Cir.1987) (grant of

authority to buy and sell water rights makes it foreseeable that a city would attach a

no-resale-allowed condition to water sales). Furthermore, the legislature explicitly contemplates that

the Association will do the other act Bankers complains of—disregarding independent agents'

preferences—provided the Association believed it was in the Association's best interests to do so.

        Because the Association is a political subdivision of the State of Florida and it acted pursuant

to a clearly articulated legislative policy permitting it to select its contracting parties as it saw fit,

the district court properly granted the Association judgment on the pleadings.

                                            III. Conclusion

        For the foregoing reasons, the district court's judgment is affirmed.

        AFFIRMED.

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