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NOT DEAD YET: Third Circuit Almost, But Not Quite, Kills Massive Suit Against Insurers

Posted  August 23, 2010

The Third Circuit has affirmed the dismissal of most of the claims in a massive antitrust class action against most of America’s biggest insurance companies.

Due to their failure to meet heightened pleading requirements, the plaintiffs in In re: Employee Benefit Insurance Brokerage Antitrust Litigation will not be able to pursue their claims of per se violations of Section 1 of the Sherman Act.  The plaintiffs alleged that insurance brokers funneled work to insurers in exchange for payments.  But the Third Circuit held that a piece of the complaint, which deals with conduct involving the Marsh & McLellan insurance broker firm, may proceed. 

According to Judge Anthony Scirica’s opinion for the court, the plaintiffs’ allegations “do not provide plausible grounds to infer a horizontal agreement” between the insurers to protect each others’ business that would qualify as a per se Section 1 violation.  Under the heightened pleading standards that antitrust complaints must satisfy, even though “[p]laintiffs have pled facts showing that brokers deceptively steered their clients to preferred insurer-partners in order to obtain contingent commission payments from those partners, but this in itself is insufficient to plausibly imply a horizontal conspiracy.”  Pointedly, the opinion denies that “defendants’ alleged treatment of insurance purchasers was praiseworthy – or even lawful.”

At the same time, the opinion kept alive the allegations involving Marsh & McLellan.  There, the complaint contained allegations of bid-rigging that constitute “something more than merely parallel behavior” among the defendants.  The opinion similarly kept alive RICO allegations involving Marsh & McLellan, but dismissed all other RICO claims.

The opinion weighs in at exactly 200 pages, and includes 13 pages that merely name the lawyers involved.  That might be an appropriate length for litigation that the court called “extraordinarily complex.”  As the Third Circuit noted, the district court dismissed the plaintiffs’ complaints three times, even after allowing multiple rounds of amendments. 

And while the appeals court reversed part of the District Court Judge Garrett Brown’s dismissal, the appeals judges also went out of their way to compliment Judge Brown’s “patient and meticulous analysis.”  No doubt, all parties hope that he will continue to offer more of the same on remand.

Tagged in: Antitrust Litigation,