(CN) – The 3rd Circuit upheld the dismissal of nearly all claims in a monumental antitrust class action against giants in the insurance industry, finding that the allegations may reveal a “pernicious industry practice” but fail to prove an “industry-wide conspiracy.”
The Philadelphia-based federal appeals court, in a 200-page ruling, found that the purchasers of commercial and employee benefit insurance failed to prove the “massive conspiracies throughout the insurance industry” put forth in their three separate pleadings. The appellate panel did however keep alive a bid-rigging issue against one of the defendants.
While claiming that the insurance companies made millions in “inflated profits” by “stifling competitive business,” the plaintiffs could not show the “existence of a horizontal agreement” required to prove per se Sherman Act violations, the circuit ruled.
The “plaintiffs have failed to plead facts plausibly supporting their allegations of horizontal conspiracies to unreasonably restrain trade, notwithstanding their conclusory assertions of agreement,” Judge Anthony Scirica wrote. “This does not mean that defendants’ alleged treatment of insurance purchasers was praiseworthy – or even lawful – but that it fails to plead a per se violation” of the Sherman Act.
Scirica continued: “Plaintiffs 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.”
The two consolidated class actions came after the New York State Attorney General filed a civil complaint against insurance broker Marsh & McLennan in 2004, alleging that Marsh had solicited rigged bids and received commissions in exchange for “steering its clients to a select group of insurers,” according to the ruling.
After allowing the plaintiffs to amend their complaints three times, the district court dismissed their Sherman Act and RICO claims because they “lacked the requisite factual
The plaintiffs appealed, but the three-judge panel agreed with the lower court on most of the claims.
The panel however refused to uphold the district court’s dismissal of the bid-rigging claims against Marsh & McLennan. The company is accused of providing insurers with “sham bids” in order to steer business to other partners.
“In the Marsh-centered commercial conspiracy, plaintiffs provide detailed allegations of bid rigging by the insurer-partners,” Scirica wrote. “Bid rigging – or more specifically, as alleged in this case, bid rotation – is quintessentially collusive behavior subject to per se condemnation” under the Sherman Act.