Sabo v. Metropolitan Life Insurance

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit

2-23-1998

Sabo v. Metropolitan Life
Precedential or Non-Precedential:

Docket 96-3663

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Filed February 23, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 96-3663

RICHARD SABO,
Appellant

v.

METROPOLITAN LIFE INSURANCE COMPANY; GARY
ANTONINO; JOEL SHERMAN; RONALD SCHRAM; UNITED
FOOD AND COMMERCIAL WORKERS INTERNATIONAL
UNION, AFL-CIO, CLC.

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No 94-cv-00307)

Argued October 16, 1997

Before: STAPLETON, ALITO, and SEITZ, Circuit Judges.

(Opinion Filed: February 23, 1998)

Stanley M. Stein, Esquire (Argued)
Michelle S. Katz, Esquire
Jeffrey B. Yao, Esquire
Feldstein, Grinberg, Stein & McKee
428 Boulevard of the Allies
Pittsburgh, PA 15219
ATTORNEYS FOR APPELLANT
RICHARD SABO
 Frederick N. Egler, Jr., Esquire
(Argued)
J. Stephen Purcupile, Esquire
Egler, Garrett & Egler
428 Forbes Avenue
2100 Lawyers Building
Pittsburgh, PA 15219
ATTORNEYS FOR APPELLEE
METROPOLITAN LIFE INSURANCE
COMPANY

Kim M. Watterson, Esquire
Richard M. Smith, Esquire
Katarincic & Salmon
625 Liberty Avenue
2600 CNG Tower
Pittsburgh, PA 1522
ATTORNEYS FOR APPELLEE
GARY ANTONINO

OPINION OF THE COURT

Seitz, Circuit Judge.

This appeal primarily presents an issue that divides
sister Courts of Appeals and is of first impression in our
court -- namely, whether the McCarran Ferguson Act, 15
U.S.C. SS 1011-1015 (1994) ("The Act"), precludes a cause
of action under the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), 18 U.S.C. SS 1961-1968 (1994),
where the challenged predicate acts arise out of the
defendant's insurance business. The district court exercised
jurisdiction over plaintiff 's federal claims pursuant to 28
U.S.C. S 1331 and over supplemental state tort claims
under 28 U.S.C. S 1367. Our appellate jurisdiction arises
under 28 U.S.C. S 1291 to review the district court's final
orders.

I. Factual Background

The Metropolitan Life Insurance Company ("MetLife")
terminated the employment of Richard Sabo as an

2
insurance sales agent in alleged retaliation for his refusal to
participate in illegal trading activity. Mr. Sabo ("Plaintiff ")
then sued MetLife and several MetLife employees
("Antonino", "Sherman", and "Schram") in the district court,
alleging causes of action under RICO as well as a claim
based on the common law tort of defamation. In particular,
the complaint recited the existence of three predicate acts
under RICO: (1) a "churning" scheme, whereby MetLife
encouraged and coerced agents to fraudulently trade
insurance policies in order to accumulate commissions and
decrease the value of outstanding policies; (2) a"50/50"
insurance plan that MetLife fraudulently advertised as a
retirement savings plan; and (3) an organized poli cy of
intimidation and harassment by MetLife management
directed toward its insurance agents to participate in these
fraudulent activities.

The district court first granted a motion by all defendants
to dismiss the RICO claims on the ground that the
McCarran-Ferguson Act precluded such claims where the
causes of action arose from MetLife's insurance business.
At the close of discovery, the district court, under a
summary judgment standard, dismissed the remaining
defamation action on the ground that the alleged
defamatory statements were not sufficiently directed toward
the plaintiff so that a jury could reasonably conclude that
they referred to him. Plaintiff now appeals these two orders.

II. The McCarran-Ferguson Act

Because the central issue in plaintiff 's RICO claims
implicates an application of the McCarran-Ferguson Act, we
turn first to that Act. Our standard of reviewing the district
court's grant of a motion to dismiss is plenary. Chester
County Intermediate Unit v. Pennsylvania Blue Shield, 896
F.2d 808, 810-811 (3d Cir. 1990).

Section 2 of the Act, codified at 15 U.S.C. S 1012, reads
as follows:

Regulation by State law; Federal law relating
specifically to insurance; applicability of certain
Federal laws after June 30, 1948

3
 (a) State regulation. The business of insuranc e, and
every person engaged therein, shall be subject to the
laws of the several States which relate to the regulation
or taxation of such business.

(b) Federal regulation. No Act of Congress shall be
construed to invalidate, impair, or supersede any law
enacted by any State for the purpose of regulating the
business of insurance, or which imposes a fee or tax
upon such business, unless such Act specifically
relates to the business of insurance: Provided, That
after June 30, 1948, the Act of July 2, 1890, as
amended, known as the Sherman Act, and the Act of
October 15, 1914, as amended, known as the Clayton
Act, and the Act of September 26, 1914, known as the
Federal Trade Commission Act, as amended, shall be
applicable to the business of insurance to the extent
that such business is not regulated by State law.

The stated purposes of the Act, as expressed in section 1,
are to leave regulation and taxation of the insurance
business to the states and to ensure that "silence on the
part of the Congress shall not be construed to impose any
barrier to the regulation or taxation of such business by the
several States." 15 U.S.C. S 1011.

In considering the defendants' motion to dismiss the
RICO claims, the district court adopted a four-part test
announced in Wexco Inc. v. IMC, Inc., 820 F.Supp. 194, 198
(M.D.Pa. 1993) which provides that the McCarran-Ferguson
Act precludes federal litigation if:

(1) the federal statute under which the allegedly
precluded action is brought ... does not specifically
relate to the "business of insurance"; (2) the
complained-of activities constitute the "business of
insurance"; (3) the relevant state has enacted laws for
the purpose of regulating these complained-of
activities; and (4) the application of the federal statute
would, "invalidate, impair[,] or supersede" such laws.

Applying this test, the district court held that RICO does
not specifically relate to the business of insurance, thus
satisfying the first element of preclusion. As to the second
element, the district court found that the plaintiff's

4
complained-of activities did indeed constitute activity within
the "business of insurance." Although plaintiff's complaint
alleged fraud and coercion under RICO, the district court
reasoned that the defendants' "underlying activity" involves
the "promotion and sale of insurance policies to MetLife
customers," which is central to the insurance business.
Next, the district court found that Pennsylvania had
enacted a comprehensive system of insurance regulation so
that the third element of the preclusion analysis was met.
Finally, the district court held that the application of RICO
in an insurance context would "invalidate, impair, or
supersede" Pennsylvania's insurance laws. The court
arrived at this conclusion by comparing the remedial
provisions of civil RICO (namely treble damages, attorney's
fees, and costs) with Pennsylvania's insurance laws
primarily providing for administrative remedies. It thus
reasoned that all the elements of preclusion under the
McCarran-Ferguson Act were satisfied which mandated a
dismissal of the plaintiff's RICO claims.

The parties to this appeal focus their arguments on two
rulings of the district court. First, they disagree as to the
scope of the "insurance business" covered by the statute,
and whether it applies to the conduct alleged in the
complaint. Plaintiff emphasizes that the alleged predicate
acts of racketeering activity stem from systematic behavior
of "coercive and intimidating tactics" and thus cannot be
construed to embrace the business of insurance.
Defendants, on the other hand, assert that plaintiff's
complaint necessarily relates to the insurance business
because it attacks the heart of the insurance industry --
specifically, how MetLife manages the licensing of its
agents, the agents' authority to solicit insurance, and how
agents receive commissions.

Second, both sides contest the proper construction of the
"invalidate, impair, or supersede" phrase in 15 U.S.C.
S 1012(b) quoted above. Plaintiff urges this court to adopt a
"direct conflict" test, in which a federal statute would not
"invalidate, impair, or supersede" a state law unless the
federal legislation directly conflicts with substantive duties
governed by state insurance law. Conversely, the
defendants argue that any analysis of the Act's impairment

5
should not focus on substantive conflict but instead should
compare the plaintiff's broad federal RICO remedies with
the exclusively administrative scheme adopted under
Pennsylvania insurance laws. We will address these two
arguments in turn.

A. Preclusion Analysis Under the McCarran-
Ferguson Act

As with any other issue of statutory construction, the
starting point in the Act's interpretation is the language of
the statute itself. Group Life & Health Ins. Co. v. Royal Drug
Co., 440 U.S. 205, 210 (1979). Section 2(a) of the statute,
by its terms, affirmatively subjects the business of
insurance to state regulation. 15 U.S.C. S 1012(a). The
statute then takes the further step of proscribing
unintended federal interference of state insurance laws by
a general mandate that no federal law "shall . . . invalidate,
impair, or supersede" any state law enacted "for the
purpose of regulating the business of insurance." 15 U.S.C.
S 1012(b). This preclusionary mandate does not apply when
the federal statute in question "specifically relates to the
business of insurance," in which case normal supremacy
rules control and the federal statute trumps conflicting
state law.1

The Supreme Court has extensively reviewed the Act's
legislative history, see, e.g., United States Dep't of the
Treasury v. Fabe, 508 U.S. 491, 499-500 (1993), Securities
and Exchange Comm'n v. National Securities, Inc., 393 U.S.
453, 458-59 (1969), and has fully explained the legislative
intent behind the statute's preclusionary approach to
federal intrusion on state insurance laws:

[C]ongress' purpose was broadly to give support to the
existing and future state systems for regulating and
taxing the business of insurance. This was done in two
_________________________________________________________________

1. Because the plaintiff 's complaint is not grounded in federal antitrust
laws, we focus our analysis on the first clause of section 1012(b). As the
Supreme Court noted, the language of the Act distinguishes preclusion
analysis where antitrust laws are at issue. United States Dep't of the
Treasury v. Fabe, 508 U.S. 491, 504 (1993).

6
 ways. One was by removing obstructions which might
be thought to flow from its own power, whether
dormant or exercised, except as otherwise provided in
the Act itself or in future legislation. The other was by
declaring expressly and affirmatively that continued
state regulation and taxation of this business is in the
public interest and that the business and all who
engage in it "shall be subject to" the laws of the several
states in these respects.

Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429-30
(1946) (footnote omitted); see also Lac D'Amiante du
Quebec, Ltee v. American Home Assurance Co., 864 F.2d
1033, 1038-39 (3d Cir. 1988).

If it is determined that the alleged conduct at issue
broadly constitutes the "business of insurance," and is
therefore subject to state regulation under section 1012(a),
the next issue is whether the anti-preemption mandate of
section 1012(b) precludes a federal cause of action. Here,
the statute makes clear that a party is barred from suing
under federal law if three distinct requirements are met.
First, the federal law at issue does not "specifically relate"
to the business of insurance. Second, the state law
regulating the challenged conduct was "enacted for the
purpose of regulating the business of insurance." Finally,
an application of federal law would "invalidate, impair, or
supersede" such state law.2 Fabe, 508 U.S. at 501.
_________________________________________________________________

2. We note at the outset that federal courts have seemingly disagreed as
to the proper analytic inquiry into McCarran-Ferguson Act preclusion.
See, e.g., Dornberger v. Metropolitan Life Ins. Co. , 961 F.Supp. 506, 516
n.4 (S.D.N.Y. 1997); Ambrose v. Blue Cross & Blue Shield of Virginia,
Inc.,
891 F.Supp. 1153, 1158 n.4 (E.D. Va. 1995), aff'd, 95 F.3d 41 (4th Cir.
1997) (unpublished per curiam). Some courts draw upon a four-part
inquiry similar to that used by district court and the Wexco court. See
Kenty v. Bank One, Columbus, N.A., 92 F.3d 384, 391-92 (6th Cir. 1996);
American Deposit Corp. v. Schacht, 84 F.3d 834, 838-43 (7th Cir. 1996);
Merchants Home Delivery Service, Inc. v. Frank B. Hall & Co., 50 F.3d
1486, 1489 (9th Cir. 1995); Cochran v. Paco, Inc. 606 F.2d 460, 464 (5th
Cir. 1979). Other courts have announced a more truncated three-part
test that does not require a specific conclusion that the defendant's
conduct constitutes the business of insurance. See Doe v. Norwest Bank
Minn., 107 F.3d 1297, 1305 n.8 (8th Cir. 1997); United States. v. Rhode
Island Insurers' Insolvency Fund, 80 F.3d 616, 619 (1st Cir. 1996).
Because of this apparent divergence, it is important to discuss our
analysis in detail.

7
The threshold question in determining whether the anti-
preemption mandate of 15 U.S.C. S 1012(b) applies is
whether the challenged conduct broadly constitutes the
"business of insurance" in the first place. 15 U.S.C.
S 1012(a). If the contested activities are wholly unrelated to
the insurance business, then the McCarran-Ferguson Act
has no place in analyzing federal regulation because only
when "[insurance companies] are engaged in the `business
of insurance' does the act apply." National Securities, 393
U.S. at 459-60.

In addressing the issue of preclusion under S 1012(b), we
read no more into the statute than what it says: unless a
federal law specifically relates to the business of insurance,
it will not be applied when it "invalidates, impairs, or
supersedes" a state law "enacted for the purpose of
regulating the business of insurance." If the defendant's
conduct does not constitute "the business of insurance,"
then the Act simply does not apply and there is no need to
confront preclusion issues under S 1012(b). We cannot
imagine how section 1012(b) protects a state law enacted
for the purpose of regulating the insurance business when
the activity in question does not relate to insurance. To
hold otherwise would require us to abandon the structure
and purpose of the McCarran-Ferguson Act.

Our reading of the Act is amply supported by its
legislative history and Supreme Court precedent. As
explained by the Supreme Court:

The statute did not purport to make the States
supreme in regulating all the activities of insurance
companies; its language refers not to the persons or
companies who are subject to state regulation, but to
laws "regulating the business of insurance." Insurance
companies may do many things which are subject to
paramount federal regulation; only when they are
engaged in the "business of insurance" does the statute
apply. Certainly the fixing of rates is part of this
business. . . . The selling and advertising of policies,
and the licensing of companies and their agents are
also within the scope of the statute. Congress was
concerned with the type of state regulation that centers
around the contract of insurance, the transaction

8
 which [the Court has previously held] was not
"commerce." The relationship between insurer and
insured, the type of policy which could be issued, its
reliability, interpretation, and enforcement--these were
the core of the "business of insurance." Undoubtedly,
other activities of insurance companies relate so closely
to their status as reliable insurers that they too must
be placed in the same class. But whatever the exact
scope of the statutory term, it is clear where the focus
was--it was on the relationship between the insurance
company and the policyholder. Statutes aimed at
protecting or regulating this relationship, directly or
indirectly are laws regulating the "business of
insurance."

National Securities, 393 U.S. at 459-60 (citations omitted).
Thus, under S 1012(a), the Act initially recognizes that
regulating the "business of insurance" rests in the hands of
the states.

Of these state "laws relat[ing] to the regulation or
taxation" of the insurance business, 15 U.S.C. S 1012(a),
the next subsection protects from federal preemption a
special class of state laws "enacted . . . for the purpose of
regulating the business of insurance." 15 U.S.C. S 1012(b).
But as explained by the Supreme Court, the categories of
laws protected by S 1012(b) "necessarily encompasses more
than just the `business of insurance' " and include those
laws that possess the " `end, intention, or aim' of adjusting,
managing, or controlling the business of insurance." Fabe,
508 U.S. at 505 (citation omitted). The focus of section
1012(b) is not directed toward the business of insurance
itself, but rather toward a certain subset of laws relating to
insurance regulation under section 1012(a). That
demarcation line is found in S 1012(b) as laws "enacted . . .
for the purpose of regulating the business of insurance."
Thus, even though the state has a law regulating the
challenged activity, a court must still address whether that
law was meant to fall within the ambit of the Act's
protection. This is achieved by deciding whether the activity
in question constitutes the business of insurance and
whether the specific state law was enacted with the " `end,
intention, or aim' of adjusting, managing, or controlling the
business of insurance." Fabe, 508 U.S. at 505.

9
B. Application of the McCarran-Ferguson Act

We first ask whether the challenged activity alleged in the
complaint constitutes the "business of insurance" in order
to determine whether the Act applies. The Supreme Court
has provided guidance as to what conduct falls within
"business of insurance" for purposes of the McCarran-
Ferguson Act. In National Securities, the Court held that the
core of the insurance business "centers around the contract
of insurance." 393 U.S. at 460. The Court further set forth
typical activity that would unquestionably constitute the
business of insurance: "[t]he relationship between insurer
and insured, the type of policy which could be issued, its
reliability, interpretation, and enforcement." Id.

Similarly, in Group Life & Health Ins. Co. v. Royal Drug
Co., the Supreme Court formulated a three part inquiry in
interpreting the phrase "business of insurance":
(1) whether the practice has the effect of transfe rring or
spreading a policyholder's risk; (2) whether the p ractice is
an integral part of the policy relationship between the
insurer and the insured; and (3) whether the pract ice is
limited to entities within the insurance industry. 440 U.S.
205, 211-21 (1979); see also Union Labor Life Ins. Co. v.
Pireno, 458 U.S. 119, 129 (1982). While this inquiry was
directed to the antitrust clause in section 1012(b), it may
nevertheless provide guidance in a more generalized
analysis under this Act. See Fabe, 508 U.S. 503-504.3

In this case, we agree with MetLife and its named
employees that their activity constitutes the business of
insurance. The challenged conduct appearing in the
plaintiff 's complaint unquestionably centers around the
insurance contract, and specifically the activities
surrounding its sale and marketing. MetLife's "50/50 plan,"
_________________________________________________________________

3. Some courts have concluded that this three part test is simply not
relevant in determining what constitutes the business of insurance in a
non-antitrust context. See, e.g., Doe, 107 F.3d at 1305 n.8. We disagree.
As Fabe makes clear, the Royal Drug test is only a starting point in the
analysis for non-antitrust cases. 508 U.S. at 503-5. However, because
laws "enacted . . . for the purpose of regulating the business of
insurance" necessarily encompass more than just the insurance
business, the analysis here is broader.

10
"churning" trades, and management's organized
intimidation of sales agents, all strike at the insurance
business "core" enumerated in National Securities because
they directly impact on the sale of insurance policies and
ultimately affect the relationship between insurer and
insured. 393 U.S. at 460. Indeed, whatever the precise
contours of the insurance business phrase may be, there is
nothing more basically "insurance" than the sale of an
insurance contract and the insurer's unique approach in
trading, advertising, or valuing that product. We need not
delve into a sophisticated three part analysis under Royal
Drug or Pireno to reach this conclusion, but instead look to
the defendants' conduct to ascertain whether it centers
around the contract of insurance and the relationship
between insurer and insured.

Plaintiff's assertion that the challenged activity cannot
constitute the business of insurance because it is illegal is
unpersuasive. By pointing to a practice that may violate
federal law, and claiming that it is not the "business of
insurance," plaintiff demonstrates a fundamental
misunderstanding of the Act. The language and purpose of
the Act speak not of legal insurance transactions, but
instead seek to allow states to regulate and enforce the
insurance business without fear of unintended federal
interference. We agree with the Court of Appeals for the
Ninth Circuit that if we were to construe the "business of
insurance" phrase by reference to federal legality, the
statute would be read out of existence. Merchants, 50 F.3d
at 1490. As noted by the Seventh Circuit Court of Appeals,
"it is not helpful to point to a practice forbidden by federal
law . . . and observe that this practice is not itself
insurance." NAACP v. American Family Mut. Ins. Co., 978
F.2d 287, 294 (7th Cir. 1992). It is not surprising,
therefore, that the majority of courts have rejected this
same argument advanced here by the plaintiff, and so do
we. See Dornberger, 961 F.Supp. at 517 (surveying cases).

C. Preclusion of RICO Claims Under the McCarran-
Ferguson Act

Having found that the activity challenged in the
complaint constitutes the business of insurance, and is

11
therefore within the ambit of the Act, we consider whether
plaintiff 's RICO cause of action is precluded under
S 1012(b). No party to the appeal argues that RICO
specifically relates to insurance. Indeed, virtually every
court considering this issue has held that RICO is not a
federal statute exempt from the McCarran-Ferguson Act.
See, e.g., Kenty, 92 F.3d at 391; Merchants, 50 F.3d at
1489; Dornberger, 961 F.Supp. at 516. Nor is it disputed
that the applicable Pennsylvania insurance statute is a
state law enacted for the purpose of regulating the
insurance business. Thus, all that is left for us to consider
under the Act is whether an application of RICO to the
instant case would "invalidate, impair, or supersede" state
law.

1. Pennsylvania Insurance Laws and RICO

In order to determine whether a cause of action under
RICO would "invalidate, impair, or supersede" Pennsylvania
insurance law, we must initially juxtapose RICO with a
specific state law enacted for the purpose of regulating the
insurance business. The district court, along with both
sides on appeal, point to Pennsylvania's Unfair Insurance
Practices Act, 40 Pa. Cons. Stat. Ann. SS 1171.1 to 1171.15
(West 1992) ("UIPA"), as the relevant state law governing
MetLife's challenged activity. The Act prohibits persons
from engaging in unfair or deceptive practices in the
business of insurance. Id. S 1171.4. An exhaustive list of
activity is set forth in section 1171.5 as deceptive or unfair
practices forbidden under section 1171.4. The UIPA further
empowers the Pennsylvania insurance commissioner to
investigate illegal insurance practices and to take certain
remedial actions including the imposition of monetary
penalties, "cease and desist" orders, the suspension or
revocation of an insurance license, or additional injunctive
relief. Id. SS 1171.7 to 1171.11.

By judicial precedent, the Pennsylvania Insurance
Commissioner alone may seek to enforce the UIPA. See
Wright v. North Am. Life Assurance Co., 372 Pa. Super. 272,
279, 539 A.2d 434, 438 (1988) ("[T]he provisions of this
statute were not intended to confer a right of private action.
Rather, the Unfair Insurance Practices Act vests

12
enforcement powers in the Pennsylvania Insurance
539>Commissioner."); Wexco, 820 F.Supp. at 203-204.

Pennsylvania courts, however, have not barred common law
actions for fraud and deceit arising out of insurance
practices even though the UIPA does not allow private
causes of action. Wright, 372 Pa. Super. at 279, 539 A.2d
at 438. These private lawsuits, in addition to other private
actions authorized by Pennsylvania law,4 provide the only
judicial remedies available to plaintiffs victimized by illegal
insurance practices.

RICO, on the other hand, grants a private cause of action
to any person injured as a result of a pattern of
racketeering activity. 18 U.S.C. S 1964(c). The statute also
authorizes the award of treble damages, attorney's fees, and
costs. Id. Pursuant to 18 U.S.C. S 1961(2), a pattern of
racketeering activity is defined as at least two acts of illegal
activity identified in section 1961(1) and includes both mail
fraud and wire fraud. Beyond the general classes of crimes
enumerated in section 1961(1), RICO does not specifically
address insurance practices.

2. "Invalidate, Impair, or Supersede"

Given this comparison of RICO with the UIPA, the legal
question before us is whether allowing plaintiff 's suit under
RICO would "invalidate, impair, or supersede" Pennsylvania
law as that phrase is understood under the Act. The phrase
"invalidate, impair, or supersede" is not defined anywhere
in the Act and we are faced with the considerable task of
grappling with its construction in the present context.

Courts of Appeals jurisprudence is in disarray as to the
extent and meaning of invalidate, impair, or supersede
under the Act. One line of cases, spearheaded by thefirst,
seventh, and ninth circuit Courts of Appeals, looks to a
_________________________________________________________________

4. In addition to common law fraud and deceit, Pennsylvania courts have
sanctioned the use of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law, 73 Pa. Cons. Stat. Ann. SS 201-1 to 201-9.2
(West 1993), to allow aggrieved insureds recovery against insurance
fraud. See Pekular v. Eich, 355 Pa. Super. 276, 285-90, 513 A.2d 427,
432-41 (1986).

13
direct conflict in the substantive provisions of the federal
and state statutes at issue. See Merchants Home Delivery
Service, Inc. v. Frank B. & Hall Co., 50 F.3d 1486, 1491-92
(9th Cir. 1995); NAACP v. American Family Mut. Ins. Co.,
978 F.2d 287, 295-97 (7th Cir. 1992); Villafane-Neriz v.
FDIC, 75 F.3d 727, 736 (1st Cir. 1996). These courts
typically reason that the Act is a form of inverse preemption
where federal laws must yield to state laws when the state
enacts a statute for the purpose of regulating the insurance
business and the federal statute does not specifically apply
to insurance. Logic then drawn from ordinary rules of
federal preemption under the supremacy clause is reversed
so that a state law will not preempt a federal law unless the
laws of both sovereigns directly conflict in terms of
governing the behavior of insurance carriers. See American
Family, 978 F.2d at 296 (citing Silkwood v. Kerr-McGee
Corp., 464 U.S. 238 (1984)). The Act's preemption is
appropriate, these courts will conclude, where it is simply
not possible for the insurance carrier to comply with both
state and federal law. However, because "duplication is not
conflict," differences in state remedies and federal remedies
could not be the basis of preemption when both statutes
proscribe the same insurance practices. Id.

In further support for the foregoing analysis, these courts
reason that the Act was not intended to cede the entire field
of insurance regulation to the states. Where a state law or
regulation is silent as to remedy, or does not provide a
private cause of action, federal regulation will not be
preempted. Merchants, 50 F.3d 1492. A contrary
interpretation of the statute, these courts will conclude,
would essentially rewrite the Act to read: No federal statute
shall be construed to apply to the business of insurance,
unless such federal statute specifically relates to the
business of insurance. The Congress did not so provide and
therefore state silence surrounding the assurance of a
private remedy does not provide the basis for federal
preemption. Id.

The fourth, eighth, and to a certain extent the sixth,
circuit Courts of Appeals disagree. When state insurance
laws provide for enforcement through an administrative
process to the exclusion of private damage actions, treble

14
damages, attorney's fees, and costs, these courts reason
that RICO's expanded remedial framework cannot coexist
with state law based on a plain meaning of the words
"invalidate," "impair," and "supersede."5 See Doe v. Norwest
Bank Minn., 107 F.3d 1297, 1307 (8th Cir. 1997); Ambrose
v. Blue Cross & Blue Shield of Virginia, Inc., 891 F.Supp.
1153, 1165 (E.D.Va. 1995), aff'd, 95 F.3d 41 (4th Cir.
1997) (unpublished per curiam). They say the Act was
designed to allow state legislatures to adopt their own
regulatory framework governing how insurance grievances
are redressed. If a state chose a private forum for redress
through administrative enforcement, then the Act would
protect such a decision and federal law would not be
allowed to upset this balance. Thus, they conclude that the
drastic nature of federal remedies is directly relevant to
assessing the application of the "invalidate, impair, or
supersede" phrase in the Act. See Doe, 107 F.3d at 1307;
Kenty v. Bank One, Columbus, N.A., 92 F.3d 384, 392 (6th
cir. 1996).

To be sure, a direct conflict in the substantive provisions
of RICO with those provided for in the UIPA would fall
within the ambit of laws that invalidate, impair, or
supersede state insurance law. If, for example,
Pennsylvania explicitly authorizes certain insurance
practices that RICO would clearly prohibit, the McCarran-
Ferguson Act would eviscerate the federal cause of action.
Cf. American Family, 978 F.2d at 297 ("If Wisconsin wants
to authorize redlining, it need only say so; if it does, any
challenge to that practice under the auspices of the Fair
Housing Act becomes untenable."). This would be the case
no matter how the phrase "invalidate, impair, or supersede"
is to be construed, as we cannot imagine any more
impairment then an absolute contradiction in legalfiat
concerning insurance practices. But we cannot find any
such conflict in the UIPA when compared to RICO, at least
in the present context. Consequently, the more critical
_________________________________________________________________

5. "Invalidate" is defined as "to weaken or make valueless"; "impair"
means to "make worse . . . diminish in quantity, value, excellence or
strength"; "supersede" means to "make obsolete, inferior, or outmoded".
Webster's Third New International Dictionary 1199, 1131, 2295 (1986).
See Ambrose, 891 F.Supp. at 1165.

15
issue is whether we may look to divergent state and federal
implementation of similar legal norms.

Part of this puzzle has been answered by the Supreme
Court in National Securities. There, the Securities and
Exchange Commission sought to unwind a merger between
two insurance companies based on violations of Rule
10b-5. The merger had already been approved by the
Arizona State Director of Insurance in his capacity as
licensor of insurers within the state. This approval was
predicated upon a finding that the merger would not
"substantially reduce the security of and service to be
rendered to policyholders." 393 U.S. at 462 (quoting Ariz.
Rev. Stat. Ann. S 20-731(B)(3) (1969)).

Upon the foregoing factual scenario, the Supreme Court
phrased the issue as whether the "McCarran-Ferguson Act
bars a federal remedy which affects a matter subject to
state insurance regulation." Id. The Court reasoned that
any "impairment" in the case would be indirect--the federal
government sought to protect security holders while the
Arizona sought to safeguard insurance policy holders. Id. at
463.

Moreover, the Court noted that there was no true
"conflict" in remedies at all because "Arizona has not
commanded something which the Federal Government
seeks to prohibit." Id. at 463. The Court also found that the
paramount federal interest in prohibiting securities fraud
was perfectly compatible with the state interest in
protecting policyholders. Thus, because of the nature of the
indirect impairment, and because "the remedy the
Commission seeks does not affect a matter predominantly
of concern to policyholders alone," the Court held that it
saw no reason to emasculate securities laws through an
application of the McCarran-Ferguson Act. In the end, the
Supreme Court "simply [could] not see the conflict" and
allowed the federal government to unwind the merger
notwithstanding Arizona's explicit approval. Id.

We too cannot see the conflict in this case andfind no
invalidation, impairment, or supersedence, however
defined, of Pennsylvania insurance law. The federal policies
embodied in RICO, namely, the grant of a liberal federal

16
remedy to those who have been victimized by organized
crime, see Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 487
(1985), are in no way inconsistent with the stated purpose
of the UIPA, which is to "regulate trade practices in the
business of insurance . . . by defining . . . such practices . . .
which constitute unfair methods of competition or unfair or
deceptive acts . . . ." 40 Pa. Cons. Stat. Ann. S 1171.2; see
also D'Ambrosio v. Pennsylvania Nat. Mut. Cas. Ins. Co.,
494 Pa. 501, 508, 431 A.2d 966, 970 (1981) (stating that
the UIPA serves to deter bad faith conduct in the insurance
business). Borrowing from the Supreme Court's analysis in
National Securities, the RICO remedy does not exclusively
affect matters predominantly of concern to those protected
only by the UIPA. 393 U.S. at 463. RICO, whether in effect
or purpose, is not an attempt to regulate the "sphere
reserved primarily to the States by the McCarran-Ferguson
Act." Id.

Of course, this court would be remiss not to recognize
MetLife's argument that an application of RICO may affect,
in a more abstract sense, Pennsylvania's overall
implementation of insurance norms and its decision to
enforce certain insurance violations in an administrative
context. As acknowledged by the Court of Appeals for the
Seventh Circuit:

Undoubtedly there is a sense in which any overlap
between state and federal law upsets a balance struck
by one of the two legislatures. . . . Laws enforced only
be administrative agencies with limited budgets are less
potent than laws enforced by both agencies and private
litigants. One could say that a federal rule increasing
the probability that a state norm will be vindicated (or
augmenting the damages assessed in the event of a
violation) conflicts with a decision by the state that
remedies should be limited or rare.

American Family, 978 F.2d at 295 (citations omitted). While
such an argument may be compelling, there is no place for
it in the present context. We find no indication, through
legislative intent or judicial interpretation, that
Pennsylvania's non-recognition of a private remedy under
the UIPA represents a reasoned state policy of exclusive
administrative enforcement or that the vindication of UIPA

17
norms should be limited or rare. Private actions for fraud
and deceit in the insurance business coexist with the UIPA
even though the same conduct may be covered by both the
common law and the UIPA. See, e.g., 40 Pa. Cons. Stat.
Ann. SS 1171.5(1) to 1171.5(3) (generally prohibiting "false",
"misleading" or misrepresentative statements and
omissions). In addition, Pennsylvania courts have held that
the state's general consumer protection statute, 73 Pa.
Cons. Stat. Ann. SS 201-1 to 201-9.2, provides a private
remedy and treble damages for victims of insurance fraud.
See Peckular, 355 Pa. Super. at 285-90, 512 A.2d at
430-41. This certainly undercuts any purported balance
struck by the Pennsylvania legislature favoring
administrative enforcement to the exclusion of private
damages actions and we see no reason why a federal
private right of action cannot coexist with the UIPA in these
circumstances.

We therefore conclude that a RICO cause of action and
remedy would not "invalidate, impair, or supersede"
Pennsylvania's scheme of insurance regulation in this
context. Because we need not reach the issue here, we will
leave for another day the question of whether different
federal and state remedies could ever be the basis for
preclusion under the Act. Accordingly, the district court's
dismissal of the plaintiff 's RICO claims for failure to state
a claim will be reversed to the extent it relied on the
McCarran-Ferguson Act as a basis for preclusion. We will
also reverse the district court's denial of the motion to
amend the complaint since the amendment would no longer
be futile under our application of the McCarran-Ferguson
Act. In so doing, however, we express no opinion as to
whether the plaintiff has stated proper claims under RICO
law itself.

III. The Defamation Claim

The plaintiff 's complaint also included a defamation
claim against MetLife alone based on Pennsylvania law. In
due course, MetLife filed a motion for summary judgment
on such a claim which was granted. We will review
plaintiff 's appeal of this order under a summary judgment
standard. The district court's grant of summary judgement

18
will be affirmed if, after a plenary review of the record, there
is no genuine issue of material fact. Fed. R. Civ. P. 56(c).
This court will not weigh the evidence in the record itself,
but instead determine whether there is a genuine issue for
trial. See Anderson v. Liberty Lobby, Inc., 447 U.S. 242, 247
(1986); Petruzzi's IGA v. Darling-Delaware, 998 F.2d 1224,
1230 (3d Cir. 1993). An issue is "genuine" if the evidence is
such that a reasonable jury could return a verdict for the
non-moving party. Anderson, 477 U.S. at 248.

Plaintiff's defamation claim arises out of the following
circumstances as set forth in the affidavit of Fred Newstrom
("Newstrom"), a sales agent for MetLife who worked with
plaintiff at one time. The affidavit is based on personal
knowledge, as required by Fed. R. Civ. P. 56(e).

About August 23, 1993, MetLife convened a meeting of its
sales agents in the Pittsburgh region. Several hundred
agents were in attendance, including Newstrom. There were
various speakers, including Gary Antonino ("Antonino"),
Pittsburgh Regional Manager, and Robert Crimmons,
MetLife Executive Vice President for Personal Insurance.
Other senior managers of MetLife were also on the dais.

During the course of an address given to the agents by
Antonino, a brief clip from the movie Ghostbusters was
shown. In the clip, an animated ghost figure known to
those familiar with the movie as "slimer" charges down a
long hallway and attacks one of the other characters.
"Slimer" is a short, fat, malformed green ghost who attacks
his victims by covering them with a slimy or gooey material.

Immediately following the showing of the movie clip,
Antonino made statements to the audience about the way
the media were portraying MetLife.

The affidavit then goes on:

At or about the time of this meeting at the Royce
Hotel, MetLife was the subject of an ongoing
investigative report on the Channel 11 news, in which
statements were made that MetLife was under
investigation by the Pennsylvania Insurance
Department for illegal deceptive sales and trade
practices.

19
 Also during this time period, Antonino was letting it
be known through the region that he "had it in" for
Sabo, and that Sabo was at fault for all of MetLife's
difficulties.

Based upon the showing of the movie clip and the
statements made by Antonino immediately thereafter,
Herrmann understood Antonino to be saying that it was
Sabo [plaintiff] who was spreading false information to
the media, and that Sabo was attempting to wrongfully
bring about the demise of MetLife.

App. at 487 (alteration in original). After the meeting, other
MetLife agents who attended the meeting informed
Newstrom that they also believed that Antonino's message
was that Sabo was responsible for the information about
MetLife in the media. Id.

In addition to the affidavit of Newstrom, an affidavit by
agent Ronald Herrmann was filed. It also was based on
personal knowledge. In it he recited that he also attended
the meeting and that he also understood Sabo to be Slimer
and the evil presence at MetLife. However, Herrmann did
not state that Antonino "had it in" for the plaintiff.

A copy of the Report and Recommendation of the
Magistrate Judge who heard the matter recommended to
the district court that summary judgment be granted to
MetLife on the defamation claim based solely on the ground
that there was no support in the record for a finding that
plaintiff was the intended target of any comments made
during the "Ghostbuster" presentation. Thereafter, the
district court granted MetLife's motion for summary
judgment on the defamation claim solely on the ground
recommended by the Magistrate Judge.

We note at the outset of this appeal that in an action for
defamation under Pennsylvania law, the plaintiff has the
burden of proving: (1) the defamatory character of the
communications; (2) its publication by the defenda nt;
(3) its application to the plaintiff; (4) the u nderstanding by
the recipient of its defamatory meaning; (5) under standing
by the recipient of it as intended to be applied to the
plaintiff; (6) special harm resulting to the plain tiff from its

20
publication; and (7) abuse of a conditionally priv ileged
occasion. 42 Pa. Cons. Stat. Ann. S 8343(a).

We analyze the record keeping in mind that we are
reviewing summary judgment and that the sole basis for
granting the motion in the district court was the absence of
evidence to meet this fifth requirement of the Pennsylvania
statute, viz., understanding by the recipients of it that it
was intended to be applied to plaintiff.

Plaintiff concedes that the alleged defamatory matter,
standing on its own, is insufficient to support a jury finding
that it refers to him. However, he argues that the
defamation analysis must nevertheless proceed as to the
fifth element if the defamatory statements may point to the
defamed through "description or circumstances tending to
identify him." Cosgrove Studio & Camera Shop, Inc. v. Pane,
408 Pa. 314, 319, 182 A.2d 751, 753 (1962). We turn to
that contention.

Taking the recited contents of the affidavits as true, we
think it reasonable to infer at this point that the affiants
were aware at the time of the meeting of rumors with
respect to MetLife's controversy with the plaintiff. When
this circumstance is combined with the contents of the
movie clip and Antonino's remarks thereafter, a genuine
issue of material fact was created with respect to the fifth
requirement of the Pennsylvania statute. Consequently, the
resolution of that factual issue was for the finder of fact.
Thus, summary judgment should not have been granted
based on a failure to meet this requirement.

But our conclusion that the district court erred in its
ruling on the foregoing issue does not end the matter. We
cannot tell from the record whether MetLife asserted
grounds other than a failure to meet the fifth element of the
Pennsylvania statute in support of its summary judgment
motion. Thus, we conclude that our reversal of the order
granting summary judgment must be without prejudice to
the district court's right to consider other asserted grounds
for summary judgment, if any, that are still before it.

IV. Conclusion

The order of the district court dismissing plaintiff 's RICO
claim will be reversed, and the order denying plaintiff 's

21
motion to amend the complaint will be vacated. The order
of the district court granting MetLife's motion for summary
judgment on plaintiff's defamation claim will be reversed to
the extent it was based on the ground relied on by the
district court. It is further ordered that this ruling is
without prejudice to a consideration by the district court of
other asserted grounds, if any, for summary judgment.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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