United States Court of Appeals,
Eleventh Circuit.
No. 95-4589.
UNIFORCE TEMPORARY PERSONNEL, INC., Uniforce Services, Inc.,
Plaintiffs-Appellants,
v.
NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC., a Florida not
for profit corporation, National Council on Compensation Insurance,
an unincorporated business entity, National Workers' Compensation
Reinsurance Pool, an unincorporated business entity, Does 1-3,
Defendants-Appellees,
Liberty Mutual Insurance Company, Travelers Insurance Company,
Insurance Company of North America, Defendants-Appellees.
July 18, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 94-8343-CIV-KLR), Kenneth L. Ryskamp,
Judge.
Before HATCHETT and BLACK, Circuit Judges, and CLARK, Senior
Circuit Judge.
HATCHETT, Circuit Judge.
This appeal presents the issue of whether certain business
practices in the insurance industry limit competition in the
temporary help industry through monopolization or constitute an
agreement in restraint of trade in violation of the Sherman Act.
We affirm the district court's ruling that the business practices
employed in this case do not violate the Sherman Act.
BACKGROUND
Uniforce Temporary Personnel, Inc. and Uniforce Services, Inc.
(collectively Uniforce) engage in the business of providing
temporary employees for other businesses. In order for Uniforce to
place its employees with businesses, Uniforce must first obtain
workers compensation insurance. Generally, businesses can obtain
workers compensation insurance for their employees through one of
three markets: (1) the voluntary market, (2) the self-insurance
market, and (3) the "assigned risk" or residual market. Uniforce,
however, only qualifies for workers compensation insurance from the
residual market. The insurance industry calls such workers
compensation policies "assigned risk" policies.
Policyholders of "assigned risk" policies pay higher insurance
premiums than policyholders of policies obtained through the
voluntary or self-insurance market. The premiums are higher
because of the combined loss experience of the insurance carriers
in the residual market and because these carriers oftentimes
contract their duties under the "assigned risk" policies to other
insurance carriers called "servicing carriers." These servicing
carriers draft the "assigned risk" policies, collect the premiums,
provide loss control services, and perform other services required
of a worker's compensation carrier. In return for these services,
the insurer pays substantial servicing fees.
PROCEDURAL HISTORY
On June 15, 1994, Uniforce filed this lawsuit against the
National Council on Compensation Insurance, Inc. (NCCI), the
National Workers Compensation Reinsurance Pool (the pool), and
insurance companies Liberty Mutual Insurance Company, Travelers
Insurance Company, and Insurance Company of North America
(collectively insurance carriers), alleging that their business
practices in the insurance industry limit competition in the
temporary help industry through monopolization of the
administration of workers compensation insurance and price fixing
in violation of 15 U.S.C. § 2 of the Sherman Act.
In its complaint, Uniforce also alleges that NCCI, the pool,
and the insurance carriers' conduct constitutes an agreement in
restraint of trade including a conspiracy to restrain the temporary
help industry in violation of 15 U.S.C. § 1 of the Sherman Act.1
In addition, Uniforce sought a declaratory judgment on the issue of
whether NCCI and the pool are insurance carriers and a judgment
declaring the state that has overall responsibility for regulating
and supervising the business of NCCI and the pool as it affects the
temporary help industry.
Prior to discovery, NCCI, the pool, and insurance carriers
(hereinafter appellees) moved for summary judgment on the grounds
that: 1) the McCarran-Ferguson Act bars Uniforce's federal
antitrust claims because the alleged activity involves the business
of insurance; and 2) Uniforce fails to state a claim under the
Sherman Act. The district court granted summary judgment on each
of Uniforce's claims.2
CONTENTIONS
Uniforce contends that the McCarran-Ferguson Act's bar on
antitrust claims involving the business of insurance does not apply
in this case because the appellees' rate-making, classification and
1
Uniforce also alleged that the rules under which assigned
risk policies operate constitute a violation of equal protection
and due process rights. Uniforce, however, does not appeal the
district court's ruling as to this claim.
2
The district court also found that the file rate and Noer-
Pennington doctrines also barred Uniforce's antitrust claims.
Because we find that the McCarran-Ferguson Act bars Uniforce's
claims, we do not address the district court's alternative
grounds for granting summary judgment.
allocation of risk, and other activities involving the
administration of workers compensation insurance concern the
"business of insurers" and not the "business of insurance." In the
alternative, Uniforce contends that its antitrust claims fall
within the "boycott" exception to the McCarran-Ferguson Act's bar
on antitrust claims. Uniforce also contends that the district
court erred in concluding that it failed to state a claim under the
Sherman Act merely because appellees do not compete in the
temporary help industry.
Appellees contend that the activities Uniforce complains of
fall squarely within the meaning of "the business of insurance."
Appellees also contend that Uniforce fails to allege facts
sufficient to constitute a boycott within the meaning of the
McCarran-Ferguson Act and therefore assert that the McCarran-
Ferguson Act bars Uniforce's antitrust claims. Finally, even
assuming that the McCarran-Ferguson Act does not bar Uniforce's
claims, the appellees contend that their practices in the insurance
industry could not violate the Sherman Act in this action because
they do not compete in the temporary help industry.
ISSUES
We address two issues on appeal: 1) whether the McCarran-
Ferguson Act bars antitrust claims involving rate-making practices
in the insurance industry; and 2) whether a competitive
relationship must exist between parties in order to assert a viable
claim under the Sherman Act.
DISCUSSION
We review the district court's grant of summary judgment de
novo and apply the same legal standards that bound the district
court in rendering its decision. Canadyne-Georgia Corp. v.
Continental Ins. Co., 999 F.2d 1547, 1554 (11th Cir.1993).
A. The McCarran-Ferguson Act
The McCarran-Ferguson Act exempts the business of insurance
from antitrust laws if: 1) state law regulates such activity; and
2) the complained of activity does not constitute a "boycott." 15
U.S.C. §§ 1011, 1012, 1013(b) (1988). The McCarran-Ferguson Act
provides in pertinent part:
Congress hereby declares that the continued regulation and
taxation by the several States of the business of insurance is
in the public interest, and 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. § 1011 (1988). The McCarran-Ferguson Act further
provides that "[n]o 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...." 15 U.S.C.
§ 1012(b) (1988).
Uniforce concedes that the McCarran-Ferguson Act exempts
conduct involving the business of insurance in most instances, but
argues that the McCarran-Ferguson Act does not apply to its
antitrust claims because they involve the "business of insurers,"
and not the business of insurance.3 Uniforce defines the business
3
Uniforce also concedes that the states in question regulate
the appellees' activities in the insurance industry. Uniforce,
however, characterizes the states' regulation of the appellees'
activities as superficial. Because Uniforce has failed to submit
any affidavits from state officials supporting its conclusion, we
of insurers as "the manipulation of the cost of workers
compensation insurance" through the classification and allocation
of risk and the contracting of the insurers' duties under the
"assigned risk" policy to servicing carriers. Employing this
definition, Uniforce claims that the appellees' activities create
and impose unreasonable premiums for "assigned risk" policies while
depriving the temporary employment industry of access to the
voluntary market.
Simply put, Uniforce's antitrust claims center on the
appellees' rate-making activity. We therefore must determine
whether appellees' rate-making activity falls within the business
of insurance for purposes of the McCarran-Ferguson Act. Courts
make three inquiries when determining whether the practice
complained of constitutes the business of insurance:
first, whether the practice has the effect of transferring or
spreading a policyholder's risk; second, whether the practice
is an integral part of the policy relationship between the
insurer and the insured; and third, whether the practice is
limited to entities within the insurance industry.
Union Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002,
3004, 73 L.Ed.2d 647 (1982). In this case, we find that appellees'
rate-making activity satisfies each of these criterion. First, in
computing the premium for the "assigned risk" policies, appellees
combine the loss experiences of insurance carriers in the residual
market and in effect spread the policyholder's risk. Second,
appellees' rate-making activity produces the premiums for the
"assigned risk" policies and this premium is an integral part of
conclude that the states in question sufficiently regulate the
appellees' activities.
the policy relationship between the insurer and the insured.
Third, the appellees' rate-making activity is limited to entities
4
within the insurance industry. Thus, appellees' rate-making
activity clearly constitutes the business of insurance for purposes
of the McCarran-Ferguson Act. See also Group Life & Health Ins.
Co. v. Royal Drug Co., 440 U.S. 205, 224, 99 S.Ct. 1067, 1080, 59
L.Ed.2d 261 (1979) ("the fixing of insurance rates is the "business
of insurance' ").
In the alternative, Uniforce argues that appellees' conduct
falls within the "boycott" exception to the McCarran-Ferguson Act's
antitrust exemption. Specifically, Uniforce alleges that appellees
have conspired to "boycott, coerce, and intimidate" it and other
temporary help companies to deprive the temporary help industry of
access to the voluntary market for workers compensation insurance.
Uniforce therefore argues that the McCarran-Ferguson Act does not
entitle the appellees to immunity from its antitrust claims. In
response, the appellees argue that the "boycott" exception cannot
apply in this case because Uniforce's antitrust claims do not
involve allegations of a "refusal to deal." We agree.
The McCarran-Ferguson Act provides in pertinent part:
"Nothing contained in this chapter shall render the said Sherman
Act inapplicable to any agreement to boycott, coerce, or
intimidate, or act of boycott, coercion, or intimidation." 15
4
Uniforce urges this court to reach a different conclusion
merely because appellees NCCI and the pool are not insurance
companies. We reject this argument noting that our review
requires us to examine whether the practice complained of is
limited to "entities within the insurance industry" and does not
require that these entities be insurance companies.
U.S.C. § 1013(b) (1988). For purposes of the McCarran-Ferguson
Act, the Supreme Court defines a "boycott" as the refusal to deal
in a collateral transaction as a means to coerce terms respecting
a primary transaction. Hartford Fire Ins. v. California, 509 U.S.
764, ----, 113 S.Ct. 2891, 2912-13, 125 L.Ed.2d 612 (1993) ("It is
the refusal to deal beyond the targeted transaction that gives the
great coercive force to a commercial boycott"). In this case, the
primary transaction concerns the purchase of workers compensation
insurance. Uniforce does not allege that appellee refused to deal
with it in a collateral transaction—i.e., the purchase of health
insurance—in an attempt to coerce the terms of its purchase of
workers compensation insurance. Consequently, we conclude that the
alleged acts do not constitute a "boycott" within the meaning of
the McCarran-Ferguson Act. Accordingly, we hold that the McCarran-
Ferguson Act bars Uniforce's antitrust claims against the
appellees.
B. The Sherman Act
Even assuming that the McCarran-Ferguson Act does not bar
Uniforce's federal antitrust claims, its claims fail as a matter of
law. In its complaint, Uniforce alleges that appellees'
rate-making activity in the insurance industry limits competition
in the temporary help industry and thereby violates section 2 of
the Sherman Act. Section 2 of the Sherman Act provides:
Every person who shall monopolize, or attempt to monopolize,
or combine or conspire with any other person or persons, to
monopolize any part of the trade or commerce among the several
States ... shall be deemed guilty of a felony, and, on
conviction thereof, shall be punished by fine not exceeding
one million dollars....
15 U.S.C. § 2 (1988). This court noted that monopolization within
the meaning of the Sherman Act "by its terms, applies in a
situation where there is competition and competitors." Ad-Vantage
Telephone Directory Consultants v. GTE Directories Corp., 849 F.2d
1336, 1348 (11th Cir.1987). In Ad-Vantage Telephone Directory, we
held that "[i]n order to demonstrate "an area of effective
competition' one must [first] establish a competitive
relationship." Ad-Vantage Telephone Directory, 849 F.2d at 1348-
49. In this case, Uniforce cannot demonstrate that a competitive
relationship exists between it and the appellees because the
appellees do not compete in the temporary help business. Uniforce
also cannot demonstrate a competitive relationship between the
insurance industry and the temporary help industry. Uniforce
counter-argues that it has standing under section 2 of the Sherman
Act as a consumer of the appellees' product and services to
challenge appellees' rate-making activities. We, however, do not
reach the standing issue because Uniforce fails as a matter of law
to state a claim under the Sherman Act. Accordingly, we affirm the
district court's grant of summary judgment for failure to state a
claim for which relief can be granted.
CONCLUSION
For the reasons stated above, we hold that the McCarran-
Ferguson Act bars Uniforce's antitrust claims. Accordingly, we
affirm the district court's grant of summary judgment in favor of
the appellees on each of Uniforce's claims.
AFFIRMED.