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BLACK v. NATIONWIDE MUT. INS. CO.

April 1, 1977

Russell W. BLACK, Plaintiff,
v.
NATIONWIDE MUTUAL INSURANCE COMPANY et al., Defendants



The opinion of the court was delivered by: WEBER

 Plaintiff brings this action against Defendants under Sec. 1 of the Sherman Act, 15 U.S.C. § 1, which provides:

 
"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations is declared to be illegal: . . .".

 The cause of action pleaded here is one between an insurance agent and the insurance companies that he represented and deals with the business of insurance. The McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 specifically exempts the business of insurance from the application of the Sherman Act to the extent that such business is regulated by state law, except for Sec. 3(b) of that Act, 15 U.S.C.A. § 1013(b), which provides:

 
"(b) 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."

 Plaintiff, therefore, must show a contract, combination or conspiracy in the form of a boycott, or coercion or intimidation, which is in restraint of trade.

 We have previously dismissed the counts of the complaint asserting various antitrust causes of action because of the limitations of the McCarran-Ferguson Act, leaving the boycott issue for determination. The Defendants now move for Summary Judgment on the "boycott" cause of action. *fn1"

 Plaintiff was a licensed agent of three defendant insurance companies for several years. He was licensed to sell several lines of insurance for the related Nationwide companies: life insurance, and the lines of casualty insurance included in the categories of automobile, fire and inland marine, health and accident, and general liability.

 It is with the lines of automobile insurance, fire insurance, commercial insurance, homeowner insurance and comprehensive liability insurance that plaintiff bases his antitrust complaint.

 The defendants are separate but related insurance companies, each dealing in separate lines of insurance. They do not compete with each other. They operate through a common line of management with common agents. The plaintiff was their agent for selling, writing and accepting applications for insurance from the public. He operated under one agency agreement for all the defendant companies.

 The agent's agreement provides:

 
"4. Exclusive Representation. It is agreed and understood that you will represent us exclusively in the sale and service of insurance. Such exclusive representation shall mean that you will not solicit or write policies of insurance in companies other than those parties to this Agreement, either directly or indirectly, without the written consent of these Companies. It is not intended that the incidental use of voluntary or statutory state or federal insurance plans, or other similar agreements, shall be a violation of this clause."

 It is from this clause that the cause of action arises. The plaintiff was terminated by defendant as its agent because of his continued representation of two other insurance companies after defendants' demand that he cease this representation. He claims that this clause is a boycott, and that the demands, threats, pressures and harassments to which he was subjected by the representatives of the defendant companies was the coercion and intimidation contemplated by the McCarran-Ferguson Act.

 So far we have been discussing the rock by which plaintiff was held. The hard place developed in 1970 when some of the defendant companies began experiencing a loss situation which caused them to institute a severe reduction in underwriting. This began in the automobile insurance line, which constituted about 75% of all of defendants' sales, and 50% of plaintiff's production. The agents were aware of the conditions which led to this reduction, but plaintiff alleges that the full burden of overcoming this loss was placed on the agents. Agents were limited in the writing of new business, they were classified according to the loss ratio of the policies they wrote, and finally, a temporary moratorium on all new business was imposed. The same types of limitations were imposed on fire and homeowners policies.

 Plaintiff complained that under these limitations and under the exclusive dealing clause of his contract, he could not stay in business writing exclusively for the Nationwide companies. He was subjected to unannounced inspections and reviews of his files by Nationwide, and it was finally learned that he was writing for two other companies. When faced with demands that he cease this, he refused on the grounds that he could not continue in business writing solely for Nationwide companies under the limitations imposed.

 Plaintiff does not claim that the exclusive dealing provision of the contract is a per se violation of the antitrust law. Such agency agreements are controlled by the insurance laws of the state and are, therefore, not subject to the federal antitrust laws unless they constitute a "boycott" as that term is used and construed in the McCarran-Ferguson Act. There is no case law that holds such an exclusive agency provision to be such. It was specifically held not to be such in Kent L. Blackley v. Farmers Insurance Group, Inc., C 74-126, D. Utah, August 26, 1976 (unreported), where Judge Anderson held in a similar set of circumstances:

 
"The court finds nothing in the operation of Farmers that contemplates a 'boycott' of its competitors, agents, or the public. Farmers sells its insurance through exclusive agents. Its competitors are not prevented access to the market, merely access through Farmers agents. They are free to sell their insurance through their own employees or exclusive agents, or through independent agents. They are unfettered by Farmers' agency system from competing with Farmers on whatever basis the marketplace will allow and whatever advantage they have achieved through economic power or business acumen. But it is not anticompetitive for Farmers to refuse its competitors the right to sell insurance through Farmers agents.
 
Farmers agents are obviously restricted in servicing their clients. Where a client's desires conflict with the interests of Farmers, Farmers agents must choose to serve their principal. Plaintiff agreed to abide by paragraph B-1 and was terminated for not doing so; his complaint is that he cannot be an independent agent while representing Farmers. He alleges in classic boycott terms that Farmers demanded that he not represent other insurance companies except as to business Farmers did not want. But such analysis fails to account for the fact that while paragraph B-1 is a restraint on Farmers agents, it is not a restraint on trade. Plaintiff simply wants to do away with Farmers' exclusive agency system so that he can sell his clients whatever insurance they want to buy.
 
Plaintiff's clients are not subject to any boycott. They are not compelled to buy Farmers policies. They are free to shop around and buy other insurance. They simply cannot engage in one-stop insurance shopping if they do not want or cannot afford Farmers insurance. It is not a restraint of trade to require them to go elsewhere if they do not desire the product plaintiff has, or was, authorized to offer."

 Blackley differed from the present case in only one respect. There the contract did not require exclusive representation of the ...


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