In his opinion, U.S. District Judge Garrett E. Brown, Jr. said the plaintiffs had not established a plausible scheme for the first part of their alleged conspiracy – the consolidation of the broker defendants’ business with a few preferred partner insurers. Brown also stated the facts did not support the theory that the insurer defendants agreed with each other to pay the broker defendants contingent commissions in order to receive the benefit of lessened competition by some discernable method.
The court said the plaintiffs’ explanation of the alleged conspiracy had not significantly changed since the court initially dismissed the First Amended Complaints. In April Brown dismissed the claims and gave the policyholders a third chance at stating their case (See Federal Judge Dismisses Antitrust Suit Against Insurers and Brokers ).
According to Brown the court could not conclude, as is required by the Sherman Act, that what the defendants agreed to do was unlawful since, in addition to a lack of agreement among the insurers, the plaintiffs’ theory is “devoid of a plausible market allocation as required by this Court.”
In addition, the opinion said that while it is not necessary for the agreement to be explicit, the facts also did not support an implied pact either.
The court said it was not persuaded that the facts satisfy the requirement that the alleged conspiracy have a horizontal element and not just consist of a series of vertical agreements between brokers and insurers, or a series of acts taken without a common scheme in place. The court dismissed both the claims of Sherman Act violations and the antitrust claims with regard to a global conspiracy between the brokers and insurers.
In their Second Amended Complaints, plaintiffs alleged that the brokers and insurers "engaged in a series of unlawful horizontal conspiracies, the purpose and effect of which were to reduce or eliminate competition among members of the various conspiracies described herein, by among other things, allocating customers to and among members of the conspiracies and protecting those conspirators from competition for those customers' business," the opinion said.
According to the complaints, the defendants engaged in a series of "hub and spoke" conspiracies, in each of which a broker defendant "hub" coordinated an illegal customer allocation scheme among the insurer defendant "spokes."
The complaints accused the brokers of consolidating their markets to increase their leverage and contingent commission revenue. The plaintiffs claim the contingent commissions were almost pure profit with no discernable associated costs and that these costs were built into the formulas used to develop premiums with the result that the contingent commission arrangements increased premium levels for all purchases, resulting in defendants enjoying supra-competitive profits.
The policyholders also supplied facts regarding the formation and operation of an alleged global conspiracy in which the broker defendants agreed not to compete for each others' customers by disclosing the true nature and effect of the parties' contingent commission arrangements and the premium price impact of those arrangements.
Plaintiffs allege that the participants in the conspiracies were aware of and agreed to an allocation of customers and business, and expected an unfair competitive advantage and protection from competition, including protection of their renewal business and access to a guaranteed flow of premium volume in return for contingent payments.
In their complaint concerning commercial insurance business, the plaintiffs supplied specific facts describing alleged broker-centered conspiracies within the Marsh, Aon, HRH, Wells Fargo/Acordia, and Willis insurance agencies. In the complaint involving employee benefit plans, the plaintiffs alleged non-disclosure of broker commissions on Form 5500, and that the brokers and insurers agreed not to disclose the commissions on these forms.
The opinion In Re Insurance Brokerage Antitrust Litigation is here .