The opinion of the court was delivered by: PETER K. LEISURE
This is an action brought by Preferred Physicians Mutual Risk Retention Group ("PP") and U.S. Physicians Mutual Risk Retention Group ("USP") to enforce their right to do business in the State of New York, as provided in the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq. ("LRRA"). Plaintiffs have moved this Court for an order, pursuant to Rules 15 (a) and (b) of the Federal Rules of Civil Procedure, granting leave to plaintiffs to file an amended and supplemental complaint. Defendants respond, in opposition to plaintiffs' motion, with motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure and a motion to dismiss pursuant to Rule 12(b)(6). Plaintiff PP, in turn, moves this Court for partial summary judgment. For the reasons stated below, plaintiffs' motion to file an amended complaint is granted, defendants' motions for summary judgment and to dismiss are denied, and plaintiff PP's motion for summary judgment is granted.
Plaintiffs, PP and USP,
are two risk retention groups ("RRGs") organized under the laws of the State of Missouri and licensed to carry on the business of medical malpractice liability insurance in the State of New York, pursuant to the LRRA. Specifically, they are engaged in the business of providing medical malpractice insurance to anesthesiologists and orthopedic surgeons, respectively. "An RRG is a group of insureds who join together to form an insurance firm of which they are the owners. The insureds, with similar interests and risks, band together and pool their resources in furtherance of creating an acceptable and reasonable liability mechanism for themselves." Amicus Curiae Brief of The National Risk Retention Association ("Amicus Mem.") at 3.
Defendant Mario M. Cuomo ("Cuomo") is the Governor of the State of New York. Defendant Salvatore R. Curiale ("Curiale") is the Superintendent of Insurance of the State of New York. Another named individual defendant is the Commissioner of Health of the State of New York ("the Commissioner"). These three defendants will be referred to collectively as "the State defendants." Defendants Medical Liability Mutual Insurance Company ("MLMIC") and Physicians' Reciprocal Insurers ("PRI") are licensed New York insurers in competition with plaintiffs. Finally, defendant Catholic Medical Center of Brooklyn and Queens, Inc. is a New York not-for-profit corporation which owns and operates hospitals in Brooklyn and Queens, New York.
Plaintiffs commenced this action in April 1991 to enforce their right to do business in the State of New York, as provided in the LRRA. Plaintiffs' original complaint alleges, inter alia: (1) that New York's Excess Insurance Law, Section 18 of Chapter 226 of the Laws of 1986 of New York, as amended and extended (the "Excess Insurance Law") violates the LRRA and the Commerce Clause, Article I, Section 8 of the United States Constitution ("the Commerce Clause"), and enforcement of the Excess Insurance Law should be enjoined; (2) that attorney's fees should be awarded, pursuant to 42 U.S.C. § 1983, for deprivation of constitutional rights secured by the Commerce Clause; (3) that certain violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1990), should be enjoined; and (4) that damages should be awarded for violations of the Sherman Act, New York's Donnelly Act (New York General Business Law § 340), and for interference with contracts with insureds.
On January 12, 1994, plaintiffs moved this Court for an order, pursuant to Rules 15(a) and 15(b) of the Federal Rules of Civil Procedure, granting to plaintiffs leave to file an amended and supplemental complaint. Plaintiffs seek to amend their claims in two respects. First, they seek to broaden their allegations within the existing causes of action and to widen their request for relief by seeking to enjoin conduct by the State defendants which allegedly interferes with plaintiffs' businesses. Second, plaintiffs seek to add claims against MLMIC and Curiale under section 1 of the Sherman Antitrust Act ("§ 1 of Sherman Act").
On May 4, 1994, in response to plaintiffs' motion to amend, State defendants moved for summary judgment on plaintiffs' first, second, third and fourth claims for relief, and moved for dismissal of plaintiffs' fifth claim for relief and its new ninth claim for relief. On that same day, Defendant MLMIC made a motion to dismiss the ninth and tenth causes of action asserted in the Amended Complaint that plaintiffs proposed to submit upon a favorable ruling in their motion to amend. Finally, completing the tangled web of overlapping motions, plaintiff PP made a motion for partial summary judgment on May 4, 1994, requesting the Court to grant the relief it requested in its first, second, third and fourth causes of action.
The plethora of motions in this case makes it difficult to choose the most efficacious point to begin analysis. The best way to proceed appears to be to address, in order, plaintiffs' causes of action with accompanying motions.
Plaintiffs' first four causes of action allege, in essence, that the Excess Insurance Law violates the LRRA and the Commerce Clause, that plaintiffs have no adequate remedy at law, and that the Excess Insurance Law should be enjoined. State defendants move for summary judgment with respect to these four causes of action, and plaintiff PP counters with its own motion for partial summary judgment asking the Court to decide these four causes of action in its favor.
A. Standard for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir. 1991). "In deciding whether to grant summary judgment all inferences drawn from the materials submitted to the trial court are viewed in a light most favorable to the party opposing the motion. The nonmovant's allegations are taken as true and it receives the benefit of the doubt when its assertions conflict with those of the movant." Cruden v. Bank of New York, 957 F.2d 961, 975 (2d Cir. 1992). "Only when no reasonable trier of fact could find in favor of the nonmoving party should summary judgment be granted." Id.; accord Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991).
"Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248. "The judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id., 477 U.S. at 249.
In the instant motions, there is no disputed element of fact. Rather, the matter turns on whether, as a matter of law, the LRRA preempts New York's Excess Insurance Law. Plaintiffs argue that it does and defendants contend that it does not. Before a determination can be reached, the history and language of the statutes in question must be carefully analyzed.
In 1981, in response to a perceived crisis in the availability and affordability of commercial product liability insurance, Congress enacted the Product Liability Risk Retention Act of 1981, 15 U.S.C. §§ 3901-3904 (1984) ("PLRRA"). State Defendants' Memorandum of Law in Support of their Motion ("State Defendants Mem.") at 2. The Risk Retention Amendments of 1986 (Pub. L. No. 99-563, 100 Stat. 3170-3172, 3177), effective October 27, 1986, created the law currently in place, the Liability Risk Retention Act. Id. at 2-3. "The LRRA was designed to eliminate state law barriers to the formation and operation of RRGs, yet reserve adequate state governmental oversight and regulation over these entities." Amicus Mem. at 7. In essence, the LRRA requires that RRGs be licensed in a single state but then permits them to operate in all other states without obtaining a separate insurance license in each state in which they do business. This is accomplished through the use of specific exemptions from state insurance regulation contained in the LRRA. State Defendants Mem. at 3. Consequently, states in which a RRG operates ("non-domiciliary" states), other than the state in which it is licensed ("domiciliary" state), are permitted to regulate the RRG only to the extent allowed under the LRRA.
The LRRA provides, in pertinent part, as follows:
(a) Except as provided in this section, a risk retention group is exempt from any State law, rule, regulation, or order to the extent that such law, rule, regulation or order would --
(1) make unlawful, or regulate, directly or indirectly, the operation of a risk retention group except that the jurisdiction in which it is chartered may regulate the formation and operation of such a group and any State may require such a group to --
(A) comply with the unfair claim settlement practices law of the State;
(B) pay, on a nondiscriminatory basis, applicable premium and other taxes which are levied on admitted insurers and surplus lines insurers, brokers, or policyholders under the laws of the State;
(C) participate, on a nondiscriminatory basis, in any mechanism established or authorized under the law of the State for the equitable apportionment among insurers of liability insurance losses and expenses incurred on policies written through such mechanism
(I) provide the following notice, in 10-point type, in any insurance policy issued by such group;
"This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your State. State insurance insolvency guaranty funds are not available for your risk retention group."
(4) otherwise discriminate against a risk retention group or any of its members, except that nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.
15 U.S.C. §§ 3902(a)(1)(E)-(I), (2), (4) (emphasis added).
C. The Excess Insurance Law
"In response to the liability insurance crisis, many states enacted their own tort and insurance reform measures." State Defendants Mem. at 3. New York, in 1985, enacted reform legislation, Chapter 294 of the Laws of 1985.
Included in the 1985 legislation was a mechanism for providing excess medical malpractice insurance coverage to physicians and dentists affiliated with hospitals in New York. Id. at 4. Chapter 266 of the Laws of 1986 was enacted to continue and expand the 1985 reforms and became effective on July 8, 1986. Id. at 5. Section 18 of the 1986 Legislation, the Excess Insurance Law, established a new mechanism to finance excess insurance coverage to hospital-affiliated physicians. Id. It is this mechanism which plaintiffs assert is preempted by the LRRA. ...