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INTELLECTIVE, INC. v. MASS. MUTUAL LIFE INS. CO.
March 8, 2002
INTELLECTIVE, INC., PLAINTIFF,
MASSACHUSETTS MUTUAL LIFE INSURANCE CO., JOHN HANCOCK LIFE INSURANCE CO., F/K/A JOHN HANCOCK MUTUAL LIFE INSURANCE CO., PRINCIPAL LIFE INSURANCE CO., TIMES SQUARE CAPITAL MANAGEMENT, INC., F/K/A CIGNA INVESTMENTS, INC., NATIONWIDE MUTUAL INSURANCE, PRICEWATERHOUSECOOPERS LLP, AND SAGAMORE ADVISORS, DEFENDANTS.
The opinion of the court was delivered by: Alvin K. Hellerstein, U.S.D.J.:
OPINION AND ORDER
DENYING AND GRANTING
MOTIONS TO DISMISS
Plaintiff brings this antitrust action against five major companies in
the life insurance industry: Massachusetts Mutual Life Insurance
Company, John Hancock Life Insurance Company, Principal Life Insurance
Company, Times Square Capital Management, Inc. (f/k/a Cigna Investments,
Inc.), and Nationwide Mutual Insurance (collectively, the "Insurance
Company Defendants"). Plaintiff also names PricewaterhouseCoopers LLP
("PwC") and Sagamore Advisors ("Sagamore") as defendants.
Plaintiff alleges that the Insurance Company Defendants "have combined
in a cartel known as `the Working Group' to attempt — with the
assistance of the other two defendants — to monopolize the market
for studies of investment performance by life insurance companies in the
United States." Amended Complaint (hereinafter, "Compl.") ¶ 1.
Accepting the allegations in the complaint as true, as I must on a
motion to dismiss, the facts of this case are as follows. The Insurance
Company Defendants, acting together as the Working Group, have
spearheaded, since 1993, an annual study of investment performance in the
life insurance industry, the Intercompany Investment Performance Study
("IIPS"). The Working Group collects confidential and proprietary
investment performance information from life insurance companies which
choose to be part of the study and then provides this data to an
independent third party. The third party "vendor" analyzes the data to
create the IIPS, which reports on such things as comparative investment
management practices, asset allocation strategies, performance and credit
quality, investment risk profiles, etc. The IIPS is the only study of
investment performance of life insurance companies in the United States.
An insurance company which wants to participate in the IIPS must first
sign a "Letter Agreement" with the Working Group. By signing the Letter
Agreement, a participant agrees, inter alia: (1) that only the Working
Group may determine whether any future similar studies are to be
performed and make arrangements for such studies; (2) that only the
Working Group may use the data, the IIPS and any instrument used in
connection with the IIPS for any similar study; (3) that the Working
Group owns all copyright in the IIPS and all instruments used in
connection with the IIPS; (4) that it will not give the results of the
IIPS to any third-party investment managers retained to assist the
participant in improving its investment performance, unless the Working
Group unanimously agrees; and (5) that any individual company's
participation in the IIPS can be terminated upon the unanimous vote of the
Working Group. In sum, the terms of the Letter Agreement give the Working
Group perpetual control over all participants' historical data. Once a
company signs on to participate in the IIPS, that company can never give
the same historical investment performance data to any other consultant.
In other words, through the Letter Agreement, the Working Group has
locked up the information necessary to perform competing studies.
Plaintiff complains that defendants' control of the investment
performance information collected from the various life insurance
companies violates federal and state antitrust laws. According to
Intellective, the Working Group has prevented the creation of competing
studies by using the Letter Agreement permanently to restrict access to
data, to coerce other insurance companies not to give investment
performance information to any other entity, and to prevent other entities
from performing competing studies. Intellective charges that, by using
the restrictive Letter Agreement, the Working Group has erected
"tremendous barriers of entry for anyone who wishes to compete" because
"[a]ny investment performance survey which does not include data from the
Working Group companies will be much less valuable than one that does."
Intellective claims that, as a result of the above, it has been injured
in its capacity as a potential producer of a competing study. The Working
Group's actions have restricted Intellective's ability to obtain the data
needed to produce a similar study, thereby either preventing Intellective
from producing a competing study at all or causing any study which
Intellective could manage to produce to be far less valuable than it
otherwise would have been. Basically, Intellective contends that the
activities of the Working Group have prevented Intellective from
competing freely and vigorously with the Working Group in the production
of investment performance studies of life insurance companies.
Second, Intellective complains that the defendants have refused to deal
with Intellective, both by denying it access to the data and by replacing
Intellective with Sagamore for the IIPS contract.
Third, Intellective complains that defendants have instigated a suit in
New York state court to prevent Intellective from producing a competing
study. The state court case alleges that Intellective breached its vendor
contract with the Working Group and PwC by retaining data and software
after the contract terminated.
Six counts of the Amended Complaint set forth appellants' various
theories of antitrust liability. Count One of the Complaint states that
the defendants' conduct is an attempt to monopolize in violation of
Section 2 of the Sherman Act. Count Two alleges a conspiracy to
monopolize, also in violation of Section 2. Count Three states that
defendants have engaged in a concerted refusal to deal, in violation of
Section 1 of the Sherman Act. Count Four contends that defendants'
activities constitute a group boycott, also in violation of Section 1.
Count Five alleges illegal "tying" under Section 3 of the Clayton Act.
And, finally, Count Six alleges violation of New York's antitrust
statute, the Donnelly Act, based on all of the above.
The motions to dismiss defendants PwC and Sagamore from the case are
granted. Intellective has not alleged anti-competitive conduct on the
part of either of these entities. The motion of the Insurance Company
Defendants is denied. At this early stage of the proceedings,
Intellective has satisfied the pleading requirements to make out an
antitrust action against these entities.
On a motion to dismiss for failure to state a claim, I must accept the
complaint's allegations as true and read them in the light most favorable
to the plaintiff. Todd v. Exxon Corp. et al.,275 F.3d 191, 197 (2d Cir.
2001). A complaint should not be dismissed for failure to state a claim
"unless it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to relief." Conley
v. Gibson, 355 U.S. 41, 45-46 (1957) (footnote omitted). "The issue is
not whether plaintiff will ultimately prevail but whether the claimant is
entitled to offer evidence to support the claims." Scheuer v. Rhodes,
416 U.S. 232, 236 (1974).
In antitrust cases, as in all federal cases, only "a short plain
statement of a claim for relief which gives notice to the opposing party"
is required of the complaint. George C. Frey Ready-Mixed Concrete, Inc.
v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 554 (2d Cir. 1977).
However, it is improper to assume that "the defendants have violated the
antitrust laws in ways that have not been alleged." Associated Gen.
Contractors of California, Inc. v. Cal. State Council of Carpenters,
459 U.S. 519, 526 (1983). Nonetheless, the Supreme Court has warned that
in antitrust cases "dismissals prior to giving the plaintiff ample
opportunity for discovery should be granted very sparingly." Hospital
Bldg. Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746 (1976).
I. Noerr-Pennington Doctrine
The Noerr-Pennington Doctrine, wholly created by case law, is a
limitation upon the scope of the Sherman Act, and provides that the Act
does not apply to joint efforts by competitors to petition the
government. First established in the context of concerted petitions for
anti-competitive legislation, see Eastern Railroad President Conference
v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers of
America v. Pennington, 381 U.S. 657 (1965), the doctrine has been held to
cover court petitions (i.e., lawsuits) as well. See Bill Johnson's
Restaurants v. NLRB, 461 U.S. 731, 741 (1983) ("The right of access to
the courts is an aspect of the First Amendment right to petition the
Government for redress of grievances. Accordingly, we construe the
antitrust laws as not prohibiting the filing of a lawsuit, regardless of
the plaintiff's anticompetitive intent or purpose in doing so, unless the
suit was a `mere sham' filed for harassment purposes.") (citing
California Motor Transport Co. v. Trucking
Unlimited, 404 U.S. 508, 510-11 (1972)).
Defendants argue that Intellective's complaint should be dismissed
because "the central allegation" in the Complaint relates to a lawsuit
filed by the Insurance Company Defendants and PwC. The Amended Complaint
alleges that, after Intellective announced its intention to conduct an
IIPS-like study, the Working Group and PwC, "with the specific intent of
maintaining the Working Group's monopoly . . ., immediately took steps
to keep Intellective from competing with the Working Group and its new
agent Sagamore." Compl. ¶ 25. Only one of these "steps" is alleged
in the Amended Complaint: the commencement by the Insurance Company
Defendants and PwC of an action against Intellective in the New York
State Supreme Court to prevent Intellective from ...