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March 24, 2004.

AGENCY DEVELOPMENT, INC., a Michigan corporation, et al., Plaintiffs,
MED AMERICA INSURANCE COMPANY of NEW YORK, A New York Corporation, et al., Defendants

The opinion of the court was delivered by: DAVID LARIMER, Chief Judge, District



Plaintiffs Agency Development, Inc. ("ADI") and Patrick D. Patterson ("Patterson"), ADI's President and Managing General Agent, commenced this action against MedAmerica Insurance Company of New York ("MANY") and its various parent and affiliated companies ("defendants") asserting federal and state antitrust and common law claims, including breach of contract, fraud, and unfair competition. Plaintiffs allege that defendants conspired with former ADI officers and employees to restrain trade, attempted to monopolize or created a monopoly in the individual long term care insurance ("LTCI") market in the Rochester, New York area in violation of the Sherman Act, 15 U.S.C. § 1 and 2, and engaged in various unfair business practices, all in an effort to drive ADI out of business and reduce competition. Page 2

  There are several motions currently pending before the Court. Defendants have moved for summary judgment*fn1 (Dkt. #24) and for sanctions pursuant to Fed.R.Civ.P. 11 (Dkt. #29). Plaintiffs have filed three separate motions for leave to amend the complaint to add new claims and an additional party defendant.*fn2

  For the reasons set forth below, the Court grants in part and denies in part plaintiffs' motions to amend. The Court treats defendants' motion for summary judgment relative to plaintiffs' complaint as amended. Defendants' motion for summary judgment is granted. Defendants' motion for sanctions is denied.


  The following facts are not in dispute. Long term care generally is understood to mean institutional or non-institutional health care, including nursing home care and home health care. Most often, long term care is needed when a person suffers a chronic or disabling condition which requires nursing care or constant supervision. (Dkt. #24, Patterson Aff, Ex. B). Page 3 Plaintiff*fn3 is in the business of selling LTCI products underwritten by various insurance companies. MANY is an insurance company that administers and underwrites LTCI policies in New York State. MANY is a for-profit corporation organized under Article 42 of the New York Insurance Law. Excellus Health Plan, Inc., MANY's parent corporation, is a subsidiary of Excellus, Inc., which is a New York not-for-profit corporation. The Excellus companies provide health insurance coverage as licensees of Blue Cross and Blue Shield.

  In 1991, MANY*fn4 entered into a written contract with plaintiff in which plaintiff agreed to train and employ insurance agents to sell MANY's LTCI products in the six-county Rochester Region.*fn5 In turn, MANY agreed to pay first-year and renewal commissions to plaintiff based on the premiums paid for the policies sold by plaintiff's agents. Pursuant to its express terms, either party could terminate the contract, with or without cause, on thirty days written notice to the other party. (Dkt. #25, Ex. 2). By the late 1990s, eighty percent of MANY's business was generated by plaintiff's agents.

  In 1998, the parties amended their contract to allow ADI's agents to sell LTCI of Network America, a subsidiary company of Perm Treaty, Inc., a competitor of MANY. MANY permitted ADI to sell Network America LTCI, but under very specific and limited circumstances. For instance, MANY had a right-of-first-refusal on all applications for insurance and ADI's sales agents Page 4 received lower commissions from sales of Network America policies. Further, MANY received a percentage of the premiums collected by ADI from these sales as a "handling fee." (Dkt. #24, Patterson Aff, Ex. D).

  In January of 1999, Perm Treaty, MANY's competitor, purchased ADI and became its parent company. On July 7, 1999, MANY gave thirty days written notice to plaintiff that it was terminating the contract as of August 6, 1999.

  Several months before MANY terminated the contract, ADI had moved its offices into MANY's headquarters in Rochester. Subsequent to that move, on July 6, 1999, Eric Dellinger, ADI's Senior Vice President of the Rochester Region, resigned and took a position with MANY. (Dkt. #41, Patterson Aff. ¶ 116; Dkt. #24, Dellinger Aff., ¶ 4, 10). On the same day that MANY terminated the contract, William Gilbert, another ADI officer, resigned to take a position with MANY. In August 1999, Anne Cahill, ADI's top selling agent, resigned from ADI and began working as an agent for MANY. (Dkt. #49, Cahill Aff, ¶ 11). In 2001, other ADI officers and agents, including Kenneth Schroeder, Peter Embury, and William Jones, left ADI to work for MANY or to sell MANY's or one of its corporate affiliate's LTCI.

  Since MANY terminated the contract, it continues to pay ADI renewal commissions pursuant to the terms of the contract. From 1999 to 2001, those commissions exceeded $5,000,000.


  Plaintiff filed a lengthy, detailed proposed second amended complaint (Dkt. #43) and two follow-up motions to amend the proposed second amended complaint (Dkts. ##51, 53). In all, plaintiff asserts nine federal and state law antitrust and common law claims that are based essentially on the same factual allegations. Plaintiff alleges that defendants engaged in a course of conduct Page 5 designed to put plaintiff out of business, to restrain trade and to secure a monopoly in the LTCI market in the Rochester, New York area.

  Specifically, plaintiff claims that defendants secretly raided ADI's officers and agents while the parties still had an agency relationship and then terminated the contract with ADI and created its own in-house sales force. Plaintiff alleges that, since then, defendants unfairly compete with plaintiff by utilizing MANY's corporate affiliation with its Excellus parent companies who are licensees of the Blue Cross and Blue Shield mark and logo. Because Blue Cross and Blue Shield of Rochester insures seventy percent of the population of the Rochester Region, defendants have access to prospective customer information which is not available to ADI or other competitors of MANY.

  Plaintiff claims that by engaging in this course of conduct, defendants have acted with the intent to put plaintiff out of business and reduce competition in the LTCI market by destroying a company that sells competing LTCI in the relevant market. Plaintiff alleges that MANY has achieved a sixty to seventy percent market share in the LTCI market in the Rochester Region. Because of its market advantage, and its improper use of its Blue Cross and Blue Shield affiliation, competitors of MANY, including plaintiff, find it difficult to compete effectively in the LTCI market. Therefore, plaintiff alleges that overall competition in the LTCI market has been adversely affected.

  Plaintiff claims that defendants have restrained trade and created a monopoly or attempted to create a monopoly in the LTCI market, in violation of the Sherman Act, 15 U.S.C. § 1 and 2, and New York's Donnelly Act, N.Y. Gen. Bus. L. § 340. Plaintiff also claims that defendants violated the Lanham Act, 15 U.S.C. § 1125(a), and New York's Unfair Competition Law, N.Y. Gen. Bus. L. § 349, by misrepresenting the nature of its business as not-for-profit and its product as a Blue Page 6 Cross and Blue Shield ...

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